ASSET SALE AGREEMENT by and between INTERSTATE POWER AND LIGHT COMPANY and ITC MIDWEST LLC Dated as of January 18, 2007
Execution Copy
by and between
INTERSTATE POWER AND LIGHT COMPANY
and
ITC MIDWEST LLC
Dated
as of January 18, 2007
TABLE OF CONTENTS
Article I DEFINITIONS |
1 | |||
1.1 Definitions |
1 | |||
1.2 Other Definitional and Interpretive Matters |
17 | |||
1.3 Joint Negotiation and Preparation of Agreement |
18 | |||
Article II PURCHASE AND SALE |
18 | |||
2.1 The Sale |
18 | |||
2.2 Excluded Assets |
19 | |||
2.3 Assumed Obligations |
20 | |||
2.4 Excluded Liabilities |
21 | |||
Article III PURCHASE PRICE |
22 | |||
3.1 Purchase Price |
22 | |||
3.2 Determination of Base Price |
23 | |||
3.3 Determination of Purchase Price |
24 | |||
3.4 Allocation of Purchase Price |
27 | |||
3.5 Proration |
27 | |||
Article IV THE CLOSING |
28 | |||
4.1 Time and Place of Closing |
28 | |||
4.2 Payment of Base Price |
28 | |||
4.3 Deliveries by Seller |
28 | |||
4.4 Deliveries by Buyer |
30 | |||
4.5 Parent Guaranty |
30 | |||
Article V REPRESENTATIONS AND WARRANTIES OF SELLER |
30 | |||
5.1 Organization; Qualification |
31 | |||
5.2 Authority Relative to this Agreement |
31 | |||
5.3 Consents and Approvals; No Violation |
31 | |||
5.4 Governmental Filings |
32 | |||
5.5 No Material Adverse Effect; Liabilities |
32 | |||
5.6 Operation in the Ordinary Course |
32 | |||
5.7 Title |
32 | |||
5.8 Leases |
33 | |||
5.9 Environmental |
33 | |||
5.10 Certain Contracts and Arrangements |
34 | |||
5.11 Legal Proceedings and Orders |
34 | |||
5.12 Permits |
35 | |||
5.13 Compliance with Laws |
35 |
i
5.14 Insurance |
35 | |||
5.15 Taxes |
35 | |||
5.16 Fees and Commissions |
36 | |||
5.17 Adequacy of Purchased Assets |
36 | |||
5.18 Employee Benefits |
36 | |||
5.19 Regulation as a Utility |
37 | |||
Article VI REPRESENTATIONS AND WARRANTIES OF BUYER |
37 | |||
6.1 Organization |
37 | |||
6.2 Authority Relative to this Agreement |
37 | |||
6.3 Consents and Approvals; No Violation |
38 | |||
6.4 Buyer’s Knowledge |
38 | |||
6.5 Legal Proceedings |
38 | |||
6.6 Fees and Commissions |
38 | |||
6.7 Financing Commitments |
39 | |||
Article VII COVENANTS OF THE PARTIES |
39 | |||
7.1 Conduct of Business |
39 | |||
7.2 Access to Information |
40 | |||
7.3 Expenses |
43 | |||
7.4 Further Assurances; Procedures with Respect to Certain Agreements and Other Assets |
43 | |||
7.5 Public Statements |
47 | |||
7.6 Consents and Approvals |
47 | |||
7.7 Tax Matters |
49 | |||
7.8 Supplements to Schedules |
50 | |||
7.9 Eminent Domain; Casualty Loss |
50 | |||
7.10 Transitional Use of Signage and Other Materials Incorporating Seller’s Name or other Logos |
51 | |||
7.11 Litigation Support |
51 | |||
7.12 Financing |
51 | |||
7.13 Post-Closing Operations |
52 | |||
7.14 Affiliate Relationships |
52 | |||
7.15 Financial Statements |
53 | |||
7.16 Non-Opposition |
53 | |||
7.17 Title Insurance |
53 | |||
7.18 Insurance |
54 | |||
Article VIII EMPLOYEE MATTERS |
54 | |||
8.1 Offers of Employment; Transferred Employees |
54 | |||
8.2 Treatment of Transferred Employees |
55 | |||
8.3 Services Provided by Represented Employees; Leased Employees |
56 | |||
8.4 WARN |
57 | |||
8.5 Employee Benefits |
57 |
ii
8.6 Seller’s Defined Benefit Pension Plan |
58 | |||
8.7 Retiree Health |
58 | |||
8.8 Tax-Qualified Defined Contribution Plan |
59 | |||
Article IX CONDITIONS TO CLOSING |
59 | |||
9.1 Conditions to Each Party’s Obligations to Effect the Closing |
59 | |||
9.2 Conditions to Obligations of Buyer |
59 | |||
9.3 Conditions to Obligations of Seller |
61 | |||
Article X INDEMNIFICATION |
62 | |||
10.1 Survival of Representations and Warranties; Notices of Claims |
62 | |||
10.2 Indemnification |
62 | |||
10.3 Indemnification Procedures |
64 | |||
10.4 Limitations on Indemnification |
66 | |||
10.5 Applicability of Article X |
67 | |||
10.6 Tax Treatment of Indemnity Payments |
68 | |||
10.7 Waiver of Certain Damages |
68 | |||
10.8 Exclusive Remedy |
68 | |||
Article XI TERMINATION AND OTHER REMEDIES |
68 | |||
11.1 Termination |
68 | |||
11.2 Procedure and Effect of Termination |
69 | |||
11.3 Remedies upon Termination |
69 | |||
11.4 Specific Performance |
71 | |||
Article XII MISCELLANEOUS PROVISIONS |
71 | |||
12.1 Amendment and Modification |
71 | |||
12.2 Waiver of Compliance; Consents |
71 | |||
12.3 Notices |
71 | |||
12.4 Assignment |
73 | |||
12.5 Governing Law |
73 | |||
12.6 Severability |
73 | |||
12.7 Entire Agreement |
73 | |||
12.8 Bulk Sales or Transfer Laws |
73 | |||
12.9 Delivery |
74 |
iii
EXHIBITS AND SCHEDULES
Exhibits
Exhibit 1.1-A
|
Form of Assignment and Assumption Agreement | |
Exhibit 1.1-B
|
Form of Xxxx of Sale | |
Exhibit 1.1-C
|
Form of Deed | |
Exhibit 1.1-D
|
Form of Distribution Interconnect Agreement | |
Exhibit 1.1-E
|
Form of Generator Interconnect Agreement | |
Exhibit 1.1-F
|
Form of Parent Guaranty | |
Exhibit 1.1-G
|
Form of Transition Services Agreement |
Schedules
Schedule 1.1-A
|
Buyer’s Knowledge | |
Schedule 1.1-B
|
Permitted Encumbrances | |
Schedule 1.1-C
|
Seller’s Knowledge | |
Schedule 1.1-D
|
Transmission Easements | |
Schedule 1.1-E
|
Excluded Easements | |
Schedule 1.1-F
|
Transmission Fee Interests | |
Schedule 1.1-G
|
Excluded Fee Interests | |
Schedule 1.1-H
|
Transmission Leases | |
Schedule 1.1-I
|
Excluded Contracts | |
Schedule 1.1-J
|
Transmission Lines | |
Schedule 1.1-K
|
Excluded Transmission Line Facilities | |
Schedule 1.1-L
|
Transmission Substation Facility | |
Schedule 1.1-M
|
Excluded Transmission Substation Facility | |
Schedule 2.1(b)
|
Inventory | |
Schedule 2.1(d)
|
Tangible Personal Property | |
Schedule 2.1(j)
|
Software | |
Schedule 2.1(k)
|
Warranties | |
Schedule 2.2(i)
|
Excluded Software | |
Schedule 2.2(j)
|
Excluded Communication Assets | |
Schedule 2.2(k)
|
Other Excluded Assets and Rights | |
Schedule 2.3(e)
|
State Regulatory Orders | |
Schedule 2.3(h)
|
Certain Liabilities and Obligations | |
Schedule 2.4(l)
|
Certain Excluded Liabilities | |
Schedule 4.3(j)
|
Joint Use Transmission Real Property | |
Schedule 4.4(g)
|
Joint Use Distribution Fee Interests | |
Schedule 5.3(a)
|
Seller’s Governing Documents | |
Schedule 5.3(b)
|
Encumbrances; Defaults | |
Schedule 5.3(c)
|
No Violations | |
Schedule 5.3(d)
|
Consents and Approvals | |
Schedule 5.5(a)
|
No Material Adverse Effect | |
Schedule 5.5(b)
|
Undisclosed Liabilities | |
Schedule 5.6
|
Operation in the Ordinary Course |
iv
Schedule 5.7(a)(i)
|
Title Exceptions | |
Schedule 5.7(a)(ii)
|
Preferential Purchase Rights | |
Schedule 5.7(b)
|
Real Property | |
Schedule 5.8(a)
|
Real Property Leases | |
Schedule 5.8(b)
|
Real Property Lease Liabilities | |
Schedule 5.9(a)-1
|
Environmental Laws | |
Schedule 5.9(a)-2
|
Transferable Environmental Permits | |
Schedule 5.9(b)
|
Environmental Law Violations | |
Schedule 5.9(c)
|
Releases | |
Schedule 5.9(d)
|
Other Environmental Matters | |
Schedule 5.9(e)
|
Hazardous Materials | |
Schedule 5.10(a)
|
Certain Contracts and Arrangements | |
Schedule 5.10(b)
|
Contract Liabilities | |
Schedule 5.11
|
Legal Proceedings and Orders | |
Schedule 5.12(a)
|
Transferable Permits | |
Schedule 5.13
|
Compliance with Laws | |
Schedule 5.14(a)
|
Insurance | |
Schedule 5.14(b)
|
Exceptions to Insurance | |
Schedule 5.17
|
Adequacy of Purchased Assets | |
Schedule 5.18(a)
|
Seller Plans | |
Schedule 5.18(e)
|
Employees | |
Schedule 6.3
|
Consents and Approvals; No Violation | |
Schedule 6.5
|
Legal Proceedings | |
Schedule 6.7
|
Financing Commitments | |
Schedule 7.1
|
Conduct of Business | |
Schedule 7.1(g)
|
Capital Expenditure Budget | |
Schedule 7.4(c)
|
Shared Easements | |
Schedule 7.8
|
Real Estate Schedule Update Procedures | |
Schedule 7.14
|
Affiliate Relationships | |
Schedule 8.1(b)
|
Approved Leave |
v
This Asset Sale Agreement (this “Agreement”), dated as of January 18, 2007, is made
and entered into by and between Interstate Power and Light Company, an Iowa corporation
(“Seller”), and ITC Midwest LLC, a Michigan limited liability company (“Buyer”).
WHEREAS, Buyer desires to purchase, and Seller desires to sell, the Purchased Assets (as
hereinafter defined) upon the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the Parties’ respective covenants, representations,
warranties, and agreements hereinafter set forth and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound,
hereby agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
1.1 Definitions.
(a) As used in this Agreement, the following capitalized terms have the meanings specified in
this Section 1.1(a):
“Actual Capital Expenditure Amount” means the amount of any capital expenditures made
by Seller between January 1, 2006 and the Effective Time, that increase the Rate Base Assets or
CWIP, as finally determined pursuant to Section 3.3.
“Actual CWIP Amount” means the CWIP transferred to Buyer included in the Purchased
Assets as of the Effective Time, as reflected on the Final Rate Base Statement delivered pursuant
to Section 3.3(a).
“Actual Rate Base Amount” means the Rate Base Amount attributable to the Rate Base
Assets as of the Effective Time, as finally determined pursuant to Section 3.3.
“Actual Rate Base Reclassification Amount” means the amount of any increase in Net
Transmission Plant Investment between the date hereof and the Effective Time, to the extent
attributable to a reclassification of assets as “Rate Base Assets”.
“Adjustment Amount” means an amount (which may be a negative number) equal to the
Purchase Price minus the Base Price.
“Affiliate” has the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
“Affiliated Group” means any affiliated group within the meaning of Code section
1504(a) or any similar group defined under a similar provision of Law.
1
“Ancillary Services” means those services which provide support to or stabilize the
transmission system but are not an integral part of Buyer’s business operations following Closing,
including without limitation, reactive supply from generation sources, voltage control by
generation sources, regulation and frequency response, energy imbalance, generation imbalance,
operating reserve, spinning reserve, supplemental reserve, scheduling of transmission service,
scheduling entity status, responsible entity status, ownership of generation assets including
plants, sales of energy, resource dispatch services, ownership of financial transmission rights,
and any other similar service as otherwise provided under the MISO tariff.
“Assignment and Assumption Agreement” means the Assignment and Assumption Agreement to
be executed and delivered by Seller and Buyer at Closing, in the form of Exhibit 1.1-A.
“Assignment of Easements” means the Assignment of Easements in form and substance
reasonably acceptable to the Parties.
“Xxxx of Sale” means the Xxxx of Sale to be executed and delivered by Seller at the
Closing, in the form of Exhibit 1.1-B.
“Business Day” means any day other than Saturday, Sunday, and any day which is a legal
holiday or a day on which banking institutions in the States of Iowa or New York are authorized or
obligated by Law to close.
“Buyer’s Knowledge,” or words to similar effect, means the actual knowledge, after
reasonable inquiry, of the persons set forth in Schedule 1.1-A.
“Buyer Material Adverse Effect” means an effect, event, development or change which
individually or in the aggregate with all effects, events, developments or changes is or is likely
to become materially adverse to the ability of Buyer to execute and perform its obligations under
this Agreement or to consummate the transactions contemplated hereby.
“Buyer Required Regulatory Approvals” means the following filings or approvals: (i)
the filings by Seller and Buyer required by the HSR Act and the expiration or early termination of
all waiting periods under the HSR Act, (ii) the State Transaction Approvals, (iii) the FERC
Transaction Approvals, (iv) the FERC 204 Approval, and (v) the FERC 205 Approval.
“Buyer’s Representatives” means Buyer’s accountants, employees, counsel, environmental
consultants, financial advisors, and other representatives.
“Calculated Accumulated Depreciation” means the product of the current effective
depreciation rate multiplied by the number of years and months (to be reflected as number of years
plus the product of number of months divided by 12) the asset has been in service multiplied by the
property, plant and equipment value reflected on the asset register at the time of transfer.
“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
2
“Claims” means any administrative, regulatory, or judicial actions or causes of
action, suits, petitions, proceedings (including arbitration proceedings), investigations,
hearings, demands, demand letters, claims, complaints, allegations of liability or potential
liability or notices of noncompliance or violation delivered by any Governmental Entity or other
Person.
“Code” means the Internal Revenue Code of 1986, as amended.
“Confidentiality Agreement” means the Mutual Confidentiality Agreement, dated
September 14, 2006, between Seller and Parent.
“Contract” means any agreement, lease, license, note, evidence of indebtedness,
mortgage, security agreement, understanding, instrument or other arrangement, in each case, whether
written or oral.
“CWIP” means the construction work in progress balance, solely related to the
Purchased Assets, that would be included in account 107 in accordance with FERC 18 CFR.
“Deed” means the Deed or deeds to be executed and delivered by Seller at the Closing
substantially in the form set forth on Exhibit 1.1-C attached hereto.
“Distribution Interconnect Agreement” means the Distribution Interconnect Agreement to
be executed and delivered by Buyer and Seller at the Closing, in the form of Exhibit 1.1-D.
“Documents” means all files, documents, instruments, papers, books, reports, tapes,
microfilms, photographs, letters, ledgers, journals, title policies, customer lists and
information, regulatory filings, operating data and plans (to the extent transferable from a
practical perspective and without any obligation to convert), technical documentation (such as
design specifications, functional requirements, and operating instructions), user documentation
(such as installation guides, user manuals, and training materials), marketing documentation (such
as sales brochures, flyers, and pamphlets), and other similar materials to the extent related to
the Purchased Assets or the Assumed Obligations and any applicable personnel records of Transferred
Employees, in each case whether or not in electronic form; provided, that “Documents” does not
include: (i) information which, if provided to Buyer, would violate any applicable Law or Order,
(ii) letters of intent, expressions of interest, or other proposals received from others in
connection with the transactions contemplated by this Agreement or otherwise and information and
analyses relating to such communications, (iii) any information, the disclosure of which would
jeopardize any legal privilege available to Seller or any of its Affiliates relating to such
information or would cause Seller or any of its Affiliates to breach a confidentiality obligation
by which it is bound (provided, that in the case of any items that would be Documents but for a
confidentiality obligation, Seller will use commercially reasonable efforts to obtain a waiver of
such obligation and to the extent such waiver is not obtained, take other commercially reasonable
efforts to otherwise provide Buyer with access to such information or a summary thereof), (iv) any
valuations or projections of or related to the Purchased Assets or the Assumed Obligations (other
than customary studies, reports, and similar items prepared by or on behalf of Seller for the
purposes of completing, performing, or executing unperformed service obligations, Easement
relocation obligations, and engineering and construction required to complete scheduled
construction, construction work in progress, and
3
other capital expenditure projects, in each case to the extent related to the Purchased
Assets), (v) any information management systems of Seller, (vi) except as specifically set forth
above including applicable personnel records, any files, books, records, rights, data, or other
information relating to any employees of Seller or its Affiliates, or (vii) any rights,
information, or other matters to the extent solely used for or on the Internet, including any web
pages or other similar items.
“Easement” means any easement, rights-of-way, leases for rights-of-way easement in
gross, sublease and any other interest in real property other than real property owned in fee
simple.
“Employees” means all employees of the Seller or its Affiliates who are listed on
Schedule 5.18(e) and, for any such individuals who terminate employment prior to the
Closing Date, their replacements. Upon mutual agreement of Buyer and Seller, additional
individuals shall be added to Schedule 5.18(e) reasonably in advance of the Closing Date so
that Buyer has the ability to hire up to 50 Employees as Transferred Employees.
“Encumbrances” means any mortgages, pledges, liens, claims, charges, security
interests, conditional and installment sale agreements, Preferential Purchase Rights, activity and
use limitations, Easements, covenants, encumbrances, obligations, limitations, title defects, deed
restrictions, and any other restrictions of any kind, including restrictions on use, transfer,
receipt of income, or exercise of any other attribute of ownership.
“Environment” means all or any of the following media: soil, land surface and
subsurface strata, surface waters (including navigable waters, streams, ponds, drainage basins, and
wetlands), groundwater, drinking water supply, sediments, ambient air (including the air within
buildings and the air within other natural or man-made structures above or below ground), plant and
animal life, and any other natural resource.
“Environmental Claims” means any and all Claims (including any such Claims involving
toxic torts or similar liabilities in tort, whether based on negligence or other fault, strict or
absolute liability, or any other basis) relating in any way to any Environmental Laws or
Environmental Permits, or arising from the presence, Release, or threatened Release (or alleged
presence, Release, or threatened Release) into the Environment of any Hazardous Materials,
including any and all Claims by any Governmental Entity or by any Person for enforcement, cleanup,
remediation, removal, response, remedial or other actions, or response costs, damages,
contribution, indemnification, cost recovery, compensation, fines or penalties or injunctive relief
arising out of or relating to any Environmental Law or Hazardous Materials or for any property
damage, natural resource damage or personal or bodily injury (including death) or threat of injury
to health, safety, natural resources, or the Environment.
“Environmental Laws” means all Laws (including common law) relating to pollution or
the protection of human health, safety, the Environment, or damage to natural resources, including
Laws relating to Releases and threatened Releases or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous
Materials. Environmental Laws include the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. § 9601 et seq.; the Federal Insecticide,
4
Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.; the Resource Conservation and Recovery
Act, 42 U.S.C. § 6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the
Clean Air Act, 42 U.S.C. § 7401 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251
et seq.; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.; the Endangered Species Act, 16 U.S.C. §
1531 et seq.; the National Environmental Policy Act, 42 U.S.C. § 4321, et seq.; the Occupational
Safety and Health Act, 29 U.S.C. § 651 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 300f et
seq.; Emergency Planning and Community Xxxxx-xx-Xxxx Xxx, 00 X.X.X. § 00000 et seq.; Atomic Energy
Act, 42 U.S.C. § 2014 et seq.; Nuclear Waste Policy Act, 42 U.S.C. § 10101 et seq.; and their state
and local counterparts or equivalents, all as amended from time to time, and regulations issued
pursuant to any of those statutes.
“Environmental Permits” means all permits, certifications, licenses, franchises,
approvals, consents, notifications, exemptions, waivers or other authorizations of any Governmental
Entity under or with respect to applicable Environmental Laws.
“Estimated Capital Expenditure Amount” means Seller’s good faith estimate of the
amount of capital expenditures made by Seller between January 1, 2006 and the Effective Time, to
increase the Rate Base Assets or CWIP, reflected on the Estimated Rate Base Statement delivered
pursuant to Section 3.2(a).
“Estimated CWIP Amount” means Seller’s good faith estimate of CWIP included in the
Purchased Assets as of the Effective Time, as reflected on the Estimated Rate Base Statement
delivered pursuant to Section 3.2(a).
“Estimated Rate Base Amount” means Seller’s good faith estimate of the Rate Base
Amount attributable to the Rate Base Assets as of the Effective Time, as reflected on the Estimated
Rate Base Statement delivered pursuant to Section 3.2(a).
“Estimated Rate Base Reclassification Amount” means Seller’s good faith estimate of
any increase in Net Transmission Plant Investment between the date hereof and the Effective Time,
to the extent attributable to a reclassification of assets as “Rate Base Assets”, as reflected on
the Estimated Rate Base Statement delivered pursuant to Section 3.2(a).
“FERC” means the Federal Energy Regulatory Commission.
“FERC 204 Approval” means an approval under Section 204 of the Federal Power Act
approving, to the extent necessary, the issuance of securities by Buyer to consummate the
Financing.
“FERC 205 Approval”
means approvals under Section 205 of the Federal Power Act
requested in the application of Buyer pursuant to
Section 7.6(b), including rates which are not suspended or
subject to hearing or refund.
“XXXX 00 XXX” means accounting rules and guidelines of the FERC contained in Title 18
of the Code of Federal Regulations.
“FERC Regulatory Order” means an Order issued by the FERC that affects or governs the
rates, services, or other utility operations of the Purchased Assets.
5
“FERC Transaction Approvals” means (i) an approval by FERC under Section 203 of the
Federal Power Act approving the transactions contemplated by this Agreement including, without
limitation, the Parent Equity Issuance Approval and (ii) an approval of the Distribution
Interconnect Agreement, the Generator Interconnect Agreement, and any other agreements, where
required, relating to the relationship between Seller and Buyer, including any agreements for the
provision of ancillary services and wholesale distribution services by Seller.
“Final Regulatory Order” means, with respect to any Required Regulatory Approval, an
Order granting such Required Regulatory Approval that has not been revised, stayed, enjoined, set
aside, annulled, or suspended, and with respect to which (i) any required waiting period has
expired, and (ii) all conditions to effectiveness prescribed therein or otherwise by Law or Order
have been satisfied; provided that, such Order shall be final irrespective of whether any rehearing
or appeal thereof is pending.
“Financial Information” means (i) the Audited Financial Statements; (ii) unaudited
interim financial statements for the business that comprises the Purchased Assets including a
balance sheet as of March 31, 2007 and an income statement and statement of cash flow for the three
months ended March 31, 2007 and 2006; (iii) unaudited interim financial statements for the business
that comprises the Purchased Assets including a balance sheet as of June 30, 2007, an income
statement for the three and six months ended June 30, 2007 and 2006 and a statement of cash flow
for the six months ended June 30, 2007 and 2006; and (iv) unaudited interim financial statements
for the business that comprises the Purchased Assets including a balance sheet as of September 30,
2007, an income statement for the three and nine months ended September 30, 2007 and 2006 and a
statement of cash flow for the nine months ended September 30, 2007 and 2006, in each case that
comply in all material respects with Regulation S-X, and in each of clauses (ii) through (iv),
reviewed by Deloitte and Touche LLP or any other independent auditor reasonably acceptable to Buyer
in accordance with SAS 71 or SAS 100, as applicable.
“Financing” means any debt or equity financing arranged by Buyer or Parent to fund the
transactions contemplated hereby.
“GAAP” means generally accepted accounting principles in the United States of America.
“Generator Interconnect Agreement” means the Generator Interconnect Agreement to be
executed and delivered by MISO, Buyer and Seller substantially in the form of Exhibit
1.1-E.
“Good Utility Practice” shall mean any of the practices, methods and acts engaged in
or approved by a significant portion of the electric industry during the relevant time period, or
any of the practices, methods and acts which, in the exercise of reasonable judgment in light of
the facts known at the time the decision was made, could have been expected to accomplish the
desired result at a reasonable cost consistent with good business practices, reliability, safety
and expedition. Good Utility Practice is not intended to be limited to the optimum practice,
method, or act to the exclusion of all others, but rather to be acceptable practices, methods, or
acts generally accepted in the region.
6
“Governing Documents” of a Party means the articles or certificate of incorporation
and bylaws, or comparable governing documents, of such Party.
“Governmental Entity” means the United States of America and any other national,
supranational, federal, state, provincial, local, or foreign governmental or regulatory authority,
department, agency, commission, body, court, or other governmental entity or instrumentality.
“Hazardous Materials” means (i) any chemicals, materials, substances, or wastes which
are now or hereafter defined as or included in the definition of “hazardous substance,” “hazardous
material,” “hazardous waste,” “solid waste,” “toxic substance,” “extremely hazardous substance,”
“pollutant,” “contaminant,” or words of similar import under any applicable Environmental Laws;
(ii) any petroleum, petroleum products (including crude oil or any fraction thereof), natural gas,
natural gas liquids, liquefied natural gas or synthetic gas useable for fuel (or mixtures of
natural gas and such synthetic gas), or oil and gas exploration or production waste,
polychlorinated biphenyls, asbestos-containing materials, mercury, urea formaldehyde insulation,
radioactivity and lead-based paints; and (iii) any other chemical, material, substances, waste, or
mixture thereof which is prohibited, limited, or regulated pursuant to, or that could reasonably be
expected to give rise to liability under, Environmental Laws.
“HSR Act” means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
“ICC” means the Illinois Commerce Commission.
“Income Tax” means any Tax based upon, measured by, or calculated with respect to (i)
net income, profits, or receipts (including capital gains Taxes and minimum Taxes) or (ii) multiple
bases (including corporate franchise and business license Taxes) if one or more of the bases on
which such Tax may be based, measured by, or calculated with respect to is described in clause (i),
in each case together with any interest, penalties, or additions to such Tax.
“Independent Accounting Firm” means an independent accounting firm of national
reputation mutually appointed by Seller and Buyer.
“IUB” means the Iowa Utilities Board.
“Law” means laws, statutes, regulations, rules, ordinances, codes, and similar acts or
promulgations or other legally enforceable requirements of any Governmental Entity.
“Loss” or “Losses” means losses, liabilities, taxes, damages, obligations,
payments, costs, and expenses (including the costs and expenses of any and all actions, suits,
proceedings, assessments, judgments, settlements, and compromises relating thereto and reasonable
attorneys’ fees and reasonable disbursements in connection therewith).
“Marketing Period” means a period of time of thirty (30) consecutive days, commencing
upon the third Business Day after the date on which the regulatory approvals set forth in
Sections 9.2 and 9.3 have been obtained; provided, however, that
(i) if such thirty day period has not been completed by August 18, 2007, then such thirty-day
period shall commence no earlier than
7
September 3, 2007, (ii) that portion of the Financial Information that would be required by
the rules and regulations of the SEC to be disclosed in connection with a public offering of
Buyer’s securities registered under the Securities Act of 1933, as amended, is available to Buyer
throughout such thirty day period and (iii) if such thirty day period has not commenced prior to
November 30, 2007, and that portion of the Financial Information that would be required by the
rules and regulations of the SEC to be disclosed in connection with a public offering of Buyer’s
securities registered under the Securities Act of 1933, as amended, is available to Buyer
throughout the period from November 30, 2007 through the Closing Date, such thirty day period shall
be deemed to be the period commencing on November 30, 2007 and expiring on December 27, 2007.
“Material Adverse Effect” means an effect, event, development or change, which
individually or in the aggregate with all effects, events, developments or changes (x) is or is
reasonably likely to become materially adverse to the business, assets, properties, results of
operations or financial condition of the Purchased Assets (taken as a whole), or (y) prevents or
has a material and adverse effect on the ability of Seller to execute and perform its obligations
under this Agreement or to consummate the transactions contemplated hereby, other than effects,
events, developments or changes to the extent (i) resulting from an Excluded Matter, or (ii) fully
cured by Seller (including by payment of money or credit to the Purchase Price) before the Closing
Date. “Excluded Matter” means any one or more of the following: (A) changes in any Law or
the issuance of any Order (other than a Law adopted or an Order issued specifically with respect to
the transactions contemplated by this Agreement), except for changes in Law that affect the
electricity transmission rates or terms and conditions of service applicable to the Purchased
Assets, (B) any change in GAAP, (C) compliance with the terms of this Agreement; provided, however,
that with respect to references to Material Adverse Effect in Section 5.3, the exception set forth
in this clause (C) shall not be applicable, (D) any change in international, national, regional, or
local economic, or political conditions, including prevailing interest rates, (E) any proposal for
a change in MISO policy or rules, other than a written proposal presented to the MISO board of
directors, a MISO committee or a Governmental Entity, (F) any matter disclosed in this Agreement or
any Schedule (excluding any updates or supplements after the date hereof) or Exhibits hereto, or
(G) any change in the market price of commodities or publicly traded securities; provided that, the
exceptions set forth in clauses (B), (D), (E) and (G) shall not be applicable to the extent such
changes affect the Purchased Assets in a disproportionate manner compared with other Persons or
assets in the electricity transmission industry; provided, further, that for purposes of this
definition, a Material Adverse Effect shall be deemed to have occurred in the event that the ICC,
IUB or MPUC takes any action indicating that upon purchase and operation of the Purchased Assets,
Buyer shall be subject to regulation as a public or electric utility by such commission (other than
to the extent any such regulation relates to customary electric transmission facility franchise
matters within the jurisdiction of such commission).
“Material Easements” means any and all Transmission Easements of Seller and Shared
Easements that underlie the Transmission Substation Facilities.
“MISO” means the Midwest Independent Transmission System Operator, Inc., or any
successor thereto.
“MPUC” means the Minnesota Public Utilities Commission.
8
“Net Book Value” means the property, plant and equipment value reflected on the
applicable asset register based on the most recently reviewed or audited financial statements of
the applicable Party, reduced by the lesser of (a) Post-Closing Calculated Accumulated Depreciation
or (b) accumulated depreciation equal to the property, plant and equipment value reflected on the
applicable asset register based on the most recently reviewed or audited financial statements of
the applicable Party.
“Net Non-Rate Base Asset Value” means the dollar amount by which cash and other
mutually agreed current assets of Seller included in Purchased Assets (other than Rate Base Assets)
exceeds the Estimated Assumed Balance Sheet Obligations or the Actual Assumed Balance Sheet
Obligations (in each case, other than those that are fully reflected as reductions to Net
Transmission Plant Investment), as applicable, as reflected as of the Effective Time in the
Estimated Balance Sheet or Final Balance Sheet, as applicable (which amount may be a negative
number).
“Net Premium Multiple” means 0.7709.
“Net Property, Plant and Equipment” means property, plant and equipment minus
accumulated depreciation minus accrued removal costs.
“Net Transmission Plant Investment” means: (A) plant assets included in FERC accounts
101 and 106 further broken down in FERC sub-accounts 350 through 359 after adjustment to exclude
(i) any plant assets depreciated or amortized in FERC account 404 and 405, (ii) asset retirement
costs for transmission plant in FERC plant account 359.1, (iii) transmission plant excluded from
ISO rates and transmission plant included in OATT Ancillary Services (Note M and Note N,
respectively, on the Third Revised Sheet No. 1322 of the Midwest ISO Transmission and Energy
Markets Tariff) and (iv) capitalized leases, plus transmission land held for future use in FERC
account 105, plus transmission related materials and supplies and stores expense in FERC accounts
154 and 163 after adjustment to exclude obsolete materials & supplies (as determined by Buyer in
accordance with GAAP) less (B) Transmission Plant Investment Accumulated Depreciation.
“Off-Site Location” means any location other than the Purchased Transmission Assets.
“Order” means any order, judgment, writ, injunction, decree, directive, or award of a
court, administrative judge, or other Governmental Entity acting in an adjudicative or regulatory
capacity, or of an arbitrator with applicable jurisdiction over the subject matter.
“Parent” means ITC Holdings Corp., a Michigan corporation.
“Parent Equity Issuance Approval” means approval by FERC of an application by Parent
to issue shares of Parent’s common stock, which application may specify an amount of such shares
and a duration for such issuance as Parent in its absolute discretion may specify; provided that,
in any event such application shall also specify in the alternative to such amount and duration,
the amount of such shares contemplated by Buyer as part of the Financing.
“Parent Guaranty” means the Guaranty in the form of Exhibit 1.1-F hereto,
which Guaranty shall have been executed by Parent as of the date of this Agreement.
9
“Partial Assignment of Shared Easements” means the Assignment of Easements in form and
substance reasonably acceptable to the Parties.
“Party” means either Buyer or Seller, as indicated by the context, and
“Parties” means Buyer and Seller.
“Permits” means all permits, certifications, licenses (including railroad crossing
permits), franchises, approvals, consents, waivers, registrations or other authorizations of
Governmental Entities issued under or with respect to applicable Laws or Orders and used or held by
Seller for the operation of the Purchased Assets, other than Environmental Permits.
“Permitted Encumbrances” means (i) those Encumbrances set forth in Schedule
1.1-B; (ii) Encumbrances securing or created by or in respect of any of the Assumed
Obligations; (iii) statutory liens for current Taxes or assessments not yet due or payable; (iv)
mechanics’, carriers’, workers’, repairers’, landlords’, and other similar liens arising or
incurred in the ordinary course of business relating to obligations as to which there is no default
on the part of Seller, or pledges, deposits, or other liens securing the performance of statutory
obligations (including workers’ compensation, unemployment insurance, or other social security
legislation); (v) any Encumbrances set forth in any state, local, or municipal franchise or
governing ordinance under which any portion of the Purchased Assets are being used or conducted; or
(vi) Encumbrances, including, without limitation, zoning, entitlement, restriction, and other land
use regulations by Governmental Entities, which, together with all other Encumbrances, do not
materially detract from the value of or materially interfere with the present use of the Purchased
Assets or the conduct of the business thereon as it is currently being used and conducted.
“Person” means any individual, partnership, limited liability company, joint venture,
corporation, trust, unincorporated organization, or Governmental Entity.
“Post-Closing Adjustment Date” means December 31, 2007 or such other date as the
parties mutually agree.
“Post-Closing Calculated Accumulated Depreciation” means the product of the current
effective depreciation rate multiplied by the number of years and months (calculated as the number
of years plus the product of the number of additional months divided by 12) the asset has been in
service multiplied by the property, plant and equipment value reflected on the applicable asset
register based on the most recently reviewed or audited financial statements of the applicable
Party.
“Post-Closing Rate Base Value” means the Rate Base Amount attributable to the assets
of Buyer included in Net Transmission Plant Investment on the Post-Closing Adjustment Date.
“Preferential Purchase Rights” means rights of any Person (other than rights of
condemnation, eminent domain, or other similar rights of any Person) to purchase or acquire any
interest in any of the Purchased Assets, including any rights that are conditional upon a sale of
any Purchased Assets or any other event or condition.
“Premium Multiple” means 1.7709.
10
“Prime Rate” means, for any day, the per annum rate of interest quoted as the
“Bank Prime Rate” rate for the most recent weekday for which such rate is quoted in the
statistical release designated as H.15(519), or any successor publication, published from time to
time by the Board of Governors of the Federal Reserve System.
“Projected CWIP Amount” means $19,076,000.
“Projected Rate Base Amount” means $423,513,994.
“Purchased Agreements” means any Contract to which (i) on the date hereof, Seller is a
party, or by which it is bound, that either (A) is listed or described on Schedule 5.8(a)
or Schedule 5.10(a) and primarily relates to Transmission, or (B) relates primarily to the
Purchased Assets or (ii) on the Closing Date, Seller is a party, or by which it is bound, that
would have been deemed a Purchased Agreement if in existence on the date hereof.
“Purchased Transmission Assets” means each individual Transmission Land Right,
Transmission Line Facility and Transmission Substation Facility.
“Rate Base Amount” means the dollar valuation of Net Transmission Plant Investment as
calculated in accordance with FERC 18 CFR.
“Rate Base Assets” means any Purchased Assets transferred to Buyer on the Closing Date
that are included in the definition of Net Transmission Plant Investment.
“Rate Base Reclassification Increase” means any increase in Net Transmission Plant
Investment between the date hereof and the Effective Time to the extent attributable to a
reclassification of Purchased Assets as Rate Base Assets.
“Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing of Hazardous Materials into the
Environment.
“Required Regulatory Approvals” means the Seller Required Regulatory Approvals and the
Buyer Required Regulatory Approvals.
“SEC” means the Securities and Exchange Commission.
“Seller Disclosure Schedule” means, collectively, all Schedules other than
Schedule 1.1-A, Schedule 6.3, Schedule 6.5, Schedule 6.7.
“Seller Marks” means the rights of Seller and its Affiliates to the names “Interstate
Power and Light Company,” “Iowa Southern Utilities Company,” “Iowa Electric Light & Power,” and
“IES Utilities Inc.,” Interstate Power Company,” “IP&L,” “Alliant Energy,” “Alliant,” “Interstate
Energy Corporation,” or any trade names, trademarks, service marks, corporate names or logos, or
any derivative or combination thereof, that are confusingly similar thereto.
“Seller Post-Closing Capital Contributions” means funds paid by Buyer at Seller’s
direction to fund capital projects set forth on Schedule 7.1(g) between the Closing Date
and Post-Closing Adjustment Date pursuant to Section 1(f) of the Transition Services Agreement, in
an
11
amount not to exceed the excess of the amounts set forth on Schedule 7.1(g) less the
Actual Capital Expenditure Amount.
“Seller Post-Closing Capital Increase” means an amount equal to the excess of the
Post-Closing Rate Base Value over the Actual Rate Base Amount; solely to the extent that such
excess is attributable to Seller Post-Closing Capital Contributions made between the Closing Date
and the Post-Closing Adjustment Date (which Seller Post-Closing Capital Contributions may be
applied to convert items included in the Actual CWIP Amount in respect of projects intended to be
completed in 2007 to assets included in the definition of Net Transmission Plant Investment).
“Seller’s Knowledge,” or words to similar effect, means the actual knowledge of the
individuals listed in Schedule 1.1-C after reasonable inquiry by them of those employees of
Seller whom they believe in good faith to be the persons generally responsible for the subject
matters to which knowledge is pertinent.
“Seller’s Representatives” means Seller’s accountants, employees, counsel,
environmental consultants, financial advisors, and other representatives.
“Seller Required Regulatory Approvals” means the following filings or approvals: (i)
the filings by Seller and Buyer required by the HSR Act and the expiration or earlier termination
of all waiting periods under the HSR Act, (ii) the State
Transaction Approvals, and (iii) the FERC
Transaction Approvals.
“State Regulatory Order” means an Order issued by the ICC, IUB or MPUC that affects or
governs the rates, services, or other utility operations of the Purchased Assets.
“State Transaction Approvals” means the order(s) or action(s) of (i) the ICC, (ii) the
IUB, and (iii) the MPUC approving or consenting to the transfer of the Purchased Assets by Seller
to Buyer in the relevant jurisdiction pursuant to this Agreement; or the order(s) or action(s) of
the Missouri Public Service Commission approving or consenting to the transfer of certificates
related to the Purchased Assets by Seller to Buyer.
“Subsidiary,” when used in reference to a Person, means any Person (i) of which
outstanding securities or other equity interests having ordinary voting power to elect a majority
of the board of directors or other Persons performing similar functions of such Person are owned
directly or indirectly by such first Person, (ii) of which such Person or any subsidiary of such
first Person is a general partner or (iii) such first Person directly or indirectly controls.
“Substation Site Easement” means the Substation Site Easement in the form and
substance reasonably acceptable to the Parties.
“Tax” and “Taxes” means all taxes, charges, customs, duties, fees, levies,
penalties, or other assessments imposed by any foreign or United States federal, state, or local
taxing authority, including profits, estimated gross receipts, income, excise, property,
replacement tax, sales, transfer, franchise, license, payroll, withholding, social security, or any
other taxes
12
(including any escheat or unclaimed property obligations), including any interest, penalties,
or additions attributable thereto.
“Tax Affiliate” of a Person means a member of that Person’s Affiliated Group and any
other Subsidiary of that Person which is a partnership or is disregarded as an entity separate from
that Person for Tax purposes.
“Tax Return” means any return, report, information return, or other document
(including any related or supporting information or schedule) required to be supplied to any
Governmental Entity with respect to Taxes, including any amendments thereto.
“Transfer Taxes” means any real property transfer, sales, use, value added, stamp,
documentary, recording, registration, conveyance, stock transfer, intangible property transfer,
personal property transfer, gross receipts, registration, duty, securities transactions or similar
fees or Taxes or governmental charges (together with any interest or penalty, addition to Tax or
additional amount imposed) as levied by any Governmental Entity in connection with the transactions
contemplated by this Agreement, including, without limitation, any payments made in lieu of any
such Taxes or governmental charges which become payable in connection with the transactions
contemplated by this Agreement.
“Transition Services Agreement” means the Transition Services Agreement to be executed
and delivered by Seller and Buyer at Closing, in the form of Exhibit 1.1-G.
“Transmission” means (i) the transmission of electricity at nominal voltages that are
greater than or equal to 34.5 kV or (ii) the transmission of electricity regardless of the nominal
voltage at which such facility is designed to operate or does operate, if the facilities are
subject to the jurisdiction of FERC as transmission.
“Transmission Easement” means any Easement, in which Seller has any right, title or
interest and upon which a Transmission Line Facility or Transmission Substation Facility is located
or otherwise used or held for use by Seller primarily in Transmission, including those set forth on
Schedule 1.1-D, except for the Shared Easements and Easements set forth on Schedule
1.1-E.
“Transmission Fee Interest” means real property owned in fee simple by Seller upon
which any Transmission Line Facility or Transmission Substation Facility is located or otherwise
used or held for use by Seller primarily in Transmission, including those set forth on Schedule
1.1-F, except for the real property owned in fee simple set forth on Schedule 1.1-G.
“Transmission Land Right” means each individual Transmission Fee Interest,
Transmission Easement and Transmission Lease.
“Transmission Lease” means each Contract pursuant to which Seller, as lessee, licensee
or contract party leases, licenses or otherwise obtains a contract right to the possession and/or
use of a parcel of real property upon which a Transmission Line Facility or Transmission Substation
Facility is located or otherwise used or held for use by Seller primarily in Transmission,
including those set forth on Schedule 1.1-H, except for those Contracts set forth on
Schedule 1.1-I.
13
“Transmission Lines” means the lines identified on Schedule 1.1-J.
“Transmission Line Facility” means any and all facilities and assets including,
without limitation, any duct, wire, line, conduit, pole, tower, equipment or other structure used
for Transmission, including any of the foregoing that are part of any Transmission Line or
Transmission Substation Facility, are connected to any Transmission Line or Transmission Substation
Facility, or are otherwise required to own, use or operate each Transmission Line or Transmission
Substation Facility in the manner owned, used or operated by Seller prior to the Closing, but
excluding (i) any Transmission Substation Facility and (ii) those assets set forth on Schedule
1.1-K.
“Transmission Plant Investment Accumulated Depreciation” means accumulated
depreciation included in FERC account 108 that reflects the accumulated depreciation on
transmission assets recorded in FERC sub-accounts 350 through 359 before reduction for amounts
related to asset retirement obligations and after adjustment to exclude the lesser of (a)
Calculated Accumulated Depreciation for the following plant assets or (b) accumulated depreciation
equal to the property, plant and equipment value at the time of transfer for the following plant
assets (i) transmission plant excluded from ISO rates and transmission plant included in OATT
Ancillary Services (Note M and Note N, respectively, on the Third Revised Sheet No. 1322
of the Midwest ISO Transmission and Energy Markets Tariff) and (ii) capitalized leases.
“Transmission Substation Facility” means any and all facilities, assets, equipment,
including, without limitation, towers, poles, transformers, circuit breakers, meters, and wires
located at any substation that are used for Transmission including those assets set forth in
Schedule 1.1-L, but excluding those assets set forth on Schedule 1.1-M.
(b) In addition, each of the following terms has the meaning specified in the Exhibit or
Section set forth opposite such term:
Term | Reference | |
Actual Assumed Balance Sheet Obligations
|
Section 3.3(a) | |
Actual Net Non-Rate Base Asset Value
|
Section 3.3(a) | |
Adjustment Dispute Notice
|
Section 3.3(b) | |
Assumed Environmental Liabilities
|
Section 2.3(d) | |
Assumed Litigation
|
Section 2.3(g) | |
Assumed Obligations
|
Section 2.3 | |
Assumed Post-Closing Environmental Liabilities
|
Section 2.3(d) |
14
Term | Reference | |
Assumed Post-Closing Litigation
|
Section 2.3(g) | |
Assumed Pre-Closing Environmental Liabilities
|
Section 2.3(d) | |
Assumed Pre-Closing Litigation
|
Section 2.3(g) | |
Audited Financial Statements
|
Section 7.15 | |
Base Price
|
Section 3.1 | |
Bonus Plan
|
Section 8.2(b) | |
Buyer 401(k) Plan
|
Section 8.8 | |
Buyer Plans
|
Section 8.5(a) | |
Buyer’s Initial Rates
|
Section 7.16 | |
Closing
|
Section 4.1 | |
Closing Date
|
Section 4.1 | |
Confidential Information
|
Section 7.2(b) | |
Direct Loss
|
Section 10.3(d) | |
Discovering Party
|
Section 7.4(b) | |
Effective Time
|
Section 4.1 | |
Estimated Assumed Balance Sheet Obligations
|
Section 3.2(a) | |
Estimated Balance Sheet
|
Section 3.2(a) | |
Estimated Net Non-Rate Base Asset Value
|
Section 3.2(a) | |
Estimated Rate Base Statement
|
Section 3.2(a) | |
Excluded Assets
|
Section 2.2 | |
Excluded Liabilities
|
Section 2.4 | |
Final Balance Sheet
|
Section 3.3(a) | |
Final Rate Base Statement
|
Section 3.3(a) | |
Financing Commitments
|
Section 6.7 |
15
Term | Reference | |
Indemnifiable Loss
|
Section 10.2(a) | |
Indemnifying Party
|
Section 10.3(a) | |
Indemnitee
|
Section 10.3(a) | |
Initial Valuation
|
Section 3.1 | |
Material Contracts
|
Section 5.10(a) | |
Missouri Assets
|
Section 7.4(h) | |
Notice of Direct Loss
|
Section 10.3(d) | |
Notice of Third Party Claim
|
Section 10.3(a) | |
Notified Party
|
Section 7.4(b) | |
Pre-Closing Non-Balance Sheet Liabilities
|
Section 2.3(i) | |
Prior Year Bonuses
|
Section 8.2(c) | |
Purchase Price
|
Section 3.1 | |
Purchased Assets
|
Section 2.1 | |
Real Property Leases
|
Section 5.8(a) | |
Represented Employee Work
|
Section 8.3(a) | |
Restricted Shares
|
Section 8.2(e) | |
Shared Easement Rights
|
Section 7.4(c) | |
Shared Easements
|
Section 7.4(c) | |
Termination Date
|
Section 11.1(b) | |
Third Party Claim
|
Section 10.3(a) | |
Title Company
|
Section 7.17 | |
Transfer Notice
|
Section 7.4(b) | |
Transfer Objection Notice
|
Section 7.4(b) | |
Transferable Environmental Permits
|
Section 2.1(g) | |
Transferable Permits
|
Section 2.1(f) |
16
Term | Reference | |
Transferred Employee
|
Section 8.1(b) | |
Transferred Employee APBO
|
Section 8.7 | |
WARN
|
Section 8.4 |
1.2 Other Definitional and Interpretive Matters. Unless otherwise expressly provided,
for purposes of this Agreement, the following rules of interpretation apply:
(a) Calculation of Time Period. When calculating the period of time before which,
within which, or following which any act is to be done or step taken pursuant to this Agreement,
the date that is the reference date in calculating such period will be excluded. If the last day
of such period is a non-Business Day, the period in question will end on the next succeeding
Business Day.
(b) Dollars. Any reference in this Agreement to “dollars” or “$” means U.S. dollars.
(c) Exhibits and Schedules. Unless otherwise expressly indicated, any reference in
this Agreement to an “Exhibit” or a “Schedule” refers to an Exhibit or Schedule to this Agreement.
The Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereof as if
set forth in full herein and are an integral part of this Agreement. Any capitalized terms used in
any Schedule or Exhibit but not otherwise defined therein are defined as set forth in this
Agreement.
(d) Gender and Number. Any reference in this Agreement to gender includes all
genders, and the meaning of defined terms applies to both the singular and the plural of those
terms.
(e) Headings. The provision of a Table of Contents, the division of this Agreement
into Articles, Sections, and other subdivisions, and the insertion of headings are for convenience
of reference only and do not affect, and will not be utilized in construing or interpreting, this
Agreement. All references in this Agreement to any “Section” are to the corresponding Section of
this Agreement unless otherwise specified.
(f) “Herein”. The words such as “herein,” “hereinafter,”
“hereof,” and “hereunder” refer to this Agreement (including the Schedules and
Exhibits to this Agreement) as a whole and not merely to a subdivision in which such words appear
unless the context otherwise requires.
(g) “Including”. The word “including” or any variation thereof means
“including, without limitation” and does not limit any general statement that it follows to
the specific or similar items or matters immediately following it.
(h) “To the extent”. The words “to the extent” when used in reference to a
liability or other matter, means that the liability or other matter referred to is included in part
or excluded in part, with the portion included or excluded determined based on the portion of such
liability or
other matter exclusively related to the subject. For example, if 40 percent of a liability is
attributable to the Purchased Assets, then a statement that Buyer will assume the liability “to the
17
extent related to the operation of the Purchased Assets” means that Buyer will assume 40 percent of
the liability. As an additional example, if a performance obligation attributable to the Purchased
Assets is by its terms to be performed prior to and following the Effective Time, a statement that
Buyer will assume the obligation “to the extent such obligation relates to the period from and
after the Effective Time” means that Buyer will assume all liability for the performance from and
after the Effective Time, and that Seller would remain liable for any failure to perform such
obligations prior to the Effective Time.
1.3 Joint Negotiation and Preparation of Agreement. The Parties have participated
jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as jointly drafted by
the Parties hereto and no presumption or burden of proof favoring or disfavoring any Party will
exist or arise by virtue of the authorship of any provision of this Agreement.
ARTICLE II
PURCHASE AND SALE
PURCHASE AND SALE
2.1 The Sale. Upon the terms and subject to the satisfaction or waiver of the
conditions contained in this Agreement, at the Closing, Seller will sell, assign, convey, transfer,
and deliver to Buyer, free and clear of all Encumbrances (except for Permitted Encumbrances), and
Buyer will purchase and acquire from Seller, all of Seller’s right, title, and interest in, to, and
under the real and personal property, tangible or intangible, described below, except to the extent
that such assets are Excluded Assets (collectively, the “Purchased Assets”):
(a) the Purchased Transmission Assets;
(b) the inventory of Seller identified in Schedule 2.1(b);
(c) the Documents;
(d) the machinery, equipment, vehicles, furniture, and other tangible personal property listed
on Schedule 2.1(d);
(e) to the extent commercially practicable, only that portion of each Purchased Agreement that
relates to Transmission, and otherwise, the Purchased Agreements;
(f) the Permits listed on Schedule 5.12(a), and all other Permits primarily used by
Seller in the ownership and operation of the Purchased Assets (the “Transferable Permits”);
(g) the Environmental Permits listed on Schedule 5.9(a)-2 and all other Environmental
Permits primarily used by Seller in the ownership and operation of the Purchased Assets (the
“Transferable Environmental Permits”);
(h) Claims and defenses of Seller to the extent such Claims or defenses arise primarily with
respect to the Assumed Obligations or the Purchased Assets, provided that any such Claims and
defenses will be assigned to Buyer without warranty or recourse, other than pursuant to the
representations and warranties contained in this Agreement;
18
(i) any assets acquired by Seller pursuant to Section 7.4(d) for inclusion in the Purchased
Assets;
(j) the software set forth on Schedule 2.1(j);
(k) all warranties pertaining to the Purchased Assets and set forth in Schedule
2.1(k);
(l) the Shared Easement Rights; and
(m) all assets to be transferred by, or on behalf of, Seller and its Affiliates to, or on
behalf of, Buyer or its Affiliates in accordance with Article VIII.
2.2 Excluded Assets. The Purchased Assets do not include any property or assets of
Seller not described in Section 2.1 and, notwithstanding any provision to the contrary in Section
2.1 or elsewhere in this Agreement, the Purchased Assets do not include, without limitation, the
following property or assets of Seller (all assets excluded pursuant to this Section 2.2, the
“Excluded Assets”):
(a) subject to Section 7.10 of this Agreement, the Seller Marks;
(b) all cash, cash equivalents, bank deposits, accounts receivable, and any income, sales,
payroll or other tax receivables;
(c) subject to Section 3.5 hereof, any refund or credit (i) related to Taxes paid by or on
behalf of Seller, whether such refund is received as a payment or as a credit against future Taxes
payable, or (ii) relating to a period before the Closing Date;
(d) any Purchased Assets that have been disposed of in compliance with this Agreement prior to
Closing;
(e) except as expressly provided in Section 2.1(h) and Section 2.1(k), all of the Claims or
causes of action of Seller against any Person;
(f) all insurance policies, and rights thereunder, including any such policies and rights in
respect of the Purchased Assets;
(g) the rights of Seller arising under or in connection with this Agreement, any certificate
or other document delivered in connection herewith, and any of the transactions contemplated hereby
and thereby;
(h) all agreements and Contracts not included in the Purchased Agreements;
(i) subject to Section 7.10, all software, software licenses, information systems, management
systems, and any items set forth in or generally described in subparts (i) through (vii) of the
definition of “Documents” in Section 1.1(a), and the software set forth on Schedule
2.2(i);
(j) the communication towers, equipment and assets set forth on Schedule 2.2(j); and
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(k) the assets and other rights set forth on Schedule 2.2(k).
2.3 Assumed Obligations. Upon the terms and subject to the satisfaction or waiver of
the conditions contained in this Agreement, at the Closing, Buyer will deliver to Seller the
Assignment and Assumption Agreement pursuant to which Buyer will assume and agree to discharge all
of the debts, liabilities, obligations, duties, and responsibilities of Seller of any kind and
description, whether absolute or contingent, monetary or non-monetary, direct or indirect, known or
unknown, or matured or unmatured, or of any other nature, to the extent primarily related to the
Purchased Assets, other than Excluded Liabilities (the “Assumed Obligations”), in
accordance with the respective terms and subject to the respective conditions thereof, including,
without limitation, the following liabilities and obligations (in every case other than Excluded
Liabilities); provided that nothing contained herein shall limit or prevent the Buyer from
asserting any defenses, claims or counterclaims that it may have against third Persons or under
this Agreement in respect of the Assumed Obligations (including those related to the validity and
enforceability thereof):
(a) all liabilities and obligations of Seller existing, arising, or asserted, whether before,
on, or after the Closing Date under the Purchased Agreements, the Transferable Permits, the
Transferable Environmental Permits (except to the extent such liabilities or obligations are
Assumed Pre-Closing Environmental Liabilities which are assumed pursuant to Section 2.3(d)), and
any other agreements or contractual rights assigned to Buyer pursuant to the terms of this
Agreement;
(b) all liabilities and obligations relating to Transmission Easement relocation obligations
and engineering and construction required to complete scheduled construction, construction work in
progress, and other capital expenditure projects, in each case related primarily to the Purchased
Assets and outstanding on or arising after the Effective Time;
(c) all liabilities and obligations associated with the Purchased Assets in respect of Taxes
for which Buyer is liable pursuant to Section 3.5 or Section 7.7;
(d) (i) all liabilities, obligations, Environmental Claims, and demands arising under, in
respect of, or relating to compliance or non-compliance by Seller, prior to the Closing Date, with
past, present, and future Environmental Laws, existing, arising, or asserted with respect to the
Purchased Assets (the “Assumed Pre-Closing Environmental Liabilities”), and (ii) all
liabilities, obligations, Environmental Claims, and demands arising under, in respect of, or
relating to compliance or noncompliance with present and future Environmental Laws with respect to
the Purchased Assets, on or after the Closing Date, except to the extent any of the foregoing is an
Assumed Pre-Closing Environmental Liability (the “Assumed Post-Closing
Environmental Liability,” and together with the Assumed Pre-Closing Environmental
Liabilities, the “Assumed Environmental Liabilities”);
(e) all liabilities and obligations in respect of the Purchased Assets arising on or after the
Closing Date (A) under (i) any FERC Regulatory Orders applicable to the Purchased Assets, (ii) the
State Regulatory Orders applicable to the Purchased Assets set forth on Schedule 2.3(e) or
(iii) State Regulatory Orders that relate to customary electric transmission facility siting or
siting certification matters within the jurisdiction of the Governmental Entity issuing such State
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Regulatory Order or (B) imposed on Buyer or the Purchased Assets in connection with any Required
Regulatory Approval;
(f) the Actual Assumed Balance Sheet Obligations;
(g) (i) all liabilities, obligations, arising under, in respect of, or relating to any Claim,
existing, arising, or asserted with respect to the Purchased Assets, prior to the Closing Date (the
“Assumed Pre-Closing Litigation”), and (ii) all liabilities, obligations, arising under, in
respect of, or relating to any Claim, existing, arising, or asserted with respect the Purchased
Assets, on or after the Closing Date, except to the extent any of the foregoing is Assumed
Pre-Closing Litigation (the “Assumed Post-Closing Litigation” and together with the Assumed
Pre-Closing Litigation, the “Assumed Litigation”);
(h) the liabilities and obligations set forth on Schedule 2.3(h);
(i) any liabilities or obligations (other than those set forth in clauses (a) through (h) of
this Section 2.3), whether known or unknown, of the Seller relating primarily to the Purchased
Assets, not reflected on the Final Balance Sheet or Final Rate Base Statement, which arose prior to
the Closing Date (the “Pre-Closing Non-Balance Sheet Liabilities”).
2.4 Excluded Liabilities. Notwithstanding anything to the contrary contained in this
Agreement, Buyer does not assume and will not be obligated to pay, perform, or otherwise discharge
any of the following liabilities or obligations of Seller or its Affiliates (collectively, the
“Excluded Liabilities”):
(a) any liabilities or obligations of Seller to the extent related to any Excluded Assets;
(b) any liabilities or obligations in respect of Taxes of Seller or any Tax Affiliate of
Seller, or any liability of Seller for unpaid Taxes of any Person under Treasury Regulation section
1.1502-6 (or similar provision of state, local, or foreign law) as a transferee or successor, by
Contract or otherwise, including without limitation, any Taxes relating to, pertaining to or
arising from the Purchased Assets for periods (or portions thereof) ending on or prior to the
Closing Date, except for Taxes for which Buyer is liable pursuant to Section 3.5 or Section 7.7;
(c) subject to Article VIII, any liabilities or obligations in respect of any employees of
Seller or its Affiliates, including any obligations of Seller for benefits, bonuses, wages,
employment Taxes, or severance pay and any liability or obligations arising under any Seller Plan;
(d) any liabilities or obligations relating to the disposal, storage, transportation,
discharge, Release, recycling, or the arrangement for such activities, by Seller, of Hazardous
Materials at any Off-Site Location, provided that for purposes of this Section 2.4(d), “Off-Site
Location” does not include any location to, at, or through which Hazardous Materials originally
disposed of at, discharged from, emitted from or Released at the Purchased Assets have migrated,
including, but not limited to, surface waters that have received waste water discharges from the
Purchased Assets (it being understood that the foregoing proviso shall not in any way diminish
Seller’s liabilities and obligations under this Agreement with respect to manufactured gas plant
sites);
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(e) liabilities or obligations relating to any properties (other than Purchased Assets)
formerly owned or operated by the Seller or its Affiliates or predecessors prior to the Closing;
(f) any liabilities or obligations reflected on the Final Balance Sheet, other than Actual
Assumed Balance Sheet Obligations and liabilities that are fully reflected as reductions to Net
Transmission Plant Investment;
(g) liabilities or obligations relating to any manufactured gas plant sites at, affecting or
related to the Purchased Assets;
(h) except for the Assumed Environmental Liabilities, liabilities or obligations arising from
any Claim (including any workers compensation Claim) related to the Purchased Assets of which
Seller has received written notice from a third party prior to the Closing;
(i) any liabilities or obligations of Seller arising under or in connection with this
Agreement, any certificate or other document delivered in connection herewith, and any of the
transactions contemplated hereby and thereby;
(j) subject to Section 7.18, all pre-closing liabilities and obligations of Seller, of
whatever nature, to the extent such liabilities are covered by a third party insurance policy
maintained by Seller and then only to the extent actual proceeds are received by Seller from such
third party insurer in respect of such liabilities or obligations;
(k) all liabilities and obligations of Seller or in respect of the Purchased Assets existing
on or after the Closing Date under any State Regulatory Orders issued prior to the Closing, other
than the liabilities or obligations (i) under the State Regulatory Orders applicable to the
Purchased Assets set forth on Schedule 2.3(e), (ii) imposed on Buyer or the Purchased
Assets in connection with any Required Regulatory Approval, or (iii) that relate to customary
transmission facility siting or siting certification matters within the jurisdiction of the
Governmental Entity issuing such State Regulatory Order;
(l) the liabilities or obligations set forth on Schedule 2.4(l);
(m) liabilities and obligations under Purchased Agreements for the provision of any Ancillary
Services or that would otherwise cause Buyer to be considered a customer of electricity
transmission service or electricity market participant under FERC rules or regulations;
(n) liabilities and obligations under Purchased Agreements to the extent not primarily related
to the Purchased Assets or Transmission; and
(o) liabilities and obligations under the Settlement Agreement dated October 31, 2002 between
Interstate Power Light and Electric and Southern Minnesota Municipal Power Agency.
ARTICLE III
PURCHASE PRICE
PURCHASE PRICE
3.1 Purchase Price. The purchase price for the Purchased Assets will be an amount
equal to $750,000,000.00 (the “Initial Valuation”), as adjusted pursuant to Section 3.2 (as
so
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adjusted, the “Base Price”), as further adjusted pursuant to Section 3.3 (as so
adjusted, the “Purchase Price”).
3.2 Determination of Base Price.
(a) Not less than fifteen (15) Business Days prior to the Closing Date, Seller shall deliver
to Buyer an estimated consolidated balance sheet of the Purchased Assets and Assumed Obligations as
of the Closing Date prepared in good faith by Seller (the “Estimated Balance Sheet”) (A)
clearly indicating in reasonable detail the liabilities and obligations included thereon that
Seller wishes to transfer to Buyer on the Closing Date (the “Estimated Assumed Balance Sheet
Obligations”) and (B) containing Seller’s good faith estimate of the Net Non-Rate Base Asset
Value as of the Closing Date (the “Estimated Net Non-Rate Base Asset Value”) and a
statement (the “Estimated Rate Base Statement”) setting forth the Estimated Rate Base
Amount, the Estimated Capital Expenditure Amount, the Estimated Rate Base Reclassification Amount
and the Estimated CWIP Amount, together with reasonably detailed supporting documentation. The
Estimated Balance Sheet shall be prepared in accordance with GAAP, consistently applied. The
Estimated Rate Base Statement shall be prepared in accordance with FERC 18 CFR, consistently
applied. Seller will provide Buyer and Buyer’s independent accountant with all supporting work
papers used by Seller in connection with such calculations at the time it delivers the Estimated
Balance Sheet and the Estimated Rate Base Statement. In the event that, not less than five (5)
Business Days prior to the Closing Date, Buyer notifies Seller of any errors contained in the
Estimated Balance Sheet or the Estimated Rate Base Statement, Seller shall in good faith consider
Buyer’s comments relating to such errors and make any amendments to the Estimated Balance Sheet or
the Estimated Rate Base Statement as Seller, acting in good faith, deems necessary or appropriate.
(b) Non-Rate Base Adjustment. For purposes of calculating the Base Price:
(i) If the Estimated Net Non-Rate Base Asset Value is a positive number, then the Base
Price shall be calculated as the Initial Valuation increased by such amount.
(ii) If the Estimated Net Non-Rate Base Asset Value is a negative number, then the Base
Price shall be calculated as the Initial Valuation decreased by such amount.
(c) Rate Base Adjustment. For purposes of calculating the Base Price:
(i) If the Estimated Rate Base Amount is greater than the Projected Rate Base Amount,
then the Base Price shall be calculated as the Initial Valuation, as adjusted pursuant to
the terms of Section 3.2(b), increased by the sum of (A) an amount equal to the Estimated
Rate Base Amount minus the Projected Rate Base Amount plus, if applicable, (B) the product
of (x) any portion of such amount (but not to exceed $20 million) calculated in the
preceding clause (A) to the extent attributable to a Rate Base Reclassification Increase
multiplied by (y) the Net Premium Multiple.
(ii) If the Estimated Rate Base Amount is less than the Projected Rate Base Amount,
then the Base Price shall be calculated as the Initial Valuation, as adjusted
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pursuant to
the terms of Section 3.2(b), decreased by the product of (x) an amount equal to the
Projected Rate Base Amount minus the Estimated Rate Base Amount, multiplied by (y) the
Premium Multiple.
(iii) If the Estimated CWIP Amount is greater than the Projected CWIP Amount, then the
Base Price shall be calculated as the Initial Valuation, as adjusted pursuant to the terms
of Section 3.2(c)(i) or (ii), as the case may be, increased by an amount equal to the
Estimated CWIP Amount minus the Projected CWIP Amount.
(iv) If the Estimated CWIP Amount is less than the Projected CWIP Amount, then the Base
Price shall be calculated as the Initial Valuation, as adjusted pursuant to the terms of
Section 3.2(c)(i) or (ii), as the case may be, decreased by an amount equal to the Projected
CWIP Amount minus the Estimated CWIP Amount.
(d) The Base Price shall be an amount equal to the Initial Valuation as adjusted pursuant to
the terms of Section 3.2(b) and 3.2(c).
3.3 Determination of Purchase Price.
(a) As soon as reasonably practicable after the Post-Closing Adjustment Date, but in any event
within ninety (90) days thereafter, Seller will prepare and deliver to Buyer a consolidated balance
sheet of the Purchased Assets and Assumed Obligations as of the Closing Date (as finally determined
pursuant to this Section 3.3, the “Final Balance Sheet”), (A) clearly indicating in
reasonable detail the liabilities and obligations included thereon that Seller transferred to Buyer
on the Closing Date (as finally determined pursuant to this Section 3.3, the “Actual Assumed
Balance Sheet Obligations”) and (B) containing the Net Non-Rate Base Asset Value as of the
Closing Date (as finally determined pursuant to this Section 3.3, the “Actual Net Non-Rate Base
Asset Value”), and a statement (as finally determined pursuant to this Section 3.3, the
“Final Rate Base Statement”) setting forth the Actual Rate Base Amount, the Post-Closing
Rate Base Value, the Actual Capital Expenditure Amount, the Actual Rate Base Reclassification
Amount and the Actual CWIP Amount, together with reasonably detailed supporting documentation.
Each of the Final Balance Sheet and the Final Rate Base Statement shall be reviewed by Deloitte &
Touche LLP. The Final Balance Sheet shall be prepared in
accordance with GAAP, consistently applied. The Final Rate Base Statement shall be prepared
in accordance with FERC 18 CFR, consistently applied. Seller shall provide Buyer and Buyer’s
independent accountant with all supporting work papers and all books and records of Seller, and
Buyer may make inquiry of the representatives of Seller’s accountants and Seller, as requested by
Buyer in connection with preparation and review of the Final Balance Sheet and the Final Rate Base
Statement. Buyer agrees to cooperate with Seller in connection with Seller’s preparation of the
Final Balance Sheet and the Final Rate Base Statement and related information, and to provide
Seller with access to its books, records, information and employees as Seller may reasonably
request in connection with such preparation. The Final Balance Sheet and Final Rate Base Statement
shall be prepared and adjusted pursuant to this Section 3.3 to avoid duplication of any items, and
not to include any items, to the extent otherwise taken into account in the prorations under
Section 3.5.
(b) The amounts set forth in the Final Balance Sheet and the Final Rate Base Statement will be
final, binding, and conclusive for all purposes unless, and only to the extent,
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that within 60 days
after Seller has delivered the Final Balance Sheet and the Final Rate Base Statement, Buyer
notifies Seller of any dispute with matters set forth therein. Any such notice of dispute
delivered by Buyer (an “Adjustment Dispute Notice”) will identify with reasonable
specificity each item in the Final Balance Sheet and the Final Rate Base Statement with respect to
which Buyer disagrees, the basis of such disagreement, and Buyer’s position with respect to such
disputed item.
(c) If Buyer delivers an Adjustment Dispute Notice in compliance with Section 3.3(b), then (i)
the undisputed portion of the total proposed Adjustment Amount based on the Final Balance Sheet and
the Final Rate Base Statement (together with interest thereon for the period commencing on the
Closing Date through the date of payment calculated at the Prime Rate in effect on the Closing
Date) will be paid by Seller or Buyer, as the case may be, in accordance with the payment
procedures set forth in Section 3.3(g); and (ii) Buyer and Seller will attempt to reconcile their
differences and any written resolution agreed and executed by both of them as to any disputed
amounts will be final, binding, and conclusive for all purposes on the Parties. If Buyer and
Seller are unable to reach a resolution with respect to all disputed items within 45 days of
delivery of the Adjustment Dispute Notice, Buyer and Seller will submit any items remaining in
dispute for determination and resolution to the Independent Accounting Firm which will be
instructed to determine and report to the Parties, within 30 days after such submission, upon such
remaining disputed items. The report of the Independent Accounting Firm will be final, binding,
and conclusive on the Parties for all purposes. The personnel of the Independent Accounting Firm
performing such services shall be individuals who are independent of, and impartial with respect to
Buyer and Seller and their Affiliates, officers, directors, agents and employees, and the officers,
directors, agents and employees of their respective Affiliates. Before referring a matter to the
Independent Accounting Firm, the Parties shall agree on procedures to be followed by the
Independent Accounting Firm (including procedures for the presentation of evidence). If the
Parties are unable to agree upon procedures before the expiration of thirty (30) days after receipt
by Seller of the Adjustment Dispute Notice, the Independent Accounting Firm shall establish
procedures, which procedures may be, but need not be, those proposed by either Party. The Parties
shall, as promptly as practicable, submit evidence to the Independent Accounting Firm in accordance
with such procedures. The fees and expenses of the Independent Accounting Firm incurred in the
resolution of such dispute shall be borne by the Parties in such proportion as is appropriate to
reflect the relative benefits received
by Seller on the one hand and Buyer on the other from the resolution of the dispute. For
example, if Buyer challenges items underlying the calculation of the Adjustment Amount in the net
amount of $100,000, but the Independent Accounting Firm determine that Buyer has a valid claim for
only $40,000, Buyer shall bear 60% of the fees and expenses of the Independent Accounting Firm and
Seller shall bear the other 40% of such fees and expenses. The decision rendered by the
Independent Accounting Firm pursuant to this Section 3.3 may be filed as a judgment in any court of
competent jurisdiction. Either Party may seek specific enforcement or take other necessary legal
action to enforce any decision of the Independent Accounting Firm under this Section 3.3.
(d) Final Non-Rate Base Adjustment. For purposes of calculating the Purchase Price:
(i) If the Actual Net Non-Rate Base Asset Value is a positive number, then the Purchase
Price shall be calculated as the Initial Valuation increased by such amount.
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(ii) If the Actual Net Non-Rate Base Asset Value is a negative number, then the
Purchase Price shall be calculated as the Initial Valuation decreased by such amount.
(e) Final Rate Base Adjustment. For purposes of calculating the Purchase Price:
(i) If the Actual Rate Base Amount is greater than the Projected Rate Base Amount, then
the Purchase Price shall be calculated as the Initial Valuation, as adjusted pursuant to the
terms of Section 3.3(d), increased by the sum of (A) an amount equal to the Actual Rate Base
Amount minus the Projected Rate Base Amount plus, if applicable, (B) the product of (x) any
portion of such amount (but not to exceed $20 million) calculated in the preceding clause
(A) to the extent attributable to a Rate Base Reclassification Increase multiplied by (y)
the Net Premium Multiple.
(ii) If the Actual Rate Base Amount is less than the Projected Rate Base Amount, then
the Purchase Price shall be calculated as the Initial Valuation, as adjusted pursuant to the
terms of Section 3.3(d), decreased by the product of (x) an amount equal to the Projected
Rate Base Amount minus the Actual Rate Base Amount, multiplied by (y) the Premium Multiple.
(iii) If the Post-Closing Rate Base Value is greater than the Actual Rate Base Amount,
then the Purchase Price shall be calculated as the Initial Valuation, as adjusted pursuant
to the terms of Section 3.3(e)(i) or (ii), as the case may be, increased by the product of
(A) an amount equal to the Seller Post-Closing Capital Increase multiplied by (B) the Net
Premium Multiple.
(iv) If the Actual CWIP Amount is greater than the Projected CWIP Amount, then the
Purchase Price shall be calculated as the Initial Valuation, as adjusted pursuant to the
terms of Section 3.3(e)(i), (ii) and/or (iii), as the case may be, increased by an amount
equal to the Actual CWIP Amount minus the Projected CWIP Amount.
(v) If the Actual CWIP Amount is less than the Projected CWIP Amount, then the Purchase
Price shall be calculated as the Initial Valuation, as adjusted pursuant to the terms of
Section 3.3(e)(i), (ii) and/or (iii), as the case may be, decreased by an amount
equal to the Projected CWIP Amount minus the Actual CWIP Amount.
(f) The Purchase Price shall be an amount equal to the Initial Valuation as adjusted pursuant
to the terms of Section 3.3(d) and 3.3(e).
(g) Within five days following the final determination of the Purchase Price pursuant to this
Article III, (i) if the Purchase Price is greater than the Base Price, Buyer will pay the
Adjustment Amount to Seller; or (ii) if the Purchase Price is less than the Base Price, Seller will
pay the Adjustment Amount to Buyer. Any amount paid under this Section 3.3(g) will be paid with
interest for the period commencing on the Post-Closing Adjustment Date through the date of payment,
calculated at the Prime Rate in effect on the Post-Closing Adjustment Date, in cash by wire
transfer of immediately available funds to the account specified by the Party receiving payment.
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3.4 Allocation of Purchase Price. The sum of the Purchase Price and the Assumed
Obligations will be allocated among the Purchased Assets on a basis consistent with Section 1060 of
the Code and the Treasury Regulations thereunder. Within 60 days following the Closing Date, the
Parties will work together in good faith to agree upon such allocation; provided that in the event
that such agreement has not been reached within such 60-day period, the allocation will be
determined by the Independent Accounting Firm, and such determination will be binding on the
Parties. Each Party will pay one-half of the fees and expenses of the Independent Accounting Firm
in connection with such determination. Each Party will report the transactions contemplated by the
Agreement for federal Income Tax and all other Tax purposes in a manner consistent with such
allocation to the extent consistent with applicable law. Each Party will provide the other
promptly with any other information required to complete Form 8594 under the Code. Each Party will
notify the other, and will provide the other with reasonably requested cooperation, in the event of
an examination, audit, or other proceeding regarding the allocations provided for in this Section
3.4.
3.5 Proration.
(a) All Taxes (but not including Transfer Taxes), utility charges, and similar items
customarily prorated, including those listed below, to the extent relating to the Purchased Assets
will be prorated as of the Effective Time, with Seller liable to the extent such items relate to
any period prior to the Effective Time, and Buyer liable to the extent such items relate to any
period from and after the Effective Time. To the extent that Seller determines in good faith that
amounts to be prorated under this Section 3.5 can be reasonably estimated at Closing, Seller will
provide Buyer with such estimate and the Parties will adjust the amounts paid at Closing to reflect
such prorations. Such items to be prorated will include:
(i) personal property Taxes, real property Taxes, replacement Taxes, assessments,
franchise Taxes, and other similar charges, including charges for water, telephone,
electricity, and other utilities;
(ii) any permit, license, registration, compliance assurance fees or other fees with
respect to any Transferable Permits and Transferable Environmental Permits that are in fact
transferred to Buyer, excluding any fees to transfer such Transferable Permits and
Transferable Environmental Permits;
(iii) any pre-paid expenses (including security deposits) relating to the Purchased
Assets;
(iv) rent, Taxes and other items (including prepaid services or goods not included in
inventory) payable by or to Seller under any of the Purchased Agreements;
(v) fees or charges (other than Taxes) imposed by any Governmental Entity; and
(vi) rents under any leases of real or personal property.
(b) In connection with any real property or personal property Tax prorations, including
installments of special assessments, replacement taxes payable by the owner of the
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Purchased
Assets, or any other taxes assessed with respect to the Purchased Assets on an annual or periodic
basis, Buyer will be credited with an amount equal to the amount of the current real property Tax
or installment of special assessments or other Tax, as the case may be, multiplied by a fraction,
(i) the numerator of which is the number of days from the date of the immediately preceding
installment to the day before the Closing Date, and (ii) the denominator of which is the total
number of days in the assessment period in which the Closing Date occurs. In connection with any
prorations, in the event that actual amounts are not available at the Closing Date, the proration
will be based upon the Taxes, assessments, charges, fees, or rents for the most recent period
completed prior to the Closing Date for which actual Taxes, assessments, charges, fees, or rents
are available. All prorations will be based upon the most recent available Tax rates, assessments,
and valuations. Any prorations will be made so as to avoid duplication of any items, and will not
include items to the extent otherwise taken into account in determining the Purchase Price,
including the Adjustment Amount.
(c) The proration of all items under this Section 3.5 will be recalculated by Buyer within 60
days following the date upon which the actual amounts become available to Buyer. Buyer will notify
Seller promptly of such recalculated amounts, and will provide Seller with all documentation
relating to such recalculations, including tax statements and other notices from third parties.
The Parties will make such payments to each other as are necessary to reconcile any estimated
amounts prorated as of the Effective Time with the final amounts to be prorated. Seller and Buyer
agree to furnish each other with such documents and other records as may be reasonably requested in
order to confirm all proration calculations made pursuant to this Section 3.5.
ARTICLE IV
THE CLOSING
THE CLOSING
4.1 Time and Place of Closing. Upon the terms and subject to the satisfaction of the conditions contained in Article IX of
this Agreement (or waiver thereof as provided herein), the closing of the purchase and sale of the
Purchased Assets and assumption of the Assumed Obligations (the “Closing”) will take place
at a location to be agreed to by the Parties beginning at 10:00 A.M. (local time) on the second
Business Day following the date on which the conditions set forth in Article IX (other than
conditions to be satisfied by deliveries at the Closing) have been satisfied or waived, or at such
other time as the Parties may agree. The date on which the Closing occurs is referred to herein as
the “Closing Date.” The purchase and sale of the Purchased Assets and assumption of the
Assumed Obligations will be effective as of 12:00:01 A.M., Cedar Rapids, Iowa time on the Closing
Date (the “Effective Time”).
4.2 Payment of Base Price. Upon the terms and subject to the satisfaction or waiver
of the conditions contained in this Agreement, at the Closing, Buyer will pay or cause to be paid
to Seller the Base Price, by wire transfer of immediately available funds, to the account or
accounts designated by Seller on the third Business Day prior to the Closing, or by such other
means as may be agreed upon by Seller and Buyer.
4.3 Deliveries by Seller. At or prior to the Closing, Seller will deliver the
following to Buyer:
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(a) the Xxxx of Sale, duly executed by Seller;
(b) the Assignment and Assumption Agreement, duly executed by Seller;
(c) the Distribution Interconnect Agreement, duly executed by Seller;
(d) the Generator Interconnect Agreement, duly executed by Seller and MISO;
(e) the Transition Services Agreement, duly executed by Seller;
(f) the lease agreement described in Section 8.3(b), duly executed by Seller;
(g) all consents, waivers, Transferable Permits, Transferable Environmental Permits or
approvals obtained by Seller from third parties in connection with this Agreement including,
without limitation, the consents, waivers, Transferable Permits, Transferable Environmental Permits
or approvals obtained by Seller pursuant to Sections 7.4 and 9.2(j);
(h) the certificate contemplated by Section 9.2(d);
(i) one or more deeds of conveyance of the Transmission Fee Interests, substantially in the
form of the Deed, duly executed and acknowledged by Seller and in recordable form, conveying good
and insurable fee simple title to the Transmission Fee Interests;
(j) one or more Easements, substantially in the form of the Substation Site Easement, as are
necessary to convey a reservation of Easement and other rights to Buyer (such that Buyer
will have access to Transmission Line Facilities and Transmission Substation Facilities
following the Closing) to the real property, Easements and other land rights of Seller set forth
Schedule 4.3(j);
(k) one or more instruments of assignment or conveyance, substantially in the form of the
Assignment of Easements and the Partial Assignment of Shared Easements, as are necessary to
transfer the Transmission Easements, the Transmission Leases, and the Shared Easement Rights;
(l) all such other instruments of assignment or conveyance as are reasonably requested by
Buyer in connection with the transfer of the Purchased Assets to Buyer in accordance with this
Agreement;
(m) terminations or releases of all Encumbrances on the Purchased Assets required to be
released pursuant to Section 9.2(f) and Section 9.2(g);
(n) a duly executed certificate, in form and substance reasonably satisfactory to the Buyer,
certifying that the transactions contemplated by this Agreement are exempt from withholding under
Section 1445 of the Code; and
(o) a receipt for payment of the Base Price by Buyer.
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4.4 Deliveries by Buyer. At or prior to the Closing, Buyer will deliver the following
to Seller:
(a) the Assignment and Assumption Agreement, duly executed by Buyer;
(b) the Distribution Interconnect Agreement, duly executed by Buyer;
(c) the Generator Interconnect Agreement, duly executed by Buyer and MISO;
(d) the Transition Services Agreement, duly executed by Buyer;
(e) the lease agreement described in Section 8.3(b), duly executed by Buyer;
(f) the certificate contemplated by Section 9.3(c);
(g) one or more Easements, substantially in the form of the Substation Site Easement, as are
necessary to convey a reservation of Easement and other rights to Seller (such that Seller will
continue to have access to its utility and distribution assets and facilities following the
Closing) to the Transmission Land Rights set forth in Schedule 4.4(g);
(h) all consents, waivers, or approvals obtained by Buyer from third parties in connection
with this Agreement; and
(i) all such other documents, instruments, and undertakings as are reasonably requested by
Seller in connection with the assumption by Buyer of the Assumed Obligations in accordance with
this Agreement.
4.5 Parent Guaranty. To guaranty its obligations under this Agreement, Buyer shall
deliver to Seller upon execution of this Agreement the Parent Guaranty, duly executed by Parent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate the transactions
contemplated hereby, except as set forth in, or qualified by any matter set forth in, the Seller
Disclosure Schedule (as the same may be supplemented or amended pursuant to Section 7.8), Seller
represents and warrants to Buyer as set forth in this Article V. For convenience of reference,
selected Sections of Article V refer to specific, numbered Schedules, but such references do not
limit the general applicability of the exceptions, qualifications, and other matters set forth in
the Seller Disclosure Schedule (excluding any supplement or amendment pursuant to Section 7.8) to
each and every representation and warranty set forth in this Article V; provided that, the
applicability of such exceptions, qualifications and other matters set forth in the Seller
Disclosure Schedule are reasonably apparent to such other representation and warranty; provided
further that, no such exception, qualification or other matter shall be deemed disclosed for the
purposes of Section 5.5(a) of this Agreement unless such exception, qualification or other matter
is set forth on Schedule 5.5(a).
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5.1 Organization; Qualification. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of Iowa and has all requisite corporate power and
authority to own, lease, and operate the Purchased Assets. Seller is duly qualified or licensed to
do business as a foreign corporation and is in good standing in each jurisdiction in which the
ownership or operation of any Purchased Assets by Seller makes such qualification necessary, except
where the failure to be so qualified or licensed and in good standing would not have a Material
Adverse Effect.
5.2 Authority Relative to this Agreement. Seller has all corporate power and
authority necessary to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the board of directors of
Seller and no other corporate proceedings on the part of Seller are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Seller, and constitutes a valid and binding agreement of Seller,
enforceable against Seller in accordance with its terms, except as 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.
5.3 Consents and Approvals; No Violation. Except as set forth in Schedules 5.3(a) through (d), the execution and delivery of
this Agreement by Seller, and the consummation by Seller of the transactions contemplated hereby,
do not:
(a) conflict with or result in any breach of Seller’s Governing Documents;
(b) (i) breach or otherwise constitute or give rise to a breach of or result in a default
under (including with notice, lapse of time, or both), (ii) give rise to any right of termination,
cancellation, acceleration or modification, under, (iii) result in or give to any person or entity
any additional rights or entitlement to increased, additional accelerated or guaranteed payments
under or (iv) result in the creation or imposition of any Encumbrance on the Purchased Assets under
any of the terms, conditions, or provisions of any Contract or other obligation to which Seller is
a party or by which Seller or any of the Purchased Assets may be bound, except for matters as to
which requisite waivers or consents have been, or will prior to the Closing be, obtained or which
if not obtained or made would not, individually or in the aggregate, have a Material Adverse
Effect;
(c) violate any Law or Order applicable to Seller, any of its Affiliates, or any of the
Purchased Assets, which violations would, individually or in the aggregate, have a Material Adverse
Effect; or
(d) require any declaration, filing, issuance of a Permit, or registration with, or notice to,
or authorization, consent, or approval or act of any Person, entity, including without limitation
any Person or entity that is party to a Purchased Agreement, or Governmental Entity, other than (i)
the Required Regulatory Approvals or (ii) such declarations, filings, registrations, notices,
authorizations, consents, or approvals which, if not obtained or made, would not, individually or
in the aggregate, have a Material Adverse Effect.
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5.4 Governmental Filings. Since January 1, 2004, Seller has filed or caused to be
filed with the ICC, IUB, MPUC and FERC and all other applicable Governmental Entities, all material
forms, statements, reports, and documents (including all exhibits, amendments, and supplements
thereto) required by Law or Order to be filed by Seller with the ICC, IUB, MPUC or FERC or such
other Governmental Entities with respect to the Purchased Assets. As of the respective dates on
which such forms, statements, reports, and documents were filed, each (to the extent prepared by
Seller and excluding information prepared or provided by third parties) complied in all material
respects with all requirements of any Law or Order applicable to such form, statement, report, or
document in effect on such date.
5.5 No Material Adverse Effect; Liabilities.
(a) Except as set forth in Schedule 5.5(a), or as required by the terms of this
Agreement, since January 1, 2006, no change, effect, development or event has occurred which,
either individually or in the aggregate, with all effects, events, developments or changes, has
resulted in a Material Adverse Effect.
(b) Except as set forth on Schedule 5.5(b), there are no material liabilities,
obligations or debts whether absolute or contingent, monetary or non-monetary, direct or indirect,
known or unknown, matured or unmatured, or of any other nature related to the Purchased Assets,
whether or not required by GAAP to be disclosed in a balance sheet, except for liabilities
reflected in the Estimated Balance Sheet. Except as set forth on Schedule 5.5(b), Seller
does not have any obligations (absolute or contingent) related to the Purchased Assets to provide
funds on behalf of, or to guarantee any debt, liability or obligation of, any Person.
5.6 Operation in the Ordinary Course. Except as otherwise disclosed herein or set
forth in Schedule 5.6, since January 1, 2006, and until the date hereof, the Purchased
Assets have been operated in the ordinary course of business consistent with past practice.
Without limiting the generality of the foregoing, from January 1, 2006 through the date hereof,
except as set forth on Schedule 5.6, Seller has not taken any action or omitted to take any
action that would, after the date hereof, be prohibited by Section 7.1 of this Agreement.
5.7 Title.
(a) Except as set forth on Schedule 5.7(a)(i), Seller owns (i) good title to the
Purchased Assets (other than Transmission Land Rights and Shared Easements), (ii) good and
insurable title to the Transmission Fee Interests, and (iii) valid and effective interests, in full
force and effect, in all Transmission Easements and Shared Easements, except as would not,
individually or in the aggregate, impair in any material respect the operation or use of the
related real estate parcels or the conduct of the business thereon as it is currently being
operated, used and conducted by Seller or impair in any material respect the value of the
Transmission Easements and Shared Easement Rights as a whole and (iv) valid and effective
interests, in full force and effect, in all Material Easements, for all of clauses (i) through (iv)
free and clear of all Encumbrances other than Permitted Encumbrances. Except as set forth on
Schedule 5.7(a)(i), to Seller’s Knowledge, there are no material defects in Seller’s valid
and effective interest in the Transmission Easements and Shared Easements listed on Schedule
5.7(b) (without regard to any
32
amendments or updates to such Schedule pursuant to Section 7.8).
Except as set forth on Schedule 5.7(a)(ii), the Purchased Assets are not subject to
Preferential Purchase Rights.
(b) Schedule 5.7(b) contains a true and correct list of (i) each Transmission Land
Right, and (ii) each parcel of real property as to which Seller has a Shared Easement.
5.8 Leases.
(a) Schedule 5.8(a) lists all real property leases under which Seller is a lessee or
lessor that (i) relate primarily to the Purchased Assets, and (ii) provide for annual payments of
more than $10,000 (collectively, “Real Property Leases”).
(b) Except as set forth in Schedule 5.8(b), each of the Real Property Leases is valid,
in full force and effect, and enforceable in accordance with its terms and constitutes a legal and
binding obligation of Seller, and to Seller’s Knowledge, each other party thereto, except to the
extent the invalidity, ineffectiveness, unenforceability, illegality, or nonbinding nature of any
such Real Property Lease would not, individually or in the aggregate, materially impair the use or
operation of the affected property or the conduct of the business thereon as it is currently being
used and conducted by Seller. Seller has neither given nor received any written notice of any
default, termination or partial termination under any Real Property Lease, and there is no existing
or continuing default by Seller or, to the Seller’s Knowledge, any other party in the performance
or payment of any obligation under any Real Property Lease, except to the extent any such defaults,
terminations or partial terminations would not, individually or in the aggregate, materially impair
the use or operation of the affected property or the conduct of the business thereon as it is
currently being used and conducted.
5.9 Environmental.
(a) Except as set forth on Schedule 5.9(a)-1, (i) to Seller’s Knowledge, Seller (to
the extent related to the Purchased Assets) is in compliance with all applicable Environmental
Laws, (ii) to Seller’s Knowledge, Seller possesses all Environmental Permits required under
Environmental Laws for the operation of the Purchased Assets as they are currently operated and is
in compliance with such Environmental Permits; and (iii) Seller has received no written notice that
any Environmental Permit is subject to termination, modification or revocation. Schedule
5.9(a)-2 sets forth a list of all material Environmental Permits held by Seller for the
operation of the Purchased Assets.
(b) Except as set forth on Schedule 5.9(b), neither Seller nor any Affiliate of Seller
has received within the last five years and, to Seller’s Knowledge, at any prior time, any written
notice, report, request for information or other information regarding any actual or alleged
violation of Environmental Laws or any liabilities or potential liabilities, including any
investigatory, remedial, or corrective obligations, relating to the operation of the Purchased
Assets arising under or relating to Environmental Laws or regarding Hazardous Materials.
(c) Except as set forth on Schedule 5.9(c), (i) to Seller’s Knowledge, Seller has not
caused any Release, and there is and has been no other Release from, in, on, beneath, or affecting
the Purchased Assets that could form a basis for an Environmental Claim, and (ii) Seller has not
received written notice of any Environmental Claims related to the Purchased Assets that have
33
not
been fully and finally resolved and, to Seller’s Knowledge, no such Environmental Claims are
pending or threatened against Seller.
(d) Except as set forth on Schedule 5.9(d), to Seller’s Knowledge there are and have
been no underground storage tanks, and there are no asbestos-containing building materials or
poly-chlorinated biphenyls owned, leased, used, operated or maintained by Seller or, to Seller’s
Knowledge, are otherwise located at any of the Purchased Assets.
(e) Except as set forth on Schedule 5.9(e), with respect to the Purchased Assets,
within the last five years and, to Seller’s Knowledge, at any prior time, Seller has not assumed or
retained, by contract or, to Seller’s Knowledge, by operation of law, any obligation under any
Environmental Law or concerning any Hazardous Materials.
(f) Seller has made available to Buyer all material environmental reports relating to the
Purchased Assets that are in the possession or reasonable control of Seller.
5.10 Certain Contracts and Arrangements.
(a) Except for Contracts which (i) are listed on Schedule 5.8(a), or Schedule
5.10(a), copies of which have been made available to Buyer prior to the date hereof (the
“Material Contracts”), or (ii) have been entered into in the ordinary course of business
and do not individually involve annual payment obligations in excess of $100,000, Seller is not a
party to any Contract, which (A) is primarily related to the Purchased Assets other than the
agreements set forth on Schedule 2.2(k) and any other Contracts which are Excluded Assets,
(B) contains any provision or covenant, which after the Closing will apply to the Purchased Assets,
or Buyer as owner thereof, prohibiting or materially restricting Seller or its Affiliates from
engaging in any lawful business activity or competing with any person or entity, (C) relate to the
Purchased Assets and involves indebtedness (other than trade payables arising in the ordinary
course or business) in excess of $10,000, (D) relates to collective bargaining or similar labor
Contracts which cover any employees of Seller or its Affiliates engaged in work related to the
Purchased Assets, (E) relate to the interconnection of the Purchased Assets, or (F) relate to the
Purchased Assets and by which any officer, director or Affiliate of Seller is also bound.
(b) Except as disclosed in Schedule 5.10(b), each Material Contract constitutes a
legal, valid and binding obligation of Seller and, to Seller’s Knowledge, constitutes a legal,
valid and binding obligation of the other parties thereto and is in full force and effect. Except
as set forth in Schedule 5.10(b), Seller is in compliance in all material respects with all
terms and requirements of each Material Contract, and no event has occurred that, with notice or
the passage of time, or both, would constitute a breach or default by Seller under any such
Material Contract. Except as set forth in Schedule 5.10(b), to Seller’s Knowledge, no
other party to any Material Contract is in breach or default (nor has any event occurred which,
with notice or the passage of time, or both, would constitute such a breach or default) under any
Material Contract.
5.11 Legal Proceedings and Orders. Except as set forth in Schedule 5.11, (a)
there are no material Claims relating to the Purchased Assets, which are pending or, to Seller’s
Knowledge, threatened against Seller or its Affiliates and (b) as of the date of this Agreement
there are no Claims pending or to Seller’s Knowledge threatened against Seller or its Affiliates
34
before any court, arbitrator, mediator or Governmental Entity which, individually or in the
aggregate, would have a Material Adverse Effect. Except for any FERC Regulatory Orders, or as set
forth in Schedule 5.11, Seller is not subject to any outstanding Orders that would
reasonably be expected to apply to the Purchased Assets following Closing.
5.12 Permits.
(a) Schedule 5.12(a) sets forth a list of all material Permits held by Seller and
required for the operation of the Purchased Assets as they are presently operated.
(b) Seller has all material Permits required by Law for the ownership or lease of and the use
and operation of the Purchased Assets as they are presently operated and, to Seller’s Knowledge,
each such material Permit is valid, binding and in full force and effect.
(c) Seller is not, and has not received any written notice that it is in default (or with the
giving of notice or lapse of time or both, would be in default) under any such material Permits.
5.13 Compliance with Laws. Neither Seller nor any of Seller’s Affiliates has at any
time within the last two (2) years been, or has received any notice that it is or has at any time
within the last two (2) years been, in violation of any Laws and Orders applicable to the ownership
or lease, operation and use of the Purchased Assets, except where any such non-compliance would
not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on
Schedule 5.13, neither Seller nor any of Seller’s Affiliates has at any time within the
last two (2) years received any written notice from any Governmental Entity of any actual alleged
or potential obligations to undertake any material remedial action applicable to the Purchased
Assets.
5.14 Insurance. Schedule 5.14(a) hereto contains a true and complete list of
all liability, property, workers’ compensation and other insurance policies currently in effect
that insure or relate to the Purchased Transmission Assets. Except as set forth on Schedule
5.14(b), since January 1, 2004, the Purchased Assets have been continuously insured with
financially sound insurers in such amounts and against such risks and losses as are customary in
the electric utility industry, no premiums due under any policy listed on Schedule 5.14(a)
have not been paid (to the extent any such non-payment would entitle the insurer to terminate such
policy) and Seller has not received any written notice of cancellation, termination or denial of a
claim thereunder with respect to any material insurance policy of Seller providing coverage in
respect of the Purchased Assets. All insurance policies of Seller covering the Purchased Assets
are in full force and effect.
5.15 Taxes.
(a) All Tax Returns relating to the Purchased Assets required to be filed by or on behalf of
Seller have been filed in a timely manner and are true and correct in all material respects, and
all Taxes due have been paid in full, except to the extent being contested in good faith by
appropriate proceedings and for which adequate reserves have been made on the Seller’s financial
statements in accordance with GAAP applied on a consistent basis.
35
(b) None of the Purchased Assets is (i) an asset or property that is or will be required to be
treated as described in Section 168(f)(8) of the Internal Revenue Code of 1954 as in effect
immediately before the enactment of the Tax Reform Act of 1986, or (ii) tax-exempt use property
within the meaning of section 168(h)(1) of the Code.
(c) There are no outstanding agreements extending the statutory period of limitation
applicable to any claim for, or the period for the collection or assessment of, Taxes with respect
to the Purchased Assets.
(d) With respect to the Purchased Assets, Seller has duly and timely withheld and paid over to
the appropriate taxing authorities all amounts required to be so withheld and paid over for all
periods under applicable laws.
(e) There is no action, suit, proceeding, investigation, audit or claim now pending or
threatened in writing with respect to any Tax with respect to the Purchased Assets.
5.16 Fees and Commissions. Except for X.X. Xxxxxx Securities Inc., which is acting
for and at the expense of Seller, no broker, finder, or other Person is entitled to any brokerage
fees, commissions, or finder’s fees for which Buyer could become liable or obligated in connection
with the transactions contemplated hereby by reason of any action taken by Seller or its
Affiliates.
5.17 Adequacy of Purchased Assets. Except as set forth on Schedule 5.17, all
of the Purchased Transmission Assets are suitable for Transmission as currently owned or used.
Except as set forth on Schedule 5.17, the Purchased Assets, comprise all of the
Transmission Lines, Transmission Line Facilities and Transmission Substation Facilities and other
material rights and assets that are necessary for: (i) Transmission over the Transmission Lines on
a commercially reasonable basis in accordance with Good Utility Practice, as conducted by Seller
and its Affiliates as of the date hereof and at Closing, and (ii) the interconnection of such
Transmission Lines with all other Transmission lines, Transmission facilities, distribution
facilities, generation facilities and other electrical equipment to which such Transmission Lines
are currently interconnected. Except as set forth on Schedule 5.17, the Transmission Lines
constitute all of the lines used for Transmission owned or operated by Seller, and the Purchased
Assets include all of the material assets, rights and properties of Seller owned, used or operated
primarily for Transmission.
5.18 Employee Benefits.
(a) Schedule 5.18(a) sets forth a list of each “employee benefit plan” (within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”)), in effect as of the date of this Agreement, including stock purchase, stock
option, severance, employment, change-in-control, fringe benefit, bonus, incentive, deferred
compensation, retention and all other employee benefit plans, agreements, programs, policies or
other arrangements maintained by Seller or any of its Affiliates, whether or not subject to
ERISA, oral or written, under which any of the Employees has any present or future right to
benefits. All such plans, agreements, programs, policies and arrangements are collectively
referred to herein as the “Seller Plans.”
36
(b) Each Seller Plan that is intended to be qualified under Section 401(a) of the Code has
received or applied for a favorable determination letter from the Internal Revenue Service to the
effect that such Plan is qualified under the Code and nothing has occurred that could reasonably be
expected to cause the loss of such qualification.
(c) Seller has notified the Employees that it intends to cease accruing additional benefits no
later than August 31, 2008 under any Seller Plan (other than a “multiemployer plan” within the
meaning of ERISA section 4001(a)(3)) that is subject to Title IV of ERISA. No Encumbrance exists on
any Purchased Asset that arose under ERISA or, in respect of any “employee benefit plan” (within
the meaning of Section 3(3) of ERISA), under the Code.
(d) No Seller Plan exists that could result in the payment to any Employee of any money or
other property (including any severance payments, bonus or other compensation) or in the
acceleration of any other rights or benefits to any Employee as a result of the transactions
contemplated herein. At the Effective Time, the Purchased Assets will not have a total gross fair
market value equal to more than one-third of the total gross fair market value of all of the assets
of Seller and its Affiliates (as contemplated by Q&A 29(a) of Treasury Reg. Section 1.280G-1).
(e) Schedule 5.18(e) contains a true and complete list of all of the Employees and
identifies, to the extent applicable, each Employee’s date of hire, title, salary or hourly rate of
pay, annual vacation allowance, bonus target for the 2006 and 2007 years, bonus actually paid or
payable for the two (2) most recent fiscal years, other compensation, work location, and leave
status.
5.19 Regulation as a Utility. Seller is regulated as a public utility in the United
States and the States of Illinois, Iowa and Minnesota. Except as provided in the previous
sentence, Seller is not subject to regulation as a public utility or public service company (or
similar designation) by any State of the United States, any foreign country or any municipality or
any political subdivision of the foregoing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter this Agreement and to consummate the transactions
contemplated hereby, Buyer represents and warrants to Seller as follows:
6.1 Organization. Buyer is a limited liability company validly existing and in good
standing under the laws of the State of Michigan and has all requisite limited liability company
power and authority to own, lease, and operate its properties and to carry on its business as is
now being conducted.
6.2 Authority Relative to this Agreement. Buyer has all limited liability company
power and authority necessary to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by the sole member of
Buyer and no other limited liability company proceedings on the part of Buyer are necessary to
authorize this Agreement or to consummate the transactions contemplated
37
hereby. This Agreement has
been duly and validly executed and delivered by Buyer, and constitutes a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms, except as 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.
6.3 Consents and Approvals; No Violation. Except as set forth in Schedule
6.3, the execution and delivery of this Agreement by Buyer, and the acquisition of the
Purchased Assets contemplated hereby, do not:
(a) conflict with or result in any breach of Buyer’s Governing Documents;
(b) (i) breach or otherwise constitute or give rise to a breach of or result in a default
under (including with notice, lapse of time, or both), (ii) give rise to any right of termination,
cancellation, acceleration or modification, under, (iii) result in or give to any person or entity
any additional rights or entitlement to increased, additional accelerated or guaranteed payments
under or (iv) result in the creation or imposition of any Encumbrance under any of the terms,
condition(s), or provisions of any Contract or other obligation to which Buyer is bound, except for
such matters as to which requisite waivers or consents have been, or will prior to the Effective
Time be, obtained or which if not obtained or made would not, individually or in the aggregate,
cause a Buyer Material Adverse Effect;
(c) violate any Law or Order applicable to Buyer, any of its Affiliates, or any of their
respective assets which violations would, individually or in the aggregate, have a Buyer Material
Adverse Effect; or
(d) require any declaration, filing, or registration with, or notice to, or authorization,
consent, or approval or act of any Person, entity or Governmental Entity, other than (i) the
Required Regulatory Approvals, or (ii) such declarations, filings, registrations, notices,
authorizations, consents, or approvals which, if not obtained or made, would not, individually or
in the aggregate, have a Buyer Material Adverse Effect.
6.4 Buyer’s Knowledge. Buyer represents that it is a sophisticated party, and has
conducted a due diligence investigation of the Purchased Assets and the Assumed Obligations. Buyer
understands and agrees that any financial forecasts or projections relating to the Purchased Assets
prepared by or on behalf of Seller have been provided to Buyer with the understanding and agreement
that Seller is making no representation or warranty with respect to such forecasts or projections;
provided that, for the avoidance of doubt, this Section 6.4 in no way limits Seller’s liability for
breach of the representations and warranties contained in this Agreement and Buyer shall
retain all rights in respect thereof.
6.5 Legal Proceedings. Except as set forth in Schedule 6.5, as of the date of
this Agreement, there are no Claims pending or to Buyer’s Knowledge threatened against Buyer before
any court, arbitrator, mediator or Governmental Entity which, individually or in the aggregate,
would have a Buyer Material Adverse Effect.
6.6 Fees and Commissions. No broker, finder, or other Person is entitled to any
brokerage fees, commissions, or finder’s fees for which Seller could become liable or obligated
38
in
connection with the transactions contemplated hereby by reason of any action taken by Buyer or its
Affiliates.
6.7 Financing Commitments. Buyer has prior to the date hereof provided Seller copies
of financing commitments from responsible financial institutions, copies of which are attached as
Schedule 6.7 (the “Financing Commitments”), to provide cash to Parent in an amount
sufficient to enable Buyer to consummate the transactions contemplated by this Agreement. The
Financing Commitments are legally binding on Parent and, to Buyer’s Knowledge, on the other parties
thereto.
ARTICLE VII
COVENANTS OF THE PARTIES
COVENANTS OF THE PARTIES
7.1 Conduct of Business. Except as otherwise contemplated by this Agreement, required
by any Purchased Agreement disclosed on Schedule 5.8(a) or 5.10(a) (without regard to any
supplements or amendments pursuant to Section 7.8), Law, or Order, or otherwise described in
Schedule 7.1, during the period from the date of this Agreement to the Closing Date, Seller
will operate the Purchased Assets in the ordinary course consistent with Good Utility Practice and
will use commercially reasonable efforts to preserve intact the Purchased Assets. Without limiting
the generality of the foregoing, except as contemplated in this Agreement, required by any Law, or
Order, or otherwise described in Schedule 7.1, prior to the Closing Date, without the prior
written consent of Buyer, which will not be unreasonably withheld or delayed, Seller will not:
(a) create, incur, assume, or suffer to exist any Encumbrance (other than Permitted
Encumbrances) upon the Purchased Assets;
(b) make any material change in the level of inventories customarily maintained by Seller with
respect to the Purchased Assets, other than in the ordinary course of business or consistent with
Good Utility Practice;
(c) sell, lease (as lessor), transfer or otherwise dispose of any of the Purchased Assets,
other than (A) any such sales, leases, transfers, or dispositions involving any Purchased
Transmission Assets in the ordinary course of business consistent with Good Utility Practice
with a fair value of less than $500,000 in the aggregate, and (B) any such sales, leases,
transfers, or dispositions involving any Purchased Assets or assets that would be Purchased Assets
at Closing which are not Purchased Transmission Assets with a fair value of less than $10,000 on an
individual basis, or $100,000 in the aggregate;
(d) other than in the ordinary course of business consistent with Good Utility Practice, (A)
enter into, terminate, extend, renew, or otherwise amend any Material Contract, or any Contract
that would have been a Material Contract if in existence on the date hereof or (B) waive any
material default or release, settle, or compromise any Claim involving more than $25,000 by any
other Person who is a party thereto;
(e) fail to maintain, or cause any Affiliate of Seller to maintain, substantially the same
levels of insurance with respect to the Purchased Assets as is in effect on the date hereof;
39
(f) to the extent related to the Purchased Assets, other than in the ordinary course of
business or except as required by Law, (i) change any method of Tax accounting, (ii) make or change
any material Tax election, (iii) file any amended Tax Return, (iv) settle or compromise any
material Tax liability, (v) agree to an extension or waiver of the statute of limitations with
respect to the assessment or determination of material Taxes, (v) enter into any closing agreement
with respect to any material Tax or (vi) surrender any right to claim a material Tax refund;
(g)(i) other than capital expenditures made as a result of Orders, emergency situations or force
majeure events (which expenditures can be substituted for planned projects upon notice and
consultation with Buyer), make any capital expenditures in an amount greater than (A) 102.5% of
the capital expenditure amount set forth on Schedule 7.1(g), minus (B) the amount of
capital expenditures made between January 1, 2006 through the date hereof, or (ii) fail to act in
accordance with the past practice of Seller with respect to pursuing future year capital projects
in a timely manner, including, without limitation, continuing planning, conceptual and detailed
engineering design, future project siting activities, Easement procurement and long-lead time
material procurement with respect to such matters;
(h) (i) increase the base salary or incentive compensation of any Employee (except for
increases in salary or hourly wage rates, in the ordinary course of business consistent with past
practice or the payment of accrued or earned but unpaid bonuses), (ii) increase the benefits of any
Employee (except for increases under the applicable Seller Plan for a broad group of Seller’s
employees), (iii) grant any right to severance or termination pay to any Employee or (iv) loan or
advance any money or other property to any Employee outside the ordinary course of business
consistent with past practice;
(i) compromise or settle any contingent liabilities with respect to the Purchased Assets for
which Buyer could be liable, other than exclusively by the payment of money, with no admission of
fault or obligations or restrictions applicable to the Purchased Assets or Buyer following the
Closing; or
(j) agree or commit to take any action which would be a violation of the restrictions set
forth in Section 7.1(a) through Section 7.1(i).
7.2 Access to Information.
(a) Between the date of this Agreement and the Closing Date, Seller will, during ordinary
business hours and upon reasonable notice, (i) give Buyer and Buyer’s Representatives reasonable
access to the Purchased Assets to which Buyer is not denied access by Law and to which Seller has
the right to grant access without the consent of any other Person (and in the case where consent of
another Person is required, only on such terms and conditions as may be imposed by such other
Person); (ii) permit Buyer to make such reasonable inspections thereof as Buyer may reasonably
request; (iii) furnish Buyer with such financial and operating data and other information with
respect to the Purchased Assets as Buyer may from time to time reasonably request; and (iv) furnish
Buyer with a copy of each material report, schedule, or other document primarily relating to the
Purchased Assets filed by Seller with, or received by Seller from, any Governmental Entity;
provided, however, that (A) any such investigation will be
40
conducted in such a manner as not to
interfere unreasonably with the operation of the Purchased Assets, (B) Buyer will indemnify and
hold harmless Seller from and against any Losses caused to Seller by any action of Buyer or Buyer’s
Representatives while present on any of the Purchased Assets or other premises to which Buyer is
granted access hereunder (including restoring any such premises to the condition substantially
equivalent to the condition such premises were in prior to any such investigation), (C) Seller will
not be required to take any action which would constitute a waiver of the attorney-client
privilege, and (D) Seller need not supply Buyer with any information which Seller is under a
contractual or other legal obligation not to supply; provided, however, if Seller relies upon
clauses (C) or (D) as a basis for withholding information from disclosure to Buyer, to the fullest
extent possible without causing a waiver of the attorney-client privilege, or a violation of a
contractual or legal obligation, as the case may be, Seller will provide Buyer with a description
of the information withheld and the basis for withholding such information and will otherwise use
commercially reasonable efforts to obtain a waiver of such obligation and to the extent such waiver
is not obtained, take other commercially reasonable efforts to otherwise provide such information
or a summary thereof to Buyer. Notwithstanding anything in this Section 7.2 to the contrary, prior
to the Closing Date, Buyer shall not have the right to perform or conduct any environmental
investigation, sampling or testing at, in, on, or underneath any of the Purchased Assets,
including, but not limited to, any visual inspections and site visits commonly included in the
scope of “Phase 1” level environmental inspections.
(b) The Parties hereto will, and will cause their Affiliates and Representatives to, hold in
strict confidence and not use or disclose to any other Person any Confidential Information.
“Confidential Information” means all information in any form heretofore or hereafter
obtained from the other Parties in connection with each Party’s evaluation of the Purchased Assets
or the negotiation of this Agreement, whether pertaining to financial condition, results of
operations, methods of operation or otherwise, other than information which is in the public
domain, or becomes in the public domain after the date hereof, through no violation of this
Agreement or the Confidentiality Agreement. For purposes of this Section 7.2(b), from and after the
Closing,
Confidential Information regarding the Purchased Assets shall be considered Confidential
Information of the Buyer. Notwithstanding the foregoing, each Party may disclose Confidential
Information to the extent that such information is required to be disclosed by Law, in connection
with any proceeding by or before a Governmental Entity, including any disclosure, financial or
otherwise, required to comply with any SEC rules. In the event that any Party believes any such
disclosure is required, such Party will give the other Parties notice thereof as promptly as
possible and will cooperate with the other Parties in seeking any protective orders or other relief
as the other Parties may determine to be necessary or desirable. In no event will any Party make
or permit to be made any disclosure of Confidential Information other than to the extent such
Party’s legal counsel has advised in writing is required by Law, and such Party will use its best
efforts to assure that any Confidential Information so disclosed is protected from further
disclosure to the maximum extent permitted by Law. Notwithstanding the foregoing, Buyer and Parent
will be permitted to disclose such information (i) to potential debt or equity financing sources,
or to advisors in any equity offering or private placement of debt or equity securities, in
connection with the Financing; provided that, such financing sources and advisors agree to be bound
by a customary confidentiality agreement with Parent and Buyer and (ii) in any offering memorandum
or prospectus or other disclosure documents (including periodic disclosure documents), in
connection with Financing or otherwise, if, in the reasonable judgment of counsel
41
to Buyer, such
disclosure is necessary to comply with applicable Law and Seller has a reasonable opportunity to
review any such disclosure. If the transactions contemplated hereby are not consummated, the
Parties will promptly return to the other Parties all copies of any Confidential Information,
including any materials prepared by such Party or its Representatives incorporating or reflecting
Confidential Information, and an officer of each Party will certify in writing compliance by such
Party with the foregoing.
(c) The provisions of Section 7.2(b) supersede the Confidentiality Agreement, and will survive
for a period of two years following the Closing or the termination of this Agreement, except that
if the Closing occurs, the provisions of Section 7.2(b) will expire with respect to any information
primarily related to the Purchased Assets.
(d) After the Closing, each Party and its representatives will have reasonable access to all
of the books and records relating to the Purchased Assets in the possession of the other Party to
the extent that such access may be reasonably required by such Party in connection with the Assumed
Obligations or the Excluded Liabilities, or other matters relating to or affected by the operation
of the Purchased Assets. Without limiting the foregoing, Buyer shall have access to operational
information and data necessary to operate, use and own the Purchased Assets in the manner operated,
used or owned by Seller prior to Closing. Such access will be afforded by the Party in possession
of such books and records upon receipt of reasonable advance notice and during normal business
hours; provided, however, that (i) any review of books and records will be conducted in such a
manner as not to interfere unreasonably with the operation of the business of any Party or its
Affiliates, (ii) no Party will be required to take any action which would constitute a waiver of
the attorney-client privilege, and (iii) no Party need supply the other Party with any information
which such Party is under a contractual or other legal obligation not to supply. The Party
exercising the right of access hereunder will be solely responsible for any costs or expenses
incurred by it pursuant to this Section 7.2(d). For a period of seven (7) years from the Closing
Date, the Party in possession of such books and records agrees not to dispose of any such books and
records unless, prior to such disposition, such Party gives the other Party a
reasonable opportunity at such other Party’s expense to segregate and take possession of such
books and records as such other Party may select.
(e) Upon the request of Parent or Buyer for a period of five years after the Closing Date, (i)
during ordinary business hours and upon reasonable notice, Seller shall provide to Buyer reasonable
access to its books, records and employees for the purpose of Buyer’s or Parent’s preparation of
periodic reports, filings or registrations required pursuant to applicable Law, including, without
limitation, any rules promulgated by the New York Stock Exchange or the SEC, and preparation of
audited or unaudited financial statements of Buyer, Parent or the Purchased Assets, historical and
pro forma, which comply with the rules and regulations promulgated by the SEC for those periods
which would be required to be included in a registration statement on Form S-1, or any other SEC
form, for Buyer or Parent, filed with the SEC under the Securities Act of 1933, as amended; and
(ii) upon reasonable notice, Seller shall use commercially reasonable efforts to cause its
officers, employees, representatives, agents and advisors, to (A) execute such certifications and
documents as are customary and required of acquired businesses, are reasonably requested by Buyer
or Parent, and are necessary for Buyer’s or Parent’s compliance with applicable Law, including,
without limitation, the rules and regulations promulgated by the New York Stock Exchange and the
SEC, and (B) provide
42
accountant’s “comfort letters” with respect to the Financial Information and
information derived therefrom and consents of accountants for use of their reports in any materials
reasonably requested by Buyer or Parent, to the extent such letters and consents are necessary for
Buyer or Parent to comply with applicable Law, including, without limitation, the rules and
regulations promulgated by the New York Stock Exchange and the SEC; provided that, Buyer shall
indemnify and hold harmless Seller, its officers, directors and Affiliates from and against Losses
suffered or incurred by any of them with respect to any Claims made by third parties (including any
Governmental Entity) relating to or based upon public disclosure by or on behalf of Buyer of any
information of Seller pursuant to this Section 7.2(e)(including, without limitation, Claims based
upon or pursuant to the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended or any state securities laws), and any other cooperation provided at Buyer’s request
pursuant to this Section 7.2(e); provided further, however, that Buyer shall not have any
obligation to indemnify and hold harmless Seller, its officers, directors or Affiliates to the
extent that any such Losses suffered or incurred arose from information provided by Seller in
writing to Buyer pursuant to this Section 7.2(e) failing to be true and correct in all material
respects. In the event of a change in applicable Law, including, without limitation, the rules and
regulations promulgated by the New York Stock Exchange and the SEC, that results in information of
the type described in this Section 7.2(e) being required by Buyer or Parent for compliance with
such Law for periods after five years following the Closing Date, Seller shall reasonably cooperate
with Buyer to furnish such information in a manner reasonably consistent with the tenor of the
foregoing sections of this Section 7.2(e). Buyer shall reimburse Seller for all third-party
out-of-pocket costs and expenses incurred by Seller in connection with its cooperation under this
Section 7.2(e).
7.3 Expenses. Except to the extent specifically provided herein, and irrespective of
whether the transactions contemplated hereby are consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby will be borne by the
Party incurring such costs and expenses. Notwithstanding the foregoing, (i) filing fees under
the HSR Act will be borne solely by Buyer; (ii) expenses associated directly with the customer
impact analysis performed for Buyer in connection with State Regulatory Approvals shall be shared
equally by the Parties, provided that the third party performing such analysis is reasonably
acceptable to Seller; and (iii) any payments to third parties that are required for Seller to
obtain consents and approvals, including with respect to the assignment of Purchased Agreements,
pursuant to Section 7.4(d) shall be borne by Seller to the extent such payments are equal to or
less than $400,000 and shared equally by the Parties to the extent such payments exceed $400,000,
and then only to the extent of such excess; provided that, neither Party shall be obligated to bear
any portion of such payments to the extent in excess of $2,900,000 in the aggregate.
7.4 Further Assurances; Procedures with Respect to Certain Agreements and Other
Assets.
(a) Subject to the terms and conditions of this Agreement, each of the Parties will use
reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done,
all things necessary, proper, or advisable to consummate and make effective the transactions
contemplated hereby, including using reasonable best efforts to obtain satisfaction of the
conditions precedent to each Party’s obligations hereunder within its reasonable control. Neither
43
Party will, without the prior written consent of the other Party, take any action which would
reasonably be expected to prevent or materially impede, interfere with or delay the transactions
contemplated by this Agreement.
(b) The Parties acknowledge that there may exist, as of the Closing, (i) assets or liabilities
of Seller and its Affiliates which, by mistake or omission, have not been transferred to or assumed
by Buyer pursuant to the terms of this Agreement, and (ii) assets or liabilities formerly of Seller
which, by mistake or omission, have been transferred to or assumed by Buyer pursuant to the terms
of this Agreement.
(i) In the event that either Party (the “Discovering Party”) discovers any such
assets or liabilities following the Closing, it shall so notify, in writing (a “Transfer
Notice”), the other Party (the “Notified Party”) that such assets or liabilities
were, by mistake or omission, transferred to or assumed by, or not transferred to or assumed
by, Buyer on the Closing. Following the delivery of any Transfer Notice, the Parties shall
cooperate with each other in good faith either to effect any transfer or assumption of any
such assets or liabilities or to cause Buyer or any successor or assign of Buyer and Seller
to enter into another mutually agreeable arrangement, in each case as necessary and
appropriate to correct such mistake or omission, including, without limitation, the payment
or repayment of any amounts required to be paid in connection with such transfer, assumption
or other arrangement pursuant to Section 7.4(b)(ii). Unless, on or before the twentieth
(20th) Business Day following the Notified Party’s receipt of a Transfer Notice, the
Notified Party delivers a notice, in writing (a “Transfer Objection Notice”), to the
Discovering Party advising it that the Notified Party disagrees with the Transfer Notice,
the Transfer Notice shall be deemed a binding agreement pursuant to
which the Parties agree to cause to be transferred to or assumed by Buyer or any
successor or assign of Buyer or Seller or one of its Affiliates, as appropriate, the assets
or liabilities identified in the Transfer Notice, or to cause Buyer or any successor or
assign of Buyer and Seller to enter into such other arrangement as may be specified in the
Transfer Notice. If the Notified Party delivers a timely Transfer Objection Notice, the
Parties shall negotiate in good faith to determine whether the assets or liabilities
identified in the Transfer Notice should be transferred or assumed as specified therein or
to cause Buyer or any successor or assign of Buyer and Seller to enter into another mutually
agreeable arrangement as necessary to give full effect to the transactions contemplated
herein. All conveyances discussed in this paragraph shall be subject to any required
approvals from Governmental Entities and all applicable provisions of the Distribution
Interconnect Agreement. Each Party agrees to use reasonable best efforts to obtain any
consents or approvals from any Governmental Entity necessary to consummate the transfers
contemplated by this Section 7.4(b).
(ii) In the event that pursuant to this Section 7.4(b): (A) Buyer transfers any assets
to Seller and such assets were not included in the calculation of the Purchase Price
pursuant to Article III of this Agreement, no payment by Seller shall be required with
respect to such transfer, (B) Buyer transfers any assets to Seller, and such assets were
included in the calculation of Purchase Price pursuant to Article III of this Agreement,
Seller shall pay to Buyer the product of (x) the Net Book Value of such assets multiplied by
(y) the Premium Multiple; provided that, if Buyer has not delivered to Seller a
44
Transfer
Notice with respect to such transfer on or prior to the second anniversary of the Closing
Date, Seller shall pay to Buyer the Net Book Value of such assets, (C) Seller transfers
assets to Buyer, and such assets were not included in the calculation of Purchase Price
pursuant to Article III of this Agreement, Buyer shall pay to Seller the Net Book Value of
such assets, or (D) Seller transfers assets to Buyer, and such assets were included in the
calculation of the Purchase Price pursuant to Article III of this Agreement, no payment by
Buyer shall be required with respect to such transfer.
(c) Seller has Transmission Easements, some of which relate solely to the Purchased Assets,
and others of which relate to the Purchased Assets and Seller’s other businesses as set forth in
Schedule 7.4(c) (the “Shared Easements”). At the Closing, Seller will assign to
Buyer, subject to the obtaining of any necessary consents, (i) by the Assignment of Easements, all
Transmission Easements which relate solely to the Purchased Assets, and (ii) by the Partial
Assignment of Shared Easement or other document, sufficient rights under the Shared Easements to
permit Buyer to use the same, as presently used by Seller with respect to the Purchased Assets, on
a non-exclusive basis (the “Shared Easement Rights”).
(d) Seller shall have primary responsibility for obtaining, and will use its reasonable best
efforts (without being required, except as set forth in Section 7.3, to make any payment to any
third party or to incur any economic burden) to obtain, all consents required pursuant to the terms
of any Purchased Agreement, Transferable Permit, Transferable Environmental Permit, Transmission
Easement or Shared Easement as promptly as possible after the date hereof. Buyer agrees to
cooperate with Seller in its efforts to obtain any such consent (including the submission of such
financial or other information concerning Buyer and the execution of any assumption agreements or
similar documents reasonably requested by a third party). Without limiting the
other covenants in this Section 7.4(d), to the extent any Purchased Agreement does not solely
relate to Transmission or the Purchased Assets, Seller shall use its commercially reasonable
efforts, with Buyer’s reasonable cooperation, to partially assign such Purchased Agreement to Buyer
to the extent related to Transmission or the Purchased Assets, or to enter into a separate
agreement with the applicable counterparty that can be assigned to Buyer, on substantially
identical terms as the applicable Purchased Agreement, relating to Transmission or the Purchased
Assets; provided that, if such efforts are unsuccessful to assign to Buyer only that
portion of the Purchased Agreement that relates to Transmission or the Purchased Assets, the Seller
shall use commercially reasonable efforts to subcontract or sublease to Buyer that portion of such
Purchased Agreement as relates to Transmission or the Purchased Assets. To the extent that
Seller’s rights under any Purchased Agreement, Transferable Permit, Transferable Environmental
Permit, Transmission Easement or Shared Easement may not be assigned or transferred without the
consent of another Person which consent has not been obtained prior to Closing, this Agreement will
not constitute an agreement to assign the same if an attempted assignment would constitute a breach
thereof or be unlawful. Seller and Buyer agree that if, following Seller’s use of its reasonable
best efforts as required in the first sentence of this Section 7.4(d), any consent to an assignment
of any Purchased Agreement, Transferable Permit, Transferable Environmental Permit, Transmission
Easement or Shared Easement is not obtained prior to Closing or any attempted assignment would be
ineffective or would impair Buyer’s rights and obligations under the Purchased Agreement,
Transferable Permit, Transferable Environmental Permit, Transmission Easement or Shared Easement in
question so that Buyer would not acquire the benefit of all such rights and obligations, (i) Seller
may elect to exercise its
45
rights under Section 7.4(e) with respect to any such Purchased Agreement
that is a personal property lease, or (ii) if Seller does not, or, is unable to, exercise such
rights, then at the Closing the Parties will, to the maximum extent permitted by Law and such
Purchased Agreement, Transferable Permit, Transferable Environmental Permit, Transmission Easement
or Shared Easement enter into such arrangements with each other as are reasonably necessary to
provide Buyer with the benefits and obligations of such Purchased Agreement, Transferable Permit,
Transferable Environmental Permit, Transmission Easement or Shared Easement from and after the
Closing; provided that, no such actions will be deemed to have caused the closing conditions set
forth in Section 9.2(b) to have been satisfied unless after giving effect thereto the Buyer would,
without being in breach of applicable Law or the applicable Contracts, be able to operate, own or
use the Purchased Assets in all material respects in the manner operated, used or owned by Seller
immediately prior to the Closing. In the event that at the Closing Seller has been unable to
transfer or assign to Buyer any Purchased Agreement, Transferred Permit, Transferred Environmental
Permit, Transmission Easement or Shared Easement Rights in respect of a Shared Easement,
notwithstanding any other arrangements established pursuant to this Section 7.4(d) in respect
thereof, at Buyer’s request Seller shall use reasonable best efforts (without being required,
except as set forth in Section 7.3, to make any payment to any third party or to incur any economic
burden) to assign such Purchased Agreement, Transferred Permit, Transferred Environmental Permit,
Transmission Easement or Shared Easement to Buyer as soon as practicable after Closing, including
continuing to use reasonable best efforts (without being required, except as set forth in Section
7.3, to make any payment to any third party or to incur any economic burden) to obtain any required
consents as contemplated in this Section 7.4(d). Buyer agrees to provide Seller with reasonable
advance notice (to the extent practicable) in connection with any expenditure made pursuant to this
Section 7.4(d) that exceeds $25,000.
(e) With respect to any assets used primarily in connection with the Purchased Assets that are
leased by Seller pursuant to a personal property lease that is a Purchased Agreement that cannot be
assigned to Buyer, and the conditions contained in Section 9.2 are satisfied on the Closing or
Buyer waives compliance with such conditions, Seller may elect prior to the Effective Time to
purchase some or all of such assets leased under such lease, and such assets will be included in
the Purchased Assets, if such purchase can be accomplished on a commercially reasonable basis.
(f) Following the Closing, each Party will promptly remit to the other any payments such Party
receives that are in satisfaction of any rights or assets belonging to the other Party.
(g) The Parties agree that the methodology and principles used to classify a facility, asset
or equipment as “transmission” or “distribution” (including, without limitation, as set forth in
the definition of Transmission) under this Agreement, shall continue to be applied for any new
facility, asset or equipment owned by Buyer in its service territory immediately after the Closing
Date or Seller in its service territory immediately prior to the Closing Date, unless and until the
Parties mutually agree to a new classification methodology and principles. In the event that after
the Closing, Seller or any of its Affiliates owns any “transmission”
asset in such service
territory or Buyer or any of its Affiliates owns any “distribution” asset in such service territory
through (i) future system modifications resulting in the reclassification of any facilities, assets
or equipment of any such Person or (ii) an acquisition of any facilities, assets or equipment by
any such Person, Seller or its relevant Affiliates shall convey to Buyer ownership of such
“transmission”
46
asset or Buyer shall convey to Seller ownership of such “distribution” asset, as the
case may be. The price to be paid for any facilities, assets or equipment so conveyed shall be
priced equal to the Net Book Value of such facilities, asset or equipment, but in any case shall
not be less than zero dollars (i.e., no payment from a seller to a buyer will occur as a result of
the Net Book Value being less than zero). All conveyances discussed in this paragraph shall be
subject to any required approvals from Governmental Entities and all applicable provisions of the
Distribution Interconnect Agreement. Each Party agrees to use reasonable best efforts to obtain
any consents or approvals from any Governmental Entity necessary to consummate the transactions
contemplated by this Section 7.4(g). For purposes of this Section 7.4(g), the “service territory”
as it relates to Seller’s obligations shall mean the geographic territory in which, immediately
prior to the Closing, Seller conducts the business directly related to the Purchased Assets. For
purposes of this Section 7.4(g), the “service territory” as it relates to Buyer’s obligations shall
mean the geographic territory in which, immediately following the Closing, Buyer conducts the
business directly related to the Purchased Assets.
(h) If at any time all of the Required Regulatory Approvals other than the approval of the
Missouri Public Service Commission have been obtained such that the conditions set forth in
Sections 9.2(e) and 9.3(d) would be satisfied, the parties shall endeavor to mutually agree upon
amendments to this Agreement to provide that (i) the approval of the Missouri Public Service
Commission is not a condition to Closing, (ii) the Purchased Assets and Assumed Obligations located
in Missouri or subject to regulation by the Missouri Public Service Commission (collectively, the
“Missouri Assets”) would not be required to be transferred and assumed at the Closing, and
the Purchase Price adjusted accordingly, (iii) Seller shall continue to use its reasonable best
efforts following the Closing Date to obtain the requisite consents and approvals required to
transfer the Missouri Assets to Buyer, and (iv) to the extent that all required
regulatory approvals for the transfer of the Missouri Assets are received by Seller and other
customary closing conditions with respect to such assets and liabilities are satisfied or waived by
the date 24 months after the Closing Date, Seller will sell, assign, convey, transfer and deliver
to Buyer, and Buyer will purchase and acquire, the Missouri Assets, with the applicable purchase
price calculated on a basis consistent with the calculation of Purchase Price hereunder.
7.5 Public Statements. Each Party will consult with the other prior to issuing, and
will consider in good faith any comments by the other to or in respect of, any public announcement,
statement, or other disclosure with respect to this Agreement or the transactions contemplated
hereby, except as may be required by Law or stock exchange rules and provided that any such public
announcement, statement, or other disclosure issued by any Party will be subject to Section 7.2(b).
7.6 Consents and Approvals.
(a) Seller and Buyer will each file or cause to be filed with the Federal Trade Commission and
the United States Department of Justice, Antitrust Division any notifications required to be filed
under the HSR Act and the rules and regulations promulgated thereunder with respect to the
transactions contemplated hereby. The Parties will consult and cooperate with each other as to the
appropriate time of filing such notifications and will (i) make such filings at the agreed upon
time, (ii) respond promptly to any requests for additional information made by either of such
agencies, and (iii) use their commercially reasonable efforts to cause the
47
waiting periods under
the HSR Act to terminate or expire at the earliest possible date after the date of such filings.
Buyer shall bear its own costs and expenses for the preparation of any such filings, including,
without limitation, the expense of the applicable filing fees.
(b) Seller and Buyer will cooperate with each other and use reasonable best efforts to (i)
promptly prepare and file, on a joint basis where feasible and applicable, all necessary
applications, notices, petitions, and filings, and execute all agreements and documents to the
extent required by Law or Order for consummation of the transactions contemplated by this Agreement
(including the Required Regulatory Approvals), (ii) obtain the transfer to Buyer of all
Transferable Permits and Transferable Environmental Permits, and the reissuance to Buyer of all
Transferable Permits and Transferable Environmental Permits that were not transferred on the
Closing, (iii) obtain the consents, approvals, and authorizations of all Governmental Entities to
the extent required by Law or Order for consummation of the transactions contemplated by this
Agreement (including the Required Regulatory Approvals), and (iv) obtain all consents, approvals,
and authorizations of all other Persons to the extent necessary to consummate the transactions
contemplated by this Agreement as required by the terms of any license, franchise, permit,
concession or Contract to which Seller or Buyer is a party or by which either of them is bound.
Seller and Buyer each will have the right to review in advance all characterizations of the
information relating to it or the transactions contemplated by this Agreement which appear in any
filing made by the other in connection with the transactions contemplated hereby; provided that,
notwithstanding anything to the contrary herein, Buyer shall have primary responsibility for the
preparation and filing of the FERC Transaction Approvals, FERC 204 Approval and FERC
205 Approval and Seller shall have primary responsibility for the preparation and filing of
the State Transaction Approvals. Buyer agrees that it shall not seek approval for the recovery of
any acquisition premium as part of any of the Required Regulatory Approvals and that the denial by
a Governmental Entity of the opportunity for the recovery of any acquisition premium shall not
constitute a Material Adverse Effect; provided that, for the avoidance of doubt, Seller will elect
to treat the transaction as a taxable asset sale. As a result of this election, Buyer will
increase its basis in the assets for tax purposes, and Seller is recognizing a taxable gain on the
assets. The tax basis and book basis are expected to be equal after the election is made, which
would result in no recognition of deferred taxes on the Closing Date.
(c) Neither Party will on an ex parte basis initiate, directly or indirectly, any
communications, meetings, or other contacts with any Governmental Entity in connection with the
transactions contemplated hereby or any matters relating to any declaration, filing, or
registration with, notice to, or authorization, consent, or approval of any such Governmental
Entity in connection with this Agreement. In connection with any communications, meetings, or
other contacts, formal or informal, oral or written, with any Governmental Entity in connection
with the transactions contemplated hereby or any such declaration, filing, registration, notice,
authorization, consent, or approval, each Party agrees: (i) to inform the other in advance of any
such communication, meeting, or other contact which such Party proposes or intends to make,
including the subject matter, contents, intended agenda, and other aspects of any of the foregoing;
(ii) to consult and cooperate with the other Party, and to take into account the comments of such
other Party in connection with any of the matters covered by Section 7.6(c)(i); (iii) to arrange
for representatives of the other Party to participate to the maximum extent possible in any such
communications, meetings, or other contacts; (iv) to notify the other Party of any oral
communications with any Governmental Entity relating to any of the foregoing; and
48
(v) to provide
the other Party with copies of all written communications with any Governmental Entity relating to
any of the foregoing. Notwithstanding the foregoing, nothing in this Section 7.6(c) will apply to
or restrict communications or other actions by Seller with or with regard to Governmental Entities
in connection with the Purchased Assets in the ordinary course of business or communications or
other actions by Buyer with or with regard to Governmental Entities in connection with Buyer’s
operations that are not related to the Purchased Assets.
(d) Seller and Buyer will cooperate with each other and promptly prepare and file
notifications with, and request Tax clearances from, state and local taxing authorities in
jurisdictions in which a portion of the Purchase Price may be required to be withheld or in which
Buyer would otherwise be liable for any Tax liabilities of Seller pursuant to such state and local
Tax Law (other than any such liabilities which under the terms hereof are to be paid by Buyer).
(e) Without limiting the foregoing, from the date hereof until the Closing Date, Seller
further agrees to, and agrees to cause its Affiliates to, use commercially reasonable efforts to
support all Buyer Required Regulatory Approvals, through advocacy before regulatory or judicial
bodies, and in other forums, as applicable, including without limitation through participation in
evidentiary hearings and other proceedings and the filing of pleadings, briefs, comments and
testimony with regulatory or judicial bodies, and in other forums, as applicable, and not to oppose
or challenge, directly or indirectly, the positions taken by Buyer under any Buyer Required
Regulatory Approval, provided that such positions taken by Buyer are not inconsistent with the
terms of this Agreement.
(f) Without limiting the foregoing, from the date hereof until the Closing Date, Buyer further
agrees to, and agrees to cause its Affiliates to, use commercially reasonable efforts to support
all Seller Required Regulatory Approvals, through advocacy before regulatory or judicial bodies,
and in other forums, as applicable, including without limitation through participation in
evidentiary hearings and other proceedings and the filing of pleadings, briefs, comments and
testimony with regulatory or judicial bodies, and in other forums, as applicable, and not to oppose
or challenge, directly or indirectly, the positions taken by Seller under any Seller Required
Regulatory Approval, provided that such positions taken by Seller are consistent with the terms of
this Agreement.
7.7 Tax Matters.
(a) Transfer Taxes incurred in connection with this Agreement and the transactions
contemplated hereby will be borne by Seller to the extent such payments are equal to or less than
the amounts paid by Buyer for filing fees under the HSR Act, and shared equally by the Parties to
the extent such Transfer Taxes exceed the amounts paid by Buyer for filing fees under the HSR Act.
Seller will file, to the extent required by applicable Law, all necessary Tax Returns and other
documentation with respect to all such Transfer Taxes, and if required by applicable Law, Buyer
will join in the execution of any such Tax Returns or other documentation.
(b) Seller will be responsible for the preparation and timely filing of all Tax Returns
reflecting Taxes payable by Seller and the timely payment of all Taxes shown to be due on such
returns. Buyer will be responsible for the preparation and timely filing of all Tax Returns
reflecting Taxes payable by Buyer and the timely payment of all Taxes shown to be due on such
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returns. Any Tax Return that reflects Taxes to be prorated in accordance with Section 3.5 will be
subject to the approval of the Party not preparing such return, to the extent related to such
prorated Taxes, which approval will not be unreasonably withheld or delayed. Each Party will make
any such Tax Return prepared by it available for the other Party’s review and approval no later
than 20 Business Days prior to the due date for filing such Tax Return. Within 15 Business Days
after receipt of such Tax Return, the approving Party will pay to the Party preparing the Tax
Return the amount of such prorated Taxes shown as due on such approved Tax Return for which such
approving Party is responsible under Section 3.5.
(c) Buyer and Seller will provide each other with such assistance as may reasonably be
requested by the other Party in connection with the preparation of any Tax Return, any audit or
other examination by any taxing authority, or any judicial or administrative proceedings relating
to liability for Taxes, and each Party will retain and provide the other with any records or
information which may be relevant to such return, audit or examination or proceedings. Any
information obtained pursuant to this Section 7.7(c) or pursuant to any other Section hereof
providing for the sharing of information in connection with the preparation of, or the review of,
any Tax Return or other schedule relating to Taxes will be kept confidential by the Parties hereto
in accordance with Section 7.2(b).
7.8 Supplements to Schedules. Not later than 30 days prior to the Closing Date, Seller may supplement or amend by written
notice to Buyer any or all of the following sections of the Seller Disclosure Schedule: (i)
Schedules 1.1-(D) through (M), 2.1(b), 2.1(d), 2.1(k), and (ii) Schedules 5.7(b), 5.8(a), 5.9(a)-2,
5.10(a), 5.12(a), 5.14(a), and 7.4(c); provided that, without limitation to Buyer’s rights under
Section 7.2, contemporaneously with any supplement or amendment pursuant to clause (ii) of this
Section 7.8, Seller shall provide to Buyer all material underlying documentation relating to each
item included in such supplement or amendment. The Parties acknowledge and agree that any updates
by Seller to Schedules 1.1-E, 1.1-G, 1.1-I, 1.1-K, 1.1-M, 4.3(j) and 4.4(g) will be made pursuant
to the principles established in Schedule 7.8.
7.9 Eminent Domain; Casualty Loss.
(a) If, before the Closing Date, any of the Purchased Assets are taken by eminent domain or
condemnation, or are the subject of a pending or (to Seller’s Knowledge) contemplated taking which
has not been consummated, Seller will (i) notify Buyer promptly in writing of such fact and (ii) at
the Closing assign to Buyer all of Seller’s right, title, and interest in and to any proceeds or
payments received, or to be received, in compensation for such taking.
(b) If, before the Closing Date, all or any material portion of the Purchased Assets are
damaged or destroyed by fire or other casualty, Seller will notify Buyer promptly in writing of
such fact and, at the Closing assign all of Seller’s right, title, and interest in and to any
insurance recoveries received, or to be received, in compensation for such damage or destruction
less any such amounts received, or to be received, to reimburse Seller for expenditures incurred by
Seller.
(c) To the extent permitted under applicable law, Seller and its Affiliates, at Buyer’s cost
and expense, shall use commercially reasonable efforts to cause the exercise of eminent domain
and/or condemnation rights, upon reasonable request of Buyer, on behalf of Buyer or any successor
or assign of Buyer (subject to Section 12.4) who acquires substantially all of the
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business
conducted with the Purchased Assets, in order to enable Buyer or any such successor or assign of
Buyer to expand or modify the Purchased Assets, until such date on which Buyer (or any such
successor or assign of Buyer (subject to Section 12.4)) is authorized by applicable law to acquire
the right of condemnation, eminent domain or any similar right which can be exercised on behalf of
public utilities.
7.10 Transitional Use of Signage and Other Materials Incorporating Seller’s Name or other
Logos. Buyer acknowledges that it will have no ongoing claim or rights in or to the Seller
Marks. Buyer will not use or permit the use of any Seller Marks, and Buyer shall (a) within 60
days following the Closing Date, remove or cause the removal of the Seller Marks from all emergency
phone number signage at each Substation Facility, and (b) within one year following the Closing
Date, remove or cause the removal of all signage or other items utilizing Seller Marks.
Notwithstanding the foregoing, Seller agrees to not allege that Buyer has violated Seller’s
intellectual property rights solely as a result of Buyer retaining Seller’s Marks on signage or
other items prior to removal in accordance with this Section 7.10.
7.11 Litigation Support. In the event and for so long as either Party is actively
contesting or defending against any third-party Claim in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date related to the Purchased Assets or Assumed Liabilities, the other Party
will cooperate with the contesting or defending Party and its counsel in the contest or defense,
make available its personnel, and provide such testimony and access to its books and records as is
reasonably necessary in connection with the contest or defense, all at the sole cost and expense of
the contesting or defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Article X hereof).
7.12 Financing.
(a) Buyer shall use its reasonable best efforts to arrange the Financing on the terms and
conditions described in the Financing Commitments (provided for clarification that Buyer has no
obligation under this Agreement to undertake any underwritten or publicly-marketed offering of debt
or equity instruments or securities). In the event any portion of the Financing becomes
unavailable on the terms and conditions contemplated in the Financing Commitments, Buyer shall use
its reasonable best efforts to arrange to obtain any such portion from alternative sources on terms
at least as favorable to Buyer (as determined in the sole discretion of Buyer) as promptly as
practicable following the occurrence of such event. Buyer shall give the Seller prompt notice of
any material breach by any party of the Financing Commitments, or any termination, modification or
amendment of the Financing Commitments.
(b) Prior to the Closing, (i) Seller shall (A) as reasonably requested by Buyer in connection
with the Financing, provide the Financial Information to Buyer; and (B) use its reasonable best
efforts to provide information regarding or relating to the Purchased Assets reasonably requested
by Buyer to assist Buyer with the preparation of materials for rating agency presentations,
offering documents, private placement memoranda, bank information memoranda, prospectuses, road
show materials and similar documents that may be used in connection with the Financing; and (ii)
Seller shall use reasonable best efforts to cause its officers, employees,
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representatives, agents
and advisors, including legal and accounting advisors, to (A) provide accountant’s “comfort
letters” with respect to the Financial Information and information derived therefrom and consents
of accountants for use of their reports in any materials relating to the Financing, to the extent
such letters and consents are customary in connection with such Financings; (B) provide applicable
and customary legal opinions of internal and outside counsel, to the extent such opinions are
customary in connection with such Financings; (C) execute such certifications and documents as are
customary for acquired businesses, are reasonably requested by Parent, and are customary in
connection with such Financings and/or necessary to allow Buyer to comply with applicable Law,
including, without limitation, the rules and regulations promulgated by the New York Stock Exchange
and the SEC; and (D) reasonably cooperate with Buyer on other matters in connection with the
Financing in a manner reasonably consistent with the tenor of the foregoing sections of this
Section 7.12; provided that nothing in this Section 7.12
shall require such cooperation to the extent it would unreasonably interfere with the business
or operations of Seller. Seller hereby consents to the use of Seller’s logo on rating agency
presentations, offering documents, private placement memoranda, bank information memoranda,
prospectuses, road show materials and similar documents that may be used in connection with the
Financing, subject to the prior written approval of its use (such approval not to be unreasonably
withheld or delayed). Buyer shall reimburse Seller for all third-party out-of-pocket costs and
expenses incurred by Seller in connection with its cooperation under this Section 7.12(b), other
than costs and expenses incurred in connection with preparing the Financial Information.
(c) Buyer shall indemnify and hold harmless Seller, its officers, directors and affiliates
from and against Losses suffered or incurred by any of them with respect to any Claims made by
third parties (including any Governmental Entity) relating to or based upon public disclosure by or
on behalf of Buyer of any information provided by Seller to Buyer pursuant to Section 7.12(b)
(including, without limitation, Claims based upon or pursuant to the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, or any state securities laws), and any
other cooperation provided at Buyer’s request pursuant to Section 7.12(b); provided further,
however, that Buyer shall not have any obligation to indemnify and hold harmless Seller, its
officers, directors or affiliates to the extent that any such Losses suffered or incurred arose
from information provided by Seller in writing to Buyer pursuant to Section 7.12(b) failing to be
true and correct in all material respects.
7.13 Post-Closing Operations.
(a) Immediately following the Effective Time, Buyer shall establish and maintain a corporate
office in Iowa.
(b) For a period of 5 years after the Closing Date, unless otherwise agreed between the
Parties, Buyer shall not intentionally and voluntarily remove the Purchased Assets from the
functional supervision and control of MISO.
7.14 Affiliate Relationships. Except as contemplated by this Agreement, all Contracts
between the Seller on the one hand, and any Affiliate of the Seller on the other hand, relating to
the Purchased Assets shall be terminated on the Closing, and all liabilities thereunder shall
thereupon be discharged and released by Seller without any liability or cost to Buyer or its
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Affiliates, except that the agreements listed on Schedule 7.14 shall remain in full force
and effect.
7.15 Financial Statements. As soon as practicable after the date hereof, and in any
event no later than June 30, 2007, Seller shall deliver to Buyer a balance sheet, income statement
and statement of cash flow for the Purchased Assets, as of and for the twelve months ended December
31, 2004, 2005 and
2006, prepared in accordance with GAAP, consistently applied and in compliance with the rules
and regulations of the SEC, and audited by Deloitte and Touche LLP or any other independent auditor
reasonably acceptable to Buyer (the “Audited Financial Statements”). Thereafter Seller
shall deliver to Buyer, as soon as practicable after it becomes available, the remainder of the
Financial Information (it being understood that those portions of the Financial Information
described in clauses (iii) and (iv) of the definition thereof shall be provided to Buyer not later
than 45 calendar days after the end of the applicable quarterly period).
7.16 Non-Opposition. After Buyer’s rates, rate construct, rate elements, terms and
conditions of service are initially set in the FERC 205 Approval (“Buyer’s Initial Rates”),
and for a period of seven (7) years after the Closing Date, Seller shall not (and shall cause its
parent and any wholly owned Affiliates of its parent not to), oppose, contest, challenge or file
any complaint before FERC regarding, or takes any position with any third Person adverse to,
Buyer’s Initial Rates. This prohibition does not apply to the extent that Buyer seeks changes to
the Buyer’s Initial Rates in a manner adverse to Seller. For a period of seven (7) years after the
Closing Date, Seller also shall not (and shall cause its parent and any wholly owned Affiliates of
its parent not to) publicly oppose, contest or challenge, with any third Person, the plan of the
Buyer, set forth in the applications for the Buyer Required Regulatory Approvals made pursuant to
Section 7.6(b), for anticipated capital expenditures, except that this prohibition does not apply
to the extent that Buyer departs from such plan. Nothing in this Section 7.16 prohibits Seller
from opposing, contesting, or challenging the withdrawal of the Purchased Assets from participation
in MISO.
7.17 Title Insurance. At Buyer’s option and at Buyer’s sole cost and expense, Buyer may
obtain policies, dated the Closing Date, on ALTA 1992 Owner’s Form B with extended coverage
guaranteeing the standard exceptions to title customarily contained in such policies, covering the
Transmission Fee Interests and the Material Easements issued by a nationally recognized title
insurance company (the “Title Company”), insuring, as of the Closing Date, the fee simple
title of Buyer in such Transmission Fee Interests or easement estate of Buyer in the Material
Easements in an amount reasonably determined by Buyer, subject only to the Permitted Encumbrances.
Seller shall cooperate reasonably and in good faith in Buyer’s efforts to obtain such policies of
title insurance, including executing and delivering, or causing to be executed and delivered, to
the Title Company any affidavits reasonably requested by the Title Company or Buyer in connection
with the issuance of the policies and to provide affirmative endorsements for no mechanics’ liens;
provided that to the extent Buyer requests Seller to provide such cooperation and/or execute and
deliver such affidavits, and without limiting any rights Buyer has under this Agreement, including
Article X, Buyer shall indemnify and hold harmless Seller, its officers, directors and Affiliates
from and against Losses suffered or incurred by any of them with respect to any Claims made by
third parties relating to or based upon any affidavit of Seller provided at Buyer’s request
pursuant to this Section 7.17; provided, however, that Buyer shall
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not have any obligation to
indemnify and hold harmless Seller, its officers, directors or Affiliates to the extent that any
such Losses suffered or incurred arose from information provided by Seller in writing in any
affidavit pursuant to this Section 7.17 failing to be true and correct in all material respects.
For the avoidance of doubt, Seller shall not be obligated to furnish any title insurance policies
to
Buyer and it shall not be a requirement of or condition to the Closing that Buyer obtain or be able
to obtain any such policies. Prior to the Closing Date, at the request of Buyer, Seller shall
provide to Buyer abstracts of title with respect to the Transmission Fee Interests, to the extent
available.
7.18 Insurance. Seller shall use commercially reasonable efforts following the Closing (a)
with respect to any “occurrence” based third party insurance policies of Seller, to recover under
such policies for losses arising from events occurring prior to the Closing and relating primarily
to the Purchased Assets, and (b) with respect to any “claims made” third party insurance policies
of Seller, to recover under such policies for losses from events occurring prior to the Closing and
relating primarily to the Purchased Assets to the extent Seller shall have received written notice
of claims relating to such events on or before the Closing Date; provided that (i) in no event
shall Seller be obligated hereunder to commence legal action against any insurer to obtain such
recovery, and (ii) such commercially reasonable efforts shall not require Seller to incur any Loss
with respect to any deductibles, self-insured retentions, retained amounts, retentions or
exclusions. With respect to all insurance proceeds actually received by Seller pursuant to clause
(a) or (b) above, Seller agrees to (x) apply such proceeds to satisfy the associated liability, and
(y) remit to Buyer such proceeds to the extent not applied by Seller to satisfy the associated
liability.
ARTICLE VIII
EMPLOYEE MATTERS
EMPLOYEE MATTERS
8.1 Offers of Employment; Transferred Employees.
(a) Upon Buyer’s request, Seller shall permit Buyer a reasonable opportunity to meet with the
Employees during Seller’s and applicable Employee’s normal business hours. At least twenty (20)
days prior to the Closing Date, Buyer shall provide to Seller a list of Employees to whom Buyer or
one of its Affiliates intends to make offers of employment. With respect to any Employee to whom
Buyer makes an offer of employment at or prior to the Closing, Seller shall not make any offer of
enhanced compensation or benefits to induce or otherwise encourage such Employee to remain in the
Seller’s employ after the Closing, but Seller shall inform such Employees of their expected status
if they elect to remain with Seller. Furthermore, Seller shall not transfer any Employee to, or
allow any Employee to bid for, a position with Seller or its Affiliates that would result in such
Employee providing a lower portion of such Employee’s time providing services in respect of the
Purchased Transmission Assets. Buyer shall notify Seller in writing as to each Employee who has
accepted an offer of employment (which shall be limited to a maximum of fifty (50)) and each
Employee who has formally rejected an offer of employment made pursuant to this section, in each
instance, within ten (10) Business Days following the receipt of such acceptance or rejection, but
in no event later than the Closing Date.
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(b) Each Employee who accepts an offer of employment from Buyer or its Affiliates, and who
continues to be an employee of Seller until immediately prior to the Closing, shall become employed
by Buyer (a “Transferred Employee”) either (i) as of the Closing Date or (ii)
in the event any such Employee is on leave as approved by Seller in the ordinary course of
business as of the Closing Date (not including any absence of short duration such as vacation,
bereavement leave or jury duty, but including short or long-term disability, military leave, or
maternity/paternity leave), such Employee shall become a Transferred Employee as of the date that
such Employee is no longer on any approved leave and reports to work for Buyer so long as the
Employee reports to work with Buyer or its Affiliates within five (5) Business Days after the end
of the leave. Notwithstanding anything to the contrary contained in this Agreement, no Employee
who is on approved leave on the Closing Date may report to work for Buyer later than 180 days after
the Closing Date (other than any Employee who is on military leave or other leave subject to the
Family and Medical Leave Act of 1993 or comparable state Law). To the extent permitted by
applicable Law, a list of Employees on approved leave as described above, the date such approved
leave is expected to end (if available) and the reason for such approved leave is provided on
Schedule 8.1(b), such list to be updated by Seller as of the Closing.
(c) For a period of 30 months from the Closing Date, Seller agrees that it will not solicit
(i) any Transferred Employees or (ii) any Employee who accepts employment with Buyer or its
Affiliates after the Closing (but is not otherwise a Transferred Employee), or hire any such person
in (i) or (ii) at an aggregate compensation (including deferred compensation) rate in excess of
that being paid to such person by Buyer.
(d) Prior to the Closing Date and for a period of 30 months from the Closing Date, Buyer
agrees that it will not solicit any employee of Seller or any of its Affiliates for any position
with Buyer or any of its Affiliates other than for positions primarily related to the Purchased
Transmission Assets.
8.2 Treatment of Transferred Employees.
(a) For a period of 30 months from and after the Closing Date, Buyer or its Affiliates shall
provide each Transferred Employee with base salary and incentive compensation opportunities
(excluding equity based compensation) that are no less favorable in the aggregate than those
provided by Seller and its Affiliates to the Transferred Employees immediately prior to the Closing
Date.
(b) Each Transferred Employee shall be eligible for a potential bonus payment from Seller
under Seller’s annual incentive plan in which each such employee participates as of the date hereof
(the “Bonus Plan”) regardless of the fact that the employee is not employed by Seller at
the end of such year or on the applicable payment date. The applicable annual bonus amount shall
first be determined based on the actual company performance for the year, indicating either no
bonus entitlement or a bonus equal to, less than or greater than target for each such Transferred
Employee. Any individual performance criteria for the Bonus Plan shall be deemed to be satisfied at
the target level. In the event that an annual bonus would be earned, Seller shall pay a fraction of
such bonus, the numerator of which shall be the number of days elapsed during such calendar year
prior to and including the Closing Date and the denominator of which shall be 365. Any such bonus
shall be payable on the date bonuses are generally paid under the Bonus
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Plan, but in no event later
than the March 15 following the end of the calendar year in which the
Closing occurs. Effective as of the Closing Date, Buyer shall provide each such Transferred
Employee with the opportunity to earn a bonus in respect of the balance of the calendar year in
which the Closing occurs that is comparable to the bonus that a similarly situated employee of
Buyer is eligible to earn in respect of such balance of the calendar year pursuant to Buyer’s
annual incentive plan.
(c) Seller shall, in addition to paying the bonus as provided in Section 8.2(b) above, pay to
each Transferred Employee the annual bonus each such employee actually earned under the Bonus Plan
in respect of the calendar year completed immediately prior to the Closing Date (the “Prior
Year Bonuses”); provided, however, that the Transferred Employees shall be
entitled to receive their Prior Year Bonuses without regard to any requirement that may exist under
the Bonus Plan that such employees be employed by Seller on the date the Prior Year Bonuses are
otherwise payable in order to receive such bonuses. Seller shall pay the Prior Year Bonuses to the
Transferred Employees on the Closing Date (or, if later, within 2.5 months of the end of the
calendar year completed immediately prior to the Closing Date), in accordance with past practice
and at such time as Prior Year Bonuses are otherwise payable to the employees of Seller.
(d) With respect to each Seller Plan that is a non-qualified deferred compensation arrangement
or equity or equity-based arrangements, Seller shall, immediately prior to the applicable hire
date, vest each Transferred Employee fully in such Transferred Employee’s account balances and
other benefits. Any such benefits shall be distributed pursuant to the terms of said Seller Plan
as in effect from time to time.
(e) Within 60 days after a Transferred Employee commences employment with Buyer or its
Affiliates, Buyer will cause such Transferred Employee to receive a grant of restricted shares of
common stock of ITC Holdings Corp. (the “Restricted Shares”) on the terms and conditions
set forth in ITC Holdings Corp.’s 2006 Long-Term Incentive Plan or 2003 Stock Purchase and Option
Plan for key employees and related forms of Restricted Stock Award Agreement, with the number of
such shares determined for each Transferred Employee by Buyer and with a vesting schedule not less
favorable to the Transferred Employees than a 5-year cliff schedule. Buyer shall notify Seller of
each such grant and, within 30 days after delivery of each such notice, Seller shall pay to Buyer
an amount equal to 65% of the fair market value of the Restricted Shares, as determined by
reference to the closing bid price for publicly traded shares of common stock of ITC Holdings Corp.
on the New York Stock Exchange on the applicable date of grant. Notwithstanding the foregoing, in
no event shall Seller pay to Buyer an amount in excess of $2,600,000 under this Section 8.2(e).
8.3 Services Provided by Represented Employees; Leased Employees.
(a) Prior to the Closing Date, certain services have been provided to Seller related to the
Purchased Assets by employees who are represented by a collective bargaining representative
(hereinafter, the “Represented Employee Work”). Subject to applicable law, for a period of
36 months from the Closing Date, Buyer shall engage Seller, and Seller shall provide to Buyer, the
Represented Employee Work at cost. For this purpose, “cost” means fully-loaded costs without any
profit factor, including, where applicable but not by way of limitation, all payroll-related
overheads, payroll taxes, stores loadings, transportation loadings, facility and supplies, and
an
56
A&G overhead to cover the costs associated with processing and xxxxxxxx, consistent with past
practice.
(b) Effective as of the Closing Date, Buyer and Seller shall enter into an employee lease
agreement pursuant to which Seller will make available, at cost (as described in 8.3(a) above) and
for a period of up to 36 months, a number of Employees who do not become Transferred Employees as
is necessary for Buyer to operate the Purchased Assets in a manner comparable to Seller’s operation
during the period prior to the Closing.
(c) Effective as of the Closing Date and for a period of up to 30 months, if requested by
Seller, Buyer shall make available to Seller the services of the Transferred Employees so indicated
on Schedule 5.18(e) who are deemed by Seller to be critical to other operations of Seller
or its Affiliates. Such services shall be provided at cost (as described in 8.3(a) above). In no
event shall the percentage of time devoted to Seller for any such employee exceed 40% of full time.
8.4 WARN. Buyer shall be responsible for any obligation with respect to the
Transferred Employees under the Worker Adjustment and Retraining Notification Act of 1988 (and the
regulations promulgated thereunder) and any applicable or similar state or local equivalent
(collectively, “WARN”) arising on or after the Closing Date except to the extent no such
liability would have arisen in the absence of any terminations of employment by Seller. Seller
shall be responsible for any such obligation arising prior to the Closing Date.
8.5 Employee Benefits.
(a) For a period of 30 months from and after the Closing Date, Buyer or its Affiliates shall
provide Transferred Employees with the opportunity to participate in the welfare benefit plans and
employee pension benefit plans, both as defined in Section 3 of ERISA, maintained by Buyer or its
Affiliates (“Buyer Plans”), on substantially the same terms and conditions on which
similarly situated employees of Buyer participate in such plans. Transferred Employees shall
receive credit under Buyer Plans toward eligibility, participation, vesting and benefit accrual
(other than for benefit accrual for any defined benefit pension plan) for prior service with Seller
or its Affiliates, except to the extent such credit would result in duplication of benefits for the
same period of service (for the avoidance of doubt, any Transferred Employee who is or becomes
entitled to receive retiree medical benefits from Seller under Seller’s retiree medical plan, as in
existence on the date of this Agreement, shall not be eligible to receive any similar benefits
under Buyer’s retiree medical plan).
(b) Effective as of the applicable date on which an Employee becomes a Transferred Employee
(as applicable, the “hire date”), Buyer or its Affiliates shall cause their respective
group health plans to, subject to their respective terms, (x) cover such Transferred Employee and
dependents of such Transferred Employee who are covered under a Seller Plan that is a group health
plan as of the Closing Date and to be responsible (in accordance with the Buyer Plans) for
expenses incurred in regards to such welfare plans for such Transferred Employee and
dependents on or after the hire date; (y) credit deductible payments and co-insurance payments made
in the calendar year of the hire date by such Transferred Employee and dependents under Seller’s
group health plans for expenses incurred on or prior to the hire date toward deductibles
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in effect
for its group health plans for the calendar year of the hire date; and (z) waive all eligibility
waiting periods for such Transferred Employee and dependents for any employee benefit plans
maintained by Buyer as of the hire date.
(c) Seller shall be responsible for providing continuation coverage, as is required pursuant
to COBRA in respect of any Employee or “qualified beneficiary” (as defined in COBRA) who incurs a
“qualifying event,” except with respect to Employees who become a Transferred Employee in
accordance with Section 8.1. On and after the Closing Date, Buyer shall be responsible for
providing such continuation coverage in respect of any Transferred Employee or qualified
beneficiary of a Transferred Employee whether the qualifying event occurs before or after the
Closing Date. Notwithstanding the foregoing, Seller shall provide COBRA continuation coverage for
a period not to exceed three months for all Transferred Employees, with such coverage to be paid
for by Buyer.
(d) With respect to any unused accrued vacation carried over from a prior calendar year,
Seller shall directly pay it or cause it to be paid to the Transferred Employees on or as promptly
as practicable after the Closing Date. Vacation used in the calendar year of the Closing Date
shall be first applied against carried over entitlement and only thereafter to the entitlement
earned for that calendar year.
(e) The obligation for vacation earned for the calendar year of the Closing Date shall be
split between Seller and Buyer. Any net liability shall be paid in cash to Seller or Buyer, as
applicable, on or as promptly as practicable after the Closing Date. The Seller portion is the
fraction of the annual vacation benefit, the numerator of which is the number of days in the
calendar year preceding the Closing Date and the denominator of which is 365. The Buyer portion is
the fraction of the annual vacation benefit, the numerator of which is the number of days in the
calendar year on and after the Closing Date and denominator of which is 365. Seller shall be
credited with any vacation actually paid during the calendar year prior to the Closing Date to the
extent that it relates to vacation earned for the calendar year, not vacation carried over from a
preceding year. Buyer shall, on and after the Closing Date, allow each Transferred Employee who
has vacation accrued with respect to the calendar year in which the Closing Date occurs, but unused
as of the Closing Date, to use such vacation during the balance of the calendar year in which the
Closing Date occurs in accordance with Buyer’s vacation policy; in the event that a Transferred
Employee does not use all of his or her accrued but unused vacation as provided in the foregoing
clause, on the last day of the applicable calendar year, Buyer shall pay each such Transferred
Employee an amount equal to such remaining accrued but unused vacation days.
8.6 Seller’s Defined Benefit Pension Plan. Transferred Employees shall be treated as
terminated as of the Closing Date with respect to Seller’s Defined Benefit Pension Plan, except
that Seller shall fully vest all Transferred Employees in their accrued benefits thereunder as of
the Closing Date.
8.7 Retiree Health. Transferred Employees who would, but for their termination of
service with the Seller on the Closing Date, be eligible to retire on or at any time prior to the
Closing Date and receive benefits under the Seller’s retiree medical plan shall be treated as
having so retired on the Closing Date solely for the purposes of eligibility for future retiree
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medical benefits under Seller’s retiree medical plan. Transferred Employees who would not be
eligible to retire prior to the Closing Date and receive benefits under the Seller’s retire medical
plan, shall be treated as terminated as of the Closing Date under the Seller’s retiree medical
plan. Within 120 days of the Closing, Buyer shall deliver to Seller its calculation of
“accumulated postretirement benefit obligation” under its retiree medical plan in respect of any
Transferred Employee who was an Employee of Seller or its Affiliates at any time after reaching age
45 but who was not yet eligible to receive benefits under Seller’s retiree medical plan upon
retirement (such amount, the “Transferred Employee APBO”) provided that such calculation
shall give effect to any service credit provided to such Transferred Employees for employment with
Seller after attainment of age 45. Within 30 days of delivery of the calculations, Seller’s
applicable Code Section 501(c)(9) trust shall pay to Buyer’s applicable Code Section 501(c)(9)
trust an amount in cash equal to the Transferred Employee APBO.
8.8 Tax-Qualified Defined Contribution Plan. Buyer agrees to cause its tax-qualified
defined contribution plan that includes a qualified cash or deferred arrangement within the meaning
of Section 401(k) of the Code (the “Buyer 401(k) Plan”) to accept a direct rollover to the
Buyer 401(k) Plan of any Transferred Employee’s account balances under any Seller 401(k) plan
and/or cash balance pension plan if such rollover is elected in accordance with applicable Law by
such Transferred Employee.
ARTICLE IX
CONDITIONS TO CLOSING
CONDITIONS TO CLOSING
9.1 Conditions to Each Party’s Obligations to Effect the Closing. The respective
obligations of each Party to effect the transactions contemplated hereby are subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The waiting period under the HSR Act, including any extension thereof, applicable to the
consummation of the transactions contemplated hereby shall have expired or been terminated; and
(b) No Order which prevents the consummation of the transactions contemplated hereby shall
have been issued and remain in effect (each Party agreeing to use its commercially reasonable
efforts to have any such Order lifted) and no Law shall have been enacted which prohibits the
consummation of the transactions contemplated hereby.
9.2 Conditions to Obligations of Buyer. The obligation of Buyer to effect the transactions contemplated hereby is subject to the
fulfillment at or prior to the Closing Date of the following additional conditions, any of which
may be waived by Buyer in its sole discretion:
(a) Since the date of this Agreement, no Material Adverse Effect shall have occurred and be
continuing;
(b) Seller shall have performed and complied in all material respects with the covenants and
agreements contained in this Agreement which are required to be performed and complied with by
Seller on or prior to the Closing Date;
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(c) The representations and warranties of Seller which are set forth in Article V of this
Agreement shall be true and correct as of the Closing as though made at and as of the Closing
(except to the extent that any such representation or warranty speaks as of a particular date, in
which case such representation and warranty will be true and correct only as of such date), except
for any failure or failures of such representations and warranties to be true and correct that
would not, individually or in the aggregate, cause, constitute, or represent a Material Adverse
Effect (it being understood that, in determining the accuracy of such representations and
warranties for purposes of this Section 9.2(c), all Material Adverse Effect and materiality
qualifications contained in such representations and warranties shall be disregarded), provided
that (x) the representations and warranties of Seller in Section 5.5(a) shall be true and correct
in all respects without disregarding the reference to Material Adverse Effect, (y) the
representations and warranties contained in Section 5.2 shall be true and correct in all respects,
and (z) the representations and warranties contained in Section 5.7(a) and Section 5.17 shall be
true and correct in all material respects;
(d) Buyer shall have received a certificate from the Chief Executive Officer of Seller, dated
the Closing Date, to the effect that the conditions set forth in Sections 9.2(b) and 9.2(c) have
been satisfied;
(e) The Buyer Required Regulatory Approvals shall have been obtained, become Final Regulatory
Orders, and contain such terms and conditions (if any) substantially equivalent to those requested
in the applications filed pursuant to Section 7.6(b), and without any limitation or condition
(excluding any limitation or condition expressly agreed to by Buyer in any written settlement or
other written agreement relating to such Order) that would require any modification to this
Agreement or any transactions or agreements contemplated hereby, or place any restriction or impose
any condition on Buyer or any of its Affiliates (including Buyer after the Closing) with respect to
the ownership or operation of the Purchased Assets or the business of Buyer and its Affiliates;
(f) Any Encumbrances on the Purchased Assets that are not Permitted Encumbrances shall have
been released other than any of such releases that the failure to obtain would not, in the
aggregate, create a Material Adverse Effect;
(g) Any Encumbrances on the Transmission Fee Interests that are not Permitted Encumbrances
shall have been released;
(h) Buyer shall have received the other items to be delivered pursuant to Section 4.3;
(i) The Marketing Period shall have expired or by its definition shall have been deemed to
have ended;
(j) All consents and approvals for the consummation of the transactions contemplated hereby
required from third parties (including any party to a Purchased Agreement or Transmission Easement)
or Governmental Entity shall have been obtained (including the consents and approvals set forth in
Schedule 5.3(a) through (d) and Schedule 6.3), other than any consents or approvals
that the failure to obtain would not, individually or in the aggregate, either (x) create a
Material Adverse Effect or (y) prevent Buyer from operating, using or owning the
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Purchased Assets
in all material respects in the manner operated, used or owned by Seller immediately prior to the
Closing; provided that satisfaction of the foregoing condition shall be determined without
consideration of any Buyer Required Regulatory Approval;
(k) Liabilities and obligations for which Buyer would be responsible after Closing relating to
or arising out of items included in supplements or amendments to Schedules pursuant to Section 7.8
shall not in the aggregate exceed $500,000, unless either (i) such liabilities and obligations, to
the extent they exceed $500,000, are reflected as liabilities in the Estimated Net Non-Rate Base
Asset Value or Estimated Rate Base Amount, or (ii) Seller, at its option, agrees to indemnify,
defend, and hold harmless Buyer from and against such liabilities and obligations, to the extent
they exceed $500,000. If Seller chooses to indemnify Buyer pursuant to this Section 9.2(k), such
indemnity shall not be subject to the indemnification limitations set forth in Article X.
(l) The Net Property, Plant and Equipment reflected on the balance sheet as of December 31,
2006 contained in the Audited Financial Statements shall not be less than $300,000,000.
9.3 Conditions to Obligations of Seller. The obligation of Seller to effect the
transactions contemplated hereby is subject to the fulfillment at or prior to the Closing Date of
the following additional conditions, any of which may be waived by Seller in its sole discretion:
(a) Buyer shall have performed and complied in all material respects with the covenants and
agreements contained in this Agreement which are required to be performed and complied with by
Buyer on or prior to the Closing Date;
(b) The representations and warranties of Buyer which are set forth in Article VI shall be
true and correct as of the Closing as though made at and as of the Closing (except to the extent
that any such representation or warranty speaks as of a particular date, in which case such
representation and warranty will be true and correct only as of such date), except for any failure
or failures of such representations and warranties to be true and correct that do not, individually
or in the aggregate, cause, constitute, or represent a Buyer Material Adverse Effect (it being
understood that, in determining the accuracy of such representations and warranties for purposes of
this Section 9.3(b), all Buyer Material Adverse Effect and materiality qualifications contained in
such representations and warranties shall be disregarded), provided that the representations and
warranties of Buyer in Section 6.2 shall be true and correct in all respects.
(c) Seller shall have received a certificate from the Chief Executive Officer of Buyer, dated
the Closing Date, to the effect that the conditions set forth in Sections 9.3(a) and 9.3(b) have
been satisfied;
(d) The Seller Required Regulatory Approvals shall have been obtained, become Final Regulatory
Orders, and contain such terms and conditions (if any) substantially equivalent with those
requested in the applications filed pursuant to Section 7.6(b), and without any limitation or
condition (excluding any limitation or condition expressly agreed to by Seller in any written
settlement or other written agreement relating to such Order) that would require any modification
to this Agreement or any transactions or agreements contemplated hereby, or place
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any restriction
or impose any condition on Seller or any of its Affiliates (including Seller or any of its
Affiliates after the Closing) or the business of Seller or its Affiliates;
(e) Seller shall have received the other items to be delivered pursuant to Section 4.4; and
(f) All consents and approvals for the consummation of the transactions contemplated hereby
required from third parties (including any party to a Purchased Agreement or Transmission Easement)
or Governmental Entity shall have been obtained (including the consents and approvals set forth in
Schedule 5.3(a) through (d) and Schedule 6.3), other than any consents or approvals
that the failure to obtain would not, individually or in the aggregate, either (x) have a material
adverse effect on Seller or any of its Affiliates (including Seller or any of its Affiliates after
the Closing), or (y) have a material adverse effect on the ability of Seller to consummate the
transactions contemplated hereby; provided that satisfaction of the foregoing condition shall be
determined without consideration of any Seller Required Regulatory Approval.
ARTICLE X
INDEMNIFICATION
INDEMNIFICATION
10.1 Survival of Representations and Warranties; Notices of Claims. The
representations and warranties of the Parties contained in this Agreement will survive the Closing
and will expire fifteen months after the Closing Date, except that (i) the representations and
warranties in Sections 5.1, 5.2, 5.3(a), 5.16, 6.1, 6.2, 6.3(a), and 6.6 will survive indefinitely,
(ii) the representations and warranties in Sections 5.7, 5.9 and 5.17 will survive the Closing and
will expire on the fifth anniversary of the date of this Agreement, and (iii) the representations
and warranties in Sections 5.15 and 5.18 will survive the Closing and will expire upon the
expiration of the applicable statute of limitations; provided that, any representation or warranty
(and the indemnification obligations of the Parties with respect thereto) that would otherwise
terminate in accordance with this Section 10.1 will continue to survive if notice for
indemnification shall have been timely given under this Article X on or prior to such termination
date, until the related claim for indemnification has been satisfied or otherwise resolved as
provided in this Article X.
10.2 Indemnification.
(a) Subject to Section 10.1 (with respect to clause (ii)) and Section 10.4 (with respect to
clauses (i), (ii), (iv), (v) and (vi)) hereof, from and after the Closing, Seller will indemnify,
defend, and hold harmless Buyer from and against any and all Claims and Losses (each, an
“Indemnifiable Loss”), asserted against or suffered by Buyer relating to, resulting from,
or arising out of:
(i) any breach by Seller of any covenant or agreement of Seller contained in this
Agreement which by its terms is to be performed prior to or at the Closing;
(ii) any breach by Seller of the representations and warranties of Seller contained in
this Agreement;
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(iii) any breach by Seller of any covenant or agreement of Seller contained in this
Agreement not covered by Section 10.2(a)(i);
(iv) the Assumed Pre-Closing Environmental Liabilities;
(v) the Assumed Pre-Closing Litigation;
(vi) the Pre-Closing Non-Balance Sheet Liabilities; or
(vii) the Excluded Liabilities.
Notwithstanding anything to the contrary set forth herein, for purposes of this Article X only, all
Material Adverse Effect and materiality qualifications contained in Seller’s representations and
warranties in Sections 5.3, 5.5(b), 5.7(a), 5.8(b), 5.9(a)-(e), 5.10(b), 5.11, 5.13, 5.15, 5.17 and
5.18(d) shall be disregarded for purposes of determining whether such representations and
warranties have been breached; provided that, in any event for purposes of calculating Losses
payable by Seller pursuant to a Claim by Buyer under this Article X, all Material Adverse Effect
and materiality qualifications contained in each of Seller’s representations and warranties shall
be disregarded.
(b) Subject to Section 10.1 (with respect to clause (ii)), Section 10.2(a) (with respect to
clauses (iv) and (v)) and Section 10.4 (with respect to clauses (i) and (ii)) hereof, from and
after the Closing, Buyer will indemnify, defend, and hold harmless Seller from and against any and
all Indemnifiable Losses asserted against or suffered by Seller relating to, resulting from, or
arising out of (i) any breach by Buyer of any covenant or agreement of Buyer contained in this
Agreement which by its terms is to be performed prior to the Closing, (ii) any breach by Buyer of
the representations and warranties of Buyer contained in this Agreement, (iii) any breach by Buyer
of any covenant or agreement of Buyer contained in this Agreement not covered by Section
10.2(b)(i), (iv) the Assumed Obligations, or (v) any and all liabilities and obligations associated
with the ownership and operation of the Purchased Assets from and after the Effective Time.
Notwithstanding anything to the contrary set forth herein, for purposes of this Article X only, all
Material Adverse Effect and materiality qualifications contained in Buyer’s representations and
warranties in Sections 6.3 and 6.5 shall be disregarded for purposes of determining whether such
representations and warranties have been breached; provided that, in
any event for purposes of calculating Losses payable by Buyer pursuant to a Claim by Seller
under this Article X, all Material Adverse Effect and materiality qualifications contained in each
of Buyer’s representations and warranties shall be disregarded.
(c) Seller shall not be obligated to satisfy any particular indemnification claim by Buyer
until with respect to that claim Buyer has first (i) used its commercially reasonable efforts to
recover all Losses from Buyer’s insurers under applicable insurance policies so as to reduce the
amount of any Indemnifiable Loss hereunder (and not taking any action specifically excluding from
any of its insurance policies any Indemnifiable Losses if Losses of such type are otherwise covered
by such policies) and (ii) used reasonable best efforts to recover such Losses through appropriate
rate recovery, provided that such efforts shall only require seeking rate recovery to the extent
that, in Buyer’s reasonable judgment acting in good faith, rate recovery of such Loss is prudent
and consistent with applicable rate recovery rules and ordinary and proper
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accounting practices.
The amount of any Indemnifiable Loss will be reduced to the extent that Buyer actually receives any
insurance proceeds or recovery through rates with respect to an Indemnifiable Loss; provided, that
the amount of any such reduction shall be calculated to take into account the time value of money
for actual recovery received by Buyer after the date the Loss is incurred. Buyer shall not be
under any obligation pursuant to this Agreement to maintain any, or any specific policies of, third
party insurance coverage. Buyer shall not have Indemnifiable Loss in respect of any indemnifiable
matter to the extent, but only to the extent, that such Losses were included in the calculation of
the Purchase Price pursuant to Article III.
10.3 Indemnification Procedures.
(a) If a Party seeking indemnification hereunder (an “Indemnitee”) receives notice of
the assertion or commencement of any Claim by any Person who is neither a Party to this Agreement
nor an Affiliate of a Party to this Agreement (a “Third Party Claim”) for which the
Indemnitee claims a right to indemnification hereunder, the Indemnitee will promptly give written
notice of such Third Party Claim (“Notice of Third Party Claim”) to the Party from whom
indemnification is sought (the “Indemnifying Party”). Such Notice of Third Party Claim
will describe the nature of the Third Party Claim in reasonable detail and will indicate the
estimated amount, to the extent practicable, of the Indemnifiable Loss that the Indemnitee claims
it has sustained or may sustain as a result of such Third Party Claim. The Indemnifying Party, at
its sole cost and expense, will have the right, upon written notice to the Indemnitee, to assume
the defense of the Third Party Claim while reserving its right to contest the issue of whether it
is liable to the Indemnitee for any indemnification hereunder with respect to such Third Party
Claim.
(b) If the Indemnifying Party assumes the defense of a Third Party Claim pursuant to Section
10.3(a), the Indemnifying Party will appoint counsel reasonably satisfactory to the Indemnitee for
the defense of such Third Party Claim, will diligently pursue such defense, and will keep the
Indemnitee reasonably informed with respect to such defense. The Indemnitee shall cooperate with
the Indemnifying Party and its counsel, including permitting reasonable access to books, records,
and personnel, in connection with the defense of any Third Party Claim (provided, that any
out-of-pocket third-party costs incurred by the Indemnitee in providing such
cooperation shall be paid by the Indemnifying Party). The Indemnitee will have the right to
participate in such defense, including appointing separate counsel, but the costs of such
participation shall be borne solely by the Indemnitee; provided that such cost shall be borne by
the Indemnifying Party in the event that the Indemnitee has determined in reasonable good faith
that there is an actual or potential legal conflict between the position of the Indemnifying Party
on the one hand and the Indemnitee on the other hand relating to the defense of the Third Party
Claim. The Indemnifying Party will have full authority, in consultation with the Indemnitee, to
make all decisions and determine all actions to be taken with respect to the defense and settlement
of the Third Party Claim, including the right to pay, compromise, settle, or otherwise dispose of
such Third Party Claim at the Indemnifying Party’s expense; provided, that any such settlement will
be subject to the prior consent of the Indemnitee, which shall not be unreasonably withheld or
delayed; provided, however, that such consent shall not be required if (i) the consent or
settlement contains a complete and unconditional general release by the third party asserting the
claim to all Indemnitees affected by the claim, (ii) requires only the payment of a monetary amount
by the Indemnifying Party, (iii) the consent or settlement does not contain any sanction
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or
restriction upon the operation of any business by the Indemnitee and (iv) the Indemnifying Party
has agreed in writing that it is liable to the Indemnitee for an indemnification payment in respect
of the full amount payable pursuant to such settlement. If a firm offer is made to settle a Third
Party Claim, which the Indemnifying Party desires to accept and which acceptance requires the
consent of the Indemnitee pursuant to the immediately preceding sentence, the Indemnifying Party
will give written notice to the Indemnitee to that effect. In no event will the Indemnifying Party
have authority to agree to any relief binding on the Indemnitee other than the payment of money
damages by the Indemnifying Party unless agreed to by the Indemnitee.
(c) If the Indemnifying Party does not assume the defense of a Third Party Claim in accordance
with the terms hereof within 10 days after the applicable Notice of Third Party Claim, the
Indemnitee may elect to defend against the Third Party Claim, and the Indemnifying Party will be
liable for all reasonable expenses of such defense to the extent the Indemnifying Party is
otherwise obligated hereunder to indemnify Indemnitee with respect to such Third Party Claim,
subject in the case of Buyer as the Indemnitee to Buyer’s obligations pursuant to Section 10.2(c).
(d) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from
a Third Party Claim (a “Direct Loss”) will be asserted by giving the Indemnifying Party
prompt written notice thereof, stating the nature of such Loss in reasonable detail and indicating
the estimated amount, if practicable (“Notice of Direct Loss”). The Indemnifying Party
will have a period of 20 Business Days within which to respond to such Notice of Direct Loss. If
the Indemnifying Party rejects such claim, or does not respond within such period, the Indemnitee
may seek enforcement of its rights to indemnification under this Agreement, subject in the case of
Buyer as the Indemnitee to Buyer’s obligations pursuant to Section 10.2(c). Any failure by the
Indemnifying Party to respond under this Section 10.3(d) will not constitute an admission by the
Indemnifying Party with respect to the claim asserted.
(e) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an
indemnity payment in respect thereof, is reduced by recovery, settlement, or otherwise under or
pursuant to any insurance coverage, or pursuant to any claim, recovery (including rate recovery),
settlement, or payment by or against any other Person, the amount of such reduction,
less any costs, expenses, or premiums incurred in connection therewith, will promptly be
repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the
Indemnifying Party will, to the extent of such indemnity payment, be subrogated to all rights of
the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity
payment relates; provided, however, that (i) the Indemnifying Party is then in compliance with its
obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the
Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying
Party against any such third party on account of said indemnity payment will be subordinated to the
Indemnitee’s rights against such third party. Without limiting the generality or effect of any
other provision hereof, the Indemnitee and the Indemnifying Party will duly execute upon request
all instruments reasonably necessary to evidence and perfect the above described subrogation and
subordination rights, and otherwise cooperate in the prosecution of such claims at the direction of
the Indemnifying Party.
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(f) A failure to give timely notice as provided in this Section 10.3 will affect the rights or
obligations of a Party hereunder only to the extent that, as a result of such failure, the Party
entitled to receive such notice was actually and materially prejudiced as a result of such failure.
Notwithstanding the foregoing, no claim for indemnification made after expiration of the
applicable time periods set forth in Sections 10.1 or 10.4 will be valid.
10.4 Limitations on Indemnification.
(a) A Party may assert a claim for indemnification pursuant to this Article X only to the
extent the Indemnitee gives a Notice of Third Party Claim or Notice of Direct Loss, as applicable,
with respect to such claim, to the Indemnifying Party (i) for claims pursuant to Section
10.2(a)(ii) or Section 10.2(b)(ii), prior to the expiration of the applicable time period set forth
in Section 10.1; (ii) for claims pursuant to Section 10.2(a)(i) or Section 10.2(b)(i), within
fifteen (15) months following the Closing Date; (iii) for claims pursuant to Section 10.2(a)(iv),
within five years following the Closing Date; and (iv) for claims pursuant to Section 10.2(a)(v) or
Section 10.2(a)(vi), within three years following the Closing Date. Any claim for indemnification
by Buyer with respect to which a Notice of Third Party Claim or Notice of Direct Loss is received
by Seller within the applicable time frame set forth in the foregoing sentence shall be deemed
timely made regardless of whether Buyer has at such point begun to comply with its obligations
pursuant to Section 10.2(c). Any claim for indemnification not made in accordance with Section
10.3 and the foregoing sentence by a Party on or prior to the applicable date set forth in Section
10.1 or this Section 10.4(a), and the other Party’s indemnification obligations with respect
thereto, will be irrevocably and unconditionally released and waived.
(b) Notwithstanding any other provision of this Article X: (i) Seller will not have any
indemnification obligations for Indemnifiable Losses under Sections 10.2(a)(i), 10.2(a)(ii),
10.2(a)(iv), 10.2(a)(v), and 10.2(a)(vi) (A) for any individual item where the Loss relating
thereto is less than $100,000 and (B) in respect of each individual item where the Loss relating
thereto is equal to or greater than $100,000, unless the aggregate amount of all such Losses
exceeds $5,000,000, and then only to the extent of such excess; and (ii) in no event will the
aggregate indemnification to be paid by Seller under Sections 10.2(a)(i), 10.2(a)(ii),
10.2(a)(iv), 10.2(a)(v), and 10.2(a)(vi) exceed 25% of the Purchase Price. Notwithstanding the
foregoing, (x) the limitations set forth in Sections 10.4(b)(i) and 10.4(b)(ii) will not apply to
claims asserted by Buyer for breaches of Sections 5.1, 5.2, 5.3(a), 5.7, 5.15, 5.16, and 5.17, (y)
the aggregate indemnification to be paid by Seller under Section 10.2(a)(ii) with respect to
breaches of Sections 5.7 and 5.17, will not exceed 50% of the Purchase Price, less any other
indemnification payments made by Seller pursuant to Sections 10.2(a)(i) and 10.2(a)(ii), and (z)
the aggregate indemnification to be paid by Seller under Section 10.2(a)(ii) with respect to
breaches of Sections 5.1, 5.2, 5.3(a), and 5.16, will not exceed 100% of the Purchase Price, less
any other indemnification payments made by Seller pursuant to Sections 10.2(a)(i) and 10.2(a)(ii).
(c) Notwithstanding any other provision of this Article X: (i) Buyer will not have any
indemnification obligations for Indemnifiable Losses under Sections 10.2(b)(i) and 10.2(b)(ii) (A)
for any individual item where the Loss relating thereto is less than $100,000 and (B) in respect of
each individual item where the Loss relating thereto is equal to or greater than $100,000, unless
the aggregate amount of all such Losses exceeds $5,000,000, and then only to
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the extent of such
excess; and (ii) in no event will the aggregate indemnification to be paid by Buyer under Sections
10.2(b)(i) and 10.2(b)(ii) exceed 25% of the Purchase Price. Notwithstanding the foregoing, (x)
the limitations set forth in Sections 10.4(b)(i) and 10.4(b)(ii) will not apply to claims asserted
by Seller for breaches of Sections 6.1, 6.2, 6.3(a), and 6.6, and (y) the aggregate indemnification
to be paid by Buyer under Section 10.2(b)(ii) with respect to breaches of Sections 6.1, 6.2,
6.3(a), and 6.6 will not exceed 100% of the Purchase Price, less any other indemnification payments
made by Buyer pursuant to Sections 10.2(b)(i) and 10.2(b)(ii).
(d) No representation or warranty of either Party contained herein will be deemed untrue or
incorrect, and such Party will not be deemed to have breached a representation, warranty, or
covenant as a consequence of the existence of any fact, circumstance, action, or event that is
permitted to be taken by such Party under the terms of this Agreement, or that is disclosed in this
Agreement, any Schedule, or Exhibit hereto.
(e) Notwithstanding anything contained in this Agreement to the contrary, except for the
representations and warranties contained in this Agreement, neither Seller nor any other Person is
making any other express or implied representation or warranty with respect to Seller, the
Purchased Assets, the Assumed Obligations or the transactions contemplated by this Agreement, and
Seller disclaims any other representations or warranties, whether made by Seller or its Affiliates,
officers, directors, employees, agents, or representatives, INCLUDING THE IMPLIED WARRANTY OF
MERCHANTABILITY AND ANY IMPLIED WARRANTY OF FITNESS. Any claims Buyer may have for breach of
representation or warranty must be based solely on the representations and warranties of Seller set
forth in this Agreement. In furtherance of the foregoing, except for the representations and
warranties contained in this Agreement, Buyer acknowledges and agrees that none of Seller, any of
its Affiliates or any other Person will have or be subject to any liability to Buyer or any other
Person for, and Seller hereby disclaims all liability and responsibility for, any representation,
warranty, projection, forecast, statement, or information made, communicated, or furnished (orally
or in writing) to Buyer or any of Buyer’s Representatives, including any confidential
memoranda distributed on behalf of Seller relating to the Purchased Assets or the Assumed
Obligations or other publications or data room information provided to Buyer or Buyer’s
Representatives, or any other document or information in any form provided to Buyer or Buyer’s
Representatives in connection with the sale of the Purchased Assets, the assumption of the Assumed
Obligations, and the transactions contemplated hereby (including any opinion, information,
projection, or advice that may have been or may be provided to Buyer or Buyer’s Representatives by
Seller or any of Seller’s Representatives). BUYER HEREBY ACKNOWLEDGES THAT, EXCEPT FOR THE
WARRANTIES EXPRESSLY SET FORTH IN ARTICLE V, THE PURCHASED ASSETS ARE BEING PURCHASED ON AN “AS IS,
WHERE IS” BASIS, WITH ALL FAULTS. Notwithstanding the foregoing, nothing contained in this Section
10.4(e) shall limit in any respect any remedy to which any Party may be entitled in respect of any
fraudulent breach of this Agreement or other fraud by the other Party.
10.5 Applicability of Article X. For the avoidance of doubt, Seller and Buyer agree
that the remedies and obligations under this Article X apply only following the Closing, and that
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prior to the Closing or in the event that this Agreement is terminated the Parties’ remedies will
be determined by applicable Law and the provisions of Article XI.
10.6 Tax Treatment of Indemnity Payments. Seller and Buyer agree to treat any
indemnity payment made pursuant to this Article X as an adjustment to the Purchase Price for
federal, state, and local Income Tax purposes, unless otherwise required by applicable Law.
10.7 Waiver of Certain Damages. Notwithstanding anything to the contrary elsewhere in this
Agreement (other than in this Section 10.7) or provided for under any applicable Law, no Party
will, in any event, be liable to the other Party, either in contract or in tort, for any
consequential, incidental, indirect, special, or punitive damages of the other Party, including
loss of future revenue, income, or profits, diminution of value, or loss of business reputation or
opportunity, relating to the breach or alleged breach hereof or otherwise, whether or not the
possibility of such damages has been disclosed to the other Party in advance or could have been
reasonably foreseen by such other Party; provided, however, that the exclusion of consequential,
incidental, indirect, special, and punitive damages as set forth above does not apply to any such
damages sought by third parties against Buyer or Seller, as the case may be, in connection with
Losses that may be indemnified pursuant to this Article X. In addition, and notwithstanding
anything to the contrary contained elsewhere in this Agreement, Seller will be liable for
consequential Losses relating to any Claims and Losses of Buyer hereunder to the extent the event,
occurrence, Claim or Loss underlying such indemnified matter negatively impacts the cash flow of
Buyer; provided that, in no event shall Seller by liable for consequential Losses hereunder in
excess of $20,000,000 in the aggregate (with such $20,000,000, to the extent incurred, deemed to be
a part of and not in addition to the aggregate indemnification limits of Seller contained in this
Article X).
10.8 Exclusive Remedy. Seller and Buyer acknowledge and agree that, from and after
the Closing, the sole and exclusive remedy for any breach or inaccuracy, or alleged breach or
inaccuracy, of any representation or warranty in this Agreement or any covenant or agreement to be
performed hereunder on or prior to the Closing Date, will be indemnification in accordance with
this Article X and the remedies provided for in Section 11.4. In furtherance of the foregoing,
Seller and Buyer hereby waive, to the fullest extent permitted by applicable Law, any and all other
rights, claims, and causes of action (including rights of contributions, if any) that may be based
upon, arise out of, or relate to this Agreement, or the negotiation, execution, or performance of
this Agreement (including any tort or breach of contract claim or cause of action based upon,
arising out of, or related to any representation or warranty made in or in connection with this
Agreement or as an inducement to enter into this Agreement), known or unknown, foreseen or
unforeseen, which exist or may arise in the future, that it may have against the other arising
under or based upon any Law (including any such Law under or relating to environmental matters),
common law, or otherwise. Notwithstanding the foregoing, nothing contained in this Section 10.8
shall limit in any respect any remedy to which any Party may be entitled in respect of any
fraudulent breach of this Agreement or any other fraud.
ARTICLE XI
TERMINATION AND OTHER REMEDIES
TERMINATION AND OTHER REMEDIES
11.1 Termination.
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(a) This Agreement may be terminated at any time prior to the Closing Date by mutual written
consent of Seller and Buyer.
(b) This Agreement may be terminated by Seller or Buyer if the Closing has not occurred on or
before December 31, 2007 (the “Termination Date”); provided that, the right to terminate
this Agreement under this Section 11.1(b) will not be available to a Party if the failure of the
Closing to occur on or before the Termination Date resulted from such Party’s willful or
intentional breach of this Agreement.
(c) This Agreement may be terminated by either Seller or Buyer if (i) any Required Regulatory
Approval has been denied by the applicable Governmental Entity and all appeals of such denial have
been taken and have been unsuccessful, or (ii) one or more courts of competent jurisdiction in the
United States or any State has issued an Order permanently restraining, enjoining, or otherwise
prohibiting the Closing, and such Order has become final and nonappealable.
(d) This Agreement may be terminated by Buyer if there has been a breach by Seller of any
representation, warranty, or covenant made by it in this Agreement which has prevented the
satisfaction of any condition to the obligations of Buyer to effect the Closing and such breach has
not been cured by Seller or waived by Buyer within twenty (20) Business Days after all other
conditions to Closing have been satisfied or are capable of being satisfied, but only if Buyer is
not then in material breach of any representation, warranty, covenant or agreement contained
herein.
(e) This Agreement may be terminated by Seller if there has been a breach by Buyer of any
representation, warranty, or covenant made by it in this Agreement which has prevented the
satisfaction of any condition to the obligations of Seller to effect the Closing and such breach
has not been cured by Buyer or waived by Seller within twenty (20) Business Days after all other
conditions to Closing have been satisfied or are capable of being satisfied, but only if Seller is
not then in material breach of any representation, warranty, covenant or agreement contained
herein; provided that such twenty (20) Business Day cure period shall not apply to Buyer’s
obligation to pay the Base Price at Closing.
11.2 Procedure and Effect of Termination. In the event of termination of this
Agreement by either or both of the Parties pursuant to Section 11.1, written notice thereof will
forthwith be given by the terminating Party to the other Party and this Agreement will terminate
and the transactions contemplated hereby will be abandoned, without further action by either Party,
whereupon the liabilities of the Parties hereunder will terminate, except as otherwise expressly
provided in this Agreement (including Section 11.3).
11.3 Remedies upon Termination. If this Agreement is terminated as provided herein:
(a) Except as otherwise provided in this Article XI, such termination will be the sole remedy
of the Parties with respect to breaches of any representation, warranty, or covenant contained in
this Agreement and neither Party nor any of its, directors, officers, or Affiliates, as the case
may be, will have any liability or further obligation to the other Party or any of its, directors,
officers, or Affiliates, as the case may be, pursuant to this Agreement.
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(b) Notwithstanding Section 11.3(a), the obligations of the Parties under Articles I, XI, and
XII, and Sections 7.2(b), 7.3, 7.5 and 7.12(c) will survive termination of this Agreement.
(c) Buyer will pay to Seller a fee equal to either (i) 3.25% of the Initial Valuation if
Seller terminates this Agreement pursuant to Section 11.1(e) due to a breach by Buyer of its
covenants and agreements hereunder (other than due to a breach by Buyer of its covenant to pay the
Base Price at Closing), or of its representations and warranties hereunder made as of the date of
this Agreement, or (ii) 6.00% of the Initial Valuation if Seller terminates this Agreement pursuant
to Section 11.1(e) due to a breach by Buyer of its covenant to pay the Base Price at Closing. In
the event that Seller is entitled to terminate this Agreement pursuant to Section 11.1(e) due to a
breach by Buyer of its covenant to pay the Base Price at Closing, then Seller’s sole and exclusive
remedy shall be the payment of liquidated damages contemplated by subparagraph (ii) above, and
Seller shall not be entitled to seek or obtain an Order for specific performance or other equitable
or injunctive relief to cause Buyer to consummate the transactions contemplated by this Agreement.
(d) Seller will pay to Buyer a fee equal to 3.25% of the Initial Valuation if Buyer terminates
this Agreement pursuant to Section 11.1(d) due to a breach by Seller of its covenants and
agreements hereunder, or of its representations and warranties hereunder (other than the
representations and warranties contained in (i) Section 5.3(b), or (ii) insofar as such breach
relates to Purchased Agreements, Easements and/or Permits, Section 5.3(d)) made as of the date of
this Agreement.
(e) In view of the difficulty of determining the amount of damages which may result from a
termination under the circumstances set forth in Section 11.1(d) or Section 11.1(e), and the
failure of the Parties to consummate the transactions contemplated by this Agreement, Buyer and
Seller have mutually agreed that the payment set forth in Section 11.3(c) and Section 11.3(d) will
be made to Seller or Buyer, as the case may be, as liquidated damages, and not as a penalty. In
the event of any such termination, the Parties have agreed that the payment set forth in Section
11.3(c) and Section 11.3(d) will be the sole and exclusive remedy for monetary damages of Seller or
Buyer, as the case may be. ACCORDINGLY, THE PARTIES HEREBY ACKNOWLEDGE THAT (i) THE EXTENT OF
DAMAGES CAUSED BY THE FAILURE OF THIS TRANSACTION TO BE CONSUMMATED WOULD BE IMPOSSIBLE OR
EXTREMELY DIFFICULT TO ASCERTAIN, (ii) THE AMOUNT OF THE LIQUIDATED DAMAGES PROVIDED FOR IN SECTION
11.3(c) AND SECTION 11.3(d) IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES UNDER THE
CIRCUMSTANCES, AND (iii) RECEIPT OF SUCH LIQUIDATED DAMAGES BY SELLER OR BUYER, AS THE CASE MAY BE,
DOES NOT CONSTITUTE A PENALTY. THE PARTIES HEREBY FOREVER WAIVE AND AGREE TO FOREGO TO THE FULLEST
EXTENT PERMITTED UNDER APPLICABLE LAW ANY AND ALL RIGHTS THEY HAVE OR IN THE FUTURE MAY HAVE TO
ASSERT ANY CLAIM DISPUTING OR OTHERWISE OBJECTING TO ANY OR ALL OF THE FOREGOING PROVISIONS OF THIS
SECTION 11.3. Any payment under Sections 11.3(c) or Section 11.3(d) will be made by wire transfer
of immediately available funds to a bank account in the United States of America designated in
writing by the Party entitled to receive such payment not later than three (3) Business Days
following the date such Party delivers notice of such account designation to the Party responsible
to make such payment. For the avoidance of doubt, in the absence of any termination of this
Agreement, nothing
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contained in this Section 11.3 shall in any way limit the Parties’ rights to
indemnification under Article X of this Agreement or any other remedy the Parties may have under
this Agreement for breach of the representations or warranties contained in this Agreement.
(f) Upon any termination of this Agreement, all filings, applications and other submissions
made pursuant to this Agreement, to the extent practicable, will be withdrawn from the Governmental
Entity or other Person to which they were made.
11.4 Specific Performance. The Parties expressly agree that the Purchased Assets are
unique, and in the event of breach of this Agreement by either Party, the other Party will, in
addition to any of its rights or remedies hereunder, have the right to enforce this Agreement by
obtaining an order for specific performance of the Parties’ obligations hereunder; provided that,
in the event of a breach by Buyer of its covenant to pay the Base Price at Closing, Seller shall
not be entitled to seek or obtain an Order for specific performance or other equitable or
injunctive relief to cause Buyer to
consummate the transactions contemplated by this Agreement. If either Party resorts to legal
proceedings to enforce this Agreement, the prevailing Party in such proceedings will be entitled to
recover all costs reasonably incurred by such Party, including reasonable attorney’s fees, in
addition to any other relief to which such Party may be entitled under the terms hereof; provided,
that in no event will either Party be entitled to receive any punitive, indirect, or consequential
damages.
ARTICLE XII
MISCELLANEOUS PROVISIONS
MISCELLANEOUS PROVISIONS
12.1 Amendment and Modification. Except as provided in Section 7.8, this Agreement
may be amended, modified, or supplemented only by written agreement of Seller and Buyer.
12.2 Waiver of Compliance; Consents. Except as otherwise provided in this Agreement,
any failure of either Party to comply with any obligation, covenant, agreement, or condition herein
may be waived by the Party entitled to the benefits thereof only by a written instrument signed by
the Party granting such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement, or condition will not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
12.3 Notices. All notices and other communications hereunder will be in writing and
will be deemed given if delivered personally or by facsimile transmission, or mailed by overnight
courier or certified mail (return receipt requested), postage prepaid, to the Party being notified
at such Party’s address indicated below (or at such other address for a Party as is specified by
like notice; provided that notices of a change of address will be effective only upon receipt
thereof):
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(a) If to Seller, to:
Interstate Power and Light Company
000 Xxxxx Xxxxxx XX
P.O. Box 351
Cedar Rapids, IA
Attn: Xxxx X. Xxxxxx, Vice President – Technical and Integrated Services
Facsimile: (000) 000-0000
000 Xxxxx Xxxxxx XX
P.O. Box 351
Cedar Rapids, IA
Attn: Xxxx X. Xxxxxx, Vice President – Technical and Integrated Services
Facsimile: (000) 000-0000
with copies to:
Interstate Power and Light Company
000 Xxxxx Xxxxxx XX
P.O. Box 351
Cedar Rapids, IA
Attention: Xxxxxxx X. Xxxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
000 Xxxxx Xxxxxx XX
P.O. Box 351
Cedar Rapids, IA
Attention: Xxxxxxx X. Xxxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
and
Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxx, III
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxx, III
Xxx X. Xxxxxxx
Facsimile: (000) 000-0000
(b) if to Buyer, to:
ITC Midwest LLC
00000 Xxxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
00000 Xxxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
All such notices and communications shall be effective when delivered by hand or overnight
courier service, in the case of mail, upon receipt of such mail, or, in the case of
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facsimile transmission, upon receipt of confirmation of delivery at the sender’s fax
machine.
12.4 Assignment. This Agreement and all of the provisions hereof will be binding upon
and inure to the benefit of the Parties and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests, or obligations hereunder may be assigned
by either Party, without the prior written consent of the other Party, nor is this Agreement
intended to
confer upon any other Person except the Parties any rights or remedies hereunder.
Notwithstanding the foregoing, Buyer may assign its rights hereunder to any bank, financial
institution or other lender providing financing to Buyer, as applicable, as collateral security for
such financing; provided, however, that no such assignment shall (x) impair, impede or delay the
consummation of the transactions contemplated hereby or (y) relieve or discharge Buyer from any of
its obligations hereunder. No provision of this Agreement creates any rights, claims or benefits
inuring to any Person that is not a party hereto or creates or establishes any third party
beneficiary rights in any Person (including any employee or former employee of Seller (including
any beneficiary or dependent thereof) in respect of continued employment or resumed employment, and
no provision of this Agreement creates any rights in any such Persons in respect of any benefits
that may be provided, directly or indirectly, under any employee benefit plan or arrangement except
as expressly provided for thereunder).
12.5 Governing Law. This Agreement is governed by and construed in accordance with
the laws of the State of Iowa (regardless of the laws that might otherwise govern under applicable
principles of conflicts of law) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
12.6 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction will not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
12.7 Entire Agreement. This Agreement will be a valid and binding agreement of the
Parties only if and when it is fully executed and delivered by the Parties, and until such
execution and delivery no legal obligation will be created by virtue hereof. This Agreement,
together with the Schedules and Exhibits hereto and the certificates and instruments delivered
under or in accordance herewith, embodies the entire agreement and understanding of the Parties
hereto in respect of the transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants, or undertakings in respect of the transactions
contemplated by this Agreement, other than those expressly set forth or referred to herein or
therein, and it is expressly acknowledged and agreed that there are no restrictions, promises,
representations, warranties, covenants, or undertakings contained in any other material made
available to the Parties, including any such material made available in any data room, confidential
information memoranda, management information presentations, or otherwise. This Agreement
supersedes all prior agreements and understandings between the Parties with respect to such
transactions.
12.8 Bulk Sales or Transfer Laws. Buyer acknowledges that Seller will not comply with
the provision of any bulk sales or transfer laws of any jurisdiction in connection with the
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transactions contemplated by this
Agreement. Buyer hereby waives compliance by Seller with the provisions of the bulk sales or
transfer laws of all applicable jurisdictions. Notwithstanding anything to the contrary in this
Agreement, Seller shall indemnify and hold Buyer harmless from and against any and all Losses,
liabilities, Claims or expenses which shall arise against or be incurred by Buyer due to the
failure of Seller and its Affiliates to comply with such requirements.
12.9 Delivery. This Agreement, and any certificates and instruments delivered under
or in accordance herewith, may be executed in multiple counterparts (each of which will be deemed
an original, but all of which together will constitute one and the same instrument), and may be
delivered by facsimile transmission, with originals to follow by overnight courier or certified
mail (return receipt requested).
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their respective
duly authorized officers as of the date first above written.
INTERSTATE POWER AND LIGHT COMPANY | ||||||
By: | /s/ Xxxxxxx X. Xxxxxx | |||||
Name: | Xxxxxxx X. Xxxxxx | |||||
Title: | Chief Executive Officer | |||||
ITC MIDWEST LLC | ||||||
By: | ITC Holdings Corp., | |||||
as sole member | ||||||
By: | /s/ Xxxxxx X. Xxxxx | |||||
Name: | Xxxxxx X. Xxxxx | |||||
Title: | President and Chief Executive Officer |
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