EXECUTION COPY
--------------
PURCHASE AND SALE AGREEMENT
(KAUAI ELECTRIC)
between
CITIZENS UTILITIES COMPANY
and
KAUAI ISLAND UTILITY CO-OP
Dated as of February 11, 2000
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.....................................................................................1
Section 1.1 Certain Defined Terms....................................................................1
Section 1.2 Other Defined Terms......................................................................8
ARTICLE II PURCHASE AND SALE...............................................................................9
Section 2.1 Purchase and Sale of Assets..............................................................9
Section 2.2 Assumed Liabilities......................................................................9
Section 2.3 Retained Liabilities....................................................................11
Section 2.4 Condition on Assignment or Assumption of Contracts and Rights...........................11
ARTICLE III PURCHASE PRICE.................................................................................12
Section 3.1 Purchase Price..........................................................................12
Section 3.2 Deposit.................................................................................13
Section 3.3 Calculation of Purchase Price...........................................................13
Section 3.4 Prorations and Adjustments as of the Closing Date.......................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................................................14
Section 4.1 Organization, Existence and Qualification...............................................14
Section 4.2 Authority Relative to this Agreement and Binding Effect.................................15
Section 4.3 Governmental Approvals..................................................................15
Section 4.4 Availability of Funds...................................................................15
Section 4.5 Filings.................................................................................15
Section 4.6 Brokers.................................................................................15
Section 4.7 Independent Investigation...............................................................16
Section 4.8 Public Utility Holding Company Status; Regulation as a Public Utility...................16
Section 4.9 Buyer's Financial Statements. ..........................................................16
Section 4.10 Buyer's Insurance.......................................................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER.......................................................16
Section 5.1 Organization, Existence and Qualification...............................................16
Section 5.2 Authority Relative to this Agreement and Binding Effect.................................16
Section 5.3 Governmental and Other Required Consents................................................17
Section 5.4 Public Utility Holding Company Status; Regulation as a Public Utility...................17
Section 5.5 Title to Assets; Liens..................................................................17
Section 5.6 Financial Statements....................................................................17
Section 5.7 Compliance with Legal Requirements; Governmental Permits. .............................18
Section 5.8 Legal Proceedings; Outstanding Orders. .................................................18
Section 5.9 Taxes...................................................................................18
Section 5.10 Intellectual Property...................................................................19
Section 5.11 Personal Property.......................................................................19
Section 5.12 Material Contracts; Existing Loan Documents.............................................19
Section 5.13 Employee Benefit Matters................................................................19
Section 5.14 Environmental Matters...................................................................20
Section 5.15 No Material Adverse Change..............................................................20
Section 5.16 State Regulatory Matters................................................................20
Section 5.17 Brokers.................................................................................21
Section 5.18 Disclaimer..............................................................................21
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Page
ARTICLE VI COVENANTS......................................................................................21
Section 6.1 Covenants of Seller.....................................................................21
Section 6.2 Covenants of Buyer......................................................................23
Section 6.3 Governmental Filings....................................................................24
Section 6.4 Citizens Marks..........................................................................24
Section 6.5 Acknowledgment by Buyer.................................................................25
Section 6.6 Transition Plan. ......................................................................26
Section 6.7 IDRB Obligations........................................................................26
ARTICLE VII CONDITIONS PRECEDENT...........................................................................29
Section 7.1 Seller's Conditions Precedent to Closing................................................29
Section 7.2 Buyer's Conditions Precedent to Closing.................................................30
ARTICLE VIII CLOSING........................................................................................32
Section 8.1 Closing.................................................................................32
ARTICLE IX TERMINATION....................................................................................33
Section 9.1 Termination Rights......................................................................33
Section 9.2 Limitation on Right to Terminate: Effect of Termination.................................34
ARTICLE X EMPLOYEE MATTERS...............................................................................35
Section 10.1 Employment of Transferred Employees.....................................................35
Section 10.2 Assumption of Collective Bargaining Agreement Obligations...............................35
Section 10.3 Cessation of Participation in Seller's Plans; Proration of Bonuses......................35
Section 10.4 Similarity of Benefit Packages..........................................................36
Section 10.5 Defined Benefit Pension Plan............................................................36
Section 10.6 401(k) Plan.............................................................................36
Section 10.7 Welfare Benefits........................................................................37
Section 10.8 Flexible Spending Accounts..............................................................38
Section 10.9 Employment Agreements...................................................................38
Section 10.10 Vacation................................................................................38
Section 10.11 Severance...............................................................................38
Section 10.12 Plant Closing Notice....................................................................39
ARTICLE XI TAX MATTERS....................................................................................39
Section 11.1 Purchase Price Allocation...............................................................39
Section 11.2 Cooperation with Respect to Like-Kind Exchange..........................................39
Section 11.3 Transaction Taxes.......................................................................40
ARTICLE XII ENVIRONMENTAL MATTERS..........................................................................40
Section 12.1 Environmental Due Diligence.............................................................40
ARTICLE XIII INDEMNIFICATION................................................................................42
Section 13.1 Indemnification by Seller...............................................................42
Section 13.2 Indemnification by Buyer................................................................42
Section 13.3 Limitations on Seller's Liability.......................................................43
Section 13.4 Claims Procedure........................................................................44
Section 13.5 Exclusive Remedy........................................................................45
Section 13.6 Indemnification for Negligence..........................................................46
Section 13.7 Waiver and Release......................................................................46
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Page
ARTICLE XIV GENERAL PROVISIONS.............................................................................46
Section 14.1 Expenses................................................................................46
Section 14.2 Notices.................................................................................46
Section 14.3 Assignment..............................................................................47
Section 14.4 Successor Bound.........................................................................48
Section 14.5 Governing Law...........................................................................48
Section 14.6 Dispute Resolution......................................................................48
Section 14.7 Cooperation.............................................................................49
Section 14.8 Construction of Agreement...............................................................49
Section 14.9 Publicity. ............................................................................50
Section 14.10 Waiver..................................................................................50
Section 14.11 Parties in Interest.....................................................................50
Section 14.12 Section and Paragraph Headings..........................................................50
Section 14.13 Amendment...............................................................................50
Section 14.14 Entire Agreement........................................................................50
Section 14.15 Counterparts............................................................................50
Section 14.16 Severability............................................................................50
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LIST OF EXHIBITS
Exhibit 6.7 Form of IDRB Obligations Agreement
Exhibit 7.1(g) Form of Buyer's Opinion of Counsel
Exhibit 7.2(g) Form of Seller's Opinion of Counsel
Exhibit 8.1(a) Form of Xxxx of Sale
LIST OF SCHEDULES
Schedule 1.1(a) Assumed IDRB Indebtedness
Schedule 1.1(b) Excluded Assets
Schedule 2.2(d) Certain Assumed Proceedings
Schedule 4.2 Buyer's Authority
Schedule 4.3 Buyer's Governmental Approvals
Schedule 5.2 Seller's Authority
Schedule 5.3 Seller's Governmental and Other Required Consents
Schedule 5.5 Encumbrances; Owned Real Property
Schedule 5.6(a) Financial Statements
Schedule 5.6(b) Certain Liabilities
Schedule 5.7 Compliance with Legal Requirements; Governmental Permits
Schedule 5.8 Legal Proceedings; Outstanding Orders
Schedule 5.9 Taxes
Schedule 5.10 Intellectual Property
Schedule 5.12 Material Contracts
Schedule 5.13 Employee Matters
Schedule 5.14 Environmental Matters
Schedule 5.15 Material Adverse Changes
Schedule 5.16 State Regulatory Matters
Schedule 6.1 Conduct of Business
Schedule 6.2(c) Citizens' Guarantees and Surety Instruments
Schedule 10.1 Active Employees
Schedule 10.7 Retirees and "Grandfathered Employees"
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PURCHASE AND SALE AGREEMENT
(KAUAI ELECTRIC)
This PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the
11th day of February, 2000, by and between CITIZENS UTILITIES COMPANY, a
Delaware corporation ("Seller"), and Kauai Island Utility Co-Op, a cooperative
association formed pursuant to the provision of Chapter 421C of the Hawaii
Revised Statutes ("Buyer"). Capitalized terms used herein shall have the
meanings ascribed to them in Article I, unless otherwise provided.
W I T N E S S E T H :
WHEREAS, Seller owns all of the Assets; and
WHEREAS, Buyer desires to purchase, and Seller desires to sell, the
Assets, subject in all respects to the provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Article I
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
"Affiliates" or "Affiliated Entities" -- entities shall be deemed
"Affiliated" as to each other to the extent (i) one of the entities directly or
indirectly controls the other, or the direct or indirect control of one of the
entities is exercised by the officers, directors, stockholders, or partners of
the other entity (whether or not such persons exercise such control in their
capacities as officers, directors, stockholders, or partners) or (ii) is deemed
to be an Affiliate under existing statutes or regulations of the SEC.
"Assets" -- all of the assets, property and interests of every type and
description, real, personal or mixed, tangible and intangible, owned by Seller
and relating primarily to the Business, other than the Excluded Assets.
"Assumed Environmental Liabilities" -- means any of the following:
(a) All Environmental Liabilities of Seller relating to the
Business or the Assets and arising from or relating to the environmental matters
or incidents either disclosed by Seller on Schedule 5.14 as of the date of
execution of this Agreement or otherwise known to Buyer on or before the date of
execution of this Agreement that remain outstanding as of the Closing Date, it
being understood by the parties that the unadjusted Purchase Price reflects
Buyer's estimate of any Losses that could arise after the Closing Date with
respect to such Environmental Liabilities;
(b) All Environmental Liabilities of Seller relating to the
Business or the Assets and arising from or relating to the environmental matters
or incidents either disclosed to Buyer by Seller after the date of execution of
this Agreement (including any additional disclosures appearing on Schedule 5.14
as revised by Seller and delivered to Buyer prior to the Closing Date) or
otherwise known to Buyer as of the Closing Date that remain outstanding as of
the Closing Date, other than any such Environmental Liabilities that are
properly designated by Buyer as New Material Environmental Liabilities in
accordance with Section 12.1(g) and that by the Closing Date have not been
remedied or responded to by Seller in a manner reasonably satisfactory to Buyer;
(c) All Environmental Liabilities of Seller relating to the
Business or the Assets that were outstanding or had arisen on or before the
Closing Date but with respect to which Seller had no Knowledge as of the Closing
Date; and
(d) Except for the Retained Environmental Liabilities, any
other Environmental Liability of Seller relating to the Business or the Assets,
Buyer or any Affiliate, successor or assign of Buyer, whether arising or
relating to the period before or after the Closing, including with respect to
the removal of asbestos or asbestos-containing materials in connection with any
renovation or structural change to any Asset conducted after Closing.
"Assumed IDRB Indebtedness" -- means the liabilities and obligations
from and after the Closing Date (except as set forth below) with respect to the
indebtedness of Seller owing to the issuer of the Bonds and arising under the
Loan Agreements included among the IDRB Documents set forth in Schedule 1.1(a).
"Assumed IDRB Indebtedness" shall include the outstanding principal amount and
the accrued but unpaid interest owed by Seller on the debt obligations set forth
in the first sentence of this definition.
"Bonds" -- means any of the bonds issued pursuant to the Indentures of
Trust, the proceeds from the issuance of which were advanced to Seller and used
in connection with the Business or the Assets of the Business pursuant to any of
the IDRB Documents.
"Business" -- means collectively:
(a) the regulated electricity generation, transmission and
distribution business conducted by Seller on the island of Kauai, Hawaii through
its Kauai Electric division; and
(b) the provision of related services and products and the
engagement in related activities by Seller on the island of Kauai, Hawaii
through its Kauai Electric division.
"Buyer's IDRB Obligations"-- means the obligations of Buyer set forth
in Sections 6.7(a) and 6.7(c), in the Retained IDRB Obligations Agreement to be
executed and delivered by Buyer on or prior to the Closing Date in accordance
with Sections 6.7(a) and 8.1(d), and in the assumption agreement that is
executed and delivered by Buyer at Closing in accordance with Section 8.1(d).
"Capital Budget -- means the capital budget for the Business approved
by the Board of Directors of Seller for the year 2000.
"Claim Notice" -- means a written notice of a claim given by a party
seeking indemnification pursuant to the terms of this Agreement that specifies
in reasonable detail the nature of the Losses and the estimated amount of such
Losses.
"Confidentiality Agreement" -- means that certain confidentiality
agreement dated October 15, 1999, between Buyer and Seller.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization from any Person.
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"Contract" -- any agreement, contract, document, instrument,
obligation, promise or undertaking (whether written or oral) that is legally
binding, including Easements.
"Easements"-- means all easements, rights of way, permits, licenses,
and other ways of necessity, whether or not of record.
"Encumbrance" -- any charge, adverse claim, lien, mortgage, pledge or
security interest.
"Environmental Law"-- any Order or Legal Requirement, and any judicial
and administrative interpretation thereof and related policies, guidelines and
standards, relating to pollution or protection of the environment and natural
resources, including those relating to (a) emissions, discharges, Releases or
threatened Releases of Hazardous Material into the environment (including
ambient air, surface water, groundwater or land), and (b) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Material, each as in effect as of the date of
determination.
"Environmental Liability" -- means any liability, responsibility or
obligation arising out of or relating to:
(a) the presence of any Hazardous Material in the fixtures,
structures, soils, groundwater, surface water or air on, under or about or
emanating from the assets and properties currently or formerly used, operated,
owned, leased, controlled, possessed, occupied or maintained by a Person, and
any such Hazardous Material emanating to adjoining or other properties;
(b) the use, generation, production, manufacture, treatment,
storage, disposal, Release, threatened Release, discharge, spillage, loss,
seepage or filtration of Hazardous Materials by a Person or its employees,
agents or contractors from, on, under or about the assets or properties
currently or formerly used, operated, owned, leased, controlled, possessed,
occupied or maintained by such Person or the presence therein or thereunder of
any underground or above-ground tanks for the storage of fuel oil, gasoline
and/or other petroleum products or by-products or other Hazardous Material;
(c) the violation or noncompliance or alleged violation or
noncompliance by a Person or its employees, agents or contractors of any
Environmental Law arising from or related to its or their conduct, actions or
operations or the former or current use, operation, ownership, lease,
possession, control, occupancy, maintenance or condition of any of such Person's
former or current assets or properties;
(d) the failure by a Person or its employees, agents, or
contractors to have obtained or maintained in effect any certificate, permit or
authorization required by any Environmental Law as a result of its or their
conduct, actions or operations or the use, operation, ownership, lease, control,
possession, occupancy, maintenance or condition of such Person's assets or
properties;
(e) any and all Proceedings arising out of any of the
above-described matters, including Proceedings by Governmental Bodies for
enforcement, cleanup, removal, treatment, response, remedial or other actions or
damages and Proceedings by any third Person seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief; and
(f) any and all remedial work and other corrective action
(including investigation or monitoring of site conditions, or any clean-up,
containment, restoration or removal) taken by, or the costs of which are imposed
upon, a Person arising from any of the above-described matters.
3
"ERISA" - the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
act or any successor law.
"Excluded Assets" -- means the following assets of Seller, each of
which shall be excluded from the Assets, and not acquired by the Buyer, at
Closing:
(a) assets that Seller uses in both the Business and in
Seller's other gas, electric, communications or water businesses, the material
items of which are described on Schedule 1.1(b), and Contracts regarding the
procurement of services or goods by Seller for use in such in other businesses;
(b) cash and cash equivalents in transit, in hand or in bank
accounts;
(c) except as otherwise set forth in Article X, assets
attributable to or related to a Benefit Plan of Seller;
(d) the stock record and minute books of Seller, duplicate
copies of all books and records transferred to Buyer, all records prepared in
connection with the sale of the Business (including bids received from third
parties and analysis relating to the Business) and all IDRB Documents;
(e) assets disposed of by Seller after the date of this
Agreement to the extent such dispositions are not prohibited by this Agreement;
(f) except to the extent set forth in Section 3.4, rights to
refunds of Taxes payable with respect to the Business, assets, properties or
operations of Seller or any member of any affiliated group of which either of
them is a member;
(g) accounts owing, by and among Seller and its Affiliates;
(h) all deferred tax assets or collectibles;
(i) any insurance policy, bond, letter of credit or other
similar item, and any cash surrender value in regard thereto;
(j) the Citizens Marks; and
(k) the other assets listed on Schedule 1.1(b).
"Existing Loan Documents"-- means all Contracts relating to the
indebtedness for money borrowed by Seller and used in connection with the
Business or the Assets as of the date hereof to which Seller is a party,
including all IDRB Documents, but excluding line extension agreements or similar
arrangements involving customer advances for construction, it being understood
and agreed that customer advances, customer deposits and construction advances
do not create indebtedness for money borrowed.
"Final Order" -- an action by a Governmental Body as to which: (a) no
request for stay of the action is pending, no such stay is in effect and if any
time period is permitted by statute or regulation for filing any request for
such stay, such time period has passed; (b) no petition for rehearing,
4
reconsideration or application for review of the action is pending and the time
for filing any such petition or application has passed; (c) such Governmental
Body does not have the action under reconsideration on its own motion and the
time in which such reconsideration is permitted has passed; and (d) no appeal to
a court, or a request for stay by a court of the Governmental Body's action is
pending or in effect and the deadline for filing any such appeal or request has
passed.
"Future Regulatory Obligations" -- means all liabilities,
responsibilities and obligations relating to the Assets or the Business,
including capital expenditure obligations and liabilities of the types that
appear as "Accrued Liabilities" and "Non-Current Liabilities" on the Balance
Sheet, arising out of any Legal Requirement or other action of any Governmental
Body, including with respect to all Proceedings of any state regulatory
commission relating to the Assets or the Business commenced before or after the
Closing Date, regardless of whether the Legal Requirement or other action is or
purports to be based on conduct, actions, facts, circumstances or conditions
arising, existing or occurring at any time on or prior to the Closing Date, but
other than relating to any Retained Environmental Liability.
"GAAP" -- generally accepted United States accounting principles,
applied on a consistent basis.
"Governmental Body" -- any of the following that possesses competent
jurisdiction:
(a) federal, state, county, local, municipal or other
governmental body;
(b) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity and
any court or other tribunal); or
(c) any governmental body entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature.
"Hazardous Materials" -- any waste or other chemical, material or
substance that is listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, toxic, or a pollutant or a
contaminant, or words of similar import, under or pursuant to any Environmental
Law, including any admixture or solution thereof, and specifically including
oil, natural gas, petroleum and all derivatives thereof or synthetic substitutes
therefor, asbestos or asbestos-containing materials, any flammable substances or
explosives, any radioactive materials, any toxic wastes of substances, urea
formaldehyde foam insulation, toluene or polychlorinated biphenyls.
"HSR Act" -- the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, or any successor law, and regulations and rules issued by the U.S.
Department of Justice or the Federal Trade Commission pursuant to that act or
any successor law.
"IDRB Documents" -- means the Loan Agreements, the Tax Regulatory
Agreements and Tax Representations and Project Certificates listed in Schedule
5.12.
"IDRB Indebtedness" -- means the indebtedness of Seller owing to the
issuers of the Bonds and arising under the Loan Agreements included among the
IDRB Documents. The IDRB Indebtedness is described further in Schedule 5.12 and
in Exhibit 6.7.
"IRC" -- the Internal Revenue Code of 1986, as amended.
"IRS" -- the Internal Revenue Service or any successor agency.
5
"Knowledge" -- means, with respect to Seller, the actual knowledge of
Seller's Chief Financial Officer; President, Citizens Public Services; or the
Vice President and General Manager of Kauai Electric, or their respective
successors.
"Legal Requirement" -- any federal, state, county, local, municipal,
foreign, international, multinational, or other administrative Order,
constitution, law, ordinance, adopted code, principle of common law, regulation,
rule, directive, approval, notice, tariff, franchise agreement, statute or
treaty.
"Losses" -- shall mean all claims, losses, liabilities, causes of
action, costs and expenses (including, without limitation, involving theories of
negligence or strict liability and including court costs and reasonable
attorneys' fees and disbursements in connection therewith).
"Material Adverse Effect" -- an occurrence or condition that has a
material adverse effect on the operation, financial condition or results of
operations of the Business, taken as a whole. For purposes of this Agreement, an
occurrence or condition shall not constitute a Material Adverse Effect (a) if it
arises from general business, economic or financial market conditions, from
conditions generally affecting the industries in which the Business competes, or
from the transactions contemplated by this Agreement, (b) if it is of the type
normally recoverable by the Business through rates, or (c) to the extent that
the Business may realize the benefit of insurance maintained by Seller or to the
extent that Seller or Buyer may receive or recover payments in respect of such
occurrence from any other source (whether in a lump sum or stream of payments).
"Material Contract" -- a Contract relating primarily to the Business
and involving a total commitment by or to any party thereto of at least $250,000
on an annual basis and which cannot be terminated by Seller with notice of
ninety (90) days or less without penalty to Seller.
"Order" -- any award, decision, injunction, judgment, order, writ,
decree, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, other Governmental Body, or by any arbitrator,
each of which possesses competent jurisdiction.
"Organizational Documents" -- the articles or certificate of
incorporation and the bylaws of a corporation or the comparable organizational
and governing documents of other Persons.
"Permitted Encumbrances" -- means any of the following:
(a) mechanics', carriers', workers' and other similar liens
arising in the ordinary course of business and which in the aggregate are not
substantial in amount and do not interfere with the present use of the Assets to
which they apply;
(b) liens for current Taxes and assessments not yet due and
payable;
(c) usual and customary nonmonetary real property
Encumbrances, covenants, imperfections in title, Easements, restrictions and
other title matters (whether or not the same are recorded) that do not and will
not materially interfere with the operation of that portion of the Business
currently conducted on such real property;
(d) Encumbrances securing the payment or performance of any of
the Assumed Liabilities;
6
(e) all applicable zoning ordinances and land use
restrictions;
(f) with respect to any Asset which consists of a leasehold or
other possessory interests in real property, all Encumbrances, covenants,
imperfections in title, Easements, restrictions and other title matters (whether
or not the same are recorded) to which the underlying fee estate in such real
property is subject that do not currently interfere materially with the
operation of that portion of the Business currently conducted on such property;
and
(g) any other Encumbrances, Contracts, obligations, defects or
irregularities of any kind whatsoever, affecting the Assets that, individually
or in the aggregate, are not such as are reasonably likely to have a Material
Adverse Effect or that will be terminated, released or waived on or before the
Closing Date.
"Person" -- any individual, corporation (including any nonprofit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization or Governmental Body.
"Proceeding" -- any claim, action, arbitration, hearing, litigation or
suit commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PUHCA" - the Public Utility Holding Company Act of 1935, as amended,
or any successor law, and regulations and rules issued by the SEC pursuant to
that act or any successor law.
"Real Property" -- all real property owned or leased by Seller in the
operation of the Business, together with all interests in real property
(including Easements) used or held for use by Seller in the operation of the
Business.
"Related Documents" -- any Contract provided for in this Agreement to
be entered into by one or more of the parties hereto in connection with the
transactions contemplated by this Agreement.
"Release" -- any presence, emission, dispersal, disposal, spilling,
leaking, emitting, discharging, depositing, pumping, pouring, escaping,
leaching, dumping, releasing or migration into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials), or in, into or from any
facility, including the movement of any Hazardous Materials through the air,
soil, surface water, groundwater or property.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Retained Environmental Liabilities" -- means Environmental Liability
of Seller that Buyer has properly designated to be a New Material Environmental
Liability in accordance with Section 12.1(g) and that has not been remedied or
responded to by Seller prior to Closing in a manner reasonably satisfactory to
Buyer.
"Retained IDRB Indebtedness" -- means the indebtedness of Seller owing
to the issuer of the Bonds and arising under the Loan Agreements included among
the IDRB Documents but only to the extent not included in the Assumed IDRB
Indebtedness.
7
"SEC" -- the United States Securities and Exchange Commission or any
successor agency.
"Tax" -- any tax (including any income tax, capital gains tax,
value-added tax, sales and use tax, franchise tax, payroll tax, withholding tax
or property tax), levy, assessment, tariff, duty (including any customs duty),
deficiency, franchise fee or payment, payroll tax, utility tax, gross receipts
tax or other fee or payment, and any related charge or amount (including any
fine, penalty, interest or addition to tax), imposed, assessed or collected by
or under the authority of any Governmental Body.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threatened" -- a claim, dispute, or other matter will be deemed to
have been "Threatened" if any demand or statement has been made in writing or
any notice has been given in writing, and Seller has Knowledge of the same.
Section 1.2 Other Defined Terms. In addition to the terms defined in
Section 1.1, certain other terms are defined elsewhere in this Agreement as
indicated below and, whenever such terms are used in this Agreement, they shall
have their respective defined meanings.
Term Section
---- -------
Active Employees 10.1
Antitrust Authorities 6.3
Assumed Liabilities 2.2
Balance Sheet 5.6(a)
Xxxx of Sale 8.1
Buyer Indemnitees 13.1
Buyer's Pension Plan 10.5
Buyer Welfare Plans 10.7(a)
CERCLA 5.14(e)
Citizens Marks 6.4
Closing 8.1
Closing Date 8.1
Deposit 3.2
Employee Plans 5.13
Environmental Data 12.1(c)
Estimated Purchase Price 3.3(a)
Financial Statements 5.6
Purchase Price 3.1
Retained Liabilities 2.3
Seller Indemnitees 13.2
Seller's Pension Plan 10.5
Seller's 401(k) Plan 10.6
Seller Welfare Plan 10.7
Transaction Taxes 11.3
Transferred Employee 10.1
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ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Assets. Upon the terms and subject to
the conditions contained herein, at the Closing, Seller shall sell, transfer,
assign, convey and deliver to Buyer, and Buyer shall purchase and accept
delivery from Seller, all of the Assets.
Section 2.2 Assumed Liabilities. In further consideration for the sale
of the Assets at the Closing, Buyer will assume and agree to pay, perform and
discharge when due, all liabilities and obligations, of every kind or nature,
arising out of or relating to:
(a) Seller's ownership of the Assets and Seller's conduct or
operation of the Business, on and prior to the Closing Date, other than the
Retained Liabilities;
(b) the Buyer's IDRB Obligations, including the Assumed IDRB
Indebtedness;
(c) Buyer's ownership or use of the Assets and the conduct or
operation of the Business by Buyer, in each case after the Closing Date,
including all liabilities, responsibilities and obligations relating to or
arising from the following:
(i) Transferred Employees (except to the extent
otherwise provided in Article X and except for any continuing obligations for
any workers compensation claims where the basis of the claim occurred on or
before the Closing Date), including any termination of any Transferred Employee
for any reason (including constructive dismissal) and Buyer's hiring practices
or decisions;
(ii) Performance of the Contracts included among the
Assets (except that Buyer shall not assume any liabilities or obligations for
any breach or default by, or payment obligations of, Seller under any such
Contract occurring or arising or accruing on or prior to the Closing Date);
(iii) Customer advances, customer deposits and
construction advances, unperformed service obligations, Easement relocation
obligations, and engineering and construction required to complete scheduled
construction, construction work in progress, and other capital expenditure
projects, in each case relating to the Business and outstanding on or arising
after the Closing Date;
(iv) Future Regulatory Obligations;
(v) Assumed Environmental Liabilities;
(vi) Transaction Taxes arising out of the sale of the
Assets to Buyer hereunder;
(vii) Proceedings based on conduct, actions, facts,
circumstances or conditions arising or occurring after the Closing Date,
Proceedings in respect of Future Regulatory Obligations regardless of when
filed, and Proceedings arising from or related to any other Assumed Liability;
and
(viii) Items addressed in Section 3.1(d) to the extent
resulting in a decrease in the Purchase Price; and
9
(4) the Proceedings described in Schedule 2.2(d) as Assumed
Liabilities; and
(5) all Proceedings involving Seller, the Assets or the Business based
on conduct, actions, facts, circumstances or conditions arising or occurring on
or before the Closing Date that are pending or Threatened as of the Closing Date
and that are disclosed to Buyer by Seller after the date of execution of this
Agreement but prior to the Closing Date (except any such Proceedings described
as Retained Liabilities on Schedule 2.2(d) and any such Proceedings relating to
the Retained Liabilities described in Sections 2.3(a), (b), (c), (d), and (f)),
provided that any Losses incurred by Buyer in connection with any such
individual Proceeding in excess of $200,000 shall be Retained Liabilities and
Seller shall be obligated to indemnify Buyer pursuant to Section 13.1 (but
subject to limitations on such obligations provided in Section 13.3) for such
Losses incurred by Buyer in the amount of such excess;
The liabilities, responsibilities and obligations to be assumed by Buyer
pursuant to this Section 2.2 are hereinafter collectively referred to as the
"Assumed Liabilities." Buyer hereby irrevocably and unconditionally waives and
releases Seller from all Assumed Liabilities and all liabilities or obligations
relating to the Business or the Assets to the extent arising from events or
occurrences after the Closing or to the extent otherwise relating to the period
after the Closing, including any liabilities created or which arise by statute
or common law, including CERCLA (it being understood that this shall not
constitute a waiver and release of any claims arising out of the contractual
relationships and indemnification arrangements between Buyer and Seller).
Notwithstanding anything in this Section 2.2 to the contrary, "Assumed
Liabilities" shall not include any liabilities, responsibilities or obligations
expressly stated to be Retained Liabilities pursuant to Section 2.3.
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Section 2.3 Retained Liabilities. Buyer shall not assume and at the
Closing Seller shall retain and pay, perform and discharge when due, all of the
liabilities and obligations relating to or arising from the following
(collectively referred to herein as the "Retained Liabilities"):
(a) all obligations of Seller under the IDRB Documents except
to the extent also included in Buyer's IDRB Obligations or the Assumed IDRB
Indebtedness, and any other indebtedness for money borrowed by Seller (including
items due to Seller's Affiliates) other than payment obligations arising after
the Closing Date under any equipment lease listed in Part VII of Schedule 5.12
or under any line extension Contracts or similar construction arrangements, it
being understood and agreed that such leases, Contracts and similar arrangements
do not create indebtedness for money borrowed;
(b) Taxes of Seller based on income and any motor vehicle
registration Taxes for periods prior to the year in which Closing occurs;
(c) Excluded Assets;
(d) Non-Transferred Employees, the Seller's Employee Benefit
Plans and Employee Plans (except to the extent otherwise provided in Article X)
and any breach or default by, or payment obligations of, Seller with respect to
any Transferred Employee occurring or arising or accruing on or prior to the
Closing Date (except to the extent any such payment obligation becomes the
responsibility and obligation of Buyer in accordance with Article X);
(e) Proceedings involving Seller, the Assets or the Business
based on conduct (including Seller's performance under any Contract included
among the Assets), action, facts, circumstances or conditions arising or
occurring on or before the Closing Date including Proceedings described as
Retained Liabilities in Schedule 2.2(d), but expressly excluding any such
liabilities or obligations relating to any Proceeding described as Assumed
Liabilities in Schedule 2.2(d) and any Proceeding relating to (x) Assumed
Liabilities (subject to the proviso set forth in Section 2.2(e) with respect to
the Proceedings described in Section 2.2(e)), (y) Future Regulatory Obligations
and (z) Proceedings affecting the industries in which the Business competes; and
(f) Retained Environmental Liabilities.
Seller hereby irrevocably and unconditionally waives and releases Buyer from all
Retained Liabilities including any liabilities created or which arise by statute
or common law, including CERCLA (it being understood that this shall not
constitute a waiver and release of any claims arising out of the contractual
relationships and indemnification arrangements between Buyer and Seller).
Section 2.4 Condition on Assignment or Assumption of Contracts and
Rights. Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign or assume any Contract or
any claim or right or any benefit arising thereunder or resulting therefrom if
an attempted assignment or assumption thereof, without the Consent of a third
party thereto, would constitute a breach thereof. Any transfer or assignment to
Buyer by Seller of any property or property rights or any Contract which
requires the Consent of any third party shall be made subject to such Consent
being obtained. If such Consent is not obtained, or if an attempted assignment
thereof would be ineffective or would affect the rights of Seller thereunder so
that Buyer would not in fact receive all such rights, Seller will cooperate with
Buyer in any arrangement reasonably designed to provide for Buyer, at Buyer's
cost, the benefits under any such Contract including, without limitation,
enforcement for the benefit of Buyer of any and all rights of Seller against a
third party thereto arising out of the breach or cancellation by such third
party or otherwise To the extent that Buyer does receive the benefits of any
such Contract pursuant to the preceding sentence, such Contract shall be a
Contract deemed to have been assigned or transferred to Buyer pursuant to
Section 2.2(c)(ii).
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ARTICLE III
PURCHASE PRICE
Section 3.1 Purchase Price.
Subject to the terms and conditions of this Agreement, the aggregate
purchase price for the Assets (the "Purchase Price") shall be an amount equal to
$270,000,000 in cash, as adjusted in accordance with the following provisions
and with such adjustments determined pursuant to Section 3.3, and the assumption
by Buyer at Closing of the Assumed Liabilities (including the Assumed IDRB
Indebtedness):
(a) Such amount will be increased by the aggregate amount of
all accounts receivable, earned but unbilled revenue and the materials and
supplies inventory of the Business, in each case outstanding as of the Closing
Date and other than any such items that are due from Seller's Affiliates.
(b) Such amount will be decreased by the aggregate amount of
all accounts payable, customer deposits and unexpended cash from customer
advances for construction, in each case to the extent relating to the Business
and outstanding as of the Closing Date and other than any such items that are
due to Seller's Affiliates.
(c) Such amount will be increased by the aggregate amount of
all (i) capital expenditures relating to the Business that are accrued by Seller
between September 30, 1999, and the Closing Date (including expenditures
recorded in the Construction Work in Progress account of the Business as of the
Closing Date and relating to such period), net of all depreciation expense
relating to such new property, plant and equipment accrued by Seller during such
periods; (ii) without duplication, expenditures to purchase materials, supplies
and other capital items that are dedicated to, but as of Closing have not been
used in, the construction or improvement of the property, plant or equipment
relating to the Business and (iii) without duplication, other expenditures
recorded as an asset of the Business as of the Closing Date and relating to such
period to the extent such expenditures are normally recoverable through rates,
including expenditures recorded in the Preliminary Survey and Investigation
account of the Business.
(d) Such amount will be decreased or increased, as
appropriate, by an aggregate amount equal to the total amount payable to or by
Buyer pursuant to Section 3.4.
(e) Such amount will be decreased by the aggregate amount of
the Assumed IDRB Indebtedness as of the Closing Date.
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Section 3.2 Deposit. Concurrently with the execution of this Agreement,
Buyer has delivered to Seller an irrevocable letter of credit from National
Rural Utilities Cooperative Finance Corporation (the "Letter of Credit"), as and
for an xxxxxxx money deposit, in the amount of $13,500,000 (the "Deposit"). The
Letter of Credit has been appropriately conditioned in accordance with the terms
of Section 9.2(c).
Section 3.3 Calculation of Purchase Price.
(a) Any of the items included in clauses (a) through (e) of
Section 3.1 that cannot be calculated in a timely fashion as of the Closing Date
shall be estimated by Seller in good faith based upon the account balance of
such item at the end of the month for which Seller's books are closed next
preceding the Closing Date, with such adjustments as may be appropriate to
reflect changes in such account balance occurring between such month-end and the
Closing Date. Any such estimated amounts shall be set forth in a certificate of
Seller delivered to Buyer at least five (5) business days prior to the Closing
Date, which certificate shall set forth an estimate of the Purchase Price (the
"Estimated Purchase Price"), including such estimated amounts and shall be
accompanied by reasonably detailed supporting documentation.
(b) Within one hundred twenty (120) days after the Closing
Date, Seller shall notify Buyer of the actual amount as recorded on Seller's
books and records for the Business of any items that were estimated in arriving
at the Estimated Purchase Price, as well as the prorations and adjustments
required to be made under Section 3.4 below. Buyer may dispute any amount so
determined by Seller, by written notice to Seller within fifteen (15) days after
receipt of Seller's notice. If Buyer does not so dispute any item, the party
owing the difference between the Estimated Purchase Price and the Purchase Price
shall pay such difference to the other party within ten (10) days after the
expiration of such fifteen (15) day period, plus interest at 8.25% per annum on
such amount from the Closing Date to (but not including) the date of payment. If
Buyer disputes the actual amount of any item, the undisputed amount plus
interest at 8.25% per annum on such amount from the Closing Date to (but not
including) the date of payment shall be paid promptly by the owing party. If
such dispute cannot be resolved within sixty (60) days after the giving of
Buyer's notice that there exists a disputed amount, then an independent auditor
mutually agreeable to Buyer and Seller shall, upon written notice from either
Buyer or Seller, resolve such dispute within sixty (60) days after receipt of
such notice. The fees and expenses of such independent auditor shall be
allocated between Buyer and Seller so that Seller's share of such fees and
expenses shall be in the same proportion that the aggregate amount of such
remaining disputed amounts so submitted by Buyer to such auditor that is
unsuccessfully disputed by Buyer (as finally determined by such auditor) bears
to the total amount of such remaining disputed amounts so submitted by Buyer to
such auditor. Any determination by such independent auditor shall be binding and
conclusive upon the parties without further appeal therefrom. Within ten (10)
days after the independent auditor shall have resolved such dispute, the party
owing the determined amount shall pay such determined amount to the other party,
plus interest at 8.25% per annum on such determined amount from the Closing Date
to (but not including) the date of payment.
13
Section 3.4 Prorations and Adjustments as of the Closing Date.
(a) Buyer and Seller agree that the following items relating
to the Assets and the Business shall be adjusted and allocated as of the Closing
Date, with Seller to be responsible for and to receive the benefit of the same
for the period through and including the Closing Date and Buyer to be
responsible for and to receive the benefit of the same after the Closing Date;
(i) real and personal property taxes, assessments and
annual registration fees;
(ii) water, sewer and other similar types of taxes, and
installments on special benefit assessments and regulatory assessments;
(iii) electric, gas, telephone and other utility charges;
(iv) payroll expenses, payroll taxes, reimbursable
employee business expenses and the financial cost of the accrued vacation time
of the Transferred Employees, in each case as recorded on Seller's books for the
Business as of the Closing Date;
(v) rents under leases transferred to or assumed by Buyer;
(vi) charges under maintenance, service and other
Contracts and fees under licenses transferred to or assumed by Buyer and not
included in the items described in Section 3.1(a);
(vii) deposits of Seller to the extent transferable to
Buyer;
(viii) prepaid and accrued expenses;
(ix) Taxes such as sales, franchise, gross receipts and
other similar taxes based upon revenues; and
(x) xxxxx cash.
(b) The items listed in Section 3.4(a) above shall be
estimated item by item by Seller and reflected on the certificate and supporting
documentation to be delivered to Buyer pursuant to Section 3.3(a) and finally
determined in accordance with Section 3.3(b).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 Organization, Existence and Qualification. Buyer is a
cooperative association duly incorporated, validly existing, and in good
standing under the laws of the State of Hawaii, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, to perform its
obligations under all Contracts to which it is a party, and to execute and
deliver this Agreement and the Related Documents to which Buyer is a party.
14
Section 4.2 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by Buyer have been duly authorized by Buyer's Board of Directors,
which constitutes all necessary corporate action required on the part of Buyer
for such authorizations. Except as set forth in Schedule 4.2, the execution,
delivery and performance of this Agreement and the Related Documents by Buyer
will not result in (a) any conflict with or breach or violation of or default
under the Organizational Documents of Buyer, or (b) a violation or breach of any
term or provision of, or constitute a default or accelerate the performance
required under, any indenture, mortgage, deed of trust, security agreement, loan
agreement, or Contract to which Buyer is a party or by which its assets are
bound, or (c) a violation of any Order of any Governmental Body, except for such
exceptions to the foregoing clauses (b) and (c) that, individually or in the
aggregate, would not be reasonably likely to have a material adverse effect on
Buyer. This Agreement constitutes, and the Related Documents to be executed by
Buyer when executed and delivered will constitute, valid and binding obligations
of Buyer, enforceable against Buyer in accordance with their respective terms,
except as such enforceability may be limited by (i) bankruptcy or similar laws
from time to time in effect affecting the enforcement of creditors' rights
generally or (ii) the availability of equitable remedies generally.
Section 4.3 Governmental Approvals. Except for those Consents described
in Schedule 4.3 and except as set forth in Schedule 5.3 to the extent (but only
to the extent) applicable to Buyer, no Consent of any Governmental Body is
required to be obtained by Buyer in connection with the execution and delivery
by Buyer of this Agreement or the Related Documents or the consummation of the
transactions contemplated by this Agreement or the Related Documents. Buyer has
no knowledge of any facts or circumstances relating to Buyer or its Affiliates
that reasonably would be likely to preclude or prolong the receipt of such
required Consents.
Section 4.4 Availability of Funds. Buyer has available, and will have
available on the Closing Date, sufficient funds to enable it to consummate the
transactions contemplated by this Agreement. Buyer has received, and has
provided to Seller a true and complete copy of, that certain commitment letter
dated as of February 11, 2000, duly executed by Buyer and the National Rural
Utilities Cooperative Finance Corporation ( the "CFC"), which commitment
includes the irrevocable commitment of the CFC to issue on behalf of Buyer a
credit support and liquidity facility with respect to all of the Assumed IDRB
Indebtedness which qualifies for a rating category from a nationally recognized
credit rating service in the highest short-term rating category and in a
long-term investment grade credit rating category of at least "A+" or its
equivalent (the "CFC Debt Support Facility").
Section 4.5 Filings. No statement furnished by Buyer for inclusion in
any filing with any Governmental Body in connection with obtaining such
Governmental Body's Consent for the consummation of the transactions
contemplated by this Agreement will contain, as of the date such information is
so provided, any untrue statement of a material fact or will omit to state, as
of the date such information is so provided, any material fact which is
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
Section 4.6 Brokers. No broker or finder has acted for or on behalf of
Buyer or any Affiliate of Buyer in connection with this Agreement or the
transactions contemplated by this Agreement. No broker or finder is entitled to
any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Buyer or any
Affiliate of Buyer for which Seller or any Affiliate of Seller has or will have
any liability or obligations (contingent or otherwise).
15
Section 4.7 Independent Investigation. Buyer, through its agents or
otherwise, is knowledgeable about the businesses engaged in by Seller through
its Kauai Electric division and of the usual and customary practices of
companies engaged in businesses similar to such businesses and has had access to
the Assets, the officers and employees of Seller, and the books, records and
files of Seller relating to the Business and the Assets. In making the decision
to enter into this Agreement and to consummate the transactions contemplated
hereby, Buyer has relied solely on the basis of its own independent due
diligence investigation of the Business and upon the representations and
warranties made in Article V. Accordingly, Buyer acknowledges that Seller has
not made, and Seller is expressly disclaiming and negating any representation or
warranty (other than those express representations and warranties made in
Article V), express, implied, at common law, by statute or otherwise, relating
to the Business.
Section 4.8 Public Utility Holding Company Status; Regulation as a
Public Utility. Neither Buyer nor any of its Affiliates is a "holding company",
a "subsidiary" of a "public utility company" or of a "holding company," or an
"affiliate" of a "public utility company" or of a "holding company," within the
meaning of such terms in PUHCA.
Section 4.9 Buyer's Financial Statements. As Buyer is not presently
doing business, and has done no business prior to the execution date of this
Agreement, it has no historical financial statements. Buyer agrees to deliver to
Seller pro forma financial statements of Buyer, based on the Financial
Statements and reflecting Buyer's financing for the acquisition contemplated by
this Agreement, within 30 days after the execution of this Agreement.
Section 4.10 Buyer's Insurance. At least ten (10) days prior to the
Closing Date, Buyer will deliver to Seller a Schedule that lists the Buyer's
policies and contracts in effect as of the date hereof for casualty and property
insurance covering its assets and properties and the operation of its business,
together with the risks insured against, coverage limits, deductible amounts and
carriers.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 5.1 Organization, Existence and Qualification. Seller is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Delaware, with full corporate power and authority to
conduct the Business as it is now being conducted, to own or use the Assets, to
perform its obligations under all Contracts to which it is a party, and to
execute and deliver this Agreement and the Related Documents to which Seller is
a party. Seller is duly qualified to do business as a foreign corporation and is
in good standing under the laws of the State of Hawaii and each other state in
which the failure to be so qualified or in good standing would have a Material
Adverse Effect.
Section 5.2 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by Seller have been duly authorized by all requisite corporate action.
Except as set forth in Schedule 5.2, the execution, delivery and performance of
this Agreement and the Related Documents by Seller will not result in (a) any
conflict with or breach or violation of or default under the Organizational
Documents of Seller, (b) to Seller's Knowledge, a violation or breach of any
term or provision of, or constitute a default or accelerate the performance
required under, any indenture, mortgage, deed of trust, security agreement, loan
agreement, or Material Contract to which Seller is a party or by which any of
16
the Assets are bound, or (c) a violation of any Order of any Governmental Body,
except for such exceptions to the foregoing clauses (b) and (c) that,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect or that will be cured, waived or otherwise remedied on
or prior to the Closing Date. This Agreement constitutes and the Related
Documents to be executed by Seller when executed and delivered will constitute
valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except as enforceability may be limited by (i)
bankruptcy or similar laws from time to time in effect affecting the enforcement
of creditors' rights generally or (ii) the availability of equitable remedies
generally.
Section 5.3 Governmental and Other Required Consents. Except as set
forth in Schedule 5.3, no Consent of any Governmental Body or third Person is
required to be obtained by Seller in connection with the execution and delivery
by Seller of this Agreement or the Related Documents or the consummation by
Seller of the transactions contemplated by this Agreement or the Related
Documents, other than (i) any Consent the failure of which to obtain would not
be reasonably likely to have a Material Adverse Effect and (ii) any Consent that
is obtained or made on or prior to the Closing Date.
Section 5.4 Public Utility Holding Company Status; Regulation as a
Public Utility. Seller is a "public utility company" (as such term is defined in
PUHCA). Seller is not a "holding company", a "subsidiary" of a "public utility
company," or an "affiliate" of a "public utility company" or of a "holding
company," within the meaning of such terms in PUHCA.
Section 5.5 Title to Assets; Liens. Seller has good and indefeasible
title to the Assets reflected in the Financial Statements except those that in
the aggregate are not material to the Business and those disposed of since the
date of the Financial Statements in the ordinary course of business or otherwise
disposed of in accordance with this Agreement. None of the Assets are subject to
any Encumbrance except (i) Encumbrances described in Schedule 5.5 and (ii)
Permitted Encumbrances. Schedule 5.5 lists each material parcel of Real Property
owned in fee simple that is a part of the Assets. To Seller's Knowledge, Seller
owns or possesses all Easements necessary to conduct the Business as now being
conducted without any known conflict with the rights of others, in each case
except to the extent that the failure to own or possess such Easements would not
have a Material Adverse Effect. Seller enjoys peaceful and undisturbed
possession under all material real property leases included in the Assets, and
to the Knowledge of Seller, all such leases are valid and subsisting and in full
force and effect.
Section 5.6 Financial Statements.
(a) Schedule 5.6(a) sets forth the unaudited balance sheet for
the Business as at September 30, 1999 (the "Balance Sheet") and unaudited
statement of income of the Business for the nine-month period ended September
30, 1999 (collectively, the "Financial Statements"). Except as set forth in
Schedule 5.6(a), the Financial Statements have been prepared on a pre-tax basis
in accordance, in all material respects, with GAAP applied on a basis consistent
with prior periods. To the Knowledge of Seller and except as set forth in
Schedule 5.6(a), the Balance Sheet presents fairly in all material respects the
financial condition of the Business as of its date and the income statement
included in the Financial Statements presents fairly in all material respects
the results of operations of the Business for the periods covered thereby. The
books and records of Seller from which the Financial Statements were prepared
were complete and accurate in all material respects at the time of such
preparation.
17
(b) To the Knowledge of Seller, as of the date of execution of
this Agreement, there are no Liabilities except for Liabilities (i) reflected in
the Balance Sheet, (ii) arising under the Existing Loan Documents, (iii) listed
in Schedule 5.6(b), or (iv) which individually or in the aggregate are not
reasonably likely to result in a Material Adverse Effect. As used in this
Section 5.6(b), the term "Liabilities" shall only mean claims of creditors and
Governmental Bodies against Seller arising out of activities, operations or
transactions of Seller relating to the Business occurring before the execution
date of this Agreement which have been Threatened or resulted in a Proceeding
against Seller and that have become due or accrued or could reasonably be
expected to become due or accrued within the twelve-month period following the
execution date of this Agreement, but excluding any Liabilities under Legal
Requirements, Orders and Contracts where Seller is not currently in material
violation of or default under any provision thereof.
Section 5.7 Compliance with Legal Requirements; Governmental Permits.
Except as set forth in Schedule 5.7, to the Knowledge of Seller: (a) Seller is
not in violation of any Legal Requirement or Order that is applicable to it, to
the conduct or operation of the Business, or to the ownership or use of any of
the Assets, other than such violations, if any, which are not, individually or
in the aggregate, reasonably likely to have a Material Adverse Effect; and (b)
Seller possesses all permits, licenses, and authorizations from Governmental
Bodies required by any applicable Legal Requirement or Order necessary to permit
the operation of the Business in the manner in which it is currently being
conducted by Seller, except where the failure to possess any such permit,
license or authorization is not reasonably likely to result in a Material
Adverse Effect.
Section 5.8 Legal Proceedings; Outstanding Orders. Except as set forth
in Schedule 5.8, there is no pending or Threatened Proceeding (a) that has been
commenced against Seller that is reasonably likely to have a Material Adverse
Effect or (b) as of the date of this Agreement, that challenges, or that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, the transactions contemplated hereby. Except as disclosed in
Schedule 5.8, there are currently no outstanding Orders against Seller which
relate to or arise out of the conduct of the Business or the ownership,
condition or operation of the Business or the Assets (other than any Order
relating to rates, tariffs and similar matters arising in the ordinary course of
business) which individually or in the aggregate would have a Material Adverse
Effect.
Section 5.9 Taxes. Seller has filed all United States federal, state
and local income Tax Returns required to be filed by Seller or requests for
extensions to file such Tax Returns have been timely filed, and Seller has paid
and discharged or made adequate provision for all Taxes except where failure to
so file, pay, discharge or make adequate provision for are not, individually or
in the aggregate, reasonably likely to have a Material Adverse Effect. There are
no pending audits or other examinations relating to any Tax matters except as
set forth in Schedule 5.9. There are no Tax liens on the Assets. As of the date
of this Agreement, Seller has not granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax except as set forth in Schedule 5.9.
18
Section 5.10 Intellectual Property. Schedule 5.10 lists all patents,
trademarks, service marks and copyrights used or held for use by Seller
primarily in the operation of the Business. Seller has no Knowledge of (i) any
infringement or claimed infringement by Seller of any patent, trademark, service
xxxx or copyright of others or (ii) any infringement of any patent, trademark,
service xxxx or copyright owned by or under license to Seller except for any
such infringements of the type described in clause (i) or (ii) that are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.
Section 5.11 Personal Property. Except for normal wear and tear, and
with such exceptions as are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect, the tangible Assets are in normal
operating condition and in a state of reasonable maintenance and repair.
Section 5.12 Material Contracts; Existing Loan Documents. Schedule 5.12
contains, to Seller's Knowledge, a complete and correct list as of the date
hereof of all Material Contracts (other than line extension Contracts and
similar construction arrangements), including all Existing Loan Documents. To
Seller's Knowledge, there are no defaults under any such Contracts that,
individually or in the aggregate, will have a Material Adverse Effect. Except as
set forth in Schedule 5.12, Seller is not obligated under any Contract relating
to the Business or the Assets with respect to industrial development bonds or
other obligations with respect to which the interest thereon is excluded from
gross income of the holder for federal or state income tax purposes.
Section 5.13 Employee Benefit Matters.
(a) Schedule 5.13 lists (i) each "Employee Benefit Plan," as
such term is defined in Section 3(3) of ERISA, which is covered by any provision
of ERISA and which is maintained by Seller for the benefit of the Active
Employees; (ii) each other material fringe benefit plan, policy or arrangement
currently maintained by Seller for the benefit of Active Employees which
provides for pension, deferred compensation, bonuses, severance, employee
insurance coverage or similar employee benefits (collectively, "Employee
Plans"); and (iii) each collective bargaining, union or other employee
association agreement, employment, managerial advisory, and consulting
agreement, employee confidentiality agreement, and all other material
agreements, policies, or arrangements maintained by Seller for the Active
Employees. Seller has made available to Buyer copies, which were accurate and
complete as of the date so made available, of all such documents and (if
applicable) summary plan descriptions with respect to such plans, agreements and
arrangements, or summary description(s) of any such plans, agreements or
arrangements not otherwise in writing.
(b) Seller's Pension Plan and Seller's 401(k) Plan are the
only Employee Benefit Plans which are intended to be qualified under Section
401(a) of the IRC.
(c) To the Knowledge of Seller, each Employee Benefit Plan has
been established and administered in all material respects in accordance with
the material terms of ERISA and the applicable provisions of the IRC.
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Section 5.14 Environmental Matters.
(a) Except as listed in Schedule 5.14, since December 31,
1996, Seller has not received a written notice from a Governmental Body that
Seller is in violation of any Environmental Law arising out of Seller's
ownership, use or operation of the Assets or the operation of the Business,
except for any violation not reasonably likely to result in a Material Adverse
Effect.
(b) Except as listed in Schedule 5.14, there are no
Proceedings pending or Threatened with respect to Seller's compliance with
Environmental Laws and relating to the Business or the Assets.
(c) Except as listed in Schedule 5.14, since December 31,
1996, Seller has not received any written notice from any Governmental Body that
Seller does not have all certificates, permits and authorizations required by
any Environmental Law for Seller's ownership, use or operation of the Assets or
the operation of the Business (other than any such environmental permit the
absence of which is not reasonably likely to result in a Material Adverse
Effect).
(d) Except as set forth in Schedule 5.14, to Seller's
Knowledge, no environmental remediation of any Release is occurring on any Real
Property included in the Assets nor has Seller issued a request for proposal or
otherwise asked an environmental remediation contractor to begin plans for any
such environmental remediation.
(e) Except as set forth in Schedule 5.14, none of the Real
Property is (i) situated in a federal "Superfund" site or, to Seller's
Knowledge, in any federal "Superfund" study area designated under the federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
or (ii) to Seller's Knowledge, situated in any site or study area designated
under any state statute comparable to CERCLA.
Section 5.15 No Material Adverse Change. Except as set forth in
Schedule 5.15, between the date of the Balance Sheet and the date of execution
of this Agreement, no Material Adverse Effect has occurred. Except for actions
taken in connection with the contemplated sale of the Business and this
Agreement and except for conversion to the SAP financial reporting system,
between the date of the Balance Sheet and the date of execution of this
Agreement, the Business has been conducted in substantially the same manner in
which it has been previously conducted.
Section 5.16 State Regulatory Matters.
(a) To Seller's Knowledge, Schedule 5.16 reflects all of the
currently pending rate filings relating to the Business heretofore made by
Seller before state regulatory commissions and each other currently pending
Proceeding of such state regulatory commission that is reasonably likely to have
a Material Adverse Effect.
(b) To Seller's Knowledge, all currently effective material
filings relating to the Business heretofore made by Seller with state regulatory
commissions were made in compliance with Legal Requirements then applicable
thereto and the information contained therein was true and correct in all
material respects as of the respective dates of such filings.
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Section 5.17 Brokers. Except for Xxxxxx Xxxxxxx & Co. Incorporated, no
broker or finder has acted for or on behalf of Seller or any Affiliate of Seller
in connection with this Agreement or the transactions contemplated by this
Agreement. No broker or finder is entitled to any brokerage or finder's fee, or
to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of Seller or any Affiliate of Seller for
which Buyer has or will have any liabilities or obligations (contingent or
otherwise).
Section 5.18 Disclaimer. Except as otherwise expressly set forth in
this Article V, Seller expressly disclaims any representations or warranties of
any kind or nature, express or implied, as to the condition, value or quality of
the assets or properties currently or formerly used, operated, owned, leased,
controlled, possessed, occupied or maintained by Seller, and Seller SPECIFICALLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH ASSETS OR PROPERTIES,
OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD THAT SUCH ASSETS
AND PROPERTIES ARE BEING ACQUIRED, "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN
THEIR PRESENT CONDITION, WITH ALL FAULTS AND THAT BUYER SHALL RELY ON ITS OWN
EXAMINATION AND INVESTIGATION THEREOF.
ARTICLE VI
COVENANTS
Section 6.1 Covenants of Seller. Seller agrees to observe and perform
the following covenants and agreements:
(a) Conduct of the Business Prior to the Closing Date. With
respect to the Business, except (i) as contemplated in this Agreement or in
Schedule 6.1, (ii) as required by any Legal Requirement or Order or (iii) as
otherwise expressly consented to in writing by Buyer which consent will not be
unreasonably withheld or delayed, prior to the Closing, Seller will, with
respect to the Business.
(1) Not make or permit any material change in the general
nature of the Business;
(2) Maintain the Business in the ordinary course of
business in accordance with prudent business judgment and consistent with past
practice and policy, and maintain the Assets in their present condition,
reasonable wear and tear excepted, subject to retirements in the ordinary course
of business;
(3) Not enter into any material transaction or Material
Contract other than in the ordinary course of business;
(4) Not purchase, sell, lease, dispose of or otherwise
transfer or make any Contract for the purchase, sale, lease, disposition or
transfer of, or subject to Encumbrance, any material Assets other than in the
ordinary course of business;
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(5) Not hire any new employee unless such employee is a
bona fide replacement for either a presently-filled position or a vacancy in an
authorized position with the Business;
(6) Not make any capital expenditure or capital
expenditure commitment in excess of $1,000,000 in the aggregate that is not
included in the Capital Budget except in the event of service interruption,
emergency or casualty loss;
(7) Comply in all material respects with all applicable
material Legal Requirements and Orders, including without limitation those
relating to the filing of reports and the payment of Taxes due to be paid prior
to the Closing, other than those contested in good faith;
(8) Except in the ordinary course of business or in
accordance with the terms of any existing Contract, Employee Plan or collective
bargaining agreement, not grant any material increase or change in total
compensation or benefits (taken as a whole) to any of the Transferred Employees
or enter into any employment, severance or similar Contract with any Person or
amend any such existing Contracts to increase any amounts payable thereunder or
benefits provided thereunder, provided that Seller agrees to consult with Buyer
prior to granting any increase in the aggregate recurring cash compensation of
the non-union Transferred Employees by an amount in excess of three percent (3%)
in any year;
(9) Not terminate any Material Contract except in the case
of a breach of such Contract by the other party thereto; or
(10) Not create, incur, assume, guarantee or otherwise
become liable with respect to any indebtedness for money borrowed other than in
the ordinary course of business (it being understood and agreed that customer
advances, customer deposits and construction advances do not create indebtedness
for money borrowed), except in connection with additional borrowings under the
Existing Loan Documents and any renewal, extension, rearrangement or refunding
of any indebtedness created under or evidenced by the Existing Loan Documents,
and except pursuant to advances made by Seller to the Business.
(b) Access to the Business, Assets and Records; Updating
Information.
(1) From and after the date hereof and until the Closing
Date, Seller shall permit Buyer and its Representatives to have, on reasonable
notice and at reasonable times, reasonable access to all books, papers and
records to the extent that they reasonably relate to the ownership, operation,
obligations and liabilities of the Business and the Assets; provided, however,
that such access shall not unreasonably interfere with the operation of the
Business; and provided, further, that Buyer hereby agrees to defend, indemnify
and hold harmless Seller from and against all Losses arising out of or relating
to Buyer's access provided pursuant to this Section 6.1(b)(1). Without limiting
the application of the Confidentiality Agreement, all documents or information
furnished by Seller hereunder shall be subject to the Confidentiality Agreement.
(2) Seller will notify Buyer as promptly as practicable of
any significant change in the ordinary course of business for the Business and
of any material Proceedings (Threatened or pending) involving or affecting the
Business or the transactions contemplated by this Agreement, and shall use
reasonable efforts to keep Buyer fully informed of such events.
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(c) Consents. Seller will use its commercially reasonable
efforts to obtain all necessary Consents from any Person required to consummate
the transactions contemplated hereby, including the Consent of any Person
required under any Legal Requirement or Contract applicable to the Business.
Section 6.2 Covenants of Buyer. Buyer agrees to observe and perform the
following covenants and agreements:
(a) Consents. Buyer will use its commercially reasonable
efforts to assist Seller in obtaining all necessary Consents from any Person
required to consummate the transactions contemplated hereby, including the
Consent of any Person required under any Legal Requirement or Contract
applicable to the Business, and will use its commercially reasonable efforts to
obtain all Consents listed in Schedule 4.2 or Schedule 4.3.
(b) Access to Information. After Closing, Buyer will, and will
cause its Representatives to, afford to Seller, including its Representatives,
reasonable access to all books, records, files and documents related to the
Business in order to permit Seller to prepare and file its tax returns and to
prepare for and participate in any investigation with respect thereto, to
prepare for and participate in any other investigation and defend any
Proceedings relating to or involving Seller or the Business for which Seller may
be responsible, to discharge its obligations under this Agreement and the other
Related Documents to which its is a party and for other reasonable purposes and
will afford Seller reasonable assistance in connection therewith. Buyer will
cause such records to be maintained for not less than seven years from the
Closing Date and will not dispose of such records without first offering in
writing to deliver them to Seller; provided, however, that in the event that
Buyer transfers all or a portion of the Business to any third party during such
period, Buyer may transfer to such third party all or a portion of the books,
records, files and documents related thereof, provided such third party
transferee expressly assumes in writing the obligations of Buyer under this
Section 6.2(b). In addition, after the Closing Date, at Seller's request, Buyer
shall make available to Seller and its Affiliates, employees, representatives
and agents, those employees of Buyer requested by Seller in connection with any
Proceeding, including to provide testimony, to be deposed, to act as witnesses
and to assist counsel; provided, however, that (x) such access to such employees
shall not unreasonably interfere with the normal conduct of the operations of
Buyer and (y) Seller shall reimburse Buyer for the allocated time charges of
such employees and the out-of-pocket costs reasonably incurred by Buyer in
making such employees available to Seller.
(c) Citizens Guarantees and Surety Instruments. Buyer shall
use its reasonable efforts to assist Seller in obtaining full and complete
releases on the guarantees, letters of credit, bonds and other surety
instruments listed in Schedule 6.2(c). For purposes of this Section 6.2(c),
reasonable efforts shall include: (i) Buyer's assumption of the Contracts on the
terms set forth in this Agreement; and (ii) an obligation on the part of Buyer
to provide a guaranty, letter of credit, bond or other surety instrument at
Closing to the extent required by any Contract assumed by Buyer at Closing and,
in general, an equivalent surety instrument to be substituted for any surety
instrument provided by Citizens to any beneficiary in connection with the
Business.
(d) Other Covenants of Buyer. Buyer agrees to submit to
regulation by the Hawaii Public Utilities Commission to the same extent as such
state regulatory commission currently regulates Seller in connection with the
Business, it being agreed that this covenant shall terminate and have no further
effect upon Closing. Buyer also agrees to make no filings with such state
regulatory commission or take any other action in connection with any Proceeding
or Legal Requirement relating to any other businesses conducted by Seller that
also are subject to regulation by such state regulatory commission.
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Section 6.3 Governmental Filings.
(a) HSR Act Filing. Buyer and Seller shall comply promptly
with the notice and reporting requirements of the HSR Act. Buyer and Seller
shall comply substantially with any additional requests for information,
including requests for production of documents and production of witnesses for
interviews or depositions, made by the Antitrust Division of the United States
Department of Justice, the United States Federal Trade Commission or the
antitrust or competition law authorities of any other jurisdiction (the
"Antitrust Authorities"). Buyer shall exercise its best efforts, and Seller
shall cooperate fully with Buyer, to prevent the entry in any Proceeding brought
by an Antitrust Authority or any Governmental Body which would prohibit, make
unlawful or delay the consummation of the transactions contemplated by this
Agreement. Seller shall not oppose any efforts of Buyer, including Buyer's
proffer of consent to any Order, to complete lawfully the transactions
contemplated by this Agreement, and shall cooperate in good faith with Buyer and
the Antitrust Authorities to the same effect.
(b) Other Regulatory Filings. Buyer and Seller will, as soon
as reasonably practicable following the execution of this Agreement, prepare and
file with each Governmental Body, including a joint application with the Hawaii
Public Utilities Commission, requests for such Consents as may be necessary for
the transfer of the Assets (including the transfer of Seller's franchise
relating to the Business) in accordance with the terms of this Agreement. Buyer
and Seller will diligently pursue such Consents and will cooperate with each
other in seeking such Consents. To this end, the parties agree to make available
the personnel and other resources of their respective organizations in order to
accomplish actions reasonably required by them to obtain all such Consents.
Buyer agrees that Seller's Hawaii regulatory counsel, at Seller's expense, will
act as counsel for the joint applicants in all Proceedings before the Hawaii
Public Utilities Commission regarding the parties' joint application.
Section 6.4 Citizens Marks. Buyer acknowledges and agrees with Seller
that Seller has the absolute and exclusive proprietary right to all names,
marks, trade names, trademarks and corporate symbols and logos incorporating
"Citizens" and "CZN" (collectively and together with all other names, marks,
trade names, trademarks and corporate symbols and logos owned by Seller or any
of its Affiliates, the "Citizens Marks"), all rights to which and the goodwill
represented thereby and pertaining thereto are being retained by Seller. Within
one hundred eighty (180) days after the Closing Date, Buyer shall cease using
any Citizens Xxxx and shall remove from the Assets any and all Citizens Marks.
Thereafter, Buyer shall not use any Citizens Xxxx in connection with the sale of
any products or services or otherwise in the conduct of its businesses. In the
event that Buyer breaches this Section 6.4, Seller shall be entitled to specific
performance of this Section 6.4 and to injunctive relief against further
violations, as well as any other remedies at law or in equity available to
Seller.
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Section 6.5 Acknowledgment by Buyer. In order to induce Seller to enter
into and perform this Agreement and the Related Documents, Buyer acknowledges
and agrees with Seller as follows:
(a) To the knowledge of Buyer, Seller's representations and
warranties made in Article V are true and correct as of the date of execution of
this Agreement. To the extent any representation or warranty of Seller made
herein is, to the knowledge of Buyer acquired prior to the date of execution of
this Agreement, untrue or incorrect, (i) Buyer shall have no rights under this
Agreement or any Related Documents by reason of such untruth or inaccuracy, and
(ii) any such representation or warranty by Seller shall be deemed to be amended
to the extent necessary to render it consistent with such knowledge of Buyer.
(b) Buyer has concluded whatever inspections, studies, tests
and investigations Buyer desired to conduct relating to the Business and the
Assets, including economic reviews and analyses, soil tests, engineering
analyses, environmental analyses and analyses of any applicable records of any
Governmental Body. Buyer is relying solely on its own investigation as to the
Business and the Assets and is assuming the risk that adverse physical, economic
or other conditions or circumstances (including soil and groundwater conditions)
may not have been revealed by such investigation.
(c) NONE OF SELLER OR ANY OF ITS AFFILIATES OR REPRESENTATIVES
MAKES ANY REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR COMPLETENESS OF ANY
INFORMATION, WRITTEN OR ORAL, FURNISHED TO OR PREPARED AT THE REQUEST OF BUYER
OR ANY OF ITS AFFILIATES OR REPRESENTATIVES WITH RESPECT TO THE BUSINESS OR THE
ASSETS.
(d) THE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE V
OF THIS AGREEMENT CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND
WARRANTIES OF SELLER TO BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED
HEREBY AND BY THE RELATED DOCUMENTS THERE ARE NO REPRESENTATIONS, WARRANTIES,
COVENANTS, UNDERSTANDINGS OR AGREEMENTS, ORAL OR WRITTEN, IN RELATION THERETO
BETWEEN THE PARTIES OTHER THAN THOSE INCORPORATED HEREIN AND THEREIN. EXCEPT FOR
THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE V OF THIS
AGREEMENT, BUYER DISCLAIMS RELIANCE ON ANY REPRESENTATIONS OR WARRANTIES, EITHER
EXPRESS OR IMPLIED, BY OR ON BEHALF OF SELLER OR ITS AFFILIATES OR
REPRESENTATIVES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER
ACKNOWLEDGES AND AGREES THAT, EXCEPT AS PROVIDED IN SECTIONS 5.7, 5.11 AND 5.14,
THERE ARE NO REPRESENTATIONS OR WARRANTIES OF SELLER WITH RESPECT TO THE
CONDITION OF THE ASSETS, COMPLIANCE WITH ENVIRONMENTAL LAWS AND ENVIRONMENTAL
PERMITS OR THE PRESENCE OR RELEASES OF HAZARDOUS MATERIAL IN THE FIXTURES,
SOILS, GROUNDWATER, SURFACE WATER OR AIR ON, UNDER OR ABOUT OR EMANATING FROM
ANY OF THE PROPERTIES OR ASSETS OF SELLER.
25
Section 6.6 Transition Plan. Within 30 days after the execution date of
this Agreement, Buyer shall deliver to Seller a list of its proposed
representatives to a joint transition team, which shall include expertise from
various functional specialties associated or involved in providing billing,
payroll and other support services provided to the Business by any automated or
manual process using facilities or employees that are not included among the
Assets or Transferred Employees. Seller will add its representatives to such
team within 15 days after receipt of Buyer's list. Such team will be responsible
for preparing as soon as reasonably practicable after the execution date of this
Agreement and at least 60 days prior to the Closing Date, and timely
implementing, a transition plan which will identify and describe substantially
all of the various transition activities that the parties will cause to occur
before and after the Closing and any other transfer of control matters that any
party reasonably believes should be addressed in such transition plan, including
the migration or conversion of the data relating to the Business that is
included among the Assets to Buyers information systems (it being understood and
agreed that such activity will be at Buyer's sole cost and expense and to be
performed by consultants reasonable satisfactory to Seller). If requested by
either party, the terms and conditions governing such transition activities will
be more fully set forth in a Transition Agreement reasonably satisfactory to the
parties. Buyer and Seller shall use their commercially reasonable efforts to
cause their Representatives on such transition team to cooperate in good faith
and take all reasonable steps necessary to develop a mutually acceptable
transition plan by no later than 120 days after the date of this Agreement.
Section 6.7 IDRB Obligations.
(a) Buyer's Obligations Regarding Retained IDRB Indebtedness.
Each party acknowledges that (x) Seller is and after the Closing Date shall
continue to be and shall remain the primary obligor with respect to all Retained
IDRB Indebtedness and related Bonds outstanding immediately after the Closing
Date to the same extent as though no sale of the Assets had been made and that
Buyer shall have no payment obligations with respect to such Retained IDRB
Indebtedness and related Bonds and (y) the IDRB Documents require Seller not to
take or permit to be taken any action which would have the effect, directly or
indirectly, of subjecting the interest on any of the Bonds to federal or state
income taxation. Accordingly, Buyer covenants and agrees at Closing to execute
and deliver to Seller an agreement substantially in the form attached hereto as
Exhibit 6.7, with respect to the Bonds that will be outstanding after the
Closing Date. Buyer represents, warrants, covenants and agrees, that so long as
any Bonds are outstanding, (a) as the "successor in interest" to Seller (as such
term is used in Section 142(f)(3)(B) of the IRC), Buyer will cause the Assets
that were acquired, constructed, improved or equipped with the proceeds of such
Bonds to be used as facilities for the local furnishing of electric energy
within the meaning of Sections 142(a)(8) and 142(f) of the IRC or, if
applicable, Section 103(b)(4)(E) of the Internal Revenue Code of 1954, as
amended (that is, the local furnishing of electric energy from such Assets shall
only include furnishing solely within the area consisting of (i) a city and one
contiguous county, or (ii) two contiguous counties; provided that such use shall
be to provide service within the same service area as served by Seller on
January 1, 1997 (or within a county or a city any potion of which is within such
area)), (b) Buyer has not made and shall not make an election pursuant to
Section 142(f)(4)(B) of the IRC to terminate tax-exempt bond financing by Buyer
and (c) Buyer shall not otherwise take or permit to be taken any action with
respect to the Assets and its use and operation thereof which would have the
effect, directly or indirectly, of subjecting interest on any of such Bonds to
federal or state income taxation. Buyer acknowledges and agrees that Seller's
bond counsel may rely on Buyer's representations, warranties and covenants as
hereinabove provided for the purpose of rendering legal opinions, as required by
the IDRB Documents as a precondition to the sale by Seller of such Assets, to
the effect that the sale of such Assets will not result in the inclusion of the
interest on the Bonds in the gross income of the recipient for purposes of
federal income taxation. Nothing in this Agreement is intended to nor shall it
be interpreted as (i) an assignment to, and assumption by, Buyer of any of the
IDRB Documents relating to the Retained IDRB Indebtedness, or (ii) as an
undertaking or agreement by Buyer to assume, guarantee or pay any of Seller's
loan or other payment obligations pursuant to the IDRB Documents relating to the
Retained IDRB Indebtedness.
26
(b) Consents and Legal Opinions. The parties shall use their
respective commercially reasonable efforts to obtain all Consents and legal
opinions as may be required under the IDRB Documents relating to the Retained
IDRB Indebtedness to enable Seller to retain all Retained IDRB Indebtedness and
to sell the Assets to Buyer without the result that the interest on the Bonds
relating to the Retained IDRB Indebtedness will be included in the gross income
of the recipient for purposes of federal income taxation.
(c) Buyer's Obligations Relating to Assumed IDRB Indebtedness.
(1) Buyer shall use its reasonable efforts to assist Seller in
obtaining all consents and opinions and taking such other actions as may be
required to enable Buyer to assume at the Closing all of the Assumed IDRB
Indebtedness. For purposes of this Section 6.7(c), reasonable efforts shall
include the obligation of Buyer to provide a debt obligation (including
obtaining a minimum credit rating necessary to prevent any change to the
tax-exempt status of any of the Bonds to which the Assumed IDRB Indebtedness
relates (the "Related Bonds") and providing credit enhancements (such as bond
insurance, the CFC Debt Support Facility or another credit support facility from
a reputable financial institution which qualifies for a rating category from a
nationally recognized credit rating service in the highest short-term rating
category and a long-term investment grade credit rating category of at least
"A+" or its equivalent (a "Credit Enhancement")) to the issuer of the Related
Bonds satisfactory to such issuer in replacement of and in substitution for
Seller's liabilities and obligations to such issuer with respect to the Assumed
IDRB Indebtedness. If, after using such reasonable efforts, the parties
reasonably conclude that all such required consents and opinions will not be
obtained by the date that the conditions to Closing set forth in the first
sentence of each of Sections 7.1(d) and 7.2(d) are expected to be satisfied,
then Seller and Buyer will use their reasonable efforts and take such other
actions as may be required to enable Seller to assign to Buyer at Closing all of
Seller's liabilities and obligations under the Assumed IDRB Indebtedness; in
such event Buyer agrees to comply with the provisions of Section 6.7(a) to the
extent applicable to such assignment of the Assumed IDRB Indebtedness and to
provide a Credit Enhancement to Seller satisfactory to Seller in its sole
discretion securing Buyer's payment obligations with respect to such assigned
liabilities and obligations.
(2) Representations of Seller.
(A) Seller represents that each of the Related Bonds is a
bond issue which was used to finance facilities for the local furnishing of
electric energy within the meaning of Section 103(b)(4)(E) of the Internal
Revenue Code of 1954 as amended ("1954 Code") or Section 142(a)(8) of the IRC,
as the case may be, and that the interest of such Bonds was as of their date of
issue, excludable from the gross income of the holders of such Bonds for federal
or State of Hawaii income tax purposes pursuant to such sections of the IRC or
the 1954 Code.
(B) Seller represents that it has complied with all of its
duties and obligations under the IDRB Documents relating to the Related Bonds,
including its obligations relating to the use of the proceeds of the Related
Bonds and the ownership, operation, use and maintenance of the Assets financed
with the proceeds of the Related Bonds. Seller represents that the
representations and warranties of "Company" in such IDRB Documents remain true
and correct, and that it has not taken nor permitted to be taken any action
which would have the effect of subjecting the interest on any of such Bonds to
federal or State of Hawaii income taxation.
27
(C) Seller represents that as of Closing all the proceeds
of the Related Bonds have been spent in accordance with the IDRB Documents
relating to such Related Bonds, the construction of the projects to be financed
with such Bonds have been completed, that there are no reserve funds associated
with the Trust Indentures for such Bonds, and that all of the proceeds of such
Bonds were invested in tax-exempt obligations of state and local governments
(except to the extent used to acquire or construct the facilities financed by
such Bonds) and, that therefore, Seller does not have any arbitrage profits
subject to the rebate requirements of Section 148 of the IRC.
(D) Seller represents that it has not made an election
pursuant to Section 142(f)(4)(B) of the IRC to terminate tax-exempt bond
financing by Seller.
(E) Seller further represents the following with respect
to the Related Bonds:
(i) The Assets financed by the Related Bonds are
facilities for the local furnishing of electric energy;
(ii) It has not caused or permitted to be caused any
reissuance if the Related Bonds under Section 1001 of the IRC, without first
obtaining a "no adverse effect" opinion of bond counsel;
(iii) has not caused an extension of the maturity of
such Related Bonds without first obtaining a "no adverse effect" opinion of bond
counsel;
(iv) It has not taken or caused to be taken any action
that would cause the Related Bonds to be arbitrage bonds under Section 148 of
the IRC, including, but not limited to, the failure to rebate arbitrage profits,
if any, as required by Section 148(d) of the IRC;
(v) It has not taken any action that would cause the
Related Bonds not to be registered in accordance with Section 149(a) of the IRC;
and
(vi) It has not permitted the Related Bonds to become
directly or indirectly "federally guaranteed" under Section 149 of the IRC.
(3) Covenants of Buyer. Buyer covenants and agrees, so long as
any Assumed IDRB Indebtedness is outstanding, to cause the Assets that were
acquired, constructed, improved or equipped with the proceeds of the Related
Bonds to be used as facilities for the local furnishing of electric energy
within the meaning of Section 103(b)(4)(E) of the 1954 Code or Section 142(a)(8)
of the IRC, as the case may be. Buyer further covenants that it has not made an
election pursuant to Section 142(f)(4)(B) of the IRC to terminate tax-exempt
bond financing by Buyer. Buyer further covenants and agrees, so long as any
Assumed IDRB Indebtedness is outstanding, the following:
(A) It will not cause or permit to be caused any
reissuance under Section 1001 of the IRC without first obtaining a "no adverse
effect" opinion of bond counsel;
(B) It will not cause an extension of the maturity of the
Related Bonds without first obtaining a "no adverse effect" opinion of bond
counsel;
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(C) It will not take or cause to be taken any action that
would cause the Related Bonds to be arbitrage bonds under Section 148 of the
IRC, including, but not limited to, the failure to rebate arbitrage profits, if
any, as required by Section 148(f) of the IRC;
(D) It will not take any action that would cause the
Related Bonds not to be registered in accordance with Section 149(a) of the IRC;
(E) It will not permit the Related Bonds to become
directly or indirectly "federally guaranteed" under Section 149 of the IRC; and
(F) It will comply with each representation, warranty,
covenant or other agreement or obligation set out by the IDRB Documents relating
to the Assumed IDRB Indebtedness as in effect on the date of execution of this
Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Seller's Conditions Precedent to Closing. The obligation of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to fulfillment at or prior to the Closing of the following conditions:
(a) Representations and Warranties True as of the Closing
Date. Buyer's representations and warranties in this Agreement shall have been
true and correct in all material respects as of the date of this Agreement and
shall be true and correct in all material respects as of the Closing Date as if
made on the Closing Date, subject to changes expressly contemplated and
permitted by this Agreement, except that representations and warranties made as
of, or in respect of, only a specified date or period shall be true and correct
in all material respects as of, or in respect of, such date or period.
(b) Compliance with Agreements. The covenants, agreements and
conditions required by this Agreement to be performed and complied with by Buyer
shall have been performed and complied with in all material respects prior to or
at the Closing Date.
(c) Certificate. Buyer shall execute and deliver to Seller a
certificate of an authorized officer of Buyer, dated the Closing Date, stating
that the conditions specified in Sections 7.1(a) and 7.1(b) of this Agreement
have been satisfied.
(d) Governmental Approvals and Other Consents. The Hawaii
Public Utilities Commission shall have issued an Order approving the
transactions contemplated hereby, the terms and conditions of such Order shall
be acceptable in all material respects to Seller in its reasonable discretion
and shall have no significant adverse effect on Seller's acquisition and
divestiture activities in the State of Hawaii (including the divestiture of the
Assets), and such Order shall have become a Final Order. Seller also shall have
obtained all other Consents of Governmental Bodies and other Persons which are
required in order to consummate the transactions contemplated hereby and to
transfer the Assets to Buyer without incurring material liability under any
Legal Requirement, Order or Contract.
(e) HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or have
been terminated.
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(f) Injunctions. On the Closing Date, there shall be no Orders
which operate to restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated by this Agreement.
(g) Opinion of Counsel. On the Closing Date, Seller shall have
received from counsel to Buyer an opinion in the form of Exhibit 7.1(g).
(h) Documents. Buyer shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder on or before the Closing Date, including pursuant to
Section 8.1, and shall have taken such actions as Seller may have requested
pursuant to Section 11.2 hereof.
(i) IDRB Indebtedness. Seller shall have obtained all Consents
and legal opinions required under the IDRB Documents to enable (x) Seller to
retain the Retained IDRB Indebtedness until maturity and (y) Seller to obtain a
release of its liability under, and Buyer to assume the Assumed IDRB
Indebtedness, (or for Seller to assign the Assumed IDRB Indebtedness to Buyer)
and in each case to sell the Assets to Buyer without the result that the
interest on any of the Bonds will be included in the gross income of the
recipient for purposes of federal income taxation and without any event of
taxability (as such term is customarily used in municipal securities
transactions) arising from the sale of the Assets pursuant to this Agreement
and/or the assignment or assumption of the Assumed IDRB Indebtedness, and Buyer
shall have duly executed and delivered all of the instruments contemplated by
Section 6.7(a) and Section 6.7(c). If Buyer actually is assuming the Assumed
IDRB Indebtedness, then Buyer also shall have provided to the issuer of the
Bonds relating to the Assumed IDRB Indebtedness a Credit Enhancement with
respect to the Assumed IDRB Indebtedness as required by Section 6.7(c)(1). If
the Assumed IDRB Indebtedness instead is being assigned to Buyer, then Buyer
also shall have provided to Seller a Credit Enhancement satisfactory to Seller
with respect to the payment obligations arising under the Assumed IDRB
Indebtedness as required by Section 6.7(c)(1).
Section 7.2 Buyer's Conditions Precedent to Closing. The obligation of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to fulfillment at or prior to the Closing of the following conditions:
(a) Representations and Warranties True as of the Closing
Date. Seller's representations and warranties in this Agreement shall have been
true and correct in all material respects as of the date of this Agreement and
shall be true and correct in all material respects as of the Closing Date as if
made on the Closing Date, subject to changes expressly contemplated and
permitted by this Agreement; except (i) that representations and warranties made
as of, or in respect of, only a specified date or period shall be true and
correct in all material respects as of, or in respect of, such date or period,
and (ii) to the extent that any failure of such representations and warranties
to be true and correct as aforesaid when taken in the aggregate would not have a
Material Adverse Effect.
(b) Compliance with Agreements. The covenants, agreements and
conditions required by this Agreement to be performed and complied with by
Seller shall have been performed and complied with in all material respects
prior to or at the Closing Date, except where the failure to so perform or
comply when taken in the aggregate would not have a Material Adverse Effect.
(c) Certificate. Seller shall execute and deliver to Buyer a
certificate of an authorized officer of Seller, dated the Closing Date, stating
that the conditions specified in Sections 7.2(a) and 7.2(b) of this Agreement
have been satisfied.
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(d) Governmental Approvals. The Hawaii Public Utilities
Commission shall have issued an Order approving the transactions contemplated
hereby, such Order shall not contain any restrictions or conditions (other than
those in effect on the date of this Agreement or requiring that the regulatory
treatment with respect to the Business in existence as of the date of this
Agreement applicable to Seller be continued following the Closing) which would
have a Material Adverse Effect, and such Order shall have become a Final Order.
In addition, Seller shall have obtained all other Consents of Governmental
Bodies and other Persons which are required in order to consummate the
transactions contemplated hereby other than those the failure of which to obtain
would not have a Material Adverse Effect.
(e) HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or have
been terminated.
(f) Injunctions. On the Closing Date, there shall be no Orders
which operate to restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated by this Agreement.
(g) Opinion of Counsel. On the Closing Date, Buyer shall have
received from L. Xxxxxxx Xxxxxx XX, Vice President and General Counsel of
Seller, an opinion in the form of Exhibit 7.2(g) hereto.
(h) Documents. Seller shall have delivered all of the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 8.1, and shall have
made arrangements reasonably satisfactory to Buyer to deliver to Buyer as
promptly as practicable after the Closing such records (including customer and
employee records) necessary to own and operate the Business.
(i) No Material Adverse Change. Since the date of execution of
this Agreement, no Material Adverse Effect shall have occurred that has
continuing effect as of the Closing Date.
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ARTICLE VIII
CLOSING
Section 8.1 Closing. The closing of the purchase and sale of the Assets
(the "Closing") will take place at the offices of Xxxxxxxxxx and Xxxxx, L.L.P.,
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxxxxxxx, X.X. 00000, on the last
calendar day of the month in which the conditions specified in Sections 7.1(d)
and 7.2(d) have been satisfied, unless another time, date and place is agreed to
in writing by the parties. The date of the Closing is referred to in this
Agreement as the "Closing Date." The transactions to be consummated on the
Closing Date shall be deemed to have been consummated as of 11:59 p.m. on the
Closing Date. At the Closing the following events shall occur, each event being
deemed to have occurred simultaneously with the other events.
(a) Xxxx of Sale. Seller and Buyer shall execute and deliver
the Xxxx of Sale and Assignment and Assumption Agreement in the form of Exhibit
8.1(a) hereto (the "Xxxx of Sale").
(b) Payment of Purchase Price. Buyer will pay to Seller an
amount equal to the Estimated Purchase Price by wire transferring such amount,
in lawful money of the United States of America in immediately available funds,
to such account as Seller shall have designed by notice to Buyer. If the Closing
Date is not a business day on which financial institutions are open and
operating, then on or before the last business day on which financial
institutions are open and operating before the Closing Date, Buyer shall deliver
the Estimated Purchase Price to Buyer's lead bank (the "Escrow Agent") in
immediately available funds in U.S. dollars. Upon receipt, the Escrow Agent
shall invest the Estimated Purchase Price in an interest-bearing account
mutually agreed upon by Seller and Buyer. At Closing, Buyer shall sign and
deliver to Seller a statement which confirms that the Closing has occurred and
which instructs the Escrow Agent to transfer to Seller the funds representing
the Estimated Purchase Price, plus an amount representing the interest earned
after the Closing Date until the date the funds are transferred, to an account
that Seller shall designate at least two (2) business days prior to the date the
funds are required to be transferred hereunder. The Escrow Agent shall refund
the balance to Buyer. The fees and expenses of Escrow Agent shall be paid
equally by Seller and Buyer.
(c) Other Related Documents. To the extent consistent with the
other provisions of this Agreement, Seller (or the appropriate Affiliate of
Seller) and Buyer shall execute and deliver such other Related Documents
(including special warranty deeds, conveyances, certificates of title, bills of
sale and assignment and assumption instruments) reasonably requested by a party
that are necessary in order to satisfy any applicable Legal Requirements
relating to the transfer of the Assets to Buyer or the assumption of the Assumed
Liabilities by Buyer or which are customarily given in the State of Hawaii to
accomplish transfers of assets of the type involved; provided, however, that
nothing in this clause (c) shall obligate Seller or any Affiliate of Seller to
execute or deliver any document that affects, in a manner adverse to Seller,
Seller's liability to Buyer as expressed herein and in the Xxxx of Sale.
(d) IDRB Indebtedness. Buyer and Seller shall execute and
deliver the Retained IDRB Obligations Agreement contemplated by Section 6.7(a)
to the extent not previously executed and delivered by Buyer and Seller. Buyer
also shall execute and deliver to Seller an assumption agreement, in form
satisfactory to Seller's special bond counsel, pursuant to which Buyer shall
assume the Assumed IDRB Indebtedness to the extent the condition precedent to
Closing set forth in Section 7.1(i) with respect to such Assumed IDRB
Indebtedness has been satisfied.
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ARTICLE IX
TERMINATION
Section 9.1 Termination Rights. This Agreement may be terminated in its
entirety at any time prior to the Closing:
(a) By the mutual written agreement of Seller and Buyer;
(b) By Buyer, on the one hand, or Seller, on the other hand,
in writing if there shall be in effect a nonappealable Order prohibiting the
transactions contemplated by this Agreement;
(c) By Buyer, upon the breach in any material respect of any
of the representations and warranties of Seller contained herein or in the
failure by Seller to perform and comply in any material respect with any of the
agreements and obligations required by this Agreement to be performed or
complied with by Seller, provided that such breach or failure is reasonably
likely to result in a Material Adverse Effect and is not cured or otherwise
addressed by Seller in a manner reasonably acceptable to Buyer within 30 days of
Seller's receipt of a written notice from Buyer that such a breach or failure
has occurred (or significant efforts have not been commenced to cure such
misrepresentation or breach if it is susceptible to cure but not capable of
being cured within such 30 days);
(d) By Seller, upon the breach in any material respect of any
of the representations and warranties of Buyer contained herein or the failure
by Buyer to perform and comply in any material respect with any of the
agreements and obligations required by this Agreement to be performed or
complied with by Buyer, provided that such breach or failure is not cured or
otherwise addressed by Buyer in a manner reasonably acceptable to Seller within
30 days of Buyer's receipt of a written notice from Seller that such a breach or
failure has occurred (or significant efforts have not been commenced to cure
such misrepresentation or breach if it is susceptible to cure but not capable of
being cured within such 30 days);
(e) By either party in writing if the Closing has not occurred
within twelve (12) months after the execution date of this Agreement; provided,
however, that the right to terminate this Agreement under this Section 9.1(e)
will not be available to any party that is in material breach of its
representations, warranties, covenants or agreements contained herein; and
provided, further, that if Closing has not occurred within such period of time
because the conditions precedent to Closing set forth in Sections 7.1(d) and
7.2(d) have not been fulfilled, then such period of time shall be automatically
extended by an additional six (6) months;
(f) By Seller or Buyer, as appropriate, if any Governmental
Body whose Consent is required to fulfill a condition precedent to Closing set
forth in Section 7.1(d) (with respect to Seller) or in Section 7.2(d) (with
respect to Buyer) has affirmatively indicated that such Consent will not be
given or will contain terms or conditions (or, if such Consent has been
obtained, contains terms or conditions) that, in the reasonable business
judgment of Seller or Buyer, as appropriate, will result in a condition
precedent to Closing set forth in Section 7.1(d) (with respect to Seller) or in
Section 7.2(d) (with respect to Buyer) not being satisfied; or
(g) By Seller because of the failure of the CFC to advance
loan proceeds to Buyer with which to fund the payments required to be made by
Buyer at Closing or because the CFC has affirmatively indicated, for no reason
or for any reason other than the proper termination of this Agreement pursuant
to any other provision of this Section 9.1, that such funding will not be
provided by the CFC.
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Section 9.2 Limitation on Right to Terminate: Effect of Termination.
(a) A party shall not be allowed to exercise any right of
termination pursuant to Section 9.1 if the event giving rise to the termination
right shall be due to the willful failure of such party seeking to terminate
this Agreement to perform or observe in any material respect any of the
covenants or agreements hereof to be performed or observed by such party.
(b) If this Agreement is terminated as permitted under Section
9.1, such termination shall be without liability of or to any party to this
Agreement, or any shareholder or Representative of such party; provided,
however, that if such termination shall result from the willful failure of any
party to fulfill a condition to the performance of any other party or to perform
a covenant of this Agreement or from a material and willful breach by any party
to this Agreement (it being understood that the failure to cure a breach shall
not, by itself, be a willful breach of this Agreement), then such party shall
(subject to the limitation set forth in the last sentence of this Section
9.2(b)) be fully liable for any and all damages sustained or incurred by the
other party. If prior to Closing either party to this Agreement resorts to legal
proceedings to enforce this Agreement, the prevailing party in such proceedings
shall be entitled to recover all costs incurred by such party including
reasonable attorney's fees, in addition to any other relief to which such party
may be entitled; provided, however, and notwithstanding anything to the contrary
in this Agreement, in no event shall either party be entitled to receive any
punitive, indirect or consequential damages.
(c) If (i) Seller terminates this Agreement pursuant to
Section 9.1(d) or (ii) this Agreement is terminated by either party pursuant to
Section 9.1(e) or 9.1(f) because the requisite Consent from the Hawaii Public
Utilities Commission has not been obtained, or because such Governmental Body
has affirmatively indicated that its Consent will not be given, due in whole or
in part to concerns about the Buyer's financial, operational or legal
qualifications or capabilities, or (iii) this Agreement is terminated by Seller
pursuant to Section 9.1(g) , then Seller may present a sight draft under the
Letter of Credit, and thereby retain the Deposit as liquidated damages free of
any claims by Buyer or any other Person with respect thereto (the parties hereby
acknowledging that the extent of damages to Seller occasioned by such breach or
default by Buyer would be impossible or extremely difficult to ascertain and
that the amount of the Deposit is a fair and reasonable estimate of such damages
under the circumstances). If this Agreement is terminated for any reason other
than as set forth in the preceding sentence, then Seller shall deliver the
Letter of Credit to Buyer, free of any claims by Seller or any other Person with
respect thereto.
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ARTICLE X
EMPLOYEE MATTERS
Section 10.1 Employment of Transferred Employees.
(a) Schedule 10.1 lists each division, and the total number of
salaried and hourly, nonunion and union, employees actively employed as of the
date of this Agreement in each division by Seller or its Affiliates whose
primary duties relate to the Business ("Active Employees"). As of the Closing
Date, Buyer shall employ all Active Employees of Seller employed in the Business
being acquired ("Transferred Employees") in the same or substantially equivalent
positions, and at the same compensation level (including wages, salary and
bonuses) as were in effect with Seller immediately prior to the Closing Date.
For purposes of the preceding sentence, "Active Employees" shall include all
full-time and part-time employees, employees on military leave, maternity leave,
leave under the Family and Medical Leave Act of 1993, on short-term disability,
on layoff with recall rights, and employees on other leaves of absences where
there is a legal or contractual right to reinstatement.
(b) Prior to the execution date of this Agreement, Seller has
delivered to Buyer a list of the persons who would have been Transferred
Employees had the Closing Date occurred on December 31, 1999, showing the
following information for each such person: (i) the name of each such person;
(ii) the name of his or her current employer; (iii) his or her current base pay,
1999 bonus and projected 2000 bonus; (iv) his or her hire date, any rehire date
(if available) and years of service; (v) his or her then-current position and
job title; (vi) whether such employee is subject to a collective bargaining
agreement or represented by a labor organization and, if so, the name of the
union and local, (vii) whether such employee is on military leave, maternity
leave, leave under the Family and Medical Leave Act of 1993, short-term
disability, on layoff with recall rights, or on other leave of absence with a
legal or contractual right to reinstatement. Seller shall update such list as of
the end of each calendar quarter occurring between the execution date hereof and
the Closing Date, in each case assuming the Closing Date had occurred on such
date, and shall deliver such updated lists to Buyer within ten (10) days after
the end of each such calendar quarter.
Section 10.2 Assumption of Collective Bargaining Agreement Obligations.
On and after the Closing Date, Buyer, shall assume all of the Seller's
obligations under, and be bound by the provisions of, each collective bargaining
agreement to the extent of provisions covering Transferred Employees. Each
collective bargaining agreement shall be identified on a Schedule 10.2 to be
prepared by Seller and submitted to Buyer on or before the Closing Date. Seller
shall cooperate with Buyer in Buyer's efforts to contact the unions representing
Transferred Employees.
Section 10.3 Cessation of Participation in Seller's Plans; Proration of
Bonuses. From and after the Closing Date, Transferred Employees shall accrue no
additional benefits under any employee benefit plan, policy, program or
arrangement of Seller or its Affiliates. Seller shall pay to the Transferred
Employees the appropriate pro rata portion of any bonuses declared by Seller
after the Closing Date that would have been payable to the Transferred Employees
had the Transferred Employees remained employed by Seller or its Affiliates
throughout the calendar year in which the Closing Date occurs, in accordance
with the provisions of any policy, plan, practice or arrangement of Seller under
which such bonus would have been paid. The pro rata portion of each such bonus
shall be determined by multiplying the amount of such bonus by a fraction, the
numerator of which is the number of days from and after the beginning of the
calendar year in which the Closing Date occurs through the Closing Date, and the
denominator of which is 365.
35
Section 10.4 Similarity of Benefit Packages. As of the Closing Date,
and except as otherwise expressly provided in this Article X, Buyer shall
include each Transferred Employee in a benefit package providing benefits that
are in the aggregate substantially similar to those provided by Seller to such
Transferred Employees immediately prior to the Closing Date. Notwithstanding the
foregoing, to the extent that one or more collective bargaining agreements being
assumed by Buyer contains provisions pertaining to employee benefits, Buyer
shall provide the Transferred Employees covered by such agreements with benefits
that are identical to those required to be provided under the terms of such
agreements. Except as otherwise expressly provided in this Article X, Buyer
shall treat all service and compensation credited to each such Transferred
Employee as if such service and compensation had been rendered to, and paid by,
Buyer for all purposes under Buyer's benefit plans, arrangements, and policies.
Section 10.5 Defined Benefit Pension Plan.
(a) At least fifteen days prior to the Closing Date, Seller
shall take any and all actions necessary to cease benefit accruals and fully
vest all Transferred Employees in their accrued benefits under the Citizens
Pension Plan ("Seller's Pension Plan"). Seller shall retain all liabilities and
assets for pension benefits accrued through the Closing Date by Transferred
Employees and retirees of the Business under Seller's Pension Plan.
(b) As of the Closing Date, Buyer shall cause all union
Transferred Employees to be included in a qualified defined benefit pension plan
providing benefits identical to the benefits provided under the Seller's Pension
Plan, and shall cause all nonunion Transferred Employees to be included in a
defined benefit pension plan providing benefits either substantially equivalent
or, if Seller transfers to Buyer the pension liabilities and assets relating to
the nonunion Transferred Employees, identical to those provided in Seller's
Pension Plan (collectively referred to herein as "Buyer's Pension Plan"). Buyer
shall take all actions necessary to cause Buyer's Pension Plan to recognize the
service that all Transferred Employees had under Seller's Pension Plan for
purposes of such Employees' eligibility to participate, vesting, attainment of
retirement dates, subsidized benefits, and entitlement to optional forms of
payment.
Section 10.6 401(k) Plan.
(a) Buyer shall take all action necessary to ensure that, as
of the Closing Date, it includes Transferred Employees in a qualified 401(k)
plan providing for matching contributions at least equivalent to that provided
to the Transferred Employee under Citizens 401(k) Savings Plan ("Seller's 401(k)
Plan") immediately prior to the Closing Date. Buyer shall take all actions
necessary to cause Buyer's 401(k) Plan to recognize the service that the
Transferred Employees had in Seller's 401(k) Plan for purposes of determining
such Employees' eligibility to participate, vesting, attainment of retirement
dates, contribution levels and, if applicable, eligibility for optional forms of
benefit payments. Buyer shall cause the trustee of Buyer's 401(k) Plan to accept
transfers and direct rollovers from Seller's 401(k) Plan of the vested account
balances of Transferred Employees, including transfers of outstanding loan
balances and related promissory notes, subject to compliance with applicable
law.
(b) Seller shall vest Transferred Employees in their account
balances under Seller's 401(k) Plan as of the Closing Date. Seller shall direct
the trustee of Seller's 401(k) Plan to transfer to the trustee of Buyer's 401(k)
Plan an amount of cash equal to the value of the account balances of the
Transferred Employees under Seller's 401(k) Plan; except that to the extent that
the account balances consist of outstanding loans, Seller shall direct the
trustee of Seller's 401(k) Plan to transfer to the trustee of Buyer's 401(k)
Plan the promissory notes and related documents evidencing such loans.
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(c) After the transfer of assets and liabilities pursuant to
this Section, Buyer shall assume all liabilities for the benefits payable with
respect to Transferred Employees under Seller's 401(k) Plan, and Seller and
Seller's 401(k) Plan shall have no liability for such benefits.
(d) In connection with the transfer of assets and liabilities
under this Section, Seller and Buyer shall cooperate in making all appropriate
filings, and providing all applicable notices, required by IRC or ERISA. Buyer
shall deliver to Seller a copy of Buyer's 401(k) Plan, and a copy of the most
recent determination letter from the IRS with respect to such Plan, together
with a certification to the effect that no events have occurred since the date
of the determination letter that would adversely affect the Plan's qualified
status.
Section 10.7 Welfare Benefits.
(a) Buyer shall take all action necessary and appropriate to
ensure that, as of the Closing Date, Buyer maintains medical, health, dental,
flexible spending account, accident, life, short-term disability, long-term
disability and other employee welfare benefit plans (including retiree medical
benefits) to Transferred Employees that, in the case of nonunion Transferred
Employees are substantially similar to those benefits provided by Seller under
its corresponding welfare benefit plans (the "Buyer's Nonunion Welfare Plans"),
and in the case of union Transferred Employees are identical to those benefits
provided to union Transferred Employees under Seller's corresponding welfare
benefit plans (the "Buyer's Bargained Welfare Plans"), as in effect immediately
prior to the Closing Date. The Buyer's Nonunion Welfare Plans and the Buyer's
Bargained Welfare Plans are hereinafter referred to collectively as the "Buyer
Welfare Plans." For purposes of determining eligibility to participate, and
entitlement to benefits, in each Buyer Welfare Plan, each Transferred Employee
shall be credited with service, determined under the terms of the corresponding
welfare plans maintained by Seller on the Closing Date (hereinafter referred to
collectively as the "Seller Welfare Plans"). Any restrictions on coverage for
pre-existing conditions, actively at work requirements, waiting periods, and
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived in the Buyer Welfare Plans for Transferred Employees, and Transferred
Employees shall receive credit under the Buyer Welfare Plans for co-payments,
payments under a deductible limit made by them, and for out-of-pocket maximums
applicable to them during the plan year of the Seller Welfare Plan in which the
Closing Date occurs. As soon as practicable after the Closing Date, Seller shall
deliver to Buyer a list of the Transferred Employees who had credited service
under a Seller Welfare Plan, together with each such Transferred Employee's
service, co-payment, deductible and out-of-pocket payment amounts under such
plan.
(b) Buyer shall provide or cause to be provided retiree
medical, dental, and life benefits to each retiree of the Business identified in
Schedule 10.7 as updated as of the Closing Date (the "Retirees"), to each
Transferred Employee who is considered to be a "grandfathered employee" (as
hereinafter defined), and to each union Transferred Employee who otherwise is
eligible for such retiree benefits, under the same terms and conditions as
applied to such Retiree or Transferred Employee immediately prior to the Closing
Date, and Seller shall have no obligation or liability, contingent or otherwise,
to provide retiree medical, dental or life benefits to any such Retiree or
Transferred Employee on or after the Closing Date. For purposes of this Section
10.7, a "grandfathered employee" is a union or nonunion Transferred Employee,
who was at least age 55 with at least 10 years of service as defined in the
Seller's Pension Plan by December 31, 1997, and who retires after December 31,
1997. Schedule 10.7 identifies each Active Employee who is a "grandfathered
37
employee" and each union Active Employee who otherwise is eligible for such
retiree benefits. Buyer agrees not to terminate or materially modify those
post-retirement benefit provisions covering "grandfathered" Transferred
Employees, eligible union Transferred Employees, Retirees, their spouses and
dependents that are in effect immediately prior to the Closing Date.
(c) Within sixty (60) days after the Closing, Seller agrees to
transfer to an exempt trust established by Buyer under Section 501(c)(9) of the
IRC ("Buyer's VEBA") the amount held under any trust established by Seller under
Section 501(c)(9) of the IRC ("Seller's VEBA") to fund post-retirement health
care and life insurance benefits for the Business. Such amount shall be
determined based upon Seller's internal recordkeeping. Buyer agrees that Buyer's
VEBA will apply an amount at least equal to the sum of the assets transferred
from Seller's VEBA (and earnings thereon calculated at the rate of return
generated by Buyer's VEBA) to provide post-retirement health care and life
insurance benefits after the Closing Date to the Retirees and, as applicable,
the Transferred Employees who become eligible for such benefits after Closing.
Upon Closing, Buyer shall be responsible for all obligations of Seller to
provide post-retirement health care and life insurance benefits to such
Transferred Employees and Retirees, and Seller and Seller's VEBA shall cease to
have any liability, contingent or otherwise, for such benefits.
Section 10.8 Flexible Spending Accounts. Seller shall transfer to
Buyer's flexible benefits plan any balances standing to the credit of
Transferred Employees under Seller's flexible benefits plan as of the Closing
Date. Seller shall provide to Buyer prior to the Closing Date a list of those
Transferred Employees that have participated in the health or dependent care
reimbursement accounts of Seller, together with their elections made prior to
the Closing Date with respect to such account, and balances standing to their
credit as of the Closing Date.
Section 10.9 Employment Agreements. Buyer shall assume all obligations
of each employment agreement to which Seller or its Affiliates is a party and
which covers any Transferred Employee immediately prior to the Closing Date.
Section 10.10 Vacation. Seller shall pay to Transferred Employees any
"banked" vacation credited to them on or prior to the Closing Date. On or after
the Closing Date, Buyer shall provide to each Transferred Employee vacation in
an amount equal to the Transferred Employee's vacation entitlement for the year
of the Closing reduced by the number of vacation days that such Transferred
Employee has taken on or before the Closing.
Section 10.11 Severance. In the event that Buyer terminates the
services of any Transferred Employee within twenty-four (24) months following
the Closing Date without cause, Buyer shall provide to any such Transferred
Employee severance or separation pay benefits that are at least equal to the
severance and separation pay benefits that would have been paid by Seller had
Seller continued to employ such Transferred Employee through such twenty-four
month period ending on the employee's date of termination from Buyer; provided,
however, that if a collective bargaining agreement that is applicable to a union
Transferred Employee would provide for a greater benefit to be paid by Buyer,
the terms and conditions of such agreement shall instead be applicable.
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Section 10.12 Plant Closing Notice. Upon not less than 60 days' written
notice from Buyer of Buyer's then present intention to terminate any Transferred
Employees after the Closing, Seller shall give any notice required to be given
by Seller under Chapter 394B, Hawaii Revised Statutes, as amended. Buyer shall
have the right to review and approve such notice prior to Seller's release of
the same. Seller shall not be obligated to provide any notice if in Seller's
reasonable opinion, after consultation with counsel and with Buyer, such action
(including the content of such notice) reasonably could result in Seller's
violation of any Legal Requirement or Order.
ARTICLE XI
TAX MATTERS
Section 11.1 Purchase Price Allocation. Prior to the Closing Date,
Buyer and Seller shall use their good faith efforts to agree upon the allocation
(the "Allocation") of the Purchase Price, the Assumed Liabilities and other
relevant items (including, for example, adjustments to the Purchase Price) to
the individual assets or classes of assets within the meaning of Section 1060 of
the IRC. If Buyer and Seller agree to such Allocation prior to Closing, Buyer
and Seller covenant and agree that (i) the values assigned to the assets by the
parties' mutual agreement shall be conclusive and final for all purposes, and
(ii) neither Buyer nor Seller will take any position before any Governmental
Body or in any Proceeding that is in any way inconsistent with such Allocation.
Notwithstanding the foregoing, if Buyer and Seller cannot agree to an
Allocation, Buyer and Seller covenant and agree to file, and to cause their
respective Affiliates to file, all Tax Returns and schedules thereto (including,
for example, amended returns, claims for refund, and those returns and forms
required under Section 1060 of the IRC and any Treasury regulations promulgated
thereunder) consistent with each of such party's good faith Allocations, unless
otherwise required because of a change in any Legal Requirement.
Section 11.2 Cooperation with Respect to Like-Kind Exchange. Buyer
agrees that Seller may, at Seller's election prior to the Closing Date, direct
that all or a portion of the Purchase Price be delivered to a "qualified
intermediary" (as defined in Treasury Regulation ss.1.1031(k) - (g)(4)) as to
enable Seller's relinquishment of the Assets to qualify as part of a like-kind
exchange of property covered by Section 1031 of the IRC. If Seller so elects,
Buyer shall cooperate with Seller (but without being required to incur any
out-of-pocket costs in the course thereof) in connection with Seller's efforts
to effect such like-kind exchange, which cooperation shall include, without
limitation, taking such actions as Seller requests in order to enable Seller to
qualify such transfer as part of a like-kind exchange of property covered by
Section 1031 of the IRC (including any actions required to facilitate the use of
a "qualified intermediary"), and Buyer agrees that Seller may assign all or part
of its rights and delegate all or part of its obligations under this Agreement
to a person or entity acting as a qualified intermediary to qualify the transfer
of the Assets as part of a like-kind exchange of property covered by Section
1031 of the IRC. Buyer and Seller agree in good faith to use reasonable efforts
to coordinate the transactions contemplated by this Agreement with any other
transactions engaged in by either Buyer or Seller; provided that such efforts
are not required to include an unreasonable delay in the consummation of the
transactions contemplated by this Agreement.
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Section 11.3 Transaction Taxes. Buyer shall bear and be responsible for
paying any Hawaii sales, use, transfer, documentary, registration, business and
occupation and other similar Taxes, other than Hawaii General Excise Taxes, if
any, (including related penalties (civil or criminal), additions to tax and
interest) imposed with respect to the transfer of Assets (including the Real
Property) to Buyer ("Transaction Taxes"), regardless of whether the tax
authority seeks to collect such Taxes from Seller or Buyer. Seller shall prepare
all tax filings related to any Transaction Taxes (other than with respect to
Real Property and motor vehicle title transfer and registration, which shall be
prepared by Buyer). Seller shall bear and be responsible for any costs similar
to Transaction Taxes imposed by any Governmental Body other than the State of
Hawaii or one of its political subdivisions. Fifteen (15) days prior to making
any such filings, the filing party shall provide to the nonfiling party the
filing party's work papers for the nonfiling party's review and approval. Ten
(10) days prior to the filing date, the non-filing party shall provide to the
filing party approval of such work papers. Buyer shall also be responsible for
(i) administering the payment of such Transaction Taxes, (ii) defending or
pursuing any Proceedings related thereto, and (iii) paying any expenses related
thereto. Seller shall give prompt written notice to Buyer of any proposed
adjustment or assessment of any Transaction Taxes with respect to the
transaction, or of any examination of said transaction in a sales, use, transfer
or similar tax audit. In any proceedings, whether formal or informal, Seller
shall permit Buyer to participate and control the defense of such proceeding and
shall take all actions and execute all documents required to allow such
participation. Seller shall not negotiate a settlement or compromise of any
Transaction Taxes without the prior written consent of Buyer, which consent
shall not be unreasonably withheld.
ARTICLE XII
ENVIRONMENTAL MATTERS
Section 12.1 Environmental Due Diligence.
(a) Right to Conduct Environmental Due Diligence. Regarding
environmental matters, Buyer has completed its reasonable and prudent
environmental due diligence prior to execution of this Agreement, including a
review of the Environmental Data. Buyer also has required Seller to make the
representations concerning environmental matters set forth in Section 5.14, upon
which Buyer is relying. In light of these actions, Buyer agrees not to conduct
additional environmental due diligence (including employee interviews and
sampling of any media or wastewater) except in accordance with this Section
12.1. All activities of Buyer regarding environmental due diligence shall be
conducted to minimize any inconvenience or interruption of the normal use and
enjoyment of the Business and the Assets.
(b) Delivery of Environmental Reports. Seller has made
available to Buyer before the date of execution of this Agreement copies of all
written environmental audits, reports or studies in Seller's possession of which
Seller has Knowledge and which were prepared after December 31, 1996, concerning
the existence or possible existence of Hazardous Materials on, or under or
adjacent to any of the Real Property or relating to potential Environmental
Liability of Seller in connection with the Business or the Assets. Buyer shall
provide to Seller copies of all reports, assessments and other information
composed or compiled by Buyer or Buyer's environmental consultant(s) promptly
following Buyer's receipt thereof. Buyer shall treat all such information
delivered to, or composed or compiled by, Buyer or Buyer's environmental
consultant(s) as Environmental Data in accordance with the procedures of Section
12.1(c).
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(c) Confidentiality of Environmental Data. All audits, reports
and studies delivered to or prepared by Buyer and all other information
collected and generated as a result of Buyer's environmental due diligence
("Environmental Data") will be subject to the terms and conditions of the
Confidentiality Agreement, except as otherwise expressly provided in this
Section 12.1. Neither Buyer nor its environmental consultant(s) shall disclose
or release any Environmental Data without the prior written consent of Seller
and all such information shall be kept strictly confidential. The Environmental
Data shall be prepared at the request of counsel to Buyer and, to the fullest
extent permitted by law, shall be the work product of such counsel and
constitute confidential attorney/client communications. The Environmental Data
shall be transferred among Buyer and its consultant(s) in a manner that will
preserve, to the greatest extent possible, such privileges. Buyer expressly
agrees that until the Closing, it will not distribute the Environmental Data to
any third party without Seller's prior written consent. After the Closing, Buyer
agrees that it will not distribute the Environmental Data to any third party
without Seller's prior written consent, except as required by law or by express
provisions of Buyer's corporate compliance program if Seller is provided written
notice at least ten (10) days prior to such distribution, provided, however,
that for a period of two (2) years after the Closing Date, Buyer may distribute
the Environmental Data to any potential purchaser of the Assets only after first
notifying the Seller.
(d) Environmental Consultants. Buyer may retain one or more
outside environmental consultants to assist in its environmental due diligence
concerning the Assets and shall notify Seller of the environmental consultant or
consultants Buyer intends to retain. Thereafter, Seller shall have five (5) days
after receipt of such notification to notify Buyer in writing of Seller's
objection (which must be for good cause) and substantiate the basis for that
objection. If Seller does not object for good cause and substantiate that
objection within said five (5) day period, Seller shall be deemed to have
consented to Buyer's selection.
(e) Phase I Reviews. Buyer has conducted various environmental
assessment activities with respect to the Assets, including reviewing existing
environmental reports, correspondence, permits and related materials regarding
the Assets, but excluding inspecting individual sites. Buyer may not conduct any
further Phase I environmental assessment activities with respect to the Assets
without the prior written consent of Seller, which consent may be withheld,
conditioned or delayed by Seller in its sole discretion. Any permitted Phase I
environmental assessment activities shall not include any sampling or intrusive
testing.
(f) Phase II Reviews. Buyer may not conduct any Phase II
environmental assessment activities with respect to the Assets (including, but
not limited to, the taking and analysis of soil, surface water and groundwater
samples, testing of buildings, drilling xxxxx, taking soil borings and
excavating) without the prior written consent of Seller, which consent may be
withheld, conditioned or delayed by Seller in its sole discretion.
(g) Additional Due Diligence. Notwithstanding the foregoing,
if prior to Closing Seller receives notice of any Proceeding or Threatened
Proceeding arising under Environmental Laws or if Seller otherwise acquires
Knowledge that is reasonably likely to require a change to Schedule 5.14, Seller
promptly shall notify Buyer of the same and Buyer may request that Seller
authorize Buyer to conduct specific additional environmental due diligence
measures if and to the extent that such measures are required to determine the
extent of any potential Environmental Liability relating thereto. Such
authorization shall not be unreasonably withheld, conditioned or delayed by
Seller. Any such additional environmental due diligence shall be conducted at
Buyer's sole expense. Within ten (10) days following the completion of any
additional environmental due diligence conducted by Buyer pursuant to this
Section 12.1(g), Buyer shall notify Seller of each incident of potential
41
Environmental Liability of Seller that Buyer in good faith has determined is
reasonably likely to result in Losses in excess of $1,000,000 (each, a "New
Material Environmental Liability"). Prior to Closing, Seller may respond to and
remedy any New Material Environmental Liability. Any New Material Environmental
Liability not responded to and remedied by Seller to Buyer's reasonable
satisfaction shall be considered a Retained Environmental Liability for purposes
of this Agreement.
(h) Indemnity for Due Diligence Activities. Buyer hereby
agrees to indemnify and hold harmless Seller, Seller's Affiliates and their
respective officers, directors, employees, agents, successors and assigns from
and against any and all Losses with respect to persons or property arising out
of or in connection with any site visit by Buyer or its environmental
consultant(s) and resulting from an act or omission of Buyer or its
environmental consultant(s).
ARTICLE XIII
INDEMNIFICATION
Section 13.1 Indemnification by Seller. From and after Closing and
subject to the other provisions of this Article XIII, Seller shall indemnify and
hold harmless Buyer, its Representatives, Affiliates, successors and permitted
assigns (collectively, the "Buyer Indemnitees") from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Seller in this
Agreement not being true and correct when made or when required by this
Agreement to be true and correct, or any breach or default by Seller in the
performance of its covenants, agreements, or obligations under this Agreement
required to be performed prior to Closing;
(b) any breach or default by Seller in the performance of its
covenants, agreements, or obligations under this Agreement required to be
performed after Closing; and
(c) the Retained Liabilities, including the Retained
Environmental Liabilities.
Section 13.2 Indemnification by Buyer. From and after Closing and
subject to the other provisions of this Article XIII, Buyer shall indemnify and
hold harmless Seller, its Representatives, Affiliates, successors and permitted
assigns (collectively, the "Seller Indemnitees") from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Buyer in this
Agreement not being true and correct when made or when required by this
Agreement to be true and correct, or any breach or default by Buyer in the
performance of its covenants, agreements, or obligations under this Agreement
required to be performed prior to Closing;
(b) any breach or default by Buyer in the performance of its
covenants, agreements, or obligations under this Agreement required to be
performed after Closing, including the Buyer's IDRB Obligations;
(c) Assumed Liabilities, including the Assumed Environmental
Liabilities; and
(d) any event as a result of which the interest on the Bonds
may be included in the gross income of the recipient for purposes of federal
income taxation, to the extent such event arises out of or results from any act,
negligence, fault or failure of Buyer or any assignee, lessee or successor of
Buyer, including any violation of the representations, warranties, covenants and
agreements set forth in Section 6.7(a) or Section 6.7(c) or in the Retained IDRB
Obligations Agreement executed and delivered by Buyer in accordance with
Sections 6.7(a) and 8.1(d).
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Section 13.3 Limitations on Seller's Liability. Notwithstanding
anything to the contrary in this Agreement, the liability of Seller under this
Agreement and any documents delivered in connection herewith or contemplated
hereby shall be limited as follows:
(a) IN NO EVENT SHALL SELLER BE LIABLE TO THE BUYER
INDEMNITEES FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL,
REMOTE OR SPECULATIVE DAMAGES; provided, however, that if Buyer is held liable
to a third party for any of such damages and Seller is obligated to indemnify
Buyer for the matter that gave rise to such damages, then Seller shall be liable
for, and obligated to reimburse Buyer for, such damages.
(b) The representations, warranties, covenants and agreements
of Seller set forth in this Agreement shall survive the Closing for a period of
one year, and all representations, warranties, covenants and agreements of
Seller under this Agreement and the indemnities granted by Seller in Section
13.1 shall terminate at 5:00 p.m., local time in Stamford, Connecticut, on the
first anniversary of the Closing Date; provided, however, that such indemnities
shall survive with respect only to the specific matters that is the subject of a
proper Claim Notice delivered in good faith in compliance with the requirements
of this Section 13.3 until the earlier to occur of (A) the date on which a final
nonappealable resolution of the matter described in such Claim Notice has been
reached or (B) the date on which the matter described in such Claim Notice has
otherwise reached final resolution. In no event shall any amounts be recovered
from Seller under Section 13.1 or otherwise for any matter for which a Claim
Notice is not delivered to Seller prior to the close of business on the
applicable date set forth above.
(c) Notwithstanding anything to the contrary in this
Agreement, in no event shall Seller indemnify the Buyer Indemnitees, or be
otherwise liable in any way whatsoever to the Buyer Indemnitees, for any Losses
until the Buyer Indemnitees have suffered Losses (determined after giving effect
to the provisions of Section 13.3(f)) that are in excess of a deductible in an
amount equal to $5,400,000, after which point Seller will be obligated only to
indemnify the Buyer Indemnitees from and against further Losses in excess of
such deductible.
(d) Notwithstanding anything to the contrary in this
Agreement, in no event shall Seller indemnify the Buyer Indemnitees, or be
otherwise liable in any way whatsoever to the Buyer Indemnitees, for any Losses
that are in excess of an amount equal to $5,400,000.
(e) No amount shall be recovered from Seller for the breach or
untruth of any of Seller's representations, warranties, covenants or agreements,
or for any other matter, to the extent that Buyer had knowledge of such breach,
untruth or other matter at or prior to the Closing, nor shall Buyer be entitled
to rescission with respect to any such matter.
(f) Seller shall have no liability for any claim or Loss (A)
that is covered by insurance maintained by or for the benefit of Buyer or any
Affiliate of Buyer (including any such insurance coverage applicable to the
Business the benefit of which the Buyer will realize) or for which Buyer
otherwise recovers payments in respect of such Loss from any other sources
(whether in a lump sum or stream of payments) or (B) that is the type normally
recoverable by the Business through rates. No cost or expense relating to any
such claim or Loss shall be included in determining the extent of Losses
suffered by the Buyer Indemnitees for purposes of Section 13.3(c) or Section
13.3(d). Buyer agrees to use its commercially reasonable efforts to give timely
43
and effective written notice to the appropriate insurance carrier(s) of any
occurrence or circumstances which, in the judgment of Buyer consistent with its
customary risk management practices, appear likely to give rise to a claim
against Buyer that is likely to involve one or more insurance policies of Buyer.
Any such notice shall be given in good faith by Buyer without regard to the
possibility of indemnification payments by Seller under Section 13.1, and shall
be processed by Buyer in good faith and in a manner consistent with its risk
management practices involving claims for which no third party contractual
indemnification is available. Buyer agrees that (i) if it is entitled to receive
payment from Seller for a Loss, and (ii) if Buyer has obtained insurance which
may cover the claim or matter giving rise to such Loss, then (iii) such
insurance shall be primary coverage and Buyer will make a claim under such
insurance (if such claim can be made in good faith) before enforcing its right
to receive payment from Seller. If at any time subsequent to the receipt by a
Buyer Indemnitee of an indemnity payment from Seller hereunder, such Buyer
Indemnitee (or any Affiliate thereof) receives any recovery, settlement or other
similar payment with respect to the Loss for which it receives such indemnity
payment, such Buyer Indemnitee shall promptly pay to Seller an amount equal to
the amount of such recovery, less (for insurance proceeds only) any
out-of-pocket costs incurred by such Buyer Indemnitee (or its Affiliates) in
connection with claim preparation and settlement, but in no event shall any such
payment exceed the amount of such indemnity payment; provided, that if such net
recover reduces the amount of Losses actually incurred by the Buyer Indemnitees
below the deductible amount set forth in Section 13.3(c) and if Seller has made
other payments to the Buyer Indemnitees for other Losses in excess of such
deductible amount, then Buyer also shall promptly pay to Seller an amount equal
to the portion of such payments made by Seller that Seller would not have been
obligated to make pursuant to Section 13.3(c) had the Losses of the Buyer
Indemnitees not included the Losses covered by such net recovery. No other costs
or expense relating to any such recovery shall reduce the amount of such payment
to Seller.
(g) Notwithstanding any language contained in any Related
Document (including deeds and other conveyance documents relating to the Real
Property), the representations and warranties of Seller set forth in this
Agreement will not be merged into any such Related Document and the
indemnification obligations of Seller, and the limitations on such obligations,
set forth in this Agreement shall control. No provision set forth in any such
Related Document shall be deemed to enlarge, alter or amend the terms or
provisions of this Agreement.
Section 13.4 Claims Procedure.
(a) All claims for indemnification under Section 13.1 or 13.2,
or any other provision of this Agreement except as otherwise expressly provided
in this Agreement, shall be asserted and resolved pursuant to this Article XIII.
Any Person claiming indemnification hereunder referred to as the "Indemnified
Party" and any Person against whom such claims are asserted hereunder is
hereinafter referred to as the "Indemnifying Party." In the event that any
Losses are asserted against or sought to be collected from an Indemnified Party
by a third party, said Indemnified Party shall with reasonable promptness
provide to the Indemnifying Party a Claim Notice. The Indemnifying Party shall
not be obligated to indemnify the Indemnified Party with respect to any such
Losses if the Indemnified Party fails to notify the Indemnifying Party thereof
in accordance with the provisions of this Agreement in reasonably sufficient
time so that the Indemnifying Party's ability to defend against the Losses is
not prejudiced. The Indemnifying Party shall have 30 days from the personal
delivery or receipt of the Claim Notice (the "Notice Period") to notify the
Indemnified Party (i) whether or not it disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to such
Losses and/or (ii) whether or not it desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Losses;
provided, however, that any Indemnified Party is hereby authorized prior to and
during the Notice Period to file any motion, answer or other pleading that it
shall deem necessary or appropriate to protect its interests or those of the
Indemnifying Party (and of which it shall have given notice and opportunity to
44
comment to the Indemnifying Party) and not prejudicial to the Indemnifying
Party. In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it desires to defend the Indemnified Party against
such Losses, the Indemnifying Party shall have the right to defend all
appropriate proceedings, and with counsel of its own choosing, which proceedings
shall be promptly settled or prosecuted by them to a final conclusion. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement it may do so at its sole cost and expense. If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Losses that the
Indemnifying Party elects to contest or, if appropriate and related to the claim
in question, in making any counterclaim against the Person asserting the third
party Losses, or any cross-complaint against any Person. No claim may be settled
or otherwise compromised without the prior written consent of the Indemnifying
Party.
(b) The Indemnified Party shall provide reasonable assistance
to the Indemnifying Party and provide access to its books, records and personnel
as the Indemnifying Party reasonably requests in connection with the
investigation or defense of the Losses. The Indemnifying Party shall promptly
upon receipt of reasonable supporting documentation reimburse the Indemnified
Party for out-of-pocket costs and expenses incurred by the latter in providing
the requested assistance.
(c) With regard to third party claims for which Buyer or
Seller is entitled to indemnification under Section 13.1 or 13.2, such
indemnification shall be paid by the Indemnifying Party upon: (i) the entry of
an Order against the Indemnified Party and the expiration of any applicable
appeal period; or (ii) a settlement with the consent of the Indemnifying Party,
provided that no such consent need be obtained if the Indemnifying Party fails
to respond to the Claim Notice as provided in Section 13.4(a). Notwithstanding
the foregoing but subject to Section 13.4(a), and provided that there is no
dispute as to the applicability of indemnification, expenses of counsel to the
Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party as if such expenses are a liability of the Indemnifying Party.
Section 13.5 Exclusive Remedy. Except as otherwise provided in Section
6.4, the rights, remedies and obligations of the Buyer Indemnitees and the
Seller Indemnitees set forth in this Article XIII will be the exclusive rights,
remedies and obligations of such Persons after the Closing with respect to this
Agreement, the events giving rise to this Agreement and the transactions
provided for herein or contemplated hereby or thereby. No Proceeding for
termination or rescission, or claiming repudiation, of this Agreement or the
Xxxx of Sale may be brought or maintained by either party against the other
following the Closing Date no matter how severe, grave or fundamental any
breach, default or nonperformance may be by one party. Accordingly, the parties
hereby expressly waive and forego any and all rights they may possess to bring
any such Proceeding.
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Section 13.6 Indemnification for Negligence. WITHOUT LIMITING OR
ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER
IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM
GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, VIOLATION OF ANY LAW OR
OTHER LEGAL FAULT OF OR BY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS
PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
Section 13.7 Waiver and Release. Buyer, on behalf of itself and each
other Buyer Indemnitee, hereby forever waives, relieves, releases and discharges
the Seller Indemnitees and their successors and assigns from any and all rights,
liabilities, Proceedings (including future Proceedings) and Losses of any Buyer
Indemnitee, whether known or unknown at the Closing Date, which any Buyer
Indemnitee has or incurs, or may in the future have or incur, arising out of or
related to any Assumed Environmental Liability.
ARTICLE XIV
GENERAL PROVISIONS
Section 14.1 Expenses. Except as otherwise specifically provided
herein, each Party will pay all costs and expenses of its performance of and
compliance with this Agreement, except Buyer will pay all real estate transfer
taxes and real estate recording fees, if any, including expenses of counsel
associated with real estate title, transfer and recording issues.
Section 14.2 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been given upon
receipt if either (a) personally delivered, (b) sent by prepaid first class
mail, and registered or certified and a return receipt requested (c) sent by
overnight delivery via a nationally recognized carrier or (d) by facsimile with
completed transmission acknowledged:
If to Seller, to:
Citizens Utilities Company
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. XxXxxxxx
Telecopier: (000) 000-0000
with a copy to:
Citizens Utilities Company
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: L. Xxxxxxx Xxxxxx, XX
Telecopier: (000) 000-0000
46
and:
Citizens Utilities Company
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: J. Xxxxxxx Xxxx
Telecopier: (000) 000-0000
and:
Xxxxxxxxxx and Xxxxx, L.L.P.
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
If to Buyer, to:
Kauai Island Utility Co-Op
0000 Xxxxxx Xxxx, Xxxxx #000
Xxxxx, Xxxxx, Xxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Chairman
Telecopier:(000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxxxx, Esq.
Belles Xxxxxx Xxxxxxxxx & Xxxxxx
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxx, Xxxxxx 00000
Telecopier: (000) 000-0000
or at such other address or number as shall be given in writing by a party to
the other party.
Section 14.3 Assignment. This Agreement may not be assigned, by
operation of law or otherwise, by any party hereto without the prior written
consent of the other party hereto, such consent not to be unreasonably withheld;
provided, however, in the event of any such assignment by a party by operation
of law without the consent of the other party as required above, such other
party may consent to such assignment after it has occurred and, in such event,
this Agreement and all the provisions hereof shall be binding upon the Person
receiving such assignment by operation of law. Notwithstanding the foregoing,
(a) Buyer may assign this Agreement, without the prior written consent of
Seller, to any direct or indirect wholly-owned subsidiary of Buyer provided such
subsidiary assumes in writing all of the duties and obligations of Buyer
hereunder (provided that no such assignment by Buyer shall in any way operate to
enlarge, alter or change any obligation due to Seller or relieve Buyer of its
obligations hereunder if such subsidiary fails to perform such obligations, with
the understanding that Buyer shall be jointly and severally liable with such
subsidiary for any nonperformance of Buyer's obligations hereunder); and (b)
Seller may assign all or part of its rights or delegate all or part of its
duties under this Agreement, without the prior written consent of Buyer, to a
qualified intermediary chosen by Seller to structure all or part of the
transactions contemplated hereby as a like-kind exchange of property covered by
Section 1031 of the IRC.
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Section 14.4 Successor Bound. Subject to the provisions of Section
14.3, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Section 14.5 Governing Law. The validity, performance, and enforcement
of this Agreement and all Related Documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of Delaware without giving
effect to the principles of conflicts of law of such state.
Section 14.6 Dispute Resolution. Except as otherwise provided in
Sections 3.3(c) and 6.4, and this Section 14.6, any dispute, controversy or
claim between the parties relating to, arising out of or in connection with this
Agreement (or any subsequent agreements or amendments thereto), including as to
its existence, enforceability, validity, interpretation, performance or breach
or as to indemnification or damages, including claims in tort, whether arising
before or after the termination of this Agreement (any such dispute, controversy
or claim being herein referred to as a "Dispute") shall be settled without
litigation and only by use of the following alternative dispute resolution
procedure:
(a) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Dispute. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties shall not
be admissible in the arbitration described below, or in any lawsuit. Documents
identified in or provided with such communications, which are not prepared for
purposes of the negotiations, are not so exempted and may, if otherwise
admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties
do not resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules, as then amended and in effect, of
the American Arbitration Association (the "Rules"). Either party may demand such
arbitration in accordance with the procedures set out in the Rules. The
arbitration shall take place in San Francisco, California. The arbitration
hearing shall be commenced within 60 days of such party's demand for
arbitration. The arbitrator shall have the power to and will instruct each party
to produce evidence through discovery (i) that is reasonably requested by the
other party to the arbitration in order to prepare and substantiate its case and
(ii) the production of which will not materially delay the expeditious
resolution of the dispute being arbitrated; each party hereto agrees to be bound
by any such discovery order. The arbitrator shall control the scheduling (so as
to process the matter expeditiously) and any discovery. The parties may submit
written briefs. At the arbitration hearing, each party may make written and oral
presentations to the arbitrator, present testimony and written evidence and
examine witnesses. No party shall be eligible to receive, and the arbitrator
shall not have the authority to award, exemplary or punitive damages. The
arbitrator shall rule on the Dispute by issuing a written opinion within 30 days
after the close of hearings. The arbitrator's decision shall be binding and
final. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction.
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator; provided, however, that if the arbitrator determines that the
position taken in the Dispute by the nonprevailing party taken as a whole is
unreasonable, the arbitrator may order the nonprevailing party to bear such fees
and expenses, and reimburse the prevailing party for all or such portion of its
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reasonable costs and expenses in submitting and presenting its position, as the
arbitrator shall reasonably determine to be fair under the circumstances. Each
party to the arbitration shall pay one-half of the fees and expenses of the
arbitrator and the American Arbitration Association.
(d) Notwithstanding any other provision of this Agreement, (i)
either party may commence an action to compel compliance with this Section 14.6
and (ii) if any party, as part of a Dispute, seeks injunctive relief or any
other equitable remedy, including specific enforcement, then such party shall be
permitted to seek such injunctive or equitable relief in any federal or state
court or competent jurisdiction before, during or after the pendency of a
mediation or arbitration proceed under this Section 14.6.
Section 14.7 Cooperation. Each of the parties hereto agrees to use its
reasonable best efforts to take or cause to be taken all action, and to do or
cause to be done all things necessary, proper or advisable under applicable
laws, regulations or otherwise, to consummate and to make effective the
transactions contemplated by this Agreement, including, without limitation, the
timely performance of all actions and things contemplated by this Agreement to
be taken or done by each of the parties hereto.
Section 14.8 Construction of Agreement. The terms and provisions of
this Agreement represent the results of negotiations between Buyer and Seller,
each of which has been represented by counsel of its own choosing, and neither
of which has acted under duress or compulsion, whether legal, economic or
otherwise. Accordingly, the terms and provisions of this Agreement shall be
interpreted and construed in accordance with their usual and customary meanings,
and Buyer and Seller hereby waive the application in connection with the
interpretation and construction of this Agreement of any rule of law to the
effect that ambiguous or conflicting terms or provisions contained in this
Agreement shall be interpreted or construed against the party whose attorney
prepared the executed draft or any earlier draft of this Agreement. It is
understood and agreed that neither the specification of any dollar amount in the
representations and warranties contained in this Agreement nor the inclusion of
any specific item in the Schedules or Exhibits is intended to imply that such
amounts or higher or lower amounts, or the items so included or other items, are
or are not material, and none of the parties shall use the fact of the setting
of such amounts or the fact of any inclusion of any such item in the Schedules
or Exhibits in any dispute or controversy between the parties as to whether any
obligation, item or matter is or is not material for purposes hereof.
49
Section 14.9 Publicity. No party hereto shall issue, make or
cause the publication of any press release or other announcement with respect to
this Agreement or the transactions contemplated hereby, or otherwise make any
disclosures relating thereto, without the consent of the other party, such
consent not to be unreasonably withheld or delayed; provided, however, that such
consent shall not be required where such release or announcement is required by
applicable law or the rules or regulations of a securities exchange, in which
event the party so required to issue such release or announcement shall
endeavor, wherever possible, to furnish an advance copy of the proposed release
to the other party.
Section 14.10 Waiver. Except as otherwise expressly provided in this
Agreement, neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such right,
power or privilege preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege available to each party at law
or in equity.
Section 14.11 Parties in Interest. This Agreement (including the
documents and instruments referred to herein) is not intended to confer upon any
Person, other than the parties hereto and their successors and permitted
assigns, any rights or remedies hereunder; provided, however, that the
indemnification provisions in Article XIII shall inure to the benefit of the
Buyer Indemnitees and the Seller Indemnitees as provided therein.
Section 14.12 Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 14.13 Amendment. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
Section 14.14 Entire Agreement. This Agreement, the Exhibits and
Schedules hereto and the documents specifically referred to herein and the
Confidentiality Agreement constitute the entire agreement, understanding,
representations and warranties of the parties hereto, and supersede all prior
agreements, both written and oral, between Buyer and Seller. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Disclosure of any
fact or item in any Schedule referenced by a particular paragraph or Section in
this Agreement shall, should the existence of the fact or item or its contents
be relevant to any other paragraph or Section, be deemed to be disclosed with
respect to that other paragraph or Section whether or not any explicit
cross-reference appears therein.
Section 14.15 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 14.16 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the greatest
extent possible.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
CITIZENS UTILITIES COMPANY
By: __________________________________
Xxxxxx X. XxXxxxxx,
Chief Financial Officer and
Vice President
ATTEST: KAUAI ISLAND UTILITY CO-OP
__________________________________ By: __________________________________
Secretary Xxxxx Xxxxxxxx, Chairman and
President
[Signature page to Purchase and Sale Agreement (Kauai Electric) between
Citizens Utilities Company and Kauai Island Utility Co-Op,
dated as of February 11, 2000.]
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