PURCHASE AND SALE AGREEMENT
(LOUISIANA GAS OPERATIONS)
among
CITIZENS UTILITIES COMPANY,
LGS NATURAL GAS COMPANY
and
ATMOS ENERGY CORPORATION
Dated as of April 13, 2000
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
Section 1.1 Certain Defined Terms..................................................................1
Section 1.2 Other Defined Terms....................................................................9
ARTICLE II PURCHASE AND SALE 10
Section 2.1 Purchase and Sale of LGSN Assets......................................................10
Section 2.2 Purchase and Sale of Division Assets..................................................10
Section 2.3 Assumed Liabilities...................................................................10
Section 2.4 Retained Liabilities..................................................................11
Section 2.5 Condition on Assignment or Assumption of Contracts and Rights.........................12
ARTICLE III PURCHASE PRICE 12
Section 3.1 Purchase Price........................................................................12
Section 3.2 Calculation of Purchase Price.........................................................13
Section 3.3 Prorations and Adjustments as of the Closing Date.....................................13
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 and other Required Consents..............................................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
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLERS 16
Section 5.1 Organization, Existence and Qualification.............................................16
Section 5.2 Authority Relative to this Agreement and Binding Effect...............................17
Section 5.3 Governmental and Other Required Consents..............................................17
Section 5.4 Filings...............................................................................17
Section 5.5 Title to Assets; Encumbrances.........................................................17
Section 5.6 Financial Statements..................................................................18
Section 5.7 Compliance with Legal Requirements; Governmental Permits;
Business Practices..................................................................19
Section 5.8 Legal Proceedings; Outstanding Orders.................................................19
Section 5.9 Taxes ................................................................................19
Section 5.10 Intellectual Property.................................................................20
Section 5.11 Y2K Compliance........................................................................20
Section 5.12 Material Contracts....................................................................20
Section 5.13 Employee Benefit Matters..............................................................21
Section 5.14 Environmental Matters.................................................................23
Section 5.15 Labor Matters.........................................................................24
Section 5.16 State Regulatory Matters..............................................................25
Section 5.17 Public Utility Holding Company Status; Regulation as a Public Utility.................25
Section 5.18 Brokers...............................................................................25
Section 5.19 Insurance.............................................................................25
Section 5.20 Disclaimer............................................................................25
ARTICLE VI COVENANTS 26
Section 6.1 Covenants of Sellers..................................................................26
Section 6.2 Covenants of Buyer....................................................................29
Section 6.3 Governmental Filings..................................................................30
Section 6.4 Citizens Marks........................................................................31
Section 6.5 Transition Plan.......................................................................31
Section 6.7 Schedule of Easements and Interests...................................................32
Section 6.8 ▇▇▇▇▇▇ Security.......................................................................32
Section 6.9 Certain Proceedings...................................................................32
Section 6.10 Buyer's Insurance.....................................................................32
ARTICLE VII CONDITIONS PRECEDENT 32
Section 7.1 Sellers' Conditions Precedent to Closing..............................................32
Section 7.2 Buyer's Conditions Precedent to Closing...............................................33
ARTICLE VIII CLOSING 35
Section 8.1 Closing...............................................................................35
ARTICLE IX TERMINATION 36
Section 9.1 Termination Rights....................................................................36
Section 9.2 Limitation on Right to Terminate: Effect of Termination...............................37
ARTICLE X EMPLOYEE MATTERS 38
Section 10.1 Employment of Transferred Employees...................................................38
Section 10.2 Intentionally Omitted.................................................................38
Section 10.3 Cessation of Participation in Sellers' Plans; Bonuses.................................38
Section 10.4 Similarity of Benefit Packages........................................................38
Section 10.5 Defined Benefit Pension Plan..........................................................39
Section 10.6 401(k) Plan...........................................................................39
Section 10.7 Welfare Benefits......................................................................40
Section 10.8 Flexible Spending Accounts............................................................41
Section 10.9 Employment Agreements.................................................................41
Section 10.10 Vacation/Time Off.....................................................................41
Section 10.11 Severance.............................................................................41
Section 10.12 Health Care Continuation Coverage.....................................................42
ARTICLE XI TAX MATTERS 42
Section 11.1 Purchase Price allocation.............................................................42
Section 11.2 Cooperation with Respect to Like-Kind Exchange........................................43
Section 11.3 Transaction Taxes.....................................................................43
Section 11.4 Clearance Certificates................................................................44
ARTICLE XII ENVIRONMENTAL MATTERS 44
Section 12.1 Environmental Due Diligence...........................................................44
ARTICLE XIII INDEMNIFICATION 46
Section 13.1 Indemnification by Sellers............................................................46
Section 13.2 Indemnification by Buyer..............................................................46
Section 13.3 Limitations on Liability..............................................................47
Section 13.4 Claims Procedure......................................................................50
Section 13.5 Exclusive Remedy......................................................................52
Section 13.6 Indemnification for Negligence........................................................52
ARTICLE XIV GENERAL PROVISIONS 52
Section 14.1 Expenses..............................................................................52
Section 14.2 Notices...............................................................................52
Section 14.3 Assignment............................................................................54
Section 14.4 Successor Bound.......................................................................54
Section 14.5 Governing Law.........................................................................54
Section 14.6 Dispute Resolution....................................................................55
Section 14.7 Cooperation...........................................................................56
Section 14.8 Construction of Agreement.............................................................56
Section 14.9 Publicity.............................................................................57
Section 14.10 Waiver................................................................................57
Section 14.11 Parties in Interest...................................................................57
Section 14.12 Section and Paragraph Headings........................................................57
Section 14.13 Amendment.............................................................................57
Section 14.14 Entire Agreement......................................................................57
Section 14.15 Counterparts..........................................................................57
Section 14.16 Severability..........................................................................57
LIST OF EXHIBITS
Exhibit 6.7 Form of Substitute Agreement
Exhibit 7.1(g) Form of Buyer's Opinion of Counsel
Exhibit 7.2(g) Form of Sellers' Opinion of Counsel
LIST OF SCHEDULES
Schedule 1.1(a) Certain Assets
Schedule 1.1(b) Certain Excluded Assets
Schedule 4.3 Buyer's Governmental Approvals
Schedule 5.2 Sellers' Authority
Schedule 5.3 Sellers' 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 5.6(c) Certain Changes
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 Labor Matters
Schedule 5.16 State Regulatory Matters
Schedule 5.19 Sellers' Insurance
Schedule 6.1 Conduct of Business Prior to Closing Date
Schedule 6.2(c) Citizens' Guarantees and Surety Instruments
Schedule 10.7 Retirees and "Grandfathered Employees"
Schedule 10.11 Severance Benefits
PURCHASE AND SALE AGREEMENT
(LOUISIANA GAS OPERATIONS)
This PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the
13th day of April, 2000, by and among CITIZENS UTILITIES COMPANY, a Delaware
corporation ("Citizens"), LGS NATURAL GAS COMPANY, a Louisiana corporation
("LGSN" and, together with Citizens, "Sellers"), and ATMOS ENERGY CORPORATION, a
Texas and Virginia corporation ("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, Citizens own all of the Division Assets and LGSN owns all of
the LGSN Assets; and
WHEREAS, Buyer desires to purchase, and Sellers desire to sell, the
Division Assets and the LGSN 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" -- means, collectively, all of the Division Assets and all of
the LGSN Assets, including the following (except to the extent included among
the Excluded Assets):
(a) the Real Property described in Schedule 5.5, and all
buildings, structures and other improvements, fixtures and fittings located on
such Real Property, and all Easements, appurtenances and other interests owned
or held by a Seller and necessary for or relating to the Business (including all
gas pipes and pipelines, and all facilities used for storing and delivering
natural gas or propane);
(b) all inventories of natural gas, propane and other fuels,
and all supplies, materials and critical spares held by a Seller for use in
connection with the Business and located on, in storage for, or in transit to
the Real Property on the Closing Date;
(c) all machinery, equipment, tools, vehicles, furniture and
other tangible personal property used in connection with the Business, including
the items of tangible personal property listed on Schedule 1.1(a); and all
warranties, guarantees, and service and replacement programs of manufacturers,
service providers or other vendors relating thereto, in each case to the extent
that the same are transferable;
(d) all Contracts relating to the Business;
(e) the franchises, ordinances or similar agreements listed
on Schedule 1.1(a) with respect to Citizens' authority to distribute natural gas
and all other licenses, permits and authorizations held by a Seller and relating
to the Business, in each case to the extent the same are assignable;
(f) originals or copies of all records, books, operating
records, operating, safety and maintenance manuals, engineering design plans,
blueprints and as-built plans, specifications, procedures and similar items of
Citizens or LGSN relating to the Assets, including all books of account,
customer lists, billing records and other customer correspondence relating to
the Business, records relating to the Transferred Employees (to the extent such
transfer is not prohibited by any Legal Requirement), all regulatory filings and
all other books and records relating to the rates and services provided by
Citizens or LGSN in connection with the operation of the Business;
(g) all rights or choses in action arising out of occurrences
before or after the Closing Date and related to any of the Assets, including all
related claims, credits, rights of recovery and set-off and other similar
contractual rights (other than with respect to rights to insurance and
condemnation proceeds described in clause (h)), as to third parties held by or
in favor of a Seller; provided, however, that notwithstanding the foregoing
provisions of this clause (g), to the extent that a Seller pays or discharges a
liability related to the Business or any of the Assets that is related to such
right or chose in action (whether by reason of indemnification under this
Agreement or otherwise), Buyer will reassign or reconvey to such Seller such
right or chose in action to the extent that such right or chose in action
relates to a recovery of amounts paid to Buyer;
(h) all rights to insurance and condemnation proceeds
outstanding on the Closing Date to the extent relating to the damage,
destruction, taking or other impairment of the Assets which damage, destruction,
taking or other impairment occurs on or prior to the Closing, but only to the
extent of any proceeds remaining after any repair or replacement of the affected
Assets; and
(i) all accounts receivable (including rights to earned but
unbilled revenue) and prepayments, in each case attributable exclusively to the
Business and accrued or outstanding on the Closing Date.
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"Business" -- means collectively:
(a) the regulated natural gas distribution business conducted
by Citizens within the State of Louisiana through its Louisiana Gas Service
division;
(b) the nonregulated natural gas transportation and sales
business conducted by Citizens within the State of Louisiana through its LGS
Intrastate Company division;
(c) the nonregulated natural gas supply, storage and trans-
mission activities conducted by LGSN within the State of Louisiana; and
(d) the provision of related services and products and the
engagement in related activities by Citizens, through its Louisiana Gas Service
division and its LGS Intrastate Company division, and by LGSN, in each case
within the State of Louisiana.
"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 the confidentiality agreement
dated October 20, 1999, between Buyer and Citizens.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization from any Person.
"Contract" -- any agreement, contract, document, instrument,
obligation, promise or undertaking (whether written or oral) that is legally
binding, including Easements.
"Division Assets" -- all of the assets, property and interests of every
type and description, real, personal or mixed, tangible and intangible, of
Citizens and relating primarily to the Business as engaged in by Citizens
through the Louisiana Gas Service (also known as LGS Gas) division of Citizens
or the LGS Intrastate Company division of Citizens, other than the Excluded
Assets.
"Easements"-- means all easements, servitudes, rights of way, permits,
licenses, and other ways of necessity, whether or not of record.
"Encumbrance" -- any charge, adverse claim, lien, mortgage, pledge,
security interest, imperfection in title, limitation, Easement, restriction or
other encumbrance of any kind.
"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.
3
"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.
"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.
"ERISA Affiliate" -- any corporation or trade or business (whether or
not incorporated) which is, as of the date of this Agreement or at any time
within the six years preceding the date hereof would be treated as a single
employer under IRC Section 414.
"Excluded Assets" -- means the following assets of Citizens or LGSN,
each of which shall be excluded from the Assets, and not acquired by Buyer, at
Closing:
4
(a) assets that Citizens uses in both the Business and in
Citizens' other gas, electric, communications or water businesses that are
described generally in Schedule 1.1(b), and Contracts regarding the procurement
of services or goods by Citizens for use in such 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 at-
tributable to or related to a Benefit Plan of Citizens;
(d) the stock record and minute books of Citizens and LGSN,
all records prepared in connection with the sale of the Business (including bids
received from third parties and analysis relating to the Business), and
duplicate copies of all books and records transferred to Buyer;
(e) assets disposed of by Citizens or LGSN 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 3.3, rights to
refunds of Taxes payable with respect to the Business, assets, properties or
operations of Citizens, LGSN or any member of any affiliated group of which
either of them is a member;
(g) accounts owing, by and among Citizens, LGSN and their
Affiliates;
(h) all deferred Tax assets;
(i) any insurance policy, bond, letter of credit or other
similar item, any cash surrender value in regard thereto, and all rights to
insurance or condemnation proceeds except to the extent provided in clause (h)
in the definition of Assets set forth in Section 1.1;
(j) the Citizens Marks;
(k) the capital stock of LGSN; and
(l) the other assets listed on Schedule 1.1(b).
"Final Order" -- an action by a Governmental Body as to which: (a) no
request for stay of the action is pending, no such stay is in effect and if any
time period is permitted by statute or regulation for filing any request for
such stay, such time period has passed; (b) no petition for rehearing,
reconsideration or application for review of the action is pending and the time
for filing any such petition or application has passed; (c) such Governmental
Body does not have the action under reconsideration on its own motion and the
time in which such reconsideration is permitted has passed; and (d) no appeal to
a court, or a request for stay by a court of the Governmental Body's action is
pending or in effect and the deadline for filing any such appeal or request has
passed.
"GAAP" -- generally accepted United States accounting principles,
applied on a consistent basis.
5
"General Order" - means any Order applicable generally to Persons
engaged in a business similar to the Business.
"General Proceeding" - means any Proceeding that is reasonably expected
to result only in a General Order.
"Governmental Body" -- any of the following that possesses competent
jurisdiction:
(a) foreign, federal, state, county, parish, local, municipal
or other governmental body;
(b) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official or en-
tity and any court or other tribunal); or
(c) any governmental body entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or Tax
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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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.
"IRC" - the Internal Revenue Code of 1986, as amended.
"IRS" -- the Internal Revenue Service or any successor agency.
"Knowledge" -- means, (i) with respect to Sellers, the actual knowledge
of Citizens' Chief Financial Officer; President, Citizens Public Services; or
the Vice President and General Manager of Louisiana Gas Services, or their
respective successor, after reasonable investigation required for the
transactions contemplated hereby, and (ii) with respect to Buyer, the actual
knowledge of Buyer's Chief Financial Officer; Executive Vice President of
Utility Operations; or Vice President and Treasurer, or their respective
successor, after reasonable investigation required for the transactions
contemplated hereby; provided that no party shall be required to perform an
environmental assessment for purposes of this definition.
"Legal Requirement" -- any federal, state, county, parish, 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.
6
"LGSN Assets" -- means all of the assets, property and interests of
every type and description, real, personal or mixed, tangible and intangible, of
LGSN, other than the Excluded Assets.
"Losses" -- shall mean all claims, losses, liabilities, damages, causes
of action, costs and expenses (including, involving theories of negligence or
strict liability and including court costs and reasonable attorneys' fees and
disbursements in connection therewith), whether or not involving a third party
claim.
"LPSC" - shall mean the Louisiana Public Service Commission.
"Material Adverse Effect" -- an occurrence or condition that has a
material adverse effect on the Business, the Assets, or the liabilities,
operations, financial condition or results of operations of the Business. In
each instance, whether an occurrence has a material adverse effect will be
determined after taking into account the totality of the facts and circumstances
relating to such occurrence or condition, or to its effect, including mitigating
factors such as insurance, rate or other regulatory relief and third party
contribution obligations. For purposes of this Agreement, an occurrence or
condition will not constitute a Material Adverse Effect 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.
"Material Contract" -- a Contract relating primarily to the Business
and involving a total commitment by or to any party thereto of at least $100,000
on an annual basis and which cannot be terminated by Citizens or LGSN with
notice of ninety (90) days or less without penalty to Citizens or LGSN.
"Order" -- any award, decision, injunction, judgment, order (including
any rule-making 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) with respect to any parcel of owned Real Property or
Easements, all nonmonetary Encumbrances (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 or result in any
7
absence, loss or reversion of, or inability to transfer, title or any
termination of the right of use with respect thereto;
(d) all applicable zoning ordinances and land use restric-
tions;
(e) with respect to any Asset which consists of a leasehold
or other possessory interest 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
(f) any other Encumbrances affecting the Assets that are dis-
closed in Schedule 5.5.
"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, noticed
investigation, litigation, suit or other proceeding 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 Citizens or
LGSN in the operation of the Business, together with all interests in real
property (including Easements) used or held for use by Citizens or LGSN 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.
"▇▇▇▇▇▇ Investigation" - means the Proceeding of the LPSC relating to
LPSC ▇▇▇▇▇▇ ▇▇. ▇-▇▇▇▇▇, ▇▇ Re: An investigation into the allegation filed by
the plaintiffs against the defendants in case No. 532-058 in the 24th JDC.
8
"▇▇▇▇▇▇ Lawsuit" -- means the Proceeding styled "The ▇▇▇▇▇▇ Company,
Inc. et al. v. Citizens Utilities Company, et al., Case No. 532-058", filed
in the 24th JDC, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Louisiana, and any additional claims made or
brought by any other claimant or class of claimants that alleges claims in
respect of the conduct that is the subject matter of such Proceeding, whether
in the periods covered by such Proceeding or in other periods.
"▇▇▇▇▇▇ Proceedings" -- means the ▇▇▇▇▇▇ Lawsuit and the ▇▇▇▇▇▇ Inves-
tigation.
"SEC" -- the United States Securities and Exchange Commission or any
successor agency.
"Tax" -- any federal, state, local or foreign tax (including any income
tax, capital gains tax, value-added tax, sales and use tax, franchise tax,
payroll tax, withholding tax or property tax, ad valorem tax, transfer tax,
profits tax, license tax, lease tax, service or use tax, employment tax, excise
tax, severance tax, stamp tax, occupation tax, windfall profits tax, utility tax
or gross receipts tax), levy, assessment, tariff, duty (including any customs
duty), deficiency, franchise fee or payment, any liability in respect of any tax
as a result of being a member of any affiliated, consolidated, combined, unitary
or similar group, 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, or any notice
has been given, and either 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
---- -------
Act 4.10
Active Employees 10.1
Antitrust Authorities 6.3(a)
Assumed Liabilities 2.3
Balance Sheet 5.6(a)
Buyer Indemnitees 13.1
Buyer's Pension Plan 10.5(b)
Buyer Welfare Plans 10.7(a)
CERCLA 5.14(e)
Citizens Preamble
Citizens Marks 6.4
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Citizens' Pension Plan 10.5
Closing 8.1
Closing Date 8.1
Employee Plans 5.13(a)
Environmental Data 12.1(c)
Estimated Purchase Price 3.3(a)
Financial Statements 5.6(a)
LGSN Preamble
Purchase Price 3.1
Retained Liabilities 2.4
Sellers Indemnitees 13.2
Sellers' 401(k) Plan 10.6(a)
Sellers Welfare Plan 10.7(a)
Sellers Preamble
Transaction Taxes 11.3
Transferred Employee 10.1
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of LGSN Assets. Upon the terms and
subject to the conditions contained herein, at the Closing, LGSN shall sell,
transfer, and deliver to Buyer, and Buyer shall purchase and accept delivery
from LGSN, all of the LGSN Assets free and clear of all Encumbrances other than
Permitted Encumbrances.
Section 2.2 Purchase and Sale of Division Assets. Upon the terms and
subject to the conditions contained herein, at the Closing, Citizens shall sell,
transfer, assign, convey and deliver to Buyer, and Buyer shall purchase and
accept delivery from Citizens, all of the Division Assets free and clear of all
Encumbrances other than Permitted Encumbrances.
Section 2.3 Assumed Liabilities. In further consideration for the sale
of the Division Assets and the LGSN Assets, at the Closing, Buyer will assume
and agree to pay, perform and discharge when due, all liabilities and
obligations relating to or arising from the following:
(a) Performance of (i) the Contracts listed on Schedule 5.12,
(ii) the Contracts that have been entered into in the ordinary course of the
Business that are not required to be listed on Schedule 5.12 by the express
terms of Section 5.12 or other Contracts inadvertently omitted from Schedule
5.12 entered into in the ordinary course of the business to the extent that the
performance of such contract is reflected in the financial performance of the
Business as of the date hereof, (iii) the Contracts that are entered into in the
ordinary course of the Business after the date hereof in accordance with this
Agreement and (iv) franchises, licenses, permits, authorizations, ordinances and
similar agreements listed on Schedule 1.1(a) or held in the ordinary course of
the Business to the extent included among the Assets (except that Buyer shall
not assume any liabilities or obligations for any breach, default or violation
by, or payment obligations of, Citizens or LGSN under any such Contract,
franchise, license, permit, ordinance or similar agreement occurring or arising
or accruing on or prior to the Closing Date);
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(b) Customer advances, customer deposits and construction
advances, unperformed customer service obligations, Easement relocation
obligations, and continuation of construction work in progress and other capital
expenditure projects, in each case relating to the Business, arising in the
ordinary course of business consistent with past practices and outstanding on or
arising after the Closing Date (except that Buyer shall not assume any
liabilities or obligations for any breach or default by Citizens or LGSN with
respect to any such matters);
(c) Items addressed in Section 3.1(a) or (b) to the extent
resulting in a decrease in the Purchase Price; and
(d) All accounts payable of Sellers relating to the Business,
other than payable to a Seller or any of its Affiliates, and outstanding as of
the Closing Date.
The liabilities, responsibilities and obligations to be assumed by Buyer
pursuant to this Section 2.3 are hereinafter collectively referred to as the
"Assumed Liabilities." Notwithstanding anything in this Section 2.3 to the
contrary, "Assumed Liabilities" shall not include any liabilities,
responsibilities or obligations expressly stated to be Retained Liabilities
pursuant to Section 2.4.
Section 2.4 Retained Liabilities. Buyer shall not assume and at the
Closing Sellers shall retain, be responsible for 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) any indebtedness for money borrowed by Citizens or LGSN
(including items due to a Seller or its Affiliates) other than payment
obligations arising after the Closing Date (i) under any equipment lease listed
in Part VIII of Schedule 5.12, (ii) under any line extension Contracts or
similar construction arrangements and (iii) in respect of customer deposits or
advances, it being understood and agreed that such leases, Contracts, deposits,
advances and similar arrangements do not create indebtedness for money borrowed;
(b) Taxes of Citizens or LGSN or any of their Affiliates;
(c) Excluded Assets;
(d) Non-Transferred Employees, the Employee Plans and the
Employee Agreements (except in each case to the extent otherwise provided in
Article X) and any breach or default by, or obligations of, Citizens or LGSN
with respect to any Transferred Employee occurring, arising or accruing on or
prior to the Closing Date or occurring, arising or accruing with respect to any
event which occurred on or prior to the Closing Date (except to the extent any
such obligation becomes the obligation of Buyer in accordance with Article X);
(e) the Proceedings listed on Schedule 5.8 and all other
Proceedings, other than General Proceedings, involving Citizens or LGSN, the
Assets or the Business based on conduct (including Citizens' or LGSN's
performance under any Contract included among the Assets), action, facts,
circumstances or conditions existing, arising or occurring on or before the
Closing Date;
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(f) Environmental Liabilities with respect to any action,
fact, circumstance or condition to the extent existing, arising or occurring on
or before the Closing Date other than with respect to the existence of
non-friable asbestos and asbestos-containing materials (to the extent the same
do not violate existing Environmental Law) and any post-Closing activity that
disturbs asbestos or asbestos-containing materials;
(g) any obligation or liability owing to either Seller or
any of their Affiliates; and
(h) all other liabilities or obligations, whether known or
unknown, accrued or contingent, of Citizens or LGSN relating to or arising from
the ownership or use of the Assets or the operation or conduct of the Business
by Citizens or LGSN (or their predecessors in interest) on or before the Closing
Date that is not an Assumed Liability or that becomes the responsibility of
Buyer as provided in Article X.
Section 2.5 Condition on Assignment or Assumption of Contracts and
Rights. Any transfer or assignment to Buyer by a 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 a Seller thereunder so that Buyer would not in fact receive
all such rights, such Seller will cooperate with Buyer in any arrangement
reasonably designed to provide for Buyer, at Buyer's cost (to the extent
commercially reasonable), the benefits under any such Contract including,
enforcement for the benefit of Buyer of any and all rights of such 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 2.3. Notwithstanding the foregoing, the provision under this Section 2.5
of benefits of any Contract identified with an asterisk on Schedule 5.3 shall
not satisfy the condition required by Section 7.2 (d) for the receipt of a
Consent with respect thereto, unless such condition is expressly waived by
Buyer.
ARTICLE III
PURCHASE PRICE
Section 3.1 Purchase Price.
Subject to the terms and conditions of this Agreement, the aggregate
purchase price for the LGSN Assets and the Division Assets (the "Purchase
Price") shall be an amount equal to $375,000,000 in cash (representing the sum
of the purchase price for the LGSN Assets of $19,237,500 and the purchase price
for the Division Assets of $355,762,500), as adjusted in accordance with the
provisions of this Section 3.1 and with such adjustments determined pursuant to
Section 3.2.
(a) Such amount will be decreased by the aggregate amount of
all capitalized lease obligations under the equipment lease listed as item 2 in
Part VIII of Schedule 5.12 or any other capitalized lease.
(b) 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 3.3.
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Section 3.2 Calculation of Purchase Price.
(a) The portion of the Purchase Price apportioned to the
LGSN Assets shall be adjusted as provided in clauses (a) and (b) of Section 3.1
to the extent such adjustments relate to LGSN, and the portion of the Purchase
Price apportioned to the Division Assets shall be adjusted as provided in
clauses (a) and (b) of Section 3.1 to the extent such adjustments relate to the
portion of the Business conducted with the Division Assets. Any of the items
included in clauses (a) and (b) of Section 3.1 that cannot be calculated in a
timely fashion as of the Closing Date shall be estimated by Sellers in good
faith based upon the account balance of such item at the end of the month for
which Sellers' 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 Sellers 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, Sellers shall notify Buyer of the actual amount as recorded on Sellers'
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 3.3. Buyer may dispute any amount so
determined by Sellers, by written notice to Sellers within forty-five (45) days
after receipt of Sellers' 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 forty-five (45) 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 a nationally recognized
independent accounting firm mutually agreeable to Buyer and Citizens shall, upon
written notice from either Buyer or Citizens, resolve such dispute within sixty
(60) days after receipt of such notice. The fees and expenses of such
independent accounting firm shall be allocated between Buyer and Sellers so that
Sellers' 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 accounting firm that is unsuccessfully disputed by Buyer (as finally
determined by such accounting firm) bears to the total amount of such remaining
disputed amounts so submitted by Buyer to such accounting firm. Any
determination by such independent accounting firm shall be binding and
conclusive upon the parties without further appeal therefrom. Within ten (10)
days after the independent accounting firm shall have resolved such dispute, the
party owing the determined amount shall pay such determined amount to the other
party, plus interest at 8.25% per annum on such determined amount from the
Closing Date to (but not including) the date of payment.
Section 3.3 Prorations and Adjustments as of the Closing Date.
(a) Buyer and Sellers agree that the following items relating
to the Assets and the Business shall be adjusted and allocated as of the Closing
Date, with Sellers to be responsible for and to receive the benefit of the same
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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 assess-
ments;
(iii) electric, gas, telephone and other utility
charges;
(iv) expenses relating to Transferred Employees,
including payroll expenses, payroll Taxes, reimbursable employee business
expenses and the financial cost of the accrued vacation time of the Transferred
Employees;
(v) rents under leases transferred to or assumed
by Buyer to the extent not included in the accounts payable of the Business;
(vi) charges under maintenance, service and other
Contracts and fees under licenses transferred to or assumed by Buyer to the
extent not included in the accounts payable of the Business;
(vii) deposits of Citizens or LGSN to the extent
transferable to Buyer;
(viii) prepaid expenses and prepayments, and accrued
expenses to the extent not included in the accounts payable of the Business;
(ix) sales, franchise, gross receipts and other
similar Taxes based upon revenues; and
(x) ▇▇▇▇▇ cash.
(b) The items listed in Section 3.3(a) above shall be
estimated item by item by Sellers and reflected on the certificate and
supporting documentation to be delivered to Buyer pursuant to Section 3.2(a) and
finally determined in accordance with Section 3.2(b).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
Section 4.1 Organization, Existence and Qualification. Buyer is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Texas and the Commonwealth of Virginia, 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.
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Buyer is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state in which the failure to be so qualified or
in good standing would materially adversely affect the business or properties of
Buyer. Buyer is, or by Closing will be, duly qualified and in good standing as a
foreign corporation licensed to do business in the State of Louisiana.
Section 4.2 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by Buyer have been duly authorized by Buyer's Board of Directors,
which constitutes all necessary corporate action required on the part of Buyer
for such authorizations. The execution, delivery and performance of this
Agreement and the Related Documents by Buyer will not result in (a) any conflict
with or breach or violation of or default under the Organizational Documents of
Buyer, or (b) a violation or breach of any term or provision of, or constitute a
default or accelerate the performance required under, any indenture, mortgage,
deed of trust, security agreement, loan agreement, or Contract to which Buyer is
a party or by which its assets are bound, or (c) a violation of any Order of any
Governmental Body. This Agreement constitutes, and the Related Documents to be
executed by Buyer when executed and delivered will constitute, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, except as such enforceability may be limited by (i) bankruptcy
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally or (ii) the availability of equitable remedies
generally.
Section 4.3 Governmental and other Required Consents. 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 or third Person 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.
Section 4.4 Availability of Funds. Buyer has available, and will have
available on the Closing Date, or has written commitments from responsible
financial institutions to provide, sufficient funds to enable it to consummate
the transactions contemplated by this Agreement.
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. Except for ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, 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 a Seller or any Affiliate of a Seller
has or will have any liability or obligations (contingent or otherwise).
15
Section 4.7 Independent Investigation. Buyer is knowledgeable about the
businesses engaged in by Citizens through its LGS and LGS Intrastate Company
divisions and by LGSN 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 Sellers, and the books, records and files
of Sellers relating to the Business, the Assets and LGSN. 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 herein or in any other document or instrument delivered by
Sellers pursuant hereto.
Section 4.8 Public Utility Holding Company Status; Regulation as a
Public Utility. Buyer is a "public utility company" (as such term is defined in
PUHCA). Neither Buyer nor any of its Affiliates is a "holding company" of a
"public utility company" or of a "holding company," within the meaning of such
terms in PUHCA, and Buyer is not a "subsidiary" or an "affiliate" of a "holding
company" within the meaning of the PUHCA.
Section 4.9 Buyer's Financial Statements. Buyer has heretofore
delivered to Sellers complete and correct copies of the following: (a) its
annual report to shareholders of its most recently ended fiscal year, (b) its
Annual Report on Form 10-K for the same fiscal year, as filed with the SEC, (c)
its proxy statement relating to its most recent Annual Meeting of Shareholders
and (d) its quarterly reports on Form 10-Q for any fiscal quarters ended after
the fiscal year described in clause (a). The consolidated financial statements
of Buyer contained therein were prepared in accordance with GAAP applied on a
consistent basis, except for changes concurred in by Buyer's accountants and
disclosed in said financial statements, throughout the periods specified, and
present fairly in all material respects the financial condition and results of
operations of the businesses of Buyer as of the dates thereof and for the
periods then ended (subject, in the case of unaudited financial statements, to
normal year-end adjustments and the omission of footnote disclosure).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to Buyer as
follows:
Section 5.1 Organization, Existence and Qualification.
(a) Citizens 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 Division 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 Citizens is a party. Citizens is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of the State of Louisiana and each other state in which the failure to
be so qualified or in good standing would have a Material Adverse Effect.
(b) LGSN is a corporation duly organized, validly existing and
in good standing under the laws of the State of Louisiana. LGSN is the only
16
Affiliate of Citizens engaged in the Business. LGSN has all the requisite
corporate power and corporate authority to own the LGSN Assets which it purports
to own and to own, lease, and operate its portion of the Business as and in the
place where such business is now conducted and where such LGSN Assets are now
owned or leased or operated. Except for LGSN's 18.6% membership interest in Pine
Pipeline Acquisition Company, L.L.C., LGSN does not own any equity or ownership
interest of any other Person and has no subsidiaries. The LGSN Assets purported
to be owned by LGSN and the portion of the Business conducted by LGSN are
located and conducted only in the State of Louisiana and LGSN is not required to
be qualified to do business as a foreign corporation in any other state as a
result of its ownership of the LGSN Assets or its conduct of the portion of the
Business conducted by LGSN.
Section 5.2 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by Sellers 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 Sellers will not
result in (a) any conflict with or breach or violation of or default under the
Organizational Documents of Citizens or LGSN, (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 other Contract listed or that would be required to be listed in
Schedule 5.12 if in existence on the date hereof to which Citizens or LGSN is a
party or by which any of the Assets are bound, or (c) a violation of any Order
of any Governmental Body. This Agreement constitutes and the Related Documents
to be executed by Sellers when executed and delivered will constitute valid and
binding obligations of Sellers, enforceable against Sellers 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 material Consent of any Governmental Body, and no
Consent of any other third Person under any Contract listed or that would be
required to be listed in Schedule 5.12 if in existence on the date hereof, is
required to be obtained by Citizens or LGSN in connection with the execution and
delivery by Sellers of this Agreement or the Related Documents or the
consummation by Sellers of the transactions contemplated by this Agreement or
the Related Documents.
Section 5.4 Filings. No statement furnished by Sellers 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 5.5 Title to Assets; Encumbrances.
(a) Except as set forth in Schedule 5.5, Citizens has good and
valid title to the Division Assets and LGSN has good and valid title to the LGSN
Assets, including in each case those reflected in the 1999 Financial Statements,
except, in each case, with respect to Assets disposed of since December 31, 1999
in the ordinary course of business consistent with past practice or otherwise
disposed of in accordance with this Agreement and except for any Permitted
17
Encumbrances. None of the Assets is subject to any Encumbrance except Permitted
Encumbrances. Schedule 5.5 lists each material parcel of Real Property owned in
fee simple that is a part of the Assets. Except as set forth in Schedule 5.5,
Citizens or LGSN owns or possesses all material Easements necessary to conduct
the Business as now being conducted without any known conflict with the rights
of others. Citizens or LGSN enjoys peaceful and undisturbed possession under all
material real property leases included in the Assets, neither Citizens nor LGSN
is in default, in any material respect, under any of such leases, and all such
leases are valid and subsisting and in full force and effect.
(b) The Assets, when taken together with the Excluded Assets,
include all assets and properties that are necessary for the supply and
servicing of the customers of the Business in accordance with the historical
supply and service standards of Sellers. The tangible assets included in the
Assets, when taken as a whole, are in good operating condition, reasonable wear
and tear excepted, and are adequate for the use to which they are being put in
the conduct of the Business.
(c) No condemnation, expropriation, eminent domain or similar
Proceeding is pending or, to the Knowledge of Sellers, Threatened with respect
to the Real Property or the Easements. Sellers are in compliance, in all
material respects, with all Easements and similar realty interests benefiting or
encumbering the Real Property. The Real Property, and all improvements thereon,
do not violate, in any material respect, any applicable zoning, construction
code or other restriction of any Governmental Body.
Section 5.6 Financial Statements.
(a) Schedule 5.6(a) sets forth the unaudited balance sheets
for the Business as of December 31, 1998 and December 31, 1999 (the "Balance
Sheets") and unaudited statements of income of the Business for the respective
years then ended (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 the books and records of
Sellers and GAAP applied on a basis consistent with prior periods. Except as set
forth in Schedule 5.6(a), the Balance Sheets present fairly in all material
respects the financial condition of the Business as of their respective dates
and the income statements included in the Financial Statements present fairly in
all material respects the results of operations of the Business for the
respective periods covered thereby. The books and records of Sellers from which
the Financial Statements were prepared were complete and accurate in all
material respects at the time of such preparation. The 1999 Financial Statements
are presented on a consolidated pro-forma basis as described therein and the
1998 Financial Statements are presented on a property-level pro-forma basis as
described therein.
(b) There are no material liabilities or obligations (whether
known or unknown and whether absolute, accrued, contingent or otherwise) of the
Business or of Citizens or LGSN arising out of or relating to the Business or
the Assets, except (i) Retained Liabilities, (ii) liabilities and obligations
reflected in the Balance Sheet as of December 31, 1999, (iii) liabilities and
obligations arising since December 31, 1999, in the ordinary course of business
consistent with past practice that are not material or that arise under any
Contract (including as a result of this Agreement) or Legal Requirement (and as
to which Legal Requirement Sellers are in compliance in all material respects),
(iv) liabilities and obligations relating to or arising from matters disclosed
in Schedule 5.6(b) or another Schedule hereto, (v) those liabilities and
18
obligations that are the subject of Article X, and (vi) those liabilities,
which, if outstanding as of the Closing Date, would result in a decrease to the
Purchase Price in accordance with Section 3.1(b).
(c) Except as set forth in Schedule 5.6(c), since December 31,
1999, (i) the Business has been operated only in the ordinary course consistent
with past practice, except for actions taken in connection with the contemplated
sale of the Business and this Agreement, which have not been materially adverse
to the Business, and except for conversion to the SAP financial reporting
system, (ii) neither Citizens nor LGSN has experienced any material damage,
destruction or loss (whether or not covered by insurance) with respect to the
Business or the Assets, (iii) neither Citizens nor LGSN has been materially
affected by any material adverse Order issued by any Governmental Body since
such date with respect to the Business other than General Orders or any material
adverse change in the amount or structure of rates or tariffs applicable to the
Business, (iv) Sellers have not changed their accounting policies or their
collection or payment procedures or practices with respect to their accounts
receivable or their accounts payable, and (v) there has been no fact,
circumstance or event existing or occurring which, either individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect.
Section 5.7 Compliance with Legal Requirements; Governmental Permits;
Business Practices. Except as set forth in Schedule 5.7: (a) neither Citizens
nor LGSN is in violation, in any material respect, 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; and (b) Citizens or LGSN possesses
all material franchises, 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 Citizens or LGSN. Neither Citizens, LGSN nor, to the Knowledge of
Sellers, any Affiliate thereof has directly or indirectly given or agreed to
give any gift or similar benefit to any customer, subcontractor, supplier,
government employee, or other Person who was or is in a possible position to
help or hinder Citizens or LGSN with respect to the Business, which gift or
benefit could reasonably be expected to (i) subject Citizens, LGSN or the
Business or the Assets to any damages or penalties in any civil or criminal
Proceeding, or (ii) have, individually or in the aggregate, 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 or affecting either Seller (with respect to the Business or
the Assets) other than General Proceedings, 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. No Proceeding listed in Schedule 5.8 is reasonably likely to have a
Material Adverse Effect; provided that no representation or warranty is made in
this sentence with respect to the Proceedings set forth in items I.5 or I.23 in
Schedule 5.8. Except as disclosed on Schedule 5.8, there is no outstanding
material Order against either Seller which relates to or arises out of the
conduct of the Business or the ownership, condition or operation of the Business
or the Assets, other than any Orders relating to rates, tariffs and similar
matters arising in the ordinary course of business (as to which there is no
allegation of a violation) and other than any General Order.
Section 5.9 Taxes. Each of Citizens and LGSN has filed all Tax Returns
required to be filed by Citizens or LGSN or requests for extensions to file such
Tax Returns have been timely filed, such Tax Returns are complete and correct in
all material respects, and Citizens or LGSN has paid and discharged or made
19
adequate provision for all Taxes and no other Taxes are payable by Citizens or
LGSN with respect to items or periods covered by such Tax Returns. There are no
pending or, to Sellers' Knowledge, Threatened audits or other examinations
relating to any Tax matters, and no deficiencies have been asserted or, to
Sellers' Knowledge, Threatened to be asserted, except as set forth in Schedule
5.9. There are no Tax liens on the Assets. As of the date of this Agreement,
neither Citizens nor LGSN has granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any Tax or
the filing of any Tax Return except as set forth in Schedule 5.9. None of the
Assets (i) secures any debt the interest on which is tax-exempt under Section
103 of the Code, (ii) is "tax-exempt use property" within the meaning of Section
168(h) of the Code, (iii) is "tax-exempt bond financing property" within the
meaning of Section 168(g)(5) of the Code, (iv) is "limited use property" within
the meaning of Revenue Procedure 76-30, or (v) is required to be treated as
being owned by any other Person pursuant to the provisions of former section
168(f)(8) of the Code.
Section 5.10 Intellectual Property. Schedule 5.10 lists all patents,
trademarks, service marks and copyrights owned by Citizens or LGSN, and all
material third party intellectual property in each case used or held for use by
Citizens or LGSN primarily in the operation of the Business other than the
Excluded Assets. Citizens or LGSN either (a) owns all right, title, and interest
in such intellectual property without any obligation to make any license,
royalty or other payment with respect thereto, including, to the Knowledge of
Sellers, any license, royalty or other payment resulting from any infringement
of any third party rights, or (b) has the right to use pursuant to license,
sublicense, agreement, or permission all such intellectual property necessary
for the operation of the Business or the Assets. Except as set forth on Schedule
5.10, such ownership rights or rights to use each item of such intellectual
property are valid and in full force and effect and are not subject to any
maintenance fees, due within one year of the date hereof, and, except for any
such intellectual property that is included among the Excluded Assets, will be
owned or available for use in the Business on identical terms and conditions
immediately subsequent to the Closing hereunder. Sellers have no Knowledge of
(i) any infringement or claimed infringement by Citizens or LGSN of any patent,
trademark, service ▇▇▇▇, copyright or other intellectual property of others or
(ii) any infringement of any patent, trademark, service ▇▇▇▇, copyright or other
intellectual property owned by or under license to Citizens or LGSN.
Section 5.11 Y2K Compliance. The information technology systems used by
Citizens and LGSN with respect to the Business are designed to be used during
and after the calendar year 2000, and will operate during such time period,
without error relating to the date data, specifically including any error
relating to, or the product of, date data which represents or references
different centuries or more than one century, except to the extent any failure
to operate or any such error would not result in a Material Adverse Effect.
Section 5.12 Material Contracts; Customers.
(a) Except for (i) Contracts listed in Schedule 5.12, (ii)
Easements, line extension Contracts and similar construction arrangements and
(iii) Contracts included among the Excluded Assets, as of the date hereof,
neither Citizens nor LGSN is a party to any Contract (1) which is a gas supply,
transportation or storage agreement relating to the Business involving a minimal
annual payment by any party thereto of more than $100,000, (2) the loss of which
would have a Material Adverse Effect, (3) pursuant to which Citizens (with
respect to the Business) or LGSN is subject to take-or-pay obligations with
20
respect to gas purchases or gas marketing, (4) which constitutes a lease of
material Real Property; (5) which restricts the operation of the Business or the
Assets, (6) which constitutes a guarantee or similar arrangement other than
surety instruments issued in the ordinary course of business, or (7) which
otherwise constitutes a Material Contract. Except as disclosed in Schedule 5.12,
each of the Contracts listed on Schedule 5.12 and each line extension Contract
and similar construction arrangement constitutes a valid and binding obligation
of Citizens or LGSN and, to the Knowledge of Sellers, constitutes a valid and
binding obligation of the other parties thereto, is in full force and effect,
and, subject to obtaining any required Consent of the other parties thereto (as
set forth on Schedule 5.3 with respect to the Contracts listed on Schedule
5.12), may be transferred to the Buyer pursuant to this Agreement and will
continue in full force and effect thereafter, in each case without breaching the
terms thereof or resulting in the forfeiture or impairment of any rights
thereunder. Neither Seller has given to or received from any other party to any
of such Contracts or arrangements any notice or other written communication
regarding any actual or alleged material breach of or default under any of such
Contracts or arrangements that has not been withdrawn, settled or otherwise
resolved. Sellers have made available to Buyer copies, which were accurate and
complete as of the date so made available, of all Contracts listed on Schedule
5.12.
(b) Neither Seller has been involved in any material
controversy with any group of similarly situated customers of the Business or
with any material suppliers of gas or transportation for the Business during the
last three (3) years.
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, and any related trust or other
funding arrangement, which is covered by any provision of ERISA and which is
maintained by Citizens or LGSN for the benefit of the Active Employees or former
employees of the Business, or for which Citizens or LGSN has any potential
liability ("Employee Benefit Plan"); (ii) each other fringe benefit plan, policy
or arrangement, including any related trust or other funding arrangement,
currently maintained by Citizens for the benefit of Active Employees or former
employees of the Business, which provides for pension, profit-sharing,
retirement, deferred compensation, bonuses, severance, incentive compensation,
stock purchase, stock options, change in control, disability, medical, dental,
life or other employee insurance coverage or similar employee benefits
(collectively, together with the Employee Benefit Plans, "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 Citizens or LGSN for the Active Employees or former
employees of the Business (collectively, "Employee Agreements"). Citizens 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 Employee Plans and Employee Agreements, or
summary description(s) of any Employee Plans and Employee Agreements, not
otherwise in writing. In addition, Citizens has delivered to Buyer, or will
deliver to Buyer within 30 days of the date of this Agreement:
(i) all employment manuals and policies relating
to Employee Plans, Employee Agreements or other employment practices; and
21
(ii) with respect to Citizens' Pension Plan and
Citizens' 401(k) Plan, the most recent IRS determination letter for each such
Plan.
(b) Except as set forth in Schedule 5.13:
(i) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding involving
Citizens' 401(k) Plan or any Employee Plan is pending or, to Sellers' Knowledge,
is threatened.
(ii) Neither Citizens, nor LGSN, nor any ERISA Af-
filiate of Citizens or LGSN has ceased operations at any facility or has with-
drawn from any Employee Benefit Plan subject to Title IV of ERISA ("Title IV
Plan") in a manner that would subject Citizens or LGSN to liability under ERISA
ss.4062(e), ss.4063 or ss.4064.
(iii) Neither Citizens, nor LGSN, nor any ERISA
Affiliate of Citizens or LGSN has filed a notice of intent to terminate any
Title IV Plan or has adopted any amendment to treat any Title IV Plan as ter-
minated, and the PBGC has not instituted proceedings to treat any Title IV
Plan as terminated, where such termination could result in potential liability
to Buyer. No event has occurred or circumstance exists that may constitute
grounds under ERISA ss.4042 for the termination of, or the appointment of a
trustee to administer, any Employee Plan.
(iv) No funding deficiency exists with respect to
any Employee Plan.
(v) Neither Citizens nor LGSN has Knowledge of
any facts or circumstances that may give rise to any liability of Buyer to the
PBGC under Title IV of ERISA.
(vi) Neither Citizens nor LGSN nor any ERISA Af-
filiate of Citizens or LGSN has withdrawn from any Employee Benefit Plan
within the meaning given in ERISA ss.3(37)(A) ("Multi-Employer Plan") with
respect to which there is any outstanding liability as of the date of this
Agreement. No event has occurred or circumstances exists that presents a risk
of the occurrence of any withdrawal from, or the participation, termination,
reorganization, or insolvency of, any Multi-Employer Plan that could result
in any liability of Buyer to a Multi-Employer Plan.
(vii) Except to the extent required under ERISAss.
601 et seq. and IRCss.4980B and except with respect to post-retirement benefits
for Retirees and "grandfathered employees" as defined in Section 10.7(b),
neither Citizens nor LGSN provides health or welfare benefits for any retired
or former employee of the Business or is obligated to provide health or welfare
benefits to any active employee of the Business following such employee's re-
tirement or other termination of service.
(viii) Except with respect to post-retirement
medical, dental and life insurance benefits for the LGS Retirees and "grand-
fathered employees" as defined in Section 10.7(b), Citizens has the right to
modify and terminate such post-retirement benefits to retirees with respect to
both retired and active employees of the Business.
(ix) Except with respect to post-retirement
medical, dental and life insurance benefits for the LGS Retirees and "grand-
fathered employees" as defined in Section 10.7(b), no commitment or representa-
22
tion has been made by Seller or any of its Affiliates to any Person with regard
to any plan providing post retirement medical, dental, or life insurance
benefits or Employee Agreement that was not in accordance with
such plan or Employee Agreement and that could have a material adverse economic
consequence to Buyer.
(c) Citizens' Pension Plan and Citizens' 401(k) Plan are the
only Employee Benefit Plans which are intended to be qualified under Section
401(a) of the IRC.
(d) To the Knowledge of Citizens, each Employee Benefit Plan
has been established and administered in all material respects in accordance
with the terms of ERISA and the applicable provisions of the IRC.
(e) LGSN does not employ and has not at any time since its
acquisition by Citizens employed any employees or maintained, sponsored or
contributed to any Employee Plans.
(f) The LPSC Rate Orders applicable to the Business authorize
the recovery of costs associated with retiree medical, dental and life insurance
benefits referred to in Section 10.7(b) hereof for the retirees of the Business
and Transferred Employees who are "grandfathered employees" as described in
Section 10.7(b) on a "pay-as-you-go" method. True and complete copy of such
Orders have been previously provided by Citizens to Buyer.
Section 5.14 Environmental Matters.
(a) Citizens and LGSN hold, and are in compliance in all
material respects with, all permits, licenses and governmental authorizations
required for the conduct of the Business or the operation of the Assets under
applicable Environmental Laws, and Citizens and LGSN are otherwise in
compliance, in all material respects, with applicable Environmental Laws with
respect to the Business and the Assets.
(b) Except as listed in Schedule 5.14, neither Citizens nor
LGSN has received any notice, demand, letter, claim or request for information
alleging that either Citizens or LGSN is in violation of or subject to liability
under any Environmental Law arising out of Citizens' or LGSN's ownership, use or
operation of the Assets or the operation of the Business, which has not been
resolved or, if resolved, as to which any material obligation or liability
remains outstanding.
(c) Except as listed in Schedule 5.14, there are no
Proceedings pending or Threatened with respect to Citizens' or LGSN's compliance
with Environmental Laws and relating to the Business or the Assets.
(d) Except as listed in Schedule 5.14, neither Citizens nor
LGSN has received any written notice from any Governmental Body that it does not
have all certificates, permits and authorizations required by any Environmental
Law for its ownership, use or operation of the Assets or the operation of the
Business which has not been resolved or, if resolved, as to which any material
obligation or liability remains outstanding.
(e) To Sellers' Knowledge, Citizens has delivered to Buyer
copies of all environmental assessments, audits, studies and other environmental
23
reports in Sellers' possession or reasonably available to either Seller relating
to the Real Property or any of the other Assets or which concern the existence
or possible existence of Hazardous Materials on, under or adjacent to any of the
Real Property or relating to potential Environmental Liability of Citizens or
LGSN in connection with the Business or the Assets. Except as set forth in
Schedule 5.14, no environmental remediation of any Release is occurring on any
Real Property included in the Assets nor has Citizens or LGSN issued a request
for proposal or otherwise asked an environmental remediation contractor to begin
plans for any such environmental remediation. Except as set forth in Schedule
5.14, to Sellers' Knowledge, there have been no Releases on any Real Property
included in the Assets that could reasonably be expected to have a Material
Adverse Effect.
(f) Except as set forth in Schedule 5.14, none of the Real
Property is (i) situated in a federal "Superfund" site or, to Sellers'
Knowledge, in any federal "Superfund" study area designated under the federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
or (ii) to Sellers' Knowledge, situated in any site or study area designated
under any state statute comparable to CERCLA.
(g) Neither Citizens nor LGSN has entered into or agreed to
any Order, and is not subject to any outstanding Order other than a General
Order relating to compliance with or liability under any Environmental Law
relating to the Business or the Assets. Neither Citizens nor LGSN is subject to
any indemnity or other agreement with any third party relating to liability
under any Environmental Law relating to the Business or the Assets, except
customary environmental indemnity arrangements contained in the Contracts
described in Parts I, II, IV through VII and XII of Schedule 5.12.
(h) To Sellers' Knowledge, the Real Property (including soils,
groundwater, surface water, buildings and other structures) is not contaminated,
in any material respect, with any Hazardous Materials, it being understood and
agreed that, for purposes of this Section 5.14(h), Hazardous Materials shall not
include non-friable asbestos or asbestos-containing materials.
(i) To Sellers' Knowledge, there are no circumstances or
conditions involving the Business or the Assets that could reasonably be
expected to result in any material claims, liability, investigations, costs or
restrictions on the ownership, operation, use or transfer of any of the Real
Property pursuant to any Environmental Law other than with respect to any
activity after the date hereof that disturbs asbestos or asbestos-containing
materials that causes them to become friable or the removal of asbestos or
asbestos-containing materials in connection with any renovation or structural
change to any Asset after the date hereof.
Section 5.15 Labor Matters. Schedule 5.15 lists with respect
to the Business any labor disputes that have arisen during the three (3) year
period ending on the date hereof through the grievance and arbitration procedure
of any collective bargaining agreements, any Proceedings that are presently
pending or have been resolved during the three (3) year period ending on the
date hereof through the National Labor Relations Board, and any labor matters
that are presently pending or have been resolved during the three (3) year
period ending on the date hereof through any court with competent jurisdiction
over labor matters. Except to the extent set forth in Schedule 5.8 or in
Schedule 5.15, (a) Citizens and LGSN are in compliance, in all material
respects, with all Legal Requirements applicable to the Active Employees
respecting employment and employment practices, terms and conditions of
employment and wages and hours; (b) neither Citizens nor LGSN has received
24
notice of any pending or Threatened unfair labor practice complaint against it
before the National Labor Relations Board with respect to any of the Active
Employees; (c) neither Citizens nor LGSN has received written notice of any
representation petition or other question concerning representation respecting
the Active Employees pending or Threatened to be filed with the National Labor
Relations Board; and (d) no arbitration proceeding arising out of or under any
collective bargaining agreement is pending or Threatened against Citizens or
LGSN. No Active Employee is covered by a collective bargaining agreement.
Section 5.16 State Regulatory Matters.
(a) Schedule 5.16 reflects all of the currently pending rate
filings relating to the Business heretofore made by Citizens or LGSN before
state regulatory commissions and each other currently pending material
Proceeding of such state regulatory commissions, other than any currently
pending General Proceeding.
(b) All currently effective material filings relating to the
Business heretofore made by Sellers with state regulatory commissions were made
in compliance in all material respects with Legal Requirements then applicable
thereto and the information contained therein was true and correct in all
material respects as of the respective dates of such filings.
Section 5.17 Public Utility Holding Company Status; Regulation as a
Public Utility. Citizens is a "public utility company," but is not a "holding
company", a "subsidiary of a public utility," an "affiliate of a public utility
company" or "an affiliate of a holding company." LGSN is not a "public utility
company," a "holding company" or an "affiliate of a holding company." LGSN is a
"subsidiary" and an "affiliate" of Citizens, a public utility company, but
neither of such relationships requires the registration of Citizens or LGSN as a
holding company under PUHCA. LGSN is not a "subsidiary" or an "affiliate" of any
"public utility company" other than Citizens. Terms in quotations have the same
meaning as such terms in PUHCA.
Section 5.18 Brokers. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, no
broker or finder has acted for or on behalf of Citizens or LGSN or any of their
Affiliates 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 Citizens or LGSN or any of their
Affiliates for which Buyer or LGSN has or will have any liabilities or
obligations (contingent or otherwise).
Section 5.19 Insurance. Schedule 5.19 identifies each material
insurance casualty and property policy of Citizens or LGSN relating to the
Business or the Assets. All such insurance is sufficient to comply with all
regulatory and contractual requirements relating to the Business or the Assets.
Neither Citizens nor LGSN has received any refusal of coverage or notice of
cancellation or non-renewal with respect to any such insurance.
Section 5.20 Disclaimer. Except as otherwise expressly set forth in
this Agreement or in any other document or instrument delivered by Sellers
pursuant hereto, Sellers expressly disclaim 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 Citizens or LGSN, and, except
25
as so otherwise set forth, Sellers SPECIFICALLY DISCLAIM 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 CONDITION OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN,
WHETHER LATENT OR PATENT.
ARTICLE VI
COVENANTS
Section 6.1 Covenants of Sellers. Sellers jointly agree to observe
and perform the following covenants and agreements:
(a) Conduct of the Business Prior to the Closing Date. During
the period from the date hereof to the Closing Date, Sellers will operate the
Assets and the Business in the usual, regular and ordinary course consistent
with past practice and will use all commercially reasonable efforts to (i)
preserve intact the Business and preserve the goodwill and relationships with
customers, suppliers and others having business dealings with the Business, (ii)
maintain the properties, machinery and equipment included in the Assets in
sufficient operating condition and repair (subject to retirements in the
ordinary course of business consistent with past practice) to enable Buyer to
use them as they have been used in conduct of the Business, and (iii) conduct
the Business in such manner that the representations and warranties of Sellers
contained herein to the extent relating to the Business or the Assets shall be
true and correct in all material respects as of the Closing Date as if made on
the Closing Date, except for representations and warranties made as of, or in
respect of, only a specified date or period, and except to the extent expressly
permitted by the next sentence hereof. Without limiting the generality of the
foregoing, 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 prior to the
Closing, Sellers will:
(1) Not make or permit any material change in the
general nature of the Business;
(2) Not enter into any material transaction or
Contract that would be required to be described on Schedule 5.12 if in existence
on the date hereof, other than (a) pursuant to the Capital Budget, (b) the pur-
chase of gas in accordance with the Asset Management Plan described in item II.2
of Schedule 5.8 (the "Asset Management Plan") or (c) in the ordinary course of
business consistent with past practices provided Buyer has consented thereto in
writing, which consent shall not be unreasonably withheld or delayed;
(3) Not purchase, sell, lease, dispose of or other-
wise transfer or make any Contract for the purchase, sale, lease, disposition or
transfer of, any material Assets other than (a) pursuant to the Capital Budget,
(b) the purchase of gas in accordance with the Asset Management Plan or (c) in
the ordinary course of business consistent with past practices provided Buyer
has consented thereto in writing, which consent shall not be unreasonably with-
held or delayed;
26
(4) Not subject any of the Assets to Encumbrances
(other than Permitted Encumbrances);
(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) Comply in all material respects with all ap-
plicable material Legal Requirements and Orders, including 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;
(7) Except in the ordinary course of business con-
sistent with past practice or in accordance with the terms of any existing
Contract or Employee Plan, not grant any material increase or change in total
compensation or benefits to any of the Transferred Employees; not 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 pro-
vided thereunder; and not enter into any collective bargaining agreement;
(8) Not terminate any Material Contract or any other
Contract described on Schedule 5.12 except in the case of a breach of such Con-
tract by the other party thereto;
(9) Not create, incur, assume, guarantee or other-
wise become liable with respect to any indebtedness for money borrowed or
capitalized lease other than in the ordinary course of business consistent with
past practice (it being understood and agreed that customer advances, customer
deposits and construction advances do not create indebtedness for money bor-
rowed), except pursuant to advances made by Citizens to LGSN or the Business;
(10) Not make any material change in the levels of
storage inventory customarily maintained by Citizens or LGSN with respect to the
Business and taking into account seasonal demands and the requirements of
the Asset Management Plan, including pursuant to the Contract described as item
I.4 in Schedule 5.12; or
(11) Not change accounting policies or collection or
payment procedures or practices with respect to accounts receivable or accounts
payable.
(b) Access to the Business, Assets and Records; Updating
Information.
(1) From and after the date hereof and until the
Closing Date, Sellers shall (A) 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 Sellers from and against all Losses arising out of or
relating to the negligence or willful misconduct of Buyer or its
Representatives in connection with Buyer's access provided pursuant to
this Section 6.1(b)(1); (B) furnish the Buyer with such financial and
operating data and other information with respect to the Business as
27
the Buyer may from time to time reasonably request; and (C) furnish the
Buyer a copy of each material report, schedule or other document filed
or received by either Seller with respect to the Business with any
Governmental Body. Without limiting the application of the
Confidentiality Agreement, all documents or information furnished by
either Seller hereunder shall be subject to the Confidentiality
Agreement.
(2) Sellers 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.
(3) From and after the Closing, so long as any
books, records and files retained by Sellers relating to the Assets
remain in existence and available, Buyer (at its expense) shall have
the right upon prior notice to inspect and to make copies thereof at
any time during business hours for any proper purpose, including the
preparation of Tax returns. For a period of seven (7) years following
the Closing Date, Sellers shall use reasonable efforts not to destroy
or allow the destruction of any such books, records and files without
first offering in writing to deliver them to Buyer (at Buyer's
expense).
(c) Consents. Sellers will use commercially reasonable efforts
to obtain all necessary Consents from any Person required under any Contract
applicable to the Business in connection with the consummation of the
transactions contemplated hereby; provided that nothing in this Section 6.1(c)
shall require any material payment or the incurrence of any material obligation.
(d) Use of Certain Information. Except as required by
applicable Legal Requirements, unless otherwise agreed to in writing by Buyer,
for a period commencing on the Closing Date and terminating five (5) years after
such date, Sellers shall (i) keep all information relating to the Business or
the Assets and all information contained in the Assets (including all
information with respect to the identities, purchasing history and natural gas
requirements of the customers of the Business) confidential and not disclose or
reveal any such information to any Person other than Sellers' Representatives
who are actively and directly participating in the transactions contemplated
hereby or who otherwise need to know such information for such purpose and to
cause those Persons and each of their Affiliates to observe the terms of this
Section 6.1(d) and (ii) not to use, or permit any Affiliate to use, such
information for any other purpose, including the marketing or sale of
unregulated natural gas to customers of the Business. Sellers shall continue to
hold all such information according to the same internal security procedures and
with the same degree of care regarding its secrecy and confidentiality as
currently applicable thereto. Sellers shall notify Buyer of any unauthorized
disclosure of any such information to third parties that it discovers and shall
endeavor to prevent any further such disclosures. Sellers shall be responsible
for any breach of the terms of this Section 6.1(d) by either Seller or any
Sellers' Representatives or any of their Affiliates. After the Closing Date, in
the event that a Seller is requested pursuant to, or required by, applicable
Legal Requirements to disclose any such information, or any other information
concerning the Business or the Assets, or the transactions contemplated hereby,
such Seller shall provide Buyer with prompt notice of such request or
requirement in order to enable Buyer to seek an appropriate protective order or
other remedy, to consult with such Seller with respect to taking steps to resist
or narrow the scope of the request or legal process (it being understood that
28
any such efforts to seek a protective order or other remedy or to resist or
narrow the scope of such request or legal process shall be at the sole cost and
expense of Buyer), or to waive compliance, in whole or in part, with the terms
of this Section 6.1(d). Such Seller agrees not to oppose any action by Buyer to
obtain any such protective order or other appropriate remedy after the Closing
Date. In the event that no such protective order or other remedy is obtained, or
that Buyer waives compliance with the terms of this Section 6.1(d), such Seller
shall furnish only that portion of such information which such Seller is advised
by its counsel is legally required. In any such event such Seller shall use its
commercially reasonable efforts to ensure that all such information that is so
disclosed will be accorded confidential treatment. Sellers acknowledge and agree
that Buyer shall be entitled, in addition to all other remedies, to injunctive
relief and specific performance of this Section 6.1(d).
(e) Certain Financial Statements. Sellers shall furnish to
Buyer, at Buyer's expense, the following financial statements for the Business:
(i) audited consolidated balance sheets as at December 31, 1999 (or such later
calendar year-end date as may be required to be filed by Buyer by Regulation S-X
under the Securities Act of 1933, as amended) and related consolidated
statements of income and cash flows for the years then ended and (ii) any
unaudited interim consolidated financial statements (including balance sheet and
statements of income and cash flows) for such later interim period as may be
required by Regulation S-X. Such financial statements shall: (x) be prepared in
accordance with the books and records of Sellers relating to the Business; (y)
be prepared in accordance with generally accepted accounting principles
consistently applied (subject, in the case of unaudited financial statements, to
the omission of footnote disclosure) and the requirements of Regulation S-X; and
(z) fairly present, in all material respects, the financial condition and the
results of operations and cash flows for the Business as at the dates thereof
and for the fiscal periods covered thereby. Buyer shall specify to Sellers such
statements that Buyer will so require. Sellers shall provide such statements to
Buyer within 90 days following such request; provided that if Closing occurs
after December 31, 2000, Sellers will provide such statements within 60 days
after the Closing. Sellers shall cooperate to provide such statements earlier to
the extent reasonably practicable if Buyer shall so request.
Section 6.2 Covenants of Buyer. Buyer covenants and agrees to observe
and perform the following covenants and agreements:
(a) Consents. Buyer will use its commercially reasonable
efforts to assist Sellers in obtaining all necessary Consents from any Person
required under any Contract applicable to the Business in connection with the
consummation of the transactions contemplated hereby; provided that, nothing in
this Section 6.2(a) shall require any material payment or the incurrence of any
material obligation.
(b) Access to Information. After Closing, Buyer will, and
will cause its Representatives to, afford to Sellers, including their
Representatives, reasonable access to all books, records, files and documents
related to the Business in order to permit Sellers to prepare and file their 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 either Citizens, LGSN or the Business
for which Sellers may be responsible, to discharge their obligations under this
Agreement and the other Related Documents to which they are a party and for
other reasonable purposes and will afford Sellers reasonable assistance in
connection therewith. Buyer will cause such records to be maintained for not
less than seven (7) years from the Closing Date and will not dispose of such
29
records without first offering in writing to deliver them to Sellers; 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 Sellers' request, Buyer shall make available to Sellers and their
Affiliates, employees, representatives and agents, those employees of Buyer
requested by Sellers 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) Sellers 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 Sellers.
(c) Citizens Guarantees and Surety Instruments. Buyer shall
use its reasonable efforts to assist Sellers 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) a guaranty, letter of credit, bond or other surety instrument at
Closing in lieu of any surety instrument provided by Citizens to any beneficiary
in connection with the Business or the activities of LGSN or (B) if such
beneficiary refuses to accept such replacement surety instrument from Buyer, a
specific indemnity from Buyer to Citizens in respect of Citizens' surety
instrument.
Section 6.3 Governmental Filings.
(a) HSR Act Filing. Buyer and Citizens shall comply promptly
with the notice and reporting requirements of the HSR Act. Buyer and Citizens
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 and Citizens shall each exercise its
commercially reasonable efforts, and each shall cooperate fully with the other
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.
(b) Other Regulatory Filings. Buyer and Sellers will, as soon
as reasonably practicable following the execution of this Agreement, prepare and
file with each Governmental Body requests for such Consents as may be necessary
for the transfer of the Assets in accordance with, or as contemplated by, the
terms of this Agreement (including using commercially reasonable efforts to
prepare and file a joint application, in a mutually acceptable form, with the
LPSC by June 1, 2000). Buyer and Sellers will use commercially reasonable
efforts to 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. A
request in the parties joint application for a rate moratorium or for consent to
amortize Buyer's acquisition premium account shall be deemed not to be
inconsistent with the parties commercially reasonable efforts.
30
(c) Efforts. Nothing contained in this Section 6.3 shall
require Sellers or Buyer to institute or defend any legal or administrative
Proceeding, make any material payment or incur any economic burden, dispose of
any material asset or business or suffer any material detriment, including any
change in the applicable rates or tariffs of the Business or the imposition of
any other materially adverse term or condition on the Business or the Assets.
Section 6.4 Citizens Marks. Buyer acknowledges and agrees that, as
between Buyer and Citizens, Citizens has the absolute and exclusive proprietary
right to all names, marks, trade names, trademarks and corporate symbols and
logos incorporating "Citizens", and "CZN" (collectively, the "Citizens Marks"),
all rights to which and the goodwill represented thereby and pertaining thereto
are being retained by Citizens. Within four (4) months after the Closing Date,
Buyer shall cease using any Citizens ▇▇▇▇ and shall remove from the Assets any
and all Citizens Marks. Thereafter, Buyer shall not use, any Citizens ▇▇▇▇ 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, Citizens
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 Citizens.
Section 6.5 Transition Plan. Within thirty (30) days after the
execution date of this Agreement, Buyer shall deliver to Citizens 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. Citizens will add its
representatives to such team within fifteen (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 sixty (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. Transition services to be supplied by
Citizens under such transition plan shall be priced in accordance with
inter-company transfer practices consistent with those historically used for the
Business for a reasonable transition period not to exceed 120 days after the
Closing Date. If requested by any 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 Citizens 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 6.6 Substitute Agreement. In the event that Sellers, after
using their best commercially reasonable effects, are unable to obtain each of
the Consents identified as items IV.F.1 through IV.F.5 of Schedule 5.3 within
120 days after the date of this Agreement, then promptly upon notice from
Sellers to Buyer, Citizens and Buyer will enter into a substitute agreement
relating to the sale by Citizens of the Division Assets and the capital stock of
LGSN substantially in the form attached as Exhibit 6.6 hereto.
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Section 6.7 Schedule of Easements and Interests. Within 180 days
following the date of this Agreement (but in no event later than 60 days prior
to the Closing Date), Citizens shall deliver to Buyer a schedule, to be
identified as Schedule 6.7, which sets forth all Easements and ownership
interests in Real Property included in the Assets, together with such title
descriptions, recorded and unrecorded acts, and other information as shall be
customary in the State of Louisiana to identify and convey such Easements and
ownership interests. All material Easements that, as a condition to their
assignment, require Consent from the grantor thereof, shall be so designated on
Schedule 6.7.
Section 6.8 ▇▇▇▇▇▇ Security. If at any time Sellers shall have any
financial obligation or liability with respect to the ▇▇▇▇▇▇ Proceedings,
whether due to any Order of the LPSC or an appeal therefrom, that is materially
more than that which is secured by a bond, other surety instrument or other
collateral (including a standby letter of credit) previously provided by
Citizens (or if no such collateral has been previously provided), Citizens shall
promptly deliver to Buyer (or the appropriate Governmental Body, if required) a
bond, other surety instrument or other collateral reasonably acceptable to Buyer
(or, if agreement is not reached as to the form or substance of such bond or
surety instrument, Citizens shall deliver to Buyer a standby letter of credit
from Citibank, N.A., or other financial institution reasonably acceptable to
Buyer) fully securing in all material respects the unsecured amount of such
obligation or liability. If at any time any bond, other security instrument or
other collateral held by Buyer in respect of the ▇▇▇▇▇▇ Proceedings shall be
materially in excess of the amount of such obligation or liability, Buyer shall
cooperate with Citizens in reducing the amount of such collateral to the extent
of such excess, including the release of a surety instrument previously
delivered to Buyer in exchange for a substitute surety instrument in the amount
of such reduced obligation or liability.
Section 6.9 Certain Proceedings. Sellers shall defend the Proceedings
described in items II.2 and II.3 of Schedule 5.16 at their own expense, with
counsel of their own choosing. Sellers shall promptly and diligently pursue to a
settlement or prosecute to a final conclusion the Proceeding described in item
II.2 of Schedule 5.16. Prior to Closing, Buyer shall have the right to
intervene, at Buyer's expense, in the Proceedings listed in items II.2 and II.3
of Schedule 5.16 to protect its interests as the prospective buyer of the
Business, including any resolution of such Proceedings that Buyer believes may
adversely affect the Business or the Assets after the Closing. If either
Proceeding listed in items II.2 and II.3 of Schedule 5.16 continues after the
Closing, Buyer shall take over the prosecution of such Proceeding, provided that
Sellers may continue to participate in such Proceeding, at Sellers' expense, to
protect their interests as the former operators of the Business with the right
to appeal either directly or through Buyer any decision adverse to Sellers.
Section 6.10 Buyer's Insurance. Buyer shall deliver at Closing a
schedule that identifies each material casualty and property insurance policy of
Buyer applicable to its business in Louisiana.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Sellers' Conditions Precedent to Closing. The obligation of
Sellers to consummate the transactions contemplated by this Agreement shall be
subject to fulfillment at or prior to the Closing of the following conditions:
32
(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 Sellers 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) have been satisfied.
(d) Governmental Approvals and Other Consents; ▇▇▇▇▇▇
Investigation. The LPSC shall have issued an Order approving the transactions
contemplated hereby, the terms and conditions of such Order shall not be
materially adverse to Citizens in the context of the transactions contemplated
herein, and such Order shall have become a Final Order. Sellers 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. The ▇▇▇▇▇▇ Investigation shall have been
resolved pursuant to an Order by the LPSC (which Order does not have to be a
Final Order).
(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, and no Proceeding to obtain
such an Order shall be pending or Threatened.
(g) Opinion of Counsel. On the Closing Date, Sellers shall
have received from counsel to Buyer an opinion to the effect set forth in
Exhibit 7.1(g); provided that such opinion may contain limitations and
exceptions that are customary for the subject matter addressed thereby.
(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 Sellers may have requested
pursuant to Section 11.2.
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:
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(a) Representations and Warranties True as of the Closing
Date. Sellers' representations and warranties in this Agreement (i) shall have
been true and correct in all material respects as of the date of this Agreement
and (ii) shall be true and correct as of the Closing Date as if made on the
Closing Date, subject to changes expressly contemplated and permitted by this
Agreement, except (A) in the case of clauses (i) and (ii) above, 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 (B) in the case of clause (ii) above, to the
extent that any failure of such representations and warranties to be true and
correct on account of events or conditions arising after the execution date of
this Agreement, without regard to any qualification as to materiality or
Material Adverse Effect set forth therein, as of the Closing Date as if made on
the Closing Date, 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
Sellers shall have been performed and complied with in all material respects
prior to or at the Closing Date.
(c) Certificate. Sellers shall execute and deliver to Buyer a
certificate of authorized officers of Sellers, dated the Closing Date, stating
that the conditions specified in Sections 7.2(a) and 7.2(b) have been satisfied.
(d) Governmental Approvals and Other Consents; ▇▇▇▇▇▇
Investigation. The LPSC shall have issued an Order approving the transactions
contemplated hereby; such Order shall not contain any restrictions, conditions
or other provisions (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 Sellers be continued
following the Closing) that are materially adverse to the conduct of the
Business as operated on the date of this Agreement or on the other operations of
Buyer in the State of Louisiana as operated on the date of this Agreement; the
other terms and conditions of such Order shall not be materially adverse to
Buyer; and such Order shall have become a Final Order. For purposes of this
Section 7.2(d), Buyer's failure to receive from the LPSC any regulatory
treatment requested by Buyer in the parties' joint application to the LPSC that
is different in any material respect from the regulatory treatment in effect
with respect to the Business as of the date of this Agreement shall not be
considered materially adverse to the Business, to Buyer's other operations in
the State of Louisiana or to Buyer. In addition, Sellers shall have obtained all
other Consents of Governmental Bodies and other Persons which are required by
Sellers in order to consummate the transactions contemplated hereby other than
those the failure of which to obtain would not result in Buyer incurring
material liability under any Legal Requirement, Order or Contract. The ▇▇▇▇▇▇
Investigation shall have been resolved pursuant to an Order of the LPSC (which
Order does not have to be a Final Order). If such LPSC Order imposes any
financial obligation or liability (or any administrative obligation or liability
that could reasonably result in a financial obligation or liability) and such
obligation or liability shall not have been discharged or settled in full by
Citizens, then Citizens shall have delivered to Buyer (or to the appropriate
Governmental Body, if required) a bond or other surety instrument or other
collateral, in either case reasonably acceptable to Buyer (or, if such agreement
is not reached, a standby letter of credit from Citibank N.A., or another
financial institution reasonably acceptable to Buyer) fully securing such
obligations or liability with respect to such Order.
34
(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, and no Proceeding to obtain
such an Order shall be pending or Threatened.
(g) Opinion of Counsel. On the Closing Date, Buyer shall
have received from L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, Vice President and General Counsel
of Citizens, an opinion in the form of Exhibit 7.2(g) hereto.
(h) Documents. Citizens and LGSN shall have delivered all of
the certificates, instruments, contracts and other documents specified to be
delivered by them 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, it being agreed that no Order
resolving or other development in the Proceedings referenced in item I.5 or I.23
in Schedule 5.8 shall be considered, for purposes of this Section 7.2(i) or
Section 7.2(a) with respect to Sellers' representations and warranties set forth
in Section 5.6(c)(v) or Section 7.2(b) with respect to Sellers' covenants in
Section 6.1(a)(iii) (as such covenant relates to such representations and
warranties) to have a Material Adverse Effect.
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 ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, 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) Payment of Purchase Price. Buyer will pay to Sellers 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(s) as Sellers shall have designated 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, and each party shall deliver in
escrow to the other party's designated outside legal counsel the instruments and
other documents to be delivered by such party at the Closing. Upon receipt, the
Escrow Agent shall invest the Estimated Purchase Price in an interest-bearing
account mutually agreed upon by Sellers and Buyer. At Closing, upon satisfaction
35
of the conditions therefor, (i) Buyer shall sign and deliver to Sellers a
statement which confirms that the Closing has occurred and which instructs the
Escrow Agent to transfer to Sellers 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
Sellers shall designate at least two (2) business days prior to the date the
funds are required to be transferred hereunder and (ii) each party shall sign
and deliver to the other party's designated outside legal counsel a statement
which confirms that Closing has occurred and which authorizes the release to the
other party of the instruments and other documents previously delivered in
escrow to such legal counsel by such party. The Escrow Agent shall refund the
balance to Buyer. If the Closing does not occur on the appointed Closing Date,
the funds shall be returned to Buyer, together with all interest earned thereon,
and all escrowed instruments and documents shall be returned to the party who
delivered them. The fees and expenses of Escrow Agent shall be paid one-half by
Sellers and one-half by Buyer.
(b) Other Related Documents. To the extent consistent with
the other provisions of this Agreement, Sellers (or the appropriate Affiliate
of Sellers) and Buyer shall execute and deliver acts of sale, conveyances,
certificates of title, bills of sale, assignment and assumption instruments and
other documents reasonably requested by a party that are necessary for the
transfer of the Assets to Buyer, or the assumption of the Assumed Liabilities by
Buyer, or the satisfaction of any applicable Legal Requirements relating
thereto, or which are customarily given in the State of Louisiana to accomplish
transfers of assets of the type involved; provided, however, that nothing in
this clause (b) shall obligate Sellers or any Affiliate of Sellers to execute or
deliver any document that affects, in a manner adverse to Sellers or Sellers'
liability to Buyer, or to Buyer or to Buyer's liability to Sellers, as expressed
herein; and provided also that all acts of sale with respect to parcels of Real
Property owned in fee simple shall be with all legal warranties by, through
and/or under the Seller, but not otherwise, with such warranty warranting title
to the property from the date such Seller acquired title to such property to the
Closing Date, subject to Permitted Encumbrances, and with full substitution and
subrogation in and to all rights and actions of warranty that such Seller has or
may have against all preceding owners and venders.
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 Sellers and Buyer;
(b) By Buyer, on the one hand, or Sellers, 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 and during the continuation of a breach in
any material respect of any of the representations and warranties of Sellers
contained herein or in the failure by Sellers 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 Sellers, provided that such breach
36
or failure is not cured by Sellers in a manner reasonably acceptable to Buyer
within 45 days of Sellers' receipt of a written notice from Buyer that such a
breach or failure has occurred;
(d) By Sellers, upon and during the continuation of a 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 by Buyer in a manner reasonably acceptable to Sellers within 45 days
of Buyer's receipt of a written notice from Sellers that such a breach or
failure has occurred;
(e) By either party in writing if the Closing has not oc-
curred within twelve (12) months after the date of this Agreement; provided
that if Closing has not occurred within such period of time because the con-
ditions 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 to
August 1, 2001; or
(f) By Sellers or Buyer, as appropriate, if any Governmental
Body or other Person whose Consent is required to fulfill a condition precedent
to Closing set forth in Section 7.1(d) (with respect to Sellers) 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 Sellers or Buyer, as appropriate, will result in a condition
precedent to Closing set forth in Section 7.1(d) (with respect to Sellers) or in
Section 7.2(d) (with respect to Buyer) not being satisfied.
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 Sec-
tion 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 material condition to the performance of any other party or
to perform a material 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 any 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 such event shall any party be entitled to
receive any consequential, exemplary, punitive, or speculative damages.
37
ARTICLE X
EMPLOYEE MATTERS
Section 10.1 Employment of Transferred Employees.
(a) As of the Closing Date, Buyer shall employ all employees
actively employed by Citizens whose primary duties relate to the Business
("Active Employees") who as of the Closing Date are classified on Citizens'
payroll records as 070 employees ("070 Active Employees") and who either are
actively at work or are on vacation, bereavement leave, short-term sick leave or
any other authorized leave of absence which is scheduled to last not more than
thirty (30) business days after the Closing Date at the same wages or salary as
were in effect with Citizens immediately prior to the Closing Date. Buyer also
shall employ any other 070 Active Employee who is on an authorized leave of
absence scheduled to last more than thirty (30) days where there is a legal or
contractual right to reinstatement, as of the date, if any, within one (1) year
from the Closing Date, on which such employee returns to active work, in
compliance with Buyer's return to work policies and practices, at the same wages
or salary as were in effect with Citizens immediately prior to the Closing Date.
Any such 070 Active Employee employed by Buyer as provided in this Section
10.1(a) is referred to herein as a "Transferred Employee".
(b) Prior to the execution date of this Agreement, Sellers
have delivered to Buyer a list of the persons who would have been Transferred
Employees had the Closing Date occurred on March 31, 2000, showing the following
information for each such person: (i) the name of each employee; (ii) the name
of his or her current employer; (iii) his or her current base pay; (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
authorized leave of absence scheduled to last more than thirty (30) days with a
legal or contractual right to reinstatement and the nature of such leave of
absence. Sellers 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 Intentionally Omitted.
Section 10.3 Cessation of Participation in Sellers' Plans; Bonuses.
From and after the Closing Date, Transferred Employees shall accrue no
additional benefits under any employee benefit plan, policy, program or
arrangement of Sellers or its Affiliates. Citizens shall on a pro rata basis or
as otherwise determined by Citizens in its sole discretion, pay any bonuses
declared by Sellers after the Closing Date that would have been payable to the
Transferred Employees had the Transferred Employees remained employed by Sellers
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 Sellers under which such bonus would have been paid.
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 identical to those provided by Buyer to its non-union gas utility employees
(which are deemed by Buyer and Seller to be in the aggregate substantially
38
similar to those provided by Sellers to such Transferred Employees). 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 of
eligibility and vesting of benefits but not for purposes of earning benefits
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, Sellers
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 ("Citizens' Pension Plan"). Sellers shall retain all liabilities
and assets for pension benefits accrued through the Closing Date by Transferred
Employees and retirees of the Business under Citizens' Pension Plan.
(b) As of the Closing Date, Buyer shall cause all Transferred
Employees who are otherwise eligible to be included in the Atmos Energy
Corporation Pension Account Plan (the "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 Citizens' Pension Plan for purposes of
such Employees' eligibility to participate, vesting, attainment of retirement
dates, eligibility for early retirement benefits under Buyer's Pension Plan 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 who are otherwise
eligible in the Atmos Energy Corporation Employee Stock Ownership Plan and Trust
(the "Buyer's 401(k) Plan"). Buyer shall take all actions necessary to cause
Buyer's 401(k) Plan to recognize the service that the Transferred Employees had
in Citizens' 401(k) Savings Plan (the "Citizens' 401(k) Plan") for purposes of
determining such Employees' eligibility to participate, vesting, attainment of
retirement dates and, if applicable, contribution levels and eligibility for
optional forms of benefit payments. Buyer shall cause the trustee of Buyer's
401(k) Plan to accept transfers and, to the extent legally permissible, direct
rollovers from Citizens' 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) Citizens shall vest Transferred Employees in their ac-
count balances under Citizens' 401(k) Plan as of the Closing Date.
(c) Citizens shall direct the trustee of Citizens' 401(k)
Plan to transfer to the trustee of Buyer's 401(k) Plan in a trustee-to-trustee
transfer the account balances of the Transferred Employees under Citizens'
401(k) Plan with such transfer to consist of cash and the shares of Citizens'
stock attributable to the former LGS Savings and Investment Plans credited to
the accounts of each Transferred Employee; except that to the extent that the
account balances consist of outstanding loans, Citizens shall direct the trustee
of Citizens' 401(k) Plan also to transfer to the trustee of Buyer's 401(k) Plan
the promissory notes, payroll deduction authorizations for installment payments
and related documents evidencing such loans.
39
(d) After the transfer of assets and liabilities pursuant to
this Section, Buyer shall assume all liabilities for the benefits payable with
respect to the assets transferred with respect to the Transferred Employees
under Citizens' 401(k) Plan, and Citizens and Citizens' 401(k) Plan shall have
no liability for such benefits.
(e) In connection with the transfer of assets and liabilities
under this Section, Citizens and Buyer shall cooperate in making all appropriate
filings, and providing all applicable notices, required by the IRC or ERISA.
Buyer shall deliver to Citizens 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. Buyer
will submit Buyer's 401(k) Plan to the IRS within the current remedial amendment
period for a determination that Buyer's Plan satisfies the requirements of the
Internal Revenue Code of 1986, as amended by the Uniformed Services Employment
and Reemployment Acts of 1999, the Small Business Job Protection Act of 1996,
the Taxpayer Relief Act of 1997 and the Internal Revenue Services Restructuring
and Reform Act of 1998.
Section 10.7 Welfare Benefits.
(a) Buyer shall take all action necessary and appropriate to
ensure that, as of the Closing Date, Buyer includes the Transferred Employees to
the extent they are otherwise eligible in the employee welfare benefit plans
(including retiree medical benefits) applicable to the other non-union gas
utility employees of Buyer (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
Citizens on the Closing Date (hereinafter referred to collectively as the
"Citizens Welfare Plans"). Any restrictions on coverage for pre-existing
conditions, actively at work requirements, waiting periods, and requirements for
evidence of insurability (with respect to life insurance and long term
disability coverage) under the Buyer Welfare Plans shall be waived in the Buyer
Welfare Plans for Transferred Employees to the extent that such Transferred
Employees are covered by Citizens' Welfare Plans immediately prior to Closing,
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 Citizens
Welfare Plan in which the Closing Date occurs. As soon as practicable after the
Closing Date, Citizens shall deliver to Buyer a list of the Transferred
Employees who had credited service under a Citizens Welfare Plan, together with
each such Transferred Employee's service, co-payment, deductible and
out-of-pocket payment amounts under each such plan.
(b) Buyer shall provide or cause to be provided retiree
medical, dental and life insurance benefits to each retiree of the Business
identified in Schedule 10.7 as updated as of the Closing Date (the "Retirees"),
including those Retirees who were retirees at the ▇▇▇▇ ▇▇▇▇▇▇ purchased LGS
("LGS Retirees"), under the same or better terms and conditions as applied to
such Retirees immediately prior to the Closing Date, and shall provide or cause
to be provided retiree medical benefits to each Transferred Employee under the
same terms and conditions as otherwise applied to non-union gas utility
employees retiring from Buyer at the time such Transferred Employee retires from
the Buyer. Citizens shall have no obligation or liability, contingent or
otherwise, to provide retiree medical, dental or life insurance benefits to any
Retiree or Transferred Employee on or after the Closing Date. For purposes of
this Section 10.7, a "grandfathered employee" is a Transferred Employee or
Retiree who was at least age 55 with at least 10 years of service as defined in
40
the Citizens' Pension Plan by December 31, 1997, and who either retired on or
after August 1, 1997 and on or prior to December 31, 1997 or was an employee of
Citizens on December 31, 1997 and retires after December 31, 1997. Schedule 10.7
identifies each "grandfathered employee." Buyer agrees that, in the event it
ever terminates or materially adversely modifies, those retiree medical, dental
and life insurance benefits covering LGS Retirees and Retirees who are
"grandfathered employees", their spouses and dependents from those in effect
immediately prior to the Closing Date or in the event it ever terminates or
materially adversely modifies those retiree medical benefits provided to those
Transferred Employees who are "grandfathered employees", their spouses and
dependents from those provided by Buyer to Buyer's non-union gas utility
employees immediately prior to the Closing Date, Buyer will indemnify and hold
harmless Sellers Indemnitees from any and all Loss in connection therewith.
Buyer's obligations under this Section 10.7(b) are subject to and conditioned
upon the truth and accuracy of the representation and warranty contained in
Section 5.13(f), and if such representation and warranty is determined at any
time not to be true and accurate, Buyer shall have no further obligations under
this Section 10.7(b).
Section 10.8 Flexible Spending Accounts. As soon as possible following
the Closing Date, Citizens shall transfer to Buyer's flexible benefits plan any
balances standing to the credit of Transferred Employees under Citizens'
flexible benefits plan as of the Closing Date. Citizens shall provide to Buyer
prior to the Closing Date a list of those Transferred Employees who have
participated in the health or dependent care reimbursement accounts of Citizens,
together with their elections made prior to the Closing Date, with respect to
such account, and balances standing to their credit or debit as of the Closing
Date, and a statement of aggregate expenses reimbursed from the plan for each
Transferred Employee during the plan year. Buyer agrees to administer such
accounts (consistent with the terms of the flexible benefits plan applicable to
Buyer's employees) such that Transferred Employees will be able to defer
compensation (in accordance with the terms of the applicable Buyer plan) and to
submit claims against such accounts within the time period permitted by
applicable law.
Section 10.9 Employment Agreements. Buyer shall assume all obligations
of each employment agreement to which Citizens or its Affiliates is a party and
which covers any Transferred Employee immediately prior to the Closing Date
other than any such employment agreement that is identified as a Retained
Liability in Part III of Schedule 5.13.
Section 10.10 Vacation/Time Off. Citizens shall pay to Transferred
Employees any "banked" vacation credited to them on or prior to the Closing
Date. On or after the Closing Date, each Transferred Employee shall be eligible
to participate in the Buyer's Time Off Policy. Buyer shall take all actions
necessary to cause Buyer's Time Off Policy to recognize for all purposes under
said Policy the service, vacation and accrued sick time off that Transferred
Employees had with Citizens. Citizens shall provide Buyer with a list of all
vacation, service and sick time off taken by each Transferred Employee and the
vacation, service and sick time off entitlement for each Transferred Employee
for the year including the Closing Date.
Section 10.11 Severance. In the event that Buyer terminates the
services of any Transferred Employee within twelve (12) months following the
Closing Date without cause, Buyer shall provide to any such Transferred Employee
severance or separation pay benefits in accordance with Schedule 10.11. Buyer
will reimburse Seller at Closing for one-half of any severance or separation pay
41
benefits provided by Citizens to any Active Employee in connection with the
termination of such employee with which Buyer concurs at any time from the date
of this Agreement through and including the Closing Date.
Section 10.12 Health Care Continuation Coverage. Citizens shall be
responsible for compliance with all requirements under Section 4980B of the Code
and Section 601 et seq. of ERISA (collectively "COBRA") with respect to any (a)
Transferred Employee and (b) family member of such Transferred Employee, in each
case who becomes a "qualified beneficiary" within the meaning of Section
4980B(g)(1) of the Code as a result of any "qualifying event" within the meaning
of Section 4980B(f)(3) of the Code which occurs on or prior to the Closing Date.
Citizens also shall remain responsible for compliance with COBRA with respect to
any (c) former employee of the Business or current employee of the Business who
is not a Transferred Employee and (d) family member of such former employee or
current employee, in each case who becomes a qualified beneficiary as a result
of any qualifying event, whether such event occurs on, prior to or after the
Closing Date. Citizens covenants and agrees that Buyer shall have no liability
or responsibility for any of Citizens' COBRA obligations as described in this
Section 10.12. Buyer shall be responsible for compliance with COBRA with respect
to any (a) Transferred Employee and (b) family member of such Transferred
Employee, in each case who becomes a qualified beneficiary as a result of any
qualifying event which occurs after the Closing Date. In the event Seller shall
fail or refuse to provide COBRA coverage as described in this Section 10.12 to
the Transferred Employees and their family members who become qualified
beneficiaries, Seller shall immediately so notify Buyer of such failure or
refusal and shall provide Buyer a list of (a) each person employed in the
Business within the 36 months immediately preceding the Closing Date and (b)
each such employee and all dependents of such employee, in each case who had
coverage at any time during such period and the dates during which he or she had
coverage during the 36 months immediately preceding the Closing Date. For each
person who had coverage from any of Seller's group health plans and lost such
coverage at any time during the 36 months immediately preceding the Closing
Date, Seller shall provide to Buyer a copy of the COBRA notice and election
provided to each at the time of his/her qualifying event (as defined in IRC ss.
4980B(f)), copies of procedures used to notify each such qualified beneficiary
of the qualifying event, evidence of any election of COBRA coverage, evidence of
the reason for termination of each such COBRA coverage, evidence of any election
not to take COBRA, and evidence of COBRA premiums paid and any delinquency. The
foregoing sentence shall apply only if Seller shall fail or refuse to provide
coverage to all Transferred Employees and family members who become qualified
beneficiaries, and shall not apply simply because any one or more individual
Transferred Employees and/or family members who become qualified beneficiaries
may not be provided with the appropriate COBRA coverage.
ARTICLE XI
TAX MATTERS
Section 11.1 Purchase Price Allocation. Prior to the Closing Date,
Buyer and Sellers shall use their good faith efforts to agree upon the
allocation (the "Allocation") of the Purchase Price for the Division Assets and
the Purchase Price for the LGSN Assets, the Assumed Liabilities and other
relevant items (including, for example, adjustments to the Purchase Price) to
the individual assets or classes of Citizens or LGSN, respectively, of assets
within the meaning of Section 1060 of the IRC. If Buyer and Sellers agree to
such Allocation prior to Closing, Buyer and Sellers covenant and agree that (i)
the values assigned to the assets by the parties' mutual agreement shall be
42
conclusive and final for all purposes, and (ii) neither Buyer nor Sellers 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 Sellers cannot agree to an Allocation, Buyer and Sellers 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 their respective
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 each Seller may, at its election prior to the Closing Date, direct
that all or a portion of the Purchase Price apportioned to its Assets be
delivered to a "qualified intermediary" (as defined in Treasury Regulation
Section 1.1031(k) - 1(g)(4)) as to enable its relinquishment of its Assets to
qualify as part of a like-kind exchange of property covered by Section 1031 of
the IRC, so long as the portion of the Purchase Price delivered to the qualified
intermediary in exchange for such Assets is consistent with Buyer's Allocation
under Section 11.1 with respect to such Assets. If a Seller so elects, Buyer
shall cooperate with such Seller (at no cost to Buyer) in connection with its
efforts to effect such like-kind exchange, which cooperation shall include
taking such actions as such Seller reasonably requests (but without Buyer being
required to incur any out-of-pocket costs in the course thereof) in order to
enable such 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 such
Seller may assign all or part of its rights and delegate all or part of its
obligations under this Agreement to a Person 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, provided, however, that no such
assignment or delegation shall relieve Sellers of any of their obligations under
this Agreement nor shall legal title to any of the Assets transfer other than
directly from a Seller to Buyer. Buyer and Sellers 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 Sellers in a manner
consistent with this Section 11.2; provided that such efforts are not required
to include an unreasonable delay in the consummation of the transactions
contemplated by this Agreement.
Section 11.3 Transaction Taxes. Buyer and Citizens shall each bear and
be responsible for paying one-half of any sales, use, transfer, documentary,
registration (other than any annual registration fees) , and other similar
transfer type Taxes (including related penalties, additions to Tax and interest)
imposed by any Governmental Body with respect to the transfer of Assets
(including the Real Property) to Buyer ("Transaction Taxes"), regardless of
whether the ax authority seeks to collect such Taxes from Sellers or Buyer.
Citizens 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). Twenty (20) days prior to
making such filings, the filing party shall provide to the nonfiling party the
filing party's workpapers and proposed Tax Return for the nonfiling party's
review and approval. The nonfiling party shall provide to the filing party
approval (which approval shall not be unreasonably withheld) or disapproval of
such workpapers and proposed Tax Return within ten (10) days of delivery by the
filing party. If the filing and nonfiling party are unable to agree on the
workpapers and proposed Tax Return, Buyer and Citizens shall engage a nationally
recognized independent accounting firm mutually satisfactory to both to prepare
the workpapers and proposed Tax Return, which preparation shall be binding and
43
conclusive on the Buyer and Sellers without further appeal therefrom, and which
fees and expenses shall be borne equally by the Buyer and Citizens. The filing
party shall be responsible for (i) administering the payment of such Transaction
Taxes, (ii) defending or pursuing any Proceedings related thereto, and (iii)
paying any expenses related thereto, in each case subject to reimbursement by
the nonfiling party for one-half of such payments and expenses. Each party shall
give prompt written notice to the other of any proposed adjustment or assessment
of any Transaction Taxes with respect to the transaction, or of any examination
of said transaction in a sales, use, transfer or similar Tax audit. In any
Proceedings, whether formal or informal, the filing party shall control the
defense of such Proceedings, but shall permit the nonfiling party to participate
in the defense of such proceeding and shall take all actions and execute all
documents required to allow such participation. Neither party shall negotiate a
settlement or compromise of any Transaction Taxes without the prior written
consent of the other, which consent shall not be unreasonably withheld.
Section 11.4 Clearance Certificates. Sellers shall provide Buyer with a
Tax clearance certificate or similar document(s) which may be required by any
state taxing authority in order to relieve Buyer of any obligation to withhold
any portion of the Purchase Price.
ARTICLE XII
ENVIRONMENTAL MATTERS
Section 12.1 Environmental Due Diligence.
(a) Right to Conduct Environmental Due Diligence. All
environmental due diligence (including employee interviews and sampling of any
media or wastewater) conducted by Buyer shall be conducted 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. Buyer shall provide to
Sellers or to Sellers' counsel, copies of all reports, assessments and other
information composed or compiled by Buyer or Buyer's environmental consultant(s)
promptly following Buyer's receipt thereof. Buyer shall treat all such
information delivered to, or composed or compiled by, Buyer or Buyer's
environmental consultant(s) as Environmental Data in accordance with the
procedures of Section 12.1(c).
(c) Confidentiality of Environmental Data. All audits, re-
ports and studies delivered to or prepared by Buyer and any 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. Prior to the Closing, neither Buyer nor its environmental
consultant(s) shall disclose or release any Environmental Data without the prior
written consent of Sellers and all such information shall be kept strictly
confidential. Buyer expressly agrees that until the Closing, it will not
distribute the Environmental Data to any third party without Sellers' prior
written consent. After the Closing, Buyer agrees that it will not distribute the
Environmental Data to any third party without Citizens' prior written consent,
except as required by applicable Legal Requirements or by express provisions of
Buyer's corporate compliance program if Sellers are provided written notice at
least ten (10) days prior to such distribution, provided, however, that after
the Closing Date, Buyer may distribute the Environmental Data to any potential
44
purchaser of any of the Assets but only after first notifying Sellers.
(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 Sellers of the environmental consultant
or consultants Buyer intends to retain. Thereafter, Sellers shall have five (5)
days after receipt of such notification to notify Buyer in writing of Sellers'
objection (which must be for good cause) and substantiate the basis for that
objection. If Sellers do not object for good cause and substantiate that
objection within said five (5) day period, Sellers shall be deemed to have
consented to Buyer's selection.
(e) Phase I Reviews. Buyer may conduct, at its sole expense,
Phase I environmental assessment activities with respect to the Assets,
including reviewing existing environmental reports, correspondence, permits and
related materials regarding the Assets and all other Phase I activities as set
forth in the ASTM protocol regarding Phase I assessments. Any permitted Phase I
environmental assessment activities shall not include any sampling or intrusive
testing. All Phase I environmental assessment activities shall be conducted in
accordance with ASTM standards regarding Phase I assessments and shall be
completed within sixty (60) days after the date of execution of this Agreement.
Upon completion of such Phase I assessment activities, Buyer's environmental
consultant shall prepare and deliver to Buyer a written report with respect
thereto. All reports from Buyer's environmental consultants shall be delivered
to Sellers or Sellers' counsel within ninety (90) days after the execution of
this Agreement. Buyer shall notify Sellers in writing within ninety (90) days
after the date of execution of this Agreement if it has concluded, based on its
environmental due diligence, that the condition to Closing set forth in Section
7.2(a) will not be satisfied due to the discovery of such potential material
Environmental Liabilities unless environmental remediation of such potential
liabilities occurs prior to Closing. Buyer's failure to provide such notice by
such date shall preclude Buyer from subsequently declaring that the condition to
Closing set forth in Section 7.2(a) has not been satisfied based on the results
of Buyer's environmental due diligence, but shall not preclude the
indemnification or other rights of Buyer from Sellers in respect of the
Environmental Liabilities discovered by Buyer.
(f) Phase II Reviews. Prior to Closing, Buyer may not conduct
any Phase II environmental assessment activities with respect to the Assets
(including the taking and analysis of soil, surface water and groundwater
samples, testing of buildings, drilling ▇▇▇▇▇, taking soil borings and
excavating) without the prior written consent of Sellers, which consent may be
withheld, conditioned or delayed by Sellers in their sole discretion.
(g) Asbestos. Buyer may conduct, at its sole expense, as-
bestos survey activities with respect to the Assets, including reviewing exist-
ing reports, correspondence and other related documents, inspecting individual
sites and collecting samples of suspected asbestos-containing materials. These
asbestos survey activities shall be completed within sixty (60) days after the
date of execution of this Agreement and shall be conducted in accordance with
the provisions of Section 12.1(e).
(h) Additional Due Diligence. Notwithstanding the foregoing,
if prior to Closing Citizens or LGSN receives notice of any Proceeding or
Threatened Proceeding arising under Environmental Laws or if Sellers otherwise
acquire Knowledge that is reasonably likely to require a change to Schedule
45
5.14, Sellers promptly shall notify Buyer of the same and Buyer may request that
Sellers 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
Sellers. Any such additional environmental due diligence shall be conducted at
Buyer's sole expense.
(i) Indemnity for Due Diligence Activities. Buyer hereby
agrees to indemnify and hold harmless Sellers, Sellers' Affiliates and their
respective officers, directors, employees, agents, successors and assigns from
and against any and all Losses with respect to personal injury or property
damage 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) in the course of its environmental inspections.
ARTICLE XIII
INDEMNIFICATION
Section 13.1 Indemnification by Sellers. From and after Closing and
subject to the other provisions of this Article XIII, Sellers shall jointly and
severally 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 Sellers in or
pursuant to 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 Sellers in
the performance of their covenants, agreements, or obligations under this
Agreement required to be performed prior to Closing;
(b) any breach or default by Sellers in the performance of
their covenants, agreements, or obligations under this Agreement or any Related
Document delivered pursuant hereto required to be performed on or after Closing;
(c) any Retained Liabilities; and
(d) the ▇▇▇▇▇▇ Proceedings.
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 Sellers, their Representatives, Affiliates, successors and
permitted assigns (collectively, the "Sellers Indemnitees") from and against any
and all Losses arising out of or resulting from:
(a) any representations and warranties made by Buyer in or
pursuant to 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;
46
(b) any breach or default by Buyer in the performance of its
covenants, agreements, or obligations under this Agreement or any Related
Document delivered pursuant hereto required to be performed on or after Closing;
and
(c) any Assumed Liabilities and, except as to Retained
Liabilities and except to the extent Buyer is entitled (without regard to the
time or amount limitations provided in this Article XIII) to indemnification
under Section 13.1 with respect thereto, the operation of the Business after the
Closing Date.
Section 13.3 Limitations on Liability. Notwithstanding anything to the
contrary in this Agreement, the liability of Sellers and Buyer under this
Agreement and any documents delivered in connection herewith or contemplated
hereby shall be limited as follows:
(a) IN NO EVENT SHALL SELLERS BE LIABLE TO THE BUYER
INDEMNITEES, OR BUYER BE LIABLE TO THE SELLERS INDEMNITEES, FOR ANY
CONSEQUENTIAL DAMAGES (OTHER THAN FORESEEABLE DAMAGES INCLUDING FORESEEABLE
DIMINUTION IN VALUE AND FORESEEABLE LOST PROFITS), EXEMPLARY, PUNITIVE, OR
SPECULATIVE DAMAGES; provided, however, that if the Indemnified Party (as such
term is hereafter defined in Section 13.4(a)) is held liable to a third party
for any of such damages and the Indemnifying Party (as such term is hereafter
defined in Section 13.4(a)), is obligated to indemnify the Indemnified Party for
the matter that gave rise to such damages, then the Indemnifying Party shall be
liable for, and obligated to reimburse the Indemnified Party for, such damages.
(b) Except as provided below, the representations, warran-
ties, covenants and agreements of Sellers and Buyer set forth in this Agreement
shall survive the Closing, and all representations, warranties, covenants and
agreements of Sellers and Buyer under this Agreement and the indemnities granted
by Sellers in Section 13.1 and by Buyer in Section 13.2 (except those that
survive without time limit) shall terminate at 5:00 p.m., local time in
Stamford, Connecticut, on the appropriate anniversary of the Closing Date or on
the expiration of the applicable statute of limitations (or extensions or
waivers thereof), as the case may be, as set forth below in this Section
13.3(b); provided, however, that, except in the case of indemnities that survive
without time limit, such indemnities shall survive with respect only to the
specific matters that are 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,
provided that in each case the Indemnifying Party has fully satisfied any
indemnity obligation arising as a result of such resolution of such matter. In
no event, except in the case of indemnities that survive without time limit,
shall any amounts be recovered from Sellers under Section 13.1 or from Buyer
under Section 13.2, respectively, or otherwise for any matter for which a Claim
Notice is not delivered to Sellers or Buyer, as the case may be, prior to the
close of business on the applicable date set forth below.
(1) All representations and warranties of Sellers
and Buyer contained in or made pursuant to this Agreement, and all covenants,
agreements or obligations of Sellers and Buyer contained in or made pursuant
to this Agreement that are required to be performed prior to Closing, and
the related indemnity obligations of Buyer and Sellers contained in Sections
13.1(a) and 13.2(a), respectively, shall survive Closing until and shall ter-
47
minate on the second anniversary of the Closing Date.
(2) The indemnity obligations of Sellers contained
in Section 13.1(b) and 13.1(c) with respect to (i) Taxes shall survive until the
expiration of the applicable statute of limitations (or extensions or waivers
thereof); (ii) Environmental Liabilities shall survive until the fifth anniver-
sary of the Closing Date except with respect to Liabilities arising out of
or relating to non-compliance with a permit or authorization requirement of
any Environmental Law, which shall only survive until the second anniversary
of the Closing Date; (iii) the matters described in Sections 2.4(a), (c), (d),
(e) (but only with respect to Proceedings pending or Threatened as of the
Closing Date), and (g) shall survive without limitation as to time; (iv) the
other matters described in Section 13.1(b) shall survive without limitation
as to time except for any covenant as to title herein (the survival of which is
addressed exclusively in clause (vii) of this Section 13.3(b)(2)) and except in
the event any specific post-Closing covenant, agreement or obligation of Sellers
under this Agreement is expressly limited as to time, in which event such cove-
nant, agreement or obligation shall survive until the expiration of such
specified time period; (v) Retained Liabilities not otherwise addressed in
clauses (i), (ii) and (iii) of this Section 13.3(b)(2)) shall survive until
the third anniversary of the Closing Date; (vi) any warranty of title included
in the acts of sale with respect to parcels of Real Property owned in fee simple
delivered pursuant to Section 8.1(b) shall survive without time limit; and
(vii) any covenant in this Agreement as to title shall only survive until the
second anniversary of the Closing Date.
(3) The indemnity obligations of Sellers contained
in Section 13.1(d) shall survive for an unlimited period of time. (The indemnity
obligations of Sellers described in this Section 13.3(b)(3) together with the
indemnity obligations of Sellers described in clauses (i), (iii) and (iv)
of Section 13.3(b)(2), and exclusive of the indemnity obligations of Sellers
described in clauses (ii), (v), (vi), and (vii) of Section 13.3(b)(2), are col-
lectively referred to hereinafter as the "Specified Indemnity Obligations.")
(4) The indemnity obligations of Buyer contained
in Sections 13.2(b) and (c) shall survive for an unlimited period of time,
except in the event any post-Closing covenant, agreement or obligation of
Buyer under this Agreement is expressly limited as to time, in which event such
covenant, agreement or obligation shall survive until the expiration of such
specified time period.
(5) Notwithstanding the foregoing, the parties
acknowledge that Buyer shall be entitled to indemnification by Sellers for
Losses incurred by Buyer in respect of any intentional misrepresentation or
omission or fraud by Sellers without any time limitation (it being understood
that the failure to cure a breach shall not, by itself, be an intentional act or
omission) (hereinafter referred to as "Sellers' Fraud").
(c) Notwithstanding anything to the contrary in this
Agreement, Sellers shall not be required to indemnify the Buyer Indemnitees, or
be otherwise liable to the Buyer Indemnitees after the Closing with respect to
this Agreement, the transactions provided for herein or contemplated hereby or
Sellers' ownership or use of the Assets or operation of the Business on or
before the Closing Date for any Losses (other than Losses incurred by the Buyer
Indemnitees in respect of Specified Indemnity Obligations or Sellers' Fraud
(hereinafter referred to as "First-Dollar Losses")) until the Buyer Indemnitees
48
have suffered Losses (determined after giving effect to the provisions of
Section 13.3(f) and other than First-Dollar Losses) that are in excess of a
deductible in an amount equal to $3,000,000, after which point Sellers will be
obligated only to indemnify the Buyer Indemnitees from and against further
Losses in excess of such deductible. Buyer shall be entitled to indemnification
for all First-Dollar Losses without regard to the foregoing limitation on
Sellers' indemnification liability.
(d) Notwithstanding anything to the contrary in this
Agreement, Sellers shall not be required to indemnify the Buyer Indemnitees, or
be otherwise liable to the Buyer Indemnitees, after the Closing with respect to
this Agreement, the transactions provided for herein or contemplated hereby or
Sellers' ownership or use of the Assets or operation of the Business on or
before the Closing Date for any Losses (other than First-Dollar Losses) that are
in excess of an amount equal to $35,000,000. Buyer shall be entitled to
indemnification for all First-Dollar Losses without regard to the foregoing
limitation on Sellers' indemnification liability.
(e) No right to indemnification under this Article XIII shall
be limited by reason of any investigation conducted by any party at any time or
by the decision by a party to complete the Closing.
(f) Buyer agrees to use its commercially reasonable efforts
to give 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 be covered by 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 Sellers 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. Sellers agree to use their
commercially reasonable efforts to give written notice to the appropriate
insurance carrier(s) of any occurrences or circumstances which, in the judgment
of Sellers consistent with their customary risk management practices, appear
likely to be covered by one or more insurance policies of Sellers; and Buyer
agrees to cooperate with Sellers in connection with Sellers' investigation,
submission, prosecution, defense and settlement of claims under Sellers'
insurance policies, at Sellers' expense. Any such notice shall be given in good
faith by Sellers without regard to the possibility of the limitation on
indemnification payments from Sellers under Sections 13(b) or (c), and shall be
processed by Sellers in good faith and in a manner consistent with its risk
management practices involving claims for which no such limitations are
available. If at any time subsequent to the receipt by a Buyer Indemnitee of an
indemnity payment from a 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 Sellers an amount equal to the amount of
such recovery, less any out-of-pocket costs incurred by such Buyer Indemnitee
(or its Affiliates) in connection with claim preparation, pursuit and
settlement; provided that if such net recovery reduces the amount of Losses
actually incurred by the Buyer Indemnitees to an amount that is then below the
deductible amount set forth in Section 13.3(c), then the amount of such
reduction below such deductible amount shall again be available for Losses in
accordance with Section 13.3(c).
(g) Any limitation on indemnification provided in this
Section 13.3 that is expressly applicable to any subsection or clause of Section
49
13.1 or 13.2 shall not be applicable to any indemnification as may be applicable
under any other subsection or clause of Section 13.1 or 13.2 to which such
limitation is not also expressly applicable.
(h) Notwithstanding any language contained in any Related
Document (including deeds and other conveyance documents relating to the Real
Property), the representations and warranties of Sellers set forth in this
Agreement will not be merged into any such Related Document and the
indemnification obligations of Sellers, 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.
(i) For the purposes of this Article XIII, once a
determination has been made that a specific breach of a representation,
warranty, covenant or agreement has occurred for purposes of the indemnification
obligation hereunder, the calculation of Losses with respect to such specific
breach shall be made without regard to any limitation or qualification as to
materially set forth in such representation, warranty, covenant or agreement.
(j) Notwithstanding anything to the contrary in this
Agreement, Sellers shall not be required to indemnify the Buyer Indemnitees or
otherwise be liable to Buyer in respect of the Proceedings described in Section
2.4(e) for any Losses of any Buyer Indemnitee arising out of or resulting from
any regulatory action affecting the regulatory treatment or requirements of
Buyer with respect to the Business after the Closing Date except to the extent a
Buyer Indemnitee is required by a Governmental Body to refund or otherwise
credit directly to customers revenues collected by Sellers on or prior to the
Closing Date, together with interest or any other amounts identified therewith.
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 is referred to as
the "Indemnified Party" and any Person against whom such claims are asserted
hereunder is referred to as the "Indemnifying Party."
(b) Except in the case of the ▇▇▇▇▇▇ Proceedings, 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 obligation of
the Indemnifying Party to indemnify the Indemnified Party with respect to any
such Losses shall be reduced to the extent the Indemnifying Party is damaged by
the failure of the Indemnified Party to provide such notice. Any other claim
hereunder shall require the provision of a Claim Notice. 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
50
its interests or those of the Indemnifying Party (and of which it shall have
given notice and opportunity to comment to the Indemnifying Party) and not
prejudicial to the Indemnifying Party. In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such Losses, the Indemnifying Party shall
defend all appropriate Proceedings, and with counsel of its own choosing, which
Proceedings shall be promptly settled or prosecuted by it to a final conclusion;
provided that no such Proceeding may be settled without the prior written
consent of the Indemnified Party unless a full release is obtained by the
Indemnified Party, all amounts payable pursuant thereto are paid by the
Indemnifying Party and the settlement does not adversely affect the business or
assets of the Indemnified Party, including the Business or the Assets. 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. In the event that the
Indemnifying Party fails to notify the Indemnified Party within the Notice
Period that it will defend against such Losses, the Indemnified Party shall have
the right to defend all appropriate Proceedings, and with counsel of its own
choosing, at the Indemnifying Party's expense, which Proceedings may be settled
(without consent of the Indemnifying Party) or prosecuted by it to a final
conclusion.
(c) Sellers shall defend the ▇▇▇▇▇▇ Proceedings at their own
expense, with counsel of their own choosing, which Sellers shall promptly and
diligently pursue to a settlement or prosecute to a final conclusion; provided
that neither of the ▇▇▇▇▇▇ Proceedings may be settled without the consent of
Buyer unless reasonably concurrently therewith any financial obligations or
liability payable pursuant thereto are paid by Sellers or provision for payment
is made in accordance with any related Legal Requirements and this Section
13.4(c) or Sections 6.8 or 7.2(d), as the case may be. If Buyer becomes
obligated to pay any financial compensation to the plaintiffs in the ▇▇▇▇▇▇
Lawsuit, then Citizens will pay such compensation in accordance with all
applicable Legal Requirements or deliver to Buyer (or to the Judicial District
Court, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Louisiana, if appropriate) a bond or other surety
instrument reasonably acceptable to Buyer fully securing payment of such
compensation. Notwithstanding the delivery of surety instruments pursuant
hereto, Citizens shall remain liable for, and shall pay when due, all
obligations secured thereby. If Citizens fails to pay any such obligations when
due, and Buyer is required to pay, Buyer shall be entitled to draw on such
surety instruments in accordance with the terms thereof. Upon satisfaction of
all of Citizens' obligations secured by any such surety instrument, Buyer shall
return such surety instrument to Citizens. Citizens' obligation to indemnify the
Buyer Indemnitees in respect of the ▇▇▇▇▇▇ Proceedings shall be paid without any
right of setoff and notwithstanding any failure of Buyer to perform any of its
obligations under the Agreement or any other agreement as instrument delivered
pursuant hereto.
(d) The Indemnified Party shall provide reasonable assis-
tance 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.
51
(e) With regard to third party claims for which Buyer is or
Sellers are entitled to indemnification under Section 13.1 or 13.2, but subject
to Section 13.4(c), 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. Notwithstanding the
foregoing but subject to Section 13.4(b) and (c), 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 Article
VI, Article X and this Section 13.5, the rights, remedies and obligations of the
Buyer Indemnitees and the Sellers 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 transactions provided for herein or
contemplated hereby or Sellers' ownership of the Assets or operation of the
Business on or before the Closing Date, except for Sellers' Fraud.
Notwithstanding the foregoing, with respect to Environmental Liabilities and
Retained Liabilities referred to in Section 13.3(b)(2)(v), the indemnification
provisions set forth in this Article XIII are not exclusive and shall be in
addition to any other remedies any Buyer Indemnitee may have pursuant to
statutory or common law, but subject to the limitations provided in Section
13.3(a), (c) and (d).
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.
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 (i) Buyer will pay all real estate and
motor vehicle title transfer recording fees, and (ii) all Transaction Taxes
relating to the transfer of real property and motor vehicles will be shared
equally between Buyer, on the one hand, and Sellers, on the other hand.
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:
52
If to either Seller, to:
Citizens Utilities Company/LGS Natural Gas Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to each of:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and:
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer, to:
Atmos Energy Corporation
1800 Three Lincoln Centre
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
53
with a copy to each of:
Atmos Energy Corporation
1800 Three Lincoln Centre
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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; 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 in writing 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 (or
any right or obligation hereunder), without the prior written consent of
Sellers, to any direct or indirect wholly-owned subsidiary of Buyer provided
such subsidiary assumes in writing all of the duties and obligations of Buyer
(or such obligation) hereunder (provided that no such assignment by Buyer shall
in any way operate to enlarge, alter or change any obligation due to Sellers 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 such obligations
hereunder); and (b) Sellers may assign all or part of its rights or delegate all
or part of their duties under this Agreement, without the prior written consent
of Buyer, to a qualified intermediary chosen by Sellers to structure all or part
of the transactions contemplated hereby as a like-kind exchange of property
covered by Section 1031 of the IRC, (provided that no such assignment by Sellers
shall in any way operate to enlarge, alter or change any obligations due to
Buyer or relieve Sellers of their obligations hereunder if such qualified
intermediary fails to perform such obligations, with the understanding that
Sellers shall be jointly and severally liable with such qualified intermediary
for any nonperformance of Sellers' obligations hereunder).
Section 14.4 Successor Bound. Subject to the provisions of Section
14.3, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Section 14.5 Governing Law. THE VALIDITY, PERFORMANCE, AND ENFORCEMENT
OF THIS AGREEMENT AND ALL RELATED DOCUMENTS, UNLESS EXPRESSLY PROVIDED TO THE
54
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 THAT WOULD APPLY ANY
OTHER LAW.
Section 14.6 Dispute Resolution. Except as otherwise provided in
Sections 3.3(b), 6.4 and 11.3, 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 by the parties, the
representatives may utilize other alternative dispute resolution procedures such
as mediation (including through a mediator upon whom the parties mutually agree
or selected or designated by the Washington, DC office of the American
Arbitration Association) to assist in the negotiations. Buyer, on the one hand,
and Sellers, on the other hand, shall bear one-half of the expenses of any such
mediator. 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 par-
ties 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 Washington, D.C. 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.
55
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator; provided, however, that if the arbitrator determines that the
position taken in the Dispute by the nonprevailing party taken as a whole is
unreasonable, the arbitrator may order the nonprevailing party to bear such fees
and expenses, and reimburse the prevailing party for all or such portion of its
reasonable costs and expenses in submitting and presenting its position, as the
arbitrator shall reasonably determine to be fair under the circumstances. Each
party to the arbitration shall pay one-half of the fees and expenses of the
arbitrator and the American Arbitration Association.
(d) Notwithstanding any other provision of this Agreement,
(i) either party may commence an action to compel compliance with this Section
14.6 and (ii) if any party, as part of a Dispute, seeks injunctive relief or any
other equitable remedy, including specific enforcement, then such party shall be
permitted to seek such injunctive or equitable relief in any federal or state
court or competent jurisdiction before, during or after the pendency of a
mediation or arbitration proceed under this Section 14.6. Each of the parties
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the United States District Court for the District
of Delaware and any state court sitting in the State of Delaware, and any
appellate court therefrom, in any action or proceeding permitted by this Section
14.6. Each of the parties hereby irrevocably consents to service of process by
registered or certified mail to the address provided for notices in Section
14.2. Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
Section 14.7 Cooperation. Except as otherwise provided herein, each of
the parties hereto agrees to use its commercially reasonable efforts to take or
cause to be taken all action, and to do or cause to be done all things
necessary, proper or advisable under applicable laws, regulations or otherwise,
to consummate and to make effective the transactions contemplated by this
Agreement, including 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 Sellers,
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 Sellers 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. The word
"including" in this Agreement shall mean including without limitation. Words in
the singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires. The
terms "hereof," "herein," and "herewith" and words of similar import shall,
56
unless otherwise stated, be construed to refer to this Agreement as a whole
(including all of the Schedules and Exhibits hereto) and not to any particular
provision of this Agreement, and Article, Section, paragraph, Exhibit and
Schedule references are to the Articles, Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified.
Section 14.9 Publicity. No party hereto shall issue, make or cause the
publication of any press release or other announcement with respect to this
Agreement or the transactions contemplated hereby, or otherwise make any
disclosures relating thereto, without the 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.
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 duly authorized officers of 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 Sellers. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Disclosure of any
fact or item in any Schedule referenced by a particular paragraph or Section in
this Agreement shall, should such fact or item or its contents be expressly or
obviously related to any other paragraph or Section, be deemed to be disclosed
with respect to that other paragraph or Section whether or not any explicit
cross-reference appears therein.
Section 14.15 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 14.16 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
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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: --------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer
and Vice President
LGS NATURAL GAS COMPANY
By: --------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
ATMOS ENERGY CORPORATION
By: --------------------------------------------
▇▇▇▇▇▇ ▇. Best, Chairman, President and
Chief Executive Officer
59