EXECUTION COPY
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PURCHASE AND SALE AGREEMENT
(ARIZONA ELECTRIC)
between
CITIZENS UTILITIES COMPANY,
CAP ROCK ELECTRIC COOPERATIVE
and
CAP ROCK ENERGY CORPORATION
Dated as of February 11, 2000
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.....................................................................................1
Section 1.1 Certain Defined Terms..................................................................1
Section 1.2 Other Defined Terms....................................................................9
ARTICLE II PURCHASE AND SALE...............................................................................9
Section 2.1 Purchase and Sale of Assets............................................................9
Section 2.2 Assumed Liabilities....................................................................9
Section 2.3 Retained Liabilities..................................................................11
Section 2.4 Condition on Assignment or Assumption of Contracts and Rights.........................12
ARTICLE III PURCHASE PRICE.................................................................................12
Section 3.1 Purchase Price........................................................................12
Section 3.2 Deposit...............................................................................13
Section 3.3 Calculation of Purchase Price.........................................................13
Section 3.4 Prorations and Adjustments as of the Closing Date.....................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................................................15
Section 4.1 Organization, Existence and Qualification.............................................15
Section 4.2 Authority Relative to this Agreement and Binding Effect...............................15
Section 4.3 Governmental Approvals................................................................15
Section 4.4 Availability of Funds.................................................................15
Section 4.5 Filings...............................................................................16
Section 4.6 Brokers...............................................................................16
Section 4.7 Independent Investigation.............................................................16
Section 4.8 Public Utility Holding Company Status; Regulation as a Public Utility.................16
Section 4.9 Buyer's Financial Statements..........................................................16
Section 4.10 Buyer's Insurance. ...................................................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER .....................................................17
Section 5.1 Organization, Existence and Qualification.............................................17
Section 5.2 Authority Relative to this Agreement and Binding Effect...............................17
Section 5.3 Governmental and Other Required Consents..............................................17
Section 5.4 Public Utility Holding Company Status; Regulation as a Public Utility.................17
Section 5.5 Title to Assets; Liens................................................................18
Section 5.6 Financial Statements..................................................................18
Section 5.7 Compliance with Legal Requirements; Governmental Permits. ...........................19
Section 5.8 Legal Proceedings; Outstanding Orders. ...............................................19
Section 5.9 Taxes.................................................................................19
Section 5.10 Intellectual Property.................................................................20
Section 5.11 Personal Property.....................................................................20
Section 5.12 Material Contracts; Existing Loan Documents...........................................20
Section 5.13 Employee Benefit Matters..............................................................20
Section 5.14 Environmental Matters.................................................................21
Section 5.15 No Material Adverse Change............................................................21
Section 5.16 State and Federal Regulatory Matters..................................................22
Page
Section 5.17 Brokers...............................................................................22
Section 5.18 Employee Relations....................................................................23
Section 5.19 Insurance.............................................................................23
Section 5.20 Accounts Receivable...................................................................23
Section 5.21 Appropriate Knowledge Persons.........................................................23
Section 5.22 Local Furnishing......................................................................23
Section 5.23 Disclaimer............................................................................24
ARTICLE VI COVENANTS......................................................................................24
Section 6.1 Covenants of Seller...................................................................24
Section 6.2 Covenants of Buyer....................................................................27
Section 6.3 Governmental Filings..................................................................28
Section 6.4 Citizens Marks........................................................................28
Section 6.5 Acknowledgment by Buyer...............................................................29
Section 6.6 Transition Plan. ....................................................................29
Section 6.7 IDRB Obligations......................................................................30
Section 6.8 Title Insurance.......................................................................31
ARTICLE VII CONDITIONS PRECEDENT...........................................................................32
Section 7.1 Seller's Conditions Precedent to Closing..............................................32
Section 7.2 Buyer's Conditions Precedent to Closing...............................................33
ARTICLE VIII CLOSING........................................................................................34
Section 8.1 Closing...............................................................................34
ARTICLE IX TERMINATION....................................................................................35
Section 9.1 Termination Rights....................................................................35
Section 9.2 Limitation on Right to Terminate: Effect of Termination...............................37
ARTICLE X EMPLOYEE MATTERS...............................................................................37
Section 10.1 Employment of Transferred Employees...................................................37
Section 10.2. Assumption of Collective Bargaining Agreement Obligations.............................38
Section 10.3 Cessation of Participation in Seller's Plans; Proration of Bonuses....................38
Section 10.4 Similarity of Benefit Packages........................................................39
Section 10.5 Defined Benefit Pension Plan..........................................................39
Section 10.6 401(k) Plan...........................................................................39
Section 10.7 Welfare Benefits......................................................................40
Section 10.8 Flexible Spending Accounts............................................................41
Section 10.9 Employment Agreements.................................................................41
Section 10.10 Vacation..............................................................................41
Section 10.11 Severance.............................................................................41
Page
ARTICLE XI TAX MATTERS....................................................................................42
Section 11.1 Purchase Price Allocation.............................................................42
Section 11.2 Cooperation with Respect to Like-Kind Exchange........................................42
Section 11.3 Transaction Taxes.....................................................................43
ARTICLE XII ENVIRONMENTAL MATTERS..........................................................................43
Section 12.1 Environmental Due Diligence...........................................................43
Page
ARTICLE XIII INDEMNIFICATION....................................................................................45
Section 13.1 Indemnification by Seller.............................................................45
Section 13.2 Indemnification by Buyer..............................................................45
Section 13.3 Limitations on Liability..............................................................46
Section 13.4 Claims Procedure......................................................................49
Section 13.5 Exclusive Remedy......................................................................50
Section 13.6 Indemnification for Negligence........................................................50
Section 13.7 Waiver and Release....................................................................50
ARTICLE XIV GENERAL PROVISIONS.................................................................................51
Section 14.1 Expenses..............................................................................51
Section 14.2 Notices...............................................................................51
Section 14.3 Assignment............................................................................52
Section 14.4 Successor Bound.......................................................................52
Section 14.5 Governing Law.........................................................................52
Section 14.6 Dispute Resolution....................................................................52
Section 14.7 Cooperation...........................................................................54
Section 14.8 Construction of Agreement.............................................................54
Section 14.9 Publicity. ..........................................................................54
Section 14.10 Waiver................................................................................54
Section 14.11 Parties in Interest...................................................................54
Section 14.12 Section and Paragraph Headings........................................................55
Section 14.13 Amendment.............................................................................55
Section 14.14 Entire Agreement......................................................................55
Section 14.15 Counterparts..........................................................................55
Section 14.16 Severability..........................................................................55
LIST OF EXHIBITS
Exhibit 6.7 Form of IDRB Obligations Agreement
Exhibit 7.1(g) Form of Buyer's Opinion of Counsel
Exhibit 7.2(g) Form of Seller's Opinion of Counsel
Exhibit 8.1(a) Form of Xxxx of Sale
LIST OF SCHEDULES
Schedule 1.1(a) Excluded Assets
Schedule 1.1(b) Related Purchase Agreements
Schedule 5.2 Seller's Authority
Schedule 5.3 Seller's Governmental and Other Required Consents
Schedule 5.5 Encumbrances; Owned Real Property
Schedule 5.6(a) Financial Statements
Schedule 5.6(b) Certain Liabilities
Schedule 5.7 Compliance with Legal Requirements; Governmental Permits
Schedule 5.8 Legal Proceedings; Outstanding Orders
Schedule 5.9 Taxes
Schedule 5.10 Intellectual Property
Schedule 5.11 Extraordinary Required Repairs
Schedule 5.12 Material Contracts
Schedule 5.13 Employee Matters
Schedule 5.14 Environmental Matters
Schedule 5.15 Material Adverse Changes
Schedule 5.16 State and Federal Regulatory Matters
Schedule 5.19 Seller's Insurance
Schedule 6.1 Conduct of Business
Schedule 6.2(c) Citizens' Guarantees and Surety Instruments
Schedule 10.1 Active Employees
Schedule 10.7 Retirees and "Grandfathered Employees"
PURCHASE AND SALE AGREEMENT
(ARIZONA ELECTRIC)
This PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the
11th day of February, 2000, by and between CITIZENS UTILITIES COMPANY, a
Delaware corporation ("Seller"), and CAP ROCK ELECTRIC COOPERATIVE, a Texas
corporation, and CAP ROCK ENERGY CORPORATION, a Texas corporation ("Cap Rock
Energy"). Cap Rock Cooperative and Cap Rock Energy are sometimes referred to in
this Agreement individually as a "Buyer Entity" and collectively as the "Buyer".
Capitalized terms used herein shall have the meanings ascribed to them in
Article I, unless otherwise provided.
W I T N E S S E T H :
WHEREAS, Seller owns all of the Assets; and
WHEREAS, Buyer desires to purchase, and Seller desires to sell, the
Assets, subject in all respects to the provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Article I
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
"Affiliates" or "Affiliated Entities" -- entities shall be deemed
"Affiliated" as to each other to the extent (i) one of the entities directly or
indirectly controls the other, or the direct or indirect control of one of the
entities is exercised by the officers, directors, stockholders, or partners of
the other entity (whether or not such persons exercise such control in their
capacities as officers, directors, stockholders, or partners) or (ii) is deemed
to be an Affiliate under existing statutes or regulations of the SEC.
"Assets" -- all of the assets, property and interests of every type and
description, real, personal or mixed, tangible and intangible, owned by Seller
and relating primarily to the Business, other than the Excluded Assets.
"Assumed Environmental Liabilities" -- means any of the following:
(a) All Environmental Liabilities of Seller relating to the
Business or the Assets and arising from or relating to the environmental matters
or incidents disclosed by Seller on Schedule 5.14 as of the date of execution of
this Agreement that remain outstanding as of the Closing Date, it being
understood by the parties that the unadjusted Purchase Price reflects Buyer's
estimate of any Losses that could arise after the Closing Date with respect to
such Environmental Liabilities;
(b) All Environmental Liabilities of Seller relating to the
Business or the Assets and arising from or relating to environmental matters or
incidents that are disclosed to Buyer by Seller after the date of execution of
this Agreement (including any additional disclosures appearing on Schedule 5.14
as revised by Seller and delivered to Buyer prior to the Closing Date) but prior
to the Closing Date that remain outstanding as of the Closing Date, provided
that any Losses incurred by Buyer in connection with any such Environmental
Liability in any year in excess of $200,000 or in the aggregate (when combined
with all other Losses incurred by Buyer in connection with its performance or
discharge of other Disclosed Pre-Closing Liabilities) in excess of $2,000,000
shall be Retained Environmental Liabilities and Seller shall be obligated to
indemnify Buyer pursuant to Section 13.1 (but subject to the applicable
limitations on such obligations provided in Section 13.3(f)) for such Losses
incurred by Buyer in the amount of such excess; and
(c) Any other Environmental Liability relating to the
Business, the Assets, Buyer or any Affiliate, successor or assign of Buyer, to
the extent arising or relating to the period after the Closing, including with
respect to the removal of asbestos or asbestos-containing materials in
connection with any renovation or structural change to any Asset conducted after
Closing.
"Bonds" -- means any of the bonds issued pursuant to the Indentures of
Trust to which IDRB Documents relate, the proceeds from the issuance of which
were advanced to Seller and used in connection with the Business or the Assets
of the Business pursuant to any of the IDRB Documents.
"Business" -- means collectively:
(a) the regulated electricity generation, transmission and
distribution business conducted by Seller within the State of Arizona through
its Arizona Electric divisions; and
(b) the provision of related services and products and the
engagement in related activities by Seller within the State of Arizona through
its Arizona Electric divisions.
"Buyer's IDRB Obligations"-- means the obligations of Buyer set forth
in Section 6.7(a) and Section 6.7(b) and in the IDRB Obligations Agreement to be
executed and delivered by Buyer on or prior to the Closing Date in accordance
with Section 6.7(a) and Section 8.1(d).
"Capital Budget -- means the capital budget for the Business approved
by the Board of Directors of Seller for the year 2000.
"Claim Notice" -- means a written notice of a claim given by a party
seeking indemnification pursuant to the terms of this Agreement that specifies
in reasonable detail the nature of the Losses and the estimated amount of such
Losses.
"Confidentiality Agreement" -- means that certain confidentiality
agreement dated October 21, 1999, between Buyer and Seller.
"Consent" -- any approval, consent, ratification, waiver, license,
permit, registration, certificate, exemption, legal statute, order,
determination or other authorization from any Person.
"Contract" -- any agreement, contract, document, instrument,
obligation, promise or undertaking (whether written or oral) that is legally
binding, including Easements.
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"Disclosed Pre-Closing Liabilities" means any and all liabilities and
obligations relating to or arising from Seller's ownership of the Assets or
Seller's conduct or operation of the Business on or prior to the Closing Date
that were not disclosed in any Schedule to this Agreement as of the date of
execution of this Agreement (and with respect to which Seller had no Knowledge
as of the date of execution of this Agreement) and that are disclosed to Buyer
by Seller after the date of execution of this Agreement to the extent remaining
outstanding or undischarged as of the Closing Date, including the Environmental
Liabilities described in clause (b) of the definition of Assumed Environmental
Liabilities and the Proceedings described in Section 2.2(d), but expressly
excluding any such liabilities and obligations that are Retained Liabilities
pursuant to Section 2.3(a), (b), (c) or (d) or with respect to which the
Purchase Price is reduced (but only to the extent reduced).
"Easements"-- means all easements, rights of way, permits, licenses,
and other ways of necessity, whether or not of record.
"Encumbrance" -- any charge, adverse claim, lien, mortgage, pledge or
security interest.
"Environmental Law"-- any Order or Legal Requirement, and any judicial
and administrative interpretation thereof and related policies, guidelines and
standards, relating to pollution or protection of the environment and natural
resources, including those relating to (a) emissions, discharges, Releases or
threatened Releases of Hazardous Material into the environment (including
ambient air, surface water, groundwater or land), and (b) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Material, each as in effect as of the date of
determination.
"Environmental Liability" -- means any liability, responsibility or
obligation arising out of or relating to:
(a) the presence of any Hazardous Material in the fixtures,
structures, soils, groundwater, surface water or air on, under or about or
emanating from the assets and properties currently or formerly used, operated,
owned, leased, controlled, possessed, occupied or maintained by a Person, and
any such Hazardous Material emanating to adjoining or other properties;
(b) the use, generation, production, manufacture, treatment,
storage, disposal, Release, threatened Release, discharge, spillage, loss,
seepage or filtration of Hazardous Materials by a Person or its employees,
agents or contractors from, on, under or about the assets or properties
currently or formerly used, operated, owned, leased, controlled, possessed,
occupied or maintained by such Person or the presence therein or thereunder of
any underground or above-ground tanks for the storage of fuel oil, gasoline
and/or other petroleum products or by-products or other Hazardous Material;
(c) the violation or noncompliance or alleged violation or
noncompliance by a Person or its employees, agents or contractors of any
Environmental Law arising from or related to its or their conduct, actions or
operations or the former or current use, operation, ownership, lease,
possession, control, occupancy, maintenance or condition of any of such Person's
former or current assets or properties;
(d) the failure by a Person or its employees, agents, or
contractors to have obtained or maintained in effect any Consent required by any
Environmental Law as a result of its or their conduct, actions or operations or
the use, operation, ownership, lease, control, possession, occupancy,
maintenance or condition of such Person's assets or properties;
(e) any and all Proceedings arising out of any of the
above-described matters, including Proceedings by Governmental Bodies for
enforcement, cleanup, removal, treatment, response, remedial or other actions or
damages and Proceedings by any third Person seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief; and
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(f) any and all remedial work and other corrective action
(including investigation or monitoring of site conditions, or any clean-up,
containment, restoration or removal) taken by, or the costs of which are imposed
upon, a Person arising from any of the above-described matters.
"ERISA" - the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
act or any successor law.
"Excluded Assets" -- means the following assets of Seller, each of
which shall be excluded from the Assets, and not acquired by the Buyer, at
Closing:
(a) assets that Seller uses in both the Business and in
Seller's other gas, electric, communications or water businesses, and which are
described generally on Schedule 1.1(a), and Contracts regarding the procurement
of services or goods by Seller for use in such in other businesses;
(b) cash and cash equivalents in transit, in hand or in bank
accounts;
(c) except as otherwise set forth in Article X, assets
attributable to or related to an Employee Benefit Plan of Seller;
(d) the stock record and minute books of Seller, duplicate
copies of all books and records transferred to Buyer, all records prepared in
connection with the sale of the Business (including bids received from third
parties and analysis relating to the Business) and all IDRB Documents;
(e) assets disposed of by Seller after the date of this
Agreement to the extent such dispositions are not prohibited by this Agreement;
(f) except to the extent set forth in Section 3.4, rights to
refunds of Taxes payable for periods prior to the Closing with respect to the
Business, assets, properties or operations of Seller or any member of any
affiliated group of which either of them is a member;
(g) accounts owing, by and among Seller and its Affiliates;
(h) all deferred tax assets or collectibles for periods prior
to the Closing;
(i) any insurance policy, bond, letter of credit or other
similar item, and any cash surrender value in regard thereto;
(j) the Citizens Marks; and
(k) the other assets listed on Schedule 1.1(a).
"Existing Loan Documents"-- means all Contracts relating to the
indebtedness for money borrowed by Seller and used in connection with the
Business or the Assets as of the date hereof to which Seller is a party,
including all IDRB Documents, but excluding line extension agreements or similar
arrangements involving customer advances for construction, it being understood
and agreed that customer advances, customer deposits and construction advances
do not create indebtedness for money borrowed.
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"Final Order" -- an action by a Governmental Body as to which: (a) no
request for stay of the action is pending, no such stay is in effect and if any
time period is permitted by statute or regulation for filing any request for
such stay, such time period has passed; (b) no petition for rehearing,
reconsideration or application for review of the action is pending and the time
for filing any such petition or application has passed; (c) such Governmental
Body does not have the action under reconsideration on its own motion and the
time in which such reconsideration is permitted has passed; and (d) no appeal to
a court, or a request for stay by a court of the Governmental Body's action is
pending or in effect and the deadline for filing any such appeal or request has
passed.
"Future Regulatory Obligations" -- means all liabilities,
responsibilities and obligations relating to the Assets or the Business,
including capital expenditure obligations and liabilities of the types that
appear as "Accrued Liabilities" and "Non-Current Liabilities" on the Balance
Sheet, arising out of any Legal Requirement or other action of any state or
federal regulatory commission or local franchising authority, including with
respect to all Proceedings of any state regulatory commission relating to the
Assets or the Business commenced before or after the Closing Date, regardless of
whether the Legal Requirement or other action is or purports to be based on
conduct, actions, facts, circumstances or conditions arising, existing or
occurring at any time on or prior to the Closing Date, but other than
liabilities, responsibilities and obligations (i) relating to any Retained
Environmental Liability or (ii) arising out of Seller's violation of any Order
or Legal Requirement of such Governmental Body, as in effect and as reasonably
interpreted by common industry practice as of the date such violation occurred,
that is found by Final Order to have occurred prior to Closing and that is
reasonably likely to have a material adverse effect on the Business or the
Assets, taken as a whole.
"GAAP" - generally accepted United States accounting principles,
applied on a consistent basis.
"Governmental Body" -- any of the following that possesses competent
jurisdiction:
(a) federal, state, county, local, municipal or other
governmental body;
(b) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity and
any court or other tribunal); or
(c) any governmental body entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature.
"Hazardous Materials" -- any waste or other chemical, material or
substance that is listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, toxic, or a pollutant or a
contaminant, or words of similar import, under or pursuant to any Environmental
Law, including any admixture or solution thereof, and specifically including
oil, natural gas, petroleum and all derivatives thereof or synthetic substitutes
therefor, asbestos or asbestos-containing materials, any flammable substances or
explosives, any radioactive materials, any toxic wastes of substances, urea
formaldehyde foam insulation, toluene or polychlorinated biphenyls.
"HSR Act" -- the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, or any successor law, and regulations and rules issued by the U.S.
Department of Justice or the Federal Trade Commission pursuant to that act or
any successor law.
"IDRB Documents" -- means, collectively, the Loan Agreements, the Tax
Regulatory Agreements and Tax Representations and Project Certificates which are
listed in Schedule 5.12.
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"IDRB Indebtedness" -- means, collectively, the indebtedness of Seller
owing to the issuer or issuers of the Bonds (as described further in Schedule
5.12 and in Exhibit 6.7) and arising under the Loan Agreements included among
the IDRB Documents.
"IRC" - the Internal Revenue Code of 1986, as amended.
"IRS" -- the Internal Revenue Service or any successor agency.
"Knowledge" -- means, with respect to Seller, the actual knowledge of
Seller's Chief Financial Officer; President, Citizens Public Services; and Vice
President of Arizona Energy Operations; and Director, Special Projects, Arizona
Electric (currently Xxxxxx X. Xxxxx), or their respective successor.
"Legal Requirement" -- any federal, state, county, local, municipal,
foreign, international, multinational, or other administrative Order,
constitution, law, ordinance, adopted code, principle of common law, regulation,
rule, directive, approval, notice, tariff, franchise agreement, statute or
treaty.
"Losses" -- shall mean all claims, losses, liabilities, causes of
action, costs and expenses (including, without limitation, involving theories of
negligence or strict liability and including court costs and reasonable
attorneys' fees and disbursements in connection therewith).
"Material Adverse Effect" -- an occurrence or condition that has a
material adverse effect on the operation, financial condition or results of
operations of the Business when combined with the businesses and assets being
acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements, taken as a whole. For purposes of this Agreement, an occurrence or
condition shall not constitute a Material Adverse Effect (a) if it arises from
general business, economic or financial market conditions, from conditions
generally affecting the industries in which the Business competes, or from the
transactions contemplated by this Agreement, (b) if it is of the type normally
recoverable by the Business through rates, or (c) to the extent that the
Business may realize the benefit of insurance maintained by Seller or to the
extent that Seller or Buyer may receive or recover payments in respect of such
occurrence from any other source (whether in a lump sum or stream of payments).
"Material Contract" -- a Contract relating primarily to the Business
and involving a total commitment by or to any party thereto of at least $100,000
on an annual basis and which cannot be terminated by Seller with notice of
ninety (90) days or less without penalty to Seller.
"Order" -- any award, decision, injunction, judgment, order, writ,
decree, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, other Governmental Body, or by any arbitrator,
each of which possesses competent jurisdiction.
"Organizational Documents" -- the articles or certificate of
incorporation and the bylaws of a corporation or the comparable organizational
and governing documents of other Persons.
"Permitted Encumbrances" -- means any of the following:
(a) mechanics', carriers', workers' and other similar liens
arising in the ordinary course of business and which in the aggregate are not
substantial in amount and do not interfere with the present use of the Assets to
which they apply;
6
(b) liens for current Taxes and assessments not yet due and
payable;
(c) usual and customary nonmonetary real property
Encumbrances, covenants, imperfections in title, Easements, restrictions and
other title matters (whether or not the same are recorded) that do not and will
not materially interfere with the operation of that portion of the Business
currently conducted on such real property;
(d) Encumbrances securing the payment or performance of any of
the Assumed Liabilities;
(e) all applicable zoning ordinances and land use
restrictions;
(f) with respect to any Asset which consists of a leasehold or
other possessory interests in real property, all usual and customary nonmonetary
real property Encumbrances, covenants, imperfections in title, Easements,
restrictions and other title matters (whether or not the same are recorded) to
which the underlying fee estate in such real property is subject that do not
currently and will not interfere materially with the operation of that portion
of the Business currently conducted on such property; and
(g) any other Encumbrances, Contracts, obligations, defects or
irregularities of any kind whatsoever, affecting the Assets that, individually
or in the aggregate, do not have a Material Adverse Effect or that will be
terminated, released or waived on or before the Closing Date.
"Person" -- any individual, corporation (including any nonprofit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization or Governmental Body.
"Proceeding" -- any claim, action, arbitration, hearing, litigation or
suit commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PUHCA" - the Public Utility Holding Company Act of 1935, as amended,
or any successor law, and regulations and rules issued by the SEC pursuant to
that act or any successor law.
"Real Property" -- all real property owned, leased or under Contract by
Seller in the operation of the Business, together with all interests in real
property (including Easements) used or held for use by Seller in the operation
of the Business.
"Related Documents" -- any Contract provided for in this Agreement to
be entered into by one or more of the parties hereto in connection with the
transactions contemplated by this Agreement.
"Related Purchase Agreements" -- means those certain purchase
agreements between Seller and Buyer or Affiliates of Buyer described on Schedule
1.1(b).
"Release" -- any presence, emission, dispersal, disposal, spilling,
leaking, emitting, discharging, depositing, pumping, pouring, escaping,
leaching, dumping, releasing or migration into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials), or in, into or from any
facility, including the movement of any Hazardous Materials through the air,
soil, surface water, groundwater or property.
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"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Retained Environmental Liabilities" -- means all Environmental
Liabilities of Seller that are described in this Agreement as Retained
Environmental Liabilities or that are otherwise not being assumed by Buyer under
this Agreement as Assumed Environmental Liabilities.
"SEC" -- the United States Securities and Exchange Commission or any
successor agency.
"Tax" -- any tax (including any income tax, capital gains tax,
value-added tax, sales and use tax, franchise tax, payroll tax, withholding tax,
property tax or transfer tax), levy, assessment, tariff, duty (including any
customs duty), deficiency, franchise fee or payment, payroll tax, utility tax,
gross receipts tax or other fee or payment relating to the foregoing, and any
related charge or amount (including any fine, penalty, interest or addition to
tax), imposed, assessed or collected by or under the authority of any
Governmental Body or for which Seller has any liability as a transferee,
pursuant to Treasury Regulations Section 1.1502-6, or pursuant to any other
Legal Requirement.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to any Governmental
Body in connection with the determination, assessment, collection or payment of
any Tax, or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"Threatened" -- a claim, dispute, or other matter will be deemed to
have been "Threatened" if any demand or statement has been made in writing or
orally or any notice has been given in writing or orally, and Seller has
Knowledge of the same.
Section 1.2 Other Defined Terms. In addition to the terms defined in
Section 1.1, certain other terms are defined elsewhere in this Agreement as
indicated below and, whenever such terms are used in this Agreement, they shall
have their respective defined meanings.
Term Section
---- -------
Active Employees 10.1
Antitrust Authorities 6.3
Assumed Liabilities 2.2
Balance Sheet 5.6(a)
Xxxx of Sale 8.1
Buyer Indemnitees 13.1
Buyer's Pension Plan 10.5
Buyer Welfare Plans 10.7(a)
CERCLA 5.14(e)
Citizens Marks 6.4
Closing 8.1
Closing Date 8.1
Deposit 3.2
Employee Plans 5.13
Environmental Data 12.1(c)
Estimated Purchase Price 3.3(a)
Financial Statements 5.6
Purchase Price 3.1
Retained Liabilities 2.3
Seller Indemnitees 13.2
Seller's Pension Plan 10.5
Seller's 401(k) Plan 10.6
Seller Welfare Plan 10.7
Transaction Taxes 11.3
Transferred Employee 10.1
8
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Assets. Upon the terms and subject to
the conditions contained herein, at the Closing, Seller shall sell, transfer,
assign, convey and deliver to Buyer, and Buyer shall purchase and accept
delivery from Seller, all of the Assets.
Section 2.2 Assumed Liabilities. In further consideration for the sale
of the Assets at the Closing, Buyer will assume and agree to pay, perform and
discharge when due, all liabilities and obligations, of every kind or nature,
arising out of or relating to:
(a) the Buyer's IDRB Obligations;
(b) Buyer's ownership or use of the Assets and the conduct or
operation of the Business by Buyer, in each case after the Closing Date,
including all liabilities, responsibilities and obligations relating to or
arising from the following:
(i) Transferred Employees (except to the extent
otherwise provided in Article X), including any termination of any Transferred
Employee for any reason (including constructive dismissal) and Buyer's hiring
practices or decisions;
(ii) Performance of the Contracts included among the
Assets (except that Buyer shall not assume any liabilities or obligations for
any breach or default by, or payment obligations of, Seller under any such
Contract occurring or arising or accruing on or prior to the Closing Date);
(iii) Customer advances, customer deposits and
construction advances, unperformed service obligations, Easement relocation
obligations, and engineering and construction required to complete scheduled
construction, construction work in progress, and other capital expenditure
projects, in each case relating to the Business and outstanding on or arising
after the Closing Date;
(iv) Future Regulatory Obligations;
(v) Assumed Environmental Liabilities;
(vi) One-half of the Transaction Taxes arising out of
the sale of the Assets to Buyer hereunder;
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(vii) Proceedings based on conduct, actions, facts,
circumstances or conditions arising or occurring after the Closing Date,
Proceedings in respect of Future Regulatory Obligations regardless of when
filed, and Proceedings arising from or related to any other Assumed Liability;
and
(viii) Items addressed in Section 3.1(d) to the
extent resulting in a decrease in the Purchase Price;
(c) Proceedings affecting other Persons engaged in a business
similar to the Business such as generic or industry-wide Proceedings; and
(d) all Proceedings involving Seller, the Assets or the
Business based on conduct, actions, facts, circumstances or conditions arising
or occurring on or before the Closing Date that are pending or Threatened as of
the Closing Date and that are disclosed to Buyer by Seller after the date of
execution of this Agreement but prior to the Closing Date (except any such
Proceedings relating to the Retained Liabilities described in Sections 2.3(a),
(b), (c), (d), and (f)), provided that any Losses incurred by Buyer in
connection with any such individual Proceeding in excess of $200,000 or in
connection with all such Proceedings in excess of $2,000,000 in the aggregate
(when combined with all other Losses incurred by Buyer in connection with its
performance or discharge of other Disclosed Pre-Closing Liabilities) shall be
Retained Liabilities and Seller shall be obligated to indemnify Buyer pursuant
to Section 13.1 (but subject to the applicable limitations on such obligations
provided in Section 13.3(f)) for such Losses incurred by Buyer in the amount of
such excess;
The liabilities, responsibilities and obligations to be assumed by Buyer
pursuant to this Section 2.2 are hereinafter collectively referred to as the
"Assumed Liabilities." Buyer hereby irrevocably and
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unconditionally waives and releases Seller from all Assumed Liabilities and all
liabilities or obligations relating to the Business or the Assets to the extent
arising from events or occurrences after the Closing or to the extent otherwise
relating to the period after the Closing, including any liabilities created or
which arise by statute or common law, including CERCLA (it being understood that
this shall not constitute a waiver and release of any claims arising out of the
contractual relationships and indemnification arrangements between Buyer and
Seller). Notwithstanding anything in this Section 2.2 to the contrary, "Assumed
Liabilities" shall not include any liabilities, responsibilities or obligations
expressly stated to be Retained Liabilities pursuant to Section 2.3.
Section 2.3 Retained Liabilities. Buyer shall not assume and at the
Closing Seller shall retain and pay, perform and discharge when due, all of the
liabilities and obligations relating to or arising from Seller's ownership of
the Assets and Seller's conduct or operation of the Business on and prior to the
Closing Date, except to the extent any such liability or obligation is included
among the Assumed Liabilities, including liabilities and obligations relating to
or arising from the following (collectively referred to herein as the "Retained
Liabilities"):
(a) all obligations of Seller under the IDRB Documents except
to the extent also included in Buyer's IDRB Obligations, and any other
indebtedness for money borrowed by Seller (including items due to Seller's
Affiliates) other than payment obligations arising after the Closing Date under
any equipment lease listed in Part VII of Schedule 5.12 or under any line
extension Contracts or similar construction arrangements, it being understood
and agreed that such leases, Contracts and similar arrangements do not create
indebtedness for money borrowed;
(b) Taxes of Seller or the Business with respect to ownership
or use of the Assets and Seller's conduct and operation of the Business on and
prior to the Closing Date;
(c) Excluded Assets;
(d) Non-Transferred Employees, the Seller's Employee Benefit
Plans and Employee Plans (except to the extent otherwise provided in Article X)
and any breach or default by, or payment obligations of, Seller with respect to
any Transferred Employee occurring or arising or accruing on or prior to the
Closing Date (except to the extent any such payment obligation becomes the
responsibility and obligation of Buyer in accordance with Article X);
(e) Proceedings involving Seller, the Assets or the Business
based on conduct (including Seller's performance under any Contract included
among the Assets), action, facts, circumstances or conditions arising or
occurring on or before the Closing Date, including Proceedings described in
Items I.1 and I.2 of Schedule 5.8 but expressly excluding any such liabilities
or obligations relating to any Proceeding relating to (x) Assumed Liabilities
(subject to the proviso set forth in Section 2.2(d) with respect to the
Proceedings described in Section 2.2(d)), (y) Future Regulatory Obligations and
(z) Proceedings affecting other Persons engaged in a business similar to the
Business such as generic or industry-wide Proceedings;
(f) Retained Environmental Liabilities; and
(g) One-half of the Transaction Taxes arising out of the sale
of the Assets, to Buyer hereunder.
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Seller hereby irrevocably and unconditionally waives and releases Buyer from all
Retained Liabilities including any liabilities created or which arise by statute
or common law, including CERCLA (it being understood that this shall not
constitute a waiver and release of any claims arising out of the contractual
relationships and indemnification arrangements between Buyer and Seller).
Section 2.4 Condition on Assignment or Assumption of Contracts and
Rights. Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign or assume any Contract or
any claim or right or any benefit arising thereunder or resulting therefrom if
an attempted assignment or assumption thereof, without the Consent of a third
party thereto, would constitute a breach thereof. Any transfer or assignment to
Buyer by Seller of any property or property rights or any Contract which
requires the Consent of any third party shall be made subject to such Consent
being obtained. If such Consent is not obtained, or if an attempted assignment
thereof would be ineffective or would affect the rights of Seller thereunder so
that Buyer would not in fact receive all such rights, Seller will, at its
expense, cooperate with Buyer in any arrangement reasonably designed to provide
for Buyer, at Buyer's cost, the benefits under any such Contract including,
without limitation, enforcement for the benefit of Buyer of any and all rights
of Seller against a third party thereto arising out of the breach or
cancellation by such third party or otherwise To the extent that Buyer does
receive the benefits of any such Contract pursuant to the preceding sentence,
such Contract shall be a Contract deemed to have been assigned or transferred to
Buyer pursuant to Section 2.2(b)(ii).
ARTICLE III
PURCHASE PRICE
Section 3.1 Purchase Price.
Subject to the terms and conditions of this Agreement, the aggregate
purchase price for the Assets (the "Purchase Price") shall be an amount equal to
$210,000,000 in cash, as adjusted in accordance with the following provisions
and with such adjustments determined pursuant to Section 3.3:
(a) Such amount will be increased by the aggregate amount of
all accounts receivable, earned but unbilled revenue, and materials and supplies
inventory of the Business, in each case outstanding as of the Closing Date and
other than any such items that are due from Seller's Affiliates.
(b) Such amount will be decreased by the aggregate amount of
all accounts payable, customer deposits and unexpended cash from customer
advances for construction, in each case to the extent relating to the Business
and outstanding as of the Closing Date and other than any such items that are
due to Seller's Affiliates.
(c) Such amount will be increased by the aggregate amount of
all (i) capital expenditures relating to the Business that are accrued by Seller
between the date of the Balance Sheet and the Closing Date (including
expenditures recorded in the Construction Work in Progress account of the
Business as of the Closing Date and relating to such period), (ii) without
duplication, expenditures to purchase materials, supplies and other capital
items that are dedicated to, but as of Closing have not been used in, the
construction or improvement of the property, plant or equipment relating to the
Business and (iii) without duplication, other expenditures recorded as an asset
of the Business as of the Closing Date and relating to such period to the extent
such expenditures are normally recoverable through rates, including expenditures
recorded in the Preliminary Survey and Investigation account of the Business, in
each case to the extent such expenditures are not prohibited by this Agreement.
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(d) Such amount will be decreased or increased, as
appropriate, by an aggregate amount equal to the total amount payable to or by
Buyer pursuant to Section 3.4.
Section 3.2 Deposit. Concurrently with the execution of this Agreement,
Buyer has delivered to Seller an irrevocable letter of credit from National
Cooperative Services Corporation (the "NCSC") (the "Letter of Credit"), as and
for an xxxxxxx money deposit, in the amount of $9,550,000 (the "Deposit"). The
Letter of Credit has been appropriately conditioned in accordance with the terms
of Section 9.2(c). Promptly (and in any event within ten (10) days after the
date of execution of this Agreement), Buyer shall file and in good faith
diligently prosecute an application with the NCSC for a revised commitment
letter that provides for the NCSC's commitment to remain outstanding until July
31, 2001, and for the NCSC to issue to Seller a letter of credit (to replace the
Letter of Credit) with an expiration date of July 31, 2001. Upon receipt of such
replacement letter of credit, such letter of credit shall be considered the
Letter of Credit for all purposes under this Agreement.
Section 3.3 Calculation of Purchase Price.
(a) Any of the items included in clauses (a) through (d) of
Section 3.1 that cannot be calculated in a timely fashion as of the Closing Date
shall be estimated by Seller in good faith based upon the account balance of
such item at the end of the month for which Seller's books are closed next
preceding the Closing Date, with such adjustments as may be appropriate to
reflect changes in such account balance occurring between such month-end and the
Closing Date. Any such estimated amounts shall be set forth in a certificate of
Seller delivered to Buyer at least five (5) business days prior to the Closing
Date, which certificate shall set forth an estimate of the Purchase Price (the
"Estimated Purchase Price"), including such estimated amounts and shall be
accompanied by reasonably detailed supporting documentation.
(b) Within one hundred twenty (120) days after the Closing
Date, Seller shall notify Buyer of the actual amount as recorded on Seller's
books and records for the Business of any items that were estimated in arriving
at the Estimated Purchase Price, as well as the prorations and adjustments
required to be made under Section 3.4 below. Buyer may dispute any amount so
determined by Seller, by written notice to Seller within fifteen (15) days after
receipt of Seller's notice. If Buyer does not so dispute any item, the party
owing the difference between the Estimated Purchase Price and the Purchase Price
shall pay such difference to the other party within ten (10) days after the
expiration of such fifteen (15) day period, plus interest at 8.25% per annum on
such amount from the Closing Date to (but not including) the date of payment. If
Buyer disputes the actual amount of any item, the undisputed amount plus
interest at 8.25% per annum on such amount from the Closing Date to (but not
including) the date of payment shall be paid promptly by the owing party. If
such dispute cannot be resolved within sixty (60) days after the giving of
Buyer's notice that there exists a disputed amount, then an independent auditor
mutually agreeable to Buyer and Seller shall, upon written notice from either
Buyer or Seller, resolve such dispute within sixty (60) days after receipt of
such notice. The fees and expenses of such independent auditor shall be
allocated between Buyer and Seller so that Seller's share of such fees and
expenses shall be in the same proportion that the aggregate amount of such
remaining disputed amounts so submitted by Buyer to such auditor that is
unsuccessfully disputed by Buyer (as finally determined by such auditor) bears
to the total amount of such remaining disputed amounts so submitted by Buyer to
such auditor. Any determination by such independent auditor shall be binding and
conclusive upon the parties without further appeal therefrom. Within ten (10)
days after the independent auditor shall have resolved such dispute, the party
owing the determined amount shall pay such determined amount to the other party,
plus interest at 8.25% per annum on such determined amount from the Closing Date
to (but not including) the date of payment.
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Section 3.4 Prorations and Adjustments as of the Closing Date.
(a) Buyer and Seller agree that the following items relating
to the Assets and the Business shall be adjusted and allocated as of the Closing
Date, with Seller to be responsible for and to receive the benefit of the same
for the period through and including the Closing Date and Buyer to be
responsible for and to receive the benefit of the same after the Closing Date;
(i) real and personal property taxes, assessments and
annual registration fees;
(ii) water, sewer and other similar types of taxes,
and installments on special benefit assessments and regulatory assessments;
(iii) electric, gas, telephone and other utility
charges;
(iv) payroll expenses, payroll taxes, reimbursable
employee business expenses and the financial cost of the accrued vacation time
of the Transferred Employees, in each case as recorded on Seller's books for the
Business as of the Closing Date;
(v) rents under leases transferred to or assumed by
Buyer;
(vi) charges under maintenance, service and other
Contracts and fees under licenses transferred to or assumed by Buyer and not
included in the items described in Section 3.1(a);
(vii) deposits of Seller to the extent transferable
to Buyer;
(viii) prepaid and accrued expenses;
(ix) sales, franchise, gross receipts and other
similar Taxes based upon revenues; and
(x) xxxxx cash.
(b) The items listed in Section 3.4(a) above shall be
estimated item by item by Seller and reflected on the certificate and supporting
documentation to be delivered to Buyer pursuant to Section 3.3(a) and finally
determined in accordance with Section 3.3(b).
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 Organization, Existence and Qualification. Buyer is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Texas, with full corporate power and authority to conduct
its business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, to perform its obligations under all
Contracts to which it is a party, and to execute and deliver this Agreement and
the Related Documents to which Buyer is a party. Buyer is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state in which the failure to be so qualified or in good standing would
materially adversely affect the business or properties of Buyer. Buyer is, or by
Closing will be, duly qualified and in good standing as a foreign corporation
licensed to do business in the State of Arizona.
Section 4.2 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by Buyer have been duly authorized by Buyer's Board of Directors,
which constitutes all necessary corporate action required on the part of Buyer
for such authorizations. The execution, delivery and performance of this
Agreement and the Related Documents by Buyer will not result in (a) any conflict
with or breach or violation of or default under the Organizational Documents of
Buyer, or (b) a violation or breach of any term or provision of, or constitute a
default or accelerate the performance required under, any indenture, mortgage,
deed of trust, security agreement, loan agreement, or Contract to which Buyer is
a party or by which its assets are bound, or (c) a violation of any Order of any
Governmental Body. This Agreement constitutes, and the Related Documents to be
executed by Buyer when executed and delivered will constitute, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, except as such enforceability may be limited by (i) bankruptcy
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally or (ii) the availability of equitable remedies
generally.
Section 4.3 Governmental Approvals. Except for those Consents described
in Schedule 5.3 to the extent applicable to Buyer, no Consent of any
Governmental Body is required to be obtained by Buyer in connection with the
execution and delivery by Buyer of this Agreement or the Related Documents or
the consummation of the transactions contemplated by this Agreement or the
Related Documents. Buyer has no knowledge of any facts or circumstances relating
to Buyer or its Affiliates that reasonably would be likely to preclude or
prolong the receipt of such required Consents.
Section 4.4 Availability of Funds. Buyer will have available on the
Closing Date sufficient funds to enable it to consummate the transactions
contemplated by this Agreement, and Buyer or the Affiliates of Buyer that are
buyers of the assets and businesses being acquired pursuant to the Related
Purchase Agreements will have available at the Closing Date, sufficient funds to
enable them to consummate the transactions contemplated by the Related Purchase
Agreements. Buyer has received, and has provided to Seller a true and complete
copy of, that certain commitment letter dated as of February 11, 2000, duly
executed by Buyer and NCSC. Buyer understands and agrees that its failure to
arrange for such funding and have such funding available by the Closing Date
will permit Seller to terminate this Agreement under Section 9.1 and to exercise
its rights under Section 9.2(c).
15
Section 4.5 Filings. No statement furnished by Buyer for inclusion in
any filing with any Governmental Body in connection with obtaining such
Governmental Body's Consent for the consummation of the transactions
contemplated by this Agreement will contain, as of the date such information is
so provided, any untrue statement of a material fact or will omit to state, as
of the date such information is so provided, any material fact which is
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
Section 4.6 Brokers. No broker or finder has acted for or on behalf of
Buyer or any Affiliate of Buyer in connection with this Agreement or the
transactions contemplated by this Agreement. No broker or finder is entitled to
any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Buyer or any
Affiliate of Buyer for which Seller or any Affiliate of Seller has or will have
any liability or obligations (contingent or otherwise).
Section 4.7 Independent Investigation. Buyer is knowledgeable about the
businesses engaged in by Seller through its Arizona Electric divisions and of
the usual and customary practices of companies engaged in businesses similar to
such businesses and has had access to the Assets, the officers and employees of
Seller, and the books, records and files of Seller relating to the Business and
the Assets. In making the decision to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer has relied solely on the
basis of its own independent due diligence investigation of the Business and
upon the representations and warranties made in this Agreement and in any other
document or instrument delivered by Seller pursuant hereto. Accordingly, Buyer
acknowledges that Seller has not made, and Seller is expressly disclaiming and
negating any representation or warranty (other than those express
representations and warranties made in Article V), express, implied, at common
law, by statute or otherwise, relating to the Business.
Section 4.8 Public Utility Holding Company Status; Regulation as a
Public Utility. Buyer is a "public utility company" (as such term is defined in
PUHCA). Neither Buyer nor any of its Affiliates is a "holding company", a
"subsidiary" of a "public utility company," or an "affiliate" of a "public
utility company" or of a "holding company," within the meaning of such terms in
PUHCA.
Section 4.9 Buyer's Financial Statements. The consolidated financial
statements of Buyer for its most recently ended fiscal year heretofore delivered
to Seller were prepared in accordance with GAAP applied on a consistent basis,
except for changes concurred in by Buyer's accountants and disclosed in said
financial statements, throughout the periods specified, and present fairly in
all material respects the financial condition and results of operations of the
businesses of Buyer as of the dates thereof and for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments).
Section 4.10 Buyer's Insurance. Within five (5) business days after the
date of execution of this Agreement, Buyer will deliver to Seller a schedule
that lists Buyer's policies and contracts in effect as of the date hereof for
casualty and property insurance covering its assets and properties and the
operation of its business, together with the risks insured against, coverage
limits and deductible amounts.
16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 5.1 Organization, Existence and Qualification. Seller is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Delaware, with full corporate power and authority to
conduct the Business as it is now being conducted, to own or use the Assets, to
perform its obligations under all Contracts to which it is a party, and to
execute and deliver this Agreement and the Related Documents to which Seller is
a party. Seller is duly qualified to do business as a foreign corporation and is
in good standing under the laws of the State of Arizona and each other state in
which the failure to be so qualified or in good standing would have a Material
Adverse Effect.
Section 5.2 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by Seller have been duly authorized by all requisite corporate action.
Except as set forth in Schedule 5.2, the execution, delivery and performance of
this Agreement and the Related Documents by Seller will not result in (a) any
conflict with or breach or violation of or default under the Organizational
Documents of Seller, (b) to Seller's Knowledge, a violation or breach of any
term or provision of, or constitute a default or accelerate the performance
required under, any indenture, mortgage, deed of trust, security agreement, loan
agreement, or Material Contract to which Seller is a party or by which any of
the Assets are bound, or (c) a violation of any Order of any Governmental Body,
except for such exceptions to the foregoing clauses (b) and (c) that, will be
cured, waived or otherwise remedied on or prior to the Closing Date. This
Agreement constitutes and the Related Documents to be executed by Seller when
executed and delivered will constitute valid and binding obligations of Seller,
enforceable against Seller in accordance with their terms, except as
enforceability may be limited by (i) bankruptcy or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally or (ii)
the availability of equitable remedies generally. No Person has any agreement,
option, warrant, subscription, understanding, or commitment, or any right or
privilege capable of becoming an agreement, option or commitment for the
purchase of the Assets of any other interest in the Business.
Section 5.3 Governmental and Other Required Consents. Except as set
forth in Schedule 5.3, no Consent of any Governmental Body or third Person is
required to be obtained by Seller in connection with the execution and delivery
by Seller of this Agreement or the Related Documents or the consummation by
Seller of the transactions contemplated by this Agreement or the Related
Documents, other than (i) any Consent the failure of which to obtain would not
be material to the operation or conduct of the Business after Closing and (ii)
any Consent that is obtained or made on or prior to the Closing Date. Seller has
no Knowledge of any facts or circumstances relating to Seller or its Affiliates,
other than those relating to the auction process in which Buyer was selected,
and other bidders were not selected, to acquire the Business or relating to the
matters disclosed in any Schedule referred to in this Agreement, that would be
reasonably likely to preclude or prolong the receipt of such required Consents.
Section 5.4 Public Utility Holding Company Status; Regulation as a
Public Utility. Seller is a "public utility company" (as such term is defined in
PUHCA). Seller is not a "holding company", a "subsidiary" of a "public utility
company," or an "affiliate" of a "public utility company" or of a "holding
company," within the meaning of such terms in PUHCA.
17
Section 5.5 Title to Assets; Liens.
Seller has good and indefeasible title to the Assets, including the
Assets reflected in the Financial Statements, except those disposed of since the
date of the Financial Statements in the ordinary course of business or otherwise
disposed of in accordance with this Agreement. None of the Assets are subject to
any Encumbrance except (i) Encumbrances described in Schedule 5.5 and (ii)
Permitted Encumbrances. Schedule 5.5 lists each parcel of Real Property owned in
fee simple that is a part of the Assets. To Seller's Knowledge, except as set
forth in Schedule 5.5, Seller owns or possesses all Easements necessary to
conduct the Business as now being conducted without any known conflict with the
rights of others. Except as set forth in Schedule 5.5, (a) Seller enjoys
peaceful and undisturbed possession under all real property leases included in
the Assets, and to the Knowledge of Seller, all such leases are valid and in
full force and effect; (b) all rents due to date from Seller on each such lease
have been paid; (c) Seller has not received notice that it is in default under
any such lease; and (d) to the Knowledge of Seller, there exists no event,
occurrence, condition or act (including the consummation of the transactions
contemplated by this Agreement) which, with the giving of notice, the lapse of
time or the happening of any further event or condition, would become a default
by Seller under such lease. Except as set forth in Schedule 5.5, all buildings,
structures and equipment that are a part of the Assets lie wholly within the
boundaries of the Real Property and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person. Seller has
adequate rights of ingress and egress for operation of the Business in the
ordinary course consistent with past practices. None of the buildings,
structures or equipment that are a part of the Assets, nor the operation and
maintenance thereof, violates any restrictive covenant.
Section 5.6 Financial Statements.
(a) Schedule 5.6(a) sets forth the unaudited balance sheet for
the Business as at September 30, 1999 (the "Balance Sheet") and unaudited
statement of income of the Business for the nine-month period ended September
30, 1999 (collectively, the "Financial Statements"). Except as set forth in
Schedule 5.6(a), the Financial Statements have been prepared on a pre-tax basis
in accordance, in all material respects, with GAAP applied on a basis consistent
with prior periods. Except as set forth in Schedule 5.6(a), the Balance Sheet
presents fairly in all material respects the financial condition of the Business
as of its date and the income statement included in the Financial Statements
presents fairly in all material respects the results of operations of the
Business for the periods covered thereby. The books and records of Seller from
which the Financial Statements were prepared were complete and accurate in all
material respects at the time of such preparation.
(b) Except as disclosed in Schedule 5.6(b), Seller has no
liabilities with respect to the Business or the Assets which would constitute
Assumed Liabilities, either direct or indirect, matured or unmatured or
absolute, contingent or otherwise, except:
(1) those liabilities set forth in the Financial
Statements or referred to in the notes to the Financial Statements and not
heretofore paid or discharged;
(2) those liabilities relating to or arising from
matters disclosed in any other Schedule hereto;
(3) liabilities arising in the ordinary course of
business consistent with past practices under any Contract or Legal
Requirements;
18
(4) those liabilities incurred, consistent with past
practices, in or as a result of the ordinary course of business since the
Balance Sheet Date which do not and could not be reasonably expected to, in the
aggregate, result in a Material Adverse Effect;
(5) those liabilities and obligations that are the
subject of Article X; and
(6) those liabilities, which, if outstanding as of
the Closing Date, would result in a decrease to the Purchase Price in accordance
with Section 3.1(b) or (d).
Section 5.7 Compliance with Legal Requirements; Governmental Permits.
Except as set forth in Schedule 5.7: (a) Seller is in substantial compliance
with each Legal Requirement or Order that is applicable to it, to the conduct or
operation of the Business, or to the ownership or use of any of the Assets; (b)
Seller possesses all Consents from Governmental Bodies required by any
applicable Legal Requirement or Order necessary to permit the operation of the
Business in the manner in which it is currently being conducted by Seller; (c)
all such Consents are in full force and effect; and (d) Seller has not received
notice from any Governmental Body of its intent to revoke or terminate of such
Consent.
Section 5.8 Legal Proceedings; Outstanding Orders. Except as set forth
in Schedule 5.8, there is no pending or Threatened Proceeding (a) that has been
commenced against Seller or the Business other than Proceedings affecting other
Persons engaged in a business similar to the Business such as generic or
industry-wide Proceedings, or (b) as of the date of this Agreement, that
challenges, or that may have the effect of preventing, delaying, making illegal,
restricting or otherwise interfering with, the transactions contemplated hereby.
Schedule 5.8 lists each outstanding Order against Seller which relates to or
arises out of the conduct of the Business or the ownership, condition or
operation of the Business or the Assets which would be considered material to a
reasonably prudent purchaser of the Business in its reasonable business
judgment, other than any Orders relating to rates, tariffs and similar matters
arising in the ordinary course of business and other than any Order applicable
to other Persons engaged in a business similar to the Business such as generic
or industry-wide Orders.
Section 5.9 Taxes. All Tax Returns required to be filed by or on behalf
of Seller or requests for extensions to file such Tax Returns have been timely
filed, and Seller has paid and discharged or made adequate provision for all
Taxes that are required to be paid or remitted by or on behalf of Seller. There
are no pending audits or other examinations relating to any Tax matters relating
to the Business or the Assets except as set forth in Schedule 5.9. There are no
Tax Encumbrances on the Assets, except for liens for Taxes not yet due and
payable or for Taxes that Seller is contesting in good faith through appropriate
proceedings. As of the date of this Agreement, Seller has not granted any waiver
of any statute of limitations with respect to, or any extension of a period for
the assessment of, any Tax relating to the Business or the Assets except as set
forth in Schedule 5.9. Except as set forth in Schedule 5.9, none of the Assets
include stock of a corporation or interests in a partnership or limited
liability company. Seller is not a party to any safe harbor lease within the
meaning of IRC Section 168(f)(8), as in effect prior to amendment by the Tax
Equity and Fiscal Responsibility Act of 1982. Seller is not a "foreign person"
as defined in IRC Section 1445(f)(3) and Buyer is not required to withhold tax
on the purchase of the Assets of Seller by reason of IRC Section 1445. Seller
has not entered into any agreement with respect to the performance of services
that would require a payment, and Seller is not requiring Buyer pursuant to this
Agreement to make any payment (including but not limited to the payments
described in Section 10.11 of this Agreement), that would result in a
nondeductible expense pursuant to IRC Section 280G or an excise tax to the
recipient of such payment pursuant to IRC Section 4999.
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Section 5.10 Intellectual Property. Schedule 5.10 lists all patents,
trademarks, service marks and copyrights used or held for use by Seller
primarily in the operation of the Business. Seller has no Knowledge of (i) any
infringement or claimed infringement by Seller of any patent, trademark, service
xxxx or copyright of others or (ii) any infringement of any patent, trademark,
service xxxx or copyright owned by or under license to Seller.
Section 5.11 Personal Property. Except for normal wear and tear, the
tangible Assets, taken as a whole, are in good operating condition and in a
state of reasonable maintenance and repair. The buildings, structures and
equipment that are a part of the Assets are structurally sound, are in good
operating condition and repair and are adequate for the uses to which they are
being put, and none of such buildings, structures or equipment is in need of
maintenance or repairs, except in each case, for the Assets described in
Schedule 5.11 and for Assets in need of ordinary and routine maintenance and
repairs that will not, individually or in the aggregate, have a Material Adverse
Effect.
Section 5.12 Material Contracts; Existing Loan Documents. Schedule 5.12
contains, to Seller's Knowledge, a complete and correct list as of the date
hereof of all Material Contracts (other than line extension Contracts and
similar construction arrangements), including all Existing Loan Documents. To
Seller's Knowledge, (i) each Material Contract is in full force and effect and
enforceable against the parties thereto, (ii) there are no defaults and Seller
has not rescinded nor given notice of a default or claimed default under any
such Material Contract, and (iii) no event has occurred which with notice or
lapse of time, or both, would constitute a default thereunder. Except as set
forth in Schedule 5.12, Seller is not obligated under any Contract relating to
the Business or the Assets with respect to industrial development bonds or other
obligations with respect to which the interest thereon is excluded from gross
income of the holder for federal or state income tax purposes.
Section 5.13 Employee Benefit Matters.
(a) Schedule 5.13 lists (i) each "Employee Benefit Plan," as
such term is defined in Section 3(3) of ERISA, which is covered by any provision
of ERISA and which is maintained or contributed to by Seller or its Affiliates
for the benefit of the Active Employees; (ii) each other material fringe benefit
plan, policy or arrangement currently maintained or contributed to by Seller or
its Affiliates for the benefit of Active Employees which provides for pension,
retirement, deferred compensation, bonuses, incentive compensation, profit
sharing, stock options, severance, employee insurance coverage or similar
employee benefits (collectively, "Employee Plans"); and (iii) each collective
bargaining, union or other employee association agreement, employment,
managerial, advisory, and consulting agreement, change-in-control agreement,
employee confidentiality agreement, and all other material agreements, policies,
or arrangements maintained or contributed to by Seller or its Affiliates for the
Active Employees or by which Seller is bound with respect to the Business.
Seller has made available to Buyer accurate and complete copies of all such
documents and (if applicable) summary plan descriptions with respect to such
plans, agreements and arrangements, or summary description(s) of any such plans,
agreements or arrangements not otherwise in writing.
(b) Seller's Pension Plan and Seller's 401(k) Plan are the
only Employee Benefit Plans which are intended to be qualified under Section
401(a) of the IRC.
(c) Each Employee Benefit Plan has been established and
administered in all material respects in accordance with its terms, ERISA and
the applicable provisions of the IRC.
20
Section 5.14 Environmental Matters.
(a) Except as listed in Schedule 5.14, since December 31,
1996, Seller has not received a written notice from a Governmental Body that
Seller is in violation of any Environmental Law arising out of Seller's
ownership, use or operation of the Assets or the operation of the Business.
(b) Except as listed in Schedule 5.14, there are no
Proceedings pending or Threatened with respect to Seller's compliance with
Environmental Laws and relating to the Business or the Assets. To Seller's
Knowledge, there is no reasonable basis for any such Proceeding that would
impose any liability or obligation that would have or would reasonably be
expected to have a Material Adverse Effect.
(c) Except as listed in Schedule 5.14, Seller possesses all
certificates, permits and authorizations required by any Environmental Law for
Seller's ownership, use or operation of the Assets or the operation of the
Business.
(d) Except as set forth in Schedule 5.14, no environmental
remediation of any Release is occurring on any Real Property included in the
Assets nor has Seller issued a request for proposal or otherwise asked an
environmental remediation contractor to begin plans for any such environmental
remediation. Except as set forth in Schedule 5.14, to Seller's Knowledge, during
or prior to the period of Seller's ownership or operation of the Business there
were no Releases or threatened Releases which would reasonably be expected to
have a Material Adverse Effect.
(e) Except as set forth in Schedule 5.14, none of the Real
Property is (i) situated in a federal "Superfund" site or, to Seller's
Knowledge, in any federal "Superfund" study area designated under the federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
or (ii) to Seller's Knowledge, situated in any site or study area designated
under any state statute comparable to CERCLA.
Section 5.15 No Material Adverse Change. Except as set forth in
Schedule 5.15, between the date of the Balance Sheet and the date of execution
of this Agreement:
(a) no Material Adverse Effect has occurred;
(b) except for actions taken in connection with the
contemplated sale of the Business and this Agreement and except for conversion
to the SAP financial reporting system, between the date of the Balance Sheet and
the date of execution of this Agreement, the Business has been conducted in the
ordinary course, consistent with past practices;
(c) there has not been any increase in the salary, wage,
bonus, grants, awards, benefits or other compensation payable or that could
become payable by Seller to its officers, directors and employees with respect
to the Business or any amendment of any of the Employee Plans, Seller's Pension
Plan and Seller's 401(k) Plan other than increases or amendments in the ordinary
course of the Business, consistent with past practices (which may include normal
periodic performance reviews and related compensation and benefit increases and
the provision of new individual compensation and benefits for promoted or newly
hired officers and employees on terms consistent with past practice), nor has
Seller granted any severance or termination pay, entered into any contract to
make or grant any severance or termination pay, or paid any bonus, in each case
to any such officer, director, or employee, other than pursuant to preexisting
agreements, arrangements or bonus plans, or taken any action that would result
in the payment of any amounts, or the accelerated vesting of any rights or
benefits, under any Employee Plan, Seller's Pension Plan or Seller's 401(k)
Plan;
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(d) there has been no change in any method of accounting or
accounting practice of the Business;
(e) Seller has not sold, mortgaged, pledged or encumbered the
Business or the Assets, other than sales of Assets in the ordinary course of
business; and
(f) no agreement or commitment to do any of the actions
contemplated by clauses (c), (d) or (e) above has been entered into.
Section 5.16 State and Federal Regulatory Matters.
(a) Schedule 5.16 reflects all of the currently pending
filings relating to the Business heretofore made by Seller before state or
federal regulatory commissions and each other currently pending Proceeding of
such state or federal regulatory commission which would be considered material
to a reasonably prudent purchaser of the Business in its reasonable business
judgment, other than any currently pending Proceeding that also is applicable to
other Persons engaged in a business similar to the Business such as generic or
industry-wide Proceedings.
(b) All currently effective material filings relating to the
Business heretofore made by Seller with state or federal regulatory commissions
were made in compliance with Legal Requirements then applicable thereto and the
information contained therein was true and correct in all material respects as
of the respective dates of such filings.
Section 5.17 Brokers. Except for Xxxxxx Xxxxxxx & Co. Incorporated, no
broker or finder has acted for or on behalf of Seller or any Affiliate of Seller
in connection with this Agreement or the transactions contemplated by this
Agreement. No broker or finder is entitled to any brokerage or finder's fee, or
to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of Seller or any Affiliate of Seller for
which Buyer has or will have any liabilities or obligations (contingent or
otherwise).
22
Section 5.18 Employee Relations. Except as disclosed in Schedule 5.18,
as of the execution of this Agreement (i) there is no strike, slowdown, picket,
work stoppage or other labor dispute or disturbance on the part of the employees
of Seller with respect to the Business pending or Threatened, and Seller has not
experienced any such strike, slowdown, picket, work stoppage or other labor
dispute or disturbance with respect to the Business within the past two years,
(ii) no grievance, unfair labor practice charge or any arbitration Proceeding
arising out of or under any collective bargaining agreement relating to the
Business exists or is pending on the date hereof, (iii) Seller is not the
subject of a Proceeding asserting that it has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to compel it
to bargain with any labor organization as to wages or conditions of employment
with respect to the Business, (iv) Seller is not aware of any activity involving
Seller's employees seeking to certify a collective bargaining unit or engaging
in other organizational activity with respect to the Business, (v) Seller is
currently in compliance in all material respects with respect to the Business
with all applicable Legal Requirements relating to the employment of labor,
including those related to wages, hours and collective bargaining, and is not
liable for any arrearages of wages, penalties or other sums for failure to
comply with any of the foregoing and (vi) there is no claim with respect to
payment of wages, salary or overtime pay that has been asserted or is now
pending or Threatened before any Governmental Body regarding any person or
entity currently or formerly employed by Seller with respect to the Business.
Section 5.19 Insurance. Schedule 5.19 lists the Seller's casualty and
property insurance policies and contracts in effect as of the date hereof in
connection with the Business. Except as disclosed in Schedule 5.19, (i) each
material insurance policy thereof is in full force and effect, (ii) Seller is
not in default with respect to its obligations under any such policy and (iii)
Seller has not received any notice of cancellation or termination with respect
to any material insurance policy thereof.
Section 5.20 Accounts Receivable. All accounts receivable and earned
but unbilled revenue reflected in the Financial Statements represent actual
indebtedness to Seller incurred by the applicable account debtors in the
ordinary course of business consistent with past practices. To Seller's
Knowledge, all accounts receivable and earned but unbilled revenue reflected in
the Financial Statements are good and collectible at the aggregate recorded
amounts thereof, net of any reserve for doubtful accounts reflected therein.
Section 5.21 Appropriate Knowledge Persons. The individuals identified
in the definition of "Knowledge" are agents, employees or officers of Seller and
certain of such individuals have primary decisionmaking responsibility for the
day-to-day operations, management, maintenance and repair of the Assets and the
Business, and they have served in such capacities for more than twelve (12)
months.
Section 5.22 Local Furnishing. Seller was engaged in the local
furnishing of electrical energy in Mohave County and Santa Xxxx County, Arizona,
respectively, within the meaning of Sections 142(a)(8) and 142(f)(3) of the IRC
on January 1, 1997, and has continued to be so engaged at all times thereafter.
All of the Assets are facilities used in the local furnishing of electrical
energy in Mohave County and Santa Xxxx County, Arizona, respectively, within the
meaning of Sections 142(a)(8) and 142(f)(3) of the IRC.
23
Section 5.23 Disclaimer. Except as otherwise expressly set forth in
this Agreement or in any other document or instrument delivered by Seller
pursuant hereto, Seller expressly disclaims any representations or warranties of
any kind or nature, express or implied, as to the condition, value or quality of
the assets or properties currently or formerly used, operated, owned, leased,
controlled, possessed, occupied or maintained by Seller, and Seller SPECIFICALLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH ASSETS OR PROPERTIES,
OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD THAT SUCH ASSETS
AND PROPERTIES ARE BEING ACQUIRED, "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN
THEIR PRESENT CONDITION, WITH ALL FAULTS AND THAT BUYER SHALL RELY ON ITS OWN
EXAMINATION AND INVESTIGATION THEREOF.
ARTICLE VI
COVENANTS
Section 6.1 Covenants of Seller. Seller agrees to observe and perform
the following covenants and agreements:
(a) Conduct of the Business Prior to the Closing Date. With
respect to the Business, except (i) as contemplated in this Agreement or in
Schedule 6.1, (ii) as required by any Legal Requirement or Order or (iii) as
otherwise expressly consented to in writing by Buyer which consent will not be
unreasonably withheld or delayed, prior to the Closing, Seller will, with
respect to the Business.
(1) Not make or permit any material change in the
general nature of the Business;
(2) Maintain and conduct the Business in the ordinary
course of business in accordance with prudent business judgment and consistent
with past practice and policy, and maintain the Assets in their present
condition, reasonable wear and tear excepted, subject to retirements in the
ordinary course of business, use all reasonable efforts to preserve intact the
present business organization and the relationship with customers, suppliers and
others having business dealings with the Business;
(3) Not enter into any material transaction or
Material Contract other than in the ordinary course of business in accordance
with prudent business judgment and consistent with past practice and policy;
(4) Not purchase, sell, lease, dispose of or
otherwise transfer or make any Contract for the purchase, sale, lease,
disposition or transfer of, or subject to Encumbrance, any material Assets other
than in the ordinary course of business in accordance with prudent business
judgment and consistent with past practice and policy;
(5) Not hire any new employee unless such employee is
a bona fide replacement for either a presently-filled position or a vacancy in
an authorized position with the Business;
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(6) Not make any capital expenditure or capital
expenditure commitment in excess of $200,000 in the aggregate that is not
included in the Capital Budget except in the event of service interruption,
emergency or casualty loss, and use commercially reasonable efforts to make
capital expenditures in accordance with the Capital Budget;
(7) Comply in all material respects with all
applicable Legal Requirements and Orders, including without limitation those
relating to the filing of reports, the timely filing of Tax Returns and the
payment of Taxes due to be paid prior to the Closing, other than those Taxes
contested in good faith;
(8) Except in the ordinary course of business
consistent with past practices or in accordance with the terms of any existing
Contract, Employee Plan or collective bargaining agreement, not grant any
material increase or change in total compensation or benefits (taken as a whole)
to any of the Transferred Employees or, except as permitted by Section 10.2,
enter into any employment, severance or similar Contract with any Person or
amend any such existing Contracts to increase any amounts payable thereunder or
benefits provided thereunder;
(9) Not terminate any Material Contract;
(10) Not create, incur, assume, guarantee or
otherwise become liable with respect to any indebtedness for money borrowed
other than in the ordinary course of business (it being understood and agreed
that customer advances, customer deposits and construction advances do not
create indebtedness for money borrowed), except in connection with additional
borrowings under the Existing Loan Documents and any renewal, extension,
rearrangement or refunding of any indebtedness created under or evidenced by the
Existing Loan Documents, and except pursuant to advances made by Seller to the
Business; or
(11) Not make any material filings with any
Governmental Body prior to consulting with Buyer except for filings made in the
ordinary course of business consistent with past practices.
(b) Access to the Business, Assets and Records; Updating
Information.
(1) From and after the date hereof and until the
Closing Date, Seller shall permit Buyer and its Representatives to have, on
reasonable notice and at reasonable times, reasonable access to the Business,
the Assets and all books, papers and records to the extent that they reasonably
relate to the ownership, operation, obligations and liabilities of the Business
and the Assets; provided, however, that such access shall not unreasonably
interfere with the operation of the Business; and provided, further, that Buyer
hereby agrees to defend, indemnify and hold harmless Seller from and against all
Losses arising out of or relating to the negligence or willful misconduct of
Buyer or its Representatives in connection with Buyer's access provided pursuant
to this Section 6.1(b)(1). Without limiting the application of the
Confidentiality Agreement, all documents or information furnished by Seller
hereunder shall be subject to the Confidentiality Agreement.
(2) Seller will notify Buyer as promptly as
practicable of any significant change in the ordinary course of business for the
Business and of any material Proceedings (Threatened or pending) involving or
affecting the Business or the transactions contemplated by this Agreement, and
shall use reasonable efforts to keep Buyer fully informed of such events.
25
(c) Consents. Seller will use its commercially reasonable
efforts to obtain all necessary Consents from any Person required to consummate
the transactions contemplated hereby, including the Consent of any Person
required under any Legal Requirement or Contract applicable to the Business and
all Consents listed in Schedule 5.3.
(d) Exclusivity. Until consummation of the transactions
contemplated hereby or termination of this Agreement pursuant to Section 9.1,
neither Seller nor its Affiliates, representatives, officers, directors,
employees or agent will, directly or indirectly, (1) submit, solicit, initiate,
encourage or discuss any proposal or offer from any Person (other than Buyer or
its Affiliates) or enter into any agreement or accept any offer relating to any
(i) reorganization, liquidation or dissolution of the Business; (ii) merger or
consolidation involving the Business; (iii) purchase or sale of substantially
all of the Assets; or (iv) similar transaction or business combination involving
the Business or the Assets, or (2) furnish any information with respect to,
assist or participate in or facilitate in any other manner any effort or attempt
by any Person or do or seek to do any of the foregoing. Seller shall notify
Buyer promptly if any Person makes any proposal, offer, inquiry or contact with
respect to an action described in clauses (i) through (iv) above.
(e) Noncompetition.
(i) From the Closing Date through the third (3rd)
anniversary thereof, Seller agrees that neither it nor any of its Affiliates
will (i) directly, or indirectly through one or more entities, own, manage,
operate, control, be employed by or participate in the ownership, management,
operation or control, or have a financial interest in, any Person which is
engaged in the Business within the State of Arizona, provided, however, that the
foregoing shall not prevent the purchase or ownership of shares which constitute
less than five percent (5%) of the outstanding equity securities of a
publicly-held company; or (ii) divert or direct any Person who is, at that time,
a customer or supplier of the Business away from the Business.
(ii) Seller acknowledges that it has carefully read
all the terms of this Section 6.1(e), and agrees that (A) the same are necessary
for the reasonable and proper protection of the value of the Business, (B) each
and every covenant is reasonable with respect to such matter, length of time and
the geographical area described, and (C) that irrespective of all other
conditions, the covenants and restrictions in clause (i) above shall be
operative during the full period and throughout the geographical area described.
In the event any court finds any such restraint or limitation to be
unreasonable, then it is the intent of the parties that such court should
determine the maximum restraint or limitation which is reasonable and
enforcement will be of that restraint or limitation.
(iii) Because of the immediate and irreparable damage
that would be caused to Buyer as a result of the breach of the covenants of
Seller contained in this Section 6.1(e), for which Buyer would not have other
adequate remedy, Seller agrees that, in the event of any such breach, Buyer
shall be entitled to seek, from any court of competent jurisdiction, an
injunction against any further breach by Seller. In addition, Buyer shall be
entitled to pursue any other remedies available under applicable laws or
equitable principles. Each party waives any requirements for security of the
posting of any bond or other surety in connection with any temporary or
permanent award or injunctive, mandatory or other equitable relief.
26
Section 6.2 Covenants of Buyer. Buyer agrees to observe and perform the
following covenants and agreements:
(a) Consents. Buyer will use its commercially reasonable
efforts to assist Seller in obtaining all necessary Consents from any Person
required to consummate the transactions contemplated hereby, including the
Consent of any Person required under any Legal Requirement or Contract
applicable to the Business, and will use its commercially reasonable efforts to
obtain all Consents listed in Schedule 4.2 and Schedule 4.3.
(b) Access to Information. After Closing, Buyer will, and will
cause its Representatives to, afford to Seller, including its Representatives,
at Seller's expense, reasonable access to all books, records, files and
documents related to the Business to the extent necessary to permit Seller to
prepare and file its tax returns and to prepare for and participate in any
investigation with respect thereto, to prepare for and participate in any other
investigation and defend any Proceedings relating to or involving Seller or the
Business for which Seller may be responsible, to discharge its obligations under
this Agreement and the other Related Documents to which its is a party and for
other reasonable purposes and will afford Seller reasonable assistance in
connection therewith. Buyer will cause such records to be maintained for not
less than seven years from the Closing Date and will not dispose of such records
without first offering in writing to deliver them to Seller; provided, however,
that in the event that Buyer transfers all or a portion of the Business to any
third party during such period, Buyer may transfer to such third party all or a
portion of the books, records, files and documents related thereof, provided
such third party transferee expressly assumes in writing the obligations of
Buyer under this Section 6.2(b). In addition, after the Closing Date, at
Seller's request, Buyer shall make available to Seller and its Affiliates,
employees, representatives and agents, those employees of Buyer requested by
Seller in connection with any Proceeding, including to provide testimony, to be
deposed, to act as witnesses and to assist counsel; provided, however, that (x)
such access to such employees shall not unreasonably interfere with the normal
conduct of the operations of Buyer and (y) Seller shall reimburse Buyer for the
allocated time charges of such employees and the out-of-pocket costs reasonably
incurred by Buyer in making such employees available to Seller.
(c) Citizens Guarantees and Surety Instruments. Buyer shall
use its commercially reasonable efforts to assist Seller in obtaining full and
complete releases on the guarantees, letters of credit, bonds and other surety
instruments listed in Schedule 6.2(c). For purposes of this Section 6.2(c),
reasonable efforts shall include: (i) Buyer's assumption of the Contracts on the
terms set forth in this Agreement; and (ii) an obligation on the part of Buyer
to provide a guaranty, letter of credit, bond or other surety instrument at
Closing to the extent required by any Contract assumed by Buyer at Closing and,
in general, an equivalent surety instrument to be substituted for any surety
instrument provided by Citizens to any beneficiary in connection with the
Business.
(d) Other Covenants of Buyer. Buyer agrees to submit to
regulation by the appropriate state regulatory commission to the same extent as
such state regulatory commission currently regulates Seller in connection with
the Business. Buyer also agrees to make no filings with such state regulatory
commission or take any other action in connection with any Proceeding or Legal
Requirement relating to any other businesses conducted by Seller that also are
subject to regulation by such state regulatory commission.
27
Section 6.3 Governmental Filings.
(a) HSR Act Filing. Buyer and Seller shall comply promptly
with the notice and reporting requirements of the HSR Act. Buyer and Seller
shall comply substantially with any additional requests for information,
including requests for production of documents and production of witnesses for
interviews or depositions, made by the Antitrust Division of the United States
Department of Justice, the United States Federal Trade Commission or the
antitrust or competition law authorities of any other jurisdiction (the
"Antitrust Authorities"). Buyer shall exercise its commercially reasonable
efforts, and Seller shall cooperate fully with Buyer, to prevent the entry in
any Proceeding brought by an Antitrust Authority or any Governmental Body which
would prohibit, make unlawful or delay the consummation of the transactions
contemplated by this Agreement. Seller shall not oppose any efforts of Buyer,
including Buyer's proffer of consent to any Order, to complete lawfully the
transactions contemplated by this Agreement, and shall cooperate in good faith
with Buyer and the Antitrust Authorities to the same effect.
(b) Other Regulatory Filings. Buyer and Seller will, as soon
as reasonably practicable following the execution of this Agreement, prepare and
file with each Governmental Body, including the appropriate state regulatory
commission, requests for such Consents as may be necessary for the transfer of
the Assets in accordance with the terms of this Agreement. Buyer and Seller will
diligently pursue such Consents and will cooperate with each other in seeking
such Consents. To this end, the parties agree to make available the personnel
and other resources of their respective organizations in order to accomplish
actions reasonably required by them to obtain all such Consents.
(c) Actions Not Required. Notwithstanding anything to the
contrary contained in this Agreement, in connection with or as a condition to
receiving any Consent, neither Seller nor Buyer shall be required (A) to divest,
abandon, license or take similar action with respect to any assets (tangible or
intangible) of it or any of its respective Affiliates, or (B) to expend material
sums of money or grant any material financial or other accommodations (other
than as contemplated hereby).
Section 6.4 Citizens Marks. Buyer acknowledges and agrees with Seller
that Seller has the absolute and exclusive proprietary right to all names,
marks, trade names, trademarks and corporate symbols and logos incorporating
"Citizens" and "CZN" (collectively and together with all other names, marks,
trade names, trademarks and corporate symbols and logos owned by Seller or any
of its Affiliates, the "Citizens Marks"), all rights to which and the goodwill
represented thereby and pertaining thereto are being retained by Seller. Within
ninety (90) days after the Closing Date, Buyer shall cease using any Citizens
Xxxx and shall remove from the Assets any and all Citizens Marks. Thereafter,
Buyer shall not use any Citizens Xxxx in connection with the sale of any
products or services or otherwise in the conduct of its businesses. In the event
that Buyer breaches this Section 6.4, Seller shall be entitled to specific
performance of this Section 6.4 and to injunctive relief against further
violations, as well as any other remedies at law or in equity available to
Seller.
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Section 6.5 Acknowledgment by Buyer. In order to induce Seller to enter
into and perform this Agreement and the Related Documents, Buyer acknowledges
and agrees with Seller as follows:
(a) To the extent any representation or warranty of Seller
made herein is, to the knowledge of Buyer acquired prior to the date of
execution of this Agreement, untrue or incorrect, (i) Buyer shall have no rights
under this Agreement or any Related Documents by reason of such untruth or
inaccuracy, and (ii) any such representation or warranty by Seller shall be
deemed to be amended to the extent necessary to render it consistent with such
knowledge of Buyer. As used in this Agreement, the "knowledge of Buyer" means
the actual knowledge of Xxxx X. Xxxxxx, Buyer's Chief Financial Officer.
(b) EXCEPT AS SET FORTH IN THIS AGREEMENT AND ANY OTHER
DOCUMENT OR INSTRUMENT DELIVERED BY SELLER PURSUANT HERETO, NONE OF SELLER OR
ANY OF ITS AFFILIATES OR REPRESENTATIVES MAKES ANY REPRESENTATION OR WARRANTY AS
TO THE ACCURACY OR COMPLETENESS OF ANY INFORMATION, WRITTEN OR ORAL, FURNISHED
TO OR PREPARED AT THE REQUEST OF BUYER OR ANY OF ITS AFFILIATES OR
REPRESENTATIVES WITH RESPECT TO THE BUSINESS OR THE ASSETS.
(c) THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
AGREEMENT AND IN ANY OTHER DOCUMENT OR INSTRUMENT DELIVERED BY SELLER PURSUANT
HERETO CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF
SELLER TO BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND BY
THE RELATED DOCUMENTS THERE ARE NO REPRESENTATIONS, WARRANTIES, COVENANTS,
UNDERSTANDINGS OR AGREEMENTS, ORAL OR WRITTEN, IN RELATION THERETO BETWEEN THE
PARTIES OTHER THAN THOSE INCORPORATED HEREIN AND THEREIN. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT AND IN ANY
OTHER DOCUMENT OR INSTRUMENT DELIVERED BY SELLER PURSUANT HERETO, BUYER
DISCLAIMS RELIANCE ON ANY REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR
IMPLIED, BY OR ON BEHALF OF SELLER OR ITS AFFILIATES OR REPRESENTATIVES. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, BUYER ACKNOWLEDGES AND AGREES THAT,
EXCEPT AS PROVIDED IN SECTIONS 5.7, 5.11 AND 5.14, THERE ARE NO REPRESENTATIONS
OR WARRANTIES OF SELLER WITH RESPECT TO THE CONDITION OF THE ASSETS, COMPLIANCE
WITH ENVIRONMENTAL LAWS AND ENVIRONMENTAL PERMITS OR THE PRESENCE OR RELEASES OF
HAZARDOUS MATERIAL IN THE FIXTURES, SOILS, GROUNDWATER, SURFACE WATER OR AIR ON,
UNDER OR ABOUT OR EMANATING FROM ANY OF THE PROPERTIES OR ASSETS OF SELLER.
Section 6.6 Transition Plan. Within 30 days after the execution date of
this Agreement, Buyer shall deliver to Seller a list of its proposed
representatives to a joint transition team, which shall include expertise from
various functional specialties associated or involved in providing billing,
payroll and other support services provided to the Business by any automated or
manual process using facilities or employees that are not included among the
Assets or Transferred Employees. Seller will add its representatives to such
team within 15 days after receipt of Buyer's list. Such team will be responsible
for preparing as soon as reasonably practicable after the execution date of this
Agreement and at least 60 days prior to the Closing Date, and timely
implementing, a transition plan which will identify and describe substantially
all of the various transition activities that the parties will cause to occur
before and after the Closing and any other transfer of control matters that any
party reasonably believes should be addressed in such transition plan, including
(i) the payment, collection, remittance and/or other appropriate arrangements
with respect to the items addressed in Sections 3.1(a), 3.1(b) and 3.4; (ii)
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post-Closing inspection and maintenance of the gas pipeline serving the Nogales,
Arizona, generation facility; (iii) post-Closing access to and use of space in
the Nogales, Arizona, operations and maintenance facility by employees of the
Arizona Gas business of Seller and its successor; and (iv) identification,
selection and hiring by Buyer on or after the Closing Date of employees of
Seller who provide support services to the Business but who are not included
among the Active Employees. If requested by either party, the terms and
conditions governing such transition activities will be more fully set forth in
a Transition Agreement reasonably satisfactory to the parties. Buyer and Seller
shall use their commercially reasonable efforts to cause their Representatives
on such transition team to cooperate in good faith and take all reasonable steps
necessary to develop a mutually acceptable transition plan by no later than 120
days after the date of this Agreement.
Section 6.7 IDRB Obligations.
(a) Buyer's IDRB Obligations. Each party acknowledges that (x)
Seller is and after the Closing Date shall continue to be and shall remain the
primary obligor with respect to all IDRB Indebtedness and related Bonds
outstanding immediately after the Closing Date to the same extent as though no
sale of the Assets had been made and that Buyer shall have no payment
obligations with respect to such IDRB Indebtedness and related Bonds and (y) the
IDRB Documents require Seller not to take or permit to be taken any action which
would have the effect, directly or indirectly, of subjecting the interest on any
of the Bonds to federal or state income taxation. Accordingly, Buyer covenants
and agrees at Closing to execute and deliver to Seller an agreement
substantially in the form attached hereto as Exhibit 6.7, with respect to the
Bonds that will be outstanding after the Closing Date. Buyer represents,
warrants, covenants and agrees, that so long as any Bonds relating to any IDRB
Indebtedness are outstanding, (a) as the "successor in interest" to Seller (as
such term is used in Section 142(f)(3)(B) of the IRC), Buyer will not take or
permit to be taken any action the effect of which is to cause the Assets that
were acquired, constructed, improved or equipped with the proceeds of such Bonds
to be used as facilities that are not facilities for the local furnishing of
electric energy within the meaning of Sections 142(a)(8) and 142(f) of the IRC
or, if applicable, Section 103(b)(4)(E) of the Internal Revenue Code of 1954, as
amended and (b) Buyer has not made and shall not make an election pursuant to
Section 142(f)(4)(B) of the IRC to terminate tax-exempt bond financing by Buyer.
Notwithstanding anything in this Agreement to the contrary, in no event shall
Buyer be liable for or have any responsibility to Seller or others under this
Section 6.7 if (i) the Assets, or the use and operation thereof, fail to satisfy
the previously mentioned requirements of the IRC as of the Closing Date or (ii)
interest on any of the Bonds was not excluded from gross income for purposes of
federal or state income taxation as of the Closing Date. Buyer acknowledges and
agrees that Seller's bond counsel may rely on Buyer's representations,
warranties and covenants as hereinabove provided for the purpose of rendering
legal opinions, as required by the IDRB Documents as a precondition to the sale
by Seller of such Assets, to the effect that the sale of such Assets will not
result in the inclusion of the interest on the Bonds in the gross income of the
recipient for purposes of federal income taxation. Nothing in this Agreement is
intended to nor shall it be interpreted as (i) an assignment to, and assumption
by, Buyer of any of the IDRB Documents, or (ii) as an undertaking or agreement
by Buyer to assume, guarantee or pay any of Seller's loan or other payment
obligations pursuant to the IDRB Documents. Seller shall not refund any Bonds or
take any action that might cause any of the Bonds to be considered "reissued"
for the purposes of Section 103 of the IRC or extend the maturity date of any of
the Bonds without the express written consent of Buyer, which consent may be
withheld in Buyer's sole and absolute discretion. In the event that the interest
on any of the Bonds becomes subject to federal or state income tax prior to
Closing, Buyer's IDRB Obligations and Seller's covenants set forth herein, in
each case with respect to such Bonds, shall be null and void ab initio.
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(b) IDRB Construction Funds. The construction funds that may
be available after the Closing Date that are held by the trustees of the Bonds
(collectively, the "Construction Fund") are listed in Schedule 5.12. From time
to time after the Closing Date, at the request of Seller, Buyer shall provide
written notice to Seller, and Seller promptly shall requisition from the
applicable bond trustee disbursements from the applicable Construction Fund in
such amount(s) which shall not exceed the amount(s) then available in the
applicable Construction Fund. Seller shall prepare and deliver to Buyer a draft
of such written notice. Such written notice shall include the information and
representations required by the Loan Agreement included among the IDRB Documents
relating to the applicable Construction Fund (including a disbursement request
proposed by Seller and for a permitted use reasonably acceptable to Buyer). Upon
Buyer's receipt of the Funds relating to a requested disbursement from the
Construction Fund, Buyer shall promptly remit to Seller an amount equal to the
amount so disbursed by the bond trustee. Buyer shall diligently complete the
construction of the facilities relating to such Construction Fund and promptly
notify Seller in writing when the construction of such facilities has been
completed. Seller shall then certify to the applicable trustee of the related
Bonds in accordance with the applicable Loan Agreement that such construction
has been completed. Seller agrees not to use any Construction Fund in any manner
prohibited by the IDRB Documents relative to such Construction Fund. Buyer shall
have no liability to Seller or any other Person for any action of Buyer in
compliance with this Section 6.7(b) which causes interest on any of the Bonds to
become subject to federal or state income taxation.
(c) Consents and Legal Opinions. The parties shall use their
respective commercially reasonable efforts to obtain all Consents and legal
opinions as may be required under the IDRB Documents to enable Seller to retain
all IDRB Indebtedness and to sell the Assets to Buyer without the result that
the interest on the Bonds will be included in the gross income of the recipient
for purposes of federal income taxation.
Section 6.8 Title Insurance. Prior to Closing, Seller shall cooperate
with Buyer and use commercially reasonable efforts to assist Buyer if Buyer
desires to obtain ALTA title insurance commitments (collectively, the "Title
Commitments," and each a "Title Commitment"), in final form, from one or more
title insurance companies (collectively, the "Title Company"), committing the
Title Company (subject only to the satisfaction of any industry standard
requirements contained in the Title Commitment) to issuing ALTA (or its local
equivalent) form of title insurance policies insuring good, valid, indefeasible
fee simple title to the owned Real Estate in Buyer, in all cases, at Buyer's
sole expense and in the respective amounts that Buyer requests prior to Closing,
subject to no Encumbrances or other exceptions to title other than Permitted
Encumbrances (collectively the "Title Policies"). On or prior to the Closing
Date, Seller shall execute and deliver, or cause to be executed and delivered,
to the Title Company, at no cost to Seller, any customary affidavits, standard
gap indemnities and similar documents reasonably requested by the Title Company
in connection with the issuance of the Title Commitments or the Title Policies;
provided that such efforts and Buyers' request for Title Policies or Title
Commitments shall, in no event, result in any delay in the consummation of the
transactions contemplated by this Agreement.
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ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Seller's Conditions Precedent to Closing. The obligation of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to fulfillment at or prior to the Closing of the following conditions:
(a) Representations and Warranties True as of the Closing
Date. Buyer's representations and warranties in this Agreement shall have been
true and correct in all material respects (except for representations and
warranties that contain a qualification as to materiality, which shall have been
true and correct in all respects) as of the date of this Agreement and shall be
true and correct in all material respects (except for representations and
warranties that contain a qualification as to materiality, which shall be true
and correct in all respects) as of the Closing Date as if made on the Closing
Date, subject to changes expressly contemplated and permitted by this Agreement,
except that representations and warranties made as of, or in respect of, only a
specified date or period shall be true and correct in all material respects as
of, or in respect of, such date or period.
(b) Compliance with Agreements. The covenants, agreements and
conditions required by this Agreement to be performed and complied with by Buyer
shall have been performed and complied with in all material respects prior to or
at the Closing Date.
(c) Certificate. Buyer shall execute and deliver to Seller a
certificate of an authorized officer of Buyer, dated the Closing Date, stating
that the conditions specified in Sections 7.1(a) and 7.1(b) of this Agreement
have been satisfied.
(d) Governmental Approvals and Other Consents. The Arizona
Corporation Commission shall have issued an Order approving the transactions
contemplated hereby, the terms and conditions of such Order shall be acceptable
in all material respects to Seller in its reasonable discretion and shall have
no significant adverse effect on Seller's acquisition and divestiture activities
in the State of Arizona (including the divestiture of the Assets), and such
Order shall have become a Final Order. Seller also shall have obtained all other
Consents of Governmental Bodies and other Persons which are required in order to
consummate the transactions contemplated hereby and to transfer the Assets to
Buyer without incurring material liability under any Legal Requirement, Order or
Contract.
(e) HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or have
been terminated without there being in effect a Legal Requirement enjoining or
restraining consummation of such transaction.
(f) Injunctions. On the Closing Date, there shall be no
Proceedings pending which seek, and no Orders which operate, to restrain, enjoin
or otherwise prevent the consummation of the transactions contemplated by this
Agreement.
(g) Opinion of Counsel. On the Closing Date, Seller shall have
received from counsel to Buyer an opinion in the form of Exhibit 7.1(g).
(h) Documents. Buyer shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder on or before the Closing Date, including pursuant to
Section 8.1, and shall have taken such actions as Seller may have requested
pursuant to Section 11.2 hereof.
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(i) IDRB Indebtedness. Seller shall have obtained all Consents
and legal opinions required under the IDRB Documents to enable Seller to retain
the IDRB Indebtedness until maturity and to sell the Assets to Buyer without the
result that the interest on the Bonds will be included in the gross income of
the recipient for purposes of federal income taxation, and Buyer shall have duly
executed and delivered all of the instruments contemplated by Section 6.7(a) and
Section 8.1(d).
(10) Related Closings. The transactions contemplated in the
Related Purchase Agreement(s) shall have been consummated, or Seller shall be
reasonably satisfied that the consummation of those transactions will occur
concurrently with the Closing.
Section 7.2 Buyer's Conditions Precedent to Closing. The obligation of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to fulfillment at or prior to the Closing of the following conditions:
(a) Representations and Warranties True as of the Closing
Date. Seller's representations and warranties in this Agreement shall have been
true and correct in all material respects (except for representations and
warranties that contain a qualification as to materiality, which shall have been
true and correct in all respects) as of the date of this Agreement and shall be
true and correct in all material respects (except for representations and
warranties that contain a qualification as to materiality, which shall be true
and correct in all respects) as of the Closing Date as if made on the Closing
Date, subject to changes expressly contemplated and permitted by this Agreement;
except (i) that representations and warranties made as of, or in respect of,
only a specified date or period shall be true and correct in all material
respects as of, or in respect of, such date or period, and (ii) to the extent
that any failure of such representations and warranties to be true and correct
as aforesaid when taken in the aggregate would not have a Material Adverse
Effect.
(b) Compliance with Agreements. The covenants, agreements and
conditions required by this Agreement to be performed and complied with by
Seller shall have been performed and complied with in all material respects
prior to or at the Closing Date, except where the failure to so perform or
comply when taken in the aggregate would not have a Material Adverse Effect.
(c) Certificate. Seller shall execute and deliver to Buyer a
certificate of an authorized officer of Seller, dated the Closing Date, stating
that the conditions specified in Sections 7.2(a) and 7.2(b) of this Agreement
have been satisfied.
(d) Governmental Approvals. The Arizona Corporation Commission
shall have issued an Order approving the transactions contemplated hereby, such
Order shall not contain any restrictions or conditions (other than those in
effect on the date of this Agreement or requiring that the regulatory treatment
with respect to the Business in existence as of the date of this Agreement
applicable to Seller be continued following the Closing) which would have a
material adverse effect on the operation, financial condition or results of
operations of the Business, and such Order shall have become a Final Order. In
addition, Seller shall have obtained all other Consents of Governmental Bodies
and other Persons which are required in order to consummate the transactions
contemplated hereby other than those the failure of which to obtain would not
have a material adverse effect on the operation, financial condition or results
of operations of the Business.
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(e) HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or have
been terminated.
(f) Injunctions. On the Closing Date, there shall be no
Proceedings pending which seek, and no Orders which operate, to restrain, enjoin
or otherwise prevent the consummation of the transactions contemplated by this
Agreement.
(g) Opinion of Counsel. On the Closing Date, Buyer shall have
received from L. Xxxxxxx Xxxxxx XX, Vice President and General Counsel of
Seller, an opinion in the form of Exhibit 7.2(g) hereto.
(h) Documents. Seller shall have delivered all of the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 8.1, and shall have
made arrangements reasonably satisfactory to Buyer to deliver to Buyer as
promptly as practicable after the Closing such records (including customer and
employee records) necessary to own and operate the Business.
(i) No Material Adverse Change. Since the date of execution of
this Agreement, no Material Adverse Effect shall have occurred that has
continuing effect as of the Closing Date.
ARTICLE VIII
CLOSING
Section 8.1 Closing. The closing of the purchase and sale of the Assets
(the "Closing") will take place at the offices of Xxxxxxxxxx and Xxxxx, L.L.P.,
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxxxxxxx, X.X. 00000, on the last
calendar day of the month in which the conditions specified in Sections 7.1(d)
and 7.2(d) have been satisfied, unless another time, date and place is agreed to
in writing by the parties. The date of the Closing is referred to in this
Agreement as the "Closing Date." The transactions to be consummated on the
Closing Date shall be deemed to have been consummated as of 11:59 p.m. on the
Closing Date. At the Closing the following events shall occur, each event being
deemed to have occurred simultaneously with the other events.
(a) Xxxx of Sale. Seller and Buyer shall execute and deliver
the Xxxx of Sale and Assignment and Assumption Agreement in the form of Exhibit
8.1(a) hereto (the "Xxxx of Sale").
(b) Payment of Purchase Price. As provided below, Buyer will
pay to Seller an amount equal to the Estimated Purchase Price by wire
transferring such amount, in lawful money of the United States of America in
immediately available funds, to such account as Seller shall have designed by
notice to Buyer. If the Closing Date is not a business day on which financial
institutions are open and operating, then on or before the last business day on
which financial institutions are open and operating before the Closing Date,
Buyer shall deliver the Estimated Purchase Price to Buyer's lead bank (the
"Escrow Agent") in immediately available funds in U.S. dollars. Upon receipt,
the Escrow Agent shall invest the Estimated Purchase Price in an
interest-bearing account mutually agreed upon by Seller and Buyer. At Closing,
Buyer shall sign and deliver to Seller a statement which confirms that the
Closing has occurred and which instructs the Escrow Agent to transfer to Seller
the funds representing the Estimated Purchase Price, plus an amount representing
the interest earned after the Closing Date until the date the funds are
transferred, to an account that Seller shall designate at least two (2) business
days prior to the date the funds are required to be transferred hereunder. The
Escrow Agent shall refund the balance to Buyer. The fees and expenses of Escrow
Agent shall be paid one-half by Seller and one-half by Buyer.
34
(c) Other Related Documents. To the extent consistent with the
other provisions of this Agreement, Seller (or the appropriate Affiliate of
Seller) and Buyer shall execute and deliver such other Related Documents
(including special warranty deeds, conveyances, certificates of title, bills of
sale, assignment and assumption instruments and FIRPTA affidavits) reasonably
requested by a party that are necessary in order to satisfy any applicable Legal
Requirements relating to the transfer of the Assets to Buyer or the assumption
of the Assumed Liabilities by Buyer or which are customarily given in the State
of Arizona to accomplish transfers of assets of the type involved; provided,
however, that nothing in this clause (c) shall obligate Seller or any Affiliate
of Seller to execute or deliver any document that affects, in a manner adverse
to Seller and in a manner not required by the terms of this Agreement, Seller's
liability to Buyer as expressed herein and in the Xxxx of Sale.
(d) IDRB Indebtedness. Buyer and Seller shall execute and
deliver the IDRB Obligations Agreement contemplated by Section 6.7(a) to the
extent not previously executed and delivered by Buyer and Seller.
(e) Office Leases. If requested by Buyer at least sixty (60)
days before Closing, Buyer and Seller (or its appropriate Affiliate) will
commence good faith negotiations regarding Buyer's short-term lease (not to
exceed 180 days from the Closing Date) of office space in Seller's Kingman,
Arizona, and Havasu, Arizona, office buildings, portions of which are used by
Seller in connection with the Business, on commercially reasonable terms
acceptable to Buyer and Seller.
(f) FIRPTA Certificate. Seller shall execute and deliver to
Buyer a certification of nonforeign status within the meaning of Treasury
Regulations Section 1.1445-2.
ARTICLE IX
TERMINATION
Section 9.1 Termination Rights. This Agreement may be terminated
in its entirety at any time prior to the Closing:
(a) By the mutual written agreement of Seller and Buyer;
(b) By Buyer, on the one hand, or Seller, on the other hand,
in writing if there shall be in effect a nonappealable Order prohibiting ,
enjoining or restricting the transactions contemplated by this Agreement;
(c) By Buyer, upon the breach in any material respect of any
of the representations and warranties of Seller contained herein or in the
failure by Seller to perform and comply in any material respect with any of the
agreements and obligations required by this Agreement to be performed or
complied with by Seller, provided that such breach or failure is reasonably
likely to result in a Material Adverse Effect and is not cured or otherwise
addressed by Seller in a manner reasonably acceptable to Buyer within 30 days of
Seller's receipt of a written notice from Buyer that such a breach or failure
has occurred (or significant efforts have not been commenced to cure such
misrepresentation or breach if it is susceptible to cure but not capable of
being cured within such 30 days);
35
(d) By Seller, upon the breach in any material respect of any
of the representations and warranties of Buyer contained herein or the failure
by Buyer to perform and comply in any material respect with any of the
agreements and obligations required by this Agreement to be performed or
complied with by Buyer, provided that such breach or failure is not cured or
otherwise addressed by Buyer in a manner reasonably acceptable to Seller within
30 days of Buyer's receipt of a written notice from Seller that such a breach or
failure has occurred (or significant efforts have not been commenced to cure
such misrepresentation or breach if it is susceptible to cure but not capable of
being cured within such 30 days);
(e) By either party in writing if the Closing has not occurred
within fifteen (15) months (twelve (12) months if the Letter of Credit is not
replaced with one that expires no earlier than July 31, 2001) after the
execution date of this Agreement; provided, however, that the right to terminate
this Agreement under this Section 9.1(e) will not be available to any party that
is in material breach of its representations, warranties, covenants or
agreements contained herein; and provided, further, that if Closing has not
occurred within such period of time because the conditions precedent to Closing
set forth in Sections 7.1(d) and 7.2(d) have not been fulfilled, then such
period of time shall be automatically extended by an additional two (2) months;
(f) By Seller or Buyer, as appropriate, if any Governmental
Body whose Consent is required to fulfill a condition precedent to Closing set
forth in Section 7.1(d) (with respect to Seller) or in Section 7.2(d) (with
respect to Buyer) has affirmatively indicated that such Consent will not be
given or will contain terms or conditions (or, if such Consent has been
obtained, contains terms or conditions) that, in the reasonable business
judgment of Seller or Buyer, as appropriate, will result in a condition
precedent to Closing set forth in Section 7.1(d) (with respect to Seller) or in
Section 7.2(d) (with respect to Buyer) not being satisfied; or
(g) By Seller if both (i) the NCSC fails to advance loan
proceeds to Buyer with which to fund the payments required to be made by Buyer
at Closing or the NCSC affirmatively indicates, for no reason or for any reason
other than the proper termination of this Agreement pursuant to any other
provision of this Section 9.1, that such funding will not be provided by the
NCSC and (ii) Buyer is unable to arrange, to Seller's reasonable satisfaction,
replacement funding from any other source within forty-five (45) days after the
occurrence of the event described in the preceding clause (i).
(8) By Seller if a Related Purchase Agreement is terminated
for any reason other than due to the failure of the applicable State regulatory
commission to Consent to the transactions contemplated by such agreement because
of concerns about Buyer's nonfinancial qualifications or capabilities.
36
Section 9.2 Limitation on Right to Terminate: Effect of Termination.
(a) A party shall not be allowed to exercise any right of
termination pursuant to Section 9.1 if the event giving rise to the termination
right shall be due to the willful failure of such party seeking to terminate
this Agreement to perform or observe in any material respect any of the
covenants or agreements hereof to be performed or observed by such party.
(b) If this Agreement is terminated as permitted under Section
9.1, such termination shall be without liability of or to any party to this
Agreement, or any shareholder or Representative of such party; provided,
however, that if such termination shall result from the willful failure of any
party to fulfill a condition to the performance of any other party or to perform
a covenant of this Agreement or from a material and willful breach by any party
to this Agreement (it being understood that the failure to cure a breach shall
not, by itself, be a willful breach of this Agreement), then such party shall
(subject to the limitation set forth in the last sentence of this Section
9.2(b)) be fully liable for any and all damages sustained or incurred by the
other party. If prior to Closing either party to this Agreement resorts to legal
proceedings to enforce this Agreement, the prevailing party in such proceedings
shall be entitled to recover all costs incurred by such party including
reasonable attorney's fees, in addition to any other relief to which such party
may be entitled; provided, however, and notwithstanding anything to the contrary
in this Agreement, in no event shall either party be entitled to receive any
punitive, indirect or consequential damages.
(c) If (i) Seller terminates this Agreement pursuant to
Section 9.1(d) or (ii) this Agreement is terminated by either party pursuant to
Section 9.1(e) or 9.1(f) because the requisite Consent from the applicable state
regulatory commission has not been obtained, or because such Governmental Body
has affirmatively indicated that its Consent will not be given, due in whole or
in part to concerns about Buyer's qualifications or capabilities, unless such
Governmental Body also has affirmatively indicated that its Consent is being
withheld due in part to concerns about Seller's operation of the Business or
ownership of the Assets or (iii) Seller terminates this Agreement pursuant to
Section 9.1(g), then Seller may present a sight draft under the Letter of
Credit, and thereby retain either all of the Deposit (if clause (i) or (iii) is
applicable) or $6,300,000 (if clause (ii) is applicable), (or, if the Letter of
Credit does not permit Seller to present a sight draft in such circumstances,
then Buyer shall pay to Seller in cash an amount equal to the Deposit or
$6,300,000, as the case may be, within five (5) business days after the
effective date of termination of this Agreement) in either case, as liquidated
damages free of any claims by Buyer or any other Person with respect thereto
(the parties hereby acknowledging that the extent of damages to Seller
occasioned by such breach or default or failure by Buyer would be impossible or
extremely difficult to ascertain and that the amount to be paid by Seller is a
fair and reasonable estimate of such damages under the circumstances). If this
Agreement is terminated for any reason other than as set forth in the preceding
sentence, then Seller shall promptly deliver the Letter of Credit to Buyer, free
of any claims by Seller or any other Person with respect thereto.
ARTICLE X
EMPLOYEE MATTERS
Section 10.1 Employment of Transferred Employees.
(a) Schedule 10.1 lists each division, and the total number of
salaried and hourly, nonunion and union, employees actively employed as of the
date of this Agreement in each division by Seller or its Affiliates whose
primary duties relate to the Business ("Active Employees"). As of the Closing
Date, Buyer shall employ all Active Employees of Seller employed in the Business
37
being acquired ("Transferred Employees") in the same comparable positions, and
at the same compensation level (including wages, salary and bonuses) as were in
effect with Seller immediately prior to the Closing Date. Buyer reserves the
right to restructure positions and functions as it deems appropriate so long as
reassignment does not result in materially diminished responsibilities or a
reduction in compensation. For purposes of the preceding sentence, "Active
Employees" shall include all full-time and part-time employees, employees on
military leave, maternity leave, leave under the Family and Medical Leave Act of
1993, on short-term disability, on layoff with recall rights, and employees on
other leaves of absences where there is a legal or contractual right to
reinstatement. Notwithstanding the foregoing, nothing in this Agreement shall
operate to prevent or prohibit Buyer from making changes in compensation of
Transferred Employees based on demotions arising for cause.
(b) Prior to the execution date of this Agreement, Seller has
delivered to Buyer a list of the persons who would have been Transferred
Employees had the Closing Date occurred on December 31, 1999, showing the
following information for each such person: (i) the name of each such person;
(ii) the name of his or her current employer; (iii) his or her current base pay,
1998 bonus that was paid in 1999 and the projected 1999 bonus that will be paid
in 2000; (iv) his or her hire date, any rehire date (if available) and years of
service; (v) his or her then-current position and job title; (vi) whether such
employee is subject to a collective bargaining agreement or represented by a
labor organization and, if so, the name of the union and local, (vii) whether
such employee is on military leave, maternity leave, leave under the Family and
Medical Leave Act of 1993, short-term disability, on layoff with recall rights,
or on other leave of absence with a legal or contractual right to reinstatement.
Seller shall update such list as of the end of each calendar quarter occurring
between the execution date hereof and the Closing Date, in each case assuming
the Closing Date had occurred on such date, and shall deliver such updated lists
to Buyer within ten (10) days after the end of each such calendar quarter.
Section 10.2. Assumption of Collective Bargaining Agreement
Obligations. On and after the Closing Date, Buyer, shall assume all of the
Seller's obligations under, and be bound by the provisions of, each collective
bargaining agreement to the extent of provisions covering Transferred Employees.
Each collective bargaining agreement shall be identified on a Schedule 10.2 to
be prepared by Seller and submitted to Buyer on or before the Closing Date.
Seller shall cooperate with Buyer in Buyer's efforts to contact the unions
representing Transferred Employees. Seller may extend, renew or enter into a new
Contract to replace any collective bargaining agreement that will expire prior
to December 31, 2000, provided that Seller shall consult with Buyer regarding
the terms and conditions of any such extension, renewal or replacement of any
such collective bargaining agreement. Notwithstanding the foregoing provisions
of this Section 10.2, Buyer shall not be obligated to assume any new collective
bargaining agreement that contains terms and conditions that, when taken as a
whole, are materially more onerous on the employer than the terms and
conditions, taken as a whole, of the collective bargaining agreement that was
replaced by such new collective bargaining agreement.
Section 10.3 Cessation of Participation in Seller's Plans; Proration of
Bonuses. From and after the Closing Date, Transferred Employees shall accrue no
additional benefits under any Employee Benefit Plan, or Employee Plan of Seller
or its Affiliates. Seller and Buyer shall pro-rate the obligation to pay any
bonuses declared by Seller after the Closing Date that would have been payable
to the Transferred Employees had the Transferred Employees remained employed by
Seller or its Affiliates throughout the calendar year in which the Closing Date
occurs, in accordance with the provisions of any Employee Benefit Plan or
Employee Plan of Seller under which such bonus would have been paid. For
Transferred Employees entitled to such bonus, Buyer shall be obligated to pay
that portion of each such bonus determined by multiplying the amount of such
bonus by a fraction, the numerator of which is the number of days from and after
the Closing Date through the end of the calendar year in which the Closing Date
occurs, and the denominator of which is 365. Seller shall be obligated to pay
the balance of any such bonuses.
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Section 10.4 Similarity of Benefit Packages. As of the Closing Date,
and except as otherwise expressly provided in this Article X, Buyer shall
include each Transferred Employee in a benefit package providing benefits that
are in the aggregate substantially similar to those provided by Seller to such
Transferred Employees immediately prior to the Closing Date. Notwithstanding the
foregoing, to the extent that one or more collective bargaining agreements being
assumed by Buyer contains provisions pertaining to employee benefits, Buyer
shall provide the Transferred Employees covered by such agreements with benefits
that are identical to those required to be provided under the terms of such
agreements. Except as otherwise expressly provided in this Article X, Buyer
shall treat all service and compensation credited to each such Transferred
Employee as if such service and compensation had been rendered to, and paid by,
Buyer for all purposes under Buyer's benefit plans, arrangements, and policies.
Section 10.5 Defined Benefit Pension Plan.
(a) At least fifteen days prior to the Closing Date, Seller
shall take any and all actions necessary to cease benefit accruals and fully
vest all Transferred Employees in their accrued benefits under the Citizens
Pension Plan ("Seller's Pension Plan"). Seller shall retain all liabilities and
assets for pension benefits accrued through the Closing Date by Transferred
Employees and retirees of the Business under Seller's Pension Plan.
(b) As of the Closing Date, Buyer shall cause all union
Transferred Employees to be included in a qualified defined benefit pension plan
providing benefits identical to the benefits provided under the Seller's Pension
Plan ("Buyer's Pension Plan"). Buyer shall take all actions necessary to cause
Buyer's Pension Plan to recognize the service that all union Transferred
Employees had under Seller's Pension Plan for purposes of such Employees'
eligibility to participate, vesting, attainment of retirement dates, subsidized
benefits, and entitlement to optional forms of payment.
Section 10.6 401(k) Plan.
(a) Buyer shall take all action necessary to ensure that, as
of the Closing Date, it includes Transferred Employees in a qualified 401(k)
plan providing for matching contributions at least equivalent to that provided
to the Transferred Employee under Citizens 401(k) Savings Plan ("Seller's 401(k)
Plan") immediately prior to the Closing Date. Buyer shall take all actions
necessary to cause Buyer's 401(k) Plan to recognize the service that the
Transferred Employees had in Seller's 401(k) Plan for purposes of determining
such Employees' eligibility to participate, vesting, attainment of retirement
dates, contribution levels and, if applicable, eligibility for optional forms of
benefit payments. Buyer shall cause the trustee of Buyer's 401(k) Plan to accept
transfers and direct rollovers from Seller's 401(k) Plan of the vested account
balances of Transferred Employees, including transfers of outstanding loan
balances and related promissory notes, subject to compliance with applicable
law.
(b) Seller shall vest Transferred Employees in their account
balances under Seller's 401(k) Plan as of the Closing Date. Seller shall direct
the trustee of Seller's 401(k) Plan to transfer to the trustee of Buyer's 401(k)
Plan an amount of cash equal to the value of the account balances of the
Transferred Employees under Seller's 401(k) Plan; except that to the extent that
the account balances consist of outstanding loans, Seller shall direct the
trustee of Seller's 401(k) Plan to transfer to the trustee of Buyer's 401(k)
Plan the promissory notes and related documents evidencing such loans.
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(c) After the transfer of assets and liabilities pursuant to
this Section, Buyer shall assume all liabilities for the benefits payable with
respect to Transferred Employees under Seller's 401(k) Plan, and Seller and
Seller's 401(k) Plan shall have no liability for such benefits.
(d) In connection with the transfer of assets and liabilities
under this Section, Seller and Buyer shall cooperate in making all appropriate
filings, and providing all applicable notices, required by the IRC or ERISA.
Buyer shall deliver to Seller a copy of Buyer's 401(k) Plan, and a copy of the
most recent determination letter from the IRS with respect to such Plan,
together with a certification to the effect that no events have occurred since
the date of the determination letter that would adversely affect the Plan's
qualified status.
Section 10.7 Welfare Benefits.
(a) Buyer shall take all action necessary and appropriate to
ensure that, as of the Closing Date, Buyer maintains employee welfare benefit
plans (including retiree medical benefits) for the benefit of Transferred
Employees that, in the case of nonunion Transferred Employees are, in the
aggregate, comparable to those benefits provided by Seller under its
corresponding welfare benefit plans (the "Buyer's Nonunion Welfare Plans"), and
in the case of union Transferred Employees are identical to those benefits
provided to union Transferred Employees under Seller's corresponding welfare
benefit plans (the "Buyer's Bargained Welfare Plans"), as in effect immediately
prior to the Closing Date. The Buyer's Nonunion Welfare Plans and the Buyer's
Bargained Welfare Plans are hereinafter referred to collectively as the "Buyer
Welfare Plans." For purposes of determining eligibility to participate, and
entitlement to benefits, in each Buyer Welfare Plan, each Transferred Employee
shall be credited with service, determined under the terms of the corresponding
welfare plans maintained by Seller on the Closing Date (hereinafter referred to
collectively as the "Seller Welfare Plans"). Any restrictions on coverage for
pre-existing conditions, actively at work requirements, waiting periods, and
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived in the Buyer Welfare Plans for Transferred Employees, and Transferred
Employees shall receive credit under the Buyer Welfare Plans for co-payments,
payments under a deductible limit made by them, and for out-of-pocket maximums
applicable to them during the plan year of the Seller Welfare Plan in which the
Closing Date occurs. As soon as practicable after the Closing Date, Seller shall
deliver to Buyer a list of the Transferred Employees who had credited service
under a Seller Welfare Plan, together with each such Transferred Employee's
service, co-payment, deductible and out-of-pocket payment amounts under such
plan.
(b) Buyer shall provide or cause to be provided retiree
medical, dental, and life benefits to each retiree of the Business identified in
Schedule 10.7 as updated as of the Closing Date (the "Retirees"), to each
Transferred Employee who is considered to be a "grandfathered employee" (as
hereinafter defined), and to each union Transferred Employee who otherwise is
eligible for such retiree benefits, under the same terms and conditions as
applied to such Retiree or Transferred Employee immediately prior to the Closing
Date, and Seller shall have no obligation or liability, contingent or otherwise,
to provide retiree medical, dental or life benefits to any such Retiree or
Transferred Employee on or after the Closing Date. For purposes of this Section
10.7, a "grandfathered employee" is a union or nonunion Transferred Employee,
who was at least age 55 with at least 10 years of service as defined in the
Seller's Pension Plan by December 31, 1997, and who retires after December 31,
1997. Schedule 10.7 identifies each Active Employee who is a "grandfathered
employee" and each union Active Employee who otherwise is eligible for such
retiree benefits. Buyer agrees not to terminate or materially modify those
post-retirement benefit provisions covering "grandfathered" Transferred
Employees, eligible union Transferred Employees, Retirees, their spouses and
dependents that are in effect immediately prior to the Closing Date.
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(c) Within sixty (60) days after the Closing, Seller agrees to
transfer to an exempt trust established by Buyer under Section 501(c)(9) of the
IRC ("Buyer's VEBA") the amount held under any trust established by Seller under
Section 501(c)(9) of the IRC ("Seller's VEBA") to fund post-retirement health
care and life insurance benefits for the Business. Such amount shall be
determined based upon Seller's internal recordkeeping. Buyer agrees that Buyer's
VEBA will apply an amount at least equal to the sum of the assets transferred
from Seller's VEBA (and earnings thereon calculated at the rate of return
generated by Buyer's VEBA) to provide post-retirement health care and life
insurance benefits after the Closing Date to the Retirees and, as applicable,
the Transferred Employees who become eligible for such benefits after Closing.
Upon Closing, Buyer shall be responsible for all obligations of Seller to
provide post-retirement health care and life insurance benefits to such
Transferred Employees and Retirees, and Seller and Seller's VEBA shall cease to
have any liability, contingent or otherwise, for such benefits.
Section 10.8 Flexible Spending Accounts. Seller shall transfer to
Buyer's flexible benefits plan any balances standing to the credit of
Transferred Employees under Seller's flexible benefits plan as of the Closing
Date. Seller shall provide to Buyer prior to the Closing Date a list of those
Transferred Employees that have participated in the health or dependent care
reimbursement accounts of Seller, together with their elections made prior to
the Closing Date with respect to such account, and balances standing to their
credit as of the Closing Date.
Section 10.9 Employment Agreements. Buyer shall assume all obligations
of each employment agreement to which Seller or its Affiliates is a party and
which covers any Transferred Employee immediately prior to the Closing Date.
Section 10.10 Vacation. Seller shall pay to Transferred Employees any
"banked" vacation credited to them on or prior to the Closing Date. On or after
the Closing Date, Buyer shall provide to each Transferred Employee vacation in
an amount equal to the Transferred Employee's vacation entitlement for the year
of the Closing reduced by the number of vacation days that such Transferred
Employee has taken on or before the Closing.
Section 10.11 Severance. In the event that Buyer terminates the
services of any Transferred Employee within twelve (12) months following the
Closing Date without cause, Buyer shall provide to any such Transferred Employee
severance or separation pay benefits that are at least equal to the benefits
that would have been paid by Seller had Seller continued to employ such
Transferred Employee through such twelve month period ending on the employee's
date of termination from Buyer; provided, however, that if a collective
bargaining agreement that is applicable to a union Transferred Employee would
provide for a greater benefit to be paid by Buyer, the terms and conditions of
such agreement shall instead be applicable. "Cause" for termination shall
consist of: (a) any act of dishonesty or fraud; (b) an employee's conviction of
a crime involving fraud, embezzlement or any other act of moral turpitude; (c)
an employee's gross negligence or willful misconduct in the performance of his
duties; (d) an employee's engagement in acts seriously detrimental to the
Business or reputation of Buyer; (e) an employee's failure to abide by lawful
policies of Buyer; and (f) the employee's failure to abide by the directives of
the employee's superior.
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ARTICLE XI
TAX MATTERS
Section 11.1 Purchase Price Allocation. Buyer and Seller shall use
their good faith efforts to agree upon the allocation (the "Allocation") of the
Purchase Price, the Assumed Liabilities and other relevant items (including, for
example, adjustments to the Purchase Price) to the individual assets or classes
of assets as required by Section 1060 of the IRC and the Treasury Regulations
promulgated thereunder. If Buyer and Seller agree to such Allocation, Buyer and
Seller covenant and agree that, except to the extent that the IRS or other
Governmental Body successfully challenges such Allocation, (i) the values
assigned to the assets by the parties' mutual agreement shall be conclusive and
final for all purposes, (ii) Buyer and Seller shall file all federal Tax
Returns, including IRS Form 8594, in accordance with such Allocation, and (iii)
neither Buyer nor Seller will take any position before any Governmental Body or
in any Proceeding that is in any way inconsistent with such Allocation.
Notwithstanding the foregoing, if Buyer and Seller cannot agree to an
Allocation, Buyer and Seller covenant and agree to file, and to cause their
respective Affiliates to file, all Tax Returns and schedules thereto (including,
for example, amended returns, claims for refund, and those returns and forms
required under Section 1060 of the IRC and any Treasury regulations promulgated
thereunder) consistent with each of such party's good faith Allocations, unless
otherwise required because of a change in any Legal Requirement.
Section 11.2 Cooperation with Respect to Like-Kind Exchange. Buyer
agrees that Seller may, at Seller's election prior to the Closing Date, direct
Buyer to acquire any portion of the Assets by delivering all or a portion of the
Purchase Price to a "qualified intermediary" (as defined in Treasury Regulations
ss.1.1031(k) - (l)(g)(4)) as to assist Seller in structuring the relinquishment
of the Assets to qualify as part of a like-kind exchange of property covered by
Section 1031 of the IRC. If Seller so elects, Buyer shall cooperate with Seller
(but without being required to incur any out-of-pocket costs in the course
thereof) in connection with Seller's efforts to effect such like-kind exchange,
which cooperation shall include, without limitation, taking such actions as
Seller reasonably requests in order to enable Seller to qualify such transfer as
part of a like-kind exchange of property covered by Section 1031 of the IRC
(including any actions required to facilitate the use of a "qualified
intermediary"), and Buyer agrees that Seller may assign all or part of its
rights and delegate all or part of its obligations under this Agreement to a
person or entity acting as a qualified intermediary to the extent necessary to
qualify the transfer of the Assets as part of a like-kind exchange of property
covered by Section 1031 of the IRC, provided, however, that no such assignment
shall relieve Seller of any of its obligations under this Agreement. Buyer and
Seller agree in good faith to use reasonable efforts to coordinate the
transactions contemplated by this Agreement with any other transactions engaged
in by either Buyer or Seller; provided that such efforts are not required to
include an unreasonable delay in the consummation of the transactions
contemplated by this Agreement. Seller agrees to pay any additional Transaction
Taxes that may be imposed as a result of any like-kind exchange contemplated by
this Section 11.2 and to reimburse Buyer for any additional out-of-pocket legal
fees and expenses that may be incurred by Buyer in connection with any such
exchange.
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Section 11.3 Transaction Taxes. Buyer and Seller shall each bear and be
responsible for paying one-half of any sales, use, transfer, documentary,
registration (other than any annual registration fees), business and occupation
and other similar Taxes (including related penalties (civil or criminal),
additions to tax and interest) imposed by any Governmental Body with respect to
the transfer of Assets (including the Real Property) to Buyer ("Transaction
Taxes"), regardless of whether the tax authority seeks to collect such Taxes
from Seller or Buyer. Seller shall prepare all tax filings related to any
Transaction Taxes (other than with respect to Real Property and motor vehicle
title transfer and registration, which shall be prepared by Buyer). Fifteen (15)
days prior to making such filings, the filing party shall provide to the
nonfiling party the filing party's workpapers for the nonfiling party's review
and approval. The nonfiling party shall provide to the filing party approval or
disapproval of such workpapers within ten (10) days of delivery by the filing
party. The filing party shall be responsible for (i) administering the payment
of such Transaction Taxes, (ii) defending or pursuing any Proceedings related
thereto, and (iii) paying any expenses related thereto, in each case subject to
reimbursement by the nonfiling party for one-half of such payments and expenses.
Each party shall give prompt written notice to the other of any proposed
adjustment or assessment of any Transaction Taxes with respect to the
transaction, or of any examination of said transaction in a sales, use, transfer
or similar tax audit. In any Proceedings, whether formal or informal, the filing
party shall control the defense of such Proceedings, but shall permit the
nonfiling party to participate in the defense of such proceeding and shall take
all actions and execute all documents required to allow such participation.
Neither party shall negotiate a settlement or compromise of any Transaction
Taxes without the prior written consent of the other, which consent shall not be
unreasonably withheld.
ARTICLE XII
ENVIRONMENTAL MATTERS
Section 12.1 Environmental Due Diligence.
(a) Right to Conduct Environmental Due Diligence. Regarding
environmental matters, Buyer has completed its initial environmental due
diligence prior to execution of this Agreement, including a review of the
Environmental Data. Buyer also has required Seller to make the representations
concerning environmental matters set forth in Section 5.14, upon which Buyer is
relying. In light of these actions, Buyer agrees not to conduct additional
environmental due diligence (including employee interviews and sampling of any
media or wastewater) except in accordance with this Section 12.1. All activities
of Buyer regarding environmental due diligence shall be conducted to minimize
any inconvenience or interruption of the normal use and enjoyment of the
Business and the Assets.
(b) Delivery of Environmental Reports. Seller has made
available to Buyer before the date of execution of this Agreement copies of all
written environmental audits, reports or studies in Seller's possession of which
Seller has Knowledge and which were prepared after December 31, 1996, concerning
the existence or possible existence of Hazardous Materials on, or under or
adjacent to any of the Real Property or relating to potential Environmental
Liability of Seller in connection with the Business or the Assets. Buyer shall
provide to Seller copies of all reports, assessments and other information
composed or compiled by Buyer or Buyer's environmental consultant(s) promptly
following Buyer's receipt thereof. Buyer shall treat all such information
delivered to, or composed or compiled by, Buyer or Buyer's environmental
consultant(s) as Environmental Data in accordance with the procedures of Section
12.1(c).
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(c) Confidentiality of Environmental Data. All audits, reports
and studies delivered to or prepared by Buyer and all other information
collected and generated as a result of Buyer's environmental due diligence
("Environmental Data") will be subject to the terms and conditions of the
Confidentiality Agreement, except as otherwise expressly provided in this
Section 12.1. Neither Buyer nor its environmental consultant(s) shall disclose
or release any Environmental Data without the prior written consent of Seller
and all such information shall be kept strictly confidential. The Environmental
Data shall be prepared at the request of counsel to Buyer and, to the fullest
extent permitted by law, shall be the work product of such counsel and
constitute confidential attorney/client communications. The Environmental Data
shall be transferred among Buyer and its consultant(s) in a manner that will
preserve, to the greatest extent possible, such privileges. Buyer expressly
agrees that until the Closing, it will not distribute the Environmental Data to
any third party without Seller's prior written consent. After the Closing, each
Party agrees that it will not distribute the Environmental Data to any third
party without the other's prior written consent, except as required by law or by
express provisions of its corporate compliance program if the other Party is
provided written notice at least ten (10) days prior to such distribution,
provided, however, that for a period of two (2) years after the Closing Date,
Buyer may distribute the Environmental Data to any potential purchaser of the
Assets only after first notifying the Seller.
(d) Environmental Consultants. Buyer may retain one or more
outside environmental consultants to assist in its environmental due diligence
concerning the Assets and shall notify Seller of the environmental consultant or
consultants Buyer intends to retain. Thereafter, Seller shall have five (5) days
after receipt of such notification to notify Buyer in writing of Seller's
objection (which must be for good cause) and substantiate the basis for that
objection. If Seller does not object for good cause and substantiate that
objection within said five (5) day period, Seller shall be deemed to have
consented to Buyer's selection.
(e) Phase I Reviews. Buyer has conducted various environmental
assessment activities with respect to the Assets, including reviewing existing
environmental reports, correspondence, permits and related materials regarding
the Assets, but excluding inspecting individual sites. Buyer may not conduct any
further Phase I environmental assessment activities with respect to the Assets
without the prior written consent of Seller, which consent may be withheld,
conditioned or delayed by Seller in its sole discretion. Any permitted Phase I
environmental assessment activities shall not include any sampling or intrusive
testing.
(f) Phase II Reviews. Buyer may not conduct any Phase II
environmental assessment activities with respect to the Assets (including, but
not limited to, the taking and analysis of soil, surface water and groundwater
samples, testing of buildings, drilling xxxxx, taking soil borings and
excavating) without the prior written consent of Seller, which consent may be
withheld, conditioned or delayed by Seller in its sole discretion.
(g) Additional Due Diligence. Notwithstanding the foregoing,
if prior to Closing Seller receives notice of any Proceeding or Threatened
Proceeding arising under Environmental Laws or if Seller otherwise acquires
Knowledge that is reasonably likely to require a change to Schedule 5.14, Seller
promptly shall notify Buyer of the same and Buyer may request that Seller
authorize Buyer to conduct specific additional environmental due diligence
measures if and to the extent that such measures are required to determine the
extent of any potential Environmental Liability relating thereto. Such
authorization shall not be unreasonably withheld, conditioned or delayed by
Seller. Any such additional environmental due diligence shall be conducted at
Buyer's sole expense.
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(h) Indemnity for Due Diligence Activities. Buyer hereby
agrees to indemnify and hold harmless Seller, Seller's Affiliates and their
respective officers, directors, employees, agents, successors and assigns from
and against any and all Losses with respect to persons or property arising out
of or resulting from any site visit by Buyer or its environmental consultant(s)
and resulting from an act or omission of Buyer or its environmental
consultant(s), provided, however, that such indemnity shall not extend to Losses
resulting from the discovery of pre-existing damage or other pre-existing
conditions of the Assets.
ARTICLE XIII
INDEMNIFICATION
Section 13.1 Indemnification by Seller. From and after Closing and
subject to the other provisions of this Article XIII, Seller shall indemnify and
hold harmless Buyer, its Representatives, Affiliates, successors and permitted
assigns (collectively, the "Buyer Indemnitees") from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Seller in this
Agreement not being true and correct when made or when required by this
Agreement to be true and correct, or any breach or default by Seller in the
performance of its covenants, agreements, or obligations under this Agreement
required to be performed prior to Closing;
(b) any breach or default by Seller in the performance of its
covenants, agreements, or obligations under this Agreement required to be
performed after Closing; and
(c) the Retained Liabilities, including the Retained
Environmental Liabilities.
Section 13.2 Indemnification by Buyer. From and after Closing and
subject to the other provisions of this Article XIII, Buyer shall indemnify and
hold harmless Seller, its Representatives, Affiliates, successors and permitted
assigns (collectively, the "Seller Indemnitees") from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Buyer in this
Agreement not being true and correct when made or when required by this
Agreement to be true and correct, or any breach or default by Buyer in the
performance of its covenants, agreements, or obligations under this Agreement
required to be performed prior to Closing;
(b) any breach or default by Buyer in the performance of its
covenants, agreements, or obligations under this Agreement required to be
performed after Closing;
(c) Assumed Liabilities, including the Assumed Environmental
Liabilities; and
(d) any event as a result of which the interest on the Bonds
may be included in the gross income of the recipient for purposes of federal
income taxation, to the extent such event arises out of or results from any act,
negligence, fault or failure of Buyer or any assignee, lessee or successor of
Buyer, including any breach or default by Buyer in its performance of the
Buyer's IDRB Obligations and any breach or violation of the representations,
warranties, covenants and agreements set forth in the IDRB Obligations Agreement
executed and delivered by Buyer in accordance with Sections 6.7(a) and 8.1(d).
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Section 13.3 Limitations on Liability. Notwithstanding
anything to the contrary in this Agreement, the liability of Seller and Buyer
under this Agreement and any documents delivered in connection herewith or
contemplated hereby shall be limited as follows:
(a) IN NO EVENT SHALL SELLER BE LIABLE TO THE BUYER
INDEMNITEES, OR SHALL BUYER BE LIABLE TO THE SELLER INDEMNITEES, FOR ANY
EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE
DAMAGES; provided, however, that if Buyer or Seller is held liable to a third
party for any of such damages and Seller or Buyer, respectively is obligated to
indemnify the other for the matter that gave rise to such damages, then Seller
or Buyer, as appropriate, shall be liable for, and obligated to reimburse the
other for, such damages.
(b) Except as provided below, the representations, warranties,
covenants and agreements of Seller and Buyer set forth in this Agreement shall
survive the Closing for the applicable period of time set forth below in this
Section 13.3(b), and all representations, warranties, covenants and agreements
of Seller and Buyer under this Agreement and the indemnities granted by Seller
and Buyer in Section 13.1 or Section 13.2, respectively, shall terminate at 5:00
p.m., local time in Stamford, Connecticut, on the appropriate anniversary of the
Closing Date or on the expiration of the applicable statute of limitations (or
extensions or waivers thereof), as the case may be, as set forth below in this
Section 13.3(b); provided, however, that such indemnities shall survive with
respect only to the specific matters that is the subject of a proper Claim
Notice delivered in good faith in compliance with the requirements of this
Section 13.3 until the earlier to occur of (A) the date on which a final
nonappealable resolution of the matter described in such Claim Notice has been
reached or (B) the date on which the matter described in such Claim Notice has
otherwise reached final resolution.
(1) The representations and warranties of Seller
contained in Section 5.9 (Taxes), the covenants and agreements of Seller
relating to Taxes, and the related indemnity obligations of Seller contained in
Section 13.1 shall terminate on, and no action or claim with respect thereto may
be brought following, the expiration of the applicable statute of limitations
(or extensions or waivers thereof).
(2) The representations and warranties of Seller
contained in Section 5.5 (Title to Assets; Liens) and the related indemnity
obligations of Seller contained in Section 13.1 shall terminate on, and no
action or claim with respect thereto may be brought after, the third anniversary
of the Closing Date.
(3) The representations and warranties of Sellers
contained in Section 5.14 (Environmental Matters) and the related indemnity
obligations of Sellers contained in Section 13.1 shall terminate on, and no
action or claim with respect thereto may be brought after, the fourth
anniversary of the Closing Date.
(4) All other representations and warranties of
Seller and Buyer contained in this Agreement and the related indemnity
obligations of Buyer and Seller contained in this Agreement shall terminate on,
and no further action or claim with respect thereto may be brought after, the
second anniversary of the Closing Date.
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(5) Except as set forth in the proviso to this clause
(5), the indemnity obligations of Seller contained in Section 13.1 with respect
to any Retained Liability shall terminate on, and no action or claim with
respect thereto may be brought after, the second anniversary of the Closing
Date, provided that the indemnity obligations of Seller contained in Section
13.1 for (i) Retained Liabilities relating to Taxes shall survive until the
expiration of the applicable statute of limitations (or extensions or waivers
thereof); (ii) Retained Environmental Liabilities with respect to which Seller
had no Knowledge as of the Closing Date shall survive until the fourth
anniversary of the Closing Date; and (iii) Retained Liabilities described in
Sections 2.3(a), (c) and (d), Retained Liabilities relating to the Proceedings
described in items I.1 and I.2 of Schedule 5.8, and any Disclosed Pre-Closing
Liability (and any liability or obligation that would have been a Disclosed
Pre-Closing Liability had Seller disclosed such liability or obligation to Buyer
if Seller had Knowledge of such liability or obligation as of the Closing Date)
shall survive for an unlimited period of time. The Retained Liabilities
described in clauses (i) and (iii) of this Section 13.3(b)(5) are collectively
referred to hereinafter as the "Specified Retained Liabilities.
(6) The indemnity obligations of Buyer contained in
Section 13.2 with respect to any Assumed Liability shall survive for an
unlimited period of time.
(7) Notwithstanding the foregoing, the Parties
acknowledge that Buyer shall be entitled to indemnification by Seller for Losses
incurred by Buyer in respect of any intentional or reckless misrepresentation or
omission or fraud by Seller without any time limitation (it being understood
that the failure to cure a breach shall not, by itself, be an intentional or
reckless act or omission).
In no event shall any amounts be recovered from Seller or Buyer under Section
13.1 or Section 13.2, respectively, or otherwise for any matter for which a
Claim Notice is not delivered to Seller or Buyer, as the case may be, prior to
the close of business on the applicable date set forth above.
(c) Notwithstanding anything to the contrary in this
Agreement, Seller shall not be required to indemnify the Buyer Indemnities, or
be otherwise liable in any way whatsoever to the Buyer Indemnitees, for any
Losses (other than Losses incurred by Buyer in respect of the Specified Retained
Liabilities and any intentional or reckless misrepresentation or omission or
fraud by Seller, it being understood that the failure to cure a breach shall
not, by itself, be an intentional or reckless act or omission (the "First-Dollar
Losses")) until the Buyer Indemnitees have suffered Losses (determined after
giving effect to the provisions of Section 13.3(f) and other than First-Dollar
Losses) that, when taken together with all other claims for Losses (other than
First-Dollar Losses) under Section 13.1 of each of the Related Purchase
Agreements, are in excess of a deductible in an amount equal to two percent (2%)
of the total of the Purchase Price plus the aggregate gross purchase price set
forth in each Related Purchase Agreement that is consummated, after which point
Seller will be obligated only to indemnify the Buyer Indemnitees from and
against further Losses other than First-Dollar Losses in excess of such
deductible. Buyer shall be entitled to indemnification for all First-Dollar
Losses.
(d) Notwithstanding anything to the contrary in this
Agreement, Seller shall not be required to indemnify the Buyer Indemnitees, or
be otherwise liable in any way whatsoever to the Buyer Indemnitees, for any
Losses (other than First-Dollar Losses) that, when combined with the aggregate
amount of Losses (other than First-Dollar Losses) that are subject to
indemnification by Seller under Section 13.1 of the Related Purchase Agreements,
are in excess of an amount equal to five percent (5%) of the total of the
Purchase Price plus the aggregate gross purchase price set forth in each Related
Purchase Agreement that is consummated. Buyer shall be entitled to
indemnification for all First-Dollar Losses.
(e) Except to the extent otherwise expressly provided in this
Agreement, no right to indemnification under this Article XIII shall be limited
by reason of any investigation conducted by any Party at any time or by the
decision by a Party to complete the Closing. Notwithstanding the foregoing,
Buyer acknowledges that Seller's indemnity obligations contained in Section 13.1
are subject to the applicable limitations set forth in Section 13.3, and that
certain obligations and liabilities of Seller are included among the Assumed
Liabilities.
47
(f) Neither Party shall have liability for any claim or Loss
(A) that is covered by insurance for which the other Party recovers payments in
respect of such Loss or with respect to which the other Party otherwise recovers
payments in respect of such Loss from any other sources (whether in a lump sum
or stream of payments) or (B) that is the type normally recoverable by the
Business through rates, but in each case only to the extent of such payments or
recovery. With respect to insurance proceeds only, such recovery shall be
calculated net of the insured party's out-of-pocket costs relating to claim
preparation and settlement. With respect to recovery through rates, if the
amount of the Losses that is included in rates is not specifically adjudicated
in the related Final Order, the amount of the Losses included in rates will be
calculated as follows: (i) if the cost associated with the Losses is booked as
an item of operating expense, the amount of such expense included in rates will
be the result of the ratio where total test period operating expenses allowed
for ratemaking purposes in such Final Order is the numerator and Buyer's total
requested test period operating expenses (including the Losses) is the
denominator; (ii) if the cost associated with the Losses is booked as an item of
rate base, the amount of such rate base included in rates will be the result of
the ratio where total test period rate base allowed for ratemaking purposes in
such Final Order is the numerator and Buyer's total requested test period rate
base (including the Losses) is the denominator. Buyer agrees to use its
commercially reasonable efforts to give timely and effective written notice to
the appropriate insurance carrier(s) of any occurrence or circumstances which,
in the judgment of Buyer consistent with its customary risk management
practices, appear likely to give rise to a claim against Buyer that is likely to
involve one or more insurance policies of Buyer. Any such notice shall be given
in good faith by Buyer without regard to the possibility of indemnification
payments by Seller under Section 13.1, and shall be processed by Buyer in good
faith and in a manner consistent with its risk management practices involving
claims for which no third party contractual indemnification is available. Buyer
agrees that (i) if it is entitled to receive payment from Seller for a Loss, and
(ii) if Buyer has obtained insurance which may cover the claim or matter giving
rise to such Loss, then (iii) such insurance shall be primary coverage and Buyer
will make a claim under such insurance (if such claim can be made in good faith)
before enforcing its right to receive payment from Seller. If at any time
subsequent to the receipt by a Buyer Indemnitee of an indemnity payment from
Seller hereunder, such Buyer Indemnitee (or any Affiliate thereof) receives any
recovery, settlement or other similar payment with respect to the Loss for which
it receives such indemnity payment, such Buyer Indemnitee shall promptly pay to
Seller an amount equal to the amount of such recovery, less (for insurance
proceeds only) any out-of-pocket costs incurred by such Buyer Indemnitee (or its
Affiliates) in connection with claim preparation and settlement, but in no event
shall any such payment exceed the amount of such indemnity payment; provided,
that if such net recovery reduces the amount of Losses actually incurred by the
Buyer Indemnitees to an amount that is then below the deductible amount set
forth in Section 13.3(c) and if Seller has made other payments to the Buyer
Indemnitees for other Losses in excess of such deductible amount, then Buyer
also shall promptly pay to Seller an amount equal to the portion of such
payments made by Seller that Seller would not have been obligated to make
pursuant to Section 13.3(c) had the Losses of the Buyer Indemnitees not included
the Losses covered by such net recovery. No other cost or expense relating to
any such recovery shall reduce the amount of such payment to Seller.
(g) Notwithstanding any language contained in any Related
Document (including deeds and other conveyance documents relating to the Real
Property), the representations and warranties of Seller set forth in this
Agreement will not be merged into any such Related Document and the
indemnification obligations of Seller, and the limitations on such obligations,
set forth in this Agreement shall control. No provision set forth in any such
Related Document shall be deemed to enlarge, alter or amend the terms or
provisions of this Agreement.
(h) In the event that the interest on any of the Bonds becomes
subject to federal or state income taxation prior to Closing, the
representations and warranties of Buyer contained in Section 6.7 with respect to
such Bonds shall be null and void ab initio and no action or claim with respect
thereto may be brought.
48
Section 13.4 Claims Procedure.
(a) All claims for indemnification under Section 13.1 or 13.2,
or any other provision of this Agreement except as otherwise expressly provided
in this Agreement, shall be asserted and resolved pursuant to this Article XIII.
Any Person claiming indemnification hereunder referred to as the "Indemnified
Party" and any Person against whom such claims are asserted hereunder is
hereinafter referred to as the "Indemnifying Party." In the event that any
Losses are asserted against or sought to be collected from an Indemnified Party
by a third party, said Indemnified Party shall with reasonable promptness
provide to the Indemnifying Party a Claim Notice. The Indemnifying Party shall
be relieved of its obligations to indemnify the Indemnified Party with respect
to any such Losses only to the extent the Indemnified Party's delay in notifying
the Indemnifying Party thereof in accordance with the provisions of this
Agreement so prejudice the Indemnifying Party's ability to defend against the
Losses. The Indemnifying Party shall have twenty (20) days from the personal
delivery or receipt of the Claim Notice (the "Notice Period") to notify the
Indemnified Party (i) whether or not it disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to such
Losses and/or (ii) whether or not it desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Losses;
provided, however, that any Indemnified Party is hereby authorized prior to and
during the Notice Period to file any motion, answer or other pleading that it
shall deem necessary or appropriate to protect its interests or those of the
Indemnifying Party (and of which it shall have given notice and opportunity to
comment to the Indemnifying Party) and not prejudicial to the Indemnifying
Party. In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it desires to defend the Indemnified Party against
such Losses, the Indemnifying Party shall have the right to defend all
appropriate proceedings, and with counsel of its own choosing, which proceedings
shall be promptly settled or prosecuted by them to a final conclusion. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement it may do so at its sole cost and expense. If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Losses that the
Indemnifying Party elects to contest or, if appropriate and related to the claim
in question, in making any counterclaim against the Person asserting the third
party Losses, or any cross-complaint against any Person. No claim may be settled
or otherwise compromised without the prior written consent of both the
Indemnifying Party and the Indemnified Party.
(b) The Indemnified Party shall provide reasonable assistance
to the Indemnifying Party and provide access to its books, records and personnel
as the Indemnifying Party reasonably requests in connection with the
investigation or defense of the Losses. The Indemnifying Party shall promptly
upon receipt of reasonable supporting documentation reimburse the Indemnified
Party for out-of-pocket costs and expenses incurred by the latter in providing
the requested assistance.
(c) With regard to third party claims for which Buyer or
Seller is entitled to indemnification under Section 13.1 or 13.2, such
indemnification shall be paid by the Indemnifying Party upon: (i) the entry of
an Order against the Indemnified Party and the expiration of any applicable
appeal period; or (ii) a settlement with the consent of the Indemnifying Party,
provided that no such consent need be obtained if the Indemnifying Party fails
to respond to the Claim Notice as provided in Section 13.4(a). Notwithstanding
the foregoing but subject to Section 13.4(a), and provided that there is no
dispute as to the applicability of indemnification, expenses of counsel to the
Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party as if such expenses are a liability of the Indemnifying Party.
49
Section 13.5 Exclusive Remedy. Except as otherwise provided in Section
6.4, the rights, remedies and obligations of the Buyer Indemnitees and the
Seller Indemnitees set forth in this Article XIII will be the exclusive rights,
remedies and obligations of such Persons after the Closing with respect to this
Agreement, the events giving rise to this Agreement and the transactions
provided for herein or contemplated hereby or thereby. No Proceeding for
termination or rescission, or claiming repudiation, of this Agreement or the
Xxxx of Sale may be brought or maintained by either party against the other
following the Closing Date no matter how severe, grave or fundamental any
breach, default or nonperformance may be by one party. Accordingly, the parties
hereby expressly waive and forego any and all rights they may possess to bring
any such Proceeding.
Section 13.6 Indemnification for Negligence. WITHOUT LIMITING OR
ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER
IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM
GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, VIOLATION OF ANY LAW OR
OTHER LEGAL FAULT OF OR BY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS
PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
Section 13.7 Waiver and Release.
(a) Buyer, on behalf of itself and each other Buyer
Indemnitee, hereby forever waives, relieves, releases and discharges the Seller
Indemnitees and their successors and assigns from any and all rights,
liabilities, Proceedings (including future Proceedings) and Losses of any Buyer
Indemnitee, whether known or unknown at the Closing Date, which any Buyer
Indemnitee has or incurs, or may in the future have or incur, arising out of or
related to any Assumed Environmental Liability.
(b) Seller, on behalf of itself and each other Seller
Indemnitee, hereby forever waives, relieves, releases and discharges to Buyer
Indemnitees and their successors and assigns from any and all rights,
liabilities, Proceedings (including future Proceedings) and Losses of any Seller
Indemnitee, whether known or unknown at the Closing Date, which any Seller
Indemnitee has or incurs, or may in the future have or incur, arising out of or
related to any Retained Environmental Liabilities.
50
ARTICLE XIV
GENERAL PROVISIONS
Section 14.1 Expenses. Except as otherwise specifically provided
herein, each Party will pay all costs and expenses of its performance of and
compliance with this Agreement, except Buyer will pay all real estate transfer
taxes and real estate recording fees, if any, including expenses of counsel
associated with real estate title, transfer and recording issues.
Section 14.2 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been given upon
receipt if either (a) personally delivered, (b) sent by prepaid first class
mail, and registered or certified and a return receipt requested (c) sent by
overnight delivery via a nationally recognized carrier or (d) by facsimile with
completed transmission acknowledged:
If to Seller, to:
Citizens Utilities Company
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. XxXxxxxx
Telecopier: (000) 000-0000
with a copy to:
Citizens Utilities Company
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: L. Xxxxxxx Xxxxxx, XX
Telecopier: (000) 000-0000
and:
Citizens Utilities Company
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: J. Xxxxxxx Xxxx
Telecopier: (000) 000-0000
and:
Xxxxxxxxxx and Xxxxx, L.L.P.
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
51
If to Buyer, to:
Cap Rock Energy
000 X. Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxx
Telecopier: (000) 000-0000
or at such other address or number as shall be given in writing by a party to
the other party.
Section 14.3 Assignment. This Agreement may not be assigned, by
operation of law or otherwise, by any party hereto without the prior written
consent of the other party hereto, such consent not to be unreasonably withheld;
provided, however, in the event of any such assignment by a party by operation
of law without the consent of the other party as required above, such other
party may consent to such assignment after it has occurred and, in such event,
this Agreement and all the provisions hereof shall be binding upon the Person
receiving such assignment by operation of law. Notwithstanding the foregoing,
(a) Buyer may assign this Agreement, without the prior written consent of
Seller, to any direct or indirect wholly-owned subsidiary of Buyer provided such
subsidiary assumes in writing all of the duties and obligations of Buyer
hereunder (provided that no such assignment by Buyer shall in any way operate to
enlarge, alter or change any obligation due to Seller or relieve Buyer of its
obligations hereunder if such subsidiary fails to perform such obligations, with
the understanding that Buyer shall be jointly and severally liable with such
subsidiary for any nonperformance of Buyer's obligations hereunder); and (b)
Seller may assign all or part of its rights or delegate all or part of its
duties under this Agreement, without the prior written consent of Buyer, to a
qualified intermediary chosen by Seller to structure all or part of the
transactions contemplated hereby as a like-kind exchange of property covered by
Section 1031 of the IRC (provided that no such assignment by Seller shall in any
way operate to enlarge, alter or change any obligations due to Buyer or relieve
Seller of its obligations hereunder if such qualified intermediary fails to
perform such obligations, with the understanding that Seller shall be jointly
and severally liable with such qualified intermediary for any nonperformance of
Seller's obligations hereunder).
Section 14.4 Successor Bound. Subject to the provisions of Section
14.3, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Section 14.5 Governing Law. The validity, performance, and enforcement
of this Agreement and all Related Documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of Delaware without giving
effect to the principles of conflicts of law of such state.
Section 14.6 Dispute Resolution. Except as otherwise provided in
Sections 3.3(c) and 6.4, and this Section 14.6, any dispute, controversy or
claim between the parties relating to, arising out of or in connection with this
Agreement (or any subsequent agreements or amendments thereto), including as to
its existence, enforceability, validity, interpretation, performance or breach
or as to indemnification or damages, including claims in tort, whether arising
before or after the termination of this Agreement (any such dispute, controversy
or claim being herein referred to as a "Dispute") shall be settled without
litigation and only by use of the following alternative dispute resolution
procedure:
52
(a) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Dispute. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties shall not
be admissible in the arbitration described below, or in any lawsuit. Documents
identified in or provided with such communications, which are not prepared for
purposes of the negotiations, are not so exempted and may, if otherwise
admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties
do not resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules, as then amended and in effect, of
the American Arbitration Association (the "Rules"). Either party may demand such
arbitration in accordance with the procedures set out in the Rules. The
arbitration shall take place in Phoenix, Arizona. The arbitration hearing shall
be commenced within 60 days of such party's demand for arbitration. The
arbitrator shall have the power to and will instruct each party to produce
evidence through discovery (i) that is reasonably requested by the other party
to the arbitration in order to prepare and substantiate its case and (ii) the
production of which will not materially delay the expeditious resolution of the
dispute being arbitrated; each party hereto agrees to be bound by any such
discovery order. The arbitrator shall control the scheduling (so as to process
the matter expeditiously) and any discovery. The parties may submit written
briefs. At the arbitration hearing, each party may make written and oral
presentations to the arbitrator, present testimony and written evidence and
examine witnesses. No party shall be eligible to receive, and the arbitrator
shall not have the authority to award, exemplary or punitive damages. The
arbitrator shall rule on the Dispute by issuing a written opinion within 30 days
after the close of hearings. The arbitrator's decision shall be binding and
final. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction.
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator; provided, however, that if the arbitrator determines that the
position taken in the Dispute by the nonprevailing party taken as a whole is
unreasonable, the arbitrator may order the nonprevailing party to bear such fees
and expenses, and reimburse the prevailing party for all or such portion of its
reasonable costs and expenses in submitting and presenting its position, as the
arbitrator shall reasonably determine to be fair under the circumstances. Each
party to the arbitration shall pay one-half of the fees and expenses of the
arbitrator and the American Arbitration Association.
(d) Notwithstanding any other provision of this Agreement, (i)
either party may commence an action to compel compliance with this Section 14.6
and (ii) if any party, as part of a Dispute, seeks injunctive relief or any
other equitable remedy, including specific enforcement, then such party shall be
permitted to seek such injunctive or equitable relief in any federal or state
court or competent jurisdiction before, during or after the pendency of a
mediation or arbitration proceed under this Section 14.6.
53
Section 14.7 Cooperation. Each of the parties hereto agrees to use its
commercially reasonable best efforts to take or cause to be taken all action,
and to do or cause to be done all things necessary, proper or advisable under
applicable laws, regulations or otherwise, to consummate and to make effective
the transactions contemplated by this Agreement, including, without limitation,
the timely performance of all actions and things contemplated by this Agreement
to be taken or done by each of the parties hereto.
Section 14.8 Construction of Agreement. The terms and provisions of
this Agreement represent the results of negotiations between Buyer and Seller,
each of which has been represented by counsel of its own choosing, and neither
of which has acted under duress or compulsion, whether legal, economic or
otherwise. Accordingly, the terms and provisions of this Agreement shall be
interpreted and construed in accordance with their usual and customary meanings,
and Buyer and Seller hereby waive the application in connection with the
interpretation and construction of this Agreement of any rule of law to the
effect that ambiguous or conflicting terms or provisions contained in this
Agreement shall be interpreted or construed against the party whose attorney
prepared the executed draft or any earlier draft of this Agreement. The word
"including" in this Agreement shall mean including without limitation. Words in
the singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires. The
terms "hereof," "herein," and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including all of the Schedules and Exhibits hereto) and not to any particular
provision of this Agreement, and Article, Section, paragraph, Exhibit and
Schedule references are to the Articles, Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified.
Section 14.9 Publicity. No party hereto shall issue, make or cause the
publication of any press release or other announcement with respect to this
Agreement or the transactions contemplated hereby, or otherwise make any
disclosures relating thereto, without the prior written consent of the other
party, such consent not to be unreasonably withheld or delayed; provided,
however, that such consent shall not be required where such release or
announcement is required by applicable law or the rules or regulations of a
securities exchange, in which event the party so required to issue such release
or announcement shall endeavor, wherever possible, to furnish an advance copy of
the proposed release to the other party.
Section 14.10 Waiver. Except as otherwise expressly provided in this
Agreement, neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such right,
power or privilege preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege available to each party at law
or in equity.
Section 14.11 Parties in Interest. This Agreement (including the
documents and instruments referred to herein) is not intended to confer upon any
Person, other than the parties hereto and their successors and permitted
assigns, any rights or remedies hereunder; provided, however, that the
indemnification provisions in Article XIII shall inure to the benefit of the
Buyer Indemnitees and the Seller Indemnitees as provided therein.
54
Section 14.12 Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 14.13 Amendment. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
Section 14.14 Entire Agreement. This Agreement, the Exhibits and
Schedules hereto and the documents specifically referred to herein and the
Confidentiality Agreement constitute the entire agreement, understanding,
representations and warranties of the parties hereto, and supersede all prior
agreements, both written and oral, between Buyer and Seller. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Disclosure of any
fact or item in any Schedule referenced by a particular paragraph or Section in
this Agreement shall, should such fact or item or its contents be expressly or
obviously related to any other paragraph or Section, be deemed to be disclosed
with respect to that other paragraph or Section whether or not any explicit
cross-reference appears therein.
Section 14.15 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 14.16 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the greatest
extent possible.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
55
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
CITIZENS UTILITIES COMPANY
By:
-----------------------------------
Xxxxxx X. XxXxxxxx, Chief Financial
Officer and Vice President
CAP ROCK ELECTRIC COOPERATIVE
By:
-----------------------------------
Name:
Title:
CAP ROCK ENERGY CORPORATION
By:
-----------------------------------
Name:
Title:
[Signature page to Purchase and Sale Agreement (Arizona Electric) between
Citizens Utilities Company, Cap Rock Electric Cooperative and Cap Rock Energy
Corporation, dated as of February 11, 2000.]
56
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
(VERMONT ELECTRIC)
between
CITIZENS UTILITIES COMPANY,
CAP ROCK ELECTRIC COOPERATIVE
and
CAP ROCK ENERGY CORPORATION
Dated as of February 11, 2000
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.........................................................................................1
Section 1.1 Certain Defined Terms..................................................................1
Section 1.2 Other Defined Terms....................................................................9
ARTICLE II PURCHASE AND SALE...................................................................................9
Section 2.1 Purchase and Sale of Assets............................................................9
Section 2.2 Assumed Liabilities....................................................................9
Section 2.3 Retained Liabilities..................................................................11
Section 2.4 Condition on Assignment or Assumption of Contracts and Rights.........................12
ARTICLE III PURCHASE PRICE.....................................................................................12
Section 3.1 Purchase Price........................................................................12
Section 3.2 Deposit...............................................................................13
Section 3.3 Calculation of Purchase Price.........................................................13
Section 3.4 Prorations and Adjustments as of the Closing Date.....................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER............................................................15
Section 4.1 Organization, Existence and Qualification.............................................15
Section 4.2 Authority Relative to this Agreement and Binding Effect...............................15
Section 4.3 Governmental Approvals................................................................15
Section 4.4 Availability of Funds.................................................................16
Section 4.5 Filings...............................................................................16
Section 4.6 Brokers...............................................................................16
Section 4.7 Independent Investigation.............................................................16
Section 4.8 Public Utility Holding Company Status; Regulation as a Public Utility.................16
Section 4.9 Buyer's Financial Statements..........................................................17
Section 4.10 Buyer's Insurance. ...................................................................17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER...........................................................17
Section 5.1 Organization, Existence and Qualification.............................................17
Section 5.2 Authority Relative to this Agreement and Binding Effect...............................17
Section 5.3 Governmental and Other Required Consents..............................................17
Section 5.4 Public Utility Holding Company Status; Regulation as a Public Utility.................18
Section 5.5 Title to Assets; Liens................................................................18
Section 5.6 Financial Statements..................................................................18
Section 5.7 Compliance with Legal Requirements; Governmental Permits. ...........................19
Section 5.8 Legal Proceedings; Outstanding Orders. ...............................................19
Section 5.9 Taxes.................................................................................20
Section 5.10 Intellectual Property.................................................................20
Section 5.11 Personal Property.....................................................................20
Section 5.12 Material Contracts; Existing Loan Documents...........................................20
Section 5.13 Employee Benefit Matters..............................................................21
Section 5.14 Environmental Matters.................................................................21
Section 5.15 No Material Adverse Change............................................................22
Section 5.16 State and Federal Regulatory Matters..................................................22
Section 5.17 Brokers...............................................................................23
Section 5.18 Employee Relations....................................................................23
Page
Section 5.19 Insurance.............................................................................23
Section 5.20 Accounts Receivable...................................................................23
Section 5.21 Appropriate Knowledge Persons.........................................................24
Section 5.22 Disclaimer............................................................................24
ARTICLE VI COVENANTS..........................................................................................24
Section 6.1 Covenants of Seller...................................................................24
Section 6.2 Covenants of Buyer....................................................................27
Section 6.3 Governmental Filings..................................................................28
Section 6.4 Citizens Marks........................................................................28
Section 6.5 Acknowledgment by Buyer...............................................................29
Section 6.6 Transition Plan. ....................................................................29
Section 6.7 Title Insurance.......................................................................30
Section 6.8 Sale of Generating Assets.............................................................30
Section 6.9 Hydro-Quebec Step-up Indemnity Agreement..............................................31
ARTICLE VII CONDITIONS PRECEDENT...............................................................................31
Section 7.1 Seller's Conditions Precedent to Closing..............................................31
Section 7.2 Buyer's Conditions Precedent to Closing...............................................33
ARTICLE VIII CLOSING............................................................................................34
Section 8.1 Closing...............................................................................34
ARTICLE IX TERMINATION........................................................................................35
Section 9.1 Termination Rights....................................................................35
Section 9.2 Limitation on Right to Terminate: Effect of Termination...............................36
ARTICLE X EMPLOYEE MATTERS...................................................................................37
Section 10.1 Employment of Transferred Employees...................................................37
Section 10.2. Assumption of Collective Bargaining Agreement Obligations.............................38
Section 10.3 Cessation of Participation in Seller's Plans; Proration of Bonuses....................38
Section 10.4 Similarity of Benefit Packages........................................................38
Section 10.5 Defined Benefit Pension Plan..........................................................39
Section 10.6 401(k) Plan...........................................................................39
Section 10.7 Welfare Benefits......................................................................40
Section 10.8 Flexible Spending Accounts............................................................41
Section 10.9 Employment Agreements.................................................................41
Section 10.10 Vacation..............................................................................41
Section 10.11 Severance.............................................................................41
Page
ARTICLE XI TAX MATTERS........................................................................................41
Section 11.1 Purchase Price Allocation.............................................................41
Section 11.2 Cooperation with Respect to Like-Kind Exchange........................................42
Section 11.3 Transaction Taxes.....................................................................42
ARTICLE XII ENVIRONMENTAL MATTERS..............................................................................43
Section 12.1 Environmental Due Diligence...........................................................43
ARTICLE XIII INDEMNIFICATION....................................................................................44
Section 13.1 Indemnification by Seller.............................................................44
Section 13.2 Indemnification by Buyer..............................................................45
Page
Section 13.3 Limitations on Liability..............................................................45
Section 13.4 Claims Procedure......................................................................48
Section 13.5 Exclusive Remedy......................................................................49
Section 13.6 Indemnification for Negligence........................................................49
Section 13.7 Waiver and Release....................................................................50
ARTICLE XIV GENERAL PROVISIONS..................................................................................50
Section 14.1 Expenses..............................................................................50
Section 14.2 Notices...............................................................................50
Section 14.3 Assignment............................................................................51
Section 14.4 Successor Bound.......................................................................52
Section 14.5 Governing Law.........................................................................52
Section 14.6 Dispute Resolution....................................................................52
Section 14.7 Cooperation...........................................................................53
Section 14.8 Construction of Agreement.............................................................53
Section 14.9 Publicity. ..........................................................................54
Section 14.10 Waiver................................................................................54
Section 14.11 Parties in Interest...................................................................54
Section 14.12 Section and Paragraph Headings........................................................54
Section 14.13 Amendment.............................................................................54
Section 14.14 Entire Agreement......................................................................54
Section 14.15 Counterparts..........................................................................54
Section 14.16 Severability..........................................................................55
LIST OF EXHIBITS
Exhibit 7.1(g) Form of Buyer's Opinion of Counsel
Exhibit 7.2(g) Form of Seller's Opinion of Counsel
Exhibit 8.1(a) Form of Xxxx of Sale
LIST OF SCHEDULES
Schedule 1.1(a) Excluded Assets
Schedule 1.1(b) Related Purchase Agreements
Schedule 2.2(b) Certain Assumed Proceedings
Schedule 5.2 Seller's Authority
Schedule 5.3 Seller's Governmental and Other Required Consents
Schedule 5.5 Encumbrances; Owned Real Property
Schedule 5.6(a) Financial Statements
Schedule 5.6(b) Certain Liabilities
Schedule 5.7 Compliance with Legal Requirements; Governmental Permits
Schedule 5.8 Legal Proceedings; Outstanding Orders
Schedule 5.9 Taxes
Schedule 5.10 Intellectual Property
Schedule 5.11 Extraordinary Required Repairs
Schedule 5.12 Material Contracts
Schedule 5.13 Employee Matters
Schedule 5.14 Environmental Matters
Schedule 5.15 Material Adverse Changes
Schedule 5.16 State and Federal Regulatory Matters
Schedule 5.19 Seller's Insurance
Schedule 6.1 Conduct of Business
Schedule 6.2(c) Citizens' Guarantees and Surety Instruments
Schedule 10.1 Active Employees
Schedule 10.7 Retirees and "Grandfathered Employees"
PURCHASE AND SALE AGREEMENT
(VERMONT ELECTRIC)
This PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the
11th day of February, 2000, by and between CITIZENS UTILITIES COMPANY, a
Delaware corporation ("Seller"), and CAP ROCK ELECTRIC COOPERATIVE, a Texas
corporation, and CAP ROCK ENERGY CORPORATION, a Texas corporation ("Cap Rock
Energy"). Cap Rock Cooperative and Cap Rock Energy are sometimes referred to in
this Agreement individually as a "Buyer Entity" and collectively as the "Buyer".
Capitalized terms used herein shall have the meanings ascribed to them in
Article I, unless otherwise provided.
W I T N E S S E T H :
WHEREAS, Seller owns all of the Assets; and
WHEREAS, Buyer desires to purchase, and Seller desires to sell, the
Assets, subject in all respects to the provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Article I
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
"Affiliates" or "Affiliated Entities" -- entities shall be deemed
"Affiliated" as to each other to the extent (i) one of the entities directly or
indirectly controls the other, or the direct or indirect control of one of the
entities is exercised by the officers, directors, stockholders, or partners of
the other entity (whether or not such persons exercise such control in their
capacities as officers, directors, stockholders, or partners) or (ii) is deemed
to be an Affiliate under existing statutes or regulations of the SEC.
"Assets" -- all of the assets, property and interests of every type and
description, real, personal or mixed, tangible and intangible, owned by Seller
and relating primarily to the Business, other than the Excluded Assets.
"Assumed Environmental Liabilities" -- means any of the following:
(a) All Environmental Liabilities of Seller relating to the
Business or the Assets and arising from or relating to the environmental matters
or incidents disclosed by Seller on Schedule 5.14 as of the date of execution of
this Agreement that remain outstanding as of the Closing Date, it being
understood by the parties that the unadjusted Purchase Price reflects Buyer's
estimate of any Losses that could arise after the Closing Date with respect to
such Environmental Liabilities;
(b) All Environmental Liabilities of Seller relating to the
Business or the Assets and arising from or relating to environmental matters or
incidents that are disclosed to Buyer by Seller after the date of execution of
this Agreement (including any additional disclosures appearing on Schedule 5.14
as revised by Seller and delivered to Buyer prior to the Closing Date) but prior
to the Closing Date
that remain outstanding as of the Closing Date, provided that any Losses
incurred by Buyer in connection with any such Environmental Liability in any
year in excess of $200,000 or in the aggregate (when combined with all other
Losses incurred by Buyer in connection with its performance or discharge of
other Disclosed Pre-Closing Liabilities) in excess of $2,000,000 shall be
Retained Environmental Liabilities and Seller shall be obligated to indemnify
Buyer pursuant to Section 13.1 (but subject to the applicable limitations on
such obligations provided in Section 13.3(f)) for such Losses incurred by Buyer
in the amount of such excess; and
(c) Any other Environmental Liability relating to the Business, the
Assets, Buyer or any Affiliate, successor or assign of Buyer, to the extent
arising or relating to the period after the Closing, including with respect to
the removal of asbestos or asbestos-containing materials in connection with any
renovation or structural change to any Asset conducted after Closing.
"Business" -- means collectively:
(a) the electricity, generation, transmission and distribution
business conducted by Seller within the State of Vermont through its Vermont
Electric division; and
(b) the provision of related services and products and the
engagement in related activities by Seller within the State of Vermont through
its Vermont Electric division.
"Capital Budget -- means the capital budget for the Business approved
by the Board of Directors of Seller for the year 2000.
"Claim Notice" -- means a written notice of a claim given by a party
seeking indemnification pursuant to the terms of this Agreement that specifies
in reasonable detail the nature of the Losses and the estimated amount of such
Losses.
"Confidentiality Agreement" -- means that certain confidentiality
agreement dated October 21, 1999, between Buyer and Seller.
"Consent" -- any approval, consent, ratification, waiver, license,
permit, registration, certificate, exemption, legal statute, order,
determination or other authorization from any Person.
"Contract" -- any agreement, contract, document, instrument,
obligation, promise or undertaking (whether written or oral) that is legally
binding, including Easements.
"Disclosed Pre-Closing Liabilities" means any and all liabilities and
obligations relating to or arising from Seller's ownership of the Assets or
Seller's conduct or operation of the Business on or prior to the Closing Date
that were not disclosed in any Schedule to this Agreement as of the date of
execution of this Agreement (and with respect to which Seller had no Knowledge
as of the date of execution of this Agreement) and that are disclosed to Buyer
by Seller after the date of execution of this Agreement to the extent remaining
outstanding or undischarged as of the Closing Date, including the Environmental
Liabilities described in clause (b) of the definition of Assumed Environmental
Liabilities and the Proceedings described in Section 2.2(c), but expressly
excluding any such liabilities and obligations that are Retained Liabilities
pursuant to Section 2.3(a), (b), (c) or (d) or with respect to which the
Purchase Price is reduced (but only to the extent reduced).
2
"Easements"-- means all easements, rights of way, permits, licenses,
and other ways of necessity, whether or not of record.
"Encumbrance" -- any charge, adverse claim, lien, mortgage, pledge or
security interest.
"Environmental Law"-- any Order or Legal Requirement, and any judicial
and administrative interpretation thereof and related policies, guidelines and
standards, relating to pollution or protection of the environment and natural
resources, including those relating to (a) emissions, discharges, Releases or
threatened Releases of Hazardous Material into the environment (including
ambient air, surface water, groundwater or land), and (b) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Material, each as in effect as of the date of
determination.
"Environmental Liability" -- means any liability, responsibility or
obligation arising out of or relating to:
(a) the presence of any Hazardous Material in the fixtures,
structures, soils, groundwater, surface water or air on, under or about or
emanating from the assets and properties currently or formerly used, operated,
owned, leased, controlled, possessed, occupied or maintained by a Person, and
any such Hazardous Material emanating to adjoining or other properties;
(b) the use, generation, production, manufacture, treatment,
storage, disposal, Release, threatened Release, discharge, spillage, loss,
seepage or filtration of Hazardous Materials by a Person or its employees,
agents or contractors from, on, under or about the assets or properties
currently or formerly used, operated, owned, leased, controlled, possessed,
occupied or maintained by such Person or the presence therein or thereunder of
any underground or above-ground tanks for the storage of fuel oil, gasoline
and/or other petroleum products or by-products or other Hazardous Material;
(c) the violation or noncompliance or alleged violation or
noncompliance by a Person or its employees, agents or contractors of any
Environmental Law arising from or related to its or their conduct, actions or
operations or the former or current use, operation, ownership, lease,
possession, control, occupancy, maintenance or condition of any of such Person's
former or current assets or properties;
(d) the failure by a Person or its employees, agents, or
contractors to have obtained or maintained in effect any Consent required by any
Environmental Law as a result of its or their conduct, actions or operations or
the use, operation, ownership, lease, control, possession, occupancy,
maintenance or condition of such Person's assets or properties;
(e) any and all Proceedings arising out of any of the
above-described matters, including Proceedings by Governmental Bodies for
enforcement, cleanup, removal, treatment, response, remedial or other actions or
damages and Proceedings by any third Person seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief; and
(f) any and all remedial work and other corrective action
(including investigation or monitoring of site conditions, or any clean-up,
containment, restoration or removal) taken by, or the costs of which are imposed
upon, a Person arising from any of the above-described matters.
"ERISA" - the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
act or any successor law.
3
"Excluded Assets" -- means the following assets of Seller, each of
which shall be excluded from the Assets, and not acquired by the Buyer, at
Closing:
(a) assets that Seller uses in both the Business and in Seller's
other gas, electric, communications or water businesses, and which are described
generally on Schedule 1.1(a), and Contracts regarding the procurement of
services or goods by Seller for use in such in other businesses;
(b) cash and cash equivalents in transit, in hand or in bank
accounts;
(c) except as otherwise set forth in Article X, assets attributable
to or related to an Employee Benefit Plan of Seller;
(d) the stock record and minute books of Seller, duplicate copies
of all books and records transferred to Buyer, all records prepared in
connection with the sale of the Business (including bids received from third
parties and analysis relating to the Business);
(e) assets disposed of by Seller after the date of this Agreement
to the extent such dispositions are not prohibited by this Agreement;
(f) except to the extent set forth in Section 3.4, rights to
refunds of Taxes payable for periods prior to the Closing with respect to the
Business, assets, properties or operations of Seller or any member of any
affiliated group of which either of them is a member;
(g) accounts owing, by and among Seller and its Affiliates;
(h) all deferred tax assets or collectibles for periods prior to
the Closing;
(i) any insurance policy, bond, letter of credit or other similar
item, and any cash surrender value in regard thereto;
(j) the Citizens Marks; and
(k) the other assets listed on Schedule 1.1(a).
"Existing Loan Documents"-- means all Contracts relating to the
indebtedness for money borrowed by Seller and used in connection with the
Business or the Assets as of the date hereof to which Seller is a party,
excluding line extension agreements or similar arrangements involving customer
advances for construction, it being understood and agreed that customer
advances, customer deposits and construction advances do not create indebtedness
for money borrowed.
"Final Order" -- an action by a Governmental Body as to which: (a) no
request for stay of the action is pending, no such stay is in effect and if any
time period is permitted by statute or regulation for filing any request for
such stay, such time period has passed; (b) no petition for rehearing,
reconsideration or application for review of the action is pending and the time
for filing any such petition or application has passed; (c) such Governmental
Body does not have the action under reconsideration on its own motion and the
time in which such reconsideration is permitted has passed;
4
and (d) no appeal to a court, or a request for stay by a court of the
Governmental Body's action is pending or in effect and the deadline for filing
any such appeal or request has passed.
"Future Regulatory Obligations" -- means all liabilities,
responsibilities and obligations relating to the Assets or the Business,
including capital expenditure obligations and liabilities of the types that
appear as "Accrued Liabilities" and "Non-Current Liabilities" on the Balance
Sheet, arising out of any Legal Requirement or other action of any state or
federal regulatory commission or local franchising authority, including with
respect to all Proceedings of any state regulatory commission relating to the
Assets or the Business commenced before or after the Closing Date, regardless of
whether the Legal Requirement or other action is or purports to be based on
conduct, actions, facts, circumstances or conditions arising, existing or
occurring at any time on or prior to the Closing Date, but other than
liabilities, responsibilities and obligations (i) relating to any Retained
Environmental Liability or (ii) arising out of Seller's violation of any Order
or Legal Requirement of such Governmental Body, as in effect and as reasonably
interpreted by common industry practice as of the date such violation occurred,
that is found by Final Order to have occurred prior to Closing and that is
reasonably likely to have a material adverse effect on the Business or the
Assets, taken as a whole.
"GAAP" -- generally accepted United States accounting principles,
applied on a consistent basis.
"Generating Assets" -- all of Seller's generating facilities and dams
located in the State of Vermont, including the Newport Generating Facility Units
1, 2, 3 and 11, the Xxxx Generating Facility, and the West Charleston Generating
Facility (collectively, the "Generating Facilities"), together with (a) the Real
Property associated with such Generating Facilities and dams, including the
buildings and other improvements located thereon and approximately 500 acres of
unimproved Real Property located around the Generating Facilities; (b) the
diesel generator sets of Seller located at the Newport Generating Facility Units
1, 2 and 3; (c) all other tangible personal property located on or relating to
the Generating Facilities; and (d) Easements and Consents (to the extent
transferrable) relating to such Generating Facilities.
"Governmental Body" -- any of the following that possesses competent
jurisdiction:
(a) federal, state, county, local, municipal or other governmental
body;
(b) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity and
any court or other tribunal); or
(c) any governmental body entitled to exercise any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"Hazardous Materials" -- any waste or other chemical, material or
substance that is listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, toxic, or a pollutant or a
contaminant, or words of similar import, under or pursuant to any Environmental
Law, including any admixture or solution thereof, and specifically including
oil, natural gas, petroleum and all derivatives thereof or synthetic substitutes
therefor, asbestos or asbestos-containing materials, any flammable substances or
explosives, any radioactive materials, any toxic wastes of substances, urea
formaldehyde foam insulation, toluene or polychlorinated biphenyls.
5
"HSR Act" -- the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, or any successor law, and regulations and rules issued by the U.S.
Department of Justice or the Federal Trade Commission pursuant to that act or
any successor law.
"Hydro-Quebec Contracts" -- means (a) the Firm Power and Energy
Contract between Hydro-Quebec and Vermont Joint Owners, dated as of December 4,
1987, as amended (as amended, the "H-Q/VJO Contract"), and (b) the Hydro-Quebec
Participation Agreement among the electric utilities named therein, dated as of
April 1, 1988, as amended and restated pursuant to Amendment No. 5 to
Hydro-Quebec Participation Agreement made as of October 21, 1993 (as amended and
restated, the "H-Q Participation Agreement").
"IRC" - the Internal Revenue Code of 1986, as amended.
"IRS" -- the Internal Revenue Service or any successor agency.
"Knowledge" -- means, with respect to Seller, the actual knowledge of
Seller's Chief Financial Officer; President, Citizens Public Services; Vice
President of Arizona Energy Operations; and Vice President and General Manager,
Vermont Electric Division, or their respective successor.
"Legal Requirement" -- any federal, state, county, local, municipal,
foreign, international, multinational, or other administrative Order,
constitution, law, ordinance, adopted code, principle of common law, regulation,
rule, directive, approval, notice, tariff, franchise agreement, statute or
treaty.
"Losses" -- shall mean all claims, losses, liabilities, causes of
action, costs and expenses (including, without limitation, involving theories of
negligence or strict liability and including court costs and reasonable
attorneys' fees and disbursements in connection therewith).
"Material Adverse Effect" -- an occurrence or condition that has a
material adverse effect on the operation, financial condition or results of
operations of the Business when combined with the businesses and assets being
acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements, taken as a whole. For purposes of this Agreement, an occurrence or
condition shall not constitute a Material Adverse Effect (a) if it arises from
general business, economic or financial market conditions, from conditions
generally affecting the industries in which the Business competes, or from the
transactions contemplated by this Agreement, (b) if it is of the type normally
recoverable by the Business through rates, or (c) to the extent that the
Business may realize the benefit of insurance maintained by Seller or to the
extent that Seller or Buyer may receive or recover payments in respect of such
occurrence from any other source (whether in a lump sum or stream of payments).
In addition, for purposes of this Agreement any increase in Seller's pro-rata
obligations under the Hydro-Quebec Contracts, or any occurrence or condition
that could result in such an increase, shall not constitute a Material Adverse
Effect.
"Material Contract" -- a Contract relating primarily to the Business
and involving a total commitment by or to any party thereto of at least $100,000
on an annual basis and which cannot be terminated by Seller with notice of
ninety (90) days or less without penalty to Seller.
"Order" -- any award, decision, injunction, judgment, order, writ,
decree, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, other Governmental Body, or by any arbitrator,
each of which possesses competent jurisdiction.
6
"Organizational Documents" -- the articles or certificate of
incorporation and the bylaws of a corporation or the comparable organizational
and governing documents of other Persons.
"Permitted Encumbrances" -- means any of the following:
(a) mechanics', carriers', workers' and other similar liens arising
in the ordinary course of business and which in the aggregate are not
substantial in amount and do not interfere with the present use of the Assets to
which they apply;
(b) liens for current Taxes and assessments not yet due and
payable;
(c) usual and customary nonmonetary real property Encumbrances,
covenants, imperfections in title, Easements, restrictions and other title
matters (whether or not the same are recorded) that do not and will not
materially interfere with the operation of that portion of the Business
currently conducted on such real property;
(d) Encumbrances securing the payment or performance of any of the
Assumed Liabilities;
(e) all applicable zoning ordinances and land use restrictions;
(f) with respect to any Asset which consists of a leasehold or
other possessory interests in real property, all usual and customary nonmonetary
real property Encumbrances, covenants, imperfections in title, Easements,
restrictions and other title matters (whether or not the same are recorded) to
which the underlying fee estate in such real property is subject that do not
currently and will not interfere materially with the operation of that portion
of the Business currently conducted on such property; and
(g) any other Encumbrances, Contracts, obligations, defects or
irregularities of any kind whatsoever, affecting the Assets that, individually
or in the aggregate, do not have a Material Adverse Effect or that will be
terminated, released or waived on or before the Closing Date.
"Person" -- any individual, corporation (including any nonprofit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization or Governmental Body.
"Proceeding" -- any claim, action, arbitration, hearing, litigation or
suit commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PUHCA" - the Public Utility Holding Company Act of 1935, as amended,
or any successor law, and regulations and rules issued by the SEC pursuant to
that act or any successor law.
"Real Property" -- all real property owned, leased or under Contract by
Seller in the operation of the Business, together with all interests in real
property (including Easements) used or held for use by Seller in the operation
of the Business.
"Related Documents" -- any Contract provided for in this Agreement to
be entered into by one or more of the parties hereto in connection with the
transactions contemplated by this Agreement.
7
"Related Purchase Agreements" -- means those certain purchase
agreements between Seller and Buyer or Affiliates of Buyer described on Schedule
1.1(b).
"Release" -- any presence, emission, dispersal, disposal, spilling,
leaking, emitting, discharging, depositing, pumping, pouring, escaping,
leaching, dumping, releasing or migration into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials), or in, into or from any
facility, including the movement of any Hazardous Materials through the air,
soil, surface water, groundwater or property.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Retained Environmental Liabilities" -- means all Environmental
Liabilities of Seller that are described in this Agreement as Retained
Environmental Liabilities or that are otherwise not being assumed by Buyer under
this Agreement as Assumed Environmental Liabilities.
"SEC" -- the United States Securities and Exchange Commission or any
successor agency.
"Tax" -- any tax (including any income tax, capital gains tax,
value-added tax, sales and use tax, franchise tax, payroll tax, withholding tax,
property tax or transfer tax), levy, assessment, tariff, duty (including any
customs duty), deficiency, franchise fee or payment, payroll tax, utility tax,
gross receipts tax or other fee or payment relating to the foregoing, and any
related charge or amount (including any fine, penalty, interest or addition to
tax), imposed, assessed or collected by or under the authority of any
Governmental Body or for which Seller has any liability as a transferee,
pursuant to Treasury Regulation Section 1.1502-6, or pursuant to any other Legal
Requirement.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to any Governmental
Body in connection with the determination, assessment, collection or payment of
any Tax, or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"Threatened" -- a claim, dispute, or other matter will be deemed to
have been "Threatened" if any demand or statement has been made in writing or
orally or any notice has been given in writing or orally, and Seller has
Knowledge of the same.
8
Section 1.2 Other Defined Terms. In addition to the terms defined in
Section 1.1, certain other terms are defined elsewhere in this Agreement as
indicated below and, whenever such terms are used in this Agreement, they shall
have their respective defined meanings.
Term Section
---- -------
Active Employees 10.1
Antitrust Authorities 6.3
Assumed Liabilities 2.2
Balance Sheet 5.6(a)
Xxxx of Sale 8.1
Buyer Indemnitees 13.1
Buyer's Pension Plan 10.5
Buyer Welfare Plans 10.7(a)
CERCLA 5.14(e)
Citizens Marks 6.4
Closing 8.1
Closing Date 8.1
Deposit 3.2
Employee Plans 5.13
Environmental Data 12.1(c)
Estimated Purchase Price 3.3(a)
Financial Statements 5.6
Purchase Price 3.1
Retained Liabilities 2.3
Seller Indemnitees 13.2
Seller's Pension Plan 10.5
Seller's 401(k) Plan 10.6
Seller Welfare Plan 10.7
Transaction Taxes 11.3
Transferred Employee 10.1
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Assets. Upon the terms and subject to
the conditions contained herein, at the Closing, Seller shall sell, transfer,
assign, convey and deliver to Buyer, and Buyer shall purchase and accept
delivery from Seller, all of the Assets.
Section 2.2 Assumed Liabilities. In further consideration for the sale
of the Assets at the Closing, Buyer will assume and agree to pay, perform and
discharge when due, all liabilities and obligations, of every kind or nature,
arising out of or relating to:
(a) Buyer's ownership or use of the Assets and the conduct or
operation of the Business by Buyer, in each case after the Closing Date,
including all liabilities, responsibilities and obligations relating to or
arising from the following:
9
(i) Transferred Employees (except to the extent otherwise
provided in Article X), including any termination of any Transferred Employee
for any reason (including constructive dismissal) and Buyer's hiring practices
or decisions;
(ii) Performance of the Contracts included among the Assets
(except that Buyer shall not assume any liabilities or obligations for any
breach or default by, or payment obligations of, Seller under any such Contract
occurring or arising or accruing on or prior to the Closing Date);
(iii) Customer advances, customer deposits and construction
advances, unperformed service obligations, Easement relocation obligations, and
engineering and construction required to complete scheduled construction,
construction work in progress, and other capital expenditure projects, in each
case relating to the Business and outstanding on or arising after the Closing
Date;
(iv) Future Regulatory Obligations;
(v) Assumed Environmental Liabilities;
(vi) One-half of the Transaction Taxes arising out of the sale
of the Assets to Buyer hereunder;
(vii) Proceedings based on conduct, actions, facts,
circumstances or conditions arising or occurring after the Closing Date,
Proceedings in respect of Future Regulatory Obligations regardless of when
filed, and Proceedings arising from or related to any other Assumed Liability;
and
(viii) Items addressed in Section 3.1(d) to the extent
resulting in a decrease in the Purchase Price;
(b) the Proceedings described as Assumed Liabilities in Schedule
2.2(b) and Proceedings affecting other Persons engaged in a business similar to
the Business such as generic or industry-wide Proceedings; and
(c) all Proceedings involving Seller, the Assets or the Business
based on conduct, actions, facts, circumstances or conditions arising or
occurring on or before the Closing Date that are pending or Threatened as of the
Closing Date and that are disclosed to Buyer by Seller after the date of
execution of this Agreement but prior to the Closing Date (except any such
Proceedings described as Retained Liabilities in Schedule 2.2(b) and any such
Proceedings relating to the Retained Liabilities described in Sections 2.3(a),
(b), (c), (d), and (f)), provided that any Losses incurred by Buyer in
connection with any such individual Proceeding in excess of $200,000 or in
connection with all such Proceedings in excess of $2,000,000 in the aggregate
(when combined with all other Losses incurred by Buyer in connection with its
performance or discharge of other Disclosed Pre-Closing Liabilities) shall be
Retained Liabilities and Seller shall be obligated to indemnify Buyer pursuant
to Section 13.1 (but subject to the applicable limitations on such obligations
provided in Section 13.3(f)) for such Losses incurred by Buyer in the amount of
such excess;
The liabilities, responsibilities and obligations to be assumed by Buyer
pursuant to this Section 2.2 are hereinafter collectively referred to as the
"Assumed Liabilities." Buyer hereby irrevocably and unconditionally waives and
releases Seller from all Assumed Liabilities and all liabilities or obligations
10
relating to the Business or the Assets to the extent arising from events or
occurrences after the Closing or to the extent otherwise relating to the period
after the Closing, including any liabilities created or which arise by statute
or common law, including CERCLA (it being understood that this shall not
constitute a waiver and release of any claims arising out of the contractual
relationships and indemnification arrangements between Buyer and Seller).
Notwithstanding anything in this Section 2.2 to the contrary, "Assumed
Liabilities" shall not include any liabilities, responsibilities or obligations
expressly stated to be Retained Liabilities pursuant to Section 2.3.
Section 2.3 Retained Liabilities. Buyer shall not assume and at the
Closing Seller shall retain and pay, perform and discharge when due, all of the
liabilities and obligations relating to or arising from Seller's ownership of
the Assets and Seller's conduct or operation of the Business on and prior to the
Closing Date, except to the extent any such liability or obligation is included
among the Assumed Liabilities, including liabilities and obligations relating to
or arising from the following (collectively referred to herein as the "Retained
Liabilities"):
(a) all indebtedness for money borrowed by Seller (including items
due to Seller's Affiliates) other than payment obligations arising after the
Closing Date under any equipment lease listed in Part VII of Schedule 5.12 or
under any line extension Contracts or similar construction arrangements, it
being understood and agreed that such leases, Contracts and similar arrangements
do not create indebtedness for money borrowed;
(b) Taxes of Seller or the Business with respect to ownership or
use of the Assets and Seller's conduct and operation of the Business on and
prior to the Closing Date;
(c) Excluded Assets;
(d) Non-Transferred Employees, the Seller's Employee Benefit Plans
and Employee Plans (except to the extent otherwise provided in Article X) and
any breach or default by, or payment obligations of, Seller with respect to any
Transferred Employee occurring or arising or accruing on or prior to the Closing
Date (except to the extent any such payment obligation becomes the
responsibility and obligation of Buyer in accordance with Article X);
(e) Proceedings involving Seller, the Assets or the Business based
on conduct (including Seller's performance under any Contract included among the
Assets), action, facts, circumstances or conditions arising or occurring on or
before the Closing Date, including Proceedings described as Retained Liabilities
on Schedule 2.2(b) but expressly excluding any such liabilities or obligations
relating to any Proceeding described as Assumed Liabilities on Schedule 2.2(b)
and any Proceeding relating to (x) Assumed Liabilities (subject to the proviso
set forth in Section 2.2(c) with respect to the Proceedings described in Section
2.2(c)), (y) Future Regulatory Obligations and (z) Proceedings affecting other
Persons engaged in a business similar to the Business such as generic or
industry-wide Proceedings;
(f) Retained Environmental Liabilities; and
(g) One-half of the Transaction Taxes arising out of the sale of
the Assets, to Buyer hereunder.
Seller hereby irrevocably and unconditionally waives and releases Buyer from all
Retained Liabilities including any liabilities created or which arise by statute
or common law, including CERCLA (it being
11
understood that this shall not constitute a waiver and release of any claims
arising out of the contractual relationships and indemnification arrangements
between Buyer and Seller).
Section 2.4 Condition on Assignment or Assumption of Contracts and
Rights. Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign or assume any Contract or
any claim or right or any benefit arising thereunder or resulting therefrom if
an attempted assignment or assumption thereof, without the Consent of a third
party thereto, would constitute a breach thereof. Any transfer or assignment to
Buyer by Seller of any property or property rights or any Contract which
requires the Consent of any third party shall be made subject to such Consent
being obtained. If such Consent is not obtained, or if an attempted assignment
thereof would be ineffective or would affect the rights of Seller thereunder so
that Buyer would not in fact receive all such rights, Seller will, at its
expense, cooperate with Buyer in any arrangement reasonably designed to provide
for Buyer, at Buyer's cost, the benefits under any such Contract including,
without limitation, enforcement for the benefit of Buyer of any and all rights
of Seller against a third party thereto arising out of the breach or
cancellation by such third party or otherwise To the extent that Buyer does
receive the benefits of any such Contract pursuant to the preceding sentence,
such Contract shall be a Contract deemed to have been assigned or transferred to
Buyer pursuant to Section 2.2(a)(ii).
ARTICLE III
PURCHASE PRICE
Section 3.1 Purchase Price.
Subject to the terms and conditions of this Agreement, the aggregate
purchase price for the Assets (the "Purchase Price") shall be an amount equal to
$38,000,000 in cash, as adjusted in accordance with the following provisions and
with such adjustments determined pursuant to Section 3.3:
(a) Such amount will be increased by the aggregate amount of all
accounts receivable, earned but unbilled revenue, and materials and supplies
inventory of the Business, in each case outstanding as of the Closing Date and
other than any such items that are due from Seller's Affiliates.
(b) Such amount will be decreased by the aggregate amount of all
accounts payable, customer deposits and unexpended cash from customer advances
for construction, in each case to the extent relating to the Business and
outstanding as of the Closing Date and other than any such items that are due to
Seller's Affiliates.
(c) Such amount will be increased by the aggregate amount of all
(i) capital expenditures relating to the Business that are accrued by Seller
between the date of the Balance Sheet and the Closing Date (including
expenditures recorded in the Construction Work in Progress account of the
Business as of the Closing Date and relating to such period), (ii) without
duplication, expenditures to purchase materials, supplies and other capital
items that are dedicated to, but as of Closing have not been used in, the
construction or improvement of the property, plant or equipment relating to the
Business and (iii) without duplication, other expenditures recorded as an asset
of the Business as of the Closing Date and relating to such period to the extent
such expenditures are normally recoverable through rates, including expenditures
recorded in the Preliminary Survey and Investigation account of the Business, in
each case to the extent such expenditures are not prohibited by this Agreement.
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(d) Such amount will be decreased or increased, as appropriate, by
an aggregate amount equal to the total amount payable to or by Buyer pursuant to
Section 3.4.
(e) Such amount will be decreased by $3,000,000 if Seller sells the
Generating Assets on or prior to the Closing Date.
Section 3.2 Deposit. Concurrently with its execution of this Agreement,
Buyer has deposited with Seller $380,000 in cash. By 5:00 p.m. East Coast Time
on Wednesday, March 15, 2000, Buyer shall deliver to Seller an irrevocable
letter of credit from a reputable financial institution with an expiration date
of at least 21 months after the date of execution of this Agreement (the "Letter
of Credit"), as and for an xxxxxxx money deposit, in the amount of $1,900,000
(the "Deposit") and appropriately conditioned in accordance with the terms of
Section 9.2(c). If Seller receives the Letter of Credit by such deadline, then
Seller promptly shall refund to Buyer the $380,000 in cash previously provided
by Buyer. If Buyer shall fail to deliver the Letter of Credit by such deadline,
then (i) Buyer shall continue using its best efforts to arrange for the Letter
of Credit to be delivered to Seller and (ii) Seller may retain, as liquidated
damages, the $380,000 in cash previously delivered to Seller, free of any claims
by Buyer or any other Person with respect thereto. The parties hereby
acknowledge that the extent of damages to Seller occasioned by Buyer's failure
to deliver the Letter of Credit to Seller by March 15, 2000, would be impossible
or extremely difficult to ascertain and that $380,000 is a fair and reasonable
estimate of such damages under the circumstances.
Section 3.3 Calculation of Purchase Price.
(a) Any of the items included in clauses (a) through (e) of Section
3.1 that cannot be calculated in a timely fashion as of the Closing Date shall
be estimated by Seller in good faith based upon the account balance of such item
at the end of the month for which Seller's books are closed next preceding the
Closing Date, with such adjustments as may be appropriate to reflect changes in
such account balance occurring between such month-end and the Closing Date. Any
such estimated amounts shall be set forth in a certificate of Seller delivered
to Buyer at least five (5) business days prior to the Closing Date, which
certificate shall set forth an estimate of the Purchase Price (the "Estimated
Purchase Price"), including such estimated amounts and shall be accompanied by
reasonably detailed supporting documentation.
(b) Within one hundred twenty (120) days after the Closing Date,
Seller shall notify Buyer of the actual amount as recorded on Seller's books and
records for the Business of any
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items that were estimated in arriving at the Estimated Purchase Price, as well
as the prorations and adjustments required to be made under Section 3.4 below.
Buyer may dispute any amount so determined by Seller, by written notice to
Seller within fifteen (15) days after receipt of Seller's notice. If Buyer does
not so dispute any item, the party owing the difference between the Estimated
Purchase Price and the Purchase Price shall pay such difference to the other
party within ten (10) days after the expiration of such fifteen (15) day period,
plus interest at 8.25% per annum on such amount from the Closing Date to (but
not including) the date of payment. If Buyer disputes the actual amount of any
item, the undisputed amount plus interest at 8.25% per annum on such amount from
the Closing Date to (but not including) the date of payment shall be paid
promptly by the owing party. If such dispute cannot be resolved within sixty
(60) days after the giving of Buyer's notice that there exists a disputed
amount, then an independent auditor mutually agreeable to Buyer and Seller
shall, upon written notice from either Buyer or Seller, resolve such dispute
within sixty (60) days after receipt of such notice. The fees and expenses of
such independent auditor shall be allocated between Buyer and Seller so that
Seller's share of such fees and expenses shall be in the same proportion that
the aggregate amount of such remaining disputed amounts so submitted by Buyer to
such auditor that is unsuccessfully disputed by Buyer (as finally determined by
such auditor) bears to the total amount of such remaining disputed amounts so
submitted by Buyer to such auditor. Any determination by such independent
auditor shall be binding and conclusive upon the parties without further appeal
therefrom. Within ten (10) days after the independent auditor shall have
resolved such dispute, the party owing the determined amount shall pay such
determined amount to the other party, plus interest at 8.25% per annum on such
determined amount from the Closing Date to (but not including) the date of
payment.
Section 3.4 Prorations and Adjustments as of the Closing Date.
(a) Buyer and Seller agree that the following items relating to the
Assets and the Business shall be adjusted and allocated as of the Closing Date,
with Seller to be responsible for and to receive the benefit of the same for the
period through and including the Closing Date and Buyer to be responsible for
and to receive the benefit of the same after the Closing Date;
(i) real and personal property taxes, assessments and annual
registration fees;
(ii) water, sewer and other similar types of taxes, and
installments on special benefit assessments and regulatory assessments;
(iii) electric, gas, telephone and other utility charges;
(iv) payroll expenses, payroll taxes, reimbursable employee
business expenses and the financial cost of the accrued vacation time of the
Transferred Employees, in each case as recorded on Seller's books for the
Business as of the Closing Date;
(v) rents under leases transferred to or assumed by Buyer;
(vi) charges under maintenance, service and other Contracts
and fees under licenses transferred to or assumed by Buyer and not included in
the items described in Section 3.1(a);
(vii) deposits of Seller to the extent transferable to Buyer;
(viii) prepaid and accrued expenses;
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(ix) sales, franchise, gross receipts and other similar Taxes
based upon revenues; and
(x) xxxxx cash.
(b) The items listed in Section 3.4(a) above shall be estimated
item by item by Seller and reflected on the certificate and supporting
documentation to be delivered to Buyer pursuant to Section 3.3(a) and finally
determined in accordance with Section 3.3(b).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 Organization, Existence and Qualification. Each Buyer
Entity is a corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Texas, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, to perform its
obligations under all Contracts to which it is a party, and to execute and
deliver this Agreement and the Related Documents to which it is a party. Buyer
Entity is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state in which the failure to be so qualified or
in good standing would materially adversely affect the business or properties of
Buyer. By Closing, Cap Rock Energy will be, duly qualified and in good standing
as a foreign corporation licensed to do business in the State of Vermont.
Section 4.2 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by Buyer have been duly authorized by Buyer's Board of Directors,
which constitutes all necessary corporate action required on the part of Buyer
for such authorizations. The execution, delivery and performance of this
Agreement and the Related Documents by Buyer will not result in (a) any conflict
with or breach or violation of or default under the Organizational Documents of
Buyer, or (b) a violation or breach of any term or provision of, or constitute a
default or accelerate the performance required under, any indenture, mortgage,
deed of trust, security agreement, loan agreement, or Contract to which Buyer is
a party or by which its assets are bound, or (c) a violation of any Order of any
Governmental Body. This Agreement constitutes, and the Related Documents to be
executed by Buyer when executed and delivered will constitute, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, except as such enforceability may be limited by (i) bankruptcy
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally or (ii) the availability of equitable remedies
generally.
Section 4.3 Governmental Approvals. Except for those Consents described
in Schedule 5.3 to the extent applicable to Buyer, no Consent of any
Governmental Body is required to be obtained by Buyer in connection with the
execution and delivery by Buyer of this Agreement or the Related Documents or
the consummation of the transactions contemplated by this Agreement or the
Related Documents. Buyer has no knowledge of any facts or circumstances relating
to Buyer or its Affiliates that reasonably would be likely to preclude or
prolong the receipt of such required Consents.
15
Section 4.4 Availability of Funds. Buyer will have available on the
Closing Date sufficient funds to enable it to consummate the transactions
contemplated by this Agreement, and Buyer or the Affiliates of Buyer that are
buyers of the assets and businesses being acquired pursuant to the Related
Purchase Agreements will have available at the Closing Date sufficient funds to
enable them to consummate the transactions contemplated by the Related Purchase
Agreements. Buyer understands and agrees that its failure to arrange for such
funding by May 15, 2000 (which date shall be extended by Seller for up to three
consecutive thirty-day periods if Buyer can reasonably demonstrate to Seller at
the end of such period that Buyer is making reasonable progress towards
arranging such funding), or to have such funds available by the Closing, will
permit Seller in either case to terminate this Agreement under Section 9.1 and
to exercise its rights under Section 9.2(c).
Section 4.5 Filings. No statement furnished by Buyer for inclusion in
any filing with any Governmental Body in connection with obtaining such
Governmental Body's Consent for the consummation of the transactions
contemplated by this Agreement will contain, as of the date such information is
so provided, any untrue statement of a material fact or will omit to state, as
of the date such information is so provided, any material fact which is
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
Section 4.6 Brokers. No broker or finder has acted for or on behalf of
Buyer or any Affiliate of Buyer in connection with this Agreement or the
transactions contemplated by this Agreement. No broker or finder is entitled to
any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Buyer or any
Affiliate of Buyer for which Seller or any Affiliate of Seller has or will have
any liability or obligations (contingent or otherwise).
Section 4.7 Independent Investigation. Buyer is knowledgeable about the
businesses engaged in by Seller through its Vermont Electric division and of the
usual and customary practices of companies engaged in businesses similar to such
businesses and has had access to the Assets, the officers and employees of
Seller, and the books, records and files of Seller relating to the Business and
the Assets. In making the decision to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer has relied solely on the
basis of its own independent due diligence investigation of the Business and
upon the representations and warranties made in this Agreement and in any other
document or instrument delivered by Seller pursuant hereto. Accordingly, Buyer
acknowledges that Seller has not made, and Seller is expressly disclaiming and
negating any representation or warranty (other than those express
representations and warranties made in Article V), express, implied, at common
law, by statute or otherwise, relating to the Business.
Section 4.8 Public Utility Holding Company Status; Regulation as a
Public Utility. Buyer is a "public utility company" (as such term is defined in
PUHCA). Neither Buyer nor any of its Affiliates is a "holding company", a
"subsidiary" of a "public utility company," or an "affiliate" of a "public
utility company" or of a "holding company," within the meaning of such terms in
PUHCA.
16
Section 4.9 Buyer's Financial Statements. The consolidated financial
statements of Buyer for its most recently ended fiscal year heretofore delivered
to Seller were prepared in accordance with GAAP applied on a consistent basis,
except for changes concurred in by Buyer's accountants and disclosed in said
financial statements, throughout the periods specified, and present fairly in
all material respects the financial condition and results of operations of the
businesses of Buyer as of the dates thereof and for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments).
Section 4.10 Buyer's Insurance. Within five (5) business days after the
date of execution of this Agreement, Buyer will deliver to Seller a schedule
that lists the Buyer's policies and contracts in effect as of the date hereof
for casualty and property insurance covering its assets and properties and the
operation of its business, together with the risks insured against, coverage
limits and deductible amounts.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 5.1 Organization, Existence and Qualification. Seller is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Delaware, with full corporate power and authority to
conduct the Business as it is now being conducted, to own or use the Assets, to
perform its obligations under all Contracts to which it is a party, and to
execute and deliver this Agreement and the Related Documents to which Seller is
a party. Seller is duly qualified to do business as a foreign corporation and is
in good standing under the laws of the State of Vermont and each other state in
which the failure to be so qualified or in good standing would have a Material
Adverse Effect.
Section 5.2 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by Seller have been duly authorized by all requisite corporate action.
Except as set forth in Schedule 5.2, the execution, delivery and performance of
this Agreement and the Related Documents by Seller will not result in (a) any
conflict with or breach or violation of or default under the Organizational
Documents of Seller, (b) to Seller's Knowledge, a violation or breach of any
term or provision of, or constitute a default or accelerate the performance
required under, any indenture, mortgage, deed of trust, security agreement, loan
agreement, or Material Contract to which Seller is a party or by which any of
the Assets are bound, or (c) a violation of any Order of any Governmental Body,
except for such exceptions to the foregoing clauses (b) and (c) that, will be
cured, waived or otherwise remedied on or prior to the Closing Date. This
Agreement constitutes and the Related Documents to be executed by Seller when
executed and delivered will constitute valid and binding obligations of Seller,
enforceable against Seller in accordance with their terms, except as
enforceability may be limited by (i) bankruptcy or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally or (ii)
the availability of equitable remedies generally. No Person has any agreement,
option, warrant, subscription, understanding, or commitment, or any right or
privilege capable of becoming an agreement, option or commitment for the
purchase of the Assets of any other interest in the Business.
Section 5.3 Governmental and Other Required Consents. Except as set
forth in Schedule 5.3, no Consent of any Governmental Body or third Person is
required to be obtained by Seller in connection with the execution and delivery
by Seller of this Agreement or the Related Documents or the consummation by
Seller of the transactions contemplated by this Agreement or the Related
Documents, other than (i) any Consent the failure of which to obtain would not
be material to the
17
operation or conduct of the Business after Closing and (ii) any Consent that is
obtained or made on or prior to the Closing Date. Seller has no Knowledge of any
facts or circumstances relating to Seller or its Affiliates, other than those
relating to the auction process in which Buyer was selected, and other bidders
were not selected, to acquire the Business or relating to the matters disclosed
in any Schedule referred to in this Agreement, that would be reasonably likely
to preclude or prolong the receipt of such required Consents.
Section 5.4 Public Utility Holding Company Status; Regulation as a
Public Utility. Seller is a "public utility company" (as such term is defined in
PUHCA). Seller is not a "holding company", a "subsidiary" of a "public utility
company," or an "affiliate" of a "public utility company" or of a "holding
company," within the meaning of such terms in PUHCA.
Section 5.5 Title to Assets; Liens.
Seller has good and indefeasible title to the Assets, including the
Assets reflected in the Financial Statements, except those disposed of since the
date of the Financial Statements in the ordinary course of business or otherwise
disposed of in accordance with this Agreement. None of the Assets are subject to
any Encumbrance except (i) Encumbrances described in Schedule 5.5 and (ii)
Permitted Encumbrances. Schedule 5.5 lists each parcel of Real Property owned in
fee simple that is a part of the Assets. To Seller's Knowledge, except as set
forth in Schedule 5.5, Seller owns or possesses all Easements necessary to
conduct the Business as now being conducted without any known conflict with the
rights of others. Except as set forth in Schedule 5.5, (a) Seller enjoys
peaceful and undisturbed possession under all real property leases included in
the Assets, and to the Knowledge of Seller, all such leases are valid and in
full force and effect; (b) all rents due to date from Seller on each such lease
have been paid; (c) Seller has not received notice that it is in default under
any such lease; and (d) to the Knowledge of Seller, there exists no event,
occurrence, condition or act (including the consummation of the transactions
contemplated by this Agreement) which, with the giving of notice, the lapse of
time or the happening of any further event or condition, would become a default
by Seller under such lease. Except as set forth in Schedule 5.5, all buildings,
structures and equipment that are a part of the Assets lie wholly within the
boundaries of the Real Property and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person. Seller has
adequate rights of ingress and egress for operation of the Business in the
ordinary course consistent with past practices. None of the buildings,
structures or equipment that are a part of the Assets, nor the operation and
maintenance thereof, violates any restrictive covenant.
Section 5.6 Financial Statements.
(a) Schedule 5.6(a) sets forth the unaudited balance sheet for the
Business as at September 30, 1999 (the "Balance Sheet") and unaudited statement
of income of the Business for the nine-month period ended September 30, 1999
(collectively, the "Financial Statements"). Except as set forth in Schedule
5.6(a), the Financial Statements have been prepared on a pre-tax basis in
accordance, in all material respects, with GAAP applied on a basis consistent
with prior periods. Except as set forth in Schedule 5.6(a), the Balance Sheet
presents fairly in all material respects the financial condition of the Business
as of its date and the income statement included in the Financial Statements
presents fairly in all material respects the results of operations of the
Business for the periods covered thereby. The books and records of Seller from
which the Financial Statements were prepared were complete and accurate in all
material respects at the time of such preparation.
18
(b) Except as disclosed in Schedule 5.6(b), Seller has no
liabilities with respect to the Business or the Assets which would constitute
Assumed Liabilities, either direct or indirect, matured or unmatured or
absolute, contingent or otherwise, except:
(1) those liabilities set forth in the Financial Statements or
referred to in the notes to the Financial Statements and not heretofore paid or
discharged;
(2) those liabilities relating to or arising from matters
disclosed in any other Schedule hereto;
(3) liabilities arising in the ordinary course of business
consistent with past practices under any Contract or Legal Requirements;
(4) those liabilities incurred, consistent with past
practices, in or as a result of the ordinary course of business since the
Balance Sheet Date which do not and could not be reasonably expected to, in the
aggregate, result in a Material Adverse Effect;
(5) those liabilities and obligations that are the subject of
Article X; and
(6) those liabilities, which, if outstanding as of the Closing
Date, would result in a decrease to the Purchase Price in accordance with
Section 3.1(b) or (d).
Section 5.7 Compliance with Legal Requirements; Governmental Permits.
Except as set forth in Schedule 5.7: (a) Seller is in substantial compliance
with each Legal Requirement or Order that is applicable to it, to the conduct or
operation of the Business, or to the ownership or use of any of the Assets; (b)
Seller possesses all Consents from Governmental Bodies required by any
applicable Legal Requirement or Order necessary to permit the operation of the
Business in the manner in which it is currently being conducted by Seller; (c)
all such Consents are in full force and effect; and (d) Seller has not received
notice from any Governmental Body of its intent to revoke or terminate of such
Consent.
Section 5.8 Legal Proceedings; Outstanding Orders. Except as set forth
in Schedule 5.8, there is no pending or Threatened Proceeding (a) that has been
commenced against Seller or the Business other than Proceedings affecting other
Persons engaged in a business similar to the Business such as generic or
industry-wide Proceedings, or (b) as of the date of this Agreement, that
challenges, or that may have the effect of preventing, delaying, making illegal,
restricting or otherwise interfering with, the transactions contemplated hereby.
Schedule 5.8 lists each outstanding Order against Seller which relates to or
arises out of the conduct of the Business or the ownership, condition or
operation of the Business or the Assets which would be considered material to a
reasonably prudent purchaser of the Business in its reasonable business
judgment, other than any Orders relating to rates, tariffs and similar matters
arising in the ordinary course of business and other than any Order applicable
to other Persons engaged in a business similar to the Business such as generic
or industry-wide Orders.
19
Section 5.9 Taxes. All Tax Returns required to be filed by or on behalf
of Seller or requests for extensions to file such Tax Returns have been timely
filed, and Seller has paid and discharged or made adequate provision for all
Taxes that are required to be paid or remitted by or on behalf of Seller. There
are no pending audits or other examinations relating to any Tax matters relating
to the Business or the Assets except as set forth in Schedule 5.9. There are no
Tax Encumbrances on the Assets, except for liens for Taxes not yet due and
payable or for Taxes that Seller is contesting in good faith through appropriate
proceedings. As of the date of this Agreement, Seller has not granted any waiver
of any statute of limitations with respect to, or any extension of a period for
the assessment of, any Tax relating to the Business or the Assets except as set
forth in Schedule 5.9. Except as set forth in Schedule 5.9, none of the Assets
include stock of a corporation or interests in a partnership or limited
liability company. Seller is not a party to any safe harbor lease within the
meaning of IRC Section 168(f)(8), as in effect prior to amendment by the Tax
Equity and Fiscal Responsibility Act of 1982. Seller is not a "foreign person"
as defined in IRC Section 1445(f)(3) and Buyer is not required to withhold tax
on the purchase of the Assets of Seller by reason of IRC Section 1445. Seller
has not entered into any agreement with respect to the performance of services
that would require a payment, and Seller is not requiring Buyer pursuant to this
Agreement to make any payment (including but not limited to the payments
described in Section 10.11 of this Agreement), that would result in a
nondeductible expense pursuant to IRC Section 280G or an excise tax to the
recipient of such payment pursuant to IRC Section 4999.
Section 5.10 Intellectual Property. Schedule 5.10 lists all patents,
trademarks, service marks and copyrights used or held for use by Seller
primarily in the operation of the Business. Seller has no Knowledge of (i) any
infringement or claimed infringement by Seller of any patent, trademark, service
xxxx or copyright of others or (ii) any infringement of any patent, trademark,
service xxxx or copyright owned by or under license to Seller.
Section 5.11 Personal Property. Except for normal wear and tear, the
tangible Assets, taken as a whole, are in good operating condition and in a
state of reasonable maintenance and repair. The buildings, structures and
equipment that are a part of the Assets are structurally sound, are in good
operating condition and repair and are adequate for the uses to which they are
being put, and none of such buildings, structures or equipment is in need of
maintenance or repairs, except in each case, for the Assets described in
Schedule 5.11 and for Assets in need of ordinary and routine maintenance and
repairs that will not, individually or in the aggregate, have a Material Adverse
Effect.
Section 5.12 Material Contracts; Existing Loan Documents. Schedule 5.12
contains, to Seller's Knowledge, a complete and correct list as of the date
hereof of all Material Contracts (other than line extension Contracts and
similar construction arrangements), including all Existing Loan Documents. To
Seller's Knowledge, (i) each Material Contract is in full force and effect and
enforceable against the parties thereto, (ii) there are no defaults and Seller
has not rescinded nor given notice of a default or claimed default under any
such Material Contract, and (iii) no event has occurred which with notice or
lapse of time, or both, would constitute a default thereunder. Except as set
forth in Schedule 5.12, Seller is not obligated under any Contract relating to
the Business or the Assets with respect to industrial development bonds or other
obligations with respect to which the interest thereon is excluded from gross
income of the holder for federal or state income tax purposes.
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Section 5.13 Employee Benefit Matters.
(a) Schedule 5.13 lists (i) each "Employee Benefit Plan," as such
term is defined in Section 3(3) of ERISA, which is covered by any provision of
ERISA and which is maintained or contributed to by Seller or its Affiliates for
the benefit of the Active Employees; (ii) each other material fringe benefit
plan, policy or arrangement currently maintained or contributed to by Seller or
its Affiliates for the benefit of Active Employees which provides for pension,
retirement, deferred compensation, bonuses, incentive compensation, profit
sharing, stock options, severance, employee insurance coverage or similar
employee benefits (collectively, "Employee Plans"); and (iii) each collective
bargaining, union or other employee association agreement, employment,
managerial, advisory, and consulting agreement, change-in-control agreement,
employee confidentiality agreement, and all other material agreements, policies,
or arrangements maintained or contributed to by Seller or its Affiliates for the
Active Employees or by which Seller is bound with respect to the Business.
Seller has made available to Buyer accurate and complete copies of all such
documents and (if applicable) summary plan descriptions with respect to such
plans, agreements and arrangements, or summary description(s) of any such plans,
agreements or arrangements not otherwise in writing.
(b) Seller's Pension Plan and Seller's 401(k) Plan are the only
Employee Benefit Plans which are intended to be qualified under Section 401(a)
of the IRC.
(c) Each Employee Benefit Plan has been established and
administered in all material respects in accordance with its terms, ERISA and
the applicable provisions of the IRC.
Section 5.14 Environmental Matters.
(a) Except as listed in Schedule 5.14, since December 31, 1996,
Seller has not received a written notice from a Governmental Body that Seller is
in violation of any Environmental Law arising out of Seller's ownership, use or
operation of the Assets or the operation of the Business.
(b) Except as listed in Schedule 5.14, there are no Proceedings
pending or Threatened with respect to Seller's compliance with Environmental
Laws and relating to the Business or the Assets. To Seller's Knowledge, there is
no reasonable basis for any such Proceeding that would impose any liability or
obligation that would have or would reasonably be expected to have a Material
Adverse Effect.
(c) Except as listed in Schedule 5.14, Seller possesses all
certificates, permits and authorizations required by any Environmental Law for
Seller's ownership, use or operation of the Assets or the operation of the
Business.
(d) Except as set forth in Schedule 5.14, no environmental
remediation of any Release is occurring on any Real Property included in the
Assets nor has Seller issued a request for proposal or otherwise asked an
environmental remediation contractor to begin plans for any such environmental
remediation. Except as set forth in Schedule 5.14, to Seller's Knowledge, during
or prior to the period of Seller's ownership or operation of the Business there
were no Releases or threatened Releases which would reasonably be expected to
have a Material Adverse Effect.
(e) Except as set forth in Schedule 5.14, none of the Real Property
is (i) situated in a federal "Superfund" site or, to Seller's Knowledge, in any
federal "Superfund" study area designated
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under the federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), or (ii) to Seller's Knowledge, situated in any site or
study area designated under any state statute comparable to CERCLA.
Section 5.15 No Material Adverse Change. Except as set forth in
Schedule 5.15, between the date of the Balance Sheet and the date of execution
of this Agreement:
(a) no Material Adverse Effect has occurred;
(b) except for actions taken in connection with the contemplated
sale of the Business and this Agreement and except for conversion to the SAP
financial reporting system, between the date of the Balance Sheet and the date
of execution of this Agreement, the Business has been conducted in the ordinary
course, consistent with past practices;
(c) there has not been any increase in the salary, wage, bonus,
grants, awards, benefits or other compensation payable or that could become
payable by Seller to its officers, directors and employees with respect to the
Business or any amendment of any of the Employee Plans, Seller's Pension Plan
and Seller's 401(k) Plan other than increases or amendments in the ordinary
course of the Business, consistent with past practices (which may include normal
periodic performance reviews and related compensation and benefit increases and
the provision of new individual compensation and benefits for promoted or newly
hired officers and employees on terms consistent with past practice), nor has
Seller granted any severance or termination pay, entered into any contract to
make or grant any severance or termination pay, or paid any bonus, in each case
to any such officer, director, or employee, other than pursuant to preexisting
agreements, arrangements or bonus plans, or taken any action that would result
in the payment of any amounts, or the accelerated vesting of any rights or
benefits, under any Employee Plan, Seller's Pension Plan or Seller's 401(k)
Plan;
(d) there has been no change in any method of accounting or
accounting practice of the Business;
(e) Seller has not sold, mortgaged, pledged or encumbered the
Business or the Assets, other than sales of Assets in the ordinary course of
business; and
(f) no agreement or commitment to do any of the actions
contemplated by clauses (c), (d) or (e) above has been entered into.
Section 5.16 State and Federal Regulatory Matters.
(a) Schedule 5.16 reflects all of the currently pending filings
relating to the Business heretofore made by Seller before state or federal
regulatory commissions and each other currently pending Proceeding of such state
or federal regulatory commission which would be considered material to a
reasonably prudent purchaser of the Business in its reasonable business
judgment, other than any currently pending Proceeding that also is applicable to
other Persons engaged in a business similar to the Business such as generic or
industry-wide Proceedings.
(b) All currently effective material filings relating to the
Business heretofore made by Seller with state or federal regulatory commissions
were made in compliance with Legal Requirements then applicable thereto and the
information contained therein was true and correct in all material respects as
of the respective dates of such filings.
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Section 5.17 Brokers. Except for Xxxxxx Xxxxxxx & Co. Incorporated, no
broker or finder has acted for or on behalf of Seller or any Affiliate of Seller
in connection with this Agreement or the transactions contemplated by this
Agreement. No broker or finder is entitled to any brokerage or finder's fee, or
to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of Seller or any Affiliate of Seller for
which Buyer has or will have any liabilities or obligations (contingent or
otherwise).
Section 5.18 Employee Relations. Except as disclosed in Schedule 5.18,
as of the execution of this Agreement (i) there is no strike, slowdown, picket,
work stoppage or other labor dispute or disturbance on the part of the employees
of Seller with respect to the Business pending or Threatened, and Seller has not
experienced any such strike, slowdown, picket, work stoppage or other labor
dispute or disturbance with respect to the Business within the past two years,
(ii) no grievance, unfair labor practice charge or any arbitration Proceeding
arising out of or under any collective bargaining agreement relating to the
Business exists or is pending on the date hereof, (iii) Seller is not the
subject of a Proceeding asserting that it has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to compel it
to bargain with any labor organization as to wages or conditions of employment
with respect to the Business, (iv) Seller is not aware of any activity involving
Seller's employees seeking to certify a collective bargaining unit or engaging
in other organizational activity with respect to the Business, (v) Seller is
currently in compliance in all material respects with respect to the Business
with all applicable Legal Requirements relating to the employment of labor,
including those related to wages, hours and collective bargaining, and is not
liable for any arrearages of wages, penalties or other sums for failure to
comply with any of the foregoing and (vi) there is no claim with respect to
payment of wages, salary or overtime pay that has been asserted or is now
pending or Threatened before any Governmental Body regarding any person or
entity currently or formerly employed by Seller with respect to the Business.
Section 5.19 Insurance. Schedule 5.19 lists the Seller's property and
casualty insurance policies and contracts in effect as of the date hereof in
connection with the Business. Except as disclosed in Schedule 5.19, (i) each
material insurance policy thereof is in full force and effect, (ii) Seller is
not in default with respect to its obligations under any such policy and (iii)
Seller has not received any notice of cancellation or termination with respect
to any material insurance policy thereof.
Section 5.20 Accounts Receivable. All accounts receivable and earned
but unbilled revenue reflected in the Financial Statements represent actual
indebtedness to Seller incurred by the applicable account debtors in the
ordinary course of business consistent with past practices. To Seller's
Knowledge, all accounts receivable and earned but unbilled revenue reflected in
the Financial Statements are good and collectible at the aggregate recorded
amounts thereof, net of any reserve for doubtful accounts reflected therein.
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Section 5.21 Appropriate Knowledge Persons. The individuals identified
in the definition of "Knowledge" are agents, employees or officers of Seller and
certain of such individuals have primary decisionmaking responsibility for the
day-to-day operations, management, maintenance and repair of the Assets and the
Business, and they have served in such capacities for more than twelve (12)
months.
Section 5.22 Disclaimer. Except as otherwise expressly set forth in
this Agreement or in any other document or instrument delivered by Seller
pursuant hereto, Seller expressly disclaims any representations or warranties of
any kind or nature, express or implied, as to the condition, value or quality of
the assets or properties currently or formerly used, operated, owned, leased,
controlled, possessed, occupied or maintained by Seller, and Seller SPECIFICALLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH ASSETS OR PROPERTIES,
OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD THAT SUCH ASSETS
AND PROPERTIES ARE BEING ACQUIRED, "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN
THEIR PRESENT CONDITION, WITH ALL FAULTS AND THAT BUYER SHALL RELY ON ITS OWN
EXAMINATION AND INVESTIGATION THEREOF.
ARTICLE VI
COVENANTS
Section 6.1 Covenants of Seller. Seller agrees to observe and perform
the following covenants and agreements:
(a) Conduct of the Business Prior to the Closing Date. With respect
to the Business, except (i) as contemplated in this Agreement or in Schedule
6.1, (ii) as required by any Legal Requirement or Order or (iii) as otherwise
expressly consented to in writing by Buyer which consent will not be
unreasonably withheld or delayed, prior to the Closing, Seller will, with
respect to the Business.
(1) Not make or permit any material change in the general
nature of the Business;
(2) Maintain and conduct the Business in the ordinary course
of business in accordance with prudent business judgment and consistent with
past practice and policy, and maintain the Assets in their present condition,
reasonable wear and tear excepted, subject to retirements in the ordinary course
of business, use all reasonable efforts to preserve intact the present business
organization and the relationship with customers, suppliers and others having
business dealings with the Business;
(3) Not enter into any material transaction or Material
Contract other than in the ordinary course of business in accordance with
prudent business judgment and consistent with past practice and policy;
(4) Not purchase, sell, lease, dispose of or otherwise
transfer or make any Contract for the purchase, sale, lease, disposition or
transfer of, or subject to Encumbrance, any material Assets other than in the
ordinary course of business in accordance with prudent business judgment and
consistent with past practice and policy;
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(5) Not hire any new employee unless such employee is a bona
fide replacement for either a presently-filled position or a vacancy in an
authorized position with the Business;
(6) Not make any capital expenditure or capital expenditure
commitment in excess of $200,000 in the aggregate that is not included in the
Capital Budget except in the event of service interruption, emergency or
casualty loss, and use commercially reasonable efforts to make capital
expenditures in accordance with the Capital Budget;
(7) Comply in all material respects with all applicable Legal
Requirements and Orders, including without limitation those relating to the
filing of reports, the timely filing of Tax Returns and the payment of Taxes due
to be paid prior to the Closing, other than those Taxes contested in good faith;
(8) Except in the ordinary course of business consistent with
past practices or in accordance with the terms of any existing Contract,
Employee Plan or collective bargaining agreement, not grant any material
increase or change in total compensation or benefits (taken as a whole) to any
of the Transferred Employees or, except as permitted by Section 10.2, enter into
any employment, severance or similar Contract with any Person or amend any such
existing Contracts to increase any amounts payable thereunder or benefits
provided thereunder;
(9) Not terminate any Material Contract;
(10) Not create, incur, assume, guarantee or otherwise become
liable with respect to any indebtedness for money borrowed other than in the
ordinary course of business (it being understood and agreed that customer
advances, customer deposits and construction advances do not create indebtedness
for money borrowed), except in connection with additional borrowings under the
Existing Loan Documents and any renewal, extension, rearrangement or refunding
of any indebtedness created under or evidenced by the Existing Loan Documents,
and except pursuant to advances made by Seller to the Business; or
(11) Not make any material filings with any Governmental Body
prior to consulting with Buyer except for filings made in the ordinary course of
business consistent with past practices.
(b) Access to the Business, Assets and Records; Updating
Information.
(1) From and after the date hereof and until the Closing Date,
Seller shall permit Buyer and its Representatives to have, on reasonable notice
and at reasonable times, reasonable access to the Business, the Assets and all
books, papers and records to the extent that they reasonably relate to the
ownership, operation, obligations and liabilities of the Business and the
Assets; provided, however, that such access shall not unreasonably interfere
with the operation of the Business; and provided, further, that Buyer hereby
agrees to defend, indemnify and hold harmless Seller from and against all Losses
arising out of or relating to the negligence or willful misconduct of Buyer or
its Representatives in connection with Buyer's access provided pursuant to this
Section 6.1(b)(1). Without limiting the application of the Confidentiality
Agreement, all documents or information furnished by Seller hereunder shall be
subject to the Confidentiality Agreement.
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(2) Seller will notify Buyer as promptly as practicable of any
significant change in the ordinary course of business for the Business and of
any material Proceedings (Threatened or pending) involving or affecting the
Business or the transactions contemplated by this Agreement, and shall use
reasonable efforts to keep Buyer fully informed of such events.
(c) Consents. Seller will use its commercially reasonable efforts
to obtain all necessary Consents from any Person required to consummate the
transactions contemplated hereby, including the Consent of any Person required
under any Legal Requirement or Contract applicable to the Business and all
Consents listed in Schedule 5.3.
(d) Exclusivity. Until consummation of the transactions
contemplated hereby or termination of this Agreement pursuant to Section 9.1,
neither Seller nor its Affiliates, representatives, officers, directors,
employees or agent will, directly or indirectly, (1) submit, solicit, initiate,
encourage or discuss any proposal or offer from any Person (other than Buyer or
its Affiliates) or enter into any agreement or accept any offer relating to any
(i) reorganization, liquidation or dissolution of the Business; (ii) merger or
consolidation involving the Business; (iii) purchase or sale of substantially
all of the Assets; or (iv) similar transaction or business combination involving
the Business or the Assets, or (2) furnish any information with respect to,
assist or participate in or facilitate in any other manner any effort or attempt
by any Person or do or seek to do any of the foregoing. Seller shall notify
Buyer promptly if any Person makes any proposal, offer, inquiry or contact with
respect to an action described in clauses (i) through (iv) above.
(e) Noncompetition.
(i) From the Closing Date through the third (3rd) anniversary
thereof, Seller agrees that neither it nor any of its Affiliates will (i)
directly, or indirectly through one or more entities, own, manage, operate,
control, be employed by or participate in the ownership, management, operation
or control, or have a financial interest in, any Person which is engaged in the
Business within the State of Vermont, provided, however, that the foregoing
shall not prevent the purchase or ownership of shares which constitute less than
five percent (5%) of the outstanding equity securities of a publicly-held
company; or (ii) divert or direct any Person who is, at that time, a customer or
supplier of the Business away from the Business.
(ii) Seller acknowledges that it has carefully read all the
terms of this Section 6.1(e), and agrees that (A) the same are necessary for the
reasonable and proper protection of the value of the Business, (B) each and
every covenant is reasonable with respect to such matter, length of time and the
geographical area described, and (C) that irrespective of all other conditions,
the covenants and restrictions in clause (i) above shall be operative during the
full period and throughout the geographical area described. In the event any
court finds any such restraint or limitation to be unreasonable, then it is the
intent of the parties that such court should determine the maximum restraint or
limitation which is reasonable and enforcement will be of that restraint or
limitation.
(iii) Because of the immediate and irreparable damage that
would be caused to Buyer as a result of the breach of the covenants of Seller
contained in this Section 6.1(e), for which Buyer would not have other adequate
remedy, Seller agrees that, in the event of any such breach, Buyer shall be
entitled to seek, from any court of competent jurisdiction, an injunction
against any further breach by Seller. In addition, Buyer shall be entitled to
pursue any other remedies available under applicable laws or equitable
principles. Each party waives any requirements for security of the posting
26
of any bond or other surety in connection with any temporary or permanent award
or injunctive, mandatory or other equitable relief.
Section 6.2 Covenants of Buyer. Buyer agrees to observe and perform the
following covenants and agreements:
(a) Consents. Buyer will use its commercially reasonable efforts to
assist Seller in obtaining all necessary Consents from any Person required to
consummate the transactions contemplated hereby, including the Consent of any
Person required under any Legal Requirement or Contract applicable to the
Business, and will use its commercially reasonable efforts to obtain all
Consents listed in Schedule 4.2 and Schedule 4.3.
(b) Access to Information. After Closing, Buyer will, and will
cause its Representatives to, afford to Seller, including its Representatives,
at Seller's expense, reasonable access to all books, records, files and
documents related to the Business to the extent necessary to permit Seller to
prepare and file its tax returns and to prepare for and participate in any
investigation with respect thereto, to prepare for and participate in any other
investigation and defend any Proceedings relating to or involving Seller or the
Business for which Seller may be responsible, to discharge its obligations under
this Agreement and the other Related Documents to which its is a party and for
other reasonable purposes and will afford Seller reasonable assistance in
connection therewith. Buyer will cause such records to be maintained for not
less than seven years from the Closing Date and will not dispose of such records
without first offering in writing to deliver them to Seller; provided, however,
that in the event that Buyer transfers all or a portion of the Business to any
third party during such period, Buyer may transfer to such third party all or a
portion of the books, records, files and documents related thereof, provided
such third party transferee expressly assumes in writing the obligations of
Buyer under this Section 6.2(b). In addition, after the Closing Date, at
Seller's request, Buyer shall make available to Seller and its Affiliates,
employees, representatives and agents, those employees of Buyer requested by
Seller in connection with any Proceeding, including to provide testimony, to be
deposed, to act as witnesses and to assist counsel; provided, however, that (x)
such access to such employees shall not unreasonably interfere with the normal
conduct of the operations of Buyer and (y) Seller shall reimburse Buyer for the
allocated time charges of such employees and the out-of-pocket costs reasonably
incurred by Buyer in making such employees available to Seller.
(c) Citizens Guarantees and Surety Instruments. Buyer shall use its
commercially reasonable efforts to assist Seller in obtaining full and complete
releases on the guarantees, letters of credit, bonds and other surety
instruments listed in Schedule 6.2(c). For purposes of this Section 6.2(c),
reasonable efforts shall include: (i) Buyer's assumption of the Contracts on the
terms set forth in this Agreement; and (ii) an obligation on the part of Buyer
to provide a guaranty, letter of credit, bond or other surety instrument at
Closing to the extent required by any Contract assumed by Buyer at Closing and,
in general, an equivalent surety instrument to be substituted for any surety
instrument provided by Citizens to any beneficiary in connection with the
Business.
(d) Other Covenants of Buyer. Buyer agrees to submit to regulation
by the appropriate state regulatory commission to the same extent as such state
regulatory commission currently regulates Seller in connection with the
Business. Buyer also agrees to make no filings with such state regulatory
commission or take any other action in connection with any Proceeding or Legal
Requirement relating to any other businesses conducted by Seller that also are
subject to regulation by such state regulatory commission.
27
Section 6.3 Governmental Filings.
(a) HSR Act Filing. Buyer and Seller shall comply promptly with the
notice and reporting requirements of the HSR Act. Buyer and Seller shall comply
substantially with any additional requests for information, including requests
for production of documents and production of witnesses for interviews or
depositions, made by the Antitrust Division of the United States Department of
Justice, the United States Federal Trade Commission or the antitrust or
competition law authorities of any other jurisdiction (the "Antitrust
Authorities"). Buyer shall exercise its commercially reasonable efforts, and
Seller shall cooperate fully with Buyer, to prevent the entry in any Proceeding
brought by an Antitrust Authority or any Governmental Body which would prohibit,
make unlawful or delay the consummation of the transactions contemplated by this
Agreement. Seller shall not oppose any efforts of Buyer, including Buyer's
proffer of consent to any Order, to complete lawfully the transactions
contemplated by this Agreement, and shall cooperate in good faith with Buyer and
the Antitrust Authorities to the same effect.
(b) Other Regulatory Filings. Buyer and Seller will, as soon as
reasonably practicable following the execution of this Agreement, prepare and
file with each Governmental Body, including the appropriate state regulatory
commission, requests for such Consents as may be necessary for the transfer of
the Assets in accordance with the terms of this Agreement. Buyer and Seller will
diligently pursue such Consents and will cooperate with each other in seeking
such Consents. To this end, the parties agree to make available the personnel
and other resources of their respective organizations in order to accomplish
actions reasonably required by them to obtain all such Consents.
(c) Actions Not Required. Notwithstanding anything to the contrary
contained in this Agreement, in connection with or as a condition to receiving
any Consent, neither Seller nor Buyer shall be required (A) to divest, abandon,
license or take similar action with respect to any assets (tangible or
intangible) of it or any of its respective Affiliates, or (B) to expend material
sums of money or grant any material financial or other accommodations (other
than as contemplated hereby).
Section 6.4 Citizens Marks. Buyer acknowledges and agrees with Seller
that Seller has the absolute and exclusive proprietary right to all names,
marks, trade names, trademarks and corporate symbols and logos incorporating
"Citizens" and "CZN" (collectively and together with all other names, marks,
trade names, trademarks and corporate symbols and logos owned by Seller or any
of its Affiliates, the "Citizens Marks"), all rights to which and the goodwill
represented thereby and pertaining thereto are being retained by Seller. Within
ninety (90) days after the Closing Date, Buyer shall cease using any Citizens
Xxxx and shall remove from the Assets any and all Citizens Marks. Thereafter,
Buyer shall not use any Citizens Xxxx in connection with the sale of any
products or services or otherwise in the conduct of its businesses. In the event
that Buyer breaches this Section 6.4, Seller shall be entitled to specific
performance of this Section 6.4 and to injunctive relief against further
violations, as well as any other remedies at law or in equity available to
Seller.
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Section 6.5 Acknowledgment by Buyer. In order to induce Seller to enter
into and perform this Agreement and the Related Documents, Buyer acknowledges
and agrees with Seller as follows:
(a) To the extent any representation or warranty of Seller made
herein is, to the knowledge of Buyer acquired prior to the date of execution of
this Agreement, untrue or incorrect, (i) Buyer shall have no rights under this
Agreement or any Related Documents by reason of such untruth or inaccuracy, and
(ii) any such representation or warranty by Seller shall be deemed to be amended
to the extent necessary to render it consistent with such knowledge of Buyer. As
used in this Agreement, the "knowledge of Buyer" means the actual knowledge of
Xxxx X. Xxxxxx, Buyer's Chief Financial Officer.
(b) EXCEPT AS SET FORTH IN THIS AGREEMENT AND ANY OTHER DOCUMENT OR
INSTRUMENT DELIVERED BY SELLER PURSUANT HERETO, NONE OF SELLER OR ANY OF ITS
AFFILIATES OR REPRESENTATIVES MAKES ANY REPRESENTATION OR WARRANTY AS TO THE
ACCURACY OR COMPLETENESS OF ANY INFORMATION, WRITTEN OR ORAL, FURNISHED TO OR
PREPARED AT THE REQUEST OF BUYER OR ANY OF ITS AFFILIATES OR REPRESENTATIVES
WITH RESPECT TO THE BUSINESS OR THE ASSETS.
(c) THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT
AND IN ANY OTHER DOCUMENT OR INSTRUMENT DELIVERED BY SELLER PURSUANT HERETO
CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF SELLER TO
BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND BY THE RELATED
DOCUMENTS THERE ARE NO REPRESENTATIONS, WARRANTIES, COVENANTS, UNDERSTANDINGS OR
AGREEMENTS, ORAL OR WRITTEN, IN RELATION THERETO BETWEEN THE PARTIES OTHER THAN
THOSE INCORPORATED HEREIN AND THEREIN. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT AND IN ANY OTHER DOCUMENT OR
INSTRUMENT DELIVERED BY SELLER PURSUANT HERETO, BUYER DISCLAIMS RELIANCE ON ANY
REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, BY OR ON BEHALF OF
SELLER OR ITS AFFILIATES OR REPRESENTATIVES. WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS PROVIDED IN
SECTIONS 5.7, 5.11 AND 5.14, THERE ARE NO REPRESENTATIONS OR WARRANTIES OF
SELLER WITH RESPECT TO THE CONDITION OF THE ASSETS, COMPLIANCE WITH
ENVIRONMENTAL LAWS AND ENVIRONMENTAL PERMITS OR THE PRESENCE OR RELEASES OF
HAZARDOUS MATERIAL IN THE FIXTURES, SOILS, GROUNDWATER, SURFACE WATER OR AIR ON,
UNDER OR ABOUT OR EMANATING FROM ANY OF THE PROPERTIES OR ASSETS OF SELLER.
Section 6.6 Transition Plan. Within 30 days after the execution date of
this Agreement, Buyer shall deliver to Seller a list of its proposed
representatives to a joint transition team, which shall include expertise from
various functional specialties associated or involved in providing billing,
payroll and other support services provided to the Business by any automated or
manual process using facilities or employees that are not included among the
Assets or Transferred Employees. Seller will add its representatives to such
team within 15 days after receipt of Buyer's list. Such team will be responsible
for preparing as soon as reasonably practicable after the execution date of this
Agreement and at least 60 days prior to the Closing Date, and timely
implementing, a transition plan which will identify and describe substantially
all of the various transition activities that the parties will cause to occur
29
before and after the Closing and any other transfer of control matters that any
party reasonably believes should be addressed in such transition plan, including
(i) the payment, collection, remittance and/or other appropriate arrangements
with respect to the items addressed in Sections 3.1(a), 3.1(b) and 3.4; and (ii)
identification, selection and hiring by Buyer on or after the Closing Date of
employees of Seller who provide support services to the Business but who are not
included among the Active Employees. If requested by either party, the terms and
conditions governing such transition activities will be more fully set forth in
a Transition Agreement reasonably satisfactory to the parties. Buyer and Seller
shall use their commercially reasonable efforts to cause their Representatives
on such transition team to cooperate in good faith and take all reasonable steps
necessary to develop a mutually acceptable transition plan by no later than 120
days after the date of this Agreement.
Section 6.7 Title Insurance. Prior to Closing, Seller shall cooperate
with Buyer and use commercially reasonable efforts to assist Buyer if Buyer
desires to obtain ALTA title insurance commitments (collectively, the "Title
Commitments," and each a "Title Commitment"), in final form, from one or more
title insurance companies (collectively, the "Title Company"), committing the
Title Company (subject only to the satisfaction of any industry standard
requirements contained in the Title Commitment) to issuing ALTA (or its local
equivalent) form of title insurance policies insuring good, valid, indefeasible
fee simple title to the owned Real Estate in Buyer, in all cases, at Buyer's
sole expense and in the respective amounts that Buyer requests prior to Closing,
subject to no Encumbrances or other exceptions to title other than Permitted
Encumbrances (collectively the "Title Policies"). On or prior to the Closing
Date, Seller shall execute and deliver, or cause to be executed and delivered,
to the Title Company, at no cost to Seller, any customary affidavits, standard
gap indemnities and similar documents reasonably requested by the Title Company
in connection with the issuance of the Title Commitments or the Title Policies;
provided that such efforts and Buyers' request for Title Policies or Title
Commitments shall, in no event, result in any delay in the consummation of the
transactions contemplated by this Agreement.
Section 6.8 Sale of Generating Assets. Seller shall use its
commercially reasonable efforts, prior to Closing, to negotiate, to enter into
and to consummate, prior to Closing, a definitive purchase and sale agreement,
containing terms and conditions reasonably acceptable to Seller and for an
adjusted purchase price of at least $3,000,000, with a third Person regarding
the sale to and purchase by such third Person of the Generating Assets and the
assumption by such third Person of related obligations and liabilities of
Seller. Upon the full execution of such an agreement, the Generating Assets
shall automatically be deemed to be Excluded Assets for all purposes of this
Agreement and Seller shall deliver to Buyer revised Schedules reflecting changes
that result as a consequence of the Generating Assets becoming Excluded Assets.
Buyer shall cooperate fully with Seller, and shall not oppose Seller's efforts
to sell the Generating Assets separately from the other Assets. Seller also may
enter into, and Buyer agrees to assume at Closing or separately to enter into at
Closing, any power purchase agreement that Seller and the buyer of the
Generating Assets may agree to enter into as part of such purchase and sale
transaction, provided such power purchase agreement is approved by the Vermont
Public Services Board.
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Section 6.9 Hydro-Quebec Step-up Indemnity Agreement. Within 30 days
after the execution date of this Agreement, the parties jointly shall establish
a working group of appropriate subject matter experts who shall be instructed to
prepare, within 120 days after the date of execution of this Agreement, a
comprehensive agreement (the "Hydro-Quebec Step-Up Indemnity Agreement"), for
execution by the parties at Closing, setting forth the following terms and
procedures, together with any other appropriate arrangements that either party
believes should be included in such agreement:
(a) It is the intention of the parties that Seller's obligations
under the Hydro-Quebec Contracts shall not be increased or enlarged as a result
of the sale of the Assets hereunder or by any act or omission of Buyer, but
shall remain to the same extent and in the same amount as if such sale of the
Assets did not occur. Accordingly, Seller shall agree to indemnify and hold
harmless Buyer from and against any and all Losses arising out of or resulting
from Section 17.3 of H-Q/VJO Contract or Sections 6.1, 6.2, 6.3 or 6.4 of the
H-Q Participation Agreement to the same extent (but only to such extent) that
Seller would have incurred such Losses had Seller continued to own the Assets as
of the time the event giving rise to such Losses occurred.
(b) Without the prior written consent of Seller (which may be
withheld in Seller's sole discretion), Buyer shall not amend, modify, waive or
agree to the waiver of any provision of the Hydro-Quebec Contracts if such
action could adversely affect the rights or obligations of Seller.
(c) Buyer shall notify Seller as promptly as practicable of any
significant change or development with respect to the Hydro-Quebec Contracts or
the parties thereto.
(d) Buyer shall take all commercially reasonable steps to mitigate
such Losses, including exercising all rights available to it under the
Hydro-Quebec Contracts to resell the additional power it purchases thereunder
and enforcing its rights against the other purchasing parties to the
Hydro-Quebec Contracts. Such rights shall be exercised by Buyer in good faith
and in a manner consistent with its business practices involving claims for
which no third party contractual indemnification is available.
(e) To the fullest extent permitted, Seller shall be subrogated to
any rights or claims that Buyer may have against any of the other power
purchasing parties under the Hydro-Quebec Contracts in connection with the event
giving rise to such Losses.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Seller's Conditions Precedent to Closing. The obligation of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to fulfillment at or prior to the Closing of the following conditions:
(a) Representations and Warranties True as of the Closing Date.
Buyer's representations and warranties in this Agreement shall have been true
and correct in all material respects (except for representations and warranties
that contain a qualification as to materiality, which shall have been true and
correct in all respects) as of the date of this Agreement and shall be true and
correct in all material respects (except for representations and warranties that
contain a qualification as to materiality, which shall be true and correct in
all respects) as of the Closing Date as if made on the Closing Date, subject to
changes expressly contemplated and permitted by this Agreement, except that
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representations and warranties made as of, or in respect of, only a specified
date or period shall be true and correct in all material respects as of, or in
respect of, such date or period.
(b) Compliance with Agreements. The covenants, agreements and
conditions required by this Agreement to be performed and complied with by Buyer
shall have been performed and complied with in all material respects prior to or
at the Closing Date.
(c) Certificate. Buyer shall execute and deliver to Seller a
certificate of an authorized officer of Buyer, dated the Closing Date, stating
that the conditions specified in Sections 7.1(a) and 7.1(b) of this Agreement
have been satisfied.
(d) Governmental Approvals and Other Consents. The Vermont Public
Services Board shall have issued an Order approving the transactions
contemplated hereby, the terms and conditions of such Order shall be acceptable
in all material respects to Seller in its reasonable discretion and shall have
no significant adverse effect on Seller's acquisition and divestiture activities
in the State of Vermont (including the divestiture of the Assets), and such
Order shall have become a Final Order. Seller also shall have obtained all other
Consents of Governmental Bodies and other Persons which are required in order to
consummate the transactions contemplated hereby and to transfer the Assets to
Buyer without incurring material liability under any Legal Requirement, Order or
Contract, including all Consents required by the Hydro-Quebec Contracts to
assign such Contracts to Buyer.
(e) HSR Act. The applicable waiting period under the HSR Act with
respect to the transactions contemplated hereby shall have expired or have been
terminated without there being in effect a Legal Requirement enjoining or
restraining consummation of such transaction.
(f) Injunctions. On the Closing Date, there shall be no Proceedings
pending which seek, and no Orders which operate, to restrain, enjoin or
otherwise prevent the consummation of the transactions contemplated by this
Agreement.
(g) Opinion of Counsel. On the Closing Date, Seller shall have
received from counsel to Buyer an opinion in the form of Exhibit 7.1(g).
(h) Documents. Buyer shall have delivered all the certificates,
instruments, contracts and other documents specified to be delivered by it
hereunder on or before the Closing Date, including pursuant to Section 8.1, and
shall have taken such actions as Seller may have requested pursuant to Section
11.2 hereof.
(i) Sale of Generating Assets. Any agreement entered into by Seller
in accordance with Section 6.8 shall have been consummated prior to the Closing
Date or Seller shall be satisfied that such transaction will be consummated
concurrently with the Closing.
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Section 7.2 Buyer's Conditions Precedent to Closing. The obligation of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to fulfillment at or prior to the Closing of the following conditions:
(a) Representations and Warranties True as of the Closing Date.
Seller's representations and warranties in this Agreement shall have been true
and correct in all material respects (except for representations and warranties
that contain a qualification as to materiality, which shall have been true and
correct in all respects) as of the date of this Agreement and shall be true and
correct in all material respects (except for representations and warranties that
contain a qualification as to materiality, which shall be true and correct in
all respects) as of the Closing Date as if made on the Closing Date, subject to
changes expressly contemplated and permitted by this Agreement; except (i) that
representations and warranties made as of, or in respect of, only a specified
date or period shall be true and correct in all material respects as of, or in
respect of, such date or period, and (ii) to the extent that any failure of such
representations and warranties to be true and correct as aforesaid when taken in
the aggregate would not have a Material Adverse Effect.
(b) Compliance with Agreements. The covenants, agreements and
conditions required by this Agreement to be performed and complied with by
Seller shall have been performed and complied with in all material respects
prior to or at the Closing Date, except where the failure to so perform or
comply when taken in the aggregate would not have a Material Adverse Effect.
(c) Certificate. Seller shall execute and deliver to Buyer a
certificate of an authorized officer of Seller, dated the Closing Date, stating
that the conditions specified in Sections 7.2(a) and 7.2(b) of this Agreement
have been satisfied.
(d) Governmental Approvals. The Vermont Public Services Board shall
have issued an Order approving the transactions contemplated hereby, such Order
shall not contain any restrictions or conditions (other than those in effect on
the date of this Agreement or requiring that the regulatory treatment with
respect to the Business in existence as of the date of this Agreement applicable
to Seller be continued following the Closing) which would have a material
adverse effect on the operation, financial condition or results of operations of
the Business, and such Order shall have become a Final Order. In addition,
Seller shall have obtained all other Consents of Governmental Bodies and other
Persons which are required in order to consummate the transactions contemplated
hereby other than those the failure of which to obtain would not have a material
adverse effect on the operation, financial condition or results of operations of
the Business.
(e) HSR Act. The applicable waiting period under the HSR Act with
respect to the transactions contemplated hereby shall have expired or have been
terminated.
(f) Injunctions. On the Closing Date, there shall be no Proceedings
pending which seek, and no Orders which operate, to restrain, enjoin or
otherwise prevent the consummation of the transactions contemplated by this
Agreement.
(g) Opinion of Counsel. On the Closing Date, Buyer shall have
received from L. Xxxxxxx Xxxxxx XX, Vice President and General Counsel of
Seller, an opinion in the form of Exhibit 7.2(g) hereto.
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(h) Documents. Seller shall have delivered all of the certificates,
instruments, contracts and other documents specified to be delivered by it
hereunder, including pursuant to Section 8.1, and shall have made arrangements
reasonably satisfactory to Buyer to deliver to Buyer as promptly as practicable
after the Closing such records (including customer and employee records)
necessary to own and operate the Business.
(i) No Material Adverse Change. Since the date of execution of this
Agreement, no Material Adverse Effect shall have occurred that has continuing
effect as of the Closing Date.
(j) Hydro-Quebec Step-Up Indemnity Agreement. Seller shall have
executed and delivered to Buyer the Hydro-Quebec Step-Up Indemnity Agreement
contemplated by Section 6.9 and such agreement shall be reasonably satisfactory
to Buyer.
ARTICLE VIII
CLOSING
Section 8.1 Closing. The closing of the purchase and sale of the Assets
(the "Closing") will take place at the offices of Xxxxxxxxxx and Xxxxx, L.L.P.,
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxxxxxxx, X.X. 00000, on the last
calendar day of the month in which the conditions specified in Sections 7.1(d)
and 7.2(d) have been satisfied, unless another time, date and place is agreed to
in writing by the parties. The date of the Closing is referred to in this
Agreement as the "Closing Date." The transactions to be consummated on the
Closing Date shall be deemed to have been consummated as of 11:59 p.m. on the
Closing Date. At the Closing the following events shall occur, each event being
deemed to have occurred simultaneously with the other events.
(a) Xxxx of Sale. Seller and Buyer shall execute and deliver the
Xxxx of Sale and Assignment and Assumption Agreement in the form of Exhibit
8.1(a) hereto (the "Xxxx of Sale").
(b) Payment of Purchase Price. As provided below, Buyer will pay to
Seller an amount equal to the Estimated Purchase Price by wire transferring such
amount, in lawful money of the United States of America in immediately available
funds, to such account as Seller shall have designed by notice to Buyer. If the
Closing Date is not a business day on which financial institutions are open and
operating, then on or before the last business day on which financial
institutions are open and operating before the Closing Date, Buyer shall deliver
the Estimated Purchase Price to Buyer's lead bank (the "Escrow Agent") in
immediately available funds in U.S. dollars. Upon receipt, the Escrow Agent
shall invest the Estimated Purchase Price in an interest-bearing account
mutually agreed upon by Seller and Buyer. At Closing, Buyer shall sign and
deliver to Seller a statement which confirms that the Closing has occurred and
which instructs the Escrow Agent to transfer to Seller the funds representing
the Estimated Purchase Price, plus an amount representing the interest earned
after the Closing Date until the date the funds are transferred, to an account
that Seller shall designate at least two (2) business days prior to the date the
funds are required to be transferred hereunder. The Escrow Agent shall refund
the balance to Buyer. The fees and expenses of Escrow Agent shall be paid
one-half by Seller and one-half by Buyer.
(c) Other Related Documents. To the extent consistent with the
other provisions of this Agreement, Seller (or the appropriate Affiliate of
Seller) and Buyer shall execute and deliver such other Related Documents
(including special warranty deeds, conveyances, certificates of title, bills of
sale, assignment and assumption instruments and FIRPTA affidavits) reasonably
requested by a party that are necessary in order to satisfy any applicable Legal
Requirements relating to the transfer of the
34
Assets to Buyer or the assumption of the Assumed Liabilities by Buyer or which
are customarily given in the State of Vermont to accomplish transfers of assets
of the type involved; provided, however, that nothing in this clause (c) shall
obligate Seller or any Affiliate of Seller to execute or deliver any document
that affects, in a manner adverse to Seller and in a manner not required by the
terms of this Agreement, Seller's liability to Buyer as expressed herein and in
the Xxxx of Sale.
(d) FIRPTA Certificate. Seller shall execute and deliver to Buyer a
certification of nonforeign status within the meaning of Treasury Regulations
Section 1.1445-2.
ARTICLE IX
TERMINATION
Section 9.1 Termination Rights. This Agreement may be terminated in its
entirety at any time prior to the Closing:
(a) By the mutual written agreement of Seller and Buyer;
(b) By Buyer, on the one hand, or Seller, on the other hand, in
writing if there shall be in effect a nonappealable Order prohibiting ,
enjoining or restricting the transactions contemplated by this Agreement;
(c) By Buyer, upon the breach in any material respect of any of the
representations and warranties of Seller contained herein or in the failure by
Seller to perform and comply in any material respect with any of the agreements
and obligations required by this Agreement to be performed or complied with by
Seller, provided that such breach or failure is reasonably likely to result in a
Material Adverse Effect and is not cured or otherwise addressed by Seller in a
manner reasonably acceptable to Buyer within 30 days of Seller's receipt of a
written notice from Buyer that such a breach or failure has occurred (or
significant efforts have not been commenced to cure such misrepresentation or
breach if it is susceptible to cure but not capable of being cured within such
30 days);
(d) By Seller, upon the breach in any material respect of any of
the representations and warranties of Buyer contained herein or the failure by
Buyer to perform and comply in any material respect with any of the agreements
and obligations required by this Agreement to be performed or complied with by
Buyer, provided that such breach or failure is not cured or otherwise addressed
by Buyer in a manner reasonably acceptable to Seller within 30 days of Buyer's
receipt of a written notice from Seller that such a breach or failure has
occurred (or significant efforts have not been commenced to cure such
misrepresentation or breach if it is susceptible to cure but not capable of
being cured within such 30 days);
(e) By either party in writing if the Closing has not occurred
within fifteen (15) months after the execution date of this Agreement; provided,
however, that the right to terminate this Agreement under this Section 9.1(e)
will not be available to any party that is in material breach of its
representations, warranties, covenants or agreements contained herein; and
provided, further, that if Closing has not occurred within such period of time
because the conditions precedent to Closing set forth in Sections 7.1(d) and
7.2(d) have not been fulfilled, then such period of time shall be automatically
extended by an additional six (6) months;
(f) By Seller or Buyer, as appropriate, if any Governmental Body
whose Consent is required to fulfill a condition precedent to Closing set forth
in Section 7.1(d) (with respect to Seller)
35
or in Section 7.2(d) (with respect to Buyer) has affirmatively indicated that
such Consent will not be given or will contain terms or conditions (or, if such
Consent has been obtained, contains terms or conditions) that, in the reasonable
business judgment of Seller or Buyer, as appropriate, will result in a condition
precedent to Closing set forth in Section 7.1(d) (with respect to Seller) or in
Section 7.2(d) (with respect to Buyer) not being satisfied;
(g) By Seller if by the deadline set forth in Section 4.4 (as such
deadline may have been extended by Seller), Buyer fails to obtain from a
reputable financial institution a binding commitment letter, in form and
substance reasonably satisfactory to Seller, obligating such financier to
provide the necessary funds to Buyer at Closing to enable Buyer to consummate
the transactions contemplated by this Agreement; or
(h) By Seller if both (i) Buyer's financier fails to advance loan
proceeds to Buyer with which to fund the payments required to be made by Buyer
at Closing or such financier affirmatively indicates, for no reason or for any
reason other than the proper termination of this Agreement pursuant to any other
provision of this Section 9.1, that such funding will not be provided to Buyer
by such financier and (ii) Buyer is unable to arrange, to Seller's reasonable
satisfaction, replacement funding from any other source within forty-five (45)
days after the occurrence of the event described in the preceding clause (i).
Section 9.2 Limitation on Right to Terminate: Effect of Termination.
(a) A party shall not be allowed to exercise any right of
termination pursuant to Section 9.1 if the event giving rise to the termination
right shall be due to the willful failure of such party seeking to terminate
this Agreement to perform or observe in any material respect any of the
covenants or agreements hereof to be performed or observed by such party.
(b) If this Agreement is terminated as permitted under Section 9.1,
such termination shall be without liability of or to any party to this
Agreement, or any shareholder or Representative of such party; provided,
however, that if such termination shall result from the willful failure of any
party to fulfill a condition to the performance of any other party or to perform
a covenant of this Agreement or from a material and willful breach by any party
to this Agreement (it being understood that the failure to cure a breach shall
not, by itself, be a willful breach of this Agreement), then such party shall
(subject to the limitation set forth in the last sentence of this Section
9.2(b)) be fully liable for any and all damages sustained or incurred by the
other party. If prior to Closing either party to this Agreement resorts to legal
proceedings to enforce this Agreement, the prevailing party in such proceedings
shall be entitled to recover all costs incurred by such party including
reasonable attorney's fees, in addition to any other relief to which such party
may be entitled; provided, however, and notwithstanding anything to the contrary
in this Agreement, in no event shall either party be entitled to receive any
punitive, indirect or consequential damages.
(c) If (i) Seller terminates this Agreement pursuant to Section
9.1(d), Section 9.1(g) or Section 9.1(h) or (ii) this Agreement is terminated by
either party pursuant to Section 9.1(e) or 9.1(f) because the requisite Consent
from the applicable state regulatory commission has not been obtained, or
because such Governmental Body has affirmatively indicated that its Consent will
not be given, due in whole or in part to concerns about Buyer's qualifications
or capabilities, unless such Governmental Body also has affirmatively indicated
that its Consent is being withheld due in part to concerns about Seller's
operation of the Business or ownership of the Assets, then Seller may present a
sight draft under the Letter of Credit, and thereby retain either all of the
Deposit (if clause (i) is applicable) or $380,000
36
(if clause (ii) is applicable), (or, if there is no Letter of Credit or if the
Letter of Credit does not permit Seller to present a sight draft in such
circumstances, then Buyer shall pay to Seller in cash an amount equal to the
Deposit or $380,000, as the case may be, within five (5) business days after the
effective date of termination of this Agreement), in either case, as liquidated
damages free of any claims by Buyer or any other Person with respect thereto
(the parties hereby acknowledging that the extent of damages to Seller
occasioned by such breach or default or failure by Buyer would be impossible or
extremely difficult to ascertain and that the amount to be paid to Seller is a
fair and reasonable estimate of such damages under the circumstances). If this
Agreement is terminated for any reason other than as set forth in the preceding
sentence, then Seller shall promptly deliver the Letter of Credit to Buyer, free
of any claims by Seller or any other Person with respect thereto.
ARTICLE X
EMPLOYEE MATTERS
Section 10.1 Employment of Transferred Employees.
(a) Schedule 10.1 lists each division, and the total number of
salaried and hourly, nonunion and union, employees actively employed as of the
date of this Agreement in each division by Seller or its Affiliates whose
primary duties relate to the Business ("Active Employees"). As of the Closing
Date, Buyer shall employ all Active Employees of Seller employed in the Business
being acquired ("Transferred Employees") in the same comparable positions, and
at the same compensation level (including wages, salary and bonuses) as were in
effect with Seller immediately prior to the Closing Date. Buyer reserves the
right to restructure positions and functions as it deems appropriate so long as
reassignment does not result in materially diminished responsibilities or a
reduction in compensation. For purposes of the preceding sentence, "Active
Employees" shall include all full-time and part-time employees, employees on
military leave, maternity leave, leave under the Family and Medical Leave Act of
1993, on short-term disability, on layoff with recall rights, and employees on
other leaves of absences where there is a legal or contractual right to
reinstatement. Notwithstanding the foregoing, nothing in this Agreement shall
operate to prevent or prohibit Buyer from making changes in compensation of
Transferred Employees based on demotions arising for cause.
(b) Prior to the execution date of this Agreement, Seller has
delivered to Buyer a list of the persons who would have been Transferred
Employees had the Closing Date occurred on December 31, 1999, showing the
following information for each such person: (i) the name of each such person;
(ii) the name of his or her current employer; (iii) his or her current base pay,
1998 bonus that was paid in 1999 and the projected 1999 bonus that will be paid
in 2000; (iv) his or her hire date, any rehire date (if available) and years of
service; (v) his or her then-current position and job title; (vi) whether such
employee is subject to a collective bargaining agreement or represented by a
labor organization and, if so, the name of the union and local, (vii) whether
such employee is on military leave, maternity leave, leave under the Family and
Medical Leave Act of 1993, short-term disability, on layoff with recall rights,
or on other leave of absence with a legal or contractual right to reinstatement.
Seller shall update such list as of the end of each calendar quarter occurring
between the execution date hereof and the Closing Date, in each case assuming
the Closing Date had occurred on such date, and shall deliver such updated lists
to Buyer within ten (10) days after the end of each such calendar quarter.
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Section 10.2. Assumption of Collective Bargaining Agreement
Obligations. On and after the Closing Date, Buyer, shall assume all of the
Seller's obligations under, and be bound by the provisions of, each collective
bargaining agreement to the extent of provisions covering Transferred Employees.
Each collective bargaining agreement shall be identified on a Schedule 10.2 to
be prepared by Seller and submitted to Buyer on or before the Closing Date.
Seller shall cooperate with Buyer in Buyer's efforts to contact the unions
representing Transferred Employees. Seller may extend, renew or enter into a new
Contract to replace any collective bargaining agreement that will expire prior
to December 31, 2000, provided that Seller shall consult with Buyer regarding
the terms and conditions of any such extension, renewal or replacement of any
such collective bargaining agreement. Notwithstanding the foregoing provisions
of this Section 10.2, Buyer shall not be obligated to assume any new collective
bargaining agreement that contains terms and conditions that, when taken as a
whole, are materially more onerous on the employer than the terms and
conditions, taken as a whole, of the collective bargaining agreement that was
replaced by such new collective bargaining agreement.
Section 10.3 Cessation of Participation in Seller's Plans; Proration of
Bonuses. From and after the Closing Date, Transferred Employees shall accrue no
additional benefits under any Employee Benefit Plan, or Employee Plan of Seller
or its Affiliates. Seller and Buyer shall pro-rate the obligation to pay any
bonuses declared by Seller after the Closing Date that would have been payable
to the Transferred Employees had the Transferred Employees remained employed by
Seller or its Affiliates throughout the calendar year in which the Closing Date
occurs, in accordance with the provisions of any Employee Benefit Plan or
Employee Plan of Seller under which such bonus would have been paid. For
Transferred Employees entitled to such bonus, Buyer shall be obligated to pay
that portion of each such bonus determined by multiplying the amount of such
bonus by a fraction, the numerator of which is the number of days from and after
the Closing Date through the end of the calendar year in which the Closing Date
occurs, and the denominator of which is 365. Seller shall be obligated to pay
the balance of any such bonuses.
Section 10.4 Similarity of Benefit Packages. As of the Closing Date,
and except as otherwise expressly provided in this Article X, Buyer shall
include each Transferred Employee in a benefit package providing benefits that
are in the aggregate substantially similar to those provided by Seller to such
Transferred Employees immediately prior to the Closing Date. Notwithstanding the
foregoing, to the extent that one or more collective bargaining agreements being
assumed by Buyer contains provisions pertaining to employee benefits, Buyer
shall provide the Transferred Employees covered by such agreements with benefits
that are identical to those required to be provided under the terms of such
agreements. Except as otherwise expressly provided in this Article X, Buyer
shall treat all service and compensation credited to each such Transferred
Employee as if such service and compensation had been rendered to, and paid by,
Buyer for all purposes under Buyer's benefit plans, arrangements, and policies.
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Section 10.5 Defined Benefit Pension Plan.
(a) At least fifteen days prior to the Closing Date, Seller shall
take any and all actions necessary to cease benefit accruals and fully vest all
Transferred Employees in their accrued benefits under the Citizens Pension Plan
("Seller's Pension Plan"). Seller shall retain all liabilities and assets for
pension benefits accrued through the Closing Date by Transferred Employees and
retirees of the Business under Seller's Pension Plan.
(b) As of the Closing Date, Buyer shall cause all union Transferred
Employees to be included in a qualified defined benefit pension plan providing
benefits identical to the benefits provided under the Seller's Pension Plan
("Buyer's Pension Plan"). Buyer shall take all actions necessary to cause
Buyer's Pension Plan to recognize the service that all union Transferred
Employees had under Seller's Pension Plan for purposes of such Employees'
eligibility to participate, vesting, attainment of retirement dates, subsidized
benefits, and entitlement to optional forms of payment.
Section 10.6 401(k) Plan.
(a) Buyer shall take all action necessary to ensure that, as of the
Closing Date, it includes Transferred Employees in a qualified 401(k) plan
providing for matching contributions at least equivalent to that provided to the
Transferred Employee under Citizens 401(k) Savings Plan ("Seller's 401(k) Plan")
immediately prior to the Closing Date. Buyer shall take all actions necessary to
cause Buyer's 401(k) Plan to recognize the service that the Transferred
Employees had in Seller's 401(k) Plan for purposes of determining such
Employees' eligibility to participate, vesting, attainment of retirement dates,
contribution levels and, if applicable, eligibility for optional forms of
benefit payments. Buyer shall cause the trustee of Buyer's 401(k) Plan to accept
transfers and direct rollovers from Seller's 401(k) Plan of the vested account
balances of Transferred Employees, including transfers of outstanding loan
balances and related promissory notes, subject to compliance with applicable
law.
(b) Seller shall vest Transferred Employees in their account
balances under Seller's 401(k) Plan as of the Closing Date. Seller shall direct
the trustee of Seller's 401(k) Plan to transfer to the trustee of Buyer's 401(k)
Plan an amount of cash equal to the value of the account balances of the
Transferred Employees under Seller's 401(k) Plan; except that to the extent that
the account balances consist of outstanding loans, Seller shall direct the
trustee of Seller's 401(k) Plan to transfer to the trustee of Buyer's 401(k)
Plan the promissory notes and related documents evidencing such loans.
(c) After the transfer of assets and liabilities pursuant to this
Section, Buyer shall assume all liabilities for the benefits payable with
respect to Transferred Employees under Seller's 401(k) Plan, and Seller and
Seller's 401(k) Plan shall have no liability for such benefits.
(d) In connection with the transfer of assets and liabilities under
this Section, Seller and Buyer shall cooperate in making all appropriate
filings, and providing all applicable notices, required by the IRC or ERISA.
Buyer shall deliver to Seller a copy of Buyer's 401(k) Plan, and a copy of the
most recent determination letter from the IRS with respect to such Plan,
together with a certification to the effect that no events have occurred since
the date of the determination letter that would adversely affect the Plan's
qualified status.
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Section 10.7 Welfare Benefits.
(a) Buyer shall take all action necessary and appropriate to ensure
that, as of the Closing Date, Buyer maintains employee welfare benefit plans
(including retiree medical benefits) for the benefit of Transferred Employees
that, in the case of nonunion Transferred Employees are, in the aggregate,
comparable to those benefits provided by Seller under its corresponding welfare
benefit plans (the "Buyer's Nonunion Welfare Plans"), and in the case of union
Transferred Employees are identical to those benefits provided to union
Transferred Employees under Seller's corresponding welfare benefit plans (the
"Buyer's Bargained Welfare Plans"), as in effect immediately prior to the
Closing Date. The Buyer's Nonunion Welfare Plans and the Buyer's Bargained
Welfare Plans are hereinafter referred to collectively as the "Buyer Welfare
Plans." For purposes of determining eligibility to participate, and entitlement
to benefits, in each Buyer Welfare Plan, each Transferred Employee shall be
credited with service, determined under the terms of the corresponding welfare
plans maintained by Seller on the Closing Date (hereinafter referred to
collectively as the "Seller Welfare Plans"). Any restrictions on coverage for
pre-existing conditions, actively at work requirements, waiting periods, and
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived in the Buyer Welfare Plans for Transferred Employees, and Transferred
Employees shall receive credit under the Buyer Welfare Plans for co-payments,
payments under a deductible limit made by them, and for out-of-pocket maximums
applicable to them during the plan year of the Seller Welfare Plan in which the
Closing Date occurs. As soon as practicable after the Closing Date, Seller shall
deliver to Buyer a list of the Transferred Employees who had credited service
under a Seller Welfare Plan, together with each such Transferred Employee's
service, co-payment, deductible and out-of-pocket payment amounts under such
plan.
(b) Buyer shall provide or cause to be provided retiree medical,
dental, and life benefits to each retiree of the Business identified in Schedule
10.7 as updated as of the Closing Date (the "Retirees"), to each Transferred
Employee who is considered to be a "grandfathered employee" (as hereinafter
defined), and to each union Transferred Employee who otherwise is eligible for
such retiree benefits, under the same terms and conditions as applied to such
Retiree or Transferred Employee immediately prior to the Closing Date, and
Seller shall have no obligation or liability, contingent or otherwise, to
provide retiree medical, dental or life benefits to any such Retiree or
Transferred Employee on or after the Closing Date. For purposes of this Section
10.7, a "grandfathered employee" is a union or nonunion Transferred Employee,
who was at least age 55 with at least 10 years of service as defined in the
Seller's Pension Plan by December 31, 1997, and who retires after December 31,
1997. Schedule 10.7 identifies each Active Employee who is a "grandfathered
employee" and each union Active Employee who otherwise is eligible for such
retiree benefits. Buyer agrees not to terminate or materially modify those
post-retirement benefit provisions covering "grandfathered" Transferred
Employees, eligible union Transferred Employees, Retirees, their spouses and
dependents that are in effect immediately prior to the Closing Date.
(c) Within sixty (60) days after the Closing, Seller agrees to
transfer to an exempt trust established by Buyer under Section 501(c)(9) of the
IRC ("Buyer's VEBA") the amount held under any trust established by Seller under
Section 501(c)(9) of the IRC ("Seller's VEBA") to fund post-retirement health
care and life insurance benefits for the Business. Such amount shall be
determined based upon Seller's internal recordkeeping. Buyer agrees that Buyer's
VEBA will apply an amount at least equal to the sum of the assets transferred
from Seller's VEBA (and earnings thereon calculated at the rate of return
generated by Buyer's VEBA) to provide post-retirement health care and life
insurance benefits after the Closing Date to the Retirees and, as applicable,
the Transferred Employees who become eligible for such benefits after Closing.
Upon Closing, Buyer shall be responsible for all
40
obligations of Seller to provide post-retirement health care and life insurance
benefits to such Transferred Employees and Retirees, and Seller and Seller's
VEBA shall cease to have any liability, contingent or otherwise, for such
benefits.
Section 10.8 Flexible Spending Accounts. Seller shall transfer to
Buyer's flexible benefits plan any balances standing to the credit of
Transferred Employees under Seller's flexible benefits plan as of the Closing
Date. Seller shall provide to Buyer prior to the Closing Date a list of those
Transferred Employees that have participated in the health or dependent care
reimbursement accounts of Seller, together with their elections made prior to
the Closing Date with respect to such account, and balances standing to their
credit as of the Closing Date.
Section 10.9 Employment Agreements. Buyer shall assume all obligations
of each employment agreement to which Seller or its Affiliates is a party and
which covers any Transferred Employee immediately prior to the Closing Date.
Section 10.10 Vacation. Seller shall pay to Transferred Employees any
"banked" vacation credited to them on or prior to the Closing Date. On or after
the Closing Date, Buyer shall provide to each Transferred Employee vacation in
an amount equal to the Transferred Employee's vacation entitlement for the year
of the Closing reduced by the number of vacation days that such Transferred
Employee has taken on or before the Closing.
Section 10.11 Severance. In the event that Buyer terminates the
services of any Transferred Employee within twelve (12) months following the
Closing Date without cause, Buyer shall provide to any such Transferred Employee
severance or separation pay benefits that are at least equal to the benefits
that would have been paid by Seller had Seller continued to employ such
Transferred Employee through such twelve month period ending on the employee's
date of termination from Buyer; provided, however, that if a collective
bargaining agreement that is applicable to a union Transferred Employee would
provide for a greater benefit to be paid by Buyer, the terms and conditions of
such agreement shall instead be applicable. "Cause" for termination shall
consist of: (a) any act of dishonesty or fraud; (b) an employee's conviction of
a crime involving fraud, embezzlement or any other act of moral turpitude; (c)
an employee's gross negligence or willful misconduct in the performance of his
duties; (d) an employee's engagement in acts seriously detrimental to the
Business or reputation of Buyer; (e) an employee's failure to abide by lawful
policies of Buyer; and (f) the employee's failure to abide by the directives of
the employee's superior.
ARTICLE XI
TAX MATTERS
Section 11.1 Purchase Price Allocation. Buyer and Seller shall use
their good faith efforts to agree upon the allocation (the "Allocation") of the
Purchase Price, the Assumed Liabilities and other relevant items (including, for
example, adjustments to the Purchase Price) to the individual assets or classes
of assets as required by Section 1060 of the IRC and the Treasury Regulations
promulgated thereunder. If Buyer and Seller agree to such Allocation, Buyer and
Seller covenant and agree that, except to the extent that the IRS or other
Governmental Body successfully challenges such Allocation, (i) the values
assigned to the assets by the parties' mutual agreement shall be conclusive and
final for all purposes, (ii) Buyer and Seller shall file all federal Tax
Returns, including IRS Form 8594, in accordance with such Allocation, and (iii)
neither Buyer nor Seller will take any position before any Governmental Body or
in any Proceeding that is in any way inconsistent with such Allocation.
Notwithstanding the foregoing, if Buyer and Seller cannot agree to an
Allocation, Buyer and Seller
41
covenant and agree to file, and to cause their respective Affiliates to file,
all Tax Returns and schedules thereto (including, for example, amended returns,
claims for refund, and those returns and forms required under Section 1060 of
the IRC and any Treasury regulations promulgated thereunder) consistent with
each of such party's good faith Allocations, unless otherwise required because
of a change in any Legal Requirement.
Section 11.2 Cooperation with Respect to Like-Kind Exchange. Buyer
agrees that Seller may, at Seller's election prior to the Closing Date, direct
Buyer to acquire any portion of the Assets by delivering all or a portion of the
Purchase Price to a "qualified intermediary" (as defined in Treasury Regulations
ss.1.1031(k) - (l)(g)(4)) as to assist Seller in structuring the relinquishment
of the Assets to qualify as part of a like-kind exchange of property covered by
Section 1031 of the IRC. If Seller so elects, Buyer shall cooperate with Seller
(but without being required to incur any out-of-pocket costs in the course
thereof) in connection with Seller's efforts to effect such like-kind exchange,
which cooperation shall include, without limitation, taking such actions as
Seller reasonably requests in order to enable Seller to qualify such transfer as
part of a like-kind exchange of property covered by Section 1031 of the IRC
(including any actions required to facilitate the use of a "qualified
intermediary"), and Buyer agrees that Seller may assign all or part of its
rights and delegate all or part of its obligations under this Agreement to a
person or entity acting as a qualified intermediary to the extent necessary to
qualify the transfer of the Assets as part of a like-kind exchange of property
covered by Section 1031 of the IRC, provided, however, that no such assignment
shall relieve Seller of any of its obligations under this Agreement. Buyer and
Seller agree in good faith to use reasonable efforts to coordinate the
transactions contemplated by this Agreement with any other transactions engaged
in by either Buyer or Seller; provided that such efforts are not required to
include an unreasonable delay in the consummation of the transactions
contemplated by this Agreement. Seller agrees to pay any additional Transaction
Taxes that may be imposed as a result of any like-kind exchange contemplated by
this Section 11.2 and to reimburse Buyer for any additional out-of-pocket legal
fees and expenses incurred by Buyer in connection with any such exchange.
Section 11.3 Transaction Taxes. Buyer and Seller shall each bear and be
responsible for paying one-half of any sales, use, transfer, documentary,
registration (other than any annual registration fees), business and occupation
and other similar Taxes (including related penalties (civil or criminal),
additions to tax and interest) imposed by any Governmental Body with respect to
the transfer of Assets (including the Real Property) to Buyer ("Transaction
Taxes"), regardless of whether the tax authority seeks to collect such Taxes
from Seller or Buyer. Seller shall prepare all tax filings related to any
Transaction Taxes (other than with respect to Real Property and motor vehicle
title transfer and registration, which shall be prepared by Buyer). Fifteen (15)
days prior to making such filings, the filing party shall provide to the
nonfiling party the filing party's workpapers for the nonfiling party's review
and approval. The nonfiling party shall provide to the filing party approval or
disapproval of such workpapers within ten (10) days of delivery by the filing
party. The filing party shall be responsible for (i) administering the payment
of such Transaction Taxes, (ii) defending or pursuing any Proceedings related
thereto, and (iii) paying any expenses related thereto, in each case subject to
reimbursement by the nonfiling party for one-half of such payments and expenses.
Each party shall give prompt written notice to the other of any proposed
adjustment or assessment of any Transaction Taxes with respect to the
transaction, or of any examination of said transaction in a sales, use, transfer
or similar tax audit. In any Proceedings, whether formal or informal, the filing
party shall control the defense of such Proceedings, but shall permit the
nonfiling party to participate in the defense of such proceeding and shall take
all actions and execute all documents required to allow such participation.
Neither party shall negotiate a settlement or compromise of any Transaction
Taxes without the prior written consent of the other, which consent shall not be
unreasonably withheld.
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ARTICLE XII
ENVIRONMENTAL MATTERS
Section 12.1 Environmental Due Diligence.
(a) Right to Conduct Environmental Due Diligence. Regarding
environmental matters, Buyer has completed its initial environmental due
diligence prior to execution of this Agreement, including a review of the
Environmental Data. Buyer also has required Seller to make the representations
concerning environmental matters set forth in Section 5.14, upon which Buyer is
relying. In light of these actions, Buyer agrees not to conduct additional
environmental due diligence (including employee interviews and sampling of any
media or wastewater) except in accordance with this Section 12.1. All activities
of Buyer regarding environmental due diligence shall be conducted to minimize
any inconvenience or interruption of the normal use and enjoyment of the
Business and the Assets.
(b) Delivery of Environmental Reports. Seller has made available to
Buyer before the date of execution of this Agreement copies of all written
environmental audits, reports or studies in Seller's possession of which Seller
has Knowledge and which were prepared after December 31, 1996, concerning the
existence or possible existence of Hazardous Materials on, or under or adjacent
to any of the Real Property or relating to potential Environmental Liability of
Seller in connection with the Business or the Assets. Buyer shall provide to
Seller copies of all reports, assessments and other information composed or
compiled by Buyer or Buyer's environmental consultant(s) promptly following
Buyer's receipt thereof. Buyer shall treat all such information delivered to, or
composed or compiled by, Buyer or Buyer's environmental consultant(s) as
Environmental Data in accordance with the procedures of Section 12.1(c).
(c) Confidentiality of Environmental Data. All audits, reports and
studies delivered to or prepared by Buyer and all other information collected
and generated as a result of Buyer's environmental due diligence ("Environmental
Data") will be subject to the terms and conditions of the Confidentiality
Agreement, except as otherwise expressly provided in this Section 12.1. Neither
Buyer nor its environmental consultant(s) shall disclose or release any
Environmental Data without the prior written consent of Seller and all such
information shall be kept strictly confidential. The Environmental Data shall be
prepared at the request of counsel to Buyer and, to the fullest extent permitted
by law, shall be the work product of such counsel and constitute confidential
attorney/client communications. The Environmental Data shall be transferred
among Buyer and its consultant(s) in a manner that will preserve, to the
greatest extent possible, such privileges. Buyer expressly agrees that until the
Closing, it will not distribute the Environmental Data to any third party
without Seller's prior written consent. After the Closing, each Party agrees
that it will not distribute the Environmental Data to any third party without
the other's prior written consent, except as required by law or by express
provisions of its corporate compliance program if the other Party is provided
written notice at least ten (10) days prior to such distribution, provided,
however, that for a period of two (2) years after the Closing Date, Buyer may
distribute the Environmental Data to any potential purchaser of the Assets only
after first notifying the Seller.
(d) Environmental Consultants. Buyer may retain one or more outside
environmental consultants to assist in its environmental due diligence
concerning the Assets and shall notify Seller of the environmental consultant or
consultants Buyer intends to retain. Thereafter, Seller shall have five (5) days
after receipt of such notification to notify Buyer in writing of Seller's
objection (which must be for good cause) and substantiate the basis for that
objection. If Seller does not object
43
for good cause and substantiate that objection within said five (5) day period,
Seller shall be deemed to have consented to Buyer's selection.
(e) Phase I Reviews. Buyer has conducted various environmental
assessment activities with respect to the Assets, including reviewing existing
environmental reports, correspondence, permits and related materials regarding
the Assets, but excluding inspecting individual sites. Buyer may not conduct any
further Phase I environmental assessment activities with respect to the Assets
without the prior written consent of Seller, which consent may be withheld,
conditioned or delayed by Seller in its sole discretion. Any permitted Phase I
environmental assessment activities shall not include any sampling or intrusive
testing.
(f) Phase II Reviews. Buyer may not conduct any Phase II
environmental assessment activities with respect to the Assets (including, but
not limited to, the taking and analysis of soil, surface water and groundwater
samples, testing of buildings, drilling xxxxx, taking soil borings and
excavating) without the prior written consent of Seller, which consent may be
withheld, conditioned or delayed by Seller in its sole discretion.
(g) Additional Due Diligence. Notwithstanding the foregoing, if
prior to Closing Seller receives notice of any Proceeding or Threatened
Proceeding arising under Environmental Laws or if Seller otherwise acquires
Knowledge that is reasonably likely to require a change to Schedule 5.14, Seller
promptly shall notify Buyer of the same and Buyer may request that Seller
authorize Buyer to conduct specific additional environmental due diligence
measures if and to the extent that such measures are required to determine the
extent of any potential Environmental Liability relating thereto. Such
authorization shall not be unreasonably withheld, conditioned or delayed by
Seller. Any such additional environmental due diligence shall be conducted at
Buyer's sole expense.
(h) Indemnity for Due Diligence Activities. Buyer hereby agrees to
indemnify and hold harmless Seller, Seller's Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and against
any and all Losses with respect to persons or property arising out of or
resulting from any site visit by Buyer or its environmental consultant(s) and
resulting from an act or omission of Buyer or its environmental consultant(s),
provided, however, that such indemnity shall not extend to Losses resulting from
the discovery of pre-existing damage or other pre-existing conditions of the
Assets.
ARTICLE XIII
INDEMNIFICATION
Section 13.1 Indemnification by Seller. From and after Closing and
subject to the other provisions of this Article XIII, Seller shall indemnify and
hold harmless Buyer, its Representatives, Affiliates, successors and permitted
assigns (collectively, the "Buyer Indemnitees") from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Seller in this
Agreement not being true and correct when made or when required by this
Agreement to be true and correct, or any breach or default by Seller in the
performance of its covenants, agreements, or obligations under this Agreement
required to be performed prior to Closing;
(b) any breach or default by Seller in the performance of its
covenants, agreements, or obligations under this Agreement required to be
performed after Closing; and
44
(c) the Retained Liabilities, including the Retained Environmental
Liabilities.
Section 13.2 Indemnification by Buyer. From and after Closing and
subject to the other provisions of this Article XIII, Buyer shall indemnify and
hold harmless Seller, its Representatives, Affiliates, successors and permitted
assigns (collectively, the "Seller Indemnitees") from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Buyer in this
Agreement not being true and correct when made or when required by this
Agreement to be true and correct, or any breach or default by Buyer in the
performance of its covenants, agreements, or obligations under this Agreement
required to be performed prior to Closing;
(b) any breach or default by Buyer in the performance of its
covenants, agreements, or obligations under this Agreement required to be
performed after Closing; and
(c) Assumed Liabilities, including the Assumed Environmental
Liabilities.
Section 13.3 Limitations on Liability. Notwithstanding anything to the
contrary in this Agreement, the liability of Seller and Buyer under this
Agreement and any documents delivered in connection herewith or contemplated
hereby shall be limited as follows:
(a) IN NO EVENT SHALL SELLER BE LIABLE TO THE BUYER INDEMNITEES, OR
SHALL BUYER BE LIABLE TO THE SELLER INDEMNITEES, FOR ANY EXEMPLARY, PUNITIVE,
SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES; provided,
however, that if Buyer or Seller is held liable to a third party for any of such
damages and Seller or Buyer, respectively is obligated to indemnify the other
for the matter that gave rise to such damages, then Seller or Buyer, as
appropriate, shall be liable for, and obligated to reimburse the other for, such
damages.
(b) Except as provided below, the representations, warranties,
covenants and agreements of Seller and Buyer set forth in this Agreement shall
survive the Closing for the applicable period of time set forth below in this
Section 13.3(b), and all representations, warranties, covenants and agreements
of Seller and Buyer under this Agreement and the indemnities granted by Seller
and Buyer in Section 13.1 or Section 13.2, respectively, shall terminate at 5:00
p.m., local time in Stamford, Connecticut, on the appropriate anniversary of the
Closing Date or on the expiration of the applicable statute of limitations (or
extensions or waivers thereof), as the case may be, as set forth below in this
Section 13.3(b); provided, however, that such indemnities shall survive with
respect only to the specific matters that is the subject of a proper Claim
Notice delivered in good faith in compliance with the requirements of this
Section 13.3 until the earlier to occur of (A) the date on which a final
nonappealable resolution of the matter described in such Claim Notice has been
reached or (B) the date on which the matter described in such Claim Notice has
otherwise reached final resolution.
(1) The representations and warranties of Seller contained in
Section 5.9 (Taxes), the covenants and agreements of Seller relating to Taxes,
and the related indemnity obligations of Seller contained in Section 13.1 shall
terminate on, and no action or claim with respect thereto may be brought
following, the expiration of the applicable statute of limitations (or
extensions or waivers thereof).
(2) The representations and warranties of Seller contained in
Section 5.5 (Title to Assets; Liens) and the related indemnity obligations of
Seller contained in Section 13.1 shall
45
terminate on, and no action or claim with respect thereto may be brought after,
the third anniversary of the Closing Date.
(3) The representations and warranties of Sellers contained in
Section 5.14 (Environmental Matters) and the related indemnity obligations of
Sellers contained in Section 13.1 shall terminate on, and no action or claim
with respect thereto may be brought after, the fourth anniversary of the Closing
Date.
(4) All other representations and warranties of Seller and
Buyer contained in this Agreement and the related indemnity obligations of Buyer
and Seller contained in this Agreement shall terminate on, and no further action
or claim with respect thereto may be brought after, the second anniversary of
the Closing Date.
(5) Except as set forth in the proviso to this clause (5), the
indemnity obligations of Seller contained in Section 13.1 with respect to any
Retained Liability shall terminate on, and no action or claim with respect
thereto may be brought after, the second anniversary of the Closing Date,
provided that the indemnity obligations of Seller contained in Section 13.1 for
(i) Retained Liabilities relating to Taxes shall survive until the expiration of
the applicable statute of limitations (or extensions or waivers thereof); (ii)
Retained Environmental Liabilities with respect to which Seller had no Knowledge
as of the Closing Date shall survive until the fourth anniversary of the Closing
Date; and (iii) Retained Liabilities described in Sections 2.3(a), (c) and (d),
Retained Liabilities relating to the Proceedings listed in Schedule 2.2(b) as
Retained Liabilities, and any Disclosed Pre-Closing Liability (and any liability
or obligation that would have been a Disclosed Pre-Closing Liability had Seller
disclosed such liability or obligation to Buyer if Seller had Knowledge of such
liability or obligation as of the Closing Date) shall survive for an unlimited
period of time. The Retained Liabilities described in clauses (i) and (iii) of
this Section 13.3(b)(5) are collectively referred to hereinafter as the
"Specified Retained Liabilities.
(6) The indemnity obligations of Buyer contained in Section
13.2 with respect to any Assumed Liability shall survive for an unlimited period
of time.
(7) Notwithstanding the foregoing, the Parties acknowledge
that Buyer shall be entitled to indemnification by Seller for Losses incurred by
Buyer in respect of any intentional or reckless misrepresentation or omission or
fraud by Seller without any time limitation (it being understood that the
failure to cure a breach shall not, by itself, be an intentional or reckless act
or omission).
In no event shall any amounts be recovered from Seller or Buyer under Section
13.1 or Section 13.2, respectively, or otherwise for any matter for which a
Claim Notice is not delivered to Seller or Buyer, as the case may be, prior to
the close of business on the applicable date set forth above.
(c) Notwithstanding anything to the contrary in this Agreement,
Seller shall not be required to indemnify the Buyer Indemnities, or be otherwise
liable in any way whatsoever to the Buyer Indemnitees, for any Losses (other
than Losses incurred by Buyer in respect of the Specified Retained Liabilities
and any intentional or reckless misrepresentation or omission or fraud by
Seller, it being understood that the failure to cure a breach shall not, by
itself, be an intentional or reckless act or omission (the "First-Dollar
Losses")) until the Buyer Indemnitees have suffered Losses (determined after
giving effect to the provisions of Section 13.3(f) and other than First-Dollar
Losses) that, when taken together with all other claims for Losses (other than
First-Dollar Losses) under Section 13.1 of each of the Related Purchase
Agreements, are in excess of a deductible in an amount equal to two percent (2%)
of the total of the Purchase Price plus the aggregate gross purchase price set
forth in each Related
46
Purchase Agreement that is consummated, after which point Seller will be
obligated only to indemnify the Buyer Indemnitees from and against further
Losses other than First-Dollar Losses in excess of such deductible. Buyer shall
be entitled to indemnification for all First-Dollar Losses.
(d) Notwithstanding anything to the contrary in this Agreement,
Seller shall not be required to indemnify the Buyer Indemnitees, or be otherwise
liable in any way whatsoever to the Buyer Indemnitees, for any Losses (other
than First-Dollar Losses) that, when combined with the aggregate amount of
Losses (other than First-Dollar Losses) that are subject to indemnification by
Seller under Section 13.1 of the Related Purchase Agreements, are in excess of
an amount equal to five percent (5%) of the total of the Purchase Price plus the
aggregate gross purchase price set forth in each Related Purchase Agreement that
is consummated. Buyer shall be entitled to indemnification for all First-Dollar
Losses.
(e) Except to the extent otherwise expressly provided in this
Agreement, no right to indemnification under this Article XIII shall be limited
by reason of any investigation conducted by any Party at any time or by the
decision by a Party to complete the Closing. Notwithstanding the foregoing,
Buyer acknowledges that Seller's indemnity obligations contained in Section 13.1
are subject to the applicable limitations set forth in Section 13.3, and that
certain obligations and liabilities of Seller are included among the Assumed
Liabilities.
(f) Neither Party shall have liability for any claim or Loss (A)
that is covered by insurance for which the other Party recovers payments in
respect of such Loss or with respect to which the other Party otherwise recovers
payments in respect of such Loss from any other sources (whether in a lump sum
or stream of payments) or (B) that is the type normally recoverable by the
Business through rates, but in each case only to the extent of such payments or
recovery. With respect to insurance proceeds only, such recovery shall be
calculated net of the insured party's out-of-pocket costs relating to claim
preparation and settlement. With respect to recovery through rates, if the
amount of the Losses that is included in rates is not specifically adjudicated
in the related Final Order, the amount of the Losses included in rates will be
calculated as follows: (i) if the cost associated with the Losses is booked as
an item of operating expense, the amount of such expense included in rates will
be the result of the ratio where total test period operating expenses allowed
for ratemaking purposes in such Final Order is the numerator and Buyer's total
requested test period operating expenses (including the Losses) is the
denominator; (ii) if the cost associated with the Losses is booked as an item of
rate base, the amount of such rate base included in rates will be the result of
the ratio where total test period rate base allowed for ratemaking purposes in
such Final Order is the numerator and Buyer's total requested test period rate
base (including the Losses) is the denominator. Buyer agrees to use its
commercially reasonable efforts to give timely and effective written notice to
the appropriate insurance carrier(s) of any occurrence or circumstances which,
in the judgment of Buyer consistent with its customary risk management
practices, appear likely to give rise to a claim against Buyer that is likely to
involve one or more insurance policies of Buyer. Any such notice shall be given
in good faith by Buyer without regard to the possibility of indemnification
payments by Seller under Section 13.1, and shall be processed by Buyer in good
faith and in a manner consistent with its risk management practices involving
claims for which no third party contractual indemnification is available. Buyer
agrees that (i) if it is entitled to receive payment from Seller for a Loss, and
(ii) if Buyer has obtained insurance which may cover the claim or matter giving
rise to such Loss, then (iii) such insurance shall be primary coverage and Buyer
will make a claim under such insurance (if such claim can be made in good faith)
before enforcing its right to receive payment from Seller. If at any time
subsequent to the receipt by a Buyer Indemnitee of an indemnity payment from
Seller hereunder, such Buyer Indemnitee (or any Affiliate thereof) receives any
recovery, settlement or other similar payment with respect to the Loss for which
it receives such indemnity payment, such Buyer Indemnitee shall promptly pay to
Seller an amount equal to the amount of such recovery, less (for insurance
proceeds only) any out-of-pocket costs
47
incurred by such Buyer Indemnitee (or its Affiliates) in connection with claim
preparation and settlement, but in no event shall any such payment exceed the
amount of such indemnity payment; provided, that if such net recovery reduces
the amount of Losses actually incurred by the Buyer Indemnitees to an amount
that is then below the deductible amount set forth in Section 13.3(c) and if
Seller has made other payments to the Buyer Indemnitees for other Losses in
excess of such deductible amount, then Buyer also shall promptly pay to Seller
an amount equal to the portion of such payments made by Seller that Seller would
not have been obligated to make pursuant to Section 13.3(c) had the Losses of
the Buyer Indemnitees not included the Losses covered by such net recovery. No
other cost or expense relating to any such recovery shall reduce the amount of
such payment to Seller.
(g) Notwithstanding any language contained in any Related Document
(including deeds and other conveyance documents relating to the Real Property),
the representations and warranties of Seller set forth in this Agreement will
not be merged into any such Related Document and the indemnification obligations
of Seller, and the limitations on such obligations, set forth in this Agreement
shall control. No provision set forth in any such Related Document shall be
deemed to enlarge, alter or amend the terms or provisions of this Agreement.
Section 13.4 Claims Procedure.
(a) All claims for indemnification under Section 13.1 or 13.2, or
any other provision of this Agreement except as otherwise expressly provided in
this Agreement, shall be asserted and resolved pursuant to this Article XIII.
Any Person claiming indemnification hereunder referred to as the "Indemnified
Party" and any Person against whom such claims are asserted hereunder is
hereinafter referred to as the "Indemnifying Party." In the event that any
Losses are asserted against or sought to be collected from an Indemnified Party
by a third party, said Indemnified Party shall with reasonable promptness
provide to the Indemnifying Party a Claim Notice. The Indemnifying Party shall
be relieved of its obligations to indemnify the Indemnified Party with respect
to any such Losses only to the extent the Indemnified Party's delay in notifying
the Indemnifying Party thereof in accordance with the provisions of this
Agreement so prejudice the Indemnifying Party's ability to defend against the
Losses. The Indemnifying Party shall have twenty (20) days from the personal
delivery or receipt of the Claim Notice (the "Notice Period") to notify the
Indemnified Party (i) whether or not it disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to such
Losses and/or (ii) whether or not it desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Losses;
provided, however, that any Indemnified Party is hereby authorized prior to and
during the Notice Period to file any motion, answer or other pleading that it
shall deem necessary or appropriate to protect its interests or those of the
Indemnifying Party (and of which it shall have given notice and opportunity to
comment to the Indemnifying Party) and not prejudicial to the Indemnifying
Party. In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it desires to defend the Indemnified Party against
such Losses, the Indemnifying Party shall have the right to defend all
appropriate proceedings, and with counsel of its own choosing, which proceedings
shall be promptly settled or prosecuted by them to a final conclusion. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement it may do so at its sole cost and expense. If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Losses that the
Indemnifying Party elects to contest or, if appropriate and related to the claim
in question, in making any counterclaim against the Person asserting the third
party Losses, or any cross-complaint against any Person. No claim may be settled
or otherwise compromised without the prior written consent of both the
Indemnifying Party and the Indemnified Party.
(b) The Indemnified Party shall provide reasonable assistance to
the Indemnifying Party and provide access to its books, records and personnel as
the Indemnifying Party reasonably
48
requests in connection with the investigation or defense of the Losses. The
Indemnifying Party shall promptly upon receipt of reasonable supporting
documentation reimburse the Indemnified Party for out-of-pocket costs and
expenses incurred by the latter in providing the requested assistance.
(c) With regard to third party claims for which Buyer or Seller is
entitled to indemnification under Section 13.1 or 13.2, such indemnification
shall be paid by the Indemnifying Party upon: (i) the entry of an Order against
the Indemnified Party and the expiration of any applicable appeal period; or
(ii) a settlement with the consent of the Indemnifying Party, provided that no
such consent need be obtained if the Indemnifying Party fails to respond to the
Claim Notice as provided in Section 13.4(a). Notwithstanding the foregoing but
subject to Section 13.4(a), and provided that there is no dispute as to the
applicability of indemnification, expenses of counsel to the Indemnified Party
shall be reimbursed on a current basis by the Indemnifying Party as if such
expenses are a liability of the Indemnifying Party.
Section 13.5 Exclusive Remedy. Except as otherwise provided in Section
6.4, the rights, remedies and obligations of the Buyer Indemnitees and the
Seller Indemnitees set forth in this Article XIII will be the exclusive rights,
remedies and obligations of such Persons after the Closing with respect to this
Agreement, the events giving rise to this Agreement and the transactions
provided for herein or contemplated hereby or thereby. No Proceeding for
termination or rescission, or claiming repudiation, of this Agreement or the
Xxxx of Sale may be brought or maintained by either party against the other
following the Closing Date no matter how severe, grave or fundamental any
breach, default or nonperformance may be by one party. Accordingly, the parties
hereby expressly waive and forego any and all rights they may possess to bring
any such Proceeding.
Section 13.6 Indemnification for Negligence. WITHOUT LIMITING OR
ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER
IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM
GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, VIOLATION OF ANY LAW OR
OTHER LEGAL FAULT OF OR BY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS
PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
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Section 13.7 Waiver and Release.
(a) Buyer, on behalf of itself and each other Buyer Indemnitee,
hereby forever waives, relieves, releases and discharges the Seller Indemnitees
and their successors and assigns from any and all rights, liabilities,
Proceedings (including future Proceedings) and Losses of any Buyer Indemnitee,
whether known or unknown at the Closing Date, which any Buyer Indemnitee has or
incurs, or may in the future have or incur, arising out of or related to any
Assumed Environmental Liability.
(b) Seller, on behalf of itself and each other Seller Indemnitee,
hereby forever waives, relieves, releases and discharges to Buyer Indemnitees
and their successors and assigns from any and all rights, liabilities,
Proceedings (including future Proceedings) and Losses of any Seller Indemnitee,
whether known or unknown at the Closing Date, which any Seller Indemnitee has or
incurs, or may in the future have or incur, arising out of or related to any
Retained Environmental Liabilities.
ARTICLE XIV
GENERAL PROVISIONS
Section 14.1 Expenses. Except as otherwise specifically provided
herein, each Party will pay all costs and expenses of its performance of and
compliance with this Agreement, except Buyer will pay all real estate transfer
taxes and real estate recording fees, if any, including expenses of counsel
associated with real estate title, transfer and recording issues.
Section 14.2 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been given upon
receipt if either (a) personally delivered, (b) sent by prepaid first class
mail, and registered or certified and a return receipt requested (c) sent by
overnight delivery via a nationally recognized carrier or (d) by facsimile with
completed transmission acknowledged:
If to Seller, to:
Citizens Utilities Company
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. XxXxxxxx
Telecopier: (000) 000-0000
with a copy to:
Citizens Utilities Company
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: L. Xxxxxxx Xxxxxx, XX
Telecopier: (000) 000-0000
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and:
Citizens Utilities Company
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: J. Xxxxxxx Xxxx
Telecopier: (000) 000-0000
and:
Xxxxxxxxxx and Xxxxx, L.L.P.
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
If to Buyer, to:
Cap Rock Energy
000 X. Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxx
Telecopier: (000) 000-0000
or at such other address or number as shall be given in writing by a party to
the other party.
Section 14.3 Assignment. This Agreement may not be assigned, by
operation of law or otherwise, by any party hereto without the prior written
consent of the other party hereto, such consent not to be unreasonably withheld;
provided, however, in the event of any such assignment by a party by operation
of law without the consent of the other party as required above, such other
party may consent to such assignment after it has occurred and, in such event,
this Agreement and all the provisions hereof shall be binding upon the Person
receiving such assignment by operation of law. Notwithstanding the foregoing,
(a) Buyer may assign this Agreement, without the prior written consent of
Seller, to any direct or indirect wholly-owned subsidiary of Buyer provided such
subsidiary assumes in writing all of the duties and obligations of Buyer
hereunder (provided that no such assignment by Buyer shall in any way operate to
enlarge, alter or change any obligation due to Seller or relieve Buyer of its
obligations hereunder if such subsidiary fails to perform such obligations, with
the understanding that Buyer shall be jointly and severally liable with such
subsidiary for any nonperformance of Buyer's obligations hereunder); and (b)
Seller may assign all or part of its rights or delegate all or part of its
duties under this Agreement, without the prior written consent of Buyer, to a
qualified intermediary chosen by Seller to structure all or part of the
transactions contemplated hereby as a like-kind exchange of property covered by
Section 1031 of the IRC (provided that no such assignment by Seller shall in any
way operate to enlarge, alter or change any obligations due to Buyer or relieve
Seller of its obligations hereunder if such qualified intermediary fails to
perform such obligations, with the understanding that Seller shall be
51
jointly and severally liable with such qualified intermediary for any
nonperformance of Seller's obligations hereunder).
Section 14.4 Successor Bound. Subject to the provisions of Section
14.3, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Section 14.5 Governing Law. The validity, performance, and enforcement
of this Agreement and all Related Documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of Delaware without giving
effect to the principles of conflicts of law of such state.
Section 14.6 Dispute Resolution. Except as otherwise provided in
Sections 3.3(c) and 6.4, and this Section 14.6, any dispute, controversy or
claim between the parties relating to, arising out of or in connection with this
Agreement (or any subsequent agreements or amendments thereto), including as to
its existence, enforceability, validity, interpretation, performance or breach
or as to indemnification or damages, including claims in tort, whether arising
before or after the termination of this Agreement (any such dispute, controversy
or claim being herein referred to as a "Dispute") shall be settled without
litigation and only by use of the following alternative dispute resolution
procedure:
(a) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Dispute. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties shall not
be admissible in the arbitration described below, or in any lawsuit. Documents
identified in or provided with such communications, which are not prepared for
purposes of the negotiations, are not so exempted and may, if otherwise
admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties
do not resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules, as then amended and in effect, of
the American Arbitration Association (the "Rules"). Either party may demand such
arbitration in accordance with the procedures set out in the Rules. The
arbitration shall take place in Phoenix, Arizona. The arbitration hearing shall
be commenced within 60 days of such party's demand for arbitration. The
arbitrator shall have the power to and will instruct each party to produce
evidence through discovery (i) that is reasonably requested by the other party
to the arbitration in order to prepare and substantiate its case and (ii) the
production of which will not materially delay the expeditious resolution of the
dispute being arbitrated; each party hereto agrees to be bound by any such
discovery order. The arbitrator shall control the scheduling (so as to process
the matter expeditiously) and any discovery. The parties may submit written
briefs. At the arbitration hearing, each party may make written and oral
presentations to the arbitrator, present testimony and written evidence and
examine witnesses. No party shall be eligible to receive, and the arbitrator
shall not have the authority to award, exemplary or punitive damages. The
arbitrator shall rule on the Dispute by issuing a written opinion within 30 days
after the close of hearings. The arbitrator's decision shall be binding and
final. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction.
52
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator; provided, however, that if the arbitrator determines that the
position taken in the Dispute by the nonprevailing party taken as a whole is
unreasonable, the arbitrator may order the nonprevailing party to bear such fees
and expenses, and reimburse the prevailing party for all or such portion of its
reasonable costs and expenses in submitting and presenting its position, as the
arbitrator shall reasonably determine to be fair under the circumstances. Each
party to the arbitration shall pay one-half of the fees and expenses of the
arbitrator and the American Arbitration Association.
(d) Notwithstanding any other provision of this Agreement, (i)
either party may commence an action to compel compliance with this Section 14.6
and (ii) if any party, as part of a Dispute, seeks injunctive relief or any
other equitable remedy, including specific enforcement, then such party shall be
permitted to seek such injunctive or equitable relief in any federal or state
court or competent jurisdiction before, during or after the pendency of a
mediation or arbitration proceed under this Section 14.6.
Section 14.7 Cooperation. Each of the parties hereto agrees to use its
commercially reasonable best efforts to take or cause to be taken all action,
and to do or cause to be done all things necessary, proper or advisable under
applicable laws, regulations or otherwise, to consummate and to make effective
the transactions contemplated by this Agreement, including, without limitation,
the timely performance of all actions and things contemplated by this Agreement
to be taken or done by each of the parties hereto.
Section 14.8 Construction of Agreement. The terms and provisions of
this Agreement represent the results of negotiations between Buyer and Seller,
each of which has been represented by counsel of its own choosing, and neither
of which has acted under duress or compulsion, whether legal, economic or
otherwise. Accordingly, the terms and provisions of this Agreement shall be
interpreted and construed in accordance with their usual and customary meanings,
and Buyer and Seller hereby waive the application in connection with the
interpretation and construction of this Agreement of any rule of law to the
effect that ambiguous or conflicting terms or provisions contained in this
Agreement shall be interpreted or construed against the party whose attorney
prepared the executed draft or any earlier draft of this Agreement. The word
"including" in this Agreement shall mean including without limitation. Words in
the singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires. The
terms "hereof," "herein," and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including all of the Schedules and Exhibits hereto) and not to any particular
provision of this Agreement, and Article, Section, paragraph, Exhibit and
Schedule references are to the Articles, Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified.
53
Section 14.9 Publicity. No party hereto shall issue, make or cause the
publication of any press release or other announcement with respect to this
Agreement or the transactions contemplated hereby, or otherwise make any
disclosures relating thereto, without the prior written consent of the other
party, such consent not to be unreasonably withheld or delayed; provided,
however, that such consent shall not be required where such release or
announcement is required by applicable law or the rules or regulations of a
securities exchange, in which event the party so required to issue such release
or announcement shall endeavor, wherever possible, to furnish an advance copy of
the proposed release to the other party.
Section 14.10 Waiver. Except as otherwise expressly provided in this
Agreement, neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such right,
power or privilege preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege available to each party at law
or in equity.
Section 14.11 Parties in Interest. This Agreement (including the
documents and instruments referred to herein) is not intended to confer upon any
Person, other than the parties hereto and their successors and permitted
assigns, any rights or remedies hereunder; provided, however, that the
indemnification provisions in Article XIII shall inure to the benefit of the
Buyer Indemnitees and the Seller Indemnitees as provided therein.
Section 14.12 Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 14.13 Amendment. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
Section 14.14 Entire Agreement. This Agreement, the Exhibits and
Schedules hereto and the documents specifically referred to herein and the
Confidentiality Agreement constitute the entire agreement, understanding,
representations and warranties of the parties hereto, and supersede all prior
agreements, both written and oral, between Buyer and Seller. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Disclosure of any
fact or item in any Schedule referenced by a particular paragraph or Section in
this Agreement shall, should such fact or item or its contents be expressly or
obviously related to any other paragraph or Section, be deemed to be disclosed
with respect to that other paragraph or Section whether or not any explicit
cross-reference appears therein.
Section 14.15 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
54
Section 14.16 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the greatest
extent possible.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
CITIZENS UTILITIES COMPANY
By:
------------------------------------
Xxxxxx X. XxXxxxxx, Chief Financial
Officer and Vice President
CAP ROCK ELECTRIC COOPERATIVE
By:
------------------------------------
Name:
Title:
CAP ROCK ENERGY CORPORATION
By:
------------------------------------
Name:
Title:
[Signature page to Purchase and Sale Agreement (Vermont Electric) between
Citizens Utilities Company, Cap Rock Electric Cooperative and Cap Rock Energy
Corporation, dated as of February 11, 2000.]
56
