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PURCHASE AND SALE AGREEMENT
FOR
FOUR CORNERS POWER PLANT
BY AND BETWEEN
SOUTHERN CALIFORNIA EDISON COMPANY,
A CALIFORNIA CORPORATION
AND
PINNACLE WEST ENERGY CORPORATION,
AN ARIZONA CORPORATION
DATED AS OF
APRIL 27, 2000
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS................................................. 1
1.1 Defined Terms............................................... 1
1.2 Index of Other Defined Terms................................ 12
1.3 Interpretation.............................................. 13
ARTICLE 2 PURCHASE AND SALE OF ASSETS................................. 13
2.1 Transfer of Assets.......................................... 13
2.2 Excluded Assets............................................. 16
2.3 Assumption of Liabilities................................... 17
2.4 Excluded Liabilities........................................ 19
2.5 Control of Litigation....................................... 20
ARTICLE 3 CLOSING..................................................... 20
3.1 Closing..................................................... 20
3.2 Purchase Price.............................................. 21
3.3 Pre-Closing and Post-Closing Adjustments.................... 21
3.4 Payment..................................................... 23
3.5 Allocation of Purchase Price................................ 23
3.6 Prorations.................................................. 23
3.7 No Assignment if Breach..................................... 24
3.8 Deliveries by Seller........................................ 25
3.9 Deliveries by Purchaser..................................... 26
3.10 Facilities Contracts........................................ 27
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLER....... 27
4.1 Organization and Existence.................................. 27
4.2 Execution, Delivery and Enforceability...................... 27
4.3 No Violation................................................ 27
4.4 Compliance with Laws........................................ 28
4.5 Permits, Licenses, Etc...................................... 28
4.6 Litigation.................................................. 28
4.7 Title....................................................... 29
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4.8 Facilities Contracts........................................ 29
4.9 Intellectual Property....................................... 29
4.10 Taxes....................................................... 29
4.11 Undisclosed Liabilities..................................... 29
4.12 Brokers..................................................... 29
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER................. 30
5.1 Organization and Existence.................................. 30
5.2 Execution, Delivery and Enforceability...................... 30
5.3 No Violation................................................ 30
5.4 ACC......................................................... 31
5.5 Compliance with Laws........................................ 31
5.6 Litigation.................................................. 31
5.7 Brokers..................................................... 31
5.8 Financing................................................... 31
5.9 Qualified for Permits....................................... 31
5.10 "AS IS" SALE................................................ 31
ARTICLE 6 COVENANTS OF EACH PARTY..................................... 32
6.1 Efforts to Close............................................ 32
6.2 Transmission................................................ 33
6.3 Updating.................................................... 33
6.4 Conduct Pending Closing..................................... 34
6.5 Consents and Approvals...................................... 35
6.6 Tax Matters................................................. 36
6.7 Risk of Loss................................................ 39
6.8 Cooperation Relating to Insurance........................... 39
6.9 Confidentiality............................................. 40
6.10 Adequate Assurance.......................................... 40
6.11 Title to Real Property and Leased Property.................. 41
6.12 Right of First Refusal...................................... 41
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6.13 Third Party Offers.......................................... 42
6.14 Post Closing - Additional Offers............................ 44
6.15 Post Closing - Further Assurances........................... 44
6.16 Post Closing - Information and Records...................... 44
6.17 Release..................................................... 45
6.18 Facilities Switchyard Capacity.............................. 46
ARTICLE 7 INDEMNIFICATION............................................. 46
7.1 Indemnification by Seller................................... 46
7.2 Indemnification by Purchaser................................ 47
7.3 Notice of Claim............................................. 47
7.4 Defense of Third Party Claims............................... 47
7.5 Cooperation................................................. 48
7.6 Mitigation and Limitation on Claims......................... 48
7.7 Exclusivity................................................. 49
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
AT THE CLOSING.............................................. 49
8.1 Compliance with Provisions.................................. 49
8.2 HSR Act..................................................... 49
8.3 Injunction.................................................. 49
8.4 Required Regulatory Approvals............................... 49
8.5 Representations and Warranties.............................. 50
8.6 Officer's Certificate....................................... 50
8.7 Title Policy/Insurance...................................... 50
8.8 Material Adverse Effect..................................... 50
8.9 Liens....................................................... 50
8.10 Seller's Required Consents.................................. 50
8.11 Legal Opinion............................................... 50
8.12 No Termination.............................................. 50
8.13 Right of First Refusal and Notice........................... 51
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8.14 Collateral Agreement........................................ 51
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
AT THE CLOSING.............................................. 51
9.1 Compliance with Provisions.................................. 51
9.2 HSR Act..................................................... 51
9.3 Injunction.................................................. 51
9.4 Approvals................................................... 51
9.5 Representations and Warranties.............................. 51
9.6 Officer's Certificate....................................... 52
9.7 Legal Opinions.............................................. 52
9.8 No Termination.............................................. 52
9.9 Right of First Refusal...................................... 52
9.10 Purchaser's Required Consents............................... 52
ARTICLE 10 TERMINATION................................................. 52
10.1 Rights To Terminate......................................... 52
10.2 Effect of Termination....................................... 53
10.3 Specific Performance; Limitation of Damages................. 53
ARTICLE 11 MISCELLANEOUS AGREEMENTS AND ACKNOWLEDGMENTS................ 54
11.1 Expenses.................................................... 54
11.2 Entire Document............................................. 54
11.3 Schedules................................................... 54
11.4 Counterparts................................................ 54
11.5 Severability................................................ 54
11.6 Assignability............................................... 54
11.7 Captions.................................................... 55
11.8 Governing Law............................................... 55
11.9 Dispute Resolution.......................................... 55
11.10 Notices..................................................... 56
11.11 Time is of the Essence...................................... 57
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11.12 No Third Party Beneficiaries................................ 57
11.13 No Joint Venture............................................ 57
11.14 Construction of Agreement................................... 57
11.15 Effect of Closing Over Known Unsatisfied Conditions or
Breached Representations, Warranties or Covenants........... 57
11.16 Conflicts................................................... 57
11.17 Waiver of Compliance........................................ 58
11.18 Survival.................................................... 58
EXHIBITS
Transmission Term Sheet........................................... A
Seller's Legal Opinion............................................ B
Purchaser's Legal Opinion......................................... C
SCHEDULES
Schedule 1.1.51(a)........."Schedule of Seller's Officers, Employees, and
Knowledgeable Persons"
Schedule 1.1.51(b)........."Schedule of Purchaser's and Operating Agent's
Officers, Employees and Authorized Agents"
Schedule 1.1.51(c)........."Schedule of Operating Agent Officers, Employees
and Authorized Agents"
Schedule 2.1(g)............"Emission Allowances"
Schedule 2.1(q)............"Schedule of Miscellaneous Assets"
Schedule 2.2(a)............"Schedule of Excluded Assets"
Schedule 2.2(i)............"Examples of Excluded Claims"
Schedule 3.2(b)............"Capital Expenditure Categories"
Schedule 3.6(a)(iv)........"Operating and Maintenance Expense Pro-Rations"
Schedule 4.8..............."Certain Facilities Contracts"
Schedule 6.6(g)(ii)........"Pollution Control Bonds"
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PURCHASE AND SALE AGREEMENT
FOR
FOUR CORNERS POWER PLANT
This PURCHASE AND SALE AGREEMENT FOR FOUR CORNERS POWER PLANT is made as of
April 27, 2000, by and between SOUTHERN CALIFORNIA EDISON COMPANY, a California
corporation ("SELLER"), and PINNACLE WEST ENERGY CORPORATION, an Arizona
corporation ("PURCHASER").
BACKGROUND
A. Seller desires to sell to Purchaser certain assets which constitute all
of Seller's participation interests in the Facilities, the Facilities Switchyard
and certain other facilities and assets associated therewith or ancillary
thereto, and Purchaser desires to purchase these assets from Seller, all on the
terms and conditions hereinafter set forth;
B. Seller and Purchaser are entering into this Agreement to evidence their
respective duties, obligations and responsibilities;
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements contained in this Agreement, Seller and
Purchaser agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. The following terms when used in this Agreement (or in
the Schedules and Exhibits to this Agreement) with initial letters capitalized
have the meanings set forth below:
1.1.1 ACC. "ACC" means the Arizona Corporation Commission or its
regulatory successor, as applicable.
1.1.2 APS. "APS" means Arizona Public Service Company, an Arizona
corporation.
1.1.3 AZ2. "AZ2" means the delivery or scheduling point designated by
the California ISO which, as of the Effective Date of this Agreement, is the
Facilities Switchyard.
1.1.4 AFFILIATE. "AFFILIATE" of a Person means any other Person that
(a) directly or indirectly controls the specified Person; (b) is controlled by
or is under direct or indirect common control with the specified Person; or (c)
is an officer, director, employee, representative or agent or subsidiary of the
Person. For the purposes of this definition, "control," when used with respect
to any specified Person, means the power to direct the management or policies of
the specified Person, directly or indirectly, whether through the ownership of
voting securities, partnership or limited liability company interests, by
contract or otherwise.
1.1.5 AGREEMENT. "AGREEMENT" means this Purchase and Sale Agreement,
together with the Schedules and Exhibits hereto.
1.1.6 ANCILLARY AGREEMENTS. "ANCILLARY AGREEMENTS" means the Deed,
Xxxx of Sale, Assignment and Assumption Agreement and any other agreement to be
executed and delivered by the Parties under this Agreement.
1.1.7 ARTICLE. "ARTICLE" means a numbered article of this Agreement.
An Article includes all the numbered sections of this Agreement that begin with
the same number as that Article.
1.1.8 ASSETS. "ASSETS" has the meaning set forth in SECTION 2.1
"Transfer of Assets."
1.1.9 ASSIGNMENT AND ASSUMPTION AGREEMENT. "ASSIGNMENT AND ASSUMPTION
AGREEMENT" means the assignment and assumption agreement between Seller and
Purchaser, to be delivered at the Closing, in such form as shall be reasonably
acceptable to Seller and Purchaser, pursuant to which Seller shall assign to
Purchaser all of Seller's right, title and interest in and to the Facilities
Contracts, certain intangible assets and certain other Assets, and Purchaser
shall accept such assignments and assume the Assumed Liabilities.
1.1.10 ASSUMED LIABILITIES. "ASSUMED LIABILITIES" has the meaning set
forth in SECTION 2.3 "Assumption of Liabilities."
1.1.11 XXXX OF SALE. "XXXX OF SALE" means the xxxx of sale from Seller
to Purchaser, to be delivered at the Closing, in such form as shall be
reasonably acceptable to Seller and Purchaser.
1.1.12 BUSINESS DAY. "BUSINESS DAY" means a day other than Saturday,
Sunday or a day on which banks are legally closed for business in the State of
Arizona.
1.1.13 CALIFORNIA ISO. "CALIFORNIA ISO" means the Independent System
Operator described in Article 3 of Chapter 2.3 of Part 1 of Division 1 of the
California Public Utilities Code.
1.1.14 CAPITAL EXPENDITURE. "CAPITAL EXPENDITURE" means any additions
to or replacements of property, plant and equipment in accordance with any of
the Facilities Contracts.
1.1.15 CLOSING. "CLOSING" has the meaning set forth in SECTION 3.1
"Closing."
1.1.16 CLOSING DATE. "CLOSING DATE" has the meaning set forth in
SECTION 3.1 "Closing."
1.1.17 CODE. "CODE" means the Internal Revenue Code of 1986, as
amended.
1.1.18 COLLATERAL AGREEMENT. "COLLATERAL AGREEMENT" means that certain
Purchase and Sale Agreement for Palo Verde Nuclear Generating Station by and
between Seller and Purchaser dated as of the Effective Date.
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1.1.19 COMMERCIALLY REASONABLE EFFORTS. "COMMERCIALLY REASONABLE
EFFORTS" means efforts by a reasonable Person in the position of a Party which
are designed to enable a Party to satisfy a condition to, or otherwise assist in
the consummation of, the transactions contemplated by, or to perform its
obligations under, this Agreement and which do not require the performing Party
to expend any funds or assume liabilities other than expenditures and
liabilities which are customary and reasonable in nature and amount for
transactions like those contemplated by this Agreement.
1.1.20 CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" has the
meaning ascribed to such term in the Confidentiality Agreement.
1.1.21 CONFIDENTIALITY AGREEMENT. "CONFIDENTIALITY AGREEMENT" means
that certain letter agreement dated February 11, 2000, between Seller and
Purchaser.
1.1.22 CPUC. "CPUC" means the California Public Utilities Commission,
or its regulatory successor, as applicable.
1.1.23 DEED. "DEED" means the special warranty deed as customarily
used in the state where the Facilities are located pursuant to which Seller will
convey all of its right, title and interest in the real property Assets sold to
Purchaser under this Agreement, subject to Permitted Encumbrances.
1.1.24 EMISSION ALLOWANCES. "EMISSION ALLOWANCES" means all
authorizations to emit specified units of pollutants or Hazardous Substances
from the Assets, which units are established by the Governmental Authority with
jurisdiction over the Assets under (a) an air pollution control and emission
reduction program designed to mitigate global warming or interstate or
intrastate transport of air pollutants, (b) a program designed to mitigate
impairment of surface waters, watersheds, or groundwater or (c) any pollution
reduction program with a similar purpose. Allowances include allowances, as
described above, regardless of whether the Governmental Authority establishing
such allowances designates such allowances by a name other than "allowances."
The amount of the Emission Allowances shall be all Emission Allowances granted
to the Facilities and in existence and not consumed as of the Effective Date or
subsequently authorized in respect of the Assets, reduced by the Emission
Allowances consumed in the operation of the Facilities between the Effective
Date and the Closing Date in the ordinary course of business.
1.1.25 ENCUMBRANCES. "ENCUMBRANCES" means any and all mortgages,
pledges, claims, liens, security interests, conditional and installment sales
agreements, easements, activity and use restrictions and limitations,
exceptions, rights-of-way, deed restrictions, defects of title, encumbrances and
charges of any kind.
1.1.26 ENVIRONMENTAL CONDITION. "ENVIRONMENTAL CONDITION" means the
presence or Release to the environment, whether at the Facilities Switchyard,
the Facilities or otherwise, of Hazardous Substances, including any migration of
Hazardous Substances through air, soil or groundwater at, to or from the
Facilities or the Facilities Switchyard or the Navajo Mine regardless of when
such presence or Release occurred or is discovered.
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1.1.27 EFFECTIVE DATE. "EFFECTIVE DATE" means the date on which this
Agreement has been executed and delivered by the Parties.
1.1.28 ENVIRONMENTAL LAWS. "ENVIRONMENTAL LAWS" means all Federal,
state, local and tribal (to the extent applicable as related to human health and
safety), civil and criminal laws, regulations, rules, ordinances, codes,
decrees, judgments, directives, or judicial or administrative orders relating to
pollution or protection of the environment, natural resources or human health
and safety, as the same may be amended or adopted, including, without
limitation, laws relating to Releases or threatened Releases of Hazardous
Substances (including, without limitation, Releases to ambient air, surface
water, groundwater, land, surface and subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, Release,
transport, disposal or handling of Hazardous Substances, including but not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 X.X.X.xx. 9601 ET SEQ.), the Hazardous Materials
Transportation Act (49 X.X.X.xx. 1801 ET SEQ.), the Resource Conservation and
Recovery Act (42 X.X.X.xx. 6901 ET seq.), the Federal Water Pollution Control
Act (33 X.X.X.xx. 1251 ET SEQ.), the Clean Air Act (42 X.X.X.xx. 7401 ET SEQ.),
the Toxic Substances Control Act (15 X.X.X.xx. 2601 ET SEQ.), the Oil Pollution
Act (33 X.X.X.xx. 2701 ET seq.), the Emergency Planning and Community
Right-to-Know Act (42 X.X.X.xx. 11001 ET SEQ.), the Oil Pollution Act (33 U.S.C.
Sec. 2701 ET SEQ.), the Safe Drinking Water Act (42 U.S.C. Secs. 300f through
300j), the Occupational Safety and Health Act (29 U.S.C. Sec. 651 ET SEQ.), the
Surface Mining Control and Reclamation Act of 1977 (30 U.S.C. Sec. 1201 ET
SEQ.), any similar laws of any Governmental Authority having jurisdiction over
the site at which the Assets are located or otherwise applicable to the Assets.
1.1.29 EXCLUDED ASSETS. "EXCLUDED ASSETS" has the meaning set forth in
SECTION 2.2 "Excluded Assets."
1.1.30 EXCLUDED LIABILITIES. "EXCLUDED LIABILITIES" has the meaning
set forth in SECTION 2.4 "Excluded Liabilities."
1.1.31 EXHIBITS. "EXHIBITS" means the exhibits to this Agreement.
1.1.32 FACILITIES. "FACILITIES" means the fossil fuel generating
facility known as the Four Corners Power Plant and located in Fruitland, New
Mexico.
1.1.33 FACILITIES CO-TENANCY AGREEMENT. "FACILITIES CO-TENANCY
AGREEMENT" means that certain Four Corners Project Co-Tenancy Agreement entered
into as of July 19, 1966, by and among the Facilities Owners, as the same may be
amended to the date of the Closing.
1.1.34 FACILITIES CONTRACTS. "FACILITIES CONTRACTS" has the meaning
set forth in SECTION 2.1(H).
1.1.35 FACILITIES FUEL AGREEMENT. "FACILITIES FUEL AGREEMENT" means
that certain Four Corners Fuel Agreement No. 2 dated as of September 1, 1966.
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1.1.36 FACILITIES INSURANCE POLICIES. "FACILITIES INSURANCE POLICIES"
means all insurance policies carried by or for the benefit of Seller with
respect to the ownership, operation or maintenance of the Facilities or the
Facilities Switchyard, including all liability, property damage, self insurance
arrangements, retrospective assessments and business interruption policies in
respect thereof.
1.1.37 FACILITIES OPERATING AGREEMENT. "FACILITIES OPERATING
AGREEMENT" means that certain Four Corners Project Operating Agreement entered
into as of May 15, 1969, by and between the Facilities Owners, as the same may
be amended to the date of the Closing.
1.1.38 FACILITIES OWNER. "FACILITIES OWNER" means each Person who, as
of the relevant time, is a "Participant" under the Facilities Co-Tenancy
Agreement, which, as of the date of this Agreement, means APS, El Paso Electric
Company, Public Service Company of New Mexico, Salt River Project Agricultural
Improvement District, Seller and Tucson Electric Power Company, in each case in
such Person's capacity as a Participant.
1.1.39 FACILITIES SWITCHYARD. "FACILITIES SWITCHYARD" means the 500 kv
and 345 kv switchyards located at and adjacent to the Facilities.
1.1.40 FERC. "FERC" means the Federal Energy Regulatory Commission as
established by the Department of Energy Organization Act of 1977, 42
U.S.C.ss.7171, as amended, or its regulatory successor, as applicable.
1.1.41 FIRPTA AFFIDAVIT. "FIRPTA AFFIDAVIT" means the Foreign
Investment in Real Property Tax Act Certificate and Affidavit of Seller, to be
delivered at the Closing.
1.1.42 FIRM TRANSMISSION RIGHTS. "FIRM TRANSMISSION RIGHTS" has the
meaning set forth in the California ISO FERC Electric Tariff Original Volume
Nos. 1 through 11, as approved by FERC as of October 13, 1999.
1.1.43 GOVERNMENTAL AUTHORITY. "GOVERNMENTAL AUTHORITY" means any
federal, state, local or other government; any governmental, regulatory or
administrative agency, commission, body or other authority exercising or
entitled to exercise any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power; any court or governmental
tribunal; and any Tribal Authority; but does not include the Purchaser, the
Seller, any Affiliate thereof, or any of their respective successors in interest
or any owner or operator of the Assets (if otherwise a Governmental Authority).
1.1.44 GUARANTOR. "GUARANTOR" means Pinnacle West Capital Corporation.
1.1.45 GUARANTY. "GUARANTY" means that certain Guaranty executed by
Guarantor and delivered by Purchaser to Seller on or before the Effective Date.
1.1.46 HAZARDOUS SUBSTANCES. "HAZARDOUS SUBSTANCES" means any
chemical, material or substance that is listed or regulated under applicable
Environmental Laws as a "hazardous" or "toxic" substance or waste, or as a
"contaminant," or is otherwise listed or
5
regulated under applicable Environmental Laws because it poses a hazard to human
health or the environment.
1.1.47 HSR ACT. "HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended from time to time.
1.1.48 INCOME TAX. "INCOME TAX" means any Tax imposed by any
Governmental Authority (a) based upon, measured by or calculated with respect to
gross or net income, profits or receipts (including municipal gross receipt
Taxes, capital gains Taxes and minimum Taxes) or (b) based upon, measured by or
calculated with respect to multiple bases (including corporate franchise Taxes)
if one or more of such bases is described in clause (a), in each case together
with any interest, penalties or additions attributable to such Tax.
1.1.49 INDEPENDENT ACCOUNTING FIRM. "INDEPENDENT ACCOUNTING FIRM"
means such nationally recognized, independent accounting firm as is mutually
appointed by Seller and Purchaser for purposes of this Agreement.
1.1.50 INITIAL PURCHASE PRICE. "INITIAL PURCHASE PRICE" has the
meaning set forth in SECTION 3.2, "Purchase Price."
1.1.51 KNOWLEDGE. The term "KNOWLEDGE" or similar phrases in this
Agreement means: (i) in the case of Seller, the extent of the actual and current
knowledge of the Seller's officers, employees, and knowledgeable persons listed
in SCHEDULE 1.1.51(a) "Schedule of Seller's Officers, Employees, and
Knowledgeable Persons" at the date of this Agreement (or, with respect to the
certificate delivered pursuant to SECTION 8.6 "Officer's Certificate," the date
of delivery of the certificate) without any implication of verification or
investigation concerning such knowledge; (ii) in the case of Purchaser, the
extent of the actual and current knowledge of the Purchaser's and Operating
Agent's officers, employees and authorized agents listed in SCHEDULE 1.1.51(b)
"Schedule of Purchaser's and Operating Agent's Officers, Employees and
Authorized Agents" at the date of this Agreement (or, with respect to the
certificate delivered pursuant to SECTION 9.6 "Officer's Certificate," the date
of delivery of the certificate) without any implication of verification or
investigation concerning such knowledge, as well as the Knowledge of the
Operating Agent; and (iii) in the case of the Operating Agent, the extent of the
actual and current knowledge of the Operating Agent's officers, employees and
authorized agents listed in SCHEDULE 1.1.51(c) "Schedule of Operating Agent
Officers, Employees and Authorized Agents" at the date of this Agreement or at
the Closing Date, as well as the Persons who, as of the date of this Agreement
or as of the Closing, serve as the plant manager of the Facilities and the
Person or Persons to whom the plant manager reports, without any implication of
verification or investigation concerning such knowledge.
1.1.52 LAWS. "LAWS" means all statutes, rules, regulations,
ordinances, orders and codes of federal, state and local governmental and
regulatory authorities.
1.1.53 MOENKOPI SWITCHYARD. "MOENKOPI SWITCHYARD" means the Moenkopi
Switching Station described in the Transmission Term Sheet.
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1.1.54 MATERIAL ADVERSE EFFECT. "MATERIAL ADVERSE EFFECT" means (x)
any event, circumstance or condition materially impairing a Party's authority,
right, or ability to consummate the transactions contemplated by this Agreement
or the Ancillary Agreements, or (y) any change (or changes taken together) in,
or effect on, the Assets that is materially adverse to the operations or
physical condition of the Facilities and the Facilities Switchyard, taken as a
whole, which exist as of the Closing, including an unscheduled shutdown that is
materially adverse to the operations or physical condition of the Assets
following the Closing, but excluding (a) any change (or changes taken together)
generally affecting the international, national, regional or local electric
industry as a whole and not affecting the Assets in any manner or degree
materially different than other facilities like the Facilities, (b) any change
(or changes) resulting from the international, national, regional or local
markets for fuel used at the Facilities, (c) any change (or changes taken
together) in the North American, national, regional or local transmission
system, (d) any change (or changes taken together) to the extent constituting or
involving an Excluded Asset or Excluded Liability, or (e) any change which is
cured (including by the payment of money) before the earlier of the Closing or
the termination of the Agreement under SECTION 10.1.
1.1.55 NAVAJO MINE. "NAVAJO MINE" means the coal mine located on the
Navajo Nation property that is operated by Broken Hill Proprietary ("BHP"),
pursuant to which the Facilities are supplied coal under the Facilities Fuel
Agreement.
1.1.56 NOTICE OF CLAIM. "NOTICE OF CLAIM" has the meaning set forth in
SECTION 7.3 "Notice of Claim."
1.1.57 OPERATING AGENT. "OPERATING AGENT" means APS, as operating
agent under the Facilities Co-Tenancy Agreement and the Facilities Operating
Agreeement, or its successor in interest.
1.1.58 PARTY. "PARTY" means either Seller or Purchaser, as the context
requires; "Parties" means, collectively, Seller and Purchaser.
1.1.59 PERMITTED ENCUMBRANCES. "PERMITTED ENCUMBRANCES" means (a)
liens for Property Taxes and other governmental charges and assessments which
are not yet due and payable, (b) all exceptions set forth in the Preliminary
Title Report to the extent deemed approved by Purchaser under SECTION 6.11, (c)
during the period prior to the Closing, the lien of Seller's Mortgage; (d)
liens, encumbrances or title imperfections with respect to the Assets created by
or resulting from the acts or omissions of Purchaser or APS, (e) liens, charges,
claims, pledges, security interests, equities and encumbrances arising under the
Facilities Contracts, or which will be and are discharged or released either
prior to, or simultaneously with, the Closing, (f) the Assumed Liabilities, and
(g) liens, charges, claims, pledges, security interests, equities and
encumbrances that do not apply only and exclusively to the interest of Seller
but that also constitute liens, charges, claims, pledges, security interests,
equities or encumbrances upon the interests of the other Facilities Owners in
common and/or the Operating Agent, as agent for any of the Facilities Owners,
and that individually, or in the aggregate, do not constitute a Material Adverse
Effect with respect to the Facilities or the Facilities Switchyard other than
Material Adverse Effects of which the Operating Agent has Knowledge.
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1.1.60 PERSON. "PERSON" means an individual, partnership, joint
venture, corporation, limited liability company, trust, association or
unincorporated organization, or any Governmental Authority.
1.1.61 PRELIMINARY TITLE REPORT. "PRELIMINARY TITLE REPORT" has the
meaning set forth in SECTION 6.11 "Title to Real Property and Leased Property."
1.1.62 PROPERTY TAX. "Property Tax" means any Tax resulting from and
relating to the assessment of real or personal property or a possessory interest
in real or personal property by any Governmental Authority.
1.1.63 PURCHASE PRICE. "PURCHASE PRICE" has the meaning set forth in
SECTION 3.2, "Purchase Price."
1.1.64 PURCHASER. "PURCHASER" has the meaning set forth in the
introductory paragraph of this Agreement.
1.1.65 PURCHASER'S REQUIRED CONSENTS. "PURCHASER'S REQUIRED CONSENTS"
means the consent of (i) any Person other than a Governmental Authority or a
Person referred to in clause (ii) necessary for Purchaser's consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements, and
(ii) any Person required by any of the Facilities Contracts for Purchaser's
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements and for the continued operation of the Facilities and the
Facilities Switchyard in the ordinary course of business consistent with past
practice.
1.1.66 PURCHASER'S REQUIRED REGULATORY APPROVALS. "PURCHASER'S
REQUIRED REGULATORY APPROVALS" means approval of the purchase and sale
contemplated hereby by (i) the CPUC (including receipt of the CPUC determination
referenced in SECTION 6.5(b)(i)), the FERC and any other Governmental Authority
with general regulatory authority over Purchaser whose approval is required for
the transactions contemplated by this Agreement and the Ancillary Agreements,
and (ii) any other Governmental Authority with regulatory authority over the
business and assets represented by the Assets and whose approval is required for
Purchaser's consummation of the transactions contemplated by this Agreement and
the Ancillary Agreements and for the continued operation of the Facilities and
the Facilities Switchyard in the ordinary course of business consistent with
past practice.
1.1.67 QUALIFIED OFFEROR. A "QUALIFIED OFFEROR" is a Person that is
not an Affiliate of the Seller that: (a) certifies, through a responsible and
duly authorized elected executive officer, that such Person (i) is engaged,
together with its Affiliates, in the business of generating electrical power,
(ii) has a Net Worth (as defined in the Guaranty) equal to at least One Billion
Dollars ($1,000,000,000) or provides a guaranty substantially equivalent to the
Guaranty with respect to its terms and credit quality, (iii) is not aware of any
conditions which might preclude such Person's qualification to obtain the
necessary licenses and consents required to consummate a Superior Offer, and
(iv) can consummate the transaction without regulatory approvals other than
those which would be required by any buyer of the assets or which are otherwise
identified in the certification; AND (b) submits a Superior Offer, or
non-binding indication of interest in making a Superior Offer, to Seller,
together with the certification in (a)
8
above, within the Initial Period; AND (c) agrees to (i) execute a customary
confidentiality agreement in favor of Seller and the Facilities Owners, (ii) not
engage in discussions concerning a Superior Offer or potential Superior Offer
with any other Qualified Offeror except as permitted by Seller in its discretion
and, in any event, without full disclosure to Seller and (iii) engage in
discussions with Seller on a non-exclusive basis.
1.1.68 RELEASE. "RELEASE" means any release, spill, leak, discharge,
disposal of, pumping, pouring, emitting, emptying, injecting, leaching, dumping,
depositing, dispersing, allowing to escape or migrate into or through the
environment (including ambient air, surface water, ground water, land surface
and subsurface strata or within any building, structure, facility or fixture) of
any Hazardous Substance, including the abandonment or discarding of Hazardous
Substances in barrels, drums, or other containers.
1.1.69 REMEDIATION. "REMEDIATION" means any action of any kind to
address an Environmental Condition or Release or threatened Release or the
presence of Hazardous Substances on or in the soil or groundwater or both,
including the following: (i) monitoring, investigation, cleanup, containment,
remediation, removal, mitigation, response or restoration work; (ii) obtaining
any permits, consents, approvals or authorizations of any Governmental Authority
necessary to conduct any such work; (iii) preparing and implementing any plans
or studies for such work; (iv) obtaining a written notice from a Governmental
Authority with jurisdiction under applicable Environmental Laws that no material
additional work is required by such Governmental Authority; (v) any response to,
or preparation for, any inquiry, order, hearing or other proceeding by or before
any Governmental Authority with respect to any such Environmental Condition,
Release or threatened Release or presence of Hazardous Substances, and (vi) any
other activities reasonably determined by the Operating Agent of the Facilities
or the Facilities Switchyard, as applicable, to be necessary or appropriate or
required under Environmental Laws to address an Environmental Condition, the
presence of or Release of Hazardous Substances in the soil or groundwater, or
both, at the Facilities, the Facilities Switchyard, the Navajo Mine or any other
off-site location.
1.1.70 SP15. "SP15" means the delivery area so designated by the
California ISO as SP15 as of the Effective Date of this Agreement.
1.1.71 SCHEDULES. "SCHEDULES" means the schedules to this Agreement.
1.1.72 SECTION. "SECTION" means a numbered section of this Agreement
included within the Article that begins with the same number as that section.
1.1.73 SELLER. "SELLER" has the meaning set forth in the introductory
paragraph of this Agreement.
1.1.74 SELLER'S MORTGAGE. "SELLER'S MORTGAGE" means the Seller's First
Mortgage Bond Trust Indenture, dated as of October 1, 1923, as amended.
1.1.75 SELLER'S REQUIRED REGULATORY APPROVALS. "SELLER'S REQUIRED
REGULATORY APPROVALS" means approval of the purchase and sale contemplated
hereby by (i) the CPUC (including receipt of the CPUC determination referenced
in SECTION 6.5(b)(i)), the FERC,
9
the California ISO, and any other Governmental Authority with general regulatory
authority over Seller whose approval is required for the transactions
contemplated by this Agreement and the Ancillary Agreements, and (ii) any other
Governmental Authority with regulatory authority over the business and assets
represented by the Assets and whose approval is required for Seller's
consummation of the transaction contemplated by this Agreement and the Ancillary
Agreements.
1.1.76 SELLER'S REQUIRED CONSENTS. "SELLER'S REQUIRED CONSENTS" means
(i) the consent of the trustee under the Seller's Mortgage if required under the
Seller's Mortgage, and any Person other than a Governmental Authority or a
Person referred to in clause (ii) necessary for Seller's consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements, and
(ii) the consent of any Person required by any of the Facilities Contracts for
Seller's consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements.
1.1.77 SUPERIOR OFFER. SUPERIOR OFFER. "SUPERIOR OFFER" means a
written bona fide offer that satisfies all of the following criteria:
(i) the offer is made by a Qualified Offeror;
(ii) the offer must be for either of the following:
(1) substantially all of the Assets and Assumed Liabilities
subject to this Agreement; or
(2) substantially all of the assets and liabilities subject
to the Collateral Agreement and this Agreement.
(iii) the offer has a cash purchase price, after application of
all cash adjustments and cash reimbursements, that exceeds the sum of the
following:
(1) the cash Purchase Price, after application of all cash
adjustments, and cash reimbursements in this Agreement or in this Agreement and
the Collateral Agreement, as the case may be; plus
(2) the Termination Fee; plus
(3) up to One Million Dollars ($1,000,000) of Seller's
incremental transaction costs arising from providing due diligence information
and opportunities to Qualified Offerors ("INCREMENTAL COSTS").
(iv) the outside closing date for the transaction subject to the
offer shall be (a) the date upon which all regulatory approvals of Seller
described in SECTION 1.1.75 "Seller's Required Regulatory Approvals" are
received for the transactions contained in the offer and all first refusal and
notice periods in favor of other Facilities Owners have expired with respect to
such offer, or (b) December 31, 2001 if later;
(v) taking into account the higher price under SECTION
1.1.77(iii) and the other terms of the offer, the Seller concludes in good faith
that the economic benefit
10
of the Superior Offer exceeds the economic benefit of this Agreement or this
Agreement and the Collateral Agreement, as the case may be (Seller will be
deemed to have met the requirements of this SECTION 1.1.77(v) if Seller receives
a written opinion, subject to customary qualifications, from an investment bank
with a national reputation to that effect or to the effect that acceptance of
the offer is fair to Seller from a financial point of view notwithstanding the
existence of this Agreement and the Collateral Agreement); and
(vi) the offer is not subject to a financing contingency or other
material contingency that is not included in this Agreement or in this Agreement
and the Collateral Agreement, as the case may be.
1.1.78 TAX. "TAX" means any federal, Tribal Authority, state, local or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property (including assessments, fees or other charges based on the use or
ownership of real property), personal property, transactional, use, transfer,
registration, value added, alternative or add-on minimum, estimated tax, or
other tax of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not, including, without limitation, any item for
which liability arises as a transferee or successor-in-interest.
1.1.79 TAX RETURN. "TAX RETURN" means any return, report, information
return, declaration, claim for refund, or other document, together with all
amendments and supplements thereto (including all related or supporting
information), required to be supplied to any Governmental Authority responsible
for the administration of Laws governing Taxes.
1.1.80 TERMINATION FEE. "TERMINATION FEE" has the meaning set forth in
SECTION 6.13(b)(ii)."
1.1.81 THIRD PARTY CLAIM. "THIRD PARTY CLAIM" means a claim by a
Person that is not a member of the Seller Group or the Purchaser Group,
including any claim for the costs of conducting Remediation or seeking an order
or demanding that a Person undertake Remediation.
1.1.82 TRANSFERABLE PERMITS. "TRANSFERABLE PERMITS" means all those
permits relating to the Facilities or the Facilities Switchyard (and all
applications pertaining thereto) which are transferable under applicable law
from Seller to Purchaser with or without a filing with, notice to, or consent or
approval of any Governmental Authority.
1.1.83 TRANSFER TAX. "TRANSFER TAX" means any sales Tax, transaction
privilege Tax, transaction Tax, conveyance fee, use Tax, stamp Tax, stock
transfer Tax or other similar Tax, including any related penalties, interest and
additions thereto.
1.1.84 TRANSMISSION TERM SHEET "TRANSMISSION TERM SHEET" means the
Transmission Term Sheet attached as EXHIBIT A.
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1.1.85 TRIBAL AUTHORITY. "TRIBAL AUTHORITY" means any sovereign nation
recognized by the United States government, Indian tribe, or any governmental
subdivision, agency, department, or instrumentality thereof with the authority
to administer and collect Taxes, administer and enforce tribal laws and
administer and enforce tribal agency processes.
1.2 INDEX OF OTHER DEFINED TERMS.
DEFINED TERM SECTION
------------ -------
Allocation 3.5
Applicable Tax Law 3.5
BHP 1.1.55
Closing Adjustment 3.3(a)
Commercial Arbitration Rules 11.9(c)
DOI 6.5(c)
Estimated Adjustment 3.3.1
Estimated Closing Statement 3.3.1
Excluded Claims 2.2(i)
Facilities Permits 2.1(i)
Final Allocation 3.5
Final Pre-Closing Allocation 3.5
Fuel Inventory 2.1(e)
Four Corners Closing 6.13(b)(iii)
Indemnifiable Claim 7.6
Indemnitee 7.3
Indemnitor 7.3
Initial Period 6.13
Inventory 2.1(f)
Inventory Threshold 3.2(c)
Inventory Value 3.2(c)
Leased Property 2.1(b)
Notice of Claim 7.3
Owned Real Property 2.1(a)
Pollution Control Bonds 6.6(g)
Post-Closing Adjustment 3.3(b)
Post-Closing Statement 3.3.2
Preliminary Title Report 6.11
Proposed Post-Closing Adjustment 3.3(b)
Purchaser Claims 7.1(a)
Purchaser Group 7.1(a)
Receiving Party 6.5(e)
Seller Claims 7.2(a)
Seller Group 7.2(a)
Seller Permits 4.5
Title Insurer 8.7
Title Policies 8.7
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1.3 INTERPRETATION. In this Agreement, unless a clear contrary intention
appears:
(a) the singular number includes the plural number and vice versa;
(b) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity;
(c) reference to any gender includes each other gender;
(d) reference to any agreement (including this Agreement), document or
instrument means such agreement, document or instrument as amended or modified
and in effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof;
(e) reference to any Article, Section, Schedule or Exhibit means such
Article, Section, Schedule or Exhibit to this Agreement, and references in any
Article, Section, Schedule, Exhibit or definition to any clause means such
clause of such Article, Section, Schedule, Exhibit or definition;
(f) "hereunder," "hereof," "hereto" and words of similar import are
references to this Agreement as a whole and not to any particular Section or
other provision hereof or thereof;
(g) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term;
(h) relative to the determination of any period of time, "from" means
"from and including," "to" means "to but excluding" and "through" means "through
and including;"
(i) reference to any law (including statutes and ordinances) means
such law as amended, modified, codified or reenacted, in whole or in part, and
in effect from time to time, including rules and regulations promulgated
thereunder; and
(j) any agreement, instrument, insurance policy, statute, regulation,
rule or order defined or referred to herein or in any agreement or instrument
that is referred to herein means such agreement, instrument, insurance policy,
statute, regulation, rule or order as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes, regulations, rules or orders) by
succession of comparable successor statutes, regulations, rules or orders and
references to all attachments thereto and instruments incorporated therein.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 TRANSFER OF ASSETS. Upon the terms and subject to the satisfaction of
the conditions contained in this Agreement, at the Closing, Seller will sell,
convey, assign, transfer and deliver to Purchaser and Purchaser will purchase
and acquire from Seller, all of Seller's interest in the Facilities and the
Facilities Switchyard, including Seller's undivided interest
13
therein as a tenant in common without the right of partition, including Seller's
interest in the following, but excluding all Excluded Assets (collectively, the
"ASSETS"):
(a) REAL PROPERTY RIGHTS. The parcels of real property owned by
Seller, or by the Operating Agent on behalf of the Seller, as one of the
Facilities Owners, relating to the Facilities or the Facilities Switchyard,
together with all buildings, facilities and other improvements thereon and all
appurtenances thereto, including all construction work in process (the "OWNED
REAL PROPERTY");
(b) LEASED REAL PROPERTY. The real property leasehold estates and the
related lease or sublease agreements, if any, related to the Facilities or the
Facilities Switchyard, together with buildings, fixtures and real property
improvements thereon and thereto, including all construction work in process
(the "LEASED PROPERTY");
(c) RIGHTS-OF-WAY/EASEMENTS AND WATER RIGHTS. All rights-of-way,
easements and privileges (including all water rights), appurtenant to the Owned
Real Property and the Leased Property;
(d) EQUIPMENT. All machinery, mobile or otherwise, equipment
(including computer hardware and software and communications equipment),
vehicles, tools, fixtures, furniture and furnishings, and other tangible
personal property related to or used, or useful, in the operation of the
Facilities or the Facilities Switchyard that (i) are not Inventory, (ii) are
licensed, owned or leased by Seller, or the Operating Agent, on behalf of the
Facilities Owners or on behalf of the Seller, as one of the Facilities Owners,
as of the Closing, and (iii) are used primarily in the operation of the
Facilities or the Facilities Switchyard, and in the ordinary course of business
are typically located at the Facilities, the Facilities Switchyard, the Navajo
Mine or other locations or facilities which are owned, operated, maintained or
under the control of the Operating Agent or one of its Affiliates.
(e) FUEL INVENTORY. All coal under contract or in inventory relating
to the operation of the Facilities located at or in transit to the Facilities
("FUEL INVENTORY");
(f) INVENTORY. The following items intended to be consumed at the
Facilities or the Facilities Switchyard in the ordinary course of business:
inventories of spare parts; maintenance, shop and office supplies; and other
similar items of tangible personal property in existence as of the Closing,
wherever located, excluding Fuel Inventory (the "INVENTORY");
(g) EMISSION ALLOWANCES. All Emission Allowances, including those
specified on SCHEDULE 2.1(G);
(h) FACILITIES CONTRACTS. Subject to the receipt of necessary consents
and approvals, the contracts, agreements, arrangements, licenses and leases of
any nature, including, but not limited to, the Facilities Fuel Agreement, (i) to
which Seller, in its capacity as a Facilities Owner, is a party, or (ii) to
which the Operating Agent, on behalf of the Facilities Owners or on behalf of
the Seller, as one of the Facilities Owners, is a party, and by or to which
Seller, the Facilities, or the Facilities Switchyard are bound or subject, in
each case relating to the
14
ownership, lease, maintenance or operation of the Facilities or the Facilities
Switchyard (the "FACILITIES CONTRACTS");
(i) PERMITS, LICENSES, ETC. Subject to the receipt of necessary
consents and approvals, the Transferable Permits and any other permits,
licenses, approvals, registrations, franchises, certificates, other
authorizations and consents of Governmental Authorities relating to the
ownership, lease, maintenance or operation of the Facilities or the Facilities
Switchyard that, in each case, as of the Closing are in favor of the Facilities
Owners, or the Operating Agent, as agent for the Facilities Owners, except for
and to the extent that such licenses, permits, approvals, registrations,
franchises, certificates, other authorizations and consents relate to Excluded
Assets (the "FACILITIES PERMITS");
(j) DOCUMENTS. The non-privileged books, records, documents, drawings,
reports, operating data, operating safety and maintenance manuals, inspection
reports, engineering design plans, blueprints, specifications and procedures and
similar items, (i) located at and relating to the Facilities or the Facilities
Switchyard or (ii) otherwise relating to the Facilities or the Facilities
Switchyard, under Seller's control, specifically identified, and reasonably
requested by Purchaser; provided, however, that Seller will transfer to
Purchaser the non-privileged portions of the foregoing privileged documents and,
to the extent practicable, without being required to risk waiver of any such
privilege, will summarize for Purchaser's benefit those portions of the
foregoing documents that are privileged;
(k) THIRD PARTY WARRANTIES. All unexpired, transferable warranties and
guarantees from third parties with respect to the Facilities or the Facilities
Switchyard;
(l) INTELLECTUAL PROPERTY. All intangible assets of an intellectual
property nature, including all patents and patent rights, trademarks and
trademark rights, inventions, trade names and copyrights relating to the
Facilities or the Facilities Switchyard, including the name of the Facilities
and the Facilities Switchyard and all pending applications therefor, together
with any trade secrets relating to the Facilities or the Facilities Switchyard,
in each case that are owned in common by the Facilities Owners or by the
Operating Agent as agent for the Facilities Owners;
(m) CLAIMS AND CAUSES OF ACTION. All rights in, to and under (i) any
claims or causes of action against any third parties (including indemnification,
contribution and insurance claims) relating to any Assets or the Assumed
Liabilities, whether occurring prior to, on or after the Closing, if any,
including any claims for refunds, prepayments, offsets, recoupment, insurance
proceeds, condemnation awards, judgments and the like, whether received as
payment or credit against future liabilities, relating to the Facilities or the
Facilities Switchyard and (ii) any actual or potential claim or cause of action
as a Facilities Owner against the Operating Agent, whether known or unknown,
contingent or accrued, arising prior to and in existence at the Closing;
(n) PREPAYMENT. Advance payments, prepayments, prepaid expenses,
deposits and the like (i) made by the Seller or the Operating Agent on Seller's
behalf in the ordinary course of business prior to the Closing specifically with
respect to the Facilities or the
15
Facilities Switchyard, (ii) which exist as of the Closing and (iii) with respect
to which Purchaser will receive the benefit after the Closing;
(o) INSURANCE PROCEEDS. The right to any proceeds from insurance
policies to the extent covering the Assumed Liabilities;
(p) TRANSMISSION. Any Firm Transmission Rights acquired by the Seller
in any auction held by the California ISO prior to the Closing, with respect to
the transmission path between the points commonly referred to as AZ2 to SP15, it
being understood and agreed that such Firm Transmission Rights must be
sufficient to meet the minimum output requirement specified under the Facilities
Co-Tenancy Agreement and the Facilities Operating Agreement; and
(q) MISCELLANEOUS. Any miscellaneous assets necessary, useful or used
in or ancillary to operating the Facilities or the Facilities Switchyard and
primarily utilized in connection therewith but not otherwise enumerated above,
including the assets specified on SCHEDULE 2.1(Q), except for Excluded Assets,
which in the ordinary course of business are typically located at the
Facilities, the Facilities Switchyard, the Navajo Mine or other locations or
facilities which are owned, operated, maintained or under the control of the
Operating Agent or one of its Affiliates.
2.2 EXCLUDED ASSETS. Nothing in this Agreement will constitute or be
construed as conferring on Purchaser, and Purchaser is not acquiring, any right,
title or interest in or to the following (the "EXCLUDED ASSETS"), except to the
extent Seller owns an interest in such assets as a tenant in common with the
other Facilities Owners, in which event such interests in such assets are
Assets:
(a) the assets listed or described on SCHEDULE 2.2(a) "Schedule of
Excluded Assets," which are associated with the Assets but are specifically
excluded from the sale;
(b) certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities;
(c) all cash, cash equivalents, bank deposits, accounts and notes
receivable (trade or otherwise), except for such assets on deposit with, or
under the control of, the Operating Agent;
(d) any and all data and information pertaining to customers of Seller
or its Affiliates;
(e) rights in, to and under all agreements and arrangements of any
nature, which are not assigned to the Purchaser under the terms of this
Agreement;
(f) all trade accounts receivable and all notes, bonds and other
evidences of indebtedness of and rights to receive payments arising out of sales
of energy from the Facilities
16
prior to the Closing and the security arrangements, if any, related thereto,
including any rights with respect to any third party collection procedures or
any other actions or proceedings which have been commenced in connection
therewith;
(g) rights arising under this Agreement or any instrument or document
executed and delivered pursuant to the terms hereof;
(h) any and all books and records not described in SECTION 2.1(J);
(i) claims, choses in action, rights of recovery, rights of set-off,
rights to refunds and similar rights, including but not limited to rights under
any insurance policy or refunds of Taxes, relating to or arising out of the
period prior to Closing (i) that do not arise from events, circumstances,
occurrences or conditions that create a liability for which Purchaser is
responsible hereunder as an Assumed Liability, and (ii) in respect of which
Seller has incurred out-of-pocket costs or losses on the basis of which such
claim, choses in action, rights of recovery, rights of set-off, rights to
refunds or similar rights may be asserted but only to the extent of such costs
and losses incurred prior to Closing ("EXCLUDED CLAIMS") (see SCHEDULE 2.2(i)
for examples of Excluded Claims);
(j) subject to the proviso of SECTION 2.1(J), all privileged or
proprietary materials, documents, information, media, methods and processes not
owned by the Facilities Owners in common or by the Operating Agent as agent for
the Facilities Owners and any and all rights to use the same, including, without
limitation, intangible assets of an intellectual property nature such as
trademarks, service marks and trade names (whether or not registered), computer
software that is proprietary to Seller, or the use of which under the pertinent
license therefor is limited to operation by Seller or its Affiliates or on
equipment owned by Seller or its Affiliates;
(k) the right to receive mail and other communications relating to any
of the Excluded Assets or Excluded Liabilities, all of which mail and other
communications shall be promptly forwarded by Purchaser to Seller; and
(l) properties of Seller that are not used primarily in the ownership
or operation of the Assets.
At any time or from time to time, up to ninety (90) days following the Closing,
any and all of the Excluded Assets may be removed from the Facilities and the
Facilities Switchyard by the Seller (at no expense to the Purchaser, but without
charge by the Purchaser for temporary storage), provided that Seller shall do so
in a manner that does not unduly or unnecessarily disrupt normal business
activities at the Facilities and the Facilities Switchyard, and provided further
that Excluded Assets may be retained at the Facilities and the Facilities
Switchyard to the extent permitted by easements, licenses, agreements or similar
arrangements in favor of Seller.
2.3 ASSUMPTION OF LIABILITIES. Upon the Closing, Purchaser will assume all
of Seller's obligations and liabilities of any kind or nature whatsoever related
to, arising from or associated with any of the following to the extent they
relate to the Assets (the "ASSUMED LIABILITIES"), except for Excluded
Liabilities:
17
(a) Except for the payment obligations pro-rated to Seller under
SECTION 3.6, all liabilities and obligations under all agreements, contracts,
undertakings, and licenses assigned to Purchaser under this Agreement, including
the Facilities Contracts, and the Transferable Permits in accordance with the
terms thereof, except in each case to the extent such liabilities and
obligations, but for a breach or default by Seller or a related waiver or
extension given by Seller, would have been paid, performed or otherwise
discharged on or prior to the Closing Date or to the extent the same arise out
of any such breach or default or related waiver or extension given by Seller;
provided that, for purposes of the foregoing, the phrase "breach or default by
Seller or a related waiver or extension given by Seller" shall not include any
such breach, default, waiver or extension that is or has been also engaged in or
agreed to by the Facilities Owners in common or by the Operating Agent acting on
behalf of any Facilities Owner, including the Seller;
(b) All liabilities or obligations of Seller under or related to
Environmental Laws, or relating to any claim in respect of Environmental
Conditions or Hazardous Substances arising under Laws, including Environmental
Laws, or the common law, whether such liability or obligation is known or
unknown, contingent or accrued, to the extent relating to the Facilities, the
Facilities Switchyard or the Navajo Mine, including (i) any violation or alleged
violation of Environmental Laws with respect to the ownership, lease,
maintenance or operation of any of the Assets, including any fines or penalties
that arise in connection with the ownership, lease, maintenance or operation of
the Assets prior to, on or after the Closing Date, and the costs associated with
correcting any such violations; (ii) loss of life, injury to Persons or property
or damage to natural resources (whether or not such loss, injury or damage arose
or was made manifest before the Closing Date or arises or becomes manifest on or
after the Closing Date), in each case, caused (or allegedly caused) by any
Environmental Condition or the presence or Release of Hazardous Substances at,
on, in, under, or migrating from the Assets prior to, on or after the Closing
Date, including any Environmental Condition or Hazardous Substances contained in
building materials at or adjacent to the Assets or in the soil, surface water,
sediments, groundwater, landfill cells, or in other environmental media at or
near the Assets; and (iii) the investigation or Remediation (whether or not such
investigation or Remediation commenced before the Closing Date or commences on
or after the Closing Date) of any Environmental Condition or Hazardous
Substances that are present or have been Released prior to, on or after the
Closing Date at, on, in, under or migrating from the Assets or in the soil,
surface water, sediments, groundwater, landfill cells or in other environmental
media at or adjacent to the Assets;
(c) All liabilities and obligations of Seller in respect of
dismantling the Facilities and the Facilities Switchyard and restoration of such
sites;
(d) Any and all liabilities and obligations respecting any changes or
improvements needed to the Assets, if any, for them to be in material compliance
with respect to safety, building, fire, land use, access (including, without
limitations, the Americans With Disabilities Act) or similar Laws respecting the
physical condition of the Assets;
(e) Without limiting the representations and warranties of Seller
contained herein or Purchaser's rights for a breach thereof, any and all
liabilities, claims, fines, penalties and expenses not otherwise enumerated
above which in any way arise out of or are related to or
18
associated with the ownership, possession, use or operation of the Assets before
or after the Closing;
(f) All other liabilities expressly allocated to Purchaser in this
Agreement or in any of the Ancillary Agreements, including but not limited to
liability, if any, of Seller to BHP related to matters covered by FAS 106; and
(g) All liabilities and obligations of Seller in respect of
post-Closing reclamation and all final reclamation of the Navajo Mine and the
site comprising the same or on which the Navajo Mine exists or has existed.
2.4 EXCLUDED LIABILITIES. Purchaser shall not assume or be obligated to
pay, perform or otherwise discharge the following liabilities or obligations
(the "EXCLUDED LIABILITIES"):
(a) Any liabilities or obligations of Seller in respect of any
Excluded Assets or other assets which are not Assets and the ownership,
operation and conduct of any business in connection therewith or therefrom;
(b) Any liabilities or obligations of Seller in respect of costs under
SECTION 3.6 and Taxes attributable to the ownership, operation or use of Assets
on or before the Closing Date (except for Taxes for which Purchaser is liable
pursuant to SECTION 3.6 hereof) and any Taxes for which Seller is liable under
SECTION 6.6;
(c) Except as otherwise specifically set forth in SECTION 2.3 herein,
liabilities or obligations arising prior to the Closing Date from the breach of
any term, covenant or provision of any of the agreements or contracts assumed by
Purchaser, including the Facilities Contracts, that would have been, but for
such breach, paid, performed or otherwise discharged on or prior to the Closing
Date or to the extent the same arise out of any such breach or default or
related waiver or extension given by Seller; provided, that for purposes of the
foregoing, no such breach, default, waiver or extension shall include any
breach, default, waiver or extension that is or has been also engaged in or
agreed to by the Facilities Owners in common or by the Operating Agent acting on
behalf of any Facilities Owner, including the Seller;
(d) Liabilities or obligations under any of the Facilities Contracts
which would be included in the Assets but for the provisions of SECTION 3.7,
unless Purchaser is provided with the benefits thereunder as contemplated by
such Section;
(e) Subject to SECTION 2.4(b) AND SECTION 2.4(i), except for fines,
penalties or costs assumed by Purchaser under SECTION 2.3(b) or SECTION 2.3(D),
any fines, penalties or costs imposed by a Governmental Authority with respect
to the Assets resulting from (i) an investigation, proceeding, request for
information or inspection before or by a Governmental Authority pending or, to
Seller's Knowledge, threatened prior to Closing, but only relating to actions or
omissions prior to the Closing Date or (ii) violations of applicable law or
illegal acts of Seller; provided, that for purposes of the foregoing, actions or
omissions of Seller shall not include acts, actions, or omissions that are or
have been also engaged in by the Facilities Owners in common or by the Operating
Agent acting on behalf of any Facilities Owner, including the Seller;
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(f) Any liability of Seller arising out of a breach by Seller of any
of its obligations under this Agreement or the Ancillary Agreements;
(g) Any obligation of Seller to indemnify any Person who is a member
of the Purchaser Group pursuant to ARTICLE 7;
(h) Any costs or expenses for which Seller is liable under this
Agreement; and
(i) Judgments, fines, and other penalties levied by a Governmental
Authority and due prior to the Closing.
2.5 CONTROL OF LITIGATION.
(a) The Parties acknowledge and agree that, from and after the Closing
Date, Seller shall be entitled exclusively to control, defend and settle any
suit, action or proceeding, and any investigation arising out of or related to
any Excluded Assets or Excluded Liabilities, and Purchaser agrees to cooperate
reasonably in connection therewith, it being understood that Purchaser shall not
be required to incur any cost in connection with any such settlement but may be
required to provide a release to a third party claimant in respect of the
specific matters involved in such suit, action, proceeding or investigation;
provided, however, that Seller shall reimburse Purchaser for all reasonable
costs and expenses incurred in providing such cooperation to Seller and shall
not unreasonably interfere with operations at the Facilities or the Facilities
Switchyard.
(b) The Parties acknowledge and agree that, from and after the Closing
Date, Purchaser shall be entitled exclusively (except as otherwise described in
subsection (c) of this Section) to control, defend and settle any suit, action
or proceeding, and any investigation arising out of or related to any Asset or
Assumed Liabilities, and Seller agrees to cooperate reasonably in connection
therewith, it being understood that Seller shall not be required to incur any
cost in connection with any such settlement but may be required to provide a
release to a third party claimant in respect of the specific matters involved in
such suit, action, proceeding, or investigation; provided, however, that
Purchaser shall reimburse Seller for all reasonable costs and expenses incurred
in providing such cooperation to Purchaser and shall not unreasonably interfere
with Seller's operations.
(c) Subject to SECTION 6.6, the Parties acknowledge and agree that,
from and after the Closing Date, Seller shall be entitled exclusively to
control, defend and settle any action or proceeding associated with any Tax and
related audit, appeals process or litigation for taxable periods occurring prior
to the Closing Date.
ARTICLE 3
CLOSING
3.1 CLOSING. The closing of the sale of the Assets to, and the assumption
of the Assumed Liabilities by, Purchaser (the "CLOSING") will take place at the
offices of Pinnacle West Capital Corporation, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxx,
Xxxxxxx 00000, at 10:00 a.m. local time on the date that is five (5) Business
Days following the date on which the conditions set forth in
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ARTICLE 8 "Conditions Precedent to the Obligations of Purchaser at the Closing"
and ARTICLE 9 "Conditions Precedent to the Obligations of Seller at the Closing"
have been either satisfied or waived by the Party for whose benefit such
conditions precedent exist, or on such other date and at such other place as the
Parties may mutually agree, but in any event no sooner than November 1, 2000,
unless agreed to by Seller. The date of Closing is hereinafter called the
"CLOSING DATE." The Closing shall be effective for all purposes as of 12:01
a.m., Fruitland, New Mexico prevailing time, on the Closing Date.
3.2 PURCHASE PRICE. The Initial Purchase Price is Three Hundred Million
Dollars ($300,000,000). At the Closing, the Initial Purchase Price shall be
adjusted, without duplication, to account for the following items and Closing
Adjustments and Post-Closing Adjustments, as set forth in SECTION 3.3, the sum
of which is hereinafter referred to as the "PURCHASE PRICE":
(a) PRORATIONS. The Initial Purchase Price shall be adjusted to
account for the items prorated as of the Closing Date pursuant to SECTION 3.6.
(b) CAPITAL EXPENDITURES. Subject to SECTION 6.7, the Initial Purchase
Price shall be increased by the amount expended by Seller between the Effective
Date and the Closing Date for Capital Expenditures, less accumulated
depreciation as of the date of Closing, to the extent that such expenditures in
the aggregate exceed the amount specified in, or are not incurred with respect
to the categories listed in SCHEDULE 3.2(b). Nothing in this paragraph should be
construed to limit Seller's rights and obligations to make all Capital
Expenditures necessary to comply with any Facilities Contract or Facilities
Permit. No increase to the Initial Purchase Price shall be made for Capital
Expenditures made by Seller after December 31, 2001.
(c) FUEL INVENTORY AND INVENTORY. The Parties agree that the Purchase
Price includes a quantity of Fuel Inventory and Inventory and value thereof
which is represented by Three Million One Hundred Thousand Dollars ($3,100,000)
of book value. Accordingly, the Parties agree that the Initial Purchase Price
shall be further adjusted by the difference between Three Million One Hundred
Thousand Dollars ($3,100,000) ("INVENTORY Threshold") and the value as of the
Closing (determined in the same manner as the initial valuation) of the Fuel
Inventory and the Inventory pro-rated to Seller's percentage ownership
("INVENTORY VALUE"). The Initial Purchase Price shall be (i) increased by the
amount by which the Inventory Value exceeds the Inventory Threshold, and (ii)
decreased by the amount by which the Inventory Value is less than the Inventory
Threshold. At least sixty (60) days prior to the Closing, Purchaser shall
propose to Seller a reasonable method of determining the items in Fuel Inventory
and Inventory as of the Closing, which shall be subject to Seller's reasonable
approval or disapproval within ten (10) days after delivery of Purchaser's
proposal. If the Parties cannot agree upon such method within (thirty) (30) days
after Purchaser's delivery of its initial proposal, then the method shall be
determined by the Independent Accounting Firm. There shall be no adjustment to
the Initial Purchase Price pursuant to this SECTION 3.2(c) unless the difference
between the Inventory Threshold and the Inventory Value exceeds One Hundred and
Fifty-Five Thousand Dollars ($155,000).
3.3 PRE-CLOSING AND POST-CLOSING ADJUSTMENTS.
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a) At least thirty (30) calendar days prior to the Closing Date,
Purchaser, with the assistance and participation of, and in consultation with,
the Seller and the Operating Agent, shall prepare and deliver to Seller an
estimated closing statement (the "ESTIMATED CLOSING STATEMENT") that shall set
forth Purchaser's best estimate of all estimated adjustments to the Initial
Purchase Price required by SECTION 3.2 (the "ESTIMATED ADJUSTMENT"). Within ten
(10) calendar days after the delivery of the Estimated Closing Statement by
Purchaser to Seller, Seller may object in good faith to the Estimated Adjustment
in writing. If Seller objects to the Estimated Adjustment within such ten (10)
day period, the Parties shall attempt to resolve their differences by
negotiation. If the Parties are unable to do so prior to the Closing Date (or if
Seller does not object to the Estimated Adjustment), the Initial Purchase Price
shall be adjusted (the "CLOSING ADJUSTMENT") at the Closing by the amount of the
Estimated Adjustment not in dispute. The disputed portion shall be resolved in
accordance with the provisions of SECTION 3.3(b) and paid as part of any
Post-Closing Adjustment to the extent required by SECTION 3.3(b).
(b) Within sixty (60) days after the Closing Date, Purchaser, with the
assistance and participation of, and in consultation with, the Seller and the
Operating Agent, shall prepare and deliver to Seller a final closing statement
(the "POST-CLOSING STATEMENT") that shall set forth all adjustments to the
Initial Purchase Price proposed by Purchaser to be required by SECTION 3.2 not
previously effected by the Closing Adjustment (the "PROPOSED POST-CLOSING
ADJUSTMENT"). To the extent applicable, the Post-Closing Statement shall be
prepared using the same accounting principles, policies and methods as the
Operating Agent has historically used in connection with the calculation of the
items reflected on such Post-Closing Statement. Within thirty (30) days after
the delivery of the Post-Closing Statement by Purchaser to Seller, Seller may
object in good faith to the Proposed Post-Closing Adjustment in writing, stating
in reasonable detail its objections thereto. Purchaser and Seller agree to
cooperate to exchange information used to prepare the Post-Closing Statement and
information relating thereto. If Seller objects to the Proposed Post-Closing
Adjustment, the Parties shall attempt to resolve such dispute by negotiation. If
the Parties are unable to resolve such dispute within thirty (30) days after any
objection by Seller, the Parties shall appoint the Independent Accounting Firm,
which shall, at Seller's and Purchaser's joint expense, review the Proposed
Post-Closing Adjustment and determine the appropriate adjustment to the Purchase
Price, if any, within thirty (30) days after such appointment. The Parties agree
to cooperate with the Independent Accounting Firm and provide it with such
information as it reasonably requests to enable it to make such determination.
For purposes of this Section and wherever the Independent Accounting Firm is
retained to resolve a dispute between the Parties, the Independent Accounting
Firm may determine the issues in dispute following such procedures, consistent
with the language of this Agreement, as it deems appropriate to the
circumstances and with reference to the amounts in issue. No particular
procedures are intended to be imposed upon the Independent Accounting Firm, it
being the desire of the Parties that any such disagreement shall be resolved as
expeditiously and inexpensively as reasonably practicable. The Independent
Accounting Firm shall have no liability to the Parties in connection with such
services except for acts of bad faith, willful misconduct or gross negligence,
and the Parties shall provide such indemnities to the Independent Accounting
Firm as it may reasonably request. The finding of such Independent Accounting
Firm shall be binding on the Parties hereto. Upon determination of the
appropriate adjustment (the "POST-CLOSING ADJUSTMENT") by agreement of the
Parties or by binding
22
determination of the Independent Accounting Firm, the Party owing the difference
shall deliver such amount to the other Party no later than two (2) Business Days
after such determination, in immediately available funds or in any other manner
as reasonably requested by the payee.
3.4 PAYMENT. Any cash payments required by this Agreement shall be paid in
U.S. dollars in immediately available funds. The recipient of such funds will
designate the account or accounts to which the funds will be wire transferred.
3.5 ALLOCATION OF PURCHASE PRICE. The Parties will file all Tax Returns
consistently with the allocation of the Purchase Price determined in accordance
with this SECTION 3.5. The allocation of the Purchase Price (including any
portion of the Assumed Liabilities if applicable) will be negotiated by the
Parties in accordance with Applicable Tax Law (as defined below). Purchaser
shall propose and deliver to Seller a preliminary allocation among the Assets of
the Purchase Price and such other consideration to be paid to Seller pursuant to
this Agreement (an "ALLOCATION") sufficiently far in advance of the Closing to
allow the Final Pre-Closing Allocation referred to below to be determined prior
to the Closing. The Allocation shall be consistent with Code Section 1060
("APPLICABLE TAX LAW") and the regulations thereunder and in a manner which
facilitates Property Tax reporting and shall separately allocate Assets in the
Facilities Switchyard. Seller shall within thirty (30) days thereafter propose
any changes to the Allocation. Within thirty (30) days following delivery of
such proposed changes, Purchaser shall provide Seller with a statement of any
objections to such proposed changes, together with a reasonably detailed
explanation of the reasons therefor. If Purchaser and Seller are unable to
resolve any disputed objections within ten (10) days thereafter, such objections
shall be referred to the Independent Accounting Firm, which shall determine the
Allocation (including any valuations). The Independent Accounting Firm shall be
instructed to deliver to Purchaser and Seller a written determination of the
proper allocation of such disputed items within twenty (20) Business Days from
the date of engagement. Such determination shall be final, conclusive and
binding upon the Parties for all purposes, and the Allocation shall be so
adjusted (the allocation, including the adjustment, if any, to be referred to as
the "FINAL PRE-CLOSING ALLOCATION"). Within thirty (30) days of the
determination of the Post-Closing Adjustment, the Parties shall agree to the
adjustments to the Final Pre-Closing Allocation ("FINAL ALLOCATION"). The fees
and disbursements of the Independent Accounting Firm attributable to any
Allocation shall be shared equally by Purchaser and Seller. Purchaser and Seller
agree to timely file Internal Revenue Service Form 8594, and all Tax Returns, in
accordance with such Allocation or Final Allocation, as the case may be, and to
report the transactions contemplated by this Agreement for Federal Income Tax
and all other tax purposes in a manner consistent with the Allocation or Final
Allocation, as the case may be. Purchaser and Seller agree to promptly provide
the other Parties with any additional information and reasonable assistance
required to complete Form 8594, or compute Taxes arising in connection with (or
otherwise affected by) the transactions contemplated hereunder.
3.6 PRORATIONS.
(a) Purchaser and Seller agree that, except as otherwise specifically
provided in this Agreement, all of the budgeted, ordinary, and recurring items
normally charged to the Facilities Owners, including those listed below (but not
including any Income Taxes and
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Transfer Taxes), relating to the business and operation of the Assets, shall be
prorated and charged as of the Closing Date, without any duplication of payment
under the Facilities Contracts, with Seller liable to the extent such items
relate to any time period prior to the Closing Date, and Purchaser liable to the
extent such items relate to periods commencing with the Closing Date (measured
in the same units used to compute the item in question, otherwise measured by
calendar days):
(i) Property Taxes having a lien date in the same calendar year
as the Closing Date, provided, however, with respect to any Property Taxes
imposed by a Tribal Authority, such Property Taxes shall be prorated based upon
that portion of the calendar year starting with the date of expiration of any
applicable tax waiver and ending with the last day of the calendar year of the
Closing Date;
(ii) Retrospective adjustments and policyholder distributions for
the applicable period during which the Closing occurs with respect to Facilities
Insurance Policies occurring within twelve (12) months of Closing or ninety (90)
days after the year-end following the Closing, whichever occurs first;
(iii) Operating and maintenance expenses incurred in any period
prior to the Closing Date (not including Capital Expenditures) in the nature of
the expenses shown on SCHEDULE 3.6(a)(iv) but only to the extent that the amount
of such expenses are determined within twelve (12) months of Closing or ninety
(90) days after the year-end following the Closing, whichever occurs first; and
(iv) A reimbursement for Firm Transmission Rights referred to in
SECTION 2.1(P) adjusted in proportion to the remaining term of the Firm
Transmission Rights.
(b) In connection with the prorations referred to in (a) above, in the
event that actual figures are not available at the Closing Date, the proration
shall be based upon the respective amounts accrued through the Closing Date or
paid for the most recent year or other appropriate period for which such amounts
paid are available. All prorated amounts shall be recalculated and paid to the
appropriate Party within sixty (60) days after the date that the previously
unavailable actual figures become available. Seller and Purchaser shall furnish
each other with such documents and other records as may be reasonably requested
in order to confirm all proration calculations made pursuant to this SECTION
3.6.
3.7 NO ASSIGNMENT IF BREACH. To the extent that Seller's rights under any
of the Facilities Contracts to be transferred to Purchaser hereunder may not be
assigned without the consent of another Person which consent has not been
obtained, this Agreement shall not constitute an agreement to assign the same if
an attempted assignment would constitute a breach thereof or be unlawful, and
Purchaser and Seller shall cooperate and each use Commercially Reasonable
Efforts to obtain any such required consent(s) as promptly as possible. Seller
and Purchaser agree that if any consent to an assignment of any of the
Facilities Contracts to be transferred hereunder shall not be obtained or if any
attempted assignment would be ineffective or would impair Purchaser's rights and
obligations under the applicable Facilities Contracts so that Purchaser would
not in effect acquire all such rights and obligations, Seller, to the maximum
24
extent permitted by law and such Facilities Contracts, shall after the Closing
appoint Purchaser to be Seller's representative and agent with respect to such
Facilities Contracts, and Seller shall, to the maximum extent permitted by law
and such Facilities Contracts, enter into such reasonable arrangements with
Purchaser as are necessary to transfer to Purchaser the benefits and obligations
of such Facilities Contracts. Seller and Purchaser shall cooperate and shall
each use Commercially Reasonable Efforts after the Closing to obtain an
assignment of such Facilities Contracts to Purchaser.
3.8 DELIVERIES BY SELLER. Subject to the terms and conditions hereof, at
the Closing, Seller shall deliver, or cause to be delivered, the following to
Purchaser:
(a) The Deed, duly executed by Seller and in recordable form, subject
only to Permitted Encumbrances and any owner's affidavits or similar documents
reasonably required by Title Insurer;
(b) The Xxxx of Sale, duly executed by Seller;
(c) The Assignment and Assumption Agreement, duly executed by Seller;
(d) Evidence, in form and substance reasonably satisfactory to
Purchaser and its respective counsel, of Seller's receipt of (i) the Seller's
Required Regulatory Approvals specified in clause (i) of the definition thereof,
(ii) the Seller's Required Consents specified in clause (i) of the definition
thereof, and (iii) documentation evidencing the release of all Encumbrances,
except for Permitted Encumbrances, including the release of Seller's Mortgage;
(e) An opinion of counsel to Seller to the effect set forth in EXHIBIT
B hereto, subject to customary limitations and qualifications;
(f) A Certificate of Good Standing with respect to Seller, as of a
recent date, issued by the Secretary of State of the State of California and of
the state where the Facilities are located;
(g) To the extent available, originals of all of the Facilities
Contracts to which Seller has Knowledge that it is a party, the Transferable
Permits issued to Seller and of which it has Knowledge and, if not available,
true and correct copies thereof;
(h) A certificate addressed to Purchaser dated the Closing Date
executed by a duly authorized officer of Seller to the effect set forth in
SECTION 8.6;
(i) A FIRPTA Affidavit to Purchaser, duly executed by Seller;
(j) Copies, certified by the Secretary or Assistant Secretary of
Seller, of corporate resolutions authorizing the execution and delivery of this
Agreement, each Ancillary Agreement to which Seller is a party and the
authorization or ratification of all of the other agreements and instruments, in
each case, to be executed and delivered by Seller in connection herewith;
25
(k) A certificate of the Secretary or Assistant Secretary of Seller
identifying the name and title and bearing the signatures of the officers of
Seller authorized to execute and deliver this Agreement, each Ancillary
Agreement to which Seller is a party and the other agreements and instruments
contemplated hereby;
(l) Assignment of Conditional Partial Assignment relating to the
assignment of the dedicated area and the supplement dedicated area set forth in
the Facilities Fuel Agreement;
(m) Assignment of Interest in New Mexico State Engineer Water Permit
No. 2838, issued October 10, 1958;
(n) Assignment of Memorandum for Recordation;
(o) Assignment of Facilities Fuel Agreement; and
(p) All such other agreements, documents, instruments and writings
required to be delivered by Seller at or prior to the Closing Date pursuant to
this Agreement necessary to sell, assign, convey, transfer and deliver all of
Seller's rights, title and interests in and to the Assets, to Purchaser, in
accordance with this Agreement and, where necessary or desirable, in recordable
form.
3.9 DELIVERIES BY PURCHASER. Subject to the terms and conditions hereof, at
the Closing, Purchaser shall deliver, or cause to be delivered, the following to
Seller:
(a) The Purchase Price, by wire transfer of immediately available
funds to the account of Seller designated by Seller in writing on or before the
Closing Date;
(b) The Assignment and Assumption Agreement, duly executed by
Purchaser;
(c) Evidence, in form and substance reasonably satisfactory to Seller
and its respective counsel, of Purchaser's receipt of (i) the Purchaser's
Required Regulatory Approvals specified in clause (i) of the definition thereof,
(ii) the Purchaser's Required Consents specified in clause (i) of there
definition thereof;
(d) An opinion of counsel to Purchaser to the effect set forth in
EXHIBIT C hereto, subject to customary limitations and qualifications;
(e) A Certificate of Good Standing with respect to Purchaser, as of a
recent date, issued by the ACC and the state in which the Facilities are
located;
(f) A certificate dated the Closing Date executed by a duly authorized
officer of Purchaser to the effect set forth in SECTION 9.6;
(g) Copies, certified by the Secretary or Assistant Secretary of
Purchaser, of resolutions authorizing the execution and delivery of this
Agreement, each Ancillary Agreement to which Purchaser is a party and the
authorization or ratification of all of the agreements and instruments, in each
case, to be executed and delivered by Purchaser in connection herewith;
26
(h) A certificate of the Secretary or Assistant Secretary of Purchaser
identifying the name and title and bearing the signatures of the officers of
Purchaser authorized to execute and deliver this Agreement, each Ancillary
Agreement to which Purchaser is a party and the other agreements contemplated
hereby; and
(i) All such other agreements, documents, instruments and writings
required to be delivered by Purchaser at or prior to the Closing Date pursuant
to this Agreement.
3.10 FACILITIES CONTRACTS. The Parties agree that between the date hereof
and the Closing Date, the ownership, lease, maintenance and operation of the
Facilities and the Facilities Switchyard will be governed by the Facilities
Contracts.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLER
Except as set forth in Seller's Schedule of Exceptions corresponding to the
Section of this Agreement to which such disclosure applies, Seller represents,
warrants and, where specified, disclaims to Purchaser as follows:
4.1 ORGANIZATION AND EXISTENCE. Seller is a corporation, duly organized,
validly existing and in good standing under the laws of the State of California
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as is now being conducted. Seller is
duly qualified to do business and is in good standing in the state where the
Facilities are located. Seller has heretofore delivered to Purchaser complete
and correct copies of its Articles of Incorporation and Bylaws as currently in
effect.
4.2 EXECUTION, DELIVERY AND ENFORCEABILITY. Seller has full corporate power
to enter into, and carry out its obligations under, this Agreement and the
Ancillary Agreements which are executed by Seller and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Ancillary Agreements which are executed by
Seller, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate action
required on the part of Seller and no other corporate proceedings on the part of
Seller are necessary to authorize this Agreement and the Ancillary Agreements to
which it is a party or to consummate the transactions contemplated hereby and
thereby. Assuming Purchaser's due authorization, execution and delivery of this
Agreement and the Ancillary Agreements when executed by Purchaser, this
Agreement does and the Ancillary Agreements when executed by Seller will
constitute the valid and legally binding obligations of Seller, enforceable
against Seller in accordance with its and their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application relating to or affecting
the enforcement of creditors' rights and by general equitable principles.
4.3 NO VIOLATION. Subject to Seller obtaining the Seller's Required
Regulatory Approvals and the Seller's Required Consents, and except for
compliance with the requirements of the HSR Act, neither the execution and
delivery of this Agreement or any of the Ancillary Agreements executed by
Seller, nor the compliance with any provision hereof or thereof, nor the
consummation of the transactions contemplated hereby or thereby will:
27
(a) violate, or conflict with, or result in a breach of any provisions
of the Articles of Incorporation or Bylaws of Seller;
(b) result in a default (or give rise to any right of termination,
cancellation or acceleration) under or conflict with any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license, or
agreement or other instrument or obligation to which Seller is a party or by
which Seller or any of the Assets may be bound, except for such defaults (or
rights of termination or acceleration) as to which requisite waivers or consents
have been, or prior to the Closing will have been, obtained or which would not,
individually or in the aggregate, create a Material Adverse Effect;
(c) violate any law, rule, regulation, order, writ, injunction, or
decree, applicable to Seller or any of its assets, except where such violations,
individually or in the aggregate, would not create a Material Adverse Effect and
will not affect the validity or enforceability of this Agreement or the
Ancillary Agreements or the validity of the transactions contemplated hereby or
thereby; or
(d) require consent or approval of, filing with, or notice to any
Person which, if not obtained would prevent Seller from performing its
obligations hereunder.
4.4 COMPLIANCE WITH LAWS. Seller has no Knowledge that it is in material
violation of any laws, orders, ordinances, rules, regulations or judgment of any
Governmental Authority in existence as of execution of this Agreement with
respect to the Assets, except for (a) violations or alleged violations the
subject matter of which the Operating Agent has Knowledge, (b) violations or
alleged violations by the Facilities Owners in common, or by the Operating Agent
acting on their behalf, or (c) violations or alleged violations that will not
have a Material Adverse Effect.
4.5 PERMITS, LICENSES, ETC. Prior to the Closing Date, Seller will hold all
permits, registrations, franchises, certificates, licenses and other
authorizations, consents and approvals of all Governmental Authorities that
Seller requires in order to own any of the Assets (collectively, "SELLER
PERMITS"), except for such failures to hold such Seller Permits as to which the
Operating Agent has Knowledge, are also failures of all of the other Facilities
Owners (or all other than the Operating Agent) or would not, individually or in
the aggregate, have a Material Adverse Effect.
4.6 LITIGATION. There is no claim, action, proceeding or investigation
pending, or to Seller's Knowledge, threatened against or relating to Seller or
its Affiliates before any court, arbitrator or Governmental Authority, or any
judgment, decree or order of any court, arbitrator or Governmental Authority,
which could, individually or in the aggregate, reasonably be expected to result,
or has resulted, in (a) the institution of legal proceedings to prohibit or
restrain the performance of this Agreement or any of the Ancillary Agreements,
or the consummation of the transactions contemplated hereby or thereby, (b) a
claim against Purchaser or its Affiliates for damages as a result of Seller
entering into this Agreement or any of the Ancillary Agreements, or the
consummation by Seller of the transactions contemplated hereby or thereby, (c) a
material impairment of Seller's ability to perform its obligations under this
Agreement or any of the Ancillary Agreements, or (d) a Material Adverse Effect,
except for claims, actions, proceedings or investigations pending against, or
judgments, decrees or orders involving all of the other
28
Facilities Owners or the Operating Agent as agent for the Facilities Owners, or
as to which the Operating Agent has Knowledge.
4.7 TITLE. Subject to the right of first refusal contained in the
Facilities Co-Tenancy Agreement and the Facilities Operating Agreement, Seller
has good and marketable title, or valid and effective leasehold rights in the
case of leased property, or valid and effective licenses in the case of licensed
rights, to the tangible personal property included in the Assets to be sold,
conveyed, assigned, transferred and delivered to Purchaser by Seller, free and
clear of all liens, charges, claims, pledges, security interests, equities and
encumbrances of any nature whatsoever, except for (a) those created or allowed
to be suffered by Purchaser, (b) those which will be discharged or released
prior to or substantially simultaneously with, the Closing, (c) Permitted
Encumbrances, (d) those which do not apply only and exclusively to the interest
of the Seller but that also apply to interests of the other Facilities Owners in
common and/or the Operating Agent, as agent for any of the Facilities Owners,
and (e) possible minor matters that do not materially interfere with the
intended use of the Assets.
4.8 FACILITIES CONTRACTS. Seller has no Knowledge of any claim, action,
proceeding or investigation, pending or threatened, challenging the
enforceability against Seller of the Facilities Contracts specified on SCHEDULE
4.8 "Certain Facilities Contracts," except for challenges to the enforceability
of such contracts against the Facilities Owners in common, challenges of which
the Operating Agent has Knowledge, or challenges which are not likely to result
in a Material Adverse Effect.
4.9 INTELLECTUAL PROPERTY. Seller does not own or otherwise have any right
to use any patent, trade name, trademark, service xxxx or other intellectual
property that is used in and necessary for the operation of the Facilities or
the Facilities Switchyard, other than such as may be included in the Assets or
is licensed to the Facilities Owners or the Operating Agent, acting on their
behalf.
4.10 TAXES. At least sixty (60) Business Days before the Closing, Seller
will advise Purchaser in writing of any taxing jurisdictions in which Seller
owns assets or conducts business that require a notification to a taxing
authority of the transactions contemplated by this Agreement, if the failure to
make such notification, or obtain Tax clearances in connection therewith, would
either require Purchaser to withhold any portion of the Purchase Price or would
subject Purchaser to any liability for any Taxes of Seller.
4.11 UNDISCLOSED LIABILITIES. Except for liabilities and obligations
specifically referred to in SECTION 2.3 or 2.4, the Assets are not, to the
Knowledge of Seller, subject to any liability or obligation that has arisen
solely as a result of an act or omission by Seller, except for Permitted
Encumbrances, acts or omissions of which the Operating Agent has Knowledge, or
liabilities and obligations that are not reasonably likely to have a Material
Adverse Effect.
4.12 BROKERS. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on by Seller and in such a
manner as not to give rise to any valid claim against Purchaser (by reason of
Seller's actions) for a brokerage commission, finder's fee or other like payment
to any Person.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth in Purchaser's Schedule of Exceptions corresponding to
the Section of this Agreement to which such disclosure applies, Purchaser
represents, warrants and, where specified, disclaims to Seller as follows:
5.1 ORGANIZATION AND EXISTENCE. Purchaser is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Arizona and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as is now being conducted. Purchaser has
heretofore delivered to Seller complete and correct copies of its Articles of
Incorporation and Bylaws as currently in effect.
5.2 EXECUTION, DELIVERY AND ENFORCEABILITY. Purchaser has full corporate
power to enter into, and carry out its obligations under, this Agreement and the
Ancillary Agreements which are executed by Purchaser and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Ancillary Agreements which are executed by
Purchaser, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate action
required on the part of Purchaser and no other corporate proceedings on the part
of Purchaser are necessary to authorize this Agreement and the Ancillary
Agreements to which it is a party or to consummate the transactions contemplated
hereby and thereby. Assuming Seller's due authorization, execution and delivery
of this Agreement and the Ancillary Agreements when executed by Seller, this
Agreement does and the Ancillary Agreements when executed by Purchaser, will
constitute the valid and legally binding obligations of Purchaser, enforceable
against Purchaser in accordance with its and their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application relating to or affecting
the enforcement of creditors' rights and by general equitable principles.
5.3 NO VIOLATION. Subject to Purchaser obtaining the Purchaser's Required
Regulatory Approvals and the Purchaser's Required Consents, and except for
compliance with the requirements of the HSR Act, neither the execution and
delivery of this Agreement or any of the Ancillary Agreements executed by
Purchaser, nor the compliance with any provision hereof or thereof, nor the
consummation of the transactions contemplated hereby or thereby will:
(a) violate, or conflict with, or result in a breach of any provisions
of the Articles of Incorporation or Bylaws of Purchaser;
(b) result in a default (or give rise to any right of termination,
cancellation or acceleration) under or conflict with any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license, or
agreement or other instrument or obligation to which Purchaser is a party or by
which Purchaser may be bound, except for such defaults (or rights of termination
or acceleration) as to which requisite waivers or consents have been, or prior
to the Closing will have been, obtained or which would not, individually or in
the aggregate, create a Material Adverse Effect;
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(c) violate any law, rule, regulation, order, writ, injunction, or
decree, applicable to Purchaser or any of its assets, except where such
violations, individually or in the aggregate, would not create a Material
Adverse Effect and will not affect the validity or enforceability of this
Agreement or the Ancillary Agreements or the validity of the transactions
contemplated hereby or thereby; or
(d) require consent or approval of, filing with, or notice to any
Person which, if not obtained would prevent Purchaser from performing its
obligations hereunder.
5.4 ACC. No approval or consent, directly or indirectly, of the ACC is
required for Purchaser's consummation of the transactions contemplated hereby.
5.5 COMPLIANCE WITH LAWS. Purchaser has no Knowledge that it is in material
violation of any laws, orders, ordinances, rules, regulations or judgment of any
Governmental Authority in existence as of execution of this Agreement with
respect to the Assets, except for violations or alleged violations that will not
have a Material Adverse Effect.
5.6 LITIGATION. There is no claim, action, proceeding or investigation
pending, or to Purchaser's Knowledge, threatened against or relating to
Purchaser or its Affiliates before any court, arbitrator or Governmental
Authority, or any judgment, decree or order of any court, arbitrator or
Governmental Authority, which could, individually or in the aggregate,
reasonably be expected to result, or has resulted, in (a) the institution of
legal proceedings to prohibit or restrain the performance of this Agreement or
any of the Ancillary Agreements, or the consummation of the transactions
contemplated hereby or thereby, (b) a claim against Seller or its Affiliates for
damages as a result of Purchaser entering into this Agreement or any of the
Ancillary Agreements, or the consummation by Purchaser of the transactions
contemplated hereby or thereby, (c) a material impairment of Purchaser's ability
to perform its obligations under this Agreement or any of the Ancillary
Agreements, or (d) a Material Adverse Effect.
5.7 BROKERS. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on by Purchaser and in such a
manner as not to give rise to any valid claim against Seller (by reason of
Purchaser's actions) for a brokerage commission, finder's fee or other like
payment to any Person.
5.8 FINANCING. Purchaser has now, and at the Closing Purchaser will have,
liquid capital or committed sources therefor sufficient to permit Purchaser to
perform timely its obligations hereunder, under the Ancillary Agreements, and
under the Collateral Agreement.
5.9 QUALIFIED FOR PERMITS. To Purchaser's Knowledge, Purchaser is, or will
be prior to the Closing, qualified to obtain any Facilities Permits necessary
for the ownership and operation by Purchaser of the Assets as of the Closing in
substantially the same manner as the Assets are currently operated.
5.10 "AS IS" SALE. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, PURCHASER
UNDERSTANDS AND AGREES THAT THE ASSETS ARE BEING ACQUIRED "AS IS, WHERE IS" ON
THE CLOSING DATE, AND IN THEIR CONDITION ON THE CLOSING DATE, AND THAT PURCHASER
IS RELYING ON
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ITS OWN EXAMINATION OF THE ASSETS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING AND EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH
IN THIS AGREEMENT, PURCHASER UNDERSTANDS AND AGREES THAT SELLER EXPRESSLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES AS TO LIABILITIES, OPERATIONS OF THE
ASSETS, TITLE, CONDITION, VALUE OR QUALITY OF THE ASSETS OR THE PROSPECTS
(FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF THE ASSETS AND ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS OR ANY PART THEREOF, OR AS TO
THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT
OR PATENT. PURCHASER FURTHER AGREES THAT NO INFORMATION OR MATERIAL PROVIDED BY
OR COMMUNICATION MADE BY SELLER OR ANY REPRESENTATIVE OF SELLER WILL CAUSE OR
CREATE ANY REPRESENTATION OR WARRANTY DISCLAIMED BY THE FOREGOING EXCEPT AS
DISCLOSED IN THIS AGREEMENT OR IN A SCHEDULE ATTACHED HERETO.
ARTICLE 6
COVENANTS OF EACH PARTY
6.1 EFFORTS TO CLOSE.
(a) COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions herein provided, each of the Parties hereto agrees to use its
Commercially Reasonable Efforts to consummate and make effective, as soon as
reasonably practicable, the transactions contemplated hereby, including the
satisfaction of all conditions thereto set forth herein. Such actions shall
include, without limitation, exerting their Commercially Reasonable Efforts to
obtain the consents, authorizations and approvals of all private parties and any
Governmental Authority whose consent is reasonably necessary to effectuate the
transactions contemplated hereby, and effecting all other necessary
registrations and filings, including, without limitation, filings under
applicable laws, including the HSR Act and all other necessary filings with the
CPUC, FERC (including applications to transfer the Facilities Switchyard), and
any other Governmental Authority. All appearances, presentations, briefs, and
proposals made or submitted by or on behalf of either Party before any
regulatory authority in connection with the approval of the transactions shall
be subject to the joint approval or disapproval in advance and the joint control
of Purchaser and Seller, acting with the advice of their respective counsel, it
being the intent that the Parties will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any such
appearance, presentation, brief, and proposal; provided that in the event of a
disagreement concerning any such appearance, presentation, brief, or proposal
before the CPUC, the determinations of Seller shall be controlling; and provided
further that nothing will prevent a Party from responding to a subpoena or other
legal process as required by law or submitting factual information in response
to a request therefor, and provided further that Seller, but not the Purchaser
without the advance approval of Seller (unless requested by the CPUC), may
engage in private meetings or in camera proceedings with members and/or
representatives of the CPUC if it reasonably apprises Purchaser of the nature of
such meetings or
32
proceedings. Each Party will provide the other with copies of all written
communications from Governmental Authorities relating to the approval or
disapproval of the transactions contemplated by the Agreement, the Ancillary
Agreements, and the Collateral Agreement.
(b) EXPENSES. Whether or not the transactions contemplated hereby are
consummated, except as otherwise provided in this Agreement, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such expenses.
Notwithstanding the foregoing:
(i) Costs associated with preliminary title reports and title
policies shall be borne by Seller up to the costs that would have been incurred
had the title policies been standard coverage policies of title insurance, and
the remaining costs, if any, including costs for extended coverage and any
endorsements shall be borne by Purchaser (except that any survey costs shall be
borne one-half by Purchaser and one-half by Seller);
(ii) Documentary transfer fees, if any, will be borne by Seller,
and recording costs and charges respecting real property will be borne one-half
by Purchaser and one-half by Seller;
(iii) Except as otherwise specifically set forth in SECTION 6.5,
all fees, charges and costs of economists and other experts, if any, jointly
retained by Purchaser and Seller in connection with submissions made to any
Governmental Authority and advice in connection therewith respecting approval of
the transactions will be borne one-half by Purchaser and one-half by Seller.
All such charges and expenses shall be promptly settled between the Parties
at the Closing or upon termination or expiration of further proceedings under
this Agreement, or with respect to such charges and expenses not determined as
of such time, as soon thereafter as is reasonably practicable.
6.2 TRANSMISSION. Commencing on the Effective Date, the Parties shall use
Commercially Reasonable Efforts to enter into an agreement or agreements which
achieve the objectives and outcomes outlined in the Transmission Term Sheet.
Further, the Parties shall use Commercially Reasonable Efforts to secure the
regulatory approvals and consents necessary to cause such agreement or
agreements to become effective as of the Closing Date; provided, however, that
the effectiveness of the agreement or agreements contemplated under this SECTION
6.2 shall not be a condition of Closing; provided further, that if such
agreement or agreements are not effective as of the Closing Date the Parties
shall continue to use Commercially Reasonable Efforts to secure such agreement
or agreements.
6.3 UPDATING. Seller shall promptly notify Purchaser of any changes or
additions to any of Seller's Schedules to this Agreement with respect to the
Assets or Assumed Liabilities related thereto by the delivery of updates
thereof, if any, as of a reasonably current date prior to the Closing, but in
any event not later than three (3) Business Days prior thereto. No such updates
made pursuant to this Section shall be deemed to cure any inaccuracy of any
representation or warranty made in this Agreement as of the date hereof, unless
Purchaser
33
specifically agrees thereto in writing, nor shall any such notification be
considered to constitute or give rise to a waiver by Purchaser of any condition
set forth in this Agreement. Without limiting the generality of the foregoing,
Seller shall notify Purchaser promptly of the occurrence of (i) any material
casualty, physical damage, destruction or physical loss respecting, or any
material adverse change in the physical condition of the Facilities or the
Facilities Switchyard, subject to ordinary wear and tear and to routine
maintenance, reasonably likely to result in a Material Adverse Effect, and (ii)
any other material event likely to impair Seller's ability to perform, if, in
the cases of clauses (i) and (ii), the occurrence is one of which Seller has
Knowledge and of which the Operating Agent does not have Knowledge.
6.4 CONDUCT PENDING CLOSING. Prior to consummation of the transactions
contemplated hereby or the termination or expiration of this Agreement pursuant
to its terms, and except to the extent approved by the other Facilities Owners,
Seller shall, in its capacity as a Facilities Owner, exercise its rights and
discharge its obligations under the Facilities Co-Tenancy Agreement and the
Facilities Operating Agreement in a manner which allows the Operating Agent to:
(a) Operate and maintain the Assets materially in accordance with the
usual and ordinary course, consistent with practices followed prior to the
execution of this Agreement;
(b) Except as required by their terms, or except to the extent agreed
to unanimously by the Facilities Owners, not amend, terminate, renew, or
renegotiate any existing Facilities Contract or enter into any new Facilities
Contract, except in the ordinary course of business and consistent with
practices of the recent past, or default (or take or omit to take any action
that with or without the giving of notice or passage of time, would constitute a
default) under any of their obligations under any such contracts;
(c) Not: (i) sell, lease, transfer or dispose of, or make any contract
for the sale lease, transfer or disposition of, any assets or properties which
would be included in the Assets, other than sales in the ordinary course of
business which would not individually, or in the aggregate, have a Material
Adverse Effect upon the operations or value of the Facilities or the Facilities
Switchyard; (ii) incur, assume, guaranty, or otherwise become liable in respect
of any indebtedness for money borrowed which would result in Purchaser assuming
such liability hereunder after the Closing; (iii) delay the payment and
discharge of any liability which, upon Closing, would be an Assumed Liability,
because of the transactions contemplated hereby; or (iv) encumber or voluntarily
subject to any lien any Asset, except for Permitted Encumbrances;
(d) Maintain in force and effect the material property and liability
insurance policies related to the Facilities or the Facilities Switchyard and
the Assets;
(e) Not take any action which would cause any of Seller's
representations and warranties set forth in ARTICLE 4 to be materially false as
of the Closing; and
(f) Not take any action or exercise any voting right with respect to
the Facilities or the Facilities Switchyard, including voting rights under the
Facilities Contracts, other than in good faith (subject to the foregoing, with
respect to any matter which requires a
34
vote of the Facilities Owners, Seller shall, if reasonably practicable, consult
with Purchaser prior to such vote and take the Purchaser's views into account in
good faith);
PROVIDED, that nothing in this Section shall (i) preclude Seller from
paying, prepaying or otherwise satisfying any liability which, if outstanding as
of the Closing Date, would be an Assumed Liability or an Excluded Liability, or
(ii) preclude Seller from incurring any liabilities or obligations to any third
party in connection with obtaining such Party's consent to any transaction
contemplated by this Agreement or the Ancillary Agreements.
6.5 CONSENTS AND APPROVALS.
(a) Subject to SECTION 6.1(a), as promptly as practicable after the
date of this Agreement, Seller and Purchaser shall each file or cause to be
filed with the Federal Trade Commission and the Department of Justice all
notifications required to be filed under the HSR Act and the rules and
regulations promulgated thereunder with respect to the transactions contemplated
hereby. The Parties shall consult with each other as to the appropriate time of
filing such notifications and shall agree upon the timing of such filings,
respond promptly to any requests for additional information made by either of
such agencies, and cause the waiting periods under the HSR Act to terminate or
expire at the earliest possible date after the date of filing. Purchaser and
Seller shall be equally responsible for the cost of all filing fees under the
HSR Act and each Party will bear its own costs for the preparation of any such
filing.
(b) Subject to SECTION 6.1(a), (i) Seller shall seek, as part of the
CPUC authorization, a determination by the CPUC that allowing the Assets to be
an eligible facility under Section 32 of the Public Utility Holding Company Act
of 1935, as amended, (A) will benefit consumers, (B) is in the public interest,
and (C) does not violate state law; (ii) as promptly as practicable after the
date of this Agreement, Purchaser shall file with FERC any other applications
required under the Federal Power Act for the purchase and sale contemplated
hereby, which filing(s) may be made individually by Purchaser or jointly with
Seller, as reasonably determined by the Parties and (iii) as promptly as
practicable after the date of this Agreement the Parties shall file with FERC
any other applications required under the Federal Power Act for the approval of
the agreement entered into pursuant to the Transmission Term Sheet. Purchaser
shall be solely responsible for the cost of preparing and filing this
application, any petition(s) for rehearing, or any reapplication(s).
(c) Subject to SECTION 6.1(a), as promptly as practicable after the
date of this Agreement, Seller and Purchaser shall submit such documents as are
necessary to obtain the approval of the Navajo Nation and the United States
Department of the Interior ("DOI") to the transaction subject to this Agreement.
Subject to SECTION 6.1(a), the Parties shall respond promptly to any requests
for additional information made by the Navajo Nation and/or the DOI, cooperate
in connection with any presentation or proceeding associated with such Navajo
Nation and/or DOI approval and use their respective best efforts to cause
approval to be obtained at the earliest possible date after the date of filing.
The Parties shall consult with each other as to the appropriate time of filing
such applications and shall agree upon the timing of such applications. Each
Party will bear its own costs in connection with obtaining such consent,
provided, Purchaser shall pay any reasonable fee or other amount as is necessary
to obtain the approval of
35
the Navajo Nation, the Parties hereby agreeing that the amounts specified in
that certain Consent Protocol Agreement which has the Navajo Nation as a party
are reasonable.
(d) Subject to SECTION 6.1(a), Purchaser shall have the primary
responsibility for securing the transfer, reissuance or procurement of the
Facilities Permits effective as of the Closing Date. Seller shall use
Commercially Reasonable Efforts to cooperate with Purchaser's efforts in this
regard and assist in any transfer or reissuance of Facilities Permits held by
Seller or the procurement of any other Facilities Permits when so requested by
Purchaser.
(e) Within fifteen (15) days after the receipt of any Purchaser's or
Seller's Required Regulatory Approval, the Party receiving such approval (the
"RECEIVING PARTY") shall notify the other Party in writing if the approval
contains any condition that the Receiving Party determines could reasonably be
expected to have a Material Adverse Effect on the Receiving Party or, in the
case of Purchaser, on the Assets; provided, however, that if the Receiving Party
does not provide such notice to the other Party within the fifteen (15)-day
period specified in this sentence, the Receiving Party shall be deemed to have
accepted such Required Regulatory Approval, including any condition contained
therein, and the condition to Closing set forth in SECTION 8.4 or SECTION 9.4,
as applicable to such Party with respect to such Required Regulatory Approval,
shall be deemed satisfied. Within fifteen (15) days after receipt of any notice
specified in the previous sentence, Seller and Purchaser shall meet to consider
what Commercially Reasonable Efforts the Receiving Party intends to take in
order to obtain the Required Regulatory Approval or to eliminate the materially
adverse conditions. After the Receiving Party has completed such agreed upon
Commercially Reasonable Efforts with respect to the materially adverse condition
contained in such Required Regulatory Approval, within fifteen (15) days of such
completion, the Receiving Party shall notify the other Party if the materially
adverse condition has been eliminated or remains in effect, and whether the
Receiving Party either will accept such materially adverse condition by a waiver
of the applicable Closing condition in SECTION 8.4 or 9.4 with respect to such
materially adverse condition or deem that the applicable Closing condition in
SECTION 8.4 or 9.4 cannot be satisfied due to the materially adverse condition
in such Required Regulatory Approval.
6.6 TAX MATTERS.
(a) All Transfer Taxes incurred in connection with this Agreement and
the transactions contemplated hereby shall be borne one-half by Seller and
one-half by Purchaser. Seller will file, to the extent required by applicable
law, all necessary Tax Returns and other documentation with respect to all such
Transfer Taxes, and Purchaser will be entitled to review such returns in advance
and, if required by applicable law, will join in the execution of any such Tax
Returns or other documentation. Not less than five (5) Business Days prior to
the due date of such Tax Returns, Purchaser shall pay the Seller one-half of the
amount shown as due on such Tax Returns, as determined in accordance with this
Agreement, and shall, to the extent required by Law, join in the execution of
any such Tax Return. Prior to the Closing Date, Purchaser will provide to
Seller, to the extent possible, an appropriate exemption certificate in
connection with this Agreement and the transactions contemplated hereby, with
respect to each applicable taxing authority.
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(b) With respect to Taxes to be prorated in accordance with SECTION
3.6 of this Agreement (except for pro-rated Property Taxes required to be paid
by Seller), Purchaser shall prepare and timely file all Tax Returns required to
be filed after the Closing with respect to the Assets, if any, and shall duly
and timely pay all such Taxes shown to be due on such Tax Returns. Purchaser's
preparation of any such Tax Returns shall be subject to Seller's approval, which
approval shall not be unreasonably withheld or delayed. Purchaser shall make
such Tax Returns available for Seller's review and approval (which approval
shall not be unreasonably withheld or delayed) no later than fifteen (15)
Business Days prior to the due date for filing such Tax Returns, it being
understood that Seller's failure to approve any such Tax Returns shall not limit
Purchaser's obligation to timely file such Tax Returns and duly and timely pay
all Taxes shown to be due thereon. Not less than five (5) Business Days prior to
the due date of any such Tax Return, Seller shall pay to Purchaser the amount
shown as due on such Tax Returns as determined in accordance with SECTION 3.6 of
this Agreement and shall, to the extent required by law, join in the execution
of any such Tax Returns.
(c) With respect to pro-rated Property Taxes, specifically including
but not limited to Property Tax Returns prepared and filed with any Tribal
Authority, Seller's preparation of any such Tax Return shall be subject to
Purchaser's approval, which approval shall not be unreasonably withheld or
delayed. Seller shall make such Tax Returns available for Purchaser's review and
approval no later than fifteen (15) Business Days prior to the due date for
filing such Tax Return, it being understood that the Purchaser's failure to
approve any such Tax Return shall not limit Seller's obligation to timely file
such Tax Returns. In preparing and reviewing said Property Tax Returns, each
Party shall cooperate and act in good faith to resolve any disagreement related
to such Tax Returns as between the Parties or as between either Party and any
Governmental Authority.
(d) Purchaser and Seller shall provide the other Party with such
assistance as may reasonably be requested by the other Party in connection with
the preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each will retain and provide the requesting Party with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination. Any information obtained pursuant to
this SECTION 6.6 or pursuant to any other Section hereof providing for the
sharing of information or review of any Tax Return or other schedule relating to
Taxes shall be kept confidential by the Parties hereto in accordance with
SECTION 6.9.
(e) In the event that a dispute arises between Seller and Purchaser as
to the amount of Taxes, the Parties shall attempt in good faith to resolve such
dispute, and any amount so agreed upon shall be paid to the appropriate Party.
If such dispute is not resolved within thirty (30) days thereafter, the Parties
shall submit the dispute to the Independent Accounting Firm for resolution,
which resolution shall be final, conclusive and binding on the Parties.
Notwithstanding anything in this Agreement to the contrary, the fees and
expenses of the Independent Accounting Firm in resolving the dispute shall be
borne equally by Seller and Purchaser. Any payment required to be made as a
result of the resolution of the dispute by the Independent Accounting Firm shall
be made within ten (10) days after such resolution, together with any interest
determined by the Independent Accounting Firm to be appropriate.
37
(f) Seller hereby certifies that all Transfer Tax liabilities of
Seller accruing before the Closing Date have been or will be fully satisfied or
provided for. In the event the Purchaser is assessed any Transfer Tax with
respect to the Assets for any period prior to the Closing Date, the Purchaser
shall notify the Seller promptly and shall provide the Seller with a validly
executed power of attorney authorizing the Seller to act in the Purchaser's
stead with regard to the assessment. Whether Seller determines to contest any
such assessment in whole or in part, Seller shall indemnify and hold harmless
the Purchaser in connection with any assessment of Tax described in this
section, whether or not contested hereunder, to the extent such Tax is
determined to be due and owing, together with interest and penalties as well as
any expenses incurred (including legal fees that may be incurred by the
Purchaser) in participating in any action related to such assessment. If the
laws of the State or the local taxing authority require payment of assessed
Taxes as a condition to contesting or further contesting their applicability,
the Seller shall make such payments together with interest and penalties. The
Purchaser agrees to cooperate fully in initiating and pursuing any action
directed by the Seller for recovery of such payments and shall refund any
amounts received (including interest and penalties) within three (3) days of
receipt by the Purchaser. Any action to contest Tax assessments hereunder or to
recover Taxes paid hereunder by the Seller on behalf of the Purchaser shall be
under the control of the Seller and at the Seller's sole cost and expense
(g) Notwithstanding any other provision hereof, Purchaser covenants
and agrees that, after the Closing Date, Purchaser will, to the extent
practicable, and at Seller's expense, (i) provide or cause to be provided
written notice to Seller sixty (60) days in advance of taking any of the actions
specified on a Schedule to be provided by Seller to Purchaser within one hundred
twenty (120) days of the Effective Date, which Schedule shall be reasonably
acceptable to Purchaser, listing actions or modifications to the Assets which in
Seller's reasonable opinion could result in a loss of the exclusion of interest
on the Pollution Control Bonds from gross income for federal income tax purposes
under Code Section 103, and (ii) take any reasonable actions which it has
authority to take that are reasonably requested by Seller in writing for the
purpose of maintaining such exclusion (including without limitation, inserting
notification requirements in operating manuals and posting notices within the
Facilities). Notwithstanding anything in this Agreement to the contrary, (i)
Purchaser will have no liability whatsoever in excess of $250,000 to Seller or
any other Person if Purchaser fails to comply with the covenants in the
preceding sentence and (ii) Purchaser shall not be required to take, or refrain
from taking, any action inconsistent with Purchaser's rights or obligations
under any of the Facilities Contracts. Purchaser further covenants and agrees
that, in the event that Purchaser transfers any of the Assets, Purchaser, shall
obtain from its transferee a covenant and agreement that is analogous to
Purchaser's covenants and agreements in this SECTION 6.6(g) pursuant to the
first sentence of this SECTION 6.6(g), as well as a covenant and agreement that
is analogous to that of this sentence. This covenant shall survive Closing and
shall continue in effect so long as such Pollution Control Bonds remain
outstanding. Seller agrees to promptly notify Purchaser at such time as no
Pollution Control Bonds remain outstanding. Seller will reimburse Purchaser for
any expenses incurred by Purchaser in connection with Purchaser's compliance
with this SECTION 6.6(g). The term "POLLUTION CONTROL BONDS" means the pollution
control bonds specified on SCHEDULE 6.6(g)(ii), and any refundings thereof,
issued or to be issued on behalf of Seller in connection with the Assets.
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6.7 RISK OF LOSS.
(a) Between the date hereof and the Closing Date, all risk of loss or
damage to the property included in the Assets shall be borne by Seller.
(b) If, before the Closing Date, all or any portion of the Facilities
or the Facilities Switchyard become subject to or is threatened with any
condemnation or eminent domain proceeding, Seller shall notify Purchaser
promptly in writing of such fact. If such taking would create a Material Adverse
Effect, then Purchaser may, at its option, (i) receive from Seller an assignment
of any claim, settlement or proceeds thereof and proceed with the transactions
contemplated by this Agreement, or (ii) terminate this Agreement pursuant to
SECTION 10.1.
(c) If, before the Closing Date all or any portion of the Facilities
or the Facilities Switchyard are damaged or destroyed (whether by fire, theft,
vandalism or other casualty) in whole or in part prior to the Closing, and
Seller's share of the fair market value of such damage or destruction or the
cost of repair of the Facilities or the Facilities Switchyard that were damaged,
lost or destroyed is less than fifteen percent (15%) of the aggregate Purchase
Price, Seller shall, at its option, either (i) reduce the Purchase Price by the
lesser of the Seller's share of the fair market value of the Facilities or the
Facilities Switchyard damaged or destroyed (such value to be determined as of
the date immediately prior to such damage or destruction), or the Seller's share
of the estimated cost to repair or restore the same (any disagreement with
respect thereto being resolved in accordance with SECTION 11.9), (ii) upon the
Closing, transfer the proceeds or the rights to the proceeds of applicable
insurance to Purchaser, or (iii) bear the Seller's share of the costs of
repairing or restoring such damaged or destroyed portions of the Facilities or
the Facilities Switchyard and, at Seller's election, delay the Closing and any
right to terminate this Agreement for a reasonable time necessary to accomplish
the same. If any part of the Facilities or the Facilities Switchyard is damaged
or destroyed (whether by fire, theft, vandalism or other casualty) in whole or
in part prior to the Closing and the lesser of the Seller's share of the fair
market value of the Facilities or the Facilities Switchyard damaged or destroyed
or the Seller's share of the cost of repair is greater than fifteen percent
(15%) of the aggregate Purchase Price, then Purchaser may elect either to (x)
require Seller upon the Closing to transfer the rights to Seller's share of
proceeds (or the right to the proceeds) of applicable insurance to Purchaser and
proceed with the transactions contemplated by this Agreement, or (y) terminate
this Agreement.
6.8 COOPERATION RELATING TO INSURANCE. Until the Closing, Seller will not
take any action that will decrease the level of insurance coverage for the
Facilities and the Facilities Switchyard as in effect on the date hereof,
including, without limitation, property damage and liability insurance, unless
agreed by the other Facilities Owners. In addition, Seller agrees to use
Commercially Reasonable Efforts to assist Purchaser in making any claims against
pre-Closing insurance policies of Seller that may provide coverage related to
Assumed Liabilities. Purchaser agrees that it will indemnify Seller for its
reasonable out-of-pocket expenses incurred in providing such assistance and
cooperation. On and after the Closing, Seller authorizes the Operating Agent to
take any actions necessary to remove Seller from any Facilities Insurance
Policies and Seller agrees to waive its rights with respect to such insurance
coverage from and after the Closing. If requested by Seller, Purchaser agrees to
exercise Commercially Reasonable
39
Efforts to assist Seller, at Seller's cost, in obtaining so-called "tail"
coverage in respect of claims brought after the Closing for events occurring
prior to the Closing, including, if appropriate, listing Seller as an additional
insured or named insured in policies of Purchaser and/or the Facilities Owners.
6.9 CONFIDENTIALITY.
(a) GENERAL. Each Party (and its officers, employees, counsel,
representatives and agents) will, using the same degree of care as that Party
takes to preserve and safeguard its own confidential information, maintain in
confidence and not disclose to third Persons, any Confidential Information
received from the other Party (or its officers, employees, counsel,
representatives and agents) in connection with the transactions contemplated by
this Agreement. Each Party may disclose Confidential Information received from
the other Party if and to the extent required by law, court order, subpoena or
other lawful order of a Governmental Authority with jurisdiction, or with the
prior written consent of the other Party. If this Agreement is terminated
pursuant to ARTICLE 10 "Termination," each Party will return promptly, if so
requested by the other Party, any Confidential Information provided to it and
will use Commercially Reasonable Efforts to return any copies thereof that may
have been provided to others in accordance with this SECTION 6.9
"Confidentiality." To the extent practicable, the Parties further agree, subject
to Section 6.13, to not issue any public announcement, statement, press release
or other public disclosure with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of the other Party, which
consent will not be unreasonably withheld. To the extent the provisions of this
SECTION 6.9(a) conflict with the Confidentiality Agreement, this SECTION 6.9(a)
shall supersede the applicable provision of the Confidentiality Agreement.
(b) REGULATORY AGENCIES. Subject to SECTION 6.1(a), upon the other
Party's prior written approval (which, except as provided below, will not be
unreasonably withheld), either Party may provide Confidential Information to the
CPUC, FERC or any other Governmental Authority with jurisdiction as necessary to
obtain Seller's Required Regulatory Approvals or Purchaser's Required Regulatory
Approvals or approval under the HSR Act. The disclosing Party will seek
confidential treatment for the Confidential Information provided to any
Governmental Authority and the disclosing Party will notify the other Party as
far in advance as is practicable of its intention to release to any Governmental
Authority any Confidential Information.
(c) SURVIVAL. The obligations of the Parties in this Section 6.9
"Confidentiality" will survive the termination of this Agreement, the discharge
of all other obligations owed by the Parties to each other, any transfer of
title to the Assets and the Closing of the transactions contemplated in this
Agreement.
6.10 ADEQUATE ASSURANCE. Within thirty (30) days following Seller's Section
851 filing with the CPUC relating to this Agreement and Collateral Agreement (if
not already received):
(a) a copy of the Sixth Amendment to the Facilities Co-Tenancy
Agreement executed by all Participants, including the Operating Agent;
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(b) a copy of the Navajo Protocol Agreement executed by the Navajo
Nation;
(c) adequate assurance from the Operating Agent that, with respect to
the Facilities, the Operating Agent will cooperate with Seller (at Seller's
cost) to provide Seller or Seller's authorized agents with timely access to due
diligence information concerning and access to the Facilities (subject to a
customary site access agreement) in good faith in accordance with its
obligations under the Facilities Contracts. Such adequate assurance shall not
obligate the Operating Agent to exceed its rights and obligations under the
Facilities Contracts and in the event the Operating Agent believes, in good
faith that it is unable to provide such information or access, such
determination shall be binding on the Seller for purposes of this Agreement,
unless the Facilities Owners shall determine otherwise, in accordance with the
provisions of the Co-Tenancy Agreement or the Facilities Operating Agreement,
provided that nothing herein shall be deemed or construed to limit Seller's
rights of access or information under the Co-Tenancy Agreement or the other
Facilities Contracts or to which it may otherwise be entitled as a
tenant-in-common with respect to the Assets.
6.11 TITLE TO REAL PROPERTY AND LEASED PROPERTY. As soon as reasonably
possible after the Effective Date, Seller and Purchaser shall work cooperatively
with the Operating Agent to cause Title Insurer to deliver a current preliminary
title report on the real property and leased property included in the Assets,
accompanied by legible copies of all documents referred to in the exception
portion of such report, to Purchaser (the "PRELIMINARY TITLE REPORT"). Purchaser
shall have not more than thirty (30) days from the delivery date of the
Preliminary Title Report in which to review and to give Seller and Title Insurer
written notice of any title exception which is unacceptable to Purchaser, and,
in the event any amendment is issued to the Preliminary Title Report, Purchaser
shall have not more than thirty (30) days from the delivery of an amendment to
deliver a written objection to any title exception appearing for the first time
in such amendment. If Purchaser is dissatisfied with any exception to title as
shown in the Preliminary Title Report, then, Seller shall have until the Closing
to eliminate any disapproved exceptions from the Preliminary Title Report, or
obtain title insurance endorsements against such exceptions. If Seller cannot
remove such exceptions or obtain title insurance endorsements before the
Closing, then Purchaser may either cancel this Agreement, or Purchaser may waive
such objections and the transaction shall close as scheduled, provided that if
Purchaser disapproves any title exception that would otherwise qualify as a
Permitted Encumbrance under SECTION 1.1.59 but for Purchaser's position that
such title exception constitutes or will constitute a Material Adverse Effect,
then Seller shall have the right to terminate this Agreement (and the Collateral
Agreement) on fifteen (15) Business Days' notice given within thirty (30) days
following Purchaser's disapproval of such title exception. Notwithstanding any
other provision hereof, the following exceptions shall be deemed accepted by
Purchaser and need not be removed or endorsed over: (a) Permitted Encumbrances;
and (b) exceptions not objected to in writing by Purchaser during the time
periods set forth above.
6.12 RIGHT OF FIRST REFUSAL. If one or more of the Facilities Owners
exercises their right of first refusal with respect to the Assets under the
Facilities Co-Tenancy Agreement, Purchaser's affiliate, APS shall, subject to
the terms and conditions of the Facilities Co-Tenancy Agreement and without
limitation of any of the rights of the other the Facilities Owners thereunder,
automatically and without further notice to Seller be deemed to have exercised
its
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right of first refusal with respect to the Assets to the maximum extent
permitted by the Facilities Co-Tenancy Agreement. Seller hereby agrees to
promptly orally notify Purchaser, confirmed in writing, as to any notices
received by Seller pursuant to Section 13 of the Facilities Co-Tenancy Agreement
regarding the Facilities Owners' right of first refusal.
6.13 THIRD PARTY OFFERS.
(a) Within forty-five (45) days (or more, up to ninety (90) days in
the aggregate, as determined by Seller) before or after Seller's Section 851
filing with the CPUC relating to this Agreement and the Collateral Agreement
(the "INITIAL PERIOD"), Seller may solicit or invite Superior Offers or written
indications of interest from Qualified Offerors by such means as Seller deems
appropriate, including issuing press releases, public announcements, mailings of
relevant portions of such Section 851 filing to prospective Qualified Offerors,
invitation letters, and similar means. Upon the expiration of the Initial
Period, Seller will cease all active solicitations of third parties with respect
to any actual or potential Superior Offers. Within five (5) days following the
close of the Initial Period, Seller will provide Purchaser with copies of any
Superior Offers or indications of interest for Superior Offers received by
Seller during the Initial Period, and Seller shall designate one such offer or
indication of interest as its Initial Period offer for purposes of Purchaser's
rights in the following sentence (the "INITIAL PERIOD OFFER"). Thereafter, until
fifteen (15) days after the close of the Initial Period (the "SECOND PERIOD"),
Purchaser shall have the right to eliminate further consideration of any
Superior Offers or indications of interest for a Superior Offer by providing
Seller written notification that Purchaser will match the Initial Period Offer
(net of the Termination Fee and the Incremental Costs) by providing written
notice thereof to Seller during the Second Period. Purchaser and Seller shall
then enter into amendments to this Agreement or this Agreement and the
Collateral Agreement, as the case may be, that would result in this Agreement or
this Agreement and the Collateral Agreement, as the case may be, having a cash
Purchase Price, after application of cash adjustments and cash reimbursements
equal to the Initial Period Offer cash purchase price, after application of cash
adjustments and cash reimbursements specified therein, and less the Termination
Fee and the Incremental Costs.
(b) If, by the end of the Second Period, the Purchaser has not
indicated to Seller its intent to match the Initial Period Offer in the manner
described IN SECTION 6.13(a), Seller may engage in further negotiations and
discussions regarding remaining Superior Offers or indications of interest
therefor received during the Initial Period for a period of up to 75 days (or
more, up to 120 days in the aggregate, as determined by Seller) following the
end of the Second Period (the "ACCEPTANCE PERIOD"). During the Acceptance
Period, the Seller may provide information to the Qualified Offerors, engage in
substantive discussions and negotiations with the Qualified Offerors or conduct
one or more auctions among the Qualified Offerors. In the event that Seller
elects to enter into a binding agreement with a Qualified Offeror with respect
to a Superior Offer (a "THIRD PARTY AGREEMENT"), Seller must provide, no later
than ten (10) days following the Acceptance Period and prior to entering into
the Third Party Agreement (or after entering into the Third Party Agreement but
subject to the terms of this Section 6.13) written notice thereof, which notice
shall include all the terms and conditions of the Third Party Agreement. The
Parties will then have the following rights:
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(i) Within thirty (30) days following Seller's notice to
Purchaser of Seller's intent to enter or entry into the Third Party Agreement,
the Purchaser may notify Seller that Purchaser agrees to amend this Agreement
(and, to the extent applicable, the Collateral Agreement) to conform its terms,
conditions and price to those of the Third Party Agreement (net of the
Termination Fee). Such notice by Purchaser shall be accompanied by such
amendments proposed by Purchaser. Such amendments shall be deemed adopted,
unless Seller notifies Purchaser in writing of its specific objections thereto
within ten (10) Business Days of its receipt of Purchaser's notice, in which
case the Parties shall exercise Commercially Reasonable Efforts to resolve such
disagreements as quickly as reasonably practicable and to execute appropriate
amendments in good faith within twenty (20) Business Days following Purchaser's
original notice under this clause (i), it being understood that any disagreement
between the Parties shall be subject to arbitration in accordance with the
provisions hereof. Upon execution of such amendments, the Third Party Agreement
shall be of no further force and effect (except as a standby commitment should
the Closing not occur under this Agreement as amended);
(ii) If the Third Party Agreement relates to the assets and
liabilities subject to this Agreement and the Collateral Agreement and the
Purchaser does not elect to amend the Collateral Agreement and this Agreement
within thirty (30) days following Purchaser's receipt of Seller's notice, the
Collateral Agreement and this Agreement will automatically terminate and the
Seller shall, within five (5) Business Days, pay the Purchaser a termination fee
equal to two and one-half percent (2.5%) of the Initial Purchase Price for the
transactions contemplated by the Collateral Agreement and this Agreement, it
being agreed that Purchaser will be entitled to a termination fee under this
Agreement only if APS does not purchase the Facilities (the appropriate amount
paid under this SECTION 6.13(b)(ii) and the last sentence of SECTION
6.13(b)(iii) is referred to herein as the "TERMINATION FEE"); and
(iii) If the Third Party Agreement relates only to the assets and
liabilities subject to this Agreement and Purchaser does not elect to amend this
Agreement within thirty (30) days following Purchaser's receipt of Seller's
notice, the Purchaser will be required (A) to consummate the transaction
contemplated by the Collateral Agreement, subject to Seller's condition that
there be a closing on assets and liabilities subject to the Third Party
Agreement or a right of first refusal under the Co-Tenancy Agreement (each, a
"FOUR CORNERS CLOSING") and (B) to remain committed as a standby purchaser under
this Agreement, according to its original terms, if a closing under the Third
Party Agreement does not occur, subject to (I) an extension of the Closing Date
as is reasonably required to secure required consents and approvals, but in no
event for more than sixty (60) days and (II) Purchaser's condition that the
Closing occurs under the Collateral Agreement, with the closing date under the
Collateral Agreement being extended to the extent that Closing Date hereunder is
extended. If the Closing fails to occur under this Agreement (including on a
standby basis), Seller shall, within five (5) Business Days of the earlier of
the date of (A) a Four Corners Closing or (B) Purchaser's no longer being bound
under the foregoing standby commitment (for other than Purchaser's default or
breach), pay the Purchaser a termination fee equal to
43
two and one-half percent (2.5%) of the Initial Purchase Price for the
transactions contemplated by this Agreement.
(c) Notwithstanding anything in this SECTION 6.13 to the contrary,
Seller will not disclose to any third party Confidential Information provided by
Purchaser in violation of SECTION 6.9 or the Confidentiality Agreement.
(d) The Parties agree that the validity and enforceability of
Purchaser's rights under this Section 6.13 shall be subject to the CPUC's
approval of this Agreement or of Purchaser's rights under this Section 6.13.
6.14 POST CLOSING - ADDITIONAL OFFERS. Subject to CPUC's approval of this
Section (which shall be deemed to have been obtained if the CPUC approves this
Agreement without disapproving this Section), in the event that (a) this
Agreement is terminated for any reason other than Seller's termination pursuant
to SECTION 10.1(a) hereof or pursuant TO SECTION 10.1(G) hereof for failure of
Seller's conditions specified in SECTIONS 9.1, 9.4 (as to Purchaser's Required
Regulatory Approvals), 9.5, 9.6, 9.7, or 9.10, (b) Seller within one year of
such termination enters into an agreement for the sale of substantially all of
the Facilities or for a portfolio of assets that includes all or a portion of
Seller's interest in the Facilities with a third party or such third party's
Affiliate from whom Seller, before such termination, received (i) a Superior
Offer or indication of interest in making a Superior Offer subsequent to
Seller's Section 851 filing; or (ii) any offer or indication of interest within
ninety (90) days prior to Seller's Section 851 filing, and (c) such agreement is
not entered into through an auction process, then and in such event, Purchaser
shall have a thirty-day right of first refusal to match the third party offer
(and, in the event Seller receives a bona fide third party offer for a portfolio
of assets that includes all or a portion of Seller's interest in the Facilities,
Purchaser shall have the option to match the portion of the offer that relates
to Seller's interest in the Facilities (and the Facilities Switchyard).
6.15 POST CLOSING - FURTHER ASSURANCES. At any time or from time to time
after the Closing, each Party will, upon the reasonable request of the other
Party, execute and deliver any further instruments or documents, and exercise
Commercially Reasonable Efforts to take such further actions as may reasonably
be required to fulfill and implement the terms of this Agreement or realize the
benefits intended to be afforded hereby. After the Closing, and upon prior
reasonable request, each Party shall exercise Commercially Reasonable Efforts to
cooperate with the other, at the requesting Party's expense (but including only
out-of-pocket expenses to third parties and not the costs incurred by any Party
for the wages or other benefits paid to its officers, directors or employees),
in furnishing non-privileged records, information, testimony and other
assistance in connection with any inquiries, actions, audits, proceedings or
disputes involving either of the Parties hereto (other than in connection with
disputes between the Parties hereto) and based upon contracts, arrangements or
acts of Seller, Purchaser, the other Facilities Owners or the Operating Agent on
behalf of one or more of the Facilities Owners which were in effect or occurred
on, prior to, or after Closing and which relate to the Assets, including,
without limitation, arranging discussions with (and calling as a witness)
officers, directors, employees, agents, and representatives of Purchaser or the
Seller.
6.16 POST CLOSING - INFORMATION AND RECORDS.
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(a) Books and Records.
(i) For a period of seven (7) years after the Closing (or, if
requested in writing by Seller within seven (7) years after the Closing, until
the closing of the examination of Seller's federal income Tax Returns for all
periods prior to and including the Closing, if later), Purchaser will not
dispose of any books, records, documents or information reasonably relating to
any of the Assets delivered to it by Seller without first giving notice to
Seller thereof and permitting Seller to retain or copy such books and records as
it may select. During such period, Purchaser will permit Seller to examine and
make copies, at Seller's expense, of such books, records, documents and
information for any reasonable purpose, including any litigation now pending or
hereafter commenced against Seller, or the preparation of income or other Tax
Returns.
(ii) During such seven (7) year time period, Purchaser will
provide to Seller, at Seller's expense, copies of such books, records, documents
and information reasonably relating to any of the Assets delivered to it by
Seller for any reasonable purpose, including any litigation now pending or
hereafter commenced against Seller by any person (including Purchaser). Seller
will provide reasonable notice to Purchaser of its need to access such books,
records, documents or other information.
(iii) If privileged and/or attorney work product documents or
information, including, communications between Seller and its counsel, are
disclosed to Purchaser in the books, records, documents or other information
delivered by Seller, Purchaser agrees (1) such disclosure is inadvertent, (2)
such disclosure will not constitute a waiver, in whole or in part, of any
privilege or work product, (3) such information will constitute Confidential
Information, and (4) it will promptly return to Seller all copies of such books,
records, documents or other information in the possession of Purchaser.
6.17 RELEASE. Except for the Excluded Liabilities and to the extent of
Seller's obligations hereunder or under any Ancillary Agreement, including
without limitation under ARTICLE 7 (including without limitation Seller's
obligations under ARTICLE 7 as the result of the breach of any provision
hereof), Purchaser on behalf of itself and each of its parent, subsidiary and
sister entities (excluding APS), and each successor or assign thereof, hereby
waives its right to recover from Seller or from any Affiliate of Seller or any
Person acting on behalf of Seller or any such Affiliate, and forever releases
and discharges Seller, and any such Affiliate and any such other Person, from
any and all damages, claims, losses, liabilities, penalties, fines, liens,
judgments, costs, or expenses whatsoever (including, without limitation,
attorneys' fees and costs), whether direct or indirect, known or unknown,
foreseen or unforeseen, that may arise on account of or in any way be connected
with the Assumed Liabilities. In this regard, Purchaser, on behalf of itself and
each of its parent, subsidiary and sister entities (excluding APS), and each
successor or assign
45
thereof, expressly waives any and all rights and benefits that it now has, or in
the future may have conferred upon it by virtue of any statute or common law
principle which provides that a general release does not extend to claims which
a party does not know or suspect to exist in its favor at the time of executing
the release, if knowledge of such claims would have materially affected such
party's settlement with the obligor. Purchaser, on behalf of itself and each of
its parent, subsidiary and sister entities (excluding APS), and each successor
or assign thereof, hereby further acknowledges that it is aware that factual
matters now unknown to it may have given or may hereafter give rise to claims,
losses and liabilities that are presently unknown, unanticipated and
unsuspected, that the release contained herein has been negotiated and agreed
upon in light of such awareness, and that it nevertheless hereby intends to be
bound to the release set forth above.
6.18 FACILITIES SWITCHYARD CAPACITY. From and after the Closing Date,
Purchaser shall permit Seller, at Seller's cost, to use capacity in the
Facilities Switchyard available to Purchaser (and not required for transmission
of Purchaser's entitlement from the Facilities related to the interest therein
being purchased under this Agreement) as required for Seller to comply with its
obligations under existing power or transmission sale, purchase, or exchange
agreements with third parties.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION BY SELLER.
(a) PURCHASER CLAIMS. From and after the Closing, Seller will
indemnify, defend and hold harmless Purchaser and its parents and Affiliates,
and each of their officers, directors, employees, attorneys, agents and
successors and assigns (collectively, the "PURCHASER GROUP"), from and against
any and all demands, suits, penalties, obligations, damages, claims, losses,
liabilities, payments, costs and expenses (including reasonable legal,
accounting and other expenses in connection therewith) and including costs and
expenses incurred in connection with investigations and settlement proceedings
which arise out of, in connection with, or relate to, the following
(collectively, "PURCHASER CLAIMS"):
(i) any breach or violation of any covenant or agreement of
Seller set forth in this Agreement;
(ii) any breach or inaccuracy of the representations or
warranties made by Seller contained in this Agreement in ARTICLE 4;
(iii) the Excluded Liabilities; and
(iv) any loss or damages resulting from or arising out of
Seller's ownership or operation of the Excluded Assets after the Closing.
(b) SELLER LIMITATIONS. If the Closing occurs, the Purchaser Group
will not be entitled to any punitive, incidental, indirect, special or
consequential damages resulting from or arising out of any Purchaser Claims,
including damages for lost revenues, income, profits or tax benefits, diminution
in value of the Facilities or any other damage or loss resulting from the
disruption to or loss of operation of the Assets, except to the extent due on
any Third Party Claim. The aggregate damages to which the Purchaser Group will
be entitled under SECTION 7.1(a)(ii) shall be limited to the Purchase Price.
46
7.2 INDEMNIFICATION BY PURCHASER.
(a) SELLER CLAIMS. From and after the Closing, Purchaser will
indemnify, defend and hold harmless Seller and its parents and Affiliates and
each of their officers, directors, employees, attorneys, agents and successors
and assigns (collectively, the "SELLER GROUP"), from and against any and all
demands, suits, penalties, obligations, damages, claims, losses, liabilities,
payments, costs and expenses (including reasonable legal, accounting and other
expenses in connection therewith) and including costs and expenses incurred in
connection with investigations and settlement proceedings which arise out of or
relate to the following (collectively, "SELLER CLAIMS"):
(i) any breach or violation of any covenant or agreement of
Purchaser set forth in this Agreement;
(ii) any breach or inaccuracy of any of the representations or
warranties made by Purchaser contained in this Agreement in ARTICLE 5;
(iii) the Assumed Liabilities; and
(iv) any loss or damages resulting from or arising out of
Purchaser's ownership or operation of the Assets from and after the Closing.
(b) PURCHASER LIMITATIONS. If the Closing occurs, the Seller Group
will not be entitled to any punitive, incidental, indirect, special or
consequential damages resulting from or arising out of any Seller Claim,
including damages for lost revenues, income, profits or tax benefits, diminution
in the value of the Facilities or any other damage or loss resulting from the
disruption to or loss of operation of the Assets, except to the extent due on
any Third Party Claim. The aggregate damages to which the Seller Group will be
entitled to under SECTION 7.2(a)(ii) shall be limited to the Purchase Price.
7.3 NOTICE OF CLAIM. Subject to the terms of this Agreement and upon a
Party's receipt of notice of the assertion of a claim or of the commencement of
any suit, action or proceeding made or brought by any Person who is not a Party
to this Agreement or an Affiliate, the Party seeking indemnification hereunder
(the "INDEMNITEE") will promptly notify the Party against whom indemnification
is sought (the "INDEMNITOR") in writing of any damage, claim, loss, liability or
expense which the Indemnitee has determined has given or could give rise to a
claim under SECTION 7.1 "Indemnification by Seller" or SECTION 7.2
"Indemnification by Purchaser." (The written notice is referred to as a "NOTICE
OF CLAIM.") A Notice of Claim will specify, in reasonable detail, the facts
known to the Indemnitee regarding the claim. Subject to the terms of this
Agreement, the failure to provide (or timely provide) a Notice of Claim will not
affect the Indemnitee's rights to indemnification; provided, however, the
Indemnitor is not obligated to indemnify the Indemnitee for the increased amount
of any claim which would otherwise have been payable to the extent that the
increase resulted from the failure to deliver timely a Notice of Claim.
7.4 DEFENSE OF THIRD PARTY CLAIMS. The Indemnitor will defend, in good
faith and at its expense, any claim or demand set forth in a Notice of Claim
relating to a Third Party Claim
47
and the Indemnitee, at its expense, may participate in the defense. The
Indemnitee cannot settle or compromise any Third Party Claim so long as the
Indemnitor is defending it in good faith. If the Indemnitor elects not to
contest a Third Party Claim, the Indemnitee may undertake its defense, and the
Indemnitor will be bound by the result obtained by the Indemnitee. The
Indemnitor may at any time request the Indemnitee to agree to the abandonment of
the contest of the Third Party Claim or to the payment or compromise by the
Indemnitor of the asserted claim or demand. If the Indemnitee does not object in
writing within fifteen (15) days of the Indemnitor's request, the Indemnitor may
proceed with the action stated in the request. If within that fifteen (15) day
period the Indemnitee notifies the Indemnitor in writing that it has determined
that the contest should be continued, the Indemnitor will be liable under this
ARTICLE 7 "Indemnification" only for an amount up to the amount which the third
party to the contested Third Party Claim had agreed to accept in payment or
compromise as of the time the Indemnitor made its request. This SECTION 7.4
"Defense of Third Party Claims" is subject to the rights of any Indemnitee's
insurance carrier that is defending the Third Party Claim.
7.5 COOPERATION. The Party defending the Third Party Claim will (a) consult
with the other Party throughout the pendency of the Third Party Claim regarding
the investigation, defense, settlement, trial, appeal or other resolution of the
Third Party Claim; and (b) afford the other Party the opportunity to be
associated in the defense of the Third Party Claim. The Parties will cooperate
in the defense of the Third Party Claim. The Indemnitee will make available to
the Indemnitor or its representatives all records and other materials reasonably
required by them for use in contesting any Third Party Claim (subject to
obtaining an agreement to maintain the confidentiality of confidential or
proprietary materials in a form reasonably acceptable to Indemnitor and
Indemnitee). If requested by the Indemnitor, the Indemnitee will cooperate with
the Indemnitor and its counsel in contesting any Third Party Claim that the
Indemnitor elects to contest or, if appropriate, in making any counterclaim
against the Person asserting the claim or demand, or any cross-complaint against
any Person. The Indemnitor will reimburse the Indemnitee for any expenses
incurred by Indemnitee in cooperating with or acting at the request of the
Indemnitor.
7.6 MITIGATION AND LIMITATION ON CLAIMS. As used in this Agreement, the
term "INDEMNIFIABLE CLAIM" means any Purchaser Claims or Seller Claims.
Notwithstanding anything to the contrary contained herein:
(a) REASONABLE STEPS TO MITIGATE. The Indemnitee will take all
reasonable steps to mitigate all losses, damages and the like relating to an
Indemnifiable Claim, including availing itself of any defenses, limitations,
rights of contribution, claims against third Persons and other rights at law or
equity, and will provide such evidence and documentation of the nature and
extent of the Indemnifiable Claim as may be reasonably requested by the
Indemnitor. The Indemnitee's reasonable steps include the reasonable expenditure
of money to mitigate or otherwise reduce or eliminate any loss or expense for
which indemnification would otherwise be due under this ARTICLE 7
"Indemnification," and the Indemnitor will reimburse the Indemnitee for the
Indemnitee's reasonable expenditures in undertaking the mitigation, together
with interest thereon from the date of payment to the date of repayment at the
"prime rate" as published in THE WALL STREET JOURNAL.
48
(b) NET OF BENEFITS. Any Indemnifiable Claim is limited to the amount
of actual damages sustained by the Indemnitee by reason of such breach or
nonperformance.
(c) MINIMUM CLAIM. No Party shall have any liability or obligation to
indemnify under SECTION 7.1(a)(ii) or SECTION 7.2(a)(ii), as the case may be,
unless the aggregate amount for which such Party would be liable thereunder, but
for this provision, exceeds one percent (1%) of the Initial Purchase Price, and
recovery shall be limited only to such amounts as exceed such percentage of the
Initial Purchase Price. For purposes of the foregoing, individual claims of
Fifteen Thousand Dollars ($15,000) or less shall not be aggregated for purposes
of calculating such deductible threshold amount or for calculating damages in
excess of such amount. Nothing in this SECTION 7.6 is intended to modify or
limit a Party's liability or obligation hereunder for other Indemnifiable Claims
or to constitute an assumption by Purchaser of any Excluded Liability or an
assumption by Seller of any Assumed Liability.
7.7 EXCLUSIVITY. Except for intentional fraud, following the Closing, the
rights and remedies of Seller, on the one hand, and Purchaser, on the other
hand, for money damages under this Article are, solely as between Seller on the
one hand, and Purchaser on the other hand, exclusive and in lieu of any and all
other rights and remedies for money damages which each of Seller on the one
hand, and Purchaser on the other hand, may have under this Agreement, under
applicable Law, with respect to any Indemnifiable Claim, whether at common law
or in equity.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF
PURCHASER AT THE CLOSING
The obligations of Purchaser under this Agreement to complete the purchase
of the Assets and assume the Assumed Liabilities are subject to the satisfaction
or waiver, or deemed satisfaction or waiver, on or prior to the Closing, of each
of the following conditions precedent:
8.1 COMPLIANCE WITH PROVISIONS. Seller has performed or complied in all
material respects with all covenants, agreements and conditions contained in
this Agreement on its part required to be performed or complied with at or prior
to the Closing.
8.2 HSR ACT. The waiting period under the HSR Act applicable to the
consummation of the sale of the Assets contemplated hereby shall have expired or
been terminated;
8.3 INJUNCTION. No preliminary or permanent injunction or other order or
decree by any federal or state court or Governmental Authority which prevents
the consummation of the sale of the Assets contemplated herein shall have been
issued and remain in effect (each Party agreeing to cooperate in all efforts to
have any such injunction, order or decree lifted) and no Law shall have been
enacted by any state or federal government or Governmental Authority which
prohibits the consummation of the sale of the Assets;
8.4 REQUIRED REGULATORY APPROVALS. Without limiting the generality of
SECTIONS 6.1(a) and 6.5, Purchaser shall have received all of Purchaser's
Required Regulatory Approvals
49
and Seller shall have received all of Seller's Required Regulatory Approvals,
which approvals shall contain no condition which could reasonably be expected to
have a Material Adverse Effect on the Assets or Purchaser.
8.5 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Seller set forth in this Agreement shall be true and correct in all material
respects as of the Closing Date, in each case as though made at and as of the
Closing Date;
8.6 OFFICER'S CERTIFICATE. Purchaser shall have received a certificate from
Seller, executed by an authorized officer, dated the Closing Date, to the effect
that the conditions set forth in SECTIONS 8.1, 8.4, (insofar as it relates to
Seller's Required Regulatory Approvals as specified in clause (i) of the
definition thereof), 8.5 and 8.10 (insofar as it relates to Seller's Required
Consents as specified in clause (i) of the definition thereof) have been
satisfied by Seller;
8.7 TITLE POLICY/INSURANCE. Title to Assets comprised of interests in real
property and leased property shall have been evidenced by the willingness of a
title insurer mutually agreeable to the Parties (the "TITLE INSURER") to issue
at regular rates ALTA owner's, or lessee's, as the case may be, extended
coverage policies of title insurance (1990 Form B) (the "TITLE POLICIES"), with
the general survey and creditors' rights exceptions removed, in amounts equal to
the portion of the Purchase Price allocated to such interests, showing title to
such interests in such real property vested in Purchaser in the condition
described in SECTION 6.11, subject only to Permitted Encumbrances, and transfer
of such interest to Purchaser. The willingness of Title Insurer to issue the
Title Policies shall be evidenced either by the issuance thereof at the Closing
or by the title Insurer's delivery of written commitments or binders, dated as
of the Closing (but insuring title as of the date title conveyance documents are
recorded), to issue such Title Policies within a reasonable time after the
Closing Date, subject to actual transfer of the real property in question.
8.8 MATERIAL ADVERSE EFFECT. Subject to SECTION 6.7, since the Effective
Date, no Material Adverse Effect shall have occurred and be continuing with
respect to the Facilities and the Facilities Switchyard.
8.9 LIENS. Any and all liens and encumbrances (other than Permitted
Encumbrances) on the Assets constituting personal property shall have been
released and any documents necessary to evidence such release shall have been
delivered to the Purchaser.
8.10 SELLER'S REQUIRED CONSENTS. Without limiting the generality of
SECTIONS 6.1(a) and 6.5, all of Seller's Required Consents shall have been
obtained.
8.11 LEGAL OPINION. Purchaser shall have received an opinion from Seller's
counsel dated the Closing Date and reasonably satisfactory in form and substance
to Purchaser and its counsel as to the matters specified in EXHIBIT B.
8.12 NO TERMINATION. Neither Party has exercised any termination right such
Party is entitled to exercise pursuant to SECTION 10.1.
50
8.13 RIGHT OF FIRST REFUSAL AND NOTICE. The right of first refusal and
notice periods set forth in SECTIONS 13.3 and 13.4 of the Facilities Co-Tenancy
Agreement shall have expired or shall have been waived.
8.14 COLLATERAL AGREEMENT. The closing under the Collateral Agreement shall
have occurred or will occur concurrent with the Closing.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER AT THE CLOSING
The obligations of Seller under this Agreement to complete the sale of the
Assets and transfer the Assets and Assumed Liabilities to Purchaser are subject
to the satisfaction or waiver, or deemed satisfaction or waiver, on or prior to
the Closing, of each of the following conditions precedent:
9.1 COMPLIANCE WITH PROVISIONS. Purchaser has performed or complied in all
material respects with all covenants, agreements and conditions contained in
this Agreement on its part required to be performed or complied with at or prior
to the Closing.
9.2 HSR ACT. The waiting period under the HSR Act applicable to the
consummation of the sale of the Assets contemplated hereby shall have expired or
been terminated;
9.3 INJUNCTION. No preliminary or permanent injunction or other order or
decree by any federal or state court or Governmental Authority which prevents
the consummation of the sale of the Assets contemplated herein shall have been
issued and remain in effect (each Party agreeing to use its best efforts to have
any such injunction, order or decree lifted) and no Law shall have been enacted
by any state or federal government or Governmental Authority in the United
States which prohibits the consummation of the sale of the Assets;
9.4 APPROVALS. Without limiting the generality of SECTIONS 6.1(a) and 6.5,
Purchaser shall have received all of Purchaser's Required Regulatory Approvals,
and Seller shall have received all of Seller's Required Regulatory Approvals
which approvals shall contain no condition which could reasonably be expected to
have a Material Adverse Effect on Seller; without limiting the generality of the
foregoing, the CPUC shall have approved Seller's application to sell the Assets
in accordance with the terms hereof pursuant to Section 851 of the California
Public Utilities Code, the Seller shall have approved the ratemaking treatment
of the transactions contemplated hereby and by the Collateral Agreement as well
as the calculation and recovery of transition cost arising therefrom and related
thereto, and there shall additionally have been no material change in the
regulations, policies, principles or terms of the restructuring of the
California electrical utilities industry set forth in California Assembly Xxxx
1890 or in the CPUC's Policy Decision on Restructuring enunciated in D.00-00-000
dated December 20, 1995, as modified by D.00-00-000;
9.5 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Purchaser set forth in this Agreement and of the Guarantor set forth in the
Guaranty shall be true
51
and correct in all material respects as of the Closing Date, in each case as
though made at and as of the Closing Date;
9.6 OFFICER'S CERTIFICATE. Seller shall have received a certificate from
Purchaser, executed by an authorized officer, dated the Closing Date, to the
effect that the conditions set forth in SECTIONS 9.1, 9.4 (insofar as it relates
to Purchaser's Required Regulatory Approvals as specified in clause (i) of the
definition thereof) AND 9.5, AND 9.10 (insofar as it relates to Purchaser's
Required Consents as specified in clause (i) of the definition thereof) have
been satisfied by Purchaser;
9.7 LEGAL OPINIONS. Seller shall have received an opinion from Purchaser's
counsel dated the Closing Date and reasonably satisfactory in form and substance
to Seller and its counsel as to the matters specified in EXHIBIT C.
9.8 NO TERMINATION. Neither Party has exercised any termination right such
Party is entitled to exercise pursuant to SECTION 10.1 "Termination."
9.9 RIGHT OF FIRST REFUSAL. The right of first refusal and notice periods
set forth in Sections 13.3 and 13.4 of the Facilities Co-Tenancy Agreement
Condition shall have expired or shall have been waived.
9.10 PURCHASER'S REQUIRED CONSENTS. Without limiting the generality of
SECTIONS 6.1(a) AND 6.5, all of Purchaser's Required Consents shall have been
obtained, subject to SECTION 3.7, and the Closing shall not result in a material
breach by Seller of a material Facilities Contract.
ARTICLE 10
TERMINATION
10.1 RIGHTS TO TERMINATE. This Agreement, or to the extent specifically
permitted herein a portion thereof, may, by written notice given on or prior to
the Closing Date, in the manner provided in SECTION 11.10 "Notices," be
terminated at any time prior to the Closing Date:
(a) by Seller if there has been a material misrepresentation or a
material default or breach by Purchaser with respect to Purchaser's
representations and warranties in this Agreement or the due and timely
performance of any of Purchaser's covenants and agreements contained in this
Agreement, and such misrepresentation, default or breach is not cured by the
earlier of the Closing Date or the date thirty (30) days after receipt by
Purchaser of written notice specifying particularly such misrepresentation,
default or breach;
(b) by Purchaser if there has been a material misrepresentation or a
material default or breach by Seller with respect to Seller's representations
and warranties in this Agreement or the due and timely performance of any of
Seller's covenants and agreements contained in this Agreement, and such
misrepresentation, default or breach is not cured by the earlier of the Closing
Date or the date thirty (30) days after receipt by Seller of written notice
specifying particularly such misrepresentation, default or breach;
52
(c) by Purchaser, upon written notice to Seller, if any of the
Purchaser's Required Regulatory Approvals shall have been denied (and a petition
for rehearing or refiling of an application initially denied without prejudice
shall also have been denied), and such denial was not caused by or the result of
a breach of this Agreement by Purchaser, or if the Purchaser's Required
Regulatory Approvals shall have been granted but are not in form and substance
reasonably satisfactory to Purchaser (including adverse conditions relating to
Purchaser or the Assets);
(d) by Seller, upon written notice to Purchaser, if any of the
Seller's Required Regulatory Approvals shall have been denied (and a petition
for rehearing or refiling of an application initially denied without prejudice
shall also have been denied), and such denial was not caused by or the result of
a breach of this Agreement by Seller, or shall have been granted but are not in
form and substance reasonably satisfactory to Seller (including adverse
conditions relating to Seller or the Assets);
(e) by Purchaser in accordance with SECTION 6.7 "Risk of Loss";
(f) by mutual agreement of Seller and Purchaser; or
(g) subject to SECTION 6.13(b)(iii), by Seller or Purchaser if the
conditions to such Party's Closing have not occurred by December 31, 2001, or if
the conditions of the terminating Party for Closing cannot reasonably be met by
such date, unless the reason for the failure of condition set forth in this
SECTION 10.1(G) is the result of the material breach of this Agreement by the
Party seeking to terminate.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
SECTION 10.1 "Rights To Terminate," all further obligations and liabilities of
the Parties hereunder will terminate, except (i) as set forth in ARTICLE 7 or as
otherwise contemplated by the Agreement, (ii) for the obligations set forth in
Sections 4.12 "Brokers," 5.7 "Brokers," 6.9 "Confidentiality," and ARTICLE 11
"Miscellaneous Agreements and Acknowledgments," and (iii) for the obligations of
the Parties set forth in the Confidentiality Agreement. Upon termination, the
originals of any items, documents or written materials provided by one Party to
the other Party will be returned by the receiving Party to the providing Party,
and any Confidential Information retained by the receiving Party will be kept
confidential.
10.3 SPECIFIC PERFORMANCE; LIMITATION OF DAMAGES. Seller acknowledges that
the transactions contemplated by this Agreement are unique and that the
Purchaser will be irreparably injured should such transactions not be
consummated in a timely fashion.. Consequently, Purchaser will not have an
adequate remedy at law if the Seller shall fail to transfer, assign and convey
the Assets when required to do so hereunder. In such event, the Purchaser shall
have the right, in addition to any other remedy available in equity or law, to
specific performance of such obligation by Seller, subject to Purchaser's
performance of its obligations hereunder. Purchaser acknowledges that the
transactions contemplated by this Agreement are unique and that Seller will be
irreparably injured should such transactions not be consummated in a timely
fashion. Consequently, Seller will not have an adequate remedy at law if the
Purchaser shall fail to purchase the Assets when required to do so hereunder. In
such event, the Seller shall have the right, in addition to any other remedy
available in equity or law,
53
to specific performance of such obligation by Purchaser, subject to Seller's
performance of its obligations hereunder. Except as otherwise provided in
SECTION 7.1(b) and SECTION 7.2(b), neither Party will be entitled to any
punitive, incidental, indirect, special or consequential damages, including
damages for lost revenues, income, or profits, resulting from or arising out of
a breach of this Agreement, whether or not the Closing occurs.
ARTICLE 11
MISCELLANEOUS AGREEMENTS AND ACKNOWLEDGMENTS
11.1 EXPENSES. Except as otherwise provided herein, each Party is
responsible for its own costs and expenses (including attorneys' and
consultants' fees, costs and expenses) incurred in connection with this
Agreement and the consummation of the transactions contemplated by this
Agreement.
11.2 ENTIRE DOCUMENT. This Agreement (including the Exhibits and Schedules
to this Agreement) the Ancillary Agreements, the Collateral Agreement and the
Confidentiality Agreement contain the entire agreement between the Parties with
respect to the transactions contemplated hereby, and supersede all negotiations,
representations, warranties, commitments, offers, contracts and writings (except
for the Confidentiality Agreement) prior to the execution date of this
Agreement, written or oral. No waiver and no modification or amendment of any
provision of this Agreement is effective unless made in writing and duly signed
by the Parties referring specifically to this Agreement, and then only to the
specific purpose, extent and interest so provided.
11.3 SCHEDULES. The Parties agree and acknowledge that the Schedules in
this Agreement may be incomplete or subject to revision prior to the Closing.
The Parties will cooperate and work in good faith to complete and update such
Schedules in a manner consistent with the requirements of this Agreement. The
Schedules delivered pursuant to the terms of this Agreement are an integral part
of this Agreement to the same extent as if they were set forth verbatim herein.
11.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which is an original, but all of which together constitute
one and the same instrument.
11.5 SEVERABILITY. If any provision hereof is held invalid or unenforceable
by any arbitrator or as a result of future legislative action, this holding or
action will be strictly construed and will not affect the validity or effect of
any other provision hereof. To the extent permitted by law, the Parties waive,
to the maximum extent permissible, any provision of law that renders any
provision hereof prohibited or unenforceable in any respect.
11.6 ASSIGNABILITY. This Agreement is binding upon and inures to the
benefit of the successors and assigns of the Parties, but is not assignable by
any Party without the prior written consent of the other Party, which consent
may be granted or withheld in such Party's sole discretion; provided, however,
Purchaser may, upon ten (10) Business Days' notice to Seller, assign its rights
and obligations to its Affiliate, APS, without Seller's consent, and Purchaser
shall use its Commercially Reasonable Efforts to assign its rights and
obligations to APS if such an agreement is necessary to obtain required consents
or Seller's or Purchaser's Required
54
Regulatory Approvals. Any such assignment is conditioned on the assignee's
agreement in writing to assume the assigning Party's duties and obligations
under this Agreement and the Ancillary Agreements, subject to any and all
restrictions, terms and conditions of the Facilities Co-Tenancy Agreement and
Operating Agreement and provided that such assignment does not adversely affect
or prejudice any of Seller's rights hereby or result in any delay in the date
when the transactions contemplated hereby would otherwise close. Any assignment
effected in accordance with this SECTION 11.6 "Assignability" will not relieve
the assigning Party of its obligations and liabilities under this Agreement and
the Ancillary Agreements.
11.7 CAPTIONS. The captions of the various Articles, Sections, Exhibits and
Schedules of this Agreement have been inserted only for convenience of reference
and do not modify, explain, enlarge or restrict any of the provisions of this
Agreement.
11.8 GOVERNING LAW. The validity, interpretation and effect of this
Agreement are governed by and will be construed in accordance with the laws of
the state in which the Facilities are located applicable to contracts made and
performed in such state and without regard to conflicts of law doctrines except
to the extent that certain matters are preempted by Federal law or are governed
by the law of the jurisdiction of organization of the respective Parties.
11.9 DISPUTE RESOLUTION.
(a) INTENT OF THE PARTIES. Except as provided in the next sentence,
the sole remedy available to either Party for any dispute or claim arising out
of or relating to this Agreement or any Ancillary Agreement is the dispute
resolution procedure set forth in this SECTION 11.9 "Dispute Resolution". Either
Party may seek a preliminary injunction or other provisional judicial remedy if
such action is necessary to prevent irreparable harm or preserve the status quo,
in which case both Parties nonetheless will continue to pursue resolution of the
dispute by means of this procedure. If the Parties cannot resolve a dispute
under SECTION 11.9(b) "Management Negotiations", then the dispute shall be
settled through binding arbitration under SECTION 11.9(c) "Arbitration."
(b) MANAGEMENT NEGOTIATIONS. The Parties will attempt in good faith to
resolve any dispute or claim arising out of or relating to this Agreement or an
Ancillary Agreement promptly by negotiations between a vice president (or more
senior officer) of Seller or his or her designated representative and an
executive of similar authority of Purchaser. Either Party may give the other
Party written notice of any dispute or claim. Within twenty (20) days after
delivery of said notice, the executives will meet at a mutually acceptable time
and place, and thereafter as often as they reasonably deem necessary to exchange
information and to attempt to resolve the dispute or claim. If the matter has
not been resolved within sixty (60) days of the first meeting, either Party (by
notice to the other Party) may initiate arbitration of the controversy pursuant
to SECTION 11.9(c) "Arbitration."
(c) ARBITRATION. In the event that meetings have been held in
accordance with SECTION 11.9(b) and any such dispute shall have not been
resolved at such meetings, then such dispute shall be resolved exclusively by
arbitration, upon the written request of any Party involved in such dispute and
the Parties shall submit such dispute to binding arbitration pursuant to the
Commercial Arbitration Rules of the American Arbitration Association (the
"COMMERCIAL
55
ARBITRATION RULES"). In the event that such dispute is submitted to arbitration
pursuant to the Commercial Arbitration Rules, then the arbitration tribunal
shall be composed of three neutral arbitrators (one such arbitrator to be
selected by Seller, on the one hand, and Purchaser, on the other hand, and the
third such arbitrator shall be a former U.S. District Court or U.S. Circuit
Court of Appeals judge and shall serve as chairperson of such tribunal, selected
by the other two arbitrators or, in the absence of agreement between such
arbitrators by the American Arbitration Association). The venue of the
arbitration shall be Phoenix, Arizona, if arbitration is initiated by Seller,
and Los Angeles, California, if arbitration is initiated by Purchaser; the
language of the arbitration shall be English and the arbitration shall commence
no later than sixty (60) days after the written request to arbitrate given by a
Party in accordance with this Agreement. The decision, judgment and order of the
arbitration tribunal shall be final, binding and conclusive as to the Parties
involved in such dispute, and their respective representatives, and may be
entered in any court of competent jurisdiction. Other than the fees and expenses
of the arbitrators, which shall be shared equally by the Parties to the dispute,
each Party shall bear its own costs and expenses (including attorneys' fees and
expenses) relating to the arbitration.
11.10 NOTICES. All notices, requests, demands and other communications
under this Agreement must be in writing and must be delivered in person or sent
by certified mail, postage prepaid, or by overnight delivery, and properly
addressed as follows:
If to Seller:
Southern California Edison Company
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
With a copy to:
Southern California Edison Company
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
If to Purchaser:
Pinnacle West Energy Corporation
000 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
With a copy to:
Pinnacle West Capital Corporation
400 North 5th Street
Mailstation 9988
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
56
With a copy to:
Pinnacle West Capital Corporation
400 North 5th Street
Mailstation 9068
Xxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Any Party may from time to time change its address for the purpose of
notices to that Party by a similar notice specifying a new address, but no such
change is effective until it is actually received by the Party sought to be
charged with its contents.
All notices and other communications required or permitted under this
Agreement which are addressed as provided in this SECTION 11.10 "Notices" are
effective upon delivery, if delivered personally or by overnight delivery, and,
are effective five (5) days following deposit in the United States mail, postage
prepaid if delivered by mail.
11.11 TIME IS OF THE ESSENCE. Time is of the essence of each term of this
Agreement. Without limiting the generality of the foregoing, all times provided
for in this Agreement for the performance of any act will be strictly construed.
11.12 NO THIRD PARTY BENEFICIARIES. Except as may be specifically set forth
in this Agreement, nothing in this Agreement, whether express or implied, is
intended to confer any rights or remedies under or by reason of this Agreement
on any Persons other than the Parties and their respective permitted successors
and assigns, nor is anything in this Agreement intended to relieve or discharge
the obligation or liability of any third Persons to any Party, nor give any
third Persons any right of subrogation or action against any Party.
11.13 NO JOINT VENTURE. Nothing contained in this Agreement creates or is
intended to create an association, trust, partnership, or joint venture or
impose a trust or partnership duty, obligation, or liability on or with regard
to any Party.
11.14 CONSTRUCTION OF AGREEMENT. Ambiguities or uncertainties in the
wording of this Agreement will not be construed for or against any Party, but
will be construed in the manner that most accurately reflects the Parties'
intent as of the date they executed this Agreement.
11.15 EFFECT OF CLOSING OVER KNOWN UNSATISFIED CONDITIONS OR BREACHED
REPRESENTATIONS, WARRANTIES OR Covenants. If Seller or Purchaser elects to
proceed with the Closing with Knowledge by it of any failure to be satisfied of
any condition in its favor or the breach of any representation, warranty or
covenant by the other Party, the condition that is unsatisfied or the
representation, warranty or covenant which is breached at the Closing Date will
be deemed waived by such Party, and such Party will be deemed to fully release
and forever discharge the other Party on account of any and all claims, demands
or charges, known or unknown, with respect to the same.
11.16 CONFLICTS. In the event of any conflicts or inconsistencies between
the terms of this Agreement and the terms of any of the Ancillary Agreements,
the terms of this Agreement will govern and prevail.
57
11.17 WAIVER OF COMPLIANCE. To the extent permitted by applicable Law, any
failure of any of the Parties to comply with any obligation, covenant, agreement
or condition set forth herein may be waived by the Party entitled to the benefit
thereof only by a written instrument signed by such Party, but any such waiver
shall not operate as a waiver of, or estoppel with respect to, any prior or
subsequent failure to comply therewith. The failure of a Party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
11.18 SURVIVAL.
(a) The representations and warranties given or made by any Party in
Articles 4 or 5 hereof or in any certificate or other writing furnished in
connection herewith shall survive the Closing for a period of twenty-four (24)
months after the Closing Date and shall thereafter terminate and be of no
further force or effect, except that (i) all representations and warranties
relating to Taxes and Tax Returns, including those set forth in SECTION 4.10,
shall survive the Closing for the period of the applicable statutes of
limitation plus any extensions or waivers thereof, (ii) all representations and
warranties relating to title, including those set forth in SECTION 4.7 shall
survive the Closing for an indefinite period of time and (iii) any
representation or warranty as to which a claim (including a contingent claim)
shall have been asserted during the survival period shall continue in effect
with respect to such claim until such claim shall have been finally resolved or
settled. Subject to SECTIONS 5.10 AND 11.15, each Party shall be entitled to
rely upon the representations and warranties of the other Party set forth
herein, notwithstanding any investigation or audit conducted before or after the
Closing Date or the decision of any Party to complete the Closing.
(b) The covenants and agreements of the Parties contained in this
Agreement, including those set forth in ARTICLE 7, shall survive the Closing
indefinitely, unless otherwise specified herein.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
SOUTHERN CALIFORNIA EDISON COMPANY,
a California corporation
By Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chairman, President and CEO
PINNACLE WEST ENERGY CORPORATION,
an Arizona corporation
By Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
59
