EXECUTION COPY
PURCHASE AGREEMENT
AMONG
EVERCORE CO-INVESTMENT PARTNERSHIP II L.P.,
EVERCORE METC CAPITAL PARTNERS II L.P.,
MEAP US HOLDINGS, LTD.,
MACQUARIE ESSENTIAL ASSETS PARTNERSHIP,
TE POWER OPPORTUNITIES INVESTORS, L.P.
TE MANAGEMENT SHAREHOLDERS,
MICH 1400 LLC,
ITC HOLDINGS CORP.,
GFI TRANSMISSION OPPORTUNITIES GP, LLC,
OCM/GFI POWER OPPORTUNITIES FUND II, L.P.,
OCM/GFI POWER OPPORTUNITIES FUND II (CAYMAN) LP,
AND
MACQUARIE HOLDINGS (USA), INC.
DATED AS OF MAY 11, 2006
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.................................................... 2
Section 1.1 Definitions........................................... 2
Section 1.2 Interpretation........................................ 11
ARTICLE II PURCHASE AND SALE............................................. 12
Section 2.1 Purchase and Sale of the Shares....................... 12
ARTICLE III PURCHASE PRICE............................................... 12
Section 3.1 Purchase Price........................................ 12
Section 3.2 Changes in Allocation of Cash Consideration........... 13
Section 3.3 Withholding........................................... 13
ARTICLE IV CLOSING....................................................... 13
Section 4.1 Closing Date.......................................... 13
Section 4.2 Preliminary Information............................... 14
Section 4.3 Buyer's Closing Date Deliveries....................... 14
Section 4.4 Selling Shareholders' and TE Parents' Closing Date
Deliveries............................................ 14
Section 4.5 FIRPTA Certificates................................... 15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS..... 16
Section 5.1 Organization.......................................... 16
Section 5.2 Capital Structure..................................... 16
Section 5.3 Acquired Entities, Subsidiaries and Investments....... 17
Section 5.4 Authority; Conflicts.................................. 18
Section 5.5 Financial Statements.................................. 19
Section 5.6 Operations Since Financial Statements Date............ 19
Section 5.7 Taxes................................................. 19
Section 5.8 Governmental Permits.................................. 20
Section 5.9 Real Property......................................... 21
Section 5.10 Personal Property..................................... 21
Section 5.11 Intellectual Property................................. 21
Section 5.12 Title to Property..................................... 22
Section 5.13 No Violation, Litigation or Regulatory Action......... 22
Section 5.14 Contracts............................................. 23
Section 5.15 Status of Contracts................................... 24
Section 5.16 ERISA................................................. 24
Section 5.17 Environmental Matters................................. 26
Section 5.18 Employee Relations and Agreements..................... 27
Section 5.19 No Undisclosed Liabilities............................ 28
Section 5.20 Availability of Assets................................ 28
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Section 5.21 Insurance............................................. 29
Section 5.22 Affiliate Transactions................................ 29
Section 5.23 Brokers, Finder, etc.................................. 29
Section 5.24 Investment Intent; Information........................ 29
Section 5.25 Market Participant.................................... 30
ARTICLE VI ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE XX XXXXXXX... 30
Section 6.1 Organization.......................................... 30
Section 6.2 Subsidiaries and Investments.......................... 30
Section 6.3 Conflicts............................................. 30
Section 6.4 Financial Statements; Undisclosed Liabilities......... 31
Section 6.5 Solvency.............................................. 32
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER...................... 32
Section 7.1 Organization of Buyer................................. 32
Section 7.2 Authority of Buyer; Conflicts......................... 32
Section 7.3 No Violation, Litigation or Regulatory Action......... 33
Section 7.4 Financing............................................. 33
Section 7.5 Investment Intent; Information........................ 34
Section 7.6 Solvency.............................................. 34
Section 7.7 Brokers, Finder, etc.................................. 34
ARTICLE VIII ACTION PRIOR TO THE CLOSING DATE............................ 34
Section 8.1 Access to Information................................. 34
Section 8.2 Preserve Accuracy of Representations and Warranties;
Notification.......................................... 35
Section 8.3 Consents of Third Parties; Governmental Approvals..... 35
Section 8.4 Operations Prior to the Closing Date.................. 36
Section 8.5 Payment of Termination Amount......................... 39
Section 8.6 Financing............................................. 39
Section 8.7 FERC Docket No. ER06-56............................... 40
Section 8.8 New TE................................................ 40
Section 8.9 Transfer Taxes........................................ 40
Section 8.10 Termination of Affiliate Relationships................ 40
ARTICLE IX ADDITIONAL AGREEMENTS......................................... 40
Section 9.1 Employee Matters...................................... 40
Section 9.2 Securities Law Legends................................ 42
Section 9.3 Insurance; Risk of Loss............................... 43
Section 9.4 Directors' and Officers' Indemnification.............. 43
Section 9.5 Use of Names.......................................... 44
Section 9.6 Restructuring......................................... 44
Section 9.7 Non-Solicitation...................................... 45
Section 9.8 Tax Matters........................................... 45
Section 9.9 Trans-Elect Compensation Payments..................... 45
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ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER................... 46
Section 10.1 No Misrepresentation, Breach of Covenants and
Warranties; Absence of Changes........................ 46
Section 10.2 HSR Act............................................... 47
Section 10.3 FERC 203 and 204 Approval............................. 47
Section 10.4 Marketing Period...................................... 47
Section 10.5 Additional Agreements................................. 47
Section 10.6 MSA Termination....................................... 47
Section 10.7 Restructuring......................................... 47
Section 10.8 No Restraint.......................................... 47
ARTICLE XI CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING
SHAREHOLDERS.......................................................... 47
Section 11.1 No Misrepresentation or Breach of Covenants and
Warranties............................................ 47
Section 11.2 HSR Act............................................... 48
Section 11.3 FERC 203 and 204 Approval............................. 48
Section 11.4 MSA Termination Amount................................ 48
Section 11.5 No Restraint.......................................... 48
ARTICLE XII TERMINATION.................................................. 48
Section 12.1 Termination........................................... 48
Section 12.2 Notice of Termination................................. 49
Section 12.3 Effect of Termination................................. 49
Section 12.4 Specific Performance.................................. 49
ARTICLE XIII INDEMNIFICATION............................................. 49
Section 13.1 Indemnification....................................... 49
Section 13.2 Limits on Indemnification............................. 50
Section 13.3 Indemnification Procedures............................ 51
Section 13.4 Treatment of Indemnity Payments....................... 51
ARTICLE XIV GENERAL PROVISIONS........................................... 52
Section 14.1 No Public Announcement................................ 52
Section 14.2 Notices............................................... 52
Section 14.3 Successors and Assigns................................ 52
Section 14.4 Access to Records after Closing....................... 53
Section 14.5 Entire Agreement; Exhibits, Annexes and Schedules;
Amendments............................................ 53
Section 14.6 Interpretation........................................ 54
Section 14.7 Waivers............................................... 54
Section 14.8 Expenses.............................................. 54
Section 14.9 Partial Invalidity.................................... 54
Section 14.10 Execution in Counterparts............................. 55
Section 14.11 Further Assurances.................................... 55
Section 14.12 Disclaimer of Warranties.............................. 55
Section 14.13 Governing Law; Submission to Jurisdiction............. 55
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Section 14.14 Waiver of Jury Trial.................................. 56
Section 14.15 No Third Party Beneficiaries.......................... 56
Section 14.16 Nonsurvival of Representations and Warranties......... 56
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PURCHASE AGREEMENT
PURCHASE AGREEMENT (the "Agreement"), dated as of May 11, 2006, by and
among TE Power Opportunities Investors, L.P., a Delaware limited partnership
("TE Power Opportunities"), such persons listed on Schedule X hereto, (such
individuals, collectively, the "TE Management Shareholders" and together with TE
Power Opportunities the "XX Xxxxxxx"), Mich 1400 LLC, a Delaware limited
liability company, MEAP US Holdings Ltd., a Canadian federal corporation,
Macquarie Essential Assets Partnership, an Ontario limited partnership, Evercore
Co-Investment Partnership II L.P., a Delaware limited partnership, and Evercore
METC Capital Partners II L.P., a Delaware limited partnership, (collectively
with the XX Xxxxxxx, the "Selling Shareholders"), ITC Holdings Corp., a Michigan
corporation ("Buyer"), solely for purposes of Articles VI, X and XIII and
Sections 4.4 and 9.8, GFI Transmission Opportunities GP, LLC, a Delaware limited
liability company, OCM/GFI Power Opportunities Fund II, L.P., a Delaware limited
partnership and OCM/GFI Power Opportunities Fund II (Cayman) L.P., a Cayman
Islands exempted limited partnership (the three preceding parties collectively
the "TE Parents") and solely for the purposes of Article XIII, Macquarie
Holdings (USA), Inc, a Delaware corporation ("MHUSA").
PRELIMINARY STATEMENT:
WHEREAS, the Selling Shareholders own or, in the case of New TE (as
defined below) prior to Closing, will own 100% of the issued and outstanding
capital stock of each of those entities set forth in Annex A (collectively, the
"Acquired Entities");
WHEREAS, the Acquired Entities and Trans-Elect, Inc. own, directly or
indirectly, 100% of the general and limited partnership interests of Michigan
Transco Holdings, Limited Partnership ("MTH"), which owns the sole membership
interest of Michigan Electric Transmission Company LLC ("METC") (MTH and METC
are hereinafter referred to collectively as the "Subsidiaries");
WHEREAS, METC has entered into new employment agreements (the
"Executive Employment Agreements") with Xxxxx Xxxxxxxxx and Royal Xxxxxx (the
"Executives") on the date hereof, pursuant to which METC agrees to continue to
employ the Executives, and the Executives agree to continue to provide services
to METC and its Affiliates (as defined below), for one year after the Closing
Date (as defined below), subject to the terms and conditions of the Executive
Employment Agreements;
WHEREAS, prior to the closing of the transactions contemplated by this
Agreement, the XX Xxxxxxx shall cause the Restructuring (as defined below) to be
effected, which, among other things, shall result in 100% of the general
partnership interests of MTH currently held indirectly by Trans-Elect, Inc. to
be held indirectly by New TE (as defined below);
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WHEREAS, the Selling Shareholders desire to sell, and Buyer desires to
purchase, all of the issued and outstanding capital stock of the Acquired
Entities from the Selling Shareholders (the "Shares"); and
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. In this Agreement, the following terms have
the meanings specified or referred to in this Section 1.1 and shall be equally
applicable to both the singular and plural forms.
"2006 BONUSES" has the meaning set forth in Section 9.1(a).
"ACTION" means any proceeding, claim, suit, case, action, litigation,
arbitration, or investigation.
"ACQUIRED ENTITIES" has the meaning set forth in the recitals.
"ADMINISTRATIVE AUTHORITY" means any foreign, federal, state, local or
other governmental authority, court, arbitrator, agency, commission, regulatory
body, stock exchange or listing authority.
"AFFILIATE" means, with respect to any Person, any other Person which,
at the time of determination, directly or indirectly through one or more
intermediaries Controls, is Controlled by or is under Common Control with such
Person.
"AFFILIATE AGREEMENTS" has the meaning set forth in Section 8.11.
"AGREEMENT" shall have the meaning set forth in the recitals.
"ANCILLARY AGREEMENTS" means all agreements, instruments and documents
required to be executed and delivered by the Selling Shareholders and/or Buyer,
as the case may be, or any Affiliate of the Selling Shareholders and/or Buyer as
the case may be (including the Companies on or after the Closing Date) under
this Agreement or in connection herewith, including the Shareholders Agreement.
"APPROVED ANNUAL BUDGET" means the 2006 annual budget of the
Subsidiaries attached hereto as Schedule 8.4(b)(iii).
"AVERAGE CLOSING PRICE" has the meaning set forth in Section 3.1(c).
"BALANCE SHEET" means the balance sheet as of December 31, 2005
contained in the Financial Statements.
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"BUYER" has the meaning specified in the first paragraph of this
Agreement.
"BUSINESS DAY" means any day on which banks are not required or
authorized to close in the City of New York.
"BUYER BENEFIT PLANS" has the meaning specified in Section 9.1(b).
"CLOSING" means the closing of the transfer of the Shares from the
Selling Shareholders to Buyer in exchange for the Purchase Price.
"CLOSING DATE" has the meaning specified in Section 4.1.
"COBRA" has the meaning specified in Section 9.1(g).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANIES" means, collectively, the Acquired Entities, TEM and the
Subsidiaries.
"COMPANY EMPLOYEE" means any Employee who remains employed with any of
Buyer or METC on or after the Closing Date.
"COMPANY PLAN" has the meaning specified in Section 5.16(a).
"COMPETING PROPOSAL" has the meaning set forth in Section 9.7.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated
September 21, 2005, among ITC Holdings Corp., International Transmission Company
and Michigan Transco Holdings, Limited Partnership on behalf of itself and
Michigan Electric Transmission Company, LLC.
"CONTAMINANT" means any waste, contaminant, pollutant, or hazardous or
toxic substance or waste, as such terms are defined in Environmental Laws and
any other substance regulated pursuant to or which could give rise to Liability
under any Environmental Laws, and includes, for purposes of this Agreement, any
petroleum (including crude oil or any fraction thereof), petroleum products or
petroleum wastes, polychlorinated biphenyls, urea-formaldehyde insulation,
asbestos, molds, pollutants, contaminants, radioactivity, and electromagnetic
fields.
"CONTRACT" means any contract, agreement, understanding, lease,
license, evidence of indebtedness, mortgage, security agreement, or other
commitment, in each case, whether written or oral.
"CONTROL" means, as to any Person, the ownership of 50% or more of the
voting equity securities of such Person or the power to direct or cause the
direction of the management and policies of such Person. The terms "Controlled
by" and "under Common Control with" shall have correlative meanings.
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"COPYRIGHTS" means United States and foreign registered copyrights,
and pending applications to register the same, and copyrightable works.
"COURT ORDER" means any judgment, order, award, injunction, decree,
settlement or stipulation of any foreign, federal, state, local or other court
or tribunal and any award in any arbitration proceeding.
"EASEMENTS" has the meaning set forth in Section 5.9(c).
"EMPLOYEES" has the meaning set forth in Section 5.16(a).
"ENCUMBRANCE" means any lien, adverse claim, charge, security
interest, mortgage, pledge, easement, conditional sale or other title retention
agreement, defect in title or other restrictions of a similar kind.
"ENVIRONMENTAL CLAIM" means any notice, claim, demand, order, Action,
complaint or other communication by any Person alleging Liability or potential
Liability (including without limiting the foregoing, Liability or potential
Liability for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damage, personal injury, fines or penalties)
arising out of or relating to (i) the presence, Release or threatened Release of
a Contaminant at any location, whether or not owned, leased or operated by the
Selling Shareholders or any Subsidiaries (ii) violations of or Liabilities
arising under applicable Environmental Laws, or (iii) otherwise relating to
Liabilities under any Environmental Laws.
"ENVIRONMENTAL ENCUMBRANCE" means an Encumbrance in favor of any
Administrative Authority for (i) any Liability under any Environmental Law or
(ii) damages arising from, or costs incurred by such Administrative Authority in
response to, a Release or threatened Release of a Contaminant into the
environment.
"ENVIRONMENTAL LAWS" means all Requirements of Law concerning worker
health and safety and pollution or protection of the environment (including
those relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, Release, threatened Release, control or cleanup of any
Contaminant).
"ENVIRONMENTAL REPORT" means any report, study, assessment, audit, or
other similar document that addresses any issue of actual or potential
noncompliance with, actual or potential Liability under or cost arising out of,
or actual or potential impact on business in connection with, any Environmental
Law or any proposed or anticipated change in or addition to Environmental Law,
or the presence or alleged or suspected presence of any Contaminant, that may
affect the Selling Shareholders or any Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974.
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"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which would be considered a single employer with any Company
pursuant to Section 414(b) or (c) of the Code and the regulations promulgated
under those Sections.
"EVERCORE NOTES" means the promissory note, dated as of December 10,
2003, in the initial amount of $41,000,000 payable by Evercore METC Investment,
Inc. to Evercore METC Capital Partners II L.P. and the promissory note, dated as
of December 10, 2003, in the initial amount of $340,000 payable by Evercore METC
Co-Investment, Inc. to Evercore Co-Investment Partnership II L.P.
"EXECUTIVES" has the meaning set forth in the recitals
"EXECUTIVE EMPLOYMENT AGREEMENTS" has the meaning set forth in the
recitals.
"EXPENSES" means any and all reasonable out-of-pocket expenses
actually incurred in connection with defending or asserting any claim, action,
suit or proceeding incident to any matter indemnified against hereunder
(including reasonable fees and disbursements of legal counsel).
"FEDERAL POWER ACT" means the Federal Power Act, as amended, and the
rules and regulations promulgated thereunder.
"FERC" means the Federal Energy Regulatory Commission.
"FERC 203 AND 204 APPROVAL" means a Final Order or Final Orders issued
by FERC pursuant to Sections 203 and 204 of the Federal Power Act approving the
transactions contemplated by this Agreement and the incurrence of indebtedness
by METC to refinance the existing indebtedness of METC.
"FERC REGULATORY FILING" means the filing or filings to be made
pursuant to the Federal Power Act requesting the FERC 203 and 204 Approval.
"FINAL ORDER" shall mean action by the relevant Administrative
Authority which has not been reversed, stayed, enjoined, set aside, annulled or
suspended (without regard to any waiting period prescribed by any Requirement of
Law other than the waiting periods under the HSR Act).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 5.5(a).
"FINANCIAL STATEMENTS DATE" means December 31, 2005.
"FINANCING" means any debt or equity financing arranged by Buyer to
fund the transactions contemplated hereby, including debt financing of the
Subsidiaries to refinance the existing indebtedness of the Subsidiaries or
equity or debt financing of Buyer.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
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"GOVERNMENTAL PERMITS" has the meaning specified in Section 5.8.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976.
"INDEMNITEES" has the meaning specified in Section 13.1(a).
"INDEMNITORS" has the meaning specified in Section 13.2.
"INTELLECTUAL PROPERTY" means all intellectual property, including,
without limiting the foregoing, all Copyrights, Patent Rights, Trademarks and
Trade Secrets.
"ITC STOCK" has the meaning set forth in Section 3.1(b).
"ITC INVESTORS" has the meaning set forth in Section 3.1(b).
"KNOWLEDGE OF BUYER" means, as to a particular matter, the current
actual knowledge of the Persons listed on Schedule 1.1.
"KNOWLEDGE OF THE SELLING SHAREHOLDERS" means, as to a particular
matter, the current actual knowledge of the Persons listed on Schedule 1.1.
"KNOWLEDGE OF XX XXXXXXX" means, as to a particular matter, the
current actual knowledge of the Persons listed on Schedule 1.1.
"LEASED REAL PROPERTY" has the meaning specified in Section 5.9(a).
"LIABILITY" shall mean any debt, liability, commitment or obligation,
of any kind whatsoever, whether due or to become due, known or unknown, accrued
or fixed, absolute or contingent, or otherwise.
"LOSSES" means any and all Liabilities or out-of-pocket losses, costs,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.
"MACQUARIE PARTIES INDEMNIFICATION TERMINATION DATE" has the meaning
set forth in Section 13.2(b).
"MARKETING PERIOD" means a period of time, not to exceed thirty (30)
consecutive days, commencing upon the third Business Day after the date on which
the regulatory approvals set forth in Sections 10.2 and 10.3 have been obtained;
provided, however, that (i) no day of such thirty (30) day period shall be
during the last two (2) weeks of August, so that if such approvals are not
received on or prior to July 15, 2006, such period shall commence on the latest
of (x) September 1, 2006 or (y) three Business Days after such approvals have
been received, and (ii) current financial information relating to the
Subsidiaries in compliance with the rules and regulations of the SEC is
available throughout the Marketing Period.
"MATERIAL ADVERSE EFFECT" means, when used with reference to any
Person, an effect, event, development or change, which individually or in the
aggregate with all effects,
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events, developments or changes, is or is reasonably likely to become materially
adverse to the assets (including regulatory assets), business, results of
operations, prospects or financial condition of such Person and its
subsidiaries, taken as a whole, other than changes (i) relating to generally
applicable economic conditions or the electricity transmission industry in
general, except, in each case, to the extent such changes affect such Person in
a disproportionate manner as compared to other Persons in the electricity
transmission industry, (ii) resulting from changes in applicable laws or
generally accepted accounting principles applicable in the jurisdictions in
which the Subsidiaries are organized, except for changes in applicable laws that
affect the electricity transmission rates or terms and conditions of service of
such Person or (iii) resulting from the execution of this Agreement, the public
announcement hereof or the consummation of the transactions contemplated hereby
(including compliance with the terms of this Agreement; provided, however, that
with respect to references to Material Adverse Effect in Sections 5.4 or 6.3,
the exception set forth in clause (iii) shall not be applicable and provided
further that the exception set forth in clause (iii) shall not be applicable to
any Requirements of Law enacted, adopted, issued or promulgated after the date
of this Agreement).
"MATERIAL CONTRACTS" has the meaning set forth in Section 5.15.
"MEAP NOTES" means the promissory note, dated as of December 9, 2003,
in the initial amount of $24,420,454.55 payable by Macquarie Transmission
Michigan, Inc. to Macquarie Essential Assets Partnership and the promissory
note, dated as of December 9, 2003, in the initial amount of $24,360,606.06
payable by NA Capital Holdings, Inc. to MHUSA.
"METC" has the meaning set forth in the recitals.
"METC MEMBERSHIP INTERESTS" has the meaning set forth in Section
5.2(c).
"MHUSA" has the meaning set forth in the recitals.
"MICH NOTE" means the promissory note in the initial amount of
$11,000,000, dated as of December 8, 2003, payable by Mich 1400 Corp. to Mich
1400 LLC.
"MSA" means the Management Services Agreement, dated as of March 11,
2003, between Trans-Elect, Inc. and METC.
"MSA TERMINATION AGREEMENT" means the MSA Termination Agreement in the
form attached hereto as Exhibit B.
"MSA TERMINATION AMOUNT" means an amount equal to the termination
payment to be made pursuant to, and in accordance with, the MSA Termination
Agreement.
"MTH" has the meaning set forth in the recitals.
"MULTIEMPLOYER PLAN" means a "multiemployer plan," as defined in
Section 4001(a)(3) of ERISA.
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"NEW TE" means a Michigan corporation to be formed by the XX Xxxxxxx
in connection with the Restructuring and prior to the Closing; upon formation of
New TE, New TE shall be deemed to be an "Acquired Entity".
"ORDINARY COURSE OF BUSINESS" means, with respect to any Person, the
ordinary course of business consistent with past practices of such Person.
"ORGANIZATIONAL DOCUMENTS" means articles of incorporation,
certificate of incorporation, charter, bylaws, certificate of formation, limited
liability company operating agreement, joint venture agreement or partnership
agreement or such other organizational documents, as applicable.
"OWNED REAL PROPERTY" has the meaning set forth in Section 5.9(a).
"PATENT RIGHTS" means United States and foreign patents, patent
applications, continuations, continuations-in-part, divisions or reissues.
"PENSION PLAN" means any pension plan, as defined in Section 3(2) of
ERISA, applied without regard to the exceptions from coverage contained in
Section 4(b)(4) or 4(b)(5) thereof.
"PERMITTED ENCUMBRANCES" means (i) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (ii)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the Ordinary Course of Business for
sums not yet due and payable, (iii) Encumbrances identified on the Schedules to
this Agreement and (iv) other Encumbrances or imperfections on property which
are not material in amount or do not materially detract from the value of or
materially impair the existing use of the property affected by such Encumbrance,
imperfection or such other matter, agreement or exception.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Administrative Authority.
"PLANT CLOSING LIABILITIES" has the meaning set forth in Section
9.1(h).
"PROPERTY AGREEMENTS" has the meaning specified in Section 5.9(a).
"PURCHASE PRICE" has the meaning specified in Section 3.1.
"REAL PROPERTY" has the meaning specified in Section 5.9(c).
"RELEASE" means the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the environment.
"REMEDIAL ACTION" means actions required by or undertaken pursuant to
any Environmental Law to (i) clean up, remove, treat or in any other way address
Contaminants in
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the environment, including institutional controls, (ii) prevent the Release or
threatened Release or minimize the further Release of Contaminants or (iii)
investigate and determine if Remedial Action is required, and to design and
implement such Remedial Action, including any necessary post-remedial
investigation, monitoring, operation and maintenance and care.
"REQUIREMENTS OF LAW" means any foreign, federal, state and local laws
(including common law), statutes, regulations, rules, codes, ordinances, orders,
decrees or other legally enforceable requirements enacted, adopted, issued or
promulgated by any Administrative Authority.
"RESTRUCTURING" means the reorganization of Trans-Elect in accordance
with the steps set forth on Annex C hereto, pursuant to which, among other
things, New TE shall own the sole membership interest in TEM, and, indirectly,
100% of the general partnership interest in MTH.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933.
"SELLING SHAREHOLDERS" has the meaning set forth in the recitals.
"SHARES" has the meaning set forth in the recitals.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement to be
entered into on the Closing Date among the Buyer and any of the Selling
Shareholders who receive ITC Stock pursuant to Section 3 hereof, substantially
in the form of Exhibit C.
"SOFTWARE" means computer software programs and software systems,
including all databases, compilations, tool sets, compilers, higher level
"proprietary" languages, related documentation and materials, whether in source
code, object code or human readable form; provided, however, that Software does
not include software that is available generally through retail stores,
distribution networks or is otherwise subject to "shrink-wrap" or
"click-through" license agreements, including any software pre-installed in the
Ordinary Course of Business as a standard part of hardware purchased by any of
the Subsidiaries.
"SOLVENT" means, with respect to any Person, that (i) the fair
saleable value of the property of such Person is, on the date of determination,
greater than the total amount of Liabilities of such Person as of such date,
(ii) as of such date, such Person is able to pay all of its Liabilities as such
Liabilities mature, (iii) such Person does not have unreasonably small capital
for conducting the business theretofore or proposed to be conducted by such
Person and its subsidiaries, and (iv) such Person has not incurred nor does it
plan to incur debts beyond its ability to pay as they mature. The amount of any
contingent or unliquidated Liability at any time will be computed as the amount
which, in light of all the facts and circumstances existing at such time, can
reasonably be expected to become an actual or mature Liability.
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"SUBSIDIARIES" when used with respect to any party means any Person,
whether incorporated or unincorporated, (i) of which such party or any other
subsidiary of such party is a general partner, (ii) of which at least a majority
of the securities or other interests which have by their terms ordinary voting
power to elect a majority of the board of directors or others performing similar
functions with respect to such Person are owned by such party or one or more of
its subsidiaries or (iii) that is directly or indirectly Controlled by such
party or by any one or more of its subsidiaries.
"SUBSIDIARIES" has the meaning set forth in the recitals.
"SURVIVING AGREEMENTS" has the meaning set forth in Section 8.13.
"TAX" means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value added, transfer or
excise tax, windfall profit, severance, production, stamp or environmental tax
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, addition
to tax or additional amount imposed by any Administrative Authority.
"TAX RETURN" means any return, report or similar statement required to
be filed with respect to any Tax (including any attached schedules), including
any information return, claim for refund, amended return or declaration of
estimated Tax.
"TE MANAGEMENT SHAREHOLDERS" has the meaning set forth in the
recitals.
"TE PARENTS" has the meaning set forth in the recitals.
"TE PARTIES" means XX Xxxxxxx together with TE Parents.
"TE PARTIES INDEMNIFICATION TERMINATION DATE" has the meaning set
forth in Section 13.2(a).
"TE POWER OPPORTUNITIES" has the meaning set forth in the recitals.
"XX XXXXXXX" has the meaning set forth in the recitals.
"TEM" means Trans-Elect Michigan LLC, a Michigan limited liability
company.
"TEM NOTE" means the promissory note, dated as of June 5, 2003, in the
initial amount of $3,500,000 payable by TEM to MP Structured Finance Fund.
"THIRD PARTY CLAIM" has the meaning specified in Section 13.2(a).
"TRADE SECRETS" means confidential ideas, trade secrets, know-how,
technology, concepts, methods, processes, formulae, reports, data, customer
lists, mailing lists, business plans, or other proprietary information that
provides the owner with a competitive advantage.
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"TRADEMARKS" means registered United States federal, state and foreign
trademarks, service marks, trade names, corporate names, domain names, logos,
trade dress and other source indicators, and pending applications to register
the foregoing, together with the goodwill of any business symbolized thereby.
"TRANS-ELECT" means Trans-Elect, Inc., a Michigan corporation, or,
following the conversion of Trans-Elect, Inc. to a limited liability company as
part of the Restructuring, Trans-Elect LLC, a Michigan limited liability
company, and, in each case, all of its direct and indirect subsidiaries (except
for TEM, METC and MTH) and its direct parent company Trans-Elect Holding Company
(or, following the conversion of Trans-Elect Holding Company to a limited
liability company as part of the Restructuring, Trans-Elect Holdings, LLC).
"TRANS-ELECT PLANS" has the meaning set forth in Section 5.16(e).
"TRANSFER TAX" means transfer, documentary, sales, use, registrations
and other such taxes (including all applicable real estate transfer taxes).
"TRANSMISSION ASSETS" means such assets and facilities (including,
without limiting the foregoing, towers, pole structures, poles, crossarms,
wires, cables, conduits, guys, anchors, transformers, insulators, substations,
switching stations and other fixtures and equipment), as well as the related
Contracts, books and records of the Subsidiaries, that are utilized in the
provision of electric transmission service.
"TREASURY REGULATION" means the regulations promulgated under the Code
by the U.S. Treasury Department.
"WELFARE PLAN" means any welfare plan, as defined in Section 3(1) of
ERISA, applied without regard to the exceptions from coverage contained in
Sections 4(b)(4) or 4(b)(5) thereof.
SECTION 1.2 INTERPRETATION. For purposes of this Agreement, (i) the
words "include," "includes" and "including" shall be deemed to be followed by
the words "without limitation," (ii) the word "or" is not exclusive and (iii)
the words "herein", "hereof", "hereby", "hereto" and "hereunder" refer to this
Agreement as a whole. Unless the context otherwise requires, references herein:
(i) to Articles, Sections, Annexes, Exhibits and Schedules mean the Articles and
Sections of, and the Annexes, Exhibits and Schedules attached to, this
Agreement; (ii) to an agreement, instrument or other document means such
agreement, instrument or other document as amended, supplemented and modified
from time to time to the extent permitted by the provisions thereof and by this
Agreement; and (iii) to a statute means such statute as amended from time to
time and includes any successor legislation thereto and any regulations
promulgated thereunder. The Annexes, Schedules and Exhibits referred to herein
shall be construed with and as an integral part of this Agreement to the same
extent as if they were set forth verbatim herein. Titles to Articles and
headings of Sections are inserted for convenience of reference only and shall
not be deemed a part of or to affect the meaning or interpretation of this
Agreement.
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ARTICLE II
PURCHASE AND SALE
SECTION 2.1 PURCHASE AND SALE OF THE SHARES. Upon the terms and
subject to the conditions of this Agreement, on the Closing Date, the Selling
Shareholders shall sell, transfer, assign, convey and deliver to Buyer, free and
clear of all Encumbrances, and Buyer shall purchase and accept from the Selling
Shareholders, the Shares.
ARTICLE III
PURCHASE PRICE
SECTION 3.1 PURCHASE PRICE. The aggregate purchase price for the
Shares shall be equal to $555,600,000.00 (Five Hundred Fifty Five Million Six
Hundred Thousand Dollars) (the "Purchase Price"). At the Closing, subject to the
terms and conditions hereof, Buyer shall pay the Purchase Price as follows:
(a) Subject to Section 3.2, Buyer shall pay to each Selling
Shareholder the amount in cash set forth opposite such Selling
Shareholder's name in Column I on Annex B;
(b) With respect to any Selling Shareholder who has a dollar amount
set forth opposite such Selling Shareholder's name in Column II on Annex B
(any such Selling Shareholder, an "ITC Investor"), Buyer shall issue to
such ITC Investor that number of validly issued, fully paid and
non-assessable shares of Buyer's common stock ("ITC Stock") equal to the
quotient determined by dividing (x) the dollar amount set forth opposite
such Selling Shareholder's name in Column II on Annex B by (y) the Average
Closing Price, rounded to the nearest whole share. Notwithstanding anything
to the contrary in this Agreement, to the extent the aggregate number of
shares of ITC Stock otherwise required to be issued by Buyer under this
Agreement exceeds 19.9% of the number of shares of ITC Stock issued on the
date of this Agreement (any such excess shares, the "Excess Shares"), in
lieu of the issuance of Excess Shares to the ITC Investors, Buyer shall pay
the ITC Investors (pro rata based on the number of Excess Shares each ITC
Investor would otherwise have acquired) an amount in cash equal to the
number of Excess Shares multiplied by the Average Closing Price.
The "Average Closing Price" shall mean the average of the closing prices of
one share of ITC Stock on the New York Stock Exchange as reported in The
Wall Street Journal for the twenty (20) consecutive days on which the New
York Stock Exchange is open and available for at least five (5) hours for
the trading of securities ending on (and including) the date that is the
third trading day prior to the Closing Date. For these purposes, during
such twenty (20) day period, Buyer or its Affiliates shall not purchase or
cause to be purchased any of the outstanding ITC Stock; provided, however,
that Buyer may purchase ITC Stock to fulfill its contractual obligations to
participants under its 401(k)
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plan. The Parties agree that the calculation of Average Closing Price shall
be carried to five (5) decimal places.
(c) The parties agree and acknowledge that the ITC Investors shall be
required to enter into the Shareholders Agreement at the Closing.
(d) The TE Management Shareholders agree and acknowledge that the
consideration due and owing to them pursuant to this Article III is in
respect of both the Shares held by such individuals and the execution and
delivery, without revocation, of a General Release of Claims, the form of
which is attached hereto as Exhibit D.
SECTION 3.2 CHANGES IN ALLOCATION OF CASH CONSIDERATION. The parties
hereto agree that the Selling Shareholders may update Column I on Annex B by
delivery to Buyer of a revised Annex B, in writing, on or prior to the third
Business Day prior to the Closing Date to reallocate the cash consideration set
forth opposite such Selling Shareholder's name in Column I on Annex B; provided,
however, that in no case shall any such update to Annex B, change (x) the
aggregate amount of cash consideration payable to the Selling Shareholders or
(y) the amounts set forth opposite such Selling Shareholder's name in Column II
on Annex B or (z) the aggregate amount of the Purchase Price. Notwithstanding
the foregoing, Macquarie Essential Assets Partnership may update its allocation
between Columns I and II on Annex B by delivery to the Buyer of a revised Annex
B, in writing, on or prior to June 30, 2006, setting forth the reallocation of
the amount of cash consideration and stock consideration to be received by
Macquarie Essential Assets Partnership; provided, however, that in no case shall
any such update to Annex B, change (i) the aggregate consideration paid to
Macquarie Essential Assets Partnership or (ii) the aggregate amount of stock
consideration due to Macquarie Essential Assets Partnership by more than
$2,500,000 (Two Million Five Hundred Thousand Dollars) or (iii) the aggregate
amount of the Purchase Price.
SECTION 3.3 WITHHOLDING. Buyer shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any Selling Shareholder such amounts as Buyer is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld and
paid over to the appropriate Administrative Authority by Buyer, (a) such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the Selling Shareholders in respect of which such deduction and
withholding was made by Buyer and (b) Buyer shall provide to the Selling
Shareholders evidence of such payment to the appropriate Administrative
Authority.
ARTICLE IV
CLOSING
SECTION 4.1 CLOSING DATE. Subject to fulfillment or waiver (where
permissible) of the conditions set forth in Articles X and XI, the Closing shall
be consummated on a date and at a time agreed upon by Buyer and the Selling
Shareholders, but in no event later than the third Business Day after the date
on which the conditions set forth in Articles X and XI have
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been satisfied or waived, at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx LLP, 425
Lexington Avenue, New York, New York, or at such other time and place as shall
be agreed upon by Buyer and the Selling Shareholders. The time and date on which
the Closing is actually held is referred to herein as the "Closing Date."
SECTION 4.2 PRELIMINARY INFORMATION. At least three Business Days
prior to the Closing Date the Selling Shareholders shall deliver to the Buyer:
(a) any written updates to Annex B as permitted pursuant to Section
3.2; and
(b) instructions designating the account or accounts to which the cash
payments to be made to the Selling Shareholders shall be deposited by wire
transfer on the Closing Date.
SECTION 4.3 BUYER'S CLOSING DATE DELIVERIES. Subject to fulfillment or
waiver (where permissible) of the conditions set forth in Article X, at the
Closing Buyer shall deliver to the Selling Shareholders:
(a) the cash payments, to be paid by Buyer in accordance with the
instructions provided to Buyer pursuant to Section 4.2;
(b) stock certificates representing the ITC Stock to be issued to the
ITC Investors;
(c) Certificate of good standing of Buyer issued as of a recent date
by the Secretary of State of the State of Michigan;
(d) Certificate of the secretary or an assistant secretary of Buyer,
dated the Closing Date, in form and substance reasonably satisfactory to
the Selling Shareholders, as to (i) the resolutions of the Board of
Directors of Buyer authorizing the execution and performance of this
Agreement, any Ancillary Agreement to which Buyer is a party, and the
transactions contemplated hereby and thereby; and (ii) incumbency and
signatures of the officers of Buyer executing this Agreement and any
Ancillary Agreement to which Buyer is a party;
(e) The Ancillary Agreements to which Buyer is a party, duly executed
by Buyer; and
(f) The certificate contemplated by Section 11.1(c), duly executed by
a duly authorized officer of Buyer.
SECTION 4.4 SELLING SHAREHOLDERS' AND TE PARENTS' CLOSING DATE
DELIVERIES. Subject to fulfillment or waiver (where permissible) of the
conditions set forth in Article XI, at the Closing the Selling Shareholders and
the TE Parents, as applicable, shall deliver to Buyer all of the following:
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(a) Certificate of the secretary or an assistant secretary or general
partner, as the case may be, of each of the Selling Shareholders and TE
Parents, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer, as to (i) the resolutions of the Board of Directors
or comparable governing body of each of the Selling Shareholders and TE
Parents authorizing the execution and performance of this Agreement, any
Ancillary Agreement to which such Selling Shareholder or TE Parents is a
party and the transactions contemplated hereby and thereby; and (ii)
incumbency and signatures of the officers or general partners, as the case
may be, of such Selling Shareholders and TE Parents executing this
Agreement and any Ancillary Agreement to which such Selling Shareholder and
TE Parents is a party;
(b) Stock certificates representing all of the Shares, duly executed
in blank or accompanied by duly executed instruments of transfer;
(c) The Ancillary Agreements, duly executed by each Selling
Shareholder, as applicable;
(d) The MSA Termination Agreement, duly executed by the Companies,
Trans-Elect, or any Affiliates thereof, as applicable;
(e) Any consents, waivers or approvals that may be obtained by the
Selling Shareholders with respect to the consummation of the transactions
contemplated by this Agreement;
(f) The certificates contemplated by Section 10.1(e), duly executed by
a duly authorized officer of each of the Selling Shareholders and the TE
Parents; and
(g) An acknowledgment from the payee of each of the MEAP Notes, the
Evercore Notes, the Mich Note and the TEM Note reasonably satisfactory to
Buyer that such MEAP Notes, Evercore Notes, Mich Note and TEM Note have
been cancelled without any further Liability of the issuer thereof and the
original MEAP Notes, Evercore Notes, Mich Note and TEM Note stamped
cancelled.
SECTION 4.5 FIRPTA CERTIFICATES. At least three Business Days prior to
the Closing Date, each of the Selling Shareholders shall also deliver to Buyer a
duly executed and acknowledged certificate, dated as of the Closing Date, in
form and substance acceptable to Buyer and in compliance with the Code and
Treasury Regulations, certifying such facts as to establish that the sale of
such Selling Shareholder's Shares and any other transactions contemplated hereby
are exempt from withholding pursuant to Section 1445 of the Code. In the event
that any Selling Shareholder does not deliver such a certificate, Buyer shall be
entitled to withhold amounts in accordance with Section 3.3.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the Selling Shareholders
represent and warrant to Buyer as follows:
SECTION 5.1 ORGANIZATION. (a) Each of the Companies and the Selling
Shareholders (other than the TE Management Shareholders) has been (or, in the
case of New TE, as of the Restructuring will be) duly formed and is (or, in the
case of New TE, as of the Restructuring will be) validly existing and in good
standing under the laws of the jurisdiction of its formation. Each of the
Companies is (or, in the case of New TE, as of the Restructuring will be) duly
qualified to transact business and is (or, in the case of New TE, as of the
Restructuring will be) in good standing in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not reasonably be expected to have a Material Adverse
Effect on the Subsidiaries. Each of the Companies and the Selling Shareholders
has (or, in the case of New TE, as of the Restructuring, will have) the
requisite power and authority to own or lease and operate its assets and to
carry on its business in the manner in which they are presently being conducted.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Selling Shareholders, and no other proceedings on the
part of the Selling Shareholders are necessary to authorize the execution,
delivery and performance of this Agreement by the Selling Shareholders.
(b) Attached to Schedule 5.1(b) are true and complete copies of the
Organizational Documents of the Companies, other than the Organizational
Documents of New TE, which shall be adopted in connection with the
Restructuring. There is no operating, member or other governing agreement in
respect of the Companies other than the Organizational Documents attached to
Schedule 5.1(b).
SECTION 5.2 CAPITAL STRUCTURE. (a) Acquired Entities. Annex A sets
forth the number of shares of each class of capital stock of each of the
Acquired Entities that are issued and outstanding (or, in the case of New TE
only, the class of capital stock that will be issued and outstanding after the
Restructuring). All of the shares of capital stock of each of the Acquired
Entities set forth on Annex A (a) constitute all of the issued and outstanding
shares of capital stock of each of the Acquired Entities, (b) are validly
issued, fully paid and nonassessable, and are owned beneficially and of record
by the Selling Shareholders set forth on Annex B free and clear of all
Encumbrances or, in the case of New TE, will be validly issued, fully paid and
nonassessable and so owned after the Restructuring. Upon the transfer of all of
the issued and outstanding shares of capital stock of each of the Acquired
Entities to Buyer on the Closing Date in accordance with this Agreement, Buyer
will receive good, valid and marketable title to such shares, free and clear of
all Encumbrances.
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(b) MTH. All of the limited partnership interests in MTH are owned
directly by the Acquired Entities and all of the general partnership interests
in MTH are owned directly by TEM. The general partner of MTH is TEM, which prior
to the Restructuring, is a wholly-owned subsidiary of Trans-Elect and, after the
Restructuring, will be a wholly-owned subsidiary of New TE.
(c) METC. All of the issued membership interests of METC are owned
beneficially and of record by MTH (the "METC Membership Interests"). Upon the
transfer of all of the issued and outstanding shares of capital stock of each of
the Acquired Entities to Buyer on the Closing Date in accordance with this
Agreement, Buyer will receive good, valid and marketable title to the METC
Membership Interests, free and clear of all Encumbrances.
(d) Except for this Agreement and except for the agreements with the
employees of the Companies specified in Schedule 5.2(d), there are no
agreements, arrangements, options, warrants, rights or commitments of any
character relating to the issuance, sale, delivery, purchase or redemption of
any shares of capital stock of, or other equity interests in any of the
Companies and there are no outstanding securities or other rights which are
convertible or exchangeable into shares of capital stock of, or other equity
interests in any of the Companies. None of the Selling Shareholders, the
Companies nor Trans-Elect is subject to any obligation to repurchase or
otherwise acquire or retire or to register any shares of capital stock of, or
other equity interests in any of the Companies. None of the Selling
Shareholders, the Companies nor Trans-Elect is a party to any equity holder,
member, operating, voting or similar arrangement with respect to the shares of
capital stock of, or other equity interests in, any of the Companies and have
not granted a proxy, power of attorney or other authority with respect to the
shares of capital stock of, or other equity interests in, any of the Companies
or the management of METC to any Person. Except as set forth in Schedule 5.2(d),
since December 31, 2005, (i) no dividends on or distributions in respect of the
Companies' capital stock have been declared or paid, (ii) there has been no
repurchase or redemptions of any shares or options in respect of the Companies'
capital stock and (iii) no phantom stock compensation or other Liabilities
linked to the value of the equity of any of the Companies has been granted.
SECTION 5.3 ACQUIRED ENTITIES, SUBSIDIARIES AND INVESTMENTS. Except as
otherwise set forth on Schedule 5.3 and each Acquired Entity's ownership
interest in the Subsidiaries, none of the Acquired Entities has, or has had, any
employees or assets or any interest in any Person other than the Subsidiaries
and none of them or any of their predecessors has conducted any operations or
engaged in any other activities. Except as otherwise set forth on Schedule 5.3,
none of the Acquired Entities has, or has had, any Liabilities of any kind.
Except as otherwise set forth on Schedule 5.3 and their ownership interest in
the Subsidiaries, none of the Acquired Entities, directly or indirectly, owns or
has the right to acquire, or has owned or had the right to acquire, any
outstanding voting securities or other equity interests in any corporation,
partnership, joint venture or other entity.
17
SECTION 5.4 AUTHORITY; CONFLICTS.
(a) Each Selling Shareholder has full power and authority to execute,
deliver and perform this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. Each Selling Shareholder has
full power and authority to execute, deliver and perform each of the Ancillary
Agreements to which such Selling Shareholder is a party. This Agreement and each
of the Ancillary Agreements to which such Selling Shareholder is a party
constitute the valid and binding obligations of each such Selling Shareholder,
enforceable in accordance with their respective terms, except to the extent that
such enforceability in each case is subject to bankruptcy, insolvency,
reorganization, moratorium, and similar laws of general application relating to
or affecting creditors' rights and to general equity principles.
(b) Except as set forth in Schedule 5.4, none of the execution and
delivery by each Selling Shareholder of this Agreement, the execution and
delivery by each Selling Shareholder of any Ancillary Agreement to which such
Selling Shareholder is a party or the consummation by each Selling Shareholder
of any of the transactions contemplated hereby or thereby, nor compliance by
each Selling Shareholder with, or fulfillment by each Selling Shareholder of,
the terms, conditions and provisions hereof or thereof will:
(i) assuming the receipt of all necessary consents and approvals and
the filing of all necessary documents as described in Section 5.4(b)(ii),
result in a violation or breach of the terms, conditions or provisions of,
or constitute a default, an event of default or an event creating rights of
acceleration, termination, purchase or sale, or a loss of rights under,
result in the creation or imposition of any Encumbrance upon a Selling
Shareholder or any of the Shares or any of the assets or properties of a
Selling Shareholder or any of the Companies, under (1) the Organizational
Documents of a Selling Shareholder (except for such Selling Shareholders
who are individuals) or any of the Companies, (2) any of the Material
Contracts, (3) any other Contract to which a Selling Shareholder or any of
the Companies is a party or by which a Selling Shareholder or any of the
Companies is bound, (4) any Court Order to which a Selling Shareholder or
any of the Companies is a party or by which a Selling Shareholder or any of
the Companies is bound or (5) any Requirements of Law affecting a Selling
Shareholder or any of the Companies, other than, in the case of clauses
(2), (3), (4) and (5) above, any such violations, breaches, defaults,
rights, loss of rights or Encumbrances that would not reasonably be
expected to have a Material Adverse Effect on the Subsidiaries or would not
prevent or materially delay the consummation of any of the transactions
contemplated hereby, or
(ii) require the approval, consent, authorization or act of, notice
to, or the making by a Selling Shareholder or any of the Companies of any
declaration, filing or registration with, any Administrative Authority,
except (1) in connection, or in compliance, with the provisions of the HSR
Act, (2) the FERC 203 and 204 Approval and any applications therefor and
other filings in connection therewith, and (3) such approvals, consents,
authorizations, notices, declarations, filings or registrations the failure
of which to be obtained or made would not reasonably be expected to have a
18
Material Adverse Effect on the Subsidiaries or would not prevent or
materially delay the consummation of any of the transactions contemplated
hereby.
SECTION 5.5 FINANCIAL STATEMENTS.
(a) Schedule 5.5(a) contains the consolidated audited balance sheets
of MTH as of December 31, 2004 and 2005, and the consolidated income statements
and statements of cash flow of MTH for the twelve months ended December 31,
2003, 2004 and 2005 including any related notes thereto (the "Financial
Statements"). The Financial Statements comply with all applicable accounting
requirements and with the published rules and regulations of the SEC with
respect to financial statements required to be included in a registration
statement on Form S-1, have been prepared in accordance with GAAP applied on a
consistent basis throughout the period covered thereby, and present, in all
material respects, the consolidated financial position of MTH and METC, as of
December 31, 2004 and 2005, and the results of operations and cash flow of MTH
and METC for the twelve months ended December 31, 2003, 2004 and 2005.
(b) Except as set forth in Schedule 5.5(b), the FERC Form No. 1 for
METC for the periods ended December 31, 2004 and 2005, which has been filed with
the FERC, has been prepared in conformity with applicable regulations of the
FERC, prior orders of FERC applicable to METC and other applicable requirements
and accurately presents in accordance with such regulations and requirements,
the financial position and results of operations of METC as of December 31, 2004
and 2005.
SECTION 5.6 OPERATIONS SINCE FINANCIAL STATEMENTS DATE. Except as set
forth in Schedule 5.6, from the Financial Statements Date through the date
hereof, there has been no Material Adverse Effect on the Subsidiaries. Except as
set forth in Schedule 5.6, from the Financial Statements Date through the date
hereof, the Subsidiaries have conducted their business in the Ordinary Course of
Business. Without limiting the generality of the foregoing, from the Financial
Statements Date through the date hereof, except as set forth in Schedule 5.6,
neither of the Subsidiaries has taken any action or omitted to take any action
that would, after the date hereof, be prohibited by Section 8.4.
SECTION 5.7 TAXES. Except as set forth in Schedule 5.7, (i) the
Companies have filed all material Tax Returns required to have been filed on or
before the date hereof and all such Tax Returns are true and complete in all
material respects, (ii) all Taxes due and payable, whether or not shown on such
Tax Returns referred to in clause (i) have been timely paid; (iii) none of the
Companies has waived in writing any statute of limitations in respect of Taxes
of such Company which waiver is currently in effect; (iv) the Tax Returns
referred to in clause (i) relating to federal and state income Taxes have been
examined by and settled with the Internal Revenue Service or the appropriate
state Administrative Authority or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired; (v) no
issues that have been raised in writing by the relevant Administrative Authority
in connection with the examination of the Tax Returns referred to in clause (i)
are currently pending; (vi) all deficiencies asserted or assessments made as a
result of any examination of the Tax Returns referred to in clause (i) by a
Administrative Authority have been paid in full or are being contested in good
faith in appropriate proceedings, and adequate reserves have been made in the
financial statements in accordance with
19
GAAP for such contested amounts; (vii) there are no liens for Taxes upon the
assets of the Companies except liens relating to current Taxes not yet due;
(viii) all material Taxes which the Companies are required by law to withhold or
to collect for payment have been duly withheld and collected and have been paid
to the appropriate governmental authority; (ix) no deficiencies for any material
Taxes have been proposed or assessed in writing against or with respect to any
Taxes due by or Tax Returns of the Companies and there is no outstanding audit,
assessment, dispute or claim concerning any material Tax Liability of the
Companies claimed, pending or raised by any Administrative Authority in writing;
(x) none of the Companies (A) is or has ever been a member of an affiliated
group of corporations filing a consolidated federal income Tax Return, or (B)
has any Liability for the Taxes of any Person (other than the applicable
Company) under Treasury Regulations Section 1.1502-6 (or any similar provision
of any state, local, or foreign law), as a transferee or successor, by contract,
or otherwise; (xi) none of the Companies is a party to, or bound by, or has any
obligation under, any tax allocation or sharing agreement or similar Contract or
arrangement; (xii) none of the Companies will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any (A)
change in method of accounting for a taxable period ending on or prior to the
Closing Date, (B) "closing agreement" as described in Section 7121 of the Code
(or any corresponding or similar provision of state or local income Tax law)
executed on or prior to the Closing Date, (C) intercompany transactions or any
excess loss account described in Treasury Regulations under Section 1502 of the
Code (or any corresponding or similar provision of state or local income Tax
law), (D) installment sale or open transaction disposition made on or prior to
the Closing Date, or (E) prepaid amount received on or prior to the Closing
Date; (xiii) none of the Companies has been either a "distributing corporation"
or a "controlled corporation" in a distribution in which the parties to such
distribution treated the distribution as one to which Section 355 of the Code is
applicable; (xiv) none of the Companies has engaged in any "reportable
transaction" under Section 6011 of the Code and the regulations thereunder; and
(xv) each of Michigan Transco Holdings, L.P. and Michigan Electric Transmission
Company, LLC is currently and has been since its formation treated as a
partnership or a disregarded entity for United States federal, state and local
income tax purposes.
SECTION 5.8 GOVERNMENTAL PERMITS. Except as set forth in Schedule 5.8
and except for Environmental Authorizations, which are governed exclusively by
Section 5.17, the Subsidiaries own, hold or possess all licenses, franchises,
permits, certificates of authority, privileges, immunities, approvals and other
authorizations or consents from an Administrative Authority that are necessary
to entitle them to own or lease, operate and use their assets and to carry on
and conduct their business as it is presently conducted (herein collectively
called "Governmental Permits"), except for such Governmental Permits as to which
the failure to so own, hold or possess would not reasonably be expected to have
a Material Adverse Effect on the Subsidiaries. Each Governmental Permit held by
the Subsidiaries is valid, binding and in full force and effect. The
Subsidiaries (i) have complied with all terms and conditions of the Governmental
Permits except where the failure to comply would not reasonably be expected to
have a Material Adverse Effect on the Subsidiaries and (ii) are not, and have
not received any notice that they are, in default (or with the giving of notice
or lapse of time or both, would be in default) under any such Governmental
Permit.
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SECTION 5.9 REAL PROPERTY. (a) Schedule 5.9 contains a true and
correct list of (i) each parcel of real property owned by any Subsidiary (the
"Owned Real Property"), (ii) each parcel of real property leased by any
Subsidiary, as lessee (the "Leased Real Property," and together with the Owned
Real Property, the "Real Property"), and (iii) each parcel of real property as
to which any Subsidiary has rights of easement, license or other occupancy
right, and the nature of such rights (the "Easements").
(b) Except as set forth on Schedule 5.9, the applicable Subsidiary has
good and marketable title to all of the Owned Real Property and the Transmission
Assets, free and clear of all Liens, except for Permitted Encumbrances.
(c) Each of the leases, easement agreements, and other occupancy
agreements (collectively, the "Property Agreements") with respect to the Leased
Real Property and the Easements is or will on the Closing Date be valid, in full
force and effect, would not have a Material Adverse Effect on the Subsidiaries.
No Subsidiary has given or has received any notice of default, termination or
partial termination under any Property Agreement, and there is no existing or
continuing default by any Subsidiary or, to the Knowledge of Seller, any other
party in the performance or payment of any obligation under any Property
Agreement, except to the extent as would not, individually or in the aggregate,
have a Material Adverse Effect on the Subsidiaries.
(d) Except as set forth on Schedule 5.9, and except for any Real
Property leased to others, each Subsidiary is in possession of each parcel of
Real Property, together with all buildings, structures, facilities, fixtures and
other improvements thereon. Each Subsidiary has adequate rights of ingress and
egress with respect to the Real Property and all buildings, structures,
facilities, fixtures and other improvements thereon, except to the extent would
not, have a Material Adverse Effect on the Subsidiaries. None of such Real
Property, Easements, buildings, structures, facilities, fixtures or other
improvements, or the use thereof, contravenes or violates any building, zoning
or land use law, except for as would not have a Material Adverse Effect on the
Subsidiaries. Except as set forth on Schedule 5.9, the Real Property (other than
Real Property leased to others by any Subsidiary) and the Easements, and each
Subsidiary's rights and interests therein, comprise or will on the Closing Date
comprise the real estate and real estate rights that are necessary, in all
material respects, for the Subsidiaries to operate the Transmission Assets and
to conduct the their business as it is presently operated and conducted.
SECTION 5.10 PERSONAL PROPERTY. Schedule 5.10 contains as of the date
of this Agreement a list of each lease or other agreement or right under which
either of the Subsidiaries is lessee of, or holds or operates, any machinery,
equipment, vehicle or other tangible personal property owned by a third Person,
except those which are terminable by such Subsidiary without penalty on 90 days'
or less notice or which provide for annual rental payments of less than $10,000.
SECTION 5.11 INTELLECTUAL PROPERTY. (a) Schedule 5.11(a) contains a
list of all Copyrights, Patent Rights and Trademarks owned by or licensed to the
Subsidiaries which are material to the conduct of their business, as currently
conducted.
21
(b) Schedule 5.11(b) contains a list of all Software owned by the
Subsidiaries which is material to the conduct of their business, as currently
conducted.
(c) Except as disclosed in Schedule 5.11(c), to the Knowledge of the
Selling Shareholders, the Subsidiaries either: (i) own the entire right, title
and interest in and to all Intellectual Property that is material to their
business as currently conducted, free and clear of all Encumbrances; or (ii)
have a valid contractual right or license to use the same in the conduct of
their business; and such conduct does not infringe or violate the intellectual
property rights of others.
(d) Except as disclosed in Schedule 5.11(d), to the Knowledge of the
Selling Shareholders: (i) all registrations for Copyrights, Patent Rights and
Trademarks identified in Schedule 5.11(a) are valid and in force, and all
applications to register any unregistered Copyrights, Patent Rights and
Trademarks so identified are pending and in good standing, all without challenge
of any kind; (ii) the Copyrights, Patent Rights and Trademarks (other than with
respect to pending applications) owned by the Subsidiaries are valid and in
force; (iii) the Subsidiaries have the right to bring actions for infringement
or unauthorized use of the Copyrights, Patent Rights, Trademarks and Software
owned by the Subsidiaries; and (iv) the Subsidiaries take all reasonable actions
to protect and maintain their material Intellectual Property.
(e) Except as disclosed in Schedule 5.11(e), as of the date hereof no
Actions are pending or, to the Knowledge of the Selling Shareholders, threatened
against the Subsidiaries which challenge the validity or ownership of any
Copyright, Patent Right, or Trademark described in Schedule 5.11(a).
SECTION 5.12 TITLE TO PROPERTY. Except for assets disposed of in the
Ordinary Course of Business, each of the Subsidiaries has good and marketable
title to each item of equipment and other tangible personal property reflected
on the Financial Statements as owned by such Subsidiary or acquired by the
Subsidiaries since the date of the Financial Statements, free and clear of all
Encumbrances, except for Permitted Encumbrances. Except as set forth on Schedule
5.12, the Subsidiaries have or will on the Closing Date have the right to use
all of the leased tangible personal property used by the Subsidiaries in the
conduct of their businesses pursuant to valid and enforceable lease agreements,
except to the extent that the failure to have such right would not have a
Material Adverse Effect on the Subsidiaries. During the two (2) year period
immediately preceding the date hereof, there has not been any material
interruption of the businesses of the Subsidiaries. Except as could not
reasonably be expected to have a Material Adverse Effect, all Transmission
Assets are suitable for such use and in reasonably good operating condition,
ordinary wear and tear excepted, and this use complies in all material respects
with all Requirements of Law.
SECTION 5.13 NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as
set forth in Schedule 5.13 and except for compliance with Environmental Laws and
for Environmental Claims, which are governed exclusively by Section 5.17:
22
(a) the Selling Shareholders and the Companies have complied with all
applicable Requirements of Law and Court Orders, other than those instances
of noncompliance which would not reasonably be expected to have a Material
Adverse Effect on the Subsidiaries;
(b) since May 1, 2000, the Companies have not received any notice from
any Administrative Agency of any actual, alleged possible or potential
obligations to undertake any material remedial action applicable to the
Subsidiaries;
(c) (i) there are no Actions pending or, to the Knowledge of the
Selling Shareholders, threatened against the Subsidiaries and (ii) no
judgment, award order or decree has been rendered against the Subsidiaries
or the Selling Shareholders (relating to the business of the Subsidiaries
or the Transmission Assets); and
(d) there is no action, suit or proceeding pending or, to the
Knowledge of the Selling Shareholders, threatened that questions the
legality of the transactions contemplated by this Agreement or any of the
Ancillary Agreements.
SECTION 5.14 CONTRACTS. Except as set forth in Schedule 5.14 and
except for wholesale insurance brokerage agreements with insurance carriers, as
of the date of this Agreement, neither of the Subsidiaries is a party to or
bound by:
(i) any Contract for the purchase by the Subsidiaries of supplies,
equipment or services which the Subsidiaries reasonably anticipate will
involve the annual payment of more than $100,000, after the date hereof;
(ii) any Contract not included in clause (iii) of this Section 5.14(a)
for the sale by the Subsidiaries of any services or products of the
Subsidiaries' businesses which the Subsidiaries reasonably anticipates will
involve the annual payment of more than $100,000 after the date hereof;
(iii) any Contract pertaining to interconnection with the Transmission
Assets, the provision of transmission or ancillary services related thereto
by the Subsidiaries, any other transmission interconnection agreements and
the purchase of ancillary services related thereto by the Subsidiaries;
(iv) any Contract, for borrowed money or other instruments involving
indebtedness;
(v) any partnership, joint venture or other similar agreement or
arrangement and any Contract relating to the joint ownership or operation
of assets;
(vi) any Contract containing any covenant or provision prohibiting the
Subsidiaries from engaging in any line or type of business or competing
with any Person or entity;
23
(vii) (A) any Contract (excluding Company Plans) providing for a
commitment of employment or consultation services for a specified or
unspecified term or otherwise relating to employment or the termination of
employment; and (B) any written or unwritten representations, commitments,
promises, communications or courses of conduct (excluding Company Plans and
any such Contract referred to in clause (A)) involving an obligation of the
Subsidiaries to make payments in any year, other than with respect to
salary or incentive compensation payments in the Ordinary Course of
Business, to any employee;
(viii) any Contract that (A) limits or contains restrictions on the
ability of the Subsidiaries to declare or pay dividends on, to make any
other distribution in respect of or to issue or purchase, redeem or
otherwise acquire its capital stock, to incur indebtedness, to incur or
suffer to exist any Encumbrances, (B) relates to the purchase or sale of
any of the Transmission Assets or (C) requires the Subsidiaries to maintain
financial ratios or levels of net worth or other indicia of financial
condition;
(ix) any Contract for the purchase of any Person or business or any
division thereof (by merger, consolidation, or sale or acquisition of stock
or assets or any other business combination);
(x) all other Contracts (other than Company Plans) that involve the
payment or potential payment, pursuant to the terms of any such Contract,
by or to the Subsidiaries of more than $500,000.
SECTION 5.15 STATUS OF CONTRACTS. Except as set forth in Schedule
5.15, each of the leases, licenses and other Contracts listed in Schedules 5.9,
5.10, 5.11(c), 5.14, 5.18 and 5.22 (collectively, the "Material Contracts") is
in full force and effect, except where such failure to be in full force and
effect would not reasonably be expected to have a Material Adverse Effect on the
Subsidiaries. The Subsidiaries are not, and, to the Knowledge of the Selling
Shareholders, are not alleged to be in breach or default under any of the
Material Contracts (or with notice or lapse of time or both, would be in breach
of or default under any such Material Contract), other than those breaches or
defaults which would not reasonably be expected to have a Material Adverse
Effect on the Subsidiaries. A true and complete copy of each Material Contract
has been made available to Buyer.
SECTION 5.16 ERISA. (a) Each Welfare Plan, Pension Plan (including,
without limiting the foregoing, Multiemployer Plans), stock purchase, stock
option, severance, employment, change-in-control, fringe benefit, collective
bargaining, bonus, incentive, deferred compensation, employee loan and all other
employee benefit plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA, under which (i) any current or former employee,
director or independent contractor of the Companies (the "Employees") has any
present or future right to benefits and which are contributed to, sponsored by
or maintained by any of the Companies or (ii) any of the Companies has had or
has any present or future Liability (collectively "Company Plans") in which
employees of the Subsidiaries participate is listed in Schedule 5.16. The
Selling Shareholders have made available to Buyer a true and correct copy of
each such plan and a summary plan description used in connection with such
24
plan and, to the extent applicable: (i) any related trust agreement or other
funding instrument; (ii) the most recent determination letter, if applicable;
(iii) any other material communications provided by the Companies to the
Employees concerning the extent of the benefits provided under a Company Plan;
and (iv) for the three most recent years (A) the Form 5500 and attached
schedules, (B) audited financial statements and (C) actuarial valuation reports.
No Company Plan is subject to Title IV of ERISA.
(b) Except as set forth on Schedule 5.16(b), with respect to each
Company Plan, (i) such Company Plan has been established, maintained and
operated in compliance in all material respects with the applicable requirements
of the Code and ERISA and the regulations issued thereunder; (ii) each Company
Plan which is intended to be qualified within the meaning of Section 401(a) of
the Code has received a favorable determination letter as to its qualification
or is maintained under a prototype plan approved by the Internal Revenue Service
with respect to which the Companies may rely on the opinion letter issued to the
prototype plan sponsor as to such Company Plan's qualified status, and nothing
has occurred, whether by action or failure to act, that could reasonably be
expected to cause the loss of such qualification or that could reasonably be
expected to cause the Company to be unable to rely on such prototype letter
issued to such prototype plan sponsor; (iii) no nonexempt "prohibited
transaction" (as such term is defined in Section 406 of ERISA and Section 4975
of the Code) has occurred with respect to any Company Plan that would reasonably
be expected to result in a material Liability to any of the Companies; (iv)
there is no intention that any Company Plan be materially amended, suspended or
terminated, or otherwise modified to adversely change benefits (or the levels
thereof) under any Company Plan at any time within the twelve months immediately
following the date hereof; (v) none of the Company Plans provide for
post-employment or post-retirement health, medical or life insurance benefits
for any Company Employee, except as required to avoid an excise tax under
Section 4980B of the Code or otherwise except as may be required pursuant to any
other applicable law; and (vi) as of the date hereof, no litigation or asserted
claims against the Companies exist or, to the Knowledge of the Selling
Shareholders, are threatened, with respect to any Company Plan (other than
claims for benefits in the normal course of business) which would reasonably be
expected to result in a material Liability to any of the Companies. None of the
Companies has, and each of them has never had, any obligation to contribute to
any Multiemployer Plan or union-sponsored welfare fund. None of the Companies or
any of their ERISA Affiliates has incurred or would reasonably be expected to
incur any Liability under or pursuant to Title IV of ERISA that would reasonably
be expected to result in a material Liability to any of the Companies. No
administrative investigation, audit or other administrative proceeding by the
Department of Labor, the Internal Revenue Service or other governmental agencies
are pending or, to the Knowledge of the Selling Shareholders, threatened.
(c) Except as set forth in Schedule 5.16(c), no Company Plan exists
that, as a result of the execution of this Agreement, shareholder approval of
this Agreement, or the transactions contemplated by this Agreement (whether
alone or in connection with any subsequent event(s)) could (i) result in any
Employee receiving severance pay or any increase in severance pay upon any
termination of employment after the date of this Agreement, (ii) accelerate the
time of payment or vesting or result in any payment or funding (through a
grantor trust or otherwise) of compensation or benefits under, increase the
amount payable or
25
result in any other material obligation pursuant to, any of the Company Plans,
(iii) limit or restrict the right of the Company to merge, amend or terminate
any of the Company Plans, (iv) cause the Company to record additional
compensation expense on its income statement with respect to any outstanding
stock option or other equity-based award, or (v) result in payments under any of
the Company Plans which would not be deductible under Section 280G of the Code.
(d) Except as set forth in Schedule 5.16(d), none of the Companies nor
the Buyer shall have any Liabilities with respect to any phantom or deferred
stock plans, programs or awards or any sale, change in control or other deal
plans, programs or award as a result of or in connection with any Company Plan.
(e) Except as set forth in Schedule 5.16(e), no Company Employee
participates in or has any rights under any Welfare Plan, Pension Plan, stock
purchase, stock option, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation,
employee loan and all other employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA sponsored or
maintained by any of Trans-Elect, Inc. or its Affiliates (other than one of the
Companies) (collectively, "Trans-Elect Plans") or is employed by any of
Trans-Elect, Inc. or its Affiliates (other than one of the Companies). None of
the Companies nor the Buyer shall have any Liabilities under any Trans-Elect
Plan.
SECTION 5.17 ENVIRONMENTAL MATTERS. Except as set forth in Schedule
5.17 or as otherwise could not have or reasonably be expected to have a Material
Adverse Effect on the Subsidiaries,
(a) each of the Subsidiaries is in compliance with all, and has not
violated any applicable Environmental Laws;
(b) each of the Subsidiaries has all permits, licenses, approvals, and
authorizations, and has filed all reports, registrations, applications and
notices under or pursuant to applicable Environmental Laws ("Environmental
Authorizations"), required for the operation of its business, is in
compliance with all such Environmental Authorizations, and has received no
notice that any such Environmental Authorization will or may be revoked,
terminated or otherwise adversely modified;
(c) none of the Subsidiaries is subject to any order from or consent
or settlement agreement with, or to the Knowledge of the Selling
Shareholders, any investigation by any Person (including any Administrative
Authority) respecting (i) any Remedial Action or (ii) any claim of Losses
and Expenses arising from the (A) presence or alleged presence of any
Contaminant or (B) Release or threatened Release of a Contaminant into the
environment; nor, to the Knowledge of the Selling Shareholders, is any
other Person subject to any of the foregoing in a manner that could
reasonably be expected to adversely affect any Subsidiary;
26
(d) to the Knowledge of the Selling Shareholders, no Owned Real
Property, Leased Real Property or Easement is the subject of any
investigation by, order from or consent or settlement agreement with any
Person (including any Administrative Agency) respecting any (i) Remedial
Action or (ii) any claim of Losses and Expenses arising from the Release or
threatened Release of a Contaminant into the environment;
(e) none of the Subsidiaries is subject to any judicial or
administrative proceeding, order, judgment, decree or settlement alleging
or addressing a violation of or Liability under any Environmental Law; nor,
to the Knowledge of the Selling Shareholders, is any other Person subject
to any of the foregoing in a manner that could reasonably be expected to
adversely affect any Subsidiary;
(f) none of the Subsidiaries has received any written notice or claim
to the effect that they are or may be liable to any Person, including any
Administrative Authority, as a result of the Release of a Contaminant;
(g) neither the Selling Shareholders nor any of the Subsidiaries is a
party to any Contract pursuant to which any Subsidiary assumes any
Liability for any Environmental Claim (asserted or unasserted) against any
other Person, or assumes any Liability with respect to any Environmental
Claim (asserted or unasserted) related to the Owned Real Property, the
Leased Real Property or the Easements, or indemnifies any Person with
respect to any Environmental Claim (asserted or unasserted) related to real
property or interests therein not owned by any Subsidiary;
(h) there are no underground storage tanks owned, leased, used,
operated or maintained by any of the Subsidiaries or, to the Knowledge of
Selling Shareholders, otherwise located at any Owned Real Property, Leased
Real Property or Easement;
(i) to the Knowledge of the Selling Shareholders, no Contaminants have
been released or are otherwise located at any Owned Real Property or on any
Leased Real Property or Easement, in amounts or concentrations requiring
investigation or cleanup under any Environmental Law, or would otherwise
give rise to any Environmental Claim affecting any Subsidiary or Buyer; and
(j) the Selling Shareholders have provided to Buyer true and complete
copies of all Environmental Reports containing material information that
are in the possession or control of any of the Selling Shareholders or
Subsidiaries.
SECTION 5.18 EMPLOYEE RELATIONS AND AGREEMENTS. (a) Schedule 5.18
contains a true and complete listing of each of the employees of the
Subsidiaries whose compensation exceeded $200,000 during the twelve months ended
December 31, 2005, along with their compensation during such period. Since the
Financial Statements Date, except as set forth in Schedule 5.18 or as has
occurred in the Ordinary Course of Business, the Companies have not: (i)
increased the compensation payable or to become payable to or for the benefit of
any Company Employee, (ii) provided any of Company Employee with increased
security or tenure of employment, (iii) increased the amount payable to any
Company Employee upon the termination
27
of such Persons' employment, or (iv) adopted, modified or terminated any Company
Plan or increased, augmented or improved benefits granted to or for the benefit
of any Company Employee under any Company Plan.
(b) Except as set forth in Schedule 5.18, none of the Companies are a
party to any labor Contract, collective bargaining agreement or employment
agreement.
(c) Except as set forth in Schedule 5.18, no union or similar
organization represents employees of the Companies and, to the Knowledge of the
Selling Shareholders, as of the date hereof no such organization is attempting
to organize such employees.
(d) Except as set forth in Schedule 5.18, no Company Employee is a
party to any employment or other agreement with any of the Companies that
entitles him or her to compensation or other consideration upon the acquisition
by any Person of control of any of the Companies.
(e) Except as set forth in Schedule 5.18, no unfair labor practice
charge or complaint is pending or, to the Knowledge of the Selling Shareholders,
threatened, against the Subsidiaries.
(f) Except as set forth in Schedule 5.18, each subsidiary is in
material compliance with all applicable laws, agreements, Contracts, policies,
plans and programs relating to employment, employment practices, compensation,
benefits, hours, terms and conditions of employment and the termination of
employment, including any obligations pursuant to the Worker Adjustment
Retraining and Notification Act of 1988 ("WARN").
(g) Except as set forth in Schedule 5.18, neither of the Subsidiaries
will be liable for any severance pay or other payments to any employee or former
employee arising from the termination of employment, and neither of the
Subsidiaries will have any Liability under any benefit or severance policy,
practice, agreement, plan or program which exists or arises, or may be deemed to
exist or arise, under any applicable law or otherwise, as a result of or in
connection with the transactions contemplated hereunder or the termination of
any of the Subsidiaries employees on or prior to the Closing Date.
SECTION 5.19 NO UNDISCLOSED LIABILITIES. Except as set forth in
Schedule 5.19, or as reflected or provided for in the Balance Sheet, as of the
Financial Statements Date, neither of the Subsidiaries was subject to any
Liability that would be required to be included on a balance sheet prepared in
accordance with GAAP. Except as set forth in Schedule 5.19 or as reflected or
provided for in the Balance Sheet, neither of the Subsidiaries has incurred any
material Liability other than in the Ordinary Course of Business.
SECTION 5.20 AVAILABILITY OF ASSETS. Except as set forth in Schedule
5.20, the assets and properties of the Subsidiaries constitute all of the assets
and properties reasonably necessary to operate the business as presently
conducted by the Subsidiaries other than assets that, individually and in the
aggregate, are not material to such business. Nothing in this Section 5.20
constitutes a representation or warranty with respect to title or the condition
of any assets or
28
properties (whether real or personal, tangible or intangible, owned, leased or
held under license), any and all representations or warranties with respect to
which are set forth in other sections of this Article V.
SECTION 5.21 INSURANCE. Schedule 5.21 hereto, contains a true and
complete list of all liability, property, workers' compensation, directors' and
officers' liability and other insurance policies currently in effect that insure
the business of the Subsidiaries or the operations of the Subsidiaries or affect
or relate to the ownership, use or operation of the Transmission Assets. Each
policy listed on Schedule 5.21 is valid and binding and in full force and
effect, no premiums due thereunder have not been paid (to the extent any such
non-payment would entitle the insurer to terminate such policy) and neither the
Selling Shareholders, nor the Companies nor the Person to whom such policy has
been issued has received any notice of cancellation or termination in respect of
any such policy or is in default thereunder (to the extent any such default
would entitle the insurer to terminate such policy). Neither the Selling
Shareholders, nor the Companies, nor the Person to whom such policy has been
issued has received notice that any insurer under any policy referred to in this
section is denying liability with respect to a claim thereunder. Each of the
Subsidiaries currently maintains casualty, liability and other forms of
insurance in such amounts and against such risks and losses, and including such
levels of self-insured retention, as are in its judgment prudent and shall keep
such insurance or comparable insurance in full force and effect through the
Closing Date.
SECTION 5.22 AFFILIATE TRANSACTIONS. Except as disclosed in Schedule
5.22, (i) there are no Contracts, indebtedness or other Liabilities between the
Subsidiaries, on the one hand, and the Selling Shareholders or any officer,
director or Affiliate (other than the Subsidiaries) of the Selling Shareholders
or the Subsidiaries, on the other hand, (ii) the Subsidiaries do not provide or
cause to be provided any assets, services (other than the transmission of
electricity and related business functions) or facilities to the Selling
Shareholders or any such officer, director or Affiliate and (iii) the
Subsidiaries do not beneficially own, directly or indirectly, any debentures,
notes and other evidences of indebtedness, securities (including rights to
purchase and securities convertible into or exchangeable for other securities),
interests in joint ventures and general and limited partnerships, mortgage loans
and other investment or portfolio assets issued by the Selling Shareholders or
any such officer, director or Affiliate.
SECTION 5.23 BROKERS, FINDER, ETC.. Neither the Selling Shareholders,
the Companies nor Trans-Elect has any Liability to pay any fees or commissions
to any broker, finder or agent with respect to the transactions contemplated by
this Agreement, including the Restructuring, for which Buyer or the Companies
could become liable or obligated.
SECTION 5.24 INVESTMENT INTENT; INFORMATION.
(a) Each ITC Investor is acquiring the ITC Stock as an investment for
its own account, not with a view to, or for resale in connection with, the
distribution thereof in violation of the Securities Act and is an "accredited
investor" as that term is defined in Regulation D under the Securities Act. Such
ITC Investor shall not sell, transfer, assign, pledge or hypothecate any of the
ITC Stock in the absence of registration under, or pursuant to an applicable
exemption from, federal and applicable state securities laws.
29
(b) Each ITC Investor acknowledges that it has been furnished with
such documents, materials and information as such ITC Investor deems necessary
or appropriate for evaluating the purchase of the ITC Stock. Each ITC Investor
confirms that it has made such further investigation of Buyer as was deemed
appropriate to evaluate the merits and risks of this purchase. Each ITC Investor
further acknowledges that it has had the opportunity to ask questions of, and
receive answers from, the directors and officers of Buyer and Persons acting on
Buyer's behalf, concerning the terms and conditions of the purchase of the ITC
Stock.
SECTION 5.25 MARKET PARTICIPANT. None of the ITC Investors are a
"market participant" as such term is defined by the FERC in 18 C.F.R.
Section 35.34(b)(2).
ARTICLE VI
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE XX XXXXXXX
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the TE Parties represent and
warrant to Buyer as follows:
SECTION 6.1 ORGANIZATION. Each of the TE Parents and Trans-Elect has
been duly formed and is validly existing and in good standing under the laws of
the jurisdiction of its formation. Each of the TE Parents and Trans-Elect is
duly qualified to transact business and is in good standing in each jurisdiction
where the character of its properties owned or held under lease or the nature of
its activities makes such qualification necessary, except where the failure to
be so qualified or in good standing would not reasonably be expected to have a
Material Adverse Effect on Trans-Elect. Each of the TE Parents and Trans-Elect,
has the requisite power and authority to own or lease and operate its assets and
to carry on its business in the manner in which that they are presently being
conducted. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, including the Restructuring, have been, or
will be, duly authorized by all necessary action on the part of the TE Parties.
No other proceedings on the part of the TE Parents or Trans-Elect are necessary
to authorize the execution, delivery and performance of this Agreement by the TE
Parents.
SECTION 6.2 SUBSIDIARIES AND INVESTMENTS. TE Power Opportunities is
wholly-owned by the TE Parents. Except as set forth on Schedule 6.2 and other
than its ownership interest in the Subsidiaries and TEM (i) Trans-Elect does not
have, or has not had, any material assets and does not own, or has not owned,
any interest in any Person and (ii) after its formation and through the Closing,
New TE will not have any employees, assets or Liabilities or own any interest in
any Person. Following the completion of the Restructuring, none of the Companies
shall be subject to, the assignee of, the transferee of, or otherwise be liable
or the obligor in respect of, any Liability, of Trans-Elect.
SECTION 6.3 CONFLICTS. (a) Each of the TE Parents has full power
and authority to execute, deliver and perform this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Each of the TE Parents has full power and authority to execute, deliver and
perform each of the Ancillary Agreements to which it is a party. This Agreement
and each of the Ancillary Agreements to which any of the TE Parents is a party,
30
constitute the valid and binding obligations of such TE Parent, enforceable in
accordance with their respective terms, except to the extent that such
enforceability in each case is subject to bankruptcy, insolvency,
reorganization, moratorium, and similar laws of general application relating to
or affecting creditors' rights and to general equity principles.
(b) None of the execution and delivery by the TE Parents of this
Agreement, the execution and delivery by the TE Parents of any Ancillary
Agreement to which the TE Parents are a party, or the consummation by the TE
Parties of any of the transactions contemplated hereby or thereby, including the
Restructuring, nor compliance by the TE Parents with, or fulfillment by the TE
Parents of, the terms, conditions and provisions hereof or thereof will:
(i) assuming the receipt of all necessary consents and approvals and
the filing of all necessary documents as described in Section 6.3(b)(ii),
result in a violation or breach of the terms, conditions or provisions of,
or constitute a default, an event of default or an event creating rights of
acceleration, termination, purchase or sale or a loss of rights under, or
result in the creation or imposition of any Encumbrance upon the TE
Parents, Trans-Elect, the Subsidiaries, TEM, the Shares or, as of the
Restructuring, New TE or any of their respective assets or properties,
under (1) their respective Organizational Documents, (2) any Contract to
which any of them is a party or by which any of them is bound, (3) any
Court Order to which any of them is a party or by which any of them is
bound or (4) any Requirements of Law affecting any of them, other than, in
the case of clauses (2), (3) and (4) above, any such violations, breaches,
defaults, rights, loss of rights or Encumbrances that would not reasonably
be expected to have a Material Adverse Effect on Trans-Elect, TEM or, as of
the Restructuring, New TE or would not prevent or materially delay the
consummation of any of the transactions contemplated hereby, including the
Restructuring, or
(ii) require the approval, consent, authorization or act of, notice
to, or the making by the TE Parents, Trans-Elect or the Companies of any
declaration, filing, recording, qualification or registration with, any
Administrative Authority, except (1) in connection, or in compliance, with
the provisions of the HSR Act, (2) approval by the FERC pursuant to Section
203 of the Federal Power Act approving the Restructuring and (3) such
approvals, consents, authorizations, notices, declarations, filings,
recordings, qualifications or registrations the failure of which to be
obtained or made would not reasonably be expected to have a Material
Adverse Effect on Trans-Elect or the Companies or would not prevent or
materially delay the consummation of any of the transactions contemplated
hereby, including the Restructuring.
SECTION 6.4 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) Schedule 6.4 contains the consolidated audited balance sheet,
income statement and statement of cash flow of Trans-Elect, Inc. as of and
for the twelve months ended December 31, 2004 (including any related notes)
and the consolidated unaudited balance sheet, income statement and
statement of cash flow of Trans-Elect, Inc. as of and for the twelve months
ended December 31, 2005, and the XX Xxxxxxx shall provide an
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audited balance sheet, income statement and statement of cash flow of
Trans-Elect, Inc. as of and for the twelve months ended December 31, 2005
(including any related notes) (collectively, the "Trans-Elect Financial
Statements") as soon as practicable after the date hereof, and in any event
by the Closing. The Trans-Elect Financial Statements comply in all material
respects with all applicable accounting requirements, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, and present, in all material respects, the consolidated
financial position of Trans-Elect, Inc., as of December 31, 2004 and 2005
and the results of operations and cash flow of Trans-Elect, Inc. for the
two year period ended December 31, 2005.
(b) Except as set forth or reflected or provided for in the balance
sheet for the period ended December 31, 2005 contained in the Trans-Elect
Financial Statements, as of the date hereof, Trans-Elect is not subject to
any Liabilities that would reasonably be expected to have a Material
Adverse Effect on Trans-Elect.
SECTION 6.5 SOLVENCY. Trans-Elect is Solvent and, following the
Restructuring, Trans-Elect will be, on a consolidated basis, and New TE will be,
on a consolidated basis, Solvent after giving effect to the Restructuring and
any other transactions contemplated hereby or by Trans-Elect or any of its
Affiliates which could be taken into account in determining whether the
transactions contemplated hereby, including the Restructuring, were a fraudulent
conveyance or impermissible dividend under applicable law.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to the Selling Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, Buyer, hereby
represents and warrant to the Selling Shareholders as follows:
SECTION 7.1 ORGANIZATION OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan. Buyer is duly qualified to transact business and is in good standing
in each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified or in good standing would not reasonably be
expected to have a Material Adverse Effect on Buyer and its subsidiaries. Buyer
has the corporate power and authority to own or lease and operate its assets and
to carry on its businesses in the manner that they are presently conducted.
SECTION 7.2 AUTHORITY OF BUYER; CONFLICTS. (a) Buyer has full power
and authority to execute, deliver and perform this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Buyer has full power and authority to execute, deliver and perform each of the
Ancillary Agreements to which it is a party. This Agreement and each of the
Ancillary Agreements, to which Buyer is a party, constitute the valid and
binding obligations of Buyer, enforceable in accordance with their respective
terms, except to the extent that such enforceability in each case is subject to
bankruptcy, insolvency,
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reorganization, moratorium, and similar laws of general application relating to
or affecting creditors' rights and to general equity principles.
(b) Except as set forth in Schedule 7.2(b), none of the execution and
delivery by Buyer of this Agreement, the execution and delivery by Buyer of any
Ancillary Agreement, to which Buyer is a party, or the consummation by Buyer of
any of the transactions contemplated hereby or thereby, nor compliance by Buyer
with, or fulfillment by Buyer of, the terms, conditions and provisions hereof or
thereof will:
(i) assuming the receipt of all necessary consents and approvals and
the filing of all necessary documents as described in Section 7.2(b)(ii),
result in (i) a violation or breach of the terms, conditions or provisions
of, or (ii) constitute a default, an event of default or an event creating
rights of acceleration, termination, cancellation purchase or sale or a
loss of rights under (1) the Organizational Documents of Buyer, (2) any
Contract to which Buyer is a party or by which Buyer is bound, (3) any
Court Order to which Buyer is a party or by which Buyer is bound or (4) any
Requirements of Law affecting Buyer, other than, in the case of clauses
(2), (3) and (4) above, any such violations, breaches, defaults, rights,
loss of rights or Encumbrances that would not reasonably be expected to
have a Material Adverse Effect on Buyer and its subsidiaries or would not
prevent or materially delay the consummation of any of the transactions
contemplated hereby, or
(ii) require the approval, consent, authorization or act of, notice
to, or the making by Buyer of any declaration, filing, recording,
qualification or registration with, any Administrative Authority, except
(1) in connection, or in compliance, with the provisions of the HSR Act,
(2) the FERC 203 and 204 Approval and any applications therefor and other
filings in connection therewith, and (3) such approvals, consents,
authorizations, notices, declarations, filings, recordings, qualifications
or registrations the failure of which to be obtained or made would not
reasonably be expected to have a Material Adverse Effect on Buyer and its
subsidiaries or would not prevent or materially delay the consummation of
any of the transactions contemplated hereby.
SECTION 7.3 NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as
set forth in Schedule 7.3:
(i) there are no Actions pending or, to the Knowledge of Buyer,
threatened against Buyer or its subsidiaries which are reasonably expected
to materially impair the ability of Buyer to perform its obligations
hereunder or prevent or materially delay the consummation of any of the
transactions contemplated hereby; and
(ii) there are no Actions pending or, to the Knowledge of Buyer,
threatened that questions the legality of the transactions contemplated by
this Agreement or any of the Ancillary Agreements.
SECTION 7.4 FINANCING. At Closing, Buyer will have sufficient funds
and ITC Stock available for it to pay the Purchase Price.
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SECTION 7.5 INVESTMENT INTENT; INFORMATION. (a) Buyer is acquiring the
Shares as an investment for its own account, not with a view to, or for resale
in connection with, the distribution thereof in violation of the Securities Act
and is an "accredited investor" as that term is defined in Regulation D under
the Securities Act. Buyer shall not sell, transfer, assign, pledge or
hypothecate any of the Shares in the absence of registration under, or pursuant
to an applicable exemption from, federal and applicable state securities laws.
(b) Buyer acknowledges that it has been furnished with such documents,
materials and information as Buyer deems necessary or appropriate for evaluating
the purchase of the Shares. Buyer confirms that it has made such further
investigation of the Companies as was deemed appropriate to evaluate the merits
and risks of this purchase. Buyer further acknowledges that it has had the
opportunity to ask questions of, and receive answers from, the directors and
officers of the Companies, the Selling Shareholders and Persons acting on the
Companies' and the Selling Shareholders' behalf, concerning the terms and
conditions of the purchase of the Shares.
SECTION 7.6 SOLVENCY. Assuming the accuracy of the representations and
warranties set forth in Article IV and V, at and immediately following the
Closing, the Companies will be, on a consolidated basis, Solvent after giving
effect to the purchase and sale of the Shares and any other transactions
contemplated hereby which could be taken into account in determining whether the
purchase and sale of the Shares or any of the transactions contemplated hereby
were a fraudulent conveyance or impermissible dividend under applicable law.
SECTION 7.7 BROKERS, FINDER, ETC.. Buyer does not have any Liability
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which the Selling
Shareholders could become liable or obligated.
ARTICLE VIII
ACTION PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take the following
actions between the date hereof and the Closing Date:
SECTION 8.1 ACCESS TO INFORMATION.
(a) The Selling Shareholders shall cause the Companies and Trans-Elect
to afford to the officers, employees and authorized representatives of Buyer
(including independent public accountants, attorneys and prospective financing
sources) reasonable access during normal business hours, upon reasonable advance
notice, to the offices, properties, employees and business and financial records
(including computer files, retrieval programs and similar documentation) of the
Companies to the extent Buyer shall reasonably deem necessary and shall furnish
to Buyer or its authorized representatives such additional information
concerning the Companies as shall be reasonably requested; provided, however,
that (i) the Companies shall not be required to violate any FERC standards of
conduct obligations set forth in 18 C.F.R. Part 358,
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(ii) the Companies shall not be required to violate any obligation of
confidentiality to which any of the Companies are subject or to waive any
privilege which they may possess in discharging its obligations pursuant to this
Section 8.1, (iii) the Companies shall not be required to furnish or otherwise
make available to Buyer customer-specific data or competitively sensitive
information relating to areas of their business in which Buyer or its Affiliates
compete against the Companies; and (iv) Buyer shall not, without the prior
written consent of the Selling Shareholders, contact or communicate with any
vendor, customer, employee or other business partner of the Company with respect
to or in connection with the transactions contemplated hereby. Buyer agrees that
such investigation shall be conducted in such a manner as not to interfere
unreasonably with the operations of the Companies. The Selling Shareholders
shall cause the Companies to provide to Buyer copies of any financial statements
or reports relating to the Companies that are furnished to the lenders or
bondholders of any Company concurrently with such statements or reports being so
furnished. The parties shall act at all times in accordance with the terms and
provisions of the Confidentiality Agreement; provided that, unless this
Agreement is terminated, any requirement in the Confidentiality Agreement to
obtain consent prior to disclosure of information to prospective financing
sources shall cease to have further force and effect from and after the date
hereof.
SECTION 8.2 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES;
NOTIFICATION. Each of Buyer and the Selling Shareholders shall refrain from
intentionally taking any action which would render any representation or
warranty contained in this Agreement inaccurate as of the Closing Date and each
party shall notify the other party of the occurrence, or failure to occur, of
any event of which such party is aware and which occurrence or failure to occur
would cause any such representation or warranty to be untrue in any material
respect. Each of Buyer and the Selling Shareholders shall promptly notify the
other of any action, suit or proceeding that shall be instituted or threatened
against such party to restrain, prohibit or otherwise challenge the legality of
any transaction contemplated by this Agreement. Each party hereto shall promptly
notify the other of any lawsuit, claim, proceeding or investigation that may be
threatened, brought, asserted or commenced against the Selling Shareholders, the
Companies, or Buyer, as the case may be, that would have been listed in Schedule
5.13 or Schedule 7.3, as the case may be, if such lawsuit, claim, proceeding or
investigation had arisen prior to the date hereof.
SECTION 8.3 CONSENTS OF THIRD PARTIES; GOVERNMENTAL APPROVALS. (a)
Subject to the terms and conditions of this Agreement, each of the Selling
Shareholders and Buyer will, and will cause its respective Affiliates to, use
its reasonable best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated
under this Agreement as soon as practicable after the date hereof, and, without
limiting the foregoing, act diligently and reasonably and shall use their
commercially reasonable efforts in attempting to secure, before the Closing
Date, the consent, approval or waiver, in form and substance reasonably
satisfactory to the other party, required to be obtained from any party (other
than a Administrative Authority) to consummate the transactions contemplated by
this Agreement, including, if applicable, approval of the shareholders of the
Buyer to issue the ITC Stock to the Selling Shareholders who elected to receive
any portion of the Purchase Price in ITC Stock; provided, however, that none of
the Companies, the Selling Shareholders nor any of their
35
respective Affiliates shall expend money, commence or participate in any
litigation, settle any claim, or proceeding, or offer or grant any accommodation
(financial or otherwise) to any third party without the prior consent of Buyer.
(b) During the period prior to the Closing Date, Buyer shall act
diligently and reasonably, and the Selling Shareholders, upon the request of
Buyer, shall use their commercially reasonable efforts to cooperate with Buyer,
in attempting to secure any consents and approvals of any Administrative
Authority required to be obtained by Buyer in order to permit the consummation
of the transactions contemplated by this Agreement; provided that Buyer shall
have primary responsibility for the preparation and filing of the FERC
Regulatory Filing with the FERC.
(c) Buyer and the Selling Shareholders shall use commercially
reasonable efforts to file as soon as practicable after the date hereof with the
Federal Trade Commission and the Antitrust Division of the Department of Justice
the notifications and other information required to be filed under the HSR Act
with respect to the transactions contemplated hereby. Each party warrants that
all such filings by it will be, as of the date filed, true and accurate in all
material respects and in material compliance with the requirements of the HSR
Act. Each of Buyer and the Selling Shareholders agrees to file any additional
information requested by such agencies under the HSR Act and to make available
to the other such information as each of them may reasonably request relative to
its business, assets and property as may be required of each of them to file
such additional information. Each of Buyer and the Selling Shareholders will
provide to the other copies of all correspondence between it (or its advisors)
and any such agency relating to this Agreement or any of the matters described
in this Section 8.3(c) and to take all other actions necessary to cause the
expiration or termination of the applicable waiting periods under the HSR Act as
soon as practicable.
(d) Buyer and the Selling Shareholders shall use commercially
reasonable efforts to file as soon as practicable after the date hereof the FERC
Regulatory Filing, and execute all agreements and documents, in each case, to
obtain promptly as practicable the FERC 203 and 204 Approval. Buyer and the
Selling Shareholders shall act diligently, and shall coordinate in completing
and submitting the FERC Regulatory Filing. Buyer and the Selling Shareholders
shall have the right to review and approve (which such approval shall not be
unreasonably delayed or withheld) in advance all of the information relating to
the transactions contemplated by this Agreement which appear in the FERC
Regulatory Filing. Buyer and the Selling Shareholders agree that all telephonic
calls and meetings with the FERC regarding the transactions contemplated by this
Agreement shall be conducted by Buyer and the Selling Shareholders jointly.
SECTION 8.4 OPERATIONS PRIOR TO THE CLOSING DATE. (a) The Selling
Shareholders shall cause the Companies to operate and carry on their business in
the Ordinary Course of Business and substantially as operated immediately prior
to the date of this Agreement. Without limiting the foregoing, the Selling
Shareholders shall cause the Companies to use their reasonable efforts
consistent with good business practice to preserve the goodwill of the
suppliers, contractors, Administrative Authorities, licensors, employees,
customers, distributors and others having business relations with the
Subsidiaries.
36
(b) Without limiting Section 8.4(a), except as set forth in Schedule
8.4 and except as contemplated by the Restructuring or except with the express
written approval of Buyer (which Buyer agrees shall not be unreasonably withheld
or delayed), the Selling Shareholders shall cause the Companies not to:
(i) transfer any of the Shares to any Person or create or suffer to
exist any Encumbrance upon the Shares;
(ii) make any material change in their business or their operations,
except such changes as may be required to comply with any applicable
Requirements of Law;
(iii) make any capital expenditures (or enter into any Contracts in
respect of capital expenditures) in excess of $50,000 or make any capital
expenditures that will materially increase the property taxes paid by the
Subsidiaries other than in accordance with the Approved Annual Budget;
(iv) enter into any Contract for the purchase of real property;
(v) enter into any Contract for any acquisitions (by merger,
consolidation, or acquisition of stock or assets or any other business
combination) of any Person or business or any division thereof;
(vi) sell, lease (as lessor), transfer or otherwise dispose of
(including any transfers to any of its Affiliates), or mortgage or pledge,
or impose or suffer to be imposed any Encumbrance on, any of their assets,
other than inventory and personal property, in an amount not to exceed
$25,000 in the aggregate, sold or otherwise disposed of in the Ordinary
Course of Business and other than Permitted Encumbrances;
(vii) cancel any debts owed to or claims held by them (including the
settlement of any claims or litigation) other than in the Ordinary Course
of Business or in accordance with Section 8.5;
(viii) create, incur, assume or guarantee, or agree to create, incur,
assume or guarantee any indebtedness for borrowed money or enter into any
"keep well" or other agreement to maintain the financial condition of
another Person into any arrangement having the economic effect of any of
the foregoing (including entering into, as lessee, any capitalized lease
obligations as defined in Statement of Financial Accounting Standards No.
13), other than in the Ordinary Course of Business;
(ix) make, or agree to make, any dividends or distribution of assets
(including cash and cash equivalents) to the Selling Shareholders or any of
their Affiliates (other than payments made in accordance with the MSA in
the Ordinary Course of Business);
(x) adopt, modify or terminate any Company Plan, or institute any
increase in any benefit provided under any Company Plan other than as
required by any such plan or Requirements of Law; increase the compensation
of any Company Employee, other than
37
increases required by any Company Plan or Requirements of Law; grant any
equity or equity-based awards to any Company Employee; hire, or make any
commitment to hire, any additional employees or independent contractors for
the benefit of any of the Companies other than with respect to personnel
required to fulfill functions (A) as a result of the pending termination of
services currently provided to the Subsidiaries by CMS Energy Corporation
or (B) at the new control center being built by the Subsidiaries in Grand
Rapids, Michigan;
(xi) enter into, amend, modify, grant a waiver in respect of, cancel
or consent to the termination of any Material Contract (or any Contract
that would be a Material Contract if in effect on the date of this
Agreement) other than any amendment, modification or waiver which is not
material to such Contract and is otherwise in the Ordinary Course of
Business;
(xii) enter into or adversely amend, modify or waive any rights under,
in each case, in any material respect, any Contract (or series of related
Contracts) with the Selling Shareholders or any Affiliate of the Selling
Shareholders (other than the Companies) other than the entry into or
amendment, modification, or waiver of any such Contracts on an arms' length
basis which are not in the aggregate materially adverse to the business of
the Subsidiaries;
(xiii) cause any of the Companies to engage in any transactions
outside the Ordinary Course of Business between the date hereof and through
the Closing that would materially increase the Taxes for which Buyer is
responsible under this Agreement, reduce the tax attributes available to
Buyer or that could reasonably be expected to have a material adverse
effect on the Taxes of any of the Companies after the date hereof, other
than transactions expressly contemplated or permitted by this Agreement or
the Schedules hereto;
(xiv) make any material change in the accounting policies applied in
the preparation of the Financial Statements, unless such change is required
by GAAP, applicable regulations of the FERC or prior orders of the FERC
applicable to METC with effect after the date hereof;
(xv) make any change in their Organizational Documents or purchase,
redeem or issue any capital stock (or securities exchangeable, convertible
or exercisable for capital stock);
(xvi) take any action that may cause a significant impairment or write
down in assets or increase in Liabilities that is reasonably likely to
cause METC's rate base to be decreased;
(xvii) make or change any material Tax election, change an annual
accounting period, adopt or change any accounting method with respect to
Taxes, file any amended Tax Return with respect to any material Taxes,
enter into any closing agreement, settle or compromise any proceeding with
respect to any material Tax claim or assessment
38
relating to such applicable Company, surrender any right to claim a refund
of material Taxes, consent to any extension or waiver of the limitation
period applicable to any material Tax claim or assessment relating to the
Company or any of its Subsidiaries, or take any other similar action
relating to the filing of any Tax Return or the payment of any material
Tax;
(xviii) take any action that is intended or is reasonably likely to
result in any of the conditions to consummation of the transactions
contemplated by this agreement not being satisfied; or
(xix) agree to enter into any Contract or otherwise make any
commitment to do any of the foregoing in this Section 8.4.
SECTION 8.5 PAYMENT OF TERMINATION AMOUNT. Buyer hereby covenants to
pay the MSA Termination Amount on behalf of METC to Trans-Elect LLC at the
Closing.
SECTION 8.6 FINANCING. Prior to the Closing, the Selling Shareholders
shall provide, shall cause the Companies and Trans-Elect to provide, and shall
use reasonable best efforts to cause the respective officers, employees,
representatives and advisors, including legal and accounting advisors, of the
Selling Shareholders, the Companies and Trans-Elect to provide, to the Buyer all
reasonable cooperation requested by the Buyer that is necessary in connection
with any Financing and the other transactions contemplated by this Agreement,
including (i) participation in meetings, presentations, road shows, due
diligence sessions and sessions with rating agencies, (ii) assisting 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 any
Financing, (iii) executing and delivering any definitive financing documents,
which documents shall not be effective until the Closing and shall not impose
any obligations on the Companies if the Closing does not occur, or other
certificates, legal opinions or documents as may be reasonably requested by
Buyer (including one or more certificates of an officer of the Companies and
Trans-Elect with respect to solvency matters and consents of accountants for use
of their reports in any materials relating to any Financing), (iv) furnishing
the Buyer and its financing sources with financial and other pertinent
information regarding the Companies as may be reasonably requested by the Buyer,
including, without limiting the foregoing, all financial statements and
financial data of the type and in the form required by Regulation S-X and
Regulation S-K under the Securities Act and in compliance with the other rules
and regulations promulgated by the SEC and of the type and in the form
customarily included in private placements pursuant to Rule 144A of the
Securities Act, to consummate the Financing at the time during the Subsidiaries
fiscal years such offerings will be made, (v) using reasonable best efforts to
obtain accountants' comfort letters, legal opinions, surveys and title insurance
as reasonably requested by the Buyer; (vi) taking all reasonable actions
necessary to permit the prospective lenders involved in the Financing to
evaluate the Companies current assets, cash management and accounting systems,
policies and procedures relating thereto for the purposes of establishing any
post-Closing collateral arrangements related to the Financing; provided that
nothing in this Section 8.7 shall require such cooperation to the extent it
would unreasonably interfere with the business or operations of the
Subsidiaries. The Buyer shall, promptly upon request by the Selling
Shareholders, reimburse the Selling Shareholders for all
39
reasonable out-of-pocket costs incurred by the Selling Shareholders or the
Subsidiaries in connection with such cooperation. The Selling Shareholders and
Trans-Elect hereby consent to the use of the METC logo, subject to the Selling
Shareholders' and Trans-Elect's prior written approval of its use (such approval
not to be unreasonably withheld or delayed), in connection with any Financing.
SECTION 8.7 FERC DOCKET NO. ER06-56. (a) Between the date hereof and
the Closing Date, the Selling Shareholders agree to cause the Subsidiaries not
to settle the current rate case pending before FERC (Michigan Electric
Transmission Company, LLC, FERC Docket No. ER06-56-000) without the prior
consent of Buyer. The Selling Shareholders further agree, immediately following
the date hereof, to cause the Subsidiaries to make and pursue in good faith a
motion to suspend the procedural schedule in FERC Docket No. ER06-56-000. The
Selling Shareholders shall not permit the Subsidiaries to make any filings in
connection with such proceeding without the prior consent of Buyer (not to be
unreasonably withheld) and shall cause the Subsidiaries to otherwise coordinate
with Buyer with respect to the management of that proceeding and take no other
action in the proceeding (except with respect to discovery requests), including
substantive discussions with any party, without the prior consent of Buyer.
SECTION 8.8 NEW TE. From the date of its organization through the
Closing, the XX Xxxxxxx shall cause New TE to (i) perform its obligations under
this Agreement, (ii) not engage directly or indirectly in any business or
activities of any type or kind and not enter into any Contracts or arrangements
with any Person, or be subject to or bound by any obligation or undertaking,
which is inconsistent with this Agreement.
SECTION 8.9 TRANSFER TAXES. Notwithstanding any provision of this
Agreement to the contrary, all Transfer Taxes incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Selling
Shareholders.
SECTION 8.10 TERMINATION OF AFFILIATE RELATIONSHIPS. Except as
contemplated by this Agreement, all Contracts between the Companies, on the one
hand, and the Selling Shareholders and their Affiliates (other than the
Companies), on the other hand (the "Affiliate Agreements") shall be terminated
as of the Closing, and all Liabilities thereunder shall thereupon be discharged
and released without any Liability or cost to the Companies, except that the
agreements listed on Schedule 8.10 (the "Surviving Agreements") shall remain in
full force and effect.
ARTICLE IX
ADDITIONAL AGREEMENTS
SECTION 9.1 EMPLOYEE MATTERS. (a) Employee Compensation. (i) For a
period of at least one year following the Closing Date, each Company Employee
shall be provided while in the employ of Buyer or its Affiliates (including the
Subsidiaries), at least the same salary or wages, as applicable, as were
provided to such employee by the Subsidiaries immediately prior to the Closing
Date. (ii) With respect to annual bonuses otherwise payable under Company Plans
in respect of calendar year 2006 to Company Employees who would have been
eligible to receive
40
such bonuses ("2006 Bonuses"), on the Closing Date, the Subsidiaries shall pay
to each such Company Employee an amount equal to a pro rated portion of each
such 2006 Bonus, prorated from January 1, 2006 through the Closing Date.
Effective as of the Closing Date, Buyer shall provide each such Company Employee
with the opportunity to earn a bonus in respect of the balance of calendar year
2006 that is comparable to the bonus that a similarly situated employee of Buyer
is eligible to earn in respect of such balance of calendar year 2006 pursuant to
Buyer's annual incentive plans. Notwithstanding any provision herein to the
contrary, neither Buyer nor any of its Affiliates (including the Subsidiaries)
shall be obligated to continue to employ any Company Employee for any specific
period of time following the Closing Date, subject to the Requirements of Law.
(b) Buyer Benefit Plans. From the Closing Date until the date on which
Buyer provides Company Employees with the opportunity to participate in the
applicable retirement, welfare and fringe benefit plans, agreements, programs,
policies or arrangements maintained by Buyer for the benefit of its employees
(the "Buyer Benefit Plans"), on the same terms and conditions as similarly
situated employees of Buyer, Buyer shall cause the Companies to continue to
maintain those Company Plans that are retirement, welfare and fringe benefit
plans, agreements, programs, policies or arrangements in which the Company
Employees participate as of the Closing Date for the benefit of such Company
Employees. In addition to the foregoing, Company Employees will be eligible to
participate in the long-term incentive plan that Buyer expects to adopt for its
employees in 2006 pending receipt of shareholder approval of such plan.
(c) Layoff Benefits. Notwithstanding any of the foregoing to the
contrary, following the Closing Date, Buyer agrees to, or to cause its
Affiliates to, provide severance benefits to any Company Employee who is laid
off after the Closing Date in an amount that is at least equal to the layoff
benefits that are provided to similarly situated employees of Buyer pursuant to
the applicable Buyer Benefit Plan.
(d) Credit for Service. To the extent that service is relevant for
purposes of eligibility and vesting (and, in order to calculate the amount of
any vacation, sick days, severance and similar benefits, but not for purposes of
defined benefit pension plans) under any Buyer Benefit Plan, in which Company
Employees, following the Closing Date, become entitled to participate, Buyer
shall credit such Company Employees for service earned on and prior to the
Closing Date with the Subsidiaries or any of their Affiliates and with service
otherwise recognized by the Subsidiaries or any of the Affiliates for such
purposes under the applicable Company Plan, in addition to service earned with
Buyer or any of Buyer's Affiliates after the Closing Date.
(e) Preexisting Conditions; Coordination. Following the Closing Date,
Buyer shall, or shall cause its Affiliates to, waive limitations on eligibility,
enrollment and benefits relating to any preexisting medical conditions of the
Company Employees and their eligible dependents to the extent waived or
otherwise satisfied under the Company Plans. Following the Closing Date, Buyer
shall recognize, or shall cause its Affiliates to also recognize, for purposes
of annual deductible and out of pocket limits under its health and dental Buyer
Benefit Plans, deductible and out of pocket expenses paid by Company Employees
and their respective
41
dependents under health and dental Company Plans in the calendar year in which
the Closing Date occurs to the extent the Company Employees participate in any
such Buyer Benefit Plans in such same calendar year.
(f) Vacations. Buyer shall, or shall cause its Affiliates to, continue
a vacation program for the benefit of the Company Employees through at least the
end of the calendar year in which the Closing occurs that is at least as
favorable as the vacation program of the Companies or their subsidiaries in
effect immediately prior to the Closing Date. Buyer shall, or shall cause its
Affiliates to, recognize and provide all accrued but unused vacation of each
Company Employee as of the Closing Date. The Selling Shareholders or one of
their Affiliates shall have no Liability to pay or provide any vacation payments
claimed on or after the Closing Date.
(g) COBRA. Buyer shall, or shall cause an Affiliate to, provide
continuation health care coverage to all individuals who are "M&A Qualified
Beneficiaries" (as defined in the regulations under Section 4980B of the Code
and Title I, Subtitle B, Part 6 of ERISA ("COBRA")) as a result of the
transactions contemplated by this Agreement and to all Company Employees and
their qualified beneficiaries, regardless of when a "qualifying event" (as
defined in COBRA) occurs, in accordance with the continuation health care
coverage requirements of COBRA.
(h) WARN. Buyer shall be responsible for all Liabilities under the
Worker Adjustment and Retraining Notification Act and similar state and local
rules, statutes and ordinances (the "Plant Closing Liabilities") relating to the
Company Employees and which are resulting from the Closing or from Buyer's or
the Subsidiaries' actions following the Closing, with Seller to be responsible
for any other Plant Closing Liabilities that arise up to the Closing Date with
respect to the employees of any Subsidiary.
(i) Incentive Plans; Trans-Elect Plans. The Selling Shareholders shall
take all actions necessary such that, effective immediately prior to the
Closing, the METC, LLC Executive Incentive Plan and any Company Plan that is
equity-based, and any awards or rights outstanding thereunder (collectively, the
"Incentive Plans"), shall terminate and be of no further force and effect, and
the Selling Shareholders (i) shall make such payments in cash as may be
necessary to make such Company Employee whole, on a fair and equitable basis,
under any such Incentive Plans and shall assume any outstanding obligations in
respect of any Liabilities under the Incentive Plans and (ii) shall retain all
obligations in respect of any Liabilities under any Trans-Elect Plan.
SECTION 9.2 SECURITIES LAW LEGENDS. Each of Buyer and each ITC
Investor agree and understand that the Shares or the ITC Stock, as the case may
be, have not been, and except as contemplated by the Shareholders Agreement will
not be, registered under the Securities Act or the securities laws of any state
and that the Shares or the ITC Stock, as the case may be, may be sold or
disposed of only in one or more transactions registered under the Securities Act
and applicable state securities laws or as to which an exemption from the
registration requirements of the Securities Act and applicable state securities
laws is available. Buyer and each ITC Investor acknowledge and agree that no
Person has any right to require the Buyer or the Selling
42
Shareholders to cause the registration of any of the Shares or the ITC Stock, as
the case may be. The certificates representing the Shares or the ITC Stock, as
the case may be, shall contain a legend similar to the following and other
legends necessary or appropriate under applicable state securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS A REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS WITH RESPECT TO SUCH SHARES IS EFFECTIVE OR UNLESS THE
COMPANY IS IN RECEIPT OF AN OPINION OF COUNSEL SATISFACTORY TO IT TO THE
EFFECT THAT SUCH SHARES MAY BE SOLD WITHOUT REGISTRATION UNDER THE ACT AND
SUCH LAWS.
SECTION 9.3 INSURANCE; RISK OF LOSS. The Selling Shareholders shall
cause the Subsidiaries to keep insurance policies currently maintained by the
Subsidiaries covering their business, assets and current or former employees, as
the case may be, or suitable replacements therefor, in full force and effect
through the close of business on the Closing Date. From and after the Closing
Date, Buyer shall be solely responsible for all insurance coverage and related
risk of loss based on claims pending as of the Closing Date and claims made
after the Closing Date, without regard to the when the event giving rise to any
such claim occurred, with respect to the Subsidiaries and their business, assets
and current or former employees. To the extent that after the Closing any party
hereto requires any information regarding claim data, payroll or other
information in order to make filing with insurance carriers or self insurance
regulators from another party hereto, such party will promptly supply such
information.
SECTION 9.4 DIRECTORS' AND OFFICERS' INDEMNIFICATION. (a) For six (6)
years from and after the Closing Date, Buyer shall cause the Companies to
indemnify and hold harmless all past and present officers and directors of the
Subsidiaries to the same extent such Persons are indemnified as of the date of
this Agreement by the Subsidiaries pursuant to the Organizational Documents of
the Companies (to the fullest extent permitted by applicable law) for acts or
omissions occurring at or prior to the Closing Date, and shall advance expenses
reasonably incurred by each such Person in connection with defending any claim,
action or investigation arising out of such acts or omissions (including the
reasonable costs of any investigation and preparation in connection therewith),
to the fullest extent permitted by applicable law; provided that any Person to
whom expenses are advanced provides an undertaking, to the extent permitted by
applicable law, to repay such advances if it is ultimately determined that such
Person is not entitled to indemnification; provided further that in the event of
such a claim, action or investigation, if any of the Companies are also a party
to such claim, action or investigation then the Companies and any indemnified
Person shall use the counsel selected by the Companies unless such Person has
determined in good faith that an actual or potential conflict of interest makes
representation by the counsel selected by the Companies inappropriate. To the
extent permitted by applicable law, Buyer shall provide such indemnification in
the event it cannot be or is not provided by the Subsidiaries.
43
(b) If the Subsidiaries or any of their successors or assigns (i)
shall consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) shall transfer all or substantially all of their properties
and assets to any individual, corporation or other entity, then, and in each
such case, proper provisions shall be made so that the successors and assigns of
the Subsidiaries shall assume all of the obligations set forth in this Section
9.4.
(c) The provisions of this Section 9.4 are intended to be for the
benefit of, and shall be enforceable by, each of the past and present officers
and directors of the Subsidiaries, their heirs, their representatives and
assigns.
SECTION 9.5 USE OF NAMES. (a) The Selling Shareholders are not
conveying ownership rights or granting Buyer or its Affiliates (including the
Companies after the Closing) a license to use any of the Trademarks of the
Selling Shareholders or any Affiliate of the Selling Shareholders (other than
the Trademarks included in the Intellectual Property identified in Schedule
5.11(a)) (collectively, the "Retained Names and Marks") and, after the Closing,
Buyer and its Affiliates (including the Companies after the Closing) are not
acquiring the right to use any such names or marks of the Selling Shareholders
or any Affiliate of the Selling Shareholders or any word that is confusingly
similar in sound or appearance to such names or marks, except as provided in
this Section 9.5. In the event Buyer or any Affiliate of Buyer (including the
Companies after the Closing) violates any of its obligations under this Section
9.5, the Selling Shareholders and their Affiliates may proceed against it in law
or in equity for such damages or other relief as a court may deem appropriate.
Buyer acknowledges that a violation of this Section 9.5 may cause the Selling
Shareholders and their Affiliates irreparable harm which may not be adequately
compensated for by money damages. Buyer therefore agrees that in the event of
any actual or threatened violation of this Section 9.5, the Selling Shareholders
and their Affiliates shall be entitled, in addition to other remedies that they
may have, to a temporary restraining order and to preliminary and final
injunctive relief against Buyer or such Affiliate of Buyer to prevent any
violations of this Section 9.5.
(b) Following the Closing, Buyer shall (and shall cause the Companies
to) within 180 days after the Closing Date, cease using any (i) advertising or
promotional materials and (ii) any stationery, business cards, business forms
and other similar items, in each case that contain anywhere thereon any of the
Retained Names and Marks; provided, however, that Buyer shall (and shall cause
the Companies to), when using items referred to in clause (ii) in the context of
entering into or conducting contractual relationships, make reasonably clear to
all other applicable parties that Buyer and the Companies, rather than the
Selling Shareholders or any Affiliate of the Selling Shareholders is the party
entering into or conducting the contractual relationship; and provided, further,
that Buyer shall (and shall cause the Companies to) ensure that personnel of the
Companies using such items shall not, and shall have no authority to, hold
themselves out as officers, employees or agents of the Selling Shareholders or
any Affiliate of the Selling Shareholders.
SECTION 9.6 RESTRUCTURING. Prior to the Closing, the XX Xxxxxxx shall
have caused the Restructuring to have occurred and following the Restructuring
the XX Xxxxxxx shall
44
take all necessary steps to ensure that none of the Companies shall be subject
to, the assignee of, the transferee of, or otherwise be liable or the obligor in
respect of, any Liability of Trans-Elect.
SECTION 9.7 NON-SOLICITATION. From the date of this Agreement through
the Closing, none of the Selling Shareholders nor any of their Affiliates or
representatives shall (a) solicit, initiate or encourage the submission by any
Person of a Competing Proposal (as defined below), (b) enter into or agree to
enter into any Contract or letter of intent with respect to any Competing
Proposal or (c) participate in any discussions or negotiations regarding, or
furnish to any Person or entity any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing Proposal.
For purposes of this Agreement, "Competing Proposal" shall mean any proposal to
acquire any interest in the capital stock of any of the Companies, or any
portion thereof, or any material portion of the assets of the Companies (except
in the Ordinary Course of Business), whether such transaction takes the form of
a merger, consolidation, stock sale, asset sale or other business combination
involving the Companies or the business of the Companies, other than the
transactions contemplated by this Agreement.
SECTION 9.8 TAX MATTERS. Buyer shall provide any income Tax Returns
for New TE filed after the Closing Date for any taxable period commencing prior
to and including the Closing Date (and, if the Closing Date occurs in 2007, the
2006 Tax Return) to the TE Parties within 30 days prior to the due date for
filing thereof and shall incorporate all reasonable comments of the TE Parties
that are received within 15 days after such Tax Returns are provided to the TE
Parties. Buyer shall claim all available net operating losses and other tax
deductions on such Tax Returns to the maximum extent permitted by applicable
law. Buyer shall provide any amendment to any income Tax Returns of New TE
relating to any taxable period commencing prior to the Closing Date to the TE
Parties within 30 days prior to the date on which Buyer intends to file such
amendment and shall incorporate all reasonable comments of the TE Parties that
are received within 15 days after any such amendment is provided to the TE
Parties.
SECTION 9.9 TRANS-ELECT COMPENSATION PAYMENTS. The TE Parties and
Buyer will use commercially reasonable efforts prior to the Closing Date to
enable New TE to claim the deductions attributable to payments by Trans-Elect
for bonuses and any other payments under its equity plans made by Trans-Elect on
or after January 1, 2006 and on or prior to the Closing Date (other than such
payments as were made prior to the date hereof which related to 2005 bonus
payments which will be included in the Tax Returns of Trans-Elect for the
taxable year ending December 31, 2005), on the Tax Return of New TE for the
taxable period including the Closing Date (and, if the Closing Date occurs in
2007, the 2006 Tax Return). In no event shall any of the TE Parties, Trans-Elect
LLC or Trans-Elect Holding LLC claim any of the deductions referred to this
Section 9.9, except to the extent applicable law prohibits such deductions from
being claimed by New TE.
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ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall, at the option of
Buyer be subject to the satisfaction, on or prior to the Closing Date, of the
following conditions:
SECTION 10.1 NO MISREPRESENTATION, BREACH OF COVENANTS AND WARRANTIES;
ABSENCE OF CHANGES.
(a) Each of the Selling Shareholders shall have complied with and
performed in all materials respects all of the covenants, agreements and
obligations herein required to be complied with or performed by them under this
Agreement prior to or at the Closing.
(b) The representations and warranties of the Selling Shareholders
contained in this Agreement shall be true and correct in all respects (without
giving effect to any limitation as to materiality or Material Adverse Effect set
forth therein) as of the date of this Agreement and as of the Closing Date as
though made on the Closing Date (except to the extent that they expressly relate
to an earlier date, which representations and warranties shall have been true
and correct on such earlier date), unless the failure or failures of all such
representations and warranties to be true and correct in all respects will not
have a Material Adverse Effect on the Subsidiaries; provided that, (x) the
representations and warranties of the Selling Shareholders in the first sentence
of Section 5.6 shall be true and correct in all respects without disregarding
the reference to Material Adverse Effect and (y) the representations of the
Selling Shareholders contained in Sections 5.2, 5.3, 5.4(a) and 5.23 shall be
true and correct in all respects as of the Closing Date.
(c) The representations and warranties of the TE Parties contained in
Sections 6.1, 6.2, 6.3 and 6.5 of this Agreement shall be true and correct in
all respects (without giving effect to any limitation as to materiality or
Material Adverse Effect set forth therein) as of the date of this Agreement and
as of the Closing Date as though made on the Closing Date (except to the extent
that they expressly relate to an earlier date, which representations and
warranties shall have been true and correct on such earlier date), unless the
failure or failures of all such representations and warranties to be true and
correct in all respects will not have a Material Adverse Effect on Trans-Elect.
(d) Since the date of this Agreement, there has been no Material
Adverse Effect on the Subsidiaries.
(e) There shall have been delivered to Buyer a certificate to the
effect that the conditions specified in paragraphs (a), (b) and (d) above have
been satisfied, dated the Closing Date, signed on behalf of each Selling
Shareholder by a duly authorized signatory. There shall have been delivered to
Buyer a certificate to the effect that the conditions specified in paragraph (c)
above have been satisfied, dated the Closing Date, signed on behalf of each of
the TE Parties by a duly authorized signatory of each of the TE Parties.
46
SECTION 10.2 HSR ACT. The waiting period under the HSR Act shall have
expired or been terminated.
SECTION 10.3 FERC 203 AND 204 APPROVAL. FERC shall have issued the
FERC 203 and 204 Approval without any material limitation or condition,
including any limitation or condition that would require any modification to
this Agreement or any transactions or agreements contemplated hereby, impose any
condition to the effectuation of the transactions contemplated hereby, or place
any material restriction or impose any material condition on Buyer or any of its
Affiliates (including the Companies after the Closing) with respect to the
ownership or operation of the Subsidiaries' or Buyer's business.
SECTION 10.4 MARKETING PERIOD. The Marketing Period shall have
expired.
SECTION 10.5 ADDITIONAL AGREEMENTS. Each of the Ancillary Agreements
shall have been entered into by all of the relevant parties thereto.
SECTION 10.6 MSA TERMINATION. The MSA shall have been terminated and
the Companies shall have no further Liability thereunder.
SECTION 10.7 RESTRUCTURING. The Restructuring shall have been effected
by the XX Xxxxxxx and their Affiliates.
SECTION 10.8 NO RESTRAINT. No injunction or restraining order shall
have been issued by any court of competent jurisdiction and be in effect which
restrains or prohibits any material transactions contemplated hereby, including
the Restructuring.
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING SHAREHOLDERS
The obligations of the Selling Shareholders under this Agreement
shall, at the option of the Selling Shareholders (to the extent permissible
under applicable law), be subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
SECTION 11.1 NO MISREPRESENTATION OR BREACH OF COVENANTS AND
WARRANTIES.
(a) Buyer shall have complied with and performed in all materials
respects all of the covenants, agreements and obligations required to be
complied with or performed by them under this Agreement prior to or at the
Closing.
(b) The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all respects (without giving effect to
any limitation as to materiality or Material Adverse Effect set forth therein)
as of the date of this Agreement and as of the Closing
47
Date as though made on the Closing Date (except to the extent that they
expressly relate to an earlier date, which representations and warranties shall
have been true and correct on such earlier date), unless the failure or failures
of all such representations and warranties to be true and correct in all
respects would not have a Material Adverse Effect on Buyer and its subsidiaries;
provided that the representations and warranties of Buyer set forth in Section
7.2(a) shall be true and correct.
(c) There shall have been delivered to the Selling Shareholders a
certificate to the effect that the conditions specified in paragraphs (a) and
(b) above have been satisfied, dated the Closing Date, signed on behalf of Buyer
by a duly authorized officer of Buyer.
SECTION 11.2 HSR ACT. The waiting period under the HSR Act shall have
expired or been terminated.
SECTION 11.3 FERC 203 AND 204 APPROVAL. FERC shall have issued the
FERC 203 and 204 Approval.
SECTION 11.4 MSA TERMINATION AMOUNT. The Buyer shall have paid the MSA
Termination Amount on behalf of METC to Trans-Elect LLC.
SECTION 11.5 NO RESTRAINT. No injunction or restraining order shall
have been issued by any court of competent jurisdiction and be in effect which
restrains or prohibits any material transactions contemplated hereby.
ARTICLE XII
TERMINATION
SECTION 12.1 TERMINATION. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any time prior to
the Closing Date:
(a) by the mutual consent of Buyer and the Selling Shareholders;
(b) by Buyer in the event of any breach by any Selling Shareholder of
any of its agreements, representations or warranties contained herein which
has resulted in (i) a material adverse effect on the Selling Shareholders'
ability to consummate the transactions contemplated hereby or (ii) a
Material Adverse Effect on the Subsidiaries or Trans-Elect, as applicable,
in each case, the failure of the Selling Shareholders to cure such breach
within 30 days after receipt of notice from Buyer requesting such breach to
be cured;
(c) by the Selling Shareholders in the event of any breach by Buyer of
any of Buyer's agreements, representations or warranties contained herein
which has resulted in
48
a material adverse effect on Buyer's ability to consummate the transactions
contemplated hereby and the failure of Buyer to cure such breach within 30
days after receipt of notice from the Selling Shareholders requesting such
breach to be cured;
(d) by Buyer or the Selling Shareholders if any court of competent
jurisdiction in the United States or other United States Administrative
Authority shall have issued a final and non-appealable order, decree or
ruling permanently restraining, enjoining or otherwise prohibiting the
consummation of any material transaction contemplated hereby; or
(e) by Buyer or the Selling Shareholders if the Closing shall not have
occurred on or before the six-month anniversary of the date of this
Agreement (the "End Date"); provided however, that the right to terminate
this Agreement under this Section 12.1(e) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Closing to occur on or
before the End Date.
SECTION 12.2 NOTICE OF TERMINATION. Any party desiring to terminate
this Agreement pursuant to Section 12.1 shall give written notice of such
termination to the other parties to this Agreement.
SECTION 12.3 EFFECT OF TERMINATION. If this Agreement shall be
terminated pursuant to this Article XI, all further obligations of the parties
under this Agreement shall be terminated without further Liability of any party
to the other; provided, however, that nothing herein shall relieve any party
from Liability for its willful breach of this Agreement.
SECTION 12.4 SPECIFIC PERFORMANCE. The parties agree that irreparable
damage would occur in the event that any of the terms or provisions of this
Agreement were not performed in accordance with their specific wording or were
otherwise breached. It is accordingly agreed that, notwithstanding anything to
the contrary contained in this Agreement, each of the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States of America or any state having jurisdiction, such remedy being in
addition to any other remedy to which any party may be entitled at law or in
equity. Each party hereby waives any requirement that any other party post any
bond in connection with any suit.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.1 INDEMNIFICATION
(a) The TE Parties shall jointly and severally, subject to the
limitations set forth in this Article XIII, indemnify and hold harmless
Buyer and its Affiliates (including, from and after the Closing, the
Companies) and their respective members, partners, stockholders, officers,
directors, employees, agents and representatives
49
(collectively, the "Indemnitees") from, against and in respect of any and
all Losses (including Tax Liabilities) arising out of or relating to (x)
the current, former or future assets, Liabilities, operations or activities
of Trans-Elect and its Affiliates (other than the Subsidiaries) or (y) the
Restructuring; provided that the indemnity contained in this Section
13.1(a) shall not be applicable (A) to any Liabilities arising out of: (i)
any Contract (excluding this Agreement), between any of Buyer or its
subsidiaries on the one hand and any of the TE Parties on the other hand to
be performed after the Closing (for the avoidance of doubt, this proviso
shall not limit the rights of Buyer or its subsidiaries under any such
Contract), or (ii) any operations or activities of New TE after the Closing
Date or (B) to any reduction in the amount of the net operating loss of New
TE, except to the extent that any such reduction results in a Tax Liability
to New TE for any taxable period (or portion thereof) ending on or prior to
the Closing Date.
(b) MHUSA shall, subject to the limitations set forth in this Article
XIII, indemnify and hold harmless the Indemnitees from, against and in
respect of any and all Losses relating to any Taxes of any member (other
than NA Capital Holdings Inc.) of an affiliated, consolidated, combined or
unitary group of which NA Capital Holdings Inc. and MHUSA were members on
or prior to the Closing Date imposed upon NA Capital Holdings Inc.,
including pursuant to Treasury Regulation section 1.1502-6 or any analogous
similar state, local or foreign law or regulation.
SECTION 13.2 LIMITS ON INDEMNIFICATION. The TE Parties' and Macquarie
Parties' (collectively the "Indemnitors") obligations to indemnify pursuant to
this Article XIII are subject to the following limitations:
(a) The Indemnitees' rights to indemnification pursuant to Section
13.1(a), shall terminate on November 1, 2009 (the "TE Parties
Indemnification Termination Date"); provided that if any notice for
indemnification shall have been given to the Indemnitees on or prior to the
TE Parties Indemnification Termination Date, the TE Parties' obligation to
indemnify shall survive until the related claim for indemnification has
been satisfied or otherwise resolved as provided in this Article XIII.
(b) The Indemnitees' rights to indemnification pursuant to Section
13.1(b), shall terminate on the expiration of the applicable statute of
limitations (the "Macquarie Parties Indemnification Termination Date");
provided that if any notice for indemnification shall have been given to
the Indemnitees on or prior to the Macquarie Parties Indemnification
Termination Date, the Macquarie Parties' obligation to indemnify shall
survive until the related claim for indemnification has been satisfied or
otherwise resolved as provided in this Article XIII.
(c) In no event shall the aggregate Liability of the TE Parents and TE
Power Opportunities pursuant to their obligation to indemnify the
Indemnitees under Section 13.1(a) exceed the aggregate consideration paid
to the XX Xxxxxxx as set forth in Column III of Annex B hereto; provided
that, nothing in this Section 13.2(b) shall be deemed to limit in any
respect any remedy to which the Indemnitees may be entitled in respect of
fraud or willful misrepresentation by the TE Parents and TE Power
Opportunities.
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(d) In no event shall the aggregate Liability of any TE Management
Shareholder pursuant to its obligation to indemnify the Indemnitees under
Section 13.1(a) exceed the aggregate consideration paid to such TE
Management Shareholder as set forth in Column III of Annex B hereto;
provided that, nothing in this Section 13.2(d) shall be deemed to limit in
any respect any remedy to which the Indemnitees may be entitled in respect
of fraud or willful misrepresentation by any TE Management Shareholder.
(e) The amount of any Indemnified Loss shall be reduced by any
available insurance proceeds actually received by Buyer with respect to
such Indemnified Loss.
SECTION 13.3 INDEMNIFICATION PROCEDURES. If any Indemnitee receives notice
from a third party of the commencement of any Action, claim or demand against
such Indemnitee which such Indemnitee determines could give rise to a claim for
Losses under Section 13.1 (such Action, a "Third Party Claim"), such Indemnitee
shall, if a claim with respect thereto is to be made against any Indemnitor,
reasonably promptly give such Indemnitor written notice of such Third Party
Claim in reasonable detail. The failure to give such notice shall not relieve
any Indemnitor from any obligation hereunder except to the extent that such
failure actually and materially prejudices such Indemnitor. Such Indemnitor, or
its designee, shall have the right to defend such Third Party Claim, at such
Indemnitor's expense and with counsel of its choice reasonably satisfactory to
the Indemnitee; provided that the Indemnitor, or its designee, conducts the
defense of such Third Party Claim actively and diligently. If the Indemnitor
assumes the defense of such Third Party Claim, the Indemnitee agrees to
reasonably cooperate in such defense at the expense of the Indemnitor; provided,
however, that the Indemnitee may retain separate co-counsel at its sole cost and
expense and may participate in such defense; provided, further, that such costs
and expenses shall be payable by the Indemnitor if the Indemnitee has determined
in good faith that an actual or potential conflict of interest makes
representation by the counsel selected by the Indemnitor inappropriate. If the
Indemnitor, or its designee, assumes the defense of the Third Party Claim, it
shall not consent to the entry of any judgment or enter into any settlement with
respect to such Third Party Claim without the prior written consent of the
Indemnitee, which consent will not be unreasonably withheld; provided, however,
that such consent shall not be required if (a) 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, (b) requires only
the payment of a monetary amount by the Indemnitor and (c) the consent or
settlement does not contain any sanction or restriction upon the conduct of any
business by the Indemnitee. In the event the Indemnitors do not or cease to
conduct the defense of such Third Party Claim actively and diligently: (x) the
Indemnitee may defend against, and, with the prior written consent of the
Indemnitor (which consent shall not be unreasonably withheld), consent to the
entry of any judgment or enter into any settlement with respect to such Third
Party Claim, (y) the Indemnitor will reimburse the Indemnitee for the costs of
defending against such Third Party Claim and (z) the Indemnitor will remain
responsible for any Losses the Indemnitee may suffer as a result of such Third
Party Claim.
SECTION 13.4 TREATMENT OF INDEMNITY PAYMENTS. The receipt by any Indemnitee
of any indemnification payment pursuant to this Article XIII will be treated and
reported as an adjustment to the Purchase Price to the extent allowable under
applicable law.
51
ARTICLE XIV
GENERAL PROVISIONS
SECTION 14.1 NO PUBLIC ANNOUNCEMENT. None of Buyer, the Selling
Shareholders or Trans-Elect, shall, without the approval of the others, make any
press release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that any such party
shall be so obligated by Requirements of Law in which case the other party shall
be advised and the parties shall use their reasonable efforts to cause a
mutually agreeable release or announcement to be issued; provided, however, that
the foregoing shall not preclude communications or disclosures necessary to
implement the provisions of this Agreement or to comply with the accounting and
the Securities and Exchange Commission disclosure obligations or the rules of
any stock exchange.
SECTION 14.2 NOTICES. All notices, consents or other communications
required or permitted hereunder shall be in writing and shall be deemed given or
delivered when delivered personally or on the third Business Day following the
Business Day when sent by registered or certified mail or on the Business Day
following the Business Day sent by overnight courier or on the Business Day sent
by facsimile if sent prior to 5.00 pm (New York time) to a party hereto at its
address specified below in the case of Buyer or on Schedule 14.2 in the case of
the other parties hereto or to such other address as any party may indicated by
a notice delivered to the other parties hereto.
If to Buyer:
ITC Holdings Corp.
00000 Xxxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Vice President, General Counsel and Secretary
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
SECTION 14.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, this Agreement shall not be
assigned by any of the parties hereto whether by operation of law or otherwise
without the prior written consent of the other parties hereto;
52
provided that Buyer may, without the prior written consent of the other parties,
assign this Agreement and all of its rights hereunder to its lenders and debt
providers for collateral security purposes.
SECTION 14.4 ACCESS TO RECORDS AFTER CLOSING. (a) For a period of six
years after the Closing Date, the Selling Shareholders and their representatives
shall have reasonable access to all of the books and records of the Companies to
the extent that such access may reasonably be required by the Selling
Shareholders in connection with any audit, investigation, dispute or litigation
or any other reasonable business purpose relating to the operations of the
Companies prior to Closing; provided, that any such access by the Selling
Shareholders and their representatives shall not unreasonably interfere with the
conduct of the business of the Subsidiaries and; provided, further, that this
provision shall not be available to and shall not expand the scope of discovery
in the case of a legal proceeding between the parties (but only to the extent of
the matters that are the subject of such proceeding). Such access shall be
afforded by Buyer upon receipt of reasonable advance notice and during normal
business hours. The Selling Shareholders shall be solely responsible for any
costs or expenses incurred by it pursuant to this Section 14.4(a). The Buyer
shall not be required to provide access to or to disclose information where such
access or disclosure would jeopardize the attorney-client privilege of the Buyer
or the Subsidiaries or contravene any Requirements of Law. If Buyer or the
Companies shall desire to dispose of any of such books and records prior to the
expiration of such six-year period, Buyer shall, prior to such disposition, give
the Selling Shareholders a reasonable opportunity, at the Selling Shareholders'
expense, to segregate and remove such books and records as the Selling
Shareholders may select.
(b) For a period of six years after the Closing Date, Buyer and its
representatives shall have reasonable access to all of the books and records
relating to the Companies which the Selling Shareholders and their Affiliates
may retain after the Closing Date; provided, that any such access by Buyer shall
not unreasonably interfere with the conduct of the business of the Selling
Shareholders or their Affiliates and; provided, further, that this provision
shall not be available to and shall not expand the scope of discovery in the
case of a legal proceeding between the parties (but only to the extent of the
matters that are the subject of such proceeding). Such access shall be afforded
by the Selling Shareholders and their Affiliates, as the case may be, upon
receipt of reasonable advance notice and during normal business hours. Buyer
shall be solely responsible for any costs and expenses incurred by it pursuant
to this Section 14.4(b). The Selling Shareholders and their Affiliates shall not
be required to provide access to or to disclose information where such access or
disclosure would jeopardize the attorney-client privilege of the Selling
Shareholders or their Affiliates or contravene any Requirements of Law. If the
Selling Shareholders or their Affiliates shall desire to dispose of any of such
books and records prior to the expiration of such six-year period, the Selling
Shareholders or their Affiliates shall, prior to such disposition, give Buyer a
reasonable opportunity, at Buyer's expense, to segregate and remove such books
and records as Buyer may select.
SECTION 14.5 ENTIRE AGREEMENT; EXHIBITS, ANNEXES AND SCHEDULES;
AMENDMENTS. This Agreement, Annexes and Schedules referred to herein, the
documents delivered pursuant hereto and the Confidentiality Agreement contain
the entire understanding of
53
the parties hereto with regard to the subject matter contained herein or
therein, and supersede all other prior representations, warranties, agreements,
understandings or letters of intent between or among any of the parties hereto.
This Agreement shall not be amended, modified or supplemented except by a
written instrument signed by an authorized representative of each of the parties
hereto.
SECTION 14.6 INTERPRETATION. Disclosure of any fact or item in any
Schedule hereto referenced by a particular section in this Agreement shall be
deemed to have been disclosed with respect to every other section in this
Agreement, to the extent that such relevance is reasonably apparent from the
face of the Schedule; provided, however, that no fact or item in any Schedule
hereto shall be deemed to be disclosed for purposes of Schedules 5.6 or 6.4
unless such fact or item is set forth on Schedules 5.6 or 6.4 respectively.
Neither the specification of any dollar amount in any representation or warranty
contained in this Agreement nor the inclusion of any specific item in any
Schedule hereto is intended to imply that such amount, or higher or lower
amounts, or the item so included or other items, are or are not material, and no
party shall use the fact of the setting forth of any such amount or the
inclusion of any such item in any dispute or controversy between the parties as
to whether any obligation, item or matter not described herein or included in
any Schedule is or is not material for purposes of this Agreement. Unless this
Agreement specifically provides otherwise, neither the specification of any item
or matter in any representation or warranty contained in this Agreement nor the
inclusion of any specific item in any Schedule hereto is intended to imply that
such item or matter, or other items or matters, are or are not in the Ordinary
Course of Business, and no party shall use the fact of the setting forth or the
inclusion of any such item or matter in any dispute or controversy between the
parties as to whether any obligation, item or matter not described herein or
included in any Schedule is or is not in the Ordinary Course of Business for
purposes of this Agreement.
SECTION 14.7 WAIVERS. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
SECTION 14.8 EXPENSES. Except as expressly set forth herein, Buyer and
each of the Selling Shareholders will pay its own costs and expenses incident to
its negotiation and preparation of this Agreement and to its performance and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with, including the fees, expenses and disbursements of
its counsel, independent public accountants and other advisors.
SECTION 14.9 PARTIAL INVALIDITY. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
54
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
SECTION 14.10 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties.
SECTION 14.11 FURTHER ASSURANCES. Upon the terms and subject to the
conditions herein, each of the parties hereto agrees to use its reasonable best
efforts to take or cause to be taken all action, to do or cause to be done, and
to assist and cooperate with the other party in doing, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including (i) the satisfaction of the conditions
precedent to the obligations of any of the parties hereto; (ii) the defending of
any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the performance of the obligations hereunder; and
(iii) the execution and delivery of such instruments, and the taking of such
other actions as the other party hereto may reasonably require in order to carry
out the intent of this Agreement.
SECTION 14.12 DISCLAIMER OF WARRANTIES. EXCEPT AS TO THOSE MATTERS
EXPRESSLY COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT, THE
SELLING SHAREHOLDERS AND THE BUYER ARE SELLING THE SHARES (AND THE BUSINESS AND
ASSETS OF THE COMPANIES REPRESENTED THEREBY) AND THE ITC STOCK RESPECTIVELY ON
AN "AS IS, WHERE IS" BASIS (1) EACH OF THE PARTIES DISCLAIM ALL OTHER
WARRANTIES, REPRESENTATIONS AND GUARANTEES WHETHER EXPRESS OR IMPLIED AND (2)
NONE OF THE PARTIES MAKES ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE AND NO IMPLIED WARRANTIES WHATSOEVER. Each
party acknowledges that none of the parties to this Agreement nor any of their
respective representatives or Affiliates or any other Person has made any
representation or warranty, express or implied, as to the accuracy or
completeness of any memoranda, charts or summaries heretofore made available by
the parties or their respective representatives or Affiliates to the other party
or any other information which is not included in this Agreement or the
Schedules hereto, and none of the parties nor any of their respective
representatives or Affiliates nor any other Person will have or be subject to
any Liability to the other party, any Affiliate of the other party or any other
Person resulting from the distribution of any such information to, or use of any
such information by, such other party or, any Affiliate of such other party or
any of their agents, consultants, accountants, counsel or other representatives.
SECTION 14.13 GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, including Sections 5-1401 and 5-1402 of the New York General
Obligations Law. By the
55
execution and delivery of this Agreement, each of the parties hereto submit to
the exclusive personal jurisdiction of any state or federal court in the State
of New York in any suit or proceeding arising out of or relating to this
Agreement.
SECTION 14.14 WAIVER OF JURY TRIAL. Each of the parties hereby
expressly waives any right to trial by jury in any dispute, whether sounding in
contract, tort or otherwise, between or among any of the parties arising out of
or related to the transactions contemplated by this Agreement or any of the
Ancillary Agreements, or any other instrument or document executed or delivered
in connection herewith or therewith. Any party may file an original counterpart
or a copy of this Agreement with any court as written evidence of the consent of
the parties to the waiver of their right to trial by jury.
SECTION 14.15 NO THIRD PARTY BENEFICIARIES. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. However, nothing in this Agreement, expressed
or implied, is intended to confer on any Person other than the parties hereto,
or their respective successors and assigns, any rights, remedies, Liabilities
under or by reason of this Agreement.
SECTION 14.16 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations, warranties or covenants in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Closing;
provided, however, that notwithstanding the foregoing, nothing in this Section
14.16 shall limit any covenant of any of the parties that by its terms
contemplates performance after the Closing and such provisions shall survive the
Closing.
56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
TE POWER OPPORTUNITIES INVESTORS, L.P.
By: GFI TRANSMISSION OPPORTUNITIES GP, LLC
By: GFI Power Opportunities Fund II GP,
LLC, Its Sole Member
By: GFI Energy Ventures LLC,
Its Managing Member
By: /s/ Xxx Xxxxxxxx
--------------------------------------
Xxx Xxxxxxxx
Principal
MICH 1400 LLC
By: /s/ Xxxxxxxxx X. Xxxx, Xx.
-----------------------------------
Name: Xxxxxxxxx X. Xxxx, Xx.
Title: Manager
By: /s/ Xxxxxxx X. Xxxxxxx XX
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx XX
Title: Manager
MEAP US HOLDINGS LTD.
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: Director
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Name: Xxxxxxx Xxxxx
Title: Director
MACQUARIE ESSENTIAL ASSETS PARTNERSHIP
By: Macquarie Canadian Infrastructure
Management Limited, its General
Partner
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Name: Xxxxx Xxxxxx
Title: CEO
By: /s/ Xxxxxxx Xxxxx
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: Director
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
EVERCORE CO-INVESTMENT
PARTNERSHIP II L.P.
By: /s/ Xxxxxx Xxxxx
------------------------------------
Name: Xxxxxx Xxxxx
Title: Senior Managing Director
EVERCORE METC CAPITAL PARTNERS II L.P.
By: /s/ Xxxxxx Xxxxx
------------------------------------
Name: Xxxxxx Xxxxx
Title: Senior Managing Director
ITC HOLDINGS CORP.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: President & CEO
Solely for purposes of Articles VI, X GFI TRANSMISSION OPPORTUNITIES GP, LLC
and XIII and Sections 4.4 and 9.8:
By: GFI Power Opportunities Fund II GP,
LLC, Its Sole Member
By: GFI Energy Ventures LLC,
Its Managing Member
By: /s/ Xxx Xxxxxxxx
------------------------------------
Xxx Xxxxxxxx
Principal
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
Solely for purposes of Articles VI, OCM/GFI POWER OPPORTUNITIES
X and XIII and Sections 4.4 and 9.8: FUND II, L.P.
By: GFI Power Opportunities Fund II GP,
LLC, its General Partner
By: GFI Energy Ventures, LLC,
its Managing Member
By: /s/ Xxx Xxxxxxx
------------------------------------
Xxx Xxxxxxxx
Principal
Solely for purposes of Articles VI, X OCM/GFI POWER OPPORTUNITIES FUND II
and XIII and Sections 4.4 and 9.8: (CAYMAN), L.P.
By: GFI Power Opportunities Fund II GP
(Cayman) Ltd., its General Partner
By: GFI Power Opportunities Fund II GP,
LLC, Director
By: GFI Energy Ventures, LLC,
its Managing Member
By: /s/ Xxx Xxxxxxxx
------------------------------------
Xxx Xxxxxxxx
Principal
Solely for purposes of Article XIII: MACQUARIE HOLDINGS (USA), Inc.
By: /s/ Xxxxxx Bleach
---------------------------------
Name: Xxxxxx Bleach
Title: President
XXXXXXXXX X. XXXXXXX, as TE Management
Shareholder
/s/ Xxxxxxxxx X. Xxxxxxx
----------------------------------------
XXXX X. XXXXX, as TE Management
Shareholder
/s/ Xxxx X. XxXxx
----------------------------------------
XXXXXX X. XXXXXXXX, as TE Management
Shareholder
/s/ Xxxxxx X. Xxxxxxxx
----------------------------------------
XXXXXXX X. XXXXXXX, as TE Management
Shareholder
/s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
XXXXX X. XXXXXXXXXX, as TE Management
Shareholder
/s/ Xxxxx X. Xxxxxxxxxx
----------------------------------------
XXXX X. XXXXXX, as TE Management
Shareholder
/s/ Xxxx X. Xxxxxx
----------------------------------------
XXXX X. XXXXX, as TE Management
Shareholder
/s/ Xxxx X. Xxxxx
----------------------------------------
XXXXX XXXXXXXX, as TE Management
Shareholder
/s/ Xxxxx Xxxxxxxx
----------------------------------------
XXXXXXX X. XXXXX, as TE Management
Shareholder
/s/Xxxxxxx X. Xxxxx
----------------------------------------
XXXXXXX XXXXXX, as TE Management
Shareholder
/s/ Xxxxxxx Xxxxxx
----------------------------------------
XXXXX XXXXXX, as TE Management
Shareholder
/s/ Xxxxx Xxxxxx
----------------------------------------
ANNEX A
ACQUIRED ENTITIES
NAME OF ACQUIRED ENTITY ISSUED AND OUTSTANDING CAPITAL STOCK
----------------------- ------------------------------------
Evercore METC Investment Inc. 100 Common Stock Shares
Evercore METC Co-Investment Inc. 100 Common Stock Shares
Macquarie Transmission Michigan Inc. 188.3464723 Common Stock Shares
NA Capital Holdings Inc. 187.93955434 Common Stock Shares
Mich 1400 Corp. 100 Common Stock Shares
New TE New TE Capital Stock will consist only
of Common Stock all of which will be
owned by the XX Xxxxxxx prior to Closing
ANNEX B
PURCHASE PRICE
COLUMN I COLUMN II COLUMN III
CASH STOCK AGGREGATE
NAME OF SELLING SHAREHOLDER NAME OF ACQUIRED ENTITY CONSIDERATION CONSIDERATION CONSIDERATION
--------------------------- ------------------------ --------------- -------------- ---------------
Evercore METC Capital Evercore METC $218,153,929.99 $ 0 $218,153,929.99
Partners II L.P. Investment Inc.
Evercore Co-Investment Evercore METC $ 1,801,077.42 $ 0 $ 1,801,077.42
Partnership II L.P. Co-Investment Inc.
MEAP US Holdings Ltd. Macquarie Transmission $ 54,557,202.27 $ 0 $ 54,557,202.27
Michigan Inc.
MEAP US Holdings Ltd. NA Capital Holdings Inc. $ 54,557,202.27 $ 0 $ 54,557,202.27
Macquarie Essential Assets Macquarie Transmission $ 13,088,242.04 $ 35,000,000 $ 48,088,242.04
Partnership Michigan Inc.
Macquarie Essential Assets NA Capital Holdings Inc. $ 13,088,242.03 $ 35,000,000 $ 48,088,242.03
Partnership
Mich 1400 LLC Mich 1400 Corp. $ 58,654,539.60 $ 0 $ 58,654,539.60
TE Power Opportunities New TE $ 61,888,600.52 $ 0 $ 61,888,600.52
Investors, L.P.
Xxxxxxxxx X. Xxxxxxx, New TE $ 2,162,656.63 $ 0 $ 2,162,656.63
in his capacity as a TE
Management Shareholder
Xxxx X. XxXxx, New TE $ 2,418,570.99 $ 0 $ 2,418,570.99
in his capacity as a TE
Management Shareholder
Xxxxxx X. Xxxxxxxx, New TE $ 3,269,215.93 $ 0 $ 3,269,215.93
in his capacity as a TE
Management Shareholder
Xxxxxxx X. Xxxxxxx, New TE $ 956,615.11 $ 0 $ 956,615.11
in his capacity as a TE
Management Shareholder
Xxxxx X. Xxxxxxxxxx, New TE $ 480,830.66 $ 0 $ 480,830.66
in his capacity as a TE
Management Shareholder
Xxxx X. Xxxxxx, New TE $ 117,360.17 $ 0 $ 117,360.17
in his capacity as a TE
Management Shareholder
Xxxx X. Xxxxx, New TE $ 117,360.17 $ 0 $ 117,360.17
in his capacity as a TE
Management Shareholder
Xxxxx Xxxxxxxx, New TE $ 72,088.55 $ 0 $ 72,088.55
in his capacity as a TE
Management Shareholder
Xxxxxxx X. Xxxxx, New TE $ 72,088.55 $ 0 $ 72,088.55
in his capacity as a TE
Management Shareholder
Xxxxxxx Xxxxxx, New TE $ 72,088.55 $ 0 $ 72,088.55
in his capacity as a TE
Management Shareholder
Xxxxx Xxxxxx, New TE $ 72,088.55 $ 0 $ 72,088.55
in his capacity as a
TE Management Shareholder
--------------- -------------- ---------------
Total $485,600,000.00 $70,000,000.00 $555,600,000.00
=============== ============== ===============
[Form of]
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT, dated as of [_____], 2006 (this "Agreement"), by
and between ITC Holdings Corp., a Michigan corporation (the "Company") and
Macquarie Essential Assets Partnership, an Ontario limited partnership (the
"Stockholder").
WHEREAS, pursuant to and in accordance with the terms of that certain
Purchase Agreement, dated as of May 11, 2006 (as the same may be amended, the
"Purchase Agreement"), by and among the Company, the Stockholder and the other
parties thereto, the Company has agreed to acquire all of the issued and
outstanding capital stock of the Acquired Entities (as defined in the Purchase
Agreement) in exchange for cash and shares of Common Stock (defined below);
WHEREAS, the Stockholder has elected to receive Common Stock pursuant to
the terms of the Purchase Agreement and, as a result of and immediately
following the consummation of the transactions contemplated by the Purchase
Agreement, the Stockholder owns that number of Registrable Securities (defined
below) set forth on the signature page hereto; and
WHEREAS, in connection with the consummation of the transactions
contemplated by the Purchase Agreement, the Company and the Stockholder desire
to enter into this Agreement to set forth certain rights and obligations of the
Company and the Stockholder with respect to the ownership by the Stockholder of
the Common Stock, all in accordance with the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby agree as follows.
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:
(a) "Affiliate" of a specified Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the Person specified. For the avoidance of doubt,
the Canadian Pension Plan Investment Board shall be considered an Affiliate of
the Stockholder for all purposes of this Agreement.
(b) "Closing Date" has the meaning assigned to such term in the Purchase
Agreement.
(c) "Common Stock" means common stock, no par value, of the Company.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
(e) "Holder" means the Stockholder and any Affiliate of the Stockholder to
whom the Stockholder Transfers Registrable Securities in accordance with the
terms of this Agreement and who agrees in writing with the Company to be bound
by the provisions of this Agreement.
(f) "Lock-Up Period" shall mean the period commencing on the Closing Date
and ending on the date that is the first anniversary of the Closing Date.
(g) "Person" means any individual, partnership, joint venture, corporation,
limited liability company, trust, unincorporated organization, government or any
department or agency thereof or any other entity.
(h) "Registrable Securities" means shares of Common Stock issued to the
Stockholder by the Company pursuant to the Purchase Agreement, and any Common
Stock which may be issued or distributed in respect thereof by way of stock
dividend or stock split or other distribution, recapitalization or
reclassification. Any particular Registrable Securities that are issued shall
cease to be Registrable Securities when (i) a registration statement with
respect to the sale by the Holder of such shares of Common Stock shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement; (ii) such shares of
Common Stock shall have been distributed to the public pursuant to Rule 144 (or
any successor provision) under the Securities Act; (iii) the date on which all
such shares of Common Stock may be freely sold publicly under Rule 144(k) under
the Securities Act (or any successor provision) (assuming the "holding period"
for purposes of Rule 144 commenced on the date hereof) and the Company shall
(upon receipt by the Company of any necessary legal opinions to such effect from
the Holder's counsel) have issued to the applicable Holder new unlegended shares
and cancelled any stop transfer restrictions or other restrictions with respect
to such shares of Common Stock; or (iv) such shares of Common Stock shall have
ceased to be outstanding.
(i) "Registration Expenses" means any and all expenses (other than
underwriting discounts and commissions) incurred in connection with the
registrations, filings or qualifications of Registrable Securities pursuant to
Section 3 for each Holder, including (i) all SEC and stock exchange or National
Association of Securities Dealers, Inc. (the "NASD") registration and filing
fees, (ii) all fees and expenses of complying with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses and (iv) the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits and/or "cold comfort" letters required by or
incident to such performance and compliance; provided that such expenses shall
not include expenses of counsel other than those provided for in clause (iv)
above.
(j) "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
(k) "SEC" means the United States Securities and Exchange Commission.
(l) "Transfer" means any voluntary or involuntary attempt to, directly or
indirectly through the transfer of interests in controlled Affiliates or
otherwise, offer, sell, assign, transfer, grant a participation in, pledge or
otherwise dispose of any Registrable Securities, or the consummation of any such
transactions.
2. TRANSFER OF THE REGISTRABLE SECURITIES.
-2-
(a) Restrictions on Transfer. The Stockholder may not Transfer any
Registrable Security without the Company's prior written consent except:
(i) during the Lock-Up Period, to any Affiliate of the Stockholder who
agrees in writing with the Company to be bound by all of the provisions of
this Agreement to the same extent as the Stockholder; or
(ii) after the expiration of the Lock-Up Period and:
(A) pursuant to an effective registration statement under the
Securities Act;
(B) pursuant to Rule 144 under the Securities Act; or
(C) upon receipt by the Company of an opinion of counsel,
delivered by such Stockholder and reasonably satisfactory to the
Company, that such Transfer is exempt from registration under the
Securities Act.
(b) Restrictive Legends. The Stockholder hereby acknowledges and agrees
that, during the term of this Agreement, each of the certificates or book-entry
confirmations representing Registrable Securities shall be subject to stop
transfer instructions and shall include the applicable portion(s) of the legend
set forth below:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR CONFIRMATION HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF ("TRANSFERRED") EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR CONFIRMATION
ARE SUBJECT TO THE TERMS OF THE SHAREHOLDERS AGREEMENT, DATED AS OF [____],
2006, AND MAY NOT BE TRANSFERRED UNLESS SUCH TRANSFER COMPLIES WITH THE
PROVISIONS OF SUCH SHAREHOLDERS AGREEMENT. A COPY OF SUCH SHAREHOLDERS
AGREEMENT IS ON FILE WITH THE SECRETARY OF ITC HOLDINGS CORP. AND IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR. THE HOLDER OF THESE
SHARES, BY ACCEPTANCE OF THIS CERTIFICATE OR CONFIRMATION, AGREES TO BE
BOUND BY ALL OF THE PROVISIONS OF THE AFORESAID AGREEMENT."
The certificates or book-entry confirmations representing such Registrable
Securities shall be replaced, at the expense of the Company, with certificates
or book-entry confirmations not bearing the legend required by this Section 2(b)
and any such stop transfer restrictions shall be cancelled, upon (i) the
Transfer of Registrable Securities in compliance with Section 2 or (ii) the
applicability of clause (iii) of the definition of "Registrable Securities" with
respect to the Common Stock.
-3-
(c) Transfers Not In Compliance. A purported or attempted Transfer of
Registrable Securities by the Stockholder that does not comply with this
Agreement shall be void ab initio and the purported transferee or successor by
operation of law shall not be deemed to be a stockholder of the Company for any
purpose and shall not be entitled to any of the rights of a stockholder,
including the right to vote any Registrable Securities or to receive a
certificate or certificates for the Registrable Securities or any dividends or
other distributions on or with respect to the Registrable Securities.
(d) Restriction on Certain Transactions. From and after the date hereof
until the expiration of the Lock-Up Period, the Stockholder hereby covenants and
agrees that such Stockholder shall not, directly or indirectly, enter into any
transaction with respect to the Common Stock held by the Stockholder designed to
reduce its risk relative to its position as a holder of Common Stock, without
the Company's written consent.
3. INCIDENTAL REGISTRATIONS.
(a) Right to Include Registrable Securities. If the Company at any time
following the expiration of the Lock-Up Period and before the date that is the
second anniversary of the date of this Agreement proposes to register Common
Stock under the Securities Act for its own account (other than a registration on
Form S-4 or S-8, or any successor or other forms promulgated for similar
purposes, or a registration of Common Stock to be issued by the Company to
acquire the assets or securities of another entity in connection with an
acquisition or other business combination transaction) in a manner which would
permit registration of Registrable Securities for sale to the public under the
Securities Act, the Company will, at each such time, give prompt written notice
to all Holders of Registrable Securities of its intention to do so and of such
Holders' rights under this Section 3. Upon the written request of any such
Holder made within 15 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
Holder), the Company will use its commercially reasonable efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holders thereof, to the extent
required to permit the disposition of the Registrable Securities so to be
registered; provided that (i) if, at any time after giving written notice of its
intention to register any Registrable Securities and prior to the effective date
of the registration statement filed in connection with such registration, the
Company shall determine for any reason not to proceed with the proposed
registration of the securities to be sold by it, the Company may, at its
election, give written notice of such determination to each Holder of
Registrable Securities and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration, and
(ii) if such registration involves an underwritten offering, all Holders of
Registrable Securities requesting to be included in the Company's registration
must sell their Registrable Securities to the underwriters selected by the
Company on the same terms and conditions as apply to the Company, with such
differences, including any with respect to indemnification and liability
insurance, as may be customary or appropriate in combined primary and secondary
offerings. If a registration requested pursuant to this Section 3(a) involves an
underwritten public offering, any Holder of Registrable Securities requesting to
be included in such registration may elect, in writing prior to the effective
date of the registration statement filed in connection with such registration,
not to register such securities in connection with such registration.
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(b) Expenses. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities. The Holders shall bear and pay
any underwriting commissions and discounts applicable to the Registrable
Securities offered for their account in connection with any registrations,
filings and qualifications made pursuant to this Agreement, as well as fees and
disbursements of counsel or other advisors to the Holders.
(c) Priority in Incidental Registrations. If a registration pursuant to
this Section 3 involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, so as to be likely to have an adverse effect on the
price, timing or distribution of the securities offered in such offering as
contemplated by the Company (other than the Registrable Securities), then the
Company will include in such registration (i) first, 100% of the securities the
Company proposes to sell, (ii) second, up to 100% of the securities, if any,
requested to be registered by any holder of Common Stock pursuant to demand
registration rights in any agreement between the Company and such Person, and
(iii) third, to the extent of the number of Registrable Securities (and Common
Stock held by any other Persons with similar incidental registration rights)
requested to be included in such registration pursuant to this Section 3 which,
in the opinion of such managing underwriter, can be sold without having the
adverse effect referred to above, the number of Registrable Securities (and such
Common Stock held by any other Person) which the Holders (and such other
Persons) have requested to be included in such registration, such amount to be
allocated pro rata among all requesting Holders (and such other Persons) on the
basis of the relative number of shares of Registrable Securities then held by
each such Holder (or shares of Common Stock then held by such other Person);
provided that any shares thereby allocated to any such Holder (or such other
Person) that exceed such Holder's (or such other Person's) request will be
reallocated among the remaining requesting Holders (and such other Persons) in
like manner.
4. REGISTRATION PROCEDURES.
(a) If and whenever the Company is required to use its commercially
reasonable efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement, the Company
will use its commercially reasonable efforts to:
(i) prepare and, in any event within 120 days after the end of the
period within which a request for registration may be given to the Company
pursuant to Section 3, file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable best efforts
to cause such registration statement to become effective; provided,
however, that the Company may discontinue any registration of its
securities which is being effected pursuant to Section 3 at any time prior
to the effective date of the registration statement relating thereto;
(ii) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary with respect to the disposition of all securities
covered by such registration statement during such period in accordance
with the intended methods of disposition by the seller or sellers thereof
set forth in such registration statement;
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(iii) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits filed therewith,
including any documents incorporated by reference), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as such seller
may reasonably request in order to facilitate the disposition of the
Registrable Securities by such seller;
(iv) use its commercially reasonable efforts to register or qualify
such Registrable Securities covered by such registration in such
jurisdictions as each seller shall reasonably request, and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such seller, except that the Company
shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction where, but for the
requirements of this clause (iv), it would not be obligated to be so
qualified, to subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such jurisdiction;
(v) use its commercially reasonable efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) notify each seller of any such Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the Company's
becoming aware that the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing, and at the request of any such seller, prepare and furnish
to such seller a reasonable number of copies of an amended or supplemental
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(vii) (A) use its commercially reasonable efforts to list such
Registrable Securities on any securities exchange on which the Common Stock
is then listed if such Registrable Securities are not already so listed and
if such listing is then permitted under the rules of such exchange; and (B)
use its commercially reasonable efforts to provide a transfer agent and
registrar for such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(viii) notify the sellers of Registrable Securities included in such
registration statement and the managing underwriter or agent (A) when the
registration statement, or any post-effective amendment to the registration
statement, shall have become effective,
-6-
or any supplement to the prospectus or any amendment prospectus shall have
been filed, (B) of the receipt of any comments from the SEC, (C) of any
request of the SEC to amend the registration statement or amend or
supplement the prospectus or for additional information, and (D) of the
issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or of any order preventing or suspending the use of
any preliminary prospectus, or of the suspension of the qualification of
the registration statement for offering or sale in any jurisdiction, or of
the institution or threatening of any proceedings for any of such purposes;
(ix) use commercially reasonable efforts to prevent the issuance of
any stop order suspending the effectiveness of the registration statement
or of any order preventing or suspending the use of any preliminary
prospectus and, if any such order is issued, to obtain the withdrawal of
any such order at the earliest possible moment;
(x) cooperate with the sellers of Registrable Securities covered by
the registration statement and the managing underwriter or agent, if any,
to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing securities to be sold under
the registration statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
agent, if any, or such sellers may request; and
(xi) cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the NASD.
(b) The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such seller and pertinent to the disclosure requirements
relating to the registration and the distribution of such securities as the
Company may from time to time reasonably request in writing.
(c) Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (vi) of this Section 4, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by clause (vi) of this
Section 4, and, if so directed by the Company, such Holder will deliver to the
Company all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
5. INDEMNIFICATION.
(a) Indemnification by the Company. In the event of any registration of any
securities of the Company under the Securities Act pursuant to Section 3, the
Company will, and it hereby does, indemnify and hold harmless, to the extent
permitted by law, the seller of any Registrable Securities covered by such
registration statement, each affiliate of such seller and their respective
directors and officers, members or general and limited partners (including any
director, officer, affiliate, employee, agent and controlling Person of any of
the foregoing), each
-7-
other Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act (collectively, the
"Indemnified Parties"), against any and all losses, claims, damages or
liabilities, joint or several, and expenses (including reasonable attorney's
fees and reasonable expenses of investigation) to which such Indemnified Party
may become subject under the Securities Act, common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto, or (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in light of the circumstances
under which they were made) not misleading, and the Company will reimburse such
Indemnified Party for any legal or any other expenses reasonably incurred by it
in connection with investigating or defending against any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liable
to any Indemnified Party in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement or amendment
or supplement thereto or in any such preliminary, final or summary prospectus in
reliance upon and in conformity with information furnished to the Company by
such seller; and provided, further, that the Company will not be liable to any
Person who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, under the indemnity agreement in this Section
5(a) with respect to any preliminary prospectus or the final prospectus or the
final prospectus as amended or supplemented, as the case may be, to the extent
that any such loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter sold Registrable
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented, whichever is most recent, if
the Company has previously furnished copies thereof to such underwriter. For
purposes of the last proviso to the immediately preceding sentence, the term
"prospectus" shall not be deemed to include the documents, if any, incorporated
therein by reference, and no Person who participates as an underwriter in the
offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the Securities Act, shall be
obligated to send or give any supplement or amendment to any document
incorporated by reference in any preliminary prospectus or the final prospectus
to any person other than a person to whom such underwriter had delivered such
incorporated document or documents in response to a written request therefor.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any Indemnified Party and
shall survive the transfer of such securities by such seller.
(b) Indemnification by the Seller. The Company may require, as a condition
to including any Registrable Securities in any registration statement filed in
accordance with Section 4 herein, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
Registrable Securities or any underwriter to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 5(a)) the
-8-
Company and all other prospective sellers with respect to any untrue statement
or alleged untrue statement in or omission or alleged omission from such
registration statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement, if such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with information furnished to the Company by such seller or
underwriter. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any of the prospective
sellers, or any of their respective affiliates, directors, officers or
controlling Persons and shall survive the transfer of such securities by such
seller. In no event shall the liability of any selling Holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Notices of Claims, Etc. Promptly after receipt by an Indemnified Party
hereunder of written notice of the commencement of any action or proceeding with
respect to which a claim for indemnification may be made pursuant to this
Section 5, such Indemnified Party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided that the failure of the Indemnified Party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under this Section 5, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an Indemnified Party, unless in such Indemnified
Party's reasonable judgment a conflict of interest between such Indemnified
Party and indemnifying parties may exist in respect of such claim, the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party will consent to entry of any judgment or enter into any settlement which
does not include, as an unconditional term thereof, the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in this Section 5
from the indemnifying party is unavailable to an Indemnified Party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and such Indemnified Party in connection with the actions which resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and such Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or Indemnified Parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party under this Section 5(d) as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include
-9-
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(e) Other Indemnification. Indemnification similar to that specified in the
preceding provisions of this Section 5 (with appropriate modifications) shall be
given by the Company and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation or governmental authority other than the Securities
Act.
(f) Non-Exclusivity. The obligations of the parties under this Section 5
shall be in addition to any liability which any party may otherwise have to any
other party.
6. RULE 144. The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder, and it will take such further
action as any Holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such Holder to sell shares of
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements. Notwithstanding
anything contained in this Section 6, the Company may deregister under Section
12 of the Exchange Act if it then is permitted to do so pursuant to the Exchange
Act and the rules and regulations thereunder.
7. MISCELLANEOUS.
(a) Other Investors. The Company may enter into agreements with other
purchasers or holders of Common Stock making them parties hereto (and thereby
giving them all, or a portion, of the rights, preferences and privileges of an
original party hereto) with respect to additional shares of Common Stock (the
"Supplemental Agreements"); provided, however, that pursuant to any such
Supplemental Agreement, such purchaser expressly agrees to be bound by all of
the terms, conditions and obligations of this Agreement as if such purchaser
were an original party hereto. All shares of Common Stock issued or issuable
pursuant to, or otherwise covered by, such Supplemental Agreements shall be
deemed to be Registrable Securities to the extent provided therein.
(b) Holdback Agreement. If any such registration shall be in connection
with an underwritten public offering, each Holder of Registrable Securities
agrees not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of
-10-
any equity securities of the Company, or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in each
case, other than as part of such underwritten public offering), within seven
days before or such period not to exceed 180 days as the underwriting agreement
may require (or such lesser period as the managing underwriters may permit)
after the effective date of such registration, and the Company hereby also so
agrees and agrees to cause each other holder of any equity security, or of any
security convertible into or exchangeable or exercisable for any equity
security, of the Company purchased from the Company (at any time other than in a
public offering) to so agree.
(c) Termination. Except with respect to Section 2, this Agreement and the
obligations of the parties hereunder (other than Section 7 hereof) shall
terminate on the earliest of (i) the first date on which the Stockholder and its
Affiliates beneficially own, in the aggregate, less than 1% of the outstanding
shares of Common Stock and (ii) the first date on which the Stockholder ceases
to beneficially own any Registrable Securities.
(d) Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Holders of
a majority of the Registrable Securities then outstanding. Each Holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Section 7(d), whether or not such Registrable
Securities shall have been marked to indicate such consent.
(e) Successors, Assigns and Transferees. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
(f) Notices. All notices, consents or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
when delivered personally or on the third business day following the business
day when sent by registered or certified mail or on the business day following
the business day sent by overnight courier or on the business day sent by
facsimile if sent prior to 5.00 pm (New York time) to a party hereto at its
address specified below or to such other address as any party may indicated by a
notice delivered to the other parties hereto:
(i) if to the Company:
ITC Holdings Corp.
00000 Xxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Vice President, General Counsel and Secretary
Facsimile: (000) 000-0000
with an additional copy (which shall not constitute notice) to:
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
-11-
(ii) if to the Stockholder:
Macquarie Essential Assets Partnership
c/o Macquarie Canadian Infrastructure Management Limited
Canadian Pacific Tower
000 Xxxxxxxxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with an additional copy (which shall not constitute notice) to:
Winston & Xxxxxx LLP
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to any other holder of Registrable Securities, to the address of such other
holder as shown in the stock record book of the Company, or to such other
address as any of the above shall have designated in writing to all of the other
above.
(g) Entire Agreement. This Agreement constitutes the entire agreement of
the parties and supersedes all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof.
(h) Descriptive Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
(i) Interpretation. When reference is made in this Agreement to a Section,
such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof," "herein," "hereby" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The word "or" shall
not be exclusive. This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
(j) Severability. In the event that any one or more of the provisions,
paragraphs, words, clauses, phrases or sentences contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in
-12-
every other respect and of the remaining provisions, paragraphs, words, clauses,
phrases or sentences hereof shall not be in any way impaired, it being intended
that all rights, powers and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
(k) Counterparts. This Agreement may be executed in counterparts (including
by facsimilie), and by different parties on separate counterparts, each of which
shall be deemed an original, but all such counterparts shall together constitute
one and the same instrument.
(l) Governing Law; Submission to Jurisdiction. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of New York. The parties to this Agreement hereby agree to submit to the
jurisdiction of the courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate courts
from any thereof in any action or proceeding arising out of or relating to this
Agreement.
(m) Specific Performance. The parties hereto acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, it is agreed that they shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of competent jurisdiction in the United States or any state thereof, in
addition to any other remedy to which they may be entitled at law or in equity.
[Remainder of Page Left Blank Intentionally]
-13-
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or
caused this Agreement to be duly executed on its behalf as of the date first
written above.
ITC HOLDINGS CORP.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
MACQUARIE ESSENTIAL ASSETS PARTNERSHIP
By: Macquarie Canadian Infrastructure
Management Limited, its General
Partner
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SHARES OF COMMON STOCK ISSUED TO
STOCKHOLDER ON THE DATE HEREOF: ________
