EXHIBIT 10.15
EXECUTION COPY
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 1 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 Buyers Financial Statements 16
Section 4.10 Buyers 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 Propel 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
Section 5.17 Brokers 22
PAGE
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 22
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 2
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
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 Regulator 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.
WITNESSETH:
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
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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.
"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 ta:x 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
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(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.
"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, t&ken 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 t&xing 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
5
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.
"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).
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"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;
(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.
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"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.
"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.
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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) 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:
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(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:
(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
10
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 but 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 ate 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
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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.
(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
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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 hither 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;
(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 all 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
17
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.
(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;
18
(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.
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
19
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.
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
20
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 MATTER'S.
(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,
21
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.
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).
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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 decision making
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;
24
(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.
25
(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) NON-COMPETITION.
(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
26
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.
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 it 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
27
Requirement relating to any other businesses conducted by Seller that also
are subject to regulation by such state regulatory commission.
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
29
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 an/or
other appropriate arrangements with respect to the items addressed in
Sections 3.1(a), 3.1(b) and 3.4; (ii) 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
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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.
(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'
31
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.
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.
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(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) 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).
(j) 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
33
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.
(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 CHANCE. 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,
34
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 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 Sellers 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 non foreign 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
35
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 (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 Sellers
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).
(h) 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
37
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.
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
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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.
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.
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(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.
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,
40
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 pr materially modify those mst-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 obligations of Seller to provide post-retirement health care and life
insurance benefits to such Transferred Employees and Retirees, and Seller and
Sellers 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
41
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 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 Section 1.1031(k)-(1)(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
preexisting 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.
(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
46
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 1.1
and 1.2 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.
47
(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 though 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.
48
(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 there to may be brought.
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
49
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 falls 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.
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) 0000000
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),
52
including as to its existence, enforceability, validity, interpretation,
performance or breach or as to indemnification or damages, including claims in
ton, 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 Fe 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 non-prevailing party taken as a whole is
unreasonable, the arbitrator may order the non-prevailing 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
53
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.
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, tat the
indemnification provisions in Article XIII shall inure to the benefit of the
Buyer Indemnitees and the Seller Indemnitees as provided therein.
54
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
CITIZENS UTILITIES COMPANY
By: /s/ Xxxxxx X. XxXxxxxx
-----------------------------------
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
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: /s/ Xxxx X. Xxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: VP/CFO
CAP ROCK ENERGY CORPORATION
By: /s/ Xxxx X. Xxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: VP/CFO
[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
Exhibit 6.7
===============================================================================
IDRB OBLIGATIONS AGREEMENT
(ARIZONA ELECTRIC)
among
CITIZENS UTILITIES COMPANY,
CAP ROCK ELECTRIC COOPERATIVE,
and
CAP ROCK ENERGY, INC,.
Dated as of______________ 2000
===============================================================================
IDRB OBLIGATIONS AGREEMENT
(ARIZONA ELECTRIC)
THIS IDRB OBLIGATIONS AGREEMENT (this "Agreement") is made as of the
day of ______________, 2000, by and between CITIZENS UTILITIES COMPANY, a
Delaware corporation, ("Seller"), and CAP ROCK ELECTRIC COOPERATIVE, a Texas
corporation ("Cap Rock Cooperative"), and CAP ROCK ENERGY, INC., a Texas
corporation (collectively with Cap Rock Cooperative, the "Buyer"). Capitalized
terms used herein shall have the meanings ascribed to them in Article I,
unless otherwise provided.
WITNESSETH:
WHEREAS, Seller and Buyer have entered into that certain Purchase and
Sale Agreement dated as of February 11, 2000 (the "Purchase Agreement"),
pursuant to which as of the date hereof Seller has sold and Buyer has purchased
the Assets (as hereinafter defined); and
WHEREAS, such Assets include assets financed through the issuance of
certain IDRB Indebtedness and related Bonds (as hereinafter defined and as
identified by Schedule I attached hereto); and
WHEREAS, notwithstanding such sale of the Assets, Seller remains
primarily liable for the payment and other obligations arising under the
respective financing agreements identified by Schedule I attached hereto
relating to the IDRB Indebtedness; and
WHEREAS, Buyer henceforth will have legal title to and entire
operational control of the Assets and Seller will have no further rights to
enter, possess or otherwise operate, control or maintain the Assets; and
WHEREAS, Seller's primary liability under the financing agreements
identified by Schedule I will terminate upon the respective termination of
such financing agreements; and
WHEREAS, pursuant to Section 6.7(a) of the Purchase Agreement, Buyer
has agreed "at Closing to execute and deliver to Seller an agreement with
respect to the Bonds that will be outstanding after the Closing Date;" and
WHEREAS, Seller and Buyer intend that this Agreement is and shall be
that agreement required to be delivered pursuant to Section 6.7(a) of the
Purchase 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. CERTAIN DEFINED TERMS. For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Article I
(capitalized terms used in this Agreement that are not defined in this Article
I shall have the meanings specified or referred to in the Purchase Agreement)
and such definitions shall be equally applicable to both the singular and
plural forms of the terms defined:
"ASSETS" means, collectively, 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."
"IDRB DOCUMENTS" means, collectively, the Loan Agreements, the Tax
Regulatory Agreements and Tax Representations and Project Certificates which
are listed in Schedule 5.12 of the Purchase Agreement.
"IDRB INDEBTEDNESS" means, collectively, the indebtedness of Seller
owing to the issuer or issuers of the Bonds (as described further on Schedule
I attached hereto) and arising under the Loan Agreements included among the
IDRB Documents.
"IRS" means the Internal Revenue Service or any successor agency.
SECTION 2. REPRESENTATION REGARDING IDRB DOCUMENTS. Seller hereby
represents that it has delivered to Buyer true and complete copies of all IDRB
Documents and all related Indentures of Trust, No Arbitrage Certificates and
IRS Forms 8038.
Buyer hereby acknowledges that it has received the documents referred
to in the preceding sentence and has had the opportunity to review the
agreements, obligations and covenants of Seller set forth in such documents,
including, in particular, those agreements, obligations, representations,
warranties and covenants relating to the ownership, operation, use and
maintenance of the Assets, to the preservation of the tax-exempt status of the
Bonds and to the indemnification by Seller of the issuer.
SECTION 3. REPRESENTATIONS REGARDING ASSETS. Seller hereby represents
that it has performed all duties and obligations of "Company" under the IDRB
Documents relating to the ownership, operation, use and maintenance of the
Assets financed with the proceeds of the IDRB Indebtedness and related Bonds
and that the representations and warranties of "Company" relating to the
ownership, operation, use and maintenance of such Assets under the IDRB
Documents remain true and correct.
SECTION 4. COVENANT REGARDING TAX EXEMPTION. 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
2
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. Buyer further
represents, warrants, covenants and agrees, so long as any Bonds relating to
an IDRB Indebtedness are outstanding, that it (i) will not commence providing
electric generation, transmission or distribution service in or with respect
to any service area in Arizona that is not a distinct service area solely
within the political boundaries of Mohave County, Arizona, or a distinct
service area solely within the political boundaries of Santa Xxxx County,
Arizona (collectively, the "Service Areas"), or in or with respect to a
service area outside of Arizona that is contiguous to either of the Service
Areas, and (ii) will not make any substantial change in the nature, use or
service areas of the facilities of which the Assets are a part, including in
particular, but without limitation, the addition of generation capacity and
any interconnections to any of Buyers' service areas other than within the
respective Service Areas, without in each case first obtaining and providing
to Seller an unqualified opinion of nationally recognized bond counsel
experienced in such matters and acceptable to Seller to the effect that such
commencement or change 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. Buyer further represents, warrants, covenants and agrees that it
will not violate or otherwise contravene any representation, warranty,
covenant or other agreement or obligation set out by the IDRB Documents as in
effect on the execution date of the Purchase Agreement (or as any such IDRB
Document might be amended solely to preserve the tax exemption of the interest
on the Bonds; provided that Buyer shall be in actual receipt of any such
amendment) to the extent such representation, warranty, covenant or other
agreement or obligation relates to the use of the facilities in the local
furnishing of electric energy and has not previously been violated or
otherwise contravened by any action of Seller. Buyer's representation,
warranty, covenant and agreement as aforesaid, however, shall not apply to (x)
the sale of the Assets to Buyer pursuant to the Purchase Agreement, (y)
subject to the two next succeeding sentences, any such covenants relating to
the application of the proceeds of any eminent domain proceeding or casualty
loss and (z) insofar as they are not integral to Buyer's use and operation of
the Assets in the local furnishing of electric energy, the representations,
warranties, covenants or other agreements or obligations relating to the
tax-exempt status of the interest on such Ponds. Buyer shall notify Seller in
writing promptly upon Buyer receiving written notice of any threatened or
impending eminent domain proceeding against the Assets or of any material
casualty loss of Assets financed with IDRB Indebtedness, shall cooperate in
good faith with Seller in Seller's efforts to ascertain the consequences of
any such eminent domain proceeding or casualty loss for the tax exemption of
the Bonds, and shall not take any action with respect to the proceeds of an
eminent domain proceeding or insurance claim without express written consent
of Seller, which consent shall not be withheld if Buyer is rn receipt of a "no
adverse effect" opinion of nationally recognized bond counsel. Notwithstanding
the next preceding sentence, as between Seller and Buyer, Seller, without
recourse to Buyer, shall be responsible for any payments with respect to the
IDRB Indebtedness arising as a result of an eminent domain proceeding or
casualty loss occurring on or after the date of Closing, and Buyer shall be
entitled to retain any eminent domain or insurance proceeds. Notwithstanding
anything in this Agreement to the contrary, in no event shall Buyer be liable
for
3
or have any responsibility to Seller or others under this Agreement or the
Purchase Agreement (i) if the Assets, or the use and operation thereof, fail
to satisfy the previously mentioned requirements of the IRC as of the Closing
Date, (ii) if interest on the Bonds was not excluded from gross income for the
purposes of federal or state income taxation as of the Closing Date or (iii)
if any action of Buyer in compliance with Section 6.7(b) of the Purchase
Agreement causes interest on any of the Bonds to become subject to federal or
state income taxation. 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.
SECTION 5. INDEMNIFICATION OF SELLER BY BUYER. In addition to its
indemnification of Seller as provided by Section 13.2 of the Purchase
Agreement, Buyer shall and hereby agrees to indemnify and save harmless Seller
against and from all claims by or on behalf of one or more of the issuer or
issuers, the trustee or trustees (collectively, the "Trustees") identified in
the IDRB Documents, any actual or beneficial owner of Bonds or any other
person, firm, corporation or other legal entity arising from (i) any breach or
default on the part of Buyer in the performance of any of its covenants,
agreements or obligations under this Agreement, (ii) any act or negligence of
Buyer or of any of its agents, contractors, servants, employees or licensees
or (iii) any act or negligence of any assignee, lessee or successor of Buyer,
or of any agents, contractors, servants, employees or licensees of any
assignee, lessee or successor of Buyer. Any claim for indemnity under this
Agreement shall follow the procedures outlined in Section 13 of the Purchase
Agreement.
SECTION 6. INDEMNIFICATION OF BUYER BY SELLER. In addition to its
indemnification of Buyer as provided by Section 13.1 of the Purchase
Agreement, Seller shall and hereby agrees to indemnify and save harmless Buyer
against and from all claims by or on behalf of one or more of the issuer or
issuers, the Trustees identified in the IDRB Documents, any actual or
beneficial owner of Bonds or any other person, firm, corporation or other
legal entity arising from Seller's performance of any of its obligations under
this Agreement and for any breach or default on the part of Seller in the
performance of any of its covenants, agreements or obligations under this
Agreement. Any claim for indemnity under this Agreement shall follow the
procedures outlined in Section 13 of the Purchase Agreement.
SECTION 7. LIMITATION ON ENFORCEMENT. In the event that the interest
on any of the Bonds becomes subject to federal or state income tax prior to
Closing, Buyer's obligations under this Agreement shall be null and void ab
initio.
SECTION 8. NO REFUNDING. Seller shall not refund any Bonds, take any
action that might cause any Bonds to be considered "reissued" for the purposes
of Section 103 of the IRC or
4
extend the maturity of any of the Bonds without the express written consent of
Buyer, which consent may be withheld in Buyer's sole and absolute discretion.
SECTION 9. TERM OF AGREEMENT. This Agreement shall be coterminous
with the terms of the IDRB Documents, provided that the obligations under
Sections 5 and 6 hereof shall survive the termination of this Agreement.
SECTION 10. SUCCESSOR BOUND. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
SECTION 11. GOVERNING LAW. The validity, performance, and enforcement
of this Agreement, 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 12. DISPUTE RESOLUTION. Except as otherwise provided in this
Section 12, any dispute, controversy or claim between the parties 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 and audit, regulatory or other actions initiated by
or on behalf of the IRS with respect to the IDRB Indebtedness or related
Bonds, whether arising before or after the termination of this Agreement (any
such dispute, controversy or claim being herein referred to ab 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 the discovery
of documents (i) that are 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
5
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. Bach 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 12 and (ii) if any party, as part of a Dispute, seeks
injunctive relief or any other equitable remedy, including specific
enforcement, then much 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 proceeding under this Section 12.
SECTION 13. COOPERATION. Each of the parties hereto agrees to use its
commercially reasonable 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. 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 nor 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."
6
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 Schedule I hereto) and not to any particular provision
of this Agreement, and Section references are to the Sections of this
Agreement unless otherwise specified.
SECTION 15. 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 16. 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 of 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 17. 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.
SECTION 18. 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 19. AMENDMENT. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
SECTION 20. ENTIRE AGREEMENT. This Agreement and Schedule I hereto
and the documents specifically referred to herein (including the Purchase
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. Schedule I annexed hereto or
referred to herein is hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Disclosure of any fact or item in Schedule I
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.
7
SECTION 21. 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 22. 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.
8
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of above.
CITIZENS UTILITIES COMPANY
By_________________________
Name ______________________
Title______________________
CAP ROCK ELECTRIC COOPERATIVE
By_________________________
Name ______________________
Title _____________________
CAP ROCK ENERGY, INC.
By ________________________
Name ______________________
Title _____________________
[Signature page to IDRB Obligations Agreement between
Citizens Utilities Company, Cap Rock Electric Cooperative and Cap Rock Energy,
Inc. dated as of , 2000.]
9
EXHIBIT 7.1(g)
[Closing Date]
Citizens Utilities Company
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Ladies and Gentlemen:
I have acted as counsel to Cap Rock Electric Cooperative, a Texas
corporation, and Cap Rock Energy Corporation, a Texas corporation
(collectively, the "Company"), in connection with the execution and delivery
by the Company, and Citizens Utilities Company, a Delaware corporation
("Seller"), of the Purchase and Sale Agreement, dated as of February___, 2000
(the "Agreement"). All capitalized terms used herein without definition shall
have the respective meanings ascribed to them in the Agreement.
In connection with the opinions expressed below, I have made such
examination of law and have examined originals, or copies certified or
otherwise identified to my satisfaction, of the Agreement, the Xxxx of Sale
and Assignment and Assumption Agreement, and the other documents delivered by
the Company at Closing pursuant to the Agreement dated the date hereof
(collectively, the "Transaction Documents"), and such corporate documents and
records of the Company, certificates of public officials and of officers of
the Company, and such other documents as I have deemed necessary or
appropriate. With respect to the matters set forth in Paragraph 1, I have
relied upon certain documentation received from public officials.
In making such examination and rendering the opinions set forth
below, I have assumed the genuineness of all signatures, the authenticity of
all documents submitted to me as originals and the conformity to authentic
original documents of all documents submitted to me as certified, conformed or
photostatic copies and the authenticity of the originals of such documents. As
to factual matters material to my opinion, I have had such discussions with
the officers of the Company as I have deemed relevant or necessary, and, I
have assumed, with your permission and without independent investigation, the
truthfUlness of all recitals, representations, warranties and factual matters
set forth in all documents, instruments, certificates and reports I have
examined.
In rendering the opinions set forth below, I have also assumed that
(a) each of the parties to the Agreement and the Transaction Documents other
than the Company is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization; (b) each of such other
parties to the Agreement and the Transaction Documents has the requisite
corporate power and corporate authority and has taken the corporate action
necessary to execute and deliver the
Citizens Utilities Company
[Closing Date]
Page 2
Citizens Utilities Company Agreement and the Transaction Documents and to
consummate the transactions contemplated thereby; (c) the Agreement and
Transaction Documents have been duly executed and delivered by each of such
other parties thereto; and (d) the Agreement and the Transaction Documents
constitute the legal, valid and binding obligations of each such other party
thereto, enforceable against such other party in accordance with its
respective terms.
I am a member of the bar of the State of, and I express, subject to
the qualifications herein, no opinion as to the laws of any jurisdiction
except the [General Corporation Law] of the State of Texas, the federal laws
of the United States of America (with the exception of federal antitrust laws
and regulations, federal securities laws and regulations, matters relating to
the Communications Act of 1934, as amended, and the rules and regulations of
the Federal Communications Commission), and the laws of the State of_______
(with the exception of state antitrust or unfair competition laws and
regulations, state securities laws and other statutes, ordinances,
administrative decisions and rules and regulations of counties, towns,
municipalities and special political subdivisions). To the extent that any
matter with respect to which an opinion is rendered herein is governed by the
laws of another jurisdiction other than the [General Corporation Law] of the
State of Texas, I have, with your permission, assumed that the laws of such
other jurisdiction are identical to the laws of the State of_______.
"Actual Knowledge" as used in this letter means the conscious
awareness of facts or other information by myself or any lawyer in the employ
of the Company who has had active involvement in negotiating the Agreement,
preparing the Transaction Documents or preparing this letter.
The opinions hereinafter expressed are subject to the following
further qualifications:
(i) My opinion is subject to the effect of bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or
otherwise similar laws now or hereafter relating to or affecting debtors'
obligations and the rights of creditors generally.
(ii) My opinion is subject to limitations imposed by general
principles of equity upon the specific enforceability of any of the remedies,
covenants or other provisions of the Transaction Documents and upon the
availability of injunctive relief or other equitable remedies, and the
application of principles of equity (regardless of whether enforcements is
considered in proceedings in law or in equity).
(iii) The opinions stated herein are as of the date hereof
and are limited to laws, facts and circumstances in existence on the date
hereof, and I assume no undertaking to advise Seller of any change in the
opinions expressed herein, whether or not material, as a result of any change
in any laws, facts or circumstances pertaining to the Transaction Documents
which may come to my attention after the date hereof.
Citizens Utilities Company
[Closing Date]
Page 3
Based upon and subject to the foregoing, it is my opinion that as of
the date hereof:
1. The Company is validly existing and in good standing under the
laws of the State of Texas. The Company has all necessary corporate power to
perform its obligations under the Transaction Documents, and the Company has
all requisite corporate power and authority to own, lease and operate the
Assets and the Business.
2. All corporate proceedings required to be taken by or on the part
of the Company and the shareholders of the Company to authorize the execution,
deliver and performance of the Transaction Documents, and the consummation of
the transactions contemplated thereby, have been duly and properly taken. Each
of the Transaction Documents has been duly and validly executed and delivered.
3. Neither the execution and delivery of the Transaction Documents by
the Company nor the consummation of the transactions contemplated thereby
will: (a) violate or conflict with any provision of the certificate or
articles of incorporation or bylaws of the Company, as amended to date; or (b)
to my Actual Knowledge, violate or conflict with any Legal Requirement or
Order.
4. The Agreement and other agreements and documents to be executed
pursuant thereto, when executed and delivered by the Company, will constitute
legal, valid and binding obligations of the Company, enforceable against it in
accordance with their respective terms.
The opinions expressed herein are intended only for your benefit and
use, and may not, without my written consent, be used or relied upon in any
manner for any purpose by any other person or entity.
Very truly yours,
EXHIBIT 7.2(g)
[Closing Date]
Cap Rock Electric Cooperative
000 X. Xxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Cap Rock Energy Corporation
000 X. Xxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Ladies and Gentlemen:
I have acted as counsel for Citizens Utilities Company, a Delaware
corporation (the "Company"), in connection with the execution and delivery by
the Company, and Cap Rock Electric Cooperative, a Texas corporation, and Cap
Rock Energy Corporation, a Texas corporation (collectively, "Buyer"), of the
Purchase and Sale Agreement, dated as of February___, 2000 (the "Agreement").
All capitalized terms used herein without definition shall have the respective
meanings ascribed to them in the Agreement.
In connection with the opinions expressed below, I have made such
examination of law and have examined originals, or copies certified or
otherwise identified to our satisfaction, of the Agreement, the Xxxx of Sale
and Assignment and Assumption Agreement, and the other documents delivered by
the Company at Closing pursuant to the Agreement dated the date
hereof(collectively, the "Transaction Documents'), and such corporate
documents and records of the Company, certificates of public officials and of
officers of the Company, and such other documents as I have deemed necessary
or appropriate. With respect to the matters set forth in Paragraph 1, I have
relied upon certain documentation received from public officials.
In making such examination and rendering the opinions set forth
below, I have assumed the genuineness of all signatures, the authenticity of
all documents submitted to me as originals and the conformity to authentic
original documents of all documents submitted to me as certified, conformed or
photostatic copies and the authenticity of the originals of such documents. As
to factual matters material to our opinion, I have had such discussions with
the officers of the Company as I have deemed relevant or necessary, and, I
have assumed, with your permission and without independent investigation, the
truthfulness of all recitals, representations, warranties and factual matters
set forth in all documents, instruments, certificates and reports I have
examined.
In rendering the opinions set forth below, I have also assumed that
(a) each of the parties to the Agreement and the Transaction Documents other
than the Company is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization; (b) each of such other
parties to the Agreement and the Transaction Documents has the requisite
corporate power and
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
[Closing Date]
Page 2
corporate authority and has taken the corporate action necessary to execute
and deliver the Agreement and the Transaction Documents and to consummate the
transactions contemplated thereby; (c) the Agreement and Transaction Documents
have been duly executed and delivered by each of such other parties thereto;
and (d) the Agreement and the Transaction Documents constitute the legal,
valid and binding obligations of each such other party thereto, enforceable
against such other party in accordance with its respective terms.
I am a member of the bar of the State of New York, and I express,
subject to the qualifications herein, no opinion as to the laws of any
jurisdiction except the General Corporation Law of the State of Delaware, the
federal laws of the United States of America (with the exception of federal
antitrust laws and regulations, federal securities laws and regulations,
matters relating to the Communications Act of 1934, as amended, and the rules
and regulations of the Federal Communications Commission), and the laws of the
State of New York (with the exception of state antitrust or unfair competition
laws and regulations, state securities laws and other statutes, ordinances,
administrative decisions and rules and regulations of counties, towns,
municipalities and special political subdivisions). I am not admitted to
practice in the State of Delaware. To the extent that any matter with respect
to which an opinion is rendered herein is governed by the laws of another
jurisdiction other than the General Corporation Law of the State of Delaware,
I have, with your permission, assumed that the laws of such other jurisdiction
are identical to the laws of the State of New York.
"Actual Knowledge" as used in this letter means the conscious
awareness of facts or other information by myself or any lawyer in the employ
of the Company who has had active involvement in negotiating the Agreement,
preparing the Transaction Documents or preparing this letter.
The opinions hereinafter expressed are subject to the following
further qualifications:
(i) This opinion is subject to the effect of bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or
otherwise similar laws now or hereafter relating to or affecting debtors'
obligations and the rights of creditors generally.
(ii) This opinion is subject to limitations imposed by
general principles of equity upon the specific enforceability of any of the
remedies, covenants or other provisions of the Transaction Documents and upon
the availability of injunctive relief or other equitable remedies, and the
application of principles of equity (regardless of whether enforcements is
considered in proceedings in law or in equity).
(iii) The opinions stated herein are as of the date hereof
and are limited to laws, facts and circumstances in existence on the date
hereof, and we assume no undertaking to advise Buyer of any change in the
opinions expressed herein, whether or not material, as a result of any change
in any laws, facts or circumstances pertaining to the Transaction Documents
which may come to our attention after the date hereof.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
[Closing Date]
Page 3
Based upon and subject to the foregoing, it is my opinion that as of
the date hereof:
1. The Company is validly existing and in good standing under the
laws of the State of Delaware. The Company has all necessary corporate power
to perform its obligations under the Transaction Documents, and the Company
has all requisite corporate power and authority to own, lease and operate the
Assets and the Business as presently being conducted.
2. All corporate proceedings required to be taken by or on the part
of the Company and the shareholders of the Company to authorize the execution,
delivery and performance of the Transaction Documents, and the consummation of
the transactions contemplated thereby, have been duly and properly taken. Each
of the Transaction Documents has been duly and validly executed and delivered.
3. Neither the execution and delivery of the Transaction Documents by
the Company nor the consummation of the transactions contemplated thereby
will: (a) violate or conflict with any provision of the certificate or
articles of incorporation or bylaws of the Company, as amended to date; or (b)
to my Actual Knowledge, violate or conflict with any Legal Requirement or
Order.
4. The Agreement and other agreements and documents to be executed
pursuant thereto, when executed and delivered by the Company, will constitute
legal, valid and binding obligations of the Company, enforceable against it in
accordance with their respective terms.
The opinions expressed herein are intended only for your benefit and
use, and may not, without my written consent, be used or relied upon in any
manner for any purpose by any other person or entity.
Very truly yours,
L. Xxxxxxx Xxxxxx, XX
Vice President-General Counsel, Citizens
Utilities Company
EXHIBIT 8.1(a)
XXXX OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT
This Xxxx of Sale and Assignment and Assumption Agreement (this
"Assignment and Assumption") is made as of ________________, between Citizens
Utilities Company, a Delaware corporation ("Transferor"), and Cap Rock Energy
Corporation, a Texas corporation ("Transferee").
This Assignment and Assumption is entered into pursuant to, and is
subject to, the terms of the Purchase and Sale Agreement, dated as of February
, 2000, by and between Transferor and Transferee (the "Agreement").
Capitalized terms not otherwise defined in this Assignment and Assumption
shall have the meanings given to such terms in the Agreement.
In consideration of the foregoing premises, the transactions
contemplated by the Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Transferor' does
hereby sell, transfer, assign and convey unto Transferee, its successors and
assigns, all of the Assets, and Buyer does hereby assume and agrees to pay,
perform and discharge when due, all Assumed Liabilities.
No provisions set forth in this Assignment and Assumption shall be
deemed to enlarge, alter or amend the terms and proVisions of the Agreement.
In the event of any conflict between the provisions of this Assignment and
Assumption and the provisions of the Agreement, the Agreement shall control.
This Assignment and Assumption is made solely for the benefit of
Transferor and Transferee and no third party shall have any right to enforce
its terms or to rely on it.
This instrument and the rights of the parties under it shall be
governed by and construed in accordance with laws of the State of Delaware,
without regard to its conflicts of laws rules.
This Assignment and Assumption may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument
[THE REMAINDER OF THIS PAGE INTENTIONALLY IS LEFT BLANK.
SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the undersigned have executed this Assignment and
Assumption effective as of the date first written above.
TRANSFEROR:
CITIZENS UTILITIES COMPANY
By:
-------------------------------------
Name:
Title:
TRANSFEREE:
CAP ROCK ENERGY CORPORATION
By:
-------------------------------------
Name:
Title:
Signature Page of Xxxx of Sale and Assignment and Assumption Agreement between
Transferor and Transferee, dated ___________
2
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
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 Prior to Closing Date
Schedule 6.2(c) Citizens' Guarantees and Surety Instruments
Schedule 10.1 Active Employees
Schedule 10.7 Retirees and "Grandfathered Employees"
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 1.1(a)
EXCLUDED ASSETS
1. R/3 Software End-User Value License Agreement, dated February 28, 1997,
by and between SAP America, Inc. and Citizens Utilities Company,
together with the licenses for SAP GUI clients that are installed on
desktop machines.
2. Software License and Services Agreement, dated September 17, 1996, by
and between PeopleSoft and Citizens Utilities Company, as amended.
3. Netscape, Novell, and other network, Internet and email software
packages and related licenses owned by Citizens Utilities Company.
4. All communications circuits owned or leased by a Citizens
Communications subsidiary or division or by Electric Lightwave, Inc.,
and all communications and network equipment owned or leased by a
Citizens Communications subsidiary or division, including WAN equipment
(routers, DSU/CSU's and related miscellaneous devices), LAN equipment
(servers, hubs, patch parcels, cables and connections and related
miscellaneous devices) and PC's located in facilities at the following
locations:
a. 0000 Xxxxxx Xxxx., Xxxxxxx, Xxxxxxx (owned by Arizona
Electric)
b. 0000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000 (owned by
Citizens Communications)
c. 0000 Xxxxxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxx 00000 (owned by
Citizens Communications)
d. 000 Xxxxx Xxxxx Xxxxxx, Xxxx Xxxxxx Xxxx, Xxxxxxx (owned by
Arizona Electric)
e. 0000 XxXxxxxxx Xxxx., Xxxx Xxxxxx Xxxx, Xxxxxxx 00000 (owned
by Citizens Communications)
5. All billing, printing, computer and other equipment and devices used to
provide support service to the Business and located outside the State
of Arizona or located in the Arizona Gas facility at 0000 Xxxxx Xxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxx, including xxxx inserting and xxxx printing
equipment located in Louisiana.
6. Vacant parcel of owned real property located at 000 Xxxxxxx Xxxxx,
Xxxx Xxxxxx Xxxx, Xxxxxxx. This parcel is being sold.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
7. All (and, buildings and improvements, and all office furniture and
equipment located at the following locations:
a. 0000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000 (owned by
Citizens Communications)
b. 0000 Xxxxxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxx 00000 (owned by
Citizens Communications), except for the AS/400 and any
other related equipment that is owned by Arizona Electric
c. 0000 XxXxxxxxx Xxxx., Xxxx Xxxxxx Xxxx, Xxxxxxx 00000 (owned
by Citizens Communications)
8. Various Easements (most of which are located in Mohave and Santa Xxxx
Counties, Arizona) granted to Citizens (or to a specific subsidiary or
division of Citizens) that were not granted solely for electric use
but permit joint use for electric and one or more other utility uses
(e.g., telephone, gas, water, and/or wastewater) [Note: When permitted
by a particular Easement that permits multiple uses, including
electric use, Citizens and/or its affiliates at Closing will assign to
the Buyer of Arizona Electric its rights and interests in such
Easement but only to the extent relating to electric use (i.e., the
Buyer will receive only a "partial assignment" of such Easement). A
joint use agreement with respect to such partially assigned Easements
will be prepared by Citizens and executed at Closing by the Buyer of
Arizona Electric and the owners of all other utility businesses now
being conducted by Citizens or its affiliates that are permitted to
use such common Easements.]
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 1.1(b)
RELATED PURCHASE AGREEMENTS
1. Purchase and Sale Agreement (Vermont Electric), dated Feb 11, 2000, by
and among Citizens Utilities Company, Cap Rock Electric Cooperative and
Cap Rock Energy Corporation.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.2
SELLER'S AUTHORITY
1. Failure to obtain certain Consents listed on Schedule 5.3 or to provide
notice to certain parties listed on Schedule 5.3 may result in a breach
of the related Contracts or Legal Requirements upon assignment to
Buyer.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.3
SELLER'S GOVERNMENTAL AND OTHER REQUIRED CONSENTS
I. Federal Governmental Bodies
A. U.S. Federal Trade Commission and the U.S. Department of
Justice, pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
B. Federal Communications Commission, with respect to the
following licenses:
1. KNNR 214 (GB) - Conventional Business License,
expiring, May 1, 2001.
2. WPNI526 - Business Radio License, expiring
September 22, 2002.
3. WPNI525 - Business Radio License, expiring
September 22, 2002.
4. WPNI527 - Business Radio License, expiring
September 22, 2002.
5. WPNI524 - Business Radio License, expiring
September 22, 2002.
6. WPOZ859 - Business Radio License, expiring
September 16, 2004.
7. WNNW240 - Radio Station License (IW Power),
expiring March 22, 2004.
8. WPFM577 - Radio Station License (Go Conv. Other
Ind./Land Trans), expired August 8, 1999. [IN THE
PROCESS OF RENEWAL.]
9. WNNJ769 - Radio Station License (Go Conv. Other
Ind./Land Trans), expiring March 6, 2001
10. WCR41 - Radio Station License (IW Power), expiring
January 31, 2001
C. Department of Energy, Office of Fossil Energy, with respect to
the following:
1. Presidential Permit authorizing Citizens Utilities
Company to operate and maintain electric
transmission facilities at the International Border
between the United States and Mexico (Federal Power
Commission - Docket No. E-6432), dated August 8,
1952, as amended by Amendatory Permit, dated
September 16, 1955.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
D. Federal Energy Regulatory Commission, for the sale or transfer
of the following:
1. Certain transmission facilities included among the
Assets.
E. Bureau of Land Management, with respect to a number of Special
Use Permits.
F. United States Department Of The Interior, National Park
Service, with respect to a number of Special Use Permits.
II. Arizona Corporation Commission
A. Certificate of Public Convenience and Necessity issued to
Citizens Utilities Company by Arizona Corporation Commission
on May 29, 1962, as amended.
B. Certificate of Public Convenience and Necessity to operate an
electric utility and a telephone utility throughout the County
of Mohave, granted to Public Utilities Consolidated
Corporation, May 23, 1934 (Docket No. 7552) assigned to
Citizens Utilities Company on 11/22135 (Decision No.
8220)
C. Certificate of Public Convenience and Necessity and for the
operation and maintenance of an electrical public utilities
system in portions of Mohave, Yavapai and Coconino Counties to
Mohave Electric Cooperative, Inc., dated May 25, 1962
(Decision No. 33905), assigned to Citizens Utilities Company
on June 24, 1964 (Decision No. 35268)
III. Local and Other State Governmental Bodies
A. Franchise, dated June 6, 1990, granted to Citizens Utilities
Company by the Board of Supervisors of the County of Santa
Xxxx, AZ, authorizing Citizens Utilities Company to operate an
electric power and energy and gas distribution and sales
system.
Note: The franchise may be transferred, in whole or in
part, upon written notice of the same to the Board
of Supervisors of Santa Xxxx County.
B. Ordinance No. 599, Franchise granted to Citizens Utilities
Company to operate and supply electricity by City of Kingman,
AZ, passed and adopted April 9, 1996.
C. Various Arizona Right of Way Permits issued by the State of
Arizona.
D. Arizona Department of Environmental Quality Permit No.
1000563, re: Valencia Power Plant Facility, renewed November
1999. [Note: Non-transferrable. Buyer must obtain a new
permit.]
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
IV Non-Governmental Third Party Contracts
A. Power Purchase and Supply Agreements
1. Power Service Xxxxxxxxx, Xx. 00000, dated January
5, 1995, between Arizona Public Service Company and
Citizens Utilities Company.
B. Customer Supply Agreements
1. Agreement, dated March 30, 1984, between Citizens
Utilities Company and Foundation for Senior Adult
Living.
2. Agreement for the Provision of Electric Service,
dated March 12, 1996, between Citizens Utilities
Company and Lazy Y U Ranch, a Joint Venture
C. Interconnection Agreements
None.
D. Transmission Agreements
1. Transmission Service Contract No. 99-DSR-11004,
dated February 23, 1999, between U.S. Department of
Energy, Western Area Power Administration, Desert
Southwest Regional Office, Pacific North West,
Pacific South West Intertie Project, Xxxxxx-Xxxxx
Project and Citizens Utilities Company.
2. Firm Transmission Service Contract
No. 87-BCA-10140, dated March 9, 1988, between
U.S., Department of Energy, Western Area Power
Administration, Xxxxxx-Xxxxx Project, Central
Arizona Project and Citizens Utilities Company.
E. Real Property Lease Agreements
None.
F. Construction and Outsourcing Agreements
1. Construction Agreement, dated August 3, 1994,
between AHA MACAV Power Service and Citizens
Utilities Company, as amended by First Amendment to
Construction Agreement, dated September 24, 1996.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
2. Team-Up Program Sub-Agreement No. 6279, dated
September 29, 1997, between Citizens Utilities
Company and Sacramento Municipal Utility District.
G. Equipment Leases
1. Lease Agreement, dated June 25, 1997, between
Citizens Utilities and Xerox, re: copier #951164409.
2. Lease Agreement, dated June 25, 1997, between
Citizens Utilities and Xerox, re: copier #95109980.
H. Other Contracts
1. Joint Use Contract, dated July 26, 1932 as amended
September 18, 1969 and July 22, 1974, between
Citizens Utilities Company, successor to Public
Utilities Consolidated Corporation and Mountain
States Telephone and Telegraph Company. (Letter to
US West dated December 3, 1998, from Citizens
Utilities Company re negotiation of new agreement.)
V. Software Licenses
A. Software License Agreement, dated April 18, 1997, between
Advance Control Systems, Inc. and Citizens Utilities Company.
B. Major Purchase Agreement, dated January 1, 2000, between
Citizens Utilities Company and Advanced Control Systems.
C. Software License Agreement, dated May 4, 1995, as amended,
between Cadtel Systems and Citizens Utilities Company.
D. Software License and Services Agreement, dated April 29, 1997,
between Citizens Utilities and HTE, Inc.
VI. Other Consents
A. Southern Pacific Company, with respect to numerous railroad
crossing agreements.
B. Union Pacific Railroad Company, with respect to numerous
railroad crossing agreements.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
C. The Xxxxxxxx, Topeka and Santa Fe Railway Company, with
respect to numerous railroad crossing agreements.
D. Right-of-way Private Easement in Mohave County with
Xxxxxx Xxxxxxxx and Xxxxx Xxxxxxxx Xxxxxxxx (Book
No. 3084, Page No. 879).
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.5
ENCUMBRANCES: OWNED REAL PROPERTY
I. Encumbrances
1. BORIANNA SUBSTATION: A right of way exists for the electric
transmission line located at the Borianna Substation in Golden
Valley. The right of way does not cover, however, the entire
confines of the Borianna Substation (Unit 2, Lot 96, Twp. 20
and Range 18327).
2. Arizona Gas Division has access rights to the storage shed
located at the Santa Xxxx Operations Center on 0000 Xxxxx
Xxxxx Xxxxxx, Nogales, Arizona.
II. Owned Real Property
1. The following are the owned Real Property parcels in Santa
Xxxx County:
USE ADDRESS
--- -------
Power Plant, warehouse. operations center 0000 X. Xxxxx Xxxxxx
Xxxxx Substation in Rio Rico Ranchettes 4, 205 Angel Court
Block 50, Lot 2 (Substation #3)
Vacant property in Rio Rico Ranchettes 18. 1732 Circulo Agua Xxxxxx
Block 523, Lot 74 (Substation 42)
Vacant property in Rio Rico Xxxxxx 00, Xxxxxxx Xxxxxx & Xxxxxx Xxxxx
Xxxxx 712, Lot A (Substation #5)
Sonoita Substation 1120 Avenida Xxxx
North Nogales Poleyard 19 Bravo Lane
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
2. The following are the owned real property parcels in Mohave
County:
--------------------
KINGMAN SUBSTATIONS AREA TAX PARCEL DEED/PERMIT DEEDED NAME
------------------- (ACRES)
Athos 0.23 000-00-000 Bk. 84, Deeds, Pg. 497-499 Citizens Utilities Company
Boundary Cone 0.52 000-00-000 Bk. 2052, O.R, Pg. 186-190 Citizens Utilities Company
Xxxxxx 2.21 Bk. 3378, O.R, 162 Citizens Utilities Company
Chloride Junc. 4.28 000-00-000 Bk. 52, Deeds, Pg. 528-530 Citizens Utilities Company
Xxxxx Springs 0.92 000-00-000 Bk. 2602. O.R, Pg. 381 Citizens Utilities Company, Inc.
Eastern - future site 1.00 000-00-000 Bk. 2554, O.R, Pg. 429 Citizens Utilities Company
Golden Valley 1.38 000-00-000 Bk. 828, O.R, Pg. 516 Citizens Utilities Company
Hilltop -230 4.34 000-00-000 Bk. 1870, O.R, Pg. 933-936 Citizens Utilities Company
Industrial 0.16 000-00-000 Bk. 270, Deeds, Pg. 213-214 Citizens Utilities Company
Xxxxxxxx 1.00 000-00-000 Bk. 1290, O.R, Pg. 19-20 Citizens Utilities Company
Kingman Airport 3.25 000-00-000 Bk. 1429, O.R. Pg. 389-391 Citizens Utilities Company
X. Xxxxxxx 305-14-015C Bk. 323, O.R, Pg. 47 Citizens Utilities Company
Oatman 0.07 000-00-000 Bk. 201, Deeds, Pg. 224 Citizens Utilities Company
Xxxxxx Xxxxx Junc. 1.25 000-00-000 Bk. 105, Deeds, Pg. 227-228 Citizens Utilities Company
X.Xxxxxxx 0.68 000-00-000 Bk. 1270, Deeds.Pg.962-3 Desert Power and Water Company
Sacramento 320.00 000-00-000 Bk. 2694, O.R., Pg. 586 Citizens Utilities Company
Shangri-La 1.06 320-02-023P Bk. 209, Deeds, Pg. 284 Citizens Utilities Company
So Hi 0.52 000-00-000 Bk. 122. Deeds, Pg. 208 Citizens Utilities Company
Yucca 2.50 000-00-000 Bk. 161, Deeds, Pg. 60-61 Citizens Utilities Company
------------------
HAVASU SUBSTATIONS
------------------
Amigo - future site 000-00-000 Bk. 590 O.R., 165-167 Citizens Resources Company
Clearwater 000-00-000 Bk. 590 O.R., Pg. 916 Citizens Utilities Company
Havasu 000-00-000 Bk. 745. O.R., Pg. 916 Citizens Utilities Company
Kiowa 000-00-000 Bk. 590 O.R., 165-167 Citizens Resources Company
London Bridge 000-00-000 Bk. 189 O.R., Pg. 140 Citizens Utilities Company
Palo Verde 000-00-000 Bk. 316 Deeds, Pg. 186-187 Citizens Utilities Company
Pueblo - future site 0.93 Citizens Utilities Company
----------
PROPERTIES
----------
Kingman operations and 000-00-000 Citizens Utilities Company
warehouse (Airway Blvd.)
Lake Havasu operations & 000-00-000 Citizens Utilities Company
warehouse
III. Missing Easements
1. BORIANNA SUBSTATION: A right of way exists for the electric
transmission line located at the Borianna Sub station in
Golden Valley. The right of way does not cover, however, the
entire, confines of the Borianna Substation (Unit 2, Lot 96,
Twp. 20 and Range 18327). (See Item 1.1, herein)
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
2. Missing Easement for forty miles of distribution line in Fort
Rock Area. The owner of the real property through which the
distribution line runs receives his energy via such line which
is the only practical energy source in the area. Prescriptive
rights are likely held.
3. Missing Easement for gas transmission line used for electric
generation over land owned by Xxxxxxx Family Trust. The
parties are executing several Easements to cure the lack of
documentation.
4. Missing Easement for gas transmission line used for electric
generation under land owned by Escalada Trust. The parties are
executing several Easements to cure the lack of documentation.
IV. Lease Defaults
1. Despite persistent attempts to make payments, for the last
year or more Citizens has unable to pay rent for its use of
the property covered by the Lease, dated April 19, 1960,
between Xxxxx & Xxxxx Xxxx (successors-in-interest to Central
Commercial Company, Inc.) and Citizens Utilities Company.
Citizens offered to purchase the site located North of Kingman
on Highway 93 (known as the Coyote Breaker) on December 15,
1999. (See Schedule 5.12, Item V.1.)
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.6(a)
FINANCIAL STATEMENTS
See Attached.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
CITIZENS ENERGY SERVICE
PROFORMA BALANCE SHEET - ARIZONA ELECTRIC
SEPTEMBER 30, 1999
(UNAUDITED)
Consolidations/
Property Level Corporate Consolidated Electric
Subtotal Adjustments Sector Total
-------------- --------------- ---------------------
Cash and Cash Equivalents 92,820 (92,820) 8,263,448
Accounts Receivable - Utilities 7,885,598 377,850 8,263,248
Accounts Receivable - Other 663,815 50,373 714,188
Reserve for Doubtful Accounts (229,065) - (229,065)
Materials and Supplies 1,094,365 - 1,094,365
Special Deposits 5,978 - 5,978
Prepayments 106,662 3,676 110,339
Other Current Assets (57) 57 -
-------------- -------------- ---------------------
Total Current Assets 9,620,116 339,137 9,959,253
Property, Plant and Equipment 222,456,126 24,730 222,480,856
Construction Work in Progress 35,340,716 37,769 35,378,485
Accumulated Depreciations (85,814,524) 4,375,839 (81,438,685)
-------------- -------------- ---------------------
Net Fixed Assets 171,982,318 4,438,338 176,420,656
Preliminary Survey and
Investigation 2,816,342 - 2,816,342
Clearing Account 3,561 (3,561) 0
Deferred Debits 2,250,632 (2,129,608) 121,024
Regulatory Assets 415,672 2,145,025 2,560,697
Other Assets - 38,856 38,856
-------------- -------------- ---------------------
Total Non-Current 5,486,208 50,712 5,536,920
Total Assets 187,088,642 4,828,187 191,916,829
============== ============== =====================
Accounts Payable 6,439,386 (545,499) 5,893,887
Customer Deposits 2,346,060 - 2,346,060
Income Taxes Accrued 4,301,635 (302,267) 3,999,368
Other Taxes Accrued 3,604,669 2,476 3,607,144
Interest Accrued 386,602 - 386,602
Other Current or Accrued Liabilities - 360,859 360,859
-------------- -------------- ---------------------
Total Current and Accrued
Liabilities 17,078,352 (484,431) 16,593,922
Subordinate Investment Notes - - -
Current Portion of LTD (DR) - - -
-------------- -------------- ---------------------
Total Long Term Debt - - -
Customer Advances for Construction 14,137,590 - 14,137,590
Regulatory Liabilities - - -
Other Deferred Credits - 33,157 33,157
Other Payables - 1,559,303 1,559,303
-------------- -------------- ---------------------
Total Non-Current Liabilities 14,137,590 1,592,460 15,730,050
Total Shareholder's Equity 155,872,699 3,720,157 159,592,857
-------------- -------------- ---------------------
Total Liabilities and Equity 187,088,642 4,828,187 191,916,829
============== ============== =====================
Notes To Financial Statement:
1. For the Proforma Balance Sheets, Deferred Income Taxes, Contributions,
in Aid of Construction and FASB 109 adjustments recorded as Regulatory
Assets and Regulatory Liabilities have been eliminated for statement
presentation.
2. FASB 106 liability allocation based on actuarial report as of 12/31/98.
3. Pension liability allocation based on 1998 expense calculation.
4. All Assets which are non-exclusive have been removed for presentation
purposes.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
CITIZENS ENERGY SERVICES
PROFORMA BALANCE SHEET PROPERTY SUBTOTAL BY STATE
SEPTEMBER 30, 1999
(UNAUDITED)
--------------------------------------------------------------------------------
State of Arizona
--------------------------------------------------------------------------------
State of Arizona Mohave Citizens Solutions Santa Xxxx
Subtotal Electric Company Electric
--------------------------------------------------------------------------------
Property, Plant and Equipment 222,456,126 143,286,690 1,266 79,168,169
Construction Work In Process 35,340,716 10,223,403 - 25,117,313
Accumulated Depreciation (85,814,524) (56,911,726) - (28,902,738)
--------------------------------------------------------------------------------
Net Fixed Assets 171,982,318 96,598,307 1,266 75,382,745
Cash and Cash Equivalents 92,820 25,000 - 67,820
Accounts Receivable Utilities 7,885,598 7,915,779 - (30,181)
Accounts Receivable-Other 663,815 7,846 - 655,968
Reserve for Doubtful Accounts (229,065) (206,386) - (22,679)
Materials & Supplies 1,094,365 879,848 - 214,518
Special Deposits 5,978 5,978 - -
Prepayments 106,662 91,173 - 15,489
Other Current Assets (57) 3,472 (3,529)
--------------------------------------------------------------------------------
Total Current Assets 9,620,116 8,722,710 - 897,406
Preliminary Survey and
Investigation 2,816,342 529,686 - 2,286,656
Clearing Assets 3,561 32 - 3,529
Deferred Debits 2,250,632 1,797,196 - 453,436
Regulatory Assets 415,672 335,598 - 80,074
--------------------------------------------------------------------------------
Total Non-Current 5,486,208 2,662,511 - 2,823,696
--------------------------------------------------------------------------------
Total Assets 187,088,642 107,983,529 1,266 79,103,847
================================================================================
--------------------------------------------------------------------------------
Total Shareholder's Equity 155,872,699 93,489,097 (90) 62,383,693
Subordinate Investment Notes - - - -
--------------------------------------------------------------------------------
Total Long Term Debt - - - -
Accounts Payable 6,439,386 2,702,528 (1) 3,736,859
Customer Deposits 2,346,060 1,811,940 - 534,121
Income Taxes Accrued 4,301,635 4,428,287 1,357 (128,009)
Other Taxes Accrued 3,604,669 2,424,128 - 1,180,541
Interest Accrued 386,602 186,092 - 200,510
Other Current and Accrued
Liabilities - (0) - (0)
--------------------------------------------------------------------------------
Total Current and Accrued
Liabilities 17,078,352 11,552,975 1,356 5,524,021
Minority Interest - - - -
Convertible Securities - - - -
Customer Advances for
Construction 14,137,590 2,941,457 - 11,196,133
Deferred Income Taxes - - - -
Regulatory Liabilities - - - -
Other Deferred Credits - - - -
Other Payables - - - -
--------------------------------------------------------------------------------
Total Non-Current Liabilities 14,137,590 2,941,457 - 11,196,133
Balance Account - - - -
--------------------------------------------------------------------------------
Total Liabilities and Equity 187,088,642 107,983,529 1,266 79,103,847
================================================================================
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
CITIZENS ENERGY SERVICES
PRO FORM: INCOME STATEMENT- ARIZONA ELECTRIC (A)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
Consolidated Consolidated
Property Level Corporate Electric
Subtotal(B) Adjustment Sector Total
-------------- ------------ ------------
Electric Revenue 76,031,741 34,164 76,065,905
Electric Energy & Fuel Oil Purchased 43,715,421 - 43,715,421
Other O&M Expenses 8,016,990 (24,249) 7,992,741
Taxes Other Than Income 7,743,688 - 7,743,688
------------ ----------- ------------
Total Operating Expenses 59,476,159 (24,249) 59,451,910
EBITDA 16,555,582 58,413 16,613,995
Depreciation & Amortization Expense 7,647,997 (396,294) 7,251,703
------------ ----------- ------------
Income From Operations 8,907,585 454,707 9,362,292
Allowance for Funds Used During
Construction 948,550 (350,631) 597,919
Investment Income - - -
Interest & Dividends From Associated
Companies - - -
Miscellaneous Non-Operating Income 59,584 (31,833) 27,751
Other Income (Deductions) (18,990) - (18,990)
------------ ----------- ------------
Total Other Income (Deductions) 989,144 (382,464) 606,681
Operating Income Before Interest Expense
and Income Taxes 9,896,729 72,243 9,968,972
Interest on Long Term Debt _ _ _
Amortization of Debt Discount - - -
Other Interest Expense 100,978 - 100,978
Allowance for Borrowed Funds (Cr) - (350,631) (350,631)
------------ ----------- ------------
Total Interest Expense 100,978 (350,631) (249,653)
------------ ----------- ------------
Operating Income Before Income Taxes 9,795,750 422,874 10,218,624
============ =========== ============
NOTES TO THE FINANCIAL STATEMENT;
(A). The following consolidated Income statement and the consolidating
Income statement have been prepared excluding special items related to
separation and Y2K costs.
(B). Santa Xxxx Electric excludes $338,700 from Other Income (Deductions)
related to a one time settlement with the City of Nogales and their
related customers.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
CITIZENS ENERGY SERVICES
PROFORMA INCOME STATEMENT PROPERTY SUBTOTAL BY STATE
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
--------------------------------------------------------------------
State of Arizona
--------------------------------------------------------------------
State of Arizona Mohave Citizens Electric Santa Xxxx
Subtotal Electric Company Electric
--------------------------------------------------------------------
Water & Wastewater Revenue - - - -
Electric Revenue 76,031,741 60,012,093 - 16,019,648
Gas Revenue - - - -
Other Revenue - - - -
--------------------------------------------------------------------
Total Operating Revenue 76,031,741 60,012,093 - 16,019,648
Electric Energy & Fuel Oil Purchased 43,715,481 34,526,610 - 9,188,870
Natural Gas Purchased - - - -
Other O&M Expenses 8,016,990 4,575,257 220 3,440,913
--------------------------------------------------------------------
Total Operation & Maintenance Expenses 51,732,471 39,102,468 220 12,629,783
Depreciation & Amortization Expense 7,647,997 5,396,439 - 2,251,558
Taxes Other Than Income 7,743,688 5,773,918 - 1,969,770
--------------------------------------------------------------------
Total Operating Expenses 15,391,685 11,170,357 - 4,221,328
Income From Operations 8,907,585 9,739,269 (220) (831,464)
Allowance for Funds Used During Construction 948,550 240,111 - 708,440
Investment Income - - - -
Interest & Dividends From Associated Companies - - - -
Miscellaneous Non-Operating Income 59,584 59,584 - (6,813)
Other Income (Deductions) (18,990) (12,177)
Tax Effect (Dr) - - - -
--------------------------------------------------------------------
Total Other Income 989,144 287,517 - 701,627
Operating Income Before Interest Expense
and Income Taxes 9,896,729 10,026,786 (220) (129,837)
Interest on Long Term Debt - - - -
Amortization of Debt Discount - - - -
Other Interest Expense 100,978 79,857 - 21,121
Allowance for Borrowed Funds (Cr) - - - -
--------------------------------------------------------------------
Total Interest Expense 100,978 79,857 - 21,121
Operating Income Before Income Taxes 9,795,750 9,946,929 (220) (150,958)
====================================================================
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.6(b)
CERTAIN LIABILITIES
1. Order of the Arizona Corporation Commission (Decision No. 62094), dated
November 19, 1999, re: (1) refund of the current purchased power-fuel
adjustment clause bank-balance, (2) reset of the purchased power-fuel
adjustment clause rate, and (3) establishment of a purchased power-fuel
adjustment clause bank-balance threshold.
2. Order of the Arizona Corporation Commission (Decision No. 62082), dated
November 19, 1999, re: rate refund.
3. Pursuant to the settlement arrangement to cure missing easements for
gas transmission line over land owned by the Xxxxxxx Family Trust,
Citizens must convert the existing aboveground distribution circuit to
an underground distribution circuit if such land owned by the Xxxxxxx
Family Trust is subdivided in the future (approximately $90,000).
4. Pursuant to the settlement arrangement to cure missing easements for
gas transmission line over land owned by the Escalada Trust, Citizens
must lower the existing underground transmission line if such land
owned by the Escalada Trust is subdivided in the future (approximately
$36,000).
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.7
COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL PERMITS
I. Violations.
None.
II. Missing Permits.
None.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.8
LEGAL PROCEEDINGS; OUTSTANDING ORDERS
I. Proceedings
1. XXXXXXXX, ET. AL. v. CITIZENS UTILITIES COMPANY, ET. AL.,
filed in the Arizona Superior Court, County of Santa Xxxx,
Case No. CV-98-471 (consolidated with CV-99-081.) Class action
suit brought by customers relates to the same power outages
noted in City of Nogales' complaint.
2. Tax dispute between Citizens Utilities Company and Avatar
regarding construction of a development and providing service.
Referred to as the Rio Rico litigation.
3 The Proceedings listed in Schedule 5.16 (State and Federal
Regulatory Matters) are incorporated in this Schedule 5.8 by
reference.
II. Outstanding Orders
1. Opinion and Order of the Arizona Corporation Commission
(Decision No. 62011), dated November 2, 1999, approving
Settlement Agreement, dated August 9, 1999, re: Santa Xxxx
Electric Division Plan of Action. (Settlement Agreement
requires Buyer to fulfill Citizens' obligations with respect
to a second transmission line as a condition to the
Commission's approval of sale.)
2. Order of the Arizona Corporation Commission (Decision No.
62094), dated November 19, 1999, re: (1) refund of the current
purchased power-fuel adjustment clause bank-balance, (2) reset
of the purchased power-fuel adjustment clause rate, and (3)
establishment of a purchased power-fuel adjustment clause
bank-balance threshold.
3. Order of the Arizona Corporation Commission (Decision No.
62082), dated November 19, 1999, re: rate refund.
4. Order of the Arizona Corporation Commission (Decision No.
61793), dated June 29, 1999, re: Revised Settlement Agreement,
dated June 1, 1999, between City of Nogales, Arizona, and
Citizens Utilities Company.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.9
TAXES
I. Pending Audits or Examinations: None.
II. Waivers of Statutes of Limitations:
FEDERAL: 1. Seller has signed a waiver that extends the statute
of limitations until December 31, 2000 for the tax
year ending December 31, 1995.
STATE: 1. Seller has signed a waiver that extends the statute
of limitations until March 31, 2000 relating to the
State of Connecticut tax filings for the years ending
December 31, 1993 and December 31, 1994.
2. Seller has signed a waiver that extends the statute
of limitations until December 31, 2000 relating
to the State of Louisiana tax filings for the years
ending December 31, 1991 through December 31, 1996.
III. Equity Interest: None.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.10
INTELLECTUAL PROPERTY
I. PATENTS, TRADEMARKS, SERVICE MARKS AND COPYRIGHTS: See attached.
II. INFRINGEMENTS:
1. Applications identified with a "+" (plus sign) on the attached
chart have been refused registration by the U.S. Patent and
Trademark Office due to the possible confusion with Citizens
Gas Light & Coke (not affiliated with Seller).
-----------------------------------------------------------------------------------------------------------------------------
XXXX/ SERIAL/REG. NO. FILED/ISSUED STATUS DUE
CLASS
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Citizens Utilities *LGS INTRASTATE 75/602,141 12/9/61 Office Action Response to Non-
Company 3/16/99 Final Action filed
37,39 9/16/99
(minor amendments
required)
-----------------------------------------------------------------------------------------------------------------------------
*LGS INTRASTATE 75/578,176 10/26/98 Office Action Response to Non-
CITIZENS ENERGY 3/16/99 Final Action filed
SERVICES & Design 9/16/99
(minor amendments
37,39 required)
-----------------------------------------------------------------------------------------------------------------------------
*THE GAS COMPANY 75/511,055 6/24/98 Office Action Response to Non-
CITIZENS ENERGY 3/16/99 Final Action filed
SERVICES & Design 9/16/99
(likelihood of
37,39 confusion as to
SoCal Gas xxxx
alleged)
-----------------------------------------------------------------------------------------------------------------------------
*KAUI ELECTRIC 75/508,537 6/24/98 Office Action Response to Non-
CITIZENS ENERGY 3/16/99 Final Action filed
SERVICES & Design 9/16/99
(minor amendments
37,39 required)
-----------------------------------------------------------------------------------------------------------------------------
October 7, 1999 Citizens Utilities Company
Page 1 of 3 Energy Trademark Status Chart
-----------------------------------------------------------------------------------------------------------------------------
*CITIZENS ARIZONA 75/508,536 6/24/98 Office Action Response to Non-
ELECTRIC & Design 3/16/99 Final Action filed
9/16/99
37,39 (likelihood of
confusion)+
-----------------------------------------------------------------------------------------------------------------------------
*CITIZENS ARIZONA 75/508,530 6/24/98 Office Action Response to Non-
GAS & Design 3/16/99 Final Action filed
9/16/99
37,39 (likelihood of
confusion)+
-----------------------------------------------------------------------------------------------------------------------------
*LOUISIANA GAS 75/508,529 6/24/98 Office Action Response to Non-
CITIZENS ENERGY 3/16/99 Final Action filed
SERVICES & Design 9/16/99
(minor amendments
37,39 required)+
-----------------------------------------------------------------------------------------------------------------------------
*CITIZENS ENERGY 75/397,886 12/1/97 Final Office Notice of Appeal
SERVICES & Design Action 4/2/99 filed 10/4/99,
Citizens Brief due
39 12/3/99
(Final likelihood of
confusion refusal)+
-----------------------------------------------------------------------------------------------------------------------------
+ These applications have been refused registration by the Examiner based on
an alleged likelihood of confusion with CITIZENS GAS LIGHT & COKE (stylized).
Citizens has approached the owner of that xxxx to seek a consent to use
agreement.
October 7, 1999 Citizens Utilities Company
Page 2 of 3 Energy Trademark Status Chart
-----------------------------------------------------------------------------------------------------------------------------
*CITIZENS ENERGY 75/397,885 12/1/97 Final Office Notice of Appeal
SERVICES & Design Action 4/2/99 filed 10/4/99,
Citizens Brief due
39 12/3/99
(Final likelihood of
confusion refusal)+
-----------------------------------------------------------------------------------------------------------------------------
*CITIZENS ENERGY 75/397,884 12/1/97 Final Office Notice of Appeal
SERVICES Action 4/2/99 filed 10/4/99,
Citizens Brief due
37 12/3/99
(Final likelihood of
confusion refusal)+
-----------------------------------------------------------------------------------------------------------------------------
*CITIZENS ENERGY 75/397,883 12/1/97 Final Office Notice of Appeal
SERVICES Action 4/2/99 filed 10/4/99,
Citizens Brief due
39 12/3/99
(Final likelihood of
confusion refusal)
-----------------------------------------------------------------------------------------------------------------------------
October 7, 1999 Citizens Utilities Company
Page 3 of 3 Energy Trademark Status Chart
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.11
EXTRAORDINARY REQUIRED REPAIRS
None.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.12
MATERIAL CONTRACTS
I. POWER AND FUEL PURCHASE AND SUPPLY AGREEMENTS
1. Power Service Agreement (No. 48166), dated January 5, 1995,
between Arizona Public Service Company and Citizens Utilities
Company.
a. Service Schedule A - wholesale Power to the Power
Service Agreement (No. 48167), dated January 5, 1995,
as amended, between Arizona Public Service Company
and Citizens Utilities Company.
b. Service Schedule B - Supplemental Capacity to the
Power Service Agreement (No. 48168), dated January 5,
1995, as amended, between Arizona Public Service
Company and Citizens Utilities Company.
c. Service Schedule C - Supplemental Peaking Energy
Power Service Agreement (No. 48169), dated January 5,
1995, as amended, between Arizona Public Service
Company and Citizens Utilities Company.
II. CUSTOMER SUPPLY AGREEMENTS
1. Agreement, dated March 30, 1984, between Citizens Utilities
Company and Foundation for Senior Adult Living.
2. Agreement for the Provision of Electric Service, dated March
12, 1996, between Citizens Utilities Company and Lazy Y U
Ranch, a Joint Venture.
3. Agreement, dated April 2, 1999, between Citizens Arizona
Electric and Xxxxxx Xxxxxxx re electric line to Hualapai
Foothills Estate.
4. Agreement, dated ___, 19__, between Citizens Utilities Company
and Hualapai Foothills Estate re electric line to Hualapai
Foothills Estates.
III. INTERCONNECTION AGREEMENTS
1. Interconnection Agreement, dated September 16, 1991 between
Citizens Utilities Company and Nevada Power Company.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
IV. TRANSMISSION AGREEMENTS
1. Transmission Service Contract No. 99-DSR-11004, dated
February 23, 1999, between U.S. Department of Energy, Western
Area Power Administration, Desert Southwest Regional Office,
Pacific North West, Pacific South West Intertie Project,
Xxxxxx-Xxxxx Project and Citizens Utilities Company.
2. Service Agreement for Non-Firm Point-to-Point Transmission
Service, dated February 23, 1999, between the U.S. Department
of Energy, Western Area Power Administration and Citizens
Utilities Company.
3. Non-Firm Transmission Service Contract, dated July 20, 1989
between U.S. Department of Energy, Western Area Power
Administration and Citizens Utilities Company.
4. Firm Transmission Service Contract No. 87-BCA-10140, dated
March 9, 1988, between U.S., Department of Energy, Western
Area Power Administration, Xxxxxx Xxxxx Project, Central
Arizona Project and Citizens Utilities Company.
5. Service Agreement for Non-Firm Point-to-Point Transmission
Service, dated September 24, 1996, between Citizens Utilities
Company and AHA MACAV Power Service.
V. REAL PROPERTY LEASE AGREEMENTS
1. Lease, dated April 19, 1960, between Xxxxx & Xxxxx Xxxx
(successors-in-interest to Central Commercial Company, Inc.)
and Citizens Utilities Company, re: 69 KV transmission
switching facility. [Note: Despite persistent attempts to make
payments, for the last year or more Citizens has unable to pay
rent for its use of the property covered by the Lease, dated
April 19, 1960, between Xxxxx & Xxxxx Xxxx
(successors-in-interest to Central Commercial Company, Inc.)
and Citizens Utilities Company. Citizens offered to purchase
the site located North of Kingman on Highway 93 (known as the
Coyote Breaker) on December 15, 1999]
2. Lease Agreement, dated April 1, 1994, between Xxxxxxx Family
Trust L.P. and Citizens Utilities Company, re: Administrative
Office Lease located on 1710 North Xxxxxxx Way, Nogales,
Arizona.
VI. CONSTRUCTION AND OUTSOURCING AGREEMENTS
1. Construction Agreement, dated August 3, 1994, between AHA
MACAV Power Service and Citizens Utilities Company, as amended
by First Amendment to
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
Construction Agreement, dated September 24, 1996.
2. Letter Agreement, dated July 23, 1997, from Citizens Utilities
Company to Xxxx Xxxxxxxx Xxxxxxx Observatory re installation
of underground line to Smithsonian Institute or Mount Hopkins
by January 1, 2005.
3. Construction Services Agreement between Citizens Utilities
Company - Arizona Electric Division and High Power, Inc.,
dated July 12, 1999 regarding services to be provided in
conjunction with Citizens' modification and expansion of the
Black Mesa Substation. Amount to be paid to High Power is
$809,690.
4. Construction Services Agreement between Citizens Utilities
Company - Arizona Electric Division and High Power, Inc.,
regarding Xxxxxxxx Substation.
5. Construction Services Agreement between Citizens Utilities
Company - Arizona Electric Division and Xxxxxx Incorporated,
regarding services to be provided in conjunction with the
construction of the Eastern Substation.
6. Construction Services Agreement between Citizens Utilities
Company - Arizona Electric Division and Xxxxxx Incorporated,
regarding services to be provided in conjunction with the
construction of the Xxxxx Springs Substation.
7. Construction Services Agreement between Citizens Utilities
Company - Arizona Electric Division and Xxxxxx Incorporated,
dated September 23, 1999 regarding services to be provided in
conjunction with the construction of the Sacramento
Substation. Amount to be paid to Xxxxxx is $646,793.
8. Construction Services Agreement between Citizens Utilities
Company - Arizona Electric Division and Xxxxxx Incorporated,
dated September 23, 1999 regarding construction of Clearwater
Substation. Amount to be paid to Xxxxxx is $658,246.
9. Contract No. 98-DSR-10872 between United States Department of
Energy - Western Area Power Administration ("WAPA") and
Citizens Utilities Company re: Construction at Black Mesa Sub
station, Hilltop Substation, North Havasu Substation,
Generator Site Sub station, and Nogales Switchyard. Citizens
to compensate WAPA for direct and associated indirect costs
incurred.
10. Consultant Services Master Agreement, made effective July 9,
1999, between Citizens Utilities Company, Arizona Electric
Division and Electrical Consultants, Inc.
11. Consultant Services Master Agreement, dated December 22, 1994,
between Citizens Utilities Company and Power Engineers, Inc.,
as amended by Amendment No. 1,
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
dated March 10, 1997.
12. Change Order, dated February 18, 1999, between Citizens
Utilities Company and Power Engineers.
13. Service Agreement, dated July 1, 1999, between Citizens
Utilities Company and Xxxxxx, Fargo and Co., re: Car Service.
14. General Services Agreement, dated December 18, 1998, as
amended, between Citizens Utilities Company and Western
Arizona Council of Government.
15. Service Agreement, dated January 8, 1999, between Citizens
Utilities Company and Kachina Telecommunications, Inc.
16. Local Collection Agency Agreement, dated August 4, 1992,
between Stockmen's Bank, Golden Valley Branch and Citizens
Utilities Company.
17. Local Collection Agency Agreement, dated November 1, 1995,
between Stockmen's Bank, Xxxxx Springs Branch and Citizens
Utilities Company.
18. Agreement, dated December 11, 1996, between Citizens Utilities
Company and Guard Force Service, re: Meter Reading.
19. General Se#vices Agreement, dated November 22, 1997, between
Citizens Utilities Company and Solar Electrical Systems.
20. Team-Up Program Sub-Agreement No. G279, dated September 29,
1997, between Citizens Utilities Company and Sacramento
Municipal Utility District.
21. General Services Agreement, dated November 22, 1997, between
Citizens Utilities Company and Sacramento Municipal Utility
District. [Note: Agreement is not assignable and relates to
Team-Up Sub Agreement.]
VII. EQUIPMENT LEASES
1. Motor Vehicle Lease Agreement Closed-end, dated June 4, 1999,
between Xxx Xxxx Dodge Chrysler Jeep and Citizens Energy
Services, re: 1999 Jeep Cherokee.
2. Lease Agreement, dated December 21, 1994, between Associates
Leasing, Inc. and Citizens Utilities Company, re: 1994 Ford
F47.
3. Motor Vehicle Closed-End Lease Agreement, dated June 6, 1996,
between Xx Xxxxx
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
Dodge Chrysler Plymouth Jeep Eagle and Citizens Utilities,
re: 1996 Dodge Ram Pickup. (Non-transferrable.)
4. Motor Vehicle Closed-End Lease Agreement, dated June 6, 1996,
between Xx Xxxxx Dodge Chrysler Plymouth Jeep Eagle and
Citizens Utilities, re: 1996 Dodge Ram Pickup.
(Non-transferrable.)
5. Lease Agreement, dated June 25, 1997, between Citizens
Utilities and Xerox, re: copier #951164409.
6. Lease Agreement, dated June 25, 1997, between Citizens
Utilities and Xerox, re: copier #95109980.
VIII. SOFTWARE LICENSES
1. Major Purchase Agreement, dated January 1, 2000, between
Advanced Control System and Citizens Utilities Company.
2. Software License Agreement, dated April 18, 1997, between
Advance Control Systems, Inc. and Citizens Utilities Company.
3. Customer Confidentiality Agreement, dated April 18, 1997,
between Advance Control Systems, Inc. and Citizens Utilities
Company.
4. Cadtel Power Logic Software Agreement, dated September 1994.
5. Wind Mil and Light Table for Windows Engineering Analysis
Software Agreement, dated July 17, 1998, between Milsoft
Integrated Solutions, Inc. and Citizens Utilities.
6. Software License Agreement, dated May 4, 1995, as amended,
between Cadtel Systems and Citizens Utilities Company.
7. Software License and Services Agreement, dated April 29, 1997,
between Citizens Utilities and HTE, Inc.
8. Maintenance Support Agreement, dated ___ 199__, between
Citizens Utilities and WE, Inc.
IX RELATED PARTY AGREEMENTS
1. Joint Use of Telephone System Poles, dated August 6, 1966, as
amended January 1, 1971, January 1, 1976, between Citizens
Utilities Company (successor-in-interest to
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
Citizens Utilities Rural Company, Inc.) and Citizens
Communications
2. License Agreement for Joint Use of Poles, dated April 16, 1973
between Citizens Utilities Rural Company, Inc., Citizens
Utilities Company and Mohave Cable Co. Inc., as amended by
Amendments No. 1, dated January 1, 1971 and Amendment No. 2,
dated January 1, 1976.
X. COLLECTIVE BARGAINING AGREEMENTS
1. The Collective Bargaining/Union Agreements described on
Schedule 5.13 (Employee Matters) are hereby incorporated
herein by reference.
XI. OTHER CONTRACTS
1. Letter Agreement, dated April 6, 1999, between Citizens Energy
Services and Turbine Technology Services Corporation, re load
testing of 3 gas turbines in Nogales, Az.
2. Letter Agreement, dated September 25, 1998, from Citizens
Utilities (Xxxx Xxxx) to Mayor of Nogales, re Citizens
response actions to recent power outage.
3. Consultant Services Master Agreement, dated December 18, 1998,
between Citizens Utilities Company and T.O.R. Engineering
Corp.
4. Joint Use Contract, dated July 26, 1932 as amended July 22,
1974 and September 18, 1969, between Citizens Utilities
Company (successor-in-interest to Public Utilities
Consolidated Corporation) and Mountain States Telephone and
Telegraph Company.
5. License Agreement, dated February 15, 1995, as amended October
1, 1996, between Citizens Utilities Company and Medicom LLC
(successor-in-interest to Saguaro Cable TV).
6. Entry and Testing Agreement, dated January 15, 1999, between
Citizens Utilities Company and Sprint Spectrum L.P. re Kontar
substation, re: testing to determining feasibility of tower
site.
7. License Agreement for Attachment on Electric Company Owned
Poles, dated August 1, 1989, between Citizens Utilities
Company and Americable International Arizona, Inc.
(successor-in-interest to Silver Springs Cable TV, Inc.).
8. Memorandum of Agreement covering attachments to the Poles and
Fixtures, dated September 1, 1985, between Citizens Utilities
Company and London Bridge
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
Broadcasting, Inc.
9. License Agreement for Attachment on Electric Company Owned
Poles, dated January 24, 1980, between Citizens Utilities
Company and Time Warner Entertainment Company, L.P. successor
to Kingman Television Company, Inc.
10. License Agreement for Attachment on Electric Company Owned
Poles, dated April 24, 1990, between Citizens Utilities
Company and Dimension Cable Services.
11. Revised Settlement Agreement, dated June 1, 1999, between the
City of Nogales, Arizona and Citizens Utilities Company.
12. Settlement Agreement, dated August 9, 1999, between Arizona
Corporation Commission Staff and Citizens Utilities Company.
XII. IDRB DOCUMENTS
See attached.
ISSUER LOAN AGREEMENT INDENTURE TAX REGULATORY
AGREEMENT
The Industrial Development
Authority of the County of Mohave
---------------------------------
$24,800,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the None
of the County of Mohave Industrial Development Authority Industrial Development Authority of
Industrial Development Revenue of the County of Mohave and the County of Mohave and The
Refunding Bonds Citizens Utilities Company Dated Connecticut National Bank Dated as of
1985 Series A-B as of July 15, 1985 July 15, 1985
(Citizens Utilities Company Project)
$11,000,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the None
of the County of Mohave Industrial Development Authority Industrial Development Authority
Industrial Development Revenue Bonds of the County of Mohave and of the County of Mohave and The
1985 Series Citizens Utilities Company Dated Connecticut National Bank as Trustee
(Citizens Utilities Company Project) as of August 1, 1985 and The Valley National Bank of
Arizona, as Co-Trustee, Dated as of
August 1, 1985
$15,000,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the Tax Regulatory
of the County of Mohave Industrial Development Authority Industrial Development Authority Agreement among
Industrial Development Revenue Bonds of the County of Mohave and of the County of Mohave and The The Industrial
1988 Series A and 1988 Series B Citizens Utilities Company Dated Connecticut National Bank, as Trustee Development
as of September 1, 1988 Dated as of September 1, 1991 Authority of the
County of Mohave,
Citizens
Utilities
Company, The
Connecticut
National Bank, as
Trustee Dated as
of September 1,
1988
$20,000,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the Tax Regulatory
of the County of Mohave Industrial Development Authority Industrial Development Authority Agreement among
Industrial Development Revenue Bonds of the County of Mohave and of the County of Mohave and The The Industrial
1991 Series A and 1988 Series B Citizens Utilities Company Dated Connecticut National Bank, as Trustee Development
as of February 15, 1991 Dated as of February 15, 1991 Authority of the
County of Mohave,
Citizens
Utilities
Company and the
Connecticut
National Bank, as
Trustee Dated as
of February 15,
1998
$22,960,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the Tax Regulatory
of the County of Mohave Industrial Development Authority Industrial Development Authority Agreement among
Industrial Development Revenue Bonds of the County of Mohave and of the County of Mohave and The Industrial
1993 Series Citizens Utilities Company Dated Shawmut Bank Connecticut, N.A. as Development
(Citizens Utilities Company Project) as of March 1, 1993 Trustee Dated as of March 1, 1993 Authority of the
County of Mohave,
Citizens
Utilities
Company and
Shawmut Bank
Connecticut, N.A.
as Trustee Dated
as of March 1,
1993
$6,640,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the Tax Regulatory
of the County of Mohave Industrial Development Authority Industrial Development Authority Agreement among
Industrial Development Revenue Bonds of the County of Mohave and of the County of Mohave and The Industrial
1994 Series Citizens Utilities Company Dated Shawmut Bank Connecticut, N.A. as Development
(Citizens Utilities Company Project) as of September 1, 1994 Trustee Dated as of September 1, 1994 Authority of the
County of Mohave,
Citizens
Utilities
Company and
Shawmut Bank
Connecticut, N.A.
as Trustee Dated
as of
September 1, 1994
$10,000,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the Tax Regulatory
of the County of Mohave Industrial Development Authority Industrial Development Authority Agreement among
Industrial Development Revenue Bonds of the County of Mohave and of the County of Mohave and The Industrial
1993 Series B Citizens Utilities Company Dated Shawmut Bank Connecticut, N.A. as Development
(Citizens Utilities Company Project) as of November 1, 1993 Trustee Dated as of November 1, 1993 Authority of the
County of Mohave,
Citizens
Utilities
Company and
Shawmut Bank
Connecticut, N.A.
as Trustee Dated
as of
November 1, 1993
ISSUER LOAN AGREEMENT INDENTURE TAX REGULATORY
AGREEMENT
$2,090,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the Tax Regulatory
of the County of Mohave Industrial Development Authority Industrial Development Authority Agreement among
Industrial Development Revenue Bonds of the County of Mohave and of the County of Mohave and Fleet The Industrial
1997 Citizens Utilities Company Dated National Bank, as Trustee Dated as of Development
(Citizens Utilities Company Project) as of March 1, 1997 March 1, 1997 Authority of the
County of Mohave,
Citizens
Utilities
Company and
Fleet National
Bank, as Trustee
Dated as of
March 1, 1997
The Industrial Development
Authority of the County of
Santa Xxxx
---------------------------------
$8,200,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the None
of the County of Santa Xxxx Industrial Development Authority Industrial Development Authority
Industrial Development Revenue Bonds of the County of Santa Xxxx and of the County of Santa Xxxx, The
1985 Series Citizens Utilities Company Dated Connecticut National Bank, as Trustee
(Citizens Utilities Company Project) as of August 1, 1985 and The Valley National Bank of
Arizona, as co-Trustee, Dated as of
August 1, 1985
$12,680,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the Tax Regulatory
of the County of Santa Xxxx Industrial Development Authority Industrial Development Authority Agreement among
Industrial Development Revenue Bonds of the County of Santa Xxxx and of the County of Santa Xxxx and The Citizens
1988 Series A and 1988 Series B Citizens Utilities Company Dated Connecticut National Bank, as Trustee Utilities
as of September 1, 1988 Dated as of September 1, 1988 Company, The
Industrial
Development
Authority of the
County of Santa
Xxxx (Arizona),
The Connecticut
National Bank,
as Trustee Dated
as of
September 1, 1988
$10,100,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the Tax Regulatory
of the County of Santa Xxxx Industrial Development Authority Industrial Development Authority Agreement among
Industrial Development Revenue Bonds of the County of Santa Xxxx and of the County of Santa Xxxx and The The Industrial
1991 Series Citizens Utilities Company Dated Connecticut National Bank, as Trustee Development
(Citizens Utilities Company Project) as of February 15, 1991 Dated as of February 15, 1991 Authority of the
County of Santa
Xxxx Citizens
Utilities
Company and The
Connecticut
National Bank,
as Trustee Dated
as of
February 15, 1991
$8,000,000
The Industrial Development Authority Loan Agreement between The Indenture of Trust between the Tax Regulatory
of the County of Santa Xxxx Industrial Development Authority Industrial Development Authority Agreement among
Industrial Development Revenue Bonds of the County of Santa Xxxx and of the County of Santa Xxxx and The Industrial
1994 Series Citizens Utilities Company Dated Shawmut Bank Connecticut, National Development
(Citizens Utilities Company Project) as of September 1, 1994 Association, as Trustee Dated Authority of the
as of September 1, 0000 Xxxxxx xx Xxxxx
Xxxx Citizens
Utilities
Company and
Shawmut Bank
Connecticut,
National
Association, as
Trustee Dated as
of September 1,
1994
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.13
EMPLOYEE MATTERS
I. EMPLOYEE PLANS PROVIDERS OF SERVICE
Citizens Pension Plan N/A
Citizens 401k Savings Xxxxxx
Plan
Citizens Utilities Company Xxxxxxx Xxxxx Barney
1992 Employee Stock Purchase
Plan
Health Care North American Benefits (third party administrator)
Plan
Blue Cross Blue Shield of Arizona
Citizens Utilities Company North American Benefits (third party administrator)
Dental Plan
Vision Service Plan Vision Service Provider
Long Term Salary Continuance CIGNA
Plan
Travel Accident Insurance Continental
Basic Group Life Insurance CIGNA
Citizens Utilities Company North American Benefits (third party administrator)
Flexible Spending Accounts
Citizens Incentive Plan N/A
Equity Incentive Plan N/A
Citizens Executive Deferred Xxxxxx
Savings Plan
Employee Manuals for Arizona N/A
Citizens Retiree Medical Plan NABN (third party administrator)
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
II. COLLECTIVE BARGAINING/UNION AGREEMENTS:
1. Agreement between Local Union 769, I.B.E.W. and Citizens
Utilities Company (Mohave), dated June 25, 1997. Expires June
24, 2002.
2. Agreement, dated March 1, 1999, between Citizens Utilities
Company and International Brotherhood of Electrical Workers,
Local Center No. 387 of Phoenix, AZ.
III. EMPLOYMENT/MANAGERIAL/ADVISORY/CONSULTING/CONFIDENTIALITY/
OTHER AGREEMENTS:
None.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.14
ENVIRONMENTAL MATTERS
I. NOTICES OF VIOLATIONS.
None.
II. PROCEEDINGS.
None.
III. NOTICES OF MISSING PERMITS.
None.
IV. REMEDIATION ACTIVITY.
1. Underground Fuel Storage Tank System Compliance Report,
Valencia Power Plant prepared by the Verde Companies, Inc.,
dated July 1999. (#133052)
2. A study is underway at the Valencia Power Plant in Nogales to
assess the impact of various petroleum releases to the soil
and ground water. A consultant has been monitoring the site
and is developing a remediation plan. Based on analyses
performed thus far, it appears that the releases are contained
within the site and have not migrated off the property.
Preliminary remediation options proposed by the consultant are
under review. When a plan of action is finalized, the Arizona
Department of Environmental Quality will be approached to
discuss the recommendation.
V. SUPERFUND SITES.
None.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.15
MATERIAL ADVERSE CHANGES
None.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.16
STATE AND FEDERAL REGULATORY MATTERS
I. Pending Filings
None.
II. Other Pending Regulatory Proceedings
1. Arizona Corporation Commission Docket No. E-01032C-98-0474,
re: Citizens Utilities Company stranded cost. (See Schedule
6.1, Item 5.)
2. Arizona Corporation Commission Docket No. E-01032C-97-0774,
re: Citizens Utilities Company unbundled and standard offer
rates. (See Schedule 6.1, Item 5.)
3. Arizona Corporation Commission Docket No. RE-0000C-94-0165,
re: Electric Competition. (See Schedule 6.1, Item 5.)
4. The Proceedings that resulted in the Orders of the Arizona
Corporation Commission listed in Part II of Schedule 5.8 are
incorporated herein by reference.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 5.19
SELLER'S INSURANCE
BROKER LIMITS OF
INSURANCE POLICY NO. (CONSULTANT) COMPANY LIABILITY DEDUCTIBLE EXPIRATION DATE
All Risk 24020010.00 Direct Writer Arkwright Property Damage; See Various. Refer to 10/01/2001
(including Boiler & Mutual Schedule on Page 1 for Schedule on Page 1
Machinery, (Xxxxx USA Ins. Co. Sub-limits
EDP & Fine Arts Inc.)
Comprehensive 000-00-00 Xxxxx USA National Union $10,000,000 except; $100,000 $25,000; None for 09/01/2000
Blanket Crime Inc. Fire Ins. Co. Securities Forgery; Credit Credit Card Forgery,
Card Forgery and $10,000 Money Orders &
Loss of Accounting Records Counterfeit Currency,
Loss of Accounting
Records or Securities
Forgery.
Workers WC189158667 Xxxxx USA CNA WC: Statutory Benefits $500,000 per 06/01/2000
Compensation & Inc. Employers Liability: occurrence
Employers $500,000 each accident:
Liability $500,000 each employee
(Disease); $500,000 policy
limit (Disease); Unlimited
where required by law
General Liability GL166793803 Xxxxx USA CNA $500,000 each occurrence N/A: all claims 06/01/2000
Inc. combined single limit reimbursed 100%
for bodily injury & by Citizens
property damage
Auto Liability BUA166793817 Xxxxx USA CNA $500,000 each occurrence N/A: all claims 06/01/2000
Inc. combined single limit reimbursed 100%
for bodily injury & by Citizens
property damage (including
Auto Physical Damage -
Comprehensive Coverage
only - collision coverage
is excluded)
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
BROKER LIMITS OF
INSURANCE POLICY NO. (CONSULTANT) COMPANY LIABILITY DEDUCTIBLE EXPIRATION DATE
Excess Liability X0187A1A99 Xxxxx USA AEGIS $35,000,000 in excess of $500,000 Pollution 06/01/2000
Inc. Employers Liability, General Liability.
Liability & Auto Liability $5,000,000 Non-Owned
policy deductibles Aviation. $250,000
each claimant/$1MM
any one occ. -
Employment Practices
2nd Layer Excess 878153100 Self-Procured Lexington $25,000,000 in excess of $35,000,000 retention 06/01/2000
Liability (Non-Gas (Xxxxx USA Insurance $35,000,000 underlying per occurrence
Operations Only) Inc.) Company
(Bermuda)
Non-Owned Aircraft 360AC-255186 Xxxxx USA Inc. USAIG $5,000,000 None 06/01/2000
Liability
Directors & 000000-00-X Xxxxx XXX Inc. Federal $35,000,000 $5,000 each Officer & 05/01/2000
Officers Liability Insurance Director; $10,000
Company aggregate; $250,000
Corporate reimbursement
Fiduciary/Pension 811534-70-C Xxxxx USA Inc. Federal $15,000,000 None 05/01/2000
Trust Liability Insurance
Company
Special Coverage GA06096650 Xxxxx USA Inc. Gulf $20,000,000 None 01/19/01
Insurance
Company
Other Broker SR83080860 AON Continental 5x salary for all Officers None 02/01/00
Policy; Group Consulting, Casualty Co. & Employee Directors,
Travel Accident Inc. Non-Employee Directors &
(Not Marsh) all other Employees subject
to a $150,000 minimum and a
$1,500,000 maximum.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 6.1
CONDUCT OF BUSINESS PRIOR TO CLOSING DATE
1. Citizens may purchase the site known as the Coyote Breaker from Xxxxx
and Xxxxx Xxxx as proposed in its offer to purchase letter, dated
December 15, 1999. (See Schedule 5.5, Item IV.1.)
2. Citizens may purchase from APS a parcel of real property located near
the Sacramento site.
3. Citizens may execute several Easements with the Xxxxxxx Family Trust.
(See Schedule 5.5, Item III.3.)
4. Citizens may execute several Easements with the Escalada Trust. (See
Schedule 5.5, Item III.4.)
5. Citizens may settle the Arizona Corporation Commission proceedings re:
(1) stranded cost, (2) unbundled and standard offer rates, and (3)
electric industry competition. (See Schedule 5.16, Items II.1, 2 and
3.)
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 6.2.(c)
CITIZENS GUARANTEES AND SURETY INSTRUMENTS
1. See attached.
2. Notary Public Bond No. 021257 for Xxxxx X. Xxxxxxx in the
amount of $5,000.
3. Notary Public Bond No. 021259 for Xxxx X. Xxxxxxxx in the
amount of $5,000.
4. Notary Public Bond No. 93-05-8402-1 for Xxxxx X. Xxx in the
amount of $1,000.
5. Notary Public Bond No. 93-CJ-9947Z AZ for Xxxx X. Xxxxxxxx in
the amount of $5,000.
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
CITIZENS UTILITIES COMPANY
SURETY BOND SCHEDULE
----------------------------------------------------------------------------------------------------------------------------------
BOND NO. PRINCIPAL OBLIGEE STATE BOND TYPE BOND AMOUNT EFF. DATE EXP. DATE PREMIUM
-------- --------- ------- ----- --------- ----------- --------- --------- -------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
KINGMAN ELECTRIC
----------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
35393397 XXXXXXXX XXXXXXXXX STATE OF ARIZONA AZ NOTARY PUBLIC BOND $5,000.00 10/05/1997 10/04/2001 $75.00
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
NOGALES
-------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
191233 CITIZENS UTILITIES COMPANY STATE OF ARIZONA AZ USE FUEL TAX BOND $500.00 07/12/1999 07/12/2000 $75.00
----------------------------------------------------------------------------------------------------------------------------------
19123297 CITIZENS UTILITIES COMPANY STATE OF ARIZONA AZ MOTOR CARRIER TAX B $500.00 07/12/1999 07/12/2000 $75.00
----------------------------------------------------------------------------------------------------------------------------------
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 10.1
ACTIVE EMPLOYEES
I. Total Employees
1. Arizona Electric, Mohave division: 95
2. Arizona Electric, Santa Xxxx (Nogales) division: 39
II. Salaried/Hourly Employees
1. Arizona Electric, Mohave division: 47 salaried/48 hourly
2. Arizona Electric, Santa Xxxx (Nogales) division:
10 salaried/29 hourly
III. Union/Nonunion Employees
1. Arizona Electric, Mohave division: 00 xxxxx/00 xxx-xxxxx
2. Arizona Electric, Santa Xxxx (Nogales) division:
29 union/10 non-union
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 10.1
ACTIVE EMPLOYEES
DESCRIPTION ANNUAL SALARY
---------------------------------------------------------------------------
Dir, Special Projects 108,710.00
Mgr, Special Projects 86,005.00
Dir, Engineering 83,326.99
Dir, Information Systems 86,191.60
Dir, Energy Services 77,131.25
Dir, Quality & Organizatio Dev 72,924.00
Dir, Electric 85,000.00
Mgr, District 67,000.00
Eng, Transmission & Distributi 78,280.00
Spec, Demand Side Management 56,815.00
Mgr, Electric Operations 70,200.00
Mgr, Demand Side Service 55,658.75
Engineer, District 62,500.00
Eng, District 64,272.00
Eng, District 61,627.20
Supt, Plant 61,000.00
Mgr, Customer Service 45,400.00
Analyst, Network 46,000.00
Analyst, Energy Services 38,419.00
Spvr, Information Systems 43,363.00
Systems Analyst/Programmer 56,653.45
Analyst, Tech Services Support 40,503.20
Coord, Human Resources 38,507.02
Supt, Electric 59,091.25
Eng, Electrical 35,647.50
Spvr, Customer Service 41,593.50
Customer Accountant 50,122.50
Spvr, Div Constr 58,999.60
Xxxxxxx, Constr 60,550.00
Xxxxxxx, Constr 59,200.00
Spvr, Substation Mtnc & Mtrg 52,500.00
Spvr, Customer Service 39,400.00
Spvr, Customer Service 43,775.00
Specialist, Right-Of-Way 39,667.50
Rep, Energy Services 34,200.00
Rep, Energy Services 41,348.25
Utility Locator 30,763.20
Rep, Cust Svc 21,902.40
Warehouse Person - A 35,110.40
Lineman 49,753.60
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
Lineman - Apprentice 39,998.40
Lineman 49,753.60
Journeyman Meterman 49,753.60
Lineman 49,753.60
Lineman 49,753.60
Lineman 49,753.60
Instrument Electrician 49,753.60
Lineman - Apprentice 36,212.80
Lineman 49,753.60
Instrument Electrician 49,753.60
Plant Operator 27,830.40
Plant Operator 34,777.60
Rep, Cust Svc 23,462.40
Planner, Cust Svc 34,840.00
Planner, Cust Svc 34,840.00
Specialist, Accounting 24,003.20
Draftsperson 23,691.20
Serviceman, Cust 30,763.20
Serviceman, Cust 30,763.20
Rep, Cust Svc 23,462.40
Rep, Cust Svc 23,462.40
Serviceman, Cust 30,763.20
Rep, Cust Svc 19,177.60
Rep, Cust Svc 19,864.00
Working Xxxxxxx - Electric 52,977.60
Working Xxxxxxx - Electric 52,977.60
Working Xxxxxxx - Electric 52,977.60
Coord. Quality & Org. Developm 24,514.00
Admin Assistant 24,086.00
Admin Assistant 28,091.70
Accounting Associate 31,000.00
Customer Service Rep III 25,873.00
Customer Service Rep III 26,624.00
Executive Secretary 31,796.88
Rep, Collections 31,628.70
Customer Service Rep II 21,300.00
Customer Service Rep II 21,400.00
Customer Service Rep II 21,738.15
Rep, Collections 23,028.75
Customer Service Rep II 20,172.00
Customer Service Rep I 19,700.00
Customer Service Rep I 20,352.80
Customer Service Rep I 20,446.40
Customer Service Rep I 21,115.00
Customer Service Rep I 19,306.00
Customer Service Rep I 18,860.00
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
Customer Service Rep I 18,400.00
District Secretary 24,036.25
Electric Dispatcher 47,000.00
Engineering Technician II 41,075.00
Engineering Technician II 41,923.00
Engineering Technician II 40,327.00
Engineering Technician II 40,327.00
Engineering Technician I 36,736.00
Engineering Technician I 36,736.00
Engineering Technician I 36,736.00
Engineering Technician I 36,736.00
Draftsman 33,210.00
Engineering Representative 38,813.00
Groundman 23,046.40
Groundman 23,046.40
Groundman 23,046.40
Groundman 23,046.40
Groundman 23,046.40
Groundman 23,046.40
Operator, Digger 31,532.80
Warehouse Person - B 32,136.00
Warehouse Person - B 32,136.00
Warehouse Person - B 25,500.80
Warehouse Person - A 35,880.00
Lineman, Appr 41,392.00
Lineman, Appr 35,859.20
Lineman, Appr 35,859.20
Lineman, Appr 26,416.00
Lineman, Appr 38,688.00
Lineman, Appr 41,392.00
Meterman, Apprentice 41,392.00
Meterman, Apprentice 34,840.00
Serviceman, Customer 31,782.40
Serviceman, Customer 31,782.40
Serviceman, Customer 31,782.40
Serviceman, Customer 31,782.40
Serviceman, Customer 31,782.40
Serviceman, Customer 31,782.40
Serviceman, Customer 28,184.00
Lineman, Journey 50,419.20
Lineman, Journey 50,419.20
Lineman, Journey 50,419.20
Lineman, Journey 50,419.20
Lineman, Journey 50,419.20
Lineman, Journey 50,419.20
Lineman, Journey 50,419.20
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
Lineman, Journey 50,419.20
Lineman, Journey 50,419.20
Lineman, Journey 50,419.20
Lineman, Journey 50,419.20
Sub Sta Main Man 50,419.20
Sub Sta Main Man 50,419.20
Substation Technician 50,419.20
Xxxxxxx, Working 53,248.00
Xxxxxxx, Working 53,248.00
Xxxxxxx, Working 53,248.00
Xxxxxxx, Working 53,248.00
Xxxxxxx, Working 53,248.00
Xxxxxxx, Working 53,248.00
Xxxxxxx, Working 53,248.00
Xxxxxxx, Working 53,248.00
CAP ROCK ELECTRIC COOPERATIVE
CAP ROCK ENERGY CORPORATION
ARIZONA ELECTRIC
SCHEDULE 10.7
RETIREES AND "GRANDFATHERED EMPLOYEES"
I. RETIREES
FIRST BIRTH HIRE RETIRE SPOUSE MEDICAL DENTAL
LAST NAME NAME SEX DATE DATE DATE COVERED COVERAGE COVERAGE LIFE DEP LIFE
--------- ----------------------------------------------------------------------------------------------------
XXXXXX XXXX H M 09/29/1933 10/08/1980 07/31/1995 N Y N 10,000 0
XXXXX XXXXXX X X 03/10/1928 04/21/1969 09/15/1995 Y Y N 10,000 0
XXXXXXXXX XXXXXX H M 09/19/1933 12/03/1979 07/31/1995 Y Y N 10,000 0
XXXXXXXX XXXXXXXXX X X 04/09/1931 04/22/1963 05/01/1993 N Y N 10,000 0
XXXXXXXX XXXXXX A M 09/26/1933 01/21/1971 07/31/1995 Y Y N 10,000 0
XXXXXXX XXXXXX M 07/22/1937
XXXXX XXXXXX F 07/24/1937 03/15/1976 08/14/1998
FRIEND XXXXXXX X X 10/04/1929 08/02/1976 02/29/1992 Y Y N 0 0
XXXXX XXXXXX X X 10/26/1927 03/01/1972 10/01/1989 Y Y N 0 0
XXXXXXXXX XXXXXX X X 03/02/1926 09/05/1973 05/31/1990 Y Y N 0 0
XXXXX XXXX E F 09/09/1932 06/20/1967 07/31/1995 N Y N 10,000 0
XXXXX XXXXXX X X 06/26/1932 02/23/1970 06/30/1993 Y Y N 10,000 0
XXXXXXX XXXXXX E M 06/17/1928 08/30/1965 08/31/1990 N Y N 0 o
XXXXXX XXXXXXXX F 01/06/1924 03/01/1976 01/31/1995 N Y N 10,000 0
XXXXXXX XXXXXX R M 01/04/1939 08/01/1977 10/31/1994 Y Y N 10,000 0
XXXXXXX XXXXXXX X X 09/09/1929 07/16/1966 09/30/1993 Y Y N 10,000 0
XXXXXX XXXXXXXX N M 10/27/1934 08/16/1961 08/01/1995 Y Y N 10,000 0
XXXXX XXXX M 03/25/1927 03/01/1969 03/31/1992 Y Y N 10,000 0
XXXXXX XXXXXXX S M 12/31/1936 05/22/1967 09/18/1995 Y Y N 10,000 0
XXXXXX XXXXXX X X 04/21/1937 01/04/1982 10/02/1995 Y Y N 10,000 0
XXXXXXXXX XXXXXXXX S M 03/20/1935 05/22/1967 10/02/1995 Y Y N 10,000 0
XXXXX XXXXXXX X X 05/05/1933 09/04/1956 08/01/1995 Y Y N 10,000 0
XXXXXXXXX XXXXXXXX B M 09/19/1933 12/01/1969 10/02/1995 Y Y N 10,000 0
II. GRANDFATHERED EMPLOYEES
NAME BIRTHDATE HIRE DATE
---- --------- ---------
Xxxxxxxx, Xxxxxx X. 08/05/36 08/12/74
Xxxxxxx, Xxxxxx X. 12/03/39 05/15/61
III. ELIGIBLE UNION EMPLOYEES
NAME BIRTHDATE HIRE DATE
---- --------- ---------
Xxxxxxxx, Xxxxxx 10/22/1938 08/13/1973
Xxxxxxxxx, Xxxx 06/03/1940 03/29/1966
Xxxxxx, Xxxx 07/29/1937 05/29/1979
