Arizona
EXECUTION COPY
ASSET PURCHASE AGREEMENT
among
CITIZENS UTILITIES COMPANY
AND
CERTAIN OF ITS AFFILIATES
AND
AMERICAN WATER WORKS COMPANY, INC. AND
ARIZONA-AMERICAN WATER COMPANY
Dated as of
October 15, 1999
Arizona
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS ................................................... 1
1.1 Certain Definitions ........................................... 1
ARTICLE 2 THE TRANSACTION ............................................... 10
2.1 Sale and Purchase of Assets ................................... 10
2.2 Excluded Assets ............................................... 10
2.3 Assumption of Certain Liabilities ............................. 11
2.4 Consent of Third Parties ...................................... 14
2.5 Closing ....................................................... 14
2.6 Purchase Price ................................................ 15
2.6.1 Purchase Price .......................................... 15
2.6.2 Payment of Initial Cash Payment ......................... 15
2.6.3 Estimated Closing Statement ............................. 15
2.6.4 Post-Closing Adjustment to Purchase Price ............... 16
2.6.5 Adjustment for Certain Liabilities ...................... 17
2.7 Deliveries and Proceedings at Closing ......................... 18
2.7.1 Deliveries to Buyer ..................................... 18
2.7.2 Deliveries By Buyer to the Seller Parties ............... 19
2.8 Allocation of Consideration ................................... 19
2.9 Prorations .................................................... 19
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER ..................... 20
3.1 Qualification; No Interest in Other Entities .................. 20
3.2 Authorization and Enforceability .............................. 20
3.3 No Violation of Laws or Agreements ............................ 21
3.4 Financial Statements .......................................... 21
3.5 No Changes .................................................... 22
3.6 Contracts ..................................................... 22
3.7 Permits and Compliance With Laws Generally .................... 23
3.8 Environmental Matters ......................................... 23
3.9 Consents ...................................................... 26
3.10 Title ......................................................... 26
3.11 Real Estate ................................................... 26
3.12 Taxes ......................................................... 27
3.13 Patents and Intellectual Property Rights ...................... 27
3.14 Accounts Receivable ........................................... 27
3.15 Labor Relations ............................................... 27
3.16 Employee Benefit Plans ........................................ 28
3.17 Absence of Undisclosed Liabilities ............................ 29
3.18 No Pending Litigation or Proceedings .......................... 30
3.19 Supply of Utilities ........................................... 30
3.20 Insurance ..................................................... 30
3.21 Relationship with Customers ................................... 30
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3.22 WARN Act ...................................................... 30
3.23 Condition of Assets ........................................... 31
3.24 Brokerage ..................................................... 31
3.25 All Assets .................................................... 31
3.26 Year 2000 Matters ............................................. 31
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER ............ 32
4.1 Organization and Good Standing ................................ 32
4.2 Authorization and Enforceability .............................. 32
4.3 No Violation of Laws or Agreements ............................ 32
4.4 Consents ...................................................... 33
4.5 Financing ..................................................... 33
4.6 Brokerage ..................................................... 33
4.7 Insurance ..................................................... 33
ARTICLE 5 ADDITIONAL COVENANTS .......................................... 34
5.1 Conduct of Business ........................................... 34
5.2 Negotiations .................................................. 35
5.3 Disclosure Schedules .......................................... 35
5.4 Mutual Covenants .............................................. 36
5.5 Filings and Authorizations .................................... 36
5.6 Public Announcement ........................................... 37
5.7 Further Assurances ............................................ 37
5.8 Cooperation ................................................... 38
5.9 Employees; Employee Benefits .................................. 39
5.10 Employee Pension Plan ......................................... 41
5.11 Employee Savings Plan ......................................... 41
5.12 Welfare Benefits .............................................. 42
5.13 Taxes ......................................................... 43
5.14 Intentionally Omitted ......................................... 43
5.15 Citizens' Guarantees and Surety Instruments ................... 44
5.16 Assumption of Seller Debt ..................................... 44
5.17 Schedule of Permits ........................................... 47
5.18 Title Information ............................................. 47
5.19 Transaction with Related Parties .......................... 47
5.20 Approval by Citizens .......................................... 47
5.21 Supplemental Information ...................................... 47
5.22 Non-Competition ............................................... 48
5.23 Intentionally Omitted ......................................... 48
5.24 IDRB Obligations .............................................. 48
5.25 Cooperation with Respect to Like-Kind Exchange ................ 49
5.26 Transition Plan ............................................... 49
5.27 Procedures regarding Refunds of Advances ...................... 50
5.28 Title Insurance ............................................... 50
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ARTICLE 6 CONDITIONS PRECEDENT; TERMINATION ............................. 50
6.1 Conditions Precedent to Obligations of Buyer and Parent ....... 50
6.1.1 Performance of Agreements; Representations and Warranties 50
6.1.2 Opinion of Counsel ...................................... 51
6.1.3 HSR Act ................................................. 51
6.1.4 Required PUC and Other Consents ......................... 51
6.1.5 Injunction; Litigation .................................. 52
6.1.6 Documents ............................................... 52
6.1.7 Related Closings ........................................ 52
6.2 Conditions Precedent to Obligations of Seller Parties ......... 52
6.2.1 Performance of Agreements; Representations and Warranties 52
6.2.2 Opinion of Counsel ...................................... 53
6.2.3 HSR Act ................................................. 53
6.2.4 Required PUC and Other Consents ......................... 53
6.2.5 Injunction; Litigation .................................. 53
6.2.6 Documents ............................................... 53
6.2.7 Related Closings ........................................ 54
6.3 Termination ................................................... 54
ARTICLE 7 CERTAIN ADDITIONAL COVENANTS .................................. 54
7.1 Certain Taxes and Expenses .................................... 54
7.2 Maintenance of Books and Records .............................. 55
7.3 Survival ...................................................... 55
7.4 Indemnification ............................................... 58
7.4.1 General Indemnification Obligations ..................... 58
7.4.2 General Indemnification Procedures ...................... 59
7.4.3 Indemnification for Negligence .......................... 62
7.5 UCC Matters ................................................... 62
7.6 Financial Statements .......................................... 62
7.7 Collection of Receivables ..................................... 63
ARTICLE 8 MISCELLANEOUS ................................................. 63
8.1 Construction .................................................. 63
8.2 Notices ....................................................... 63
8.3 Successors and Assigns ........................................ 65
8.4 Exhibits and Schedules ........................................ 65
8.5 Governing Law ................................................. 65
8.6 Dispute Resolution ............................................ 66
8.7 Severability .................................................. 67
8.8 No Third Party Beneficiaries .................................. 67
8.9 Entire Agreement .............................................. 67
8.10 Amendment and Waiver .......................................... 67
8.11 Counterparts .................................................. 68
8.12 Headings ...................................................... 68
8.13 Definitions ................................................... 68
8.14 No Implied Representation ..................................... 68
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8.15 Construction of Certain Provisions ............................ 68
8.16 Bulk Sales .................................................... 69
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List of Schedules
Schedule 1.1.1(a) ..................................................Real Estate
Schedule 1.1.10 ...........................................Assumed Indebtedness
Schedule 1.1.52 .................................................IDRB Documents
Schedule 2.2.12 ................................................Excluded Assets
Schedule 3.3 ................................No Violation of Laws or Agreements
Schedule 3.4 ..............................................Financial Statements
Schedule 3.5 ........................................................No Changes
Schedule 3.6 .........................................................Contracts
Schedule 3.7 ........................Permits and Compliance with Laws Generally
Schedule 3.8 .................................Environmental Matters - Generally
Schedule 3.8.10 ................................Compliance with Water Standards
Schedule 3.8.11 ...............................................Deed Restriction
Schedule 3.9 ..........................................Seller Parties' Consents
Schedule 3.10 ............................................................Title
Schedule 3.11 ..........................................Real Estate Proceedings
Schedule 3.12 ............................................................Taxes
Schedule 3.15 ..................................................Labor Relations
Schedule 3.16.1 .........................................Employee Benefit Plans
Schedule 3.16.4 ............................Employee Benefit Plans - Compliance
Schedule 3.16.9 ................Employee Benefit Plans - Extraordinary Benefits
Schedule 3.17 ...............................Absence of Undisclosed Liabilities
Schedule 3.18 .............................No Pending Litigation or Proceedings
Schedule 3.19 ..............................................Supply of Utilities
Schedule 3.20 ...............................................Seller's Insurance
Schedule 3.22 .........................................................WARN Act
Schedule 3.23 ..............................................Condition of Assets
Schedule 3.25 .......................................................All Assets
Schedule 3.27 ................................................Product Liability
Schedule 4.7 .................................................Buyer's Insurance
Schedule 5.1 ...............................................Conduct of Business
Schedule 5.9.1 .......................................................Employees
Schedule 5.9.2 ................................Collective Bargaining Agreements
Schedule 5.12 .................................................Former Employees
Schedule 5.15 .............................................Citizens' Guarantees
Schedule 5.16 ..............................................Schedule of Permits
Schedule 6.1.7 .....................................Related Purchase Agreements
Arizona
TABLE OF EXHIBITS
Exhibit A - Form of Assumption Agreement
Exhibit B - Form of Assignment and ▇▇▇▇ of Sale
Exhibit C - Form of Maricopa ▇▇▇ Agreement
Exhibit D - Form of Retained IDRB Obligations Agreement
Exhibit E - Form of Seller's Opinion of Counsel
Exhibit F - Form of Buyer's Opinion of Counsel
Arizona
ASSET PURCHASE AGREEMENT
THIS IS AN ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of October
15, 1999, by and among Citizens Utilities Company, a Delaware corporation
("Citizens"), and each of the wholly-owned subsidiaries of Citizens named on the
signature page hereof (collectively with Citizens, "Seller" or the "Seller
Parties"), and American Water Works Company, Inc., a Delaware corporation
("Parent"), and Arizona-American Water Company, an Arizona corporation
("Buyer").
Background
1. Citizens, directly and indirectly through the other Seller Parties, is
a public utility engaged, among other things, in the business of storing,
supplying, distributing and selling water to the public, wholesale water
transmission, wastewater treatment, and related services and activities in the
State of Arizona (the "Business").
2. Parent is a holding company which desires to cause the Buyer to
purchase substantially all of the assets, properties and rights of the Seller
Parties relating to the Business, and Seller desires to sell, and to cause the
sale of, such assets, properties and rights, on the terms and subject to the
conditions set forth in this Agreement.
Terms
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the respective meanings ascribed to them in this Section:
1.1.1 "Acquired Assets" means, subject to Section 2.2, all of
each Seller Party's right, title, and interest in, under and to all of the
assets, properties and rights exclusively used in the Business (including those
owned or held directly by Citizens and exclusively used in the Business as
engaged in by Citizens through the Agua Fria Water and Mohave Water divisions of
Citizens) as a going concern of every kind, nature and description existing on
the Closing Date, wherever such assets, properties and rights are located and
whether such assets, properties and rights are real, personal or mixed, tangible
or intangible, and whether or not any of such assets, properties and rights have
any value for accounting purposes or are carried or reflected on or specifically
referred to in Seller's books or financial statements, including all of the
assets, properties and rights exclusively relating to the Business enumerated
below:
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(a) all real property described in Schedule 1.1.1(a),
together with all fixtures, fittings, buildings, structures and other
improvements erected thereon, and easements, rights of way, water lines, rights
of use, licenses, railroad crossing agreements, hereditaments, tenements,
privileges and other appurtenances thereto or otherwise exclusively related to
the Business (such as appurtenant rights in and to public streets) (the "Real
Estate");
(b) to the extent not included in clause (a) above, all
water tanks, reservoirs, water works, plant and systems, purification and
filtration systems, pumping stations, pumps, wells, mains, water pipes,
hydrants, equipment, machinery, vehicles, tools, dies, spare parts, materials,
water supplies, fixtures and improvements, construction in progress, jigs,
molds, patterns, gauges and production fixtures and other tangible personal
property, in transit or otherwise, used exclusively in the Business (the
"Equipment and Other Tangible Personal Property");
(c) notwithstanding the provisions of Section 2.2 but
subject to Section 2.4, all of Seller's water appropriation and flowage rights
to the extent not transferred to Buyer upon assignment of the Contracts and
Permits to Buyer;
(d) all notes receivable, accounts receivable, accrued
utility revenues, materials and supplies (at average cost net of reserve for
obsolescence) and prepayments attributable in each case exclusively to the
Business;
(e) all unamortized debt expense related to the Assumed
Indebtedness, deferred CAP water costs and capital costs, and other deferred
charges (excluding deferred taxes collectable) attributable exclusively to the
Business of which recovery in future rates is probable;
(f) Intellectual Property and goodwill, licenses and
sublicenses granted and obtained with respect thereto;
(g) subject to Section 2.4 hereof, (i) contracts,
commitments, agreements and instruments relating to the sale of any assets,
services, properties, materials or products, including all customer contracts,
operating contracts and distribution contracts relating exclusively to the
conduct of the Business; (ii) orders, contracts, supply agreements and other
agreements relating exclusively to the purchase of any assets, services,
properties, materials, or products for the Business; (iii) all leases of Real
Estate exclusively related to the Business; (iv) all other contracts, agreements
and instruments related exclusively to the Business (other than contracts,
agreements and instruments included in the definition of Real Estate or
Permits); and (v) any such contracts, agreements and other instruments referred
to in clauses (i) - (iv) inclusive, entered into between the date hereof and the
Closing Date which are consistent with the terms of this Agreement and are
entered into in the ordinary course of business consistent with past practice,
and including in the case of clauses (i) - (iv) all such contracts, agreements
and instruments more specifically listed or described in Schedule 3.6 (but
specifically excluding any contract, agreement and instrument listed or
described on Schedule 2.2.12) (the "Contracts");
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(h) subject to Section 2.4 hereof, franchises,
approvals, permits, authorizations, licenses, orders, registrations,
certificates, variances, and other similar permits or rights obtained from any
Authority relating exclusively to the conduct of the Business and all pending
applications therefor (the "Permits");
(i) books, records, ledgers, files, documents (including
originally executed copies of written Contracts, to the extent available, and
copies to the extent not available), correspondence, Tax returns relating
exclusively to the Business, memoranda, forms, lists, plats, architectural
plans, drawings, and specifications, new product development materials, creative
materials, advertising and promotional materials, studies, reports, sales and
purchase correspondence, books of account and records relating to the
Transferred Employees (to the extent such transfer is not prohibited by law),
photographs, records of plant operations and materials used, quality control
records and procedures, equipment maintenance records, manuals and warranty
information, research and development files, data and laboratory books,
inspection processes, in each case, whether in hard copy or magnetic format, in
each instance, to the extent exclusively relating to the Business, the Acquired
Assets or the Transferred Employees;
(j) all rights or choses in action arising out of
occurrences before or after the Closing Date and exclusively related to any of
the Acquired Assets, including third party warranties and guarantees and all
related claims, credits, rights of recovery and set-off and other similar
contractual rights, as to third parties held by or in favor of Seller; provided,
however, that (notwithstanding the foregoing provisions of this Section
1.1.1(j)), to the extent that Seller pays or discharges a liability related to
the Business or any of the Acquired Assets and related to such right or chose in
action (whether by reason of indemnification under this Agreement or otherwise),
Buyer will reassign or reconvey to 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; and
(k) all rights to insurance and condemnation proceeds
(i) to the extent relating to the damage, destruction, taking or other
impairment of the Acquired Assets which damage, destruction, taking or other
impairment occurs on or prior to the Closing but only to the extent that the
proceeds exceed the amount of the write-down of the net book value of such
Acquired Assets on the books and records of Seller as a result of such damage,
destruction, taking or other impairment, (ii) to the extent they relate to
amounts paid by Buyer for Damages to the extent Buyer does not receive payment
pursuant to Section 7.4.1(a), but only to the extent Buyer is entitled to
indemnification by Seller pursuant to Sections 7.3 and 7.4, and (iii) as
provided in Section 4 of the agreement attached as Exhibit D hereto.
1.1.2. "Adjusted Net Assets" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.3. "Affected Participant" has the meaning set forth as
Section 5.11.1 hereof.
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1.1.4. "Affiliate" of any Person means any Person, directly or
indirectly controlling, controlled by or under common control with such Person.
1.1.5. "Agreement" has the meaning set forth in the
introduction hereof.
1.1.6. "American Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.7. "American Savings Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.8 "Antitrust Division" has the meaning set forth in
Section 5.5 hereof
1.1.9 "Assumed Benefit Liabilities" has the meaning set forth
in Section 3.16.6 hereof.
1.1.10 "Assumed Indebtedness" means the liabilities and
obligations from and after the Closing Date (except as set forth below) with
respect to the IDRB Financings and IDRB Documents set forth on Schedule 1.1.10.
For purposes of clarity, except as set forth in the next sentence below,
"Assumed Indebtedness" shall not include any liability or obligation to the
extent accrued prior to the Closing Date or to the extent arising out of or
relating to an event, circumstance or occurrence prior to the Closing Date.
"Assumed Indebtedness" shall include the outstanding principal amount and the
accrued but unpaid interest owed by Seller on the debt obligations set forth in
the first sentence of this definition.
1.1.11 "Assumed Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.12 "Assumption Agreement" has the meaning set forth in
Section 2.3.2 hereof.
1.1.13 "Authority" means any federal, state, local or foreign
governmental or regulatory entity (or any department, agency, authority or
political subdivision thereof).
1.1.14 "Base Cash Purchase Price" has the meaning set forth in
Section 2.6.1 hereof.
1.1.15 "Beneficiary" means the Person(s) designated by an
Employee, by operation of law or otherwise, as entitled to compensation,
benefits, insurance coverage, payments or any other goods or services under a
Benefit Plan.
1.1.16 "Benefit Plans" has the meaning set forth in Section
3.16.1 hereof.
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1.1.17 "Bonds" means any of the bonds issued pursuant to the
Indentures of Trust, the proceeds from the issuance of which were advanced to
Seller pursuant to any of the IDRB Documents.
1.1.18 "Business" has the meaning set forth in the Background
section hereof.
1.1.19 Business Day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the Commonwealth of
Pennsylvania are authorized or obligated by law or executive order to close.
1.1.20 "Buyer" has the meaning set forth in the introduction
hereof.
1.1.21 "Buyer's IDRB Obligations" means the obligations of
Parent and Buyer set forth in Section 5.24 (a) and in the instruments to be
executed and delivered by Parent and Buyer on or prior to the Closing Date in
accordance with Section 5.24 (a).
1.1.22 "Buyer's Accountants" means PricewaterhouseCoopers LLP
or any firm of independent public accountants hereafter designated by Buyer for
purposes of this Agreement.
1.1.23 Intentionally omitted
1.1.24 "Ceiling" has the meaning set forth in Section 7.4.2(e)
hereof.
1.1.25 "CERCLA" has the meaning set forth in Section 3.8.2
hereof.
1.1.26 "CERCLIS" has the meaning set forth in Section 3.8.7
hereof.
1.1.27 "Citizens" has the meaning set forth in the
introduction hereof.
1.1.28 "Closing" has the meaning set forth in Section 2.5
hereof.
1.1.29 "Closing Date" has the meaning set forth in Section 2.5
hereof.
1.1.30 "Closing Statement of Net Assets" has the meaning set
forth in Section 2.6.4(a) hereof.
1.1.31 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.32 Intentionally Omitted.
1.1.33 "Competing Transaction" has the meaning set forth in
Section 5.2.
1.1.34 "Contracts" has the meaning set forth in Section
1.1.1(g) hereof.
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Arizona
1.1.35 "Control" with respect to any Person means the
ownership, directly or indirectly, of at least a majority of the voting power of
each class of capital stock of such Person entitled to vote in the election of
directors of such Person generally.
1.1.36 "Damages" has the meaning set forth in Section 7.4.1
hereof.
1.1.37 "Disclosure Schedules" means the Schedules referenced
in Articles 3, 4 and 5 of this Agreement, as amended or supplemented pursuant to
Section 5.3.
1.1.38 "Dispute" has the meaning set forth in Section 8.6.
1.1.39 "Employees" has the meaning set forth in Section 5.9.1
hereof.
1.1.40 "Environmental Laws" has the meaning set forth in
Section 3.8 hereof.
1.1.41 "Equipment and Other Tangible Personal Property" has
the meaning set forth in Section 1.1.1(b) hereof.
1.1.42 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.1.43 "ERISA Affiliate" means (a) any corporation included
with any of the Seller Parties in a controlled group of corporations within the
meaning of Section 414(b) of the Code; (b) any trade or business (whether or not
incorporated) which is under common control with any of the Seller Parties
within the meaning of Section 414 of the Code; any member of an affiliated
service group of which any of the Seller Parties is a member within the meaning
of Section 414(m) of the Code; or (d) any other person or entity treated as an
affiliate of any of the Seller Parties under Section 414(o) of the Code.
1.1.44 "Excluded Assets" has the meaning set forth in Section
2.2 hereof.
1.1.45 "Financial Statements" has the meaning set forth in
Section 3.4 hereof.
1.1.46 "FIRPTA Affidavit" has the meaning set forth in Section
2.7.1 hereof.
1.1.47 "Former Employees" means all salaried and hourly
employees once employed by Seller or any of its Affiliates, but who are no
longer so employed on the Closing Date.
1.1.48 "FTC" has the meaning set forth in Section 5.5 hereof.
1.1.49 "GAAP" has the meaning set forth in Section 3.4 hereof.
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1.1.50 "Hazardous Substance" has the meaning set forth in
Section 3.8 hereof.
1.1.51 "HSR Act" has the meaning set forth in Section 3.9
hereof.
1.1.52 "IDRB Documents" shall mean the Loan Agreements, the
Tax Regulatory Agreements, the Project Tax Certificates, and the other Contracts
related thereto to which Citizens is a party and which are listed on Schedule
1.1.52.
1.1.53 "IDRB Financings" shall mean the indebtedness arising
under the Loan Agreements included among the IDRB Documents.
1.1.54 "Indemnified Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.55 "Indemnifying Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.56 "Intellectual Property" means the trademarks, patents,
trade names and copyrights and applications therefor, inventions, trade secrets,
and confidential business information (including know-how, formulas, water
filtration, purification and pumping processes and techniques, technical data,
designs, drawings, customer and supplier lists, and business and marketing plans
and proposals), all computer software (including data and related documentation
and object and source codes), whether in magnetic format or hard copy, and
tangible embodiments thereof (in whatever form or medium) of Seller, in each
case, utilized exclusively in the Business.
1.1.57 "Interim Statement of Net Assets" means the Citizens
Water Resources Statement of Net Assets - Arizona, June 30, 1999, which is
attached hereto as Schedule 3.4.
1.1.58 "Interim Statement of Net Assets Date" means June 30,
1999.
1.1.59 "IRS" has the meaning set forth in Section 3.16.2
hereof.
1.1.60 "Lien" means any lien, charge, claim, pledge, security
interest, conditional sale agreement or other title retention agreement, lease,
mortgage, security agreement, right of first refusal, option, restriction,
tenancy, license, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction).
1.1.61 "Material Adverse Effect" means a change or effect (or
series of related changes or effects) which has or is reasonably likely to have
a material adverse change in or effect upon the business, assets, condition
(financial or otherwise), or results of operations of the Business or the
Acquired Assets, taken as a whole and taken together with the businesses and
assets
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being acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements. For purpose of this Agreement, an occurrence or condition shall not
constitute a Material Adverse Effect (a) if it arises from general business,
economic or financial market conditions, from conditions generally effecting the
industries in which Seller competes, or from the transactions contemplated by
this Agreement, or (b) solely with respect to matters arising prior to Closing,
to the extent that either (i) Seller realizes the benefit of insurance
maintained by Citizens on or prior to the Closing Date and Buyer receives the
cash proceeds of such insurance to the extent required by Section 1.1.1(k), or
(ii) Seller arranges for Buyer to recover payments in respect of such occurrence
or condition from any other source (whether in a lump sum or stream of
payments), it being understood and agreed that a Material Adverse Effect may
have occurred irrespective of such insurance recovery if the occurrence or
condition giving rise to such recovery also causes a non-monetary material
adverse change in or effect upon the Business or the Acquired Assets, taken as a
whole and taken together with the businesses and assets being acquired by Buyer
or Affiliates of Buyer pursuant to the Related Purchase Agreements.
1.1.62 "Mortgage Indenture" means Indenture of Mortgage and
Deed of Trust between BNY Western Trust Company (successor in interest to ▇▇▇▇▇
Fargo Bank, N.A.) and First Interstate Bank of California (as successor trustee
to Marine Midland, N.A., formerly the Marine Midland Trust Company of New York).
1.1.63 "OSHA" has the meaning set forth in Section 3.7.1
hereof.
1.1.64 "PCBs" has the meaning set forth in Section 3.8.6
hereof.
1.1.65 "Permits" has the meaning set forth in Section 1.1.1(h)
hereof.
1.1.66 "Permitted Exceptions" has the meaning set forth in
Section 3.10 hereof; provided, however, that from and after the Closing,
Permitted Exceptions shall not include any Lien arising under or resulting from
the Mortgage Indenture.
1.1.67 "Person" means an individual, a corporation, a
partnership, an association, an Authority, a trustor other entity or
organization.
1.1.68 "Pre-Existing Conditions" has the meaning set forth in
Section 2.3.1(d).
1.1.69 "Prime Rate" means the rate per annum announced from
time to time during the reference period by Citibank N.A. as its United States
prime, reference or base rate for commercial loans.
1.1.70 "PUC" has the meaning set forth in Section 5.5 hereof.
1.1.71 "Purchase Price" has the meaning set forth in Section
2.6.1 hereof.
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1.1.72 "Real Estate" has the meaning set forth in Section
1.1.1(a) hereof.
1.1.73 "Recovery" has the meaning set forth in Section
7.4.2(l) hereof.
1.1.74 "Related Purchase Agreements" as the meaning set forth
in Section 6.1.7 hereof.
1.1.75 "Release" or "Released" has the meaning set forth in
Section 3.8 hereof.
1.1.76 "Remedial Action" has the meaning set forth in Section
3.8 hereof.
1.1.77 "Retained IDRB Indebtedness" means the indebtedness of
the Seller owing to the issuers of the Bonds and arising under the Loan
Agreements included among the IDRB Documents but only to the extent not included
in the Assumed Indebtedness.
1.1.78 "Retained Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.79 "Review Period" has the meaning set forth in Section
2.6.4(b) hereof.
1.1.80 "SEC" means the U.S. Securities and Exchange
Commission.
1.1.81 "Securities Filings" has the meaning set forth in
Section 5.8.2 hereof.
1.1.82 "Seller" and "Seller Parties" have the respective
meaning set forth in the introduction hereof.
1.1.83 "Seller's Accountants" means KPMG LLP or any other firm
of independent public accountants hereafter designated by Seller for purposes of
this Agreement.
1.1.84 "Seller's Adjusted Amount" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.85 "Seller's Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.86 "Seller's 401(k) Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.87 "Specified Liabilities" has the meaning set forth in
Section 7.4.2(f) hereof.
1.1.88 "Taxes" means any federal, state, local and foreign
income, payroll, withholding, excise, sales, use, personal property, use and
occupancy, business and occupation, mercantile, real estate, gross receipts,
license, employment, severance, stamp, premium, windfall
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Arizona
profits, social security (or similar unemployment), disability, transfer,
registration, value added, alternative, or add-on minimum, estimated, or capital
stock and franchise and other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not.
1.1.89 "Third Accounting Firm" has the meaning set forth in
Section 2.6.4(b) hereof.
1.1.90 "Threshold Amount" has the meaning set forth in Section
7.4.2(e) hereof.
1.1.91 "Third Party Claim" has the meaning set forth in
Section 7.4(b)(i) hereof.
1.1.92 "Transferred Accounts" has the meaning set forth in
Section 5.11.2 hereof.
1.1.93 "Transaction Documents" has the meaning set forth in
Section 3.2 hereof.
1.1.94 "Transferred Employees" has the meaning set forth in
Section 5.9.2 hereof.
1.1.95 "Union Employees" has the meaning set forth in Section
5.9.1 hereof.
1.1.96 "VEBAs" has the meaning set forth in Section 5.12
hereof.
1.1.97 "WARN Act" means the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. section 2102- 2109, as amended.
ARTICLE 2
THE TRANSACTION
2.1 Sale and Purchase of Assets. Subject to the terms and conditions
of this Agreement, at the Closing referred to in Section 2.5 below, Citizens
shall, and shall cause the other Seller Parties to, sell, assign, transfer,
deliver and convey to Buyer, and Parent shall cause Buyer to purchase, the
Acquired Assets for the Purchase Price specified in Section 2.6.
2.2 Excluded Assets. The following assets of Seller shall be
excluded from the Acquired Assets (the "Excluded Assets"):
2.2.1. assets of the Seller used in both the Business and in
Citizens' gas, electric or communications businesses, the material items of
which are described on Schedule 2.2.12;
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Arizona
2.2.2. cash and cash equivalents in transit, in hand or in
bank accounts.
2.2.3. except as otherwise set forth herein, assets
attributable or related to any Benefit Plan;
2.2.4. the stock record and minute books of Seller;
2.2.5.Acquired Assets disposed of by Seller after the date of
this Agreement to the extent such dispositions are not prohibited by this
Agreement;
2.2.6. except to the extent set forth in Sections 2.9, rights
to refunds of Taxes payable with respect to the Business, assets, properties or
operations of any of the Seller Parties or any member of any affiliated group of
which any of them is a member, and which are treated as Retained Liabilities
under Section 2.3.3(b) below.
2.2.7. customer and other deposits held in Seller's accounts;
2.2.8. accounts owing by and among Seller and its Affiliates;
2.2.9. notes receivable and other receivables (other than note
and accounts receivable attributable exclusively to the Business);
2.2.10. all deferred tax assets or collectibles;
2.2.11. duplicate copies of all books and records transferred
to Buyer; and
2.2.12. those certain items listed on Schedule 2.2.12.
2.3 Assumption of Certain Liabilities.
2.3.1.Buyer shall not assume any liabilities of Citizens or
Seller or any of their Affiliates, except that Buyer shall assume the following
specific liabilities and obligations:
(a) the obligations and liabilities set forth in
Sections 5.9, 5.10, 5.11 and 5.12 hereof;
(b) except as set forth in Section 2.3.3(b), all
liabilities and obligations of Seller in respect of the Contracts and Permits
assigned or transferred to Buyer pursuant to this Agreement in accordance with
the respective terms thereof, except that Buyer shall not assume any liabilities
or obligations for any breach or default by, or payment obligations of, Seller
under such Contracts and Permits occurring or arising or accruing on or prior to
the Closing Date;
(c) the Assumed Indebtedness and the Buyer's IDRB
Obligations;
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Arizona
(d) any liability, obligation or responsibility of
Seller for conditions at the Real Estate, whether based on statutory or common
law, now or hereafter in effect, known or unknown, contingent or actual,
relating to or arising from pollution, contamination or protection of the
environment, human health or safety or natural resources or relating to or
arising from the presence or Release or threat of Release of Hazardous
Substances into the environment at the Real Estate or into or from any building,
structure, pipeline or other facility at the Real Estate, or from violation of
any law relating to the foregoing, including without limitation, any CERCLA or
similar liability under any federal or state law or regulation, except to the
extent Buyer has given written notice of a claim for indemnification pursuant to
Sections 7.3 and 7.4 hereof prior to the expiration of the claims period set
forth in Section 7.3.2(a) or (b) (and if Buyer has given written notice prior to
the expiration of such claims period, to the extent that such claim is not
entitled to indemnification under Sections 7.3 and 7.4) (the foregoing, the
"Pre-Existing Conditions");
(e) all liabilities and obligations of Seller related to
unperformed service obligations, easement and right-of-way relocation
obligations, and construction work in progress, and all engineering and
construction required to complete scheduled construction and other capital
projects for the Business, in each case relating to the Business 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, or payment obligations
of, Seller under such Contracts and Permits occurring or arising or accruing on
or prior to the Closing Date;
(f) liability for accrued but unused vacation pay for
the Transferred Employees to the extent provided in Section 5.9.2;
(g) any liability, obligation or responsibility relating
to customer deposits held by Seller on the Closing Date and relating to the
Business; and
(h) all liabilities and obligations imposed on Buyer by
any PUC in connection with the operation of the Business or the ownership of the
Acquired Assets, including with respect to any liability of the types that
appear as "Accrued Liabilities" and "Non-Current Liabilities" on the financial
statements of Seller.
2.3.2.Any liabilities or obligations which are assumed by
Buyer pursuant to Section 2.3.1 above are hereinafter referred to as the
"Assumed Liabilities. " At the Closing, Parent shall cause Buyer to execute and
deliver to Seller an assumption agreement, in substantially the form of the
Assumption Agreement attached hereto as Exhibit A (the "Assumption Agreement"),
pursuant to which Buyer shall assume the Assumed Liabilities. Each of Parent and
Buyer hereby irrevocably and unconditionally waives and releases the Seller
Parties from all Assumed Liabilities and all liabilities or obligations
exclusively relating to the Business or the Acquired Assets to the extent
arising from events or occurrences after the Closing or to the extent otherwise
relating to the period after the Closing, including any liabilities created or
which arise by statute or common law, including CERCLA (it being understood that
this shall not constitute a waiver and release of any
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Arizona
claims arising out of the contractual relationships and indemnification
arrangements between Buyer and Seller).
2.3.3. Buyer shall not assume any liabilities, commitments or
obligations (contingent or absolute and whether or not determinable as of the
Closing) of any of the Seller Parties or any of their Affiliates except for the
Assumed Liabilities as specifically and expressly provided for above, whether
such liabilities or obligations relate to payment, performance or otherwise, and
all liabilities, commitments or obligations not expressly transferred to Buyer
hereunder as Assumed Liabilities are being retained by the Seller Parties, (the
"Retained Liabilities"). Each of the Seller Parties hereby irrevocably and
unconditionally waives and releases Buyer from all Retained Liabilities
including any liabilities created or which arise by statute or common law,
including CERCLA (it being understood that this shall not constitute a waiver
and release of any claims arising out of the contractual relationships and
indemnification arrangements between Buyer and Seller).
Without limitation to the foregoing, all of the following shall be
considered Retained Liabilities and not Assumed Liabilities (except as specified
below) for the purposes of this Agreement:
(a) any product liability, toxic tort or similar claim
for injury to person or property, regardless of when made or asserted, to the
extent that it arises out of or is based upon any express or implied
representation, warranty, agreement or guarantee made by any of the Seller
Parties or any of their Affiliates prior to Closing, or alleged to have been
made by any of such Persons, or to the extent that it is imposed or asserted to
be imposed by operation of law, in connection with any service performed or
product distributed or sold by or on behalf of any of the Seller Parties or any
of their Affiliates prior to Closing, including any claim referred to above in
this Section 2.3.3(a) relating to water quality standards, any claim relating to
any product delivered in connection with the performance of services provided by
Seller and any claim seeking recovery for consequential damages, lost revenue or
income;
(b) all refund obligations relating to the advances
existing on the Closing Date for construction of facilities relating to the
Business;
(c) except to the extent set forth in Section 2.9, any
federal, state, foreign or local income or other Tax payable with respect to the
business, assets, properties or operations of any of the Seller Parties or any
member of any affiliated group of which any of them is a member.
(d) any liability or obligation associated with or in
connection with any common plant assets of Seller (other than the liabilities
and obligations exclusively related to any common plant assets included among
the Acquired Assets);
(e) except as provided in Section 2.3.1 above, any
liability or obligation with respect to compensation or employee benefits of any
nature owed to any employees, agents or independent contractors of any of the
Seller Parties or any of their Affiliates, whether or
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Arizona
not employed by Buyer after the Closing, that arises out of or relates to events
or conditions to the extent occurring before the Closing Date;
(f) except to the extent set forth in Section 2.3.1(d),
any liability, obligation or responsibility of any of the Seller Parties, or any
of their Affiliates or predecessors, whether based on statutory or common law,
but only as any such law is interpreted, amended and in effect on the Closing
Date, known or unknown, contingent or actual, relating to or arising from
pollution, contamination or protection of the environment, human health or
safety or natural resources or relating to or arising from the presence or
Release or threat of Release of Hazardous Substances into the environment or
into or from any building, structure, pipeline or other facility or relating to
or arising from the generation, use, storage, treatment, disposal, transport or
other handling of Hazardous Substances or sale or product containing Hazardous
Substances from violation of any law relating to the foregoing (but only as such
law is interpreted, amended and in effect on the Closing Date) including without
limitation, any (A) CERCLA or similar liability under any federal or state law
or regulation as interpreted, amended and in effect on the Closing Date or (B)
any such liability associated with businesses or assets of the Seller Parties
other than the Business or the Acquired Assets;
(g) liabilities and obligations relating to the Business
to the extent arising prior to Closing (unless otherwise constituting Assumed
Liabilities) arising by operation of law under any common law or statutory
doctrine (including successor liability or de facto merger);
(h) any obligation or liability arising under any
contract, commitment, instrument or agreement (1) except for Buyer's IDRB
Obligations and subject to the penultimate sentence of Section 2.4, that is not
transferred to Buyer as part of the Acquired Assets, or (2) that relates to any
breach or default (or to the extent that it relates to an event which would,
with the passing of time or the giving of notice, or both, constitute a default)
under any Contract, instrument or agreement or to any services to be provided by
Seller under any such Contract, instrument or agreement to the extent that such
services were performed or were required to have been performed on or prior to
the Closing Date;
(i) any liability or obligation in respect of the
Excluded Assets;
(j) any liability or obligation of any of the Seller
Parties or any of their Affiliates existing as a result of any act, failure to
act or other state of facts or occurrence which constitutes a breach or
violation of any of Seller's representations, warranties, covenants or
agreements contained in this Agreement, except to the extent set forth in
Section 7.4; or
(k) except for the Assumed Liabilities as specifically
and expressly set forth herein, any liability to the extent arising out of or
relating to the ownership or operation of the Acquired Assets or the Business
prior to the Closing Date (including any predecessor operations), any claims,
obligations or litigation to the extent arising out of or relating to events or
conditions occurring before the Closing Date, and any liability associated with
any business other than the Business.
14
Arizona
2.4 Consent of Third Parties. On the Closing Date, Citizens shall
cause Seller to assign to Buyer, and Parent shall cause Buyer to assume, the
Contracts and the Permits which are to be transferred to Buyer as provided in
this Agreement by means of the Assumption Agreement. To the extent that the
assignment of all or any portion of any Contract or Permit shall require the
consent (or result in a breach or violation thereof) of the other party thereto
or any other third party, and such consent shall not be obtained prior to
Closing, this Agreement shall not constitute an agreement to assign any such
Contract or Permit included in the Acquired Assets. In order, however, to
provide Buyer the full realization and value of every Contract of the character
described in the immediately preceding sentence, Seller agrees that on and after
the Closing, it will, at the request and under the direction of Buyer, in the
name of Seller or otherwise as Buyer shall specify, take all reasonable actions
(including without limitation the appointment of Buyer as attorney-in-fact for
Seller to proceed at Buyer's sole cost and expense) and do or cause to be done
all such things as shall in the reasonable opinion of Buyer be necessary (a) to
assure that the rights of Seller or its Affiliates under such Contracts shall be
preserved for the benefit of Buyer and (b) to facilitate receipt of the
consideration to be received by Seller or its Affiliates in and under every such
Contract. To the extent that Buyer does receive the benefits of any such
Contract pursuant to the preceding sentence, such Contract shall be a Contract
"assigned or transferred to Buyer pursuant to this Agreement" within the meaning
of Section 2.3.1(b) hereof. Nothing in this Section 2.4 shall in any way
diminish the obligations of Seller to obtain consents and approvals under this
Agreement.
2.5 Closing. Subject to the terms and conditions of this Agreement,
the closing of the sale and purchase of the Acquired Assets (the "Closing")
shall take place at 10 a.m., East Coast time, on a date mutually satisfactory to
Buyer and Seller which is no later than the fifth Business Day after
satisfaction (or waiver) of the conditions to Closing set forth in Sections 6.1
and 6.2 hereof (other than those conditions which require the delivery of any
documents or the taking of other action, at the Closing) at the offices of
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇,
or on such other date and at such other time or place as may be mutually agreed
upon by the parties hereto (the "Closing Date"). Upon payment of the Initial
Cash Payment by Buyer and confirmed receipt thereof by Seller or the Escrow
Agent pursuant to Section 2.6.2 below, Seller shall operate the Business at the
direction of and under the control of Buyer. Notwithstanding the foregoing, the
Closing shall be deemed to be effective as of 11:59 p.m. on the Closing Date for
all purposes.
2.6 Purchase Price.
2.6.1. Purchase Price. Subject to the terms and conditions of
this Agreement, the aggregate purchase price be paid by Buyer for the purchase
of the Acquired Assets (the "Purchase Price") shall be: (i) $231,310,000 in cash
(the "Base Cash Purchase Price," the Base Cash Purchase Price as adjusted in
accordance with Section 2.6.3 and Section 2.6.5 is referred to as the "Initial
Cash Payment"), subject to adjustment pursuant to the provisions of this
Agreement (including Section 2.6.3, Section 2.6.4, Section 2.6.5 and Section 2.9
of this Agreement) and (ii) the assumption by Buyer of the Assumed Liabilities.
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Arizona
2.6.2. Payment of Initial Cash Payment. Subject to the terms
and conditions of this Agreement, the Initial Cash Payment shall be paid by
Buyer on the Closing Date by federal other wire transfer of immediately
available funds to the account designated by Seller in writing at least two (2)
Business Days prior to the Closing Date. 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 Initial Cash Payment to Buyer's
lead bank (the "Escrow Agent") in immediately available funds in U.S. dollars.
Upon receipt, the Escrow Agent shall invest the Initial Cash Payment in an
interest-bearing account mutually agreed upon by Seller and Buyer. At Closing,
Parent shall sign and deliver to Citizens a statement which confirms that the
Closing has occurred and which instructs the Escrow Agent to transfer to
Citizens the funds representing the Initial Cash Payment, plus an amount
representing the interest earned after the Closing Date until the date the funds
are transferred, to an account that Citizens shall designate at least two (2)
business days prior to the date the funds are required to be transferred
hereunder. The Escrow Agent shall refund the balance to Buyer. The fees and
expenses of Escrow Agent shall be paid by Buyer.
2.6.3. Estimated Closing Statement. At least five (5) business
days prior to the Closing Date, Citizens shall deliver to Parent and Buyer a
statement of net assets (the "Estimated Statement of Net Assets") reflecting its
good faith calculation of the Acquired Assets of the Business as of the last day
of the latest calendar month for which financial statements of Seller are
available (the "Estimated Adjusted Net Assets"). The Estimated Statement of Net
Assets shall be prepared in the same manner and utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets (excluding for this purpose any change required by GAAP
or any Authority since June 30, 1999). The Base Cash Purchase Price shall be
increased or decreased on a dollar for dollar basis by the amount, if any, by
which the Estimated Adjusted Net Assets is greater than or less than
$160,180,848 (such increase or decrease, as the case may be, is referred to
herein as the "Estimated Net Asset Adjustment").
2.6.4 Post-Closing Adjustment to Purchase Price.
(a) Within 90 days after the Closing, Citizens shall
prepare and deliver to Parent and Buyer a Statement of Net Assets (the "Closing
Statement of Net Assets") which reflects the Acquired Assets as of 11:59 p.m. on
the Closing Date, based on actual financial performance and calculated in the
same manner, utilizing the same accounting principles, policies and methods
utilized in preparing the Interim Statement of Net Assets (excluding for this
purpose any change required by GAAP or any Authority since June 30, 1999),
together with (A) an audit report of Seller's Accountants stating that the
Closing Statement of Net Assets has been prepared utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets and (B) a calculation of Citizens' determination of the
amount of increase or decrease in the amount of the Acquired Assets of the
Business from the Interim Statement of Net Assets Date to the Closing Date which
is derived from the Closing Statement of Net Assets ("Seller's Adjustment
Amount"). The Closing Statement of Net Assets shall not give effect to any
purchase accounting treatment arising from Buyer's purchase of the Acquired
Assets. Buyer shall pay the fees and expenses of Seller's Accountants incurred
in connection with this Section 2.6.4.
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Arizona
Buyer agrees to cooperate, and agrees to cause Buyer's Accountants to cooperate,
with Citizens and Seller's Accountants in connection with the preparation of the
Closing Statement of Net Assets, and related information, and shall provide to
Citizens and Seller's Accountants such books, records and information as may be
reasonably requested from time to time, including the work papers of Buyer's
Accountants. Citizens will give Buyer and its representatives access during the
normal business hours of Citizens to the personnel, books and records of
Citizens and the work papers of Seller's Accountants to assist Buyer in the
review of the Closing Statement of Net Assets and related matters. Buyer agrees
that, following the Closing through the date on which the Closing Statement of
Net Assets is delivered, it will not take any actions with respect to any
accounting books, records, policies or procedures on which the Closing Statement
of Net Assets is to be based that would make it impossible or impracticable to
calculate the Acquired Assets in the manner and utilizing the methods required
hereby. Without limiting the generality of the foregoing, no changes shall be
made in any reserve or other account existing as of the date of the Interim
Statement of Net Assets except in the ordinary course or as a result of events
occurring after the date of the Interim Statement of Net Assets and, in such
event, only in a manner consistent with past practices of Seller.
(b) Parent or Buyer may dispute any amounts reflected on
the Closing Statement of Net Assets, in the Seller's Adjustment Amount or in the
Statement of Certain Assumed Liabilities, provided, however, that Buyer shall
notify Citizens in writing of each disputed amount, and specify the amount
thereof in dispute and the basis of such dispute, within 30 days of the Buyer's
receipt of the Closing Statement of Net Assets and the Seller's Adjustment
Amount (such 30 day period hereinafter referred to as the "Review Period"). In
the event of a dispute with respect to the Closing Statement of Net Assets, the
Seller's Adjustment Amount or the Statement of Certain Assumed Liabilities,
Buyer and Seller shall attempt to reconcile their differences and any resolution
by them as to any disputed amounts shall be final, binding and conclusive on the
parties. If Buyer and Seller are unable to reach a resolution of such
differences within 30 days of receipt of Buyer's written notice of dispute to
Seller, Buyer and Seller shall submit the amounts remaining in dispute (together
with any amounts remaining in dispute pursuant to Section 2.6.4(b) of each of
the Related Purchase Agreements) for resolution to an independent accountant
firm of national reputation mutually appointed by Seller and Buyer (such
independent accounting firm being herein referred to as the "Third Accounting
Firm"), which shall be requested to determine and report to the parties, within
30 days after such submission, upon such remaining disputed amounts, and such
report shall be final, binding and conclusive on the parties hereto with respect
to the amounts disputed. The fees and disbursements of the Third Accounting Firm
shall be allocated between Buyer and the Seller Parties so that the Seller
Parties' share of such fees and disbursements shall be in the same proportion
that the aggregate amount of such remaining disputed amounts so submitted by
Buyer to the Third Accounting Firm that is unsuccessfully disputed by Buyer (as
finally determined by the Third Accounting Firm) bears to the total amount of
such remaining disputed amounts so submitted by Buyer to the Third Accounting
Firm. Buyer shall pay the fees and expenses of Buyer's Accountants incurred in
connection with this Section 2.6.4(b). Seller's Adjustment Amount, if there are
no disputes with respect thereto, or Seller's Adjustment Amount as adjusted
after the resolution of all disputes with respect thereto in accordance
herewith, shall be referred to as the "Final Net Asset Adjustment."
17
Arizona
(c) If the Base Cash Purchase Price plus (or minus, if
negative) the Final Net Asset Adjustment exceeds the Initial Cash Payment, then
within five (5) business days after final determination thereof Buyer shall pay
Seller the amount of such excess together with interest thereon for the period
commencing on the Closing Date through the date of payment calculated at the
Prime Rate in cash by federal or other wire transfer of immediately available
funds, or certified or bank cashier's check. If the Initial Cash Payment exceeds
the sum of the Base Cash Purchase Price plus (or minus, if negative) the Final
Net Asset Adjustment, then within five (5) business days after final
determination thereof Seller shall pay Buyer the amount of such excess together
with interest thereon for the period commencing on the Closing Date through the
date of payment calculated at the Prime Rate in cash by federal or other wire
transfer of immediately available funds, or certified or bank cashier's check.
2.6.5. Adjustment for Certain Liabilities. Concurrent with the
delivery of the Estimated Statement of Net Assets, Citizens also shall deliver
to Parent and Buyer a statement reflecting (i) the customer and other deposits
held by Seller on the Closing Date and relating to the Business, (ii) the total
amount of the Assumed Indebtedness that will be outstanding immediately after
the Closing Date, (iii) the items specified in Section 2.9 to the extent set
forth therein, and (iv) without duplications of any amount included in clause
(i) above and except as provided in Section 5.15, any payments received by
Seller under the Contracts and Permits for obligations not performed as of the
Closing Date (the "Statement of Certain Assumed Liabilities"). The Statement of
Certain Assumed Liabilities shall reflect Citizens' good faith calculation of
such liabilities as of the Closing Date. The Base Cash Purchase Price shall be
decreased by the net amount set forth in the Statement of Certain Assumed
Liabilities. Concurrent with the delivery of the Closing Statement of Net
Assets, Citizens also shall deliver to Parent a statement showing any
adjustments to the Statement of Certain Assumed Liabilities and the Base Cash
Purchase Price shall be further adjusted to give effect to any such adjustments
to the Statement of Certain Assumed Liabilities.
2.7 Deliveries and Proceedings at Closing. Subject to the terms and
conditions of this Agreement, at the Closing:
2.7.1. Deliveries to Buyer. Citizens shall, and shall cause
Seller to deliver to Buyer:
(a) bills of sale and instruments of assignment to the
Acquired Assets, duly executed by Seller, substantially in the form of Exhibit B
hereto and;
(b) the consents to transfer, of all transferable or
assignable Contracts, Intellectual Property, Permits (including Environmental
Permits), to the extent specifically required hereunder;
(c) title certificates to any motor vehicles included in
the Acquired Assets, duly executed by Seller (together with any other transfer
forms necessary to transfer title to such vehicles);
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Arizona
(d) special warranty deeds of conveyance with respect to
the parcels of Real Estate owned in fee simple by Seller (or, with respect to
any such parcel which was acquired by Seller (or its predecessor in interest, in
cases involving mergers) by deed without covenant or warranty of title, a quit
claim deed without covenant or warranty of title) to Buyer, duly executed and
acknowledged by Seller and in recordable form;
(e) the Foreign Investment in Real Property Tax Act
Certification and Affidavit for each parcel of Real Estate, duly executed by the
Seller Parties (the "FIRPTA Affidavit");
(f) the certificates, opinions and other documents
required to be delivered by the Seller Parties pursuant to Section 6.1 hereof
and certified resolutions evidencing the authority of the Seller Parties as set
forth in Section 3.2 hereof;
(g) all agreements and other documents required by this
Agreement;
(h) a receipt for the payment of the Initial Cash
Payment duly executed by Citizens;
(i) all such other instruments of conveyance as shall,
in the reasonable opinion of Buyer and its counsel, be necessary to transfer to
Buyer the Acquired Assets in accordance with this Agreement and where necessary
or desirable, in recordable form; and
(j) if requested by Buyer at least sixty (60) days
before Closing, a lease of that portion of Citizens' Bullhead City, Arizona
office building used exclusively by Seller in connection with the Business, on
commercially reasonable terms reasonably acceptable to Buyer and Seller.
2.7.2. Deliveries By Buyer to the Seller Parties. Parent
shall, and shall cause Buyer to deliver to the Seller Parties:
(a) wire transfer of immediately available funds in an
amount equal to the Initial Cash Payment;
(b) the Assumption Agreement, duly executed by Buyer;
(c) the certificates, opinions and other documents
required to be delivered by Buyer pursuant to Section 6.2 hereof;
(d) all of the instruments contemplated by Section
5.24(a) to the extent not previously executed and delivered by Parent; and
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Arizona
(e) all such other instruments of assumption as shall,
in the reasonable opinion of Seller and its counsel, be necessary for Parent and
Buyer to assume the Assumed Liabilities in accordance with this Agreement.
2.8 Allocation of Consideration. Buyer and Seller shall use their
good faith efforts to agree upon the allocation (the "Allocation") of the
Purchase Price, the Assumed Liabilities and other relevant items (including, for
example, adjustments to the Purchase Price) to the individual assets or classes
of assets within the meaning of Section 1060 of the Code. If Buyer and Seller
agree to such Allocation on or before ninety (90) days after the Closing Date,
Buyer and Seller covenant and agree that (i) the values assigned to the assets
by the parties' mutual agreement shall be conclusive and final for all purposes,
and (ii) neither Buyer nor Seller will take any position before any Authority or
in any proceeding that is in any way inconsistent with such Allocation.
Notwithstanding the foregoing, if Buyer and Seller cannot agree to an Allocation
on or before ninety (90) days after the Closing Date, Buyer and Seller covenant
and agree to file and to cause their respective Affiliates to file, all Tax
returns and schedules thereto (including, for example, amended returns, claims
for refund, and those returns and forms required under Section 1060 of the Code
and any Treasury regulations promulgated thereunder) consistent with each of
Buyer and Seller's good faith Allocations, unless otherwise required because of
a change in any legal requirement.
2.9 Prorations. The parties hereto agree that the following expenses
shall be calculated and pro rated as of the Closing Date, with Seller
responsible for such expenses and to receive the benefit for the same for the
period through and including the Closing Date, and Buyer to be responsible for
and to receive the benefit of the same after the Closing Date:
2.9.1. personal and real property taxes (on the basis on which
the same were assessed and paid) and sales, occupation and use taxes, in each
case, to the extent relating to the Business and except as otherwise provided in
Section 7.1;
2.9.2. electric, fuel, gas, telephone, sewer and utility
charges, in each case, to the extent relating to the Business;
2.9.3. rentals and other charges under Contracts to be assumed
by Buyer pursuant to Section 2.3 (except to the extent provided in Section
2.3.3(h)); and
2.9.4. charges under maintenance and service contracts and
other Contracts (except to the extent provided in Section 2.3.3(h)), and fees
under Permits to be transferred to Buyer as part of the Acquired Assets;
2.9.5. water, sewer and other similar types of taxes, and
installments on special benefit assessments; and
2.9.6. payroll expenses, payroll taxes, reimbursable employee
business expenses and the financial cost of the accrued vacation of each
Transferred Employee.
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Arizona
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Each of the Seller Parties jointly and severally represent and warrant to
Parent and Buyer as follows:
3.1 Qualification; No Interest in Other Entities.
3.1.1 Each of the Seller Parties is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to own, lease
and operate the Acquired Assets and the Business as presently being conducted.
Each of the Seller Parties is qualified to do business and is in good standing
as a foreign corporation in all jurisdictions wherein the nature of the business
conducted by it or such Seller Party's ownership or use of assets and properties
make such qualification necessary, except such failures to be qualified or to be
in good standing, if any, which when taken together with all such other failures
of the Seller Parties do not have a Material Adverse Effect.
3.1.2. No shares of any corporation or any ownership or other
investment interest, either of record, beneficially or equitably, in any Person
are included in the Acquired Assets.
3.2 Authorization and Enforceability. Each of the Seller Parties has
full corporate power and authority to execute, deliver and perform this
Agreement and all other agreements and instruments to be executed by them in
connection herewith (such other agreements and instruments being hereinafter
referred to collectively as the "Transaction Documents"). The execution,
delivery and performance by each of the Seller Parties of this Agreement and the
Transaction Documents to which such Seller Party is a party have been duly
authorized by all necessary corporate action on the part of each of them. This
Agreement has been duly executed and delivered by each of the Seller Parties,
and as of the Closing Date the other Transaction Documents will be duly executed
and delivered by the Seller Parties. This Agreement is a legal, valid and
binding obligation of each Seller Party, enforceable against them in accordance
with its terms except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court. As of the Closing
Date, each of the other Transaction Documents to which each of the Seller
Parties is a party will be duly executed and delivered by each of the Seller
Parties and will constitute the legal, valid and binding obligations of each of
the Seller Parties, enforceable against them in accordance with its respective
terms, except as such enforceability may be limited by applicable laws relating
to bankruptcy, insolvency, fraudulent conveyance, reorganization or affecting
creditors' rights generally and except to the extent that injunctive or other
equitable relief is within the discretion of a court.
3.3 No Violation of Laws or Agreements. The execution, delivery, and
performance of this Agreement and the Transaction Documents by each of the
Seller Parties do not,
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Arizona
and the consummation of the transactions contemplated by this Agreement and the
Transaction Documents by the Seller Parties, will not: (a) contravene any
provision of the Restated Articles of Incorporation or Bylaws of Citizens or the
Articles of Incorporation or Bylaws of the other Seller Parties; or (b) except
as set forth on Schedule 3.3, violate, conflict with, result in a breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or result in or permit
the termination, modification, acceleration, or cancellation of, or result in
the creation or imposition of any Lien of any nature whatsoever upon any of the
Acquired Assets or give to others any interests or rights therein under (i) any
indenture, mortgage, loan or credit agreement, license, instrument, lease,
contract, plan, permit or other agreement or commitment, oral or written, to
which any of the Seller Parties is a party, or by which the Business or any of
the Acquired Assets may be bound or affected, except for such violations,
conflicts, breaches, terminations, modifications, accelerations, cancellations,
Liens, interests or rights which, individually and in the aggregate, do not have
a Material Adverse Effect or will be cured, waived or terminated prior to the
Closing Date, or (ii) any judgment, injunction, writ, award, decree,
restriction, ruling, or order of any court, arbitrator or Authority or any
applicable constitution, law, ordinance, rule or regulation, to which any of the
Seller Parties is subject, other than those violations or conflicts which
individually and in the aggregate would not have a Material Adverse Effect.
3.4 Financial Statements. Citizens has previously delivered to Buyer
the statement of income of the Business (the "Income Statement") and the Interim
Statement of Net Assets contained in Schedule 3.4 (collectively, the "Financial
Statements"). The Income Statement (a) fairly presents in all material respects
the results of operations of the Business in accordance with generally accepted
accounting principles ("GAAP") consistently applied except for the omission of
full footnotes to the Income Statement and (b) has in all material respects been
derived from the books and records of Seller and reflects the separation of the
operation associated with the Business from other operations of Citizens. The
Interim Statement of Net Assets (a) has in all material respects been derived
from the books and records of Seller and reflects the separation of the
operations associated with the Business from other operations of Citizens; (b)
fairly presents in all material respects the Acquired Assets as of the Interim
Statement of Net Assets Date; and (c) has in all material respects been prepared
in accordance with GAAP consistently applied except for the omission of full
footnotes to such Interim Statement of Net Assets. The financial statements
included in the Annual Report to each PUC for the year ended December 31, 1998,
were prepared in all material respects in accordance with the rules and
regulations of such PUC.
3.5 No Changes. Since the Interim Statement of Net Assets Date to
the date hereof, except as disclosed in Schedule 3.5, the Seller Parties have
conducted the Business as presently operated only in the ordinary course of
business consistent with past practice. Since the Interim Statement of Net
Assets Date, except as disclosed in Schedule 3.5, there has not been:
3.5.1 any Material Adverse Effect;
3.5.2 prior to the date of this Agreement, any change in the
salaries or other compensation payable or to become payable to, or any advance
(excluding advances for ordinary business expenses) or loan to, any Transferred
Employee, or material change or material addition
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Arizona
to, or material modification of, other benefits (including any bonus,
profit-sharing, pension or other plan in which any of the Transferred Employees
participate) to which any of the Transferred Employees may be entitled, or any
payments to any pension, retirement, profit-sharing, bonus or similar plan other
than in any such case (i) in the ordinary course consistent with past practice,
(ii) as required by law, or (iii) as required by any collective bargaining
agreement, if any;
3.5.3 any alteration in any material respect of the customary
practices with respect to the collection of accounts receivable of the Business
or the provision of discounts, rebates or allowances;
3.5.4 any disposition of or failure to keep in effect any
rights in, to or for the use of any Permit of the Business which individually or
in the aggregate would have a Material Adverse Effect;
3.5.5 any damage, destruction or loss affecting the Business
which individually or in the aggregate would have a Material Adverse Effect
whether or not covered by insurance;
3.5.6 prior to the date of this Agreement, any change by
Seller in its method of accounting or keeping its books of account or accounting
practices with respect to the Business except as required by GAAP and is set
forth on Schedule 3.5; or
3.5.7 prior to the date of this Agreement, any sale, transfer
or other disposition of any material assets, properties or rights of the
Business, except in the ordinary course of business consistent with past
practice.
3.6 Contracts. As of the date of this Agreement, Schedule 3.6
contains a list of all Contracts (other than (i) with respect to which the
Business' total annual liability or expense is less than (a) $250,000 per such
Contract and (b) $6,123,000 per all such Contracts (when taken together with
similar contracts omitted from Schedule 3.6 of the Related Purchase Agreements),
and (ii) Contracts that may be terminated by Seller, without penalty, on notice
of 90 days or less) except line extension agreements and similar agreements and
construction and design contracts. Seller has furnished to Buyer a correct and
complete copy of each written agreement listed in Schedule 3.6. Except as
disclosed on Schedule 3.6, with respect to each Contract, neither Seller nor, to
the Seller Parties' knowledge, any other party thereto, is in breach or default,
and to the Seller Parties' knowledge, no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the Contract, except in each case where
such breaches, terminations, modifications, accelerations or defaults,
individually or in the aggregate, do not have a Material Adverse Effect. Except
as set forth in Schedule 3.6, there are no disputes pending or to the best of
the Seller Parties' knowledge, threatened, under or in respect of any of the
Contracts, other than those that individually and in the aggregate do not have a
Material Adverse Effect.
3.7 Permits and Compliance With Laws Generally.
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3.7.1 Except as disclosed on Schedule 3.7, Seller possesses
and is in compliance with all Permits required to operate the Business as
presently operated and to own, lease or otherwise hold the Acquired Assets under
all applicable laws, rules, regulations, ordinances and codes, including
Environmental Laws (as defined below), except to the extent that any failure to
possess, or to comply with, any Permit, laws, rules, regulations or orders would
not, individually or in the aggregate, have a Material Adverse Effect. Except as
disclosed in Schedule 3.7, the Business is conducted by Seller in compliance
with all applicable laws (including the Occupational Safety and Health Act and
the rules and regulations thereunder ("OSHA"), zoning, building and similar laws
and Environmental Laws), rules, regulations, ordinances, codes, judgments and
orders, except for such failures to comply which do not individually or in the
aggregate have a Material Adverse Effect. Except as disclosed on Schedule 3.7,
all Permits of Seller relating to the operation of the Business are in full
force and effect, other than those the failure of which to be in full force and
effect would not individually or in the aggregate have a Material Adverse
Effect. There are no proceedings pending or, to the Seller Parties' knowledge,
threatened that seek the revocation, cancellation, suspension or any adverse
modification of any such Permits presently possessed by Seller other than those
revocations, cancellations, suspensions or modifications which do not
individually or in the aggregate have a Material Adverse Effect.
3.7.2 Except as set forth on Schedule 3.7, no outstanding
notice, citation, summons or order has been issued, no outstanding complaint has
been filed, no outstanding penalty has been assessed and no investigation or
review is pending or, to the knowledge of the Seller Parties, threatened, by any
Authority or other Person with respect to any alleged (i) violation by Seller or
any Affiliate of Seller relating to the Business of any law, ordinance, rule,
regulation, code or order of any Authority; or (ii) failure by Seller or any
Affiliate to have any Permit required in connection with the conduct of the
Business or otherwise applicable to the Business (including the Acquired
Assets), except, in each case, where such violations or failures, individually
or in the aggregate, would not have a Material Adverse Effect.
3.8 Environmental Matters. Except as set forth on Schedule 3.8
hereto, and with such exceptions as are not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect:
3.8.1 Seller has not disposed of or arranged for the disposal
of or Released any Hazardous Substances, other than in conformity with
Environmental Laws, at any Real Estate, or, in connection with the Business or
Acquired Assets, at any other facility, location, or other site.
3.8.2 Seller has not received any written notice or request
for information with respect to, and to the best of the Seller Parties'
knowledge, Seller has not been designated a potentially liable party for
Remedial Action, in connection with any Real Estate, or, as of the date hereof,
with respect to the Business or Acquired Assets, at any other facility,
location, or other site under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or comparable state statutes.
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Arizona
3.8.3 To the best of the Seller Parties' knowledge, except for
such use or storage of Hazardous Substances as is incidental to the conduct of
the Business, which use and storage is or has been in compliance with
Environmental Laws, and which use and storage has not caused any condition that
requires Remedial Action, no Real Estate has been used for the storage,
treatment, generation, processing, production or disposal of any Hazardous
Substances or as a landfill or other waste disposal site in violation of any
Environmental Law.
3.8.4 To the best of the Seller Parties' knowledge,
underground storage tanks are not, and have not in the past been, located on or
under any Real Estate.
3.8.5 There are no pending or unresolved claims against Seller
or the Business for investigatory costs, cleanup, removal, remedial or response
costs, or natural resource damages arising out of any Releases or threat of
Release of any Hazardous Substances at any Real Estate or, as of the date
hereof, with respect to the Business or the Acquired Assets or at any other
facility, location, or other site.
3.8.6 To the best of the Seller Parties' knowledge, no
polychlorinated biphenyls ("PCBs") or asbestos-containing materials are located
at or in any Real Estate in violation of Environmental Laws or which require
Remedial Action.
3.8.7 To the best of the Seller Parties' knowledge, no
Hazardous Substance managed or generated by or on behalf of Seller at the Real
Estate or in connection with the Business or Acquired Assets has come to be
located at any site that is listed or formally proposed for listing under
CERCLA, the Comprehensive Environmental Response, Compensation and Liability
Information System ("CERCLIS"), or any similar state list or that is the subject
of federal, state, or local enforcement actions or investigations.
3.8.8 The Seller Parties know of no facts or circumstances
related to environmental matters (i) in connection with the operation of the
Business or (ii) concerning the Real Estate, that are reasonably likely to
result in any material reduction in the quality or quantity of water available
for supply to the Seller Parties' customers.
3.8.9 The Seller Parties will within thirty (30) days of the
date hereof provide Buyer with copies of all written environmental audits or
investigations of which they are aware (after due inquiry) prepared for the Real
Estate or operations of the Business.
3.8.10 Except as set forth in Schedule 3.8.10 or Citizens'
Annual Report on Form 10-K for the year ended December 31, 1998:
(a) The Seller Parties (including for purposes of
Section 3.8.10(a) and (b), Affiliates and predecessors of the Seller Parties)
are and have been for the past three years in full compliance with all federal
and state primary drinking water standards;
(b) The Seller Parties are and have been for the past
three years in full compliance with all federal and state secondary drinking
water standards; and
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Arizona
(c) As to all outstanding violations of state or federal
drinking water standards, as of the date hereof, the Seller Parties have
completed or are in the process of completion in accordance with all applicable
deadlines, all actions required by Environmental Law or Authorities to correct
or otherwise respond to such violations.
3.8.11 Except as set forth in Schedule 3.8.11, none of the
Seller Parties will be required to place any notice or restriction relating to
the presence of Hazardous Substances in the deed to any Real Estate, or in any
written instrument accompanying this Agreement, and no Real Estate has such a
notice or restriction in its deed or any other written instrument relating to
the purchase, lease or rental of such property.
For the purposes of these Sections 3.7 and 3.8: (A) "Remedial Action" means all
actions to (x) clean up, remove, treat or in any other way respond to any
presence, Release or threat of Release of Hazardous Substances; (y) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Substances so it does not endanger or threaten to endanger public or employee
health or welfare or the environment; or (z) perform studies, investigations or
monitoring necessary or required to investigate the foregoing; (B)
"Environmental Laws" means any common law or federal, state or local law,
statutes, rule, regulation, ordinance, code, judgment or order relating to the
protection of the environment or human health and safety and includes, but is
not limited to, CERCLA (42 U.S.C. section 9601, et seq.), the Clean Water Act
(33 U.S.C. section 1251 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.), the Toxic Substances Control Act (15 U.S.C.
section 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. section 300f et
seq.) and the Oil Pollution Act of 1990 (33 U.S.C. section 2701 et seq.), each
as has been or may be interpreted or amended as of the Closing Date and the
regulations promulgated pursuant thereto and in effect as of the Closing Date;
(C) "Released" means released, spilled, leaked, discharged, disposed of, pumped,
poured, emitted, emptied, injected, leached, dumped or allowed to escape; and
(D) "Hazardous Substances" means hazardous or toxic or polluting substance or
waste or contaminant under or pursuant to any Environmental Law, including
petroleum products, PCBs and radioactive materials.
3.9 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by the Selling Parties
of this Agreement, the Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by the Seller Parties, including
without limitation in connection with the assignment of the Contracts and
Permits contemplated hereby, except (i) as required by the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇
Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), (▇▇) as specified on
Schedule 3.9, (iii) as required by the IDRB Documents, and (iv) for such other
consents, approvals, authorizations, registrations or filings the failure of
which to obtain or make would not individually or in the aggregate have a
Material Adverse Effect or which are obtained by the Closing Date.
3.10 Title. Seller has good and valid title to all of the Acquired
Assets constituting personal property, good and marketable title in fee simple
to all of the owned Acquired Assets
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Arizona
constituting Real Estate and good and valid leasehold title to all of the leased
Acquired Assets constituting Real Estate, in each case, free and clear of Liens
subject only to the Permitted Exceptions. "Permitted Exceptions" as used herein
shall mean (a) the Liens set forth in Schedule 3.10 hereto, (b) Liens securing
Taxes, assessments, governmental charges or levies, or the claims of
materialmen, mechanics, carriers and like persons, all of which are not yet due
and payable or which are being contested in good faith or (c) such other Liens
which, individually or in the aggregate, do not have a Material Adverse Effect
(it being understood that to the extent a Permitted Exception relates to or
arises from a Retained Liability, Seller shall still be liable for such Retained
Liability to the extent set forth herein).
3.11 Real Estate.
3.11.1 As of the date hereof, Seller has not received any
written or oral notice for assessments for public improvements against the Real
Estate which remains unpaid, and to the best knowledge of the Seller Parties, no
such assessment has been proposed. Except as set forth on Schedule 3.11, as of
the date hereof, there is no pending condemnation, expropriation, eminent domain
or similar proceeding affecting all or any portion of any of the Real Estate and
to the best knowledge of the Seller Parties no such proceeding is threatened.
3.11.2 Except as disclosed on Schedule 3.6, as of the date
hereof, Seller is not a lessee under any Contract relating to the use or
occupancy of the Real Estate involving annual payments in excess of $100,000.
3.11.3 Each parcel of the Real Estate has physical and, to
Seller's knowledge, legal vehicular and pedestrian access to and from public
roadways as may be reasonably necessary to the operation of the Business except
where the failure to have such access does not have a Material Adverse Effect.
To Seller's knowledge, no fact or condition exists which would result in the
termination of (a) the current access from each parcel of the Real Estate, and
(b) continued use, operation, maintenance, repair and replacement of all
existing and currently committed water lines used by Seller in connection with
the Business, except where such termination would not have a Material Adverse
Effect.
3.12 Taxes. The Seller Parties have (a) timely filed all material
returns and reports for Taxes, including information returns, that are required
to have been filed in connection with, relating to, or arising out of, the
Business, (b) paid all Taxes that are shown to have come due pursuant to such
returns or reports and (c) paid all other material Taxes not required to be
reported on returns in connection with, relating to, or arising out of, or
imposed on the property of the Business for which a notice of assessment or
demand for payment has been received or which have otherwise become due. To the
best of the Seller Parties' knowledge, all such returns or reports have been
prepared in accordance with all applicable laws and requirements in all material
respects. Except to the extent disclosed on Schedule 3.12, none of the assets of
the Business or constituting any of the Acquired Assets (a) is property that is
required to be treated as owned by another Person pursuant to the "safe harbor
lease" provisions of former Section 168(f)(8) of the Code, (b) is
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Arizona
"tax-exempt use property" within the meaning of Section 168(h) of the Code or
(c) directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
3.13 Patents and Intellectual Property Rights. To the best of the
Seller Parties' knowledge, the operations of Seller do not make any unauthorized
use of any Intellectual Property except for any such unauthorized uses which do
not have a Material Adverse Effect. Assuming the consents listed as item XII on
Schedule 3.9 are obtained, Buyer will not lose any of Seller's rights to, or be
required to pay increased royalties for, any Intellectual Property included in
the Acquired Assets as a result of the Closing and the consummation of the
transactions contemplated by this Agreement, except for any such rights or such
increased royalties the loss or payment of which would, individually or in the
aggregate, not have a Material Adverse Effect.
3.14 Accounts Receivable. The accounts receivable of Seller arising
from the Business as set forth on the Interim Statement of Net Assets or arising
since the date thereof have arisen out of bona fide sales and deliveries of
goods, performance of services and other business transactions in the ordinary
course of business consistent with past practice; the allowance for collection
losses on the Interim Statement of Net Assets has been determined in accordance
with GAAP consistent with past practice.
3.15 Labor Relations. As of the date hereof, except as set forth in
Schedule 3.15, to best of the knowledge of the Seller Parties, there has been no
union organizing efforts with respect to the Business conducted within the last
three (3) years and there are none now being conducted with respect to the
Business. Except as set forth in Schedule 3.15, Seller has not at any time
during the three (3) years prior to the date of this Agreement had, nor, to the
best of the Seller Parties' knowledge, is there now threatened, a strike, work
stoppage or work slow down with respect to or affecting the Business which had
or could reasonably be expected to have a Material Adverse Effect. As of the
date hereof, except as set forth in Schedule 3.15, (i) no Employee is
represented by any union or other labor organization and (ii) there is no unfair
labor practice charge pending or, to the best knowledge of the Seller Parties,
threatened against Seller relating to any of the Employees as related to the
Business which could reasonably be expected to have a Material Adverse Effect.
3.16 Employee Benefit Plans.
3.16.1 Schedule 3.16.1 contains a true and complete list of
each "employee benefit plan," as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA), bonus, incentive,
deferred compensation, excess benefit, employment contract, stock purchase,
stock ownership, stock option, supplemental unemployment, vacation, sabbatical,
sick-day, severance or other material employee benefit plan, program or
arrangement (other than those required to be maintained by law), whether written
or unwritten, qualified or nonqualified, funded or unfunded, foreign or
domestic, (i) maintained by, or contributed to by Citizens or any of its
Affiliates, in respect of any Employee or Former Employee, or (ii) with respect
to which Citizens or any of its Affiliates has any liability in respect of any
Employee or Former Employee (the"Benefit Plans"). Except as disclosed on
Schedule 3.16.1, neither Citizens nor any
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Arizona
of its Affiliates maintains any bonus, pension or welfare benefit plan, program
or arrangement, including any deferred compensation arrangement, for directors,
consultants or independent contractors of the Business.
3.16.2 A true and complete copy of each Benefit Plan and
related trust agreements and (to the extent applicable) a copy of each Benefit
Plan's current summary plan description and in the case of an unwritten Benefit
Plan, a written description thereof, has been furnished to Buyer. In addition,
to the extent applicable, Buyer has been provided a copy of the most recent
Internal Revenue Service ("IRS") determination letter issued to each Benefit
Plan and a copy of the most recent IRS Form 5500 together with all schedules and
accountants' statement filed, and actuarial reports prepared, on behalf of each
Benefit Plan.
3.16.3 Each Benefit Plan which is intended to be qualified
under Section 401(a) of the Code (as designated on Schedule 3.16.1) is so
qualified, and will remain so qualified upon the timely making of certain
amendments required by law during the applicable remedial amendment period, and
any trust forming a part of such a Benefit Plan is tax exempt under Section
501(a) of the Code. Each such Benefit Plan has been amended, as and when
necessary, to comply with the Tax Reform Act of 1986 and upon timely filing of
an Application for Determination with the Internal Revenue Service, will be
eligible to make further such amendments under the"remedial amendment period."
3.16.4 Except as disclosed in Schedule 3.16.4, each Benefit
Plan has been operated and administered in all material respects in accordance
with its terms and all applicable laws, including ERISA and the Code.
3.16.5 None of the Acquired Assets is subject to a Lien or Tax
under the Code or ERISA.
3.16.6 Neither Citizens nor any ERISA Affiliate and, to the
knowledge of the Seller Parties, no other Person, has taken any action or failed
to take any action with respect to any Benefit Plan that may subject Buyer or
any Benefit Plan under which liabilities may be assumed by Buyer under Sections
5.10, 5.11 or 5.12 ("Assumed Benefit Liabilities") to any material liability or
Tax under the Code or ERISA.
3.16.7 Neither Citizens nor any ERISA Affiliate has incurred
or expects to incur any withdrawal liability with respect to any Benefit Plan
which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA, including any contingent liability under Section 4204 of ERISA or
withdrawal liability arising from the actions of Citizens or any ERISA Affiliate
contemplated by this Agreement. All contributions that Citizens or any ERISA
Affiliate have been obliged to make to any Benefit Plan, including any
multiemployer plan, have been duly and timely made.
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Arizona
3.16.8 There are no pending or, to the knowledge of the Seller
Parties, threatened claims (other than routine claims for benefits),
assessments, complaints, proceedings or investigations of any kind in any court
or governmental agency with respect to any Benefit Plan which could reasonably
be expected to give rise to a material liability to Buyer.
3.16.9 Except as disclosed on Schedule 3.16.9, no Benefit Plan
provides benefits, including without limitation, death or medical benefits,
beyond termination of service or retirement other than (i) coverage mandated by
law, or (ii) death or retirement benefits under a Benefit Plan qualified under
Section 401(a) of the Code. Seller's Retiree Medical Plan contains provisions
permitting Seller to modify or terminate retiree medical benefits at any time,
without prior notice to any covered individual. Except with respect to retirees,
"grandfathered" employees and collectively bargained employees, Seller knows of
no reason why its ability to effect those provisions would be limited.
3.16.10 With respect to each Benefit Plan that is a "group
health plan" within the meaning of Section 607 of ERISA and that is subject to
Section 4980B of the Code, Citizens and each ERISA Affiliate have complied in
all material respects with the continuation coverage requirements of the Code
and ERISA.
3.17 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 3.17, Seller has no liabilities with respect to the Business which
would constitute Assumed Liabilities, either direct or indirect, matured or
unmatured or absolute, contingent or otherwise, except:
3.17.1 the Assumed Indebtedness and those other liabilities
which would decrease the Base Cash Purchase Price pursuant to Section 2.6.5 to
the extent assumed by Buyer at Closing;
3.17.2 liabilities arising in the ordinary course of business
under any Contract or Permit or with respect to any agreement or instrument
included within the definition of Real Estate; and
3.17.3 those liabilities incurred, consistent with past
business practice, in or as a result of the normal and ordinary course of
business and reflected in the books and records related to the Business;
3.17.4 the obligations and liabilities set forth in Sections
5.9, 5.10, 5.11 and 5.12 hereof; and
3.17.5 those other liabilities, which individually and in the
aggregate, would not have a Material Adverse Effect.
3.18 No Pending Litigation or Proceedings. Except as disclosed in
Schedule 3.18, there are no actions, suits, investigations or proceedings
pending against or, to the best of the Seller
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Parties' knowledge, threatened, against or affecting, Seller, the Business or
any of the Acquired Assets before any court or arbitrator or Authority which
individually or in the aggregate, would have a Material Adverse Effect. Except
as disclosed in Schedule 3.18, there are currently no outstanding judgments,
decrees or orders of any court or Authority against any of the Seller Parties,
which relate to or arise out of the conduct of the Business or the ownership,
condition or operation of the Business or the Acquired Assets (other than any
PUC order relating to rates, tariffs and similar matters arising in the ordinary
course of business) which individually or in the aggregate would have a Material
Adverse Effect.
3.19 Supply of Utilities. Except as set forth on Schedule 3.19, the
Real Estate has adequate arrangements for supplies of electricity, gas, oil,
coal and/or sewer for all operations at the 1998 or current operating levels,
whichever is greater. Except as set forth on Schedule 3.19, there are no actions
or proceedings pending or, to the best of the Seller Parties' knowledge,
threatened, that would adversely affect the supply of electricity, gas, coal or
sewer to the Real Estate except for those which individually and in the
aggregate would not have a Material Adverse Effect.
3.20 Insurance. Schedule 3.20 lists the Seller Parties' policies and
contracts in effect as of the date hereof for insurance covering the Acquired
Assets or Assumed Liabilities and the operation of the facilities constituting
the Business owned or held by Seller, together with the risks insured against,
coverage limits and deductible amounts.
3.21 Relationship with Customers. As of the date hereof, Seller does
not have any current customer which accounted for more than 5% of the net sales
of the Business (taken together with the businesses being acquired by Buyer or
Affiliates of Buyer pursuant to the Related Purchase Agreements) for the
immediately preceding 12-month period.
3.22 WARN Act. Except as contemplated by Section 5.9 hereby or as
set forth in Schedule 3.22 hereto, within six months prior to the date hereof,
(i) Seller has not effectuated (a) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Business; or (b) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Business; (ii) Seller has not been affected by any transaction or engaged in
layoffs or employment terminations with respect to the Business sufficient in
number to trigger application of any similar state or local law; and (iii) none
of Seller's employees who are employed in connection with the Business has
suffered an "employment loss" (as defined in the WARN Act).
3.23 Condition of Assets. Except as set forth on Schedule 3.23, the
buildings, machinery, equipment, tools, furniture, improvements and other fixed
tangible assets of the Business included in the Acquired Assets, taken as a
whole and taken together with the similar assets included among the assets being
acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements, are in good operating condition and repair, reasonable wear and tear
excepted.
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3.24 Brokerage. None of the Seller Parties or their Affiliates have
made any agreement or taken any other action which might cause any Person to
become entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to Buyer or
its Affiliates.
3.25 All Assets. Except as set forth on Schedule 3.25 and for the
Excluded Assets, the Acquired Assets include all assets, rights, properties and
contracts the use of which is necessary to the continued conduct of the Business
by Buyer substantially in the manner as it was conducted prior to the Closing
Date, including the service of all utility customers in substantially the same
manner and at substantially the same service levels as provided by Seller on the
date hereof.
3.26 Year 2000 Matters. Citizens has (1) initiated a review and
assessment of all mission critical areas within the Business and related
operations (including those affected by suppliers and vendors) that it
reasonably believes could be adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by any Seller Party (or suppliers
and vendors) may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
all as set forth in Citizens' Annual report on Form 10-K for the fiscal year
ended December 31, 1998 and Citizens' Quarterly reports on Form 10-Q for the
periods ending March 31, 1999 and June 30, 1999, and (iii) to date, implemented
that plan substantially in accordance with that timetable. Seller has
contingency plans that are dedicated to ensuring that established and expected
levels of customer service are maintained without interruption, while core
business functionality is preserved during the millennium transition. With
respect to its suppliers and vendors, the foregoing representation and warranty
is expressly limited to matters known to Seller after making reasonable
inquiries of such suppliers and vendors. Seller makes no representation or
warranty with respect to the receipt or accuracy of any response received from
any vendor or supplier.
3.27 Product Liability. Except as disclosed in Schedule 3.27 and
except for those liabilities which individually or in the aggregate would not
have a Material Adverse Effect, there are no (a) liabilities of the Seller
Parties or their Affiliates, fixed or contingent, asserted or, to the knowledge
of the Seller Parties, unasserted, with respect to any product liability or
similar claim that relates to any product or service sold by Seller or the
Business to others or (b) liabilities of the Seller Parties or their Affiliates,
fixed or contingent, asserted or, to the knowledge of the Seller Parties
unasserted, with respect to any claim for the breach of any express or implied
product warranty or a similar claim with respect to any product or service sold
by Seller or the Business to others.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer jointly and severally represent and warrant to Seller as
follows:
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4.1 Organization and Good Standing.
4.1.1 Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
4.1.2 Buyer is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to own, lease and operate the Acquired
Assets and the Business. Buyer is qualified to do business and is in good
standing in all jurisdictions wherein the nature of the business conducted by it
Buyer's ownership or use of assets and properties make such qualification
necessary, except such failures to be qualified or to be in good standing, if
any, which when taken together with all such failures of Buyer do not have a
material adverse effect on its ability to perform its obligations under this
Agreement and the Transaction Documents.
4.2 Authorization and Enforceability. Each of Buyer and Parent has
full corporate power and authority to execute, deliver and perform this
Agreement and the other Transaction Documents to which either of them is a
party. The execution, delivery and performance by Buyer and Parent of this
Agreement and the Transaction Documents to which Buyer and/or Parent is a party
have been duly authorized by all necessary corporate action on the part of each
of them. This Agreement has been duly executed and delivered by Buyer and
Parent, and as of the Closing Date the other Transaction Documents will be duly
executed and delivered by Buyer and Parent. This Agreement is a legal, valid and
binding obligation of Buyer and Parent, enforceable against them in accordance
with its terms, except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court. As of the Closing
Date, each of the other Transaction Documents to which Buyer and Parent is a
party will be duly executed and delivered by Buyer and Parent and will
constitute the legal, valid and binding obligations of Buyer and Parent,
enforceable against them in accordance with its respective terms, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court.
4.3 No Violation of Laws or Agreements. The execution, delivery and
performance of this Agreement and the Transaction Documents by Buyer and/or
Parent do not, and the consummation of the transactions contemplated hereby and
thereby will not, (a) contravene any provision of the Articles of Incorporation
or Bylaws of Buyer or the Certificate of Incorporation or Bylaws of Parent; or
(b) violate, conflict with, result in a breach of, or constitute a default (or
an event which would with the passage of time or the giving of notice, or both,
constitute a default) under, or result in or permit the termination,
modification, acceleration, or cancellation of (i) any indenture, mortgage, loan
or credit agreement, license, instrument, lease, contract, plan, permit,
authorization, proof of dedication or other agreement or commitment, oral or
written, to which Parent or Buyer is a party, or by which any of their assets or
properties may be bound or affected,
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except for such violations, conflicts, breaches, terminations, modifications,
accelerations, cancellations, interests or rights which, individually or in the
aggregate do not have a material adverse effect on their respective ability to
perform their obligations under this Agreement and the Transaction Documents, or
(ii) any judgment, injunction, writ, award, decree, restriction, ruling, or
order of any court, arbitrator or Authority or any applicable constitution, law,
ordinance, rule or regulation to which Buyer or Parent is subject other than
those violations and conflicts which individually or in the aggregate do not
have a material adverse effect on their respective ability to perform their
obligations under this Agreement and the Transaction Documents.
4.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by Buyer and Parent of
this Agreement, the other Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by Buyer or Parent except (i) as
required by the HSR Act, (ii) as specified on Schedule 3.9 and (iii) for such
consents, approvals, authorizations, registrations or filings, the failure to
obtain or make would not individually or in the aggregate have a material
adverse effect on their respective ability to perform their obligations under
this Agreement and the Transaction Documents.
4.5 Financing. Buyer and Parent have, and at the Closing Date, will
have sufficient resources to pay the Purchase Price, and Parent, Buyer or the
other Affiliates of Parent that are buyers of the assets and businesses being
acquired pursuant to the Related Purchase Agreements have, and at the Closing
Date, will have sufficient resources to pay the purchase prices set forth in the
Related Purchase Agreements.
4.6 Brokerage. None of Parent, Buyer or their Affiliates have made
any agreement or taken any other action which might cause any Person to become
entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to the
Seller Parties.
4.7 Insurance. Schedule 4.7 lists the policies and contracts in
effect as of the date hereof for casualty and property insurance covering
Buyer's assets and properties and the operation of Buyer's business, together
with the risks insured against, coverage limits and deductible amounts.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Conduct of Business. Except (i) as otherwise specifically
permitted by this Agreement, (ii) as set forth in Schedule 5.1 hereto or (iii)
with the prior written consent of Buyer, from and after the date of this
Agreement and up to and including the Closing Date, each of the Seller Parties
agree that:
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5.1.1 Seller shall conduct the Business as presently operated
and only in the ordinary course of business consistent with past practice.
5.1.2 They shall promptly inform Buyer in writing of any
specific event or circumstance of which they are aware, or of which they receive
notice, that has or is likely to have, individually or in the aggregate, taken
together with the other events or circumstances, a Material Adverse Effect on
the Acquired Assets or the Assumed Liabilities.
5.1.3 Seller shall not:
(a) change or modify in any material respect existing
credit and collection policies, procedures and practices with respect to
accounts receivable;
(b) enter into any contract or commitment, waive any
right or enter into any other transaction (except in the ordinary course of
business) which would have a Material Adverse Effect;
(c) except in the event of service interruption,
emergency or casualty loss, commit to acquire subsequent to the Closing Date on
behalf of the Business any capital asset or group of capital assets costing in
excess of $1,000,000 that is not included in the capital budget of Seller for
fiscal year 2000 and which, if so acquired, would be included in the Acquired
Assets; commencing December 1, 1999, accept or receive customer advances for
construction in excess of $9,000,000 (when combined with customer advances
relating to the businesses being acquired by Buyer or Affiliates of Buyer
pursuant to the Related Purchase Agreements) per each of the next four
consecutive three-month periods unless pursuant to an existing tariff, Contract
or Permit of Seller; or sell or lease or agree to sell or lease or otherwise
dispose of any assets included in the Acquired Assets except in the ordinary
course of the conduct of the Business, consistent with past practice;
(d) except in the ordinary course of business,
consistent with past practice or as required under any of Seller's debt
instruments or indentures, mortgage, pledge or subject to any Lien (other than
Permitted Liens) any of the Acquired Assets;
(e) change any compensation or benefits or grant any
material new compensation or benefits payable to or in respect of any
Transferred Employee except (i) as required by law, and (ii) in the ordinary
course, consistent with past practice; provided, however, no individual Employee
shall in any event receive a compensation increase in excess of seven percent
(7%);
(f) other than in the ordinary course of business
consistent with past practice, sell or otherwise transfer any assets necessary,
or otherwise material to the conduct of, the Business which would constitute
Acquired Assets;
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(g) change the Seller's method of accounting or keeping
its books of account or accounting practices with respect to the Business,
except as required by GAAP or any Authority;
(h) intentionally and wilfully take or omit to take any
action which if taken or omitted prior to the date hereof would constitute or
result in a breach of any representations or warranties set forth in Sections
3.1, 3.2, 3.3, 3.4, 3.7, 3.8, 3.10, 3.14, 3.16 and 3.25 hereof (it being
understood that the failure to cure a breach shall not, by itself, be an
intentional and wilful omission to take action); or
(i) prepay, redeem, retire, refund or otherwise
extinguish any of the Assumed Indebtedness.
5.2 Negotiations. Neither Citizens nor any Person controlled by
Citizens or under common control with Citizens (each such person being a
"Section 5.2 Affiliate"), nor any officer, director, employee, representative or
agent of Citizens or any of their Section 5.2 Affiliates, shall, directly or
indirectly, solicit or initiate or participate in any way in discussions or
negotiations with, or provide any information or assistance to, or enter into an
agreement with any Person or group of Persons (other than Parent, Buyer or any
Person controlled by Parent or Buyer or under common control with Parent, Buyer
or any Persons providing financing to the parties hereto in connection with
facilitating the consummation of the transactions contemplated by this
Agreement) concerning any acquisition, merger, consolidation, liquidation,
dissolution, disposition or other transaction (or series of such transactions)
that would result in the transfer to any such Person or group of Persons of ten
percent (10%) of the Acquired Assets (as measured by net book value of such
assets on the date of each such transaction) or the acquisition, merger,
consolidation, liquidation, dissolution, disposition or other transaction (or
series of such transactions) involving the Seller Parties, if such acquisition,
merger, consolidation, liquidation, dissolution, disposition or other
transaction (or series of such transactions) would be inconsistent, in any
respect, with the obligations of the Seller Parties hereunder (any of the
foregoing transactions, a "Competing Transaction").
5.3 Disclosure Schedules. As promptly as practicable, the Seller
Parties will provide Buyer with a supplement or amendment to the Disclosure
Schedules with respect to any matter, condition or occurrence which is required
to be set forth or described in the Disclosure Schedules. For the avoidance of
doubt, a matter, condition or occurrence shall only be "required" to be set
forth or described in the Disclosure Schedules if the failure to be so disclosed
would result in a breach of the applicable representation or warranty (qualified
by Material Adverse Effect where applicable) on the date hereof or on the
Closing Date. In addition, Seller shall have the right at any time and from time
to time prior to the Closing to supplement or amend the Disclosure Schedules.
Seller may provide Disclosure Schedules with respect to any representation or
warranty of this Agreement whether or not a specific schedule is referred to
therein. In the event that any supplement or amendment of such Disclosure
Schedules shall be provided later than five (5) business days prior to the
Closing Date, the Buyer shall have the right to delay the Closing for a period
of five (5) business days in order for Buyer to review such supplement or
amendment. No such supplement
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or amendment shall be deemed to cure any breach of or alter any representation
or warranty made in this Agreement so as to permit the Closing to occur unless
Buyer specifically agrees thereto in writing. The Seller Parties shall promptly
inform Buyer, and Buyer will promptly inform the Seller Parties of any fact or
event which comes to their attention, the existence of which constitutes or
likely will constitute a breach in any material respects of any representation
or warranty in this Agreement. In addition, Parent will, within five (5) days of
receipt thereof, forward to Seller (i) any title report Buyer receives from a
title company with respect to the Real Estate and (ii) any written communication
regarding a specific Lien or title defect affecting a specifically identified
parcel of the Real Estate sent to the President, Treasurer or General Counsel of
Parent or the President or Corporate Counsel of any other Buyer Party, and sent
by a party other than the Seller Parties, their legal counsel, financial
advisors or representatives.
5.4 Mutual Covenants. The parties mutually covenant from the date of
this Agreement to the Closing Date (and subject to the other terms of this
Agreement, including Section 5.8 hereof):
5.4.1 to cooperate with each other in determining whether
filings are required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents;
5.4.2 to use all reasonable efforts to obtain promptly the
satisfaction (but not waiver) of the conditions to the Closing of the
transactions contemplated herein (each party hereto shall furnish to the other
and to the other's counsel all such information as may be reasonably required in
order to effectuate the foregoing action); and
5.4.3 to advise the other parties promptly if such party
determines that any condition precedent to its obligations hereunder will not be
satisfied in a timely manner.
5.5 Filings and Authorizations. The parties hereto will as promptly
as practicable, make or cause to be made all such filings and submissions under
laws, rules and regulations applicable to it or its Affiliates as may be
required to consummate the terms of this Agreement, including all notifications
and information to be filed or supplied pursuant to the HSR Act and with the
applicable public utility commission (each, a "PUC"). Any such filings and
supplemental information will be in substantial compliance with the requirements
of the applicable law, rule or regulation. Each of Parent and Buyer, on the one
hand, and the Seller Parties, on the other, shall furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing or submission to the PUC or which
is necessary under the HSR Act. The Seller Parties, on the one hand and Buyer
and Parent, on the other, shall keep each other apprised of the status of any
communications with, and inquiries or requests for additional information from,
any Authority, including the PUC, the United States Federal Trade Commission
("FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division"), and shall comply promptly with any such inquiry or
request. Each
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of Citizens, Seller, Parent and Buyer will use its reasonable efforts to obtain
any clearance required under the HSR Act and from the PUC for the purchase and
sale of the Acquired Assets in accordance with the terms and conditions hereof.
Notwithstanding the foregoing, nothing contained in this Agreement will require
or obligate any party or their respective Affiliates: (i) to initiate, pursue or
defend any litigation (or threatened litigation) to which any Authority
(including the PUC, the Antitrust Division and the FTC) is a party; (ii) to
agree or otherwise become subject to any material limitations on (A) the right
of Buyer or its Affiliates effectively to control or operate the Business or the
right of Seller or its Affiliates effectively to control or operate Citizens'
other businesses, (B) the right of Buyer or its Affiliates to acquire or hold
the Business or the right of Seller or its Affiliates to hold the Excluded
Assets or Citizens' other businesses, or (C) the right of Buyer to exercise full
rights of ownership of the Business or all or any material portion of the
Acquired Assets or the right of Citizens to exercise full rights of ownership of
Citizens' other businesses or all or any material portion of the Excluded
Assets; or (iii) to agree or otherwise be required to sell or otherwise dispose
of, hold separate (through the establishment of a trust or otherwise), or divest
itself of all or any portion of the business, assets or operations of Citizens,
Seller, Parent, Buyer, any Affiliate of Buyer or the Business. The parties agree
that no representation, warranty or covenant of Buyer, Parent, or Citizens
contained in this Agreement shall be breached or deemed breached as a result of
the failure by Parent and Buyer on the one hand or the Seller Parties, on the
other, to take any of the actions specified in the preceding sentence.
5.6 Public Announcement. No party hereto shall make or issue, or
cause to be made or issued, any public announcement or written statement
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party (which will not be unreasonably
withheld or delayed), unless counsel to such party advises that such
announcement or statement is required by law (in which case the parties shall
make reasonable efforts to consult with each other prior to such required
announcement).
5.7 Further Assurances. Each of Citizens, Parent, Buyer and Seller,
from time to time after the Closing, at Buyer's or Seller's request, will
execute, acknowledge and deliver to the applicable person such other instruments
of conveyance and transfer and will take such other actions and execute such
other documents, certifications, and further assurances as Buyer or Seller, as
the case may be, may reasonably require in order to transfer, in accordance with
the terms and conditions of this Agreement, more effectively in Buyer or to put
Buyer more fully in possession of any of the Acquired Assets or better to enable
Buyer to complete, perform and discharge any of the Assumed Liabilities. Each
party shall cooperate and deliver such instruments and take such action as may
be reasonably requested by the other party in order to carry out the provisions
and purposes of this Agreement and the transactions contemplated hereby.
5.8 Cooperation.
5.8.1 Parent, Buyer, Citizens and Seller shall cooperate and
shall cause their respective Affiliates, officers, employees, agents and
representatives to cooperate to ensure the
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orderly transition of the Business from Seller to Buyer and to minimize the
disruption to the Business resulting from the transactions contemplated hereby.
5.8.2 Without limiting the foregoing, neither Parent and
Buyer, nor Citizens and Seller (nor any of their respective Affiliates) shall
make any filings pursuant to federal or state securities laws ("Securities
Filings") or make any consent solicitations to holders of Assumed Indebtedness
which include any information about Seller, Buyer (or their respective
Affiliates) or the transactions contemplated hereby without consulting with the
other party and providing the other party a reasonable opportunity to review and
comment on such information, it being understood and agreed that any party may
so disclose such information in its reasonable judgment to the extent such
party's counsel advises it that such disclosure is advisable under applicable
law. Each of Parent, Buyer, Citizens and Seller shall, and shall cause their
respective Affiliates to, comply with all applicable federal and state
securities laws in connection with this Agreement and the transactions
contemplated hereby (including any solicitation of consents of holders of
Assumed Indebtedness), and all information supplied by any party for inclusion
in any Securities Filing or consent solicitation, including, without limitation,
any proxy or information statement, or any registration statement on Form S-4
shall be true and correct in all material respect and shall not contain any
untrue statement of a material fact or omit to state any material fact which is
required to be stated therein or which is necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made.
5.8.3 During the first 90 days after the Closing Date (180
days for Trademarks on tanks), Buyer shall have the right to use all of the
logos, trademarks and trade identification of Seller as are located at the Real
Estate or on the Acquired Assets (collectively, the "Trademarks"). Buyer's use
of the Trademarks shall be in accordance with such reasonable quality control
standards as may be promulgated by Seller and provided to Buyer. If Seller shall
notify Buyer in writing of Buyer's material failure to comply with such
reasonable quality control standards and Buyer continues to not comply with such
reasonable quality control standards for more than 20 days after receipt of such
notice, Seller shall have the right to terminate Buyer's right under this
Section 5.8.3 to use the Trademarks.
5.8.4 Seller shall give Buyer and its representatives
(including Buyer's Accountants, consultants, counsel and employees), upon
reasonable notice and during normal business hours, full access to the
properties, contracts, employees, books, records and affairs of Seller to the
extent relating to the Business and the Acquired Assets, and shall cause its
officers, employees, agents and representatives to furnish to Buyer all
documents, records and information (and copies thereof), to the extent relating
to the Business and the Acquired Assets, as Buyer may reasonably request. Except
to the extent disclosed in the Disclosure Schedules in accordance with Sections
5.3 and 8.4, no investigation or receipt of information by Buyer pursuant to, or
in connection with, this Agreement, shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Seller Parties under
this Agreement or the conditions to the obligations of Parent or Buyer under
this
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Agreement. All information provided to Buyer under this Agreement shall be held
subject to the terms and conditions of the Confidentiality Agreement dated
August 2, 1999 between Citizens and Parent.
5.9 Employees; Employee Benefits.
5.9.1 Schedule 5.9.1 lists divisions and the number of all
salaried and hourly employees actively employed (as of the date of this
Agreement) in each division by Seller or any of its Affiliates whose primary
responsibilities relate to the Business. Schedule 5.9.1 lists job
classifications and number of employees in each job classifications of those
employees whose terms and conditions of employment are subject to a collective
bargaining agreement ("Union Employees"). All individuals referred to on
Schedule 5.9.1 are herein referred to as the "Employees." No later than March 1,
2000, Buyer and Seller shall determine the number of Employees to whom Buyer
will offer employment, which number shall be at least equal to 250 (when
combined with offers made by Buyer or Affiliates of Buyer to employees of
Affiliates of Seller in connection with the Related Purchase Agreements) (the
"Base Number"), and such additional number of Employees, if any, whom Buyer also
wishes to employ. Upon determination of such Employees, Seller will supplement
Schedule 5.9.1 with the name, job title, unused vacation, current base salary or
hourly wage, date of hire and assigned location of each Transferred Employee (as
that term is defined below). At the Closing, Seller shall provide an updated
Schedule 5.9.1 which shall disclose all the information required under the
preceding sentence as of the most recent practicable date prior to Closing.
5.9.2 Effective as of the Closing, Buyer shall offer
employment to at least the Base Number of those employees included on Schedule
5.9.1. All Employees to whom Buyer offers employment and who accept such
employment are herein referred to as the "Transferred Employees." In the event
any Employees do not accept Buyer's offer of employment, Buyer shall offer
employment to such additional employees (the identity of whom shall be
determined by Buyer and Seller) as are necessary to bring the total number of
Transferred Employees to the Base Number. Subject to the provisions of this
Section 5.9 and Section 5.12, Buyer shall provide each Transferred Employee with
base compensation at least equal to that provided by Seller on the Closing Date,
and employee benefits which are substantially comparable to those provided by
Buyer to its other similarly situated employees. Buyer agrees (i) to credit the
service of each Transferred Employee with Seller and its Affiliates before the
Closing, for all purposes under all employee benefit plans and arrangements
maintained by Buyer (and/or any of its Affiliates) for the benefit of any
Transferred Employee (including without limitation for purposes of attainment of
retirement dates and payment of optional forms of benefits), other than for
purposes of benefit accrual under any "defined benefit plan", within the meaning
of Section 3(35) of ERISA, (ii) to provide accrued vacation to Transferred
Employees in the year in which the Closing occurs, equal to the excess, if any,
of the accrued vacation to which the Transferred Employee would otherwise be
entitled under Seller's vacation plan during that year over the amount of
accrued vacation the Transferred Employee
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Arizona
had taken during that year, and, thereafter, to provide vacation to Transferred
Employees on the same basis as provided to similarly situated employees of
Buyer, with service credit as provided in (i) hereof, (iii) to provide severance
benefits to Transferred Employees terminated by Buyer that are substantially
comparable to those benefits provided by Buyer to similarly situated employees,
and (iv) to comply with all applicable legal requirements with respect to Union
Employees (including without limitation any applicable duty to bargain with
those employees' bargaining representative). Buyer shall be responsible for
providing to each Transferred Employee vacation in an amount equal to the
Transferred Employee's vacation entitlement for the year of Closing reduced by
the number of vacation days such Transferred Employee has taken on or before
Closing. Nothing in this Section 5.9 shall limit Buyer's authority to terminate
the employment of any Transferred Employee at any time and for whatever reason.
Until the second anniversary of the Closing Date, neither Seller nor any of its
Affiliates shall directly or indirectly solicit or offer employment to any
Transferred Employee then employed by Buyer or its Affiliates.
5.9.3 Except as specifically provided in Sections 5.9 and
5.12, Seller shall be solely responsible for any liability, claim or expense
(including reasonable attorneys' fees) related to compensation or employee
benefits incurred by Buyer as the result of any claims against Buyer or its
Affiliates that are made by any Employees or Former Employees (or the
Beneficiary of any Employee or Former Employee) who are not made offers to
become employees of Buyer or its Affiliates including, without limitation,
claims asserted against Buyer as a result of their termination by Seller or its
Affiliates.
5.9.4 Seller shall be solely responsible for any liability,
claim or expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation claims or the benefits
provided under the Benefit Plans, whether paid before or after the Closing) owed
to any Transferred Employee or the Beneficiary of any Transferred Employee or
any Water Sector Retiree or the Beneficiary of any Water Sector Retiree that
arises out of or relates to (i) the employment relationship between Seller or
any of its Affiliates and such Transferred Employee or Beneficiary or (ii) any
benefit claim or expense (including medical expenses) incurred before Closing
under any Benefit Plan. For purposes of this Agreement, a medical expense shall
be deemed to be incurred when the services giving rise to a claim are rendered,
regardless of when billed or paid. Without limiting the foregoing, Seller shall
be responsible for the payment of any employee benefits that become due to any
Transferred Employees as a result of their termination by Seller.
5.9.5 Except as otherwise specifically provided in Section
5.9, 5.11 or 5.12, Buyer shall be solely responsible for any liability, claim or
expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation, claims or the benefits
provided under any employee benefit plan or arrangement of Buyer incurred after
Closing) owed to any Transferred Employee or Beneficiary of any Transferred
Employee or any Water Sector Retiree or Beneficiary of any Water Sector Retiree
that arises out of or relates to (i) the employment relationship between Buyer
or any of its Affiliates and any Transferred Employee or (ii) any benefit claim
or expense (including medical expense) incurred after Closing under any
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Arizona
employee benefit plan sponsored or contributed to by Buyer or an ERISA Affiliate
after Closing. Notwithstanding the foregoing, Buyer shall not be responsible for
the payment of any employee benefits that become due to any Transferred
Employees under any Benefit Plan (other than the Assumed Benefit Liabilities).
5.9.6 Buyer agrees to reimburse Seller for its proportionate
share (as defined below) of any amount in excess of $1,000,000 paid by Seller as
severance under Citizens' severance plan as in effect on the date hereof to any
Employees (when such amount paid by Seller is aggregated with amounts paid by
Citizens to other employees as referenced in Section 5.9.6 of the Related
Purchase Agreements) provided (i) Buyer does not hire such Employees in
accordance with the provisions of Sections 5.9, 5.11 and 5.12 and (ii) Seller
provides notice to those Employees on or before the Closing Date to the effect
that their employment will be terminated on or shortly after the Closing Date.
Buyer will pay such reimbursement to Citizens within 5 days after receipt of a
list of the Employees showing which are entitled to severance pay, the amounts
of that severance pay and certifying that those amounts have been paid. The
Buyer's "proportionate share" means the amount obtained by multiplying the
amount in excess of $1,000,000 by a fraction, the numerator of which is the
amount of severance paid by Seller to Employees under Section 5.9.6 of this
Agreement and the denominator of which is the sum of (i) the amount paid by
Seller to Employees under Section 5.9.6 of this Agreement and (ii) the aggregate
amount paid by Citizens under Section 5.9.6 of each of the Related Purchase
Agreements.
5.9.7 Until the second anniversary of the Closing Date, Buyer
shall not directly or indirectly solicit or offer employment to any active
employee of Seller, other than the Transferred Employees.
5.10 Employee Pension Plan.
5.10.1 At least fifteen days prior to the Closing Date, Seller
shall take any and all actions necessary to cease benefit accruals and fully
vest all Transferred Employees in their accrued benefits under the Citizens
Pension Plan ("Seller's Pension Plan" or "Citizens Pension Plan"). Seller shall
retain liability and related assets for benefits accrued through the Closing
Date by Transferred Employees under Seller's Pension Plan.
5.10.2 As of the Closing Date, Transferred Employees shall be
covered under the American Pension Plan, and shall be given credit for service
with Seller and its Affiliates for eligibility, vesting, attainment of
retirement dates, subsidized benefits, and entitlement to optional forms of
payment, but not for accrual of benefits.
5.11 Employee Savings Plan.
5.11.1 Effective upon the date of the transfer described in
Section 5.11.2, subject to the terms and conditions of this Agreement, Parent
shall cause the Savings Plan for Employees of American Water Works Company, Inc.
(the "American Savings Plan") to assume the
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Arizona
liability of the Seller's 401(k) Plan for the account balances of those
Transferred Employees participating in the Seller's 401(k) Plan on the Closing
Date (the "Affected Participants") that are transferred to the American Savings
Plan. As of the Closing Date, Affected Participants shall be 100% vested in
their account balances under the Seller's 401(k) Plan. Transferred Employees
shall be given credit under the American Savings Plan for service with Seller
and its Affiliates for eligibility, vesting, attainment of retirement dates,
contribution levels and optional forms of benefit payment, to the same extent
that credit for such service has been given by Seller and its Affiliates.
5.11.2 Buyer shall deliver to Seller as soon as practicable,
but in no event later than ninety (90) days after Closing (i) a certified copy
of the American Savings Plan and any amendment necessary to effectuate the
transfer of assets and the assumption of account balances in accordance with
this Section 5.11, (ii) a certified copy of the trust agreement for the American
Savings Plan; (iii) the most recent favorable determination letter from the IRS
with respect to the American Savings Plan; and (iv) an opinion from Buyer's
legal counsel acceptable to Seller that the American Savings Plan, as so
amended, complies or will comply on a timely basis with the applicable
provisions of the Code relating to the qualification of, and the transfer of
assets and assumption of benefit liabilities by, the American Savings Plan.
Seller shall deliver to Buyer as soon as practicable, but in no event later than
ninety (90) days after Closing, an opinion from Seller's legal counsel
acceptable to Buyer that the Seller's 401(k) Plan complies or will comply on a
timely basis with the applicable provisions of the Code relating to the
qualification of the Seller's 401(k) Plan, and the transfer of assets to, and
assumptions of benefit limitations by, the American Savings Plan. As soon as
practicable, but in any event within 120 days after Closing, Seller shall cause
the trustee of the Seller's 401(k) Plan to transfer in cash and promissory notes
representing outstanding loans to Affected Participants to the trustee of the
American Savings Plan an amount equal to the sum of the account balances of the
Transferred Employees (the "Transferred Accounts") calculated as of the most
recent valuation date under the Seller's 401(k) Plan (which shall, in any event,
be within thirty (30) days of the transfer). Both the Seller Parties and Buyer
will file any IRS Form 5310A that is required with respect to the transfer
contemplated by this Section 5.11 date at least 30 days prior to the transfer.
Upon the transfer described in this Section 5.11, Buyer and the American Savings
Plan shall be responsible for all benefits attributable to the Transferred
Accounts to which Transferred Employees were entitled under the Seller's 401(k)
Plan as of such date, and Seller and the Seller's 401(k) Plan shall cease to
have any liability, contingent or otherwise, for such benefits.
5.12 Welfare Benefits.
5.12.1 Within sixty (60) days after the Closing, Seller agrees
to transfer to trusts established by Buyer under Section 501(c)(9) of the Code
("Buyer's VEBAs") the amount held under any trust established by Seller under
Section 501(c)(9) of the Code ("Seller's VEBAs") to fund post-retirement health
care and life insurance benefits attributable to the Business, including Former
Employees identified on Schedule 5.12 (the "Water Sector Retirees") and any
"grandfathered" Transferred Employees as set forth on Schedule 5.12. Buyer
agrees to provide post-retirement health care and life insurance benefits to the
Water Sector Retirees and, as applicable, Transferred Employees who become
eligible for such benefits after Closing and further agrees that Buyer's
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Arizona
VEBAs will apply an amount at least equal to the sum of the assets (and earnings
thereon calculated at the rate of return generated by Buyer's VEBAs) transferred
from Seller's VEBAs to provide post-retirement health care and life insurance
benefits for such employees. Upon Closing, Buyer shall be responsible for all
obligations of the Seller Parties to provide post-retirement health care and
life insurance benefits "incurred" (within the meaning of Section 5.9.4) after
the Closing and the Seller Parties shall cease to have any liability, contingent
or otherwise, for such benefits. In consideration of such transfer, Buyer agrees
not to terminate or materially modify those post-retirement health and life
benefit provisions applicable to such grandfathered Transferred Employees and
Water Sector Retirees as such provisions are in effect immediately prior to the
Closing Date.
5.12.2 Buyer shall take all action necessary and appropriate
to ensure that, as of the Closing Date, Buyer provides medical, health, dental,
flexible spending account, accident, life, short-term disability, long-term
disability and other employee welfare benefits (including retiree medical
benefits) to Transferred Employees that, in the case of Non-Union Transferred
Employees and Union Transferred Employees are substantially similar to those
benefits provided by Buyer under its corresponding welfare benefit plans (the
"Buyer's Welfare Plans"). For purposes of determining eligibility to
participate, and entitlement to benefits, in each Buyer Welfare Plan, each
Transferred Employee shall be credited with service, determined under the terms
of the corresponding welfare plans maintained by Seller on the Closing Date
(hereinafter referred to collectively as the "Seller Welfare Plans"). Any
restrictions on coverage for pre-existing conditions, waiting periods, and
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived in Buyer's Welfare Plans for Transferred Employees and retirees of the
Water Sector and their respective Beneficiaries, and Transferred Employees and
retirees of the Water Sector and their respective Beneficiaries shall receive
credit under the Buyer Welfare Plans for co-payments, payments under a
deductible limit made by them, and for out-of-pocket maximums applicable to them
during the plan year of the Seller Welfare Plan in which the Closing Date
occurs. As soon as practicable after the Closing Date, Seller shall deliver to
Buyer a list of the Transferred Employees and retirees of the Water Sector and
their respective Beneficiaries who had credited service under a Seller Welfare
Plan, together with each such individual's service, copayment, deductible and
out-of-pocket payment amounts under such plan.
5.12.3 Seller shall transfer to Buyer's flexible benefits plan
any balances standing to the credit of Transferred Employees under Seller's
flexible benefits plan as of the Closing Date. Seller shall provide to Buyer
prior to the Closing Date a list of those Transferred Employees that have
participated in the health or dependent care reimbursement accounts of Seller,
together with their elections made prior to the Closing Date with respect to
such Account, and balances standing to their credit as of the Closing Date.
5.13 Taxes. The Seller Parties, on the one hand, and Parent and
Buyer, on the other, shall (a) each provide the other with such assistance as
may reasonably be requested by either of them in connection with the preparation
of any Tax return, any audit or other examination by any taxing authority or any
judicial or administrative proceeding with respect to Taxes; (b) each retain and
provide the other with any records or other information which may be relevant to
such return,
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Arizona
audit, examination or proceeding, and (c) each provide the other with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any Tax return of the other for any
period (which shall be maintained confidentially). Without limiting the
generality of the foregoing, Parent and Buyer, on the one hand, and the Seller
Parties, on the other, shall retain, until the applicable statutes of
limitations (including all extensions) have expired, copies of all Tax returns,
supporting workpapers, and other books and records or information which may be
relevant to such returns for all Tax periods or portions thereof ending before
or including the Closing Date, and shall not destroy or dispose of such records
or information without first providing the other party with a reasonable
opportunity to review and copy the same.
5.14 Intentionally Omitted.
5.15 Citizens' Guarantees and Surety Instruments. Each of Parent and
Buyer shall use its reasonable efforts to assist Citizens in obtaining full and
complete releases on the guarantees, letters of credit, bonds and other surety
instruments listed on Schedule 5.15. In addition, until such time as Citizens'
guarantee to the City of ▇▇▇▇▇▇▇▇, Arizona (as listed as item 1 on Schedule
5.15) is released, Buyer shall deposit into a BancOne, Arizona trust account, on
the first business day of each calendar month commencing after the Closing Date,
cash in the amount of $43,430.00. Citizens will open such account at its expense
prior to Closing and, on the Closing Date, Sun City Sewer Company will deposit
into such account cash equal to the total accrued amount recorded on the books
of Sun City Sewer Company as of the Closing Date that is associated with the
City of ▇▇▇▇▇▇▇▇ Municipal Finance Corporation Refunding Series 1998 Bonds.
Buyer shall maintain such account after Closing and be responsible for all fees
and expenses of BancOne, Arizona, relating to such account arising after
Closing. For purposes of this Section 5.15 and Section 5.16, reasonable efforts:
(a) shall include Parent's or Buyer's assumption of the Assumed Indebtedness,
the Contracts and the Permits on the terms set forth in this Agreement; (b)
shall include an obligation on the part of Parent or Buyer to provide a
guarantee, letter of credit, bond or other required surety instrument at Closing
to the extent required by any Contract or Permit and in general to provide an
equivalent surety instrument to be substituted for any surety instrument
provided by Citizens to any beneficiary in connection with the Business; and (c)
shall include the obligation of Buyer and/or Parent to provide a debt obligation
(including obtaining a minimum credit rating necessary to prevent any change to
the tax-exempt status of any of the Assumed Indebtedness and providing credit
enhancements such as bond insurance) to the issuer of any Bonds relating to the
Assumed Indebtedness satisfactory to such issuer in replacement of and in
substitution for Citizens' obligations to such issuer under the Assumed
Indebtedness, all to enable Parent or Buyer to assume the Assumed Indebtedness.
5.16 Assumption of Seller Debt.
5.16.1 Each of Buyer and Parent shall use its reasonable
efforts (as defined in Section 5.15) to assist Seller in obtaining all consents
and opinions and taking such other actions as may be required to enable Buyer or
Parent, as the case may be, to assume at the Closing all of Seller's liabilities
and obligations under the Assumed Indebtedness to the extent provided in Section
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Arizona
2.3. If, after using such reasonable efforts, the parties reasonably conclude
that all such required consents and opinions will not be obtained by the date
that the conditions to Closing set forth in the first sentences of Sections
6.1.4 and 6.2.4 are expected to be satisfied, then Citizens, Parent and Buyer
will use their reasonable efforts and take such other actions as may be required
to enable Citizens to assign at the Closing all of Seller's liabilities and
obligations under the Assumed Indebtedness to the extent provided in Section
2.3, including complying with the provisions of Section 5.24 to the extent
applicable to such assignment of the Assumed Indebtedness.
5.16.2 Representations Re: Assumed Indebtedness.
(a) The Seller Parties represent that each of the Bonds
which make up the Assumed Indebtedness is a bond issue which was used to finance
sewage facilities within the meaning of Section 103(b)(4)(E) of the Internal
Revenue Code of 1954 as amended ("1954 Code") or Section 142(a)(5) of the Code,
as the case may be, or facilities for the furnishing of water within the meaning
of Section 103(b)(4)(G) of the 1954 Code or Section 142(a)(4) and Section 142(e)
of the Code, as the case may be, and that the interest of such Bonds was as of
their date of issue, excludable from the gross income of the holders of such
Bonds for federal or state (other than Illinois) income tax purposes pursuant to
such sections of the IRC or the Code. In the case of the facilities for the
furnishing of water (a) the water is or will be made available to members of the
general public (including electric utility, industrial, agricultural, or
commercial users) and (b) either the facility is operated by a governmental unit
or the rates for the furnishing or sale of the water have been established or
approved by a State or political subdivision thereof, by an agency or
instrumentality of the United States, or by a public service or public utility
commission or other similar body of any State or political subdivision thereof.
(b) The Seller Parties represent that they have complied
with all of their duties and obligations under the IDRB Documents, including
their obligations relating to the use of the proceeds of the bonds and the
ownership, operation, use and maintenance of the Assets financed with the
proceeds of the Bonds. Citizens and the other Seller Parties represent that the
representations and warranties of "Company" in the IDRB Documents remain true
and correct, and that they have not taken nor permitted to be taken any action
which would have the effect of subjecting the interest on any of such Bonds to
federal or state (other than Illinois) income taxation, except as otherwise
contemplated or permitted by the IDRB Documents.
(c) The Seller Parties represent that as of Closing all
the proceeds of the Bonds will have been spent in accordance with the IDRB
Documents, the construction of the projects to be financed with the Bonds will
have been completed, that there are no reserve funds associated with the Trust
Indentures for such Bonds, and that all of the proceeds of such Bonds were
invested in tax-exempt obligations of state and local governments (except to the
extent used to acquire or construct the facilities financed by such Bonds) and,
that therefore, the Seller Parties do not have any arbitrage profits subject to
the rebate requirements of Section 148 of the Code.
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Arizona
(d) The Seller Parties represent that there is and has
been no audit or other examination by any taxing authority relating to the
Bonds.
(e) The Seller Parties further represent the following
with respect to the Bonds:
(1) The Assets financed by the Bonds are sewage facilities or
facilities for the furnishing of water, which means that (a)
the water is or will be made available to members of the
general public (including electric utility, industrial,
agricultural, or commercial users) and (b) either the facility
is operated by a governmental unit or the rates for the
furnishing or sale of the water have been established or
approved by a State or political subdivision thereof, by an
agency or instrumentality of the United States, or by a public
service or public utility commission or other similar body of
any State or political subdivision thereof;
(2) They have not caused or permitted to be caused any reissuance
of the Bonds under Section 1001 of the Code, without first
obtaining a "no adverse effect" opinion of bond counsel;
(3) They have not caused an extension of the maturity of such
Bonds without first obtaining a "no adverse effect" opinion of
bond counsel;
(4) They have not taken or caused to be taken any action that
would cause the Bonds to be arbitrage bonds under Section 148
of the Code, including, but not limited to, the failure to
rebate arbitrage profits, if any, as required by Section
148(f) of the Code;
(5) They have not taken any action that would cause the Bonds not
to be registered in accordance with Section 149(a) of the
Code; and
(6) They have not permitted the Bonds to become directly or
indirectly "federally guaranteed" under Section 149 of the
Code.
5.16.3 Covenants of Parent and Buyer. Parent and Buyer
covenant and agree, so long as any Assumed IDRB Indebtedness is outstanding, to
cause the Assets that were acquired, constructed, improved or equipped with the
proceeds of such Assumed IDRB Indebtedness to be used as sewage facilities
within the meaning of Section 103(b)(4)(E) of the 1954 Code or Section 142(a)(5)
of the Code, as the case may be, and facilities for the furnishing of water
within the meaning of Section 103(b)(4)(G) of the 1954 Code or 142(a)(4) and
Section 142(e) of the Code, as the case may be, which means in the case of the
facilities for the furnishing of water that (a) the
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Arizona
water is or will be made available to members of the general public (including
electric utility, industrial, agricultural, or commercial users) and (b) either
the facility is operated by a governmental unit or the rates for the furnishing
or sale of the water have been established or approved by a State or political
subdivision thereof, by an agency or instrumentality of the United States, or by
a public service or public utility commission or other similar body of any State
or political subdivision thereof. Each of Parent and Buyer further covenants and
agrees, so long as any Assumed IDRB Indebtedness is outstanding, the following:
(a) It will not cause or permit to be caused any
reissuance under Section 1001 of the Code without first obtaining a "no adverse
effect" opinion of bond counsel;
(b) It will not cause an extension of the maturity of
the Bonds without first obtaining a "no adverse effect" opinion of bond counsel;
(c) It will not take or cause to be taken any action
that would cause the Bonds to be arbitrage bonds under Section 148 of the Code,
including, but not limited to, the failure to rebate arbitrage profits, if any,
as required by Section 148(f) of the Code;
(d) It will not take any action that would cause the
Bonds not to be registered in accordance with Section 149(a) of the Code;
(e) It will not permit the Bonds to become directly or
indirectly "federally guaranteed" under Section 149 of the Code; and
(f) It will comply with each representation, warranty,
covenant or other agreement or obligation set out by the IDRB Documents as in
effect on the date of execution of this Agreement.
5.17 Schedule of Permits. No later than March 13, 2000, Citizens
shall deliver to Buyer a schedule, to be identified as Schedule 5.17, which sets
forth all material Permits required for the use of the Acquired Assets and the
operation of the Business by Buyer substantially in the manner as it was
conducted prior to the date hereof. For purposes of this Section 5.17, material
Permits shall include those required for the service of all utility customers at
substantially the same service levels as provided by Seller on the date of this
Agreement. All Permits listed on Schedule 5.17 that are required to be listed on
Schedule 3.3 or Schedule 3.9 shall be so designated. Seller has made or will
make prior to the Closing Date timely applications for renewals of all such
Permits listed on Schedule 5.17, which under applicable law must be filed prior
to the Closing Date to maintain the Permits listed on Schedule 5.17 in full
force and effect.
5.18 Title Information. No later than March 13, 2000, Seller shall
use its reasonable efforts to deliver to Buyer true, correct and complete copies
of all existing title policies, surveys, leases, deeds, instruments and
agreements relating to title to the Real Estate in Seller's possession.
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Arizona
5.19 Transaction with Related Parties. Effective as of the Closing
Date, except as otherwise provided in Sections 5.9 through 5.12, 5.15, 5.24,
5.26, 5.27 and 2.7.1(j) of this Agreement, Seller shall have terminated and
canceled all contracts, commitments and agreements (including employment
relationships) relating to the Acquired Assets or the Business, between Seller,
any Affiliate of Seller (including Citizens), any officer or director of any
Seller Party, or any Affiliate of the foregoing. Seller shall be solely liable
for any contractual or other claims, express or implied arising out of the
termination and cancellation of any of the foregoing raised by any party
thereto.
5.20 Approval by Citizens. Citizens shall, as the sole owner of
common stock of each other Seller Party, vote all of such shares of common stock
to approve this Agreement and the transactions contemplated hereby.
5.21 Supplemental Information.
5.21.1 Citizens shall provide Buyer, within fifteen (15) days
after the execution or the date of receipt thereof, a copy of (a) each Contract
(other than with respect to which the Business' total annual liability or
expense is less than $100,000 per such Contract) entered into by Seller after
the date hereof and prior to the Closing Date; (b) a copy of any written notice
for assessments for public improvements against the Real Estate received after
the date hereof and prior to the Closing Date; (c) a copy of the filing of any
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any of the Real Estate received after the date hereof but
prior to the Closing Date; and (d) a copy of any Contract where Seller is a
lessee relating to the use or occupancy of the Real Estate and where such
Contract involves annual payments in excess of $100,000 entered into by Seller
after the date hereof and prior to the Closing Date.
5.21.2 Within fifteen (15) days after the receipt of notice of
violation, Citizens shall notify Buyer of any violations of state or federal
drinking water standards which, if such violations existed on the date hereof,
would be required to be disclosed pursuant to Section 3.8.10 hereof, and shall
promptly notify Buyer of the actions proposed to be taken by Seller to correct
or otherwise respond to such violations.
5.22 Non-Competition. The Seller Parties agree that for a period of
fifteen (15) years after the Closing Date no Seller Party nor any Affiliate of a
Seller Party shall directly or indirectly own, manage, operate, control or
participate in the ownership, management, operation or control of or be
otherwise connected in any substantial manner with any entity (other than Buyer
and its successors and assigns) engaged in the business of storing, supplying
and distributing water in the States in which Buyer acquires any Acquired
Assets, whether or not such business is subject to regulation by a PUC (it being
understood that the individual directors of Seller and Citizens are not
Affiliates of a Seller Party).
5.23 Intentionally Omitted.
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Arizona
5.24 IDRB Obligations.
(a) Buyer's IDRB Obligations. Each party acknowledges that (x)
Citizens is and after the Closing Date shall continue to be and shall remain the
primary obligor with respect to the Retained IDRB Indebtedness outstanding
immediately after the Closing Date to the same extent as though no sale of the
Acquired Assets had been made and that Parent and Buyer shall have no payment
obligations with respect to such Retained IDRB Indebtedness, (y) the IDRB
Documents require Citizens not to take or permit to be taken any action which
would have the effect, directly or indirectly, of subjecting the interest on any
of the Bonds to federal or state (other than Illinois) income taxation, and (z)
the IDRB Documents governing certain of the Bonds issued by The Industrial
Development Authority of the County of Maricopa, Arizona (the "Maricopa ▇▇▇"),
require Buyer to agree in writing with the Maricopa ▇▇▇ with respect to certain
matters relating to the operation, ownership, maintenance and use of the Assets
that were acquired, constructed, improved or equipped with the proceeds of such
Bonds. Accordingly, Parent and Buyer covenant and agree (i) to deliver to the
Maricopa ▇▇▇ on or prior to the Closing Date an agreement substantially in the
form attached hereto as Exhibit C, duly executed by Buyer, (ii) at Closing to
execute and deliver to Citizens an agreement substantially in the form attached
hereto as Exhibit D, with respect to each issuer of Bonds relating to Retained
IDRB Documents that will be outstanding after the Closing Date, (iii) so long as
any such Bonds are outstanding, to cause the Acquired Assets that were acquired,
constructed, improved or equipped with the proceeds of such Bonds to be used as
facilities for the furnishing of water (that is, (a) the water is or will be
made available to members of the general public (including electric utility,
industrial, agricultural, or commercial users) and (b) either the facility is
operated by a governmental unit or the rates for the furnishing or sale of the
water have been established or approved by a State or political subdivision
thereof, by an agency or instrumentality of the United States, or by a public
service or public utility commission or other similar body of any State or
political subdivision thereof) or sewage facilities within the meaning of
Section 103(b)(4)(E) of the 1954 Code, or Section 142(a)(5) of the Code as the
case may be.
(b) IDRB Construction Funds. Citizens hereby represents that
there will be no construction funds or unspent bond proceeds available after the
Closing Date that are held by the trustees of the Bonds relating to the Retained
IDRB Indebtedness.
(c) Consents and Opinions. The parties shall use their
respective best commercially reasonable efforts to obtain all consents and legal
opinions as may be required under the Retained IDRB Documents to enable Seller
to retain all Retained IDRB Indebtedness and to sell the Acquired Assets to
Buyer.
5.25 Cooperation with Respect to Like-Kind Exchange. Buyer agrees
that Seller may, at Seller's written election delivered to Buyer no later than
five (5) days prior to the Closing Date, direct that all or a portion of the
Initial Cash Payment be delivered to a "qualified intermediary" as defined in
Treasury Regulation ss.1.1031(k) - (g)(4) as to enable Seller's relinquishment
of the Acquired Assets to qualify as part of a like-kind exchange of property
covered
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Arizona
by Section 1031 of the Code. If Seller so elects, Buyer shall reasonably
cooperate with Seller (but without being required to incur any out-of-pocket
costs in the course thereof) in connection with Seller's efforts to effect such
like-kind exchange, which cooperation shall include, without limitation, taking
such actions as Seller reasonably requests in order to enable Seller to qualify
such transfer as part of a like-kind exchange of property covered by Section
1031 of the Code (including any actions reasonably required to facilitate the
use of a "qualified intermediary"), and Buyer agrees that Seller may assign all
or part of its rights (but no obligations) under this Agreement to a person or
entity acting as a qualified intermediary to qualify the transfer of the Assets
as part of a like-kind exchange of property covered by Section 1031 of the Code.
Buyer and Seller agree in good faith to use reasonable efforts to coordinate the
transactions contemplated by this Agreement with any other transactions engaged
in by either Buyer or Seller; provided that such efforts shall, in no event,
result in any delay in the consummation of the transactions contemplated by this
Agreement. Seller shall indemnify and hold Buyer harmless from any cost, expense
or liability arising from its cooperating under this Section 5.25.
5.26 Transition Plan. Within 30 days after the execution date of
this Agreement, the parties jointly shall establish a transitional services
team, which shall include expertise from various functional specialties
associated with or involved in providing billing, payroll and other support
services provided to Seller by any automated or manual process using facilities
or employees that are not included among the Acquired Assets or Transferred
Employees. Such team will be responsible for preparing, 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 Closing and any other transfer of control matters that any party
reasonably believes should be addressed in such transition plan. The transition
plan will set forth reasonable arrangements providing Buyer, at Buyer's sole
expense, with appropriate access to Seller's relevant computer systems to allow
for a full conversion of the relevant data and functionality to Buyer's systems
on the Closing Date. Buyer and Seller shall use their commercially reasonable
efforts to cause their representatives on such transition team to cooperate in
good faith and take all reasonable steps necessary to develop a mutually
acceptable transition plan no later than 60 days prior to the Closing Date.
5.27 Procedures regarding Refunds of Advances. Within 30 days after
the execution date of this Agreement, the parties jointly shall establish a
working group of appropriate subject matter experts to determine the appropriate
obligations of Parent and Buyer regarding notification and the provision of
other accurate and timely data to Citizens to enable Citizens timely and
accurately to satisfy the refund obligations described in Section 2.3.3(b). Such
working group will be responsible for preparing a comprehensive agreement no
later than March 13, 2000, which agreement shall be executed by the parties at
Closing. Among other arrangements, the parties would require that the customers
and developers owed refunds provide joint notices to Buyer and Citizens.
5.28 Title Insurance. Prior to Closing, Seller shall cooperate with
Buyer and use commercially reasonable efforts to assist Buyer if Buyer desires
to obtain ALTA title insurance commitments (collectively, the "Title
Commitments," and each a "Title Commitment"), in final
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Arizona
form, from one or more title insurance companies (collectively, the "Title
Company"), committing the Title Company (subject only to the satisfaction of any
industry standard requirements contained in the Title Commitment) to issuing
ALTA (or its local equivalent) form of title insurance policies insuring good,
valid, indefeasible fee simple title to the Real Estate in Buyer, in all cases,
at Buyer's sole expense and in the respective amounts that Buyer requests prior
to Closing, subject to no Liens or other exceptions to title other than
Permitted Exceptions (collectively the "Title Policies"). On or prior to the
Closing Date, Seller shall execute and deliver, or cause to be executed and
delivered, to the Title Company, at no cost to Seller, any customary affidavits,
standard gap indemnities and similar documents reasonably requested by the Title
Company in connection with the issuance of the Title Commitments or the Title
Policies; provided that such efforts and Buyers' request for Title Policies or
Title Commitments shall, in no event, result in any delay in the consummation of
the transactions contemplated by this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT; TERMINATION
6.1 Conditions Precedent to Obligations of Buyer and Parent. The
obligations of Buyer and Parent to cause the purchase of the Acquired Assets and
the assumption of the Assumed Liabilities and to consummate the other
transactions contemplated hereby are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions (any one or more of which
may be waived in writing in whole or in part by Buyer and Parent in their sole
discretion):
6.1.1 Performance of Agreements; Representations and
Warranties. Seller shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by them at or prior to the Closing; and the representations and
warranties set forth in this Agreement made by Seller shall be true and correct
on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date,
except for representations and warranties that speak as of a specific date or
time other than the Closing Date (which need only be true and correct as of such
date or time), other than, in all such cases (except Section 3.25), such
failures to be true and/or correct as would not in the aggregate reasonably be
expected to have a Material Adverse Effect; provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso); and provided further, that
the representation and warranty set forth in Section 3.5.1 shall be deemed to be
true and correct on and as of the Closing Date if any Material Adverse Effect
that may have arisen or occurred between the execution date of this Agreement
and the Closing Date shall have been cured or remedied such that such Material
Adverse Effect is not continuing as of the Closing Date. Buyer shall have been
furnished with a
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certificate of the Chief Financial Officer or other Vice President of Citizens
dated the Closing Date, certifying to the foregoing.
6.1.2 Opinion of Counsel. Buyer shall have received from L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, Vice President and General Counsel of Seller, an opinion
dated the Closing Date, in form and substance satisfactory to Buyer, to the
effect set forth in Exhibit E hereto.
6.1.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.1.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby, and such order
shall not contain any restrictions or conditions (other than those in effect on
the date hereof or requiring that the regulatory treatment with respect to the
Business in existence as of the date of this Agreement applicable to Seller be
continued following the transactions contemplated hereby) which would have a
Material Adverse Effect or a material adverse effect on any other regulated
business of Buyer in the state in which the PUC has jurisdiction, and such order
shall be final and unappealable; Seller shall have obtained all statutory,
regulatory and other consents and approvals which are required in order to
consummate the transactions contemplated hereby and to permit Buyer to conduct
the Business in the manner contemplated by Section 3.25 hereof other than those
the failure of which to obtain would not have a Material Adverse Effect. Seller
shall have also obtained (i) all consents and legal opinions required to enable
Parent or Buyer to assume (or for Citizens to assign to Parent or Buyer) the
Assumed Indebtedness (without any change in the tax-exempt status of such
Assumed Indebtedness and without any event of taxability relating to the matters
set forth in Sections 7.4.1(a)(D) and 7.4.1(b)(F)) and all other consents and
legal opinions required to enable Seller to sell the Acquired Assets to Buyer at
the Closing (without any change in the tax-exempt status of such Assumed
Indebtedness and without any event of taxability relating to the matters set
forth in Sections 7.4.1(a)(D) and 7.4.1(b)(F)), free and clear of all Liens
other than Permitted Exceptions (and specifically free and clear of any Lien
arising under or pursuant to the Mortgage Indenture) and (ii) all consents
required under Contracts and Permits relating to Seller's water appropriation
and flowage rights to the extent reasonably sufficient to enable Buyer to
service the customers of the Business and to service future commitments under
such Contracts.
6.1.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Buyer's ownership of all or any material portion
of the Acquired Assets, nor (ii) shall there be pending or threatened any
litigation, suit, action or proceeding by any party which would reasonably be
expected to materially limit or materially adversely affect Buyer's ownership of
the Acquired Assets.
6.1.6 Documents. Seller and Citizens shall have delivered all
of the certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 2.7 hereof and shall
have made arrangements reasonably satisfactory
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Arizona
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.
6.1.7 Related Closings. Buyer shall be reasonably satisfied
that the consummation of each of the asset purchase and sale transactions
contemplated by those certain purchase agreements described on Schedule 6.1.7
(the "Related Purchase Agreements") will occur concurrently with the Closing.
6.2 Conditions Precedent to Obligations of Seller Parties. The
obligations of the Seller Parties to cause the sale of the Acquired Assets and
to consummate the other transactions contemplated hereby are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions (any one or more of which may be waived in writing in whole or in
part by the Seller Parties in their sole discretion):
6.2.1 Performance of Agreements; Representations and
Warranties. Parent and Buyer shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them at or prior to the Closing; and the
representations and warranties set forth in this Agreement made by Buyer and
Parent shall be true and correct on and as of the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date, except for representations and warranties that speak
as of a specific date or time other than the Closing Date (which need only be
true and correct as of such date or time), other than, in all such cases (except
Section 4.2), such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a material adverse effect on the
respective ability of Buyer and Parent to perform their obligations under this
Agreement and the Transaction Documents, provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso). Seller shall have been
furnished with a certificate of the President or Vice President of Parent and
Buyer, dated the Closing Date, certifying to the foregoing.
6.2.2 Opinion of Counsel. Seller shall have received from
Dechert Price & ▇▇▇▇▇▇, counsel to Parent and Buyer, an opinion dated the
Closing Date, in form and substance satisfactory to Seller, to the effect set
forth in Exhibit F hereto.
6.2.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.2.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby and such order
shall not contain any restrictions or conditions which would have a material
adverse effect on Seller's business activities in the State in which the PUC has
jurisdiction or any significant adverse effect on Citizens'
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acquisition and divestiture activities in that State (including divestiture of
the Acquired Assets), and such order shall be final and unappealable; Seller
shall have obtained all statutory and regulatory consents and approvals which
are required in order to consummate the transactions contemplated hereby, other
than those the failure of which to obtain would not have a material adverse
effect on the Seller after the Closing. Seller shall have obtained (i) all
consents and legal opinions required to enable Parent or Buyer to assume (or
Citizens to assign to Parent or Buyer) the Assumed Indebtedness without any
change in the tax-exempt status thereof and without any event of taxability
relating to the matters set forth in Sections 7.4.1(a)(D) and 7.4.1(b)(F), (ii)
all consents and legal opinions required under the Retained IDRB Documents to
enable Seller to retain the Retained IDRB Indebtedness until maturity and to
sell the Acquired Assets to Buyer at the Closing (in each case without any
change in the tax-exempt status of the Assumed Indebtedness or the Retained IDRB
Indebtedness and without any event of taxability relating to the matters set
forth in Sections 7.4.1(a)(D) and 7.4.1(b)(F)), free and clear of all Liens
other than Permitted Exceptions (and specifically free and clear of any Lien
arising under or pursuant to the Mortgage Indenture), and (iii) all other
consents required or advisable in order for Seller to transfer Acquired Assets
without incurring material liability under any Contract, Permit or Real Estate
instrument.
6.2.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Seller's ownership of all or any material portion
of its properties, nor (ii) shall there be pending or threatened any litigation,
suit, action or proceeding by any party which could reasonably be expected to
materially limit or materially adversely affect Seller's ownership of any of its
properties.
6.2.6 Documents. Parent and Buyer shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Sections 2.7, 5.24 and 5.27,
and shall have taken such actions as Seller may have requested pursuant to
Section 5.25 hereof.
6.2.7 Related Closings. Seller shall be reasonably satisfied
that the consummation of each of the Related Purchase Agreements will occur
concurrently with Closing.
6.3 Termination. This Agreement may be terminated at anytime prior
to the Closing Date:
6.3.1 by mutual written consent of the Seller Parties, Buyer
and Parent;
6.3.2 by any of the Seller Parties, Parent or Buyer if: (i)
any governmental or regulatory body the consent of which is a condition to the
obligations of the Seller Parties, Parent and Buyer to consummate the
transactions contemplated hereby shall have determined not to grant its consent
and all appeals of such determination shall have been taken and have been
unsuccessful; (ii) any court of competent jurisdiction shall have issued an
order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the transactions
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Arizona
contemplated hereby and such order, judgment or decree shall have become final
and nonappealable; or (iii) the Closing shall not have occurred on or before
March 31, 2001; provided, however, that the right to terminate this Agreement
under this Section 6.3.2(iii) will not be available to any party that is in
material breach of its representations, warranties, covenants or agreements
contained herein; and provided, further, that if Closing has not occurred by
such date because the conditions precedent to Closing set forth in the first
sentence of Section 6.1.4 and the first sentence of Section 6.2.4 have not been
fulfilled, then such date shall be automatically extended to September 30, 2001;
or
6.3.3 If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 6.3, this
Agreement shall become void and of no further force and effect, except for the
provisions of Section 5.6 relating to publicity, Sections 3.24 and 4.6 relating
to brokerage and Section 7.1 relating to expenses. Nothing in this Section 6.3
shall be deemed to release either party from any liability for any willful
breach by such party of the terms and provisions of this Agreement.
ARTICLE 7
CERTAIN ADDITIONAL COVENANTS
7.1 Certain Taxes and Expenses. Citizens shall be solely responsible
for all state and local sales, use, transfer, real property transfer and other
similar taxes, fees and charges that are calculated based on the value of the
Acquired Assets being transferred arising from and with respect to the sale and
purchase of the Acquired Assets and Buyer shall be solely responsible for all
transfer, registration, documentary stamp, recording and other similar fees and
charges arising from and with respect to the transfer and recording of title
documentation relating to the Acquired Assets. Parent shall be responsible for
all costs and expenses relating to the assumption by or assignment to Parent or
Buyer of the Assumed Indebtedness. Except as otherwise provided in this
Agreement, each of the parties hereto shall each bear its respective accounting,
legal and other expenses incurred in connection with the transactions
contemplated by this Agreement.
7.2 Maintenance of Books and Records. The Seller Parties, on the one
hand, and Buyer and Parent, on the other hand, shall cooperate fully with each
other after the Closing so that (subject to any limitations that are reasonably
required to preserve any applicable attorney-client privilege) each party has
access to the business records, contracts and other information existing at the
Closing Date and relating in any manner to the Acquired Assets or the Assumed
Liabilities or the conduct of the Business (whether in the possession of the
Seller Parties or Buyer or Parent). No files, books or records existing at the
Closing Date and relating in any manner to the Acquired Assets or the conduct of
the Business shall be destroyed by any party for a period of six years after the
Closing Date without giving the other party at least 30 days prior written
notice, during which time such other party shall have the right (subject to the
provisions hereof) to examine and to remove any such files, books and records
prior to their destruction. The access to files, books and records contemplated
by this Section 7.2 shall be during normal business hours and upon not less than
two (2) business days prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information
56
Arizona
contained therein, and shall not extend to material subject to a claim of
privilege unless expressly waived by the party entitled to claim the same.
7.3 Survival.
7.3.1 Subject to this Section 7.3, Section 7.4.2(g) and
Section 7.4.2(j), all representations, warranties, covenants and agreements
contained in this Agreement or the Transaction Documents shall survive (and not
be affected in any respect by) the Closing, any investigation conducted by any
party hereto and any information which any party may receive. Notwithstanding
the foregoing:
(a) the covenants contained in Sections 5.1, 5.3, 5.4,
5.5, 5.8.2 through 5.8.4 and 5.21 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
(b) the covenants contained in Section 5.2 and the
related indemnity obligations contained in Section 7.4 shall terminate on, and
no action or claim with respect thereto may be brought after, the Closing Date;
(c) the representations and warranties contained in
Sections 3.12 and 3.16 and the related indemnity obligations contained in
Section 7.4 shall terminate on, and no action or claim with respect thereto may
be brought following the expiration of the applicable statute of limitations (or
extensions or waivers thereof);
(d) the representations and warranties contained in
Section 3.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(e) the representations and warranties contained in
Section 3.10 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
(f) the representations and warranties contained in
Section 3.7 and 3.17 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(g) the representations and warranties contained in
Sections 3.3, 3.5, 3.6, 3.8, 3.9 and 3.25 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
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Arizona
(h) the representations and warranties contained in
Section 3.11 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
(i) the representations and warranties contained in
Section 4.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(j) the representations and warranties contained in
Sections 4.3 and 4.4 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(k) the representations and warranties contained in
Section 4.5 and the related indemnity obligations contained in Section 7.4 shall
terminate on, and no action or claim with respect thereto may be brought after,
the Closing Date; and
(l) all other representations and warranties contained
in this Agreement and the related indemnity obligations contained in Section 7.4
shall terminate on and no further action or claim with respect thereto may be
brought after, the second anniversary of the Closing Date;
(m) such representations and warranties specified in the
foregoing clauses (c) through (k), and the covenants contained in Section 5.1,
5.2, 5.3, 5.4, 5.5, 5.8.2 through 5.8.4 and 5.21 and the liability of any party
with respect thereto, shall not terminate with respect to any claim, whether or
not fixed as to liability or liquidated as to amount, with respect to which such
party has been given written notice setting forth the facts upon which the claim
for indemnification is based and, if possible, a reasonable estimate of the
amount of the claims prior to the relevant anniversary of the Closing Date or
the 30th day after the expiration of the applicable statute of limitations (or
extensions or waivers thereof), as the case may be. If any claim for
indemnification is asserted or could be asserted with respect to a breach or
asserted breach of Section 3.17 (Undisclosed Liabilities) and the Buyer or
Parent is also entitled to indemnification in respect of that claim for breach
or asserted breach of any other representation or warranty in this Agreement for
which there is a shorter survival period, such shorter period will apply to such
claim except to the extent that such claim is a product liability, toxic tort or
similar claim (as described in Section 2.3.3(a)) brought by a private party
litigant.
7.3.2 No claim for indemnity under Section 7.4 shall be
brought or made by Buyer or Parent pursuant to Sections 7.4.1(a)(B) or
7.4.1(a)(C):
(a) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), for any action or claim with respect to the Pre-Existing Conditions;
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Arizona
(b) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), with respect to the presence of Hazardous Substances at any locations
other than the Real Estate; and
(c) after the third anniversary of the Closing Date, for
any action or claim with respect to any other Retained Liability;
Provided, however, that the foregoing time limitations shall not apply to
any such claims which have been the subject of a written notice from Parent
and/or Buyer to the Seller Parties prior to such period setting forth the facts
upon which the claim for indemnification is based and, if possible, a reasonable
estimate of the amount of the claims; and, provided, further, that the foregoing
time limitations shall also not apply to any such claims: (u) with respect to
Taxes; (v) with respect to any liability of the types that appear as "Trade
Payables" or "Other Current and Accrued Liabilities" (other than liabilities
arising after the Closing Date and relating to the Contracts listed as items
I.G.3(a), (b) and (c) on Schedule 3.6 (relating to the Tolleson contractual
arrangements) and the Contract listed as item I.G.4 (the Glendale contract) on
the financial statements of Seller; (w) not exclusively related to the Acquired
Assets or not exclusively related to the Business; and (x) with respect to any
of the matters discussed in Section 3.16 hereof.
For purposes of Sections 7.3.2(a) and (b), a "Change of Control of
Citizens" shall be deemed to have occurred if: (i) any "person" (as such term is
used in Section 13(d) and 14(d) of the Exchange Act of 1934, as amended (the
"Exchange Act"), other than an underwriter engaged in a firm commitment
underwriting on behalf of Citizens, is or becomes the beneficial owner (as such
term is used in Rule 13D-3 and 13D-5 under the Exchange Act, except that for
purposes of this clause (i) a person shall be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding shares of common stock of
the Company; (ii) all or substantially all of Citizens' and its Subsidiaries'
assets are sold, leased, exchanged or otherwise transferred to any person or
group of persons acting in concert; (iii) Citizens is merged or consolidated
with any other person, whether or not Citizens is the surviving corporation in
such merger or consolidation; or (iv) Citizens is liquidated or dissolved or
adopts a plan of liquidation.
7.4 Indemnification. Seller, Parent and Buyer agree as follows:
7.4.1 General Indemnification Obligations.
(a) Seller shall indemnify Buyer and its directors,
officers and other Affiliates (including Parent) and hold Buyer and such other
parties harmless from and against any and all Damages arising out of or
resulting from (A) any breach of any representation, warranty, covenant or
agreement made by the Seller Parties in this Agreement or in any document or
certificate required to be furnished to Buyer by any of the Seller Parties
pursuant to this Agreement (including the Transaction Documents); (B) subject to
Section 7.3.2, any Excluded Assets or Retained Liabilities; (C) subject to
Section 7.3.2, the ownership, operation or use of any of the businesses or
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Arizona
assets of the Seller Parties or their Affiliates (other than the Business and
the Acquired Assets) whether before, on or after the Closing Date; and (D) an
event of taxability, as such term is customarily used in municipal securities
transactions, relating to the Retained IDRB Indebtedness and arising from the
sale of the Acquired Assets pursuant to this Agreement.
(b) Buyer and Parent shall indemnify Seller, and their
directors, officers and other Affiliates (including Citizens) and hold Seller
and such other parties harmless from and against any and all Damages arising out
of or resulting from (A) any breach of any representation, warranty, covenant or
agreement made by Parent or Buyer in this Agreement or in any document or
certificate required to be furnished to Seller by Parent or Buyer pursuant to
this Agreement (including the Transaction Documents), including the Buyer's IDRB
Obligations; (B) any Assumed Liabilities after the Closing Date, including the
Assumed Indebtedness; (C) the ownership, operation or use of the Business or the
Acquired Assets after the Closing Date (except to the extent resulting from
Retained Liabilities or to the extent resulting from breaches by the Seller
Parties of representations, warranties, covenants or agreements hereunder or in
the other Transaction Documents); (D) any claim by a Transferred Employee or a
Former Employee referred to on Schedule 5.12 or the Beneficiary of any such
employee or former employee for post-retirement health care or life insurance
benefits "incurred" (within the meaning of Section 5.9.4) after the Closing; (E)
any violation by Parent or Buyer, or any assignee, lessee or successor of Parent
or Buyer, of the covenants and agreements as provided by Section 5.16.3 hereof
and Section 5 of Exhibit D hereto; and (F) an event of taxability, as such term
is customarily used in municipal securities transactions, relating to the
Assumed Indebtedness and arising from the sale of the Acquired Assets pursuant
to this Agreement and/or the assignment or assumption of the Assumed
Indebtedness.
(c) For purposes of this Agreement, "Damages" shall mean
any and all losses, liabilities, obligations, damages (including any
governmental penalty or punitive damages assessed or asserted against the party
seeking indemnification and including costs of investigation, clean-up and
remediation), deficiencies, interest, costs and expenses and any claims,
actions, demands, causes of action, judgments, costs and reasonable expenses
(including reasonable attorneys' fees and all other reasonable expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened, incident to the successful enforcement of this Agreement). For
purposes of this Section 7.4, the determination of whether any breach of any
representation, covenant or agreement has occurred, and the calculation of the
amount of Damages incurred by the Indemnified Party arising out of or resulting
from any breach of a representation, covenant or agreement by any party hereto,
the references to a "Material Adverse Effect" or materiality (or other
correlative terms) shall be disregarded, provided that no such breach shall be
found to have occurred due to facts or circumstances arising from an occurrence
or condition described in Section 1.1.61(a). Notwithstanding the foregoing,
Damages shall not include the loss of profits of the party seeking
indemnification, or punitive damages unless the party seeking indemnification
has had punitive damages assessed or asserted against it.
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(d) Notwithstanding any language contained in any
Transaction Document (including deeds to Real Estate and instruments delivered
by Seller to the Title Company), representations and warranties as to Real
Estate set forth in Section 3.10 and 3.11 will not be merged into any
Transaction Document and the indemnification obligations of Seller, and the
limitations on such obligations, set forth in this Agreement, shall control. No
provision set forth in any Transaction Document shall be deemed to enlarge,
alter or amend the terms or provisions of this Agreement.
7.4.2 General Indemnification Procedures.
(a) A party seeking indemnification pursuant to this
Section 7.4 (an "Indemnified Party") shall give prompt written notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of the
assertion of any claim, the incurrence of any Damages, or the commencement of
any action, suit or proceeding, of which it has knowledge and in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but failure to give such required notice shall relieve the Indemnifying
Party of any liability hereunder only to the extent that the Indemnifying Party
has suffered actual prejudice thereby. The Indemnifying Party shall have the
right, exercisable by written notice to the Indemnified Party after receipt of
notice from the Indemnified Party of the commencement of or assertion of any
claim or action, suit or proceeding by a third party in respect of which
indemnity may be sought hereunder (a "Third Party Claim"), to assume the defense
of such Third Party Claim which involves (and continues to involve) solely
monetary damages; provided, that (A) the Indemnifying Party expressly agrees in
such notice that, as between the Indemnifying Party and the Indemnified Party,
solely the Indemnifying Party shall be obligated to satisfy and discharge the
Third Party Claim, (B) such Third Party Claim does not include a request or
demand for injunctive or other equitable relief by an Authority and (C) the
Indemnifying Party makes reasonably adequate provision to assure the Indemnified
Party of the ability of the Indemnifying Party to satisfy the full amount of any
adverse monetary judgment that is reasonably likely to result. The Indemnifying
Party shall be deemed to have satisfied the condition set forth in clause (C) of
the proceeding sentence if it is a regulated utility.
(b) Neither the Indemnified Party nor the Indemnifying
Party shall settle any Third Party Claim without the prior written consent of
the other, which consent shall not be unreasonably withheld or delayed.
(c) The Indemnifying Party or the Indemnified Party, as
the case may be, shall have the right to participate in (but not control), at
its own expense, the defense of any Third Party Claim which the other party is
defending as provided in this Agreement.
(d) Amounts paid in respect of indemnification
obligations of the parties shall be treated as an adjustment to the Purchase
Price.
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(e) Subject to Section 7.4.2(f) and Section 7.4.2(i),
neither Parent nor Buyer (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages incurred
unless the aggregate amount of Damages incurred by Parent or Buyer (or the other
Persons for which they can claim indemnification), together with all other
claims for Damages under Section 7.4.2(e) of each of the Related Purchase
Agreements, exceeds $6,123,000 in the aggregate (the "Threshold Amount"), in
which case Seller shall then be liable for Damages in excess of the Threshold
Amount. Subject to Section 7.4.2(f) and Section 7.4.2(i), the cumulative
aggregate indemnity obligation of Citizens and its Affiliates under Section 7.4
of this Agreement and the Related Purchase Agreements shall not exceed
$60,000,000 (the "Ceiling").
(f) Notwithstanding the foregoing, the parties
acknowledge that Parent or Buyer (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages in respect
of intentional and wilful breaches of covenants or agreements in this Agreement
or any of the Retained Liabilities other than the Specified Liabilities
irrespective of the Threshold Amount or the Ceiling (it being understood that
the failure to cure a breach shall not, by itself, be an intentional and wilful
breach). As used herein, the "Specified Liabilities" shall mean the Retained
Liabilities arising from claims made after the Closing Date which (i) do not
relate to matters within the scope of clauses (u), (v), (w) and (x) of Section
7.3.2; (ii) were not known to the Seller Parties on or prior to Closing; and
(iii) relate exclusively to the Acquired Assets or the Business prior to the
Closing Date. Notwithstanding anything to the contrary in this Section 7.4,
Parent or Buyer (or the other Persons for which they can claim indemnification)
shall be entitled to indemnification for Damages in respect of a breach of
Section 3.2, 3.12 or 3.16 irrespective of the Threshold Amount or the Ceiling.
(g) The rights and remedies of Seller, Parent and Buyer
under this Section 7.4 are exclusive and in lieu of any and all other rights and
remedies which Seller, Parent and Buyer may have under this Agreement or
otherwise for monetary relief with respect to (x) the inaccuracy of any
representation, warranty, certification or other statement made (or deemed made)
by Seller, Parent or Buyer in or pursuant to this Agreement or any of the
Transaction Documents or (y) any breach or failure to perform any covenant or
agreements set forth in this Agreement or any of the Transaction Documents.
(h) Except to the extent provided in Section 7.4.2(j)
below, no right to indemnification under this Section 7.4 shall be limited by
reason of any investigation or audit conducted before or after the Closing of
any party hereto including, without limitation, the knowledge of such party of
any breach of any representation, warranty, agreement or covenant by the other
party at any time, or the decision by such party to complete the Closing.
(i) No party shall have any liability to another party
under this Section 7.4 for Damages (and no cost or expense relating to such
Damages shall be included in determining the extent of Damages incurred by such
party for purposes of Section 7.4.2(e)) to the extent that:
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(A) the Indemnified Party recovers insurance
proceeds covering the Damages or otherwise recovers payments in respect of such
Damages from any other source (whether in a lump sum or stream of payments); or
(B) the Indemnified Party's Tax liability is
actually reduced as a result of a tax benefit to which the Indemnified Party
becomes entitled in respect of the Damages.
(j) Seller shall have no liability or obligation under
this Section 7.4 for any Damages resulting from the inaccuracy or breach of any
representation or warranty if such inaccuracy or breach is disclosed by Seller
pursuant to and in accordance with Sections 5.3 and 8.4 hereof;
(k) Buyer agrees to use its commercially reasonable
efforts to give timely and effective written notice to the appropriate insurance
carrier(s) of any occurrence or circumstances which, in the judgment of Buyer
consistent with its customary risk management practices, appear likely to give
rise to a claim against Buyer that is likely to involve one or more insurance
policies of Buyer. Any such notice shall be given in good faith by Buyer without
regard to the possibility of indemnification payments by Seller under this
Section 7.4, and shall be processed by Buyer in good faith and in a manner
consistent with its risk management practices involving claims for which no
third party contractual indemnification is available. Buyer agrees that (i) if
it is entitled to receive payment from Seller for Damages arising under or
pursuant to a breach of the representation and warranty set forth in Section
3.10, and (ii) if Buyer has obtained title insurance which may cover the claim
or matter giving rise to such Damages, then (iii) such title insurance shall be
primary coverage and Buyer will make a claim under the title insurance if such
claim can be made in good faith before enforcing its right to receive payment
from Seller. Buyer shall be under no obligation to obtain title insurance or
prosecute such claim (other than the initial filing of such claim).
(l) If at any time subsequent to the receipt by an
Indemnified Party of an indemnity payment hereunder, such Indemnified Party (or
any Affiliate thereof) receives any recovery, settlement or other similar
payment with respect to the Damages for which it received such indemnity payment
(including insurance proceeds and other payments pursuant to Section 7.4.2(i)(A)
and a tax benefit pursuant to Section 7.4.2(i)(B)) (the "Recovery"), such
Indemnified Party shall promptly pay to the Indemnifying Party an amount equal
to the amount of such Recovery, less any expense incurred by such Indemnified
Party (or its Affiliates) in connection with such Recovery, but in no event
shall any such payment exceed the amount of such indemnity payment;
(m) In the event of any indemnification claim under this
Section 7.4 involving the claim of any third party, the Indemnified Party shall
cooperate fully (and shall cause its Affiliates to cooperate fully) with the
Indemnifying Party in the defense of any such claim under this Section 7.4.
Without limiting the generality of the foregoing, the Indemnified Party shall
furnish the Indemnifying Party with such documentary or other evidence as is
then in its or any of its Affiliates' possession as may reasonably be requested
by the Indemnifying Party for the purpose
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of defending against any such claim. Whether or not the Indemnifying Party
chooses to defend or prosecute any claim involving a third party, all the
parties hereto shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials and appeals, as may be reasonably
requested in connection therewith.
7.4.3 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.
7.5 UCC Matters. From and after the Closing Date, Seller will
promptly refer all inquiries with respect to ownership of the Acquired Assets or
the Business to Buyer. In addition, Seller will execute such documents and
financing statements as Buyer may reasonably request from time to time to
evidence transfer of the Acquired Assets to Buyer in accordance with this
Agreement, including any necessary assignment of financing statements.
7.6 Financial Statements. In connection with the preparation and
filing of any registration statement or periodic report of Buyer or its
Affiliates pursuant to Rule 3-05, Article 11 of Regulation S-X or other rule or
regulation promulgated under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, Seller, at Buyer's expense, shall
provide Buyer (a) by April 30, 2000 or within 120 days after Buyer's written
request therefor if made after January 1, 2000, with the following audited
financial statements: (i) a statement of net assets of the Business as of the
end of the last fiscal year prior to Closing; and (ii) a statement of income of
the Business and a statement of cash flows or its equivalent of the Business for
the last fiscal year prior to Closing (in each case combined with the businesses
being acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements), including opinions thereon of Seller's Accountants, and (b) within
90 days after Buyer's written request made therefor (provided such request is
made after the end of the fiscal quarter described below), the following
unaudited statements: (i) a statement of net assets of the Business as of the
end of the last fiscal quarter prior to Closing (but only if such quarter is
subsequent to the last fiscal year prior to Closing); and (ii) a statement of
income of the Business and a statement of cash flows or its equivalent of the
Business, for the period from the end of the last fiscal year through the end of
the last fiscal quarter prior to Closing (in each case combined with the
businesses being acquired by Buyer or Affiliates of Buyer pursuant to the
Related Purchase Agreements).
7.7 Collection of Receivables. Seller agrees that it shall promptly
(and in any event no later than five (5) Business Days following receipt)
deliver all such payments with respect
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to accounts receivable from customers of the Business received on and after the
Closing Date (including but not limited to negotiable instruments tendered in
payment of accounts receivable assigned to Buyer hereunder which shall be duly
endorsed by Seller to the order of Buyer) to Buyer. Seller shall cooperate with
Buyer in coordinating the transfer of collection agents and customers of the
Business who pay their bills through the Automated Clearinghouse (ACH) process
to Buyer.
ARTICLE 8
MISCELLANEOUS
8.1 Construction. Parent, Buyer and the Seller Parties have
participated jointly in the negotiation and drafting of this Agreement and the
Transaction Documents. In the event any ambiguity or question of intent or
interpretation arises, this Agreement and the Transaction Documents shall be
construed as if drafted jointly by Parent, Buyer and the Seller Parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" in this Agreement shall mean
including without limitation. Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
genders as the context requires. The terms "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole (including all of the Schedules and Exhibits
hereto) and not to any particular provision of this Agreement, and Article,
Section, paragraph, Exhibit and Schedule references are to the Articles,
Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise
specified. The word "or" shall not be exclusive. Provisions of this Agreement
shall apply, when appropriate, to successive events and transactions. Section
references refer to this Agreement unless otherwise specified.
8.2 Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy, by registered or certified
mail (return receipt requested) with postage and registration or certification
fees thereon prepaid, or by any nationally recognized overnight courier
addressed to the party at its address set forth below:
If to Parent:
American Water Works Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Buyer:
Arizona-American Water Company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporation Counsel
With a copy to Parent and a copy to:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Seller:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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with copies to:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that no party
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other party hereto; provided
that Seller may assign its rights or delegate its duties under this Agreement to
a qualified intermediary chosen by Seller to structure the transactions
contemplated hereby as a like-kind exchange of property covered by Section 1031
of the Code.
8.4 Exhibits and Schedules. All Exhibits and Disclosure Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Disclosure of any fact or item
in any Schedule referenced by a particular paragraph or Section in this
Agreement shall, should the existence of the fact or item or its contents be
clearly related to any other paragraph or section, be deemed to be disclosed
with respect to that other paragraph or section.
8.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the conflicts of laws principles thereof.
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8.6 Dispute Resolution. Except as otherwise provided herein, any
dispute, controversy or claim between the parties relating to, arising out of or
in connection with this Agreement (or any subsequent agreements or amendments
thereto), including as to its existence, enforceability, validity,
interpretation, performance or breach or as to indemnification or damages,
including claims in tort, whether arising before or after the termination of
this Agreement (any such dispute, controversy or claim being herein referred to
as a "Dispute") shall be settled without litigation and only by use of the
following alternative dispute resolution procedure:
(a) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Dispute. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties shall not
be admissible in the arbitration described below, or in any lawsuit. Documents
identified in or provided with such communications, which are not prepared for
purposes of the negotiations, are not so exempted and may, if otherwise
admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties
do not resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules, as then amended and in effect, of
the American Arbitration Association (the "Rules"); provided, however, that at
the election of either party, the arbitration shall take place before three (3)
arbitrators, one arbitrator being selected by Parent, one arbitrator being
selected by Citizen, and the third arbitrator, knowledgeable in the general
subject matter of the dispute, controversy or claim, being selected by the other
two arbitrators. Either party may demand such arbitration in accordance with the
procedures set out in the Rules. The parties hereto shall use reasonable efforts
to coordinate any arbitration commenced under this Agreement with any
arbitration on the same or similar issues commenced under any of the Related
Purchase Agreements so that the resolution of the arbitration under this
Agreement and the similar issues under the Related Purchase Agreements can be
resolved as expeditiously and efficiently as reasonably practicable. Reasonable
efforts shall include use of a common arbitrator or panel of arbitrators where
practicable. The arbitration shall take place in Newark, New Jersey. The
arbitration hearing shall be commenced within 60 days of such party's demand for
arbitration. The arbitrator(s) 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(s) 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(s), present testimony and written
evidence and examine witnesses. No party shall be eligible to receive, and the
arbitrator(s) shall not have the authority to award, exemplary or punitive
damages. The
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arbitrator(s) shall rule on the Dispute by issuing a written opinion within 30
days after the close of hearings. The arbitrators' majority decision shall be
binding and final. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator(s); provided, however, that if the arbitrator(s) determines that the
position taken in the Dispute by the non-prevailing party taken as a whole is
unreasonable, the arbitrator(s) may order the non-prevailing party to bear such
fees and expenses, and reimburse the prevailing party for all or such portion of
its reasonable costs and expenses in submitting and presenting its position, as
the arbitrator(s) 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(s) 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 8.6
and (ii) if any party, as party 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 8.6.
8.7 Severability. The parties agree that (a) the provisions of this
Agreement shall be severable in the event that any provision hereof is held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
(b) such invalid, void or otherwise unenforceable provision shall be
automatically replaced by another provision which is as similar as possible in
terms to such invalid, void or otherwise unenforceable provision but which is
valid and enforceable and (c) the remaining provisions shall remain enforceable
to the fullest extent permitted by law.
8.8 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or should be construed to confer upon or give to any Person
other than the parties hereto and their successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
8.9 Entire Agreement. This Agreement, the Schedules and Exhibits
hereto and the other Transaction Documents, and the Confidentiality Agreement
dated August 2, 1999, between Citizens and Parent, (i) together constitute the
entire understanding of the parties (and their affiliates) with respect to the
subject matter hereof, and any related matter, (ii) supercede all prior
agreements or understandings, written or oral, entered into by any of the
parties that concern the subject matter hereof and (iii) are not intended to
confer upon any Person other than the parties hereto any benefit, right or
remedy.
8.10 Amendment and Waiver. The parties may, by mutual agreement,
amend this Agreement in any respect, and any party, as to such party, may (i)
extend the time for the
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performance of any of the obligations of the other party; (ii) waive any
inaccuracies in representations and warranties by the other party; (iii) waive
compliance by the other party with any of the covenants or agreements contained
herein and performance of any obligations by the other party; and (iv) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party providing such
waiver or extension, as the case may be. The waiver by any party hereto of any
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach, whether or not similar.
8.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
8.12 Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
8.13 Definitions. For purposes of this Agreement, references to the
knowledge of the Seller Parties (including a reference to "the best of the
knowledge of the Seller Parties" and similar references) shall mean the actual
knowledge possessed by any of the following officers or employees of Citizens:
Chief Financial Officer, Vice President and Treasurer; President, Citizens
Public Services; Vice President, Corporate Human Resources; Secretary; Vice
President, Water; and the general manager of the Business.
8.14 No Implied Representation. NOTWITHSTANDING ANYTHING CONTAINED
IN THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT NEITHER
OF THE SELLER PARTIES ARE MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT, ANY SCHEDULE
HERETO, THE TRANSACTION DOCUMENTS, OR ANY DOCUMENT, EXHIBIT, CERTIFICATE,
INSTRUMENT OR STATEMENT TO BE DELIVERED HEREUNDER OR THEREUNDER INCLUDING, BUT
NOT LIMITED TO, ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO ANY OF
THE ACQUIRED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IT IS
UNDERSTOOD AND AGREED THAT ANY COST ESTIMATES, PROJECTIONS OR OTHER PREDICTIONS
CONTAINED OR REFERRED TO IN THE SCHEDULES AND ANY COST ESTIMATES, PROJECTIONS OR
PREDICTIONS OR ANY OTHER INFORMATION CONTAINED OR REFERRED TO IN OTHER MATERIALS
THAT HAVE BEEN OR SHALL HEREINAFTER BE PROVIDED TO PARENT, BUYER OR ANY OF THEIR
AFFILIATES, AGENTS OR REPRESENTATIVES ARE NOT AND SHALL NOT BE DEEMED TO BE
REPRESENTATIONS OR WARRANTIES OF ANY OF THE SELLER PARTIES.
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8.15 Construction of Certain Provisions. 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.
8.16 Bulk Sales. Buyer agrees that it shall not make any filings
under any tax bulk sales provisions with respect to the transactions
contemplated by this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
CITIZENS UTILITIES COMPANY
By:_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial
Officer, Vice President and Treasurer
CITIZENS BUSINESS SERVICES COMPANY
CITIZENS CONSUMER SERVICES, INC.
CITIZENS RESOURCES COMPANY
CITIZENS WATER RESOURCES COMPANY OF
ARIZONA
CITIZENS WATER SERVICES COMPANY OF
ARIZONA
HAVASU WATER COMPANY, INC.
SUN CITY SEWER COMPANY
SUN CITY WATER COMPANY
SUN CITY WEST UTILITIES COMPANY
TUBAC VALLEY WATER COMPANY, INC.
CITIZENS PUBLIC WORKS SERVICE COMPANY OF
ARIZONA
By:_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
AMERICAN WATER WORKS COMPANY, INC.
By:_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Treasurer
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ARIZONA-AMERICAN WATER COMPANY
By:_____________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇., President
California
EXECUTION COPY
ASSET PURCHASE AGREEMENT
among
CITIZENS UTILITIES COMPANY
AND
CERTAIN OF ITS AFFILIATES
AND
AMERICAN WATER WORKS COMPANY, INC. AND
CALIFORNIA-AMERICAN WATER COMPANY
Dated as of
October 15, 1999
California
TABLE OF CONTENTS Page
ARTICLE 1 DEFINITIONS......................................................1
1.1 Certain Definitions..............................................1
ARTICLE 2 THE TRANSACTION.................................................10
2.1 Sale and Purchase of Assets.....................................10
2.2 Excluded Assets.................................................10
2.3 Assumption of Certain Liabilities...............................11
2.4 Consent of Third Parties........................................14
2.5 Closing.........................................................14
2.6 Purchase Price..................................................15
2.6.1 Purchase Price............................................15
2.6.2 Payment of Initial Cash Payment...........................15
2.6.3 Estimated Closing Statement...............................15
2.6.4 Post-Closing Adjustment to Purchase Price.................16
2.6.5 Adjustment for Certain Liabilities........................17
2.6.6 Additional Adjustment to the Purchase Price...............18
2.7 Deliveries and Proceedings at Closing...........................18
2.7.1 Deliveries to Buyer.......................................18
2.7.2 Deliveries By Buyer to the Seller Parties.................19
2.8 Allocation of Consideration.....................................19
2.9 Prorations......................................................19
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER.......................20
3.1 Qualification; No Interest in Other Entities....................20
3.2 Authorization and Enforceability................................20
3.3 No Violation of Laws or Agreements..............................21
3.4 Financial Statements............................................21
3.5 No Changes......................................................22
3.6 Contracts.......................................................23
3.7 Permits and Compliance With Laws Generally......................23
3.8 Environmental Matters...........................................24
3.9 Consents........................................................26
3.10 Title...........................................................26
3.11 Real Estate.....................................................26
3.12 Taxes...........................................................27
3.13 Patents and Intellectual Property Rights........................27
3.14 Accounts Receivable.............................................27
3.15 Labor Relations.................................................27
3.16 Employee Benefit Plans..........................................28
3.17 Absence of Undisclosed Liabilities..............................29
3.18 No Pending Litigation or Proceedings............................30
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3.19 Supply of Utilities.............................................30
3.20 Insurance.......................................................30
3.21 Relationship with Customers.....................................30
3.22 WARN Act........................................................31
3.23 Condition of Assets.............................................31
3.24 Brokerage.......................................................31
3.25 All Assets......................................................31
3.26 Year 2000 Matters...............................................31
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER..............32
4.1 Organization and Good Standing..................................32
4.2 Authorization and Enforceability................................32
4.3 No Violation of Laws or Agreements..............................33
4.4 Consents........................................................33
4.5 Financing.......................................................33
4.6 Brokerage.......................................................34
4.7 Insurance.......................................................34
ARTICLE 5 ADDITIONAL COVENANTS............................................34
5.1 Conduct of Business.............................................34
5.2 Negotiations....................................................35
5.3 Disclosure Schedules............................................36
5.4 Mutual Covenants................................................36
5.5 Filings and Authorizations......................................37
5.6 Public Announcement.............................................37
5.7 Further Assurances..............................................38
5.8 Cooperation.....................................................38
5.9 Employees; Employee Benefits....................................39
5.10 Employee Pension Plan...........................................42
5.11 Employee Savings Plan...........................................42
5.12 Welfare Benefits................................................43
5.13 Taxes...........................................................44
5.14 Intentionally Omitted...........................................45
5.15 Citizens' Guarantees and Surety Instruments.....................45
5.16 Assumption of Seller Debt.......................................45
5.17 Schedule of Permits.............................................45
5.18 Title Information...............................................45
5.19 Transaction with Related Parties................................45
5.20 Approval by Citizens............................................46
5.21 Supplemental Information........................................46
5.22 Non-Competition.................................................46
5.23 Intentionally Omitted...........................................46
5.24 Intentionally Omitted...........................................46
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5.25 Cooperation with Respect to Like-Kind Exchange..................46
5.26 Transition Plan.................................................47
5.27 Procedures regarding Refunds of Advances........................47
5.28 Title Insurance.................................................47
ARTICLE 6 CONDITIONS PRECEDENT; TERMINATION...............................48
6.1 Conditions Precedent to Obligations of Buyer and Parent.........48
6.1.1 Performance of Agreements; Representations and Warranties.48
6.1.2 Opinion of Counsel........................................49
6.1.3 HSR Act...................................................49
6.1.4 Required PUC and Other Consents...........................49
6.1.5 Injunction; Litigation....................................49
6.1.6 Documents.................................................49
6.1.7 Related Closings..........................................49
6.2 Conditions Precedent to Obligations of Seller Parties...........50
6.2.1 Performance of Agreements; Representations and Warranties.50
6.2.2 Opinion of Counsel........................................50
6.2.3 HSR Act...................................................50
6.2.4 Required PUC and Other Consents...........................50
6.2.5 Injunction; Litigation....................................51
6.2.6 Documents.................................................51
6.2.7 Related Closings..........................................51
6.3 Termination.....................................................51
ARTICLE 7 CERTAIN ADDITIONAL COVENANTS....................................52
7.1 Certain Taxes and Expenses......................................52
7.2 Maintenance of Books and Records................................52
7.3 Survival........................................................52
7.4 Indemnification.................................................55
7.4.1 General Indemnification Obligations.......................55
7.4.2 General Indemnification Procedures........................56
7.4.3 Indemnification for Negligence............................59
7.5 UCC Matters.....................................................59
7.6 Financial Statements............................................59
7.7 Collection of Receivables.......................................60
ARTICLE 8 MISCELLANEOUS...................................................60
8.1 Construction....................................................60
8.2 Notices.........................................................61
8.3 Successors and Assigns..........................................62
8.4 Exhibits and Schedules..........................................62
8.5 Governing Law...................................................63
8.6 Dispute Resolution..............................................63
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8.7 Severability....................................................64
8.8 No Third Party Beneficiaries....................................64
8.9 Entire Agreement................................................64
8.10 Amendment and Waiver............................................65
8.11 Counterparts....................................................65
8.12 Headings........................................................65
8.13 Definitions.....................................................65
8.14 No Implied Representation.......................................65
8.15 Construction of Certain Provisions..............................66
8.16 Bulk Sales......................................................66
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v
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vi
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List of Schedules
Schedule 1.1.1(a) ................................................. Real Estate
Schedule 1.1.10 .......................................... Assumed Indebtedness
Schedule 2.2.12 ............................................... Excluded Assets
Schedule 2.6 ................................................... Purchase Price
Schedule 3.3 ............................... No Violation of Laws or Agreements
Schedule 3.4 ............................................. Financial Statements
Schedule 3.5 ....................................................... No Changes
Schedule 3.6 ........................................................ Contracts
Schedule 3.7 ....................... Permits and Compliance with Laws Generally
Schedule 3.8 ................................ Environmental Matters - Generally
Schedule 3.8.10 ............................... Compliance with Water Standards
Schedule 3.8.11 .............................................. Deed Restriction
Schedule 3.9 ......................................... Seller Parties' Consents
Schedule 3.10 ........................................................... Title
Schedule 3.11 ......................................... Real Estate Proceedings
Schedule 3.12 ........................................................... Taxes
Schedule 3.15 ................................................. Labor Relations
Schedule 3.16.1 ........................................ Employee Benefit Plans
Schedule 3.16.4 ........................... Employee Benefit Plans - Compliance
Schedule 3.16.9 ............... Employee Benefit Plans - Extraordinary Benefits
Schedule 3.17 .............................. Absence of Undisclosed Liabilities
Schedule 3.18 ............................ No Pending Litigation or Proceedings
Schedule 3.19 ............................................. Supply of Utilities
Schedule 3.20 .............................................. Seller's Insurance
Schedule 3.22 ........................................................ WARN Act
Schedule 3.23 ............................................. Condition of Assets
Schedule 3.25 ...................................................... All Assets
Schedule 3.27 ............................................... Product Liability
Schedule 4.7 ................................................ Buyer's Insurance
Schedule 5.1 .............................................. Conduct of Business
Schedule 5.9.1 ...................................................... Employees
Schedule 5.9.2 ............................... Collective Bargaining Agreements
Schedule 5.12 ................................................ Former Employees
Schedule 5.15 ............................................ Citizens' Guarantees
Schedule 5.16 ............................................. Schedule of Permits
Schedule 6.1.7 .................................... Related Purchase Agreements
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TABLE OF EXHIBITS
Exhibit A - Form of Assumption Agreement
Exhibit B - Form of Assignment and ▇▇▇▇ of Sale
Exhibit C - Intentionally Omitted
Exhibit D - Intentionally Omitted
Exhibit E - Form of Seller's Opinion of Counsel
Exhibit F - Form of Buyer's Opinion of Counsel
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ASSET PURCHASE AGREEMENT
THIS IS AN ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of October
15, 1999, by and among Citizens Utilities Company, a Delaware corporation
("Citizens"), and each of the wholly-owned subsidiaries of Citizens named on the
signature page hereof (collectively with Citizens, "Seller" or the "Seller
Parties"), and American Water Works Company, Inc., a Delaware corporation
("Parent"), and California-American Water Company, a California corporation
("Buyer").
Background
1. Citizens Utilities Company of California is a public utility engaged,
among other things, in the business of storing, supplying, distributing and
selling water to the public, wholesale water transmission, and related services
and activities in the State of California (the "Business").
2. Parent is a holding company which desires to cause the Buyer to
purchase substantially all of the assets, properties and rights of the Seller
Parties relating to the Business, and Seller desires to sell, and to cause the
sale of, such assets, properties and rights, on the terms and subject to the
conditions set forth in this Agreement.
Terms
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the respective meanings ascribed to them in this Section:
1.1.1 "Acquired Assets" means, subject to Section 2.2, all of
each Seller Party's right, title, and interest in, under and to all of the
assets, properties and rights exclusively used in the Business as a going
concern of every kind, nature and description existing on the Closing Date,
wherever such assets, properties and rights are located and whether such assets,
properties and rights are real, personal or mixed, tangible or intangible, and
whether or not any of such assets, properties and rights have any value for
accounting purposes or are carried or reflected on or specifically referred to
in Seller's books or financial statements, including all of the assets,
properties and rights exclusively relating to the Business enumerated below:
(a) all real property described in Schedule 1.1.1(a),
together with all fixtures, fittings, buildings, structures and other
improvements erected thereon, and easements,
California
rights of way, water lines, rights of use, licenses, railroad crossing
agreements, hereditaments, tenements, privileges and other appurtenances thereto
or otherwise exclusively related to the Business (such as appurtenant rights in
and to public streets) (the "Real Estate");
(b) to the extent not included in clause (a) above, all
water tanks, reservoirs, water works, plant and systems, purification and
filtration systems, pumping stations, pumps, wells, mains, water pipes,
hydrants, equipment, machinery, vehicles, tools, dies, spare parts, materials,
water supplies, fixtures and improvements, construction in progress, jigs,
molds, patterns, gauges and production fixtures and other tangible personal
property, in transit or otherwise, used exclusively in the Business (the
"Equipment and Other Tangible Personal Property");
(c) notwithstanding the provisions of Section 2.2 but
subject to Section 2.4, all of Seller's water appropriation and flowage rights
to the extent not transferred to Buyer upon assignment of the Contracts and
Permits to Buyer;
(d) all notes receivable, accounts receivable, accrued
utility revenues, materials and supplies (at average cost net of reserve for
obsolescence) and prepayments attributable in each case exclusively to the
Business;
(e) all unamortized debt expense related to the Assumed
Indebtedness, deferred capital costs, and other deferred charges (excluding
deferred taxes collectable) attributable exclusively to the Business of which
recovery in future rates is probable;
(f) Intellectual Property and goodwill, licenses and
sublicenses granted and obtained with respect thereto;
(g) subject to Section 2.4 hereof, (i) contracts,
commitments, agreements and instruments relating to the sale of any assets,
services, properties, materials or products, including all customer contracts,
operating contracts and distribution contracts relating exclusively to the
conduct of the Business; (ii) orders, contracts, supply agreements and other
agreements relating exclusively to the purchase of any assets, services,
properties, materials, or products for the Business; (iii) all leases of Real
Estate exclusively related to the Business; (iv) all other contracts, agreements
and instruments related exclusively to the Business (other than contracts,
agreements and instruments included in the definition of Real Estate or
Permits); and (v) any such contracts, agreements and other instruments referred
to in clauses (i) - (iv) inclusive, entered into between the date hereof and the
Closing Date which are consistent with the terms of this Agreement and are
entered into in the ordinary course of business consistent with past practice,
and including in the case of clauses (i) - (iv) all such contracts, agreements
and instruments more specifically listed or described in Schedule 3.6 (and
specifically including one Collective Bargaining Agreement to the extent
provided in Section 5.9.2, but specifically excluding any contract, agreement
and instrument listed or described on Schedule 2.2.12) (the "Contracts");
2
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(h) subject to Section 2.4 hereof, franchises,
approvals, permits, authorizations, licenses, orders, registrations,
certificates, variances, and other similar permits or rights obtained from any
Authority relating exclusively to the conduct of the Business and all pending
applications therefor (the "Permits");
(i) books, records, ledgers, files, documents (including
originally executed copies of written Contracts, to the extent available, and
copies to the extent not available), correspondence, Tax returns relating
exclusively to the Business, memoranda, forms, lists, plats, architectural
plans, drawings, and specifications, new product development materials, creative
materials, advertising and promotional materials, studies, reports, sales and
purchase correspondence, books of account and records relating to the
Transferred Employees (to the extent such transfer is not prohibited by law),
photographs, records of plant operations and materials used, quality control
records and procedures, equipment maintenance records, manuals and warranty
information, research and development files, data and laboratory books,
inspection processes, in each case, whether in hard copy or magnetic format, in
each instance, to the extent exclusively relating to the Business, the Acquired
Assets or the Transferred Employees;
(j) all rights or choses in action arising out of
occurrences before or after the Closing Date and exclusively related to any of
the Acquired Assets, including third party warranties and guarantees and all
related claims, credits, rights of recovery and set-off and other similar
contractual rights, as to third parties held by or in favor of Seller; provided,
however, that (notwithstanding the foregoing provisions of this Section
1.1.1(j)), to the extent that Seller pays or discharges a liability related to
the Business or any of the Acquired Assets and related to such right or chose in
action (whether by reason of indemnification under this Agreement or otherwise),
Buyer will reassign or reconvey to 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; and
(k) all rights to insurance and condemnation proceeds
(i) to the extent relating to the damage, destruction, taking or other
impairment of the Acquired Assets which damage, destruction, taking or other
impairment occurs on or prior to the Closing but only to the extent that the
proceeds exceed the amount of the write-down of the net book value of such
Acquired Assets on the books and records of Seller as a result of such damage,
destruction, taking or other impairment and (ii) to the extent they relate to
amounts paid by Buyer for Damages to the extent Buyer does not receive payment
pursuant to Section 7.4.1(a), but only to the extent Buyer is entitled to
indemnification by Seller pursuant to Sections 7.3 and 7.4.
1.1.2 "Adjusted Net Assets" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.3 "Affected Participant" has the meaning set forth as
Section 5.11.1 hereof.
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1.1.4 "Affiliate" of any Person means any Person, directly or
indirectly controlling, controlled by or under common control with such Person.
1.1.5 "Agreement" has the meaning set forth in the
introduction hereof.
1.1.6 "American Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.7 "American Savings Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.8 "Antitrust Division" has the meaning set forth in
Section 5.5 hereof
1.1.9 "Assumed Benefit Liabilities" has the meaning set forth
in Section 3.16.6 hereof.
1.1.10 "Assumed Indebtedness" means the liabilities and
obligations from and after the Closing Date (except as set forth below) with
respect to the loan document listed as item I.L.1 of Schedule 3.6 with respect
to the indebtedness of Citizens Utilities Company of California owed to the
State of California Department of Water Resources (the "California Water Debt"),
to the extent assumed by Buyer. For purposes of clarity, except as set forth in
the next sentence below, "Assumed Indebtedness" shall not include any liability
or obligation to the extent accrued prior to the Closing Date or to the extent
arising out of or relating to an event, circumstance or occurrence prior to the
Closing Date. "Assumed Indebtedness" shall include the outstanding principal
amount and the accrued but unpaid interest owed by Seller on the debt
obligations set forth in the first sentence of this definition, if such debt
obligations are assumed by Buyer.
1.1.11 "Assumed Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.12 "Assumption Agreement" has the meaning set forth in
Section 2.3.2 hereof.
1.1.13 "Authority" means any federal, state, local or foreign
governmental or regulatory entity (or any department, agency, authority or
political subdivision thereof).
1.1.14 "Base Cash Purchase Price" has the meaning set forth in
Section 2.6.1 hereof.
1.1.15 "Beneficiary" means the Person(s) designated by an
Employee, by operation of law or otherwise, as entitled to compensation,
benefits, insurance coverage, payments or any other goods or services under a
Benefit Plan.
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1.1.16 "Benefit Plans" has the meaning set forth in Section
3.16.1 hereof.
1.1.17 Intentionally Omitted.
1.1.18 "Business" has the meaning set forth in the Background
section hereof.
1.1.19 Business Day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the Commonwealth of
Pennsylvania are authorized or obligated by law or executive order to close.
1.1.20 "Buyer" has the meaning set forth in the introduction
hereof.
1.1.21 Intentionally Omitted.
1.1.22 "Buyer's Accountants" means PricewaterhouseCoopers LLP
or any firm of independent public accountants hereafter designated by Buyer for
purposes of this Agreement.
1.1.23 Intentionally Omitted
1.1.24 "Ceiling" has the meaning set forth in Section 7.4.2(e)
hereof.
1.1.25 "CERCLA" has the meaning set forth in Section 3.8.2
hereof.
1.1.26 "CERCLIS" has the meaning set forth in Section 3.8.7
hereof.
1.1.27 "Citizens" has the meaning set forth in the
introduction hereof.
1.1.28 "Closing" has the meaning set forth in Section 2.5
hereof.
1.1.29 "Closing Date" has the meaning set forth in Section 2.5
hereof.
1.1.30 "Closing Statement of Net Assets" has the meaning set
forth in Section 2.6.4(a) hereof.
1.1.31 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.32 "Collective Bargaining Agreement" means the agreement
identified as such on Schedule 3.6 hereto.
1.1.33 "Competing Transaction" has the meaning set forth in
Section 5.2.
1.1.34 "Contracts" has the meaning set forth in Section
1.1.1(g) hereof.
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1.1.35 "Control" with respect to any Person means the
ownership, directly or indirectly, of at least a majority of the voting power of
each class of capital stock of such Person entitled to vote in the election of
directors of such Person generally.
1.1.36 "Damages" has the meaning set forth in Section 7.4.1
hereof.
1.1.37 "Disclosure Schedules" means the Schedules referenced
in Articles 3, 4 and 5 of this Agreement, as amended or supplemented pursuant to
Section 5.3.
1.1.38 "Dispute" has the meaning set forth in Section 8.6.
1.1.39 "Employees" has the meaning set forth in Section 5.9.1
hereof.
1.1.40 "Environmental Laws" has the meaning set forth in
Section 3.8 hereof.
1.1.41 "Equipment and Other Tangible Personal Property" has
the meaning set forth in Section 1.1.1(b) hereof.
1.1.42 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.1.43 "ERISA Affiliate" means (a) any corporation included
with any of the Seller Parties in a controlled group of corporations within the
meaning of Section 414(b) of the Code; (b) any trade or business (whether or not
incorporated) which is under common control with any of the Seller Parties
within the meaning of Section 414 of the Code; any member of an affiliated
service group of which any of the Seller Parties is a member within the meaning
of Section 414(m) of the Code; or (d) any other person or entity treated as an
affiliate of any of the Seller Parties under Section 414(o) of the Code.
1.1.44 "Excluded Assets" has the meaning set forth in Section
2.2 hereof.
1.1.45 "Financial Statements" has the meaning set forth in
Section 3.4 hereof.
1.1.46 "FIRPTA Affidavit" has the meaning set forth in Section
2.7.1 hereof.
1.1.47 "Former Employees" means all salaried and hourly
employees once employed by Seller or any of its Affiliates, but who are no
longer so employed on the Closing Date.
1.1.48 "FTC" has the meaning set forth in Section 5.5 hereof.
1.1.49 "GAAP" has the meaning set forth in Section 3.4 hereof.
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1.1.50 "Hazardous Substance" has the meaning set forth in
Section 3.8 hereof.
1.1.51 "HSR Act" has the meaning set forth in Section 3.9
hereof.
1.1.52 Intentionally Omitted.
1.1.53 Intentionally Omitted.
1.1.54 "Indemnified Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.55 "Indemnifying Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.56 "Intellectual Property" means the trademarks, patents,
trade names and copyrights and applications therefor, inventions, trade secrets,
and confidential business information (including know-how, formulas, water
filtration, purification and pumping processes and techniques, technical data,
designs, drawings, customer and supplier lists, and business and marketing plans
and proposals), all computer software (including data and related documentation
and object and source codes), whether in magnetic format or hard copy, and
tangible embodiments thereof (in whatever form or medium) of Seller, in each
case, utilized exclusively in the Business.
1.1.57 "Interim Statement of Net Assets" means the Citizens
Water Resources Statement of Net Assets - California, June 30, 1999, which is
attached hereto as Schedule 3.4.
1.1.58 "Interim Statement of Net Assets Date" means June 30,
1999.
1.1.59 "IRS" has the meaning set forth in Section 3.16.2
hereof.
1.1.60 "Lien" means any lien, charge, claim, pledge, security
interest, conditional sale agreement or other title retention agreement, lease,
mortgage, security agreement, right of first refusal, option, restriction,
tenancy, license, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction).
1.1.61 "Material Adverse Effect" means a change or effect (or
series of related changes or effects) which has or is reasonably likely to have
a material adverse change in or effect upon the business, assets, condition
(financial or otherwise), or results of operations of the Business or the
Acquired Assets, taken as a whole and taken together with the businesses and
assets being acquired by Buyer or Affiliates of Buyer pursuant to the Related
Purchase Agreements. For purpose of this Agreement, an occurrence or condition
shall not constitute a Material Adverse Effect
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(a) if it arises from general business, economic or financial market conditions,
from conditions generally effecting the industries in which Seller competes, or
from the transactions contemplated by this Agreement, or (b) to the extent that
it consists of strikes, work stoppages, walk-outs, slow-downs or other business
interruption at the facilities in California that are part of the Acquired
Assets, or (c) solely with respect to matters arising prior to Closing, to the
extent that either (i) Seller realizes the benefit of insurance maintained by
Citizens on or prior to the Closing Date and Buyer receives the cash proceeds of
such insurance to the extent required by Section 1.1.1(k), or (ii) Seller
arranges for Buyer to recover payments in respect of such occurrence or
condition from any other source (whether in a lump sum or stream of payments),
it being understood and agreed that a Material Adverse Effect may have occurred
irrespective of such insurance recovery if the occurrence or condition giving
rise to such recovery also causes a non-monetary material adverse change in or
effect upon the Business or the Acquired Assets, taken as a whole and taken
together with the businesses and assets being acquired by Buyer or Affiliates of
Buyer pursuant to the Related Purchase Agreements.
1.1.62 "Mortgage Indenture" means Indenture of Mortgage and
Deed of Trust between BNY Western Trust Company (successor in interest to ▇▇▇▇▇
Fargo Bank, N.A.) and First Interstate Bank of California (as successor trustee
to Marine Midland, N.A., formerly the Marine Midland Trust Company of New York).
1.1.63 "OSHA" has the meaning set forth in Section 3.7.1
hereof.
1.1.64 "PCBs" has the meaning set forth in Section 3.8.6
hereof.
1.1.65 "Permits" has the meaning set forth in Section 1.1.1(h)
hereof.
1.1.66 "Permitted Exceptions" has the meaning set forth in
Section 3.10 hereof; provided, however, that from and after the Closing,
Permitted Exceptions shall not include any Lien arising under or resulting from
the Mortgage Indenture.
1.1.67 "Person" means an individual, a corporation, a
partnership, an association, an Authority, a trustor other entity or
organization.
1.1.68 "Pre-Existing Conditions" has the meaning set forth in
Section 2.3.1(d).
1.1.69 "Prime Rate" means the rate per annum announced from
time to time during the reference period by Citibank N.A. as its United States
prime, reference or base rate for commercial loans.
1.1.70 "PUC" has the meaning set forth in Section 5.5 hereof.
1.1.71 "Purchase Price" has the meaning set forth in Section
2.6.1 hereof.
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1.1.72 "Real Estate" has the meaning set forth in Section
1.1.1(a) hereof.
1.1.73 "Recovery" has the meaning set forth in Section
7.4.2(l) hereof.
1.1.74 "Related Purchase Agreements" as the meaning set forth
in Section 6.1.7 hereof.
1.1.75 "Release" or "Released" has the meaning set forth in
Section 3.8 hereof.
1.1.76 "Remedial Action" has the meaning set forth in Section
3.8 hereof.
1.1.77 Intentionally Omitted.
1.1.78 "Retained Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.79 "Review Period" has the meaning set forth in Section
2.6.4(b) hereof.
1.1.80 "SEC" means the U.S. Securities and Exchange
Commission.
1.1.81 "Securities Filings" has the meaning set forth in
Section 5.8.2 hereof.
1.1.82 "Seller" and "Seller Parties" have the respective
meaning set forth in the introduction hereof.
1.1.83 "Seller's Accountants" means KPMG LLP or any other firm
of independent public accountants hereafter designated by Seller for purposes of
this Agreement.
1.1.84 "Seller's Adjusted Amount" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.85 "Seller's Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.86 "Seller's 401(k) Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.87 "Specified Liabilities" has the meaning set forth in
Section 7.4.2(f) hereof.
1.1.88 "Taxes" means any federal, state, local and foreign
income, payroll, withholding, excise, sales, use, personal property, use and
occupancy, business and occupation, mercantile, real estate, gross receipts,
license, employment, severance, stamp, premium, windfall profits, social
security (or similar unemployment), disability, transfer, registration, value
added,
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alternative, or add-on minimum, estimated, or capital stock and franchise
and other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
1.1.89 "Third Accounting Firm" has the meaning set forth in
Section 2.6.4(b) hereof.
1.1.91 "Threshold Amount" has the meaning set forth in Section
7.4.2(e) hereof.
1.1.92 "Third Party Claim" has the meaning set forth in
Section 7.4(b)(i) hereof.
1.1.93 "Transferred Accounts" has the meaning set forth in
Section 5.11.2 hereof.
1.1.94 "Transaction Documents" has the meaning set forth in
Section 3.2 hereof.
1.1.95 "Transferred Employees" has the meaning set forth in
Section 5.9.2 hereof.
1.1.96 "Union Employees" has the meaning set forth in Section
5.9.1 hereof.
1.1.97 "VEBAs" has the meaning set forth in Section 5.12
hereof.
1.1.98 "WARN Act" means the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. section 2102- 2109, as amended.
ARTICLE 2
THE TRANSACTION
2.1 Sale and Purchase of Assets. Subject to the terms and conditions
of this Agreement, at the Closing referred to in Section 2.5 below, Citizens
shall, and shall cause the other Seller Parties to, sell, assign, transfer,
deliver and convey to Buyer, and Parent shall cause Buyer to purchase, the
Acquired Assets for the Purchase Price specified in Section 2.6.
2.2 Excluded Assets. The following assets of Seller shall be
excluded from the Acquired Assets (the "Excluded Assets"):
2.2.1 assets of the Seller used in both the Business and in
Citizens' gas, electric or communications businesses, the material items of
which are described on Schedule 2.2.12;
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2.2.2 cash and cash equivalents in transit, in hand or in bank
accounts.
2.2.3 except as otherwise set forth herein, assets
attributable or related to any Benefit Plan;
2.2.4 the stock record and minute books of Seller;
2.2.5 Acquired Assets disposed of by Seller after the date of
this Agreement to the extent such dispositions are not prohibited by this
Agreement;
2.2.6 except to the extent set forth in Sections 2.9, rights
to refunds of Taxes payable with respect to the Business, assets, properties or
operations of any of the Seller Parties or any member of any affiliated group of
which any of them is a member, and which are treated as Retained Liabilities
under Section 2.3.3(b) below.
2.2.7 customer and other deposits held in Seller's accounts;
2.2.8 accounts owing by and among Seller and its Affiliates;
2.2.9 notes receivable and other receivables (other than note
and accounts receivable attributable exclusively to the Business);
2.2.10 all deferred tax assets or collectibles;
2.2.11 duplicate copies of all books and records transferred
to Buyer; and
2.2.12 those certain items listed on Schedule 2.2.12.
2.3 Assumption of Certain Liabilities.
2.3.1 Buyer shall not assume any liabilities of Citizens or
Seller or any of their Affiliates, except that Buyer shall assume the following
specific liabilities and obligations:
(a) the obligations and liabilities set forth in
Sections 5.9, 5.10, 5.11 and 5.12 hereof;
(b) except as set forth in Section 2.3.3(b), all
liabilities and obligations of Seller in respect of the Contracts and Permits
assigned or transferred to Buyer pursuant to this Agreement in accordance with
the respective terms thereof, except that Buyer shall not assume any liabilities
or obligations for any breach or default by, or payment obligations of, Seller
under such Contracts and Permits occurring or arising or accruing on or prior to
the Closing Date;
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(c) the Assumed Indebtedness;
(d) any liability, obligation or responsibility of
Seller for conditions at the Real Estate, whether based on statutory or common
law, now or hereafter in effect, known or unknown, contingent or actual,
relating to or arising from pollution, contamination or protection of the
environment, human health or safety or natural resources or relating to or
arising from the presence or Release or threat of Release of Hazardous
Substances into the environment at the Real Estate or into or from any building,
structure, pipeline or other facility at the Real Estate, or from violation of
any law relating to the foregoing, including without limitation, any CERCLA or
similar liability under any federal or state law or regulation, except to the
extent Buyer has given written notice of a claim for indemnification pursuant to
Sections 7.3 and 7.4 hereof prior to the expiration of the claims period set
forth in Section 7.3.2(a) or (b) (and if Buyer has given written notice prior to
the expiration of such claims period, to the extent that such claim is not
entitled to indemnification under Sections 7.3 and 7.4) (the foregoing, the
"Pre-Existing Conditions");
(e) all liabilities and obligations of Seller related to
unperformed service obligations, easement and right-of-way relocation
obligations, and construction work in progress, and all engineering and
construction required to complete scheduled construction and other capital
projects for the Business, in each case relating to the Business 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, or payment obligations
of, Seller under such Contracts and Permits occurring or arising or accruing on
or prior to the Closing Date;
(f) liability for accrued but unused vacation pay for
the Transferred Employees to the extent provided in Section 5.9.2;
(g) any liability, obligation or responsibility relating
to customer deposits held by Seller on the Closing Date and relating to the
Business; and
(h) all liabilities and obligations imposed on Buyer by
any PUC in connection with the operation of the Business or the ownership of the
Acquired Assets, including with respect to any liability of the types that
appear as "Accrued Liabilities" and "Non-Current Liabilities" on the financial
statements of Seller.
2.3.2 Any liabilities or obligations which are assumed
by Buyer pursuant to Section 2.3.1 above are hereinafter referred to as the
"Assumed Liabilities." At the Closing, Parent shall cause Buyer to execute and
deliver to Seller an assumption agreement, in substantially the form of the
Assumption Agreement attached hereto as Exhibit A (the "Assumption Agreement"),
pursuant to which Buyer shall assume the Assumed Liabilities. Each of Parent and
Buyer hereby irrevocably and unconditionally waives and releases the Seller
Parties from all Assumed Liabilities and all liabilities or obligations
exclusively relating to the Business or the Acquired Assets to the extent
arising from events or occurrences after the Closing or to the extent otherwise
relating to the period after the Closing, including any liabilities created or
which arise by statute or common law,
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including CERCLA (it being understood that this shall not constitute a waiver
and release of any claims arising out of the contractual relationships and
indemnification arrangements between Buyer and Seller).
2.3.3 Buyer shall not assume any liabilities, commitments or
obligations (contingent or absolute and whether or not determinable as of the
Closing) of any of the Seller Parties or any of their Affiliates except for the
Assumed Liabilities as specifically and expressly provided for above, whether
such liabilities or obligations relate to payment, performance or otherwise, and
all liabilities, commitments or obligations not expressly transferred to Buyer
hereunder as Assumed Liabilities are being retained by the Seller Parties, (the
"Retained Liabilities"). Each of the Seller Parties hereby irrevocably and
unconditionally waives and releases Buyer from all Retained Liabilities
including any liabilities created or which arise by statute or common law,
including CERCLA (it being understood that this shall not constitute a waiver
and release of any claims arising out of the contractual relationships and
indemnification arrangements between Buyer and Seller).
Without limitation to the foregoing, all of the following shall be
considered Retained Liabilities and not Assumed Liabilities (except as specified
below) for the purposes of this Agreement:
(a) any product liability, toxic tort or similar claim
for injury to person or property, regardless of when made or asserted, to the
extent that it arises out of or is based upon any express or implied
representation, warranty, agreement or guarantee made by any of the Seller
Parties or any of their Affiliates prior to Closing, or alleged to have been
made by any of such Persons, or to the extent that it is imposed or asserted to
be imposed by operation of law, in connection with any service performed or
product distributed or sold by or on behalf of any of the Seller Parties or any
of their Affiliates prior to Closing, including any claim referred to above in
this Section 2.3.3(a) relating to water quality standards, any claim relating to
any product delivered in connection with the performance of services provided by
Seller and any claim seeking recovery for consequential damages, lost revenue or
income;
(b) all refund obligations relating to the advances
existing on the Closing Date for construction of facilities relating to the
Business;
(c) except to the extent set forth in Section 2.9, any
federal, state, foreign or local income or other Tax payable with respect to the
business, assets, properties or operations of any of the Seller Parties or any
member of any affiliated group of which any of them is a member.
(d) any liability or obligation associated with or in
connection with any common plant assets of Seller (other than the liabilities
and obligations exclusively related to any common plant assets included among
the Acquired Assets);
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(e) except as provided in Section 2.3.1 above, any
liability or obligation with respect to compensation or employee benefits of any
nature owed to any employees, agents or independent contractors of any of the
Seller Parties or any of their Affiliates, whether or not employed by Buyer
after the Closing, that arises out of or relates to events or conditions to the
extent occurring before the Closing Date;
(f) except to the extent set forth in Section 2.3.1(d),
any liability, obligation or responsibility of any of the Seller Parties, or any
of their Affiliates or predecessors, whether based on statutory or common law,
but only as any such law is interpreted, amended and in effect on the Closing
Date, known or unknown, contingent or actual, relating to or arising from
pollution, contamination or protection of the environment, human health or
safety or natural resources or relating to or arising from the presence or
Release or threat of Release of Hazardous Substances into the environment or
into or from any building, structure, pipeline or other facility or relating to
or arising from the generation, use, storage, treatment, disposal, transport or
other handling of Hazardous Substances or sale or product containing Hazardous
Substances from violation of any law relating to the foregoing (but only as such
law is interpreted, amended and in effect on the Closing Date) including without
limitation, any (A) CERCLA or similar liability under any federal or state law
or regulation as interpreted, amended and in effect on the Closing Date or (B)
any such liability associated with businesses or assets of the Seller Parties
other than the Business or the Acquired Assets;
(g) liabilities and obligations relating to the Business
to the extent arising prior to Closing (unless otherwise constituting Assumed
Liabilities) arising by operation of law under any common law or statutory
doctrine (including successor liability or de facto merger);
(h) any obligation or liability arising under any
contract, commitment, instrument or agreement (1) subject to the penultimate
sentence of Section 2.4, that is not transferred to Buyer as part of the
Acquired Assets, or (2) that relates to any breach or default (or to the extent
that it relates to an event which would, with the passing of time or the giving
of notice, or both, constitute a default) under any Contract, instrument or
agreement or to any services to be provided by Seller under any such Contract,
instrument or agreement to the extent that such services were performed or were
required to have been performed on or prior to the Closing Date;
(i) any liability or obligation in respect of the
Excluded Assets;
(j) any liability or obligation of any of the Seller
Parties or any of their Affiliates existing as a result of any act, failure to
act or other state of facts or occurrence which constitutes a breach or
violation of any of Seller's representations, warranties, covenants or
agreements contained in this Agreement, except to the extent set forth in
Section 7.4; or
(k) except for the Assumed Liabilities as specifically
and expressly set forth herein, any liability to the extent arising out of or
relating to the ownership or operation of the Acquired Assets or the Business
prior to the Closing Date (including any predecessor
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operations), any claims, obligations or litigation to the extent arising out of
or relating to events or conditions occurring before the Closing Date, and any
liability associated with any business other than the Business.
2.4 Consent of Third Parties. On the Closing Date, Citizens shall
cause Seller to assign to Buyer, and Parent shall cause Buyer to assume, the
Contracts and the Permits which are to be transferred to Buyer as provided in
this Agreement by means of the Assumption Agreement. To the extent that the
assignment of all or any portion of any Contract or Permit shall require the
consent (or result in a breach or violation thereof) of the other party thereto
or any other third party, and such consent shall not be obtained prior to
Closing, this Agreement shall not constitute an agreement to assign any such
Contract or Permit included in the Acquired Assets. In order, however, to
provide Buyer the full realization and value of every Contract of the character
described in the immediately preceding sentence, Seller agrees that on and after
the Closing, it will, at the request and under the direction of Buyer, in the
name of Seller or otherwise as Buyer shall specify, take all reasonable actions
(including without limitation the appointment of Buyer as attorney-in-fact for
Seller to proceed at Buyer's sole cost and expense) and do or cause to be done
all such things as shall in the reasonable opinion of Buyer be necessary (a) to
assure that the rights of Seller or its Affiliates under such Contracts shall be
preserved for the benefit of Buyer and (b) to facilitate receipt of the
consideration to be received by Seller or its Affiliates in and under every such
Contract. To the extent that Buyer does receive the benefits of any such
Contract pursuant to the preceding sentence, such Contract shall be a Contract
"assigned or transferred to Buyer pursuant to this Agreement" within the meaning
of Section 2.3.1(b) hereof. Nothing in this Section 2.4 shall in any way
diminish the obligations of Seller to obtain consents and approvals under this
Agreement.
2.5 Closing. Subject to the terms and conditions of this Agreement,
the closing of the sale and purchase of the Acquired Assets (the "Closing")
shall take place at 10 a.m., East Coast time, on a date mutually satisfactory to
Buyer and Seller which is no later than the fifth Business Day after
satisfaction (or waiver) of the conditions to Closing set forth in Sections 6.1
and 6.2 hereof (other than those conditions which require the delivery of any
documents or the taking of other action, at the Closing) at the offices of
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇,
or on such other date and at such other time or place as may be mutually agreed
upon by the parties hereto (the "Closing Date"). Upon payment of the Initial
Cash Payment by Buyer and confirmed receipt thereof by Seller or the Escrow
Agent pursuant to Section 2.6.2 below, Seller shall operate the Business at the
direction of and under the control of Buyer. Notwithstanding the foregoing, the
Closing shall be deemed to be effective as of 11:59 p.m. on the Closing Date for
all purposes.
2.6 Purchase Price.
2.6.1 Purchase Price. Subject to the terms and conditions of
this Agreement, the aggregate purchase price be paid by Buyer for the purchase
of the Acquired Assets (the "Purchase Price") shall be: (i) $161,330,000 in cash
(the "Base Cash Purchase Price," the Base Cash Purchase Price as adjusted in
accordance with Section 2.6.3, Section 2.6.5 and Section 2.6.6
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is referred to as the "Initial Cash Payment"), subject to adjustment pursuant to
the provisions of this Agreement (including Section 2.6.3, Section 2.6.4,
Section 2.6.5, Section 2.6.6 and Section 2.9 of this Agreement) and (ii) the
assumption by Buyer of the Assumed Liabilities.
2.6.2 Payment of Initial Cash Payment. Subject to the terms
and conditions of this Agreement, the Initial Cash Payment shall be paid by
Buyer on the Closing Date by federal other wire transfer of immediately
available funds to the account designated by Seller in writing at least two (2)
Business Days prior to the Closing Date. 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 Initial Cash Payment to Buyer's
lead bank (the "Escrow Agent") in immediately available funds in U.S. dollars.
Upon receipt, the Escrow Agent shall invest the Initial Cash Payment in an
interest-bearing account mutually agreed upon by Seller and Buyer. At Closing,
Parent shall sign and deliver to Citizens a statement which confirms that the
Closing has occurred and which instructs the Escrow Agent to transfer to
Citizens the funds representing the Initial Cash Payment, plus an amount
representing the interest earned after the Closing Date until the date the funds
are transferred, to an account that Citizens shall designate at least two (2)
business days prior to the date the funds are required to be transferred
hereunder. The Escrow Agent shall refund the balance to Buyer. The fees and
expenses of Escrow Agent shall be paid by Buyer.
2.6.3 Estimated Closing Statement. At least five (5) business
days prior to the Closing Date, Citizens shall deliver to Parent and Buyer a
statement of net assets (the "Estimated Statement of Net Assets") reflecting its
good faith calculation of the Acquired Assets of the Business as of the last day
of the latest calendar month for which financial statements of Seller are
available (the "Estimated Adjusted Net Assets"). The Estimated Statement of Net
Assets shall be prepared in the same manner and utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets (excluding for this purpose any change required by GAAP
or any Authority since June 30, 1999). The Base Cash Purchase Price shall be
increased or decreased on a dollar for dollar basis by the amount, if any, by
which the Estimated Adjusted Net Assets is greater than or less than $93,819,658
(such increase or decrease, as the case may be, is referred to herein as the
"Estimated Net Asset Adjustment").
2.6.4 Post-Closing Adjustment to Purchase Price.
(a) Within 90 days after the Closing, Citizens shall
prepare and deliver to Parent and Buyer a Statement of Net Assets (the "Closing
Statement of Net Assets") which reflects the Acquired Assets, as of 11:59 p.m.
on the Closing Date, based on actual financial performance and calculated in the
same manner, utilizing the same accounting principles, policies and methods
utilized in preparing the Interim Statement of Net Assets (excluding for this
purpose any change required by GAAP or any Authority since June 30, 1999),
together with (A) an audit report of Seller's Accountants stating that the
Closing Statement of Net Assets has been prepared utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets and (B) a calculation of Citizens' determination of the
amount of increase
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or decrease in the amount of the Acquired Assets of the Business from the
Interim Statement of Net Assets Date to the Closing Date which is derived from
the Closing Statement of Net Assets ("Seller's Adjustment Amount"). The Closing
Statement of Net Assets shall not give effect to any purchase accounting
treatment arising from Buyer's purchase of the Acquired Assets. Buyer shall pay
the fees and expenses of Seller's Accountants incurred in connection with this
Section 2.6.4. Buyer agrees to cooperate, and agrees to cause Buyer's
Accountants to cooperate, with Citizens and Seller's Accountants in connection
with the preparation of the Closing Statement of Net Assets, and related
information, and shall provide to Citizens and Seller's Accountants such books,
records and information as may be reasonably requested from time to time,
including the work papers of Buyer's Accountants. Citizens will give Buyer and
its representatives access during the normal business hours of Citizens to the
personnel, books and records of Citizens and the work papers of Seller's
Accountants to assist Buyer in the review of the Closing Statement of Net Assets
and related matters. Buyer agrees that, following the Closing through the date
on which the Closing Statement of Net Assets is delivered, it will not take any
actions with respect to any accounting books, records, policies or procedures on
which the Closing Statement of Net Assets is to be based that would make it
impossible or impracticable to calculate the Acquired Assets in the manner and
utilizing the methods required hereby. Without limiting the generality of the
foregoing, no changes shall be made in any reserve or other account existing as
of the date of the Interim Statement of Net Assets except in the ordinary course
or as a result of events occurring after the date of the Interim Statement of
Net Assets and, in such event, only in a manner consistent with past practices
of Seller.
(b) Parent or Buyer may dispute any amounts reflected on
the Closing Statement of Net Assets, in the Seller's Adjustment Amount or in the
Statement of Certain Assumed Liabilities, provided, however, that Buyer shall
notify Citizens in writing of each disputed amount, and specify the amount
thereof in dispute and the basis of such dispute, within 30 days of the Buyer's
receipt of the Closing Statement of Net Assets and the Seller's Adjustment
Amount (such 30 day period hereinafter referred to as the "Review Period"). In
the event of a dispute with respect to the Closing Statement of Net Assets, the
Seller's Adjustment Amount or the Statement of Certain Assumed Liabilities,
Buyer and Seller shall attempt to reconcile their differences and any resolution
by them as to any disputed amounts shall be final, binding and conclusive on the
parties. If Buyer and Seller are unable to reach a resolution of such
differences within 30 days of receipt of Buyer's written notice of dispute to
Seller, Buyer and Seller shall submit the amounts remaining in dispute (together
with any amounts remaining in dispute pursuant to Section 2.6.4(b) of each of
the Related Purchase Agreements) for resolution to an independent accountant
firm of national reputation mutually appointed by Seller and Buyer (such
independent accounting firm being herein referred to as the "Third Accounting
Firm"), which shall be requested to determine and report to the parties, within
30 days after such submission, upon such remaining disputed amounts, and such
report shall be final, binding and conclusive on the parties hereto with respect
to the amounts disputed. The fees and disbursements of the Third Accounting Firm
shall be allocated between Buyer and the Seller Parties so that the Seller
Parties' share of such fees and disbursements shall be in the same proportion
that the aggregate amount of such remaining disputed amounts so submitted by
Buyer to the Third Accounting Firm that is unsuccessfully disputed by the Buyer
(as finally determined by the Third Accounting Firm) bears to the total amount
of such remaining disputed
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amounts so submitted by the Buyer to the Third Accounting Firm. Buyer shall pay
the fees and expenses of Buyer's Accountants incurred in connection with this
Section 2.6.4(b). Seller's Adjustment Amount, if there are no disputes with
respect thereto, or Seller's Adjustment Amount as adjusted after the resolution
of all disputes with respect thereto in accordance herewith, shall be referred
to as the "Final Net Asset Adjustment."
(c) If the Base Cash Purchase Price plus (or minus, if
negative) the Final Net Asset Adjustment exceeds the Initial Cash Payment, then
within five (5) business days after final determination thereof Buyer shall pay
Seller the amount of such excess together with interest thereon for the period
commencing on the Closing Date through the date of payment calculated at the
Prime Rate in cash by federal or other wire transfer of immediately available
funds, or certified or bank cashier's check. If the Initial Cash Payment exceeds
the sum of the Base Cash Purchase Price plus (or minus, if negative) the Final
Net Asset Adjustment, then within five (5) business days after final
determination thereof Seller shall pay Buyer the amount of such excess together
with interest thereon for the period commencing on the Closing Date through the
date of payment calculated at the Prime Rate in cash by federal or other wire
transfer of immediately available funds, or certified or bank cashier's check.
2.6.5 Adjustment for Certain Liabilities. Concurrent with the
delivery of the Estimated Statement of Net Assets, Citizens also shall deliver
to Parent and Buyer a statement reflecting (i) the customer and other deposits
held by Seller on the Closing Date and relating to the Business, (ii) the total
amount of the Assumed Indebtedness that will be outstanding immediately after
the Closing Date, (iii) the items specified in Section 2.9 to the extent set
forth therein, and (iv) without duplications of any amount included in clause
(i) above any payments received by Seller under the Contracts and Permits for
obligations not performed as of the Closing Date (the "Statement of Certain
Assumed Liabilities"). The Statement of Certain Assumed Liabilities shall
reflect Citizens' good faith calculation of such liabilities as of the Closing
Date. The Base Cash Purchase Price shall be decreased by the net amount set
forth in the Statement of Certain Assumed Liabilities. Concurrent with the
delivery of the Closing Statement of Net Assets, Citizens also shall deliver to
Parent a statement showing any adjustments to the Statement of Certain Assumed
Liabilities and the Base Cash Purchase Price shall be further adjusted to give
effect to any such adjustments to the Statement of Certain Assumed Liabilities.
2.6.6 Additional Adjustment to the Purchase Price. The Base
Cash Purchase Price shall be decreased by an amount equal to the proceeds of
Seller's sale of the property described in Item 2 of Schedule 5.1 (net of
expenses) less the sum of (i) the federal and state income taxes payable by
Seller in respect of those proceeds and (ii) the book value of such property, as
of June 30, 1999, on Seller's books.
2.7 Deliveries and Proceedings at Closing. Subject to the terms and
conditions of this Agreement, at the Closing:
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2.7.1 Deliveries to Buyer. Citizens shall, and shall cause
Seller to deliver to Buyer:
(a) bills of sale and instruments of assignment to the
Acquired Assets, duly executed by Seller, substantially in the form of Exhibit B
hereto and;
(b) the consents to transfer, of all transferable or
assignable Contracts, Intellectual Property, Permits (including Environmental
Permits), to the extent specifically required hereunder;
(c) title certificates to any motor vehicles included in
the Acquired Assets, duly executed by Seller (together with any other transfer
forms necessary to transfer title to such vehicles);
(d) special warranty deeds of conveyance with respect to
the parcels of Real Estate owned in fee simple by Seller (or, with respect to
any such parcel which was acquired by Seller (or its predecessor in interest, in
cases involving mergers) by deed without covenant or warranty of title, a quit
claim deed without covenant or warranty of title) to Buyer, duly executed and
acknowledged by Seller and in recordable form;
(e) the Foreign Investment in Real Property Tax Act
Certification and Affidavit for each parcel of Real Estate, duly executed by the
Seller Parties (the "FIRPTA Affidavit");
(f) the certificates, opinions and other documents
required to be delivered by the Seller Parties pursuant to Section 6.1 hereof
and certified resolutions evidencing the authority of the Seller Parties as set
forth in Section 3.2 hereof;
(g) all agreements and other documents required by this
Agreement;
(h) a receipt for the payment of the Initial Cash
Payment duly executed by Citizens; and
(i) all such other instruments of conveyance as shall,
in the reasonable opinion of Buyer and its counsel, be necessary to transfer to
Buyer the Acquired Assets in accordance with this Agreement and where necessary
or desirable, in recordable form.
2.7.2 Deliveries By Buyer to the Seller Parties. Parent shall,
and shall cause Buyer to deliver to the Seller Parties:
(a) wire transfer of immediately available funds in an
amount equal to the Initial Cash Payment;
(b) the Assumption Agreement, duly executed by Buyer;
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(c) the certificates, opinions and other documents
required to be delivered by Buyer pursuant to Section 6.2 hereof;
(d) all of the instruments contemplated by Section
5.24(a) to the extent not previously executed and delivered by Parent; and
(e) all such other instruments of assumption as shall,
in the reasonable opinion of Seller and its counsel, be necessary for Parent and
Buyer to assume the Assumed Liabilities in accordance with this Agreement.
2.8 Allocation of Consideration. Buyer and Seller shall use their
good faith efforts to agree upon the allocation (the "Allocation") of the
Purchase Price, the Assumed Liabilities and other relevant items (including, for
example, adjustments to the Purchase Price) to the individual assets or classes
of assets within the meaning of Section 1060 of the Code. If Buyer and Seller
agree to such Allocation on or before ninety (90) days after the Closing Date,
Buyer and Seller covenant and agree that (i) the values assigned to the assets
by the parties' mutual agreement shall be conclusive and final for all purposes,
and (ii) neither Buyer nor Seller will take any position before any Authority or
in any proceeding that is in any way inconsistent with such Allocation.
Notwithstanding the foregoing, if Buyer and Seller cannot agree to an Allocation
on or before ninety (90) days after the Closing Date, Buyer and Seller covenant
and agree to file and to cause their respective Affiliates to file, all Tax
returns and schedules thereto (including, for example, amended returns, claims
for refund, and those returns and forms required under Section 1060 of the Code
and any Treasury regulations promulgated thereunder) consistent with each of
Buyer and Seller's good faith Allocations, unless otherwise required because of
a change in any legal requirement.
2.9 Prorations. The parties hereto agree that the following expenses
shall be calculated and pro rated as of the Closing Date, with Seller
responsible for such expenses and to receive the benefit for the same for the
period through and including the Closing Date, and Buyer to be responsible for
and to receive the benefit of the same after the Closing Date:
2.9.1 personal and real property taxes (on the basis on which
the same were assessed and paid) and sales, occupation and use taxes, in each
case, to the extent relating to the Business and except as otherwise provided in
Section 7.1;
2.9.2 electric, fuel, gas, telephone, sewer and utility
charges, in each case, to the extent relating to the Business;
2.9.3 rentals and other charges under Contracts to be assumed
by Buyer pursuant to Section 2.3 (except to the extent provided in Section
2.3.3(h)); and
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2.9.4 charges under maintenance and service contracts and
other Contracts (except to the extent provided in Section 2.3.3(h)), and fees
under Permits to be transferred to Buyer as part of the Acquired Assets;
2.9.5 water, sewer and other similar types of taxes, and
installments on special benefit assessments; and
2.9.6 payroll expenses, payroll taxes, reimbursable employee
business expenses and the financial cost of the accrued vacation of each
Transferred Employee.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Each of the Seller Parties jointly and severally represent and warrant to
Parent and Buyer as follows:
3.1 Qualification; No Interest in Other Entities.
3.1.1 Each of the Seller Parties is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to own, lease
and operate the Acquired Assets and the Business as presently being conducted.
Each of the Seller Parties is qualified to do business and is in good standing
as a foreign corporation in all jurisdictions wherein the nature of the business
conducted by it or such Seller Party's ownership or use of assets and properties
make such qualification necessary, except such failures to be qualified or to be
in good standing, if any, which when taken together with all such other failures
of the Seller Parties do not have a Material Adverse Effect.
3.1.2 No shares of any corporation or any ownership or other
investment interest, either of record, beneficially or equitably, in any Person
are included in the Acquired Assets.
3.2 Authorization and Enforceability. Each of the Seller Parties has
full corporate power and authority to execute, deliver and perform this
Agreement and all other agreements and instruments to be executed by them in
connection herewith (such other agreements and instruments being hereinafter
referred to collectively as the "Transaction Documents"). The execution,
delivery and performance by each of the Seller Parties of this Agreement and the
Transaction Documents to which such Seller Party is a party have been duly
authorized by all necessary corporate action on the part of each of them. This
Agreement has been duly executed and delivered by each of the Seller Parties,
and as of the Closing Date the other Transaction Documents will be duly executed
and delivered by the Seller Parties. This Agreement is a legal, valid and
binding obligation of each Seller Party, enforceable against them in accordance
with its terms except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief
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is within the discretion of a court. As of the Closing Date, each of the other
Transaction Documents to which each of the Seller Parties is a party will be
duly executed and delivered by each of the Seller Parties and will constitute
the legal, valid and binding obligations of each of the Seller Parties,
enforceable against them in accordance with its respective terms, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court.
3.3 No Violation of Laws or Agreements. The execution, delivery, and
performance of this Agreement and the Transaction Documents by each of the
Seller Parties do not, and the consummation of the transactions contemplated by
this Agreement and the Transaction Documents by the Seller Parties, will not:
(a) contravene any provision of the Restated Articles of Incorporation or Bylaws
of Citizens or the Articles of Incorporation or Bylaws of the other Seller
Parties; or (b) except as set forth on Schedule 3.3, violate, conflict with,
result in a breach of, or constitute a default (or an event which would, with
the passage of time or the giving of notice or both, constitute a default)
under, or result in or permit the termination, modification, acceleration, or
cancellation of, or result in the creation or imposition of any Lien of any
nature whatsoever upon any of the Acquired Assets or give to others any
interests or rights therein under (i) any indenture, mortgage, loan or credit
agreement, license, instrument, lease, contract, plan, permit or other agreement
or commitment, oral or written, to which any of the Seller Parties is a party,
or by which the Business or any of the Acquired Assets may be bound or affected,
except for such violations, conflicts, breaches, terminations, modifications,
accelerations, cancellations, Liens, interests or rights which, individually and
in the aggregate, do not have a Material Adverse Effect or will be cured, waived
or terminated prior to the Closing Date, or (ii) any judgment, injunction, writ,
award, decree, restriction, ruling, or order of any court, arbitrator or
Authority or any applicable constitution, law, ordinance, rule or regulation, to
which any of the Seller Parties is subject, other than those violations or
conflicts which individually and in the aggregate would not have a Material
Adverse Effect.
3.4 Financial Statements. Citizens has previously delivered to Buyer
the statement of income of the Business (the "Income Statement") and the Interim
Statement of Net Assets contained in Schedule 3.4 (collectively, the "Financial
Statements"). The Income Statement (a) fairly presents in all material respects
the results of operations of the Business in accordance with generally accepted
accounting principles ("GAAP") consistently applied except for the omission of
full footnotes to the Income Statement and (b) has in all material respects been
derived from the books and records of Seller and reflects the separation of the
operation associated with the Business from other operations of Citizens. The
Interim Statement of Net Assets (a) has in all material respects been derived
from the books and records of Seller and reflects the separation of the
operations associated with the Business from other operations of Citizens; (b)
fairly presents in all material respects the Acquired Assets as of the Interim
Statement of Net Assets Date; and (c) has in all material respects been prepared
in accordance with GAAP consistently applied except for the omission of full
footnotes to such Interim Statement of Net Assets. The financial statements
included in the Annual Report to each PUC for the year ended December 31, 1998,
were prepared in all material respects in accordance with the rules and
regulations of such PUC.
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3.5 No Changes. Since the Interim Statement of Net Assets Date to
the date hereof, except as disclosed in Schedule 3.5, the Seller Parties have
conducted the Business as presently operated only in the ordinary course of
business consistent with past practice. Since the Interim Statement of Net
Assets Date, except as disclosed in Schedule 3.5, there has not been:
3.5.1 any Material Adverse Effect;
3.5.2 prior to the date of this Agreement, any change in the
salaries or other compensation payable or to become payable to, or any advance
(excluding advances for ordinary business expenses) or loan to, any Transferred
Employee, or material change or material addition to, or material modification
of, other benefits (including any bonus, profit-sharing, pension or other plan
in which any of the Transferred Employees participate) to which any of the
Transferred Employees may be entitled, or any payments to any pension,
retirement, profit-sharing, bonus or similar plan other than in any such case
(i) in the ordinary course consistent with past practice, (ii) as required by
law, or (iii) as required by the Collective Bargaining Agreement;
3.5.3 any alteration in any material respect of the customary
practices with respect to the collection of accounts receivable of the Business
or the provision of discounts, rebates or allowances;
3.5.4 any disposition of or failure to keep in effect any
rights in, to or for the use of any Permit of the Business which individually or
in the aggregate would have a Material Adverse Effect;
3.5.5 any damage, destruction or loss affecting the Business
which individually or in the aggregate would have a Material Adverse Effect
whether or not covered by insurance;
3.5.6 prior to the date of this Agreement, any change by
Seller in its method of accounting or keeping its books of account or accounting
practices with respect to the Business except as required by GAAP and is set
forth on Schedule 3.5; or
3.5.7 prior to the date of this Agreement, any sale, transfer
or other disposition of any material assets, properties or rights of the
Business, except in the ordinary course of business consistent with past
practice.
3.6 Contracts. As of the date of this Agreement, Schedule 3.6
contains a list of all Contracts (other than (i) with respect to which the
Business' total annual liability or expense is less than (a) $250,000 per such
Contract and (b) $6,123,000 per all such Contracts (when taken together with
similar contracts omitted from Schedule 3.6 of the Related Purchase Agreements),
and (ii) Contracts that may be terminated by Seller, without penalty, on notice
of 90 days or less) except line extension agreements and similar agreements and
construction and design contracts. Seller has
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furnished to Buyer a correct and complete copy of each written agreement listed
in Schedule 3.6. Except as disclosed on Schedule 3.6, with respect to each
Contract, neither Seller nor, to the Seller Parties' knowledge, any other party
thereto, is in breach or default, and to the Seller Parties' knowledge, no event
has occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
Contract, except in each case where such breaches, terminations, modifications,
accelerations or defaults, individually or in the aggregate, do not have a
Material Adverse Effect. Except as set forth in Schedule 3.6, there are no
disputes pending or to the best of the Seller Parties' knowledge, threatened,
under or in respect of any of the Contracts, other than those that individually
and in the aggregate do not have a Material Adverse Effect.
3.7 Permits and Compliance With Laws Generally.
3.7.1 Except as disclosed on Schedule 3.7, Seller possesses
and is in compliance with all Permits required to operate the Business as
presently operated and to own, lease or otherwise hold the Acquired Assets under
all applicable laws, rules, regulations, ordinances and codes, including
Environmental Laws (as defined below), except to the extent that any failure to
possess, or to comply with, any Permit, laws, rules, regulations or orders would
not, individually or in the aggregate, have a Material Adverse Effect. Except as
disclosed in Schedule 3.7, the Business is conducted by Seller in compliance
with all applicable laws (including the Occupational Safety and Health Act and
the rules and regulations thereunder ("OSHA"), zoning, building and similar laws
and Environmental Laws), rules, regulations, ordinances, codes, judgments and
orders, except for such failures to comply which do not individually or in the
aggregate have a Material Adverse Effect. Except as disclosed on Schedule 3.7,
all Permits of Seller relating to the operation of the Business are in full
force and effect, other than those the failure of which to be in full force and
effect would not individually or in the aggregate have a Material Adverse
Effect. There are no proceedings pending or, to the Seller Parties' knowledge,
threatened that seek the revocation, cancellation, suspension or any adverse
modification of any such Permits presently possessed by Seller other than those
revocations, cancellations, suspensions or modifications which do not
individually or in the aggregate have a Material Adverse Effect.
3.7.2 Except as set forth on Schedule 3.7, no outstanding
notice, citation, summons or order has been issued, no outstanding complaint has
been filed, no outstanding penalty has been assessed and no investigation or
review is pending or, to the knowledge of the Seller Parties, threatened, by any
Authority or other Person with respect to any alleged (i) violation by Seller or
any Affiliate of Seller relating to the Business of any law, ordinance, rule,
regulation, code or order of any Authority; or (ii) failure by Seller or any
Affiliate to have any Permit required in connection with the conduct of the
Business or otherwise applicable to the Business (including the Acquired
Assets), except, in each case, where such violations or failures, individually
or in the aggregate, would not have a Material Adverse Effect.
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3.8 Environmental Matters. Except as set forth on Schedule 3.8
hereto, and with such exceptions as are not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect:
3.8.1 Seller has not disposed of or arranged for the disposal
of or Released any Hazardous Substances, other than in conformity with
Environmental Laws, at any Real Estate, or, in connection with the Business or
Acquired Assets, at any other facility, location, or other site.
3.8.2 Seller has not received any written notice or request
for information with respect to, and to the best of the Seller Parties'
knowledge, Seller has not been designated a potentially liable party for
Remedial Action, in connection with any Real Estate, or, as of the date hereof,
with respect to the Business or Acquired Assets, at any other facility,
location, or other site under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or comparable state statutes.
3.8.3 To the best of the Seller Parties' knowledge, except for
such use or storage of Hazardous Substances as is incidental to the conduct of
the Business, which use and storage is or has been in compliance with
Environmental Laws, and which use and storage has not caused any condition that
requires Remedial Action, no Real Estate has been used for the storage,
treatment, generation, processing, production or disposal of any Hazardous
Substances or as a landfill or other waste disposal site in violation of any
Environmental Law.
3.8.4 To the best of the Seller Parties' knowledge,
underground storage tanks are not, and have not in the past been, located on or
under any Real Estate.
3.8.5 There are no pending or unresolved claims against Seller
or the Business for investigatory costs, cleanup, removal, remedial or response
costs, or natural resource damages arising out of any Releases or threat of
Release of any Hazardous Substances at any Real Estate or, as of the date
hereof, with respect to the Business or the Acquired Assets or at any other
facility, location, or other site.
3.8.6 To the best of the Seller Parties' knowledge, no
polychlorinated biphenyls ("PCBs") or asbestos-containing materials are located
at or in any Real Estate in violation of Environmental Laws or which require
Remedial Action.
3.8.7 To the best of the Seller Parties' knowledge, no
Hazardous Substance managed or generated by or on behalf of Seller at the Real
Estate or in connection with the Business or Acquired Assets has come to be
located at any site that is listed or formally proposed for listing under
CERCLA, the Comprehensive Environmental Response, Compensation and Liability
Information System ("CERCLIS"), or any similar state list or that is the subject
of federal, state, or local enforcement actions or investigations.
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3.8.8 The Seller Parties know of no facts or circumstances
related to environmental matters (i) in connection with the operation of the
Business or (ii) concerning the Real Estate, that are reasonably likely to
result in any material reduction in the quality or quantity of water available
for supply to the Seller Parties' customers.
3.8.9 The Seller Parties will within thirty (30) days of the
date hereof provide Buyer with copies of all written environmental audits or
investigations of which they are aware (after due inquiry) prepared for the Real
Estate or operations of the Business.
3.8.10 Except as set forth in Schedule 3.8.10 or Citizens'
Annual Report on Form 10-K for the year ended December 31, 1998:
(a) The Seller Parties (including for purposes of
Section 3.8.10(a) and (b), Affiliates and predecessors of the Seller Parties)
are and have been for the past three years in full compliance with all federal
and state primary drinking water standards;
(b) The Seller Parties are and have been for the past
three years in full compliance with all federal and state secondary drinking
water standards; and
(c) As to all outstanding violations of state or federal
drinking water standards, as of the date hereof, the Seller Parties have
completed or are in the process of completion in accordance with all applicable
deadlines, all actions required by Environmental Law or Authorities to correct
or otherwise respond to such violations.
3.8.11 Except as set forth in Schedule 3.8.11, none of the Seller
Parties will be required to place any notice or restriction relating to the
presence of Hazardous Substances in the deed to any Real Estate, or in any
written instrument accompanying this Agreement, and no Real Estate has such a
notice or restriction in its deed or any other written instrument relating to
the purchase, lease or rental of such property.
For the purposes of these Sections 3.7 and 3.8: (A) "Remedial Action" means all
actions to (x) clean up, remove, treat or in any other way respond to any
presence, Release or threat of Release of Hazardous Substances; (y) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Substances so it does not endanger or threaten to endanger public or employee
health or welfare or the environment; or (z) perform studies, investigations or
monitoring necessary or required to investigate the foregoing; (B)
"Environmental Laws" means any common law or federal, state or local law,
statutes, rule, regulation, ordinance, code, judgment or order relating to the
protection of the environment or human health and safety and includes, but is
not limited to, CERCLA (42 U.S.C. section 9601, et seq.), the Clean Water Act
(33 U.S.C. section 1251 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.), the Toxic Substances Control Act (15 U.S.C.
section 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. section 300f et
seq.) and the Oil Pollution Act of 1990 (33 U.S.C. section 2701 et seq.), each
as has been or may be interpreted or amended as of the Closing Date and the
regulations promulgated pursuant thereto
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and in effect as of the Closing Date; (C) "Released" means released, spilled,
leaked, discharged, disposed of, pumped, poured, emitted, emptied, injected,
leached, dumped or allowed to escape; and (D) "Hazardous Substances" means
hazardous or toxic or polluting substance or waste or contaminant under or
pursuant to any Environmental Law, including petroleum products, PCBs and
radioactive materials.
3.9 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by the Selling Parties
of this Agreement, the Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by the Seller Parties, including
without limitation in connection with the assignment of the Contracts and
Permits contemplated hereby, except (i) as required by the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇
Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), (▇▇) as specified on
Schedule 3.9, (iii) as required to assume the California Water Debt, and (iv)
for such other consents, approvals, authorizations, registrations or filings the
failure of which to obtain or make would not individually or in the aggregate
have a Material Adverse Effect or which are obtained by the Closing Date.
3.10 Title. Seller has good and valid title to all of the Acquired
Assets constituting personal property, good and marketable title in fee simple
to all of the owned Acquired Assets constituting Real Estate and good and valid
leasehold title to all of the leased Acquired Assets constituting Real Estate,
in each case, free and clear of Liens subject only to the Permitted Exceptions.
"Permitted Exceptions" as used herein shall mean (a) the Liens set forth in
Schedule 3.10 hereto, (b) Liens securing Taxes, assessments, governmental
charges or levies, or the claims of materialmen, mechanics, carriers and like
persons, all of which are not yet due and payable or which are being contested
in good faith or (c) such other Liens which, individually or in the aggregate,
do not have a Material Adverse Effect (it being understood that to the extent a
Permitted Exception relates to or arises from a Retained Liability, Seller shall
still be liable for such Retained Liability to the extent set forth herein).
3.11 Real Estate.
3.11.1 As of the date hereof, Seller has not received any
written or oral notice for assessments for public improvements against the Real
Estate which remains unpaid, and to the best knowledge of the Seller Parties, no
such assessment has been proposed. Except as set forth on Schedule 3.11, as of
the date hereof, there is no pending condemnation, expropriation, eminent domain
or similar proceeding affecting all or any portion of any of the Real Estate and
to the best knowledge of the Seller Parties no such proceeding is threatened.
3.11.2 Except as disclosed on Schedule 3.6, as of the date
hereof, Seller is not a lessee under any Contract relating to the use or
occupancy of the Real Estate involving annual payments in excess of $100,000.
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3.11.3 Each parcel of the Real Estate has physical and, to
Seller's knowledge, legal vehicular and pedestrian access to and from public
roadways as may be reasonably necessary to the operation of the Business except
where the failure to have such access does not have a Material Adverse Effect.
To Seller's knowledge, no fact or condition exists which would result in the
termination of (a) the current access from each parcel of the Real Estate, and
(b) continued use, operation, maintenance, repair and replacement of all
existing and currently committed water lines used by Seller in connection with
the Business, except where such termination would not have a Material Adverse
Effect.
3.12 Taxes. The Seller Parties have (a) timely filed all material
returns and reports for Taxes, including information returns, that are required
to have been filed in connection with, relating to, or arising out of, the
Business, (b) paid all Taxes that are shown to have come due pursuant to such
returns or reports and (c) paid all other material Taxes not required to be
reported on returns in connection with, relating to, or arising out of, or
imposed on the property of the Business for which a notice of assessment or
demand for payment has been received or which have otherwise become due. To the
best of the Seller Parties' knowledge, all such returns or reports have been
prepared in accordance with all applicable laws and requirements in all material
respects. Except to the extent disclosed on Schedule 3.12, none of the assets of
the Business or constituting any of the Acquired Assets (a) is property that is
required to be treated as owned by another Person pursuant to the "safe harbor
lease" provisions of former Section 168(f)(8) of the Code, (b) is "tax-exempt
use property" within the meaning of Section 168(h) of the Code or (c) directly
or indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code.
3.13 Patents and Intellectual Property Rights. To the best of the
Seller Parties' knowledge, the operations of Seller do not make any unauthorized
use of any Intellectual Property except for any such unauthorized uses which do
not have a Material Adverse Effect. Assuming the consents listed as item XII on
Schedule 3.9 are obtained, Buyer will not lose any of Seller's rights to, or be
required to pay increased royalties for, any Intellectual Property included in
the Acquired Assets as a result of the Closing and the consummation of the
transactions contemplated by this Agreement, except for any such rights or such
increased royalties the loss or payment of which would, individually or in the
aggregate, not have a Material Adverse Effect.
3.14 Accounts Receivable. The accounts receivable of Seller arising
from the Business as set forth on the Interim Statement of Net Assets or arising
since the date thereof have arisen out of bona fide sales and deliveries of
goods, performance of services and other business transactions in the ordinary
course of business consistent with past practice; the allowance for collection
losses on the Interim Statement of Net Assets has been determined in accordance
with GAAP consistent with past practice.
3.15 Labor Relations. As of the date hereof, except as set forth in
Schedule 3.15, to best of the knowledge of the Seller Parties, there has been no
union organizing efforts with respect to the Business conducted
within the last
three (3) years and there are none now being conducted
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with respect to the Business. Except as set forth in Schedule 3.15, Seller has
not at any time during the three (3) years prior to the date of this Agreement
had, nor, to the best of the Seller Parties' knowledge, is there now threatened,
a strike, work stoppage or work slow down with respect to or affecting the
Business which had or could reasonably be expected to have a Material Adverse
Effect. As of the date hereof, except as set forth in Schedule 3.15, (i) no
Employee is represented by any union or other labor organization and (ii) there
is no unfair labor practice charge pending or, to the best knowledge of the
Seller Parties, threatened against Seller relating to any of the Employees as
related to the Business which could reasonably be expected to have a Material
Adverse Effect.
3.16 Employee Benefit Plans.
3.16.1 Schedule 3.16.1 contains a true and complete list of
each "employee benefit plan," as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA), bonus, incentive,
deferred compensation, excess benefit, employment contract, stock purchase,
stock ownership, stock option, supplemental unemployment, vacation, sabbatical,
sick-day, severance or other material employee benefit plan, program or
arrangement (other than those required to be maintained by law), whether written
or unwritten, qualified or nonqualified, funded or unfunded, foreign or
domestic, (i) maintained by, or contributed to by Citizens or any of its
Affiliates, in respect of any Employee or Former Employee, or (ii) with respect
to which Citizens or any of its Affiliates has any liability in respect of any
Employee or Former Employee (the"Benefit Plans"). Except as disclosed on
Schedule 3.16.1, neither Citizens nor any of its Affiliates maintains any bonus,
pension or welfare benefit plan, program or arrangement, including any deferred
compensation arrangement, for directors, consultants or independent contractors
of the Business.
3.16.2 A true and complete copy of each Benefit Plan and
related trust agreements and (to the extent applicable) a copy of each Benefit
Plan's current summary plan description and in the case of an unwritten Benefit
Plan, a written description thereof, has been furnished to Buyer. In addition,
to the extent applicable, Buyer has been provided a copy of the most recent
Internal Revenue Service ("IRS") determination letter issued to each Benefit
Plan and a copy of the most recent IRS Form 5500 together with all schedules and
accountants' statement filed, and actuarial reports prepared, on behalf of each
Benefit Plan.
3.16.3 Each Benefit Plan which is intended to be qualified
under Section 401(a) of the Code (as designated on Schedule 3.16.1) is so
qualified, and will remain so qualified upon the timely making of certain
amendments required by law during the applicable remedial amendment period, and
any trust forming a part of such a Benefit Plan is tax exempt under Section
501(a) of the Code. Each such Benefit Plan has been amended, as and when
necessary, to comply with the Tax Reform Act of 1986 and upon timely filing of
an Application for Determination with the Internal Revenue Service, will be
eligible to make further such amendments under the"remedial amendment period."
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3.16.4 Except as disclosed in Schedule 3.16.4, each Benefit
Plan has been operated and administered in all material respects in accordance
with its terms and all applicable laws, including ERISA and the Code.
3.16.5 None of the Acquired Assets is subject to a Lien or Tax
under the Code or ERISA.
3.16.6 Neither Citizens nor any ERISA Affiliate and, to the
knowledge of the Seller Parties, no other Person, has taken any action or failed
to take any action with respect to any Benefit Plan that may subject Buyer or
any Benefit Plan under which liabilities may be assumed by Buyer under Sections
5.10, 5.11 or 5.12 ("Assumed Benefit Liabilities") to any material liability or
Tax under the Code or ERISA.
3.16.7 Neither Citizens nor any ERISA Affiliate has incurred
or expects to incur any withdrawal liability with respect to any Benefit Plan
which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA, including any contingent liability under Section 4204 of ERISA or
withdrawal liability arising from the actions of Citizens or any ERISA Affiliate
contemplated by this Agreement. All contributions that Citizens or any ERISA
Affiliate have been obliged to make to any Benefit Plan, including any
multiemployer plan, have been duly and timely made.
3.16.8 There are no pending or, to the knowledge of the Seller
Parties, threatened claims (other than routine claims for benefits),
assessments, complaints, proceedings or investigations of any kind in any court
or governmental agency with respect to any Benefit Plan which could reasonably
be expected to give rise to a material liability to Buyer.
3.16.9 Except as disclosed on Schedule 3.16.9, no Benefit Plan
provides benefits, including without limitation, death or medical benefits,
beyond termination of service or retirement other than (i) coverage mandated by
law, or (ii) death or retirement benefits under a Benefit Plan qualified under
Section 401(a) of the Code. Seller's Retiree Medical Plan contains provisions
permitting Seller to modify or terminate retiree medical benefits at any time,
without prior notice to any covered individual. Except with respect to retirees,
"grandfathered" employees and collectively bargained employees, Seller knows of
no reason why its ability to effect those provisions would be limited.
3.16.10 With respect to each Benefit Plan that is a "group
health plan" within the meaning of Section 607 of ERISA and that is subject to
Section 4980B of the Code, Citizens and each ERISA Affiliate have complied in
all material respects with the continuation coverage requirements of the Code
and ERISA.
3.17 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 3.17, Seller has no liabilities with respect to the Business which
would constitute Assumed Liabilities, either direct or indirect, matured or
unmatured or absolute, contingent or otherwise, except:
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3.17.1 the Assumed Indebtedness and those other liabilities
which would decrease the Base Cash Purchase Price pursuant to Section 2.6.5 to
the extent assumed by Buyer at Closing;
3.17.2 liabilities arising in the ordinary course of business
under any Contract or Permit or with respect to any agreement or instrument
included within the definition of Real Estate; and
3.17.3 those liabilities incurred, consistent with past
business practice, in or as a result of the normal and ordinary course of
business and reflected in the books and records related to the Business;
3.17.4 the obligations and liabilities set forth in Sections
5.9, 5.10, 5.11 and 5.12 hereof; and
3.17.5 those other liabilities, which individually and in the
aggregate, would not have a Material Adverse Effect.
3.18 No Pending Litigation or Proceedings. Except as disclosed in
Schedule 3.18, there are no actions, suits, investigations or proceedings
pending against or, to the best of the Seller Parties' knowledge, threatened,
against or affecting, Seller, the Business or any of the Acquired Assets before
any court or arbitrator or Authority which individually or in the aggregate,
would have a Material Adverse Effect. Except as disclosed in Schedule 3.18,
there are currently no outstanding judgments, decrees or orders of any court or
Authority against any of the Seller Parties, which relate to or arise out of the
conduct of the Business or the ownership, condition or operation of the Business
or the Acquired Assets (other than any PUC order relating to rates, tariffs and
similar matters arising in the ordinary course of business) which individually
or in the aggregate would have a Material Adverse Effect.
3.19 Supply of Utilities. Except as set forth on Schedule 3.19, the
Real Estate has adequate arrangements for supplies of electricity, gas, oil,
coal and/or sewer for all operations at the 1998 or current operating levels,
whichever is greater. Except as set forth on Schedule 3.19, there are no actions
or proceedings pending or, to the best of the Seller Parties' knowledge,
threatened, that would adversely affect the supply of electricity, gas, coal or
sewer to the Real Estate except for those which individually and in the
aggregate would not have a Material Adverse Effect.
3.20 Insurance. Schedule 3.20 lists the Seller Parties' policies and
contracts in effect as of the date hereof for insurance covering the Acquired
Assets or Assumed Liabilities and the operation of the facilities constituting
the Business owned or held by Seller, together with the risks insured against,
coverage limits and deductible amounts.
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3.21 Relationship with Customers. As of the date hereof, Seller does
not have any current customer which accounted for more than 5% of the net sales
of the Business (taken together with the businesses being acquired by Buyer or
Affiliates of Buyer pursuant to the Related Purchase Agreements) for the
immediately preceding 12-month period.
3.22 WARN Act. Except as contemplated by Section 5.9 hereby or as
set forth in Schedule 3.22 hereto, within six months prior to the date hereof,
(i) Seller has not effectuated (a) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Business; or (b) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Business; (ii) Seller has not been affected by any transaction or engaged in
layoffs or employment terminations with respect to the Business sufficient in
number to trigger application of any similar state or local law; and (iii) none
of Seller's employees who are employed in connection with the Business has
suffered an "employment loss" (as defined in the WARN Act) .
3.23 Condition of Assets. Except as set forth on Schedule 3.23, the
buildings, machinery, equipment, tools, furniture, improvements and other fixed
tangible assets of the Business included in the Acquired Assets, taken as a
whole and taken together with the similar assets included among the assets being
acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements, are in good operating condition and repair, reasonable wear and tear
excepted.
3.24 Brokerage. None of the Seller Parties or their Affiliates have
made any agreement or taken any other action which might cause any Person to
become entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to Buyer or
its Affiliates.
3.25 All Assets. Except as set forth on Schedule 3.25 and for the
Excluded Assets, the Acquired Assets include all assets, rights, properties and
contracts the use of which is necessary to the continued conduct of the Business
by Buyer substantially in the manner as it was conducted prior to the Closing
Date, including the service of all utility customers in substantially the same
manner and at substantially the same service levels as provided by Seller on the
date hereof.
3.26 Year 2000 Matters. Citizens has (1) initiated a review and
assessment of all mission critical areas within the Business and related
operations (including those affected by suppliers and vendors) that it
reasonably believes could be adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by any Seller Party (or suppliers
and vendors) may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
all as set forth in Citizens' Annual report on Form 10-K for the fiscal year
ended December 31, 1998 and Citizens' Quarterly reports on Form 10-Q for the
periods ending March 31, 1999 and June 30, 1999, and (iii) to date, implemented
that plan substantially in
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accordance with that timetable. Seller has contingency plans that are dedicated
to ensuring that established and expected levels of customer service are
maintained without interruption, while core business functionality is preserved
during the millennium transition. With respect to its suppliers and vendors, the
foregoing representation and warranty is expressly limited to matters known to
Seller after making reasonable inquiries of such suppliers and vendors. Seller
makes no representation or warranty with respect to the receipt or accuracy of
any response received from any vendor or supplier.
3.27 Product Liability. Except as disclosed in Schedule 3.27 and
except for those liabilities which individually or in the aggregate would not
have a Material Adverse Effect, there are no (a) liabilities of the Seller
Parties or their Affiliates, fixed or contingent, asserted or, to the knowledge
of the Seller Parties, unasserted, with respect to any product liability or
similar claim that relates to any product or service sold by Seller or the
Business to others or (b) liabilities of the Seller Parties or their Affiliates,
fixed or contingent, asserted or, to the knowledge of the Seller Parties
unasserted, with respect to any claim for the breach of any express or implied
product warranty or a similar claim with respect to any product or service sold
by Seller or the Business to others.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer jointly and severally represent and warrant to Seller as
follows:
4.1 Organization and Good Standing.
4.1.1 Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
4.1.2 Buyer is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to own, lease and operate the Acquired
Assets and the Business. Buyer is qualified to do business and is in good
standing in all jurisdictions wherein the nature of the business conducted by it
or Buyer's ownership or use of assets and properties make such qualification
necessary, except such failures to be qualified or to be in good standing, if
any, which when taken together with all such failures of Buyer do not have a
material adverse effect on its ability to perform its obligations under this
Agreement and the Transaction Documents.
4.2 Authorization and Enforceability. Each of Buyer and Parent has
full corporate power and authority to execute, deliver and perform this
Agreement and the other Transaction Documents to which either of them is a
party. The execution, delivery and performance by Buyer and Parent of this
Agreement and the Transaction Documents to which Buyer and/or Parent is a party
have been duly authorized by all necessary corporate action on the part of each
of
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them. This Agreement has been duly executed and delivered by Buyer and Parent,
and as of the Closing Date the other Transaction Documents will be duly executed
and delivered by Buyer and Parent. This Agreement is a legal, valid and binding
obligation of Buyer and Parent, enforceable against them in accordance with its
terms, except as such enforceability may be limited by applicable laws relating
to bankruptcy, insolvency, fraudulent conveyance, reorganization or affecting
creditors' rights generally and except to the extent that injunctive or other
equitable relief is within the discretion of a court. As of the Closing Date,
each of the other Transaction Documents to which Buyer and Parent is a party
will be duly executed and delivered by Buyer and Parent and will constitute the
legal, valid and binding obligations of Buyer and Parent, enforceable against
them in accordance with its respective terms, except as such enforceability may
be limited by applicable laws relating to bankruptcy, insolvency, fraudulent
conveyance, reorganization or affecting creditors' rights generally and except
to the extent that injunctive or other equitable relief is within the discretion
of a court.
4.3 No Violation of Laws or Agreements. The execution, delivery and
performance of this Agreement and the Transaction Documents by Buyer and/or
Parent do not, and the consummation of the transactions contemplated hereby and
thereby will not, (a) contravene any provision of the Articles of Incorporation
or Bylaws of Buyer or the Certificate of Incorporation or Bylaws of Parent; or
(b) violate, conflict with, result in a breach of, or constitute a default (or
an event which would with the passage of time or the giving of notice, or both,
constitute a default) under, or result in or permit the termination,
modification, acceleration, or cancellation of (i) any indenture, mortgage, loan
or credit agreement, license, instrument, lease, contract, plan, permit,
authorization, proof of dedication or other agreement or commitment, oral or
written, to which Parent or Buyer is a party, or by which any of their assets or
properties may be bound or affected, except for such violations, conflicts,
breaches, terminations, modifications, accelerations, cancellations, interests
or rights which, individually or in the aggregate do not have a material adverse
effect on their respective ability to perform their obligations under this
Agreement and the Transaction Documents, or (ii) any judgment, injunction, writ,
award, decree, restriction, ruling, or order of any court, arbitrator or
Authority or any applicable constitution, law, ordinance, rule or regulation to
which Buyer or Parent is subject other than those violations and conflicts which
individually or in the aggregate do not have a material adverse effect on their
respective ability to perform their obligations under this Agreement and the
Transaction Documents.
4.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by Buyer and Parent of
this Agreement, the other Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by Buyer or Parent except (i) as
required by the HSR Act, (ii) as specified on Schedule 3.9 and (iii) for such
consents, approvals, authorizations, registrations or filings, the failure to
obtain or make would not individually or in the aggregate have a material
adverse effect on their respective ability to perform their obligations under
this Agreement and the Transaction Documents.
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4.5 Financing. Buyer and Parent have, and at the Closing Date, will
have sufficient resources to pay the Purchase Price, and Parent, Buyer or the
other Affiliates of Parent that are buyers of the assets and businesses being
acquired pursuant to the Related Purchase Agreements have, and at the Closing
Date, will have sufficient resources to pay the purchase prices set forth in the
Related Purchase Agreements.
4.6 Brokerage. None of Parent, Buyer or their Affiliates have made
any agreement or taken any other action which might cause any Person to become
entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to the
Seller Parties.
4.7 Insurance. Schedule 4.7 lists the policies and contracts in
effect as of the date hereof for casualty and property insurance covering
Buyer's assets and properties and the operation of Buyer's business, together
with the risks insured against, coverage limits and deductible amounts.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Conduct of Business. Except (i) as otherwise specifically
permitted by this Agreement, (ii) as set forth in Schedule 5.1 hereto or (iii)
with the prior written consent of Buyer, from and after the date of this
Agreement and up to and including the Closing Date, each of the Seller Parties
agree that:
5.1.1 Seller shall conduct the Business as presently operated
and only in the ordinary course of business consistent with past practice.
5.1.2 They shall promptly inform Buyer in writing of any
specific event or circumstance of which they are aware, or of which they receive
notice, that has or is likely to have, individually or in the aggregate, taken
together with the other events or circumstances, a Material Adverse Effect on
the Acquired Assets or the Assumed Liabilities.
5.1.3 Seller shall not:
(a) change or modify in any material respect existing
credit and collection policies, procedures and practices with respect to
accounts receivable;
(b) enter into any contract or commitment, waive any
right or enter into any other transaction (except in the ordinary course of
business) which would have a Material Adverse Effect;
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(c) except in the event of service interruption,
emergency or casualty loss, commit to acquire subsequent to the Closing Date on
behalf of the Business any capital asset or group of capital assets costing in
excess of $1,000,000 that is not included in the capital budget of Seller for
fiscal year 2000 and which, if so acquired, would be included in the Acquired
Assets; commencing December 1, 1999, accept or receive customer advances for
construction in excess of $9,000,000 (when combined with customer advances
relating to the businesses being acquired by Buyer or Affiliates of Buyer
pursuant to the Related Purchase Agreements) per each of the next four
consecutive three-month periods unless pursuant to an existing tariff, Contract
or Permit of Seller; or sell or lease or agree to sell or lease or otherwise
dispose of any assets included in the Acquired Assets except in the ordinary
course of the conduct of the Business, consistent with past practice;
(d) except in the ordinary course of business,
consistent with past practice or as required under any of Seller's debt
instruments or indentures, mortgage, pledge or subject to any Lien (other than
Permitted Liens) any of the Acquired Assets;
(e) change any compensation or benefits or grant any
material new compensation or benefits payable to or in respect of any
Transferred Employee except (i) as required by law, (ii) in the ordinary course,
consistent with past practice and (iii) as required by the Collective Bargaining
Agreement in existence on the date hereof; provided, however, no individual
Employee shall in any event receive a compensation increase in excess of seven
percent (7%) except as required by the Collective Bargaining Agreement in
existence on the date hereof;
(f) other than in the ordinary course of business
consistent with past practice, sell or otherwise transfer any assets necessary,
or otherwise material to the conduct of, the Business which would constitute
Acquired Assets;
(g) change the Seller's method of accounting or keeping
its books of account or accounting practices with respect to the Business,
except as required by GAAP or any Authority;
(h) intentionally and wilfully take or omit to take any
action which if taken or omitted prior to the date hereof would constitute or
result in a breach of any representations or warranties set forth in Sections
3.1, 3.2, 3.3, 3.4, 3.7, 3.8, 3.10, 3.14, 3.16 and 3.25 hereof (it being
understood that the failure to cure a breach shall not, by itself, be an
intentional and wilful omission to take action); or
(i) prepay, redeem, retire, refund or otherwise
extinguish any of the Assumed Indebtedness.
5.2 Negotiations. Neither Citizens nor any Person controlled by
Citizens or under common control with Citizens (each such person being a
"Section 5.2 Affiliate"), nor any
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officer, director, employee, representative or agent of Citizens or any of their
Section 5.2 Affiliates, shall, directly or indirectly, solicit or initiate or
participate in any way in discussions or negotiations with, or provide any
information or assistance to, or enter into an agreement with any Person or
group of Persons (other than Parent, Buyer or any Person controlled by Parent or
Buyer or under common control with Parent, Buyer or any Persons providing
financing to the parties hereto in connection with facilitating the consummation
of the transactions contemplated by this Agreement) concerning any acquisition,
merger, consolidation, liquidation, dissolution, disposition or other
transaction (or series of such transactions) that would result in the transfer
to any such Person or group of Persons of ten percent (10%) of the Acquired
Assets (as measured by net book value of such assets on the date of each such
transaction) or the acquisition, merger, consolidation, liquidation,
dissolution, disposition or other transaction (or series of such transactions)
involving the Seller Parties, if such acquisition, merger, consolidation,
liquidation, dissolution, disposition or other transaction (or series of such
transactions) would be inconsistent, in any respect, with the obligations of the
Seller Parties hereunder (any of the foregoing transactions, a "Competing
Transaction").
5.3 Disclosure Schedules. As promptly as practicable, the Seller
Parties will provide Buyer with a supplement or amendment to the Disclosure
Schedules with respect to any matter, condition or occurrence which is required
to be set forth or described in the Disclosure Schedules. For the avoidance of
doubt, a matter, condition or occurrence shall only be "required" to be set
forth or described in the Disclosure Schedules if the failure to be so disclosed
would result in a breach of the applicable representation or warranty (qualified
by Material Adverse Effect where applicable) on the date hereof or on the
Closing Date. In addition, Seller shall have the right at any time and from time
to time prior to the Closing to supplement or amend the Disclosure Schedules.
Seller may provide Disclosure Schedules with respect to any representation or
warranty of this Agreement whether or not a specific schedule is referred to
therein. In the event that any supplement or amendment of such Disclosure
Schedules shall be provided later than five (5) business days prior to the
Closing Date, the Buyer shall have the right to delay the Closing for a period
of five (5) business days in order for Buyer to review such supplement or
amendment. No such supplement or amendment shall be deemed to cure any breach of
or alter any representation or warranty made in this Agreement so as to permit
the Closing to occur unless Buyer specifically agrees thereto in writing. The
Seller Parties shall promptly inform Buyer, and Buyer will promptly inform the
Seller Parties of any fact or event which comes to their attention, the
existence of which constitutes or likely will constitute a breach in any
material respects of any representation or warranty in this Agreement. In
addition, Parent will, within five (5) days of receipt thereof, forward to
Seller (i) any title report Buyer receives from a title company with respect to
the Real Estate and (ii) any written communication regarding a specific Lien or
title defect affecting a specifically identified parcel of the Real Estate sent
to the President, Treasurer or General Counsel of Parent or the President or
Corporate Counsel of any other Buyer Party, and sent by a party other than the
Seller Parties, their legal counsel, financial advisors or representatives.
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5.4 Mutual Covenants. The parties mutually covenant from the date of
this Agreement to the Closing Date (and subject to the other terms of this
Agreement, including Section 5.8 hereof):
5.4.1 to cooperate with each other in determining whether
filings are required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents;
5.4.2 to use all reasonable efforts to obtain promptly the
satisfaction (but not waiver) of the conditions to the Closing of the
transactions contemplated herein (each party hereto shall furnish to the other
and to the other's counsel all such information as may be reasonably required in
order to effectuate the foregoing action); and
5.4.3 to advise the other parties promptly if such party
determines that any condition precedent to its obligations hereunder will not be
satisfied in a timely manner.
5.5 Filings and Authorizations. The parties hereto will as promptly
as practicable, make or cause to be made all such filings and submissions under
laws, rules and regulations applicable to it or its Affiliates as may be
required to consummate the terms of this Agreement, including all notifications
and information to be filed or supplied pursuant to the HSR Act and with the
applicable public utility commission (each, a "PUC"). Any such filings and
supplemental information will be in substantial compliance with the requirements
of the applicable law, rule or regulation. Each of Parent and Buyer, on the one
hand, and the Seller Parties, on the other, shall furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing or submission to the PUC or which
is necessary under the HSR Act. The Seller Parties, on the one hand and Buyer
and Parent, on the other, shall keep each other apprised of the status of any
communications with, and inquiries or requests for additional information from,
any Authority, including the PUC, the United States Federal Trade Commission
("FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division"), and shall comply promptly with any such inquiry or
request. Each of Citizens, Seller, Parent and Buyer will use its reasonable
efforts to obtain any clearance required under the HSR Act and from the PUC for
the purchase and sale of the Acquired Assets in accordance with the terms and
conditions hereof. Notwithstanding the foregoing, nothing contained in this
Agreement will require or obligate any party or their respective Affiliates: (i)
to initiate, pursue or defend any litigation (or threatened litigation) to which
any Authority (including the PUC, the Antitrust Division and the FTC) is a
party; (ii) to agree or otherwise become subject to any material limitations on
(A) the right of Buyer or its Affiliates effectively to control or operate the
Business or the right of Seller or its Affiliates effectively to control or
operate Citizens' other businesses, (B) the right of Buyer or its Affiliates to
acquire or hold the Business or the right of Seller or its Affiliates to hold
the Excluded Assets or Citizens' other businesses, or (C) the right of Buyer to
exercise full rights of ownership of the Business or all or any material portion
of the Acquired Assets
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or the right of Citizens to exercise full rights of ownership of Citizens' other
businesses or all or any material portion of the Excluded Assets; or (iii) to
agree or otherwise be required to sell or otherwise dispose of, hold separate
(through the establishment of a trust or otherwise), or divest itself of all or
any portion of the business, assets or operations of Citizens, Seller, Parent,
Buyer, any Affiliate of Buyer or the Business. The parties agree that no
representation, warranty or covenant of Buyer, Parent, or Citizens contained in
this Agreement shall be breached or deemed breached as a result of the failure
by Parent and Buyer on the one hand or the Seller Parties, on the other, to take
any of the actions specified in the preceding sentence.
5.6 Public Announcement. No party hereto shall make or issue, or
cause to be made or issued, any public announcement or written statement
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party (which will not be unreasonably
withheld or delayed), unless counsel to such party advises that such
announcement or statement is required by law (in which case the parties shall
make reasonable efforts to consult with each other prior to such required
announcement).
5.7 Further Assurances. Each of Citizens, Parent, Buyer and Seller,
from time to time after the Closing, at Buyer's or Seller's request, will
execute, acknowledge and deliver to the applicable person such other instruments
of conveyance and transfer and will take such other actions and execute such
other documents, certifications, and further assurances as Buyer or Seller, as
the case may be, may reasonably require in order to transfer, in accordance with
the terms and conditions of this Agreement, more effectively in Buyer or to put
Buyer more fully in possession of any of the Acquired Assets or better to enable
Buyer to complete, perform and discharge any of the Assumed Liabilities. Each
party shall cooperate and deliver such instruments and take such action as may
be reasonably requested by the other party in order to carry out the provisions
and purposes of this Agreement and the transactions contemplated hereby.
5.8 Cooperation.
5.8.1 Parent, Buyer, Citizens and Seller shall cooperate and
shall cause their respective Affiliates, officers, employees, agents and
representatives to cooperate to ensure the orderly transition of the Business
from Seller to Buyer and to minimize the disruption to the Business resulting
from the transactions contemplated hereby.
5.8.2 Without limiting the foregoing, neither Parent and
Buyer, nor Citizens and Seller (nor any of their respective Affiliates) shall
make any filings pursuant to federal or state securities laws ("Securities
Filings") or make any consent solicitations to holders of Assumed Indebtedness
which include any information about Seller, Buyer (or their respective
Affiliates) or the transactions contemplated hereby without consulting with the
other party and providing the other party a reasonable opportunity to review and
comment on such information, it being understood and agreed that any party may
so disclose such information in its reasonable judgment to the extent such
party's counsel advises it that such disclosure is advisable under applicable
law. Each of Parent,
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Buyer, Citizens and Seller shall, and shall cause their respective Affiliates
to, comply with all applicable federal and state securities laws in connection
with this Agreement and the transactions contemplated hereby (including any
solicitation of consents of holders of Assumed Indebtedness), and all
information supplied by any party for inclusion in any Securities Filing or
consent solicitation, including, without limitation, any proxy or information
statement, or any registration statement on Form S-4 shall be true and correct
in all material respect and shall not contain any untrue statement of a material
fact or omit to state any material fact which is required to be stated therein
or which is necessary to make the statements contained therein not misleading in
light of the circumstances in which they were made.
5.8.3 During the first 90 days after the Closing Date (180
days for Trademarks on tanks), Buyer shall have the right to use all of the
logos, trademarks and trade identification of Seller as are located at the Real
Estate or on the Acquired Assets (collectively, the "Trademarks"). Buyer's use
of the Trademarks shall be in accordance with such reasonable quality control
standards as may be promulgated by Seller and provided to Buyer. If Seller shall
notify Buyer in writing of Buyer's material failure to comply with such
reasonable quality control standards and Buyer continues to not comply with such
reasonable quality control standards for more than 20 days after receipt of such
notice, Seller shall have the right to terminate Buyer's right under this
Section 5.8.3 to use the Trademarks.
5.8.4 Seller shall give Buyer and its representatives
(including Buyer's Accountants, consultants, counsel and employees), upon
reasonable notice and during normal business hours, full access to the
properties, contracts, employees, books, records and affairs of Seller to the
extent relating to the Business and the Acquired Assets, and shall cause its
officers, employees, agents and representatives to furnish to Buyer all
documents, records and information (and copies thereof), to the extent relating
to the Business and the Acquired Assets, as Buyer may reasonably request. Except
to the extent disclosed in the Disclosure Schedules in accordance with Sections
5.3 and 8.4, no investigation or receipt of information by Buyer pursuant to, or
in connection with, this Agreement, shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Seller Parties under
this Agreement or the conditions to the obligations of Parent or Buyer under
this Agreement. All information provided to Buyer under this Agreement shall be
held subject to the terms and conditions of the Confidentiality Agreement dated
August 2, 1999 between Citizens and Parent.
5.9 Employees; Employee Benefits.
5.9.1 Schedule 5.9.1 lists divisions and the number of all
salaried and hourly employees actively employed (as of the date of this
Agreement) in each division by Seller or any of its Affiliates whose primary
responsibilities relate to the Business. Schedule 5.9.1 lists job
classifications and number of employees in each job classification of those
employees whose terms and conditions of employment are subject to the Collective
Bargaining Agreement ("Union Employees"). All individuals referred to on
Schedule 5.9.1 are herein referred to as the
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"Employees." No later than March 1, 2000, Buyer and Seller shall determine the
number of Employees to whom Buyer will offer employment, which number shall be
at least equal to 250 (when combined with offers made by Buyer or Affiliates of
Buyer to employees of Affiliates of Seller in connection with the Related
Purchase Agreements) (the "Base Number"), and such additional number of
Employees, if any, whom Buyer also wishes to employ. Upon determination of such
Employees, Seller will supplement Schedule 5.9.1 with the name, job title,
unused vacation, current base salary or hourly wage, date of hire and assigned
location of each Transferred Employee (as that term is defined below). At the
Closing, Seller shall provide an updated Schedule 5.9.1 which shall disclose all
the information required under the preceding sentence as of the most recent
practicable date prior to Closing.
5.9.2 Effective as of the Closing, Buyer shall offer
employment to at least the Base Number of those employees included on Schedule
5.9.1. All Employees to whom Buyer offers employment and who accept such
employment are herein referred to as the "Transferred Employees." In the event
any Employees do not accept Buyer's offer of employment, Buyer shall offer
employment to such additional employees (the identity of whom shall be
determined by Buyer and Seller) as are necessary to bring the total number of
Transferred Employees to the Base Number. Subject to the provisions of this
Section 5.9 and Section 5.12, Buyer shall provide each Transferred Employee with
base compensation at least equal to that provided by Seller on the Closing Date,
and employee benefits which are substantially comparable to those provided by
Buyer to its other similarly situated employees. Except as otherwise provided
under the terms of any assumed collective bargaining agreement and under terms
of Section 5.12, Buyer shall provide each Union Transferred Employee with
compensation at least equal to that provided by Seller immediately prior to the
Closing Date and with the benefits provided to Buyer's similarly situated
collectively bargained employees. On and after the Closing Date, Buyer shall
assume Seller's obligations under, and be bound by the provisions of, the
collective bargaining agreement between Citizens Utilities Company of
California, Sacramento District, and International Union of Operating Engineers
Stationary Local No. 39, AFL-CIO (the "California Union"), dated March 4, 1997
(the "California Agreement"), to the extent of provisions covering Transferred
Employees, as in effect on the date of this Agreement. With respect to any
amendment, extension, or renegotiation of the California Agreement, the contract
as so amended, extended or renegotiated will be assumed if, but only if, (i) in
connection with such amendment, extension or renegotiation, the California Union
agrees to substitute for Seller's employee pension plan (to the extent required
to be provided under the California Agreement) Parents' employee pension plan,
and (ii) the other terms and conditions of the collective bargaining agreement
pertaining to the Transferred Employees on the Closing Date are substantially
identical to the terms and conditions of the Collective Bargaining Agreement as
in effect on the date of this Agreement. Each collective bargaining agreement
pertaining to Transferred Employees shall be identified on a Schedule 5.9.2 to
be prepared by Seller and submitted to Buyer on or before the Closing Date.
Seller shall cooperate with Buyer in Buyer's efforts to contact the unions
representing Transferred Employees. Buyer agrees (i) to credit the service of
each Transferred Employee with Seller and its Affiliates before the Closing, for
all purposes under all employee benefit plans and arrangements maintained by
Buyer (and/or any of its Affiliates) for the
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benefit of any Transferred Employee (including without limitation for purposes
of attainment of retirement dates and payment of optional forms of benefits),
other than for purposes of benefit accrual under any "defined benefit plan",
within the meaning of Section 3(35) of ERISA, (ii) to provide accrued vacation
to Transferred Employees in the year in which the Closing occurs, equal to the
excess, if any, of the accrued vacation to which the Transferred Employee would
otherwise be entitled under Seller's vacation plan during that year over the
amount of accrued vacation the Transferred Employee had taken during that year,
and, thereafter, to provide vacation to Transferred Employees on the same basis
as provided to similarly situated employees of Buyer, with service credit as
provided in (i) hereof, (iii) to provide severance benefits to Transferred
Employees terminated by Buyer that are substantially comparable to those
benefits provided by Buyer to similarly situated employees, and (iv) to comply
with all applicable legal requirements with respect to Union Employees
(including without limitation any applicable duty to bargain with those
employees' bargaining representative). Buyer shall be responsible for providing
to each Transferred Employee vacation in an amount equal to the Transferred
Employee's vacation entitlement for the year of Closing reduced by the number of
vacation days such Transferred Employee has taken on or before Closing. Nothing
in this Section 5.9 shall limit Buyer's authority to terminate the employment of
any Transferred Employee at any time and for whatever reason. Until the second
anniversary of the Closing Date, neither Seller nor any of its Affiliates shall
directly or indirectly solicit or offer employment to any Transferred Employee
then employed by Buyer or its Affiliates.
5.9.3 Except as specifically provided in Sections 5.9 and
5.12, Seller shall be solely responsible for any liability, claim or expense
(including reasonable attorneys' fees) related to compensation or employee
benefits incurred by Buyer as the result of any claims against Buyer or its
Affiliates that are made by any Employees or Former Employees (or the
Beneficiary of any Employee or Former Employee) who are not made offers to
become employees of Buyer or its Affiliates including, without limitation,
claims asserted against Buyer as a result of their termination by Seller or its
Affiliates.
5.9.4 Seller shall be solely responsible for any liability,
claim or expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation claims or the benefits
provided under the Benefit Plans, whether paid before or after the Closing) owed
to any Transferred Employee or the Beneficiary of any Transferred Employee or
any Water Sector Retiree or the Beneficiary of any Water Sector Retiree that
arises out of or relates to (i) the employment relationship between Seller or
any of its Affiliates and such Transferred Employee or Beneficiary or (ii) any
benefit claim or expense (including medical expenses) incurred before Closing
under any Benefit Plan. For purposes of this Agreement, a medical expense shall
be deemed to be incurred when the services giving rise to a claim are rendered,
regardless of when billed or paid. Without limiting the foregoing, Seller shall
be responsible for the payment of any employee benefits that become due to any
Transferred Employees as a result of their termination by Seller.
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5.9.5 Except as otherwise specifically provided in Section
5.9, 5.11 or 5.12, Buyer shall be solely responsible for any liability, claim or
expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation, claims or the benefits
provided under any employee benefit plan or arrangement of Buyer incurred after
Closing) owed to any Transferred Employee or Beneficiary of any Transferred
Employee or any Water Sector Retiree or Beneficiary of any Water Sector Retiree
that arises out of or relates to (i) the employment relationship between Buyer
or any of its Affiliates and any Transferred Employee or (ii) any benefit claim
or expense (including medical expense) incurred after Closing under any employee
benefit plan sponsored or contributed to by Buyer or an ERISA Affiliate after
Closing. Notwithstanding the foregoing, Buyer shall not be responsible for the
payment of any employee benefits that become due to any Transferred Employees
under any Benefit Plan (other than the Assumed Benefit Liabilities).
5.9.6 Buyer agrees to reimburse Seller for its proportionate
share (as defined below) of any amount in excess of $1,000,000 paid by Seller as
severance under Citizens' severance plan as in effect on the date hereof to any
Employees (when such amount paid by Seller is aggregated with amounts paid by
Citizens to other employees as referenced in Section 5.9.6 of the Related
Purchase Agreements) provided (i) Buyer does not hire such Employees in
accordance with the provisions of Sections 5.9, 5.11 and 5.12 and (ii) Seller
provides notice to those Employees on or before the Closing Date to the effect
that their employment will be terminated on or shortly after the Closing Date.
Buyer will pay such reimbursement to Citizens within 5 days after receipt of a
list of the Employees showing which are entitled to severance pay, the amounts
of that severance pay and certifying that those amounts have been paid. The
Buyer's "proportionate share" means the amount obtained by multiplying the
amount in excess of $1,000,000 by a fraction, the numerator of which is the
amount of severance paid by Seller to Employees under Section 5.9.6 of this
Agreement and the denominator of which is the sum of (i) the amount paid by
Seller to Employees under Section 5.9.6 of this Agreement and (ii) the aggregate
amount paid by Citizens under Section 5.9.6 of each of the Related Purchase
Agreements.
5.9.7 Until the second anniversary of the Closing Date, Buyer
shall not directly or indirectly solicit or offer employment to any active
employee of Seller, other than the Transferred Employees.
5.10 Employee Pension Plan.
5.10.1 At least fifteen days prior to the Closing Date, Seller
shall take any and all actions necessary to cease benefit accruals and fully
vest all Transferred Employees in their accrued benefits under the Citizens
Pension Plan ("Seller's Pension Plan" or "Citizens Pension Plan"). Seller shall
retain liability and related assets for benefits accrued through the Closing
Date by Transferred Employees under Seller's Pension Plan.
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5.10.2 As of the Closing Date except as may be required under
the California Agreement, Transferred Employees shall be covered under the
American Pension Plan, and shall be given credit for service with Seller and its
Affiliates for eligibility, vesting, attainment of retirement dates, subsidized
benefits, and entitlement to optional forms of payment, but not for accrual of
benefits.
5.11 Employee Savings Plan.
5.11.1 Effective upon the date of the transfer described in
Section 5.11.2, subject to the terms and conditions of this Agreement, Parent
shall cause the Savings Plan for Employees of American Water Works Company, Inc.
(the "American Savings Plan") to assume the liability of the Seller's 401(k)
Plan for the account balances of those Transferred Employees participating in
the Seller's 401(k) Plan on the Closing Date (the "Affected Participants") that
are transferred to the American Savings Plan. As of the Closing Date, Affected
Participants shall be 100% vested in their account balances under the Seller's
401(k) Plan. Transferred Employees shall be given credit under the American
Savings Plan for service with Seller and its Affiliates for eligibility,
vesting, attainment of retirement dates, contribution levels and optional forms
of benefit payment, to the same extent that credit for such service has been
given by Seller and its Affiliates.
5.11.2 Buyer shall deliver to Seller as soon as practicable,
but in no event later than ninety (90) days after Closing (i) a certified copy
of the American Savings Plan and any amendment necessary to effectuate the
transfer of assets and the assumption of account balances in accordance with
this Section 5.11, (ii) a certified copy of the trust agreement for the American
Savings Plan; (iii) the most recent favorable determination letter from the IRS
with respect to the American Savings Plan; and (iv) an opinion from Buyer's
legal counsel acceptable to Seller that the American Savings Plan, as so
amended, complies or will comply on a timely basis with the applicable
provisions of the Code relating to the qualification of, and the transfer of
assets and assumption of benefit liabilities by, the American Savings Plan.
Seller shall deliver to Buyer as soon as practicable, but in no event later than
ninety (90) days after Closing, an opinion from Seller's legal counsel
acceptable to Buyer that the Seller's 401(k) Plan complies or will comply on a
timely basis with the applicable provisions of the Code relating to the
qualification of the Seller's 401(k) Plan, and the transfer of assets to, and
assumptions of benefit limitations by, the American Savings Plan. As soon as
practicable, but in any event within 120 days after Closing, Seller shall cause
the trustee of the Seller's 401(k) Plan to transfer in cash and promissory notes
representing outstanding loans to Affected Participants to the trustee of the
American Savings Plan an amount equal to the sum of the account balances of the
Transferred Employees (the "Transferred Accounts") calculated as of the most
recent valuation date under the Seller's 401(k) Plan (which shall, in any event,
be within thirty (30) days of the transfer). Both the Seller Parties and Buyer
will file any IRS Form 5310A that is required with respect to the transfer
contemplated by this Section 5.11 date at least 30 days prior to the transfer.
Upon the transfer described in this Section 5.11, Buyer and the American Savings
Plan shall be responsible for all benefits attributable to the Transferred
Accounts to which
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Transferred Employees were entitled under the Seller's 401(k) Plan as of such
date, and Seller and the Seller's 401(k) Plan shall cease to have any liability,
contingent or otherwise, for such benefits.
5.12 Welfare Benefits.
5.12.1 Within sixty (60) days after the Closing, Seller agrees
to transfer to trusts established by Buyer under Section 501(c)(9) of the Code
("Buyer's VEBAs") the amount held under any trust established by Seller under
Section 501(c)(9) of the Code ("Seller's VEBAs") to fund post-retirement health
care and life insurance benefits attributable to the Business, including Former
Employees identified on Schedule 5.12 (the "Water Sector Retirees") and any
"grandfathered" Transferred Employees as set forth on Schedule 5.12. Buyer
agrees to provide post-retirement health care and life insurance benefits to the
Water Sector Retirees and, as applicable, Transferred Employees who become
eligible for such benefits after Closing and further agrees that Buyer's VEBAs
will apply an amount at least equal to the sum of the assets (and earnings
thereon calculated at the rate of return generated by Buyer's VEBAs) transferred
from Seller's VEBAs to provide post-retirement health care and life insurance
benefits for such employees. Upon Closing, Buyer shall be responsible for all
obligations of the Seller Parties to provide post-retirement health care and
life insurance benefits "incurred" (within the meaning of Section 5.9.4) after
the Closing and the Seller Parties shall cease to have any liability, contingent
or otherwise, for such benefits. In consideration of such transfer, Buyer agrees
not to terminate or materially modify those post-retirement health and life
benefit provisions applicable to such grandfathered Transferred Employees and
Water Sector Retirees as such provisions are in effect immediately prior to the
Closing Date.
5.12.2 Buyer shall take all action necessary and appropriate
to ensure that, as of the Closing Date, Buyer provides medical, health, dental,
flexible spending account, accident, life, short-term disability, long-term
disability and other employee welfare benefits (including retiree medical
benefits) to Transferred Employees that, in the case of Non-Union Transferred
Employees and Union Transferred Employees are substantially similar to those
benefits provided by Buyer under its corresponding welfare benefit plans (the
"Buyer's Welfare Plans"). For purposes of determining eligibility to
participate, and entitlement to benefits, in each Buyer Welfare Plan, each
Transferred Employee shall be credited with service, determined under the terms
of the corresponding welfare plans maintained by Seller on the Closing Date
(hereinafter referred to collectively as the "Seller Welfare Plans"). Any
restrictions on coverage for pre-existing conditions, waiting periods, and
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived in Buyer's Welfare Plans for Transferred Employees and retirees of the
Water Sector and their respective Beneficiaries, and Transferred Employees and
retirees of the Water Sector and their respective Beneficiaries shall receive
credit under the Buyer Welfare Plans for co-payments, payments under a
deductible limit made by them, and for out-of-pocket maximums applicable to them
during the plan year of the Seller Welfare Plan in which the Closing Date
occurs. As soon as practicable after the Closing Date, Seller shall deliver to
Buyer a list of the Transferred Employees and retirees of the Water Sector and
their respective Beneficiaries who had credited service under
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a Seller Welfare Plan, together with each such individual's service, copayment,
deductible and out-of-pocket payment amounts under such plan.
5.12.3 Seller shall transfer to Buyer's flexible benefits plan
any balances standing to the credit of Transferred Employees under Seller's
flexible benefits plan as of the Closing Date. Seller shall provide to Buyer
prior to the Closing Date a list of those Transferred Employees that have
participated in the health or dependent care reimbursement accounts of Seller,
together with their elections made prior to the Closing Date with respect to
such Account, and balances standing to their credit as of the Closing Date.
5.13 Taxes. The Seller Parties, on the one hand, and Parent and
Buyer, on the other, shall (a) each provide the other with such assistance as
may reasonably be requested by either of them in connection with the preparation
of any Tax return, any audit or other examination by any taxing authority or any
judicial or administrative proceeding with respect to Taxes; (b) each retain and
provide the other with any records or other information which may be relevant to
such return, audit, examination or proceeding, and (c) each provide the other
with any final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Tax return of
the other for any period (which shall be maintained confidentially). Without
limiting the generality of the foregoing, Parent and Buyer, on the one hand, and
the Seller Parties, on the other, shall retain, until the applicable statutes of
limitations (including all extensions) have expired, copies of all Tax returns,
supporting workpapers, and other books and records or information which may be
relevant to such returns for all Tax periods or portions thereof ending before
or including the Closing Date, and shall not destroy or dispose of such records
or information without first providing the other party with a reasonable
opportunity to review and copy the same.
5.14 Intentionally Omitted.
5.15 Citizens' Guarantees and Surety Instruments. Each of Parent and
Buyer shall use its reasonable efforts to assist Citizens in obtaining full and
complete releases on the guarantees, letters of credit, bonds and other surety
instruments listed on Schedule 5.15. For purposes of this Section 5.15 and
Section 5.16, reasonable efforts: (a) shall include Parent's or Buyer's
assumption of the Assumed Indebtedness, the Contracts and the Permits on the
terms set forth in this Agreement; (b) shall include an obligation on the part
of Parent or Buyer to provide a guarantee, letter of credit, bond or other
required surety instrument at Closing to the extent required by any Contract or
Permit and in general to provide an equivalent surety instrument to be
substituted for any surety instrument provided by Citizens to any beneficiary in
connection with the Business; and (c) shall include the obligation of Buyer to
provide a debt obligation relating to the California Water Debt satisfactory to
the lender in replacement of and in substitution for the obligations of Citizens
Utilities Company of California to such lender under the California Water Debt,
all to enable Buyer to assume the California Water Debt.
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5.16 Assumption of Seller Debt. Each of Buyer and Parent shall use
its reasonable efforts (as defined in Section 5.15) to assist Seller in
obtaining all consents and opinions and taking such other actions as may be
required to enable Buyer or Parent, as the case may be, to assume at the Closing
all of Seller's liabilities and obligations under the Assumed Indebtedness to
the extent provided in Section 2.3.
5.17 Schedule of Permits. No later than March 13, 2000, Citizens
shall deliver to Buyer a schedule, to be identified as Schedule 5.17, which sets
forth all material Permits required for the use of the Acquired Assets and the
operation of the Business by Buyer substantially in the manner as it was
conducted prior to the date hereof. For purposes of this Section 5.17, material
Permits shall include those required for the service of all utility customers at
substantially the same service levels as provided by Seller on the date of this
Agreement. All Permits listed on Schedule 5.17 that are required to be listed on
Schedule 3.3 or Schedule 3.9 shall be so designated. Seller has made or will
make prior to the Closing Date timely applications for renewals of all such
Permits listed on Schedule 5.17, which under applicable law must be filed prior
to the Closing Date to maintain the Permits listed on Schedule 5.17 in full
force and effect.
5.18 Title Information. No later than March 13, 2000, Seller shall
use its reasonable efforts to deliver to Buyer true, correct and complete copies
of all existing title policies, surveys, leases, deeds, instruments and
agreements relating to title to the Real Estate in Seller's possession.
5.19 Transaction with Related Parties. Effective as of the Closing
Date, except as otherwise provided in Sections 5.9 through 5.12, 5.15, 5.26,
5.27 and 2.7.1(j) of this Agreement, Seller shall have terminated and canceled
all contracts, commitments and agreements (including employment relationships)
relating to the Acquired Assets or the Business, between Seller, any Affiliate
of Seller (including Citizens), any officer or director of any Seller Party, or
any Affiliate of the foregoing. Seller shall be solely liable for any
contractual or other claims, express or implied arising out of the termination
and cancellation of any of the foregoing raised by any party thereto.
5.20 Approval by Citizens. Citizens shall, as the sole owner of
common stock of each other Seller Party, vote all of such shares of common stock
to approve this Agreement and the transactions contemplated hereby.
5.21 Supplemental Information.
5.21.1 Citizens shall provide Buyer, within fifteen (15) days
after the execution or the date of receipt thereof, a copy of (a) each Contract
(other than with respect to which the Business' total annual liability or
expense is less than $100,000 per such Contract) entered into by Seller after
the date hereof and prior to the Closing Date; (b) a copy of any written notice
for assessments for public improvements against the Real Estate received after
the date hereof and prior to the Closing Date; (c) a copy of the filing of any
condemnation, expropriation, eminent domain
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or similar proceeding affecting all or any portion of any of the Real Estate
received after the date hereof but prior to the Closing Date; and (d) a copy of
any Contract where Seller is a lessee relating to the use or occupancy of the
Real Estate and where such Contract involves annual payments in excess of
$100,000 entered into by Seller after the date hereof and prior to the Closing
Date.
5.21.2 Within fifteen (15) days after the receipt of notice of
violation, Citizens shall notify Buyer of any violations of state or federal
drinking water standards which, if such violations existed on the date hereof,
would be required to be disclosed pursuant to Section 3.8.10 hereof, and shall
promptly notify Buyer of the actions proposed to be taken by Seller to correct
or otherwise respond to such violations.
5.22 Non-Competition. The Seller Parties agree that for a period of
fifteen (15) years after the Closing Date no Seller Party nor any Affiliate of a
Seller Party shall directly or indirectly own, manage, operate, control or
participate in the ownership, management, operation or control of or be
otherwise connected in any substantial manner with any entity (other than Buyer
and its successors and assigns) engaged in the business of storing, supplying
and distributing water in the States in which Buyer acquires any Acquired
Assets, whether or not such business is subject to regulation by a PUC (it being
understood that the individual directors of Seller and Citizens are not
Affiliates of a Seller Party).
5.23 Intentionally Omitted.
5.24 Intentionally Omitted.
5.25 Cooperation with Respect to Like-Kind Exchange. Buyer agrees
that Seller may, at Seller's written election delivered to Buyer no later than
five (5) days prior to the Closing Date, direct that all or a portion of the
Initial Cash Payment be delivered to a "qualified intermediary" as defined in
Treasury Regulation ss.1.1031(k) - (g)(4) as to enable Seller's relinquishment
of the Acquired Assets to qualify as part of a like-kind exchange of property
covered by Section 1031 of the Code. If Seller so elects, Buyer shall reasonably
cooperate with Seller (but without being required to incur any out-of-pocket
costs in the course thereof) in connection with Seller's efforts to effect such
like-kind exchange, which cooperation shall include, without limitation, taking
such actions as Seller reasonably requests in order to enable Seller to qualify
such transfer as part of a like-kind exchange of property covered by Section
1031 of the Code (including any actions reasonably required to facilitate the
use of a "qualified intermediary"), and Buyer agrees that Seller may assign all
or part of its rights (but no obligations) under this Agreement to a person or
entity acting as a qualified intermediary to qualify the transfer of the Assets
as part of a like-kind exchange of property covered by Section 1031 of the Code.
Buyer and Seller agree in good faith to use reasonable efforts to coordinate the
transactions contemplated by this Agreement with any other transactions engaged
in by either Buyer or Seller; provided that such efforts shall, in no event,
result in any delay in the consummation of the transactions contemplated by this
Agreement. Seller shall
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indemnify and hold Buyer harmless from any cost, expense or liability arising
from its cooperating under this Section 5.25.
5.26 Transition Plan. Within 30 days after the execution date of
this Agreement, the parties jointly shall establish a transitional services
team, which shall include expertise from various functional specialties
associated with or involved in providing billing, payroll and other support
services provided to Seller by any automated or manual process using facilities
or employees that are not included among the Acquired Assets or Transferred
Employees. Such team will be responsible for preparing, 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 Closing and any other transfer of control matters that any party
reasonably believes should be addressed in such transition plan. The transition
plan will set forth reasonable arrangements providing Buyer, at Buyer's sole
expense, with appropriate access to Seller's relevant computer systems to allow
for a full conversion of the relevant data and functionality to Buyer's systems
on the Closing Date. Buyer and Seller shall use their commercially reasonable
efforts to cause their representatives on such transition team to cooperate in
good faith and take all reasonable steps necessary to develop a mutually
acceptable transition plan no later than 60 days prior to the Closing Date.
5.27 Procedures regarding Refunds of Advances. Within 30 days after
the execution date of this Agreement, the parties jointly shall establish a
working group of appropriate subject matter experts to determine the appropriate
obligations of Parent and Buyer regarding notification and the provision of
other accurate and timely data to Citizens to enable Citizens timely and
accurately to satisfy the refund obligations described in Section 2.3.3(b). Such
working group will be responsible for preparing a comprehensive agreement no
later than March 13, 2000, which agreement shall be executed by the parties at
Closing. Among other arrangements, the parties would require that the customers
and developers owed refunds provide joint notices to Buyer and Citizens.
5.28 Title Insurance. Prior to Closing, Seller shall cooperate with
Buyer and use commercially reasonable efforts to assist Buyer if Buyer desires
to obtain ALTA title insurance commitments (collectively, the "Title
Commitments," and each a "Title Commitment"), in final form, from one or more
title insurance companies (collectively, the "Title Company"), committing the
Title Company (subject only to the satisfaction of any industry standard
requirements contained in the Title Commitment) to issuing ALTA (or its local
equivalent) form of title insurance policies insuring good, valid, indefeasible
fee simple title to the Real Estate in Buyer, in all cases, at Buyer's sole
expense and in the respective amounts that Buyer requests prior to Closing,
subject to no Liens or other exceptions to title other than Permitted Exceptions
(collectively the "Title Policies"). On or prior to the Closing Date, Seller
shall execute and deliver, or cause to be executed and delivered, to the Title
Company, at no cost to Seller, any customary affidavits, standard gap
indemnities and similar documents reasonably requested by the Title Company in
connection with the issuance of the Title Commitments or the Title Policies;
provided that such efforts and Buyers' request for Title
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Policies or Title Commitments shall, in no event, result in any delay in the
consummation of the transactions contemplated by this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT; TERMINATION
6.1 Conditions Precedent to Obligations of Buyer and Parent. The
obligations of Buyer and Parent to cause the purchase of the Acquired Assets and
the assumption of the Assumed Liabilities and to consummate the other
transactions contemplated hereby are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions (any one or more of which
may be waived in writing in whole or in part by Buyer and Parent in their sole
discretion):
6.1.1 Performance of Agreements; Representations and
Warranties. Seller shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by them at or prior to the Closing; and the representations and
warranties set forth in this Agreement made by Seller shall be true and correct
on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date,
except for representations and warranties that speak as of a specific date or
time other than the Closing Date (which need only be true and correct as of such
date or time), other than, in all such cases (except Section 3.25), such
failures to be true and/or correct as would not in the aggregate reasonably be
expected to have a Material Adverse Effect; provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso); and provided further, that
the representation and warranty set forth in Section 3.5.1 shall be deemed to be
true and correct on and as of the Closing Date if any Material Adverse Effect
that may have arisen or occurred between the execution date of this Agreement
and the Closing Date shall have been cured or remedied such that such Material
Adverse Effect is not continuing as of the Closing Date. Buyer shall have been
furnished with a certificate of the Chief Financial Officer or other Vice
President of Citizens dated the Closing Date, certifying to the foregoing.
6.1.2 Opinion of Counsel. Buyer shall have received from L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, Vice President and General Counsel of Seller, an opinion
dated the Closing Date, in form and substance satisfactory to Buyer, to the
effect set forth in Exhibit E hereto.
6.1.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
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6.1.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby, and such order
shall not contain any restrictions or conditions (other than those in effect on
the date hereof or requiring that the regulatory treatment with respect to the
Business in existence as of the date of this Agreement applicable to Seller be
continued following the transactions contemplated hereby) which would have a
Material Adverse Effect or a material adverse effect on any other regulated
business of Buyer in the state in which the PUC has jurisdiction, and such order
shall be final and unappealable; Seller shall have obtained all statutory,
regulatory and other consents and approvals which are required in order to
consummate the transactions contemplated hereby and to permit Buyer to conduct
the Business in the manner contemplated by Section 3.25 hereof other than those
the failure of which to obtain would not have a Material Adverse Effect and
other than with respect to the assumption of the California Water Debt. Seller
shall have also obtained (i) all consents and legal opinions required to enable
Seller to sell the Acquired Assets to Buyer at the Closing, free and clear of
all Liens other than Permitted Exceptions (and specifically free and clear of
any Lien arising under or pursuant to the Mortgage Indenture) and (ii) all
consents required under Contracts and Permits relating to Seller's water
appropriation and flowage rights to the extent reasonably sufficient to enable
Buyer to service the customers of the Business and to service future commitments
under such Contracts.
6.1.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Buyer's ownership of all or any material portion
of the Acquired Assets, nor (ii) shall there be pending or threatened any
litigation, suit, action or proceeding by any party which would reasonably be
expected to materially limit or materially adversely affect Buyer's ownership of
the Acquired Assets.
6.1.6 Documents. Seller and Citizens shall have delivered all
of the certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 2.7 hereof 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.
6.1.7 Related Closings. Buyer shall be reasonably satisfied
that the consummation of each of the asset purchase and sale transactions
contemplated by those certain purchase agreements described on Schedule 6.1.7
(the "Related Purchase Agreements") will occur concurrently with the Closing.
6.2 Conditions Precedent to Obligations of Seller Parties. The
obligations of the Seller Parties to cause the sale of the Acquired Assets and
to consummate the other transactions contemplated hereby are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions (any one or more of which may be waived in writing in whole or in
part by the Seller Parties in their sole discretion):
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6.2.1 Performance of Agreements; Representations and
Warranties. Parent and Buyer shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them at or prior to the Closing; and the
representations and warranties set forth in this Agreement made by Buyer and
Parent shall be true and correct on and as of the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date, except for representations and warranties that speak
as of a specific date or time other than the Closing Date (which need only be
true and correct as of such date or time), other than, in all such cases (except
Section 4.2), such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a material adverse effect on the
respective ability of Buyer and Parent to perform their obligations under this
Agreement and the Transaction Documents, provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso). Seller shall have been
furnished with a certificate of the President or Vice President of Parent and
Buyer, dated the Closing Date, certifying to the foregoing.
6.2.2 Opinion of Counsel. Seller shall have received from
Dechert Price & ▇▇▇▇▇▇, counsel to Parent and Buyer, an opinion dated the
Closing Date, in form and substance satisfactory to Seller, to the effect set
forth in Exhibit F hereto.
6.2.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.2.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby and such order
shall not contain any restrictions or conditions which would have a material
adverse effect on Seller's business activities in the State in which the PUC has
jurisdiction or any significant adverse effect on Citizens' acquisition and
divestiture activities in that State (including divestiture of the Acquired
Assets), and such order shall be final and unappealable; Seller shall have
obtained all statutory and regulatory consents and approvals which are required
in order to consummate the transactions contemplated hereby, other than those
the failure of which to obtain would not have a material adverse effect on the
Seller after the Closing. Seller shall have obtained (i) all consents and legal
opinions required to enable Seller to sell the Acquired Assets to Buyer at the
Closing, free and clear of all Liens other than Permitted Exceptions (and
specifically free and clear of any Lien arising under or pursuant to the
Mortgage Indenture), and (ii) all other consents required or advisable in order
for Seller to transfer Acquired Assets without incurring material liability
under any Contract, Permit or Real Estate instrument.
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6.2.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Seller's ownership of all or any material portion
of its properties, nor (ii) shall there be pending or threatened any litigation,
suit, action or proceeding by any party which could reasonably be expected to
materially limit or materially adversely affect Seller's ownership of any of its
properties.
6.2.6 Documents. Parent and Buyer shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Sections 2.7 and 5.27, and
shall have taken such actions as Seller may have requested pursuant to Section
5.25 hereof.
6.2.7 Related Closings. Seller shall be reasonably satisfied
that the consummation of each of the Related Purchase Agreements will occur
concurrently with Closing.
6.3 Termination. This Agreement may be terminated at anytime prior
to the Closing Date:
6.3.1 by mutual written consent of the Seller Parties, Buyer
and Parent;
6.3.2 by any of the Seller Parties, Parent or Buyer if: (i)
any governmental or regulatory body the consent of which is a condition to the
obligations of the Seller Parties, Parent and Buyer to consummate the
transactions contemplated hereby shall have determined not to grant its consent
and all appeals of such determination shall have been taken and have been
unsuccessful; (ii) any court of competent jurisdiction shall have issued an
order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have become final and
nonappealable; or (iii) the Closing shall not have occurred on or before March
31, 2001; provided, however, that the right to terminate this Agreement under
this Section 6.3.2(iii) will not be available to any party that is in material
breach of its representations, warranties, covenants or agreements contained
herein; and provided, further, that if Closing has not occurred by such date
because the conditions precedent to Closing set forth in the first sentence of
Section 6.1.4 and the first sentence of Section 6.2.4 have not been fulfilled,
then such date shall be automatically extended to September 30, 2001; or
6.3.3 If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 6.3, this
Agreement shall become void and of no further force and effect, except for the
provisions of Section 5.6 relating to publicity, Sections 3.24 and 4.6 relating
to brokerage and Section 7.1 relating to expenses. Nothing in this Section 6.3
shall be deemed to release either party from any liability for any willful
breach by such party of the terms and provisions of this Agreement.
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ARTICLE 7
CERTAIN ADDITIONAL COVENANTS
7.1 Certain Taxes and Expenses. Citizens shall be solely responsible
for all state and local sales, use, transfer, real property transfer and other
similar taxes, fees and charges that are calculated based on the value of the
Acquired Assets being transferred arising from and with respect to the sale and
purchase of the Acquired Assets and Buyer shall be solely responsible for all
transfer, registration, documentary stamp, recording and other similar fees and
charges arising from and with respect to the transfer and recording of title
documentation relating to the Acquired Assets. Parent shall be responsible for
all costs and expenses relating to the assumption by or assignment to Parent or
Buyer of the Assumed Indebtedness. Except as otherwise provided in this
Agreement, each of the parties hereto shall each bear its respective accounting,
legal and other expenses incurred in connection with the transactions
contemplated by this Agreement.
7.2 Maintenance of Books and Records. The Seller Parties, on the one
hand, and Buyer and Parent, on the other hand, shall cooperate fully with each
other after the Closing so that (subject to any limitations that are reasonably
required to preserve any applicable attorney-client privilege) each party has
access to the business records, contracts and other information existing at the
Closing Date and relating in any manner to the Acquired Assets or the Assumed
Liabilities or the conduct of the Business (whether in the possession of the
Seller Parties or Buyer or Parent). No files, books or records existing at the
Closing Date and relating in any manner to the Acquired Assets or the conduct of
the Business shall be destroyed by any party for a period of six years after the
Closing Date without giving the other party at least 30 days prior written
notice, during which time such other party shall have the right (subject to the
provisions hereof) to examine and to remove any such files, books and records
prior to their destruction. The access to files, books and records contemplated
by this Section 7.2 shall be during normal business hours and upon not less than
two (2) business days prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the party entitled to claim the same.
7.3 Survival.
7.3.1 Subject to this Section 7.3, Section 7.4.2(g) and
Section 7.4.2(j), all representations, warranties, covenants and agreements
contained in this Agreement or the Transaction Documents shall survive (and not
be affected in any respect by) the Closing, any investigation conducted by any
party hereto and any information which any party may receive. Notwithstanding
the foregoing:
(a) the covenants contained in Sections 5.1, 5.3, 5.4,
5.5, 5.8.2 through 5.8.4 and 5.21 and the related indemnity obligations
contained in Section 7.4 shall terminate
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on, and no action or claim with respect thereto may be brought after, the third
anniversary of the Closing Date;
(b) the covenants contained in Section 5.2 and the
related indemnity obligations contained in Section 7.4 shall terminate on, and
no action or claim with respect thereto may be brought after, the Closing Date;
(c) the representations and warranties contained in
Sections 3.12 and 3.16 and the related indemnity obligations contained in
Section 7.4 shall terminate on, and no action or claim with respect thereto may
be brought following the expiration of the applicable statute of limitations (or
extensions or waivers thereof);
(d) the representations and warranties contained in
Section 3.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(e) the representations and warranties contained in
Section 3.10 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
(f) the representations and warranties contained in
Section 3.7 and 3.17 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(g) the representations and warranties contained in
Sections 3.3, 3.5, 3.6, 3.8, 3.9 and 3.25 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
(h) the representations and warranties contained in
Section 3.11 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
(i) the representations and warranties contained in
Section 4.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(j) the representations and warranties contained in
Sections 4.3 and 4.4 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
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(k) the representations and warranties contained in
Section 4.5 and the related indemnity obligations contained in Section 7.4 shall
terminate on, and no action or claim with respect thereto may be brought after,
the Closing Date; and
(l) all other representations and warranties contained
in this Agreement and the related indemnity obligations contained in Section 7.4
shall terminate on and no further action or claim with respect thereto may be
brought after, the second anniversary of the Closing Date;
(m) such representations and warranties specified in the
foregoing clauses (c) through (k), and the covenants contained in Section 5.1,
5.2, 5.3, 5.4, 5.5, 5.8.2 through 5.8.4 and 5.21 and the liability of any party
with respect thereto, shall not terminate with respect to any claim, whether or
not fixed as to liability or liquidated as to amount, with respect to which such
party has been given written notice setting forth the facts upon which the claim
for indemnification is based and, if possible, a reasonable estimate of the
amount of the claims prior to the relevant anniversary of the Closing Date or
the 30th day after the expiration of the applicable statute of limitations (or
extensions or waivers thereof), as the case may be. If any claim for
indemnification is asserted or could be asserted with respect to a breach or
asserted breach of Section 3.17 (Undisclosed Liabilities) and the Buyer or
Parent is also entitled to indemnification in respect of that claim for breach
or asserted breach of any other representation or warranty in this Agreement for
which there is a shorter survival period, such shorter period will apply to such
claim except to the extent that such claim is a product liability, toxic tort or
similar claim (as described in Section 2.3.3(a)) brought by a private party
litigant.
7.3.2 No claim for indemnity under Section 7.4 shall be
brought or made by Buyer or Parent pursuant to Sections 7.4.1(a)(B) or
7.4.1(a)(C):
(a) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), for any action or claim with respect to the Pre-Existing Conditions;
(b) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), with respect to the presence of Hazardous Substances at any locations
other than the Real Estate; and
(c) after the third anniversary of the Closing Date, for
any action or claim with respect to any other Retained Liability;
Provided, however, that the foregoing time limitations shall not apply to
any such claims which have been the subject of a written notice from Parent
and/or Buyer to the Seller Parties prior to such period setting forth the facts
upon which the claim for indemnification is based and, if possible, a reasonable
estimate of the amount of the claims; and, provided, further, that the foregoing
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time limitations shall also not apply to any such claims: (u) with respect to
Taxes; (v) with respect to any liability of the types that appear as "Trade
Payables" or "Other Current and Accrued Liabilities" (other than liabilities
arising after the Closing Date and relating to the California Water Debt) on the
financial statements of Seller; (w) not exclusively related to the Acquired
Assets or not exclusively related to the Business; and (x) with respect to any
of the matters discussed in Section 3.16 hereof.
For purposes of Sections 7.3.2(a) and (b), a "Change of Control of
Citizens" shall be deemed to have occurred if: (i) any "person" (as such term is
used in Section 13(d) and 14(d) of the Exchange Act of 1934, as amended (the
"Exchange Act"), other than an underwriter engaged in a firm commitment
underwriting on behalf of Citizens, is or becomes the beneficial owner (as such
term is used in Rule 13D-3 and 13D-5 under the Exchange Act, except that for
purposes of this clause (i) a person shall be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding shares of common stock of
the Company; (ii) all or substantially all of Citizens' and its Subsidiaries'
assets are sold, leased, exchanged or otherwise transferred to any person or
group of persons acting in concert; (iii) Citizens is merged or consolidated
with any other person, whether or not Citizens is the surviving corporation in
such merger or consolidation; or (iv) Citizens is liquidated or dissolved or
adopts a plan of liquidation.
7.4 Indemnification. Seller, Parent and Buyer agree as follows:
7.4.1 General Indemnification Obligations.
(a) Seller shall indemnify Buyer and its directors,
officers and other Affiliates (including Parent) and hold Buyer and such other
parties harmless from and against any and all Damages arising out of or
resulting from (A) any breach of any representation, warranty, covenant or
agreement made by the Seller Parties in this Agreement or in any document or
certificate required to be furnished to Buyer by any of the Seller Parties
pursuant to this Agreement (including the Transaction Documents); (B) subject to
Section 7.3.2, any Excluded Assets or Retained Liabilities; and (C) subject to
Section 7.3.2, the ownership, operation or use of any of the businesses or
assets of the Seller Parties or their Affiliates (other than the Business and
the Acquired Assets) whether before, on or after the Closing Date.
(b) Buyer and Parent shall indemnify Seller, and their
directors, officers and other Affiliates (including Citizens) and hold Seller
and such other parties harmless from and against any and all Damages arising out
of or resulting from (A) any breach of any representation, warranty, covenant or
agreement made by Parent or Buyer in this Agreement or in any document or
certificate required to be furnished to Seller by Parent or Buyer pursuant to
this Agreement (including the Transaction Documents); (B) any Assumed
Liabilities after the Closing Date, including the Assumed Indebtedness; (C) the
ownership, operation or use of the Business or
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the Acquired Assets after the Closing Date (except to the extent resulting from
Retained Liabilities or to the extent resulting from breaches by the Seller
Parties of representations, warranties, covenants or agreements hereunder or in
the other Transaction Documents); and (D) any claim by a Transferred Employee or
a Former Employee referred to on Schedule 5.12 or the Beneficiary of any such
employee or former employee for post-retirement health care or life insurance
benefits "incurred" (within the meaning of Section 5.9.4) after the Closing.
(c) For purposes of this Agreement, "Damages" shall mean
any and all losses, liabilities, obligations, damages (including any
governmental penalty or punitive damages assessed or asserted against the party
seeking indemnification and including costs of investigation, clean-up and
remediation), deficiencies, interest, costs and expenses and any claims,
actions, demands, causes of action, judgments, costs and reasonable expenses
(including reasonable attorneys' fees and all other reasonable expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened, incident to the successful enforcement of this Agreement). For
purposes of this Section 7.4, the determination of whether any breach of any
representation, covenant or agreement has occurred, and the calculation of the
amount of Damages incurred by the Indemnified Party arising out of or resulting
from any breach of a representation, covenant or agreement by any party hereto,
the references to a "Material Adverse Effect" or materiality (or other
correlative terms) shall be disregarded, provided that no such breach shall be
found to have occurred due to facts or circumstances arising from an occurrence
or condition described in Section 1.1.61(a). Notwithstanding the foregoing,
Damages shall not include the loss of profits of the party seeking
indemnification, or punitive damages unless the party seeking indemnification
has had punitive damages assessed or asserted against it.
(d) Notwithstanding any language contained in any
Transaction Document (including deeds to Real Estate and instruments delivered
by Seller to the Title Company), representations and warranties as to Real
Estate set forth in Section 3.10 and 3.11 will not be merged into any
Transaction Document and the indemnification obligations of Seller, and the
limitations on such obligations, set forth in this Agreement, shall control. No
provision set forth in any Transaction Document shall be deemed to enlarge,
alter or amend the terms or provisions of this Agreement.
7.4.2 General Indemnification Procedures.
(a) A party seeking indemnification pursuant to this
Section 7.4 (an "Indemnified Party") shall give prompt written notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of the
assertion of any claim, the incurrence of any Damages, or the commencement of
any action, suit or proceeding, of which it has knowledge and in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but failure to give such required notice shall relieve the Indemnifying
Party of any liability hereunder only to the extent that the Indemnifying Party
has suffered actual prejudice thereby. The Indemnifying Party
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shall have the right, exercisable by written notice to the Indemnified Party
after receipt of notice from the Indemnified Party of the commencement of or
assertion of any claim or action, suit or proceeding by a third party in respect
of which indemnity may be sought hereunder (a "Third Party Claim"), to assume
the defense of such Third Party Claim which involves (and continues to involve)
solely monetary damages; provided, that (A) the Indemnifying Party expressly
agrees in such notice that, as between the Indemnifying Party and the
Indemnified Party, solely the Indemnifying Party shall be obligated to satisfy
and discharge the Third Party Claim, (B) such Third Party Claim does not include
a request or demand for injunctive or other equitable relief by an Authority and
(C) the Indemnifying Party makes reasonably adequate provision to assure the
Indemnified Party of the ability of the Indemnifying Party to satisfy the full
amount of any adverse monetary judgment that is reasonably likely to result. The
Indemnifying Party shall be deemed to have satisfied the condition set forth in
clause (C) of the proceeding sentence if it is a regulated utility.
(b) Neither the Indemnified Party nor the Indemnifying
Party shall settle any Third Party Claim without the prior written consent of
the other, which consent shall not be unreasonably withheld or delayed.
(c) The Indemnifying Party or the Indemnified Party, as
the case may be, shall have the right to participate in (but not control), at
its own expense, the defense of any Third Party Claim which the other party is
defending as provided in this Agreement.
(d) Amounts paid in respect of indemnification
obligations of the parties shall be treated as an adjustment to the Purchase
Price.
(e) Subject to Section 7.4.2(f) and Section 7.4.2(i),
neither Parent nor Buyer (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages incurred
unless the aggregate amount of Damages incurred by Parent or Buyer (or the other
Persons for which they can claim indemnification), together with all other
claims for Damages under Section 7.4.2(e) of each of the Related Purchase
Agreements, exceeds $6,123,000 in the aggregate (the "Threshold Amount"), in
which case Seller shall then be liable for Damages in excess of the Threshold
Amount. Subject to Section 7.4.2(f) and Section 7.4.2(i), the cumulative
aggregate indemnity obligation of Citizens and its Affiliates under Section 7.4
of this Agreement and the Related Purchase Agreements shall not exceed
$60,000,000 (the "Ceiling").
(f) Notwithstanding the foregoing, the parties
acknowledge that Parent or Buyer (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages in respect
of intentional and wilful breaches of covenants or agreements in this Agreement
or any of the Retained Liabilities other than the Specified Liabilities
irrespective of the Threshold Amount or the Ceiling (it being understood that
the failure to cure a breach shall not, by itself, be an intentional and wilful
breach). As used herein, the "Specified Liabilities" shall mean the Retained
Liabilities arising from claims made after the Closing
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Date which (i) do not relate to matters within the scope of clauses (u), (v),
(w) and (x) of Section 7.3.2; (ii) were not known to the Seller Parties on or
prior to Closing; and (iii) relate exclusively to the Acquired Assets or the
Business prior to the Closing Date. Notwithstanding anything to the contrary in
this Section 7.4, Parent or Buyer (or the other Persons for which they can claim
indemnification) shall be entitled to indemnification for Damages in respect of
a breach of Section 3.2, 3.12 or 3.16 irrespective of the Threshold Amount or
the Ceiling.
(g) The rights and remedies of Seller, Parent and Buyer
under this Section 7.4 are exclusive and in lieu of any and all other rights and
remedies which Seller, Parent and Buyer may have under this Agreement or
otherwise for monetary relief with respect to (x) the inaccuracy of any
representation, warranty, certification or other statement made (or deemed made)
by Seller, Parent or Buyer in or pursuant to this Agreement or any of the
Transaction Documents or (y) any breach or failure to perform any covenant or
agreements set forth in this Agreement or any of the Transaction Documents.
(h) Except to the extent provided in Section 7.4.2(j)
below, no right to indemnification under this Section 7.4 shall be limited by
reason of any investigation or audit conducted before or after the Closing of
any party hereto including, without limitation, the knowledge of such party of
any breach of any representation, warranty, agreement or covenant by the other
party at any time, or the decision by such party to complete the Closing.
(i) No party shall have any liability to another party
under this Section 7.4 for Damages (and no cost or expense relating to such
Damages shall be included in determining the extent of Damages incurred by such
party for purposes of Section 7.4.2(e)) to the extent that:
(A) the Indemnified Party recovers insurance
proceeds covering the Damages or otherwise recovers payments in respect of such
Damages from any other source (whether in a lump sum or stream of payments); or
(B) the Indemnified Party's Tax liability is
actually reduced as a result of a tax benefit to which the Indemnified Party
becomes entitled in respect of the Damages.
(j) Seller shall have no liability or obligation under
this Section 7.4 for any Damages resulting from the inaccuracy or breach of any
representation or warranty if such inaccuracy or breach is disclosed by Seller
pursuant to and in accordance with Sections 5.3 and 8.4 hereof;
(k) Buyer agrees to use its commercially reasonable
efforts to give timely and effective written notice to the appropriate insurance
carrier(s) of any occurrence or circumstances which, in the judgment of Buyer
consistent with its customary risk management
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practices, appear likely to give rise to a claim against Buyer that is likely to
involve one or more insurance policies of Buyer. Any such notice shall be given
in good faith by Buyer without regard to the possibility of indemnification
payments by Seller under this Section 7.4, and shall be processed by Buyer in
good faith and in a manner consistent with its risk management practices
involving claims for which no third party contractual indemnification is
available. Buyer agrees that (i) if it is entitled to receive payment from
Seller for Damages arising under or pursuant to a breach of the representation
and warranty set forth in Section 3.10, and (ii) if Buyer has obtained title
insurance which may cover the claim or matter giving rise to such Damages, then
(iii) such title insurance shall be primary coverage and Buyer will make a claim
under the title insurance if such claim can be made in good faith before
enforcing its right to receive payment from Seller. Buyer shall be under no
obligation to obtain title insurance or prosecute such claim (other than the
initial filing of such claim).
(l) If at any time subsequent to the receipt by an
Indemnified Party of an indemnity payment hereunder, such Indemnified Party (or
any Affiliate thereof) receives any recovery, settlement or other similar
payment with respect to the Damages for which it received such indemnity payment
(including insurance proceeds and other payments pursuant to Section 7.4.2(i)(A)
and a tax benefit pursuant to Section 7.4.2(i)(B)) (the "Recovery"), such
Indemnified Party shall promptly pay to the Indemnifying Party an amount equal
to the amount of such Recovery, less any expense incurred by such Indemnified
Party (or its Affiliates) in connection with such Recovery, but in no event
shall any such payment exceed the amount of such indemnity payment;
(m) In the event of any indemnification claim under this
Section 7.4 involving the claim of any third party, the Indemnified Party shall
cooperate fully (and shall cause its Affiliates to cooperate fully) with the
Indemnifying Party in the defense of any such claim under this Section 7.4.
Without limiting the generality of the foregoing, the Indemnified Party shall
furnish the Indemnifying Party with such documentary or other evidence as is
then in its or any of its Affiliates' possession as may reasonably be requested
by the Indemnifying Party for the purpose of defending against any such claim.
Whether or not the Indemnifying Party chooses to defend or prosecute any claim
involving a third party, all the parties hereto shall cooperate in the defense
or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith.
7.4.3 Indemnification for Negligence. WITHOUT LIMITING OR
ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER
IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM
GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, VIOLATION OF ANY LAW OR
OTHER LEGAL FAULT OF OR BY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS
PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
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7.5 UCC Matters. From and after the Closing Date, Seller will
promptly refer all inquiries with respect to ownership of the Acquired Assets or
the Business to Buyer. In addition, Seller will execute such documents and
financing statements as Buyer may reasonably request from time to time to
evidence transfer of the Acquired Assets to Buyer in accordance with this
Agreement, including any necessary assignment of financing statements.
7.6 Financial Statements. In connection with the preparation and
filing of any registration statement or periodic report of Buyer or its
Affiliates pursuant to Rule 3-05, Article 11 of Regulation S-X or other rule or
regulation promulgated under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, Seller, at Buyer's expense, shall
provide Buyer (a) by April 30, 2000 or within 120 days after Buyer's written
request therefor if made after January 1, 2000, with the following audited
financial statements: (i) a statement of net assets of the Business as of the
end of the last fiscal year prior to Closing; and (ii) a statement of income of
the Business and a statement of cash flows or its equivalent of the Business for
the last fiscal year prior to Closing (in each case combined with the businesses
being acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements), including opinions thereon of Seller's Accountants, and (b) within
90 days after Buyer's written request made therefor (provided such request is
made after the end of the fiscal quarter described below), the following
unaudited statements: (i) a statement of net assets of the Business as of the
end of the last fiscal quarter prior to Closing (but only if such quarter is
subsequent to the last fiscal year prior to Closing); and (ii) a statement of
income of the Business and a statement of cash flows or its equivalent of the
Business, for the period from the end of the last fiscal year through the end of
the last fiscal quarter prior to Closing (in each case combined with the
businesses being acquired by Buyer or Affiliates of Buyer pursuant to the
Related Purchase Agreements).
7.7 Collection of Receivables. Seller agrees that it shall promptly
(and in any event no later than five (5) Business Days following receipt)
deliver all such payments with respect to accounts receivable from customers of
the Business received on and after the Closing Date (including but not limited
to negotiable instruments tendered in payment of accounts receivable assigned to
Buyer hereunder which shall be duly endorsed by Seller to the order of Buyer) to
Buyer. Seller shall cooperate with Buyer in coordinating the transfer of
collection agents and customers of the Business who pay their bills through the
Automated Clearinghouse (ACH) process to Buyer.
ARTICLE 8
MISCELLANEOUS
8.1 Construction. Parent, Buyer and the Seller Parties have
participated jointly in the negotiation and drafting of this Agreement and the
Transaction Documents. In the event any ambiguity or question of intent or
interpretation arises, this Agreement and the Transaction Documents shall be
construed as if drafted jointly by Parent, Buyer and the Seller Parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the
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authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local or foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" in this Agreement shall mean including without
limitation. Words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other genders as the
context requires. The terms "hereof," "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules and Exhibits hereto) and
not to any particular provision of this Agreement, and Article, Section,
paragraph, Exhibit and Schedule references are to the Articles, Sections,
paragraphs, Exhibits and Schedules to this Agreement unless otherwise specified.
The word "or" shall not be exclusive. Provisions of this Agreement shall apply,
when appropriate, to successive events and transactions. Section references
refer to this Agreement unless otherwise specified.
8.2 Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy, by registered or certified
mail (return receipt requested) with postage and registration or certification
fees thereon prepaid, or by any nationally recognized overnight courier
addressed to the party at its address set forth below:
If to Parent:
American Water Works Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
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If to Buyer:
California-American Water Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Counsel
with a copy to Parent and a copy to:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Seller:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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and
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that no party
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other party hereto; provided
that Seller may assign its rights or delegate its duties under this Agreement to
a qualified intermediary chosen by Seller to structure the transactions
contemplated hereby as a like-kind exchange of property covered by Section 1031
of the Code.
8.4 Exhibits and Schedules. All Exhibits and Disclosure Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Disclosure of any fact or item
in any Schedule referenced by a particular paragraph or Section in this
Agreement shall, should the existence of the fact or item or its contents be
clearly related to any other paragraph or section, be deemed to be disclosed
with respect to that other paragraph or section.
8.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the conflicts of laws principles thereof.
8.6 Dispute Resolution. Except as otherwise provided herein, any
dispute, controversy or claim between the parties relating to, arising out of or
in connection with this Agreement (or any subsequent agreements or amendments
thereto), including as to its existence, enforceability, validity,
interpretation, performance or breach or as to indemnification or damages,
including claims in tort, whether arising before or after the termination of
this Agreement (any such dispute, controversy or claim being herein referred to
as a "Dispute") shall be settled without litigation and only by use of the
following alternative dispute resolution procedure:
(a) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Dispute. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties shall
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not be admissible in the arbitration described below, or in any lawsuit.
Documents identified in or provided with such communications, which are not
prepared for purposes of the negotiations, are not so exempted and may, if
otherwise admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the
parties do not resolve the Dispute within 60 days of the initial written
request, the Dispute shall be submitted to binding arbitration by a single
arbitrator pursuant to the Commercial Arbitration Rules, as then amended and in
effect, of the American Arbitration Association (the "Rules"); provided,
however, that at the election of either party, the arbitration shall take place
before three (3) arbitrators, one arbitrator being selected by Parent, one
arbitrator being selected by Citizen, and the third arbitrator, knowledgeable in
the general subject matter of the dispute, controversy or claim, being selected
by the other two arbitrators. Either party may demand such arbitration in
accordance with the procedures set out in the Rules. The parties hereto shall
use reasonable efforts to coordinate any arbitration commenced under this
Agreement with any arbitration on the same or similar issues commenced under any
of the Related Purchase Agreements so that the resolution under this Agreement
and the similar issues under the Related Purchase Agreements can be resolved as
expeditiously and efficiently as reasonably practicable. Reasonable efforts
shall include use of a common arbitrator or panel of arbitrators where
practicable. The arbitration shall take place in Newark, New Jersey. The
arbitration hearing shall be commenced within 60 days of such party's demand for
arbitration. The arbitrator(s) 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(s) 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(s), present testimony and written
evidence and examine witnesses. No party shall be eligible to receive, and the
arbitrator(s) shall not have the authority to award, exemplary or punitive
damages. The arbitrator(s) shall rule on the Dispute by issuing a written
opinion within 30 days after the close of hearings. The arbitrators' majority
decision shall be binding and final. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction.
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator(s); provided, however, that if the arbitrator(s) determines that the
position taken in the Dispute by the non-prevailing party taken as a whole is
unreasonable, the arbitrator(s) may order the non-prevailing party to bear such
fees and expenses, and reimburse the prevailing party for all or such portion of
its reasonable costs and expenses in submitting and presenting its position, as
the arbitrator(s) 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(s) 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 8.6 and (ii) if any party, as
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party 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 8.6.
8.7 Severability. The parties agree that (a) the provisions of this
Agreement shall be severable in the event that any provision hereof is held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
(b) such invalid, void or otherwise unenforceable provision shall be
automatically replaced by another provision which is as similar as possible in
terms to such invalid, void or otherwise unenforceable provision but which is
valid and enforceable and (c) the remaining provisions shall remain enforceable
to the fullest extent permitted by law.
8.8 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or should be construed to confer upon or give to any Person
other than the parties hereto and their successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
8.9 Entire Agreement. This Agreement, the Schedules and Exhibits
hereto and the other Transaction Documents, and the Confidentiality Agreement
dated August 2, 1999, between Citizens and Parent, (i) together constitute the
entire understanding of the parties (and their affiliates) with respect to the
subject matter hereof, and any related matter, (ii) supercede all prior
agreements or understandings, written or oral, entered into by any of the
parties that concern the subject matter hereof and (iii) are not intended to
confer upon any Person other than the parties hereto any benefit, right or
remedy.
8.10 Amendment and Waiver. The parties may, by mutual agreement,
amend this Agreement in any respect, and any party, as to such party, may (i)
extend the time for the performance of any of the obligations of the other
party; (ii) waive any inaccuracies in representations and warranties by the
other party; (iii) waive compliance by the other party with any of the covenants
or agreements contained herein and performance of any obligations by the other
party; and (iv) waive the fulfillment of any condition that is precedent to the
performance by such party of any of its obligations under this Agreement. To be
effective, any such amendment or waiver must be in writing and be signed by the
party providing such waiver or extension, as the case may be. The waiver by any
party hereto of any breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach, whether or not similar.
8.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.\
8.12 Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
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8.13 Definitions. For purposes of this Agreement, references to the
knowledge of the Seller Parties (including a reference to "the best of the
knowledge of the Seller Parties" and similar references) shall mean the actual
knowledge possessed by any of the following officers or employees of Citizens:
Chief Financial Officer, Vice President and Treasurer; President, Citizens
Public Services; Vice President, Corporate Human Resources; Secretary; Vice
President, Water; and the general manager of the Business.
8.14 No Implied Representation. NOTWITHSTANDING ANYTHING CONTAINED
IN THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT NEITHER
OF THE SELLER PARTIES ARE MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT, ANY SCHEDULE
HERETO, THE TRANSACTION DOCUMENTS, OR ANY DOCUMENT, EXHIBIT, CERTIFICATE,
INSTRUMENT OR STATEMENT TO BE DELIVERED HEREUNDER OR THEREUNDER INCLUDING, BUT
NOT LIMITED TO, ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO ANY OF
THE ACQUIRED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IT IS
UNDERSTOOD AND AGREED THAT ANY COST ESTIMATES, PROJECTIONS OR OTHER PREDICTIONS
CONTAINED OR REFERRED TO IN THE SCHEDULES AND ANY COST ESTIMATES, PROJECTIONS OR
PREDICTIONS OR ANY OTHER INFORMATION CONTAINED OR REFERRED TO IN OTHER MATERIALS
THAT HAVE BEEN OR SHALL HEREINAFTER BE PROVIDED TO PARENT, BUYER OR ANY OF THEIR
AFFILIATES, AGENTS OR REPRESENTATIVES ARE NOT AND SHALL NOT BE DEEMED TO BE
REPRESENTATIONS OR WARRANTIES OF ANY OF THE SELLER PARTIES.
8.15 Construction of Certain Provisions. 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.
8.16 Bulk Sales. Buyer agrees that it shall not make any filings
under any tax bulk sales provisions with respect to the transactions
contemplated by this Agreement.
[Signatures appear on following page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
CITIZENS UTILITIES COMPANY
By:___________________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer, Vice President
and Treasurer
CITIZENS BUSINESS SERVICES COMPANY
CITIZENS RESOURCES COMPANY
CITIZENS UTILITIES COMPANY OF CALIFORNIA
By:___________________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
AMERICAN WATER WORKS COMPANY, INC.
By:___________________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Treasurer
CALIFORNIA-AMERICAN WATER COMPANY
By:___________________________________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇., President
Illinois
EXECUTION COPY
ASSET AND STOCK PURCHASE AGREEMENT
among
CITIZENS UTILITIES COMPANY
AND
CERTAIN OF ITS AFFILIATES
AND
AMERICAN WATER WORKS COMPANY, INC. AND
ILLINOIS-AMERICAN WATER COMPANY
Dated as of
October 15, 1999
Illinois
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS......................................................1
1.1 Certain Definitions..............................................1
ARTICLE 2 THE TRANSACTION.................................................10
2.1 Sale and Purchase...............................................10
2.2 Excluded Assets.................................................11
2.3 Assumption of Certain Liabilities...............................12
2.4 Consent of Third Parties........................................15
2.5 Closing.........................................................16
2.6 Purchase Price..................................................16
2.6.1 Purchase Price............................................16
2.6.2 Payment of Initial Cash Payment...........................16
2.6.3 Estimated Closing Statement...............................17
2.6.4 Post-Closing Adjustment to Purchase Price.................17
2.6.5 Adjustment for Certain Liabilities........................19
2.6.6 Additional Adjustment to the Purchase Price...............19
2.7 Deliveries and Proceedings at Closing...........................19
2.7.1 Deliveries to each of Parent and IAWC....................19
2.7.2 Deliveries By Parent and IAWC to the Seller Parties......20
2.8 Tax Allocation of Consideration.................................21
2.9 Prorations......................................................21
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER.......................22
3.1 Qualification; No Interest in Other Entities....................22
3.2 Authorization and Enforceability................................22
3.3 No Violation of Laws or Agreements..............................23
3.4 Financial Statements............................................23
3.5 No Changes......................................................23
3.6 Contracts.......................................................24
3.7 Permits and Compliance With Laws Generally......................25
3.8 Environmental Matters...........................................25
3.9 Consents........................................................27
3.10 Title...........................................................28
3.11 Real Estate.....................................................28
3.12 Taxes...........................................................28
3.13 Patents and Intellectual Property Rights........................29
3.14 Accounts Receivable.............................................29
3.15 Labor Relations.................................................29
3.16 Employee Benefit Plans..........................................29
3.17 Absence of Undisclosed Liabilities..............................31
3.18 No Pending Litigation or Proceedings............................31
3.19 Supply of Utilities.............................................32
3.20 Insurance.......................................................32
3.21 Relationship with Customers.....................................32
Illinois
3.22 WARN Act........................................................32
3.23 Condition of Assets.............................................32
3.24 Brokerage.......................................................32
3.25 All Assets......................................................33
3.26 Year 2000 Matters...............................................33
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND IAWC...............34
4.1 Organization and Good Standing..................................34
4.2 Authorization and Enforceability................................34
4.3 No Violation of Laws or Agreements..............................34
4.4 Consents........................................................35
4.5 Financing.......................................................35
4.6 Brokerage.......................................................35
4.7 Insurance.......................................................35
ARTICLE 5 ADDITIONAL COVENANTS............................................36
5.1 Conduct of Business.............................................36
5.2 Negotiations....................................................37
5.3 Disclosure Schedules............................................38
5.4 Mutual Covenants................................................38
5.5 Filings and Authorizations......................................39
5.6 Public Announcement.............................................39
5.7 Further Assurances..............................................40
5.8 Cooperation.....................................................40
5.9 Employees; Employee Benefits....................................41
5.10 Employee Pension Plan...........................................44
5.11 Employee Savings Plan...........................................44
5.12 Welfare Benefits................................................45
5.13 Taxes...........................................................46
5.14 Intentionally Omitted...........................................46
5.15 Citizens' Guarantees and Surety Instruments.....................46
5.16 Assumption of Seller Debt.......................................47
5.17 Schedule of Permits.............................................49
5.18 Title Information...............................................49
5.19 Transaction with Related Parties................................49
5.20 Approval by Citizens............................................50
5.21 Supplemental Information........................................50
5.22 Non-Competition.................................................50
5.23 Intentionally Omitted...........................................50
5.24 IDRB Obligations................................................51
5.25 Cooperation with Respect to Like-Kind Exchange..................51
5.26 Transition Plan.................................................52
5.27 Procedures regarding Refunds of Advances........................52
5.28 Title Insurance.................................................52
ARTICLE 6 CONDITIONS PRECEDENT; TERMINATION...............................53
6.1 Conditions Precedent to Obligations of IAWC and Parent..........53
Illinois
6.1.1 Performance of Agreements; Representations and Warranties.53
6.1.2 Opinion of Counsel........................................53
6.1.3 HSR Act...................................................53
6.1.4 Required PUC and Other Consents...........................53
6.1.5 Injunction; Litigation....................................54
6.1.6 Documents.................................................54
6.1.7 Related Closings..........................................54
6.2 Conditions Precedent to Obligations of Seller Parties...........54
6.2.1 Performance of Agreements; Representations and Warranties.55
6.2.2 Opinion of Counsel........................................55
6.2.3 HSR Act...................................................55
6.2.4 Required PUC and Other Consents...........................55
6.2.5 Injunction; Litigation....................................56
6.2.6 Documents.................................................56
6.2.7 Related Closings..........................................56
6.3 Termination.....................................................56
ARTICLE 7 CERTAIN ADDITIONAL COVENANTS....................................57
7.1 Certain Taxes and Expenses......................................57
7.2 Maintenance of Books and Records................................57
7.3 Survival........................................................57
7.4 Indemnification.................................................60
7.4.1 General Indemnification Obligations.......................60
7.4.2 General Indemnification Procedures........................61
7.4.3 Indemnification for Negligence............................64
7.5 UCC Matters.....................................................64
7.6 Financial Statements............................................64
7.7 Collection of Receivables.......................................65
ARTICLE 8 MISCELLANEOUS...................................................65
8.1 Construction....................................................65
8.2 Notices.........................................................65
8.3 Successors and Assigns..........................................67
8.4 Exhibits and Schedules..........................................68
8.5 Governing Law...................................................68
8.6 Dispute Resolution..............................................68
8.7 Severability....................................................69
8.8 No Third Party Beneficiaries....................................69
8.9 Entire Agreement................................................69
8.10 Amendment and Waiver............................................70
8.11 Counterparts....................................................70
8.12 Headings........................................................70
8.13 Definitions.....................................................70
8.14 No Implied Representation.......................................70
8.15 Construction of Certain Provisions..............................71
8.16 Bulk Sales......................................................71
Illinois
List of Schedules
Schedule 1.1.1(a) ..................................................Real Estate
Schedule 1.1.10 ...........................................Assumed Indebtedness
Schedule 1.1.51 .................................................IDRB Documents
Schedule 2.2.12 ................................................Excluded Assets
Schedule 2.6 ....................................................Purchase Price
Schedule 3.3 ................................No Violation of Laws or Agreements
Schedule 3.4 ..............................................Financial Statements
Schedule 3.5 ........................................................No Changes
Schedule 3.6 .........................................................Contracts
Schedule 3.7 ........................Permits and Compliance with Laws Generally
Schedule 3.8 .................................Environmental Matters - Generally
Schedule 3.8.10 ................................Compliance with Water Standards
Schedule 3.8.11 ...............................................Deed Restriction
Schedule 3.9 ..........................................Seller Parties' Consents
Schedule 3.10 ............................................................Title
Schedule 3.11 ..........................................Real Estate Proceedings
Schedule 3.12 ............................................................Taxes
Schedule 3.15 ..................................................Labor Relations
Schedule 3.16.1 .........................................Employee Benefit Plans
Schedule 3.16.4 ............................Employee Benefit Plans - Compliance
Schedule 3.16.9 ................Employee Benefit Plans - Extraordinary Benefits
Schedule 3.17 ...............................Absence of Undisclosed Liabilities
Schedule 3.18 .............................No Pending Litigation or Proceedings
Schedule 3.19 ..............................................Supply of Utilities
Schedule 3.20 ...............................................Seller's Insurance
Schedule 3.22 .........................................................WARN Act
Schedule 3.23 ..............................................Condition of Assets
Schedule 3.25 .......................................................All Assets
Schedule 3.27 ................................................Product Liability
Schedule 4.7 ..................................................IAWC's Insurance
Schedule 5.1 ...............................................Conduct of Business
Schedule 5.9.1 .......................................................Employees
Schedule 5.9.2 ................................Collective Bargaining Agreements
Schedule 5.12 .................................................Former Employees
Schedule 5.15 .............................................Citizens' Guarantees
Schedule 5.16 ..............................................Schedule of Permits
Schedule 6.1.7 .....................................Related Purchase Agreements
Illinois
TABLE OF EXHIBITS
Exhibit A - Form of Assumption Agreement
Exhibit B - Form of Assignment and ▇▇▇▇ of Sale
Exhibit C - Intentionally Omitted
Exhibit D - Form of Retained IDRB Obligations Agreement
Exhibit E - Form of Seller's Opinion of Counsel
Exhibit F - Form of Parent's and IAWC's Opinion of Counsel
Illinois
ASSET AND STOCK PURCHASE AGREEMENT
THIS IS AN ASSET AND STOCK PURCHASE AGREEMENT (the "Agreement"), dated as
of October 15, 1999, by and among Citizens Utilities Company, a Delaware
corporation ("Citizens"), Citizens Resources Company, a Delaware corporation
("Citizens Resources"), Citizens Utilities Company of Illinois, an Illinois
corporation ("CUCI"), Citizens Business Services Company, an Illinois
corporation ("CBSC"), and Citizens Lake Water Company, an Illinois corporation
("CLWC" and, together with Citizens, Citizens Resources, CUCI and CBSC, "Seller"
or the "Seller Parties"), and American Water Works Company, Inc., a Delaware
corporation ("Parent"), and Illinois-American Water Company, an Illinois
corporation ("IAWC").
Background
1. The Seller Parties are engaged, among other things, in the business of
storing, supplying, distributing and selling water to the public, wholesale
water transmission, wastewater treatment, and related services and activities in
the State of Illinois (the "Business").
2. CUCI is engaged, among other things, in that part of the Business that
consists of storing, supplying, distributing and selling water to the public,
wastewater treatment, and related services and activities, all in the State of
Illinois.
3. Citizens owns all of the issued and outstanding shares of capital stock
of CLWC (the "CLWC Stock"). CLWC is engaged in that part of the Business that
consists of wholesale water transmission.
4. CBSC and Citizens Resources own certain assets, properties and rights
that relate to the Business, in whole or in part.
5. Parent is a holding company that desires to purchase the CLWC Stock,
substantially all of the assets, properties and rights of Citizens Resources
relating to the Business, and those assets of CBSC that relate in part to the
Business and in part to businesses being acquired under the Related Purchase
Agreements (as that term is defined below).
6. Parent also desires to cause IAWC to purchase (and IAWC desires to
Purchase) substantially all of the assets, properties and rights of CUCI and
those assets, properties and rights of CBSC that primarily relate to the
Business.
7. Citizens desires to sell the CLWC Stock and to cause the sale of such
assets, properties and rights referred to above, on the terms and subject to the
conditions set forth in this Agreement.
Illinois
Terms
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the respective meanings ascribed to them in this Section:
1.1.1 "Acquired Assets" means, subject to Section 2.2, all of
each Seller Party's right, title, and interest in, under and to all of the
assets, properties and rights exclusively used in, or, in the case of Citizens
Resources and CBSC, primarily related to, the Business as a going concern of
every kind, nature and description existing on the Closing Date, wherever such
assets, properties and rights are located and whether such assets, properties
and rights are real, personal or mixed, tangible or intangible, and whether or
not any of such assets, properties and rights have any value for accounting
purposes or are carried or reflected on or specifically referred to in Seller's
books or financial statements, including all of the assets, properties and
rights exclusively relating to the Business enumerated below:
(a) all real property described in Schedule 1.1.1(a),
together with all fixtures, fittings, buildings, structures and other
improvements erected thereon, and easements, rights of way, water lines, rights
of use, licenses, railroad crossing agreements, hereditaments, tenements,
privileges and other appurtenances thereto or otherwise exclusively related to
the Business (such as appurtenant rights in and to public streets) (the "Real
Estate");
(b) to the extent not included in clause (a) above, all
water tanks, reservoirs, water works, plant and systems, purification and
filtration systems, pumping stations, pumps, wells, mains, water pipes,
hydrants, equipment, machinery, vehicles, tools, dies, spare parts, materials,
water supplies, fixtures and improvements, construction in progress, jigs,
molds, patterns, gauges and production fixtures and other tangible personal
property, in transit or otherwise, used exclusively in the Business (the
"Equipment and Other Tangible Personal Property");
(c) notwithstanding the provisions of Section 2.2 but
subject to Section 2.4, all water appropriation and flowage rights of Seller
other than CLWC (it being intended that any such rights of CLWC will remain with
CLWC whose stock is being acquired by Parent) to the extent not transferred to
IAWC upon assignment of the Contracts and Permits to IAWC;
(d) all notes receivable, accounts receivable, accrued
utility revenues, materials and supplies (at average cost net of reserve for
obsolescence) and prepayments attributable in each case exclusively to the
Business;
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(e) all unamortized debt expense related to the Assumed
Indebtedness, deferred capital costs, and other deferred charges (excluding
deferred taxes collectable) attributable exclusively to the Business of which
recovery in future rates is probable;
(f) Intellectual Property and goodwill, licenses and
sublicenses granted and obtained with respect thereto;
(g) subject to Section 2.4 hereof, (i) contracts,
commitments, agreements and instruments relating to the sale of any assets,
services, properties, materials or products, including all customer contracts,
operating contracts and distribution contracts relating exclusively to the
conduct of the Business; (ii) orders, contracts, supply agreements and other
agreements relating exclusively to the purchase of any assets, services,
properties, materials, or products for the Business; (iii) all leases of Real
Estate exclusively related to the Business; (iv) all other contracts, agreements
and instruments related exclusively to the Business (other than contracts,
agreements and instruments included in the definition of Real Estate or
Permits); and (v) any such contracts, agreements and other instruments referred
to in clauses (i) - (iv) inclusive, entered into between the date hereof and the
Closing Date which are consistent with the terms of this Agreement and are
entered into in the ordinary course of business consistent with past practice,
and including in the case of clauses (i) - (iv) all such contracts, agreements
and instruments more specifically listed or described in Schedule 3.6 (but
specifically excluding any contract, agreement and instrument listed or
described on Schedule 2.2.12) (the "Contracts");
(h) subject to Section 2.4 hereof, franchises,
approvals, permits, authorizations, licenses, orders, registrations,
certificates, variances, and other similar permits or rights obtained from any
Authority relating exclusively to the conduct of the Business and all pending
applications therefor (the "Permits");
(i) books, records, ledgers, files, documents (including
originally executed copies of written Contracts, to the extent available, and
copies to the extent not available), correspondence, Tax returns relating
exclusively to the Business, memoranda, forms, lists, plats, architectural
plans, drawings, and specifications, new product development materials, creative
materials, advertising and promotional materials, studies, reports, sales and
purchase correspondence, books of account and records relating to the
Transferred Employees (to the extent such transfer is not prohibited by law),
photographs, records of plant operations and materials used, quality control
records and procedures, equipment maintenance records, manuals and warranty
information, research and development files, data and laboratory books,
inspection processes, in each case, whether in hard copy or magnetic format, in
each instance, to the extent exclusively relating to the Business, the Acquired
Assets or the Transferred Employees;
(j) all rights or choses in action arising out of
occurrences before or after the Closing Date and exclusively related to any of
the Acquired Assets, including third party warranties and guarantees and all
related claims, credits, rights of recovery and set-off and other similar
contractual rights, as to third parties held by or in favor of Seller; provided,
however, that (notwithstanding the foregoing provisions of this Section
1.1.1(j)), to the extent that Seller pays or discharges a liability related to
the Business or any of the Acquired Assets and related to such right
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or chose in action (whether by reason of indemnification under this Agreement or
otherwise), IAWC or Parent, as the case may be, will reassign or reconvey to
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 IAWC or Parent, as the case may
be;
(k) all rights to insurance and condemnation proceeds
(i) to the extent relating to the damage, destruction, taking or other
impairment of the Acquired Assets which damage, destruction, taking or other
impairment occurs on or prior to the Closing but only to the extent that the
proceeds exceed the amount of the write-down of the net book value of such
Acquired Assets on the books and records of Seller as a result of such damage,
destruction, taking or other impairment, (ii) to the extent they relate to
amounts paid by IAWC or Parent, as the case may be, for Damages to the extent
IAWC or Parent, as the case may be, does not receive payment pursuant to Section
7.4.1(a), but only to the extent IAWC or Parent, as the case may be, is entitled
to indemnification by Seller pursuant to Sections 7.3 and 7.4, and (iii) as
provided in Section 4 of the agreement attached as Exhibit D hereto; and
(12) without limiting the foregoing, but for the
avoidance of doubt, in any case, all of the assets reflected on the Interim
Statement of Net Assets attached as Schedule 3.4.
For purposes of this Agreement, "Citizens Assets" shall mean the CLWC
Stock; "CUCI Assets" shall mean those Acquired Assets owned or held by CUCI;
"Citizens Resources Assets"shall mean those Acquired Assets owned or held by
Citizens Resources; "CBSC Assets" shall mean those Acquired Assets owned or held
by CBSC; and "CLWC Assets" shall mean those Acquired Assets owned or held by
CLWC. For the avoidance of doubt, the "Acquired Assets" include the Citizens
Assets, CUCI Assets, CLWC Assets, Citizens Resources Assets and the CBSC Assets.
1.1.2 "Adjusted Net Assets" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.3 "Affected Participant" has the meaning set forth as
Section 5.11.1 hereof.
1.1.4 "Affiliate" of any Person means any Person, directly or
indirectly controlling, controlled by or under common control with such Person.
1.1.5 "Agreement" has the meaning set forth in the
introduction hereof.
1.1.6 "American Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.7 "American Savings Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.8 "Antitrust Division" has the meaning set forth in
Section 5.5 hereof.
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1.1.9 "Assumed Benefit Liabilities" has the meaning set forth
in Section 3.16.6 hereof.
1.1.10 "Assumed Indebtedness" means the liabilities and
obligations from and after the Closing Date (except as set forth below) with
respect to the IDRB Financings and IDRB Documents set forth on Schedule 1.1.10.
For purposes of clarity, except as set forth in the next sentence below,
"Assumed Indebtedness" shall not include any liability or obligation to the
extent accrued prior to the Closing Date or to the extent arising out of or
relating to an event, circumstance or occurrence prior to the Closing Date.
"Assumed Indebtedness" shall include the outstanding principal amount and the
accrued but unpaid interest owed by Seller on the debt obligations set forth in
the first sentence of this definition.
1.1.11 "Assumed Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.12 "Assumption Agreement" has the meaning set forth in
Section 2.3.2 hereof.
1.1.13 "Authority" means any federal, state, local or foreign
governmental or regulatory entity (or any department, agency, authority or
political subdivision thereof).
1.1.14 "Base Cash Purchase Price" has the meaning set forth in
Section 2.6.1 hereof.
1.1.15 "Beneficiary" means the Person(s) designated by an
Employee, by operation of law or otherwise, as entitled to compensation,
benefits, insurance coverage, payments or any other goods or services under a
Benefit Plan.
1.1.16 "Benefit Plans" has the meaning set forth in Section
3.16.1 hereof.
1.1.17 "Bonds" means any of the bonds issued pursuant to the
Indentures of Trust, the proceeds from the issuance of which were advanced to
Seller pursuant to any of the IDRB Documents.
1.1.18 "Business" has the meaning set forth in the Background
section hereof.
1.1.19 "Business Day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the Commonwealth of
Pennsylvania are authorized or obligated by law or executive order to close.
1.1.20 "Ceiling" has the meaning set forth in Section 7.4.2(e)
hereof.
1.1.21 "CERCLA" has the meaning set forth in Section 3.8.2
hereof.
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1.1.22 "CERCLIS" has the meaning set forth in Section 3.8.7
hereof.
1.1.23 "Citizens" has the meaning set forth in the
introduction hereof.
1.1.24 "Closing" has the meaning set forth in Section 2.5
hereof.
1.1.25 "Closing Date" has the meaning set forth in Section 2.5
hereof.
1.1.26 "Closing Statement of Net Assets" has the meaning set
forth in Section 2.6.4(a) hereof.
1.1.27 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.28 "Collective Bargaining Agreement" means the agreement
identified as such on Schedule 3.6 hereto.
1.1.29 "Competing Transaction" has the meaning set forth in
Section 5.2.
1.1.30 "Contracts" has the meaning set forth in Section
1.1.1(g) hereof.
1.1.31 "Control" with respect to any Person means the
ownership, directly or indirectly, of at least a majority of the voting power of
each class of capital stock of such Person entitled to vote in the election of
directors of such Person generally.
1.1.32 "Damages" has the meaning set forth in Section 7.4.1
hereof.
1.1.33 "Disclosure Schedules" means the Schedules referenced
in Articles 3, 4 and 5 of this Agreement, as amended or supplemented pursuant to
Section 5.3.
1.1.34 "Dispute" has the meaning set forth in Section 8.6.
1.1.35 "Employees" has the meaning set forth in Section 5.9.1
hereof.
1.1.36 "Environmental Laws" has the meaning set forth in
Section 3.8 hereof.
1.1.37 "Equipment and Other Tangible Personal Property" has
the meaning set forth in Section 1.1.1(b) hereof.
1.1.38 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.1.39 "ERISA Affiliate" means (a) any corporation included
with any of the Seller Parties in a controlled group of corporations within the
meaning of Section 414(b) of the Code; (b) any trade or business (whether or not
incorporated) which is under common control with any of the Seller Parties
within the meaning of Section 414 of the Code; any member of an affiliated
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service group of which any of the Seller Parties is a member within the meaning
of Section 414(m) of the Code; or (d) any other person or entity treated as an
affiliate of any of the Seller Parties under Section 414(o) of the Code.
1.1.40 "Excluded Assets" has the meaning set forth in Section
2.2 hereof.
1.1.41 "Financial Statements" has the meaning set forth in
Section 3.4 hereof.
1.1.42 "FIRPTA Affidavit" has the meaning set forth in Section
2.7.1 hereof.
1.1.43 "Former Employees" means all salaried and hourly
employees once employed by Seller or any of its Affiliates, but who are no
longer so employed on the Closing Date.
1.1.44 "FTC" has the meaning set forth in Section 5.5 hereof.
1.1.45 "GAAP" has the meaning set forth in Section 3.4 hereof.
1.1.46 "Hazardous Substance" has the meaning set forth in
Section 3.8 hereof.
1.1.47 "HSR Act" has the meaning set forth in Section 3.9
hereof.
1.1.48 "IAWC" has the meaning set forth in the introduction
hereof.
1.1.49 "IAWC's IDRB Obligations" means the obligations of
Parent and IAWC set forth in Section 5.24 (a) and in the instruments to be
executed and delivered by Parent and IAWC on or prior to the Closing Date in
accordance with Section 5.24 (a).
1.1.50 "IAWC's Accountants" means PricewaterhouseCoopers LLP
or any firm of independent public accountants hereafter designated by IAWC for
purposes of this Agreement.
1.1.51 "IDRB Documents" shall mean the Loan Agreements, the
Tax Regulatory Agreements, the Project Tax Certificates, and the other Contracts
related thereto to which Citizens is a party and which are listed on Schedule
1.1.51.
1.1.52 "IDRB Financings" shall mean the indebtedness arising
under the Loan Agreements included among the IDRB Documents.
1.1.53 "Indemnified Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.54 "Indemnifying Party" has the meaning set forth in
Section 7.4.2(a) hereof.
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1.1.55 "Intellectual Property" means the trademarks, patents,
trade names and copyrights and applications therefor, inventions, trade secrets,
and confidential business information (including know-how, formulas, water
filtration, purification and pumping processes and techniques, technical data,
designs, drawings, customer and supplier lists, and business and marketing plans
and proposals), all computer software (including data and related documentation
and object and source codes), whether in magnetic format or hard copy, and
tangible embodiments thereof (in whatever form or medium) of Seller, in each
case, utilized exclusively in the Business.
1.1.56 "Interim Statement of Net Assets" means the Citizens
Water Resources Statement of Net Assets-Illinois, which is attached hereto as
Schedule 3.4.
1.1.57 "Interim Statement of Net Assets Date" means June 30,
1999.
1.1.58 "IRS" has the meaning set forth in Section 3.16.2
hereof.
1.1.59 "Lien" means any lien, charge, claim, pledge, security
interest, conditional sale agreement or other title retention agreement, lease,
mortgage, security agreement, right of first refusal, option, restriction,
tenancy, license, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction).
1.1.60 "Material Adverse Effect" means a change or effect (or
series of related changes or effects) which has or is reasonably likely to have
a material adverse change in or effect upon the business, assets, condition
(financial or otherwise), or results of operations of the Business or the
Acquired Assets, taken as a whole and taken together with the businesses and
assets being acquired by Parent or Affiliates of Parent pursuant to the Related
Purchase Agreements. For purpose of this Agreement, an occurrence or condition
shall not constitute a Material Adverse Effect (a) if it arises from general
business, economic or financial market conditions, from conditions generally
effecting the industries in which Seller competes, or from the transactions
contemplated by this Agreement, or (b) to the extent that it consists of
strikes, work stoppages, walk-outs, slow-downs or other business interruption at
the facilities in Illinois that are part of the Acquired Assets, or (c) solely
with respect to matters arising prior to Closing, to the extent that either (i)
Seller realizes the benefit of insurance maintained by Citizens on or prior to
the Closing Date and IAWC or Parent, as the case may be, receives the cash
proceeds of such insurance to the extent required by Section 1.1.1(k), or (ii)
Seller arranges for IAWC or Parent , as the case may be, to recover payments in
respect of such occurrence or condition from any other source (whether in a lump
sum or stream of payments), it being understood and agreed that a Material
Adverse Effect may have occurred irrespective of such insurance recovery if the
occurrence or condition giving rise to such recovery also causes a non-monetary
material adverse change in or effect upon the Business or the Acquired Assets,
taken as a whole and taken together with the businesses and assets being
acquired by Parent or Affiliates of Parent pursuant to the Related Purchase
Agreements.
1.1.61 "Mortgage Indenture" means Indenture of Mortgage and
Deed of Trust between BNY Western Trust Company (successor in interest to ▇▇▇▇▇
Fargo Bank, N.A.) and
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First Interstate Bank of California (as successor trustee to Marine Midland,
N.A., formerly the Marine Midland Trust Company of New York).
1.1.62 "OSHA" has the meaning set forth in Section 3.7.1
hereof.
1.1.63 "PCBs" has the meaning set forth in Section 3.8.6
hereof.
1.1.64 "Permits" has the meaning set forth in Section 1.1.1(h)
hereof.
1.1.65 "Permitted Exceptions" has the meaning set forth in
Section 3.10 hereof; provided, however, that from and after the Closing,
Permitted Exceptions shall not include any Lien arising under or resulting from
the Mortgage Indenture.
1.1.66 "Person" means an individual, a corporation, a
partnership, an association, an Authority, a trustor other entity or
organization.
1.1.67 "Pre-Existing Conditions" has the meaning set forth in
Section 2.3.1(d).
1.1.68 "Prime Rate" means the rate per annum announced from
time to time during the reference period by Citibank N.A. as its United States
prime, reference or base rate for commercial loans.
1.1.69 "PUC" has the meaning set forth in Section 5.5 hereof.
1.1.70 "Purchase Price" has the meaning set forth in Section
2.6.1 hereof.
1.1.71 "Real Estate" has the meaning set forth in Section
1.1.1(a) hereof.
1.1.72 "Recovery" has the meaning set forth in Section
7.4.2(l) hereof.
1.1.73 "Related Purchase Agreements" as the meaning set forth
in Section 6.1.7 hereof.
1.1.74 "Release" or "Released" has the meaning set forth in
Section 3.8 hereof.
1.1.75 "Remedial Action" has the meaning set forth in Section
3.8 hereof.
1.1.76 "Retained IDRB Indebtedness" means the indebtedness of
the Seller owing to the issuers of the Bonds and arising under the Loan
Agreements included among the IDRB Documents but only to the extent not included
in the Assumed Indebtedness.
1.1.77 "Retained Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.78 "Review Period" has the meaning set forth in Section
2.6.4(b) hereof.
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1.1.79 "SEC" means the U.S. Securities and Exchange
Commission.
1.1.80 "Securities Filings" has the meaning set forth in
Section 5.8.2 hereof.
1.1.81 "Seller" and "Seller Parties" have the respective
meaning set forth in the introduction hereof.
1.1.82 "Seller's Accountants" means KPMG LLP or any other firm
of independent public accountants hereafter designated by Seller for purposes of
this Agreement.
1.1.83 "Seller's Adjusted Amount" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.84 "Seller's Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.85 "Seller's 401(k) Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.86 "Specified Liabilities" has the meaning set forth in
Section 7.4.2(f) hereof.
1.1.87 "Taxes" means any federal, state, local and foreign
income, payroll, withholding, excise, sales, use, personal property, use and
occupancy, business and occupation, mercantile, real estate, gross receipts,
license, employment, severance, stamp, premium, windfall profits, social
security (or similar unemployment), disability, transfer, registration, value
added, alternative, or add-on minimum, estimated, or capital stock and franchise
and other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
1.1.88 "Third Accounting Firm" has the meaning set forth in
Section 2.6.4(b) hereof.
1.1.89 "Threshold Amount" has the meaning set forth in Section
7.4.2(e) hereof.
1.1.90 "Third Party Claim" has the meaning set forth in
Section 7.4(b)(i) hereof.
1.1.91 "Transferred Accounts" has the meaning set forth in
Section 5.11.2 hereof.
1.1.92 "Transaction Documents" has the meaning set forth in
Section 3.2 hereof.
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1.1.93 "Transferred Employees" has the meaning set forth in
Section 5.9.2 hereof.
1.1.94 "Union Employees" has the meaning set forth in Section
5.9.1 hereof.
1.1.95 "VEBAs" has the meaning set forth in Section 5.12
hereof.
1.1.96 "WARN Act" means the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. section 2102- 2109, as amended.
ARTICLE 2
THE TRANSACTION
2.1 Sale and Purchase.
2.1.1 Subject to the terms and conditions of this Agreement,
at the Closing referred to in Section 2.5 below:
(i) Citizens shall cause CUCI to, and CUCI shall, sell, assign,
transfer, deliver and convey the CUCI Assets to IAWC, and
Parent shall cause IAWC to, and IAWC shall, purchase the CUCI
Assets;
(ii) Citizens shall cause CBSC to, and CBSC shall, sell, assign,
transfer, deliver and convey to IAWC, and Parent shall cause
IAWC to, and IAWC shall, purchase the CBSC Assets primarily
related to the Business (for the avoidance of doubt, such CBSC
Assets primarily related to the Business described in this
subsection (ii) shall not include any CBSC Assets described in
subsection (iii) of this Section 2.1.1);
(iii) Citizens shall cause CBSC to, and CBSC shall, sell, transfer,
deliver and convey to Parent, and Parent shall purchase, the
CBSC Assets that relate in part to the Business and in part to
businesses being acquired under the Related Purchase
Agreements;
(iv) Citizens shall cause Citizens Resources to, and Citizens
Resources shall, sell assign, transfer deliver and convey the
Citizens Resources Assets to Parent, and Parent shall purchase
the Citizens Resources Assets; and
(v) Citizens shall sell, assign transfer, deliver and convey the
Citizens Assets to Parent, and Parent shall purchase the
Citizens Assets (for the avoidance of doubt, "Citizens Assets"
is defined in Section 1.1.1 as the CLWC Stock).
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2.2 Excluded Assets. The following assets of Seller shall be
excluded from the Acquired Assets (the "Excluded Assets"):
2.2.1 assets of the Seller used in both the Business and in
Citizens' gas, electric or communications businesses, the material items of
which are described on Schedule 2.2.12;
2.2.2 cash and cash equivalents in transit, in hand or in bank
accounts.
2.2.3 except as otherwise set forth herein, assets
attributable or related to any Benefit Plan;
2.2.4 the stock record and minute books of Seller (other than
the stock record and minute books of CLWC);
2.2.5 Acquired Assets disposed of by Seller after the date of
this Agreement to the extent such dispositions are not prohibited by this
Agreement;
2.2.6 except to the extent set forth in Section 2.9, rights to
refunds of Taxes payable with respect to the Business, assets, properties or
operations of any of the Seller Parties or any member of any affiliated group of
which any of them is a member, and which are treated as Retained Liabilities
under Section 2.3.3(b) below.
2.2.7 customer and other deposits held in Seller's accounts;
2.2.8 accounts owing by and among Seller and its Affiliates;
2.2.9 notes receivable and other receivables (other than note
and accounts receivable attributable exclusively to the Business);
2.2.10 all deferred tax assets or collectibles;
2.2.11 duplicate copies of all books and records transferred
to IAWC or Parent, as the case may be; and
2.2.12 those certain items listed on Schedule 2.2.12.
2.3 Assumption of Certain Liabilities.
2.3.1 Neither Parent nor IAWC shall assume any liabilities of
Citizens, CUCI, Citizens Resources, CBSC, CLWC or any of their Affiliates,
except that IAWC or Parent, as the case may be, shall assume the following
specific liabilities and obligations from their respective Seller Parties:
(a) the obligations and liabilities set forth in
Sections 5.9, 5.10, 5.11 and 5.12 hereof;
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(b) except as set forth in Section 2.3.3(b), all
liabilities and obligations of Seller in respect of the Contracts and Permits
assigned or transferred to IAWC or Parent, as the case may be, pursuant to this
Agreement in accordance with the respective terms thereof, except that neither
Parent nor IAWC shall assume any liabilities or obligations for any breach or
default by, or payment obligations of, Seller under such Contracts and Permits
occurring or arising or accruing on or prior to the Closing Date;
(c) the Assumed Indebtedness and the IAWC's IDRB
Obligations;
(d) any liability, obligation or responsibility of
Seller for conditions at the Real Estate, whether based on statutory or common
law, now or hereafter in effect, known or unknown, contingent or actual,
relating to or arising from pollution, contamination or protection of the
environment, human health or safety or natural resources or relating to or
arising from the presence or Release or threat of Release of Hazardous
Substances into the environment at the Real Estate or into or from any building,
structure, pipeline or other facility at the Real Estate, or from violation of
any law relating to the foregoing, including without limitation, any CERCLA or
similar liability under any federal or state law or regulation, except to the
extent Parent or IAWC has given written notice of a claim for indemnification
pursuant to Sections 7.3 and 7.4 hereof prior to the expiration of the claims
period set forth in Section 7.3.2(a) or (b) (and if Parent or IAWC has given
written notice prior to the expiration of such claims period, to the extent that
such claim is not entitled to indemnification under Sections 7.3 and 7.4) (the
foregoing, the "Pre-Existing Conditions");
(e) all liabilities and obligations of Seller related to
unperformed service obligations, easement and right-of-way relocation
obligations, and construction work in progress, and all engineering and
construction required to complete scheduled construction and other capital
projects for the Business, in each case relating to the Business and outstanding
on or arising after the Closing Date except that neither Parent nor IAWC shall
assume any liabilities or obligations for any breach or default by, or payment
obligations of, Seller under such Contracts and Permits occurring or arising or
accruing on or prior to the Closing Date;
(f) liability for accrued but unused vacation pay for
the Transferred Employees to the extent provided in Section 5.9.2;
(g) any liability, obligation or responsibility relating
to customer deposits held by Seller on the Closing Date and relating to the
Business; and
(h) all liabilities and obligations imposed on Parent or
IAWC by any PUC in connection with the operation of the Business or the
ownership of the Acquired Assets, including with respect to any liability of the
types that appear as "Accrued Liabilities" and "Non-Current Liabilities" on the
financial statements of Seller.
2.3.2 Any liabilities or obligations which are assumed by
Parent or IAWC pursuant to Section 2.3.1 above are hereinafter referred to as
the "Assumed Liabilities." At the
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Closing, each of Parent and IAWC shall (and Parent shall cause IAWC to) execute
and deliver to Seller an assumption agreement, in substantially the form of the
Assumption Agreement attached hereto as Exhibit A (the "Assumption Agreement"),
pursuant to which Parent and IAWC shall assume their respective Assumed
Liabilities. Each of Parent and IAWC hereby irrevocably and unconditionally
waives and releases the Seller Parties from all Assumed Liabilities and all
liabilities or obligations exclusively relating to the Business or, the Acquired
Assets to the extent arising from events or occurrences after the Closing or to
the extent otherwise relating to the period after the Closing, including any
liabilities created or which arise by statute or common law, including CERCLA
(it being understood that this shall not constitute a waiver and release of any
claims arising out of the contractual relationships and indemnification
arrangements between Parent and IAWC on the one hand, and the Seller Parties on
the other hand).
2.3.3 Neither Parent nor IAWC shall assume any liabilities,
commitments or obligations (contingent or absolute and whether or not
determinable as of the Closing) of any of the Seller Parties or any of their
Affiliates except for the Assumed Liabilities as specifically and expressly
provided for above, whether such liabilities or obligations relate to payment,
performance or otherwise, and all liabilities, commitments or obligations not
expressly transferred to Parent or IAWC hereunder as Assumed Liabilities are
being retained by the Seller Parties, (the "Retained Liabilities"). Each of the
Seller Parties hereby irrevocably and unconditionally waives and releases Parent
and IAWC from all Retained Liabilities including any liabilities created or
which arise by statute or common law, including CERCLA (it being understood that
this shall not constitute a waiver and release of any claims arising out of the
contractual relationships and indemnification arrangements between Parent and
IAWC on the one hand, and the Seller Parties on the other hand).
Without limitation to the foregoing, all of the following shall be
considered Retained Liabilities and not Assumed Liabilities (except as specified
below) for the purposes of this Agreement:
(a) any product liability, toxic tort or similar claim
for injury to person or property, regardless of when made or asserted, to the
extent that it arises out of or is based upon any express or implied
representation, warranty, agreement or guarantee made by any of the Seller
Parties or any of their Affiliates prior to Closing, or alleged to have been
made by any of such Persons, or to the extent that it is imposed or asserted to
be imposed by operation of law, in connection with any service performed or
product distributed or sold by or on behalf of any of the Seller Parties or any
of their Affiliates prior to Closing, including any claim referred to above in
this Section 2.3.3(a) relating to water quality standards, any claim relating to
any product delivered in connection with the performance of services provided by
Seller and any claim seeking recovery for consequential damages, lost revenue or
income;
(b) all refund obligations relating to the advances
existing on the Closing Date for construction of facilities relating to the
Business;
(c) except to the extent set forth in Section 2.9, any
federal, state, foreign or local income or other Tax payable with respect to the
business, assets, properties or operations of any of the Seller Parties or any
member of any affiliated group of which any of them is a member.
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(d) any liability or obligation associated with or in
connection with any common plant assets of Seller (other than the liabilities
and obligations exclusively related to any common plant assets included among
the Acquired Assets);
(e) except as provided in Section 2.3.1 above, any
liability or obligation with respect to compensation or employee benefits of any
nature owed to any employees, agents or independent contractors of any of the
Seller Parties or any of their Affiliates, whether or not employed by Parent or
IAWC after the Closing, that arises out of or relates to events or conditions to
the extent occurring before the Closing Date;
(f) except to the extent set forth in Section 2.3.1(d),
any liability, obligation or responsibility of any of the Seller Parties, or any
of their Affiliates or predecessors, whether based on statutory or common law,
but only as any such law is interpreted, amended and in effect on the Closing
Date, known or unknown, contingent or actual, relating to or arising from
pollution, contamination or protection of the environment, human health or
safety or natural resources or relating to or arising from the presence or
Release or threat of Release of Hazardous Substances into the environment or
into or from any building, structure, pipeline or other facility or relating to
or arising from the generation, use, storage, treatment, disposal, transport or
other handling of Hazardous Substances or sale or product containing Hazardous
Substances from violation of any law relating to the foregoing (but only as such
law is interpreted, amended and in effect on the Closing Date) including without
limitation (A) any CERCLA or similar liability under any federal or state law or
regulation as interpreted, amended and in effect on the Closing Date or (B) any
such liability associated with businesses or assets of the Seller Parties other
than the Business or the Acquired Assets;
(g) liabilities and obligations relating to the Business
to the extent arising prior to Closing (unless otherwise constituting Assumed
Liabilities) arising by operation of law under any common law or statutory
doctrine (including successor liability or de facto merger);
(h) any obligation or liability arising under any
contract, commitment, instrument or agreement (1) except for IAWC's IDRB
Obligations (subject to the penultimate sentence of Section 2.4) that are not
transferred to Parent or IAWC as part of the Acquired Assets, or (2) that
relates to any breach or default (or to the extent that it relates to an event
which would, with the passing of time or the giving of notice, or both,
constitute a default) under any Contract, instrument or agreement or to any
services to be provided by Seller under any such Contract, instrument or
agreement to the extent that such services were performed or were required to
have been performed on or prior to the Closing Date;
(i) any liability or obligation in respect of the
Excluded Assets;
(j) any liability or obligation of any of the Seller
Parties or any of their Affiliates existing as a result of any act, failure to
act or other state of facts or occurrence which constitutes a breach or
violation of any of Seller's representations, warranties, covenants or
agreements contained in this Agreement, except to the extent set forth in
Section 7.4;
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(k) except for the Assumed Liabilities as specifically
and expressly set forth herein, any liability to the extent arising out of or
relating to the ownership or operation of the Acquired Assets or the Business
prior to the Closing Date (including any predecessor operations), any claims,
obligations or litigation to the extent arising out of or relating to events or
conditions occurring before the Closing Date, and any liability associated with
any business other than the Business; or
(l) for the avoidance of doubt, even though Parent is
acquiring the CLWC Stock and is not directly acquiring the assets of CLWC, all
liabilities of CLWC other than those referred to in the last sentence of Section
3.28 shall be considered Retained Liabilities subject to the indemnification
provisions of clause (B) of Section 7.4.1(a).
2.4 Consent of Third Parties. On the Closing Date, Citizens and each
of the other Seller Parties shall, and Citizens shall cause each of the other
Seller Parties to, assign or transfer to Parent or IAWC, and Parent and IAWC
shall assume (and Parent shall cause IAWC to assume) the Contracts and the
Permits which are to be transferred to Parent and IAWC respectively as provided
in this Agreement by means of the Assumption Agreement. To the extent that the
assignment of all or any portion of any Contract or Permit shall require the
consent (or result in a breach or violation thereof) of the other party thereto
or any other third party, and such consent shall not be obtained prior to
Closing, this Agreement shall not constitute an agreement to assign any such
Contract or Permit included in the Acquired Assets. In order, however, to
provide IAWC or Parent, as the case may be, the full realization and value of
every Contract of the character described in the immediately preceding sentence,
Seller agrees that on and after the Closing, it will, at the request and under
the direction of Parent or IAWC, in the name of Seller or otherwise as Parent or
IAWC shall specify, take all reasonable actions (including without limitation
the appointment of IAWC or Parent, as the case may be, as attorney-in-fact for
Seller to proceed at Parent's or IAWC's sole cost and expense) and do or cause
to be done all such things as shall in the reasonable opinion of IAWC or Parent,
as the case may be, be necessary (a) to assure that the rights of Seller or its
Affiliates under such Contracts shall be preserved for the benefit of IAWC or
Parent, as the case may be, and (b) to facilitate receipt of the consideration
to be received by Seller or its Affiliates in and under every such Contract. To
the extent that IAWC or Parent, as the case may be, does receive the benefits of
any such Contract pursuant to the preceding sentence, such Contract shall be a
Contract "assigned or transferred to IAWC or Parent, as the case may be,
pursuant to this Agreement" within the meaning of Section 2.3.1(b) hereof.
Nothing in this Section 2.4 shall in any way diminish the obligations of Seller
to obtain consents and approvals under this Agreement.
2.5 Closing. Subject to the terms and conditions of this Agreement,
the closing of the sale and purchase described in Section 2.1 hereof (the
"Closing") shall take place at 10 a.m., East Coast time, on a date mutually
satisfactory to Parent, IAWC and Seller Parties which is no later than the fifth
Business Day after satisfaction (or waiver) of the conditions to Closing set
forth in Sections 6.1 and 6.2 hereof (other than those conditions which require
the delivery of any documents or the taking of other action, at the Closing) at
the offices of ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.,
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, or on such other date and at such other time or place as
may be mutually agreed upon by the parties hereto (the "Closing Date"). Upon
payment
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of the Initial Cash Payment by IAWC and Parent and confirmed receipt thereof by
Seller or the Escrow Agent pursuant to Section 2.6.2 below, Seller shall operate
the Business at the direction of and under the control of Parent or IAWC as to
the respective Acquired Assets acquired by each. Notwithstanding the foregoing,
the Closing shall be deemed to be effective as of 11:59 p.m. on the Closing Date
for all purposes.
2.6 Purchase Price.
2.6.1 Purchase Price. Subject to the terms and conditions of
this Agreement, the aggregate purchase price to be paid by Parent and IAWC for
the purchase of their respective Acquired Assets (including the CLWC Stock) (the
"Purchase Price") shall be: (i) $253,160,000 in cash representing the sum of the
amounts owing by Parent and IAWC, respectively, set forth on Schedule 2.6 (the
"Base Cash Purchase Price," the Base Cash Purchase Price as adjusted in
accordance with Section 2.6.3, Section 2.6.5 and Section 2.6.6 is referred to as
the "Initial Cash Payment"), subject to adjustment pursuant to the provisions of
this Agreement (including Section 2.6.3, Section 2.6.4, Section 2.6.5, Section
2.6.6 and Section 2.9 of this Agreement) and (ii) the assumption by IAWC or
Parent, as the case may be, of the Assumed Liabilities.
2.6.2 Payment of Initial Cash Payment. Subject to the terms
and conditions of this Agreement, the Initial Cash Payment shall be paid by
Parent and IAWC for the respective Acquired Assets being acquired by each on the
Closing Date by federal or other wire transfer of immediately available funds to
the account designated by Seller in writing at least two (2) Business Days prior
to the Closing Date. 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, Parent and IAWC shall deliver the Initial Cash Payment to Parent's
lead bank (the "Escrow Agent") in immediately available funds in U.S. dollars.
The Escrow Agent shall keep amounts deposited by Parent and IAWC in separate
accounts. Upon receipt, the Escrow Agent shall invest the Initial Cash Payment
in an interest-bearing account mutually agreed upon by Seller, Parent and IAWC.
At Closing, Parent and IAWC shall sign and deliver to Citizens a statement which
confirms that the Closing has occurred and which instructs the Escrow Agent to
transfer to Citizens the funds representing the Initial Cash Payment, plus an
amount representing the interest earned after the Closing Date until the date
the funds are transferred, to an account that Citizens shall designate at least
two (2) business days prior to the date the funds are required to be transferred
hereunder. The Escrow Agent shall refund the balance to IAWC and Parent from
their respective accounts. The fees and expenses of Escrow Agent shall be paid
by Parent and IAWC in proportion to the amount deposited by each.
2.6.3 Estimated Closing Statement. At least five (5) business
days prior to the Closing Date, Citizens shall deliver to Parent and IAWC a
statement of net assets (the "Estimated Statement of Net Assets") reflecting its
good faith calculation of the Acquired Assets of the Business as of the last day
of the latest calendar month for which financial statements of Seller are
available (the "Estimated Adjusted Net Assets"). The Estimated Statement of Net
Assets shall be prepared in the same manner and utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets (excluding for this purpose any change required by GAAP
or any Authority since June 30, 1999). The Base Cash Purchase Price shall be
increased
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or decreased on a dollar for dollar basis by the amount, if any, by which the
Estimated Adjusted Net Assets is greater than or less than $163,999,975 (such
increases or decreases, as the case may be, are collectively referred to herein
as the "Estimated Net Asset Adjustment"). For the avoidance of doubt, the
increase or decrease in the Base Cash Purchase Price described in this Section
2.6.3 shall be applied to the amounts owing by Parent and IAWC as referenced on
Schedule 2.6 as such increase or decrease relates to the Acquired Assets being
acquired by each of Parent and IAWC, respectively.
2.6.4 Post-Closing Adjustment to Purchase Price.
(a) Within 90 days after the Closing, Citizens shall
prepare and deliver to Parent and IAWC a Statement of Net Assets (the "Closing
Statement of Net Assets") which reflect the Acquired Assets, as of 11:59 p.m. on
the Closing Date, based on actual financial performance and calculated in the
same manner, utilizing the same accounting principles, policies and methods
utilized in preparing the Interim Statement of Net Assets (excluding for this
purpose any change required by GAAP or any Authority since June 30, 1999),
together with (A) an audit report of Seller's Accountants stating that the
Closing Statement of Net Assets have been prepared utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets and (B) a calculation of Citizens' determination of the
amount of increase or decrease in the amount of the Acquired Assets of the
Business from the Interim Statement of Net Assets Date to the Closing Date which
is derived from the Closing Statement of Net Assets ("Seller's Adjustment
Amount"). The Closing Statement of Net Assets shall not give effect to any
purchase accounting treatment arising from Parent's and IAWC's purchase of their
respective Acquired Assets. IAWC and Parent shall pay the fees and expenses of
Seller's Accountants incurred in connection with this Section 2.6.4, each
bearing the same proportion of such fees and expenses as its respective portion
of the Purchase Price bears to the total Purchase Price. Parent and IAWC agree
to cooperate, and agree to cause IAWC's Accountants to cooperate, with Citizens
and Seller's Accountants in connection with the preparation of the Closing
Statement of Net Assets, and related information, and shall provide to Citizens
and Seller's Accountants such books, records and information as may be
reasonably requested from time to time, including the work papers of IAWC's
Accountants. Citizens will give Parent and IAWC and their representatives access
during the normal business hours of Citizens to the personnel, books and records
of Citizens and the work papers of Seller's Accountants to assist Parent and
IAWC in the review of the Closing Statement of Net Assets and related matters.
Parent and IAWC agree that, following the Closing through the date on which the
Closing Statement of Net Assets are delivered, they will not take any actions
with respect to any accounting books, records, policies or procedures on which
the Closing Statement of Net Assets are to be based that would make it
impossible or impracticable to calculate the Acquired Assets in the manner and
utilizing the methods required hereby. Without limiting the generality of the
foregoing, no changes shall be made in any reserve or other account existing as
of the date of the Interim Statement of Net Assets except in the ordinary course
or as a result of events occurring after the date of the Interim Statement of
Net Assets and, in such event, only in a manner consistent with past practices
of Seller.
(b) Parent and IAWC may dispute any amounts reflected on
the Closing Statement of Net Assets, in the Seller's Adjustment Amount or in the
Statement of Certain Assumed Liabilities, provided, however, that Parent or IAWC
shall notify Citizens in writing of each
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disputed amount, and specify the amount thereof in dispute and the basis of such
dispute, within 30 days of the Parent's or IAWC's receipt of the Closing
Statement of Net Assets and the Seller's Adjustment Amount (such 30 day period
hereinafter referred to as the "Review Period"). In the event of a dispute with
respect to the Closing Statement of Net Assets, the Seller's Adjustment Amount
or the Statement of Certain Assumed Liabilities, Parent, IAWC and Seller shall
attempt to reconcile their differences and any resolution by them as to any
disputed amounts shall be final, binding and conclusive on the parties. If
Parent, IAWC and Seller are unable to reach a resolution of such differences
within 30 days of receipt of Parent's or IAWC's written notice of dispute to
Seller, then Parent, IAWC and Seller shall submit the amounts remaining in
dispute (together with any amounts remaining in dispute pursuant to Section
2.6.4(b) of each of the Related Purchase Agreements) for resolution to an
independent accountant firm of national reputation mutually appointed by Seller,
Parent, and IAWC (such independent accounting firm being herein referred to as
the "Third Accounting Firm"), which shall be requested to determine and report
to the parties, within 30 days after such submission, upon such remaining
disputed amounts, and such report shall be final, binding and conclusive on the
parties hereto with respect to the amounts disputed. The fees and disbursements
of the Third Accounting Firm shall be allocated between Parent and IAWC on the
one hand and Seller Parties on the other hand so that the Seller Parties' share
of such fees and disbursements shall be in the same proportion that the
aggregate amount of such remaining disputed amounts so submitted by Parent and
IAWC to the Third Accounting Firm that is unsuccessfully disputed by Parent and
IAWC (as finally determined by the Third Accounting Firm) bears to the total
amount of such remaining disputed amounts so submitted by Parent and IAWC to the
Third Accounting Firm. Parent and IAWC shall pay the fees and expenses of IAWC's
Accountants incurred in connection with this Section 2.6.4(b). Seller's
Adjustment Amount, if there are no disputes with respect thereto, or Seller's
Adjustment Amount as adjusted after the resolution of all disputes with respect
thereto in accordance herewith, shall be referred to as the "Final Net Asset
Adjustment."
(c) If the Base Cash Purchase Price plus (or minus, if
negative) the Final Net Asset Adjustment exceeds the Initial Cash Payment, then
within five (5) business days after final determination thereof Parent and IAWC
shall pay Seller the amount of such excess together with interest thereon for
the period commencing on the Closing Date through the date of payment calculated
at the Prime Rate in cash by federal or other wire transfer of immediately
available funds, or certified or bank cashier's check. If the Initial Cash
Payment exceeds the sum of the Base Cash Purchase Price plus (or minus, if
negative) the Final Net Asset Adjustment, then within five (5) business days
after final determination thereof Seller shall pay Parent and IAWC the amount of
such excess together with interest thereon for the period commencing on the
Closing Date through the date of payment calculated at the Prime Rate in cash by
federal or other wire transfer of immediately available funds, or certified or
bank cashier's check. The amount paid by or to Parent and/or IAWC under this
Section 2.6.5(c) shall be based on the appropriate adjustments to the prices of
the Acquired Assets being acquired by each of Parent and IAWC, respectively.
2.6.5 Adjustment for Certain Liabilities. Concurrent with the
delivery of the Estimated Statement of Net Assets, Citizens also shall deliver
to Parent and IAWC a statement reflecting (i) the customer and other deposits
held by Seller on the Closing Date and relating to the Business, (ii) the total
amount of the Assumed Indebtedness that will be outstanding immediately
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after the Closing Date, (iii) the items specified in Section 2.9 to the extent
set forth therein, and (iv) without duplications of any amount included in
clause (i) above any payments received by Seller under the Contracts and Permits
for obligations not performed as of the Closing Date (the "Statement of Certain
Assumed Liabilities"). The Statement of Certain Assumed Liabilities shall
reflect Citizens' good faith calculation of such liabilities as of the Closing
Date. The Base Cash Purchase Price shall be decreased by the net amount set
forth in the Statement of Certain Assumed Liabilities. Concurrent with the
delivery of the Closing Statement of Net Assets, Citizens also shall deliver to
Parent and IAWC a statement showing any adjustments to the Statement of Certain
Assumed Liabilities and the Base Cash Purchase Price shall be further adjusted
to give effect to any such adjustments to the Statement of Certain Assumed
Liabilities.
2.6.6 Additional Adjustment to the Purchase Price. The aggregate
amount of the Base Cash Purchase Price (and the portion thereof to be paid by
IAWC in accordance with Section 2.6) shall be decreased by an amount equal to
the proceeds of Seller's sale of the property described in Item 7 of Schedule
3.5 (net of expenses) (which property, for the avoidance of doubt, was property
previously used by IAWC in connection with the Business) less the sum of (i) the
federal and state income taxes payable by Seller in respect of those proceeds
and (ii) the book value of such property, as of June 30, 1999, on Seller's
books.
2.7 Deliveries and Proceedings at Closing. Subject to the terms and
conditions of this Agreement, at the Closing:
2.7.1 Deliveries to each of Parent and IAWC. Citizens shall,
and shall cause Seller to, deliver to each of Parent and IAWC with respect to
the Acquired Assets acquired by each:
(a) bills of sale and instruments of assignment to the
Acquired Assets, duly executed by Citizens, CUCI, CBSC and Citizens Resources,
as the case may be, substantially in the form of Exhibit B hereto and;
(b) the consents to transfer, of all transferable or
assignable Contracts, Intellectual Property, Permits (including Environmental
Permits), to the extent specifically required hereunder;
(c) title certificates to any motor vehicles included in
the Acquired Assets, duly executed by Citizens, CUCI, CBSC and Citizens
Resources, as the case may be (together with any other transfer forms necessary
to transfer title to such vehicles);
(d) special warranty deeds of conveyance with respect to
the parcels of Real Estate owned in fee simple by Citizens, CUCI and Citizens
Resources, as the case may be (or, with respect to any such parcel which was
acquired by Citizens, CUCI and Citizens Resources (or its predecessor in
interest, in cases involving mergers) by deed without covenant or warranty of
title, a quit claim deed without covenant or warranty of title) to Parent or
IAWC, as the case may be, duly executed and acknowledged by Citizens, CUCI and
Citizens Resources as appropriate, and in recordable form;
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(e) the Foreign Investment in Real Property Tax Act
Certification and Affidavit for each parcel of Real Estate, duly executed by
Citizens, CUCI and Citizens Resources, as appropriate (the "FIRPTA Affidavit");
(f) the certificates, opinions and other documents
required to be delivered by the Seller Parties pursuant to Section 6.1 hereof
and certified resolutions evidencing the authority of the Seller Parties as set
forth in Section 3.2 hereof;
(g) all agreements and other documents required by this
Agreement;
(h) a receipt for the payment of the Initial Cash
Payment duly executed by Citizens;
(i) the CLWC Stock by delivering the certificate
representing the CLWC Stock, endorsed or accompanied by a stock power (in form
reasonably satisfactory to counsel to Parent), in favor of Parent;
(j) duly executed letters of resignation, effective as
of the Closing Date, of all the officers and directors of CLWC; and
(k) all such other instruments of conveyance as shall,
in the reasonable opinion of Parent, IAWC and their counsel, be necessary to
transfer to Parent and IAWC, as the case may be, the Acquired Assets being
acquired by each in accordance with this Agreement and where necessary or
desirable, in recordable form.
2.7.2 Deliveries By Parent and IAWC to the Seller Parties.
Each of Parent and IAWC shall, and Parent shall cause IAWC to, deliver to the
Seller Parties:
(a) wire transfer of immediately available funds in an
amount equal to the Initial Cash Payment payable by each;
(b) Assumption Agreements, duly executed by IAWC and
Parent, with respect to the liabilities being assumed by each;
(c) the certificates, opinions and other documents
required to be delivered by Parent and/or IAWC pursuant to Section 6.2 hereof;
(d) all of the instruments contemplated by Section
5.24(a) to the extent not previously executed and delivered by Parent; and
(e) all such other instruments of assumption as shall,
in the reasonable opinion of Seller and its counsel, be necessary for Parent and
IAWC to assume the Assumed Liabilities in accordance with this Agreement.
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2.8 Tax Allocation of Consideration. Parent, IAWC and Seller shall
use their good faith efforts to agree upon the allocation (the "Allocation") of
the Purchase Price, the Assumed Liabilities and other relevant items (including,
for example, adjustments to the Purchase Price but excluding amounts
attributable to the CLWC Stock) to the individual assets or classes of assets
other than the CLWC Stock within the meaning of Section 1060 of the Code. If
Parent, IAWC and Seller agree to such Allocation on or before ninety (90) days
after the Closing Date, Parent, IAWC and Seller covenant and agree that (i) the
values assigned to the assets by the parties' mutual agreement shall be
conclusive and final for all purposes, and (ii) none of Parent, IAWC or Seller
will take any position before any Authority or in any proceeding that is in any
way inconsistent with such Allocation. Notwithstanding the foregoing, if Parent,
IAWC and Seller cannot agree to an Allocation on or before ninety (90) days
after the Closing Date, Parent, IAWC and Seller covenant and agree to file and
to cause their respective Affiliates to file, all Tax returns and schedules
thereto (including, for example, amended returns, claims for refund, and those
returns and forms required under Section 1060 of the Code and any Treasury
regulations promulgated thereunder) consistent with each of Parent, IAWC and
Seller's good faith Allocations, unless otherwise required because of a change
in any legal requirement.
2.9 Prorations. The parties hereto agree that the following expenses
shall be calculated and pro rated as of the Closing Date, with Seller
responsible for such expenses and to receive the benefit for the same for the
period through and including the Closing Date, and Parent and IAWC to be
responsible for and to receive the benefit of the same after the Closing Date
with respect to the Acquired Assets being acquired by each:
2.9.1 personal and real property taxes (on the basis on which
the same were assessed and paid) and sales, occupation and use taxes, in each
case, to the extent relating to the Business and except as otherwise provided in
Section 7.1;
2.9.2 electric, fuel, gas, telephone, sewer and utility
charges, in each case, to the extent relating to the Business;
2.9.3 rentals and other charges under Contracts to be assumed
by Parent or IAWC, as the case may be, pursuant to Section 2.3 (except to the
extent provided in Section 2.3.3(h)); and
2.9.4 charges under maintenance and service contracts and
other Contracts (except to the extent provided in Section 2.3.3(h)), and fees
under Permits to be transferred to Parent or IAWC, as the case may be, as part
of the Acquired Assets;
2.9.5 water, sewer and other similar types of taxes, and
installments on special benefit assessments; and
2.9.6 payroll expenses, payroll taxes, reimbursable employee
business expenses and the financial cost of the accrued vacation of each
Transferred Employee.
2.10 Intercompany Accounts. Notwithstanding any other provision of
this
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Agreement, any amounts due to CLWC from any of its Affiliates as of the Closing
Date (collectively, "Affiliate Receivables") shall be netted against any amounts
due from CLWC to any of its Affiliates as of the Closing Date (collectively,
"Affiliate Payables"). Seller shall arrange for the elimination of any net
excess of Affiliate Receivables due to CLWC, or any net excess of Affiliate
Payables due from CLWC, so that the balances of the Affiliate Receivables and
Affiliate Payables of CLWC as of the Closing Date shall be zero.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Each of the Seller Parties jointly and severally represent and warrant to
Parent and IAWC as follows:
3.1 Qualification; No Interest in Other Entities.
3.1.1 Each of the Seller Parties is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to own, lease
and operate the Acquired Assets and the Business as presently being conducted.
Each of the Seller Parties is qualified to do business and is in good standing
as a foreign corporation in all jurisdictions wherein the nature of the business
conducted by it or such Seller Party's ownership or use of assets and properties
make such qualification necessary, except such failures to be qualified or to be
in good standing, if any, which when taken together with all such other failures
of the Seller Parties do not have a Material Adverse Effect.
3.1.2 Except for the CLWC Stock, no shares of any corporation
or any ownership or other investment interest, either of record, beneficially or
equitably, in any Person are included in the Acquired Assets.
3.2 Authorization and Enforceability. Each of the Seller Parties has
full corporate power and authority to execute, deliver and perform this
Agreement and all other agreements and instruments to be executed by them in
connection herewith (such other agreements and instruments being hereinafter
referred to collectively as the "Transaction Documents"). The execution,
delivery and performance by each of the Seller Parties of this Agreement and the
Transaction Documents to which such Seller Party is a party have been duly
authorized by all necessary corporate action on the part of each of them. This
Agreement has been duly executed and delivered by each of the Seller Parties,
and as of the Closing Date the other Transaction Documents will be duly executed
and delivered by the Seller Parties. This Agreement is a legal, valid and
binding obligation of each Seller Party, enforceable against them in accordance
with its terms except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court. As of the Closing
Date, each of the other Transaction Documents to which each of the Seller
Parties is a party will be duly executed and delivered by each of the Seller
Parties and will constitute the legal, valid and binding obligations of each of
the Seller Parties, enforceable against them in accordance with its respective
terms, except as such enforceability may
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be limited by applicable laws relating to bankruptcy, insolvency, fraudulent
conveyance, reorganization or affecting creditors' rights generally and except
to the extent that injunctive or other equitable relief is within the discretion
of a court.
3.3 No Violation of Laws or Agreements. The execution, delivery, and
performance of this Agreement and the Transaction Documents by each of the
Seller Parties do not, and the consummation of the transactions contemplated by
this Agreement and the Transaction Documents by the Seller Parties, will not:
(a) contravene any provision of the Restated Articles of Incorporation or Bylaws
of Citizens or the Articles of Incorporation or Bylaws of the other Seller
Parties; or (b) except as set forth on Schedule 3.3, violate, conflict with,
result in a breach of, or constitute a default (or an event which would, with
the passage of time or the giving of notice or both, constitute a default)
under, or result in or permit the termination, modification, acceleration, or
cancellation of, or result in the creation or imposition of any Lien of any
nature whatsoever upon any of the Acquired Assets or the CLWC Stock or give to
others any interests or rights therein under (i) any indenture, mortgage, loan
or credit agreement, license, instrument, lease, contract, plan, permit or other
agreement or commitment, oral or written, to which any of the Seller Parties is
a party, or by which the Business or any of the Acquired Assets may be bound or
affected, except for such violations, conflicts, breaches, terminations,
modifications, accelerations, cancellations, Liens, interests or rights which,
individually and in the aggregate, do not have a Material Adverse Effect or will
be cured, waived or terminated prior to the Closing Date, or (ii) any judgment,
injunction, writ, award, decree, restriction, ruling, or order of any court,
arbitrator or Authority or any applicable constitution, law, ordinance, rule or
regulation, to which any of the Seller Parties is subject, other than those
violations or conflicts which individually and in the aggregate would not have a
Material Adverse Effect.
3.4 Financial Statements. Citizens has previously delivered to
Parent and IAWC the statement of income of the Business (the "Income Statement")
and the Interim Statement of Net Assets contained in Schedule 3.4 (collectively,
the "Financial Statements"). The Income Statement (a) fairly presents in all
material respects the results of operations of the Business in accordance with
generally accepted accounting principles ("GAAP") consistently applied except
for the omission of full footnotes to the Income Statement and (b) has in all
material respects been derived from the books and records of Seller and reflects
the separation of the operation associated with the Business from other
operations of Citizens. The Interim Statement of Net Assets (a) has in all
material respects been derived from the books and records of Seller and reflects
the separation of the operations associated with the Business from other
operations of Citizens; (b) fairly presents in all material respects the
Acquired Assets as of the Interim Statement of Net Assets Date; and (c) has in
all material respects been prepared in accordance with GAAP consistently applied
except for the omission of full footnotes to such Interim Statement of Net
Assets. The financial statements included in the Annual Report to each PUC for
the year ended December 31, 1998 were prepared in all material respects in
accordance with the rules and regulations of such PUC.
3.5 No Changes. Since the Interim Statement of Net Assets Date to
the date hereof, except as disclosed in Schedule 3.5, the Seller Parties have
conducted the Business as presently operated only in the ordinary course of
business consistent with past practice. Since the
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Interim Statement of Net Assets Date, except as disclosed in Schedule 3.5, there
has not been:
3.5.1 any Material Adverse Effect;
3.5.2 prior to the date of this Agreement, any change in the
salaries or other compensation payable or to become payable to, or any advance
(excluding advances for ordinary business expenses) or loan to, any Transferred
Employee, or material change or material addition to, or material modification
of, other benefits (including any bonus, profit-sharing, pension or other plan
in which any of the Transferred Employees participate) to which any of the
Transferred Employees may be entitled, or any payments to any pension,
retirement, profit-sharing, bonus or similar plan other than in any such case
(i) in the ordinary course consistent with past practice, (ii) as required by
law, or (iii) as required by the Collective Bargaining Agreement;
3.5.3 any alteration in any material respect of the customary
practices with respect to the collection of accounts receivable of the Business
or the provision of discounts, rebates or allowances;
3.5.4 any disposition of or failure to keep in effect any
rights in, to or for the use of any Permit of the Business which individually or
in the aggregate would have a Material Adverse Effect;
3.5.5 any damage, destruction or loss affecting the Business
which individually or in the aggregate would have a Material Adverse Effect
whether or not covered by insurance;
3.5.6 prior to the date of this Agreement, any change by
Seller in its method of accounting or keeping its books of account or accounting
practices with respect to the Business except as required by GAAP and as set
forth on Schedule 3.5; or
3.5.7 prior to the date of this Agreement, any sale, transfer
or other disposition of any material assets, properties or rights of the
Business, except in the ordinary course of business consistent with past
practice.
3.6 Contracts. As of the date of this Agreement, Schedule 3.6
contains a list of all Contracts (other than (i) with respect to which the
Business' total annual liability or expense is less than (a) $250,000 per such
Contract and (b) $6,123,000 per all such Contracts (when taken together with
similar contracts omitted from Schedule 3.6 of the Related Purchase Agreements),
and (ii) Contracts that may be terminated by Seller, without penalty, on notice
of 90 days or less) except line extension agreements and similar agreements and
construction and design contracts. Seller has furnished to Parent or IAWC a
correct and complete copy of each written agreement listed in Schedule 3.6.
Except as disclosed on Schedule 3.6, with respect to each Contract, neither
Seller nor, to the Seller Parties' knowledge, any other party thereto, is in
breach or default, and to the Seller Parties' knowledge, no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the Contract, except in
each case where such breaches, terminations, modifications, accelerations or
defaults, individually or in the aggregate, do not have a Material Adverse
Effect. Except as set forth in Schedule 3.6, there
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are no disputes pending or to the best of the Seller Parties' knowledge,
threatened, under or in respect of any of the Contracts, other than those that
individually and in the aggregate do not have a Material Adverse Effect.
3.7 Permits and Compliance With Laws Generally.
3.7.1 Except as disclosed on Schedule 3.7, Seller possesses
and is in compliance with all Permits required to operate the Business as
presently operated and to own, lease or otherwise hold the Acquired Assets under
all applicable laws, rules, regulations, ordinances and codes, including
Environmental Laws (as defined below), except to the extent that any failure to
possess, or to comply with, any Permit, laws, rules, regulations or orders would
not, individually or in the aggregate, have a Material Adverse Effect. Except as
disclosed in Schedule 3.7, the Business is conducted by Seller in compliance
with all applicable laws (including the Occupational Safety and Health Act and
the rules and regulations thereunder ("OSHA"), zoning, building and similar laws
and Environmental Laws), rules, regulations, ordinances, codes, judgments and
orders, except for such failures to comply which do not individually or in the
aggregate have a Material Adverse Effect. Except as disclosed on Schedule 3.7,
all Permits of Seller relating to the operation of the Business are in full
force and effect, other than those the failure of which to be in full force and
effect would not individually or in the aggregate have a Material Adverse
Effect. There are no proceedings pending or, to the Seller Parties' knowledge,
threatened that seek the revocation, cancellation, suspension or any adverse
modification of any such Permits presently possessed by Seller other than those
revocations, cancellations, suspensions or modifications which do not
individually or in the aggregate have a Material Adverse Effect.
3.7.2 Except as set forth on Schedule 3.7, no outstanding
notice, citation, summons or order has been issued, no outstanding complaint has
been filed, no outstanding penalty has been assessed and no investigation or
review is pending or, to the knowledge of the Seller Parties, threatened, by any
Authority or other Person with respect to any alleged (i) violation by Seller or
any Affiliate of Seller relating to the Business of any law, ordinance, rule,
regulation, code or order of any Authority; or (ii) failure by Seller or any
Affiliate to have any Permit required in connection with the conduct of the
Business or otherwise applicable to the Business (including the Acquired
Assets), except, in each case, where such violations or failures, individually
or in the aggregate, would not have a Material Adverse Effect.
3.8 Environmental Matters. Except as set forth on Schedule 3.8
hereto, and with such exceptions as are not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect:
3.8.1 Seller has not disposed of or arranged for the disposal
of or Released any Hazardous Substances, other than in conformity with
Environmental Laws, at any Real Estate, or, in connection with the Business or
Acquired Assets, at any other facility, location, or other site.
3.8.2 Seller has not received any written notice or request
for information with respect to, and to the best of the Seller Parties'
knowledge, Seller has not been designated a potentially liable party for
Remedial Action, in connection with any Real Estate, or, as of the date
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hereof, with respect to the Business or Acquired Assets, at any other facility,
location, or other site under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or comparable state statutes.
3.8.3 To the best of the Seller Parties' knowledge, except for
such use or storage of Hazardous Substances as is incidental to the conduct of
the Business, which use and storage is or has been in compliance with
Environmental Laws, and which use and storage has not caused any condition that
requires Remedial Action, no Real Estate has been used for the storage,
treatment, generation, processing, production or disposal of any Hazardous
Substances or as a landfill or other waste disposal site in violation of any
Environmental Law.
3.8.4 To the best of the Seller Parties' knowledge,
underground storage tanks are not, and have not in the past been, located on or
under any Real Estate.
3.8.5 There are no pending or unresolved claims against Seller
or the Business for investigatory costs, cleanup, removal, remedial or response
costs, or natural resource damages arising out of any Releases or threat of
Release of any Hazardous Substances at any Real Estate or, as of the date
hereof, with respect to the Business or the Acquired Assets or at any other
facility, location, or other site.
3.8.6 To the best of the Seller Parties' knowledge, no
polychlorinated biphenyls ("PCBs") or asbestos-containing materials are located
at or in any Real Estate in violation of Environmental Laws or which require
Remedial Action.
\ 3.8.7 To the best of the Seller Parties' knowledge, no
Hazardous Substance managed or generated by or on behalf of Seller at the Real
Estate or in connection with the Business or Acquired Assets has come to be
located at any site that is listed or formally proposed for listing under
CERCLA, the Comprehensive Environmental Response, Compensation and Liability
Information System ("CERCLIS"), or any similar state list or that is the subject
of federal, state, or local enforcement actions or investigations.
3.8.8 The Seller Parties know of no facts or circumstances
related to environmental matters (i) in connection with the operation of the
Business or (ii) concerning the Real Estate, that are reasonably likely to
result in any material reduction in the quality or quantity of water available
for supply to the Seller Parties' customers.
3.8.9 The Seller Parties will within thirty (30) days of the
date hereof provide Parent or IAWC with copies of all written environmental
audits or investigations of which they are aware (after due inquiry) prepared
for the Real Estate or operations of the Business.
3.8.10 Except as set forth in Schedule 3.8.10 or Citizens'
Annual Report on Form 10-K for the year ended December 31, 1998:
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(a) The Seller Parties (including for purposes of
Section 3.8.10(a) and (b), Affiliates and predecessors of the Seller Parties)
are and have been for the past three years in full compliance with all federal
and state primary drinking water standards;
(b) The Seller Parties are and have been for the past
three years in full compliance with all federal and state secondary drinking
water standards; and
(c) As to all outstanding violations of state or federal
drinking water standards, as of the date hereof, the Seller Parties have
completed or are in the process of completion in accordance with all applicable
deadlines, all actions required by Environmental Law or Authorities to correct
or otherwise respond to such violations.
3.8.11 Except as set forth in Schedule 3.8.11, none of the
Seller Parties will be required to place any notice or restriction relating to
the presence of Hazardous Substances in the deed to any Real Estate, or in any
written instrument accompanying this Agreement, and no Real Estate has such a
notice or restriction in its deed or any other written instrument relating to
the purchase, lease or rental of such property.
For the purposes of these Sections 3.7 and 3.8: (A) "Remedial Action" means all
actions to (x) clean up, remove, treat or in any other way respond to any
presence, Release or threat of Release of Hazardous Substances; (y) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Substances so it does not endanger or threaten to endanger public or employee
health or welfare or the environment; or (z) perform studies, investigations or
monitoring necessary or required to investigate the foregoing; (B)
"Environmental Laws" means any common law or federal, state or local law,
statutes, rule, regulation, ordinance, code, judgment or order relating to the
protection of the environment or human health and safety and includes, but is
not limited to, CERCLA (42 U.S.C. section 9601, et seq.), the Clean Water Act
(33 U.S.C. section 1251 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.), the Toxic Substances Control Act (15 U.S.C.
section 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. section 300f et
seq.) and the Oil Pollution Act of 1990 (33 U.S.C. section 2701 et seq.), each
as has been or may be interpreted or amended as of the Closing Date and the
regulations promulgated pursuant thereto and in effect as of the Closing Date;
(C) "Released" means released, spilled, leaked, discharged, disposed of, pumped,
poured, emitted, emptied, injected, leached, dumped or allowed to escape; and
(D) "Hazardous Substances" means hazardous or toxic or polluting substance or
waste or contaminant under or pursuant to any Environmental Law, including
petroleum products, PCBs and radioactive materials.
3.9 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by the Selling Parties
of this Agreement, the Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by the Seller Parties, including
without limitation in connection with the assignment or transfer of the
Contracts and Permits contemplated hereby, except (i) as required by the
▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), (▇▇) as
specified on Schedule 3.9, (iii) as required by the IDRB Documents, and (iv) for
such other consents, approvals, authorizations, registrations or filings the
failure of
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which to obtain or make would not individually or in the aggregate have a
Material Adverse Effect or which are obtained by the Closing Date.
3.10 Title. Seller has good and valid title to all of the Acquired
Assets constituting personal property, good and marketable title in fee simple
to all of the owned Acquired Assets constituting Real Estate and good and valid
leasehold title to all of the leased Acquired Assets constituting Real Estate,
in each case, free and clear of Liens subject only to the Permitted Exceptions.
"Permitted Exceptions" as used herein shall mean (a) the Liens set forth in
Schedule 3.10 hereto, (b) Liens securing Taxes, assessments, governmental
charges or levies, or the claims of materialmen, mechanics, carriers and like
persons, all of which are not yet due and payable or which are being contested
in good faith or (c) such other Liens which, individually or in the aggregate,
do not have a Material Adverse Effect (it being understood that to the extent a
Permitted Exception relates to or arises from a Retained Liability, Seller shall
still be liable for such Retained Liability to the extent set forth herein).
3.11 Real Estate.
3.11.1 As of the date hereof, Seller has not received any
written or oral notice for assessments for public improvements against the Real
Estate which remains unpaid, and to the best knowledge of the Seller Parties, no
such assessment has been proposed. Except as set forth on Schedule 3.11, as of
the date hereof, there is no pending condemnation, expropriation, eminent domain
or similar proceeding affecting all or any portion of any of the Real Estate and
to the best knowledge of the Seller Parties no such proceeding is threatened.
3.11.2 Except as disclosed on Schedule 3.6, as of the date
hereof, Seller is not a lessee under any Contract relating to the use or
occupancy of the Real Estate involving annual payments in excess of $100,000.
3.11.3 Each parcel of the Real Estate has physical and, to
Seller's knowledge, legal vehicular and pedestrian access to and from public
roadways as may be reasonably necessary to the operation of the Business except
where the failure to have such access does not have a Material Adverse Effect.
To Seller's knowledge, no fact or condition exists which would result in the
termination of (a) the current access from each parcel of the Real Estate, and
(b) continued use, operation, maintenance, repair and replacement of all
existing and currently committed water lines used by Seller in connection with
the Business, except where such termination would not have a Material Adverse
Effect.
3.12 Taxes. The Seller Parties have (a) timely filed all material
returns and reports for Taxes, including information returns, that are required
to have been filed in connection with, relating to, or arising out of, the
Business, (b) paid all Taxes that are shown to have come due pursuant to such
returns or reports and (c) paid all other material Taxes not required to be
reported on returns in connection with, relating to, or arising out of, or
imposed on the property of the Business for which a notice of assessment or
demand for payment has been received or which have otherwise become due. To the
best of the Seller Parties' knowledge, all such returns or reports have
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been prepared in accordance with all applicable laws and requirements in all
material respects. Except to the extent disclosed on Schedule 3.12, none of the
assets of the Business or constituting any of the Acquired Assets (a) is
property that is required to be treated as owned by another Person pursuant to
the "safe harbor lease" provisions of former Section 168(f)(8) of the Code, (b)
is "tax-exempt use property" within the meaning of Section 168(h) of the Code or
(c) directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
3.13 Patents and Intellectual Property Rights. To the best of the
Seller Parties' knowledge, the operations of Seller do not make any unauthorized
use of any Intellectual Property except for any such unauthorized uses which do
not have a Material Adverse Effect. Assuming the consents listed as item XII on
Schedule 3.9 are obtained, neither Parent nor IAWC will lose any of Seller's
rights to, or be required to pay increased royalties for, any Intellectual
Property included in the Acquired Assets being acquired by it as a result of the
Closing and the consummation of the transactions contemplated by this Agreement,
except for any such rights or such increased royalties the loss or payment of
which would, individually or in the aggregate, not have a Material Adverse
Effect.
3.14 Accounts Receivable. The accounts receivable of Seller arising
from the Business as set forth on the Interim Statement of Net Assets or arising
since the date thereof have arisen out of bona fide sales and deliveries of
goods, performance of services and other business transactions in the ordinary
course of business consistent with past practice; the allowance for collection
losses on the Interim Statement of Net Assets has been determined in accordance
with GAAP consistent with past practice.
3.15 Labor Relations. As of the date hereof, except as set forth in
Schedule 3.15, to best of the knowledge of the Seller Parties, there has been no
union organizing efforts with respect to the Business conducted within the last
three (3) years and there are none now being conducted with respect to the
Business. Except as set forth in Schedule 3.15, Seller has not at any time
during the three (3) years prior to the date of this Agreement had, nor, to the
best of the Seller Parties' knowledge, is there now threatened, a strike, work
stoppage or work slow down with respect to or affecting the Business which had
or could reasonably be expected to have a Material Adverse Effect. As of the
date hereof, except as set forth in Schedule 3.15, (i) no Employee is
represented by any union or other labor organization and (ii) there is no unfair
labor practice charge pending or, to the best knowledge of the Seller Parties,
threatened against Seller relating to any of the Employees as related to the
Business which could reasonably be expected to have a Material Adverse Effect.
3.16 Employee Benefit Plans.
3.16.1 Schedule 3.16.1 contains a true and complete list of
each "employee benefit plan," as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA), bonus, incentive,
deferred compensation, excess benefit, employment
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contract, stock purchase, stock ownership, stock option, supplemental
unemployment, vacation, sabbatical, sick-day, severance or other material
employee benefit plan, program or arrangement (other than those required to be
maintained by law), whether written or unwritten, qualified or nonqualified,
funded or unfunded, foreign or domestic, (i) maintained by, or contributed to by
Citizens or any of its Affiliates, in respect of any Employee or Former
Employee, or (ii) with respect to which Citizens or any of its Affiliates has
any liability in respect of any Employee or Former Employee (the"Benefit
Plans"). Except as disclosed on Schedule 3.16.1, neither Citizens nor any of its
Affiliates maintains any bonus, pension or welfare benefit plan, program or
arrangement, including any deferred compensation arrangement, for directors,
consultants or independent contractors of the Business.
3.16.2 A true and complete copy of each Benefit Plan and
related trust agreements and (to the extent applicable) a copy of each Benefit
Plan's current summary plan description and in the case of an unwritten Benefit
Plan, a written description thereof, has been furnished to Parent or IAWC. In
addition, to the extent applicable, Parent or IAWC has been provided a copy of
the most recent Internal Revenue Service ("IRS") determination letter issued to
each Benefit Plan and a copy of the most recent IRS Form 5500 together with all
schedules and accountants' statement filed, and actuarial reports prepared, on
behalf of each Benefit Plan.
3.16.3 Each Benefit Plan which is intended to be qualified
under Section 401(a) of the Code (as designated on Schedule 3.16.1) is so
qualified, and will remain so qualified upon the timely making of certain
amendments required by law during the applicable remedial amendment period, and
any trust forming a part of such a Benefit Plan is tax exempt under Section
501(a) of the Code. Each such Benefit Plan has been amended, as and when
necessary, to comply with the Tax Reform Act of 1986 and upon timely filing of
an Application for Determination with the Internal Revenue Service, will be
eligible to make further such amendments under the"remedial amendment period."
3.16.4 Except as disclosed in Schedule 3.16.4, each Benefit
Plan has been operated and administered in all material respects in accordance
with its terms and all applicable laws, including ERISA and the Code.
3.16.5 None of the Acquired Assets is subject to a Lien or Tax
under the Code or ERISA.
3.16.6 Neither Citizens nor any ERISA Affiliate and, to the
knowledge of the Seller Parties, no other Person, has taken any action or failed
to take any action with respect to any Benefit Plan that may subject Parent or
IAWC or any Benefit Plan under which liabilities may be assumed by Parent or
IAWC under Sections 5.10, 5.11 or 5.12 ("Assumed Benefit Liabilities") to any
material liability or Tax under the Code or ERISA.
3.16.7 Neither Citizens nor any ERISA Affiliate has incurred
or expects to incur any withdrawal liability with respect to any Benefit Plan
which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA, including any contingent liability under Section 4204 of ERISA or
withdrawal liability arising from the actions of Citizens or any ERISA Affiliate
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contemplated by this Agreement. All contributions that Citizens or any ERISA
Affiliate have been obliged to make to any Benefit Plan, including any
multiemployer plan, have been duly and timely made.
3.16.8 There are no pending or, to the knowledge of the Seller
Parties, threatened claims (other than routine claims for benefits),
assessments, complaints, proceedings or investigations of any kind in any court
or governmental agency with respect to any Benefit Plan which could reasonably
be expected to give rise to a material liability to IAWC.
3.16.9 Except as disclosed on Schedule 3.16.9, no Benefit Plan
provides benefits, including without limitation, death or medical benefits,
beyond termination of service or retirement other than (i) coverage mandated by
law, or (ii) death or retirement benefits under a Benefit Plan qualified under
Section 401(a) of the Code. Seller's Retiree Medical Plan contains provisions
permitting Seller to modify or terminate retiree medical benefits at any time,
without prior notice to any covered individual. Except with respect to retirees,
"grandfathered" employees and collectively bargained employees, Seller knows of
no reason why its ability to effect those provisions would be limited.
3.16.10 With respect to each Benefit Plan that is a "group
health plan" within the meaning of Section 607 of ERISA and that is subject to
Section 4980B of the Code, Citizens and each ERISA Affiliate have complied in
all material respects with the continuation coverage requirements of the Code
and ERISA.
3.17 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 3.17, Seller has no liabilities with respect to the Business which
would constitute Assumed Liabilities, either direct or indirect, matured or
unmatured or absolute, contingent or otherwise, except:
3.17.1 the Assumed Indebtedness and those other liabilities
which would decrease the Base Cash Purchase Price pursuant to Section 2.6.5 to
the extent assumed by Parent or IAWC at Closing;
3.17.2 liabilities arising in the ordinary course of business
under any Contract or Permit or with respect to any agreement or instrument
included within the definition of Real Estate; and
3.17.3 those liabilities incurred, consistent with past
business practice, in or as a result of the normal and ordinary course of
business and reflected in the books and records related to the Business;
3.17.4 the obligations and liabilities set forth in Sections
5.9, 5.10, 5.11 and 5.12 hereof; and
3.17.5 those other liabilities, which individually and in the
aggregate, would not have a Material Adverse Effect.
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3.18 No Pending Litigation or Proceedings. Except as disclosed in
Schedule 3.18, there are no actions, suits, investigations or proceedings
pending against or, to the best of the Seller Parties' knowledge, threatened,
against or affecting, Seller, the Business or any of the Acquired Assets before
any court or arbitrator or Authority which individually or in the aggregate,
would have a Material Adverse Effect. Except as disclosed in Schedule 3.18,
there are currently no outstanding judgments, decrees or orders of any court or
Authority against any of the Seller Parties, which relate to or arise out of the
conduct of the Business or the ownership, condition or operation of the Business
or the Acquired Assets (other than any PUC order relating to rates, tariffs and
similar matters arising in the ordinary course of business) which individually
or in the aggregate would have a Material Adverse Effect.
3.19 Supply of Utilities. Except as set forth on Schedule 3.19, the
Real Estate has adequate arrangements for supplies of electricity, gas, oil,
coal and/or sewer for all operations at the 1998 or current operating levels,
whichever is greater. Except as set forth on Schedule 3.19, there are no actions
or proceedings pending or, to the best of the Seller Parties' knowledge,
threatened, that would adversely affect the supply of electricity, gas, coal or
sewer to the Real Estate except for those which individually and in the
aggregate would not have a Material Adverse Effect.
3.20 Insurance. Schedule 3.20 lists the Seller Parties' policies and
contracts in effect as of the date hereof for insurance covering the Acquired
Assets or Assumed Liabilities and the operation of the facilities constituting
the Business owned or held by Seller, together with the risks insured against,
coverage limits and deductible amounts.
3.21 Relationship with Customers. As of the date hereof, CUCI does
not have any current customer which accounted for more than 5% of the net sales
of the Business (taken together with the businesses being acquired by Parent or
IAWC or Affiliates of Parent pursuant to the Related Purchase Agreements) for
the immediately preceding 12-month period.
3.22 WARN Act. Except as contemplated by Section 5.9 hereby or as
set forth in Schedule 3.22 hereto, within six months prior to the date hereof,
(i) Seller has not effectuated (a) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Business; or (b) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Business; (ii) Seller has not been affected by any transaction or engaged in
layoffs or employment terminations with respect to the Business sufficient in
number to trigger application of any similar state or local law; and (iii) none
of Seller's employees who are employed in connection with the Business has
suffered an "employment loss" (as defined in the WARN Act).
3.23 Condition of Assets. Except as set forth on Schedule 3.23, the
buildings, machinery, equipment, tools, furniture, improvements and other fixed
tangible assets of the Business included in the Acquired Assets, taken as a
whole and taken together with the similar assets included among the assets being
acquired by Parent or IAWC or Affiliates of Parent pursuant to the Related
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Purchase Agreements, are in good operating condition and repair, reasonable wear
and tear excepted.
3.24 Brokerage. None of the Seller Parties or their Affiliates have
made any agreement or taken any other action which might cause any Person to
become entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to IAWC or
its Affiliates.
3.25 All Assets. Except as set forth on Schedule 3.25 and for the
Excluded Assets, the Acquired Assets include all assets, rights, properties and
contracts the use of which is necessary to the continued conduct of the Business
by Parent or IAWC, as the case may be, substantially in the manner as it was
conducted prior to the Closing Date, including the service of all utility
customers in substantially the same manner and at substantially the same service
levels as provided by Seller on the date hereof.
3.26 Year 2000 Matters. Citizens has (1) initiated a review and
assessment of all mission critical areas within the Business and related
operations (including those affected by suppliers and vendors) that it
reasonably believes could be adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by any Seller Party (or suppliers
and vendors) may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
all as set forth in Citizens' Annual report on Form 10-K for the fiscal year
ended December 31, 1998 and Citizens' Quarterly reports on Form 10-Q for the
periods ending March 31, 1999 and June 30, 1999, and (iii) to date, implemented
that plan substantially in accordance with that timetable. Seller has
contingency plans that are dedicated to ensuring that established and expected
levels of customer service are maintained without interruption, while core
business functionality is preserved during the millennium transition. With
respect to its suppliers and vendors, the foregoing representation and warranty
is expressly limited to matters known to Seller after making reasonable
inquiries of such suppliers and vendors. Seller makes no representation or
warranty with respect to the receipt or accuracy of any response received from
any vendor or supplier.
3.27 Product Liability. Except as disclosed in Schedule 3.27 and
except for those liabilities which individually or in the aggregate would not
have a Material Adverse Effect, there are no (a) liabilities of the Seller
Parties or their Affiliates, fixed or contingent, asserted or, to the knowledge
of the Seller Parties, unasserted, with respect to any product liability or
similar claim that relates to any product or service sold by Seller or the
Business to others or (b) liabilities of the Seller Parties or their Affiliates,
fixed or contingent, asserted or, to the knowledge of the Seller Parties
unasserted, with respect to any claim for the breach of any express or implied
product warranty or a similar claim with respect to any product or service sold
by Seller or the Business to others.
3.28 Capitalization of CLWC; Title to CLWC Stock. There are 100
shares of CLWC common stock authorized and 100 shares of CLWC common stock
issued and outstanding. The CLWC Stock comprises all of the shares of capital
stock of CLWC that are issued and outstanding. All shares of CLWC Stock are duly
authorized, validly issued and outstanding, fully
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paid and nonassessable. All CLWC Stock is owned by Citizens. By delivery of
payment for the CLWC Stock and by delivery of the certificate representing the
CLWC Stock as provided for in this Agreement, Parent shall acquire good title to
the CLWC Stock, free and clear of all Liens. There are no outstanding
subscriptions, options, warrants, conversion rights, convertible securities,
preemptive rights, preferential rights, or other rights (contractual or
otherwise) or agreements of any kind for the purchase or acquisition from (or
the purchase, sale or issuance by) Citizens or CLWC of any shares of CLWC Stock
or other equity or ownership interests in CLWC, and no outstanding authorization
therefor has been given. CLWC has no liabilities other than those that, if
outstanding as of the Closing Date, would have been included among the Assumed
Liabilities under the terms of Section 2.3 had Parent purchased the assets of
CLWC rather than its stock.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND IAWC
Parent and IAWC jointly and severally represent and warrant to Seller as
follows:
4.1 Organization and Good Standing.
4.1.1 Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
4.1.2 IAWC is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation and each of
Parent and IAWC has all requisite corporate power and authority to own, lease
and operate the Acquired Assets and the Business being acquired by it hereunder.
Each of Parent and IAWC is qualified to do business and is in good standing in
all jurisdictions wherein the nature of the business conducted by it or its
ownership or use of assets and properties make such qualification necessary,
except such failures to be qualified or to be in good standing, if any, which
when taken together with all such failures of such Parent and IAWC do not have a
material adverse effect on its ability to perform each of their obligations
under this Agreement and the Transaction Documents.
4.2 Authorization and Enforceability. Each of IAWC and Parent has
full corporate power and authority to execute, deliver and perform this
Agreement and the other Transaction Documents to which either of them is a
party. The execution, delivery and performance by IAWC and Parent of this
Agreement and the Transaction Documents to which IAWC and/or Parent is a party
have been duly authorized by all necessary corporate action on the part of each
of them. This Agreement has been duly executed and delivered by IAWC and Parent,
and as of the Closing Date the other Transaction Documents will be duly executed
and delivered by IAWC and Parent. This Agreement is a legal, valid and binding
obligation of IAWC and Parent, enforceable against them in accordance with its
terms, except as such enforceability may be limited by applicable laws relating
to bankruptcy, insolvency, fraudulent conveyance, reorganization or affecting
creditors' rights generally and except to the extent that injunctive or other
equitable relief is within the
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discretion of a court. As of the Closing Date, each of the other Transaction
Documents to which IAWC and Parent is a party will be duly executed and
delivered by IAWC and Parent and will constitute the legal, valid and binding
obligations of IAWC and Parent, enforceable against them in accordance with its
respective terms, except as such enforceability may be limited by applicable
laws relating to bankruptcy, insolvency, fraudulent conveyance, reorganization
or affecting creditors' rights generally and except to the extent that
injunctive or other equitable relief is within the discretion of a court.
4.3 No Violation of Laws or Agreements. The execution, delivery and
performance of this Agreement and the Transaction Documents by IAWC and/or
Parent do not, and the consummation of the transactions contemplated hereby and
thereby will not, (a) contravene any provision of the Articles of Incorporation
or Bylaws of IAWC or the Certificate of Incorporation or Bylaws of Parent; or
(b) violate, conflict with, result in a breach of, or constitute a default (or
an event which would with the passage of time or the giving of notice, or both,
constitute a default) under, or result in or permit the termination,
modification, acceleration, or cancellation of (i) any indenture, mortgage, loan
or credit agreement, license, instrument, lease, contract, plan, permit,
authorization, proof of dedication or other agreement or commitment, oral or
written, to which Parent or IAWC is a party, or by which any of their assets or
properties may be bound or affected, except for such violations, conflicts,
breaches, terminations, modifications, accelerations, cancellations, interests
or rights which, individually or in the aggregate do not have a material adverse
effect on their respective ability to perform their obligations under this
Agreement and the Transaction Documents, or (ii) any judgment, injunction, writ,
award, decree, restriction, ruling, or order of any court, arbitrator or
Authority or any applicable constitution, law, ordinance, rule or regulation to
which IAWC or Parent is subject other than those violations and conflicts which
individually or in the aggregate do not have a material adverse effect on their
respective ability to perform their obligations under this Agreement and the
Transaction Documents.
4.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by IAWC and Parent of
this Agreement, the other Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by IAWC or Parent except (i) as
required by the HSR Act, (ii) as specified on Schedule 3.9 and (iii) for such
consents, approvals, authorizations, registrations or filings, the failure to
obtain or make would not individually or in the aggregate have a material
adverse effect on their respective ability to perform their obligations under
this Agreement and the Transaction Documents.
4.5 Financing. IAWC and Parent have, and at the Closing Date, will
have sufficient resources to pay the Purchase Price, and Parent, IAWC or the
other Affiliates of Parent that are buyers of the assets and businesses being
acquired pursuant to the Related Purchase Agreements have, and at the Closing
Date, will have sufficient resources to pay the purchase prices set forth in the
Related Purchase Agreements.
4.6 Brokerage. None of Parent, IAWC or their Affiliates have made
any agreement or taken any other action which might cause any Person to become
entitled to a broker's
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or finder's fee or commission as a result of the transactions contemplated
hereunder which could result in liability to the Seller Parties.
4.7 Insurance. Schedule 4.7 lists the policies and contracts in
effect as of the date hereof for casualty and property insurance covering IAWC's
assets and properties and the operation of IAWC's business, together with the
risks insured against, coverage limits and deductible amounts.
4.8 Purchase for Investment. Parent acknowledges that the CLWC Stock
has not been registered under the Securities Act of 1933, as amended (the
"Act"), or qualified or registered under any state securities law and that no
public market now exists for the CLWC Stock and a public market may never exist
therefore. Parent has no Contract with any Person to sell, transfer or pledge to
such Person, or to any other Person, the CLWC Stock, and Parent has no present
plans or intentions to enter into any such Contract. Parent is acquiring the
CLWC Stock for its own account, for investment only, without a view to
distribution, as that phrase has meaning under the Act, and rules and
regulations of the SEC. Parent understands that the effect of the foregoing
representation and warranty is that the CLWC Stock must be held by it
indefinitely unless subsequently registered under the Act or unless an exemption
from registration is available at the time of any proposed sale or other
transfer thereof. Parent agrees to indemnify and hold harmless Seller against
all liabilities, costs and expenses, including reasonable attorneys' fees, and
other Damages incurred by Seller as a result of any sale, transfer or other
disposition by Parent of all or any part of the CLWC Stock in violation of the
Act or applicable state securities laws.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Conduct of Business. Except (i) as otherwise specifically
permitted by this Agreement, (ii) as set forth in Schedule 5.1 hereto or (iii)
with the prior written consent of Parent and IAWC, from and after the date of
this Agreement and up to and including the Closing Date, each of the Seller
Parties agree that:
5.1.1 Seller shall conduct the Business as presently operated
and only in the ordinary course of business consistent with past practice.
5.1.2 They shall promptly inform Parent and IAWC in writing of
any specific event or circumstance of which they are aware, or of which they
receive notice, that has or is likely to have, individually or in the aggregate,
taken together with the other events or circumstances, a Material Adverse Effect
on the Acquired Assets or the Assumed Liabilities.
5.1.3 Seller shall not:
(a) change or modify in any material respect existing
credit and collection policies, procedures and practices with respect to
accounts receivable;
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(b) enter into any contract or commitment, waive any
right or enter into any other transaction (except in the ordinary course of
business) which would have a Material Adverse Effect;
(c) except in the event of service interruption,
emergency or casualty loss, commit to acquire subsequent to the Closing Date on
behalf of the Business any capital asset or group of capital assets costing in
excess of $1,000,000 that is not included in the capital budget of Seller for
fiscal year 2000 and which, if so acquired, would be included in the Acquired
Assets; commencing December 1, 1999, accept or receive customer advances for
construction in excess of $9,000,000 when combined with customer advances
relating to the businesses being acquired by IAWC or Affiliates of IAWC pursuant
to the Related Purchase Agreements per each of the next four consecutive
three-month periods unless pursuant to an existing tariff, Contract or Permit of
Seller; or sell or lease or agree to sell or lease or otherwise dispose of any
assets included in the Acquired Assets except in the ordinary course of the
conduct of the Business, consistent with past practice;
(d) except in the ordinary course of business,
consistent with past practice or as required under any of Seller's debt
instruments or indentures, mortgage, pledge or subject to any Lien (other than
Permitted Liens) any of the Acquired Assets (including the CLWC Stock);
(e) change any compensation or benefits or grant any
material new compensation or benefits payable to or in respect of any
Transferred Employee except (i) as required by law, (ii) in the ordinary course,
consistent with past practice and (iii) as required by the Collective Bargaining
Agreement in existence on the date hereof; provided, however, no individual
Employee shall in any event receive a compensation increase in excess of seven
percent (7%) except as required by the Collective Bargaining Agreement in
existence on the date hereof;
(f) other than in the ordinary course of business
consistent with past practice, sell or otherwise transfer any assets necessary,
or otherwise material to the conduct of, the Business which would constitute
Acquired Assets;
(g) change the Seller's method of accounting or keeping
its books of account or accounting practices with respect to the Business,
except as required by GAAP or any Authority;
(h) intentionally and wilfully take or omit to take any
action which if taken or omitted prior to the date hereof would constitute or
result in a breach of any representations or warranties set forth in Sections
3.1, 3.2, 3.3, 3.4, 3.7, 3.8, 3.10, 3.14, 3.16 and 3.25 hereof (it being
understood that the failure to cure a breach shall not, by itself, be an
intentional and wilful omission to take action);
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(i) prepay, redeem, retire, refund or otherwise
extinguish any of the Assumed Indebtedness; or
(j) permit CLWC to amend its articles of incorporation
or bylaws, to issue any shares of its capital stock or to enter into any
Contract calling for the issuance of any such shares, to merge or consolidate
with any other Person or to acquire any stock, securities, or business assets of
any other Person.
5.2 Negotiations. Neither Citizens nor any Person controlled by
Citizens or under common control with Citizens (each such person being a
"Section 5.2 Affiliate"), nor any officer, director, employee, representative or
agent of Citizens or any of their Section 5.2 Affiliates, shall, directly or
indirectly, solicit or initiate or participate in any way in discussions or
negotiations with, or provide any information or assistance to, or enter into an
agreement with any Person or group of Persons (other than Parent, IAWC or any
Person controlled by Parent or IAWC or under common control with Parent, IAWC or
any Persons providing financing to the parties hereto in connection with
facilitating the consummation of the transactions contemplated by this
Agreement) concerning any acquisition, merger, consolidation, liquidation,
dissolution, disposition or other transaction (or series of such transactions)
that would result in the transfer to any such Person or group of Persons of ten
percent (10%) of the Acquired Assets (as measured by net book value of such
assets on the date of each such transaction) or the acquisition, merger,
consolidation, liquidation, dissolution, disposition or other transaction (or
series of such transactions) involving the Seller Parties, if such acquisition,
merger, consolidation, liquidation, dissolution, disposition or other
transaction (or series of such transactions) would be inconsistent, in any
respect, with the obligations of the Seller Parties hereunder (any of the
foregoing transactions, a "Competing Transaction").
5.3 Disclosure Schedules. As promptly as practicable, the Seller
Parties will provide Parent and IAWC with a supplement or amendment to the
Disclosure Schedules with respect to any matter, condition or occurrence which
is required to be set forth or described in the Disclosure Schedules. For the
avoidance of doubt, a matter, condition or occurrence shall only be "required"
to be set forth or described in the Disclosure Schedules if the failure to be so
disclosed would result in a breach of the applicable representation or warranty
(qualified by Material Adverse Effect where applicable) on the date hereof or on
the Closing Date. In addition, Seller shall have the right at any time and from
time to time prior to the Closing to supplement or amend the Disclosure
Schedules. Seller may provide Disclosure Schedules with respect to any
representation or warranty of this Agreement whether or not a specific schedule
is referred to therein. In the event that any supplement or amendment of such
Disclosure Schedules shall be provided later than five (5) business days prior
to the Closing Date, Parent or IAWC shall have the right to delay the Closing
for a period of five (5) business days in order for Parent and IAWC to review
such supplement or amendment. No such supplement or amendment shall be deemed to
cure any breach of or alter any representation or warranty made in this
Agreement so as to permit the Closing to occur unless Parent and IAWC
specifically agree thereto in writing. The Seller Parties shall promptly inform
Parent and IAWC, and Parent and IAWC will promptly inform the Seller Parties of
any fact or event which comes to their attention, the existence of which
constitutes or likely will constitute a breach in any material respects of any
representation or warranty in this Agreement. In addition, Parent will, within
five (5) days
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of receipt thereof, forward to Seller (i) any title report Parent or IAWC
receives from a title company with respect to the Real Estate and (ii) any
written communication regarding a specific Lien or title defect affecting a
specifically identified parcel of the Real Estate sent to the President,
Treasurer or General Counsel of Parent or the President or Corporate Counsel of
IAWC, and sent by a party other than the Seller Parties, their legal counsel,
financial advisors or representatives.
5.4 Mutual Covenants. The parties mutually covenant from the date of
this Agreement to the Closing Date (and subject to the other terms of this
Agreement, including Section 5.8 hereof):
5.4.1 to cooperate with each other in determining whether
filings are required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents;
5.4.2 to use all reasonable efforts to obtain promptly the
satisfaction (but not waiver) of the conditions to the Closing of the
transactions contemplated herein (each party hereto shall furnish to the other
and to the other's counsel all such information as may be reasonably required in
order to effectuate the foregoing action); and
5.4.3 to advise the other parties promptly if such party
determines that any condition precedent to its obligations hereunder will not be
satisfied in a timely manner.
5.5 Filings and Authorizations. The parties hereto will as promptly
as practicable, make or cause to be made all such filings and submissions under
laws, rules and regulations applicable to it or its Affiliates as may be
required to consummate the terms of this Agreement, including all notifications
and information to be filed or supplied pursuant to the HSR Act and with the
applicable public utility commission (each, a "PUC"). Any such filings and
supplemental information will be in substantial compliance with the requirements
of the applicable law, rule or regulation. Each of Parent and IAWC, on the one
hand, and the Seller Parties, on the other, shall furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing or submission to the PUC or which
is necessary under the HSR Act. The Seller Parties, on the one hand and IAWC and
Parent, on the other, shall keep each other apprised of the status of any
communications with, and inquiries or requests for additional information from,
any Authority, including the PUC, the United States Federal Trade Commission
("FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division"), and shall comply promptly with any such inquiry or
request. Each of Citizens, Seller, Parent and IAWC will use its reasonable
efforts to obtain any clearance required under the HSR Act and from the PUC for
the purchase and sale of the Acquired Assets (including the CLWC Stock) in
accordance with the terms and conditions hereof. Notwithstanding the foregoing,
nothing contained in this Agreement will require or obligate any party or their
respective Affiliates: (i) to initiate, pursue or defend any litigation (or
threatened litigation) to which any Authority (including the PUC, the Antitrust
Division and the FTC) is a party; (ii) to agree or otherwise become subject to
any material limitations on (A) the right of Parent and IAWC effectively to
control or operate the Business being acquired by each or the right of Seller or
its
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Affiliates effectively to control or operate Citizens' other businesses, (B) the
right of Parent and IAWC or its Affiliates to acquire or hold the Business being
acquired by each or the right of Seller or its Affiliates to hold the Excluded
Assets or Citizens' other businesses, or (C) the right of Parent and IAWC to
exercise full rights of ownership of the Business or all or any material portion
of the Acquired Assets being acquired by each or the right of Citizens to
exercise full rights of ownership of Citizens' other businesses or all or any
material portion of the Excluded Assets; or (iii) to agree or otherwise be
required to sell or otherwise dispose of, hold separate (through the
establishment of a trust or otherwise), or divest itself of all or any portion
of the business, assets or operations of Citizens, Seller, Parent, IAWC, any
Affiliate of Parent or the Business. The parties agree that no representation,
warranty or covenant of IAWC, Parent, or Citizens contained in this Agreement
shall be breached or deemed breached as a result of the failure by Parent and
IAWC on the one hand or the Seller Parties, on the other, to take any of the
actions specified in the preceding sentence.
5.6 Public Announcement. No party hereto shall make or issue, or
cause to be made or issued, any public announcement or written statement
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party (which will not be unreasonably
withheld or delayed), unless counsel to such party advises that such
announcement or statement is required by law (in which case the parties shall
make reasonable efforts to consult with each other prior to such required
announcement).
5.7 Further Assurances. Each of Citizens, Parent, IAWC and Seller,
from time to time after the Closing, at Parent's, IAWC's or Seller's request,
will execute, acknowledge and deliver to the applicable person such other
instruments of conveyance and transfer and will take such other actions and
execute such other documents, certifications, and further assurances as Parent,
IAWC or Seller, as the case may be, may reasonably require in order to transfer,
in accordance with the terms and conditions of this Agreement, more effectively
in Parent or IAWC or to put Parent or IAWC more fully in possession of any of
the Acquired Assets being acquired by each or better to enable Parent or IAWC to
complete, perform and discharge any of the Assumed Liabilities being assumed by
each. Each party shall cooperate and deliver such instruments and take such
action as may be reasonably requested by the other party in order to carry out
the provisions and purposes of this Agreement and the transactions contemplated
hereby.
5.8 Cooperation.
5.8.1 Parent, IAWC, Citizens and Seller shall cooperate and
shall cause their respective Affiliates, officers, employees, agents and
representatives to cooperate to ensure the orderly transition of the Business
from Seller to Parent and IAWC to the extent being acquired by each and to
minimize the disruption to the Business resulting from the transactions
contemplated hereby.
5.8.2 Without limiting the foregoing, neither Parent and IAWC, nor
Citizens and Seller (nor any of their respective Affiliates) shall make any
filings pursuant to federal or state securities laws ("Securities Filings") or
make any consent solicitations to holders of Assumed Indebtedness which include
any information about Seller, IAWC (or their respective
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Affiliates) or the transactions contemplated hereby without consulting with the
other party and providing the other party a reasonable opportunity to review and
comment on such information, it being understood and agreed that any party may
so disclose such information in its reasonable judgment to the extent such
party's counsel advises it that such disclosure is advisable under applicable
law. Each of Parent, IAWC, Citizens and Seller shall, and shall cause their
respective Affiliates to, comply with all applicable federal and state
securities laws in connection with this Agreement and the transactions
contemplated hereby (including any solicitation of consents of holders of
Assumed Indebtedness), and all information supplied by any party for inclusion
in any Securities Filing or consent solicitation, including, without limitation,
any proxy or information statement, or any registration statement on Form S-4
shall be true and correct in all material respect and shall not contain any
untrue statement of a material fact or omit to state any material fact which is
required to be stated therein or which is necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made.
5.8.3 During the first 90 days after the Closing Date (180
days for Trademarks on tanks), Parent and IAWC shall have the right to use all
of the logos, trademarks and trade identification of Seller as are located at
the Real Estate or on the Acquired Assets (collectively, the "Trademarks").
Parent's and IAWC's use of the Trademarks shall be in accordance with such
reasonable quality control standards as may be promulgated by Seller and
provided to Parent and IAWC. If Seller shall notify Parent and IAWC in writing
of Parent's or IAWC's (as the case may be) material failure to comply with such
reasonable quality control standards and Parent or IAWC continues to not comply
with such reasonable quality control standards for more than 20 days after
receipt of such notice, Seller shall have the right to terminate Parent's and
IAWC's right under this Section 5.8.3 to use the Trademarks.
5.8.4 Seller shall give Parent and IAWC and its
representatives (including IAWC's Accountants, consultants, counsel and
employees), upon reasonable notice and during normal business hours, full access
to the properties, contracts, employees, books, records and affairs of Seller to
the extent relating to the Business and the Acquired Assets, and shall cause its
officers, employees, agents and representatives to furnish to Parent and IAWC
all documents, records and information (and copies thereof), to the extent
relating to the Business and the Acquired Assets, as Parent and IAWC may
reasonably request. Except to the extent disclosed in the Disclosure Schedules
in accordance with Sections 5.3 and 8.4, no investigation or receipt of
information by Parent or IAWC pursuant to, or in connection with, this
Agreement, shall diminish or obviate any of the representations, warranties,
covenants or agreements of the Seller Parties under this Agreement or the
conditions to the obligations of Parent or IAWC under this Agreement. All
information provided to Parent or IAWC under this Agreement shall be held
subject to the terms and conditions of the Confidentiality Agreement dated
August 2, 1999 between Citizens and Parent.
5.9 Employees; Employee Benefits.
5.9.1 Schedule 5.9.1 lists divisions and the number of all
salaried and hourly employees actively employed (as of the date of this
Agreement) in each division by Seller or any of its Affiliates whose primary
responsibilities relate to the Business. Schedule 5.9.1 lists job
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classifications and number of employees in each job classification of those
employees whose terms and conditions of employment are subject to the Collective
Bargaining Agreement ("Union Employees"). All individuals referred to on
Schedule 5.9.1 are herein referred to as the "Employees." For the avoidance of
doubt, it is understood that no employees of CBSC or Citizens Resources are
included in Schedule 5.9.1. No later than March 1, 2000, IAWC and Seller shall
determine the number of Employees to whom IAWC will offer employment, which
number shall be at least equal to 250 (when combined with offers made by IAWC or
Affiliates of IAWC to employees of Affiliates of Seller in connection with the
Related Purchase Agreements) (the "Base Number"), and such additional number of
Employees, if any, whom IAWC also wishes to employ. Upon determination of such
Employees, Seller will supplement Schedule 5.9.1 with the name, job title,
unused vacation, current base salary or hourly wage, date of hire and assigned
location of each Transferred Employee (as that term is defined below). At the
Closing, Seller shall provide an updated Schedule 5.9.1 which shall disclose all
the information required under the preceding sentence as of the most recent
practicable date prior to Closing.
5.9.2 Effective as of the Closing, IAWC shall offer employment
to at least the Base Number of those employees included on Schedule 5.9.1. All
Employees to whom IAWC offers employment and who accept such employment are
herein referred to as the "Transferred Employees." In the event any Employees do
not accept IAWC's offer of employment, IAWC shall offer employment to such
additional employees (the identity of whom shall be determined by IAWC and
Seller) as are necessary to bring the total number of Transferred Employees to
the Base Number. Subject to the provisions of this Section 5.9 and Section 5.12,
IAWC shall provide each Non-Union Transferred Employee with base compensation at
least equal to that provided by Seller on the Closing Date, and employee
benefits which are substantially comparable to those provided by IAWC to its
other similarly situated employees. Except as otherwise provided under the terms
of Section 5.12, IAWC shall provide each Union Transferred Employee with
compensation at least equal to that provided by Seller immediately prior to the
Closing Date and with the benefits provided to IAWC's similarly situated
collectively bargained employees. Each collective bargaining agreement
pertaining to Transferred Employees shall be identified on a Schedule 5.9.2 to
be prepared by Seller and submitted to IAWC on or before the Closing Date.
Seller shall cooperate with IAWC in IAWC's efforts to contact the unions
representing Transferred Employees. IAWC agrees (i) to credit the service of
each Transferred Employee with Seller and its Affiliates before the Closing, for
all purposes under all employee benefit plans and arrangements maintained by
IAWC (and/or any of its Affiliates) for the benefit of any Transferred Employee
(including without limitation for purposes of attainment of retirement dates and
payment of optional forms of benefits), other than for purposes of benefit
accrual under any "defined benefit plan", within the meaning of Section 3(35) of
ERISA, (ii) to provide accrued vacation to Transferred Employees in the year in
which the Closing occurs, equal to the excess, if any, of the accrued vacation
to which the Transferred Employee would otherwise be entitled under Seller's
vacation plan during that year over the amount of accrued vacation the
Transferred Employee had taken during that year, and, thereafter, to provide
vacation to Transferred Employees on the same basis as provided to similarly
situated employees of IAWC, with service credit as provided in (i) hereof, (iii)
to provide severance benefits to Transferred Employees terminated by IAWC that
are substantially comparable to those benefits provided by IAWC to similarly
situated employees, and (iv) to comply with all applicable legal requirements
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with respect to the Union Employees (including without limitation any applicable
duty to bargain with those employees' bargaining representative). IAWC shall be
responsible for providing to each Transferred Employee vacation in an amount
equal to the Transferred Employee's vacation entitlement for the year of Closing
reduced by the number of vacation days such Transferred Employee has taken on or
before Closing. Nothing in this Section 5.9 shall limit IAWC's authority to
terminate the employment of any Transferred Employee at any time and for
whatever reason. Until the second anniversary of the Closing Date, neither
Seller nor any of its Affiliates shall directly or indirectly solicit or offer
employment to any Transferred Employee then employed by IAWC or its Affiliates.
5.9.3 Except as specifically provided in Sections 5.9 and
5.12, Seller shall be solely responsible for any liability, claim or expense
(including reasonable attorneys' fees) related to compensation or employee
benefits incurred by IAWC as the result of any claims against IAWC or its
Affiliates that are made by any Employees or Former Employees (or the
Beneficiary of any Employee or Former Employee) who are not made offers to
become employees of IAWC or its Affiliates including, without limitation, claims
asserted against IAWC as a result of their termination by Seller or its
Affiliates.
5.9.4 Seller shall be solely responsible for any liability,
claim or expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation claims or the benefits
provided under the Benefit Plans, whether paid before or after the Closing) owed
to any Transferred Employee or the Beneficiary of any Transferred Employee or
any Water Sector Retiree or the Beneficiary of any Water Sector Retiree that
arises out of or relates to (i) the employment relationship between Seller or
any of its Affiliates and such Transferred Employee or Beneficiary or (ii) any
benefit claim or expense (including medical expenses) incurred before Closing
under any Benefit Plan. For purposes of this Agreement, a medical expense shall
be deemed to be incurred when the services giving rise to a claim are rendered,
regardless of when billed or paid. Without limiting the foregoing, Seller shall
be responsible for the payment of any employee benefits that become due to any
Transferred Employees as a result of their termination by Seller.
5.9.5 Except as otherwise specifically provided in Section
5.9, 5.11 or 5.12, IAWC shall be solely responsible for any liability, claim or
expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation, claims or the benefits
provided under any employee benefit plan or arrangement of IAWC incurred after
Closing) owed to any Transferred Employee or Beneficiary of any Transferred
Employee or any Water Sector Retiree or Beneficiary of any Water Sector Retiree
that arises out of or relates to (i) the employment relationship between IAWC or
any of its Affiliates and any Transferred Employee or (ii) any benefit claim or
expense (including medical expense) incurred after Closing under any employee
benefit plan sponsored or contributed to by IAWC or an ERISA Affiliate after
Closing. Notwithstanding the foregoing, IAWC shall not be responsible for the
payment of any employee benefits that become due to any Transferred Employees
under any Benefit Plan (other than the Assumed Benefit Liabilities).
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5.9.6 IAWC agrees to reimburse Seller for its proportionate
share (as defined below) of any amount in excess of $1,000,000 paid by Seller as
severance under Citizens' severance plan as in effect on the date hereof to any
Employees (when such amount paid by Seller is aggregated with amounts paid by
Citizens to other employees as referenced in Section 5.9.6 of the Related
Purchase Agreements) provided (i) IAWC does not hire such Employees in
accordance with the provisions of Sections 5.9, 5.11 and 5.12 and (ii) Seller
provides notice to those Employees on or before the Closing Date to the effect
that their employment will be terminated on or shortly after the Closing Date.
IAWC will pay such reimbursement to Citizens within 5 days after receipt of a
list of the Employees showing which are entitled to severance pay, the amounts
of that severance pay and certifying that those amounts have been paid. The
IAWC's "proportionate share" means the amount obtained by multiplying the amount
in excess of $1,000,000 by a fraction, the numerator of which is the amount of
severance paid by Seller to Employees under Section 5.9.6 of this Agreement and
the denominator of which is the sum of (i) the amount paid by Seller to
Employees under Section 5.9.6 of this Agreement and (ii) the aggregate amount
paid by Citizens under Section 5.9.6 of each of the Related Purchase Agreements.
5.9.7 Until the second anniversary of the Closing Date, IAWC
shall not directly or indirectly solicit or offer employment to any active
employee of Seller, other than the Transferred Employees.
5.10 Employee Pension Plan.
5.10.1 At least fifteen days prior to the Closing Date, Seller
shall take any and all actions necessary to cease benefit accruals and fully
vest all Transferred Employees in their accrued benefits under the Citizens
Pension Plan ("Seller's Pension Plan" or "Citizens Pension Plan"). Seller shall
retain liability and related assets for benefits accrued through the Closing
Date by Transferred Employees under Seller's Pension Plan.
5.10.2 As of the Closing Date, Transferred Employees shall be
covered under the American Pension Plan, and shall be given credit for service
with Seller and its Affiliates for eligibility, vesting, attainment of
retirement dates, subsidized benefits, and entitlement to optional forms of
payment, but not for accrual of benefits.
5.11 Employee Savings Plan.
5.11.1 Effective upon the date of the transfer described in
Section 5.11.2, subject to the terms and conditions of this Agreement, Parent
shall cause the Savings Plan for Employees of American Water Works Company, Inc.
(the "American Savings Plan") to assume the liability of the Seller's 401(k)
Plan for the account balances of those Transferred Employees participating in
the Seller's 401(k) Plan on the Closing Date (the "Affected Participants") that
are transferred to the American Savings Plan. As of the Closing Date, Affected
Participants shall be 100% vested in their account balances under the Seller's
401(k) Plan. Transferred Employees shall be given credit under the American
Savings Plan for service with Seller and its Affiliates for
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eligibility, vesting, attainment of retirement dates, contribution levels and
optional forms of benefit payment, to the same extent that credit for such
service has been given by Seller and its Affiliates.
5.11.2 Parent shall deliver to Seller as soon as practicable,
but in no event later than ninety (90) days after Closing (i) a certified copy
of the American Savings Plan and any amendment necessary to effectuate the
transfer of assets and the assumption of account balances in accordance with
this Section 5.11, (ii) a certified copy of the trust agreement for the American
Savings Plan; (iii) the most recent favorable determination letter from the IRS
with respect to the American Savings Plan; and (iv) an opinion from Parent's
legal counsel acceptable to Seller that the American Savings Plan, as so
amended, complies or will comply on a timely basis with the applicable
provisions of the Code relating to the qualification of, and the transfer of
assets and assumption of benefit liabilities by, the American Savings Plan.
Seller shall deliver to Parent as soon as practicable, but in no event later
than ninety (90) days after Closing, an opinion from Seller's legal counsel
acceptable to Parent that the Seller's 401(k) Plan complies or will comply on a
timely basis with the applicable provisions of the Code relating to the
qualification of the Seller's 401(k) Plan, and the transfer of assets to, and
assumptions of benefit limitations by, the American Savings Plan. As soon as
practicable, but in any event within 120 days after Closing, Seller shall cause
the trustee of the Seller's 401(k) Plan to transfer in cash and promissory notes
representing outstanding loans to Affected Participants to the trustee of the
American Savings Plan an amount equal to the sum of the account balances of the
Transferred Employees (the "Transferred Accounts") calculated as of the most
recent valuation date under the Seller's 401(k) Plan (which shall, in any event,
be within thirty (30) days of the transfer). Both the Seller Parties and Parent
will file any IRS Form 5310A that is required with respect to the transfer
contemplated by this Section 5.11 date at least 30 days prior to the transfer.
Upon the transfer described in this Section 5.11, Parent and the American
Savings Plan shall be responsible for all benefits attributable to the
Transferred Accounts to which Transferred Employees were entitled under the
Seller's 401(k) Plan as of such date, and Seller and the Seller's 401(k) Plan
shall cease to have any liability, contingent or otherwise, for such benefits.
5.12 Welfare Benefits.
5.12.1 Within sixty (60) days after the Closing, Seller agrees
to transfer to trusts established by Parent under Section 501(c)(9) of the Code
("Parent's VEBAs") the amount held under any trust established by Seller under
Section 501(c)(9) of the Code ("Seller's VEBAs") to fund post-retirement health
care and life insurance benefits attributable to the Business, including Former
Employees identified on Schedule 5.12 (the "Water Sector Retirees") and any
"grandfathered" Transferred Employees as set forth on Schedule 5.12. For the
avoidance of doubt, it is understood that no employees of CBSC or Citizens
Resources are included in Schedule 5.12. Parent agrees to provide
post-retirement health care and life insurance benefits to the Water Sector
Retirees and, as applicable, Transferred Employees who become eligible for such
benefits after Closing and further agrees that Parent's VEBAs will apply an
amount at least equal to the sum of the assets (and earnings thereon calculated
at the rate of return generated by Parent's VEBAs) transferred from Seller's
VEBAs to provide post-retirement health care and life insurance benefits for
such employees. Upon Closing, Parent shall be responsible for all obligations of
the Seller Parties to provide post-retirement health care and life insurance
benefits "incurred" (within the meaning of Section 5.9.4) after the
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Closing and the Seller Parties shall cease to have any liability, contingent or
otherwise, for such benefits. In consideration of such transfer, Parent agrees
not to terminate or materially modify those post-retirement health and life
benefit provisions applicable to such grandfathered Transferred Employees and
Water Sector Retirees as such provisions are in effect immediately prior to the
Closing Date.
5.12.2 Parent shall take all action necessary and appropriate
to ensure that, as of the Closing Date, Parent provides medical, health, dental,
flexible spending account, accident, life, short-term disability, long-term
disability and other employee welfare benefits (including retiree medical
benefits) to Transferred Employees that, in the case of Non-Union Transferred
Employees and Union Transferred Employees are substantially similar to those
benefits provided by Parent under its corresponding welfare benefit plans (the
"Parent's Welfare Plans"). For purposes of determining eligibility to
participate, and entitlement to benefits, in each Parent Welfare Plan, each
Transferred Employee shall be credited with service, determined under the terms
of the corresponding welfare plans maintained by Seller on the Closing Date
(hereinafter referred to collectively as the "Seller Welfare Plans"). Any
restrictions on coverage for pre-existing conditions, waiting periods, and
requirements for evidence of insurability under the Parent Welfare Plans shall
be waived in Parent's Welfare Plans for Transferred Employees and retirees of
the Water Sector and their respective Beneficiaries, and Transferred Employees
and retirees of the Water Sector and their respective Beneficiaries shall
receive credit under the Parent Welfare Plans for co-payments, payments under a
deductible limit made by them, and for out-of-pocket maximums applicable to them
during the plan year of the Seller Welfare Plan in which the Closing Date
occurs. As soon as practicable after the Closing Date, Seller shall deliver to
Parent a list of the Transferred Employees and retirees of the Water Sector and
their respective Beneficiaries who had credited service under a Seller Welfare
Plan, together with each such individual's service, copayment, deductible and
out-of-pocket payment amounts under such plan.
5.12.3 Seller shall transfer to Parent's flexible benefits
plan any balances standing to the credit of Transferred Employees under Seller's
flexible benefits plan as of the Closing Date. Seller shall provide to Parent
prior to the Closing Date a list of those Transferred Employees that have
participated in the health or dependent care reimbursement accounts of Seller,
together with their elections made prior to the Closing Date with respect to
such Account, and balances standing to their credit as of the Closing Date.
5.13 Taxes. The Seller Parties, on the one hand, and Parent and
IAWC, on the other, shall (a) each provide the other with such assistance as may
reasonably be requested by either of them in connection with the preparation of
any Tax return, any audit or other examination by any taxing authority or any
judicial or administrative proceeding with respect to Taxes; (b) each retain and
provide the other with any records or other information which may be relevant to
such return, audit, examination or proceeding, and (c) each provide the other
with any final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Tax return of
the other for any period (which shall be maintained confidentially). Without
limiting the generality of the foregoing, Parent and IAWC, on the one hand, and
the Seller Parties, on the other, shall retain, until the applicable statutes of
limitations (including all extensions) have
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expired, copies of all Tax returns, supporting workpapers, and other books and
records or information which may be relevant to such returns for all Tax periods
or portions thereof ending before or including the Closing Date, and shall not
destroy or dispose of such records or information without first providing the
other party with a reasonable opportunity to review and copy the same.
5.14 Intentionally Omitted.
5.15 Citizens' Guarantees and Surety Instruments. Each of Parent and
IAWC shall use its reasonable efforts to assist Citizens in obtaining full and
complete releases on the guarantees, letters of credit, bonds and other surety
instruments listed on Schedule 5.15. For purposes of this Section 5.15 and
Section 5.16, reasonable efforts: (a) shall include Parent's or IAWC's
assumption of the Assumed Indebtedness, the Contracts and the Permits on the
terms set forth in this Agreement; (b) shall include an obligation on the part
of Parent or IAWC to provide a guarantee, letter of credit, bond or other
required surety instrument at Closing to the extent required by any Contract or
Permit and in general to provide an equivalent surety instrument to be
substituted for any surety instrument provided by Citizens to any beneficiary in
connection with the Business; and (c) shall include the obligation of IAWC
and/or Parent to provide a debt obligation (including obtaining a minimum credit
rating necessary to prevent any change to the tax-exempt status of any of the
Assumed Indebtedness and providing credit enhancements such as bond insurance)
to the issuer of any Bonds relating to the Assumed Indebtedness satisfactory to
such issuer in replacement of and in substitution for Citizens' obligations to
such issuer under the Assumed Indebtedness, all to enable Parent or IAWC to
assume the Assumed Indebtedness.
5.16 Assumption of Seller Debt.
5.16.1 Each of IAWC and Parent shall use its reasonable
efforts (as defined in Section 5.15) to assist Seller in obtaining all consents
and opinions and taking such other actions as may be required to enable IAWC or
Parent, as the case may be, to assume at the Closing all of Seller's liabilities
and obligations under the Assumed Indebtedness to the extent provided in Section
2.3. If, after using such reasonable efforts, the parties reasonably conclude
that all such required consents and opinions will not be obtained by the date
that the conditions to Closing set forth in the first sentences of Sections
6.1.4 and 6.2.4 are expected to be satisfied, then Citizens, Parent and IAWC
will use their reasonable efforts and take such other actions as may be required
to enable Citizens to assign at the Closing all of Seller's liabilities and
obligations under the Assumed Indebtedness to the extent provided in Section
2.3, including complying with the provisions of Section 5.24 to the extent
applicable to such assignment of the Assumed Indebtedness.
5.16.2 Representations Re: Assumed Indebtedness.
(a) The Seller Parties represent that each of the Bonds
which make up the Assumed Indebtedness is a bond issue which was used to finance
sewage facilities within the meaning of Section 103(b)(4)(E) of the Internal
Revenue Code of 1954 as amended ("1954 Code") or Section 142(a)(5) of the Code,
as the case may be, or facilities for the furnishing of water within the meaning
of Section 103(b)(4)(G) of the 1954 Code or Section 142(a)(4) and
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Section 142(e) of the Code, as the case may be, and that the interest of such
Bonds was as of their date of issue, excludable from the gross income of the
holders of such Bonds for federal or state (other than Illinois) income tax
purposes pursuant to such sections of the IRC or the Code. In the case of the
facilities for the furnishing of water (a) the water is or will be made
available to members of the general public (including electric utility,
industrial, agricultural, or commercial users) and (b) either the facility is
operated by a governmental unit or the rates for the furnishing or sale of the
water have been established or approved by a State or political subdivision
thereof, by an agency or instrumentality of the United States, or by a public
service or public utility commission or other similar body of any State or
political subdivision thereof.
(b) The Seller Parties represent that they have complied
with all of their duties and obligations under the IDRB Documents, including
their obligations relating to the use of the proceeds of the bonds and the
ownership, operation, use and maintenance of the Assets financed with the
proceeds of the Bonds. Citizens and the other Seller Parties represent that the
representations and warranties of "Company" in the IDRB Documents remain true
and correct, and that they have not taken nor permitted to be taken any action
which would have the effect of subjecting the interest on any of such Bonds to
federal or state (other than Illinois) income taxation, except as otherwise
contemplated or permitted by the IDRB Documents.
(c) The Seller Parties represent that as of Closing all
the proceeds of the Bonds will have been spent in accordance with the IDRB
Documents, the construction of the projects to be financed with the Bonds will
have been completed, that there are no reserve funds associated with the Trust
Indentures for such Bonds, and that all of the proceeds of such Bonds were
invested in tax-exempt obligations of state and local governments (except to the
extent used to acquire or construct the facilities financed by such Bonds) and,
that therefore, the Seller Parties do not have any arbitrage profits subject to
the rebate requirements of Section 148 of the Code.
(d) The Seller Parties represent that there is and has
been no audit or other examination by any taxing authority relating to the
Bonds.
(e) The Seller Parties further represent the following
with respect to the Bonds:
(1) The Assets financed by the Bonds are sewage facilities or
facilities for the furnishing of water, which means that (a)
the water is or will be made available to members of the
general public (including electric utility, industrial,
agricultural, or commercial users) and (b) either the facility
is operated by a governmental unit or the rates for the
furnishing or sale of the water have been established or
approved by a State or political subdivision thereof, by an
agency or instrumentality of the United States, or by a public
service or public utility commission or other similar body of
any State or political subdivision thereof;
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(2) They have not caused or permitted to be caused any reissuance
of the Bonds under Section 1001 of the Code, without first
obtaining a "no adverse effect" opinion of bond counsel;
(3) They have not caused an extension of the maturity of such
Bonds without first obtaining a "no adverse effect" opinion of
bond counsel;
(4) They have not taken or caused to be taken any action that
would cause the Bonds to be arbitrage bonds under Section 148
of the Code, including, but not limited to, the failure to
rebate arbitrage profits, if any, as required by Section
148(f) of the Code;
(5) They have not taken any action that would cause the Bonds not
to be registered in accordance with Section 149(a) of the
Code; and
(6) They have not permitted the Bonds to become directly or
indirectly "federally guaranteed" under Section 149 of the
Code.
5.16.3 Covenants of Parent and IAWC. Each of Parent and IAWC
covenants and agrees, so long as any Assumed IDRB Indebtedness is outstanding,
to cause the Assets that were acquired, constructed, improved or equipped with
the proceeds of such Assumed IDRB Indebtedness to be used as sewage facilities
within the meaning of Section 103(b)(4)(E) of the 1954 Code or Section 142(a)(5)
of the Code, as the case may be, and facilities for the furnishing of water
within the meaning of Section 103(b)(4)(G) of the 1954 Code or 142(a)(4) and
Section 142(e) of the Code, as the case may be, which means in the case of the
facilities for the furnishing of water that (a) the water is or will be made
available to members of the general public (including electric utility,
industrial, agricultural, or commercial users) and (b) either the facility is
operated by a governmental unit or the rates for the furnishing or sale of the
water have been established or approved by a State or political subdivision
thereof, by an agency or instrumentality of the United States, or by a public
service or public utility commission or other similar body of any State or
political subdivision thereof. Each of Parent and IAWC further covenants and
agrees, so long as any Assumed IDRB Indebtedness is outstanding, the following:
(a) It will not cause or permit to be caused any
reissuance under Section 1001 of the Code without first obtaining a "no adverse
effect" opinion of bond counsel;
(b) It will not cause an extension of the maturity of
the Bonds without first obtaining a "no adverse effect" opinion of bond counsel;
(c) It will not take or cause to be taken any action
that would cause the Bonds to be arbitrage bonds under Section 148 of the Code,
including, but not limited to, the failure to rebate arbitrage profits, if any,
as required by Section 148(f) of the Code;
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(d) It will not take any action that would cause the
Bonds not to be registered in accordance with Section 149(a) of the Code;
(e) It will not permit the Bonds to become directly or
indirectly "federally guaranteed" under Section 149 of the Code; and
(f) It will comply with each representation, warranty,
covenant or other agreement or obligation set out by the IDRB Documents as in
effect on the date of execution of this Agreement.
5.17 Schedule of Permits. No later than March 13, 2000, Seller shall
deliver to Parent and IAWC a schedule, to be identified as Schedule 5.17, which
sets forth all material Permits required for the use of the Acquired Assets
being acquired by each and the operation of the Business by Parent and IAWC
substantially in the manner as it was conducted prior to the date hereof. For
purposes of this Section 5.17, material Permits shall include those required for
the service of all utility customers at substantially the same service levels as
provided by Seller on the date of this Agreement. All Permits listed on Schedule
5.17 that are required to be listed on Schedule 3.3 or Schedule 3.9 shall be so
designated. Seller has made or will make prior to the Closing Date timely
applications for renewals of all such Permits listed on Schedule 5.17, which
under applicable law must be filed prior to the Closing Date to maintain the
Permits listed on Schedule 5.17 in full force and effect.
5.18 Title Information. No later than March 13, 2000, Seller shall
use its reasonable efforts to deliver to Parent or IAWC true, correct and
complete copies of all existing title policies, surveys, leases, deeds,
instruments and agreements in Seller's possession relating to title to the Real
Estate that will be acquired by each.
5.19 Transaction with Related Parties. Effective as of the Closing
Date, except as otherwise provided in Sections 5.9 through 5.12, 5.15, 5.24,
5.26, 5.27 and 2.7.1(j) of this Agreement, Seller shall have terminated and
canceled all contracts, commitments and agreements (including employment
relationships) relating to the Acquired Assets or the Business, between Seller,
any Affiliate of Seller (including Citizens), any officer or director of any
Seller Party, or any Affiliate of the foregoing. Seller shall be solely liable
for any contractual or other claims, express or implied arising out of the
termination and cancellation of any of the foregoing raised by any party
thereto.
5.20 Approval by Citizens. Citizens shall, as the sole owner of
common stock of each other Seller Party, vote all of such shares of common stock
to approve this Agreement and the transactions contemplated hereby.
5.21 Supplemental Information.
5.21.1 Citizens shall provide IAWC, within fifteen (15) days
after the execution or the date of receipt thereof, a copy of (a) each Contract
(other than with respect to which the Business' total annual liability or
expense is less than $100,000 per such Contract) entered into by Seller after
the date hereof and prior to the Closing Date; (b) a copy of any written notice
for
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assessments for public improvements against the Real Estate received after the
date hereof and prior to the Closing Date; (c) a copy of the filing of any
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any of the Real Estate received after the date hereof but
prior to the Closing Date; and (d) a copy of any Contract where Seller is a
lessee relating to the use or occupancy of the Real Estate and where such
Contract involves annual payments in excess of $100,000 entered into by Seller
after the date hereof and prior to the Closing Date. Citizens will also provide
the copies referred to in clauses (b), (c) and (d) of this Section 5.2.1.1 to
Parent if the copies relate to Real Estate being purchased by Parent.
5.21.2 Within fifteen (15) days after the receipt of notice of
violation, Citizens shall notify Parent and IAWC of any violations of state or
federal drinking water standards which, if such violations existed on the date
hereof, would be required to be disclosed pursuant to Section 3.8.10 hereof, and
shall promptly notify Parent and IAWC of the actions proposed to be taken by
Seller to correct or otherwise respond to such violations.
5.22 Non-Competition. The Seller Parties agree that for a period of
fifteen (15) years after the Closing Date no Seller Party nor any Affiliate of a
Seller Party shall directly or indirectly own, manage, operate, control or
participate in the ownership, management, operation or control of or be
otherwise connected in any substantial manner with any entity (other than IAWC
and its successors and assigns) engaged in the business of storing, supplying
and distributing water in the States in which IAWC acquires any Acquired Assets,
whether or not such business is subject to regulation by a PUC (it being
understood that the individual directors of Seller and Citizens are not
Affiliates of a Seller Party).
5.23 Intentionally Omitted.
5.24 IDRB Obligations.
(a) IAWC's IDRB Obligations. Each party acknowledges that (x)
Citizens is and after the Closing Date shall continue to be and shall remain the
primary obligor with respect to the Retained IDRB Indebtedness outstanding
immediately after the Closing Date to the same extent as though no sale of the
Acquired Assets had been made and that Parent and IAWC shall have no payment
obligations with respect to such Retained IDRB Indebtedness and (y) the IDRB
Documents require Citizens not to take or permit to be taken any action which
would have the effect, directly or indirectly, of subjecting the interest on any
of the Bonds to federal or state (other than Illinois) income taxation.
Accordingly, Parent and IAWC covenant and agree (i) at Closing to execute and
deliver to Citizens an agreement substantially in the form attached hereto as
Exhibit D, with respect to each issuer of Bonds relating to Retained IDRB
Documents that will be outstanding after the Closing Date, and (ii) so long as
any such Bonds are outstanding, to cause the Acquired Assets that were acquired,
constructed, improved or equipped with the proceeds of such Bonds to be used as
facilities for the furnishing of water (that is, (a) the water is or will be
made available to members of the general public (including electric utility,
industrial, agricultural, or commercial users) and (b) either the facility is
operated by a governmental unit or the rates for the
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furnishing or sale of the water have been established or approved by a State or
political subdivision thereof, by an agency or instrumentality of the United
States, or by a public service or public utility commission or other similar
body of any State or political subdivision thereof) or sewage facilities within
the meaning of Section 103(b)(4)(E) of the 1954 Code, or Section 142(a)(5) of
the Code as the case may be.
(b) IDRB Construction Funds. Citizens hereby represents that
there will be no construction funds or unspent bond proceeds available after the
Closing Date that are held by the trustees of the Bonds relating to the Retained
IDRB Indebtedness.
(c) Consents and Opinions. The parties shall use their
respective best commercially reasonable efforts to obtain all consents and legal
opinions as may be required under the Retained IDRB Documents to enable Seller
to retain all Retained IDRB Indebtedness and to sell the Acquired Assets to IAWC
or Parent.
5.25 Cooperation with Respect to Like-Kind Exchange. Parent and IAWC
agree that Seller may, at Seller's written election delivered to Parent and IAWC
no later than five (5) days prior to the Closing Date, direct that all or a
portion of the Initial Cash Payment be delivered to a "qualified intermediary"
as defined in Treasury Regulation ss.1.1031(k) - (g)(4) as to enable Seller's
relinquishment of the Acquired Assets to qualify as part of a like-kind exchange
of property covered by Section 1031 of the Code. If Seller so elects, Parent and
IAWC shall reasonably cooperate with Seller (but without being required to incur
any out-of-pocket costs in the course thereof) in connection with Seller's
efforts to effect such like-kind exchange, which cooperation shall include,
without limitation, taking such actions as Seller reasonably requests in order
to enable Seller to qualify such transfer as part of a like-kind exchange of
property covered by Section 1031 of the Code (including any actions reasonably
required to facilitate the use of a "qualified intermediary"), and Parent and
IAWC agree that Seller may assign all or part of its rights (but no obligations)
under this Agreement to a person or entity acting as a qualified intermediary to
qualify the transfer of the Assets as part of a like-kind exchange of property
covered by Section 1031 of the Code. Parent, IAWC and Seller agree in good faith
to use reasonable efforts to coordinate the transactions contemplated by this
Agreement with any other transactions engaged in by either Parent, IAWC or
Seller; provided that such efforts shall, in no event, result in any delay in
the consummation of the transactions contemplated by this Agreement. Seller
shall indemnify and hold Parent and IAWC harmless from any cost, expense or
liability arising from its cooperating under this Section 5.25.
5.26 Transition Plan. Within 30 days after the execution date of
this Agreement, the parties jointly shall establish a transitional services
team, which shall include expertise from various functional specialties
associated with or involved in providing billing, payroll and other support
services provided to Seller by any automated or manual process using facilities
or employees that are not included among the Acquired Assets or Transferred
Employees. Such team will be responsible for preparing, 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 Closing and any other transfer of control matters that any party
reasonably believes should be addressed in such transition plan. The transition
plan will set forth reasonable arrangements
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providing IAWC, at IAWC's sole expense, with appropriate access to Seller's
relevant computer systems to allow for a full conversion of the relevant data
and functionality to IAWC's systems on the Closing Date. Parent, IAWC and Seller
shall use their commercially reasonable efforts to cause their representatives
on such transition team to cooperate in good faith and take all reasonable steps
necessary to develop a mutually acceptable transition plan no later than 60 days
prior to the Closing Date.
5.27 Procedures regarding Refunds of Advances. Within 30 days after
the execution date of this Agreement, the parties jointly shall establish a
working group of appropriate subject matter experts to determine the appropriate
obligations of Parent and IAWC regarding notification and the provision of other
accurate and timely data to Citizens to enable Citizens timely and accurately to
satisfy the refund obligations described in Section 2.3.3(b). Such working group
will be responsible for preparing a comprehensive agreement no later than March
13, 2000, which agreement shall be executed by the parties at Closing. Among
other arrangements, the parties would require that the customers and developers
owed refunds provide joint notices to IAWC and Citizens.
5.28 Title Insurance. Prior to Closing, Seller shall cooperate with
Parent and IAWC and use commercially reasonable efforts to assist each of Parent
and IAWC if either of them desires to obtain ALTA title insurance commitments
(collectively, the "Title Commitments," and each a "Title Commitment"), in final
form, from one or more title insurance companies (collectively, the "Title
Company"), committing the Title Company (subject only to the satisfaction of any
industry standard requirements contained in the Title Commitment) to issuing
ALTA (or its local equivalent) form of title insurance policies insuring good,
valid, indefeasible fee simple title to the Real Estate in IAWC or Parent, as
the case may be, in all cases, at IAWC's and Parent's sole expense and in the
respective amounts that IAWC or Parent, as the case may be, requests prior to
Closing, subject to no Liens or other exceptions to title other than Permitted
Exceptions (collectively the "Title Policies"). On or prior to the Closing Date,
Seller shall execute and deliver, or cause to be executed and delivered, to the
Title Company, at no cost to Seller, any customary affidavits, standard gap
indemnities and similar documents reasonably requested by the Title Company in
connection with the issuance of the Title Commitments or the Title Policies;
provided that such efforts and IAWC's and Parent's request for Title Policies or
Title Commitments shall, in no event, result in any delay in the consummation of
the transactions contemplated by this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT; TERMINATION
6.1 Conditions Precedent to Obligations of IAWC and Parent. The
obligations of IAWC and Parent to consummate the transactions contemplated
hereby are subject to the satisfaction, on or prior to the Closing Date, of each
of the following conditions (any one or more of which may be waived in writing
in whole or in part by IAWC and Parent in their sole discretion):
6.1.1 Performance of Agreements; Representations and
Warranties. Seller shall have performed or complied in all material respects
with all agreements and covenants required
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by this Agreement to be performed or complied with by them at or prior to the
Closing; and the representations and warranties set forth in this Agreement made
by Seller shall be true and correct on and as of the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date, except for representations and warranties that speak
as of a specific date or time other than the Closing Date (which need only be
true and correct as of such date or time), other than, in all such cases (except
Section 3.25), such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a Material Adverse Effect; provided,
however, that if any such representation or warranty is already qualified in any
respect by materiality or as to material adverse effect, for purposes of
determining whether this condition has been satisfied, such materiality or
material adverse effect qualification will be in all respects ignored and such
representation or warranty shall be true and correct in all respects without
regard to such qualification (but subject to the overall exception as to
material adverse effect set forth immediately prior to this proviso); and
provided further, that the representation and warranty set forth in Section
3.5.1 shall be deemed to be true and correct on and as of the Closing Date if
any Material Adverse Effect that may have arisen or occurred between the
execution date of this Agreement and the Closing Date shall have been cured or
remedied such that such Material Adverse Effect is not continuing as of the
Closing Date. IAWC and Parent shall have been furnished with a certificate of
the Chief Financial Officer or other Vice President of Citizens dated the
Closing Date, certifying to the foregoing.
6.1.2 Opinion of Counsel. IAWC and Parent shall have received
from L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, Vice President and General Counsel of Seller, an
opinion dated the Closing Date, in form and substance satisfactory to IAWC and
Parent, to the effect set forth in Exhibit E hereto.
6.1.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.1.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby, and such order
shall not contain any restrictions or conditions (other than those in effect on
the date hereof or requiring that the regulatory treatment with respect to the
Business in existence as of the date of this Agreement applicable to Seller be
continued following the transactions contemplated hereby) which would have a
Material Adverse Effect or a material adverse effect on any other regulated
business of Parent or IAWC in the state in which the PUC has jurisdiction, and
such order shall be final and unappealable; Seller shall have obtained all
statutory, regulatory and other consents and approvals which are required in
order to consummate the transactions contemplated hereby and to permit IAWC and
Parent to conduct the Business being acquired by each in the manner contemplated
by Section 3.25 hereof other than those the failure of which to obtain would not
have a Material Adverse Effect. Seller shall have also obtained (i) all consents
and legal opinions required to enable Parent or IAWC to assume (or for Citizens
to assign to Parent or IAWC) the Assumed Indebtedness (without any change in the
tax-exempt status of such Assumed Indebtedness and without any event of
taxability relating to the matters set forth in Sections 7.4.1(a)(D) and
7.4.1(b)(F)) and all other consents and legal opinions required to enable Seller
to sell to Parent and IAWC the Acquired Assets being acquired by each at the
Closing (without any change in the tax-exempt status of such Assumed
Indebtedness and without
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any event of taxability relating to the matters set forth in Sections
7.4.1(a)(D) and 7.4.1(b)(F)), free and clear of all Liens other than Permitted
Exceptions (and specifically free and clear of any Lien arising under or
pursuant to the Mortgage Indenture) and (ii) all consents required under
Contracts and Permits relating to Seller's water appropriation and flowage
rights to the extent reasonably sufficient to enable IAWC to service the
customers of the Business and to service future commitments under such
Contracts.
6.1.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect IAWC's and Parent's respective ownership of all
or any material portion of the Acquired Assets, nor (ii) shall there be pending
or threatened any litigation, suit, action or proceeding by any party which
would reasonably be expected to materially limit or materially adversely affect
IAWC's and Parent's respective ownership of the Acquired Assets.
6.1.6 Documents. Seller and Citizens shall have delivered all
of the certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 2.7 hereof and shall
have made arrangements reasonably satisfactory to Parent and IAWC to deliver to
Parent and IAWC as promptly as practicable after the Closing such records
(including customer and employee records) necessary to own and operate the
respective portion of the Business being acquired by each.
6.1.7 Related Closings. Parent and IAWC shall be reasonably
satisfied that the consummation of each of the asset purchase and sale
transactions contemplated by those certain purchase agreements described on
Schedule 6.1.7 (the "Related Purchase Agreements") will occur concurrently with
the Closing.
6.2 Conditions Precedent to Obligations of Seller Parties. The
obligations of the Seller Parties to cause the consummation of the transactions
contemplated hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions (any one or more of which may be
waived in writing in whole or in part by the Seller Parties in their sole
discretion):
6.2.1 Performance of Agreements; Representations and
Warranties. Parent and IAWC shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them at or prior to the Closing; and the
representations and warranties set forth in this Agreement made by IAWC and
Parent shall be true and correct on and as of the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date, except for representations and warranties that speak
as of a specific date or time other than the Closing Date (which need only be
true and correct as of such date or time), other than, in all such cases (except
Section 4.2), such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a material adverse effect on the
respective ability of IAWC and Parent to perform their obligations under this
Agreement and the Transaction Documents, provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material
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adverse effect qualification will be in all respects ignored and such
representation or warranty shall be true and correct in all respects without
regard to such qualification (but subject to the overall exception as to
material adverse effect set forth immediately prior to this proviso). Seller
shall have been furnished with a certificate of the President or Vice President
of Parent and IAWC, dated the Closing Date, certifying to the foregoing.
6.2.2 Opinion of Counsel. Seller shall have received from
Dechert Price & ▇▇▇▇▇▇, counsel to IAWC and Parent, an opinion dated the Closing
Date, in form and substance satisfactory to Seller, to the effect set forth in
Exhibit F hereto.
6.2.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.2.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby and such order
shall not contain any restrictions or conditions which would have a material
adverse effect on Seller's business activities in the State in which the PUC has
jurisdiction or any significant adverse effect on Citizens' acquisition and
divestiture activities in that State (including divestiture of the Acquired
Assets), and such order shall be final and unappealable; Seller shall have
obtained all statutory and regulatory consents and approvals which are required
in order to consummate the transactions contemplated hereby, other than those
the failure of which to obtain would not have a material adverse effect on the
Seller after the Closing. Seller shall have obtained (i) all consents and legal
opinions required to enable Parent or IAWC to assume (or Citizens to assign to
Parent or IAWC) the Assumed Indebtedness without any change in the tax-exempt
status thereof and without any event of taxability relating to the matters set
forth in Sections 7.4.1(a)(D) and 7.4.1(b)(F), (ii) all consents and legal
opinions required under the Retained IDRB Documents to enable Seller to retain
the Retained IDRB Indebtedness until maturity and to sell to Parent and IAWC the
Acquired Assets being acquired by each at the Closing (in each case without any
change in the tax-exempt status of the Assumed Indebtedness or the Retained IDRB
Indebtedness and without any event of taxability relating to the matters set
forth in Sections 7.4.1(a)(D) and 7.4.1(b)(F)), free and clear of all Liens
other than Permitted Exceptions (and specifically free and clear of any Lien
arising under or pursuant to the Mortgage Indenture), and (iii) all other
consents required or advisable in order for Seller to transfer Acquired Assets
without incurring material liability under any Contract, Permit or Real Estate
instrument.
6.2.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Seller's ownership of all or any material portion
of its properties, nor (ii) shall there be pending or threatened any litigation,
suit, action or proceeding by any party which could reasonably be expected to
materially limit or materially adversely affect Seller's ownership of any of its
properties.
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6.2.6 Documents. Parent and IAWC shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Sections 2.7, 5.24 and 5.27,
and shall have taken such actions as Seller may have requested pursuant to
Section 5.25 hereof.
6.2.7 Related Closings. Seller shall be reasonably satisfied
that the consummation of each of the Related Purchase Agreements will occur
concurrently with Closing.
6.3 Termination. This Agreement may be terminated at anytime prior
to the Closing Date:
6.3.1 by mutual written consent of the Seller Parties, IAWC
and Parent;
6.3.2 by any of the Seller Parties, Parent or IAWC if: (i) any
governmental or regulatory body the consent of which is a condition to the
obligations of the Seller Parties, Parent and IAWC to consummate the
transactions contemplated hereby shall have determined not to grant its consent
and all appeals of such determination shall have been taken and have been
unsuccessful; (ii) any court of competent jurisdiction shall have issued an
order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have become final and
nonappealable; or (iii) the Closing shall not have occurred on or before March
31, 2001; provided, however, that the right to terminate this Agreement under
this Section 6.3.2(iii) will not be available to any party that is in material
breach of its representations, warranties, covenants or agreements contained
herein; and provided, further, that if Closing has not occurred by such date
because the conditions precedent to Closing set forth in the first sentence of
Section 6.1.4 and the first sentence of Section 6.2.4 have not been fulfilled,
then such date shall be automatically extended to September 30, 2001; or
6.3.3 If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 6.3, this
Agreement shall become void and of no further force and effect, except for the
provisions of Section 5.6 relating to publicity, Sections 3.24 and 4.6 relating
to brokerage and Section 7.1 relating to expenses. Nothing in this Section 6.3
shall be deemed to release either party from any liability for any willful
breach by such party of the terms and provisions of this Agreement.
ARTICLE 7
CERTAIN ADDITIONAL COVENANTS
7.1 Certain Taxes and Expenses. Citizens shall be solely responsible
for all state and local sales, use, transfer, real property transfer and other
similar taxes, fees and charges that are calculated based on the value of the
Acquired Assets being transferred arising from and with respect to the sale and
purchase of the Acquired Assets and each of Parent and IAWC shall be solely
responsible for all transfer, registration, documentary stamp, recording and
other similar fees and
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charges arising from and with respect to the transfer and recording of title
documentation relating to the Acquired Assets being acquired by each. Parent
shall be responsible for all costs and expenses relating to the assumption by or
assignment to Parent or IAWC of the Assumed Indebtedness. Except as otherwise
provided in this Agreement, each of the parties hereto shall each bear its
respective accounting, legal and other expenses incurred in connection with the
transactions contemplated by this Agreement.
7.2 Maintenance of Books and Records. The Seller Parties, on the one
hand, and IAWC and Parent, on the other hand, shall cooperate fully with each
other after the Closing so that (subject to any limitations that are reasonably
required to preserve any applicable attorney-client privilege) each party has
access to the business records, contracts and other information existing at the
Closing Date and relating in any manner to the Acquired Assets or the Assumed
Liabilities or the conduct of the Business (whether in the possession of the
Seller Parties or IAWC or Parent). No files, books or records existing at the
Closing Date and relating in any manner to the Acquired Assets or the conduct of
the Business shall be destroyed by any party for a period of six years after the
Closing Date without giving the other party at least 30 days prior written
notice, during which time such other party shall have the right (subject to the
provisions hereof) to examine and to remove any such files, books and records
prior to their destruction. The access to files, books and records contemplated
by this Section 7.2 shall be during normal business hours and upon not less than
two (2) business days prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the party entitled to claim the same.
7.3 Survival.
7.3.1 Subject to this Section 7.3, Section 7.4.2(g) and
Section 7.4.2(j), all representations, warranties, covenants and agreements
contained in this Agreement or the Transaction Documents shall survive (and not
be affected in any respect by) the Closing, any investigation conducted by any
party hereto and any information which any party may receive. Notwithstanding
the foregoing:
(a) the covenants contained in Sections 5.1, 5.3, 5.4,
5.5, 5.8.2 through 5.8.4 and 5.21 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
(b) the covenants contained in Section 5.2 and the
related indemnity obligations contained in Section 7.4 shall terminate on, and
no action or claim with respect thereto may be brought after, the Closing Date;
(c) the representations and warranties contained in
Sections 3.12 and 3.16 and the related indemnity obligations contained in
Section 7.4 shall terminate on, and no
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action or claim with respect thereto may be brought following the expiration of
the applicable statute of limitations (or extensions or waivers thereof);
(d) the representations and warranties contained in
Section 3.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(e) the representations and warranties contained in
Section 3.10 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
(f) the representations and warranties contained in
Section 3.7 and 3.17 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(g) the representations and warranties contained in
Sections 3.3, 3.5, 3.6, 3.8, 3.9 and 3.25 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
(h) the representations and warranties contained in
Section 3.11 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
(i) the representations and warranties contained in
Section 4.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(j) the representations and warranties contained in
Sections 4.3 and 4.4 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(k) the representations and warranties contained in
Section 4.5 and the related indemnity obligations contained in Section 7.4 shall
terminate on, and no action or claim with respect thereto may be brought after,
the Closing Date; and
(l) all other representations and warranties contained
in this Agreement and the related indemnity obligations contained in Section 7.4
shall terminate on and no further action or claim with respect thereto may be
brought after, the second anniversary of the Closing Date;
(m) such representations and warranties specified in the
foregoing clauses (c) through (k), and the covenants contained in Section 5.1,
5.2, 5.3, 5.4, 5.5, 5.8.2 through 5.8.4 and 5.21 and the liability of any party
with respect thereto, shall not terminate with respect to any claim, whether or
not fixed as to liability or liquidated as to amount, with respect to which such
party has been given written notice setting forth the facts upon which the claim
for indemnification
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is based and, if possible, a reasonable estimate of the amount of the claims
prior to the relevant anniversary of the Closing Date or the 30th day after the
expiration of the applicable statute of limitations (or extensions or waivers
thereof), as the case may be. If any claim for indemnification is asserted or
could be asserted with respect to a breach or asserted breach of Section 3.17
(Undisclosed Liabilities) and the IAWC or Parent is also entitled to
indemnification in respect of that claim for breach or asserted breach of any
other representation or warranty in this Agreement for which there is a shorter
survival period, such shorter period will apply to such claim except to the
extent that such claim is a product liability, toxic tort or similar claim (as
described in Section 2.3.3(a)) brought by a private party litigant.
7.3.2 No claim for indemnity under Section 7.4 shall be
brought or made by IAWC or Parent pursuant to Sections 7.4.1(a)(B) or
7.4.1(a)(C):
(a) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), for any action or claim with respect to the Pre-Existing Conditions;
(b) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), with respect to the presence of Hazardous Substances at any locations
other than the Real Estate; and
(c) after the third anniversary of the Closing Date, for
any action or claim with respect to any other Retained Liability;
Provided, however, that the foregoing time limitations shall not apply to
any such claims which have been the subject of a written notice from Parent
and/or IAWC to the Seller Parties prior to such period setting forth the facts
upon which the claim for indemnification is based and, if possible, a reasonable
estimate of the amount of the claims; and, provided, further, that the foregoing
time limitations shall also not apply to any such claims: (u) with respect to
Taxes; (v) with respect to any liability of the types that appear as "Trade
Payables" or "Other Current and Accrued Liabilities" on the financial statements
of Seller; (w) not exclusively related to the Acquired Assets or not exclusively
related to the Business; and (x) with respect to any of the matters discussed in
Section 3.16 hereof.
For purposes of Sections 7.3.2(a) and (b), a "Change of Control of
Citizens" shall be deemed to have occurred if: (i) any "person" (as such term is
used in Section 13(d) and 14(d) of the Exchange Act of 1934, as amended (the
"Exchange Act"), other than an underwriter engaged in a firm commitment
underwriting on behalf of Citizens, is or becomes the beneficial owner (as such
term is used in Rule 13D-3 and 13D-5 under the Exchange Act, except that for
purposes of this clause (i) a person shall be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding shares of common stock of
the Company; (ii) all or substantially all of Citizens' and its Subsidiaries'
assets are sold, leased, exchanged or otherwise transferred to any person or
group of persons acting in concert; (iii) Citizens
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is merged or consolidated with any other person, whether or not Citizens is the
surviving corporation in such merger or consolidation; or (iv) Citizens is
liquidated or dissolved or adopts a plan of liquidation.
7.4 Indemnification. Seller, Parent and IAWC agree as follows:
7.4.1 General Indemnification Obligations.
(a) Seller shall indemnify Parent and IAWC and their
directors, officers and other Affiliates and hold Parent and IAWC and such other
parties harmless from and against any and all Damages arising out of or
resulting from (A) any breach of any representation, warranty, covenant or
agreement made by the Seller Parties in this Agreement or in any document or
certificate required to be furnished to Parent or IAWC by any of the Seller
Parties pursuant to this Agreement (including the Transaction Documents); (B)
subject to Section 7.3.2, any Excluded Assets or Retained Liabilities; (C)
subject to Section 7.3.2, the ownership, operation or use of any of the
businesses or assets of the Seller Parties or their Affiliates (other than the
Business, the Acquired Assets or the CLWC Stock) whether before, on or after the
Closing Date; and (D) an event of taxability, as such term is customarily used
in municipal securities transactions, relating to the Retained IDRB Indebtedness
and arising from the sale of the Acquired Assets pursuant to this Agreement.
(b) IAWC and Parent shall indemnify Seller, and their
directors, officers and other Affiliates (including Citizens) and hold Seller
and such other parties harmless from and against any and all Damages arising out
of or resulting from (A) any breach of any representation, warranty, covenant or
agreement made by Parent or IAWC in this Agreement or in any document or
certificate required to be furnished to Seller by Parent or IAWC pursuant to
this Agreement (including the Transaction Documents), including the IAWC's IDRB
Obligations; (B) any Assumed Liabilities after the Closing Date, including the
Assumed Indebtedness; (C) the ownership, operation or use of the Business, the
Acquired Assets or the CLWC Stock after the Closing Date (except to the extent
resulting from Retained Liabilities or to the extent resulting from breaches by
the Seller Parties of representations, warranties, covenants or agreements
hereunder or in the other Transaction Documents); (D) any claim by a Transferred
Employee or a Former Employee referred to on Schedule 5.12 or the Beneficiary of
any such employee or former employee for post-retirement health care or life
insurance benefits "incurred" (within the meaning of Section 5.9.4) after the
Closing; (E) any violation by Parent or IAWC, or any assignee, lessee or
successor of Parent or IAWC, of the covenants and agreements as provided by
Section 5.16.3 hereof and Section 5 of Exhibit D hereto; and (F) an event of
taxability, as such term is customarily used in municipal securities
transactions, relating to the Assumed Indebtedness and arising from the sale of
the Acquired Assets pursuant to this Agreement and/or the assignment or
assumption of the Assumed Indebtedness.
(c) For purposes of this Agreement, "Damages" shall mean
any and all losses, liabilities, obligations, damages (including any
governmental penalty or punitive damages assessed or asserted against the party
seeking indemnification and including costs of
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investigation, clean-up and remediation), deficiencies, interest, costs and
expenses and any claims, actions, demands, causes of action, judgments, costs
and reasonable expenses (including reasonable attorneys' fees and all other
reasonable expenses incurred in investigating, preparing or defending any
litigation or proceeding, commenced or threatened, incident to the successful
enforcement of this Agreement). For purposes of this Section 7.4, the
determination of whether any breach of any representation, covenant or agreement
has occurred, and the calculation of the amount of Damages incurred by the
Indemnified Party arising out of or resulting from any breach of a
representation, covenant or agreement by any party hereto, the references to a
"Material Adverse Effect" or materiality (or other correlative terms) shall be
disregarded, provided that no such breach shall be found to have occurred due to
facts or circumstances arising from an occurrence or condition described in
Section 1.1.60(a). Notwithstanding the foregoing, Damages shall not include the
loss of profits of the party seeking indemnification, or punitive damages unless
the party seeking indemnification has had punitive damages assessed or asserted
against it.
(d) Notwithstanding any language contained in any
Transaction Document (including deeds to Real Estate and instruments delivered
by Seller to the Title Company), representations and warranties as to Real
Estate set forth in Section 3.10 and 3.11 will not be merged into any
Transaction Document and the indemnification obligations of Seller, and the
limitations on such obligations, set forth in this Agreement, shall control. No
provision set forth in any Transaction Document shall be deemed to enlarge,
alter or amend the terms or provisions of this Agreement.
7.4.2 General Indemnification Procedures.
(a) A party seeking indemnification pursuant to this
Section 7.4 (an "Indemnified Party") shall give prompt written notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of the
assertion of any claim, the incurrence of any Damages, or the commencement of
any action, suit or proceeding, of which it has knowledge and in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but failure to give such required notice shall relieve the Indemnifying
Party of any liability hereunder only to the extent that the Indemnifying Party
has suffered actual prejudice thereby. The Indemnifying Party shall have the
right, exercisable by written notice to the Indemnified Party after receipt of
notice from the Indemnified Party of the commencement of or assertion of any
claim or action, suit or proceeding by a third party in respect of which
indemnity may be sought hereunder (a "Third Party Claim"), to assume the defense
of such Third Party Claim which involves (and continues to involve) solely
monetary damages; provided, that (A) the Indemnifying Party expressly agrees in
such notice that, as between the Indemnifying Party and the Indemnified Party,
solely the Indemnifying Party shall be obligated to satisfy and discharge the
Third Party Claim, (B) such Third Party Claim does not include a request or
demand for injunctive or other equitable relief by an Authority and (C) the
Indemnifying Party makes reasonably adequate provision to assure the Indemnified
Party of the ability of the Indemnifying Party to satisfy the full amount of any
adverse monetary judgment that is reasonably likely to result. The Indemnifying
Party shall be deemed to have satisfied the condition set forth in clause (C) of
the proceeding sentence if it is a regulated utility.
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(b) Neither the Indemnified Party nor the Indemnifying
Party shall settle any Third Party Claim without the prior written consent of
the other, which consent shall not be unreasonably withheld or delayed.
(c) The Indemnifying Party or the Indemnified Party, as
the case may be, shall have the right to participate in (but not control), at
its own expense, the defense of any Third Party Claim which the other party is
defending as provided in this Agreement.
(d) Amounts paid in respect of indemnification
obligations of the parties shall be treated as an adjustment to the Purchase
Price.
(e) Subject to Section 7.4.2(f) and Section 7.4.2(i),
neither Parent nor IAWC (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages incurred
unless the aggregate amount of Damages incurred by Parent and IAWC (or the other
Persons for which they can claim indemnification), together with all other
claims for Damages under Section 7.4.2(e) of each of the Related Purchase
Agreements, exceeds $6,123,000 in the aggregate (the "Threshold Amount"), in
which case Seller shall then be liable for Damages in excess of the Threshold
Amount. Subject to Section 7.4.2(f) and Section 7.4.2(i), the cumulative
aggregate indemnity obligation of Citizens and its Affiliates under Section 7.4
of this Agreement and the Related Purchase Agreements shall not exceed
$60,000,000 (the "Ceiling").
(f) Notwithstanding the foregoing, the parties
acknowledge that Parent and IAWC (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages in respect
of intentional and wilful breaches of covenants or agreements in this Agreement
or any of the Retained Liabilities other than the Specified Liabilities
irrespective of the Threshold Amount or the Ceiling (it being understood that
the failure to cure a breach shall not, by itself, be an intentional and wilful
breach). As used herein, the "Specified Liabilities" shall mean the Retained
Liabilities arising from claims made after the Closing Date which (i) do not
relate to matters within the scope of clauses (u), (v), (w) and (x) of Section
7.3.2; (ii) were not known to the Seller Parties on or prior to Closing; and
(iii) relate exclusively to the Acquired Assets or the Business prior to the
Closing Date. Notwithstanding anything to the contrary in this Section 7.4,
Parent and IAWC (or the other Persons for which they can claim indemnification)
shall be entitled to indemnification for Damages in respect of a breach of
Section 3.2, 3.12 or 3.16 irrespective of the Threshold Amount or the Ceiling.
(g) The rights and remedies of Seller, Parent and IAWC
under this Section 7.4 are exclusive and in lieu of any and all other rights and
remedies which Seller, Parent and IAWC may have under this Agreement or
otherwise for monetary relief with respect to (x) the inaccuracy of any
representation, warranty, certification or other statement made (or deemed made)
by Seller, Parent or IAWC in or pursuant to this Agreement or any of the
Transaction Documents or (y) any breach or failure to perform any covenant or
agreements set forth in this Agreement or any of the Transaction Documents.
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(h) Except to the extent provided in Section 7.4.2(j)
below, no right to indemnification under this Section 7.4 shall be limited by
reason of any investigation or audit conducted before or after the Closing of
any party hereto including, without limitation, the knowledge of such party of
any breach of any representation, warranty, agreement or covenant by the other
party at any time, or the decision by such party to complete the Closing.
(i) No party shall have any liability to another party
under this Section 7.4 for Damages (and no cost or expense relating to such
Damages shall be included in determining the extent of Damages incurred by such
party for purposes of Section 7.4.2(e)) to the extent that:
(A) the Indemnified Party recovers insurance
proceeds covering the Damages or otherwise recovers payments in respect of such
Damages from any other source (whether in a lump sum or stream of payments); or
(B) the Indemnified Party's Tax liability is
actually reduced as a result of a tax benefit to which the Indemnified Party
becomes entitled in respect of the Damages.
(j) Seller shall have no liability or obligation under
this Section 7.4 for any Damages resulting from the inaccuracy or breach of any
representation or warranty if such inaccuracy or breach is disclosed by Seller
pursuant to and in accordance with Sections 5.3 and 8.4 hereof;
(k) Parent and IAWC agree to use commercially reasonable
efforts to give timely and effective written notice to the appropriate insurance
carrier(s) of any occurrence or circumstances which, in the judgment of Parent
or IAWC consistent with its customary risk management practices, appear likely
to give rise to a claim against Parent or IAWC that is likely to involve one or
more insurance policies of Parent or IAWC. Any such notice shall be given in
good faith by Parent or IAWC, as the case may be, without regard to the
possibility of indemnification payments by Seller under this Section 7.4, and
shall be processed by Parent or IAWC, as the case may be, in good faith and in a
manner consistent with its risk management practices involving claims for which
no third party contractual indemnification is available. Each of Parent and IAWC
agree that (i) if it is entitled to receive payment from Seller for Damages
arising under or pursuant to a breach of the representation and warranty set
forth in Section 3.10, and (ii) if Parent or IAWC has obtained title insurance
which may cover the claim or matter giving rise to such Damages, then (iii) such
title insurance shall be primary coverage and Parent or IAWC, as the case may
be, will make a claim under the title insurance if such claim can be made in
good faith before enforcing its right to receive payment from Seller. Neither
Parent nor IAWC shall be under any obligation to obtain title insurance or
prosecute such claim (other than the initial filing of such claim).
(l) If at any time subsequent to the receipt by an
Indemnified Party of an indemnity payment hereunder, such Indemnified Party (or
any Affiliate thereof) receives
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any recovery, settlement or other similar payment with respect to the Damages
for which it received such indemnity payment (including insurance proceeds and
other payments pursuant to Section 7.4.2(i)(A) and a tax benefit pursuant to
Section 7.4.2(i)(B)) (the "Recovery"), such Indemnified Party shall promptly pay
to the Indemnifying Party an amount equal to the amount of such Recovery, less
any expense incurred by such Indemnified Party (or its Affiliates) in connection
with such Recovery, but in no event shall any such payment exceed the amount of
such indemnity payment;
(m) In the event of any indemnification claim
under this Section 7.4 involving the claim of any third party, the Indemnified
Party shall cooperate fully (and shall cause its Affiliates to cooperate fully)
with the Indemnifying Party in the defense of any such claim under this Section
7.4. Without limiting the generality of the foregoing, the Indemnified Party
shall furnish the Indemnifying Party with such documentary or other evidence as
is then in its or any of its Affiliates' possession as may reasonably be
requested by the Indemnifying Party for the purpose of defending against any
such claim. Whether or not the Indemnifying Party chooses to defend or prosecute
any claim involving a third party, all the parties hereto shall cooperate in the
defense or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith.
7.4.3 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.
7.5 UCC Matters. From and after the Closing Date, Seller will
promptly refer to Parent or IAWC all inquiries with respect to ownership of the
Acquired Assets and the Business being acquired by each, and will refer to
Parent all inquiries with respect to the ownership of the CLWC Stock. In
addition, Seller will execute such documents and financing statements as Parent
or IAWC may reasonably request from time to time to evidence transfer of the
Acquired Assets to Parent or IAWC in accordance with this Agreement, including
any necessary assignment of financing statements.
7.6 Financial Statements. In connection with the preparation and
filing of any registration statement or periodic report of Parent or its
Affiliates pursuant to Rule 3-05, Article 11 of Regulation S-X or other rule or
regulation promulgated under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, Seller, at Parent's expense, shall
provide Parent (a) by April 30, 2000 or within 120 days after Parent's written
request therefor if made after January 1, 2000, with the following audited
financial statements: (i) a statement of net assets of the Business as of the
end of the last fiscal year prior to Closing; and (ii) a statement of
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income of the Business and a statement of cash flows or its equivalent of the
Business for the last fiscal year prior to Closing (in each case combined with
the businesses being acquired by Parent, IAWC and Affiliates of Parent pursuant
to the Related Purchase Agreements), including opinions thereon of Seller's
Accountants, and (b) within 90 days after Parent's written request made therefor
(provided such request is made after the end of the fiscal quarter described
below), the following unaudited statements: (i) a statement of net assets of the
Business as of the end of the last fiscal quarter prior to Closing (but only if
such quarter is subsequent to the last fiscal year prior to Closing); and (ii) a
statement of income of the Business and a statement of cash flows or its
equivalent of the Business, for the period from the end of the last fiscal year
through the end of the last fiscal quarter prior to Closing (in each case
combined with the businesses being acquired by Parent, IAWC and Affiliates of
Parent pursuant to the Related Purchase Agreements).
7.7 Collection of Receivables. Seller agrees that it shall promptly
(and in any event no later than five (5) Business Days following receipt)
deliver all such payments with respect to accounts receivable from customers of
the Business received on and after the Closing Date (including but not limited
to negotiable instruments tendered in payment of accounts receivable assigned to
IAWC hereunder which shall be duly endorsed by Seller to the order of IAWC) to
IAWC. Seller shall cooperate with IAWC in coordinating the transfer of
collection agents and customers of the Business who pay their bills through the
Automated Clearinghouse (ACH) process to IAWC.
ARTICLE 8
MISCELLANEOUS
8.1 Construction. Parent, IAWC and the Seller Parties have
participated jointly in the negotiation and drafting of this Agreement and the
Transaction Documents. In the event any ambiguity or question of intent or
interpretation arises, this Agreement and the Transaction Documents shall be
construed as if drafted jointly by Parent, IAWC and the Seller Parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" in this Agreement shall mean
including without limitation. Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
genders as the context requires. The terms "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole (including all of the Schedules and Exhibits
hereto) and not to any particular provision of this Agreement, and Article,
Section, paragraph, Exhibit and Schedule references are to the Articles,
Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise
specified. The word "or" shall not be exclusive. Provisions of this Agreement
shall apply, when appropriate, to successive events and transactions. Section
references refer to this Agreement unless otherwise specified.
8.2 Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted to be given to any party
hereunder shall be in writing
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and shall be deemed given only if delivered to the party personally or sent to
the party by telecopy, by registered or certified mail (return receipt
requested) with postage and registration or certification fees thereon prepaid,
or by any nationally recognized overnight courier addressed to the party at its
address set forth below:
If to Parent:
American Water Works Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Illinois-American Water Company
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Counsel
and:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to IAWC:
Illinois-American Water Company
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Counsel
with a copy to Parent and a copy to:
Dechert Price & ▇▇▇▇▇▇
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4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Seller:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that no party
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other parties hereto; provided,
that (a) Parent may assign this Agreement, without the prior written consent of
Seller, to any direct or indirect subsidiary of Parent provided such subsidiary
assumes in writing all the duties and
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obligations of Parent hereunder and, if such assignment requires the approval of
the PUC, such assignment was described in the initial filing made by the parties
pursuant to Section 5.5 (provided that no such assignment by Parent shall in any
way operate to enlarge, alter or change any obligation due to Seller or relieve
Parent of its obligations hereunder if such subsidiary fails to perform such
obligations, with the understanding that Parent shall be jointly and severally
liable with such subsidiary for any non-performance of Parent's obligations
hereunder); and (b) Seller may assign its rights or delegate its duties under
this Agreement to a qualified intermediary chosen by Seller to structure the
transactions contemplated hereby as a like-kind exchange of property covered by
Section 1031 of the Code.
8.4 Exhibits and Schedules. All Exhibits and Disclosure Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Disclosure of any fact or item
in any Schedule referenced by a particular paragraph or Section in this
Agreement shall, should the existence of the fact or item or its contents be
clearly related to any other paragraph or section, be deemed to be disclosed
with respect to that other paragraph or section.
8.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the conflicts of laws principles thereof.
8.6 Dispute Resolution. Except as otherwise provided herein, any
dispute, controversy or claim between the parties relating to, arising out of or
in connection with this Agreement (or any subsequent agreements or amendments
thereto), including as to its existence, enforceability, validity,
interpretation, performance or breach or as to indemnification or damages,
including claims in tort, whether arising before or after the termination of
this Agreement (any such dispute, controversy or claim being herein referred to
as a "Dispute") shall be settled without litigation and only by use of the
following alternative dispute resolution procedure:
(a) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Dispute. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties shall not
be admissible in the arbitration described below, or in any lawsuit. Documents
identified in or provided with such communications, which are not prepared for
purposes of the negotiations, are not so exempted and may, if otherwise
admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties
do not resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules, as then amended and in effect, of
the American Arbitration Association (the "Rules"); provided, however,
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that at the election of either party, the arbitration shall take place before
three (3) arbitrators, one arbitrator being selected by Parent and IAWC, one
arbitrator being selected by Citizens, and the third arbitrator, knowledgeable
in the general subject matter of the dispute, controversy or claim, being
selected by the other two arbitrators. Either party may demand such arbitration
in accordance with the procedures set out in the Rules. The arbitration shall
take place in Newark, New Jersey. The arbitration hearing shall be commenced
within 60 days of such party's demand for arbitration. The arbitrator(s) 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(s) 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(s), present testimony and written evidence and examine witnesses. No
party shall be eligible to receive, and the arbitrator(s) shall not have the
authority to award, exemplary or punitive damages. The arbitrator(s) shall rule
on the Dispute by issuing a written opinion within 30 days after the close of
hearings. The arbitrators' majority decision shall be binding and final.
Judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction.
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator(s); provided, however, that if the arbitrator(s) determines that the
position taken in the Dispute by the non-prevailing party taken as a whole is
unreasonable, the arbitrator(s) may order the non-prevailing party to bear such
fees and expenses, and reimburse the prevailing party for all or such portion of
its reasonable costs and expenses in submitting and presenting its position, as
the arbitrator(s) 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(s) 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 8.6
and (ii) if any party, as party 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 8.6.
8.7 Severability. The parties agree that (a) the provisions of this
Agreement shall be severable in the event that any provision hereof is held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
(b) such invalid, void or otherwise unenforceable provision shall be
automatically replaced by another provision which is as similar as possible in
terms to such invalid, void or otherwise unenforceable provision but which is
valid and enforceable and (c) the remaining provisions shall remain enforceable
to the fullest extent permitted by law.
8.8 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or should be construed to confer upon or give to any Person
other than the parties hereto
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and their successors and permitted assigns any rights or remedies under or by
reason of this Agreement.
8.9 Entire Agreement. This Agreement, the Schedules and Exhibits
hereto and the other Transaction Documents, and the Confidentiality Agreement
dated August 2, 1999, between Citizens and Parent, (i) together constitute the
entire understanding of the parties (and their affiliates) with respect to the
subject matter hereof, and any related matter, (ii) supercede all prior
agreements or understandings, written or oral, entered into by any of the
parties that concern the subject matter hereof and (iii) are not intended to
confer upon any Person other than the parties hereto any benefit, right or
remedy.
8.10 Amendment and Waiver. The parties may, by mutual agreement,
amend this Agreement in any respect, and any party, as to such party, may (i)
extend the time for the performance of any of the obligations of the other
party; (ii) waive any inaccuracies in representations and warranties by the
other party; (iii) waive compliance by the other party with any of the covenants
or agreements contained herein and performance of any obligations by the other
party; and (iv) waive the fulfillment of any condition that is precedent to the
performance by such party of any of its obligations under this Agreement. To be
effective, any such amendment or waiver must be in writing and be signed by the
party providing such waiver or extension, as the case may be. The waiver by any
party hereto of any breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach, whether or not similar.
8.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
8.12 Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
8.13 Definitions. For purposes of this Agreement, references to the
knowledge of the Seller Parties (including a reference to "the best of the
knowledge of the Seller Parties" and similar references) shall mean the actual
knowledge possessed by any of the following officers or employees of Citizens:
Chief Financial Officer, Vice President and Treasurer; President, Citizens
Public Services; Vice President, Corporate Human Resources; Secretary; Vice
President, Water; and the general manager of the Business.
8.14 No Implied Representation. NOTWITHSTANDING ANYTHING CONTAINED
IN THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT NEITHER
OF THE SELLER PARTIES ARE MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT, ANY SCHEDULE
HERETO, THE TRANSACTION DOCUMENTS, OR ANY DOCUMENT, EXHIBIT, CERTIFICATE,
INSTRUMENT OR STATEMENT TO BE DELIVERED HEREUNDER OR THEREUNDER INCLUDING, BUT
NOT LIMITED TO, ANY IMPLIED WARRANTY OR REPRESENTATION
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AS TO CONDITION, MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR
PURPOSE AS TO ANY OF THE ACQUIRED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, IT IS UNDERSTOOD AND AGREED THAT ANY COST ESTIMATES, PROJECTIONS OR
OTHER PREDICTIONS CONTAINED OR REFERRED TO IN THE SCHEDULES AND ANY COST
ESTIMATES, PROJECTIONS OR PREDICTIONS OR ANY OTHER INFORMATION CONTAINED OR
REFERRED TO IN OTHER MATERIALS THAT HAVE BEEN OR SHALL HEREINAFTER BE PROVIDED
TO PARENT, IAWC OR ANY OF THEIR AFFILIATES, AGENTS OR REPRESENTATIVES ARE NOT
AND SHALL NOT BE DEEMED TO BE REPRESENTATIONS OR WARRANTIES OF ANY OF THE SELLER
PARTIES.
8.15 Construction of Certain Provisions. 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.
8.16 Bulk Sales. Each of Parent and IAWC agrees that it shall not
make any filings under any tax bulk sales provisions with respect to the
transactions contemplated by this Agreement.
[Signatures appear on following page.]
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Illinois
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
CITIZENS UTILITIES COMPANY
By:_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial
Officer, Vice President
and Treasurer
CITIZENS BUSINESS SERVICES COMPANY
CITIZENS LAKE WATER COMPANY
CITIZENS RESOURCES COMPANY
CITIZENS UTILITIES COMPANY OF ILLINOIS
By:_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
AMERICAN WATER WORKS COMPANY, INC.
By:_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Treasurer
ILLINOIS-AMERICAN WATER COMPANY
By:_____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Indiana
EXECUTION COPY
ASSET PURCHASE AGREEMENT
among
CITIZENS UTILITIES COMPANY
AND
FLOWING ▇▇▇▇▇, INC.
AND
AMERICAN WATER WORKS COMPANY, INC. AND
INDIANA-AMERICAN WATER COMPANY
Dated as of
October 15, 1999
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS......................................................1
1.1 Certain Definitions..............................................1
ARTICLE 2 THE TRANSACTION..................................................9
2.1 Sale and Purchase of Assets......................................9
2.2 Excluded Assets..................................................9
2.3 Assumption of Certain Liabilities...............................10
2.4 Consent of Third Parties........................................13
2.5 Closing.........................................................14
2.6 Purchase Price..................................................14
2.6.1 Purchase Price............................................14
2.6.2 Payment of Initial Cash Payment...........................14
2.6.3 Estimated Closing Statement...............................15
2.6.4 Post-Closing Adjustment to Purchase Price.................15
2.6.5 Adjustment for Certain Liabilities........................17
2.7 Deliveries and Proceedings at Closing...........................17
2.7.1 Deliveries to Buyer.......................................17
2.7.2 Deliveries By Buyer to the Seller Parties.................18
2.8 Allocation of Consideration.....................................18
2.9 Prorations......................................................18
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER.......................19
3.1 Qualification; No Interest in Other Entities....................19
3.2 Authorization and Enforceability................................19
3.3 No Violation of Laws or Agreements..............................20
3.4 Financial Statements............................................20
3.5 No Changes......................................................21
3.6 Contracts.......................................................21
3.7 Permits and Compliance With Laws Generally......................22
3.8 Environmental Matters...........................................22
3.9 Consents........................................................24
3.10 Title...........................................................25
3.11 Real Estate.....................................................25
3.12 Taxes...........................................................25
3.13 Patents and Intellectual Property Rights........................26
3.14 Accounts Receivable.............................................26
3.15 Labor Relations.................................................26
3.16 Employee Benefit Plans..........................................26
3.17 Absence of Undisclosed Liabilities..............................28
3.18 No Pending Litigation or Proceedings............................28
3.19 Supply of Utilities.............................................29
3.20 Insurance.......................................................29
3.21 Relationship with Customers.....................................29
3.22 WARN Act........................................................29
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3.23 Condition of Assets.............................................29
3.24 Brokerage.......................................................29
3.25 All Assets......................................................29
3.26 Year 2000 Matters...............................................30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER..............30
4.1 Organization and Good Standing..................................30
4.2 Authorization and Enforceability................................31
4.3 No Violation of Laws or Agreements..............................31
4.4 Consents........................................................32
4.5 Financing.......................................................32
4.6 Brokerage.......................................................32
4.7 Insurance.......................................................32
ARTICLE 5 ADDITIONAL COVENANTS............................................32
5.1 Conduct of Business.............................................32
5.2 Negotiations....................................................34
5.3 Disclosure Schedules............................................34
5.4 Mutual Covenants................................................35
5.5 Filings and Authorizations......................................35
5.6 Public Announcement.............................................36
5.7 Further Assurances..............................................36
5.8 Cooperation.....................................................36
5.9 Employees; Employee Benefits....................................37
5.10 Employee Pension Plan...........................................39
5.12 Welfare Benefits................................................41
5.13 Taxes...........................................................42
5.14 Intentionally Omitted...........................................42
5.15 Citizens' Guarantees and Surety Instruments.....................42
5.16 Intentionally Omitted. .........................................42
5.17 Schedule of Permits.............................................42
5.18 Title Information...............................................42
5.19 Transaction with Related Parties................................43
5.20 Approval by Citizens............................................43
5.21 Supplemental Information........................................43
5.22 Non-Competition.................................................43
5.23 Intentionally Omitted...........................................43
5.24 Intentionally Omitted...........................................44
5.25 Cooperation with Respect to Like-Kind Exchange..................44
5.26 Transition Plan.................................................44
5.27 Procedures regarding Refunds of Advances........................44
5.28 Title Insurance.................................................45
ARTICLE 6 CONDITIONS PRECEDENT; TERMINATION...............................45
6.1 Conditions Precedent to Obligations of Buyer and Parent.........45
6.1.1 Performance of Agreements; Representations and Warranties.45
6.1.2 Opinion of Counsel........................................46
6.1.3 HSR Act...................................................46
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6.1.4 Required PUC and Other Consents...........................46
6.1.5 Injunction; Litigation....................................46
6.1.6 Documents.................................................46
6.1.7 Related Closings..........................................47
6.2 Conditions Precedent to Obligations of Seller Parties...........47
6.2.1 Performance of Agreements; Representations and Warranties.47
6.2.2 Opinion of Counsel........................................47
6.2.3 HSR Act...................................................47
6.2.4 Required PUC and Other Consents...........................47
6.2.5 Injunction; Litigation....................................48
6.2.6 Documents.................................................48
6.2.7 Related Closings..........................................48
6.3 Termination.....................................................48
ARTICLE 7 CERTAIN ADDITIONAL COVENANTS....................................49
7.1 Certain Taxes and Expenses......................................49
7.2 Maintenance of Books and Records................................49
7.3 Survival........................................................49
7.4 Indemnification.................................................52
7.4.1 General Indemnification Obligations.......................52
7.4.2 General Indemnification Procedures........................53
7.4.3 Indemnification for Negligence............................56
7.5 UCC Matters.....................................................56
7.6 Financial Statements............................................56
7.7 Collection of Receivables.......................................57
ARTICLE 8 MISCELLANEOUS...................................................57
8.1 Construction....................................................57
8.2 Notices.........................................................57
8.3 Successors and Assigns..........................................59
8.4 Exhibits and Schedules..........................................59
8.5 Governing Law...................................................60
8.6 Dispute Resolution..............................................60
8.7 Severability....................................................61
8.8 No Third Party Beneficiaries....................................61
8.9 Entire Agreement................................................61
8.10 Amendment and Waiver............................................61
8.11 Counterparts....................................................62
8.12 Headings........................................................62
8.13 Definitions.....................................................62
8.14 No Implied Representation.......................................62
8.15 Construction of Certain Provisions..............................62
8.16 Bulk Sales......................................................63
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List of Schedules
Schedule 1.1.1(a) ................................................. Real Estate
Schedule 2.2.12 ................................................Excluded Assets
Schedule 3.3 ................................No Violation of Laws or Agreements
Schedule 3.4 ..............................................Financial Statements
Schedule 3.5 ........................................................No Changes
Schedule 3.6 .........................................................Contracts
Schedule 3.7 ........................Permits and Compliance with Laws Generally
Schedule 3.8 .................................Environmental Matters - Generally
Schedule 3.8.10 ................................Compliance with Water Standards
Schedule 3.8.11 ...............................................Deed Restriction
Schedule 3.9 ..........................................Seller Parties' Consents
Schedule 3.10 ............................................................Title
Schedule 3.11 ..........................................Real Estate Proceedings
Schedule 3.12 ............................................................Taxes
Schedule 3.15 ..................................................Labor Relations
Schedule 3.16.1 .........................................Employee Benefit Plans
Schedule 3.16.4 ............................Employee Benefit Plans - Compliance
Schedule 3.16.9 ................Employee Benefit Plans - Extraordinary Benefits
Schedule 3.17 ...............................Absence of Undisclosed Liabilities
Schedule 3.18 .............................No Pending Litigation or Proceedings
Schedule 3.19 ..............................................Supply of Utilities
Schedule 3.20 ...............................................Seller's Insurance
Schedule 3.22 .........................................................WARN Act
Schedule 3.23 ..............................................Condition of Assets
Schedule 3.25 .......................................................All Assets
Schedule 3.27 ................................................Product Liability
Schedule 4.7 .................................................Buyer's Insurance
Schedule 5.1 ...............................................Conduct of Business
Schedule 5.9.1 .......................................................Employees
Schedule 5.9.2 ................................Collective Bargaining Agreements
Schedule 5.12 .................................................Former Employees
Schedule 5.15 ............................................ Citizens' Guarantees
Schedule 5.16 ..............................................Schedule of Permits
Schedule 6.1.7 .....................................Related Purchase Agreements
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TABLE OF EXHIBITS
Exhibit A - Form of Assumption Agreement
Exhibit B - Form of Assignment and ▇▇▇▇ of Sale
Exhibit C - Intentionally Omitted.
Exhibit D - Intentionally Omitted.
Exhibit E - Form of Seller's Opinion of Counsel
Exhibit F - Form of Buyer's Opinion of Counsel
Indiana
ASSET PURCHASE AGREEMENT
THIS IS AN ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of October
15, 1999, by and among Citizens Utilities Company, a Delaware corporation
("Citizens"), and Flowing ▇▇▇▇▇, Inc., an Indiana corporation and a wholly-owned
subsidiaries of Citizens (collectively with Citizens, "Seller" or the "Seller
Parties"), and American Water Works Company, Inc., a Delaware corporation
("Parent"), and Indiana-American Water Company, Inc., an Indiana corporation
("Buyer").
Background
1. Flowing ▇▇▇▇▇, Inc., is a public utility engaged in the business of
storing, supplying, distributing and selling water to the public and related
services and activities in the State of Indiana, (the "Business").
2. Parent is a holding company which desires to cause the Buyer to
purchase substantially all of the assets, properties and rights of the Seller
Parties relating to the Business, and Seller desires to sell, and to cause the
sale of, such assets, properties and rights, on the terms and subject to the
conditions set forth in this Agreement.
Terms
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the respective meanings ascribed to them in this Section:
1.1.1 "Acquired Assets" means, subject to Section 2.2, all of
each Seller Party's right, title, and interest in, under and to all of the
assets, properties and rights exclusively used in the Business as a going
concern of every kind, nature and description existing on the Closing Date,
wherever such assets, properties and rights are located and whether such assets,
properties and rights are real, personal or mixed, tangible or intangible, and
whether or not any of such assets, properties and rights have any value for
accounting purposes or are carried or reflected on or specifically referred to
in Seller's books or financial statements, including all of the assets,
properties and rights exclusively relating to the Business enumerated below:
(a) all real property described in Schedule 1.1.1(a),
together with all fixtures, fittings, buildings, structures and other
improvements erected thereon, and easements, rights of way, water lines, rights
of use, licenses, railroad crossing agreements, hereditaments, tenements,
privileges and other appurtenances thereto or otherwise exclusively related to
the Business (such as appurtenant rights in and to public streets) (the "Real
Estate");
Indiana
(b) to the extent not included in clause (a) above, all
water tanks, reservoirs, water works, plant and systems, purification and
filtration systems, pumping stations, pumps, wells, mains, water pipes,
hydrants, equipment, machinery, vehicles, tools, dies, spare parts, materials,
water supplies, fixtures and improvements, construction in progress, jigs,
molds, patterns, gauges and production fixtures and other tangible personal
property, in transit or otherwise, used exclusively in the Business (the
"Equipment and Other Tangible Personal Property");
(c) notwithstanding the provisions of Section 2.2 but
subject to Section 2.4, all of Seller's water appropriation and flowage rights
to the extent not transferred to Buyer upon assignment of the Contracts and
Permits to Buyer;
(d) all notes receivable, accounts receivable, accrued
utility revenues, materials and supplies (at average cost net of reserve for
obsolescence) and prepayments attributable in each case exclusively to the
Business;
(e) all deferred capital costs and other deferred
charges (excluding deferred taxes collectable) attributable exclusively to the
Business of which recovery in future rates is probable;
(f) Intellectual Property and goodwill, licenses and
sublicenses granted and obtained with respect thereto;
(g) subject to Section 2.4 hereof, (i) contracts,
commitments, agreements and instruments relating to the sale of any assets,
services, properties, materials or products, including all customer contracts,
operating contracts and distribution contracts relating exclusively to the
conduct of the Business; (ii) orders, contracts, supply agreements and other
agreements relating exclusively to the purchase of any assets, services,
properties, materials, or products for the Business; (iii) all leases of Real
Estate exclusively related to the Business; (iv) all other contracts, agreements
and instruments related exclusively to the Business (other than contracts,
agreements and instruments included in the definition of Real Estate or
Permits); and (v) any such contracts, agreements and other instruments referred
to in clauses (i) - (iv) inclusive, entered into between the date hereof and the
Closing Date which are consistent with the terms of this Agreement and are
entered into in the ordinary course of business consistent with past practice,
and including in the case of clauses (i) - (iv) all such contracts, agreements
and instruments more specifically listed or described in Schedule 3.6 (but
specifically excluding any contract, agreement and instrument listed or
described on Schedule 2.2.12) (the "Contracts");
(h) subject to Section 2.4 hereof, franchises,
approvals, permits, authorizations, licenses, orders, registrations,
certificates, variances, and other similar permits or rights obtained from any
Authority relating exclusively to the conduct of the Business and all pending
applications therefor (the "Permits");
(i) books, records, ledgers, files, documents (including
originally executed copies of written Contracts, to the extent available, and
copies to the extent not available), correspondence, Tax returns relating
exclusively to the Business, memoranda, forms, lists, plats, architectural
plans, drawings, and specifications, new product development materials, creative
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materials, advertising and promotional materials, studies, reports, sales and
purchase correspondence, books of account and records relating to the
Transferred Employees (to the extent such transfer is not prohibited by law),
photographs, records of plant operations and materials used, quality control
records and procedures, equipment maintenance records, manuals and warranty
information, research and development files, data and laboratory books,
inspection processes, in each case, whether in hard copy or magnetic format, in
each instance, to the extent exclusively relating to the Business, the Acquired
Assets or the Transferred Employees;
(j) all rights or choses in action arising out of
occurrences before or after the Closing Date and exclusively related to any of
the Acquired Assets, including third party warranties and guarantees and all
related claims, credits, rights of recovery and set-off and other similar
contractual rights, as to third parties held by or in favor of Seller; provided,
however, that (notwithstanding the foregoing provisions of this Section
1.1.1(j)), to the extent that Seller pays or discharges a liability related to
the Business or any of the Acquired Assets and related to such right or chose in
action (whether by reason of indemnification under this Agreement or otherwise),
Buyer will reassign or reconvey to 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; and
(k) all rights to insurance and condemnation proceeds
(i) to the extent relating to the damage, destruction, taking or other
impairment of the Acquired Assets which damage, destruction, taking or other
impairment occurs on or prior to the Closing but only to the extent that the
proceeds exceed the amount of the write-down of the net book value of such
Acquired Assets on the books and records of Seller as a result of such damage,
destruction, taking or other impairment and (ii) to the extent they relate to
amounts paid by Buyer for Damages to the extent Buyer does not receive payment
pursuant to Section 7.4.1(a), but only to the extent Buyer is entitled to
indemnification by Seller pursuant to Sections 7.3 and 7.4.
1.1.2 "Adjusted Net Assets" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.3 "Affected Participant" has the meaning set forth as
Section 5.11.1 hereof.
1.1.4 "Affiliate" of any Person means any Person, directly or
indirectly controlling, controlled by or under common control with such Person.
1.1.5 "Agreement" has the meaning set forth in the
introduction hereof.
1.1.6 "American Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.7 "American Savings Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.8 "Antitrust Division" has the meaning set forth in
Section 5.5 hereof
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1.1.9 "Assumed Benefit Liabilities" has the meaning set forth
in Section 3.16.6 hereof.
1.1.10 Intentionally Omitted.
1.1.11 "Assumed Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.12 "Assumption Agreement" has the meaning set forth in
Section 2.3.2 hereof.
1.1.13 "Authority" means any federal, state, local or foreign
governmental or regulatory entity (or any department, agency, authority or
political subdivision thereof).
1.1.14 "Base Cash Purchase Price" has the meaning set forth in
Section 2.6.1 hereof.
1.1.15 "Beneficiary" means the Person(s) designated by an
Employee, by operation of law or otherwise, as entitled to compensation,
benefits, insurance coverage, payments or any other goods or services under a
Benefit Plan.
1.1.16 "Benefit Plans" has the meaning set forth in Section
3.16.1 hereof.
1.1.17 Intentionally Omitted.
1.1.18 "Business" has the meaning set forth in the Background
section hereof.
1.1.19 "Business Day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the Commonwealth of
Pennsylvania are authorized or obligated by law or executive order to close.
1.1.20 "Buyer" has the meaning set forth in the introduction
hereof.
1.1.21 Intentionally Omitted.
1.1.22 "Buyer's Accountants" means PricewaterhouseCoopers LLP
or any firm of independent public accountants hereafter designated by Buyer for
purposes of this Agreement.
1.1.23 Intentionally Omitted.
1.1.24 "Ceiling" has the meaning set forth in Section 7.4.2(e)
hereof.
1.1.25 "CERCLA" has the meaning set forth in Section 3.8.2
hereof.
1.1.26 "CERCLIS" has the meaning set forth in Section 3.8.7
hereof.
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1.1.27 "Citizens" has the meaning set forth in the
introduction hereof.
1.1.28 "Closing" has the meaning set forth in Section 2.5
hereof.
1.1.29 "Closing Date" has the meaning set forth in Section 2.5
hereof.
1.1.30 "Closing Statement of Net Assets" has the meaning set
forth in Section 2.6.4(a) hereof.
1.1.31 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.32 Intentionally Omitted.
1.1.33 "Competing Transaction" has the meaning set forth in
Section 5.2.
1.1.34 "Contracts" has the meaning set forth in Section
1.1.1(g) hereof.
1.1.35 "Control" with respect to any Person means the
ownership, directly or indirectly, of at least a majority of the voting power of
each class of capital stock of such Person entitled to vote in the election of
directors of such Person generally.
1.1.36 "Damages" has the meaning set forth in Section 7.4.1
hereof.
1.1.37 "Disclosure Schedules" means the Schedules referenced
in Articles 3, 4 and 5 of this Agreement, as amended or supplemented pursuant to
Section 5.3.
1.1.38 "Dispute" has the meaning set forth in Section 8.6.
1.1.39 "Employees" has the meaning set forth in Section 5.9.1
hereof.
1.1.40 "Environmental Laws" has the meaning set forth in
Section 3.8 hereof.
1.1.41 "Equipment and Other Tangible Personal Property" has
the meaning set forth in Section 1.1.1(b) hereof.
1.1.42 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.1.43 "ERISA Affiliate" means (a) any corporation included
with any of the Seller Parties in a controlled group of corporations within the
meaning of Section 414(b) of the Code; (b) any trade or business (whether or not
incorporated) which is under common control with any of the Seller Parties
within the meaning of Section 414 of the Code; any member of an affiliated
service group of which any of the Seller Parties is a member within the meaning
of Section 414(m) of the Code; or (d) any other person or entity treated as an
affiliate of any of the Seller Parties under Section 414(o) of the Code.
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1.1.44 "Excluded Assets" has the meaning set forth in Section
2.2 hereof.
1.1.45 "Financial Statements" has the meaning set forth in
Section 3.4 hereof.
1.1.46 "FIRPTA Affidavit" has the meaning set forth in Section
2.7.1 hereof.
1.1.47 "Former Employees" means all salaried and hourly
employees once employed by Seller or any of its Affiliates, but who are no
longer so employed on the Closing Date.
1.1.48 "FTC" has the meaning set forth in Section 5.5 hereof.
1.1.49 "GAAP" has the meaning set forth in Section 3.4 hereof.
1.1.50 "Hazardous Substance" has the meaning set forth in
Section 3.8 hereof.
1.1.51 "HSR Act" has the meaning set forth in Section 3.9
hereof.
1.1.52 Intentionally Omitted.
1.1.53 Intentionally Omitted.
1.1.54 "Indemnified Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.55 "Indemnifying Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.56 "Intellectual Property" means the trademarks, patents,
trade names and copyrights and applications therefor, inventions, trade secrets,
and confidential business information (including know-how, formulas, water
filtration, purification and pumping processes and techniques, technical data,
designs, drawings, customer and supplier lists, and business and marketing plans
and proposals), all computer software (including data and related documentation
and object and source codes), whether in magnetic format or hard copy, and
tangible embodiments thereof (in whatever form or medium) of Seller, in each
case, utilized exclusively in the Business.
1.1.57 "Interim Statement of Net Assets" means the Citizens
Water Resources Statement of Net Assets - Indiana, June 30, 1999, which is
attached hereto as Schedule 3.4.
1.1.58 "Interim Statement of Net Assets Date" means June 30,
1999.
1.1.59 "IRS" has the meaning set forth in Section 3.16.2
hereof.
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1.1.60 "Lien" means any lien, charge, claim, pledge, security
interest, conditional sale agreement or other title retention agreement, lease,
mortgage, security agreement, right of first refusal, option, restriction,
tenancy, license, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction).
1.1.61 "Material Adverse Effect" means a change or effect (or
series of related changes or effects) which has or is reasonably likely to have
a material adverse change in or effect upon the business, assets, condition
(financial or otherwise), or results of operations of the Business or the
Acquired Assets, taken as a whole and taken together with the businesses and
assets being acquired by Buyer or Affiliates of Buyer pursuant to the Related
Purchase Agreements. For purpose of this Agreement, an occurrence or condition
shall not constitute a Material Adverse Effect (a) if it arises from general
business, economic or financial market conditions, from conditions generally
effecting the industries in which Seller competes, or from the transactions
contemplated by this Agreement, or (b) solely with respect to matters arising
prior to Closing, to the extent that either (i) Seller realizes the benefit of
insurance maintained by Citizens on or prior to the Closing Date and Buyer
receives the cash proceeds of such insurance to the extent required by Section
1.1.1(k), or (ii) Seller arranges for Buyer to recover payments in respect of
such occurrence or condition from any other source (whether in a lump sum or
stream of payments), it being understood and agreed that a Material Adverse
Effect may have occurred irrespective of such insurance recovery if the
occurrence or condition giving rise to such recovery also causes a non-monetary
material adverse change in or effect upon the Business or the Acquired Assets,
taken as a whole and taken together with the businesses and assets being
acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements.
1.1.62 "Mortgage Indenture" means Indenture of Mortgage and
Deed of Trust between BNY Western Trust Company (successor in interest to ▇▇▇▇▇
Fargo Bank, N.A.) and First Interstate Bank of California (as successor trustee
to Marine Midland, N.A., formerly the Marine Midland Trust Company of New York).
1.1.63 "OSHA" has the meaning set forth in Section 3.7.1
hereof.
1.1.64 "PCBs" has the meaning set forth in Section 3.8.6
hereof.
1.1.65 "Permits" has the meaning set forth in Section 1.1.1(h)
hereof.
1.1.66 "Permitted Exceptions" has the meaning set forth in
Section 3.10 hereof; provided, however, that from and after the Closing,
Permitted Exceptions shall not include any Lien arising under or resulting from
the Mortgage Indenture.
1.1.67 "Person" means an individual, a corporation, a
partnership, an association, an Authority, a trustor other entity or
organization.
1.1.68 "Pre-Existing Conditions" has the meaning set forth in
Section 2.3.1(d).
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1.1.69 "Prime Rate" means the rate per annum announced from
time to time during the reference period by Citibank N.A. as its United States
prime, reference or base rate for commercial loans.
1.1.70 "PUC" has the meaning set forth in Section 5.5 hereof.
1.1.71 "Purchase Price" has the meaning set forth in Section
2.6.1 hereof.
1.1.72 "Real Estate" has the meaning set forth in Section
1.1.1(a) hereof.
1.1.73 "Recovery" has the meaning set forth in Section
7.4.2(l) hereof.
1.1.74 "Related Purchase Agreements" as the meaning set forth
in Section 6.1.7 hereof.
1.1.75 "Release" or "Released" has the meaning set forth in
Section 3.8 hereof.
1.1.76 "Remedial Action" has the meaning set forth in Section
3.8 hereof.
1.1.77 Intentionally Omitted.
1.1.78 "Retained Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.79 "Review Period" has the meaning set forth in Section
2.6.4(b) hereof.
1.1.80 "SEC" means the U.S. Securities and Exchange
Commission.
1.1.81 "Securities Filings" has the meaning set forth in
Section 5.8.2 hereof.
1.1.82 "Seller" and "Seller Parties" have the respective
meaning set forth in the introduction hereof.
1.1.83 "Seller's Accountants" means KPMG LLP or any other firm
of independent public accountants hereafter designated by Seller for purposes of
this Agreement.
1.1.84 "Seller's Adjusted Amount" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.85 "Seller's Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.86 "Seller's 401(k) Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.87 "Specified Liabilities" has the meaning set forth in
Section 7.4.2(f) hereof.
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1.1.88 "Taxes" means any federal, state, local and foreign
income, payroll, withholding, excise, sales, use, personal property, use and
occupancy, business and occupation, mercantile, real estate, gross receipts,
license, employment, severance, stamp, premium, windfall profits, social
security (or similar unemployment), disability, transfer, registration, value
added, alternative, or add-on minimum, estimated, or capital stock and franchise
and other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
1.1.89 "Third Accounting Firm" has the meaning set forth in
Section 2.6.4(b) hereof.
1.1.90 "Threshold Amount" has the meaning set forth in Section
7.4.2(e) hereof.
1.1.91 "Third Party Claim" has the meaning set forth in
Section 7.4(b)(i) hereof.
1.1.92 "Transferred Accounts" has the meaning set forth in
Section 5.11.2 hereof.
1.1.93 "Transaction Documents" has the meaning set forth in
Section 3.2 hereof.
1.1.94 "Transferred Employees" has the meaning set forth in
Section 5.9.2 hereof.
1.1.95 "Union Employees" has the meaning set forth in Section
5.9.1 hereof.
1.1.96 "VEBAs" has the meaning set forth in Section 5.12
hereof.
1.1.97 "WARN Act" means the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. section 2102- 2109, as amended.
ARTICLE 2
THE TRANSACTION
2.1 Sale and Purchase of Assets. Subject to the terms and conditions
of this Agreement, at the Closing referred to in Section 2.5 below, Citizens
shall, and shall cause the other Seller Parties to, sell, assign, transfer,
deliver and convey to Buyer, and Parent shall cause Buyer to purchase, the
Acquired Assets for the Purchase Price specified in Section 2.6.
2.2 Excluded Assets. The following assets of Seller shall be
excluded from the Acquired Assets (the "Excluded Assets"):
2.2.1 assets of the Seller used in both the Business and in
Citizens' gas, electric or communications businesses, the material items of
which are described on Schedule 2.2.12;
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2.2.2 cash and cash equivalents in transit, in hand or in bank
accounts;
2.2.3 except as otherwise set forth herein, assets
attributable or related to any Benefit Plan;
2.2.4 the stock record and minute books of Seller;
2.2.5 Acquired Assets disposed of by Seller after the date of
this Agreement to the extent such dispositions are not prohibited by this
Agreement;
2.2.6 except to the extent set forth in Sections 2.9, rights
to refunds of Taxes payable with respect to the Business, assets, properties or
operations of any of the Seller Parties or any member of any affiliated group of
which any of them is a member, and which are treated as Retained Liabilities
under Section 2.3.3(b) below.
2.2.7 customer and other deposits held in Seller's accounts;
2.2.8 accounts owing by and among Seller and its Affiliates;
2.2.9 notes receivable and other receivables (other than note
and accounts receivable attributable exclusively to the Business);
2.2.10 all deferred tax assets or collectibles;
2.2.11 duplicate copies of all books and records transferred
to Buyer; and
2.2.12 those certain items listed on Schedule 2.2.12.
2.3 Assumption of Certain Liabilities.
2.3.1 Buyer shall not assume any liabilities of Citizens or
Seller or any of their Affiliates, except that Buyer shall assume the following
specific liabilities and obligations:
(a) the obligations and liabilities set forth in
Sections 5.9, 5.10, 5.11 and 5.12 hereof;
(b) except as set forth in Section 2.3.3(b), all
liabilities and obligations of Seller in respect of the Contracts and Permits
assigned or transferred to Buyer pursuant to this Agreement in accordance with
the respective terms thereof, except that Buyer shall not assume any liabilities
or obligations for any breach or default by, or payment obligations of, Seller
under such Contracts and Permits occurring or arising or accruing on or prior to
the Closing Date;
(c) intentionally omitted;
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(d) any liability, obligation or responsibility of
Seller for conditions at the Real Estate, whether based on statutory or common
law, now or hereafter in effect, known or unknown, contingent or actual,
relating to or arising from pollution, contamination or protection of the
environment, human health or safety or natural resources or relating to or
arising from the presence or Release or threat of Release of Hazardous
Substances into the environment at the Real Estate or into or from any building,
structure, pipeline or other facility at the Real Estate, or from violation of
any law relating to the foregoing, including without limitation, any CERCLA or
similar liability under any federal or state law or regulation, except to the
extent Buyer has given written notice of a claim for indemnification pursuant to
Sections 7.3 and 7.4 hereof prior to the expiration of the claims period set
forth in Section 7.3.2(a) or (b) (and if Buyer has given written notice prior to
the expiration of such claims period, to the extent that such claim is not
entitled to indemnification under Sections 7.3 and 7.4) (the foregoing, the
"Pre-Existing Conditions");
(e) all liabilities and obligations of Seller related to
unperformed service obligations, easement and right-of-way relocation
obligations, and construction work in progress, and all engineering and
construction required to complete scheduled construction and other capital
projects for the Business, in each case relating to the Business 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, or payment obligations
of, Seller under such Contracts and Permits occurring or arising or accruing on
or prior to the Closing Date;
(f) liability for accrued but unused vacation pay for
the Transferred Employees to the extent provided in Section 5.9.2;
(g) any liability, obligation or responsibility relating
to customer deposits held by Seller on the Closing Date and relating to the
Business; and
(h) all liabilities and obligations imposed on Buyer by
any PUC in connection with the operation of the Business or the ownership of the
Acquired Assets, including with respect to any liability of the types that
appear as "Accrued Liabilities" and "Non-Current Liabilities" on the financial
statements of Seller.
2.3.2 Any liabilities or obligations which are assumed by
Buyer pursuant to Section 2.3.1 above are hereinafter referred to as the
"Assumed Liabilities." At the Closing, Parent shall cause Buyer to execute and
deliver to Seller an assumption agreement, in substantially the form of the
Assumption Agreement attached hereto as Exhibit A (the "Assumption Agreement"),
pursuant to which Buyer shall assume the Assumed Liabilities. Each of Parent and
Buyer hereby irrevocably and unconditionally waives and releases the Seller
Parties from all Assumed Liabilities and all liabilities or obligations
exclusively relating to the Business or the Acquired Assets to the extent
arising from events or occurrences after the Closing or to the extent otherwise
relating to the period after the Closing, including any liabilities created or
which arise by statute or common law, including CERCLA (it being understood that
this shall not constitute a waiver and release of any claims arising out of the
contractual relationships and indemnification arrangements between Buyer and
Seller).
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2.3.3 Buyer shall not assume any liabilities, commitments or
obligations (contingent or absolute and whether or not determinable as of the
Closing) of any of the Seller Parties or any of their Affiliates except for the
Assumed Liabilities as specifically and expressly provided for above, whether
such liabilities or obligations relate to payment, performance or otherwise, and
all liabilities, commitments or obligations not expressly transferred to Buyer
hereunder as Assumed Liabilities are being retained by the Seller Parties, (the
"Retained Liabilities"). Each of the Seller Parties hereby irrevocably and
unconditionally waives and releases Buyer from all Retained Liabilities
including any liabilities created or which arise by statute or common law,
including CERCLA (it being understood that this shall not constitute a waiver
and release of any claims arising out of the contractual relationships and
indemnification arrangements between Buyer and Seller).
Without limitation to the foregoing, all of the following shall be
considered Retained Liabilities and not Assumed Liabilities (except as specified
below) for the purposes of this Agreement:
(a) any product liability, toxic tort or similar claim
for injury to person or property, regardless of when made or asserted, to the
extent that it arises out of or is based upon any express or implied
representation, warranty, agreement or guarantee made by any of the Seller
Parties or any of their Affiliates prior to Closing, or alleged to have been
made by any of such Persons, or to the extent that it is imposed or asserted to
be imposed by operation of law, in connection with any service performed or
product distributed or sold by or on behalf of any of the Seller Parties or any
of their Affiliates prior to Closing, including any claim referred to above in
this Section 2.3.3(a) relating to water quality standards, any claim relating to
any product delivered in connection with the performance of services provided by
Seller and any claim seeking recovery for consequential damages, lost revenue or
income;
(b) all refund obligations relating to the advances
existing on the Closing Date for construction of facilities relating to the
Business;
(c) except to the extent set forth in Section 2.9, any
federal, state, foreign or local income or other Tax payable with respect to the
business, assets, properties or operations of any of the Seller Parties or any
member of any affiliated group of which any of them is a member;
(d) any liability or obligation associated with or in
connection with any common plant assets of Seller (other than the liabilities
and obligations exclusively related to any common plant assets included among
the Acquired Assets);
(e) except as provided in Section 2.3.1 above, any
liability or obligation with respect to compensation or employee benefits of any
nature owed to any employees, agents or independent contractors of any of the
Seller Parties or any of their Affiliates, whether or not employed by Buyer
after the Closing, that arises out of or relates to events or conditions to the
extent occurring before the Closing Date;
(f) except to the extent set forth in Section 2.3.1(d),
any liability, obligation or responsibility of any of the Seller Parties, or any
of their Affiliates or predecessors;
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whether based on statutory or common law, but only as any such law is
interpreted, amended and in effect on the Closing Date, known or unknown,
contingent or actual, relating to or arising from pollution, contamination or
protection of the environment, human health or safety or natural resources or
relating to or arising from the presence or Release or threat of Release of
Hazardous Substances into the environment or into or from any building,
structure, pipeline or other facility or relating to or arising from the
generation, use, storage, treatment, disposal, transport or other handling of
Hazardous Substances or sale or product containing Hazardous Substances from
violation of any law relating to the foregoing (but only as such law is
interpreted, amended and in effect on the Closing Date) including without
limitation, any (A) CERCLA or similar liability under any federal or state law
or regulation as interpreted, amended and in effect on the Closing Date or (B)
any such liability associated with businesses or assets of the Seller Parties
other than the Business or the Acquired Assets;
(g) liabilities and obligations relating to the Business
to the extent arising prior to Closing (unless otherwise constituting Assumed
Liabilities) arising by operation of law under any common law or statutory
doctrine (including successor liability or de facto merger);
(h) any obligation or liability arising under any
contract, commitment, instrument or agreement (1) subject to the penultimate
sentence of Section 2.4, that is not transferred to Buyer as part of the
Acquired Assets, or (2) that relates to any breach or default (or to the extent
that it relates to an event which would, with the passing of time or the giving
of notice, or both, constitute a default) under any Contract, instrument or
agreement or to any services to be provided by Seller under any such Contract,
instrument or agreement to the extent that such services were performed or were
required to have been performed on or prior to the Closing Date;
(i) any liability or obligation in respect of the
Excluded Assets;
(j) any liability or obligation of any of the Seller
Parties or any of their Affiliates existing as a result of any act, failure to
act or other state of facts or occurrence which constitutes a breach or
violation of any of Seller's representations, warranties, covenants or
agreements contained in this Agreement, except to the extent set forth in
Section 7.4; or
(k) except for the Assumed Liabilities as specifically
and expressly set forth herein, any liability to the extent arising out of or
relating to the ownership or operation of the Acquired Assets or the Business
prior to the Closing Date (including any predecessor operations), any claims,
obligations or litigation to the extent arising out of or relating to events or
conditions occurring before the Closing Date, and any liability associated with
any business other than the Business.
2.4 Consent of Third Parties. On the Closing Date, Citizens shall
cause Seller to assign to Buyer, and Parent shall cause Buyer to assume, the
Contracts and the Permits which are to be transferred to Buyer as provided in
this Agreement by means of the Assumption Agreement. To the extent that the
assignment of all or any portion of any Contract or Permit shall require the
consent (or result in a breach or violation thereof) of the other party thereto
or any other third party, and such consent shall not be obtained prior to
Closing, this Agreement shall not constitute an agreement to assign any such
Contract or Permit included in the Acquired Assets. In order, however,
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to provide Buyer the full realization and value of every Contract of the
character described in the immediately preceding sentence, Seller agrees that on
and after the Closing, it will, at the request and under the direction of Buyer,
in the name of Seller or otherwise as Buyer shall specify, take all reasonable
actions (including without limitation the appointment of Buyer as
attorney-in-fact for Seller to proceed at Buyer's sole cost and expense) and do
or cause to be done all such things as shall in the reasonable opinion of Buyer
be necessary (a) to assure that the rights of Seller or its Affiliates under
such Contracts shall be preserved for the benefit of Buyer and (b) to facilitate
receipt of the consideration to be received by Seller or its Affiliates in and
under every such Contract. To the extent that Buyer does receive the benefits of
any such Contract pursuant to the preceding sentence, such Contract shall be a
Contract "assigned or transferred to Buyer pursuant to this Agreement" within
the meaning of Section 2.3.1(b) hereof. Nothing in this Section 2.4 shall in any
way diminish the obligations of Seller to obtain consents and approvals under
this Agreement.
2.5 Closing. Subject to the terms and conditions of this Agreement,
the closing of the sale and purchase of the Acquired Assets (the "Closing")
shall take place at 10 a.m., East Coast time, on a date mutually satisfactory to
Buyer and Seller which is no later than the fifth Business Day after
satisfaction (or waiver) of the conditions to Closing set forth in Sections 6.1
and 6.2 hereof (other than those conditions which require the delivery of any
documents or the taking of other action, at the Closing) at the offices of
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇,
or on such other date and at such other time or place as may be mutually agreed
upon by the parties hereto (the "Closing Date"). Upon payment of the Initial
Cash Payment by Buyer and confirmed receipt thereof by Seller or the Escrow
Agent pursuant to Section 2.6.2 below, Seller shall operate the Business at the
direction of and under the control of Buyer. Notwithstanding the foregoing, the
Closing shall be deemed to be effective as of 11:59 p.m. on the Closing Date for
all purposes.
2.6 Purchase Price.
2.6.1 Purchase Price. Subject to the terms and conditions of
this Agreement, the aggregate purchase price be paid by Buyer for the purchase
of the Acquired Assets (the "Purchase Price") shall be: (i) $1,780,000 in cash
(the "Base Cash Purchase Price," the Base Cash Purchase Price as adjusted in
accordance with Section 2.6.3 and Section 2.6.5 is referred to as the "Initial
Cash Payment"), subject to adjustment pursuant to the provisions of this
Agreement (including Section 2.6.3, Section 2.6.4, Section 2.6.5 and Section 2.9
of this Agreement) and (ii) the assumption by Buyer of the Assumed Liabilities.
2.6.2 Payment of Initial Cash Payment. Subject to the terms
and conditions of this Agreement, the Initial Cash Payment shall be paid by
Buyer on the Closing Date by federal other wire transfer of immediately
available funds to the account designated by Seller in writing at least two (2)
Business Days prior to the Closing Date. 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 Initial Cash Payment to Buyer's
lead bank (the "Escrow Agent") in immediately available funds in U.S. dollars.
Upon receipt, the Escrow Agent shall invest the Initial Cash Payment in an
interest-bearing account mutually agreed upon by Seller and Buyer. At Closing,
Parent shall sign and deliver to Citizens a statement which confirms that the
Closing has occurred and which instructs the Escrow
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Agent to transfer to Citizens the funds representing the Initial Cash Payment,
plus an amount representing the interest earned after the Closing Date until the
date the funds are transferred, to an account that Citizens shall designate at
least two (2) business days prior to the date the funds are required to be
transferred hereunder. The Escrow Agent shall refund the balance to Buyer. The
fees and expenses of Escrow Agent shall be paid by Buyer.
2.6.3 Estimated Closing Statement. At least five (5) business
days prior to the Closing Date, Citizens shall deliver to Parent and Buyer a
statement of net assets (the "Estimated Statement of Net Assets") reflecting its
good faith calculation of the Acquired Assets of the Business as of the last day
of the latest calendar month for which financial statements of Seller are
available (the "Estimated Adjusted Net Assets"). The Estimated Statement of Net
Assets shall be prepared in the same manner and utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets (excluding for this purpose any change required by GAAP
or any Authority since June 30, 1999). The Base Cash Purchase Price shall be
increased or decreased on a dollar for dollar basis by the amount, if any, by
which the Estimated Adjusted Net Assets is greater than or less than $886,056
(such increase or decrease, as the case may be, is referred to herein as the
"Estimated Net Asset Adjustment").
2.6.4 Post-Closing Adjustment to Purchase Price.
(a) Within 90 days after the Closing, Citizens shall
prepare and deliver to Parent and Buyer a Statement of Net Assets (the "Closing
Statement of Net Assets") which reflects the Acquired Assets, as of 11:59 p.m.
on the Closing Date, based on actual financial performance and calculated in the
same manner, utilizing the same accounting principles, policies and methods
utilized in preparing the Interim Statement of Net Assets (excluding for this
purpose any change required by GAAP or any Authority since June 30, 1999),
together with (A) an audit report of Seller's Accountants stating that the
Closing Statement of Net Assets has been prepared utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets and (B) a calculation of Citizens' determination of the
amount of increase or decrease in the amount of the Acquired Assets of the
Business from the Interim Statement of Net Assets Date to the Closing Date which
is derived from the Closing Statement of Net Assets ("Seller's Adjustment
Amount"). The Closing Statement of Net Assets shall not give effect to any
purchase accounting treatment arising from Buyer's purchase of the Acquired
Assets. Buyer shall pay the fees and expenses of Seller's Accountants incurred
in connection with this Section 2.6.4. Buyer agrees to cooperate, and agrees to
cause Buyer's Accountants to cooperate, with Citizens and Seller's Accountants
in connection with the preparation of the Closing Statement of Net Assets, and
related information, and shall provide to Citizens and Seller's Accountants such
books, records and information as may be reasonably requested from time to time,
including the work papers of Buyer's Accountants. Citizens will give Buyer and
its representatives access during the normal business hours of Citizens to the
personnel, books and records of Citizens and the work papers of Seller's
Accountants to assist Buyer in the review of the Closing Statement of Net Assets
and related matters. Buyer agrees that, following the Closing through the date
on which the Closing Statement of Net Assets is delivered, it will not take any
actions with respect to any accounting books, records, policies or procedures on
which the Closing Statement of Net Assets is to be based that would make it
impossible or impracticable to calculate the Acquired Assets in the manner and
utilizing the methods required hereby. Without limiting the generality of the
foregoing, no changes shall be made
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in any reserve or other account existing as of the date of the Interim Statement
of Net Assets except in the ordinary course or as a result of events occurring
after the date of the Interim Statement of Net Assets and, in such event, only
in a manner consistent with past practices of Seller.
(b) Parent or Buyer may dispute any amounts reflected on the Closing
Statement of Net Assets, in the Seller's Adjustment Amount or in the Statement
of Certain Assumed Liabilities, provided, however, that Buyer shall notify
Citizens in writing of each disputed amount, and specify the amount thereof in
dispute and the basis of such dispute, within 30 days of the Buyer's receipt of
the Closing Statement of Net Assets and the Seller's Adjustment Amount (such 30
day period hereinafter referred to as the "Review Period"). In the event of a
dispute with respect to the Closing Statement of Net Assets, the Seller's
Adjustment Amount or the Statement of Certain Assumed Liabilities, Buyer and
Seller shall attempt to reconcile their differences and any resolution by them
as to any disputed amounts shall be final, binding and conclusive on the
parties. If Buyer and Seller are unable to reach a resolution of such
differences within 30 days of receipt of Buyer's written notice of dispute to
Seller, Buyer and Seller shall submit the amounts remaining in dispute (together
with any amounts remaining in dispute pursuant to Section 2.6.4(b) of each of
the Related Purchase Agreements) for resolution to an independent accountant
firm of national reputation mutually appointed by Seller and Buyer (such
independent accounting firm being herein referred to as the "Third Accounting
Firm"), which shall be requested to determine and report to the parties, within
30 days after such submission, upon such remaining disputed amounts, and such
report shall be final, binding and conclusive on the parties hereto with respect
to the amounts disputed. The fees and disbursements of the Third Accounting Firm
shall be allocated between Buyer and the Seller Parties so that the Seller
Parties' share of such fees and disbursements shall be in the same proportion
that the aggregate amount of such remaining disputed amounts so submitted by
Buyer to the Third Accounting Firm that is unsuccessfully disputed by the Buyer
(as finally determined by the Third Accounting Firm) bears to the total amount
of such remaining disputed amounts so submitted by the Buyer to the Third
Accounting Firm. Buyer shall pay the fees and expenses of Buyer's Accountants
incurred in connection with this Section 2.6.4(b). Seller's Adjustment Amount,
if there are no disputes with respect thereto, or Seller's Adjustment Amount as
adjusted after the resolution of all disputes with respect thereto in accordance
herewith, shall be referred to as the "Final Net Asset Adjustment."
(c) If the Base Cash Purchase Price plus (or minus, if negative) the Final
Net Asset Adjustment exceeds the Initial Cash Payment, then within five (5)
business days after final determination thereof Buyer shall pay Seller the
amount of such excess together with interest thereon for the period commencing
on the Closing Date through the date of payment calculated at the Prime Rate in
cash by federal or other wire transfer of immediately available funds, or
certified or bank cashier's check. If the Initial Cash Payment exceeds the sum
of the Base Cash Purchase Price plus (or minus, if negative) the Final Net Asset
Adjustment, then within five (5) business days after final determination thereof
Seller shall pay Buyer the amount of such excess together with interest thereon
for the period commencing on the Closing Date through the date of payment
calculated at the Prime Rate in cash by federal or other wire transfer of
immediately available funds, or certified or bank cashier's check.
2.6.5 Adjustment for Certain Liabilities. Concurrent with the
delivery of the Estimated Statement of Net Assets, Citizens also shall deliver
to Parent and Buyer a statement reflecting (i) the customer and other deposits
held by Seller on the Closing Date and relating to the
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Business, (ii) the items specified in Section 2.9 to the extent set forth
therein, and (iii) without duplications of any amount included in clause (i)
above, any payments received by Seller under the Contracts and Permits for
obligations not performed as of the Closing Date (the "Statement of Certain
Assumed Liabilities"). The Statement of Certain Assumed Liabilities shall
reflect Citizens' good faith calculation of such liabilities as of the Closing
Date. The Base Cash Purchase Price shall be decreased by the net amount set
forth in the Statement of Certain Assumed Liabilities. Concurrent with the
delivery of the Closing Statement of Net Assets, Citizens also shall deliver to
Parent a statement showing any adjustments to the Statement of Certain Assumed
Liabilities and the Base Cash Purchase Price shall be further adjusted to give
effect to any such adjustments to the Statement of Certain Assumed Liabilities.
2.7 Deliveries and Proceedings at Closing. Subject to the terms and
conditions of this Agreement, at the Closing:
2.7.1 Deliveries to Buyer. Citizens shall, and shall cause
Seller to deliver to Buyer:
(a) bills of sale and instruments of assignment to the
Acquired Assets, duly executed by Seller, substantially in the form of Exhibit B
hereto and;
(b) the consents to transfer, of all transferable or
assignable Contracts, Intellectual Property, Permits (including Environmental
Permits), to the extent specifically required hereunder;
(c) title certificates to any motor vehicles included in
the Acquired Assets, duly executed by Seller (together with any other transfer
forms necessary to transfer title to such vehicles);
(d) special warranty deeds of conveyance with respect to
the parcels of Real Estate owned in fee simple by Seller (or, with respect to
any such parcel which was acquired by Seller (or its predecessor in interest, in
cases involving mergers) by deed without covenant or warranty of title, a quit
claim deed without covenant or warranty of title) to Buyer, duly executed and
acknowledged by Seller and in recordable form;
(e) the Foreign Investment in Real Property Tax Act
Certification and Affidavit for each parcel of Real Estate, duly executed by the
Seller Parties (the "FIRPTA Affidavit");
(f) the certificates, opinions and other documents
required to be delivered by the Seller Parties pursuant to Section 6.1 hereof
and certified resolutions evidencing the authority of the Seller Parties as set
forth in Section 3.2 hereof;
(g) all agreements and other documents required by this
Agreement;
(h) a receipt for the payment of the Initial Cash
Payment duly executed by Citizens; and
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(i) all such other instruments of conveyance as shall,
in the reasonable opinion of Buyer and its counsel, be necessary to transfer to
Buyer the Acquired Assets in accordance with this Agreement and where necessary
or desirable, in recordable form.
2.7.2 Deliveries By Buyer to the Seller Parties. Parent shall,
and shall cause Buyer to deliver to the Seller Parties:
(a) wire transfer of immediately available funds in an
amount equal to the Initial Cash Payment;
(b) the Assumption Agreement, duly executed by Buyer;
(c) the certificates, opinions and other documents
required to be delivered by Buyer pursuant to Section 6.2 hereof;
(d) all of the instruments contemplated by Section
5.24(a) to the extent not previously executed and delivered by Parent; and
(e) all such other instruments of assumption as shall,
in the reasonable opinion of Seller and its counsel, be necessary for Parent and
Buyer to assume the Assumed Liabilities in accordance with this Agreement.
2.8 Allocation of Consideration. Buyer and Seller shall use their
good faith efforts to agree upon the allocation (the "Allocation") of the
Purchase Price, the Assumed Liabilities and other relevant items (including, for
example, adjustments to the Purchase Price) to the individual assets or classes
of assets within the meaning of Section 1060 of the Code. If Buyer and Seller
agree to such Allocation on or before ninety (90) days after the Closing Date,
Buyer and Seller covenant and agree that (i) the values assigned to the assets
by the parties' mutual agreement shall be conclusive and final for all purposes,
and (ii) neither Buyer nor Seller will take any position before any Authority or
in any proceeding that is in any way inconsistent with such Allocation.
Notwithstanding the foregoing, if Buyer and Seller cannot agree to an Allocation
on or before ninety (90) days after the Closing Date, Buyer and Seller covenant
and agree to file and to cause their respective Affiliates to file, all Tax
returns and schedules thereto (including, for example, amended returns, claims
for refund, and those returns and forms required under Section 1060 of the Code
and any Treasury regulations promulgated thereunder) consistent with each of
Buyer and Seller's good faith Allocations, unless otherwise required because of
a change in any legal requirement.
2.9 Prorations. The parties hereto agree that the following expenses
shall be calculated and pro rated as of the Closing Date, with Seller
responsible for such expenses and to receive the benefit for the same for the
period through and including the Closing Date, and Buyer to be responsible for
and to receive the benefit of the same after the Closing Date:
2.9.1 personal and real property taxes (on the basis on which
the same were assessed and paid) and sales, occupation and use taxes, in each
case, to the extent relating to the Business and except as otherwise provided in
Section 7.1;
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2.9.2 electric, fuel, gas, telephone, sewer and utility
charges, in each case, to the extent relating to the Business;
2.9.3 rentals and other charges under Contracts to be assumed
by Buyer pursuant to Section 2.3 (except to the extent provided in Section
2.3.3(h)); and
2.9.4 charges under maintenance and service contracts and
other Contracts (except to the extent provided in Section 2.3.3(h)), and fees
under Permits to be transferred to Buyer as part of the Acquired Assets;
2.9.5 water, sewer and other similar types of taxes, and
installments on special benefit assessments; and
2.9.6 payroll expenses, payroll taxes, reimbursable employee
business expenses and the financial cost of the accrued vacation of each
Transferred Employee.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Each of the Seller Parties jointly and severally represent and warrant to
Parent and Buyer as follows:
3.1 Qualification; No Interest in Other Entities.
3.1.1 Each of the Seller Parties is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to own, lease
and operate the Acquired Assets and the Business as presently being conducted.
Each of the Seller Parties is qualified to do business and is in good standing
as a foreign corporation in all jurisdictions wherein the nature of the business
conducted by it or such Seller Party's ownership or use of assets and properties
make such qualification necessary, except such failures to be qualified or to be
in good standing, if any, which when taken together with all such other failures
of the Seller Parties do not have a Material Adverse Effect.
3.1.2 No shares of any corporation or any ownership or other
investment interest, either of record, beneficially or equitably, in any Person
are included in the Acquired Assets.
3.2 Authorization and Enforceability. Each of the Seller Parties has
full corporate power and authority to execute, deliver and perform this
Agreement and all other agreements and instruments to be executed by them in
connection herewith (such other agreements and instruments being hereinafter
referred to collectively as the "Transaction Documents"). The execution,
delivery and performance by each of the Seller Parties of this Agreement and the
Transaction Documents to which such Seller Party is a party have been duly
authorized by all necessary corporate action on the part of each of them. This
Agreement has been duly executed and delivered by each of the Seller
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Parties, and as of the Closing Date the other Transaction Documents will be duly
executed and delivered by the Seller Parties. This Agreement is a legal, valid
and binding obligation of each Seller Party, enforceable against them in
accordance with its terms except as such enforceability may be limited by
applicable laws relating to bankruptcy, insolvency, fraudulent conveyance,
reorganization or affecting creditors' rights generally and except to the extent
that injunctive or other equitable relief is within the discretion of a court.
As of the Closing Date, each of the other Transaction Documents to which each of
the Seller Parties is a party will be duly executed and delivered by each of the
Seller Parties and will constitute the legal, valid and binding obligations of
each of the Seller Parties, enforceable against them in accordance with its
respective terms, except as such enforceability may be limited by applicable
laws relating to bankruptcy, insolvency, fraudulent conveyance, reorganization
or affecting creditors' rights generally and except to the extent that
injunctive or other equitable relief is within the discretion of a court.
3.3 No Violation of Laws or Agreements. The execution, delivery, and
performance of this Agreement and the Transaction Documents by each of the
Seller Parties do not, and the consummation of the transactions contemplated by
this Agreement and the Transaction Documents by the Seller Parties, will not:
(a) contravene any provision of the Restated Articles of Incorporation or Bylaws
of Citizens or the Articles of Incorporation or Bylaws of the other Seller
Party; or (b) except as set forth on Schedule 3.3, violate, conflict with,
result in a breach of, or constitute a default (or an event which would, with
the passage of time or the giving of notice or both, constitute a default)
under, or result in or permit the termination, modification, acceleration, or
cancellation of, or result in the creation or imposition of any Lien of any
nature whatsoever upon any of the Acquired Assets or give to others any
interests or rights therein under (i) any indenture, mortgage, loan or credit
agreement, license, instrument, lease, contract, plan, permit or other agreement
or commitment, oral or written, to which any of the Seller Parties is a party,
or by which the Business or any of the Acquired Assets may be bound or affected,
except for such violations, conflicts, breaches, terminations, modifications,
accelerations, cancellations, Liens, interests or rights which, individually and
in the aggregate, do not have a Material Adverse Effect or will be cured, waived
or terminated prior to the Closing Date, or (ii) any judgment, injunction, writ,
award, decree, restriction, ruling, or order of any court, arbitrator or
Authority or any applicable constitution, law, ordinance, rule or regulation, to
which any of the Seller Parties is subject, other than those violations or
conflicts which individually and in the aggregate would not have a Material
Adverse Effect.
3.4 Financial Statements. Citizens has previously delivered to Buyer
the statement of income of the Business (the "Income Statement") and the Interim
Statement of Net Assets contained in Schedule 3.4 (collectively, the "Financial
Statements"). The Income Statement (a) fairly presents in all material respects
the results of operations of the Business in accordance with generally accepted
accounting principles ("GAAP") consistently applied except for the omission of
full footnotes to the Income Statement and (b) has in all material respects been
derived from the books and records of Seller and reflects the separation of the
operation associated with the Business from other operations of Citizens. The
Interim Statement of Net Assets (a) has in all material respects been derived
from the books and records of Seller and reflects the separation of the
operations associated with the Business from other operations of Citizens; (b)
fairly presents in all material respects the Acquired Assets as of the Interim
Statement of Net Assets Date; and (c) has in all material respects been prepared
in accordance with GAAP consistently applied except for the omission of full
footnotes to such Interim Statement of Net Assets. The financial statements
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included in the Annual Report to each PUC for the year ended December 31, 1998,
were prepared in all material respects in accordance with the rules and
regulations of such PUC.
3.5 No Changes. Since the Interim Statement of Net Assets Date to
the date hereof, except as disclosed in Schedule 3.5, the Seller Parties have
conducted the Business as presently operated only in the ordinary course of
business consistent with past practice. Since the Interim Statement of Net
Assets Date, except as disclosed in Schedule 3.5, there has not been:
3.5.1 any Material Adverse Effect;
3.5.2 prior to the date of this Agreement, any change in the
salaries or other compensation payable or to become payable to, or any advance
(excluding advances for ordinary business expenses) or loan to, any Transferred
Employee, or material change or material addition to, or material modification
of, other benefits (including any bonus, profit-sharing, pension or other plan
in which any of the Transferred Employees participate) to which any of the
Transferred Employees may be entitled, or any payments to any pension,
retirement, profit-sharing, bonus or similar plan other than in any such case
(i) in the ordinary course consistent with past practice, (ii) as required by
law, or (iii) as required by any collective bargaining agreement, if any;
3.5.3 any alteration in any material respect of the customary
practices with respect to the collection of accounts receivable of the Business
or the provision of discounts, rebates or allowances;
3.5.4 any disposition of or failure to keep in effect any
rights in, to or for the use of any Permit of the Business which individually or
in the aggregate would have a Material Adverse Effect;
3.5.5 any damage, destruction or loss affecting the Business
which individually or in the aggregate would have a Material Adverse Effect
whether or not covered by insurance;
3.5.6 prior to the date of this Agreement, any change by
Seller in its method of accounting or keeping its books of account or accounting
practices with respect to the Business except as required by GAAP and is set
forth on Schedule 3.5; or
3.5.7 prior to the date of this Agreement, any sale, transfer
or other disposition of any material assets, properties or rights of the
Business, except in the ordinary course of business consistent with past
practice.
3.6 Contracts. As of the date of this Agreement, Schedule 3.6
contains a list of all Contracts (other than (i) with respect to which the
Business' total annual liability or expense is less than (a) $250,000 per such
Contract and (b) $6,123,000 per all such Contracts (when taken together with
similar contracts omitted from Schedule 3.6 of the Related Purchase Agreements),
and (ii) Contracts that may be terminated by Seller, without penalty, on notice
of 90 days or less) except line extension agreements and similar agreements and
construction and design contracts. Seller has furnished to Buyer a correct and
complete copy of each written agreement listed in Schedule 3.6.
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Except as disclosed on Schedule 3.6, with respect to each Contract, neither
Seller nor, to the Seller Parties' knowledge, any other party thereto, is in
breach or default, and to the Seller Parties' knowledge, no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the Contract, except in
each case where such breaches, terminations, modifications, accelerations or
defaults, individually or in the aggregate, do not have a Material Adverse
Effect. Except as set forth in Schedule 3.6, there are no disputes pending or to
the best of the Seller Parties' knowledge, threatened, under or in respect of
any of the Contracts, other than those that individually and in the aggregate do
not have a Material Adverse Effect.
3.7 Permits and Compliance With Laws Generally.
3.7.1 Except as disclosed on Schedule 3.7, Seller possesses
and is in compliance with all Permits required to operate the Business as
presently operated and to own, lease or otherwise hold the Acquired Assets under
all applicable laws, rules, regulations, ordinances and codes, including
Environmental Laws (as defined below), except to the extent that any failure to
possess, or to comply with, any Permit, laws, rules, regulations or orders would
not, individually or in the aggregate, have a Material Adverse Effect. Except as
disclosed in Schedule 3.7, the Business is conducted by Seller in compliance
with all applicable laws (including the Occupational Safety and Health Act and
the rules and regulations thereunder ("OSHA"), zoning, building and similar laws
and Environmental Laws), rules, regulations, ordinances, codes, judgments and
orders, except for such failures to comply which do not individually or in the
aggregate have a Material Adverse Effect. Except as disclosed on Schedule 3.7,
all Permits of Seller relating to the operation of the Business are in full
force and effect, other than those the failure of which to be in full force and
effect would not individually or in the aggregate have a Material Adverse
Effect. There are no proceedings pending or, to the Seller Parties' knowledge,
threatened that seek the revocation, cancellation, suspension or any adverse
modification of any such Permits presently possessed by Seller other than those
revocations, cancellations, suspensions or modifications which do not
individually or in the aggregate have a Material Adverse Effect.
3.7.2 Except as set forth on Schedule 3.7, no outstanding
notice, citation, summons or order has been issued, no outstanding complaint has
been filed, no outstanding penalty has been assessed and no investigation or
review is pending or, to the knowledge of the Seller Parties, threatened, by any
Authority or other Person with respect to any alleged (i) violation by Seller or
any Affiliate of Seller relating to the Business of any law, ordinance, rule,
regulation, code or order of any Authority; or (ii) failure by Seller or any
Affiliate to have any Permit required in connection with the conduct of the
Business or otherwise applicable to the Business (including the Acquired
Assets), except, in each case, where such violations or failures, individually
or in the aggregate, would not have a Material Adverse Effect.
3.8 Environmental Matters. Except as set forth on Schedule 3.8
hereto, and with such exceptions as are not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect:
3.8.1 Seller has not disposed of or arranged for the disposal
of or Released any Hazardous Substances, other than in conformity with
Environmental Laws, at any Real Estate,
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or, in connection with the Business or Acquired Assets, at any other facility,
location, or other site.
3.8.2 Seller has not received any written notice or request
for information with respect to, and to the best of the Seller Parties'
knowledge, Seller has not been designated a potentially liable party for
Remedial Action, in connection with any Real Estate, or, as of the date hereof,
with respect to the Business or Acquired Assets, at any other facility,
location, or other site under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or comparable state statutes.
3.8.3 To the best of the Seller Parties' knowledge, except for
such use or storage of Hazardous Substances as is incidental to the conduct of
the Business, which use and storage is or has been in compliance with
Environmental Laws, and which use and storage has not caused any condition that
requires Remedial Action, no Real Estate has been used for the storage,
treatment, generation, processing, production or disposal of any Hazardous
Substances or as a landfill or other waste disposal site in violation of any
Environmental Law.
3.8.4 To the best of the Seller Parties' knowledge,
underground storage tanks are not, and have not in the past been, located on or
under any Real Estate.
3.8.5 There are no pending or unresolved claims against Seller
or the Business for investigatory costs, cleanup, removal, remedial or response
costs, or natural resource damages arising out of any Releases or threat of
Release of any Hazardous Substances at any Real Estate or, as of the date
hereof, with respect to the Business or the Acquired Assets or at any other
facility, location, or other site.
3.8.6 To the best of the Seller Parties' knowledge, no
polychlorinated biphenyls ("PCBs") or asbestos-containing materials are located
at or in any Real Estate in violation of Environmental Laws or which require
Remedial Action.
3.8.7 To the best of the Seller Parties' knowledge, no
Hazardous Substance managed or generated by or on behalf of Seller at the Real
Estate or in connection with the Business or Acquired Assets has come to be
located at any site that is listed or formally proposed for listing under
CERCLA, the Comprehensive Environmental Response, Compensation and Liability
Information System ("CERCLIS"), or any similar state list or that is the subject
of federal, state, or local enforcement actions or investigations.
3.8.8 The Seller Parties know of no facts or circumstances
related to environmental matters (i) in connection with the operation of the
Business or (ii) concerning the Real Estate, that are reasonably likely to
result in any material reduction in the quality or quantity of water available
for supply to the Seller Parties' customers.
3.8.9 The Seller Parties will within thirty (30) days of the
date hereof provide Buyer with copies of all written environmental audits or
investigations of which they are aware (after due inquiry) prepared for the Real
Estate or operations of the Business.
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3.8.10 Except as set forth in Schedule 3.8.10 or Citizens'
Annual Report on Form 10-K for the year ended December 31, 1998:
(a) The Seller Parties (including for purposes of
Section 3.8.10(a) and (b), Affiliates and predecessors of the Seller Parties)
are and have been for the past three years in full compliance with all federal
and state primary drinking water standards;
(b) The Seller Parties are and have been for the past
three years in full compliance with all federal and state secondary drinking
water standards; and
(c) As to all outstanding violations of state or federal
drinking water standards, as of the date hereof, the Seller Parties have
completed or are in the process of completion in accordance with all applicable
deadlines, all actions required by Environmental Law or Authorities to correct
or otherwise respond to such violations.
3.8.11 Except as set forth in Schedule 3.8.11, none of the
Seller Parties will be required to place any notice or restriction relating to
the presence of Hazardous Substances in the deed to any Real Estate, or in any
written instrument accompanying this Agreement, and no Real Estate has such a
notice or restriction in its deed or any other written instrument relating to
the purchase, lease or rental of such property.
For the purposes of these Sections 3.7 and 3.8: (A) "Remedial Action" means all
actions to (x) clean up, remove, treat or in any other way respond to any
presence, Release or threat of Release of Hazardous Substances; (y) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Substances so it does not endanger or threaten to endanger public or employee
health or welfare or the environment; or (z) perform studies, investigations or
monitoring necessary or required to investigate the foregoing; (B)
"Environmental Laws" means any common law or federal, state or local law,
statutes, rule, regulation, ordinance, code, judgment or order relating to the
protection of the environment or human health and safety and includes, but is
not limited to, CERCLA (42 U.S.C. section 9601, et seq.), the Clean Water Act
(33 U.S.C. section 1251 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.), the Toxic Substances Control Act (15 U.S.C.
section 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. section 300f et
seq.) and the Oil Pollution Act of 1990 (33 U.S.C. section 2701 et seq.), each
as has been or may be interpreted or amended as of the Closing Date and the
regulations promulgated pursuant thereto and in effect as of the Closing Date;
(C) "Released" means released, spilled, leaked, discharged, disposed of, pumped,
poured, emitted, emptied, injected, leached, dumped or allowed to escape; and
(D) "Hazardous Substances" means hazardous or toxic or polluting substance or
waste or contaminant under or pursuant to any Environmental Law, including
petroleum products, PCBs and radioactive materials.
3.9 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by the Selling Parties
of this Agreement, the Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by the Seller Parties, including
without limitation in connection with the assignment of the Contracts and
Permits contemplated hereby, except (i) as required by the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇
Antitrust Improvements Act of 1976 (the
▇▇
▇▇▇▇▇▇▇
"▇▇▇ ▇▇▇"), (▇▇) as specified on Schedule 3.9, and (iii) for such other
consents, approvals, authorizations, registrations or filings the failure of
which to obtain or make would not individually or in the aggregate have a
Material Adverse Effect or which are obtained by the Closing Date.
3.10 Title. Seller has good and valid title to all of the Acquired
Assets constituting personal property, good and marketable title in fee simple
to all of the owned Acquired Assets constituting Real Estate and good and valid
leasehold title to all of the leased Acquired Assets constituting Real Estate,
in each case, free and clear of Liens subject only to the Permitted Exceptions.
"Permitted Exceptions" as used herein shall mean (a) the Liens set forth in
Schedule 3.10 hereto, (b) Liens securing Taxes, assessments, governmental
charges or levies, or the claims of materialmen, mechanics, carriers and like
persons, all of which are not yet due and payable or which are being contested
in good faith or (c) such other Liens which, individually or in the aggregate,
do not have a Material Adverse Effect (it being understood that to the extent a
Permitted Exception relates to or arises from a Retained Liability, Seller shall
still be liable for such Retained Liability to the extent set forth herein).
3.11 Real Estate.
3.11.1 As of the date hereof, Seller has not received any
written or oral notice for assessments for public improvements against the Real
Estate which remains unpaid, and to the best knowledge of the Seller Parties, no
such assessment has been proposed. Except as set forth on Schedule 3.11, as of
the date hereof, there is no pending condemnation, expropriation, eminent domain
or similar proceeding affecting all or any portion of any of the Real Estate and
to the best knowledge of the Seller Parties no such proceeding is threatened.
3.11.2 Except as disclosed on Schedule 3.6, as of the date
hereof, Seller is not a lessee under any Contract relating to the use or
occupancy of the Real Estate involving annual payments in excess of $100,000.
3.11.3 Each parcel of the Real Estate has physical and, to
Seller's knowledge, legal vehicular and pedestrian access to and from public
roadways as may be reasonably necessary to the operation of the Business except
where the failure to have such access does not have a Material Adverse Effect.
To Seller's knowledge, no fact or condition exists which would result in the
termination of (a) the current access from each parcel of the Real Estate, and
(b) continued use, operation, maintenance, repair and replacement of all
existing and currently committed water lines used by Seller in connection with
the Business, except where such termination would not have a Material Adverse
Effect.
3.12 Taxes. The Seller Parties have (a) timely filed all material
returns and reports for Taxes, including information returns, that are required
to have been filed in connection with, relating to, or arising out of, the
Business, (b) paid all Taxes that are shown to have come due pursuant to such
returns or reports and (c) paid all other material Taxes not required to be
reported on returns in connection with, relating to, or arising out of, or
imposed on the property of the Business for which a notice of assessment or
demand for payment has been received or which have otherwise become due. To the
best of the Seller Parties' knowledge, all such returns or reports have been
prepared in accordance with all applicable laws and requirements in all material
respects.
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Except to the extent disclosed on Schedule 3.12, none of the assets of the
Business or constituting any of the Acquired Assets (a) is property that is
required to be treated as owned by another Person pursuant to the "safe harbor
lease" provisions of former Section 168(f)(8) of the Code, (b) is "tax-exempt
use property" within the meaning of Section 168(h) of the Code or (c) directly
or indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code.
3.13 Patents and Intellectual Property Rights. To the best of the
Seller Parties' knowledge, the operations of Seller do not make any unauthorized
use of any Intellectual Property except for any such unauthorized uses which do
not have a Material Adverse Effect. Assuming the consents listed as item XII on
Schedule 3.9 are obtained, Buyer will not lose any of Seller's rights to, or be
required to pay increased royalties for, any Intellectual Property included in
the Acquired Assets as a result of the Closing and the consummation of the
transactions contemplated by this Agreement, except for any such rights or such
increased royalties the loss or payment of which would, individually or in the
aggregate, not have a Material Adverse Effect.
3.14 Accounts Receivable. The accounts receivable of Seller arising
from the Business as set forth on the Interim Statement of Net Assets or arising
since the date thereof have arisen out of bona fide sales and deliveries of
goods, performance of services and other business transactions in the ordinary
course of business consistent with past practice; the allowance for collection
losses on the Interim Statement of Net Assets has been determined in accordance
with GAAP consistent with past practice.
3.15 Labor Relations. As of the date hereof, except as set forth in
Schedule 3.15, to best of the knowledge of the Seller Parties, there has been no
union organizing efforts with respect to the Business conducted within the last
three (3) years and there are none now being conducted with respect to the
Business. Except as set forth in Schedule 3.15, Seller has not at any time
during the three (3) years prior to the date of this Agreement had, nor, to the
best of the Seller Parties' knowledge, is there now threatened, a strike, work
stoppage or work slow down with respect to or affecting the Business which had
or could reasonably be expected to have a Material Adverse Effect. As of the
date hereof, except as set forth in Schedule 3.15, (i) no Employee is
represented by any union or other labor organization and (ii) there is no unfair
labor practice charge pending or, to the best knowledge of the Seller Parties,
threatened against Seller relating to any of the Employees as related to the
Business which could reasonably be expected to have a Material Adverse Effect.
3.16 Employee Benefit Plans.
3.16.1 Schedule 3.16.1 contains a true and complete list of
each "employee benefit plan," as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA), bonus, incentive,
deferred compensation, excess benefit, employment contract, stock purchase,
stock ownership, stock option, supplemental unemployment, vacation, sabbatical,
sick-day, severance or other material employee benefit plan, program or
arrangement (other than those required to be maintained by law), whether written
or unwritten, qualified or nonqualified, funded or unfunded, foreign or
domestic, (i) maintained by, or contributed to by Citizens or any of its
Affiliates, in respect of any Employee or Former Employee, or (ii) with respect
to which Citizens or any of its Affiliates has any liability in respect of any
Employee or Former Employee (the"Benefit Plans"). Except as disclosed on
Schedule 3.16.1, neither Citizens nor any
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of its Affiliates maintains any bonus, pension or welfare benefit plan, program
or arrangement, including any deferred compensation arrangement, for directors,
consultants or independent contractors of the Business.
3.16.2 A true and complete copy of each Benefit Plan and
related trust agreements and (to the extent applicable) a copy of each Benefit
Plan's current summary plan description and in the case of an unwritten Benefit
Plan, a written description thereof, has been furnished to Buyer. In addition,
to the extent applicable, Buyer has been provided a copy of the most recent
Internal Revenue Service ("IRS") determination letter issued to each Benefit
Plan and a copy of the most recent IRS Form 5500 together with all schedules and
accountants' statement filed, and actuarial reports prepared, on behalf of each
Benefit Plan.
3.16.3 Each Benefit Plan which is intended to be qualified
under Section 401(a) of the Code (as designated on Schedule 3.16.1) is so
qualified, and will remain so qualified upon the timely making of certain
amendments required by law during the applicable remedial amendment period, and
any trust forming a part of such a Benefit Plan is tax exempt under Section
501(a) of the Code. Each such Benefit Plan has been amended, as and when
necessary, to comply with the Tax Reform Act of 1986 and upon timely filing of
an Application for Determination with the Internal Revenue Service, will be
eligible to make further such amendments under the"remedial amendment period."
3.16.4 Except as disclosed in Schedule 3.16.4, each Benefit
Plan has been operated and administered in all material respects in accordance
with its terms and all applicable laws, including ERISA and the Code.
3.16.5 None of the Acquired Assets is subject to a Lien or Tax
under the Code or ERISA.
3.16.6 Neither Citizens nor any ERISA Affiliate and, to the
knowledge of the Seller Parties, no other Person, has taken any action or failed
to take any action with respect to any Benefit Plan that may subject Buyer or
any Benefit Plan under which liabilities may be assumed by Buyer under Sections
5.10, 5.11 or 5.12 ("Assumed Benefit Liabilities") to any material liability or
Tax under the Code or ERISA.
3.16.7 Neither Citizens nor any ERISA Affiliate has incurred
or expects to incur any withdrawal liability with respect to any Benefit Plan
which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA, including any contingent liability under Section 4204 of ERISA or
withdrawal liability arising from the actions of Citizens or any ERISA Affiliate
contemplated by this Agreement. All contributions that Citizens or any ERISA
Affiliate have been obliged to make to any Benefit Plan, including any
multiemployer plan, have been duly and timely made.
3.16.8 There are no pending or, to the knowledge of the Seller
Parties, threatened claims (other than routine claims for benefits),
assessments, complaints, proceedings or investigations of any kind in any court
or governmental agency with respect to any Benefit Plan which could reasonably
be expected to give rise to a material liability to Buyer.
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3.16.9 Except as disclosed on Schedule 3.16.9, no Benefit Plan
provides benefits, including without limitation, death or medical benefits,
beyond termination of service or retirement other than (i) coverage mandated by
law, or (ii) death or retirement benefits under a Benefit Plan qualified under
Section 401(a) of the Code. Seller's Retiree Medical Plan contains provisions
permitting Seller to modify or terminate retiree medical benefits at any time,
without prior notice to any covered individual. Except with respect to retirees,
"grandfathered" employees and collectively bargained employees, Seller knows of
no reason why its ability to effect those provisions would be limited.
3.16.10 With respect to each Benefit Plan that is a "group
health plan" within the meaning of Section 607 of ERISA and that is subject to
Section 4980B of the Code, Citizens and each ERISA Affiliate have complied in
all material respects with the continuation coverage requirements of the Code
and ERISA.
3.17 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 3.17, Seller has no liabilities with respect to the Business which
would constitute Assumed Liabilities, either direct or indirect, matured or
unmatured or absolute, contingent or otherwise, except:
3.17.1 the liabilities which would decrease the Base Cash
Purchase Price pursuant to Section 2.6.5 to the extent assumed by Buyer at
Closing;
3.17.2 liabilities arising in the ordinary course of business
under any Contract or Permit or with respect to any agreement or instrument
included within the definition of Real Estate; and
3.17.3 those liabilities incurred, consistent with past
business practice, in or as a result of the normal and ordinary course of
business and reflected in the books and records related to the Business;
3.17.4 the obligations and liabilities set forth in Sections
5.9, 5.10, 5.11 and 5.12 hereof; and
3.17.5 those other liabilities, which individually and in the
aggregate, would not have a Material Adverse Effect.
3.18 No Pending Litigation or Proceedings. Except as disclosed in
Schedule 3.18, there are no actions, suits, investigations or proceedings
pending against or, to the best of the Seller Parties' knowledge, threatened,
against or affecting, Seller, the Business or any of the Acquired Assets before
any court or arbitrator or Authority which individually or in the aggregate,
would have a Material Adverse Effect. Except as disclosed in Schedule 3.18,
there are currently no outstanding judgments, decrees or orders of any court or
Authority against any of the Seller Parties, which relate to or arise out of the
conduct of the Business or the ownership, condition or operation of the Business
or the Acquired Assets (other than any PUC order relating to rates, tariffs and
similar matters arising in the ordinary course of business) which individually
or in the aggregate would have a Material Adverse Effect.
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3.19 Supply of Utilities. Except as set forth on Schedule 3.19, the
Real Estate has adequate arrangements for supplies of electricity, gas, oil,
coal and/or sewer for all operations at the 1998 or current operating levels,
whichever is greater. Except as set forth on Schedule 3.19, there are no actions
or proceedings pending or, to the best of the Seller Parties' knowledge,
threatened, that would adversely affect the supply of electricity, gas, coal or
sewer to the Real Estate except for those which individually and in the
aggregate would not have a Material Adverse Effect.
3.20 Insurance. Schedule 3.20 lists the Seller Parties' policies and
contracts in effect as of the date hereof for insurance covering the Acquired
Assets or Assumed Liabilities and the operation of the facilities constituting
the Business owned or held by Seller, together with the risks insured against,
coverage limits and deductible amounts.
3.21 Relationship with Customers. As of the date hereof, Seller does
not have any current customer which accounted for more than 5% of the net sales
of the Business (taken together with the businesses being acquired by Buyer or
Affiliates of Buyer pursuant to the Related Purchase Agreements) for the
immediately preceding 12-month period.
3.22 WARN Act. Except as contemplated by Section 5.9 hereby or as
set forth in Schedule 3.22 hereto, within six months prior to the date hereof,
(i) Seller has not effectuated (a) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Business; or (b) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Business; (ii) Seller has not been affected by any transaction or engaged in
layoffs or employment terminations with respect to the Business sufficient in
number to trigger application of any similar state or local law; and (iii) none
of Seller's employees who are employed in connection with the Business has
suffered an "employment loss" (as defined in the WARN Act) .
3.23 Condition of Assets. Except as set forth on Schedule 3.23, the
buildings, machinery, equipment, tools, furniture, improvements and other fixed
tangible assets of the Business included in the Acquired Assets, taken as a
whole and taken together with the similar assets included among the assets being
acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements, are in good operating condition and repair, reasonable wear and tear
excepted.
3.24 Brokerage. None of the Seller Parties or their Affiliates have
made any agreement or taken any other action which might cause any Person to
become entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to Buyer or
its Affiliates.
3.25 All Assets. Except as set forth on Schedule 3.25 and for the
Excluded Assets, the Acquired Assets include all assets, rights, properties and
contracts the use of which is necessary to the continued conduct of the Business
by Buyer substantially in the manner as it was conducted prior to the Closing
Date, including the service of all utility customers in substantially the same
manner and at substantially the same service levels as provided by Seller on the
date hereof.
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3.26 Year 2000 Matters. Citizens has (1) initiated a review and
assessment of all mission critical areas within the Business and related
operations (including those affected by suppliers and vendors) that it
reasonably believes could be adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by any Seller Party (or suppliers
and vendors) may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
all as set forth in Citizens' Annual report on Form 10-K for the fiscal year
ended December 31, 1998 and Citizens' Quarterly reports on Form 10-Q for the
periods ending March 31, 1999 and June 30, 1999, and (iii) to date, implemented
that plan substantially in accordance with that timetable. Seller has
contingency plans that are dedicated to ensuring that established and expected
levels of customer service are maintained without interruption, while core
business functionality is preserved during the millennium transition. With
respect to its suppliers and vendors, the foregoing representation and warranty
is expressly limited to matters known to Seller after making reasonable
inquiries of such suppliers and vendors. Seller makes no representation or
warranty with respect to the receipt or accuracy of any response received from
any vendor or supplier.
3.27 Product Liability. Except as disclosed in Schedule 3.27 and
except for those liabilities which individually or in the aggregate would not
have a Material Adverse Effect, there are no (a) liabilities of the Seller
Parties or their Affiliates, fixed or contingent, asserted or, to the knowledge
of the Seller Parties, unasserted, with respect to any product liability or
similar claim that relates to any product or service sold by Seller or the
Business to others or (b) liabilities of the Seller Parties or their Affiliates,
fixed or contingent, asserted or, to the knowledge of the Seller Parties
unasserted, with respect to any claim for the breach of any express or implied
product warranty or a similar claim with respect to any product or service sold
by Seller or the Business to others.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer jointly and severally represent and warrant to Seller as
follows:
4.1 Organization and Good Standing.
4.1.1 Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
4.1.2 Buyer is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to own, lease and operate the Acquired
Assets and the Business. Buyer is qualified to do business and is in good
standing in all jurisdictions wherein the nature of the business conducted by it
or Buyer's ownership or use of assets and properties make such qualification
necessary, except such failures to be qualified or to be in good standing, if
any, which when taken together with all such failures of Buyer do not have a
material adverse effect on its ability to perform its obligations under this
Agreement and the Transaction Documents.
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4.2 Authorization and Enforceability. Each of Buyer and Parent has
full corporate power and authority to execute, deliver and perform this
Agreement and the other Transaction Documents to which either of them is a
party. The execution, delivery and performance by Buyer and Parent of this
Agreement and the Transaction Documents to which Buyer and/or Parent is a party
have been duly authorized by all necessary corporate action on the part of each
of them. This Agreement has been duly executed and delivered by Buyer and
Parent, and as of the Closing Date the other Transaction Documents will be duly
executed and delivered by Buyer and Parent. This Agreement is a legal, valid and
binding obligation of Buyer and Parent, enforceable against them in accordance
with its terms, except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court. As of the Closing
Date, each of the other Transaction Documents to which Buyer and Parent is a
party will be duly executed and delivered by Buyer and Parent and will
constitute the legal, valid and binding obligations of Buyer and Parent,
enforceable against them in accordance with its respective terms, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court.
4.3 No Violation of Laws or Agreements. The execution, delivery and
performance of this Agreement and the Transaction Documents by Buyer and/or
Parent do not, and the consummation of the transactions contemplated hereby and
thereby will not, (a) contravene any provision of the Articles of Incorporation
or Bylaws of Buyer or the Certificate of Incorporation or Bylaws of Parent; or
(b) violate, conflict with, result in a breach of, or constitute a default (or
an event which would with the passage of time or the giving of notice, or both,
constitute a default) under, or result in or permit the termination,
modification, acceleration, or cancellation of (i) any indenture, mortgage, loan
or credit agreement, license, instrument, lease, contract, plan, permit,
authorization, proof of dedication or other agreement or commitment, oral or
written, to which Parent or Buyer is a party, or by which any of their assets or
properties may be bound or affected, except for such violations, conflicts,
breaches, terminations, modifications, accelerations, cancellations, interests
or rights which, individually or in the aggregate do not have a material adverse
effect on their respective ability to perform their obligations under this
Agreement and the Transaction Documents, or (ii) any judgment, injunction, writ,
award, decree, restriction, ruling, or order of any court, arbitrator or
Authority or any applicable constitution, law, ordinance, rule or regulation to
which Buyer or Parent is subject other than those violations and conflicts which
individually or in the aggregate do not have a material adverse effect on their
respective ability to perform their obligations under this Agreement and the
Transaction Documents.
4.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by Buyer and Parent of
this Agreement, the other Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by Buyer or Parent except (i) as
required by the HSR Act, (ii) as specified on Schedule 3.9 and (iii) for such
consents, approvals, authorizations, registrations or filings, the failure to
obtain or make would not individually or in the aggregate have a material
adverse effect on their respective ability to perform their obligations under
this Agreement and the Transaction Documents.
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4.5 Financing. Buyer and Parent have, and at the Closing Date, will
have sufficient resources to pay the Purchase Price, and Parent, Buyer or the
other Affiliates of Parent that are buyers of the assets and businesses being
acquired pursuant to the Related Purchase Agreements have, and at the Closing
Date, will have sufficient resources to pay the purchase prices set forth in the
Related Purchase Agreements.
4.6 Brokerage. None of Parent, Buyer or their Affiliates have made
any agreement or taken any other action which might cause any Person to become
entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to the
Seller Parties.
4.7 Insurance. Schedule 4.7 lists the policies and contracts in
effect as of the date hereof for casualty and property insurance covering
Buyer's assets and properties and the operation of Buyer's business, together
with the risks insured against, coverage limits and deductible amounts.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Conduct of Business. Except (i) as otherwise specifically
permitted by this Agreement, (ii) as set forth in Schedule 5.1 hereto or (iii)
with the prior written consent of Buyer, from and after the date of this
Agreement and up to and including the Closing Date, each of the Seller Parties
agree that:
5.1.1 Seller shall conduct the Business as presently operated
and only in the ordinary course of business consistent with past practice.
5.1.2 They shall promptly inform Buyer in writing of any
specific event or circumstance of which they are aware, or of which they receive
notice, that has or is likely to have, individually or in the aggregate, taken
together with the other events or circumstances, a Material Adverse Effect on
the Acquired Assets or the Assumed Liabilities.
5.1.3 Seller shall not:
(a) change or modify in any material respect existing
credit and collection policies, procedures and practices with respect to
accounts receivable;
(b) enter into any contract or commitment, waive any
right or enter into any other transaction (except in the ordinary course of
business) which would have a Material Adverse Effect;
(c) except in the event of service interruption,
emergency or casualty loss, commit to acquire subsequent to the Closing Date on
behalf of the Business any capital asset or group of capital assets costing in
excess of $1,000,000 that is not included in the capital budget of Seller for
fiscal year 2000 and which, if so acquired, would be included in the Acquired
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Assets; commencing December 1, 1999, accept or receive customer advances for
construction in excess of $9,000,000 (when combined with customer advances
relating to the businesses being acquired by Buyer or Affiliates of Buyer
pursuant to the Related Purchase Agreements) per each of the next four
consecutive three-month periods unless pursuant to an existing tariff, Contract
or Permit of Seller; or sell or lease or agree to sell or lease or otherwise
dispose of any assets included in the Acquired Assets except in the ordinary
course of the conduct of the Business, consistent with past practice;
(d) except in the ordinary course of business,
consistent with past practice or as required under any of Seller's debt
instruments or indentures, mortgage, pledge or subject to any Lien (other than
Permitted Liens) any of the Acquired Assets;
(e) change any compensation or benefits or grant any
material new compensation or benefits payable to or in respect of any
Transferred Employee except (i) as required by law, and (ii) in the ordinary
course, consistent with past practice; provided, however, no individual Employee
shall in any event receive a compensation increase in excess of seven percent
(7%);
(f) other than in the ordinary course of business
consistent with past practice, sell or otherwise transfer any assets necessary,
or otherwise material to the conduct of, the Business which would constitute
Acquired Assets;
(g) change the Seller's method of accounting or keeping
its books of account or accounting practices with respect to the Business,
except as required by GAAP or any Authority;
(h) intentionally and wilfully take or omit to take any
action which if taken or omitted prior to the date hereof would constitute or
result in a breach of any representations or warranties set forth in Sections
3.1, 3.2, 3.3, 3.4, 3.7, 3.8, 3.10, 3.14, 3.16 and 3.25 hereof (it being
understood that the failure to cure a breach shall not, by itself, be an
intentional and wilful omission to take action); or
(i) prepay, redeem, retire, refund or otherwise
extinguish any of the Assumed Indebtedness.
5.2 Negotiations. Neither Citizens nor any Person controlled by
Citizens or under common control with Citizens (each such person being a
"Section 5.2 Affiliate"), nor any officer, director, employee, representative or
agent of Citizens or any of their Section 5.2 Affiliates, shall, directly or
indirectly, solicit or initiate or participate in any way in discussions or
negotiations with, or provide any information or assistance to, or enter into an
agreement with any Person or group of Persons (other than Parent, Buyer or any
Person controlled by Parent or Buyer or under common control with Parent, Buyer
or any Persons providing financing to the parties hereto in connection with
facilitating the consummation of the transactions contemplated by this
Agreement) concerning any acquisition, merger, consolidation, liquidation,
dissolution, disposition or other transaction (or series of such transactions)
that would result in the transfer to any such Person or
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group of Persons of ten percent (10%) of the Acquired Assets (as measured by net
book value of such assets on the date of each such transaction) or the
acquisition, merger, consolidation, liquidation, dissolution, disposition or
other transaction (or series of such transactions) involving the Seller Parties,
if such acquisition, merger, consolidation, liquidation, dissolution,
disposition or other transaction (or series of such transactions) would be
inconsistent, in any respect, with the obligations of the Seller Parties
hereunder (any of the foregoing transactions, a "Competing Transaction").
5.3 Disclosure Schedules. As promptly as practicable, the Seller
Parties will provide Buyer with a supplement or amendment to the Disclosure
Schedules with respect to any matter, condition or occurrence which is required
to be set forth or described in the Disclosure Schedules. For the avoidance of
doubt, a matter, condition or occurrence shall only be "required" to be set
forth or described in the Disclosure Schedules if the failure to be so disclosed
would result in a breach of the applicable representation or warranty (qualified
by Material Adverse Effect where applicable) on the date hereof or on the
Closing Date. In addition, Seller shall have the right at any time and from time
to time prior to the Closing to supplement or amend the Disclosure Schedules.
Seller may provide Disclosure Schedules with respect to any representation or
warranty of this Agreement whether or not a specific schedule is referred to
therein. In the event that any supplement or amendment of such Disclosure
Schedules shall be provided later than five (5) business days prior to the
Closing Date, the Buyer shall have the right to delay the Closing for a period
of five (5) business days in order for Buyer to review such supplement or
amendment. No such supplement or amendment shall be deemed to cure any breach of
or alter any representation or warranty made in this Agreement so as to permit
the Closing to occur unless Buyer specifically agrees thereto in writing. The
Seller Parties shall promptly inform Buyer, and Buyer will promptly inform the
Seller Parties of any fact or event which comes to their attention, the
existence of which constitutes or likely will constitute a breach in any
material respects of any representation or warranty in this Agreement. In
addition, Parent will, within five (5) days of receipt thereof, forward to
Seller (i) any title report Buyer receives from a title company with respect to
the Real Estate and (ii) any written communication regarding a specific Lien or
title defect affecting a specifically identified parcel of the Real Estate sent
to the President, Treasurer or General Counsel of Parent or the President or
Corporate Counsel of any other Buyer Party, and sent by a party other than the
Seller Parties, their legal counsel, financial advisors or representatives.
5.4 Mutual Covenants. The parties mutually covenant from the date of
this Agreement to the Closing Date (and subject to the other terms of this
Agreement, including Section 5.8 hereof):
5.4.1 to cooperate with each other in determining whether
filings are required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents;
5.4.2 to use all reasonable efforts to obtain promptly the
satisfaction (but not waiver) of the conditions to the Closing of the
transactions contemplated herein (each party hereto shall furnish to the other
and to the other's counsel all such information as may be reasonably required in
order to effectuate the foregoing action); and
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5.4.3 to advise the other parties promptly if such party
determines that any condition precedent to its obligations hereunder will not be
satisfied in a timely manner.
5.5 Filings and Authorizations. The parties hereto will as promptly
as practicable, make or cause to be made all such filings and submissions under
laws, rules and regulations applicable to it or its Affiliates as may be
required to consummate the terms of this Agreement, including all notifications
and information to be filed or supplied pursuant to the HSR Act and with the
applicable public utility commission (each, a "PUC"). Any such filings and
supplemental information will be in substantial compliance with the requirements
of the applicable law, rule or regulation. Each of Parent and Buyer, on the one
hand, and the Seller Parties, on the other, shall furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing or submission to the PUC or which
is necessary under the HSR Act. The Seller Parties, on the one hand and Buyer
and Parent, on the other, shall keep each other apprised of the status of any
communications with, and inquiries or requests for additional information from,
any Authority, including the PUC, the United States Federal Trade Commission
("FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division"), and shall comply promptly with any such inquiry or
request. Each of Citizens, Seller, Parent and Buyer will use its reasonable
efforts to obtain any clearance required under the HSR Act and from the PUC for
the purchase and sale of the Acquired Assets in accordance with the terms and
conditions hereof. Notwithstanding the foregoing, nothing contained in this
Agreement will require or obligate any party or their respective Affiliates: (i)
to initiate, pursue or defend any litigation (or threatened litigation) to which
any Authority (including the PUC, the Antitrust Division and the FTC) is a
party; (ii) to agree or otherwise become subject to any material limitations on
(A) the right of Buyer or its Affiliates effectively to control or operate the
Business or the right of Seller or its Affiliates effectively to control or
operate Citizens' other businesses, (B) the right of Buyer or its Affiliates to
acquire or hold the Business or the right of Seller or its Affiliates to hold
the Excluded Assets or Citizens' other businesses, or (C) the right of Buyer to
exercise full rights of ownership of the Business or all or any material portion
of the Acquired Assets or the right of Citizens to exercise full rights of
ownership of Citizens' other businesses or all or any material portion of the
Excluded Assets; or (iii) to agree or otherwise be required to sell or otherwise
dispose of, hold separate (through the establishment of a trust or otherwise),
or divest itself of all or any portion of the business, assets or operations of
Citizens, Seller, Parent, Buyer, any Affiliate of Buyer or the Business. The
parties agree that no representation, warranty or covenant of Buyer, Parent, or
Citizens contained in this Agreement shall be breached or deemed breached as a
result of the failure by Parent and Buyer on the one hand or the Seller Parties,
on the other, to take any of the actions specified in the preceding sentence.
5.6 Public Announcement. No party hereto shall make or issue, or
cause to be made or issued, any public announcement or written statement
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party (which will not be unreasonably
withheld or delayed), unless counsel to such party advises that such
announcement or statement is required by law (in which case the parties shall
make reasonable efforts to consult with each other prior to such required
announcement).
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5.7 Further Assurances. Each of Citizens, Parent, Buyer and Seller,
from time to time after the Closing, at Buyer's or Seller's request, will
execute, acknowledge and deliver to the applicable person such other instruments
of conveyance and transfer and will take such other actions and execute such
other documents, certifications, and further assurances as Buyer or Seller, as
the case may be, may reasonably require in order to transfer, in accordance with
the terms and conditions of this Agreement, more effectively in Buyer or to put
Buyer more fully in possession of any of the Acquired Assets or better to enable
Buyer to complete, perform and discharge any of the Assumed Liabilities. Each
party shall cooperate and deliver such instruments and take such action as may
be reasonably requested by the other party in order to carry out the provisions
and purposes of this Agreement and the transactions contemplated hereby.
5.8 Cooperation.
5.8.1 Parent, Buyer, Citizens and Seller shall cooperate and
shall cause their respective Affiliates, officers, employees, agents and
representatives to cooperate to ensure the orderly transition of the Business
from Seller to Buyer and to minimize the disruption to the Business resulting
from the transactions contemplated hereby.
5.8.2 Without limiting the foregoing, neither Parent and
Buyer, nor Citizens and Seller (nor any of their respective Affiliates) shall
make any filings pursuant to federal or state securities laws ("Securities
Filings") or make any consent solicitations to holders of Assumed Indebtedness
which include any information about Seller, Buyer (or their respective
Affiliates) or the transactions contemplated hereby without consulting with the
other party and providing the other party a reasonable opportunity to review and
comment on such information, it being understood and agreed that any party may
so disclose such information in its reasonable judgment to the extent such
party's counsel advises it that such disclosure is advisable under applicable
law. Each of Parent, Buyer, Citizens and Seller shall, and shall cause their
respective Affiliates to, comply with all applicable federal and state
securities laws in connection with this Agreement and the transactions
contemplated hereby (including any solicitation of consents of holders of
Assumed Indebtedness), and all information supplied by any party for inclusion
in any Securities Filing or consent solicitation, including, without limitation,
any proxy or information statement, or any registration statement on Form S-4
shall be true and correct in all material respect and shall not contain any
untrue statement of a material fact or omit to state any material fact which is
required to be stated therein or which is necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made.
5.8.3 During the first 90 days after the Closing Date (180
days for Trademarks on tanks), Buyer shall have the right to use all of the
logos, trademarks and trade identification of Seller as are located at the Real
Estate or on the Acquired Assets (collectively, the "Trademarks"). Buyer's use
of the Trademarks shall be in accordance with such reasonable quality control
standards as may be promulgated by Seller and provided to Buyer. If Seller shall
notify Buyer in writing of Buyer's material failure to comply with such
reasonable quality control standards and Buyer continues to not comply with such
reasonable quality control standards for more than 20 days after receipt of such
notice, Seller shall have the right to terminate Buyer's right under this
Section 5.8.3 to use the Trademarks.
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5.8.4 Seller shall give Buyer and its representatives
(including Buyer's Accountants, consultants, counsel and employees), upon
reasonable notice and during normal business hours, full access to the
properties, contracts, employees, books, records and affairs of Seller to the
extent relating to the Business and the Acquired Assets, and shall cause its
officers, employees, agents and representatives to furnish to Buyer all
documents, records and information (and copies thereof), to the extent relating
to the Business and the Acquired Assets, as Buyer may reasonably request. Except
to the extent disclosed in the Disclosure Schedules in accordance with Sections
5.3 and 8.4, no investigation or receipt of information by Buyer pursuant to, or
in connection with, this Agreement, shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Seller Parties under
this Agreement or the conditions to the obligations of Parent or Buyer under
this Agreement. All information provided to Buyer under this Agreement shall be
held subject to the terms and conditions of the Confidentiality Agreement dated
August 2, 1999 between Citizens and Parent.
5.9 Employees; Employee Benefits.
5.9.1 Schedule 5.9.1 lists divisions and the number of all
salaried and hourly employees actively employed (as of the date of this
Agreement) in each division by Seller or any of its Affiliates whose primary
responsibilities relate to the Business. None of the employees listed on
Schedule 5.9.1 is subject to a collective bargaining agreement. All individuals
referred to on Schedule 5.9.1 are herein referred to as the "Employees." No
later than March 1, 2000, Buyer and Seller shall determine the number of
Employees to whom Buyer will offer employment, which number shall be at least
equal to 250 (when combined with offers made by Buyer or Affiliates of Buyer to
employees of Affiliates of Seller in connection with the Related Purchase
Agreements) (the "Base Number"), and such additional number of Employees, if
any, whom Buyer also wishes to employ. Upon determination of such Employees,
Seller will supplement Schedule 5.9.1 with the name, job title, unused vacation,
current base salary or hourly wage, date of hire and assigned location of each
Transferred Employee (as that term is defined below). At the Closing, Seller
shall provide an updated Schedule 5.9.1 which shall disclose all the information
required under the preceding sentence as of the most recent practicable date
prior to Closing.
5.9.2 Effective as of the Closing, Buyer shall offer
employment to at least the Base Number of those employees included on Schedule
5.9.1. All Employees to whom Buyer offers employment and who accept such
employment are herein referred to as the "Transferred Employees." In the event
any Employees do not accept Buyer's offer of employment, Buyer shall offer
employment to such additional employees (the identity of whom shall be
determined by Buyer and Seller) as are necessary to bring the total number of
Transferred Employees to the Base Number. Subject to the provisions of this
Section 5.9 and Section 5.12, Buyer shall provide each Transferred Employee with
base compensation at least equal to that provided by Seller on the Closing Date,
and employee benefits which are substantially comparable to those provided by
Buyer to its other similarly situated employees. Buyer agrees (i) to credit the
service of each Transferred Employee with Seller and its Affiliates before the
Closing, for all purposes under all employee benefit plans and arrangements
maintained by Buyer (and/or any of its Affiliates) for the benefit of any
Transferred Employee (including without limitation for purposes of attainment of
retirement dates and payment of optional forms of benefits), other than for
purposes of benefit accrual under any
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"defined benefit plan", within the meaning of Section 3(35) of ERISA, (ii) to
provide accrued vacation to Transferred Employees in the year in which the
Closing occurs, equal to the excess, if any, of the accrued vacation to which
the Transferred Employee would otherwise be entitled under Seller's vacation
plan during that year over the amount of accrued vacation the Transferred
Employee had taken during that year, and, thereafter, to provide vacation to
Transferred Employees on the same basis as provided to similarly situated
employees of Buyer, with service credit as provided in (i) hereof, and (iii) to
provide severance benefits to Transferred Employees terminated by Buyer that are
substantially comparable to those benefits provided by Buyer. Buyer shall be
responsible for providing to each Transferred Employee vacation in an amount
equal to the Transferred Employee's vacation entitlement for the year of Closing
reduced by the number of vacation days such Transferred Employee has taken on or
before Closing. Nothing in this Section 5.9 shall limit Buyer's authority to
terminate the employment of any Transferred Employee at any time and for
whatever reason. Until the second anniversary of the Closing Date, neither
Seller nor any of its Affiliates shall directly or indirectly solicit or offer
employment to any Transferred Employee then employed by Buyer or its Affiliates.
5.9.3 Except as specifically provided in Sections 5.9 and
5.12, Seller shall be solely responsible for any liability, claim or expense
(including reasonable attorneys' fees) related to compensation or employee
benefits incurred by Buyer as the result of any claims against Buyer or its
Affiliates that are made by any Employees or Former Employees (or the
Beneficiary of any Employee or Former Employee) who are not made offers to
become employees of Buyer or its Affiliates including, without limitation,
claims asserted against Buyer as a result of their termination by Seller or its
Affiliates.
5.9.4 Seller shall be solely responsible for any liability,
claim or expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation claims or the benefits
provided under the Benefit Plans, whether paid before or after the Closing) owed
to any Transferred Employee or the Beneficiary of any Transferred Employee or
any Water Sector Retiree or the Beneficiary of any Water Sector Retiree that
arises out of or relates to (i) the employment relationship between Seller or
any of its Affiliates and such Transferred Employee or Beneficiary or (ii) any
benefit claim or expense (including medical expenses) incurred before Closing
under any Benefit Plan. For purposes of this Agreement, a medical expense shall
be deemed to be incurred when the services giving rise to a claim are rendered,
regardless of when billed or paid. Without limiting the foregoing, Seller shall
be responsible for the payment of any employee benefits that become due to any
Transferred Employees as a result of their termination by Seller.
5.9.5 Except as otherwise specifically provided in Section
5.9, 5.11 or 5.12, Buyer shall be solely responsible for any liability, claim or
expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation, claims or the benefits
provided under any employee benefit plan or arrangement of Buyer incurred after
Closing) owed to any Transferred Employee or Beneficiary of any Transferred
Employee or any Water Sector Retiree or Beneficiary of any Water Sector Retiree
that arises out of or relates to (i) the employment relationship between Buyer
or any of its Affiliates and any Transferred Employee or (ii) any benefit claim
or expense (including medical expense) incurred after Closing under any
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employee benefit plan sponsored or contributed to by Buyer or an ERISA Affiliate
after Closing. Notwithstanding the foregoing, Buyer shall not be responsible for
the payment of any employee benefits that become due to any Transferred
Employees under any Benefit Plan (other than the Assumed Benefit Liabilities).
5.9.6 Buyer agrees to reimburse Seller for its proportionate
share (as defined below) of any amount in excess of $1,000,000 paid by Seller as
severance under Citizens' severance plan as in effect on the date hereof to any
Employees (when such amount paid by Seller is aggregated with amounts paid by
Citizens to other employees as referenced in Section 5.9.6 of the Related
Purchase Agreements) provided (i) Buyer does not hire such Employees in
accordance with the provisions of Sections 5.9, 5.11 and 5.12 and (ii) Seller
provides notice to those Employees on or before the Closing Date to the effect
that their employment will be terminated on or shortly after the Closing Date.
Buyer will pay such reimbursement to Citizens within 5 days after receipt of a
list of the Employees showing which are entitled to severance pay, the amounts
of that severance pay and certifying that those amounts have been paid. The
Buyer's "proportionate share" means the amount obtained by multiplying the
amount in excess of $1,000,000 by a fraction, the numerator of which is the
amount of severance paid by Seller to Employees under Section 5.9.6 of this
Agreement and the denominator of which is the sum of (i) the amount paid by
Seller to Employees under Section 5.9.6 of this Agreement and (ii) the aggregate
amount paid by Citizens under Section 5.9.6 of each of the Related Purchase
Agreements.
5.9.7 Until the second anniversary of the Closing Date, Buyer
shall not directly or indirectly solicit or offer employment to any active
employee of Seller, other than the Transferred Employees.
5.10 Employee Pension Plan.
5.10.1 At least fifteen days prior to the Closing Date, Seller
shall take any and all actions necessary to cease benefit accruals and fully
vest all Transferred Employees in their accrued benefits under the Citizens
Pension Plan ("Seller's Pension Plan" or "Citizens Pension Plan"). Seller shall
retain liability and related assets for benefits accrued through the Closing
Date by Transferred Employees under Seller's Pension Plan.
5.10.2 As of the Closing Date, Transferred Employees shall be
covered under the American Pension Plan, and shall be given credit for service
with Seller and its Affiliates for eligibility, vesting, attainment of
retirement dates, subsidized benefits, and entitlement to optional forms of
payment, but not for accrual of benefits.
5.11 Employee Savings Plan.
5.11.1 Effective upon the date of the transfer described in
Section 5.11.2, subject to the terms and conditions of this Agreement, Parent
shall cause the Savings Plan for Employees of American Water Works Company, Inc.
(the "American Savings Plan") to assume the liability of the Seller's 401(k)
Plan for the account balances of those Transferred Employees participating in
the Seller's 401(k) Plan on the Closing Date (the "Affected Participants") that
are
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transferred to the American Savings Plan. As of the Closing Date, Affected
Participants shall be 100% vested in their account balances under the Seller's
401(k) Plan. Transferred Employees shall be given credit under the American
Savings Plan for service with Seller and its Affiliates for eligibility,
vesting, attainment of retirement dates, contribution levels and optional forms
of benefit payment, to the same extent that credit for such service has been
given by Seller and its Affiliates.
5.11.2 Buyer shall deliver to Seller as soon as practicable,
but in no event later than ninety (90) days after Closing (i) a certified copy
of the American Savings Plan and any amendment necessary to effectuate the
transfer of assets and the assumption of account balances in accordance with
this Section 5.11, (ii) a certified copy of the trust agreement for the American
Savings Plan; (iii) the most recent favorable determination letter from the IRS
with respect to the American Savings Plan; and (iv) an opinion from Buyer's
legal counsel acceptable to Seller that the American Savings Plan, as so
amended, complies or will comply on a timely basis with the applicable
provisions of the Code relating to the qualification of, and the transfer of
assets and assumption of benefit liabilities by, the American Savings Plan.
Seller shall deliver to Buyer as soon as practicable, but in no event later than
ninety (90) days after Closing, an opinion from Seller's legal counsel
acceptable to Buyer that the Seller's 401(k) Plan complies or will comply on a
timely basis with the applicable provisions of the Code relating to the
qualification of the Seller's 401(k) Plan, and the transfer of assets to, and
assumptions of benefit limitations by, the American Savings Plan. As soon as
practicable, but in any event within 120 days after Closing, Seller shall cause
the trustee of the Seller's 401(k) Plan to transfer in cash and promissory notes
representing outstanding loans to Affected Participants to the trustee of the
American Savings Plan an amount equal to the sum of the account balances of the
Transferred Employees (the "Transferred Accounts") calculated as of the most
recent valuation date under the Seller's 401(k) Plan (which shall, in any event,
be within thirty (30) days of the transfer). Both the Seller Parties and Buyer
will file any IRS Form 5310A that is required with respect to the transfer
contemplated by this Section 5.11 date at least 30 days prior to the transfer.
Upon the transfer described in this Section 5.11, Buyer and the American Savings
Plan shall be responsible for all benefits attributable to the Transferred
Accounts to which Transferred Employees were entitled under the Seller's 401(k)
Plan as of such date, and Seller and the Seller's 401(k) Plan shall cease to
have any liability, contingent or otherwise, for such benefits.
5.12 Welfare Benefits.
5.12.1 Within sixty (60) days after the Closing, Seller agrees
to transfer to trusts established by Buyer under Section 501(c)(9) of the Code
("Buyer's VEBAs") the amount held under any trust established by Seller under
Section 501(c)(9) of the Code ("Seller's VEBAs") to fund post-retirement health
care and life insurance benefits attributable to the Business, including Former
Employees identified on Schedule 5.12 (the "Water Sector Retirees") and any
"grandfathered" Transferred Employees as set forth on Schedule 5.12. Buyer
agrees to provide post-retirement health care and life insurance benefits to the
Water Sector Retirees and, as applicable, Transferred Employees who become
eligible for such benefits after Closing and further agrees that Buyer's VEBAs
will apply an amount at least equal to the sum of the assets (and earnings
thereon calculated at the rate of return generated by Buyer's VEBAs) transferred
from Seller's VEBAs to provide post-retirement health care and life insurance
benefits for such employees. Upon Closing, Buyer shall be responsible for all
obligations of the Seller Parties to provide post-retirement health care and
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life insurance benefits "incurred" (within the meaning of Section 5.9.4) after
the Closing and the Seller Parties shall cease to have any liability, contingent
or otherwise, for such benefits. In consideration of such transfer, Buyer agrees
not to terminate or materially modify those post-retirement health and life
benefit provisions applicable to such grandfathered Transferred Employees and
Water Sector Retirees as such provisions are in effect immediately prior to the
Closing Date.
5.12.2 Buyer shall take all action necessary and appropriate
to ensure that, as of the Closing Date, Buyer provides medical, health, dental,
flexible spending account, accident, life, short-term disability, long-term
disability and other employee welfare benefits (including retiree medical
benefits) to Transferred Employees that, in the case of Non-Union Transferred
Employees and Union Transferred Employees are substantially similar to those
benefits provided by Buyer under its corresponding welfare benefit plans (the
"Buyer's Welfare Plans"). For purposes of determining eligibility to
participate, and entitlement to benefits, in each Buyer Welfare Plan, each
Transferred Employee shall be credited with service, determined under the terms
of the corresponding welfare plans maintained by Seller on the Closing Date
(hereinafter referred to collectively as the "Seller Welfare Plans"). Any
restrictions on coverage for pre-existing conditions, waiting periods, and
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived in Buyer's Welfare Plans for Transferred Employees and retirees of the
Water Sector and their respective Beneficiaries, and Transferred Employees and
retirees of the Water Sector and their respective Beneficiaries shall receive
credit under the Buyer Welfare Plans for co-payments, payments under a
deductible limit made by them, and for out-of-pocket maximums applicable to them
during the plan year of the Seller Welfare Plan in which the Closing Date
occurs. As soon as practicable after the Closing Date, Seller shall deliver to
Buyer a list of the Transferred Employees and retirees of the Water Sector and
their respective Beneficiaries who had credited service under a Seller Welfare
Plan, together with each such individual's service, copayment, deductible and
out-of-pocket payment amounts under such plan.
5.12.3 Seller shall transfer to Buyer's flexible benefits plan
any balances standing to the credit of Transferred Employees under Seller's
flexible benefits plan as of the Closing Date. Seller shall provide to Buyer
prior to the Closing Date a list of those Transferred Employees that have
participated in the health or dependent care reimbursement accounts of Seller,
together with their elections made prior to the Closing Date with respect to
such Account, and balances standing to their credit as of the Closing Date.
5.13 Taxes. The Seller Parties, on the one hand, and Parent and
Buyer, on the other, shall (a) each provide the other with such assistance as
may reasonably be requested by either of them in connection with the preparation
of any Tax return, any audit or other examination by any taxing authority or any
judicial or administrative proceeding with respect to Taxes; (b) each retain and
provide the other with any records or other information which may be relevant to
such return, audit, examination or proceeding, and (c) each provide the other
with any final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Tax return of
the other for any period (which shall be maintained confidentially). Without
limiting the generality of the foregoing, Parent and Buyer, on the one hand, and
the Seller Parties, on the other, shall retain, until the applicable statutes of
limitations (including all extensions) have expired, copies of all Tax returns,
supporting workpapers, and other books and records or
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information which may be relevant to such returns for all Tax periods or
portions thereof ending before or including the Closing Date, and shall not
destroy or dispose of such records or information without first providing the
other party with a reasonable opportunity to review and copy the same.
5.14 Intentionally Omitted.
5.15 Citizens' Guarantees and Surety Instruments. Each of Parent and
Buyer shall use its reasonable efforts to assist Citizens in obtaining full and
complete releases on the guarantees, letters of credit, bonds and other surety
instruments listed on Schedule 5.15. For purposes of this Section 5.15 and
Section 5.16, reasonable efforts: (a) shall include Parent's or Buyer's
assumption of the Contracts and the Permits on the terms set forth in this
Agreement; and (b) shall include an obligation on the part of Parent or Buyer to
provide a guarantee, letter of credit, bond or other required surety instrument
at Closing to the extent required by any Contract or Permit and in general to
provide an equivalent surety instrument to be substituted for any surety
instrument provided by Citizens to any beneficiary in connection with the
Business.
5.16 Intentionally Omitted.
5.17 Schedule of Permits. No later than March 13, 2000, Citizens
shall deliver to Buyer a schedule, to be identified as Schedule 5.17, which sets
forth all material Permits required for the use of the Acquired Assets and the
operation of the Business by Buyer substantially in the manner as it was
conducted prior to the date hereof. For purposes of this Section 5.17, material
Permits shall include those required for the service of all utility customers at
substantially the same service levels as provided by Seller on the date of this
Agreement. All Permits listed on Schedule 5.17 that are required to be listed on
Schedule 3.3 or Schedule 3.9 shall be so designated. Seller has made or will
make prior to the Closing Date timely applications for renewals of all such
Permits listed on Schedule 5.17, which under applicable law must be filed prior
to the Closing Date to maintain the Permits listed on Schedule 5.17 in full
force and effect.
5.18 Title Information. No later than March 13, 2000, Seller shall
use its reasonable efforts to deliver to Buyer true, correct and complete copies
of all existing title policies, surveys, leases, deeds, instruments and
agreements relating to title to the Real Estate in Seller's possession.
5.19 Transaction with Related Parties. Effective as of the Closing
Date, except as otherwise provided in Sections 5.9 through 5.12, 5.15, 5.26,
5.27 and 2.7.1(j) of this Agreement, Seller shall have terminated and canceled
all contracts, commitments and agreements (including employment relationships)
relating to the Acquired Assets or the Business, between Seller, any Affiliate
of Seller (including Citizens), any officer or director of any Seller Party, or
any Affiliate of the foregoing. Seller shall be solely liable for any
contractual or other claims, express or implied arising out of the termination
and cancellation of any of the foregoing raised by any party thereto.
5.20 Approval by Citizens. Citizens shall, as the sole owner of
common stock of each other Seller Party, vote all of such shares of common stock
to approve this Agreement and the transactions contemplated hereby.
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5.21 Supplemental Information.
5.21.1 Citizens shall provide Buyer, within fifteen (15) days
after the execution or the date of receipt thereof, a copy of (a) each Contract
(other than with respect to which the Business' total annual liability or
expense is less than $100,000 per such Contract) entered into by Seller after
the date hereof and prior to the Closing Date; (b) a copy of any written notice
for assessments for public improvements against the Real Estate received after
the date hereof and prior to the Closing Date; (c) a copy of the filing of any
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any of the Real Estate received after the date hereof but
prior to the Closing Date; and (d) a copy of any Contract where Seller is a
lessee relating to the use or occupancy of the Real Estate and where such
Contract involves annual payments in excess of $100,000 entered into by Seller
after the date hereof and prior to the Closing Date.
5.21.2 Within fifteen (15) days after the receipt of notice of
violation, Citizens shall notify Buyer of any violations of state or federal
drinking water standards which, if such violations existed on the date hereof,
would be required to be disclosed pursuant to Section 3.8.10 hereof, and shall
promptly notify Buyer of the actions proposed to be taken by Seller to correct
or otherwise respond to such violations.
5.22 Non-Competition. The Seller Parties agree that for a period of
fifteen (15) years after the Closing Date no Seller Party nor any Affiliate of a
Seller Party shall directly or indirectly own, manage, operate, control or
participate in the ownership, management, operation or control of or be
otherwise connected in any substantial manner with any entity (other than Buyer
and its successors and assigns) engaged in the business of storing, supplying
and distributing water in the States in which Buyer acquires any Acquired
Assets, whether or not such business is subject to regulation by a PUC (it being
understood that the individual directors of Seller and Citizens are not
Affiliates of a Seller Party).
5.23 Intentionally Omitted.
5.24 Intentionally Omitted.
5.25 Cooperation with Respect to Like-Kind Exchange. Buyer agrees
that Seller may, at Seller's written election delivered to Buyer no later than
five (5) days prior to the Closing Date, direct that all or a portion of the
Initial Cash Payment be delivered to a "qualified intermediary" as defined in
Treasury Regulation ss.1.1031(k) - (g)(4) as to enable Seller's relinquishment
of the Acquired Assets to qualify as part of a like-kind exchange of property
covered by Section 1031 of the Code. If Seller so elects, Buyer shall reasonably
cooperate with Seller (but without being required to incur any out-of-pocket
costs in the course thereof) in connection with Seller's efforts to effect such
like-kind exchange, which cooperation shall include, without limitation, taking
such actions as Seller reasonably requests in order to enable Seller to qualify
such transfer as part of a like-kind exchange of property covered by Section
1031 of the Code (including any actions reasonably required to facilitate the
use of a "qualified intermediary"), and Buyer agrees that Seller may assign all
or part of its rights (but no obligations) under this Agreement to a person
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or entity acting as a qualified intermediary to qualify the transfer
of the Assets as part of a like-kind exchange of property covered by Section
1031 of the Code. Buyer and Seller agree in good faith to use reasonable efforts
to coordinate the transactions contemplated by this Agreement with any other
transactions engaged in by either Buyer or Seller; provided that such efforts
shall, in no event, result in any delay in the consummation of the transactions
contemplated by this Agreement. Seller shall indemnify and hold Buyer harmless
from any cost, expense or liability arising from its cooperating under this
Section 5.25.
5.26 Transition Plan. Within 30 days after the execution date of
this Agreement, the parties jointly shall establish a transitional services
team, which shall include expertise from various functional specialties
associated with or involved in providing billing, payroll and other support
services provided to Seller by any automated or manual process using facilities
or employees that are not included among the Acquired Assets or Transferred
Employees. Such team will be responsible for preparing, 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 Closing and any other transfer of control matters that any party
reasonably believes should be addressed in such transition plan. The transition
plan will set forth reasonable arrangements providing Buyer, at Buyer's sole
expense, with appropriate access to Seller's relevant computer systems to allow
for a full conversion of the relevant data and functionality to Buyer's systems
on the Closing Date. Buyer and Seller shall use their commercially reasonable
efforts to cause their representatives on such transition team to cooperate in
good faith and take all reasonable steps necessary to develop a mutually
acceptable transition plan no later than 60 days prior to the Closing Date.
5.27 Procedures regarding Refunds of Advances. Within 30 days after
the execution date of this Agreement, the parties jointly shall establish a
working group of appropriate subject matter experts to determine the appropriate
obligations of Parent and Buyer regarding notification and the provision of
other accurate and timely data to Citizens to enable Citizens timely and
accurately to satisfy the refund obligations described in Section 2.3.3(b). Such
working group will be responsible for preparing a comprehensive agreement no
later than March 13, 2000, which agreement shall be executed by the parties at
Closing. Among other arrangements, the parties would require that the customers
and developers owed refunds provide joint notices to Buyer and Citizens.
5.28 Title Insurance. Prior to Closing, Seller shall cooperate with
Buyer and use commercially reasonable efforts to assist Buyer if Buyer desires
to obtain ALTA title insurance commitments (collectively, the "Title
Commitments," and each a "Title Commitment"), in final form, from one or more
title insurance companies (collectively, the "Title Company"), committing the
Title Company (subject only to the satisfaction of any industry standard
requirements contained in the Title Commitment) to issuing ALTA (or its local
equivalent) form of title insurance policies insuring good, valid, indefeasible
fee simple title to the Real Estate in Buyer, in all cases, at Buyer's sole
expense and in the respective amounts that Buyer requests prior to Closing,
subject to no Liens or other exceptions to title other than Permitted Exceptions
(collectively the "Title Policies"). On or prior to the Closing Date, Seller
shall execute and deliver, or cause to be executed and delivered, to the Title
Company, at no cost to Seller, any customary affidavits, standard gap
indemnities and similar documents reasonably requested by the Title Company in
connection with the issuance of
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the Title Commitments or the Title Policies; provided that such efforts and
Buyers' request for Title Policies or Title Commitments shall, in no event,
result in any delay in the consummation of the transactions contemplated by this
Agreement.
ARTICLE 6
CONDITIONS PRECEDENT; TERMINATION
6.1 Conditions Precedent to Obligations of Buyer and Parent. The
obligations of Buyer and Parent to cause the purchase of the Acquired Assets and
the assumption of the Assumed Liabilities and to consummate the other
transactions contemplated hereby are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions (any one or more of which
may be waived in writing in whole or in part by Buyer and Parent in their sole
discretion):
6.1.1 Performance of Agreements; Representations and
Warranties. Seller shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by them at or prior to the Closing; and the representations and
warranties set forth in this Agreement made by Seller shall be true and correct
on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date,
except for representations and warranties that speak as of a specific date or
time other than the Closing Date (which need only be true and correct as of such
date or time), other than, in all such cases (except Section 3.25), such
failures to be true and/or correct as would not in the aggregate reasonably be
expected to have a Material Adverse Effect; provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso); and provided further, that
the representation and warranty set forth in Section 3.5.1 shall be deemed to be
true and correct on and as of the Closing Date if any Material Adverse Effect
that may have arisen or occurred between the execution date of this Agreement
and the Closing Date shall have been cured or remedied such that such Material
Adverse Effect is not continuing as of the Closing Date. Buyer shall have been
furnished with a certificate of the Chief Financial Officer or other Vice
President of Citizens dated the Closing Date, certifying to the foregoing.
6.1.2 Opinion of Counsel. Buyer shall have received from L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, Vice President and General Counsel of Seller, an opinion
dated the Closing Date, in form and substance satisfactory to Buyer, to the
effect set forth in Exhibit E hereto.
6.1.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.1.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby, and such order
shall not contain any
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restrictions or conditions (other than those in effect on the date hereof or
requiring that the regulatory treatment with respect to the Business in
existence as of the date of this Agreement applicable to Seller be continued
following the transactions contemplated hereby) which would have a Material
Adverse Effect or a material adverse effect on any other regulated business of
Buyer in the state in which the PUC has jurisdiction, and such order shall be
final and unappealable; Seller shall have obtained all statutory, regulatory and
other consents and approvals which are required in order to consummate the
transactions contemplated hereby and to permit Buyer to conduct the Business in
the manner contemplated by Section 3.25 hereof other than those the failure of
which to obtain would not have a Material Adverse Effect. Seller shall have also
obtained (i) all consents and legal opinions required to enable Seller to sell
the Acquired Assets to Buyer at the Closing, free and clear of all Liens other
than Permitted Exceptions (and specifically free and clear of any Lien arising
under or pursuant to the Mortgage Indenture) and (ii) all consents required
under Contracts and Permits relating to Seller's water appropriation and flowage
rights to the extent reasonably sufficient to enable Buyer to service the
customers of the Business and to service future commitments under such
Contracts.
6.1.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Buyer's ownership of all or any material portion
of the Acquired Assets, nor (ii) shall there be pending or threatened any
litigation, suit, action or proceeding by any party which would reasonably be
expected to materially limit or materially adversely affect Buyer's ownership of
the Acquired Assets.
6.1.6 Documents. Seller and Citizens shall have delivered all
of the certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 2.7 hereof 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.
6.1.7 Related Closings. Buyer shall be reasonably satisfied
that the consummation of each of the asset purchase and sale transactions
contemplated by those certain purchase agreements described on Schedule 6.1.7
(the "Related Purchase Agreements") will occur concurrently with the Closing.
6.2 Conditions Precedent to Obligations of Seller Parties. The
obligations of the Seller Parties to cause the sale of the Acquired Assets and
to consummate the other transactions contemplated hereby are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions (any one or more of which may be waived in writing in whole or in
part by the Seller Parties in their sole discretion):
6.2.1 Performance of Agreements; Representations and
Warranties. Parent and Buyer shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them at or prior to the Closing; and the
representations and warranties set forth in this Agreement made by Buyer and
Parent shall be true and correct on and as of the Closing Date, with the same
force and effect as
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though such representations and warranties had been made on and as of the
Closing Date, except for representations and warranties that speak as of a
specific date or time other than the Closing Date (which need only be true and
correct as of such date or time), other than, in all such cases (except Section
4.2), such failures to be true and/or correct as would not in the aggregate
reasonably be expected to have a material adverse effect on the respective
ability of Buyer and Parent to perform their obligations under this Agreement
and the Transaction Documents, provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso). Seller shall have been
furnished with a certificate of the President or Vice President of Parent and
Buyer, dated the Closing Date, certifying to the foregoing.
6.2.2 Opinion of Counsel. Seller shall have received from
Dechert Price & ▇▇▇▇▇▇, counsel to Parent and Buyer, an opinion dated the
Closing Date, in form and substance satisfactory to Seller, to the effect set
forth in Exhibit F hereto.
6.2.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.2.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby and such order
shall not contain any restrictions or conditions which would have a material
adverse effect on Seller's business activities in the State in which the PUC has
jurisdiction or any significant adverse effect on Citizens' acquisition and
divestiture activities in that State (including divestiture of the Acquired
Assets), and such order shall be final and unappealable; Seller shall have
obtained all statutory and regulatory consents and approvals which are required
in order to consummate the transactions contemplated hereby, other than those
the failure of which to obtain would not have a material adverse effect on the
Seller after the Closing. Seller shall have obtained (i) all consents and legal
opinions required to enable Seller to sell the Acquired Assets to Buyer at the
Closing, free and clear of all Liens other than Permitted Exceptions (and
specifically free and clear of any Lien arising under or pursuant to the
Mortgage Indenture), and (ii) all other consents required or advisable in order
for Seller to transfer Acquired Assets without incurring material liability
under any Contract, Permit or Real Estate instrument.
6.2.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Seller's ownership of all or any material portion
of its properties, nor (ii) shall there be pending or threatened any litigation,
suit, action or proceeding by any party which could reasonably be expected to
materially limit or materially adversely affect Seller's ownership of any of its
properties.
6.2.6 Documents. Parent and Buyer shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including
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pursuant to Sections 2.7 and 5.27, and shall have taken such actions as Seller
may have requested pursuant to Section 5.25 hereof.
6.2.7 Related Closings. Seller shall be reasonably satisfied
that the consummation of each of the Related Purchase Agreements will occur
concurrently with Closing.
6.3 Termination. This Agreement may be terminated at anytime prior
to the Closing Date:
6.3.1 by mutual written consent of the Seller Parties, Buyer
and Parent;
6.3.2 by any of the Seller Parties, Parent or Buyer if: (i)
any governmental or regulatory body the consent of which is a condition to the
obligations of the Seller Parties, Parent and Buyer to consummate the
transactions contemplated hereby shall have determined not to grant its consent
and all appeals of such determination shall have been taken and have been
unsuccessful; (ii) any court of competent jurisdiction shall have issued an
order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have become final and
nonappealable; or (iii) the Closing shall not have occurred on or before March
31, 2001; provided, however, that the right to terminate this Agreement under
this Section 6.3.2(iii) will not be available to any party that is in material
breach of its representations, warranties, covenants or agreements contained
herein; and provided, further, that if Closing has not occurred by such date
because the conditions precedent to Closing set forth in the first sentence of
Section 6.1.4 and the first sentence of Section 6.2.4 have not been fulfilled,
then such date shall be automatically extended to September 30, 2001; or
6.3.3 If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 6.3, this
Agreement shall become void and of no further force and effect, except for the
provisions of Section 5.6 relating to publicity, Sections 3.24 and 4.6 relating
to brokerage and Section 7.1 relating to expenses. Nothing in this Section 6.3
shall be deemed to release either party from any liability for any willful
breach by such party of the terms and provisions of this Agreement.
ARTICLE 7
CERTAIN ADDITIONAL COVENANTS
7.1 Certain Taxes and Expenses. Citizens shall be solely responsible
for all state and local sales, use, transfer, real property transfer and other
similar taxes, fees and charges that are calculated based on the value of the
Acquired Assets being transferred arising from and with respect to the sale and
purchase of the Acquired Assets and Buyer shall be solely responsible for all
transfer, registration, documentary stamp, recording and other similar fees and
charges arising from and with respect to the transfer and recording of title
documentation relating to the Acquired Assets. Parent shall be responsible for
all costs and expenses relating to the assumption by or assignment to Parent or
Buyer of the Assumed Indebtedness. Except as otherwise provided in this
Agreement, each of
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the parties hereto shall each bear its respective accounting, legal and other
expenses incurred in connection with the transactions contemplated by this
Agreement.
7.2 Maintenance of Books and Records. The Seller Parties, on the one
hand, and Buyer and Parent, on the other hand, shall cooperate fully with each
other after the Closing so that (subject to any limitations that are reasonably
required to preserve any applicable attorney-client privilege) each party has
access to the business records, contracts and other information existing at the
Closing Date and relating in any manner to the Acquired Assets or the Assumed
Liabilities or the conduct of the Business (whether in the possession of the
Seller Parties or Buyer or Parent). No files, books or records existing at the
Closing Date and relating in any manner to the Acquired Assets or the conduct of
the Business shall be destroyed by any party for a period of six years after the
Closing Date without giving the other party at least 30 days prior written
notice, during which time such other party shall have the right (subject to the
provisions hereof) to examine and to remove any such files, books and records
prior to their destruction. The access to files, books and records contemplated
by this Section 7.2 shall be during normal business hours and upon not less than
two (2) business days prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the party entitled to claim the same.
7.3 Survival.
7.3.1 Subject to this Section 7.3, Section 7.4.2(g) and
Section 7.4.2(j), all representations, warranties, covenants and agreements
contained in this Agreement or the Transaction Documents shall survive (and not
be affected in any respect by) the Closing, any investigation conducted by any
party hereto and any information which any party may receive. Notwithstanding
the foregoing:
(a) the covenants contained in Sections 5.1, 5.3, 5.4,
5.5, 5.8.2 through 5.8.4 and 5.21 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
(b) the covenants contained in Section 5.2 and the
related indemnity obligations contained in Section 7.4 shall terminate on, and
no action or claim with respect thereto may be brought after, the Closing Date;
(c) the representations and warranties contained in
Sections 3.12 and 3.16 and the related indemnity obligations contained in
Section 7.4 shall terminate on, and no action or claim with respect thereto may
be brought following the expiration of the applicable statute of limitations (or
extensions or waivers thereof);
(d) the representations and warranties contained in
Section 3.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
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(e) the representations and warranties contained in
Section 3.10 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
(f) the representations and warranties contained in
Section 3.7 and 3.17 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(g) the representations and warranties contained in
Sections 3.3, 3.5, 3.6, 3.8, 3.9 and 3.25 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
(h) the representations and warranties contained in
Section 3.11 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
(i) the representations and warranties contained in
Section 4.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(j) the representations and warranties contained in
Sections 4.3 and 4.4 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(k) the representations and warranties contained in
Section 4.5 and the related indemnity obligations contained in Section 7.4 shall
terminate on, and no action or claim with respect thereto may be brought after,
the Closing Date; and
(l) all other representations and warranties contained
in this Agreement and the related indemnity obligations contained in Section 7.4
shall terminate on and no further action or claim with respect thereto may be
brought after, the second anniversary of the Closing Date;
(m) such representations and warranties specified in the
foregoing clauses (c) through (k), and the covenants contained in Section 5.1,
5.2, 5.3, 5.4, 5.5, 5.8.2 through 5.8.4 and 5.21 and the liability of any party
with respect thereto, shall not terminate with respect to any claim, whether or
not fixed as to liability or liquidated as to amount, with respect to which such
party has been given written notice setting forth the facts upon which the claim
for indemnification is based and, if possible, a reasonable estimate of the
amount of the claims prior to the relevant anniversary of the Closing Date or
the 30th day after the expiration of the applicable statute of limitations (or
extensions or waivers thereof), as the case may be. If any claim for
indemnification is asserted or could be asserted with respect to a breach or
asserted breach of Section 3.17 (Undisclosed Liabilities) and the Buyer or
Parent is also entitled to indemnification in respect of that claim for breach
or asserted breach of any other representation or warranty in this Agreement for
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which there is a shorter survival period, such shorter period will apply to such
claim except to the extent that such claim is a product liability, toxic tort or
similar claim (as described in Section 2.3.3(a)) brought by a private party
litigant.
7.3.2 No claim for indemnity under Section 7.4 shall be
brought or made by Buyer or Parent pursuant to Sections 7.4.1(a)(B) or
7.4.1(a)(C):
(a) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), for any action or claim with respect to the Pre-Existing Conditions;
(b) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), with respect to the presence of Hazardous Substances at any locations
other than the Real Estate; and
(c) after the third anniversary of the Closing Date, for
any action or claim with respect to any other Retained Liability;
Provided, however, that the foregoing time limitations shall not apply to
any such claims which have been the subject of a written notice from Parent
and/or Buyer to the Seller Parties prior to such period setting forth the facts
upon which the claim for indemnification is based and, if possible, a reasonable
estimate of the amount of the claims; and, provided, further, that the foregoing
time limitations shall also not apply to any such claims: (u) with respect to
Taxes; (v) with respect to any liability of the types that appear as "Trade
Payables" or "Other Current and Accrued Liabilities" on the financial statements
of Seller; (w) not exclusively related to the Acquired Assets or not exclusively
related to the Business; and (x) with respect to any of the matters discussed in
Section 3.16 hereof.
For purposes of Sections 7.3.2(a) and (b), a "Change of Control of
Citizens" shall be deemed to have occurred if: (i) any "person" (as such term is
used in Section 13(d) and 14(d) of the Exchange Act of 1934, as amended (the
"Exchange Act"), other than an underwriter engaged in a firm commitment
underwriting on behalf of Citizens, is or becomes the beneficial owner (as such
term is used in Rule 13D-3 and 13D-5 under the Exchange Act, except that for
purposes of this clause (i) a person shall be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding shares of common stock of
the Company; (ii) all or substantially all of Citizens' and its Subsidiaries'
assets are sold, leased, exchanged or otherwise transferred to any person or
group of persons acting in concert; (iii) Citizens is merged or consolidated
with any other person, whether or not Citizens is the surviving corporation in
such merger or consolidation; or (iv) Citizens is liquidated or dissolved or
adopts a plan of liquidation.
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7.4 Indemnification. Seller, Parent and Buyer agree as follows:
7.4.1 General Indemnification Obligations.
(a) Seller shall indemnify Buyer and its directors,
officers and other Affiliates (including Parent) and hold Buyer and such other
parties harmless from and against any and all Damages arising out of or
resulting from (A) any breach of any representation, warranty, covenant or
agreement made by the Seller Parties in this Agreement or in any document or
certificate required to be furnished to Buyer by any of the Seller Parties
pursuant to this Agreement (including the Transaction Documents); (B) subject to
Section 7.3.2, any Excluded Assets or Retained Liabilities; and (C) subject to
Section 7.3.2, the ownership, operation or use of any of the businesses or
assets of the Seller Parties or their Affiliates (other than the Business and
the Acquired Assets) whether before, on or after the Closing Date.
(b) Buyer and Parent shall indemnify Seller, and their
directors, officers and other Affiliates (including Citizens) and hold Seller
and such other parties harmless from and against any and all Damages arising out
of or resulting from (A) any breach of any representation, warranty, covenant or
agreement made by Parent or Buyer in this Agreement or in any document or
certificate required to be furnished to Seller by Parent or Buyer pursuant to
this Agreement (including the Transaction Documents), (B) any Assumed
Liabilities after the Closing Date, (C) the ownership, operation or use of the
Business or the Acquired Assets after the Closing Date (except to the extent
resulting from Retained Liabilities or to the extent resulting from breaches by
the Seller Parties of representations, warranties, covenants or agreements
hereunder or in the other Transaction Documents); and (D) any claim by a
Transferred Employee or a Former Employee referred to on Schedule 5.12 or the
Beneficiary of any such employee or former employee for post-retirement health
care or life insurance benefits "incurred" (within the meaning of Section 5.9.4)
after the Closing.
(c) For purposes of this Agreement, "Damages" shall mean
any and all losses, liabilities, obligations, damages (including any
governmental penalty or punitive damages assessed or asserted against the party
seeking indemnification and including costs of investigation, clean-up and
remediation), deficiencies, interest, costs and expenses and any claims,
actions, demands, causes of action, judgments, costs and reasonable expenses
(including reasonable attorneys' fees and all other reasonable expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened, incident to the successful enforcement of this Agreement). For
purposes of this Section 7.4, the determination of whether any breach of any
representation, covenant or agreement has occurred, and the calculation of the
amount of Damages incurred by the Indemnified Party arising out of or resulting
from any breach of a representation, covenant or agreement by any party hereto,
the references to a "Material Adverse Effect" or materiality (or other
correlative terms) shall be disregarded, provided that no such breach shall be
found to have occurred due to facts or circumstances arising from an occurrence
or condition described in Section 1.1.61(a). Notwithstanding the foregoing,
Damages shall not include the loss of profits of the party seeking
indemnification, or punitive damages unless the party seeking indemnification
has had punitive damages assessed or asserted against it.
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(d) Notwithstanding any language contained in any
Transaction Document (including deeds to Real Estate and instruments delivered
by Seller to the Title Company), representations and warranties as to Real
Estate set forth in Section 3.10 and 3.11 will not be merged into any
Transaction Document and the indemnification obligations of Seller, and the
limitations on such obligations, set forth in this Agreement, shall control. No
provision set forth in any Transaction Document shall be deemed to enlarge,
alter or amend the terms or provisions of this Agreement.
7.4.2 General Indemnification Procedures.
(a) A party seeking indemnification pursuant to this
Section 7.4 (an "Indemnified Party") shall give prompt written notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of the
assertion of any claim, the incurrence of any Damages, or the commencement of
any action, suit or proceeding, of which it has knowledge and in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but failure to give such required notice shall relieve the Indemnifying
Party of any liability hereunder only to the extent that the Indemnifying Party
has suffered actual prejudice thereby. The Indemnifying Party shall have the
right, exercisable by written notice to the Indemnified Party after receipt of
notice from the Indemnified Party of the commencement of or assertion of any
claim or action, suit or proceeding by a third party in respect of which
indemnity may be sought hereunder (a "Third Party Claim"), to assume the defense
of such Third Party Claim which involves (and continues to involve) solely
monetary damages; provided, that (A) the Indemnifying Party expressly agrees in
such notice that, as between the Indemnifying Party and the Indemnified Party,
solely the Indemnifying Party shall be obligated to satisfy and discharge the
Third Party Claim, (B) such Third Party Claim does not include a request or
demand for injunctive or other equitable relief by an Authority and (C) the
Indemnifying Party makes reasonably adequate provision to assure the Indemnified
Party of the ability of the Indemnifying Party to satisfy the full amount of any
adverse monetary judgment that is reasonably likely to result. The Indemnifying
Party shall be deemed to have satisfied the condition set forth in clause (C) of
the proceeding sentence if it is a regulated utility.
(b) Neither the Indemnified Party nor the Indemnifying
Party shall settle any Third Party Claim without the prior written consent of
the other, which consent shall not be unreasonably withheld or delayed.
(c) The Indemnifying Party or the Indemnified Party, as
the case may be, shall have the right to participate in (but not control), at
its own expense, the defense of any Third Party Claim which the other party is
defending as provided in this Agreement.
(d) Amounts paid in respect of indemnification
obligations of the parties shall be treated as an adjustment to the Purchase
Price.
(e) Subject to Section 7.4.2(f) and Section 7.4.2(i),
neither Parent nor Buyer (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages incurred
unless the aggregate amount of Damages incurred by
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Parent or Buyer (or the other Persons for which they can claim indemnification),
together with all other claims for Damages under Section 7.4.2(e) of each of the
Related Purchase Agreements, exceeds $6,123,000 in the aggregate (the "Threshold
Amount"), in which case Seller shall then be liable for Damages in excess of the
Threshold Amount. Subject to Section 7.4.2(f) and Section 7.4.2(i), the
cumulative aggregate indemnity obligation of Citizens and its Affiliates under
Section 7.4 of this Agreement and the Related Purchase Agreements shall not
exceed $60,000,000 (the "Ceiling").
(f) Notwithstanding the foregoing, the parties
acknowledge that Parent or Buyer (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages in respect
of intentional and wilful breaches of covenants or agreements in this Agreement
or any of the Retained Liabilities other than the Specified Liabilities
irrespective of the Threshold Amount or the Ceiling (it being understood that
the failure to cure a breach shall not, by itself, be an intentional and wilful
breach). As used herein, the "Specified Liabilities" shall mean the Retained
Liabilities arising from claims made after the Closing Date which (i) do not
relate to matters within the scope of clauses (u), (v), (w) and (x) of Section
7.3.2; (ii) were not known to the Seller Parties on or prior to Closing; and
(iii) relate exclusively to the Acquired Assets or the Business prior to the
Closing Date. Notwithstanding anything to the contrary in this Section 7.4,
Parent or Buyer (or the other Persons for which they can claim indemnification)
shall be entitled to indemnification for Damages in respect of a breach of
Section 3.2, 3.12 or 3.16 irrespective of the Threshold Amount or the Ceiling.
(g) The rights and remedies of Seller, Parent and Buyer
under this Section 7.4 are exclusive and in lieu of any and all other rights and
remedies which Seller, Parent and Buyer may have under this Agreement or
otherwise for monetary relief with respect to (x) the inaccuracy of any
representation, warranty, certification or other statement made (or deemed made)
by Seller, Parent or Buyer in or pursuant to this Agreement or any of the
Transaction Documents or (y) any breach or failure to perform any covenant or
agreements set forth in this Agreement or any of the Transaction Documents.
(h) Except to the extent provided in Section 7.4.2(j)
below, no right to indemnification under this Section 7.4 shall be limited by
reason of any investigation or audit conducted before or after the Closing of
any party hereto including, without limitation, the knowledge of such party of
any breach of any representation, warranty, agreement or covenant by the other
party at any time, or the decision by such party to complete the Closing.
(i) No party shall have any liability to another party
under this Section 7.4 for Damages (and no cost or expense relating to such
Damages shall be included in determining the extent of Damages incurred by such
party for purposes of Section 7.4.2(e)) to the extent that:
(A) the Indemnified Party recovers insurance
proceeds covering the Damages or otherwise recovers payments in respect of such
Damages from any other source (whether in a lump sum or stream of payments); or
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(B) the Indemnified Party's Tax liability is
actually reduced as a result of a tax benefit to which the Indemnified Party
becomes entitled in respect of the Damages.
(j) Seller shall have no liability or obligation under
this Section 7.4 for any Damages resulting from the inaccuracy or breach of any
representation or warranty if such inaccuracy or breach is disclosed by Seller
pursuant to and in accordance with Sections 5.3 and 8.4 hereof;
(k) Buyer agrees to use its commercially reasonable
efforts to give timely and effective written notice to the appropriate insurance
carrier(s) of any occurrence or circumstances which, in the judgment of Buyer
consistent with its customary risk management practices, appear likely to give
rise to a claim against Buyer that is likely to involve one or more insurance
policies of Buyer. Any such notice shall be given in good faith by Buyer without
regard to the possibility of indemnification payments by Seller under this
Section 7.4, and shall be processed by Buyer in good faith and in a manner
consistent with its risk management practices involving claims for which no
third party contractual indemnification is available. Buyer agrees that (i) if
it is entitled to receive payment from Seller for Damages arising under or
pursuant to a breach of the representation and warranty set forth in Section
3.10, and (ii) if Buyer has obtained title insurance which may cover the claim
or matter giving rise to such Damages, then (iii) such title insurance shall be
primary coverage and Buyer will make a claim under the title insurance if such
claim can be made in good faith before enforcing its right to receive payment
from Seller. Buyer shall be under no obligation to obtain title insurance or
prosecute such claim (other than the initial filing of such claim);
(l) If at any time subsequent to the receipt by an
Indemnified Party of an indemnity payment hereunder, such Indemnified Party (or
any Affiliate thereof) receives any recovery, settlement or other similar
payment with respect to the Damages for which it received such indemnity payment
(including insurance proceeds and other payments pursuant to Section 7.4.2(i)(A)
and a tax benefit pursuant to Section 7.4.2(i)(B)) (the "Recovery"), such
Indemnified Party shall promptly pay to the Indemnifying Party an amount equal
to the amount of such Recovery, less any expense incurred by such Indemnified
Party (or its Affiliates) in connection with such Recovery, but in no event
shall any such payment exceed the amount of such indemnity payment;
(m) In the event of any indemnification claim under this
Section 7.4 involving the claim of any third party, the Indemnified Party shall
cooperate fully (and shall cause its Affiliates to cooperate fully) with the
Indemnifying Party in the defense of any such claim under this Section 7.4.
Without limiting the generality of the foregoing, the Indemnified Party shall
furnish the Indemnifying Party with such documentary or other evidence as is
then in its or any of its Affiliates' possession as may reasonably be requested
by the Indemnifying Party for the purpose of defending against any such claim.
Whether or not the Indemnifying Party chooses to defend or prosecute any claim
involving a third party, all the parties hereto shall cooperate in the defense
or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith.
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7.4.3 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.
7.5 UCC Matters. From and after the Closing Date, Seller will
promptly refer all inquiries with respect to ownership of the Acquired Assets or
the Business to Buyer. In addition, Seller will execute such documents and
financing statements as Buyer may reasonably request from time to time to
evidence transfer of the Acquired Assets to Buyer in accordance with this
Agreement, including any necessary assignment of financing statements.
7.6 Financial Statements. In connection with the preparation and
filing of any registration statement or periodic report of Buyer or its
Affiliates pursuant to Rule 3-05, Article 11 of Regulation S-X or other rule or
regulation promulgated under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, Seller, at Buyer's expense, shall
provide Buyer (a) by April 30, 2000 or within 120 days after Buyer's written
request therefor if made after January 1, 2000, with the following audited
financial statements: (i) a statement of net assets of the Business as of the
end of the last fiscal year prior to Closing; and (ii) a statement of income of
the Business and a statement of cash flows or its equivalent of the Business for
the last fiscal year prior to Closing (in each case combined with the businesses
being acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements), including opinions thereon of Seller's Accountants, and (b) within
90 days after Buyer's written request made therefor (provided such request is
made after the end of the fiscal quarter described below), the following
unaudited statements: (i) a statement of net assets of the Business as of the
end of the last fiscal quarter prior to Closing (but only if such quarter is
subsequent to the last fiscal year prior to Closing); and (ii) a statement of
income of the Business and a statement of cash flows or its equivalent of the
Business, for the period from the end of the last fiscal year through the end of
the last fiscal quarter prior to Closing (in each case combined with the
businesses being acquired by Buyer or Affiliates of Buyer pursuant to the
Related Purchase Agreements).
7.7 Collection of Receivables. Seller agrees that it shall promptly
(and in any event no later than five (5) Business Days following receipt)
deliver all such payments with respect to accounts receivable from customers of
the Business received on and after the Closing Date (including but not limited
to negotiable instruments tendered in payment of accounts receivable assigned to
Buyer hereunder which shall be duly endorsed by Seller to the order of Buyer) to
Buyer. Seller shall cooperate with Buyer in coordinating the transfer of
collection agents and customers of the Business who pay their bills through the
Automated Clearinghouse (ACH) process to Buyer.
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ARTICLE 8
MISCELLANEOUS
8.1 Construction. Parent, Buyer and the Seller Parties have
participated jointly in the negotiation and drafting of this Agreement and the
Transaction Documents. In the event any ambiguity or question of intent or
interpretation arises, this Agreement and the Transaction Documents shall be
construed as if drafted jointly by Parent, Buyer and the Seller Parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" in this Agreement shall mean
including without limitation. Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
genders as the context requires. The terms "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole (including all of the Schedules and Exhibits
hereto) and not to any particular provision of this Agreement, and Article,
Section, paragraph, Exhibit and Schedule references are to the Articles,
Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise
specified. The word "or" shall not be exclusive. Provisions of this Agreement
shall apply, when appropriate, to successive events and transactions. Section
references refer to this Agreement unless otherwise specified.
8.2 Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy, by registered or certified
mail (return receipt requested) with postage and registration or certification
fees thereon prepaid, or by any nationally recognized overnight courier
addressed to the party at its address set forth below:
If to Parent:
American Water Works Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
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with a copy to:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Buyer:
Indiana-American Water Company, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇. ▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Counsel
with a copy to Parent and a copy to:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Seller:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
58
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and
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that no party
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other party hereto; provided
that Seller may assign its rights or delegate its duties under this Agreement to
a qualified intermediary chosen by Seller to structure the transactions
contemplated hereby as a like-kind exchange of property covered by Section 1031
of the Code.
8.4 Exhibits and Schedules. All Exhibits and Disclosure Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Disclosure of any fact or item
in any Schedule referenced by a particular paragraph or Section in this
Agreement shall, should the existence of the fact or item or its contents be
clearly related to any other paragraph or section, be deemed to be disclosed
with respect to that other paragraph or section.
8.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the conflicts of laws principles thereof.
8.6 Dispute Resolution. Except as otherwise provided herein, 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
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Dispute. The discussions shall be left to the discretion of the representatives.
Upon agreement, the representatives may utilize other alternative dispute
resolution procedures such as mediation to assist in the negotiations.
Discussions and correspondence among the parties' representatives for purposes
of these negotiations shall be treated as confidential information developed for
the purposes of settlement, exempt from discovery and production, and without
the concurrence of both parties shall not be admissible in the arbitration
described below, or in any lawsuit. Documents identified in or provided with
such communications, which are not prepared for purposes of the negotiations,
are not so exempted and may, if otherwise admissible, be admitted in the
arbitration.
(b) If negotiations between the representatives of the parties
do not resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules, as then amended and in effect, of
the American Arbitration Association (the "Rules"); provided, however, that at
the election of either party, the arbitration shall take place before three (3)
arbitrators, one arbitrator being selected by Parent, one arbitrator being
selected by Citizen, and the third arbitrator, knowledgeable in the general
subject matter of the dispute, controversy or claim, being selected by the other
two arbitrators. Either party may demand such arbitration in accordance with the
procedures set out in the Rules. The parties hereto shall use reasonable efforts
to coordinate any arbitration commenced under any of the Related Purchase
Agreements so that the resolution of the arbitration under this Agreement and
the similar issues under the Related Purchase Agreements can be resolved as
expeditiously and efficiently as reasonably practicable. Reasonable efforts
shall include use of a common arbitrator or panel of arbitrators where
practicable. The arbitration shall take place in Newark, New Jersey. The
arbitration hearing shall be commenced within 60 days of such party's demand for
arbitration. The arbitrator(s) 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(s) 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(s), present testimony and written
evidence and examine witnesses. No party shall be eligible to receive, and the
arbitrator(s) shall not have the authority to award, exemplary or punitive
damages. The arbitrator(s) shall rule on the Dispute by issuing a written
opinion within 30 days after the close of hearings. The arbitrators' majority
decision shall be binding and final. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction.
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator(s); provided, however, that if the arbitrator(s) determines that the
position taken in the Dispute by the non-prevailing party taken as a whole is
unreasonable, the arbitrator(s) may order the non-prevailing party to bear such
fees and expenses, and reimburse the prevailing party for all or such portion of
its reasonable costs and expenses in submitting and presenting its position, as
the arbitrator(s) 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(s) and the American Arbitration Association.
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(d) Notwithstanding any other provision of this Agreement, (i)
either party may commence an action to compel compliance with this Section 8.6
and (ii) if any party, as party 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 8.6.
8.7 Severability. The parties agree that (a) the provisions of this
Agreement shall be severable in the event that any provision hereof is held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
(b) such invalid, void or otherwise unenforceable provision shall be
automatically replaced by another provision which is as similar as possible in
terms to such invalid, void or otherwise unenforceable provision but which is
valid and enforceable and (c) the remaining provisions shall remain enforceable
to the fullest extent permitted by law.
8.8 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or should be construed to confer upon or give to any Person
other than the parties hereto and their successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
8.9 Entire Agreement. This Agreement, the Schedules and Exhibits
hereto and the other Transaction Documents, and the Confidentiality Agreement
dated August 2, 1999, between Citizens and Parent, (i) together constitute the
entire understanding of the parties (and their affiliates) with respect to the
subject matter hereof, and any related matter, (ii) supercede all prior
agreements or understandings, written or oral, entered into by any of the
parties that concern the subject matter hereof and (iii) are not intended to
confer upon any Person other than the parties hereto any benefit, right or
remedy.
8.10 Amendment and Waiver. The parties may, by mutual agreement,
amend this Agreement in any respect, and any party, as to such party, may (i)
extend the time for the performance of any of the obligations of the other
party; (ii) waive any inaccuracies in representations and warranties by the
other party; (iii) waive compliance by the other party with any of the covenants
or agreements contained herein and performance of any obligations by the other
party; and (iv) waive the fulfillment of any condition that is precedent to the
performance by such party of any of its obligations under this Agreement. To be
effective, any such amendment or waiver must be in writing and be signed by the
party providing such waiver or extension, as the case may be. The waiver by any
party hereto of any breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach, whether or not similar.
8.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
8.12 Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
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8.13 Definitions. For purposes of this Agreement, references to the
knowledge of the Seller Parties (including a reference to "the best of the
knowledge of the Seller Parties" and similar references) shall mean the actual
knowledge possessed by any of the following officers or employees of Citizens:
Chief Financial Officer, Vice President and Treasurer; President, Citizens
Public Services; Vice President, Corporate Human Resources; Secretary; Vice
President, Water; and the general manager of the Business.
8.14 No Implied Representation. NOTWITHSTANDING ANYTHING CONTAINED
IN THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT NEITHER
OF THE SELLER PARTIES ARE MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT, ANY SCHEDULE
HERETO, THE TRANSACTION DOCUMENTS, OR ANY DOCUMENT, EXHIBIT, CERTIFICATE,
INSTRUMENT OR STATEMENT TO BE DELIVERED HEREUNDER OR THEREUNDER INCLUDING, BUT
NOT LIMITED TO, ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO ANY OF
THE ACQUIRED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IT IS
UNDERSTOOD AND AGREED THAT ANY COST ESTIMATES, PROJECTIONS OR OTHER PREDICTIONS
CONTAINED OR REFERRED TO IN THE SCHEDULES AND ANY COST ESTIMATES, PROJECTIONS OR
PREDICTIONS OR ANY OTHER INFORMATION CONTAINED OR REFERRED TO IN OTHER MATERIALS
THAT HAVE BEEN OR SHALL HEREINAFTER BE PROVIDED TO PARENT, BUYER OR ANY OF THEIR
AFFILIATES, AGENTS OR REPRESENTATIVES ARE NOT AND SHALL NOT BE DEEMED TO BE
REPRESENTATIONS OR WARRANTIES OF ANY OF THE SELLER PARTIES.
8.15 Construction of Certain Provisions. 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.
8.16 Bulk Sales. Buyer agrees that it shall not make any filings
under any tax bulk sales provisions with respect to the transactions
contemplated by this Agreement.
[Signatures appear on following page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
CITIZENS UTILITIES COMPANY
By:___________________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer, Vice President
and Treasurer
FLOWING ▇▇▇▇▇, INC.
By:___________________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
AMERICAN WATER WORKS COMPANY, INC.
By:___________________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Treasurer
INDIANA-AMERICAN WATER COMPANY, INC.
By:___________________________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Ohio
EXECUTION COPY
ASSET PURCHASE AGREEMENT
among
CITIZENS UTILITIES COMPANY
AND
CERTAIN OF ITS AFFILIATES
AND
AMERICAN WATER WORKS COMPANY, INC. AND
OHIO-AMERICAN WATER COMPANY
Dated as of
October 15, 1999
Ohio
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS......................................................1
1.1 Certain Definitions..............................................1
ARTICLE 2 THE TRANSACTION.................................................10
2.1 Sale and Purchase of Assets.....................................10
2.2 Excluded Assets.................................................10
2.3 Assumption of Certain Liabilities...............................11
2.4 Consent of Third Parties........................................14
2.5 Closing.........................................................15
2.6 Purchase Price..................................................15
2.6.1 Purchase Price............................................15
2.6.2 Payment of Initial Cash Payment...........................15
2.6.3 Estimated Closing Statement...............................16
2.6.4 Post-Closing Adjustment to Purchase Price.................16
2.6.5 Adjustment for Certain Liabilities........................18
2.6.6 Additional Adjustment to the Purchase Price...............18
2.7 Deliveries and Proceedings at Closing...........................18
2.7.1 Deliveries to Buyer.......................................18
2.7.2 Deliveries By Buyer to the Seller Parties.................19
2.8 Allocation of Consideration.....................................19
2.9 Prorations......................................................20
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER.......................20
3.1 Qualification; No Interest in Other Entities....................21
3.2 Authorization and Enforceability................................21
3.3 No Violation of Laws or Agreements..............................21
3.4 Financial Statements............................................22
3.5 No Changes......................................................22
3.6 Contracts.......................................................23
3.7 Permits and Compliance With Laws Generally......................23
3.8 Environmental Matters...........................................24
3.9 Consents........................................................26
3.10 Title...........................................................26
3.11 Real Estate.....................................................27
3.12 Taxes...........................................................27
3.13 Patents and Intellectual Property Rights........................28
3.14 Accounts Receivable.............................................28
3.15 Labor Relations.................................................28
3.16 Employee Benefit Plans..........................................28
3.17 Absence of Undisclosed Liabilities..............................30
3.18 No Pending Litigation or Proceedings............................30
3.19 Supply of Utilities.............................................31
Ohio
3.20 Insurance.......................................................31
3.21 Relationship with Customers.....................................31
3.22 WARN Act........................................................31
3.23 Condition of Assets.............................................31
3.24 Brokerage.......................................................32
3.25 All Assets......................................................32
3.26 Year 2000 Matters...............................................32
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER..............32
4.1 Organization and Good Standing..................................33
4.2 Authorization and Enforceability................................33
4.3 No Violation of Laws or Agreements..............................33
4.4 Consents........................................................34
4.5 Financing.......................................................34
4.6 Brokerage.......................................................34
4.7 Insurance.......................................................34
ARTICLE 5 ADDITIONAL COVENANTS............................................34
5.1 Conduct of Business.............................................34
5.2 Negotiations....................................................37
5.3 Disclosure Schedules............................................37
5.4 Mutual Covenants................................................38
5.5 Filings and Authorizations......................................38
5.6 Public Announcement.............................................39
5.7 Further Assurances..............................................39
5.8 Cooperation.....................................................39
5.9 Employees; Employee Benefits....................................40
5.10 Employee Pension Plan...........................................43
5.11 Employee Savings Plan...........................................44
5.12 Welfare Benefits................................................45
5.13 Taxes...........................................................46
5.14 Intentionally Omitted...........................................46
5.15 Citizens' Guarantees and Surety Instruments.....................46
5.16 Intentionally Omitted...........................................46
5.17 Schedule of Permits.............................................46
5.18 Title Information...............................................47
5.19 Transaction with Related Parties................................47
5.20 Approval by Citizens............................................47
5.21 Supplemental Information........................................47
5.22 Non-Competition.................................................47
5.23 Intentionally Omitted...........................................48
5.24 IDRB Obligations................................................48
5.25 Cooperation with Respect to Like-Kind Exchange..................48
5.26 Transition Plan.................................................49
5.27 Procedures regarding Refunds of Advances........................49
5.28 Title Insurance.................................................50
Ohio
ARTICLE 6 CONDITIONS PRECEDENT; TERMINATION...............................50
6.1 Conditions Precedent to Obligations of Buyer and Parent.........50
6.1.1 Performance of Agreements; Representations and Warranties.50
6.1.2 Opinion of Counsel........................................51
6.1.3 HSR Act...................................................51
6.1.4 Required PUC and Other Consents...........................51
6.1.5 Injunction; Litigation....................................51
6.1.6 Documents.................................................51
6.1.7 Related Closings..........................................52
6.2 Conditions Precedent to Obligations of Seller Parties...........52
6.2.1 Performance of Agreements; Representations and Warranties.52
6.2.2 Opinion of Counsel........................................52
6.2.3 HSR Act...................................................52
6.2.4 Required PUC and Other Consents...........................52
6.2.5 Injunction; Litigation....................................53
6.2.6 Documents.................................................53
6.2.7 Related Closings..........................................53
6.3 Termination.....................................................53
ARTICLE 7 CERTAIN ADDITIONAL COVENANTS....................................54
7.1 Certain Taxes and Expenses......................................54
7.2 Maintenance of Books and Records................................54
7.3 Survival........................................................54
7.4 Indemnification.................................................57
7.4.1 General Indemnification Obligations.......................57
7.4.2 General Indemnification Procedures........................58
7.4.3 Indemnification for Negligence............................61
7.5 UCC Matters.....................................................62
7.6 Financial Statements............................................62
7.7 Collection of Receivables.......................................62
ARTICLE 8 MISCELLANEOUS...................................................62
8.1 Construction....................................................62
8.2 Notices.........................................................63
8.3 Successors and Assigns..........................................65
8.4 Exhibits and Schedules..........................................65
8.5 Governing Law...................................................65
8.6 Dispute Resolution..............................................65
8.7 Severability....................................................67
8.8 No Third Party Beneficiaries....................................67
8.9 Entire Agreement................................................67
8.10 Amendment and Waiver............................................67
8.11 Counterparts....................................................67
8.12 Headings........................................................67
8.13 Definitions.....................................................68
Ohio
8.14 No Implied Representation.......................................68
8.15 Construction of Certain Provisions..............................68
8.16 Bulk Sales......................................................68
Ohio
v
Ohio
vi
Ohio
vii
Ohio
List of Schedules
Schedule 1.1.1(a) ............................................... ...Real Estate
Schedule 1.1.52 ..................................................IDRB Documents
Schedule 2.2.12 .................................................Excluded Assets
Schedule 3.3 ................................ No Violation of Laws or Agreements
Schedule 3.4 ...............................................Financial Statements
Schedule 3.5 .........................................................No Changes
Schedule 3.6 ..........................................................Contracts
Schedule 3.7 .........................Permits and Compliance with Laws Generally
Schedule 3.8 ..................................Environmental Matters - Generally
Schedule 3.8.10 .................................Compliance with Water Standards
Schedule 3.8.11 ................................................Deed Restriction
Schedule 3.9 ...........................................Seller Parties' Consents
Schedule 3.10 .............................................................Title
Schedule 3.11 ...........................................Real Estate Proceedings
Schedule 3.12 .............................................................Taxes
Schedule 3.15 ...................................................Labor Relations
Schedule 3.16.1 ..........................................Employee Benefit Plans
Schedule 3.16.4 .............................Employee Benefit Plans - Compliance
Schedule 3.16.9 .................Employee Benefit Plans - Extraordinary Benefits
Schedule 3.17 ................................Absence of Undisclosed Liabilities
Schedule 3.18 ..............................No Pending Litigation or Proceedings
Schedule 3.19 ...............................................Supply of Utilities
Schedule 3.20 ................................................Seller's Insurance
Schedule 3.22 ..........................................................WARN Act
Schedule 3.23 ...............................................Condition of Assets
Schedule 3.25 ........................................................All Assets
Schedule 3.27 .................................................Product Liability
Schedule 4.7 ..................................................Buyer's Insurance
Schedule 5.1 ................................................Conduct of Business
Schedule 5.9.1 ........................................................Employees
Schedule 5.9.2 .................................Collective Bargaining Agreements
Schedule 5.12 ..................................................Former Employees
Schedule 5.15 ..............................................Citizens' Guarantees
Schedule 5.16 ...............................................Schedule of Permits
Schedule 6.1.7 ......................................Related Purchase Agreements
viii
Ohio
TABLE OF EXHIBITS
Exhibit A - Form of Assumption Agreement
Exhibit B - Form of Assignment and ▇▇▇▇ of Sale
Exhibit C - Intentionally Omitted
Exhibit D - Form of Retained IDRB Obligations Agreement
Exhibit E - Form of Seller's Opinion of Counsel
Exhibit F - Form of Buyer's Opinion of Counsel
ix
Ohio
ASSET PURCHASE AGREEMENT
THIS IS AN ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of October
15, 1999, by and among Citizens Utilities Company, a Delaware corporation
("Citizens"), and each of the wholly-owned subsidiaries of Citizens named on the
signature page hereof (collectively with Citizens, "Seller" or the "Seller
Parties"), and American Water Works Company, Inc., a Delaware corporation
("Parent"), and Ohio-American Water Company, an Ohio corporation ("Buyer").
Background
1. Citizens Utilities Company of Ohio is a public utility engaged, among
other things, in the business of storing, supplying, distributing and selling
water to the public, wastewater treatment, and related services and activities
in the State of Ohio (the "Business").
2. Parent is a holding company which desires to cause the Buyer to
purchase substantially all of the assets, properties and rights of the Seller
Parties relating to the Business, and Seller desires to sell, and to cause the
sale of, such assets, properties and rights, on the terms and subject to the
conditions set forth in this Agreement.
Terms
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the respective meanings ascribed to them in this Section:
1.1.1 "Acquired Assets" means, subject to Section 2.2, all of
each Seller Party's right, title, and interest in, under and to all of the
assets, properties and rights exclusively used in the Business as a going
concern of every kind, nature and description existing on the Closing Date,
wherever such assets, properties and rights are located and whether such assets,
properties and rights are real, personal or mixed, tangible or intangible, and
whether or not any of such assets, properties and rights have any value for
accounting purposes or are carried or reflected on or specifically referred to
in Seller's books or financial statements, including all of the assets,
properties and rights exclusively relating to the Business enumerated below:
1
Ohio
(a) all real property described in Schedule 1.1.1(a),
together with all fixtures, fittings, buildings, structures and other
improvements erected thereon, and easements, rights of way, water lines, rights
of use, licenses, railroad crossing agreements, hereditaments, tenements,
privileges and other appurtenances thereto or otherwise exclusively related to
the Business (such as appurtenant rights in and to public streets) (the "Real
Estate");
(b) to the extent not included in clause (a) above, all
water tanks, reservoirs, water works, plant and systems, purification and
filtration systems, pumping stations, pumps, wells, mains, water pipes,
hydrants, equipment, machinery, vehicles, tools, dies, spare parts, materials,
water supplies, fixtures and improvements, construction in progress, jigs,
molds, patterns, gauges and production fixtures and other tangible personal
property, in transit or otherwise, used exclusively in the Business (the
"Equipment and Other Tangible Personal Property");
(c) notwithstanding the provisions of Section 2.2 but
subject to Section 2.4, all of Seller's water appropriation and flowage rights
to the extent not transferred to Buyer upon assignment of the Contracts and
Permits to Buyer;
(d) all notes receivable, accounts receivable, accrued
utility revenues, materials and supplies (at average cost net of reserve for
obsolescence) and prepayments attributable in each case exclusively to the
Business;
(e) all deferred capital costs and other deferred
charges (excluding deferred taxes collectable) attributable exclusively to the
Business of which recovery in future rates is probable;
(f) Intellectual Property and goodwill, licenses and
sublicenses granted and obtained with respect thereto;
(g) subject to Section 2.4 hereof, (i) contracts,
commitments, agreements and instruments relating to the sale of any assets,
services, properties, materials or products, including all customer contracts,
operating contracts and distribution contracts relating exclusively to the
conduct of the Business; (ii) orders, contracts, supply agreements and other
agreements relating exclusively to the purchase of any assets, services,
properties, materials, or products for the Business; (iii) all leases of Real
Estate exclusively related to the Business; (iv) all other contracts, agreements
and instruments related exclusively to the Business (other than contracts,
agreements and instruments included in the definition of Real Estate or
Permits); and (v) any such contracts, agreements and other instruments referred
to in clauses (i) - (iv) inclusive, entered into between the date hereof and the
Closing Date which are consistent with the terms of this Agreement and are
entered into in the ordinary course of business consistent with past practice,
and including in the case of clauses (i) - (iv) all such contracts, agreements
and instruments more specifically listed or described in Schedule 3.6 (and
specifically including one Collective Bargaining Agreement to the extent
provided in Section 5.9.2, but specifically excluding any contract, agreement
and instrument listed or described on Schedule 2.2.12) (the "Contracts");
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Ohio
(h) subject to Section 2.4 hereof, franchises,
approvals, permits, authorizations, licenses, orders, registrations,
certificates, variances, and other similar permits or rights obtained from any
Authority relating exclusively to the conduct of the Business and all pending
applications therefor (the "Permits");
(i) books, records, ledgers, files, documents (including
originally executed copies of written Contracts, to the extent available, and
copies to the extent not available), correspondence, Tax returns relating
exclusively to the Business, memoranda, forms, lists, plats, architectural
plans, drawings, and specifications, new product development materials, creative
materials, advertising and promotional materials, studies, reports, sales and
purchase correspondence, books of account and records relating to the
Transferred Employees (to the extent such transfer is not prohibited by law),
photographs, records of plant operations and materials used, quality control
records and procedures, equipment maintenance records, manuals and warranty
information, research and development files, data and laboratory books,
inspection processes, in each case, whether in hard copy or magnetic format, in
each instance, to the extent exclusively relating to the Business, the Acquired
Assets or the Transferred Employees;
(j) all rights or choses in action arising out of
occurrences before or after the Closing Date and exclusively related to any of
the Acquired Assets, including third party warranties and guarantees and all
related claims, credits, rights of recovery and set-off and other similar
contractual rights, as to third parties held by or in favor of Seller; provided,
however, that (notwithstanding the foregoing provisions of this Section
1.1.1(j)), to the extent that Seller pays or discharges a liability related to
the Business or any of the Acquired Assets and related to such right or chose in
action (whether by reason of indemnification under this Agreement or otherwise),
Buyer will reassign or reconvey to 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; and
(k) all rights to insurance and condemnation proceeds
(i) to the extent relating to the damage, destruction, taking or other
impairment of the Acquired Assets which damage, destruction, taking or other
impairment occurs on or prior to the Closing but only to the extent that the
proceeds exceed the amount of the write-down of the net book value of such
Acquired Assets on the books and records of Seller as a result of such damage,
destruction, taking or other impairment; (ii) to the extent they relate to
amounts paid by Buyer for Damages to the extent Buyer does not receive payment
pursuant to Section 7.4.1(a), but only to the extent Buyer is entitled to
indemnification by Seller pursuant to Sections 7.3 and 7.4, and (iii) as
provided in Section 4 of the agreement attached as Exhibit D hereto.
1.1.2."Adjusted Net Assets" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.3."Affected Participant" has the meaning set forth as
Section 5.11.1 hereof.
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1.1.4."Affiliate" of any Person means any Person, directly or
indirectly controlling, controlled by or under common control with such Person.
1.1.5."Agreement" has the meaning set forth in the
introduction hereof.
1.1.6."American Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.7."American Savings Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.8 "Antitrust Division" has the meaning set forth in
Section 5.5 hereof
1.1.9 "Assumed Benefit Liabilities" has the meaning set forth
in Section 3.16.6 hereof.
1.1.10 Intentionally Omitted.
1.1.11 "Assumed Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.12 "Assumption Agreement" has the meaning set forth in
Section 2.3.2 hereof.
1.1.13 "Authority" means any federal, state, local or foreign
governmental or regulatory entity (or any department, agency, authority or
political subdivision thereof).
1.1.14 "Base Cash Purchase Price" has the meaning set forth in
Section 2.6.1 hereof.
1.1.15 "Beneficiary" means the Person(s) designated by an
Employee, by operation of law or otherwise, as entitled to compensation,
benefits, insurance coverage, payments or any other goods or services under a
Benefit Plan.
1.1.16 "Benefit Plans" has the meaning set forth in Section
3.16.1 hereof.
1.1.17 "Bonds" means any of the bonds issued pursuant to the
Indentures of Trust, the proceeds from the issuance of which were advanced to
Seller pursuant to any of the IDRB Documents.
1.1.18 "Business" has the meaning set forth in the Background
section hereof.
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1.1.19 Business Day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the Commonwealth of
Pennsylvania are authorized or obligated by law or executive order to close.
1.1.20 "Buyer" has the meaning set forth in the introduction
hereof.
1.1.21 "Buyer's IDRB Obligations" means the obligations of
Parent and Buyer set forth in Section 5.24 (a) and in the instruments to be
executed and delivered by Parent and Buyer on or prior to the Closing Date in
accordance with Section 5.24 (a).
1.1.22 "Buyer's Accountants" means PricewaterhouseCoopers LLP
or any firm of independent public accountants hereafter designated by Buyer for
purposes of this Agreement.
1.1.23 Intentionally Omitted.
1.1.24 "Ceiling" has the meaning set forth in Section 7.4.2(e)
hereof.
1.1.25 "CERCLA" has the meaning set forth in Section 3.8.2
hereof.
1.1.26 "CERCLIS" has the meaning set forth in Section 3.8.7
hereof.
1.1.27 "Citizens" has the meaning set forth in the
introduction hereof.
1.1.28 "Closing" has the meaning set forth in Section 2.5
hereof.
1.1.29 "Closing Date" has the meaning set forth in Section 2.5
hereof.
1.1.30 "Closing Statement of Net Assets" has the meaning set
forth in Section 2.6.4(a) hereof.
1.1.31 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.32 "Collective Bargaining Agreement" means the agreement
identified as such on Schedule 3.6 hereto.
1.1.33 "Competing Transaction" has the meaning set forth in
Section 5.2.
1.1.34 "Contracts" has the meaning set forth in Section
1.1.1(g) hereof.
1.1.35 "Control" with respect to any Person means the
ownership, directly or indirectly, of at least a majority of the voting power of
each class of capital stock of such Person entitled to vote in the election of
directors of such Person generally.
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1.1.36 "Damages" has the meaning set forth in Section 7.4.1
hereof.
1.1.37 "Disclosure Schedules" means the Schedules referenced
in Articles 3, 4 and 5 of this Agreement, as amended or supplemented pursuant to
Section 5.3.
1.1.38 "Dispute" has the meaning set forth in Section 8.6.
1.1.39 "Employees" has the meaning set forth in Section 5.9.1
hereof.
1.1.40 "Environmental Laws" has the meaning set forth in
Section 3.8 hereof.
1.1.41 "Equipment and Other Tangible Personal Property" has
the meaning set forth in Section 1.1.1(b) hereof.
1.1.42 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.1.43 "ERISA Affiliate" means (a) any corporation included
with any of the Seller Parties in a controlled group of corporations within the
meaning of Section 414(b) of the Code; (b) any trade or business (whether or not
incorporated) which is under common control with any of the Seller Parties
within the meaning of Section 414 of the Code; any member of an affiliated
service group of which any of the Seller Parties is a member within the meaning
of Section 414(m) of the Code; or (d) any other person or entity treated as an
affiliate of any of the Seller Parties under Section 414(o) of the Code.
1.1.44 "Excluded Assets" has the meaning set forth in Section
2.2 hereof.
1.1.45 "Financial Statements" has the meaning set forth in
Section 3.4 hereof.
1.1.46 "FIRPTA Affidavit" has the meaning set forth in Section
2.7.1 hereof.
1.1.47 "Former Employees" means all salaried and hourly
employees once employed by Seller or any of its Affiliates, but who are no
longer so employed on the Closing Date.
1.1.48 "FTC" has the meaning set forth in Section 5.5 hereof.
1.1.49 "GAAP" has the meaning set forth in Section 3.4 hereof.
1.1.50 "Hazardous Substance" has the meaning set forth in
Section 3.8 hereof.
1.1.51 "HSR Act" has the meaning set forth in Section 3.9
hereof.
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1.1.52 "IDRB Documents" shall mean the Loan Agreements, the
Tax Regulatory Agreements, the Project Tax Certificates, and the other Contracts
related thereto to which Citizens is a party and which are listed on Schedule
1.1.52.
1.1.53 "IDRB Financings" shall mean the indebtedness arising
under the Loan Agreements included among the IDRB Documents.
1.1.54 "Indemnified Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.55 "Indemnifying Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.56 "Intellectual Property" means the trademarks, patents,
trade names and copyrights and applications therefor, inventions, trade secrets,
and confidential business information (including know-how, formulas, water
filtration, purification and pumping processes and techniques, technical data,
designs, drawings, customer and supplier lists, and business and marketing plans
and proposals), all computer software (including data and related documentation
and object and source codes), whether in magnetic format or hard copy, and
tangible embodiments thereof (in whatever form or medium) of Seller, in each
case, utilized exclusively in the Business.
1.1.57 "Interim Statement of Net Assets" means the Citizens
Water Resources Statement of Net Assets - Ohio, June 30, 1999, which is attached
hereto as Schedule 3.4.
1.1.58 "Interim Statement of Net Assets Date" means June 30,
1999.
1.1.59 "IRS" has the meaning set forth in Section 3.16.2
hereof.
1.1.60 "Lien" means any lien, charge, claim, pledge, security
interest, conditional sale agreement or other title retention agreement, lease,
mortgage, security agreement, right of first refusal, option, restriction,
tenancy, license, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction).
1.1.61 "Material Adverse Effect" means a change or effect (or
series of related changes or effects) which has or is reasonably likely to have
a material adverse change in or effect upon the business, assets, condition
(financial or otherwise), or results of operations of the Business or the
Acquired Assets, taken as a whole and taken together with the businesses and
assets being acquired by Buyer or Affiliates of Buyer pursuant to the Related
Purchase Agreements. For purpose of this Agreement, an occurrence or condition
shall not constitute a Material Adverse Effect (a) if it arises from general
business, economic or financial market conditions, from conditions generally
effecting the industries in which Seller competes, or from the transactions
contemplated
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by this Agreement, or (b) solely with respect to matters arising prior to
Closing, to the extent that either (i) Seller realizes the benefit of insurance
maintained by Citizens on or prior to the Closing Date and Buyer receives the
cash proceeds of such insurance to the extent required by Section 1.1.1(k), or
(ii) Seller arranges for Buyer to recover payments in respect of such occurrence
or condition from any other source (whether in a lump sum or stream of
payments), it being understood and agreed that a Material Adverse Effect may
have occurred irrespective of such insurance recovery if the occurrence or
condition giving rise to such recovery also causes a non-monetary material
adverse change in or effect upon the Business or the Acquired Assets, taken as a
whole and taken together with the businesses and assets being acquired by Buyer
or Affiliates of Buyer pursuant to the Related Purchase Agreements.
1.1.62 "Mortgage Indenture" means Indenture of Mortgage and
Deed of Trust between BNY Western Trust Company (successor in interest to ▇▇▇▇▇
Fargo Bank, N.A.) and First Interstate Bank of California (as successor trustee
to Marine Midland, N.A., formerly the Marine Midland Trust Company of New York).
1.1.63 "OSHA" has the meaning set forth in Section 3.7.1
hereof.
1.1.64 "PCBs" has the meaning set forth in Section 3.8.6
hereof.
1.1.65 "Permits" has the meaning set forth in Section 1.1.1(h)
hereof.
1.1.66 "Permitted Exceptions" has the meaning set forth in
Section 3.10 hereof; provided, however, that from and after the Closing,
Permitted Exceptions shall not include any Lien arising under or resulting from
the Mortgage Indenture.
1.1.67 "Person" means an individual, a corporation, a
partnership, an association, an Authority, a trustor other entity or
organization.
1.1.68 "Pre-Existing Conditions" has the meaning set forth in
Section 2.3.1(d).
1.1.69 "Prime Rate" means the rate per annum announced from
time to time during the reference period by Citibank N.A. as its United States
prime, reference or base rate for commercial loans.
1.1.70 "PUC" has the meaning set forth in Section 5.5 hereof.
1.1.71 "Purchase Price" has the meaning set forth in Section
2.6.1 hereof.
1.1.72 "Real Estate" has the meaning set forth in Section
1.1.1(a) hereof.
1.1.73 "Recovery" has the meaning set forth in Section
7.4.2(l) hereof.
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1.1.74 "Related Purchase Agreements" as the meaning set forth
in Section 6.1.7 hereof.
1.1.75 "Release" or "Released" has the meaning set forth in
Section 3.8 hereof.
1.1.76 "Remedial Action" has the meaning set forth in Section
3.8 hereof.
1.1.77 "Retained IDRB Indebtedness" means the indebtedness of
the Seller owing to the issuers of the Bonds and arising under the Loan
Agreements included among the IDRB Documents but only to the extent not included
in the Assumed Indebtedness.
1.1.78 "Retained Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.79 "Review Period" has the meaning set forth in Section
2.6.4(b) hereof.
1.1.80 "SEC" means the U.S. Securities and Exchange
Commission.
1.1.81 "Securities Filings" has the meaning set forth in
Section 5.8.2 hereof.
1.1.82 "Seller" and "Seller Parties" have the respective
meaning set forth in the introduction hereof.
1.1.83 "Seller's Accountants" means KPMG LLP or any other firm
of independent public accountants hereafter designated by Seller for purposes of
this Agreement.
1.1.84 "Seller's Adjusted Amount" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.85 "Seller's Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.86 "Seller's 401(k) Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.87 "Specified Liabilities" has the meaning set forth in
Section 7.4.2(f) hereof.
1.1.88 "Taxes" means any federal, state, local and foreign
income, payroll, withholding, excise, sales, use, personal property, use and
occupancy, business and occupation, mercantile, real estate, gross receipts,
license, employment, severance, stamp, premium, windfall profits, social
security (or similar unemployment), disability, transfer, registration, value
added, alternative, or add-on minimum, estimated, or capital stock and franchise
and other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
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1.1.89 "Third Accounting Firm" has the meaning set forth in
Section 2.6.4(b) hereof.
1.1.90 "Threshold Amount" has the meaning set forth in Section
7.4.2(e) hereof.
1.1.91 "Third Party Claim" has the meaning set forth in
Section 7.4(b)(i) hereof.
1.1.92 "Transferred Accounts" has the meaning set forth in
Section 5.11.2 hereof.
1.1.93 "Transaction Documents" has the meaning set forth in
Section 3.2 hereof.
1.1.94 "Transferred Employees" has the meaning set forth in
Section 5.9.2 hereof.
1.1.95 "Union Employees" has the meaning set forth in Section
5.9.1 hereof.
1.1.96 "VEBAs" has the meaning set forth in Section 5.12
hereof.
1.1.97 "WARN Act" means the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. section 2102- 2109, as amended.
ARTICLE 2
THE TRANSACTION
2.1 Sale and Purchase of Assets. Subject to the terms and conditions
of this Agreement, at the Closing referred to in Section 2.5 below, Citizens
shall, and shall cause the other Seller Parties to, sell, assign, transfer,
deliver and convey to Buyer, and Parent shall cause Buyer to purchase, the
Acquired Assets for the Purchase Price specified in Section 2.6.
2.2 Excluded Assets. The following assets of Seller shall be
excluded from the Acquired Assets (the "Excluded Assets"):
2.2.1 assets of the Seller used in both the Business and in
Citizens' gas, electric or communications businesses, the material items of
which are described on Schedule 2.2.12;
2.2.2 cash and cash equivalents in transit, in hand or in bank
accounts.
2.2.3 except as otherwise set forth herein, assets
attributable or related to any Benefit Plan;
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Ohio
2.2.4 the stock record and minute books of Seller;
2.2.5 Acquired Assets disposed of by Seller after the date of
this Agreement to the extent such dispositions are not prohibited by this
Agreement;
2.2.6 except to the extent set forth in Sections 2.9, rights
to refunds of Taxes payable with respect to the Business, assets, properties or
operations of any of the Seller Parties or any member of any affiliated group of
which any of them is a member, and which are treated as Retained Liabilities
under Section 2.3.3(b) below.
2.2.7 customer and other deposits held in Seller's accounts;
2.2.8 accounts owing by and among Seller and its Affiliates;
2.2.9 notes receivable and other receivables (other than note
and accounts receivable attributable exclusively to the Business);
2.2.10 all deferred tax assets or collectibles;
2.2.11 duplicate copies of all books and records transferred
to Buyer; and
2.2.12 those certain items listed on Schedule 2.2.12.
2.3 Assumption of Certain Liabilities
2.3.1 Buyer shall not assume any liabilities of Citizens or
Seller or any of their Affiliates, except that Buyer shall assume the following
specific liabilities and obligations:
(a) the obligations and liabilities set forth in
Sections 5.9, 5.10, 5.11 and 5.12 hereof;
(b) except as set forth in Section 2.3.3(b), all
liabilities and obligations of Seller in respect of the Contracts and Permits
assigned or transferred to Buyer pursuant to this Agreement in accordance with
the respective terms thereof, except that Buyer shall not assume any liabilities
or obligations for any breach or default by, or payment obligations of, Seller
under such Contracts and Permits occurring or arising or accruing on or prior to
the Closing Date;
(c) the Buyer's IDRB Obligations;
(d) any liability, obligation or responsibility of
Seller for conditions at the Real Estate, whether based on statutory or common
law, now or hereafter in effect, known or unknown, contingent or actual,
relating to or arising from pollution, contamination or protection of the
environment, human health or safety or natural resources or relating to or
arising
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from the presence or Release or threat of Release of Hazardous Substances into
the environment at the Real Estate or into or from any building, structure,
pipeline or other facility at the Real Estate, or from violation of any law
relating to the foregoing, including without limitation, any CERCLA or similar
liability under any federal or state law or regulation, except to the extent
Buyer has given written notice of a claim for indemnification pursuant to
Sections 7.3 and 7.4 hereof prior to the expiration of the claims period set
forth in Section 7.3.2(a) or (b) (and if Buyer has given written notice prior to
the expiration of such claims period, to the extent that such claim is not
entitled to indemnification under Sections 7.3 and 7.4) (the foregoing, the
"Pre-Existing Conditions");
(e) all liabilities and obligations of Seller related to
unperformed service obligations, easement and right-of-way relocation
obligations, and construction work in progress, and all engineering and
construction required to complete scheduled construction and other capital
projects for the Business, in each case relating to the Business 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, or payment obligations
of, Seller under such Contracts and Permits occurring or arising or accruing on
or prior to the Closing Date;
(f) liability for accrued but unused vacation pay for
the Transferred Employees to the extent provided in Section 5.9.2;
(g) any liability, obligation or responsibility relating
to customer deposits held by Seller on the Closing Date and relating to the
Business; and
(h) all liabilities and obligations imposed on Buyer by
any PUC in connection with the operation of the Business or the ownership of the
Acquired Assets, including with respect to any liability of the types that
appear as "Accrued Liabilities" and "Non-Current Liabilities" on the financial
statements of Seller.
2.3.2 Any liabilities or obligations which are assumed by
Buyer pursuant to Section 2.3.1 above are hereinafter referred to as the
"Assumed Liabilities." At the Closing, Parent shall cause Buyer to execute and
deliver to Seller an assumption agreement, in substantially the form of the
Assumption Agreement attached hereto as Exhibit A (the "Assumption Agreement"),
pursuant to which Buyer shall assume the Assumed Liabilities. Each of Parent and
Buyer hereby irrevocably and unconditionally waives and releases the Seller
Parties from all Assumed Liabilities and all liabilities or obligations
exclusively relating to the Business or the Acquired Assets to the extent
arising from events or occurrences after the Closing or to the extent otherwise
relating to the period after the Closing, including any liabilities created or
which arise by statute or common law, including CERCLA (it being understood that
this shall not constitute a waiver and release of any claims arising out of the
contractual relationships and indemnification arrangements between Buyer and
Seller).
2.3.3 Buyer shall not assume any liabilities, commitments or
obligations (contingent or absolute and whether or not determinable as of the
Closing) of any of the Seller Parties or any of their Affiliates except for the
Assumed Liabilities as specifically and expressly
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Ohio
provided for above, whether such liabilities or obligations relate to payment,
performance or otherwise, and all liabilities, commitments or obligations not
expressly transferred to Buyer hereunder as Assumed Liabilities are being
retained by the Seller Parties, (the "Retained Liabilities"). Each of the Seller
Parties hereby irrevocably and unconditionally waives and releases Buyer from
all Retained Liabilities including any liabilities created or which arise by
statute or common law, including CERCLA (it being understood that this shall not
constitute a waiver and release of any claims arising out of the contractual
relationships and indemnification arrangements between Buyer and Seller).
Without limitation to the foregoing, all of the following shall be
considered Retained Liabilities and not Assumed Liabilities (except as specified
below) for the purposes of this Agreement:
(a) any product liability, toxic tort or similar claim
for injury to person or property, regardless of when made or asserted, to the
extent that it arises out of or is based upon any express or implied
representation, warranty, agreement or guarantee made by any of the Seller
Parties or any of their Affiliates prior to Closing, or alleged to have been
made by any of such Persons, or to the extent that it is imposed or asserted to
be imposed by operation of law, in connection with any service performed or
product distributed or sold by or on behalf of any of the Seller Parties or any
of their Affiliates prior to Closing, including any claim referred to above in
this Section 2.3.3(a) relating to water quality standards, any claim relating to
any product delivered in connection with the performance of services provided by
Seller and any claim seeking recovery for consequential damages, lost revenue or
income;
(b) all refund obligations relating to the advances
existing on the Closing Date for construction of facilities relating to the
Business;
(c) except to the extent set forth in Section 2.9, any
federal, state, foreign or local income or other Tax payable with respect to the
business, assets, properties or operations of any of the Seller Parties or any
member of any affiliated group of which any of them is a member.
(d) any liability or obligation associated with or in
connection with any common plant assets of Seller (other than the liabilities
and obligations exclusively related to any common plant assets included among
the Acquired Assets);
(e) except as provided in Section 2.3.1 above, any
liability or obligation with respect to compensation or employee benefits of any
nature owed to any employees, agents or independent contractors of any of the
Seller Parties or any of their Affiliates, whether or not employed by Buyer
after the Closing, that arises out of or relates to events or conditions to the
extent occurring before the Closing Date;
(f) except to the extent set forth in Section 2.3.1(d),
any liability, obligation or responsibility of any of the Seller Parties, or any
of their Affiliates or predecessors, whether based on statutory or common law,
but only as any such law is interpreted, amended and
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Ohio
in effect on the Closing Date, known or unknown, contingent or actual, relating
to or arising from pollution, contamination or protection of the environment,
human health or safety or natural resources or relating to or arising from the
presence or Release or threat of Release of Hazardous Substances into the
environment or into or from any building, structure, pipeline or other facility
or relating to or arising from the generation, use, storage, treatment,
disposal, transport or other handling of Hazardous Substances or sale or product
containing Hazardous Substances from violation of any law relating to the
foregoing (but only as such law is interpreted, amended and in effect on the
Closing Date) including without limitation, any (A) CERCLA or similar liability
under any federal or state law or regulation as interpreted, amended and in
effect on the Closing Date or (B) any such liability associated with businesses
or assets of the Seller Parties other than the Business or the Acquired Assets;
(g) liabilities and obligations relating to the Business
to the extent arising prior to Closing (unless otherwise constituting Assumed
Liabilities) arising by operation of law under any common law or statutory
doctrine (including successor liability or de facto merger);
(h) any obligation or liability arising under any
contract, commitment, instrument or agreement (1) except for Buyer's IDRB
Obligations and subject to the penultimate sentence of Section 2.4, that is not
transferred to Buyer as part of the Acquired Assets, or (2) that relates to any
breach or default (or to the extent that it relates to an event which would,
with the passing of time or the giving of notice, or both, constitute a default)
under any Contract, instrument or agreement or to any services to be provided by
Seller under any such Contract, instrument or agreement to the extent that such
services were performed or were required to have been performed on or prior to
the Closing Date;
(i) any liability or obligation in respect of the
Excluded Assets;
(j) any liability or obligation of any of the Seller
Parties or any of their Affiliates existing as a result of any act, failure to
act or other state of facts or occurrence which constitutes a breach or
violation of any of Seller's representations, warranties, covenants or
agreements contained in this Agreement, except to the extent set forth in
Section 7.4; or
(k) except for the Assumed Liabilities as specifically
and expressly set forth herein, any liability to the extent arising out of or
relating to the ownership or operation of the Acquired Assets or the Business
prior to the Closing Date (including any predecessor operations), any claims,
obligations or litigation to the extent arising out of or relating to events or
conditions occurring before the Closing Date, and any liability associated with
any business other than the Business.
2.4 Consent of Third Parties. On the Closing Date, Citizens shall
cause Seller to assign to Buyer, and Parent shall cause Buyer to assume, the
Contracts and the Permits which are to be transferred to Buyer as provided in
this Agreement by means of the Assumption Agreement. To the extent that the
assignment of all or any portion of any Contract or Permit shall require the
consent (or result in a breach or violation thereof) of the other party thereto
or any other third party,
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Ohio
and such consent shall not be obtained prior to Closing, this Agreement shall
not constitute an agreement to assign any such Contract or Permit included in
the Acquired Assets. In order, however, to provide Buyer the full realization
and value of every Contract of the character described in the immediately
preceding sentence, Seller agrees that on and after the Closing, it will, at the
request and under the direction of Buyer, in the name of Seller or otherwise as
Buyer shall specify, take all reasonable actions (including without limitation
the appointment of Buyer as attorney-in-fact for Seller to proceed at Buyer's
sole cost and expense) and do or cause to be done all such things as shall in
the reasonable opinion of Buyer be necessary (a) to assure that the rights of
Seller or its Affiliates under such Contracts shall be preserved for the benefit
of Buyer and (b) to facilitate receipt of the consideration to be received by
Seller or its Affiliates in and under every such Contract. To the extent that
Buyer does receive the benefits of any such Contract pursuant to the preceding
sentence, such Contract shall be a Contract "assigned or transferred to Buyer
pursuant to this Agreement" within the meaning of Section 2.3.1(b) hereof.
Nothing in this Section 2.4 shall in any way diminish the obligations of Seller
to obtain consents and approvals under this Agreement.
2.5 Closing. Subject to the terms and conditions of this Agreement,
the closing of the sale and purchase of the Acquired Assets (the "Closing")
shall take place at 10 a.m., East Coast time, on a date mutually satisfactory to
Buyer and Seller which is no later than the fifth Business Day after
satisfaction (or waiver) of the conditions to Closing set forth in Sections 6.1
and 6.2 hereof (other than those conditions which require the delivery of any
documents or the taking of other action, at the Closing) at the offices of
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇,
or on such other date and at such other time or place as may be mutually agreed
upon by the parties hereto (the "Closing Date"). Upon payment of the Initial
Cash Payment by Buyer and confirmed receipt thereof by Seller or the Escrow
Agent pursuant to Section 2.6.2 below, Seller shall operate the Business at the
direction of and under the control of Buyer. Notwithstanding the foregoing, the
Closing shall be deemed to be effective as of 11:59 p.m. on the Closing Date for
all purposes.
2.6 Purchase Price
2.6.1 Purchase Price. Subject to the terms and conditions of
this Agreement, the aggregate purchase price be paid by Buyer for the purchase
of the Acquired Assets (the "Purchase Price") shall be: (i) $35,140,000 in cash
(the "Base Cash Purchase Price," the Base Cash Purchase Price as adjusted in
accordance with Section 2.6.3, Section 2.6.5 and Section 2.6.6 is referred to as
the "Initial Cash Payment"), subject to adjustment pursuant to the provisions of
this Agreement (including Section 2.6.3, Section 2.6.4, Section 2.6.5, Section
2.6.6 and Section 2.9 of this Agreement) and (ii) the assumption by Buyer of the
Assumed Liabilities.
2.6.2 Payment of Initial Cash Payment. Subject to the terms
and conditions of this Agreement, the Initial Cash Payment shall be paid by
Buyer on the Closing Date by federal other wire transfer of immediately
available funds to the account designated by Seller in writing at least two (2)
Business Days prior to the Closing Date. 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 Initial
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Ohio
Cash Payment to Buyer's lead bank (the "Escrow Agent") in immediately available
funds in U.S. dollars. Upon receipt, the Escrow Agent shall invest the Initial
Cash Payment in an interest-bearing account mutually agreed upon by Seller and
Buyer. At Closing, Parent shall sign and deliver to Citizens a statement which
confirms that the Closing has occurred and which instructs the Escrow Agent to
transfer to Citizens the funds representing the Initial Cash Payment, plus an
amount representing the interest earned after the Closing Date until the date
the funds are transferred, to an account that Citizens shall designate at least
two (2) business days prior to the date the funds are required to be transferred
hereunder. The Escrow Agent shall refund the balance to Buyer. The fees and
expenses of Escrow Agent shall be paid by Buyer.
2.6.3 Estimated Closing Statement. At least five (5) business
days prior to the Closing Date, Citizens shall deliver to Parent and Buyer a
statement of net assets (the "Estimated Statement of Net Assets") reflecting its
good faith calculation of the Acquired Assets of the Business as of the last day
of the latest calendar month for which financial statements of Seller are
available (the "Estimated Adjusted Net Assets"). The Estimated Statement of Net
Assets shall be prepared in the same manner and utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets (excluding for this purpose any change required by GAAP
or any Authority since June 30, 1999). The Base Cash Purchase Price shall be
increased or decreased on a dollar for dollar basis by the amount, if any, by
which the Estimated Adjusted Net Assets is greater than or less than $19,807,252
(such increase or decrease, as the case may be, is referred to herein as the
"Estimated Net Asset Adjustment").
2.6.4 Post-Closing Adjustment to Purchase Price.
(a) Within 90 days after the Closing, Citizens shall
prepare and deliver to Parent and Buyer a Statement of Net Assets (the "Closing
Statement of Net Assets") which reflects the Acquired Assets, as of 11:59 p.m.
on the Closing Date, based on actual financial performance and calculated in the
same manner, utilizing the same accounting principles, policies and methods
utilized in preparing the Interim Statement of Net Assets (excluding for this
purpose any change required by GAAP or any Authority since June 30, 1999),
together with (A) an audit report of Seller's Accountants stating that the
Closing Statement of Net Assets has been prepared utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets and (B) a calculation of Citizens' determination of the
amount of increase or decrease in the amount of the Acquired Assets of the
Business from the Interim Statement of Net Assets Date to the Closing Date which
is derived from the Closing Statement of Net Assets ("Seller's Adjustment
Amount"). The Closing Statement of Net Assets shall not give effect to any
purchase accounting treatment arising from Buyer's purchase of the Acquired
Assets. Buyer shall pay the fees and expenses of Seller's Accountants incurred
in connection with this Section 2.6.4. Buyer agrees to cooperate, and agrees to
cause Buyer's Accountants to cooperate, with Citizens and Seller's Accountants
in connection with the preparation of the Closing Statement of Net Assets, and
related information, and shall provide to Citizens and Seller's Accountants such
books, records and information as may be reasonably requested from time to time,
including the work papers of Buyer's Accountants. Citizens will give Buyer and
its representatives access during the normal business hours of Citizens to the
personnel, books and records of Citizens and the work papers of Seller's
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Ohio
Accountants to assist Buyer in the review of the Closing Statement of Net Assets
and related matters. Buyer agrees that, following the Closing through the date
on which the Closing Statement of Net Assets is delivered, it will not take any
actions with respect to any accounting books, records, policies or procedures on
which the Closing Statement of Net Assets is to be based that would make it
impossible or impracticable to calculate the Acquired Assets in the manner and
utilizing the methods required hereby. Without limiting the generality of the
foregoing, no changes shall be made in any reserve or other account existing as
of the date of the Interim Statement of Net Assets except in the ordinary course
or as a result of events occurring after the date of the Interim Statement of
Net Assets and, in such event, only in a manner consistent with past practices
of Seller.
(b) Parent or Buyer may dispute any amounts reflected on
the Closing Statement of Net Assets, in the Seller's Adjustment Amount or in the
Statement of Certain Assumed Liabilities, provided, however, that Buyer shall
notify Citizens in writing of each disputed amount, and specify the amount
thereof in dispute and the basis of such dispute, within 30 days of the Buyer's
receipt of the Closing Statement of Net Assets and the Seller's Adjustment
Amount (such 30 day period hereinafter referred to as the "Review Period"). In
the event of a dispute with respect to the Closing Statement of Net Assets, the
Seller's Adjustment Amount or the Statement of Certain Assumed Liabilities,
Buyer and Seller shall attempt to reconcile their differences and any resolution
by them as to any disputed amounts shall be final, binding and conclusive on the
parties. If Buyer and Seller are unable to reach a resolution of such
differences within 30 days of receipt of Buyer's written notice of dispute to
Seller, Buyer and Seller shall submit the amounts remaining in dispute (together
with any amounts remaining in dispute pursuant to Section 2.6.4(b) of each of
the Related Purchase Agreements) for resolution to an independent accountant
firm of national reputation mutually appointed by Seller and Buyer (such
independent accounting firm being herein referred to as the "Third Accounting
Firm"), which shall be requested to determine and report to the parties, within
30 days after such submission, upon such remaining disputed amounts, and such
report shall be final, binding and conclusive on the parties hereto with respect
to the amounts disputed. The fees and disbursements of the Third Accounting Firm
shall be allocated between Buyer and the Seller Parties so that the Seller
Parties' share of such fees and disbursements shall be in the same proportion
that the aggregate amount of such remaining disputed amounts so submitted by
Buyer to the Third Accounting Firm that is unsuccessfully disputed by the Buyer
(as finally determined by the Third Accounting Firm) bears to the total amount
of such remaining disputed amounts so submitted by the Buyer to the Third
Accounting Firm. Buyer shall pay the fees and expenses of Buyer's Accountants
incurred in connection with this Section 2.6.4(b). Seller's Adjustment Amount,
if there are no disputes with respect thereto, or Seller's Adjustment Amount as
adjusted after the resolution of all disputes with respect thereto in accordance
herewith, shall be referred to as the "Final Net Asset Adjustment."
(c) If the Base Cash Purchase Price plus (or minus, if
negative) the Final Net Asset Adjustment exceeds the Initial Cash Payment, then
within five (5) business days after final determination thereof Buyer shall pay
Seller the amount of such excess together with interest thereon for the period
commencing on the Closing Date through the date of payment calculated at the
Prime Rate in cash by federal or other wire transfer of immediately available
funds, or certified or bank cashier's check. If the Initial Cash Payment exceeds
the sum of the Base Cash
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Ohio
Purchase Price plus (or minus, if negative) the Final Net Asset Adjustment, then
within five (5) business days after final determination thereof Seller shall pay
Buyer the amount of such excess together with interest thereon for the period
commencing on the Closing Date through the date of payment calculated at the
Prime Rate in cash by federal or other wire transfer of immediately available
funds, or certified or bank cashier's check.
2.6.5 Adjustment for Certain Liabilities. Concurrent with the
delivery of the Estimated Statement of Net Assets, Citizens also shall deliver
to Parent and Buyer a statement reflecting (i) the customer and other deposits
held by Seller on the Closing Date and relating to the Business, (ii) the items
specified in Section 2.9 to the extent set forth therein, and (iii) without
duplications of any amount included in clause (i), above any payments received
by Seller under the Contracts and Permits for obligations not performed as of
the Closing Date (the "Statement of Certain Assumed Liabilities"). The Statement
of Certain Assumed Liabilities shall reflect Citizens' good faith calculation of
such liabilities as of the Closing Date. The Base Cash Purchase Price shall be
decreased by the net amount set forth in the Statement of Certain Assumed
Liabilities. Concurrent with the delivery of the Closing Statement of Net
Assets, Citizens also shall deliver to Parent a statement showing any
adjustments to the Statement of Certain Assumed Liabilities and the Base Cash
Purchase Price shall be further adjusted to give effect to any such adjustments
to the Statement of Certain Assumed Liabilities.
2.6.6 Additional Adjustment to the Purchase Price. The Base
Cash Purchase Price shall be decreased by an amount equal to the proceeds of
Seller's sale of the property described in Item 7 of Schedule 3.5 (net of
expenses) less the sum of (i) the federal and state income taxes payable by
Seller in respect of those proceeds and (ii) the book value of such property, as
of June 30, 1999, on Seller's books.
2.7 Deliveries and Proceedings at Closing. Subject to the terms and
conditions of this Agreement, at the Closing:
2.7.1 Deliveries to Buyer. Citizens shall, and shall cause
Seller to deliver to Buyer:
(a) bills of sale and instruments of assignment to the
Acquired Assets, duly executed by Seller, substantially in the form of Exhibit B
hereto and;
(b) the consents to transfer, of all transferable or
assignable Contracts, Intellectual Property, Permits (including Environmental
Permits), to the extent specifically required hereunder;
(c) title certificates to any motor vehicles included in
the Acquired Assets, duly executed by Seller (together with any other transfer
forms necessary to transfer title to such vehicles);
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Ohio
(d) special warranty deeds of conveyance with respect to
the parcels of Real Estate owned in fee simple by Seller (or, with respect to
any such parcel which was acquired by Seller (or its predecessor in interest, in
cases involving mergers) by deed without covenant or warranty of title, a quit
claim deed without covenant or warranty of title) to Buyer, duly executed and
acknowledged by Seller and in recordable form;
(e) the Foreign Investment in Real Property Tax Act
Certification and Affidavit for each parcel of Real Estate, duly executed by the
Seller Parties (the "FIRPTA Affidavit");
(f) the certificates, opinions and other documents
required to be delivered by the Seller Parties pursuant to Section 6.1 hereof
and certified resolutions evidencing the authority of the Seller Parties as set
forth in Section 3.2 hereof;
(g) all agreements and other documents required by this
Agreement;
(h) a receipt for the payment of the Initial Cash
Payment duly executed by Citizens; and
(i) all such other instruments of conveyance as shall,
in the reasonable opinion of Buyer and its counsel, be necessary to transfer to
Buyer the Acquired Assets in accordance with this Agreement and where necessary
or desirable, in recordable form.
2.7.2 Deliveries By Buyer to the Seller Parties. Parent shall,
and shall cause Buyer to deliver to the Seller Parties:
(a) wire transfer of immediately available funds in an
amount equal to the Initial Cash Payment;
(b) the Assumption Agreement, duly executed by Buyer;
(c) the certificates, opinions and other documents
required to be delivered by Buyer pursuant to Section 6.2 hereof;
(d) all of the instruments contemplated by Section
5.24(a) to the extent not previously executed and delivered by Parent; and
(e) all such other instruments of assumption as shall,
in the reasonable opinion of Seller and its counsel, be necessary for Parent and
Buyer to assume the Assumed Liabilities in accordance with this Agreement.
2.8 Allocation of Consideration. Buyer and Seller shall use their
good faith efforts to agree upon the allocation (the "Allocation") of the
Purchase Price, the Assumed Liabilities and other relevant items (including, for
example, adjustments to the Purchase Price) to the individual
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Ohio
assets or classes of assets within the meaning of Section 1060 of the Code. If
Buyer and Seller agree to such Allocation on or before ninety (90) days after
the Closing Date, Buyer and Seller covenant and agree that (i) the values
assigned to the assets by the parties' mutual agreement shall be conclusive and
final for all purposes, and (ii) neither Buyer nor Seller will take any position
before any Authority or in any proceeding that is in any way inconsistent with
such Allocation. Notwithstanding the foregoing, if Buyer and Seller cannot agree
to an Allocation on or before ninety (90) days after the Closing Date, Buyer and
Seller covenant and agree to file and to cause their respective Affiliates to
file, all Tax returns and schedules thereto (including, for example, amended
returns, claims for refund, and those returns and forms required under Section
1060 of the Code and any Treasury regulations promulgated thereunder) consistent
with each of Buyer and Seller's good faith Allocations, unless otherwise
required because of a change in any legal requirement.
2.9 Prorations. The parties hereto agree that the following expenses
shall be calculated and pro rated as of the Closing Date, with Seller
responsible for such expenses and to receive the benefit for the same for the
period through and including the Closing Date, and Buyer to be responsible for
and to receive the benefit of the same after the Closing Date:
2.9.1 personal and real property taxes (on the basis on which
the same were assessed and paid) and sales, occupation and use taxes, in each
case, to the extent relating to the Business and except as otherwise provided in
Section 7.1;
2.9.2 electric, fuel, gas, telephone, sewer and utility
charges, in each case, to the extent relating to the Business;
2.9.3 rentals and other charges under Contracts to be assumed
by Buyer pursuant to Section 2.3 (except to the extent provided in Section
2.3.3(h)); and
2.9.4 charges under maintenance and service contracts and
other Contracts (except to the extent provided in Section 2.3.3(h)), and fees
under Permits to be transferred to Buyer as part of the Acquired Assets;
2.9.5 water, sewer and other similar types of taxes, and
installments on special benefit assessments; and
2.9.6 payroll expenses, payroll taxes, reimbursable employee
business expenses and the financial cost of the accrued vacation of each
Transferred Employee.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Each of the Seller Parties jointly and severally represent and warrant to
Parent and Buyer as follows:
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Ohio
3.1 Qualification; No Interest in Other Entities
3.1.1 Each of the Seller Parties is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to own, lease
and operate the Acquired Assets and the Business as presently being conducted.
Each of the Seller Parties is qualified to do business and is in good standing
as a foreign corporation in all jurisdictions wherein the nature of the business
conducted by it or such Seller Party's ownership or use of assets and properties
make such qualification necessary, except such failures to be qualified or to be
in good standing, if any, which when taken together with all such other failures
of the Seller Parties do not have a Material Adverse Effect.
3.1.2 No shares of any corporation or any ownership or other
investment interest, either of record, beneficially or equitably, in any Person
are included in the Acquired Assets.
3.2 Authorization and Enforceability. Each of the Seller Parties has
full corporate power and authority to execute, deliver and perform this
Agreement and all other agreements and instruments to be executed by them in
connection herewith (such other agreements and instruments being hereinafter
referred to collectively as the "Transaction Documents"). The execution,
delivery and performance by each of the Seller Parties of this Agreement and the
Transaction Documents to which such Seller Party is a party have been duly
authorized by all necessary corporate action on the part of each of them. This
Agreement has been duly executed and delivered by each of the Seller Parties,
and as of the Closing Date the other Transaction Documents will be duly executed
and delivered by the Seller Parties. This Agreement is a legal, valid and
binding obligation of each Seller Party, enforceable against them in accordance
with its terms except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court. As of the Closing
Date, each of the other Transaction Documents to which each of the Seller
Parties is a party will be duly executed and delivered by each of the Seller
Parties and will constitute the legal, valid and binding obligations of each of
the Seller Parties, enforceable against them in accordance with its respective
terms, except as such enforceability may be limited by applicable laws relating
to bankruptcy, insolvency, fraudulent conveyance, reorganization or affecting
creditors' rights generally and except to the extent that injunctive or other
equitable relief is within the discretion of a court.
3.3 No Violation of Laws or Agreements. The execution, delivery, and
performance of this Agreement and the Transaction Documents by each of the
Seller Parties do not, and the consummation of the transactions contemplated by
this Agreement and the Transaction Documents by the Seller Parties, will not:
(a) contravene any provision of the Restated Articles of Incorporation or Bylaws
of Citizens or the Articles of Incorporation or Bylaws of the other Seller
Parties; or (b) except as set forth on Schedule 3.3, violate, conflict with,
result in a breach of, or constitute a default (or an event which would, with
the passage of time or the giving of notice or both, constitute a default)
under, or result in or permit the termination, modification, acceleration, or
cancellation of, or result in the creation or imposition of any Lien of any
nature whatsoever upon any of the Acquired Assets or give to others any
interests or rights therein under (i) any indenture,
21
Ohio
mortgage, loan or credit agreement, license, instrument, lease, contract, plan,
permit or other agreement or commitment, oral or written, to which any of the
Seller Parties is a party, or by which the Business or any of the Acquired
Assets may be bound or affected, except for such violations, conflicts,
breaches, terminations, modifications, accelerations, cancellations, Liens,
interests or rights which, individually and in the aggregate, do not have a
Material Adverse Effect or will be cured, waived or terminated prior to the
Closing Date, or (ii) any judgment, injunction, writ, award, decree,
restriction, ruling, or order of any court, arbitrator or Authority or any
applicable constitution, law, ordinance, rule or regulation, to which any of the
Seller Parties is subject, other than those violations or conflicts which
individually and in the aggregate would not have a Material Adverse Effect.
3.4 Financial Statements. Citizens has previously delivered to Buyer
the statement of income of the Business (the "Income Statement") and the Interim
Statement of Net Assets contained in Schedule 3.4 (collectively, the "Financial
Statements"). The Income Statement (a) fairly presents in all material respects
the results of operations of the Business in accordance with generally accepted
accounting principles ("GAAP") consistently applied except for the omission of
full footnotes to the Income Statement and (b) has in all material respects been
derived from the books and records of Seller and reflects the separation of the
operation associated with the Business from other operations of Citizens. The
Interim Statement of Net Assets (a) has in all material respects been derived
from the books and records of Seller and reflects the separation of the
operations associated with the Business from other operations of Citizens; (b)
fairly presents in all material respects the Acquired Assets as of the Interim
Statement of Net Assets Date; and (c) has in all material respects been prepared
in accordance with GAAP consistently applied except for the omission of full
footnotes to such Interim Statement of Net Assets. The financial statements
included in the Annual Report to each PUC for the year ended December 31, 1998,
were prepared in all material respects in accordance with the rules and
regulations of such PUC.
3.5 No Changes. Since the Interim Statement of Net Assets Date to
the date hereof, except as disclosed in Schedule 3.5, the Seller Parties have
conducted the Business as presently operated only in the ordinary course of
business consistent with past practice. Since the Interim Statement of Net
Assets Date, except as disclosed in Schedule 3.5, there has not been:
3.5.1 any Material Adverse Effect;
3.5.2 prior to the date of this Agreement, any change in the
salaries or other compensation payable or to become payable to, or any advance
(excluding advances for ordinary business expenses) or loan to, any Transferred
Employee, or material change or material addition to, or material modification
of, other benefits (including any bonus, profit-sharing, pension or other plan
in which any of the Transferred Employees participate) to which any of the
Transferred Employees may be entitled, or any payments to any pension,
retirement, profit-sharing, bonus or similar plan other than in any such case
(i) in the ordinary course consistent with past practice, (ii) as required by
law, or (iii) as required by the Collective Bargaining Agreement;
22
Ohio
3.5.3 any alteration in any material respect of the customary
practices with respect to the collection of accounts receivable of the Business
or the provision of discounts, rebates or allowances;
3.5.4 any disposition of or failure to keep in effect any
rights in, to or for the use of any Permit of the Business which individually or
in the aggregate would have a Material Adverse Effect;
3.5.5 any damage, destruction or loss affecting the Business
which individually or in the aggregate would have a Material Adverse Effect
whether or not covered by insurance;
3.5.6 prior to the date of this Agreement, any change by
Seller in its method of accounting or keeping its books of account or accounting
practices with respect to the Business except as required by GAAP and is set
forth on Schedule 3.5; or
3.5.7 prior to the date of this Agreement, any sale, transfer
or other disposition of any material assets, properties or rights of the
Business, except in the ordinary course of business consistent with past
practice.
3.6 Contracts. As of the date of this Agreement, Schedule 3.6
contains a list of all Contracts (other than (i) with respect to which the
Business' total annual liability or expense is less than (a) $250,000 per such
Contract and (b) $6,123,000 per all such Contracts (when taken together with
similar contracts omitted from Schedule 3.6 of the Related Purchase Agreements),
and (ii) Contracts that may be terminated by Seller, without penalty, on notice
of 90 days or less) except line extension agreements and similar agreements and
construction and design contracts. Seller has furnished to Buyer a correct and
complete copy of each written agreement listed in Schedule 3.6. Except as
disclosed on Schedule 3.6, with respect to each Contract, neither Seller nor, to
the Seller Parties' knowledge, any other party thereto, is in breach or default,
and to the Seller Parties' knowledge, no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the Contract, except in each case where
such breaches, terminations, modifications, accelerations or defaults,
individually or in the aggregate, do not have a Material Adverse Effect. Except
as set forth in Schedule 3.6, there are no disputes pending or to the best of
the Seller Parties' knowledge, threatened, under or in respect of any of the
Contracts, other than those that individually and in the aggregate do not have a
Material Adverse Effect.
3.7 Permits and Compliance With Laws Generally.
3.7.1 Except as disclosed on Schedule 3.7, Seller possesses
and is in compliance with all Permits required to operate the Business as
presently operated and to own, lease or otherwise hold the Acquired Assets under
all applicable laws, rules, regulations, ordinances and codes, including
Environmental Laws (as defined below), except to the extent that any failure to
possess, or to comply with, any Permit, laws, rules, regulations or orders would
not, individually or
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Ohio
in the aggregate, have a Material Adverse Effect. Except as disclosed in
Schedule 3.7, the Business is conducted by Seller in compliance with all
applicable laws (including the Occupational Safety and Health Act and the rules
and regulations thereunder ("OSHA"), zoning, building and similar laws and
Environmental Laws), rules, regulations, ordinances, codes, judgments and
orders, except for such failures to comply which do not individually or in the
aggregate have a Material Adverse Effect. Except as disclosed on Schedule 3.7,
all Permits of Seller relating to the operation of the Business are in full
force and effect, other than those the failure of which to be in full force and
effect would not individually or in the aggregate have a Material Adverse
Effect. There are no proceedings pending or, to the Seller Parties' knowledge,
threatened that seek the revocation, cancellation, suspension or any adverse
modification of any such Permits presently possessed by Seller other than those
revocations, cancellations, suspensions or modifications which do not
individually or in the aggregate have a Material Adverse Effect.
3.7.2 Except as set forth on Schedule 3.7, no outstanding
notice, citation, summons or order has been issued, no outstanding complaint has
been filed, no outstanding penalty has been assessed and no investigation or
review is pending or, to the knowledge of the Seller Parties, threatened, by any
Authority or other Person with respect to any alleged (i) violation by Seller or
any Affiliate of Seller relating to the Business of any law, ordinance, rule,
regulation, code or order of any Authority; or (ii) failure by Seller or any
Affiliate to have any Permit required in connection with the conduct of the
Business or otherwise applicable to the Business (including the Acquired
Assets), except, in each case, where such violations or failures, individually
or in the aggregate, would not have a Material Adverse Effect.
3.8 Environmental Matters. Except as set forth on Schedule 3.8
hereto, and with such exceptions as are not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect:
3.8.1 Seller has not disposed of or arranged for the disposal
of or Released any Hazardous Substances, other than in conformity with
Environmental Laws, at any Real Estate, or, in connection with the Business or
Acquired Assets, at any other facility, location, or other site.
3.8.2 Seller has not received any written notice or request
for information with respect to, and to the best of the Seller Parties'
knowledge, Seller has not been designated a potentially liable party for
Remedial Action, in connection with any Real Estate, or, as of the date hereof,
with respect to the Business or Acquired Assets, at any other facility,
location, or other site under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or comparable state statutes.
3.8.3 To the best of the Seller Parties' knowledge, except for
such use or storage of Hazardous Substances as is incidental to the conduct of
the Business, which use and storage is or has been in compliance with
Environmental Laws, and which use and storage has not caused any condition that
requires Remedial Action, no Real Estate has been used for the storage,
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Ohio
treatment, generation, processing, production or disposal of any Hazardous
Substances or as a landfill or other waste disposal site in violation of any
Environmental Law.
3.8.4 To the best of the Seller Parties' knowledge,
underground storage tanks are not, and have not in the past been, located on or
under any Real Estate.
3.8.5 There are no pending or unresolved claims against Seller
or the Business for investigatory costs, cleanup, removal, remedial or response
costs, or natural resource damages arising out of any Releases or threat of
Release of any Hazardous Substances at any Real Estate or, as of the date
hereof, with respect to the Business or the Acquired Assets or at any other
facility, location, or other site.
3.8.6 To the best of the Seller Parties' knowledge, no
polychlorinated biphenyls ("PCBs") or asbestos-containing materials are located
at or in any Real Estate in violation of Environmental Laws or which require
Remedial Action.
3.8.7 To the best of the Seller Parties' knowledge, no
Hazardous Substance managed or generated by or on behalf of Seller at the Real
Estate or in connection with the Business or Acquired Assets has come to be
located at any site that is listed or formally proposed for listing under
CERCLA, the Comprehensive Environmental Response, Compensation and Liability
Information System ("CERCLIS"), or any similar state list or that is the subject
of federal, state, or local enforcement actions or investigations.
3.8.8 The Seller Parties know of no facts or circumstances
related to environmental matters (i) in connection with the operation of the
Business or (ii) concerning the Real Estate, that are reasonably likely to
result in any material reduction in the quality or quantity of water available
for supply to the Seller Parties' customers.
3.8.9 The Seller Parties will within thirty (30) days of the
date hereof provide Buyer with copies of all written environmental audits or
investigations of which they are aware (after due inquiry) prepared for the Real
Estate or operations of the Business.
3.8.10 Except as set forth in Schedule 3.8.10 or Citizens'
Annual Report on Form 10-K for the year ended December 31, 1998:
(a) The Seller Parties (including for purposes of
Section 3.8.10(a) and (b), Affiliates and predecessors of the Seller Parties)
are and have been for the past three years in full compliance with all federal
and state primary drinking water standards;
(b) The Seller Parties are and have been for the past
three years in full compliance with all federal and state secondary drinking
water standards; and
(c) As to all outstanding violations of state or federal
drinking water standards, as of the date hereof, the Seller Parties have
completed or are in the process of
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Ohio
completion in accordance with all applicable deadlines, all actions required by
Environmental Law or Authorities to correct or otherwise respond to such
violations.
3.8.11 Except as set forth in Schedule 3.8.11, none of the
Seller Parties will be required to place any notice or restriction relating to
the presence of Hazardous Substances in the deed to any Real Estate, or in any
written instrument accompanying this Agreement, and no Real Estate has such a
notice or restriction in its deed or any other written instrument relating to
the purchase, lease or rental of such property.
For the purposes of these Sections 3.7 and 3.8: (A) "Remedial Action" means all
actions to (x) clean up, remove, treat or in any other way respond to any
presence, Release or threat of Release of Hazardous Substances; (y) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Substances so it does not endanger or threaten to endanger public or employee
health or welfare or the environment; or (z) perform studies, investigations or
monitoring necessary or required to investigate the foregoing; (B)
"Environmental Laws" means any common law or federal, state or local law,
statutes, rule, regulation, ordinance, code, judgment or order relating to the
protection of the environment or human health and safety and includes, but is
not limited to, CERCLA (42 U.S.C. section 9601, et seq.), the Clean Water Act
(33 U.S.C. section 1251 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.), the Toxic Substances Control Act (15 U.S.C.
section 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. section 300f et
seq.) and the Oil Pollution Act of 1990 (33 U.S.C. section 2701 et seq.), each
as has been or may be interpreted or amended as of the Closing Date and the
regulations promulgated pursuant thereto and in effect as of the Closing Date;
(C) "Released" means released, spilled, leaked, discharged, disposed of, pumped,
poured, emitted, emptied, injected, leached, dumped or allowed to escape; and
(D) "Hazardous Substances" means hazardous or toxic or polluting substance or
waste or contaminant under or pursuant to any Environmental Law, including
petroleum products, PCBs and radioactive materials.
3.9 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by the Selling Parties
of this Agreement, the Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by the Seller Parties, including
without limitation in connection with the assignment of the Contracts and
Permits contemplated hereby, except (i) as required by the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇
Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), (▇▇) as specified on
Schedule 3.9, (iii) as required by the IDRB Documents, and (iv) for such other
consents, approvals, authorizations, registrations or filings the failure of
which to obtain or make would not individually or in the aggregate have a
Material Adverse Effect or which are obtained by the Closing Date.
3.10 Title. Seller has good and valid title to all of the Acquired
Assets constituting personal property, good and marketable title in fee simple
to all of the owned Acquired Assets constituting Real Estate and good and valid
leasehold title to all of the leased Acquired Assets constituting Real Estate,
in each case, free and clear of Liens subject only to the Permitted Exceptions.
"Permitted Exceptions" as used herein shall mean (a) the Liens set forth in
Schedule
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3.10 hereto, (b) Liens securing Taxes, assessments, governmental charges or
levies, or the claims of materialmen, mechanics, carriers and like persons, all
of which are not yet due and payable or which are being contested in good faith
or (c) such other Liens which, individually or in the aggregate, do not have a
Material Adverse Effect (it being understood that to the extent a Permitted
Exception relates to or arises from a Retained Liability, Seller shall still be
liable for such Retained Liability to the extent set forth herein).
3.11 Real Estate.
3.11.1 As of the date hereof, Seller has not received any written or
oral notice for assessments for public improvements against the Real Estate
which remains unpaid, and to the best knowledge of the Seller Parties, no such
assessment has been proposed. Except as set forth on Schedule 3.11, as of the
date hereof, there is no pending condemnation, expropriation, eminent domain or
similar proceeding affecting all or any portion of any of the Real Estate and to
the best knowledge of the Seller Parties no such proceeding is threatened.
3.11.2 Except as disclosed on Schedule 3.6, as of the date
hereof, Seller is not a lessee under any Contract relating to the use or
occupancy of the Real Estate involving annual payments in excess of $100,000.
3.11.3 Each parcel of the Real Estate has physical and, to
Seller's knowledge, legal vehicular and pedestrian access to and from public
roadways as may be reasonably necessary to the operation of the Business except
where the failure to have such access does not have a Material Adverse Effect.
To Seller's knowledge, no fact or condition exists which would result in the
termination of (a) the current access from each parcel of the Real Estate, and
(b) continued use, operation, maintenance, repair and replacement of all
existing and currently committed water lines used by Seller in connection with
the Business, except where such termination would not have a Material Adverse
Effect.
3.12 Taxes. The Seller Parties have (a) timely filed all material
returns and reports for Taxes, including information returns, that are required
to have been filed in connection with, relating to, or arising out of, the
Business, (b) paid all Taxes that are shown to have come due pursuant to such
returns or reports and (c) paid all other material Taxes not required to be
reported on returns in connection with, relating to, or arising out of, or
imposed on the property of the Business for which a notice of assessment or
demand for payment has been received or which have otherwise become due. To the
best of the Seller Parties' knowledge, all such returns or reports have been
prepared in accordance with all applicable laws and requirements in all material
respects. Except to the extent disclosed on Schedule 3.12, none of the assets of
the Business or constituting any of the Acquired Assets (a) is property that is
required to be treated as owned by another Person pursuant to the "safe harbor
lease" provisions of former Section 168(f)(8) of the Code, (b) is "tax-exempt
use property" within the meaning of Section 168(h) of the Code or (c) directly
or indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code.
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3.13 Patents and Intellectual Property Rights. To the best of the
Seller Parties' knowledge, the operations of Seller do not make any unauthorized
use of any Intellectual Property except for any such unauthorized uses which do
not have a Material Adverse Effect. Assuming the consents listed as item XII on
Schedule 3.9 are obtained, Buyer will not lose any of Seller's rights to, or be
required to pay increased royalties for, any Intellectual Property included in
the Acquired Assets as a result of the Closing and the consummation of the
transactions contemplated by this Agreement, except for any such rights or such
increased royalties the loss or payment of which would, individually or in the
aggregate, not have a Material Adverse Effect.
3.14 Accounts Receivable. The accounts receivable of Seller arising
from the Business as set forth on the Interim Statement of Net Assets or arising
since the date thereof have arisen out of bona fide sales and deliveries of
goods, performance of services and other business transactions in the ordinary
course of business consistent with past practice; the allowance for collection
losses on the Interim Statement of Net Assets has been determined in accordance
with GAAP consistent with past practice.
3.15 Labor Relations. As of the date hereof, except as set forth in
Schedule 3.15, to best of the knowledge of the Seller Parties, there has been no
union organizing efforts with respect to the Business conducted within the last
three (3) years and there are none now being conducted with respect to the
Business. Except as set forth in Schedule 3.15, Seller has not at any time
during the three (3) years prior to the date of this Agreement had, nor, to the
best of the Seller Parties' knowledge, is there now threatened, a strike, work
stoppage or work slow down with respect to or affecting the Business which had
or could reasonably be expected to have a Material Adverse Effect. As of the
date hereof, except as set forth in Schedule 3.15, (i) no Employee is
represented by any union or other labor organization and (ii) there is no unfair
labor practice charge pending or, to the best knowledge of the Seller Parties,
threatened against Seller relating to any of the Employees as related to the
Business which could reasonably be expected to have a Material Adverse Effect.
3.16 Employee Benefit Plans.
3.16.1 Schedule 3.16.1 contains a true and complete list of
each "employee benefit plan," as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA), bonus, incentive,
deferred compensation, excess benefit, employment contract, stock purchase,
stock ownership, stock option, supplemental unemployment, vacation, sabbatical,
sick-day, severance or other material employee benefit plan, program or
arrangement (other than those required to be maintained by law), whether written
or unwritten, qualified or nonqualified, funded or unfunded, foreign or
domestic, (i) maintained by, or contributed to by Citizens or any of its
Affiliates, in respect of any Employee or Former Employee, or (ii) with respect
to which Citizens or any of its Affiliates has any liability in respect of any
Employee or Former Employee (the"Benefit Plans"). Except as disclosed on
Schedule 3.16.1, neither Citizens nor any of its Affiliates maintains any bonus,
pension or welfare benefit plan, program or arrangement, including any deferred
compensation arrangement, for directors, consultants or independent contractors
of the Business.
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3.16.2 A true and complete copy of each Benefit Plan and
related trust agreements and (to the extent applicable) a copy of each Benefit
Plan's current summary plan description and in the case of an unwritten Benefit
Plan, a written description thereof, has been furnished to Buyer. In addition,
to the extent applicable, Buyer has been provided a copy of the most recent
Internal Revenue Service ("IRS") determination letter issued to each Benefit
Plan and a copy of the most recent IRS Form 5500 together with all schedules and
accountants' statement filed, and actuarial reports prepared, on behalf of each
Benefit Plan.
3.16.3 Each Benefit Plan which is intended to be qualified
under Section 401(a) of the Code (as designated on Schedule 3.16.1) is so
qualified, and will remain so qualified upon the timely making of certain
amendments required by law during the applicable remedial amendment period, and
any trust forming a part of such a Benefit Plan is tax exempt under Section
501(a) of the Code. Each such Benefit Plan has been amended, as and when
necessary, to comply with the Tax Reform Act of 1986 and upon timely filing of
an Application for Determination with the Internal Revenue Service, will be
eligible to make further such amendments under the"remedial amendment period."
3.16.4 Except as disclosed in Schedule 3.16.4, each Benefit
Plan has been operated and administered in all material respects in accordance
with its terms and all applicable laws, including ERISA and the Code.
3.16.5 None of the Acquired Assets is subject to a Lien or Tax
under the Code or ERISA.
3.16.6 Neither Citizens nor any ERISA Affiliate and, to the
knowledge of the Seller Parties, no other Person, has taken any action or failed
to take any action with respect to any Benefit Plan that may subject Buyer or
any Benefit Plan under which liabilities may be assumed by Buyer under Sections
5.10, 5.11 or 5.12 ("Assumed Benefit Liabilities") to any material liability or
Tax under the Code or ERISA.
3.16.7 Neither Citizens nor any ERISA Affiliate has incurred
or expects to incur any withdrawal liability with respect to any Benefit Plan
which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA, including any contingent liability under Section 4204 of ERISA or
withdrawal liability arising from the actions of Citizens or any ERISA Affiliate
contemplated by this Agreement. All contributions that Citizens or any ERISA
Affiliate have been obliged to make to any Benefit Plan, including any
multiemployer plan, have been duly and timely made.
3.16.8 There are no pending or, to the knowledge of the Seller
Parties, threatened claims (other than routine claims for benefits),
assessments, complaints, proceedings or investigations of any kind in any court
or governmental agency with respect to any Benefit Plan which could reasonably
be expected to give rise to a material liability to Buyer.
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3.16.9 Except as disclosed on Schedule 3.16.9, no Benefit Plan
provides benefits, including without limitation, death or medical benefits,
beyond termination of service or retirement other than (i) coverage mandated by
law, or (ii) death or retirement benefits under a Benefit Plan qualified under
Section 401(a) of the Code. Seller's Retiree Medical Plan contains provisions
permitting Seller to modify or terminate retiree medical benefits at any time,
without prior notice to any covered individual. Except with respect to retirees,
"grandfathered" employees and collectively bargained employees, Seller knows of
no reason why its ability to effect those provisions would be limited.
3.16.10 With respect to each Benefit Plan that is a "group
health plan" within the meaning of Section 607 of ERISA and that is subject to
Section 4980B of the Code, Citizens and each ERISA Affiliate have complied in
all material respects with the continuation coverage requirements of the Code
and ERISA.
3.17 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 3.17, Seller has no liabilities with respect to the Business which
would constitute Assumed Liabilities, either direct or indirect, matured or
unmatured or absolute, contingent or otherwise, except:
3.17.1 the liabilities which would decrease the Base Cash
Purchase Price pursuant to Section 2.6.5 to the extent assumed by Buyer at
Closing;
3.17.2 liabilities arising in the ordinary course of business
under any Contract or Permit or with respect to any agreement or instrument
included within the definition of Real Estate; and
3.17.3 those liabilities incurred, consistent with past
business practice, in or as a result of the normal and ordinary course of
business and reflected in the books and records related to the Business;
3.17.4 the obligations and liabilities set forth in Sections
5.9, 5.10, 5.11 and 5.12 hereof; and
3.17.5 those other liabilities, which individually and in the
aggregate, would not have a Material Adverse Effect.
3.18 No Pending Litigation or Proceedings. Except as disclosed in
Schedule 3.18, there are no actions, suits, investigations or proceedings
pending against or, to the best of the Seller Parties' knowledge, threatened,
against or affecting, Seller, the Business or any of the Acquired Assets before
any court or arbitrator or Authority which individually or in the aggregate,
would have a Material Adverse Effect. Except as disclosed in Schedule 3.18,
there are currently no outstanding judgments, decrees or orders of any court or
Authority against any of the Seller Parties, which relate to or arise out of the
conduct of the Business or the ownership, condition or operation of the Business
or the Acquired Assets (other than any PUC order relating to rates, tariffs and
similar
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matters arising in the ordinary course of business) which individually or in the
aggregate would have a Material Adverse Effect.
3.19 Supply of Utilities. Except as set forth on Schedule 3.19, the
Real Estate has adequate arrangements for supplies of electricity, gas, oil,
coal and/or sewer for all operations at the 1998 or current operating levels,
whichever is greater. Except as set forth on Schedule 3.19, there are no actions
or proceedings pending or, to the best of the Seller Parties' knowledge,
threatened, that would adversely affect the supply of electricity, gas, coal or
sewer to the Real Estate except for those which individually and in the
aggregate would not have a Material Adverse Effect.
3.20 Insurance. Schedule 3.20 lists the Seller Parties' policies and
contracts in effect as of the date hereof for insurance covering the Acquired
Assets or Assumed Liabilities and the operation of the facilities constituting
the Business owned or held by Seller, together with the risks insured against,
coverage limits and deductible amounts.
3.21 Relationship with Customers. As of the date hereof, Seller does
not have any current customer which accounted for more than 5% of the net sales
of the Business (taken together with the businesses being acquired by Buyer or
Affiliates of Buyer pursuant to the Related Purchase Agreements) for the
immediately preceding 12-month period.
3.22 WARN Act. Except as contemplated by Section 5.9 hereby or as
set forth in Schedule 3.22 hereto, within six months prior to the date hereof,
(i) Seller has not effectuated (a) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Business; or (b) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Business; (ii) Seller has not been affected by any transaction or engaged in
layoffs or employment terminations with respect to the Business sufficient in
number to trigger application of any similar state or local law; and (iii) none
of Seller's employees who are employed in connection with the Business has
suffered an "employment loss" (as defined in the WARN Act) .
3.23 Condition of Assets. Except as set forth on Schedule 3.23, the
buildings, machinery, equipment, tools, furniture, improvements and other fixed
tangible assets of the Business included in the Acquired Assets, taken as a
whole and taken together with the similar assets included among the assets being
acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements, are in good operating condition and repair, reasonable wear and tear
excepted.
3.24 Brokerage. None of the Seller Parties or their Affiliates have
made any agreement or taken any other action which might cause any Person to
become entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to Buyer or
its Affiliates.
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3.25 All Assets. Except as set forth on Schedule 3.25 and for the
Excluded Assets, the Acquired Assets include all assets, rights, properties and
contracts the use of which is necessary to the continued conduct of the Business
by Buyer substantially in the manner as it was conducted prior to the Closing
Date, including the service of all utility customers in substantially the same
manner and at substantially the same service levels as provided by Seller on the
date hereof.
3.26 Year 2000 Matters. Citizens has (1) initiated a review and
assessment of all mission critical areas within the Business and related
operations (including those affected by suppliers and vendors) that it
reasonably believes could be adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by any Seller Party (or suppliers
and vendors) may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
all as set forth in Citizens' Annual report on Form 10-K for the fiscal year
ended December 31, 1998 and Citizens' Quarterly reports on Form 10-Q for the
periods ending March 31, 1999 and June 30, 1999, and (iii) to date, implemented
that plan substantially in accordance with that timetable. Seller has
contingency plans that are dedicated to ensuring that established and expected
levels of customer service are maintained without interruption, while core
business functionality is preserved during the millennium transition. With
respect to its suppliers and vendors, the foregoing representation and warranty
is expressly limited to matters known to Seller after making reasonable
inquiries of such suppliers and vendors. Seller makes no representation or
warranty with respect to the receipt or accuracy of any response received from
any vendor or supplier.
3.27 Product Liability. Except as disclosed in Schedule 3.27 and
except for those liabilities which individually or in the aggregate would not
have a Material Adverse Effect, there are no (a) liabilities of the Seller
Parties or their Affiliates, fixed or contingent, asserted or, to the knowledge
of the Seller Parties, unasserted, with respect to any product liability or
similar claim that relates to any product or service sold by Seller or the
Business to others or (b) liabilities of the Seller Parties or their Affiliates,
fixed or contingent, asserted or, to the knowledge of the Seller Parties
unasserted, with respect to any claim for the breach of any express or implied
product warranty or a similar claim with respect to any product or service sold
by Seller or the Business to others.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer jointly and severally represent and warrant to Seller as
follows:
4.1 Organization and Good Standing.
4.1.1 Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
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4.1.2 Buyer is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to own, lease and operate the Acquired
Assets and the Business. Buyer is qualified to do business and is in good
standing in all jurisdictions wherein the nature of the business conducted by it
or Buyer's ownership or use of assets and properties make such qualification
necessary, except such failures to be qualified or to be in good standing, if
any, which when taken together with all such failures of Buyer do not have a
material adverse effect on its ability to perform its obligations under this
Agreement and the Transaction Documents.
4.2 Authorization and Enforceability. Each of Buyer and Parent has
full corporate power and authority to execute, deliver and perform this
Agreement and the other Transaction Documents to which either of them is a
party. The execution, delivery and performance by Buyer and Parent of this
Agreement and the Transaction Documents to which Buyer and/or Parent is a party
have been duly authorized by all necessary corporate action on the part of each
of them. This Agreement has been duly executed and delivered by Buyer and
Parent, and as of the Closing Date the other Transaction Documents will be duly
executed and delivered by Buyer and Parent. This Agreement is a legal, valid and
binding obligation of Buyer and Parent, enforceable against them in accordance
with its terms, except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court. As of the Closing
Date, each of the other Transaction Documents to which Buyer and Parent is a
party will be duly executed and delivered by Buyer and Parent and will
constitute the legal, valid and binding obligations of Buyer and Parent,
enforceable against them in accordance with its respective terms, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court.
4.3 No Violation of Laws or Agreements. The execution, delivery and
performance of this Agreement and the Transaction Documents by Buyer and/or
Parent do not, and the consummation of the transactions contemplated hereby and
thereby will not, (a) contravene any provision of the Articles of Incorporation
or Bylaws of Buyer or the Certificate of Incorporation or Bylaws of Parent; or
(b) violate, conflict with, result in a breach of, or constitute a default (or
an event which would with the passage of time or the giving of notice, or both,
constitute a default) under, or result in or permit the termination,
modification, acceleration, or cancellation of (i) any indenture, mortgage, loan
or credit agreement, license, instrument, lease, contract, plan, permit,
authorization, proof of dedication or other agreement or commitment, oral or
written, to which Parent or Buyer is a party, or by which any of their assets or
properties may be bound or affected, except for such violations, conflicts,
breaches, terminations, modifications, accelerations, cancellations, interests
or rights which, individually or in the aggregate do not have a material adverse
effect on their respective ability to perform their obligations under this
Agreement and the Transaction Documents, or (ii) any judgment, injunction, writ,
award, decree, restriction, ruling, or order of any court, arbitrator or
Authority or any applicable constitution, law, ordinance, rule or regulation to
which Buyer or Parent is subject other than those violations and conflicts which
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individually or in the aggregate do not have a material adverse effect on their
respective ability to perform their obligations under this Agreement and the
Transaction Documents.
4.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by Buyer and Parent of
this Agreement, the other Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by Buyer or Parent except (i) as
required by the HSR Act, (ii) as specified on Schedule 3.9 and (iii) for such
consents, approvals, authorizations, registrations or filings, the failure to
obtain or make would not individually or in the aggregate have a material
adverse effect on their respective ability to perform their obligations under
this Agreement and the Transaction Documents.
4.5 Financing. Buyer and Parent have, and at the Closing Date, will
have sufficient resources to pay the Purchase Price, and Parent, Buyer or the
other Affiliates of Parent that are buyers of the assets and businesses being
acquired pursuant to the Related Purchase Agreements have, and at the Closing
Date, will have sufficient resources to pay the purchase prices set forth in the
Related Purchase Agreements.
4.6 Brokerage. None of Parent, Buyer or their Affiliates have made
any agreement or taken any other action which might cause any Person to become
entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to the
Seller Parties.
4.7 Insurance. Schedule 4.7 lists the policies and contracts in
effect as of the date hereof for casualty and property insurance covering
Buyer's assets and properties and the operation of Buyer's business, together
with the risks insured against, coverage limits and deductible amounts.
ARTICLE 5
ADDITIONAL COVENANT
5.1 Conduct of Business. Except (i) as otherwise specifically
permitted by this Agreement, (ii) as set forth in Schedule 5.1 hereto or (iii)
with the prior written consent of Buyer, from and after the date of this
Agreement and up to and including the Closing Date, each of the Seller Parties
agree that:
5.1.1 Seller shall conduct the Business as presently operated
and only in the ordinary course of business consistent with past practice.
5.1.2 They shall promptly inform Buyer in writing of any
specific event or circumstance of which they are aware, or of which they receive
notice, that has or is likely to have, individually or in the aggregate, taken
together with the other events or circumstances, a Material Adverse Effect on
the Acquired Assets or the Assumed Liabilities.
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5.1.3 Seller shall not:
(a) change or modify in any material respect existing
credit and collection policies, procedures and practices with respect to
accounts receivable;
(b) enter into any contract or commitment, waive any
right or enter into any other transaction (except in the ordinary course of
business) which would have a Material Adverse Effect;
(c) except in the event of service interruption,
emergency or casualty loss, commit to acquire subsequent to the Closing Date on
behalf of the Business any capital asset or group of capital assets costing in
excess of $1,000,000 that is not included in the capital budget of Seller for
fiscal year 2000 and which, if so acquired, would be included in the Acquired
Assets; commencing December 1, 1999, accept or receive customer advances for
construction in excess of $9,000,000 (when combined with customer advances
relating to the businesses being acquired by Buyer or Affiliates of Buyer
pursuant to the Related Purchase Agreements) per each of the next four
consecutive three-month periods unless pursuant to an existing tariff, Contract
or Permit of Seller; or sell or lease or agree to sell or lease or otherwise
dispose of any assets included in the Acquired Assets except in the ordinary
course of the conduct of the Business, consistent with past practice;
(d) except in the ordinary course of business,
consistent with past practice or as required under any of Seller's debt
instruments or indentures, mortgage, pledge or subject to any Lien (other than
Permitted Liens) any of the Acquired Assets;
(e) change any compensation or benefits or grant any
material new compensation or benefits payable to or in respect of any
Transferred Employee except (i) as required by law, (ii) in the ordinary course,
consistent with past practice and (iii) as required by the Collective Bargaining
Agreement in existence on the date hereof; provided, however, no individual
Employee shall in any event receive a compensation increase in excess of seven
percent (7%) except as required by the Collective Bargaining Agreement in
existence on the date hereof;
(f) other than in the ordinary course of business
consistent with past practice, sell or otherwise transfer any assets necessary,
or otherwise material to the conduct of, the Business which would constitute
Acquired Assets;
(g) change the Seller's method of accounting or keeping
its books of account or accounting practices with respect to the Business,
except as required by GAAP or any Authority;
(h) intentionally and wilfully take or omit to take any
action which if taken or omitted prior to the date hereof would constitute or
result in a breach of any representations or warranties set forth in Sections
3.1, 3.2, 3.3, 3.4, 3.7, 3.8, 3.10, 3.14, 3.16 and
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3.25 hereof (it being understood that the failure to cure a breach shall not, by
itself, be an intentional and wilful omission to take action); or
(i) prepay, redeem, retire, refund or otherwise
extinguish any of the Assumed Indebtedness.
5.2 Negotiations. Neither Citizens nor any Person controlled by
Citizens or under common control with Citizens (each such person being a
"Section 5.2 Affiliate"), nor any officer, director, employee, representative or
agent of Citizens or any of their Section 5.2 Affiliates, shall, directly or
indirectly, solicit or initiate or participate in any way in discussions or
negotiations with, or provide any information or assistance to, or enter into an
agreement with any Person or group of Persons (other than Parent, Buyer or any
Person controlled by Parent or Buyer or under common control with Parent, Buyer
or any Persons providing financing to the parties hereto in connection with
facilitating the consummation of the transactions contemplated by this
Agreement) concerning any acquisition, merger, consolidation, liquidation,
dissolution, disposition or other transaction (or series of such transactions)
that would result in the transfer to any such Person or group of Persons of ten
percent (10%) of the Acquired Assets (as measured by net book value of such
assets on the date of each such transaction) or the acquisition, merger,
consolidation, liquidation, dissolution, disposition or other transaction (or
series of such transactions) involving the Seller Parties, if such acquisition,
merger, consolidation, liquidation, dissolution, disposition or other
transaction (or series of such transactions) would be inconsistent, in any
respect, with the obligations of the Seller Parties hereunder (any of the
foregoing transactions, a "Competing Transaction").
5.3 Disclosure Schedules. As promptly as practicable, the Seller
Parties will provide Buyer with a supplement or amendment to the Disclosure
Schedules with respect to any matter, condition or occurrence which is required
to be set forth or described in the Disclosure Schedules. For the avoidance of
doubt, a matter, condition or occurrence shall only be "required" to be set
forth or described in the Disclosure Schedules if the failure to be so disclosed
would result in a breach of the applicable representation or warranty (qualified
by Material Adverse Effect where applicable) on the date hereof or on the
Closing Date. In addition, Seller shall have the right at any time and from time
to time prior to the Closing to supplement or amend the Disclosure Schedules.
Seller may provide Disclosure Schedules with respect to any representation or
warranty of this Agreement whether or not a specific schedule is referred to
therein. In the event that any supplement or amendment of such Disclosure
Schedules shall be provided later than five (5) business days prior to the
Closing Date, the Buyer shall have the right to delay the Closing for a period
of five (5) business days in order for Buyer to review such supplement or
amendment. No such supplement or amendment shall be deemed to cure any breach of
or alter any representation or warranty made in this Agreement so as to permit
the Closing to occur unless Buyer specifically agrees thereto in writing. The
Seller Parties shall promptly inform Buyer, and Buyer will promptly inform the
Seller Parties of any fact or event which comes to their attention, the
existence of which constitutes or likely will constitute a breach in any
material respects of any representation or warranty in this Agreement. In
addition, Parent will, within five (5) days of receipt thereof, forward to
Seller (i) any title report Buyer receives from a title company with respect to
the Real Estate and (ii) any written
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communication regarding a specific Lien or title defect affecting a specifically
identified parcel of the Real Estate sent to the President, Treasurer or General
Counsel of Parent or the President or Corporate Counsel of any other Buyer
Party, and sent by a party other than the Seller Parties, their legal counsel,
financial advisors or representatives.
5.4 Mutual Covenants. The parties mutually covenant from the date of
this Agreement to the Closing Date (and subject to the other terms of this
Agreement, including Section 5.8 hereof):
5.4.1 to cooperate with each other in determining whether
filings are required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents;
5.4.2 to use all reasonable efforts to obtain promptly the
satisfaction (but not waiver) of the conditions to the Closing of the
transactions contemplated herein (each party hereto shall furnish to the other
and to the other's counsel all such information as may be reasonably required in
order to effectuate the foregoing action); and
5.4.3 to advise the other parties promptly if such party
determines that any condition precedent to its obligations hereunder will not be
satisfied in a timely manner.
5.5 Filings and Authorizations. The parties hereto will as promptly
as practicable, make or cause to be made all such filings and submissions under
laws, rules and regulations applicable to it or its Affiliates as may be
required to consummate the terms of this Agreement, including all notifications
and information to be filed or supplied pursuant to the HSR Act and with the
applicable public utility commission (each, a "PUC"). Any such filings and
supplemental information will be in substantial compliance with the requirements
of the applicable law, rule or regulation. Each of Parent and Buyer, on the one
hand, and the Seller Parties, on the other, shall furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing or submission to the PUC or which
is necessary under the HSR Act. The Seller Parties, on the one hand and Buyer
and Parent, on the other, shall keep each other apprised of the status of any
communications with, and inquiries or requests for additional information from,
any Authority, including the PUC, the United States Federal Trade Commission
("FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division"), and shall comply promptly with any such inquiry or
request. Each of Citizens, Seller, Parent and Buyer will use its reasonable
efforts to obtain any clearance required under the HSR Act and from the PUC for
the purchase and sale of the Acquired Assets in accordance with the terms and
conditions hereof. Notwithstanding the foregoing, nothing contained in this
Agreement will require or obligate any party or their respective Affiliates: (i)
to initiate, pursue or defend any litigation (or threatened litigation) to which
any Authority (including the PUC, the Antitrust Division and the FTC) is a
party; (ii) to agree or otherwise become subject to any material limitations on
(A) the right of Buyer or its Affiliates effectively to control or operate the
Business
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or the right of Seller or its Affiliates effectively to control or operate
Citizens' other businesses, (B) the right of Buyer or its Affiliates to acquire
or hold the Business or the right of Seller or its Affiliates to hold the
Excluded Assets or Citizens' other businesses, or (C) the right of Buyer to
exercise full rights of ownership of the Business or all or any material portion
of the Acquired Assets or the right of Citizens to exercise full rights of
ownership of Citizens' other businesses or all or any material portion of the
Excluded Assets; or (iii) to agree or otherwise be required to sell or otherwise
dispose of, hold separate (through the establishment of a trust or otherwise),
or divest itself of all or any portion of the business, assets or operations of
Citizens, Seller, Parent, Buyer, any Affiliate of Buyer or the Business. The
parties agree that no representation, warranty or covenant of Buyer, Parent, or
Citizens contained in this Agreement shall be breached or deemed breached as a
result of the failure by Parent and Buyer on the one hand or the Seller Parties,
on the other, to take any of the actions specified in the preceding sentence.
5.6 Public Announcement. No party hereto shall make or issue, or
cause to be made or issued, any public announcement or written statement
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party (which will not be unreasonably
withheld or delayed), unless counsel to such party advises that such
announcement or statement is required by law (in which case the parties shall
make reasonable efforts to consult with each other prior to such required
announcement).
5.7 Further Assurances. Each of Citizens, Parent, Buyer and Seller,
from time to time after the Closing, at Buyer's or Seller's request, will
execute, acknowledge and deliver to the applicable person such other instruments
of conveyance and transfer and will take such other actions and execute such
other documents, certifications, and further assurances as Buyer or Seller, as
the case may be, may reasonably require in order to transfer, in accordance with
the terms and conditions of this Agreement, more effectively in Buyer or to put
Buyer more fully in possession of any of the Acquired Assets or better to enable
Buyer to complete, perform and discharge any of the Assumed Liabilities. Each
party shall cooperate and deliver such instruments and take such action as may
be reasonably requested by the other party in order to carry out the provisions
and purposes of this Agreement and the transactions contemplated hereby.
5.8 Cooperation.
5.8.1 Parent, Buyer, Citizens and Seller shall cooperate and
shall cause their respective Affiliates, officers, employees, agents and
representatives to cooperate to ensure the orderly transition of the Business
from Seller to Buyer and to minimize the disruption to the Business resulting
from the transactions contemplated hereby.
5.8.2 Without limiting the foregoing, neither Parent and
Buyer, nor Citizens and Seller (nor any of their respective Affiliates) shall
make any filings pursuant to federal or state securities laws ("Securities
Filings") or make any consent solicitations to holders of Assumed Indebtedness
which include any information about Seller, Buyer (or their respective
Affiliates) or the transactions contemplated hereby without consulting with the
other
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party and providing the other party a reasonable opportunity to review and
comment on such information, it being understood and agreed that any party may
so disclose such information in its reasonable judgment to the extent such
party's counsel advises it that such disclosure is advisable under applicable
law. Each of Parent, Buyer, Citizens and Seller shall, and shall cause their
respective Affiliates to, comply with all applicable federal and state
securities laws in connection with this Agreement and the transactions
contemplated hereby (including any solicitation of consents of holders of
Assumed Indebtedness), and all information supplied by any party for inclusion
in any Securities Filing or consent solicitation, including, without limitation,
any proxy or information statement, or any registration statement on Form S-4
shall be true and correct in all material respect and shall not contain any
untrue statement of a material fact or omit to state any material fact which is
required to be stated therein or which is necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made.
5.8.3 During the first 90 days after the Closing Date (180
days for Trademarks on tanks), Buyer shall have the right to use all of the
logos, trademarks and trade identification of Seller as are located at the Real
Estate or on the Acquired Assets (collectively, the "Trademarks"). Buyer's use
of the Trademarks shall be in accordance with such reasonable quality control
standards as may be promulgated by Seller and provided to Buyer. If Seller shall
notify Buyer in writing of Buyer's material failure to comply with such
reasonable quality control standards and Buyer continues to not comply with such
reasonable quality control standards for more than 20 days after receipt of such
notice, Seller shall have the right to terminate Buyer's right under this
Section 5.8.3 to use the Trademarks.
5.8.4 Seller shall give Buyer and its representatives
(including Buyer's Accountants, consultants, counsel and employees), upon
reasonable notice and during normal business hours, full access to the
properties, contracts, employees, books, records and affairs of Seller to the
extent relating to the Business and the Acquired Assets, and shall cause its
officers, employees, agents and representatives to furnish to Buyer all
documents, records and information (and copies thereof), to the extent relating
to the Business and the Acquired Assets, as Buyer may reasonably request. Except
to the extent disclosed in the Disclosure Schedules in accordance with Sections
5.3 and 8.4, no investigation or receipt of information by Buyer pursuant to, or
in connection with, this Agreement, shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Seller Parties under
this Agreement or the conditions to the obligations of Parent or Buyer under
this Agreement. All information provided to Buyer under this Agreement shall be
held subject to the terms and conditions of the Confidentiality Agreement dated
August 2, 1999 between Citizens and Parent.
5.9 Employees; Employee Benefits.
5.9.1 Schedule 5.9.1 lists divisions and the number of all
salaried and hourly employees actively employed (as of the date of this
Agreement) in each division by Seller or any of its Affiliates whose primary
responsibilities relate to the Business. Schedule 5.9.1 lists job
classifications and number of employees in each job classification of those
employees whose terms
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and conditions of employment are subject to the Collective Bargaining Agreement
("Union Employees"). All individuals referred to on Schedule 5.9.1 are herein
referred to as the "Employees." No later than March 1, 2000, Buyer and Seller
shall determine the number of Employees to whom Buyer will offer employment,
which number shall be at least equal to 250 (when combined with offers made by
Buyer or Affiliates of Buyer to employees of Affiliates of Seller in connection
with the Related Purchase Agreements) (the "Base Number"), and such additional
number of Employees, if any, whom Buyer also wishes to employ. Upon
determination of such Employees, Seller will supplement Schedule 5.9.1 with the
name, job title, unused vacation, current base salary or hourly wage, date of
hire and assigned location of each Transferred Employee (as that term is defined
below). At the Closing, Seller shall provide an updated Schedule 5.9.1 which
shall disclose all the information required under the preceding sentence as of
the most recent practicable date prior to Closing.
5.9.2 Effective as of the Closing, Buyer shall offer
employment to at least the Base Number of those employees included on Schedule
5.9.1. All Employees to whom Buyer offers employment and who accept such
employment are herein referred to as the "Transferred Employees." In the event
any Employees do not accept Buyer's offer of employment, Buyer shall offer
employment to such additional employees (the identity of whom shall be
determined by Buyer and Seller) as are necessary to bring the total number of
Transferred Employees to the Base Number. Subject to the provisions of this
Section 5.9 and Section 5.12, Buyer shall provide each Transferred Employee with
base compensation at least equal to that provided by Seller on the Closing Date,
and employee benefits which are substantially comparable to those provided by
Buyer to its other similarly situated employees. Except as otherwise provided
under the terms of any assumed collective bargaining agreement and under terms
of Section 5.12, Buyer shall provide each Union Transferred Employee with
compensation at least equal to that provided by Seller immediately prior to the
Closing Date and with the benefits provided to Buyer's similarly situated
collectively bargained employees. On and after the Closing Date, Buyer shall
assume Seller's obligations under, and be bound by the provisions of, the
collective bargaining agreement between Citizens Utilities Company of Ohio and
the International Union of Operating Engineers, Local Union 18S (the "Ohio
Union"), dated March 12, 1997 (the "Ohio Agreement"), to the extent of
provisions covering Transferred Employees, as in effect on the date of this
Agreement. With respect to any amendment, extension, or renegotiation of the
Ohio Agreement, the contract as so amended, extended or renegotiated will be
assumed if, but only if, (i) in connection with such amendment, extension or
renegotiation, the Ohio Union agrees to substitute for Seller's employee pension
plan (to the extent required to be provided under the Ohio Agreement) Parent's
employee pension plan, and (ii) the other terms and conditions of those
collective bargaining agreements pertaining to the Transferred Employees on the
Closing Date are substantially identical to the terms and conditions of such
Collective Bargaining Agreement as in effect on the date of this Agreement. Each
collective bargaining agreement pertaining to Transferred Employees shall be
identified on a Schedule 5.9.2 to be prepared by Seller and submitted to Buyer
on or before the Closing Date. Seller shall cooperate with Buyer in Buyer's
efforts to contact the unions representing Transferred Employees. Buyer agrees
(i) to credit the service of each Transferred Employee with Seller and its
Affiliates before the Closing, for all purposes under all employee benefit plans
and arrangements maintained
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by Buyer (and/or any of its Affiliates) for the benefit of any Transferred
Employee (including without limitation for purposes of attainment of retirement
dates and payment of optional forms of benefits), other than for purposes of
benefit accrual under any "defined benefit plan", within the meaning of Section
3(35) of ERISA, (ii) to provide accrued vacation to Transferred Employees in the
year in which the Closing occurs, equal to the excess, if any, of the accrued
vacation to which the Transferred Employee would otherwise be entitled under
Seller's vacation plan during that year over the amount of accrued vacation the
Transferred Employee had taken during that year, and, thereafter, to provide
vacation to Transferred Employees on the same basis as provided to similarly
situated employees of Buyer, with service credit as provided in (i) hereof,
(iii) to provide severance benefits to Transferred Employees terminated by Buyer
that are substantially comparable to those benefits provided by Buyer to
similarly situated employees, and (iv) to comply with all applicable legal
requirements with respect to Union Employees (including without limitation any
applicable duty to bargain with those employees' bargaining representative).
Buyer shall be responsible for providing to each Transferred Employee vacation
in an amount equal to the Transferred Employee's vacation entitlement for the
year of Closing reduced by the number of vacation days such Transferred Employee
has taken on or before Closing. Nothing in this Section 5.9 shall limit Buyer's
authority to terminate the employment of any Transferred Employee at any time
and for whatever reason. Until the second anniversary of the Closing Date,
neither Seller nor any of its Affiliates shall directly or indirectly solicit or
offer employment to any Transferred Employee then employed by Buyer or its
Affiliates.
5.9.3 Except as specifically provided in Sections 5.9 and
5.12, Seller shall be solely responsible for any liability, claim or expense
(including reasonable attorneys' fees) related to compensation or employee
benefits incurred by Buyer as the result of any claims against Buyer or its
Affiliates that are made by any Employees or Former Employees (or the
Beneficiary of any Employee or Former Employee) who are not made offers to
become employees of Buyer or its Affiliates including, without limitation,
claims asserted against Buyer as a result of their termination by Seller or its
Affiliates.
5.9.4 Seller shall be solely responsible for any liability,
claim or expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation claims or the benefits
provided under the Benefit Plans, whether paid before or after the Closing) owed
to any Transferred Employee or the Beneficiary of any Transferred Employee or
any Water Sector Retiree or the Beneficiary of any Water Sector Retiree that
arises out of or relates to (i) the employment relationship between Seller or
any of its Affiliates and such Transferred Employee or Beneficiary or (ii) any
benefit claim or expense (including medical expenses) incurred before Closing
under any Benefit Plan. For purposes of this Agreement, a medical expense shall
be deemed to be incurred when the services giving rise to a claim are rendered,
regardless of when billed or paid. Without limiting the foregoing, Seller shall
be responsible for the payment of any employee benefits that become due to any
Transferred Employees as a result of their termination by Seller.
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5.9.5 Except as otherwise specifically provided in Section
5.9, 5.11 or 5.12, Buyer shall be solely responsible for any liability, claim or
expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation, claims or the benefits
provided under any employee benefit plan or arrangement of Buyer incurred after
Closing) owed to any Transferred Employee or Beneficiary of any Transferred
Employee or any Water Sector Retiree or Beneficiary of any Water Sector Retiree
that arises out of or relates to (i) the employment relationship between Buyer
or any of its Affiliates and any Transferred Employee or (ii) any benefit claim
or expense (including medical expense) incurred after Closing under any employee
benefit plan sponsored or contributed to by Buyer or an ERISA Affiliate after
Closing. Notwithstanding the foregoing, Buyer shall not be responsible for the
payment of any employee benefits that become due to any Transferred Employees
under any Benefit Plan (other than the Assumed Benefit Liabilities).
5.9.6 Buyer agrees to reimburse Seller for its proportionate
share (as defined below) of any amount in excess of $1,000,000 paid by Seller as
severance under Citizens' severance plan as in effect on the date hereof to any
Employees (when such amount paid by Seller is aggregated with amounts paid by
Citizens to other employees as referenced in Section 5.9.6 of the Related
Purchase Agreements) provided (i) Buyer does not hire such Employees in
accordance with the provisions of Sections 5.9, 5.11 and 5.12 and (ii) Seller
provides notice to those Employees on or before the Closing Date to the effect
that their employment will be terminated on or shortly after the Closing Date.
Buyer will pay such reimbursement to Citizens within 5 days after receipt of a
list of the Employees showing which are entitled to severance pay, the amounts
of that severance pay and certifying that those amounts have been paid. The
Buyer's "proportionate share" means the amount obtained by multiplying the
amount in excess of $1,000,000 by a fraction, the numerator of which is the
amount of severance paid by Seller to Employees under Section 5.9.6 of this
Agreement and the denominator of which is the sum of (i) the amount paid by
Seller to Employees under Section 5.9.6 of this Agreement and (ii) the aggregate
amount paid by Citizens under Section 5.9.6 of each of the Related Purchase
Agreements.
5.9.7 Until the second anniversary of the Closing Date, Buyer
shall not directly or indirectly solicit or offer employment to any active
employee of Seller, other than the Transferred Employees.
5.10 Employee Pension Plan.
5.10.1 At least fifteen days prior to the Closing Date, Seller
shall take any and all actions necessary to cease benefit accruals and fully
vest all Transferred Employees in their accrued benefits under the Citizens
Pension Plan ("Seller's Pension Plan" or "Citizens Pension Plan"). Seller shall
retain liability and related assets for benefits accrued through the Closing
Date by Transferred Employees under Seller's Pension Plan.
5.10.2 As of the Closing Date except as may be required under
the Ohio Agreement, Transferred Employees shall be covered under the American
Pension Plan, and shall be
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given credit for service with Seller and its Affiliates for eligibility,
vesting, attainment of retirement dates, subsidized benefits, and entitlement to
optional forms of payment, but not for accrual of benefits.
5.11 Employee Savings Plan.
5.11.1 Effective upon the date of the transfer described in Section
5.11.2, subject to the terms and conditions of this Agreement, Parent shall
cause the Savings Plan for Employees of American Water Works Company, Inc. (the
"American Savings Plan") to assume the liability of the Seller's 401(k) Plan for
the account balances of those Transferred Employees participating in the
Seller's 401(k) Plan on the Closing Date (the "Affected Participants") that are
transferred to the American Savings Plan. As of the Closing Date, Affected
Participants shall be 100% vested in their account balances under the Seller's
401(k) Plan. Transferred Employees shall be given credit under the American
Savings Plan for service with Seller and its Affiliates for eligibility,
vesting, attainment of retirement dates, contribution levels and optional forms
of benefit payment, to the same extent that credit for such service has been
given by Seller and its Affiliates.
5.11.2 Buyer shall deliver to Seller as soon as practicable,
but in no event later than ninety (90) days after Closing (i) a certified copy
of the American Savings Plan and any amendment necessary to effectuate the
transfer of assets and the assumption of account balances in accordance with
this Section 5.11, (ii) a certified copy of the trust agreement for the American
Savings Plan; (iii) the most recent favorable determination letter from the IRS
with respect to the American Savings Plan; and (iv) an opinion from Buyer's
legal counsel acceptable to Seller that the American Savings Plan, as so
amended, complies or will comply on a timely basis with the applicable
provisions of the Code relating to the qualification of, and the transfer of
assets and assumption of benefit liabilities by, the American Savings Plan.
Seller shall deliver to Buyer as soon as practicable, but in no event later than
ninety (90) days after Closing, an opinion from Seller's legal counsel
acceptable to Buyer that the Seller's 401(k) Plan complies or will comply on a
timely basis with the applicable provisions of the Code relating to the
qualification of the Seller's 401(k) Plan, and the transfer of assets to, and
assumptions of benefit limitations by, the American Savings Plan. As soon as
practicable, but in any event within 120 days after Closing, Seller shall cause
the trustee of the Seller's 401(k) Plan to transfer in cash and promissory notes
representing outstanding loans to Affected Participants to the trustee of the
American Savings Plan an amount equal to the sum of the account balances of the
Transferred Employees (the "Transferred Accounts") calculated as of the most
recent valuation date under the Seller's 401(k) Plan (which shall, in any event,
be within thirty (30) days of the transfer). Both the Seller Parties and Buyer
will file any IRS Form 5310A that is required with respect to the transfer
contemplated by this Section 5.11 date at least 30 days prior to the transfer.
Upon the transfer described in this Section 5.11, Buyer and the American Savings
Plan shall be responsible for all benefits attributable to the Transferred
Accounts to which Transferred Employees were entitled under the Seller's 401(k)
Plan as of such date, and Seller and the Seller's 401(k) Plan shall cease to
have any liability, contingent or otherwise, for such benefits.
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5.12 Welfare Benefits.
5.12.1 Within sixty (60) days after the Closing, Seller agrees
to transfer to trusts established by Buyer under Section 501(c)(9) of the Code
("Buyer's VEBAs") the amount held under any trust established by Seller under
Section 501(c)(9) of the Code ("Seller's VEBAs") to fund post-retirement health
care and life insurance benefits attributable to the Business, including Former
Employees identified on Schedule 5.12 (the "Water Sector Retirees") and any
"grandfathered" Transferred Employees as set forth on Schedule 5.12. Buyer
agrees to provide post-retirement health care and life insurance benefits to the
Water Sector Retirees and, as applicable, Transferred Employees who become
eligible for such benefits after Closing and further agrees that Buyer's VEBAs
will apply an amount at least equal to the sum of the assets (and earnings
thereon calculated at the rate of return generated by Buyer's VEBAs) transferred
from Seller's VEBAs to provide post-retirement health care and life insurance
benefits for such employees. Upon Closing, Buyer shall be responsible for all
obligations of the Seller Parties to provide post-retirement health care and
life insurance benefits "incurred" (within the meaning of Section 5.9.4) after
the Closing and the Seller Parties shall cease to have any liability, contingent
or otherwise, for such benefits. In consideration of such transfer, Buyer agrees
not to terminate or materially modify those post-retirement health and life
benefit provisions applicable to such grandfathered Transferred Employees and
Water Sector Retirees as such provisions are in effect immediately prior to the
Closing Date.
5.12.2 Buyer shall take all action necessary and appropriate
to ensure that, as of the Closing Date, Buyer provides medical, health, dental,
flexible spending account, accident, life, short-term disability, long-term
disability and other employee welfare benefits (including retiree medical
benefits) to Transferred Employees that, in the case of Non-Union Transferred
Employees and Union Transferred Employees are substantially similar to those
benefits provided by Buyer under its corresponding welfare benefit plans (the
"Buyer's Welfare Plans"). For purposes of determining eligibility to
participate, and entitlement to benefits, in each Buyer Welfare Plan, each
Transferred Employee shall be credited with service, determined under the terms
of the corresponding welfare plans maintained by Seller on the Closing Date
(hereinafter referred to collectively as the "Seller Welfare Plans"). Any
restrictions on coverage for pre-existing conditions, waiting periods, and
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived in Buyer's Welfare Plans for Transferred Employees and retirees of the
Water Sector and their respective Beneficiaries, and Transferred Employees and
retirees of the Water Sector and their respective Beneficiaries shall receive
credit under the Buyer Welfare Plans for co-payments, payments under a
deductible limit made by them, and for out-of-pocket maximums applicable to them
during the plan year of the Seller Welfare Plan in which the Closing Date
occurs. As soon as practicable after the Closing Date, Seller shall deliver to
Buyer a list of the Transferred Employees and retirees of the Water Sector and
their respective Beneficiaries who had credited service under a Seller Welfare
Plan, together with each such individual's service, copayment, deductible and
out-of-pocket payment amounts under such plan.
5.12.3 Seller shall transfer to Buyer's flexible benefits plan
any balances standing to the credit of Transferred Employees under Seller's
flexible benefits plan as of the
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Closing Date. Seller shall provide to Buyer prior to the Closing Date a list of
those Transferred Employees that have participated in the health or dependent
care reimbursement accounts of Seller, together with their elections made prior
to the Closing Date with respect to such Account, and balances standing to their
credit as of the Closing Date.
5.13 Taxes. The Seller Parties, on the one hand, and Parent and
Buyer, on the other, shall (a) each provide the other with such assistance as
may reasonably be requested by either of them in connection with the preparation
of any Tax return, any audit or other examination by any taxing authority or any
judicial or administrative proceeding with respect to Taxes; (b) each retain and
provide the other with any records or other information which may be relevant to
such return, audit, examination or proceeding, and (c) each provide the other
with any final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Tax return of
the other for any period (which shall be maintained confidentially). Without
limiting the generality of the foregoing, Parent and Buyer, on the one hand, and
the Seller Parties, on the other, shall retain, until the applicable statutes of
limitations (including all extensions) have expired, copies of all Tax returns,
supporting workpapers, and other books and records or information which may be
relevant to such returns for all Tax periods or portions thereof ending before
or including the Closing Date, and shall not destroy or dispose of such records
or information without first providing the other party with a reasonable
opportunity to review and copy the same.
5.14 Intentionally Omitted.
5.15 Citizens' Guarantees and Surety Instruments. Each of Parent and
Buyer shall use its reasonable efforts to assist Citizens in obtaining full and
complete releases on the guarantees, letters of credit, bonds and other surety
instruments listed on Schedule 5.15. For purposes of this Section 5.15 and
Section 5.16, reasonable efforts: (a) shall include Parent's or Buyer's
assumption of the Contracts and the Permits on the terms set forth in this
Agreement; and (b) shall include an obligation on the part of Parent or Buyer to
provide a guarantee, letter of credit, bond or other required surety instrument
at Closing to the extent required by any Contract or Permit and in general to
provide an equivalent surety instrument to be substituted for any surety
instrument provided by Citizens to any beneficiary in connection with the
Business.
5.16 Intentionally Omitted.
5.17 Schedule of Permits. No later than March 13, 2000, Citizens
shall deliver to Buyer a schedule, to be identified as Schedule 5.17, which sets
forth all material Permits required for the use of the Acquired Assets and the
operation of the Business by Buyer substantially in the manner as it was
conducted prior to the date hereof. For purposes of this Section 5.17, material
Permits shall include those required for the service of all utility customers at
substantially the same service levels as provided by Seller on the date of this
Agreement. All Permits listed on Schedule 5.17 that are required to be listed on
Schedule 3.3 or Schedule 3.9 shall be so designated. Seller has made or will
make prior to the Closing Date timely applications for renewals of all such
Permits
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Ohio
listed on Schedule 5.17, which under applicable law must be filed prior to the
Closing Date to maintain the Permits listed on Schedule 5.17 in full force and
effect.
5.18 Title Information. No later than March 13, 2000, Seller shall
use its reasonable efforts to deliver to Buyer true, correct and complete copies
of all existing title policies, surveys, leases, deeds, instruments and
agreements relating to title to the Real Estate in Seller's possession.
5.19 Transaction with Related Parties. Effective as of the Closing
Date, except as otherwise provided in Sections 5.9 through 5.12, 5.15, 5.24,
5.26, 5.27 and 2.7.1(j) of this Agreement, Seller shall have terminated and
canceled all contracts, commitments and agreements (including employment
relationships) relating to the Acquired Assets or the Business, between Seller,
any Affiliate of Seller (including Citizens), any officer or director of any
Seller Party, or any Affiliate of the foregoing. Seller shall be solely liable
for any contractual or other claims, express or implied arising out of the
termination and cancellation of any of the foregoing raised by any party
thereto.
5.20 Approval by Citizens. Citizens shall, as the sole owner of
common stock of each other Seller Party, vote all of such shares of common stock
to approve this Agreement and the transactions contemplated hereby.
5.21 Supplemental Information
5.21.1 Citizens shall provide Buyer, within fifteen (15) days
after the execution or the date of receipt thereof, a copy of (a) each Contract
(other than with respect to which the Business' total annual liability or
expense is less than $100,000 per such Contract) entered into by Seller after
the date hereof and prior to the Closing Date; (b) a copy of any written notice
for assessments for public improvements against the Real Estate received after
the date hereof and prior to the Closing Date; (c) a copy of the filing of any
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any of the Real Estate received after the date hereof but
prior to the Closing Date; and (d) a copy of any Contract where Seller is a
lessee relating to the use or occupancy of the Real Estate and where such
Contract involves annual payments in excess of $100,000 entered into by Seller
after the date hereof and prior to the Closing Date.
5.21.2 Within fifteen (15) days after the receipt of notice of
violation, Citizens shall notify Buyer of any violations of state or federal
drinking water standards which, if such violations existed on the date hereof,
would be required to be disclosed pursuant to Section 3.8.10 hereof, and shall
promptly notify Buyer of the actions proposed to be taken by Seller to correct
or otherwise respond to such violations.
5.22 Non-Competition. The Seller Parties agree that for a period of
fifteen (15) years after the Closing Date no Seller Party nor any Affiliate of a
Seller Party shall directly or indirectly own, manage, operate, control or
participate in the ownership, management, operation or control of or be
otherwise connected in any substantial manner with any entity (other than Buyer
and
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its successors and assigns) engaged in the business of storing, supplying and
distributing water in the States in which Buyer acquires any Acquired Assets,
whether or not such business is subject to regulation by a PUC (it being
understood that the individual directors of Seller and Citizens are not
Affiliates of a Seller Party).
5.23 Intentionally Omitted.
5.24 IDRB Obligations.
(a) Buyer's IDRB Obligations. Each party acknowledges that (x)
Citizens is and after the Closing Date shall continue to be and shall remain the
primary obligor with respect to the Retained IDRB Indebtedness outstanding
immediately after the Closing Date to the same extent as though no sale of the
Acquired Assets had been made and that Parent and Buyer shall have no payment
obligations with respect to such Retained IDRB Indebtedness, and (y) the IDRB
Documents require Citizens not to take or permit to be taken any action which
would have the effect, directly or indirectly, of subjecting the interest on any
of the Bonds to federal or state (other than Illinois) income taxation.
Accordingly, Parent and Buyer covenant and agree at Closing to execute and
deliver to Citizens an agreement substantially in the form attached hereto as
Exhibit D, with respect to each issuer of Bonds relating to Retained IDRB
Documents that will be outstanding after the Closing Date, and (ii) so long as
any such Bonds are outstanding, to cause the Acquired Assets that were acquired,
constructed, improved or equipped with the proceeds of such Bonds to be used as
facilities for the furnishing of water (that is, (a) the water is or will be
made available to members of the general public (including electric utility,
industrial, agricultural, or commercial users) and (b) either the facility is
operated by a governmental unit or the rates for the furnishing or sale of the
water have been established or approved by a State or political subdivision
thereof, by an agency or instrumentality of the United States, or by a public
service or public utility commission or other similar body of any State or
political subdivision thereof) or sewage facilities within the meaning of
Section 103(b)(4)(E) of the 1954 Code, or Section 142(a)(5) of the Code as the
case may be.
(b) IDRB Construction Funds. Citizens hereby represents that
there will be no construction funds or unspent bond proceeds available after the
Closing Date that are held by the trustees of the Bonds relating to the Retained
IDRB Indebtedness.
(c) Consents and Opinions. The parties shall use their
respective best commercially reasonable efforts to obtain all consents and legal
opinions as may be required under the Retained IDRB Documents to enable Seller
to retain all Retained IDRB Indebtedness and to sell the Acquired Assets to
Buyer.
5.25 Cooperation with Respect to Like-Kind Exchange. Buyer agrees
that Seller may, at Seller's written election delivered to Buyer no later than
five (5) days prior to the Closing Date, direct that all or a portion of the
Initial Cash Payment be delivered to a "qualified intermediary" as defined in
Treasury Regulation ss.1.1031(k) - (g)(4) as to enable Seller's
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relinquishment of the Acquired Assets to qualify as part of a like-kind exchange
of property covered by Section 1031 of the Code. If Seller so elects, Buyer
shall reasonably cooperate with Seller (but without being required to incur any
out-of-pocket costs in the course thereof) in connection with Seller's efforts
to effect such like-kind exchange, which cooperation shall include, without
limitation, taking such actions as Seller reasonably requests in order to enable
Seller to qualify such transfer as part of a like-kind exchange of property
covered by Section 1031 of the Code (including any actions reasonably required
to facilitate the use of a "qualified intermediary"), and Buyer agrees that
Seller may assign all or part of its rights (but no obligations) under this
Agreement to a person or entity acting as a qualified intermediary to qualify
the transfer of the Assets as part of a like-kind exchange of property covered
by Section 1031 of the Code. Buyer and Seller agree in good faith to use
reasonable efforts to coordinate the transactions contemplated by this Agreement
with any other transactions engaged in by either Buyer or Seller; provided that
such efforts shall, in no event, result in any delay in the consummation of the
transactions contemplated by this Agreement. Seller shall indemnify and hold
Buyer harmless from any cost, expense or liability arising from its cooperating
under this Section 5.25.
5.26 Transition Plan. Within 30 days after the execution date of
this Agreement, the parties jointly shall establish a transitional services
team, which shall include expertise from various functional specialties
associated with or involved in providing billing, payroll and other support
services provided to Seller by any automated or manual process using facilities
or employees that are not included among the Acquired Assets or Transferred
Employees. Such team will be responsible for preparing, 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 Closing and any other transfer of control matters that any party
reasonably believes should be addressed in such transition plan. The transition
plan will set forth reasonable arrangements providing Buyer, at Buyer's sole
expense, with appropriate access to Seller's relevant computer systems to allow
for a full conversion of the relevant data and functionality to Buyer's systems
on the Closing Date. Buyer and Seller shall use their commercially reasonable
efforts to cause their representatives on such transition team to cooperate in
good faith and take all reasonable steps necessary to develop a mutually
acceptable transition plan no later than 60 days prior to the Closing Date.
5.27 Procedures regarding Refunds of Advances. Within 30 days after
the execution date of this Agreement, the parties jointly shall establish a
working group of appropriate subject matter experts to determine the appropriate
obligations of Parent and Buyer regarding notification and the provision of
other accurate and timely data to Citizens to enable Citizens timely and
accurately to satisfy the refund obligations described in Section 2.3.3(b). Such
working group will be responsible for preparing a comprehensive agreement no
later than March 13, 2000, which agreement shall be executed by the parties at
Closing. Among other arrangements, the parties would require that the customers
and developers owed refunds provide joint notices to Buyer and Citizens.
5.28 Title Insurance. Prior to Closing, Seller shall cooperate with
Buyer and use commercially reasonable efforts to assist Buyer if Buyer desires
to obtain ALTA title insurance
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commitments (collectively, the "Title Commitments," and each a "Title
Commitment"), in final form, from one or more title insurance companies
(collectively, the "Title Company"), committing the Title Company (subject only
to the satisfaction of any industry standard requirements contained in the Title
Commitment) to issuing ALTA (or its local equivalent) form of title insurance
policies insuring good, valid, indefeasible fee simple title to the Real Estate
in Buyer, in all cases, at Buyer's sole expense and in the respective amounts
that Buyer requests prior to Closing, subject to no Liens or other exceptions to
title other than Permitted Exceptions (collectively the "Title Policies"). On or
prior to the Closing Date, Seller shall execute and deliver, or cause to be
executed and delivered, to the Title Company, at no cost to Seller, any
customary affidavits, standard gap indemnities and similar documents reasonably
requested by the Title Company in connection with the issuance of the Title
Commitments or the Title Policies; provided that such efforts and Buyers'
request for Title Policies or Title Commitments shall, in no event, result in
any delay in the consummation of the transactions contemplated by this
Agreement.
ARTICLE 6
CONDITIONS PRECEDENT; TERMINATION
6.1 Conditions Precedent to Obligations of Buyer and Parent. The
obligations of Buyer and Parent to cause the purchase of the Acquired Assets and
the assumption of the Assumed Liabilities and to consummate the other
transactions contemplated hereby are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions (any one or more of which
may be waived in writing in whole or in part by Buyer and Parent in their sole
discretion):
6.1.1 Performance of Agreements; Representations and
Warranties. Seller shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by them at or prior to the Closing; and the representations and
warranties set forth in this Agreement made by Seller shall be true and correct
on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date,
except for representations and warranties that speak as of a specific date or
time other than the Closing Date (which need only be true and correct as of such
date or time), other than, in all such cases (except Section 3.25), such
failures to be true and/or correct as would not in the aggregate reasonably be
expected to have a Material Adverse Effect; provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso); and provided further, that
the representation and warranty set forth in Section 3.5.1 shall be deemed to be
true and correct on and as of the Closing Date if any Material Adverse Effect
that may have arisen or occurred between the execution date of this Agreement
and the Closing Date shall have been cured or remedied such that such Material
Adverse Effect is not continuing as of the Closing Date. Buyer shall have been
furnished with a
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certificate of the Chief Financial Officer or other Vice President of Citizens
dated the Closing Date, certifying to the foregoing.
6.1.2 Opinion of Counsel. Buyer shall have received from L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, Vice President and General Counsel of Seller, an opinion
dated the Closing Date, in form and substance satisfactory to Buyer, to the
effect set forth in Exhibit E hereto.
6.1.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.1.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby, and such order
shall not contain any restrictions or conditions (other than those in effect on
the date hereof or requiring that the regulatory treatment with respect to the
Business in existence as of the date of this Agreement applicable to Seller be
continued following the transactions contemplated hereby) which would have a
Material Adverse Effect or a material adverse effect on any other regulated
business of Buyer in the state in which the PUC has jurisdiction, and such order
shall be final and unappealable; Seller shall have obtained all statutory,
regulatory and other consents and approvals which are required in order to
consummate the transactions contemplated hereby and to permit Buyer to conduct
the Business in the manner contemplated by Section 3.25 hereof other than those
the failure of which to obtain would not have a Material Adverse Effect. Seller
shall have also obtained (i) all consents and legal opinions required to enable
Seller to sell the Acquired Assets to Buyer at the Closing, free and clear of
all Liens other than Permitted Exceptions (and specifically free and clear of
any Lien arising under or pursuant to the Mortgage Indenture) and (ii) all
consents required under Contracts and Permits relating to Seller's water
appropriation and flowage rights to the extent reasonably sufficient to enable
Buyer to service the customers of the Business and to service future commitments
under such Contracts.
6.1.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Buyer's ownership of all or any material portion
of the Acquired Assets, nor (ii) shall there be pending or threatened any
litigation, suit, action or proceeding by any party which would reasonably be
expected to materially limit or materially adversely affect Buyer's ownership of
the Acquired Assets.
6.1.6 Documents. Seller and Citizens shall have delivered all
of the certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 2.7 hereof 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.
6.1.7 Related Closings. Buyer shall be reasonably satisfied
that the consummation of each of the asset purchase and sale transactions
contemplated by those certain
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purchase agreements described on Schedule 6.1.7 (the "Related Purchase
Agreements") will occur concurrently with the Closing.
6.2 Conditions Precedent to Obligations of Seller Parties. The
obligations of the Seller Parties to cause the sale of the Acquired Assets and
to consummate the other transactions contemplated hereby are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions (any one or more of which may be waived in writing in whole or in
part by the Seller Parties in their sole discretion):
6.2.1 Performance of Agreements; Representations and
Warranties. Parent and Buyer shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them at or prior to the Closing; and the
representations and warranties set forth in this Agreement made by Buyer and
Parent shall be true and correct on and as of the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date, except for representations and warranties that speak
as of a specific date or time other than the Closing Date (which need only be
true and correct as of such date or time), other than, in all such cases (except
Section 4.2), such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a material adverse effect on the
respective ability of Buyer and Parent to perform their obligations under this
Agreement and the Transaction Documents, provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso). Seller shall have been
furnished with a certificate of the President or Vice President of Parent and
Buyer, dated the Closing Date, certifying to the foregoing.
6.2.2 Opinion of Counsel. Seller shall have received from
Dechert Price & ▇▇▇▇▇▇, counsel to Parent and Buyer, an opinion dated the
Closing Date, in form and substance satisfactory to Seller, to the effect set
forth in Exhibit F hereto.
6.2.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.2.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby and such order
shall not contain any restrictions or conditions which would have a material
adverse effect on Seller's business activities in the State in which the PUC has
jurisdiction or any significant adverse effect on Citizens' acquisition and
divestiture activities in that State (including divestiture of the Acquired
Assets), and such order shall be final and unappealable; Seller shall have
obtained all statutory and regulatory consents and approvals which are required
in order to consummate the transactions contemplated hereby, other than those
the failure of which to obtain would not have a material adverse effect on
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the Seller after the Closing. Seller shall have obtained (i) all consents and
legal opinions required under the Retained IDRB Documents to enable Seller to
retain the Retained IDRB Indebtedness until maturity and to sell the Acquired
Assets to Buyer at the Closing (in each case without any change in the
tax-exempt status of the Retained IDRB Indebtedness and without any event of
taxability relating to the matters set forth in Section 7.4.1(a)(D)), free and
clear of all Liens other than Permitted Exceptions (and specifically free and
clear of any Lien arising under or pursuant to the Mortgage Indenture), and
(iii) all other consents required or advisable in order for Seller to transfer
Acquired Assets without incurring material liability under any Contract, Permit
or Real Estate instrument.
6.2.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Seller's ownership of all or any material portion
of its properties, nor (ii) shall there be pending or threatened any litigation,
suit, action or proceeding by any party which could reasonably be expected to
materially limit or materially adversely affect Seller's ownership of any of its
properties.
6.2.6 Documents. Parent and Buyer shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Sections 2.7, 5.24 and 5.27,
and shall have taken such actions as Seller may have requested pursuant to
Section 5.25 hereof.
6.2.7 Related Closings. Seller shall be reasonably satisfied
that the consummation of each of the Related Purchase Agreements will occur
concurrently with Closing.
6.3 Termination. This Agreement may be terminated at anytime prior
to the Closing Date:
6.3.1 by mutual written consent of the Seller Parties, Buyer
and Parent;
6.3.2 by any of the Seller Parties, Parent or Buyer if: (i)
any governmental or regulatory body the consent of which is a condition to the
obligations of the Seller Parties, Parent and Buyer to consummate the
transactions contemplated hereby shall have determined not to grant its consent
and all appeals of such determination shall have been taken and have been
unsuccessful; (ii) any court of competent jurisdiction shall have issued an
order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have become final and
nonappealable; or (iii) the Closing shall not have occurred on or before March
31, 2001; provided, however, that the right to terminate this Agreement under
this Section 6.3.2(iii) will not be available to any party that is in material
breach of its representations, warranties, covenants or agreements contained
herein; and provided, further, that if Closing has not occurred by such date
because the conditions precedent to Closing set forth in the first sentence of
Section 6.1.4 and the first sentence of Section 6.2.4 have not been fulfilled,
then such date shall be automatically extended to September 30, 2001; or
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Ohio
6.3.3 If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 6.3, this
Agreement shall become void and of no further force and effect, except for the
provisions of Section 5.6 relating to publicity, Sections 3.24 and 4.6 relating
to brokerage and Section 7.1 relating to expenses. Nothing in this Section 6.3
shall be deemed to release either party from any liability for any willful
breach by such party of the terms and provisions of this Agreement.
ARTICLE 7
CERTAIN ADDITIONAL COVENANTS
7.1 Certain Taxes and Expenses. Citizens shall be solely responsible
for all state and local sales, use, transfer, real property transfer and other
similar taxes, fees and charges that are calculated based on the value of the
Acquired Assets being transferred arising from and with respect to the sale and
purchase of the Acquired Assets and Buyer shall be solely responsible for all
transfer, registration, documentary stamp, recording and other similar fees and
charges arising from and with respect to the transfer and recording of title
documentation relating to the Acquired Assets. Parent shall be responsible for
all costs and expenses relating to the assumption by or assignment to Parent or
Buyer of the Assumed Indebtedness. Except as otherwise provided in this
Agreement, each of the parties hereto shall each bear its respective accounting,
legal and other expenses incurred in connection with the transactions
contemplated by this Agreement.
7.2 Maintenance of Books and Records. The Seller Parties, on the one
hand, and Buyer and Parent, on the other hand, shall cooperate fully with each
other after the Closing so that (subject to any limitations that are reasonably
required to preserve any applicable attorney-client privilege) each party has
access to the business records, contracts and other information existing at the
Closing Date and relating in any manner to the Acquired Assets or the Assumed
Liabilities or the conduct of the Business (whether in the possession of the
Seller Parties or Buyer or Parent). No files, books or records existing at the
Closing Date and relating in any manner to the Acquired Assets or the conduct of
the Business shall be destroyed by any party for a period of six years after the
Closing Date without giving the other party at least 30 days prior written
notice, during which time such other party shall have the right (subject to the
provisions hereof) to examine and to remove any such files, books and records
prior to their destruction. The access to files, books and records contemplated
by this Section 7.2 shall be during normal business hours and upon not less than
two (2) business days prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the party entitled to claim the same.
7.3 Survival
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7.3.1 Subject to this Section 7.3, Section 7.4.2(g) and
Section 7.4.2(j), all representations, warranties, covenants and agreements
contained in this Agreement or the Transaction Documents shall survive (and not
be affected in any respect by) the Closing, any investigation conducted by any
party hereto and any information which any party may receive. Notwithstanding
the foregoing:
(a) the covenants contained in Sections 5.1, 5.3, 5.4,
5.5, 5.8.2 through 5.8.4 and 5.21 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
(b) the covenants contained in Section 5.2 and the
related indemnity obligations contained in Section 7.4 shall terminate on, and
no action or claim with respect thereto may be brought after, the Closing Date;
(c) the representations and warranties contained in
Sections 3.12 and 3.16 and the related indemnity obligations contained in
Section 7.4 shall terminate on, and no action or claim with respect thereto may
be brought following the expiration of the applicable statute of limitations (or
extensions or waivers thereof);
(d) the representations and warranties contained in
Section 3.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(e) the representations and warranties contained in
Section 3.10 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
(f) the representations and warranties contained in
Section 3.7 and 3.17 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(g) the representations and warranties contained in
Sections 3.3, 3.5, 3.6, 3.8, 3.9 and 3.25 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
(h) the representations and warranties contained in
Section 3.11 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
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Ohio
(i) the representations and warranties contained in
Section 4.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(j) the representations and warranties contained in
Sections 4.3 and 4.4 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(k) the representations and warranties contained in
Section 4.5 and the related indemnity obligations contained in Section 7.4 shall
terminate on, and no action or claim with respect thereto may be brought after,
the Closing Date; and
(l) all other representations and warranties contained
in this Agreement and the related indemnity obligations contained in Section 7.4
shall terminate on and no further action or claim with respect thereto may be
brought after, the second anniversary of the Closing Date;
(m) such representations and warranties specified in the
foregoing clauses (c) through (k), and the covenants contained in Section 5.1,
5.2, 5.3, 5.4, 5.5, 5.8.2 through 5.8.4 and 5.21 and the liability of any party
with respect thereto, shall not terminate with respect to any claim, whether or
not fixed as to liability or liquidated as to amount, with respect to which such
party has been given written notice setting forth the facts upon which the claim
for indemnification is based and, if possible, a reasonable estimate of the
amount of the claims prior to the relevant anniversary of the Closing Date or
the 30th day after the expiration of the applicable statute of limitations (or
extensions or waivers thereof), as the case may be. If any claim for
indemnification is asserted or could be asserted with respect to a breach or
asserted breach of Section 3.17 (Undisclosed Liabilities) and the Buyer or
Parent is also entitled to indemnification in respect of that claim for breach
or asserted breach of any other representation or warranty in this Agreement for
which there is a shorter survival period, such shorter period will apply to such
claim except to the extent that such claim is a product liability, toxic tort or
similar claim (as described in Section 2.3.3(a)) brought by a private party
litigant.
7.3.2 No claim for indemnity under Section 7.4 shall be
brought or made by Buyer or Parent pursuant to Sections 7.4.1(a)(B) or
7.4.1(a)(C):
(a) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), for any action or claim with respect to the Pre-Existing Conditions;
(b) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), with respect to the presence of Hazardous Substances at any locations
other than the Real Estate; and
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(c) after the third anniversary of the Closing Date, for
any action or claim with respect to any other Retained Liability;
Provided, however, that the foregoing time limitations shall not apply to
any such claims which have been the subject of a written notice from Parent
and/or Buyer to the Seller Parties prior to such period setting forth the facts
upon which the claim for indemnification is based and, if possible, a reasonable
estimate of the amount of the claims; and, provided, further, that the foregoing
time limitations shall also not apply to any such claims: (u) with respect to
Taxes; (v) with respect to any liability of the types that appear as "Trade
Payables" or "Other Current and Accrued Liabilities" on the financial statements
of Seller; (w) not exclusively related to the Acquired Assets or not exclusively
related to the Business; and (x) with respect to any of the matters discussed in
Section 3.16 hereof.
For purposes of Sections 7.3.2(a) and (b), a "Change of Control of
Citizens" shall be deemed to have occurred if: (i) any "person" (as such term is
used in Section 13(d) and 14(d) of the Exchange Act of 1934, as amended (the
"Exchange Act"), other than an underwriter engaged in a firm commitment
underwriting on behalf of Citizens, is or becomes the beneficial owner (as such
term is used in Rule 13D-3 and 13D-5 under the Exchange Act, except that for
purposes of this clause (i) a person shall be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding shares of common stock of
the Company; (ii) all or substantially all of Citizens' and its Subsidiaries'
assets are sold, leased, exchanged or otherwise transferred to any person or
group of persons acting in concert; (iii) Citizens is merged or consolidated
with any other person, whether or not Citizens is the surviving corporation in
such merger or consolidation; or (iv) Citizens is liquidated or dissolved or
adopts a plan of liquidation.
7.4 Indemnification. Seller, Parent and Buyer agree as follows:
7.4.1 General Indemnification Obligations.
(a) Seller shall indemnify Buyer and its directors,
officers and other Affiliates (including Parent) and hold Buyer and such other
parties harmless from and against any and all Damages arising out of or
resulting from (A) any breach of any representation, warranty, covenant or
agreement made by the Seller Parties in this Agreement or in any document or
certificate required to be furnished to Buyer by any of the Seller Parties
pursuant to this Agreement (including the Transaction Documents); (B) subject to
Section 7.3.2, any Excluded Assets or Retained Liabilities; (C) subject to
Section 7.3.2, the ownership, operation or use of any of the businesses or
assets of the Seller Parties or their Affiliates (other than the Business and
the Acquired Assets) whether before, on or after the Closing Date; and (D) an
event of taxability, as such term is customarily used in municipal securities
transactions, relating to the Retained IDRB Indebtedness and arising from the
sale of the Acquired Assets pursuant to this Agreement.
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(b) Buyer and Parent shall indemnify Seller, and their
directors, officers and other Affiliates (including Citizens) and hold Seller
and such other parties harmless from and against any and all Damages arising out
of or resulting from (A) any breach of any representation, warranty, covenant or
agreement made by Parent or Buyer in this Agreement or in any document or
certificate required to be furnished to Seller by Parent or Buyer pursuant to
this Agreement (including the Transaction Documents), including the Buyer's IDRB
Obligations; (B) any Assumed Liabilities after the Closing Date; (C) the
ownership, operation or use of the Business or the Acquired Assets after the
Closing Date (except to the extent resulting from Retained Liabilities or to the
extent resulting from breaches by the Seller Parties of representations,
warranties, covenants or agreements hereunder or in the other Transaction
Documents); (D) any claim by a Transferred Employee or a Former Employee
referred to on Schedule 5.12 or the Beneficiary of any such employee or former
employee for post-retirement health care or life insurance benefits "incurred"
(within the meaning of Section 5.9.4) after the Closing; and (E) any violation
by Parent or Buyer, or any assignee, lessee or successor of Parent or Buyer, of
the covenants and agreements as provided by Section 5 of Exhibit D hereto.
(c) For purposes of this Agreement, "Damages" shall mean
any and all losses, liabilities, obligations, damages (including any
governmental penalty or punitive damages assessed or asserted against the party
seeking indemnification and including costs of investigation, clean-up and
remediation), deficiencies, interest, costs and expenses and any claims,
actions, demands, causes of action, judgments, costs and reasonable expenses
(including reasonable attorneys' fees and all other reasonable expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened, incident to the successful enforcement of this Agreement). For
purposes of this Section 7.4, the determination of whether any breach of any
representation, covenant or agreement has occurred, and the calculation of the
amount of Damages incurred by the Indemnified Party arising out of or resulting
from any breach of a representation, covenant or agreement by any party hereto,
the references to a "Material Adverse Effect" or materiality (or other
correlative terms) shall be disregarded, provided that no such breach shall be
found to have occurred due to facts or circumstances arising from an occurrence
or condition described in Section 1.1.61(a). Notwithstanding the foregoing,
Damages shall not include the loss of profits of the party seeking
indemnification, or punitive damages unless the party seeking indemnification
has had punitive damages assessed or asserted against it.
(d) Notwithstanding any language contained in any
Transaction Document (including deeds to Real Estate and instruments delivered
by Seller to the Title Company), representations and warranties as to Real
Estate set forth in Section 3.10 and 3.11 will not be merged into any
Transaction Document and the indemnification obligations of Seller, and the
limitations on such obligations, set forth in this Agreement, shall control. No
provision set forth in any Transaction Document shall be deemed to enlarge,
alter or amend the terms or provisions of this Agreement.
7.4.2 General Indemnification Procedures.
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(a) A party seeking indemnification pursuant to this
Section 7.4 (an "Indemnified Party") shall give prompt written notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of the
assertion of any claim, the incurrence of any Damages, or the commencement of
any action, suit or proceeding, of which it has knowledge and in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but failure to give such required notice shall relieve the Indemnifying
Party of any liability hereunder only to the extent that the Indemnifying Party
has suffered actual prejudice thereby. The Indemnifying Party shall have the
right, exercisable by written notice to the Indemnified Party after receipt of
notice from the Indemnified Party of the commencement of or assertion of any
claim or action, suit or proceeding by a third party in respect of which
indemnity may be sought hereunder (a "Third Party Claim"), to assume the defense
of such Third Party Claim which involves (and continues to involve) solely
monetary damages; provided, that (A) the Indemnifying Party expressly agrees in
such notice that, as between the Indemnifying Party and the Indemnified Party,
solely the Indemnifying Party shall be obligated to satisfy and discharge the
Third Party Claim, (B) such Third Party Claim does not include a request or
demand for injunctive or other equitable relief by an Authority and (C) the
Indemnifying Party makes reasonably adequate provision to assure the Indemnified
Party of the ability of the Indemnifying Party to satisfy the full amount of any
adverse monetary judgment that is reasonably likely to result. The Indemnifying
Party shall be deemed to have satisfied the condition set forth in clause (C) of
the proceeding sentence if it is a regulated utility.
(b) Neither the Indemnified Party nor the Indemnifying
Party shall settle any Third Party Claim without the prior written consent of
the other, which consent shall not be unreasonably withheld or delayed.
(c) The Indemnifying Party or the Indemnified Party, as
the case may be, shall have the right to participate in (but not control), at
its own expense, the defense of any Third Party Claim which the other party is
defending as provided in this Agreement.
(d) Amounts paid in respect of indemnification
obligations of the parties shall be treated as an adjustment to the Purchase
Price.
(e) Subject to Section 7.4.2(f) and Section 7.4.2(i),
neither Parent nor Buyer (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages incurred
unless the aggregate amount of Damages incurred by Parent or Buyer (or the other
Persons for which they can claim indemnification), together with all other
claims for Damages under Section 7.4.2(e) of each of the Related Purchase
Agreements, exceeds $6,123,000 in the aggregate (the "Threshold Amount"), in
which case Seller shall then be liable for Damages in excess of the Threshold
Amount. Subject to Section 7.4.2(f) and Section 7.4.2(i), the cumulative
aggregate indemnity obligation of Citizens and its Affiliates under Section 7.4
of this Agreement and the Related Purchase Agreements shall not exceed
$60,000,000 (the "Ceiling").
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(f) Notwithstanding the foregoing, the parties
acknowledge that Parent or Buyer (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages in respect
of intentional and wilful breaches of covenants or agreements in this Agreement
or any of the Retained Liabilities other than the Specified Liabilities
irrespective of the Threshold Amount or the Ceiling (it being understood that
the failure to cure a breach shall not, by itself, be an intentional and wilful
breach). As used herein, the "Specified Liabilities" shall mean the Retained
Liabilities arising from claims made after the Closing Date which (i) do not
relate to matters within the scope of clauses (u), (v), (w) and (x) of Section
7.3.2; (ii) were not known to the Seller Parties on or prior to Closing; and
(iii) relate exclusively to the Acquired Assets or the Business prior to the
Closing Date. Notwithstanding anything to the contrary in this Section 7.4,
Parent or Buyer (or the other Persons for which they can claim indemnification)
shall be entitled to indemnification for Damages in respect of a breach of
Section 3.2, 3.12 or 3.16 irrespective of the Threshold Amount or the Ceiling.
(g) The rights and remedies of Seller, Parent and Buyer
under this Section 7.4 are exclusive and in lieu of any and all other rights and
remedies which Seller, Parent and Buyer may have under this Agreement or
otherwise for monetary relief with respect to (x) the inaccuracy of any
representation, warranty, certification or other statement made (or deemed made)
by Seller, Parent or Buyer in or pursuant to this Agreement or any of the
Transaction Documents or (y) any breach or failure to perform any covenant or
agreements set forth in this Agreement or any of the Transaction Documents.
(h) Except to the extent provided in Section 7.4.2(j)
below, no right to indemnification under this Section 7.4 shall be limited by
reason of any investigation or audit conducted before or after the Closing of
any party hereto including, without limitation, the knowledge of such party of
any breach of any representation, warranty, agreement or covenant by the other
party at any time, or the decision by such party to complete the Closing.
(i) No party shall have any liability to another party
under this Section 7.4 for Damages (and no cost or expense relating to such
Damages shall be included in determining the extent of Damages incurred by such
party for purposes of Section 7.4.2(e)) to the extent that:
(A) the Indemnified Party recovers insurance
proceeds covering the Damages or otherwise recovers payments in respect of such
Damages from any other source (whether in a lump sum or stream of payments); or
(B) the Indemnified Party's Tax liability is
actually reduced as a result of a tax benefit to which the Indemnified Party
becomes entitled in respect of the Damages.
(j) Seller shall have no liability or obligation under
this Section 7.4 for any Damages resulting from the inaccuracy or breach of any
representation or warranty if
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such inaccuracy or breach is disclosed by Seller pursuant to and in accordance
with Sections 5.3 and 8.4 hereof;
(k) Buyer agrees to use its commercially reasonable
efforts to give timely and effective written notice to the appropriate insurance
carrier(s) of any occurrence or circumstances which, in the judgment of Buyer
consistent with its customary risk management practices, appear likely to give
rise to a claim against Buyer that is likely to involve one or more insurance
policies of Buyer. Any such notice shall be given in good faith by Buyer without
regard to the possibility of indemnification payments by Seller under this
Section 7.4, and shall be processed by Buyer in good faith and in a manner
consistent with its risk management practices involving claims for which no
third party contractual indemnification is available. Buyer agrees that (i) if
it is entitled to receive payment from Seller for Damages arising under or
pursuant to a breach of the representation and warranty set forth in Section
3.10, and (ii) if Buyer has obtained title insurance which may cover the claim
or matter giving rise to such Damages, then (iii) such title insurance shall be
primary coverage and Buyer will make a claim under the title insurance if such
claim can be made in good faith before enforcing its right to receive payment
from Seller. Buyer shall be under no obligation to obtain title insurance or
prosecute such claim (other than the initial filing of such claim).
(l) If at any time subsequent to the receipt by an
Indemnified Party of an indemnity payment hereunder, such Indemnified Party (or
any Affiliate thereof) receives any recovery, settlement or other similar
payment with respect to the Damages for which it received such indemnity payment
(including insurance proceeds and other payments pursuant to Section 7.4.2(i)(A)
and a tax benefit pursuant to Section 7.4.2(i)(B)) (the "Recovery"), such
Indemnified Party shall promptly pay to the Indemnifying Party an amount equal
to the amount of such Recovery, less any expense incurred by such Indemnified
Party (or its Affiliates) in connection with such Recovery, but in no event
shall any such payment exceed the amount of such indemnity payment;
(m) In the event of any indemnification claim under this
Section 7.4 involving the claim of any third party, the Indemnified Party shall
cooperate fully (and shall cause its Affiliates to cooperate fully) with the
Indemnifying Party in the defense of any such claim under this Section 7.4.
Without limiting the generality of the foregoing, the Indemnified Party shall
furnish the Indemnifying Party with such documentary or other evidence as is
then in its or any of its Affiliates' possession as may reasonably be requested
by the Indemnifying Party for the purpose of defending against any such claim.
Whether or not the Indemnifying Party chooses to defend or prosecute any claim
involving a third party, all the parties hereto shall cooperate in the defense
or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith.
7.4.3 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,
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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.
7.5 UCC Matters. From and after the Closing Date, Seller will
promptly refer all inquiries with respect to ownership of the Acquired Assets or
the Business to Buyer. In addition, Seller will execute such documents and
financing statements as Buyer may reasonably request from time to time to
evidence transfer of the Acquired Assets to Buyer in accordance with this
Agreement, including any necessary assignment of financing statements.
7.6 Financial Statements. In connection with the preparation and
filing of any registration statement or periodic report of Buyer or its
Affiliates pursuant to Rule 3-05, Article 11 of Regulation S-X or other rule or
regulation promulgated under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, Seller, at Buyer's expense, shall
provide Buyer (a) by April 30, 2000 or within 120 days after Buyer's written
request therefor if made after January 1, 2000, with the following audited
financial statements: (i) a statement of net assets of the Business as of the
end of the last fiscal year prior to Closing; and (ii) a statement of income of
the Business and a statement of cash flows or its equivalent of the Business for
the last fiscal year prior to Closing (in each case combined with the businesses
being acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements), including opinions thereon of Seller's Accountants, and (b) within
90 days after Buyer's written request made therefor (provided such request is
made after the end of the fiscal quarter described below), the following
unaudited statements: (i) a statement of net assets of the Business as of the
end of the last fiscal quarter prior to Closing (but only if such quarter is
subsequent to the last fiscal year prior to Closing); and (ii) a statement of
income of the Business and a statement of cash flows or its equivalent of the
Business, for the period from the end of the last fiscal year through the end of
the last fiscal quarter prior to Closing (in each case combined with the
businesses being acquired by Buyer or Affiliates of Buyer pursuant to the
Related Purchase Agreements).
7.7 Collection of Receivables. Seller agrees that it shall promptly
(and in any event no later than five (5) Business Days following receipt)
deliver all such payments with respect to accounts receivable from customers of
the Business received on and after the Closing Date (including but not limited
to negotiable instruments tendered in payment of accounts receivable assigned to
Buyer hereunder which shall be duly endorsed by Seller to the order of Buyer) to
Buyer. Seller shall cooperate with Buyer in coordinating the transfer of
collection agents and customers of the Business who pay their bills through the
Automated Clearinghouse (ACH) process to Buyer.
ARTICLE 8
MISCELLANEOUS
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8.1 Construction. Parent, Buyer and the Seller Parties have
participated jointly in the negotiation and drafting of this Agreement and the
Transaction Documents. In the event any ambiguity or question of intent or
interpretation arises, this Agreement and the Transaction Documents shall be
construed as if drafted jointly by Parent, Buyer and the Seller Parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" in this Agreement shall mean
including without limitation. Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
genders as the context requires. The terms "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole (including all of the Schedules and Exhibits
hereto) and not to any particular provision of this Agreement, and Article,
Section, paragraph, Exhibit and Schedule references are to the Articles,
Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise
specified. The word "or" shall not be exclusive. Provisions of this Agreement
shall apply, when appropriate, to successive events and transactions. Section
references refer to this Agreement unless otherwise specified.
8.2 Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy, by registered or certified
mail (return receipt requested) with postage and registration or certification
fees thereon prepaid, or by any nationally recognized overnight courier
addressed to the party at its address set forth below:
If to Parent:
American Water Works Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
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If to Buyer:
Ohio-American Water Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Counsel
with a copy to Parent and a copy to:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Seller:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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and
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that no party
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other party hereto; provided
that Seller may assign its rights or delegate its duties under this Agreement to
a qualified intermediary chosen by Seller to structure the transactions
contemplated hereby as a like-kind exchange of property covered by Section 1031
of the Code.
8.4 Exhibits and Schedules. All Exhibits and Disclosure Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Disclosure of any fact or item
in any Schedule referenced by a particular paragraph or Section in this
Agreement shall, should the existence of the fact or item or its contents be
clearly related to any other paragraph or section, be deemed to be disclosed
with respect to that other paragraph or section.
8.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the conflicts of laws principles thereof.
8.6 Dispute Resolution. Except as otherwise provided herein, any
dispute, controversy or claim between the parties relating to, arising out of or
in connection with this Agreement (or any subsequent agreements or amendments
thereto), including as to its existence, enforceability, validity,
interpretation, performance or breach or as to indemnification or damages,
including claims in tort, whether arising before or after the termination of
this Agreement (any such dispute, controversy or claim being herein referred to
as a "Dispute") shall be settled without litigation and only by use of the
following alternative dispute resolution procedure:
(a) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Dispute. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes
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of settlement, exempt from discovery and production, and without the concurrence
of both parties shall not be admissible in the arbitration described below, or
in any lawsuit. Documents identified in or provided with such communications,
which are not prepared for purposes of the negotiations, are not so exempted and
may, if otherwise admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties
do not resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules, as then amended and in effect, of
the American Arbitration Association (the "Rules"); provided, however, that at
the election of either party, the arbitration shall take place before three (3)
arbitrators, one arbitrator being selected by Parent, one arbitrator being
selected by Citizen, and the third arbitrator, knowledgeable in the general
subject matter of the dispute, controversy or claim, being selected by the other
two arbitrators. Either party may demand such arbitration in accordance with the
procedures set out in the Rules. The parties hereto shall use reasonable efforts
to coordinate any arbitration commenced under this Agreement with any
arbitration on the same or similar issues commenced under any of the Related
Purchase Agreements so that the resolution of the arbitration under this
Agreement and the similar issues under the Related Purchase Agreements can be
resolved as expeditiously and efficiently as reasonable practicable. Reasonable
efforts shall include use of a common arbitrator or panel of arbitrators where
practicable. The arbitration shall take place in Newark, New Jersey. The
arbitration hearing shall be commenced within 60 days of such party's demand for
arbitration. The arbitrator(s) 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(s) 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(s), present testimony and written
evidence and examine witnesses. No party shall be eligible to receive, and the
arbitrator(s) shall not have the authority to award, exemplary or punitive
damages. The arbitrator(s) shall rule on the Dispute by issuing a written
opinion within 30 days after the close of hearings. The arbitrators' majority
decision shall be binding and final. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction.
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator(s); provided, however, that if the arbitrator(s) determines that the
position taken in the Dispute by the non-prevailing party taken as a whole is
unreasonable, the arbitrator(s) may order the non-prevailing party to bear such
fees and expenses, and reimburse the prevailing party for all or such portion of
its reasonable costs and expenses in submitting and presenting its position, as
the arbitrator(s) 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(s) and the American Arbitration Association.
65
Ohio
(d) Notwithstanding any other provision of this Agreement, (i)
either party may commence an action to compel compliance with this Section 8.6
and (ii) if any party, as party 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 8.6.
8.7 Severability. The parties agree that (a) the provisions of this
Agreement shall be severable in the event that any provision hereof is held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
(b) such invalid, void or otherwise unenforceable provision shall be
automatically replaced by another provision which is as similar as possible in
terms to such invalid, void or otherwise unenforceable provision but which is
valid and enforceable and (c) the remaining provisions shall remain enforceable
to the fullest extent permitted by law.
8.8 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or should be construed to confer upon or give to any Person
other than the parties hereto and their successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
8.9 Entire Agreement. This Agreement, the Schedules and Exhibits
hereto and the other Transaction Documents, and the Confidentiality Agreement
dated August 2, 1999, between Citizens and Parent, (i) together constitute the
entire understanding of the parties (and their affiliates) with respect to the
subject matter hereof, and any related matter, (ii) supercede all prior
agreements or understandings, written or oral, entered into by any of the
parties that concern the subject matter hereof and (iii) are not intended to
confer upon any Person other than the parties hereto any benefit, right or
remedy.
8.10 Amendment and Waiver. The parties may, by mutual agreement,
amend this Agreement in any respect, and any party, as to such party, may (i)
extend the time for the performance of any of the obligations of the other
party; (ii) waive any inaccuracies in representations and warranties by the
other party; (iii) waive compliance by the other party with any of the covenants
or agreements contained herein and performance of any obligations by the other
party; and (iv) waive the fulfillment of any condition that is precedent to the
performance by such party of any of its obligations under this Agreement. To be
effective, any such amendment or waiver must be in writing and be signed by the
party providing such waiver or extension, as the case may be. The waiver by any
party hereto of any breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach, whether or not similar.
8.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
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8.12 Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
8.13 Definitions. For purposes of this Agreement, references to the
knowledge of the Seller Parties (including a reference to "the best of the
knowledge of the Seller Parties" and similar references) shall mean the actual
knowledge possessed by any of the following officers or employees of Citizens:
Chief Financial Officer, Vice President and Treasurer; President, Citizens
Public Services; Vice President, Corporate Human Resources; Secretary; Vice
President, Water; and the general manager of the Business.
8.14 No Implied Representation. NOTWITHSTANDING ANYTHING CONTAINED
IN THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT NEITHER
OF THE SELLER PARTIES ARE MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT, ANY SCHEDULE
HERETO, THE TRANSACTION DOCUMENTS, OR ANY DOCUMENT, EXHIBIT, CERTIFICATE,
INSTRUMENT OR STATEMENT TO BE DELIVERED HEREUNDER OR THEREUNDER INCLUDING, BUT
NOT LIMITED TO, ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO ANY OF
THE ACQUIRED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IT IS
UNDERSTOOD AND AGREED THAT ANY COST ESTIMATES, PROJECTIONS OR OTHER PREDICTIONS
CONTAINED OR REFERRED TO IN THE SCHEDULES AND ANY COST ESTIMATES, PROJECTIONS OR
PREDICTIONS OR ANY OTHER INFORMATION CONTAINED OR REFERRED TO IN OTHER MATERIALS
THAT HAVE BEEN OR SHALL HEREINAFTER BE PROVIDED TO PARENT, BUYER OR ANY OF THEIR
AFFILIATES, AGENTS OR REPRESENTATIVES ARE NOT AND SHALL NOT BE DEEMED TO BE
REPRESENTATIONS OR WARRANTIES OF ANY OF THE SELLER PARTIES.
8.15 Construction of Certain Provisions. 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.
8.16 Bulk Sales. Buyer agrees that it shall not make any filings
under any tax bulk sales provisions with respect to the transactions
contemplated by this Agreement.
[Signatures appear on following page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
CITIZENS UTILITIES COMPANY
By:___________________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer, Vice President
and Treasurer
CITIZENS BUSINESS SERVICES COMPANY
CITIZENS RESOURCES COMPANY
CITIZENS UTILITIES COMPANY OF OHIO
By:___________________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
AMERICAN WATER WORKS COMPANY, INC.
By:___________________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Treasurer
OHIO-AMERICAN WATER COMPANY
By:___________________________________________________________
▇▇▇▇▇ ▇. ▇▇▇, President
Pennsylvania
EXECUTION COPY
ASSET PURCHASE AGREEMENT
among
CITIZENS UTILITIES COMPANY
AND
CERTAIN OF ITS AFFILIATES
AND
AMERICAN WATER WORKS COMPANY, INC. AND
PENNSYLVANIA-AMERICAN WATER COMPANY
Dated as of
October 15, 1999
Pennsylvania
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS......................................................1
1.1 Certain Definitions..............................................1
ARTICLE 2 THE TRANSACTION.................................................10
2.1 Sale and Purchase of Assets.....................................10
2.2 Excluded Assets.................................................10
2.3 Assumption of Certain Liabilities...............................11
2.4 Consent of Third Parties........................................14
2.5 Closing.........................................................15
2.6 Purchase Price..................................................15
2.6.1 Purchase Price............................................15
2.6.2 Payment of Initial Cash Payment...........................15
2.6.3 Estimated Closing Statement...............................16
2.6.4 Post-Closing Adjustment to Purchase Price.................16
2.6.5 Adjustment for Certain Liabilities........................18
2.6.6 Additional Adjustment to the Purchase Price...............18
2.7 Deliveries and Proceedings at Closing...........................18
2.7.1 Deliveries to Buyer.......................................18
2.7.2 Deliveries By Buyer to the Seller Parties.................19
2.8 Allocation of Consideration.....................................20
2.9 Prorations......................................................20
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER.......................20
3.1 Qualification; No Interest in Other Entities....................21
3.2 Authorization and Enforceability................................21
3.3 No Violation of Laws or Agreements..............................21
3.4 Financial Statements............................................22
3.5 No Changes......................................................22
3.6 Contracts.......................................................23
3.7 Permits and Compliance With Laws Generally......................23
3.8 Environmental Matters...........................................24
3.9 Consents........................................................26
3.10 Title...........................................................26
3.11 Real Estate.....................................................27
3.12 Taxes...........................................................27
3.13 Patents and Intellectual Property Rights........................28
3.14 Accounts Receivable.............................................28
3.15 Labor Relations.................................................28
3.16 Employee Benefit Plans..........................................28
3.17 Absence of Undisclosed Liabilities..............................30
3.18 No Pending Litigation or Proceedings............................31
3.19 Supply of Utilities.............................................31
3.20 Insurance.......................................................31
Pennsylvania
3.21 Relationship with Customers.....................................31
3.22 WARN Act........................................................31
3.23 Condition of Assets.............................................32
3.24 Brokerage.......................................................32
3.25 All Assets......................................................32
3.26 Year 2000 Matters...............................................32
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER..............33
4.1 Organization and Good Standing..................................33
4.2 Authorization and Enforceability................................33
4.3 No Violation of Laws or Agreements..............................33
4.4 Consents........................................................34
4.5 Financing.......................................................34
4.6 Brokerage.......................................................34
4.7 Insurance.......................................................34
ARTICLE 5 ADDITIONAL COVENANTS............................................35
5.1 Conduct of Business.............................................35
5.2 Negotiations....................................................36
5.3 Disclosure Schedules............................................36
5.4 Mutual Covenants................................................37
5.5 Filings and Authorizations......................................37
5.6 Public Announcement.............................................38
5.7 Further Assurances..............................................38
5.8 Cooperation.....................................................39
5.9 Employees; Employee Benefits....................................40
5.10 Employee Pension Plan...........................................42
5.11 Employee Savings Plan...........................................43
5.12 Welfare Benefits................................................43
5.13 Taxes...........................................................45
5.14 Intentionally Omitted...........................................45
5.15 Citizens' Guarantees and Surety Instruments.....................45
5.16 Assumption of Seller Debt.......................................45
5.17 Schedule of Permits.............................................48
5.18 Title Information...............................................48
5.19 Transaction with Related Parties................................49
5.20 Approval by Citizens............................................49
5.21 Supplemental Information........................................49
5.22 Non-Competition.................................................49
5.23 Intentionally Omitted...........................................49
5.24 IDRB Obligations................................................50
5.25 Cooperation with Respect to Like-Kind Exchange..................50
5.26 Transition Plan.................................................51
5.27 Procedures regarding Refunds of Advances........................51
5.28 Title Insurance.................................................51
Pennsylvania
ARTICLE 6 CONDITIONS PRECEDENT; TERMINATION...............................52
6.1 Conditions Precedent to Obligations of Buyer and Parent.........52
6.1.1 Performance of Agreements; Representations and Warranties.52
6.1.2 Opinion of Counsel........................................53
6.1.3 HSR Act...................................................53
6.1.4 Required PUC and Other Consents...........................53
6.1.5 Injunction; Litigation....................................53
6.1.6 Documents.................................................53
6.1.7 Related Closings..........................................54
6.2 Conditions Precedent to Obligations of Seller Parties...........54
6.2.1 Performance of Agreements; Representations and Warranties.54
6.2.2 Opinion of Counsel........................................54
6.2.3 HSR Act...................................................54
6.2.4 Required PUC and Other Consents...........................54
6.2.5 Injunction; Litigation....................................55
6.2.6 Documents.................................................55
6.2.7 Related Closings..........................................55
6.3 Termination.....................................................55
ARTICLE 7 CERTAIN ADDITIONAL COVENANTS....................................56
7.1 Certain Taxes and Expenses......................................56
7.2 Maintenance of Books and Records................................56
7.3 Survival........................................................57
7.4 Indemnification.................................................59
7.4.1 General Indemnification Obligations.......................59
7.4.2 General Indemnification Procedures........................61
7.4.3 Indemnification for Negligence............................64
7.5 UCC Matters.....................................................64
7.6 Financial Statements............................................64
7.7 Collection of Receivables.......................................65
ARTICLE 8 MISCELLANEOUS...................................................65
8.1 Construction....................................................65
8.2 Notices.........................................................65
8.3 Successors and Assigns..........................................67
8.4 Exhibits and Schedules..........................................67
8.5 Governing Law...................................................67
8.6 Dispute Resolution..............................................68
8.7 Severability....................................................69
8.8 No Third Party Beneficiaries....................................69
8.9 Entire Agreement................................................69
8.10 Amendment and Waiver............................................69
8.11 Counterparts....................................................70
8.12 Headings........................................................70
8.13 Definitions.....................................................70
8.14 No Implied Representation.......................................70
Pennsylvania
8.15 Construction of Certain Provisions..............................71
8.16 Bulk Sales......................................................71
Pennsylvania
List of Schedules
Schedule 1.1.1(a)................................................... Real Estate
Schedule 1.1.10............................................ Assumed Indebtedness
Schedule 1.1.52.................................................. IDRB Documents
Schedule 2.2.12................................................. Excluded Assets
Schedule 3.3................................. No Violation of Laws or Agreements
Schedule 3.4............................................... Financial Statements
Schedule 3.5......................................................... No Changes
Schedule 3.6.......................................................... Contracts
Schedule 3.7......................... Permits and Compliance with Laws Generally
Schedule 3.8...................................Environmental Matters - Generally
Schedule 3.8.10................................. Compliance with Water Standards
Schedule 3.8.11................................................ Deed Restriction
Schedule 3.9........................................... Seller Parties' Consents
Schedule 3.10............................................................. Title
Schedule 3.11........................................... Real Estate Proceedings
Schedule 3.12............................................................. Taxes
Schedule 3.15................................................... Labor Relations
Schedule 3.16.1.......................................... Employee Benefit Plans
Schedule 3.16.4............................. Employee Benefit Plans - Compliance
Schedule 3.16.9................. Employee Benefit Plans - Extraordinary Benefits
Schedule 3.17................................ Absence of Undisclosed Liabilities
Schedule 3.18.............................. No Pending Litigation or Proceedings
Schedule 3.19............................................... Supply of Utilities
Schedule 3.20................................................ Seller'▇.▇▇▇▇▇▇▇▇▇
Schedule 3.22.......................................................... WARN Act
Schedule 3.23............................................... Condition of Assets
Schedule 3.25........................................................ All Assets
Schedule 3.27................................................. Product Liability
Schedule 4.7.................................................. Buyer's Insurance
Schedule 5.1................................................ Conduct of Business
Schedule 5.9.1........................................................ Employees
Schedule 5.9.2................................. Collective Bargaining Agreements
Schedule 5.12.................................................. Former Employees
Schedule 5.15.............................................. Citizens' Guarantees
Schedule 5.16............................................... Schedule of Permits
Schedule 6.1.7.......................................Related Purchase Agreements
Pennsylvania
TABLE OF EXHIBITS
Exhibit A - Form of Assumption Agreement
Exhibit B - Form of Assignment and ▇▇▇▇ of Sale
Exhibit C - Intentionally Omitted
Exhibit D - Form of Retained IDRB Obligations Agreement
Exhibit E - Form of Seller's Opinion of Counsel
Exhibit F - Form of Buyer's Opinion of Counsel
Pennsylvania
ASSET PURCHASE AGREEMENT
THIS IS AN ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of October
15, 1999, by and among Citizens Utilities Company, a Delaware corporation
("Citizens"), and each of the wholly-owned subsidiaries of Citizens named on the
signature page hereof (collectively with Citizens, "Seller" or the "Seller
Parties"), and American Water Works Company, Inc., a Delaware corporation
("Parent"), and Pennsylvania-American Water Company, a Pennsylvania corporation
("Buyer").
Background
1. Citizens Utilities Water Company of Pennsylvania is a public utility
engaged, among other things, in the business of storing, supplying, distributing
and selling water to the public, wholesale water transmission and related
services and activities in the State of Pennsylvania (the "Business").
2. Parent is a holding company which desires to cause the Buyer to
purchase substantially all of the assets, properties and rights of the Seller
Parties relating to the Business, and Seller desires to sell, and to cause the
sale of, such assets, properties and rights, on the terms and subject to the
conditions set forth in this Agreement.
Terms
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the respective meanings ascribed to them in this Section:
1.1.1 "Acquired Assets" means, subject to Section 2.2, all of
each Seller Party's right, title, and interest in, under and to all of the
assets, properties and rights exclusively used in the Business as a going
concern of every kind, nature and description existing on the Closing Date,
wherever such assets, properties and rights are located and whether such assets,
properties and rights are real, personal or mixed, tangible or intangible, and
whether or not any of such assets, properties and rights have any value for
accounting purposes or are carried or reflected on or specifically referred to
in Seller's books or financial statements, including all of the assets,
properties and rights exclusively relating to the Business enumerated below:
(a) all real property described in Schedule 1.1.1(a),
together with all fixtures, fittings, buildings, structures and other
improvements erected thereon, and easements, rights of way, water lines, rights
of use, licenses, railroad crossing agreements, hereditaments,
Pennsylvania
tenements, privileges and other appurtenances thereto or otherwise exclusively
related to the Business (such as appurtenant rights in and to public streets)
(the "Real Estate");
(b) to the extent not included in clause (a) above, all
water tanks, reservoirs, water works, plant and systems, purification and
filtration systems, pumping stations, pumps, wells, mains, water pipes,
hydrants, equipment, machinery, vehicles, tools, dies, spare parts, materials,
water supplies, fixtures and improvements, construction in progress, jigs,
molds, patterns, gauges and production fixtures and other tangible personal
property, in transit or otherwise, used exclusively in the Business (the
"Equipment and Other Tangible Personal Property");
(c) notwithstanding the provisions of Section 2.2 but
subject to Section 2.4, all of Seller's water appropriation and flowage rights
to the extent not transferred to Buyer upon assignment of the Contracts and
Permits to Buyer;
(d) all notes receivable, accounts receivable, accrued
utility revenues, materials and supplies (at average cost net of reserve for
obsolescence) and prepayments attributable in each case exclusively to the
Business;
(e) all unamortized debt expense related to the Assumed
Indebtedness, deferred capital costs, and other deferred charges (excluding
deferred taxes collectable) attributable exclusively to the Business of which
recovery in future rates is probable;
(f) Intellectual Property and goodwill, licenses and
sublicenses granted and obtained with respect thereto;
(g) subject to Section 2.4 hereof, (i) contracts,
commitments, agreements and instruments relating to the sale of any assets,
services, properties, materials or products, including all customer contracts,
operating contracts and distribution contracts relating exclusively to the
conduct of the Business; (ii) orders, contracts, supply agreements and other
agreements relating exclusively to the purchase of any assets, services,
properties, materials, or products for the Business; (iii) all leases of Real
Estate exclusively related to the Business; (iv) all other contracts, agreements
and instruments related exclusively to the Business (other than contracts,
agreements and instruments included in the definition of Real Estate or
Permits); and (v) any such contracts, agreements and other instruments referred
to in clauses (i) - (iv) inclusive, entered into between the date hereof and the
Closing Date which are consistent with the terms of this Agreement and are
entered into in the ordinary course of business consistent with past practice,
and including in the case of clauses (i) - (iv) all such contracts, agreements
and instruments more specifically listed or described in Schedule 3.6 (but
specifically excluding any contract, agreement and instrument listed or
described on Schedule 2.2.12) (the "Contracts");
(h) subject to Section 2.4 hereof, franchises,
approvals, permits, authorizations, licenses, orders, registrations,
certificates, variances, and other similar permits or rights obtained from any
Authority relating exclusively to the conduct of the Business and all pending
applications therefor (the "Permits");
3
Pennsylvania
(i) books, records, ledgers, files, documents (including
originally executed copies of written Contracts, to the extent available, and
copies to the extent not available), correspondence, Tax returns relating
exclusively to the Business, memoranda, forms, lists, plats, architectural
plans, drawings, and specifications, new product development materials, creative
materials, advertising and promotional materials, studies, reports, sales and
purchase correspondence, books of account and records relating to the
Transferred Employees (to the extent such transfer is not prohibited by law),
photographs, records of plant operations and materials used, quality control
records and procedures, equipment maintenance records, manuals and warranty
information, research and development files, data and laboratory books,
inspection processes, in each case, whether in hard copy or magnetic format, in
each instance, to the extent exclusively relating to the Business, the Acquired
Assets or the Transferred Employees;
(j) all rights or choses in action arising out of
occurrences before or after the Closing Date and exclusively related to any of
the Acquired Assets, including third party warranties and guarantees and all
related claims, credits, rights of recovery and set-off and other similar
contractual rights, as to third parties held by or in favor of Seller; provided,
however, that (notwithstanding the foregoing provisions of this Section
1.1.1(j)), to the extent that Seller pays or discharges a liability related to
the Business or any of the Acquired Assets and related to such right or chose in
action (whether by reason of indemnification under this Agreement or otherwise),
Buyer will reassign or reconvey to 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; and
(k) all rights to insurance and condemnation proceeds
(i) to the extent relating to the damage, destruction, taking or other
impairment of the Acquired Assets which damage, destruction, taking or other
impairment occurs on or prior to the Closing but only to the extent that the
proceeds exceed the amount of the write-down of the net book value of such
Acquired Assets on the books and records of Seller as a result of such damage,
destruction, taking or other impairment, (ii) to the extent they relate to
amounts paid by Buyer for Damages to the extent Buyer does not receive payment
pursuant to Section 7.4.1(a), but only to the extent Buyer is entitled to
indemnification by Seller pursuant to Sections 7.3 and 7.4, and (iii) as
provided in Section 4 of the agreement attached as Exhibit D hereto.
1.1.2 "Adjusted Net Assets" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.3 "Affected Participant" has the meaning set forth as
Section 5.11.1 hereof.
1.1.4 "Affiliate" of any Person means any Person, directly or
indirectly controlling, controlled by or under common control with such Person.
1.1.5 "Agreement" has the meaning set forth in the
introduction hereof.
4
Pennsylvania
1.1.6 "American Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.7 "American Savings Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.8 "Antitrust Division" has the meaning set forth in
Section 5.5 hereof
1.1.9 "Assumed Benefit Liabilities" has the meaning set forth
in Section 3.16.6 hereof.
1.1.10 "Assumed Indebtedness" means the liabilities and
obligations from and after the Closing Date (except as set forth below) with
respect to the IDRB Financings and IDRB Documents set forth on Schedule 1.1.10.
For purposes of clarity, except as set forth in the next sentence below,
"Assumed Indebtedness" shall not include any liability or obligation to the
extent accrued prior to the Closing Date or to the extent arising out of or
relating to an event, circumstance or occurrence prior to the Closing Date.
"Assumed Indebtedness" shall include the outstanding principal amount and the
accrued but unpaid interest owed by Seller on the debt obligations set forth in
the first sentence of this definition.
1.1.11 "Assumed Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.12 "Assumption Agreement" has the meaning set forth in
Section 2.3.2 hereof.
1.1.13 "Authority" means any federal, state, local or foreign
governmental or regulatory entity (or any department, agency, authority or
political subdivision thereof).
1.1.14 "Base Cash Purchase Price" has the meaning set forth in
Section 2.6.1 hereof.
1.1.15 "Beneficiary" means the Person(s) designated by an
Employee, by operation of law or otherwise, as entitled to compensation,
benefits, insurance coverage, payments or any other goods or services under a
Benefit Plan.
1.1.16 "Benefit Plans" has the meaning set forth in Section
3.16.1 hereof.
1.1.17 "Bonds" means any of the bonds issued pursuant to the
Indentures of Trust, the proceeds from the issuance of which were advanced to
Seller pursuant to any of the IDRB Documents.
1.1.18 "Business" has the meaning set forth in the Background
section hereof.
5
Pennsylvania
1.1.19 "Business Day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the Commonwealth of
Pennsylvania are authorized or obligated by law or executive order to close.
1.1.20 "Buyer" shall have the meaning set forth in the
introduction hereof.
1.1.21 "Buyer's IDRB Obligations" means the obligations of
Parent and Buyer set forth in Section 5.24 (a) and in the instruments to be
executed and delivered by Parent and Buyer on or prior to the Closing Date in
accordance with Section 5.24 (a).
1.1.22 "Buyer's Accountants" means PricewaterhouseCoopers LLP
or any firm of independent public accountants hereafter designated by Buyer for
purposes of this Agreement.
1.1.23 Intentionally Omitted.
1.1.24 "Ceiling" has the meaning set forth in Section 7.4.2(e)
hereof.
1.1.25 "CERCLA" has the meaning set forth in Section 3.8.2
hereof.
1.1.26 "CERCLIS" has the meaning set forth in Section 3.8.7
hereof.
1.1.27 "Citizens" has the meaning set forth in the
introduction hereof.
1.1.28 "Closing" has the meaning set forth in Section 2.5
hereof.
1.1.29 "Closing Date" has the meaning set forth in Section 2.5
hereof.
1.1.30 "Closing Statement of Net Assets" has the meaning set
forth in Section 2.6.4(a) hereof.
1.1.31 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.32 Intentionally Omitted.
1.1.33 "Competing Transaction" has the meaning set forth in
Section 5.2.
1.1.34 "Contracts" has the meaning set forth in Section
1.1.1(g) hereof.
1.1.35 "Control" with respect to any Person means the
ownership, directly or indirectly, of at least a majority of the voting power of
each class of capital stock of such Person entitled to vote in the election of
directors of such Person generally.
1.1.36 "Damages" has the meaning set forth in Section 7.4.1
hereof.
6
Pennsylvania
1.1.37 "Disclosure Schedules" means the Schedules referenced
in Articles 3, 4 and 5 of this Agreement, as amended or supplemented pursuant to
Section 5.3.
1.1.38 "Dispute" has the meaning set forth in Section 8.6.
1.1.39 "Employees" has the meaning set forth in Section 5.9.1
hereof.
1.1.40 "Environmental Laws" has the meaning set forth in
Section 3.8 hereof.
1.1.41 "Equipment and Other Tangible Personal Property" has
the meaning set forth in Section 1.1.1(b) hereof.
1.1.42 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.1.43 "ERISA Affiliate" means (a) any corporation included
with any of the Seller Parties in a controlled group of corporations within the
meaning of Section 414(b) of the Code; (b) any trade or business (whether or not
incorporated) which is under common control with any of the Seller Parties
within the meaning of Section 414 of the Code; any member of an affiliated
service group of which any of the Seller Parties is a member within the meaning
of Section 414(m) of the Code; or (d) any other person or entity treated as an
affiliate of any of the Seller Parties under Section 414(o) of the Code.
1.1.44 "Excluded Assets" has the meaning set forth in Section
2.2 hereof.
1.1.45 "Financial Statements" has the meaning set forth in
Section 3.4 hereof.
1.1.46 "FIRPTA Affidavit" has the meaning set forth in Section
2.7.1 hereof.
1.1.47 "Former Employees" means all salaried and hourly
employees once employed by Seller or any of its Affiliates, but who are no
longer so employed on the Closing Date.
1.1.48 "FTC" has the meaning set forth in Section 5.5 hereof.
1.1.49 "GAAP" has the meaning set forth in Section 3.4 hereof.
1.1.50 "Hazardous Substance" has the meaning set forth in
Section 3.8 hereof.
1.1.51 "HSR Act" has the meaning set forth in Section 3.9
hereof.
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1.1.52 "IDRB Documents" shall mean the Loan Agreements, the
Tax Regulatory Agreements, the Project Tax Certificates, and the other Contracts
related thereto to which Citizens is a party and which are listed on Schedule
1.1.52.
1.1.53 "IDRB Financings" shall mean the indebtedness arising
under the Loan Agreements included among the IDRB Documents.
1.1.54 "Indemnified Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.55 "Indemnifying Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.56 "Intellectual Property" means the trademarks, patents,
trade names and copyrights and applications therefor, inventions, trade secrets,
and confidential business information (including know-how, formulas, water
filtration, purification and pumping processes and techniques, technical data,
designs, drawings, customer and supplier lists, and business and marketing plans
and proposals), all computer software (including data and related documentation
and object and source codes), whether in magnetic format or hard copy, and
tangible embodiments thereof (in whatever form or medium) of Seller, in each
case, utilized exclusively in the Business.
1.1.57 "Interim Statement of Net Assets" means the Citizens
Water Resources Statement of Net Assets - Pennsylvania, June 30, 1999, which is
attached hereto as Schedule 3.4.
1.1.58 "Interim Statement of Net Assets Date" means June 30,
1999.
1.1.59 "IRS" has the meaning set forth in Section 3.16.2
hereof.
1.1.60 "Lien" means any lien, charge, claim, pledge, security
interest, conditional sale agreement or other title retention agreement, lease,
mortgage, security agreement, right of first refusal, option, restriction,
tenancy, license, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction).
1.1.61 "Material Adverse Effect" means a change or effect (or
series of related changes or effects) which has or is reasonably likely to have
a material adverse change in or effect upon the business, assets, condition
(financial or otherwise), or results of operations of the Business or the
Acquired Assets, taken as a whole and taken together with the businesses and
assets being acquired by Buyer or Affiliates of Buyer pursuant to the Related
Purchase Agreements. For purpose of this Agreement, an occurrence or condition
shall not constitute a Material Adverse Effect (a) if it arises from general
business, economic or financial market conditions, from conditions generally
effecting the industries in which Seller competes, or from the transactions
contemplated by this Agreement, or (b) solely with respect to matters arising
prior to Closing, to the extent that
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either (i) Seller realizes the benefit of insurance maintained by Citizens on or
prior to the Closing Date and Buyer receives the cash proceeds of such insurance
to the extent required by Section 1.1.1(k), or (ii) Seller arranges for Buyer to
recover payments in respect of such occurrence or condition from any other
source (whether in a lump sum or stream of payments), it being understood and
agreed that a Material Adverse Effect may have occurred irrespective of such
insurance recovery if the occurrence or condition giving rise to such recovery
also causes a non-monetary material adverse change in or effect upon the
Business or the Acquired Assets, taken as a whole and taken together with the
businesses and assets being acquired by Buyer or Affiliates of Buyer pursuant to
the Related Purchase Agreements.
1.1.62 "Mortgage Indenture" means Indenture of Mortgage and
Deed of Trust between BNY Western Trust Company (successor in interest to ▇▇▇▇▇
Fargo Bank, N.A.) and First Interstate Bank of California (as successor trustee
to Marine Midland, N.A., formerly the Marine Midland Trust Company of New York).
1.1.63 "OSHA" has the meaning set forth in Section 3.7.1
hereof.
1.1.64 "PCBs" has the meaning set forth in Section 3.8.6
hereof.
1.1.65 "Permits" has the meaning set forth in Section 1.1.1(h)
hereof.
1.1.66 "Permitted Exceptions" has the meaning set forth in
Section 3.10 hereof; provided, however, that from and after the Closing,
Permitted Exceptions shall not include any Lien arising under or resulting from
the Mortgage Indenture.
1.1.67 "Person" means an individual, a corporation, a
partnership, an association, an Authority, a trustor other entity or
organization.
1.1.68 "Pre-Existing Conditions" has the meaning set forth in
Section 2.3.1(d).
1.1.69 "Prime Rate" means the rate per annum announced from
time to time during the reference period by Citibank N.A. as its United States
prime, reference or base rate for commercial loans.
1.1.70 "PUC" has the meaning set forth in Section 5.5 hereof.
1.1.71 "Purchase Price" has the meaning set forth in Section
2.6.1 hereof.
1.1.72 "Real Estate" has the meaning set forth in Section
1.1.1(a) hereof.
1.1.73 "Recovery" has the meaning set forth in Section
7.4.2(l) hereof.
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1.1.74 "Related Purchase Agreements" as the meaning set forth
in Section 6.1.7 hereof.
1.1.75 "Release" or "Released" has the meaning set forth in
Section 3.8 hereof.
1.1.76 "Remedial Action" has the meaning set forth in Section
3.8 hereof.
1.1.77 "Retained IDRB Indebtedness" means the indebtedness of
the Seller owing to the issuers of the Bonds and arising under the Loan
Agreements included among the IDRB Documents but only to the extent not included
in the Assumed Indebtedness.
1.1.78 "Retained Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.79 "Review Period" has the meaning set forth in Section
2.6.4(b) hereof.
1.1.80 "SEC" means the U.S. Securities and Exchange
Commission.
1.1.81 "Securities Filings" has the meaning set forth in
Section 5.8.2 hereof.
1.1.82 "Seller" and "Seller Parties" have the respective
meaning set forth in the introduction hereof.
1.1.83 "Seller's Accountants" means KPMG LLP or any other firm
of independent public accountants hereafter designated by Seller for purposes of
this Agreement.
1.1.84 "Seller's Adjusted Amount" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.85 "Seller's Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.86 "Seller's 401(k) Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.87 "Specified Liabilities" has the meaning set forth in
Section 7.4.2(f) hereof.
1.1.88 "Taxes" means any federal, state, local and foreign
income, payroll, withholding, excise, sales, use, personal property, use and
occupancy, business and occupation, mercantile, real estate, gross receipts,
license, employment, severance, stamp, premium, windfall profits, social
security (or similar unemployment), disability, transfer, registration, value
added, alternative, or add-on minimum, estimated, or capital stock and franchise
and other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
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1.1.89 "Third Accounting Firm" has the meaning set forth in
Section 2.6.4(b) hereof.
1.1.90 "Threshold Amount" has the meaning set forth in Section
7.4.2(e) hereof.
1.1.91 "Third Party Claim" has the meaning set forth in
Section 7.4(b)(i) hereof.
1.1.92 "Transferred Accounts" has the meaning set forth in
Section 5.11.2 hereof.
1.1.93 "Transaction Documents" has the meaning set forth in
Section 3.2 hereof.
1.1.94 "Transferred Employees" has the meaning set forth in
Section 5.9.2 hereof.
1.1.95 "Union Employees" has the meaning set forth in Section
5.9.1 hereof.
1.1.96 "VEBAs" has the meaning set forth in Section 5.12
hereof.
1.1.97 "WARN Act" means the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. section 2102- 2109, as amended.
ARTICLE 2
THE TRANSACTION
2.1 Sale and Purchase of Assets. Subject to the terms and conditions
of this Agreement, at the Closing referred to in Section 2.5 below, Citizens
shall, and shall cause the other Seller Parties to, sell, assign, transfer,
deliver and convey to Buyer, and Parent shall cause Buyer to purchase, the
Acquired Assets for the Purchase Price specified in Section 2.6.
2.2 Excluded Assets. The following assets of Seller shall be
excluded from the Acquired Assets (the "Excluded Assets"):
2.2.1 assets of the Seller used in both the Business and in
Citizens' gas, electric or communications businesses, the material items of
which are described on Schedule 2.2.12;
2.2.2 cash and cash equivalents in transit, in hand or in bank
accounts.
2.2.3 except as otherwise set forth herein, assets
attributable or related to any Benefit Plan;
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2.2.4 the stock record and minute books of Seller;
2.2.5 Acquired Assets disposed of by Seller after the date of
this Agreement to the extent such dispositions are not prohibited by this
Agreement;
2.2.6 except to the extent set forth in Sections 2.9, rights
to refunds of Taxes payable with respect to the Business, assets, properties or
operations of any of the Seller Parties or any member of any affiliated group of
which any of them is a member, and which are treated as Retained Liabilities
under Section 2.3.3(b) below.
2.2.7 customer and other deposits held in Seller's accounts;
2.2.8 accounts owing by and among Seller and its Affiliates;
2.2.9 notes receivable and other receivables (other than note
and accounts receivable attributable exclusively to the Business);
2.2.10 all deferred tax assets or collectibles;
2.2.11 duplicate copies of all books and records transferred
to Buyer; and
2.2.12 those certain items listed on Schedule 2.2.12.
2.3 Assumption of Certain Liabilities.
2.3.1 Buyer shall not assume any liabilities of Citizens or
Seller or any of their Affiliates, except that Buyer shall assume the following
specific liabilities and obligations:
(a) the obligations and liabilities set forth in
Sections 5.9, 5.10, 5.11 and 5.12 hereof;
(b) except as set forth in Section 2.3.3(b), all
liabilities and obligations of Seller in respect of the Contracts and Permits
assigned or transferred to Buyer pursuant to this Agreement in accordance with
the respective terms thereof, except that Buyer shall not assume any liabilities
or obligations for any breach or default by, or payment obligations of, Seller
under such Contracts and Permits occurring or arising or accruing on or prior to
the Closing Date;
(c) the Assumed Indebtedness and the Buyer's IDRB
Obligations;
(d) any liability, obligation or responsibility of
Seller for conditions at the Real Estate, whether based on statutory or common
law, now or hereafter in effect,
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known or unknown, contingent or actual, relating to or arising from pollution,
contamination or protection of the environment, human health or safety or
natural resources or relating to or arising from the presence or Release or
threat of Release of Hazardous Substances into the environment at the Real
Estate or into or from any building, structure, pipeline or other facility at
the Real Estate, or from violation of any law relating to the foregoing,
including without limitation, any CERCLA or similar liability under any federal
or state law or regulation, except to the extent Buyer has given written notice
of a claim for indemnification pursuant to Sections 7.3 and 7.4 hereof prior to
the expiration of the claims period set forth in Section 7.3.2(a) or (b) (and if
Buyer has given written notice prior to the expiration of such claims period, to
the extent that such claim is not entitled to indemnification under Sections 7.3
and 7.4) (the foregoing, the "Pre-Existing Conditions");
(e) all liabilities and obligations of Seller related to
unperformed service obligations, easement and right-of-way relocation
obligations, and construction work in progress, and all engineering and
construction required to complete scheduled construction and other capital
projects for the Business, in each case relating to the Business 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, or payment obligations
of, Seller under such Contracts and Permits occurring or arising or accruing on
or prior to the Closing Date;
(f) liability for accrued but unused vacation pay for
the Transferred Employees to the extent provided in Section 5.9.2;
(g) any liability, obligation or responsibility relating
to customer deposits held by Seller on the Closing Date and relating to the
Business; and
(h) all liabilities and obligations imposed on Buyer by
any PUC in connection with the operation of the Business or the ownership of the
Acquired Assets, including with respect to any liability of the types that
appear as "Accrued Liabilities" and "Non-Current Liabilities" on the financial
statements of Seller.
2.3.2 Any liabilities or obligations which are assumed by
Buyer pursuant to Section 2.3.1 above are hereinafter referred to as the
"Assumed Liabilities." At the Closing, Parent shall cause Buyer to execute and
deliver to Seller an assumption agreement, in substantially the form of the
Assumption Agreement attached hereto as Exhibit A (the "Assumption Agreement"),
pursuant to which Buyer shall assume the Assumed Liabilities. Each of Parent and
Buyer hereby irrevocably and unconditionally waives and releases the Seller
Parties from all Assumed Liabilities and all liabilities or obligations
exclusively relating to the Business or the Acquired Assets to the extent
arising from events or occurrences after the Closing or to the extent otherwise
relating to the period after the Closing, including any liabilities created or
which arise by statute or common law, including CERCLA (it being understood that
this shall not constitute a waiver and release of any claims arising out of the
contractual relationships and indemnification arrangements between Buyer and
Seller).
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2.3.3 Buyer shall not assume any liabilities, commitments or
obligations (contingent or absolute and whether or not determinable as of the
Closing) of any of the Seller Parties or any of their Affiliates except for the
Assumed Liabilities as specifically and expressly provided for above, whether
such liabilities or obligations relate to payment, performance or otherwise, and
all liabilities, commitments or obligations not expressly transferred to Buyer
hereunder as Assumed Liabilities are being retained by the Seller Parties, (the
"Retained Liabilities"). Each of the Seller Parties hereby irrevocably and
unconditionally waives and releases Buyer from all Retained Liabilities
including any liabilities created or which arise by statute or common law,
including CERCLA (it being understood that this shall not constitute a waiver
and release of any claims arising out of the contractual relationships and
indemnification arrangements between Buyer and Seller).
Without limitation to the foregoing, all of the following shall be
considered Retained Liabilities and not Assumed Liabilities (except as specified
below) for the purposes of this Agreement:
(a) any product liability, toxic tort or similar claim
for injury to person or property, regardless of when made or asserted, to the
extent that it arises out of or is based upon any express or implied
representation, warranty, agreement or guarantee made by any of the Seller
Parties or any of their Affiliates prior to Closing, or alleged to have been
made by any of such Persons, or to the extent that it is imposed or asserted to
be imposed by operation of law, in connection with any service performed or
product distributed or sold by or on behalf of any of the Seller Parties or any
of their Affiliates prior to Closing, including any claim referred to above in
this Section 2.3.3(a) relating to water quality standards, any claim relating to
any product delivered in connection with the performance of services provided by
Seller and any claim seeking recovery for consequential damages, lost revenue or
income;
(b) all refund obligations relating to the advances
existing on the Closing Date for construction of facilities relating to the
Business;
(c) except to the extent set forth in Section 2.9, any
federal, state, foreign or local income or other Tax payable with respect to the
business, assets, properties or operations of any of the Seller Parties or any
member of any affiliated group of which any of them is a member.
(d) any liability or obligation associated with or in
connection with any common plant assets of Seller (other than the liabilities
and obligations exclusively related to any common plant assets included among
the Acquired Assets);
(e) except as provided in Section 2.3.1 above, any
liability or obligation with respect to compensation or employee benefits of any
nature owed to any employees, agents or independent contractors of any of the
Seller Parties or any of their Affiliates, whether or not employed by Buyer
after the Closing, that arises out of or relates to events or conditions to the
extent occurring before the Closing Date;
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(f) except to the extent set forth in Section 2.3.1(d),
any liability, obligation or responsibility of any of the Seller Parties, or any
of their Affiliates or predecessors, whether based on statutory or common law,
but only as any such law is interpreted, amended and in effect on the Closing
Date, known or unknown, contingent or actual, relating to or arising from
pollution, contamination or protection of the environment, human health or
safety or natural resources or relating to or arising from the presence or
Release or threat of Release of Hazardous Substances into the environment or
into or from any building, structure, pipeline or other facility or relating to
or arising from the generation, use, storage, treatment, disposal, transport or
other handling of Hazardous Substances or sale or product containing Hazardous
Substances from violation of any law relating to the foregoing (but only as such
law is interpreted, amended and in effect on the Closing Date) including without
limitation, any (A) CERCLA or similar liability under any federal or state law
or regulation as interpreted, amended and in effect on the Closing Date or (B)
any such liability associated with businesses or assets of the Seller Parties
other than the Business or the Acquired Assets;
(g) liabilities and obligations relating to the Business
to the extent arising prior to Closing (unless otherwise constituting Assumed
Liabilities) arising by operation of law under any common law or statutory
doctrine (including successor liability or de facto merger);
(h) any obligation or liability arising under any
contract, commitment, instrument or agreement (1) except for Buyer's IDRB
Obligations and subject to the penultimate sentence of Section 2.4, that is not
transferred to Buyer as part of the Acquired Assets, or (2) that relates to any
breach or default (or to the extent that it relates to an event which would,
with the passing of time or the giving of notice, or both, constitute a default)
under any Contract, instrument or agreement or to any services to be provided by
Seller under any such Contract, instrument or agreement to the extent that such
services were performed or were required to have been performed on or prior to
the Closing Date;
(i) any liability or obligation in respect of the
Excluded Assets;
(j) any liability or obligation of any of the Seller
Parties or any of their Affiliates existing as a result of any act, failure to
act or other state of facts or occurrence which constitutes a breach or
violation of any of Seller's representations, warranties, covenants or
agreements contained in this Agreement, except to the extent set forth in
Section 7.4; or
(k) except for the Assumed Liabilities as specifically
and expressly set forth herein, any liability to the extent arising out of or
relating to the ownership or operation of the Acquired Assets or the Business
prior to the Closing Date (including any predecessor operations), any claims,
obligations or litigation to the extent arising out of or relating to events or
conditions occurring before the Closing Date, and any liability associated with
any business other than the Business.
2.4 Consent of Third Parties. On the Closing Date, Citizens shall
cause Seller to assign to Buyer, and Parent shall cause Buyer to assume, the
Contracts and the Permits which are
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to be transferred to Buyer as provided in this Agreement by means of the
Assumption Agreement. To the extent that the assignment of all or any portion of
any Contract or Permit shall require the consent (or result in a breach or
violation thereof) of the other party thereto or any other third party, and such
consent shall not be obtained prior to Closing, this Agreement shall not
constitute an agreement to assign any such Contract or Permit included in the
Acquired Assets. In order, however, to provide Buyer the full realization and
value of every Contract of the character described in the immediately preceding
sentence, Seller agrees that on and after the Closing, it will, at the request
and under the direction of Buyer, in the name of Seller or otherwise as Buyer
shall specify, take all reasonable actions (including without limitation the
appointment of Buyer as attorney-in-fact for Seller to proceed at Buyer's sole
cost and expense) and do or cause to be done all such things as shall in the
reasonable opinion of Buyer be necessary (a) to assure that the rights of Seller
or its Affiliates under such Contracts shall be preserved for the benefit of
Buyer and (b) to facilitate receipt of the consideration to be received by
Seller or its Affiliates in and under every such Contract. To the extent that
Buyer does receive the benefits of any such Contract pursuant to the preceding
sentence, such Contract shall be a Contract "assigned or transferred to Buyer
pursuant to this Agreement" within the meaning of Section 2.3.1(b) hereof.
Nothing in this Section 2.4 shall in any way diminish the obligations of Seller
to obtain consents and approvals under this Agreement.
2.5 Closing. Subject to the terms and conditions of this Agreement,
the closing of the sale and purchase of the Acquired Assets (the "Closing")
shall take place at 10 a.m., East Coast time, on a date mutually satisfactory to
Buyer and Seller which is no later than the fifth Business Day after
satisfaction (or waiver) of the conditions to Closing set forth in Sections 6.1
and 6.2 hereof (other than those conditions which require the delivery of any
documents or the taking of other action, at the Closing) at the offices of
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇,
or on such other date and at such other time or place as may be mutually agreed
upon by the parties hereto (the "Closing Date"). Upon payment of the Initial
Cash Payment by Buyer and confirmed receipt thereof by Seller or the Escrow
Agent pursuant to Section 2.6.2 below, Seller shall operate the Business at the
direction of and under the control of Buyer. Notwithstanding the foregoing, the
Closing shall be deemed to be effective as of 11:59 p.m. on the Closing Date for
all purposes.
2.6 Purchase Price.
2.6.1 Purchase Price. Subject to the terms and conditions of
this Agreement, the aggregate purchase price be paid by Buyer for the purchase
of the Acquired Assets (the "Purchase Price") shall be: (i) $152,280,000 in cash
(the "Base Cash Purchase Price," the Base Cash Purchase Price as adjusted in
accordance with Section 2.6.3, Section 2.6.5 and Section 2.6.6 is referred to as
the "Initial Cash Payment"), subject to adjustment pursuant to the provisions of
this Agreement (including Section 2.6.3, Section 2.6.4, Section 2.6.5, Section
2.6.6 and Section 2.9 of this Agreement) and (ii) the assumption by Buyer of the
Assumed Liabilities.
2.6.2 Payment of Initial Cash Payment. Subject to the terms
and conditions of this Agreement, the Initial Cash Payment shall be paid by
Buyer on the Closing Date by federal other wire transfer of immediately
available funds to the account designated by Seller in writing at
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least two (2) Business Days prior to the Closing Date. 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 Initial Cash Payment
to Buyer's lead bank (the "Escrow Agent") in immediately available funds in U.S.
dollars. Upon receipt, the Escrow Agent shall invest the Initial Cash Payment in
an interest-bearing account mutually agreed upon by Seller and Buyer. At
Closing, Parent shall sign and deliver to Citizens a statement which confirms
that the Closing has occurred and which instructs the Escrow Agent to transfer
to Citizens the funds representing the Initial Cash Payment, plus an amount
representing the interest earned after the Closing Date until the date the funds
are transferred, to an account that Citizens shall designate at least two (2)
business days prior to the date the funds are required to be transferred
hereunder. The Escrow Agent shall refund the balance to Buyer. The fees and
expenses of Escrow Agent shall be paid by Buyer.
2.6.3 Estimated Closing Statement. At least five (5) business
days prior to the Closing Date, Citizens shall deliver to Parent and Buyer a
statement of net assets (the "Estimated Statement of Net Assets") reflecting its
good faith calculation of the Acquired Assets of the Business as of the last day
of the latest calendar month for which financial statements of Seller are
available (the "Estimated Adjusted Net Assets"). The Estimated Statement of Net
Assets shall be prepared in the same manner and utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets (excluding for this purpose any change required by GAAP
or any Authority since June 30, 1999). The Base Cash Purchase Price shall be
increased or decreased on a dollar for dollar basis by the amount, if any, by
which the Estimated Adjusted Net Assets is greater than or less than
$106,248,178 (such increase or decrease, as the case may be, is referred to
herein as the "Estimated Net Asset Adjustment").
2.6.4 Post-Closing Adjustment to Purchase Price.
(a) Within 90 days after the Closing, Citizens shall
prepare and deliver to Parent and Buyer a Statement of Net Assets (the "Closing
Statement of Net Assets") which reflects the Acquired Assets, as of 11:59 p.m.
on the Closing Date, based on actual financial performance and calculated in the
same manner, utilizing the same accounting principles, policies and methods
utilized in preparing the Interim Statement of Net Assets (excluding for this
purpose any change required by GAAP or any Authority since June 30, 1999),
together with (A) an audit report of Seller's Accountants stating that the
Closing Statement of Net Assets has been prepared utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets and (B) a calculation of Citizens' determination of the
amount of increase or decrease in the amount of the Acquired Assets of the
Business from the Interim Statement of Net Assets Date to the Closing Date which
is derived from the Closing Statement of Net Assets ("Seller's Adjustment
Amount"). The Closing Statement of Net Assets shall not give effect to any
purchase accounting treatment arising from Buyer's purchase of the Acquired
Assets. Buyer shall pay the fees and expenses of Seller's Accountants incurred
in connection with this Section 2.6.4. Buyer agrees to cooperate, and agrees to
cause Buyer's Accountants to cooperate, with Citizens and Seller's Accountants
in connection with the preparation of the Closing Statement of Net Assets, and
related information, and shall provide to Citizens and Seller's Accountants such
books, records and
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information as may be reasonably requested from time to time, including the work
papers of Buyer's Accountants. Citizens will give Buyer and its representatives
access during the normal business hours of Citizens to the personnel, books and
records of Citizens and the work papers of Seller's Accountants to assist Buyer
in the review of the Closing Statement of Net Assets and related matters. Buyer
agrees that, following the Closing through the date on which the Closing
Statement of Net Assets is delivered, it will not take any actions with respect
to any accounting books, records, policies or procedures on which the Closing
Statement of Net Assets is to be based that would make it impossible or
impracticable to calculate the Acquired Assets in the manner and utilizing the
methods required hereby. Without limiting the generality of the foregoing, no
changes shall be made in any reserve or other account existing as of the date of
the Interim Statement of Net Assets except in the ordinary course or as a result
of events occurring after the date of the Interim Statement of Net Assets and,
in such event, only in a manner consistent with past practices of Seller.
(b) Parent or Buyer may dispute any amounts reflected on
the Closing Statement of Net Assets, in the Seller's Adjustment Amount or in the
Statement of Certain Assumed Liabilities, provided, however, that Buyer shall
notify Citizens in writing of each disputed amount, and specify the amount
thereof in dispute and the basis of such dispute, within 30 days of the Buyer's
receipt of the Closing Statement of Net Assets and the Seller's Adjustment
Amount (such 30 day period hereinafter referred to as the "Review Period"). In
the event of a dispute with respect to the Closing Statement of Net Assets, the
Seller's Adjustment Amount or the Statement of Certain Assumed Liabilities,
Buyer and Seller shall attempt to reconcile their differences and any resolution
by them as to any disputed amounts shall be final, binding and conclusive on the
parties. If Buyer and Seller are unable to reach a resolution of such
differences within 30 days of receipt of Buyer's written notice of dispute to
Seller, Buyer and Seller shall submit the amounts remaining in dispute (together
with any amounts remaining in dispute pursuant to Section 2.6.4(b) of each of
the Related Purchase Agreements) for resolution to an independent accountant
firm of national reputation mutually appointed by Seller and Buyer (such
independent accounting firm being herein referred to as the "Third Accounting
Firm"), which shall be requested to determine and report to the parties, within
30 days after such submission, upon such remaining disputed amounts, and such
report shall be final, binding and conclusive on the parties hereto with respect
to the amounts disputed. The fees and disbursements of the Third Accounting Firm
shall be allocated between Buyer and the Seller Parties so that the Seller
Parties' share of such fees and disbursements shall be in the same proportion
that the aggregate amount of such remaining disputed amounts so submitted by
Buyer to the Third Accounting Firm that is unsuccessfully disputed by the Buyer
(as finally determined by the Third Accounting Firm) bears to the total amount
of such remaining disputed amounts so submitted by the Buyer to the Third
Accounting Firm. Buyer shall pay the fees and expenses of Buyer's Accountants
incurred in connection with this Section 2.6.4(b). Seller's Adjustment Amount,
if there are no disputes with respect thereto, or Seller's Adjustment Amount as
adjusted after the resolution of all disputes with respect thereto in accordance
herewith, shall be referred to as the "Final Net Asset Adjustment."
(c) If the Base Cash Purchase Price plus (or minus, if
negative) the Final Net Asset Adjustment exceeds the Initial Cash Payment, then
within five (5) business days after final determination thereof Buyer shall pay
Seller the amount of such excess together with
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Pennsylvania
interest thereon for the period commencing on the Closing Date through the date
of payment calculated at the Prime Rate in cash by federal or other wire
transfer of immediately available funds, or certified or bank cashier's check.
If the Initial Cash Payment exceeds the sum of the Base Cash Purchase Price plus
(or minus, if negative) the Final Net Asset Adjustment, then within five (5)
business days after final determination thereof Seller shall pay Buyer the
amount of such excess together with interest thereon for the period commencing
on the Closing Date through the date of payment calculated at the Prime Rate in
cash by federal or other wire transfer of immediately available funds, or
certified or bank cashier's check.
2.6.5 Adjustment for Certain Liabilities. Concurrent with the
delivery of the Estimated Statement of Net Assets, Citizens also shall deliver
to Parent and Buyer a statement reflecting (i) the customer and other deposits
held by Seller on the Closing Date and relating to the Business, (ii) the total
amount of the Assumed Indebtedness that will be outstanding immediately after
the Closing Date, (iii) the items specified in Section 2.9 to the extent set
forth therein, and (iv) without duplications of any amount included in clause
(i) above any payments received by Seller under the Contracts and Permits for
obligations not performed as of the Closing Date (the "Statement of Certain
Assumed Liabilities"). The Statement of Certain Assumed Liabilities shall
reflect Citizens' good faith calculation of such liabilities as of the Closing
Date. The Base Cash Purchase Price shall be decreased by the net amount set
forth in the Statement of Certain Assumed Liabilities. Concurrent with the
delivery of the Closing Statement of Net Assets, Citizens also shall deliver to
Parent a statement showing any adjustments to the Statement of Certain Assumed
Liabilities and the Base Cash Purchase Price shall be further adjusted to give
effect to any such adjustments to the Statement of Certain Assumed Liabilities.
2.6.6 Additional Adjustment to the Purchase Price. The Base
Cash Purchase Price shall be decreased by an amount equal to the proceeds of
Seller's sale of the property described in Item 7 of Schedule 3.5 (net of
expenses) less the sum of (i) the federal and state income taxes payable by
Seller in respect of those proceeds and (ii) the book value of such property, as
of June 30, 1999, on Seller's books.
2.7 Deliveries and Proceedings at Closing. Subject to the terms and
conditions of this Agreement, at the Closing:
2.7.1 Deliveries to Buyer. Citizens shall, and shall cause
Seller to deliver to Buyer:
(a) bills of sale and instruments of assignment to the
Acquired Assets, duly executed by Seller, substantially in the form of Exhibit B
hereto and;
(b) the consents to transfer, of all transferable or
assignable Contracts, Intellectual Property, Permits (including Environmental
Permits), to the extent specifically required hereunder;
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Pennsylvania
(c) title certificates to any motor vehicles included in
the Acquired Assets, duly executed by Seller (together with any other transfer
forms necessary to transfer title to such vehicles);
(d) special warranty deeds of conveyance with respect to
the parcels of Real Estate owned in fee simple by Seller (or, with respect to
any such parcel which was acquired by Seller (or its predecessor in interest, in
cases involving mergers) by deed without covenant or warranty of title, a quit
claim deed without covenant or warranty of title) to Buyer, duly executed and
acknowledged by Seller and in recordable form;
(e) the Foreign Investment in Real Property Tax Act
Certification and Affidavit for each parcel of Real Estate, duly executed by the
Seller Parties (the "FIRPTA Affidavit");
(f) the certificates, opinions and other documents
required to be delivered by the Seller Parties pursuant to Section 6.1 hereof
and certified resolutions evidencing the authority of the Seller Parties as set
forth in Section 3.2 hereof;
(g) all agreements and other documents required by this
Agreement;
(h) a receipt for the payment of the Initial Cash
Payment duly executed by Citizens; and
(i) all such other instruments of conveyance as shall,
in the reasonable opinion of Buyer and its counsel, be necessary to transfer to
Buyer the Acquired Assets in accordance with this Agreement and where necessary
or desirable, in recordable form.
2.7.2 Deliveries By Buyer to the Seller Parties. Parent shall,
and shall cause Buyer to deliver to the Seller Parties:
(a) wire transfer of immediately available funds in an
amount equal to the Initial Cash Payment;
(b) the Assumption Agreement, duly executed by Buyer;
(c) the certificates, opinions and other documents
required to be delivered by Buyer pursuant to Section 6.2 hereof;
(d) all of the instruments contemplated by Section
5.24(a) to the extent not previously executed and delivered by Parent; and
(e) all such other instruments of assumption as shall,
in the reasonable opinion of Seller and its counsel, be necessary for Parent and
Buyer to assume the Assumed Liabilities in accordance with this Agreement.
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2.8 Allocation of Consideration. Buyer and Seller shall use their
good faith efforts to agree upon the allocation (the "Allocation") of the
Purchase Price, the Assumed Liabilities and other relevant items (including, for
example, adjustments to the Purchase Price) to the individual assets or classes
of assets within the meaning of Section 1060 of the Code. If Buyer and Seller
agree to such Allocation on or before ninety (90) days after the Closing Date,
Buyer and Seller covenant and agree that (i) the values assigned to the assets
by the parties' mutual agreement shall be conclusive and final for all purposes,
and (ii) neither Buyer nor Seller will take any position before any Authority or
in any proceeding that is in any way inconsistent with such Allocation.
Notwithstanding the foregoing, if Buyer and Seller cannot agree to an Allocation
on or before ninety (90) days after the Closing Date, Buyer and Seller covenant
and agree to file and to cause their respective Affiliates to file, all Tax
returns and schedules thereto (including, for example, amended returns, claims
for refund, and those returns and forms required under Section 1060 of the Code
and any Treasury regulations promulgated thereunder) consistent with each of
Buyer and Seller's good faith Allocations, unless otherwise required because of
a change in any legal requirement.
2.9 Prorations. The parties hereto agree that the following expenses
shall be calculated and pro rated as of the Closing Date, with Seller
responsible for such expenses and to receive the benefit for the same for the
period through and including the Closing Date, and Buyer to be responsible for
and to receive the benefit of the same after the Closing Date:
2.9.1 personal and real property taxes (on the basis on which
the same were assessed and paid) and sales, occupation and use taxes, in each
case, to the extent relating to the Business and except as otherwise provided in
Section 7.1;
2.9.2 electric, fuel, gas, telephone, sewer and utility
charges, in each case, to the extent relating to the Business;
2.9.3 rentals and other charges under Contracts to be assumed
by Buyer pursuant to Section 2.3 (except to the extent provided in Section
2.3.3(h)); and
2.9.4 charges under maintenance and service contracts and
other Contracts (except to the extent provided in Section 2.3.3(h)), and fees
under Permits to be transferred to Buyer as part of the Acquired Assets;
2.9.5 water, sewer and other similar types of taxes, and
installments on special benefit assessments; and
2.9.6 payroll expenses, payroll taxes, reimbursable employee
business expenses and the financial cost of the accrued vacation of each
Transferred Employee.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
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Each of the Seller Parties jointly and severally represent and warrant to
Parent and Buyer as follows:
3.1 Qualification; No Interest in Other Entities.
3.1.1 Each of the Seller Parties is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to own, lease
and operate the Acquired Assets and the Business as presently being conducted.
Each of the Seller Parties is qualified to do business and is in good standing
as a foreign corporation in all jurisdictions wherein the nature of the business
conducted by it or such Seller Party's ownership or use of assets and properties
make such qualification necessary, except such failures to be qualified or to be
in good standing, if any, which when taken together with all such other failures
of the Seller Parties do not have a Material Adverse Effect.
3.1.2 No shares of any corporation or any ownership or other
investment interest, either of record, beneficially or equitably, in any Person
are included in the Acquired Assets.
3.2 Authorization and Enforceability. Each of the Seller Parties has
full corporate power and authority to execute, deliver and perform this
Agreement and all other agreements and instruments to be executed by them in
connection herewith (such other agreements and instruments being hereinafter
referred to collectively as the "Transaction Documents"). The execution,
delivery and performance by each of the Seller Parties of this Agreement and the
Transaction Documents to which such Seller Party is a party have been duly
authorized by all necessary corporate action on the part of each of them. This
Agreement has been duly executed and delivered by each of the Seller Parties,
and as of the Closing Date the other Transaction Documents will be duly executed
and delivered by the Seller Parties. This Agreement is a legal, valid and
binding obligation of each Seller Party, enforceable against them in accordance
with its terms except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court. As of the Closing
Date, each of the other Transaction Documents to which each of the Seller
Parties is a party will be duly executed and delivered by each of the Seller
Parties and will constitute the legal, valid and binding obligations of each of
the Seller Parties, enforceable against them in accordance with its respective
terms, except as such enforceability may be limited by applicable laws relating
to bankruptcy, insolvency, fraudulent conveyance, reorganization or affecting
creditors' rights generally and except to the extent that injunctive or other
equitable relief is within the discretion of a court.
3.3 No Violation of Laws or Agreements. The execution, delivery, and
performance of this Agreement and the Transaction Documents by each of the
Seller Parties do not, and the consummation of the transactions contemplated by
this Agreement and the Transaction Documents by the Seller Parties, will not:
(a) contravene any provision of the Restated Articles of Incorporation or Bylaws
of Citizens or the Articles of Incorporation or Bylaws of the other Seller
Parties; or (b) except as set forth on Schedule 3.3, violate, conflict with,
result in a breach of, or
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constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or result in or permit
the termination, modification, acceleration, or cancellation of, or result in
the creation or imposition of any Lien of any nature whatsoever upon any of the
Acquired Assets or give to others any interests or rights therein under (i) any
indenture, mortgage, loan or credit agreement, license, instrument, lease,
contract, plan, permit or other agreement or commitment, oral or written, to
which any of the Seller Parties is a party, or by which the Business or any of
the Acquired Assets may be bound or affected, except for such violations,
conflicts, breaches, terminations, modifications, accelerations, cancellations,
Liens, interests or rights which, individually and in the aggregate, do not have
a Material Adverse Effect or will be cured, waived or terminated prior to the
Closing Date, or (ii) any judgment, injunction, writ, award, decree,
restriction, ruling, or order of any court, arbitrator or Authority or any
applicable constitution, law, ordinance, rule or regulation, to which any of the
Seller Parties is subject, other than those violations or conflicts which
individually and in the aggregate would not have a Material Adverse Effect.
3.4 Financial Statements. Citizens has previously delivered to Buyer
the statement of income of the Business (the "Income Statement") and the Interim
Statement of Net Assets contained in Schedule 3.4 (collectively, the "Financial
Statements"). The Income Statement (a) fairly presents in all material respects
the results of operations of the Business in accordance with generally accepted
accounting principles ("GAAP") consistently applied except for the omission of
full footnotes to the Income Statement and (b) has in all material respects been
derived from the books and records of Seller and reflects the separation of the
operation associated with the Business from other operations of Citizens. The
Interim Statement of Net Assets (a) has in all material respects been derived
from the books and records of Seller and reflects the separation of the
operations associated with the Business from other operations of Citizens; (b)
fairly presents in all material respects the Acquired Assets as of the Interim
Statement of Net Assets Date; and (c) has in all material respects been prepared
in accordance with GAAP consistently applied except for the omission of full
footnotes to such Interim Statement of Net Assets. The financial statements
included in the Annual Report to each PUC for the year ended December 31, 1998,
were prepared in all material respects in accordance with the rules and
regulations of such PUC.
3.5 No Changes. Since the Interim Statement of Net Assets Date to
the date hereof, except as disclosed in Schedule 3.5, the Seller Parties have
conducted the Business as presently operated only in the ordinary course of
business consistent with past practice. Since the Interim Statement of Net
Assets Date, except as disclosed in Schedule 3.5, there has not been:
3.5.1 any Material Adverse Effect;
3.5.2 prior to the date of this Agreement, any change in the
salaries or other compensation payable or to become payable to, or any advance
(excluding advances for ordinary business expenses) or loan to, any Transferred
Employee, or material change or material addition to, or material modification
of, other benefits (including any bonus, profit-sharing, pension or other plan
in which any of the Transferred Employees participate) to which any of the
Transferred Employees may be entitled, or any payments to any pension,
retirement, profit-sharing, bonus or
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similar plan other than in any such case (i) in the ordinary course consistent
with past practice, (ii) as required by law, or (iii) as required by any
collective bargaining agreement, if any;
3.5.3 any alteration in any material respect of the customary
practices with respect to the collection of accounts receivable of the Business
or the provision of discounts, rebates or allowances;
3.5.4 any disposition of or failure to keep in effect any
rights in, to or for the use of any Permit of the Business which individually or
in the aggregate would have a Material Adverse Effect;
3.5.5 any damage, destruction or loss affecting the Business
which individually or in the aggregate would have a Material Adverse Effect
whether or not covered by insurance;
3.5.6 prior to the date of this Agreement, any change by
Seller in its method of accounting or keeping its books of account or accounting
practices with respect to the Business except as required by GAAP and is set
forth on Schedule 3.5; or
3.5.7 prior to the date of this Agreement, any sale, transfer
or other disposition of any material assets, properties or rights of the
Business, except in the ordinary course of business consistent with past
practice.
3.6 Contracts. As of the date of this Agreement, Schedule 3.6
contains a list of all Contracts (other than (i) with respect to which the
Business' total annual liability or expense is less than (a) $250,000 per such
Contract and (b) $6,123,000 per all such Contracts (when taken together with
similar contracts omitted from Schedule 3.6 of the Related Purchase Agreements),
and (ii) Contracts that may be terminated by Seller, without penalty, on notice
of 90 days or less) except line extension agreements and similar agreements and
construction and design contracts. Seller has furnished to Buyer a correct and
complete copy of each written agreement listed in Schedule 3.6. Except as
disclosed on Schedule 3.6, with respect to each Contract, neither Seller nor, to
the Seller Parties' knowledge, any other party thereto, is in breach or default,
and to the Seller Parties' knowledge, no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the Contract, except in each case where
such breaches, terminations, modifications, accelerations or defaults,
individually or in the aggregate, do not have a Material Adverse Effect. Except
as set forth in Schedule 3.6, there are no disputes pending or to the best of
the Seller Parties' knowledge, threatened, under or in respect of any of the
Contracts, other than those that individually and in the aggregate do not have a
Material Adverse Effect.
3.7 Permits and Compliance With Laws Generally.
3.7.1 Except as disclosed on Schedule 3.7, Seller possesses
and is in compliance with all Permits required to operate the Business as
presently operated and to own, lease
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Pennsylvania
or otherwise hold the Acquired Assets under all applicable laws, rules,
regulations, ordinances and codes, including Environmental Laws (as defined
below), except to the extent that any failure to possess, or to comply with, any
Permit, laws, rules, regulations or orders would not, individually or in the
aggregate, have a Material Adverse Effect. Except as disclosed in Schedule 3.7,
the Business is conducted by Seller in compliance with all applicable laws
(including the Occupational Safety and Health Act and the rules and regulations
thereunder ("OSHA"), zoning, building and similar laws and Environmental Laws),
rules, regulations, ordinances, codes, judgments and orders, except for such
failures to comply which do not individually or in the aggregate have a Material
Adverse Effect. Except as disclosed on Schedule 3.7, all Permits of Seller
relating to the operation of the Business are in full force and effect, other
than those the failure of which to be in full force and effect would not
individually or in the aggregate have a Material Adverse Effect. There are no
proceedings pending or, to the Seller Parties' knowledge, threatened that seek
the revocation, cancellation, suspension or any adverse modification of any such
Permits presently possessed by Seller other than those revocations,
cancellations, suspensions or modifications which do not individually or in the
aggregate have a Material Adverse Effect.
3.7.2 Except as set forth on Schedule 3.7, no outstanding
notice, citation, summons or order has been issued, no outstanding complaint has
been filed, no outstanding penalty has been assessed and no investigation or
review is pending or, to the knowledge of the Seller Parties, threatened, by any
Authority or other Person with respect to any alleged (i) violation by Seller or
any Affiliate of Seller relating to the Business of any law, ordinance, rule,
regulation, code or order of any Authority; or (ii) failure by Seller or any
Affiliate to have any Permit required in connection with the conduct of the
Business or otherwise applicable to the Business (including the Acquired
Assets), except, in each case, where such violations or failures, individually
or in the aggregate, would not have a Material Adverse Effect.
3.8 Environmental Matters. Except as set forth on Schedule 3.8
hereto, and with such exceptions as are not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect:
3.8.1 Seller has not disposed of or arranged for the disposal
of or Released any Hazardous Substances, other than in conformity with
Environmental Laws, at any Real Estate, or, in connection with the Business or
Acquired Assets, at any other facility, location, or other site.
3.8.2 Seller has not received any written notice or request
for information with respect to, and to the best of the Seller Parties'
knowledge, Seller has not been designated a potentially liable party for
Remedial Action, in connection with any Real Estate, or, as of the date hereof,
with respect to the Business or Acquired Assets, at any other facility,
location, or other site under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or comparable state statutes.
3.8.3 To the best of the Seller Parties' knowledge, except for
such use or storage of Hazardous Substances as is incidental to the conduct of
the Business, which use and storage is or has been in compliance with
Environmental Laws, and which use and storage has not
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Pennsylvania
caused any condition that requires Remedial Action, no Real Estate has been used
for the storage, treatment, generation, processing, production or disposal of
any Hazardous Substances or as a landfill or other waste disposal site in
violation of any Environmental Law.
3.8.4 To the best of the Seller Parties' knowledge,
underground storage tanks are not, and have not in the past been, located on or
under any Real Estate.
3.8.5 There are no pending or unresolved claims against Seller
or the Business for investigatory costs, cleanup, removal, remedial or response
costs, or natural resource damages arising out of any Releases or threat of
Release of any Hazardous Substances at any Real Estate or, as of the date
hereof, with respect to the Business or the Acquired Assets or at any other
facility, location, or other site.
3.8.6 To the best of the Seller Parties' knowledge, no
polychlorinated biphenyls ("PCBs") or asbestos-containing materials are located
at or in any Real Estate in violation of Environmental Laws or which require
Remedial Action.
3.8.7 To the best of the Seller Parties' knowledge, no
Hazardous Substance managed or generated by or on behalf of Seller at the Real
Estate or in connection with the Business or Acquired Assets has come to be
located at any site that is listed or formally proposed for listing under
CERCLA, the Comprehensive Environmental Response, Compensation and Liability
Information System ("CERCLIS"), or any similar state list or that is the subject
of federal, state, or local enforcement actions or investigations.
3.8.8 The Seller Parties know of no facts or circumstances
related to environmental matters (i) in connection with the operation of the
Business or (ii) concerning the Real Estate, that are reasonably likely to
result in any material reduction in the quality or quantity of water available
for supply to the Seller Parties' customers.
3.8.9 The Seller Parties will within thirty (30) days of the
date hereof provide Buyer with copies of all written environmental audits or
investigations of which they are aware (after due inquiry) prepared for the Real
Estate or operations of the Business.
3.8.10 Except as set forth in Schedule 3.8.10 or Citizens'
Annual Report on Form 10-K for the year ended December 31, 1998:
(a) The Seller Parties (including for purposes of
Section 3.8.10(a) and (b), Affiliates and predecessors of the Seller Parties)
are and have been for the past three years in full compliance with all federal
and state primary drinking water standards;
(b) The Seller Parties are and have been for the past
three years in full compliance with all federal and state secondary drinking
water standards; and
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Pennsylvania
(c) As to all outstanding violations of state or federal
drinking water standards, as of the date hereof, the Seller Parties have
completed or are in the process of completion in accordance with all applicable
deadlines, all actions required by Environmental Law or Authorities to correct
or otherwise respond to such violations.
3.8.11 Except as set forth in Schedule 3.8.11, none of the
Seller Parties will be required to place any notice or restriction relating to
the presence of Hazardous Substances in the deed to any Real Estate, or in any
written instrument accompanying this Agreement, and no Real Estate has such a
notice or restriction in its deed or any other written instrument relating to
the purchase, lease or rental of such property.
For the purposes of these Sections 3.7 and 3.8: (A) "Remedial Action" means all
actions to (x) clean up, remove, treat or in any other way respond to any
presence, Release or threat of Release of Hazardous Substances; (y) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Substances so it does not endanger or threaten to endanger public or employee
health or welfare or the environment; or (z) perform studies, investigations or
monitoring necessary or required to investigate the foregoing; (B)
"Environmental Laws" means any common law or federal, state or local law,
statutes, rule, regulation, ordinance, code, judgment or order relating to the
protection of the environment or human health and safety and includes, but is
not limited to, CERCLA (42 U.S.C. section 9601, et seq.), the Clean Water Act
(33 U.S.C. section 1251 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.), the Toxic Substances Control Act (15 U.S.C.
section 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. section 300f et
seq.) and the Oil Pollution Act of 1990 (33 U.S.C. section 2701 et seq.), each
as has been or may be interpreted or amended as of the Closing Date and the
regulations promulgated pursuant thereto and in effect as of the Closing Date;
(C) "Released" means released, spilled, leaked, discharged, disposed of, pumped,
poured, emitted, emptied, injected, leached, dumped or allowed to escape; and
(D) "Hazardous Substances" means hazardous or toxic or polluting substance or
waste or contaminant under or pursuant to any Environmental Law, including
petroleum products, PCBs and radioactive materials.
3.9 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by the Selling Parties
of this Agreement, the Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by the Seller Parties, including
without limitation in connection with the assignment of the Contracts and
Permits contemplated hereby, except (i) as required by the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇
Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), (▇▇) as specified on
Schedule 3.9, (iii) as required by the IDRB Documents, and (iv) for such other
consents, approvals, authorizations, registrations or filings the failure of
which to obtain or make would not individually or in the aggregate have a
Material Adverse Effect or which are obtained by the Closing Date.
3.10 Title. Seller has good and valid title to all of the Acquired
Assets constituting personal property, good and marketable title in fee simple
to all of the owned Acquired Assets constituting Real Estate and good and valid
leasehold title to all of the leased Acquired Assets
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Pennsylvania
constituting Real Estate, in each case, free and clear of Liens subject only to
the Permitted Exceptions. "Permitted Exceptions" as used herein shall mean (a)
the Liens set forth in Schedule 3.10 hereto, (b) Liens securing Taxes,
assessments, governmental charges or levies, or the claims of materialmen,
mechanics, carriers and like persons, all of which are not yet due and payable
or which are being contested in good faith or (c) such other Liens which,
individually or in the aggregate, do not have a Material Adverse Effect (it
being understood that to the extent a Permitted Exception relates to or arises
from a Retained Liability, Seller shall still be liable for such Retained
Liability to the extent set forth herein).
3.11 Real Estate.
3.11.1 As of the date hereof, Seller has not received any
written or oral notice for assessments for public improvements against the Real
Estate which remains unpaid, and to the best knowledge of the Seller Parties, no
such assessment has been proposed. Except as set forth on Schedule 3.11, as of
the date hereof, there is no pending condemnation, expropriation, eminent domain
or similar proceeding affecting all or any portion of any of the Real Estate and
to the best knowledge of the Seller Parties no such proceeding is threatened.
3.11.2 Except as disclosed on Schedule 3.6, as of the date
hereof, Seller is not a lessee under any Contract relating to the use or
occupancy of the Real Estate involving annual payments in excess of $100,000.
3.11.3 Each parcel of the Real Estate has physical and, to
Seller's knowledge, legal vehicular and pedestrian access to and from public
roadways as may be reasonably necessary to the operation of the Business except
where the failure to have such access does not have a Material Adverse Effect.
To Seller's knowledge, no fact or condition exists which would result in the
termination of (a) the current access from each parcel of the Real Estate, and
(b) continued use, operation, maintenance, repair and replacement of all
existing and currently committed water lines used by Seller in connection with
the Business, except where such termination would not have a Material Adverse
Effect.
3.12 Taxes. The Seller Parties have (a) timely filed all material
returns and reports for Taxes, including information returns, that are required
to have been filed in connection with, relating to, or arising out of, the
Business, (b) paid all Taxes that are shown to have come due pursuant to such
returns or reports and (c) paid all other material Taxes not required to be
reported on returns in connection with, relating to, or arising out of, or
imposed on the property of the Business for which a notice of assessment or
demand for payment has been received or which have otherwise become due. To the
best of the Seller Parties' knowledge, all such returns or reports have been
prepared in accordance with all applicable laws and requirements in all material
respects. Except to the extent disclosed on Schedule 3.12, none of the assets of
the Business or constituting any of the Acquired Assets (a) is property that is
required to be treated as owned by another Person pursuant to the "safe harbor
lease" provisions of former Section 168(f)(8) of the Code, (b) is
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"tax-exempt use property" within the meaning of Section 168(h) of the Code or
(c) directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
3.13 Patents and Intellectual Property Rights. To the best of the
Seller Parties' knowledge, the operations of Seller do not make any unauthorized
use of any Intellectual Property except for any such unauthorized uses which do
not have a Material Adverse Effect. Assuming the consents listed as item XII on
Schedule 3.9 are obtained, Buyer will not lose any of Seller's rights to, or be
required to pay increased royalties for, any Intellectual Property included in
the Acquired Assets as a result of the Closing and the consummation of the
transactions contemplated by this Agreement, except for any such rights or such
increased royalties the loss or payment of which would, individually or in the
aggregate, not have a Material Adverse Effect.
3.14 Accounts Receivable. The accounts receivable of Seller arising
from the Business as set forth on the Interim Statement of Net Assets or arising
since the date thereof have arisen out of bona fide sales and deliveries of
goods, performance of services and other business transactions in the ordinary
course of business consistent with past practice; the allowance for collection
losses on the Interim Statement of Net Assets has been determined in accordance
with GAAP consistent with past practice.
3.15 Labor Relations. As of the date hereof, except as set forth in
Schedule 3.15, to best of the knowledge of the Seller Parties, there has been no
union organizing efforts with respect to the Business conducted within the last
three (3) years and there are none now being conducted with respect to the
Business. Except as set forth in Schedule 3.15, Seller has not at any time
during the three (3) years prior to the date of this Agreement had, nor, to the
best of the Seller Parties' knowledge, is there now threatened, a strike, work
stoppage or work slow down with respect to or affecting the Business which had
or could reasonably be expected to have a Material Adverse Effect. As of the
date hereof, except as set forth in Schedule 3.15, (i) no Employee is
represented by any union or other labor organization and (ii) there is no unfair
labor practice charge pending or, to the best knowledge of the Seller Parties,
threatened against Seller relating to any of the Employees as related to the
Business which could reasonably be expected to have a Material Adverse Effect.
3.16 Employee Benefit Plans.
3.16.1 Schedule 3.16.1 contains a true and complete list of
each "employee benefit plan," as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA), bonus, incentive,
deferred compensation, excess benefit, employment contract, stock purchase,
stock ownership, stock option, supplemental unemployment, vacation, sabbatical,
sick-day, severance or other material employee benefit plan, program or
arrangement (other than those required to be maintained by law), whether written
or unwritten, qualified or nonqualified, funded or unfunded, foreign or
domestic, (i) maintained by, or contributed to by Citizens or any of its
Affiliates, in respect of any Employee or Former Employee, or (ii) with respect
to which Citizens or any of its Affiliates has any liability in respect of any
Employee or Former
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Employee (the"Benefit Plans"). Except as disclosed on Schedule 3.16.1, neither
Citizens nor any of its Affiliates maintains any bonus, pension or welfare
benefit plan, program or arrangement, including any deferred compensation
arrangement, for directors, consultants or independent contractors of the
Business.
3.16.2 A true and complete copy of each Benefit Plan and
related trust agreements and (to the extent applicable) a copy of each Benefit
Plan's current summary plan description and in the case of an unwritten Benefit
Plan, a written description thereof, has been furnished to Buyer. In addition,
to the extent applicable, Buyer has been provided a copy of the most recent
Internal Revenue Service ("IRS") determination letter issued to each Benefit
Plan and a copy of the most recent IRS Form 5500 together with all schedules and
accountants' statement filed, and actuarial reports prepared, on behalf of each
Benefit Plan.
3.16.3 Each Benefit Plan which is intended to be qualified
under Section 401(a) of the Code (as designated on Schedule 3.16.1) is so
qualified, and will remain so qualified upon the timely making of certain
amendments required by law during the applicable remedial amendment period, and
any trust forming a part of such a Benefit Plan is tax exempt under Section
501(a) of the Code. Each such Benefit Plan has been amended, as and when
necessary, to comply with the Tax Reform Act of 1986 and upon timely filing of
an Application for Determination with the Internal Revenue Service, will be
eligible to make further such amendments under the"remedial amendment period."
3.16.4 Except as disclosed in Schedule 3.16.4, each Benefit
Plan has been operated and administered in all material respects in accordance
with its terms and all applicable laws, including ERISA and the Code.
3.16.5 None of the Acquired Assets is subject to a Lien or Tax
under the Code or ERISA.
3.16.6 Neither Citizens nor any ERISA Affiliate and, to the
knowledge of the Seller Parties, no other Person, has taken any action or failed
to take any action with respect to any Benefit Plan that may subject Buyer or
any Benefit Plan under which liabilities may be assumed by Buyer under Sections
5.10, 5.11 or 5.12 ("Assumed Benefit Liabilities") to any material liability or
Tax under the Code or ERISA.
3.16.7 Neither Citizens nor any ERISA Affiliate has incurred
or expects to incur any withdrawal liability with respect to any Benefit Plan
which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA, including any contingent liability under Section 4204 of ERISA or
withdrawal liability arising from the actions of Citizens or any ERISA Affiliate
contemplated by this Agreement. All contributions that Citizens or any ERISA
Affiliate have been obliged to make to any Benefit Plan, including any
multiemployer plan, have been duly and timely made.
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3.16.8 There are no pending or, to the knowledge of the Seller
Parties, threatened claims (other than routine claims for benefits),
assessments, complaints, proceedings or investigations of any kind in any court
or governmental agency with respect to any Benefit Plan which could reasonably
be expected to give rise to a material liability to Buyer.
3.16.9 Except as disclosed on Schedule 3.16.9, no Benefit Plan
provides benefits, including without limitation, death or medical benefits,
beyond termination of service or retirement other than (i) coverage mandated by
law, or (ii) death or retirement benefits under a Benefit Plan qualified under
Section 401(a) of the Code. Seller's Retiree Medical Plan contains provisions
permitting Seller to modify or terminate retiree medical benefits at any time,
without prior notice to any covered individual. Except with respect to retirees,
"grandfathered" employees and collectively bargained employees, Seller knows of
no reason why its ability to effect those provisions would be limited.
3.16.10 With respect to each Benefit Plan that is a "group
health plan" within the meaning of Section 607 of ERISA and that is subject to
Section 4980B of the Code, Citizens and each ERISA Affiliate have complied in
all material respects with the continuation coverage requirements of the Code
and ERISA.
3.17 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 3.17, Seller has no liabilities with respect to the Business which
would constitute Assumed Liabilities, either direct or indirect, matured or
unmatured or absolute, contingent or otherwise, except:
3.17.1 the Assumed Indebtedness and those other liabilities
which would decrease the Base Cash Purchase Price pursuant to Section 2.6.5 to
the extent assumed by Buyer at Closing;
3.17.2 liabilities arising in the ordinary course of business
under any Contract or Permit or with respect to any agreement or instrument
included within the definition of Real Estate; and
3.17.3 those liabilities incurred, consistent with past
business practice, in or as a result of the normal and ordinary course of
business and reflected in the books and records related to the Business;
3.17.4 the obligations and liabilities set forth in Sections
5.9, 5.10, 5.11 and 5.12 hereof; and
3.17.5 those other liabilities, which individually and in the
aggregate, would not have a Material Adverse Effect.
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3.18 No Pending Litigation or Proceedings. Except as disclosed in
Schedule 3.18, there are no actions, suits, investigations or proceedings
pending against or, to the best of the Seller Parties' knowledge, threatened,
against or affecting, Seller, the Business or any of the Acquired Assets before
any court or arbitrator or Authority which individually or in the aggregate,
would have a Material Adverse Effect. Except as disclosed in Schedule 3.18,
there are currently no outstanding judgments, decrees or orders of any court or
Authority against any of the Seller Parties, which relate to or arise out of the
conduct of the Business or the ownership, condition or operation of the Business
or the Acquired Assets (other than any PUC order relating to rates, tariffs and
similar matters arising in the ordinary course of business) which individually
or in the aggregate would have a Material Adverse Effect.
3.19 Supply of Utilities. Except as set forth on Schedule 3.19, the
Real Estate has adequate arrangements for supplies of electricity, gas, oil,
coal and/or sewer for all operations at the 1998 or current operating levels,
whichever is greater. Except as set forth on Schedule 3.19, there are no actions
or proceedings pending or, to the best of the Seller Parties' knowledge,
threatened, that would adversely affect the supply of electricity, gas, coal or
sewer to the Real Estate except for those which individually and in the
aggregate would not have a Material Adverse Effect.
3.20 Insurance. Schedule 3.20 lists the Seller Parties' policies and
contracts in effect as of the date hereof for insurance covering the Acquired
Assets or Assumed Liabilities and the operation of the facilities constituting
the Business owned or held by Seller, together with the risks insured against,
coverage limits and deductible amounts.
3.21 Relationship with Customers. As of the date hereof, Seller does
not have any current customer which accounted for more than 5% of the net sales
of the Business (taken together with the businesses being acquired by Buyer or
Affiliates of Buyer pursuant to the Related Purchase Agreements) for the
immediately preceding 12-month period.
3.22 WARN Act. Except as contemplated by Section 5.9 hereby or as
set forth in Schedule 3.22 hereto, within six months prior to the date hereof,
(i) Seller has not effectuated (a) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Business; or (b) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Business; (ii) Seller has not been affected by any transaction or engaged in
layoffs or employment terminations with respect to the Business sufficient in
number to trigger application of any similar state or local law; and (iii) none
of Seller's employees who are employed in connection with the Business has
suffered an "employment loss" (as defined in the WARN Act) .
3.23 Condition of Assets. Except as set forth on Schedule 3.23, the
buildings, machinery, equipment, tools, furniture, improvements and other fixed
tangible assets of the Business included in the Acquired Assets, taken as a
whole and taken together with the similar assets included
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among the assets being acquired by Buyer or Affiliates of Buyer pursuant to the
Related Purchase Agreements, are in good operating condition and repair,
reasonable wear and tear excepted.
3.24 Brokerage. None of the Seller Parties or their Affiliates have
made any agreement or taken any other action which might cause any Person to
become entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to Buyer or
its Affiliates.
3.25 All Assets. Except as set forth on Schedule 3.25 and for the
Excluded Assets, the Acquired Assets include all assets, rights, properties and
contracts the use of which is necessary to the continued conduct of the Business
by Buyer substantially in the manner as it was conducted prior to the Closing
Date, including the service of all utility customers in substantially the same
manner and at substantially the same service levels as provided by Seller on the
date hereof.
3.26 Year 2000 Matters. Citizens has (1) initiated a review and
assessment of all mission critical areas within the Business and related
operations (including those affected by suppliers and vendors) that it
reasonably believes could be adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by any Seller Party (or suppliers
and vendors) may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
all as set forth in Citizens' Annual report on Form 10-K for the fiscal year
ended December 31, 1998 and Citizens' Quarterly reports on Form 10-Q for the
periods ending March 31, 1999 and June 30, 1999, and (iii) to date, implemented
that plan substantially in accordance with that timetable. Seller has
contingency plans that are dedicated to ensuring that established and expected
levels of customer service are maintained without interruption, while core
business functionality is preserved during the millennium transition. With
respect to its suppliers and vendors, the foregoing representation and warranty
is expressly limited to matters known to Seller after making reasonable
inquiries of such suppliers and vendors. Seller makes no representation or
warranty with respect to the receipt or accuracy of any response received from
any vendor or supplier.
3.27 Product Liability. Except as disclosed in Schedule 3.27 and
except for those liabilities which individually or in the aggregate would not
have a Material Adverse Effect, there are no (a) liabilities of the Seller
Parties or their Affiliates, fixed or contingent, asserted or, to the knowledge
of the Seller Parties, unasserted, with respect to any product liability or
similar claim that relates to any product or service sold by Seller or the
Business to others or (b) liabilities of the Seller Parties or their Affiliates,
fixed or contingent, asserted or, to the knowledge of the Seller Parties
unasserted, with respect to any claim for the breach of any express or implied
product warranty or a similar claim with respect to any product or service sold
by Seller or the Business to others.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer jointly and severally represent and warrant to Seller as
follows:
4.1 Organization and Good Standing.
4.1.1 Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
4.1.2 Buyer is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to own, lease and operate the Acquired
Assets and the Business. Buyer is qualified to do business and is in good
standing in all jurisdictions wherein the nature of the business conducted by it
or Buyer's ownership or use of assets and properties make such qualification
necessary, except such failures to be qualified or to be in good standing, if
any, which when taken together with all such failures of Buyer do not have a
material adverse effect on its ability to perform its obligations under this
Agreement and the Transaction Documents.
4.2 Authorization and Enforceability. Each of Buyer and Parent has
full corporate power and authority to execute, deliver and perform this
Agreement and the other Transaction Documents to which either of them is a
party. The execution, delivery and performance by Buyer and Parent of this
Agreement and the Transaction Documents to which Buyer and/or Parent is a party
have been duly authorized by all necessary corporate action on the part of each
of them. This Agreement has been duly executed and delivered by Buyer and
Parent, and as of the Closing Date the other Transaction Documents will be duly
executed and delivered by Buyer and Parent. This Agreement is a legal, valid and
binding obligation of Buyer and Parent, enforceable against them in accordance
with its terms, except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court. As of the Closing
Date, each of the other Transaction Documents to which Buyer and Parent is a
party will be duly executed and delivered by Buyer and Parent and will
constitute the legal, valid and binding obligations of Buyer and Parent,
enforceable against them in accordance with its respective terms, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court.
4.3 No Violation of Laws or Agreements. The execution, delivery and
performance of this Agreement and the Transaction Documents by Buyer and/or
Parent do not, and
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the consummation of the transactions contemplated hereby and thereby will not,
(a) contravene any provision of the Articles of Incorporation or Bylaws of Buyer
or the Certificate of Incorporation or Bylaws of Parent; or (b) violate,
conflict with, result in a breach of, or constitute a default (or an event which
would with the passage of time or the giving of notice, or both, constitute a
default) under, or result in or permit the termination, modification,
acceleration, or cancellation of (i) any indenture, mortgage, loan or credit
agreement, license, instrument, lease, contract, plan, permit, authorization,
proof of dedication or other agreement or commitment, oral or written, to which
Parent or Buyer is a party, or by which any of their assets or properties may be
bound or affected, except for such violations, conflicts, breaches,
terminations, modifications, accelerations, cancellations, interests or rights
which, individually or in the aggregate do not have a material adverse effect on
their respective ability to perform their obligations under this Agreement and
the Transaction Documents, or (ii) any judgment, injunction, writ, award,
decree, restriction, ruling, or order of any court, arbitrator or Authority or
any applicable constitution, law, ordinance, rule or regulation to which Buyer
or Parent is subject other than those violations and conflicts which
individually or in the aggregate do not have a material adverse effect on their
respective ability to perform their obligations under this Agreement and the
Transaction Documents.
4.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by Buyer and Parent of
this Agreement, the other Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by Buyer or Parent except (i) as
required by the HSR Act, (ii) as specified on Schedule 3.9 and (iii) for such
consents, approvals, authorizations, registrations or filings, the failure to
obtain or make would not individually or in the aggregate have a material
adverse effect on their respective ability to perform their obligations under
this Agreement and the Transaction Documents.
4.5 Financing. Buyer and Parent have, and at the Closing Date, will
have sufficient resources to pay the Purchase Price, and Parent, Buyer or the
other Affiliates of Parent that are buyers of the assets and businesses being
acquired pursuant to the Related Purchase Agreements have, and at the Closing
Date, will have sufficient resources to pay the purchase prices set forth in the
Related Purchase Agreements.
4.6 Brokerage. None of Parent, Buyer or their Affiliates have made
any agreement or taken any other action which might cause any Person to become
entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereunder which could result in liability to the
Seller Parties.
4.7 Insurance. Schedule 4.7 lists the policies and contracts in
effect as of the date hereof for casualty and property insurance covering
Buyer's assets and properties and the operation of Buyer's business, together
with the risks insured against, coverage limits and deductible amounts.
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ARTICLE 5
ADDITIONAL COVENANTS
5.1 Conduct of Business. Except (i) as otherwise specifically
permitted by this Agreement, (ii) as set forth in Schedule 5.1 hereto or (iii)
with the prior written consent of Buyer, from and after the date of this
Agreement and up to and including the Closing Date, each of the Seller Parties
agree that:
5.1.1 Seller shall conduct the Business as presently operated
and only in the ordinary course of business consistent with past practice.
5.1.2 They shall promptly inform Buyer in writing of any
specific event or circumstance of which they are aware, or of which they receive
notice, that has or is likely to have, individually or in the aggregate, taken
together with the other events or circumstances, a Material Adverse Effect on
the Acquired Assets or the Assumed Liabilities.
5.1.3 Seller shall not:
(a) change or modify in any material respect existing
credit and collection policies, procedures and practices with respect to
accounts receivable;
(b) enter into any contract or commitment, waive any
right or enter into any other transaction (except in the ordinary course of
business) which would have a Material Adverse Effect;
(c) except in the event of service interruption,
emergency or casualty loss, commit to acquire subsequent to the Closing Date on
behalf of the Business any capital asset or group of capital assets costing in
excess of $1,000,000 that is not included in the capital budget of Seller for
fiscal year 2000 and which, if so acquired, would be included in the Acquired
Assets; commencing December 1, 1999, accept or receive customer advances for
construction in excess of $9,000,000 (when combined with customer advances
relating to the businesses being acquired by Buyer or Affiliates of Buyer
pursuant to the Related Purchase Agreements) per each of the next four
consecutive three-month periods unless pursuant to an existing tariff, Contract
or Permit of Seller; or sell or lease or agree to sell or lease or otherwise
dispose of any assets included in the Acquired Assets except in the ordinary
course of the conduct of the Business, consistent with past practice;
(d) except in the ordinary course of business,
consistent with past practice or as required under any of Seller's debt
instruments or indentures, mortgage, pledge or subject to any Lien (other than
Permitted Liens) any of the Acquired Assets;
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(e) change any compensation or benefits or grant any
material new compensation or benefits payable to or in respect of any
Transferred Employee except (i) as required by law, and (ii) in the ordinary
course, consistent with past practice; provided, however, no individual Employee
shall in any event receive a compensation increase in excess of seven percent
(7%);
(f) other than in the ordinary course of business
consistent with past practice, sell or otherwise transfer any assets necessary,
or otherwise material to the conduct of, the Business which would constitute
Acquired Assets;
(g) change the Seller's method of accounting or keeping
its books of account or accounting practices with respect to the Business,
except as required by GAAP or any Authority;
(h) intentionally and wilfully take or omit to take any
action which if taken or omitted prior to the date hereof would constitute or
result in a breach of any representations or warranties set forth in Sections
3.1, 3.2, 3.3, 3.4, 3.7, 3.8, 3.10, 3.14, 3.16 and 3.25 hereof (it being
understood that the failure to cure a breach shall not, by itself, be an
intentional and wilful omission to take action); or
(i) prepay, redeem, retire, refund or otherwise
extinguish any of the Assumed Indebtedness.
5.2 Negotiations. Neither Citizens nor any Person controlled by
Citizens or under common control with Citizens (each such person being a
"Section 5.2 Affiliate"), nor any officer, director, employee, representative or
agent of Citizens or any of their Section 5.2 Affiliates, shall, directly or
indirectly, solicit or initiate or participate in any way in discussions or
negotiations with, or provide any information or assistance to, or enter into an
agreement with any Person or group of Persons (other than Parent, Buyer or any
Person controlled by Parent or Buyer or under common control with Parent, Buyer
or any Persons providing financing to the parties hereto in connection with
facilitating the consummation of the transactions contemplated by this
Agreement) concerning any acquisition, merger, consolidation, liquidation,
dissolution, disposition or other transaction (or series of such transactions)
that would result in the transfer to any such Person or group of Persons of ten
percent (10%) of the Acquired Assets (as measured by net book value of such
assets on the date of each such transaction) or the acquisition, merger,
consolidation, liquidation, dissolution, disposition or other transaction (or
series of such transactions) involving the Seller Parties, if such acquisition,
merger, consolidation, liquidation, dissolution, disposition or other
transaction (or series of such transactions) would be inconsistent, in any
respect, with the obligations of the Seller Parties hereunder (any of the
foregoing transactions, a "Competing Transaction").
5.3 Disclosure Schedules. As promptly as practicable, the Seller
Parties will provide Buyer with a supplement or amendment to the Disclosure
Schedules with respect to any
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matter, condition or occurrence which is required to be set forth or described
in the Disclosure Schedules. For the avoidance of doubt, a matter, condition or
occurrence shall only be "required" to be set forth or described in the
Disclosure Schedules if the failure to be so disclosed would result in a breach
of the applicable representation or warranty (qualified by Material Adverse
Effect where applicable) on the date hereof or on the Closing Date. In addition,
Seller shall have the right at any time and from time to time prior to the
Closing to supplement or amend the Disclosure Schedules. Seller may provide
Disclosure Schedules with respect to any representation or warranty of this
Agreement whether or not a specific schedule is referred to therein. In the
event that any supplement or amendment of such Disclosure Schedules shall be
provided later than five (5) business days prior to the Closing Date, the Buyer
shall have the right to delay the Closing for a period of five (5) business days
in order for Buyer to review such supplement or amendment. No such supplement or
amendment shall be deemed to cure any breach of or alter any representation or
warranty made in this Agreement so as to permit the Closing to occur unless
Buyer specifically agrees thereto in writing. The Seller Parties shall promptly
inform Buyer, and Buyer will promptly inform the Seller Parties of any fact or
event which comes to their attention, the existence of which constitutes or
likely will constitute a breach in any material respects of any representation
or warranty in this Agreement. In addition, Parent will, within five (5) days of
receipt thereof, forward to Seller (i) any title report Buyer receives from a
title company with respect to the Real Estate and (ii) any written communication
regarding a specific Lien or title defect affecting a specifically identified
parcel of the Real Estate sent to the President, Treasurer or General Counsel of
Parent or the President or Corporate Counsel of any other Buyer Party, and sent
by a party other than the Seller Parties, their legal counsel, financial
advisors or representatives.
5.4 Mutual Covenants. The parties mutually covenant from the date of
this Agreement to the Closing Date (and subject to the other terms of this
Agreement, including Section 5.8 hereof):
5.4.1 to cooperate with each other in determining whether
filings are required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents;
5.4.2 to use all reasonable efforts to obtain promptly the
satisfaction (but not waiver) of the conditions to the Closing of the
transactions contemplated herein (each party hereto shall furnish to the other
and to the other's counsel all such information as may be reasonably required in
order to effectuate the foregoing action); and
5.4.3 to advise the other parties promptly if such party
determines that any condition precedent to its obligations hereunder will not be
satisfied in a timely manner.
5.5 Filings and Authorizations. The parties hereto will as promptly
as practicable, make or cause to be made all such filings and submissions under
laws, rules and
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regulations applicable to it or its Affiliates as may be required to consummate
the terms of this Agreement, including all notifications and information to be
filed or supplied pursuant to the HSR Act and with the applicable public utility
commission (each, a "PUC"). Any such filings and supplemental information will
be in substantial compliance with the requirements of the applicable law, rule
or regulation. Each of Parent and Buyer, on the one hand, and the Seller
Parties, on the other, shall furnish to the other such necessary information and
reasonable assistance as the other may request in connection with its
preparation of any filing or submission to the PUC or which is necessary under
the HSR Act. The Seller Parties, on the one hand and Buyer and Parent, on the
other, shall keep each other apprised of the status of any communications with,
and inquiries or requests for additional information from, any Authority,
including the PUC, the United States Federal Trade Commission ("FTC") and the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division"), and shall comply promptly with any such inquiry or request. Each of
Citizens, Seller, Parent and Buyer will use its reasonable efforts to obtain any
clearance required under the HSR Act and from the PUC for the purchase and sale
of the Acquired Assets in accordance with the terms and conditions hereof.
Notwithstanding the foregoing, nothing contained in this Agreement will require
or obligate any party or their respective Affiliates: (i) to initiate, pursue or
defend any litigation (or threatened litigation) to which any Authority
(including the PUC, the Antitrust Division and the FTC) is a party; (ii) to
agree or otherwise become subject to any material limitations on (A) the right
of Buyer or its Affiliates effectively to control or operate the Business or the
right of Seller or its Affiliates effectively to control or operate Citizens'
other businesses, (B) the right of Buyer or its Affiliates to acquire or hold
the Business or the right of Seller or its Affiliates to hold the Excluded
Assets or Citizens' other businesses, or (C) the right of Buyer to exercise full
rights of ownership of the Business or all or any material portion of the
Acquired Assets or the right of Citizens to exercise full rights of ownership of
Citizens' other businesses or all or any material portion of the Excluded
Assets; or (iii) to agree or otherwise be required to sell or otherwise dispose
of, hold separate (through the establishment of a trust or otherwise), or divest
itself of all or any portion of the business, assets or operations of Citizens,
Seller, Parent, Buyer, any Affiliate of Buyer or the Business. The parties agree
that no representation, warranty or covenant of Buyer, Parent, or Citizens
contained in this Agreement shall be breached or deemed breached as a result of
the failure by Parent and Buyer on the one hand or the Seller Parties, on the
other, to take any of the actions specified in the preceding sentence.
5.6 Public Announcement. No party hereto shall make or issue, or
cause to be made or issued, any public announcement or written statement
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party (which will not be unreasonably
withheld or delayed), unless counsel to such party advises that such
announcement or statement is required by law (in which case the parties shall
make reasonable efforts to consult with each other prior to such required
announcement).
5.7 Further Assurances. Each of Citizens, Parent, Buyer and Seller,
from time to time after the Closing, at Buyer's or Seller's request, will
execute, acknowledge and deliver to the applicable person such other instruments
of conveyance and transfer and will take such other actions
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Pennsylvania
and execute such other documents, certifications, and further assurances as
Buyer or Seller, as the case may be, may reasonably require in order to
transfer, in accordance with the terms and conditions of this Agreement, more
effectively in Buyer or to put Buyer more fully in possession of any of the
Acquired Assets or better to enable Buyer to complete, perform and discharge any
of the Assumed Liabilities. Each party shall cooperate and deliver such
instruments and take such action as may be reasonably requested by the other
party in order to carry out the provisions and purposes of this Agreement and
the transactions contemplated hereby.
5.8 Cooperation.
5.8.1 Parent, Buyer, Citizens and Seller shall cooperate and
shall cause their respective Affiliates, officers, employees, agents and
representatives to cooperate to ensure the orderly transition of the Business
from Seller to Buyer and to minimize the disruption to the Business resulting
from the transactions contemplated hereby.
5.8.2 Without limiting the foregoing, neither Parent and
Buyer, nor Citizens and Seller (nor any of their respective Affiliates) shall
make any filings pursuant to federal or state securities laws ("Securities
Filings") or make any consent solicitations to holders of Assumed Indebtedness
which include any information about Seller, Buyer (or their respective
Affiliates) or the transactions contemplated hereby without consulting with the
other party and providing the other party a reasonable opportunity to review and
comment on such information, it being understood and agreed that any party may
so disclose such information in its reasonable judgment to the extent such
party's counsel advises it that such disclosure is advisable under applicable
law. Each of Parent, Buyer, Citizens and Seller shall, and shall cause their
respective Affiliates to, comply with all applicable federal and state
securities laws in connection with this Agreement and the transactions
contemplated hereby (including any solicitation of consents of holders of
Assumed Indebtedness), and all information supplied by any party for inclusion
in any Securities Filing or consent solicitation, including, without limitation,
any proxy or information statement, or any registration statement on Form S-4
shall be true and correct in all material respect and shall not contain any
untrue statement of a material fact or omit to state any material fact which is
required to be stated therein or which is necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made.
5.8.3 During the first 90 days after the Closing Date (180
days for Trademarks on tanks), Buyer shall have the right to use all of the
logos, trademarks and trade identification of Seller as are located at the Real
Estate or on the Acquired Assets (collectively, the "Trademarks"). Buyer's use
of the Trademarks shall be in accordance with such reasonable quality control
standards as may be promulgated by Seller and provided to Buyer. If Seller shall
notify Buyer in writing of Buyer's material failure to comply with such
reasonable quality control standards and Buyer continues to not comply with such
reasonable quality control standards for more than 20 days after receipt of such
notice, Seller shall have the right to terminate Buyer's right under this
Section 5.8.3 to use the Trademarks.
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5.8.4 Seller shall give Buyer and its representatives
(including Buyer's Accountants, consultants, counsel and employees), upon
reasonable notice and during normal business hours, full access to the
properties, contracts, employees, books, records and affairs of Seller to the
extent relating to the Business and the Acquired Assets, and shall cause its
officers, employees, agents and representatives to furnish to Buyer all
documents, records and information (and copies thereof), to the extent relating
to the Business and the Acquired Assets, as Buyer may reasonably request. Except
to the extent disclosed in the Disclosure Schedules in accordance with Sections
5.3 and 8.4, no investigation or receipt of information by Buyer pursuant to, or
in connection with, this Agreement, shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Seller Parties under
this Agreement or the conditions to the obligations of Parent or Buyer under
this Agreement. All information provided to Buyer under this Agreement shall be
held subject to the terms and conditions of the Confidentiality Agreement dated
August 2, 1999 between Citizens and Parent.
5.9 Employees; Employee Benefits.
5.9.1 Schedule 5.9.1 lists divisions and the number of all
salaried and hourly employees actively employed (as of the date of this
Agreement) in each division by Seller or any of its Affiliates whose primary
responsibilities relate to the Business. Schedule 5.9.1 lists job
classifications and number of employees in each job classification of those
employees whose terms and conditions of employment are subject to a collective
bargaining agreement ("Union Employees"). All individuals referred to on
Schedule 5.9.1 are herein referred to as the "Employees." No later than March 1,
2000, Buyer and Seller shall determine the number of Employees to whom Buyer
will offer employment, which number shall be at least equal to 250 (when
combined with offers made by Buyer or Affiliates of Buyer to employees of
Affiliates of Seller in connection with the Related Purchase Agreements) (the
"Base Number"), and such additional number of Employees, if any, whom Buyer also
wishes to employ. Upon determination of such Employees, Seller will supplement
Schedule 5.9.1 with the name, job title, unused vacation, current base salary or
hourly wage, date of hire and assigned location of each Transferred Employee (as
that term is defined below). At the Closing, Seller shall provide an updated
Schedule 5.9.1 which shall disclose all the information required under the
preceding sentence as of the most recent practicable date prior to Closing.
5.9.2 Effective as of the Closing, Buyer shall offer
employment to at least the Base Number of those employees included on Schedule
5.9.1. All Employees to whom Buyer offers employment and who accept such
employment are herein referred to as the "Transferred Employees." In the event
any Employees do not accept Buyer's offer of employment, Buyer shall offer
employment to such additional employees (the identity of whom shall be
determined by Buyer and Seller) as are necessary to bring the total number of
Transferred Employees to the Base Number. Subject to the provisions of this
Section 5.9 and Section 5.12, Buyer shall provide each Transferred Employee with
base compensation at least equal to that provided by Seller on the Closing Date,
and employee benefits which are substantially comparable to those provided by
Buyer to its other
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similarly situated employees. Buyer agrees (i) to credit the service of each
Transferred Employee with Seller and its Affiliates before the Closing, for all
purposes under all employee benefit plans and arrangements maintained by Buyer
(and/or any of its Affiliates) for the benefit of any Transferred Employee
(including without limitation for purposes of attainment of retirement dates and
payment of optional forms of benefits), other than for purposes of benefit
accrual under any "defined benefit plan", within the meaning of Section 3(35) of
ERISA, (ii) to provide accrued vacation to Transferred Employees in the year in
which the Closing occurs, equal to the excess, if any, of the accrued vacation
to which the Transferred Employee would otherwise be entitled under Seller's
vacation plan during that year over the amount of accrued vacation the
Transferred Employee had taken during that year, and, thereafter, to provide
vacation to Transferred Employees on the same basis as provided to similarly
situated employees of Buyer, with service credit as provided in (i) hereof,
(iii) to provide severance benefits to Transferred Employees terminated by Buyer
that are substantially comparable to those benefits provided by Buyer to
similarly situated employees, and (iv) to comply with all applicable legal
requirements with respect to Union Employees (including without limitation any
applicable duty to bargain with those employees' bargaining representative).
Buyer shall be responsible for providing to each Transferred Employee vacation
in an amount equal to the Transferred Employee's vacation entitlement for the
year of Closing reduced by the number of vacation days such Transferred Employee
has taken on or before Closing. Nothing in this Section 5.9 shall limit Buyer's
authority to terminate the employment of any Transferred Employee at any time
and for whatever reason. Until the second anniversary of the Closing Date,
neither Seller nor any of its Affiliates shall directly or indirectly solicit or
offer employment to any Transferred Employee then employed by Buyer or its
Affiliates.
5.9.3 Except as specifically provided in Sections 5.9 and
5.12, Seller shall be solely responsible for any liability, claim or expense
(including reasonable attorneys' fees) related to compensation or employee
benefits incurred by Buyer as the result of any claims against Buyer or its
Affiliates that are made by any Employees or Former Employees (or the
Beneficiary of any Employee or Former Employee) who are not made offers to
become employees of Buyer or its Affiliates including, without limitation,
claims asserted against Buyer as a result of their termination by Seller or its
Affiliates.
5.9.4 Seller shall be solely responsible for any liability,
claim or expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation claims or the benefits
provided under the Benefit Plans, whether paid before or after the Closing) owed
to any Transferred Employee or the Beneficiary of any Transferred Employee or
any Water Sector Retiree or the Beneficiary of any Water Sector Retiree that
arises out of or relates to (i) the employment relationship between Seller or
any of its Affiliates and such Transferred Employee or Beneficiary or (ii) any
benefit claim or expense (including medical expenses) incurred before Closing
under any Benefit Plan. For purposes of this Agreement, a medical expense shall
be deemed to be incurred when the services giving rise to a claim are rendered,
regardless of when billed or paid. Without limiting the foregoing, Seller shall
be
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responsible for the payment of any employee benefits that become due to any
Transferred Employees as a result of their termination by Seller.
5.9.5 Except as otherwise specifically provided in Section
5.9, 5.11 or 5.12, Buyer shall be solely responsible for any liability, claim or
expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation, claims or the benefits
provided under any employee benefit plan or arrangement of Buyer incurred after
Closing) owed to any Transferred Employee or Beneficiary of any Transferred
Employee or any Water Sector Retiree or Beneficiary of any Water Sector Retiree
that arises out of or relates to (i) the employment relationship between Buyer
or any of its Affiliates and any Transferred Employee or (ii) any benefit claim
or expense (including medical expense) incurred after Closing under any employee
benefit plan sponsored or contributed to by Buyer or an ERISA Affiliate after
Closing. Notwithstanding the foregoing, Buyer shall not be responsible for the
payment of any employee benefits that become due to any Transferred Employees
under any Benefit Plan (other than the Assumed Benefit Liabilities).
5.9.6 Buyer agrees to reimburse Seller for its proportionate
share (as defined below) of any amount in excess of $1,000,000 paid by Seller as
severance under Citizens' severance plan as in effect on the date hereof to any
Employees (when such amount paid by Seller is aggregated with amounts paid by
Citizens to other employees as referenced in Section 5.9.6 of the Related
Purchase Agreements) provided (i) Buyer does not hire such Employees in
accordance with the provisions of Sections 5.9, 5.11 and 5.12 and (ii) Seller
provides notice to those Employees on or before the Closing Date to the effect
that their employment will be terminated on or shortly after the Closing Date.
Buyer will pay such reimbursement to Citizens within 5 days after receipt of a
list of the Employees showing which are entitled to severance pay, the amounts
of that severance pay and certifying that those amounts have been paid. The
Buyer's "proportionate share" means the amount obtained by multiplying the
amount in excess of $1,000,000 by a fraction, the numerator of which is the
amount of severance paid by Seller to Employees under Section 5.9.6 of this
Agreement and the denominator of which is the sum of (i) the amount paid by
Seller to Employees under Section 5.9.6 of this Agreement and (ii) the aggregate
amount paid by Citizens under Section 5.9.6 of each of the Related Purchase
Agreements.
5.9.7 Until the second anniversary of the Closing Date, Buyer
shall not directly or indirectly solicit or offer employment to any active
employee of Seller, other than the Transferred Employees.
5.10 Employee Pension Plan.
5.10.1 At least fifteen days prior to the Closing Date, Seller
shall take any and all actions necessary to cease benefit accruals and fully
vest all Transferred Employees in their accrued benefits under the Citizens
Pension Plan ("Seller's Pension Plan" or "Citizens Pension
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Plan"). Seller shall retain liability and related assets for benefits accrued
through the Closing Date by Transferred Employees under Seller's Pension Plan.
5.10.2 As of the Closing Date, Transferred Employees shall be
covered under the American Pension Plan, and shall be given credit for service
with Seller and its Affiliates for eligibility, vesting, attainment of
retirement dates, subsidized benefits, and entitlement to optional forms of
payment, but not for accrual of benefits.
5.11 Employee Savings Plan.
5.11.1 Effective upon the date of the transfer described in
Section 5.11.2, subject to the terms and conditions of this Agreement, Parent
shall cause the Savings Plan for Employees of American Water Works Company, Inc.
(the "American Savings Plan") to assume the liability of the Seller's 401(k)
Plan for the account balances of those Transferred Employees participating in
the Seller's 401(k) Plan on the Closing Date (the "Affected Participants") that
are transferred to the American Savings Plan. As of the Closing Date, Affected
Participants shall be 100% vested in their account balances under the Seller's
401(k) Plan. Transferred Employees shall be given credit under the American
Savings Plan for service with Seller and its Affiliates for eligibility,
vesting, attainment of retirement dates, contribution levels and optional forms
of benefit payment, to the same extent that credit for such service has been
given by Seller and its Affiliates.
5.11.2 Buyer shall deliver to Seller as soon as practicable,
but in no event later than ninety (90) days after Closing (i) a certified copy
of the American Savings Plan and any amendment necessary to effectuate the
transfer of assets and the assumption of account balances in accordance with
this Section 5.11, (ii) a certified copy of the trust agreement for the American
Savings Plan; (iii) the most recent favorable determination letter from the IRS
with respect to the American Savings Plan; and (iv) an opinion from Buyer's
legal counsel acceptable to Seller that the American Savings Plan, as so
amended, complies or will comply on a timely basis with the applicable
provisions of the Code relating to the qualification of, and the transfer of
assets and assumption of benefit liabilities by, the American Savings Plan.
Seller shall deliver to Buyer as soon as practicable, but in no event later than
ninety (90) days after Closing, an opinion from Seller's legal counsel
acceptable to Buyer that the Seller's 401(k) Plan complies or will comply on a
timely basis with the applicable provisions of the Code relating to the
qualification of the Seller's 401(k) Plan, and the transfer of assets to, and
assumptions of benefit limitations by, the American Savings Plan. As soon as
practicable, but in any event within 120 days after Closing, Seller shall cause
the trustee of the Seller's 401(k) Plan to transfer in cash and promissory notes
representing outstanding loans to Affected Participants to the trustee of the
American Savings Plan an amount equal to the sum of the account balances of the
Transferred Employees (the "Transferred Accounts") calculated as of the most
recent valuation date under the Seller's 401(k) Plan (which shall, in any event,
be within thirty (30) days of the transfer). Both the Seller Parties and Buyer
will file any IRS Form 5310A that is required with respect to the transfer
contemplated by this Section 5.11 date at least 30 days prior to the transfer.
Upon the transfer described in this Section 5.11, Buyer and the American Savings
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Plan shall be responsible for all benefits attributable to the Transferred
Accounts to which Transferred Employees were entitled under the Seller's 401(k)
Plan as of such date, and Seller and the Seller's 401(k) Plan shall cease to
have any liability, contingent or otherwise, for such benefits.
5.12 Welfare Benefits.
5.12.1 Within sixty (60) days after the Closing, Seller agrees
to transfer to trusts established by Buyer under Section 501(c)(9) of the Code
("Buyer's VEBAs") the amount held under any trust established by Seller under
Section 501(c)(9) of the Code ("Seller's VEBAs") to fund post-retirement health
care and life insurance benefits attributable to the Business, including Former
Employees identified on Schedule 5.12 (the "Water Sector Retirees") and any
"grandfathered" Transferred Employees as set forth on Schedule 5.12. Buyer
agrees to provide post-retirement health care and life insurance benefits to the
Water Sector Retirees and, as applicable, Transferred Employees who become
eligible for such benefits after Closing and further agrees that Buyer's VEBAs
will apply an amount at least equal to the sum of the assets (and earnings
thereon calculated at the rate of return generated by Buyer's VEBAs) transferred
from Seller's VEBAs to provide post-retirement health care and life insurance
benefits for such employees. Upon Closing, Buyer shall be responsible for all
obligations of the Seller Parties to provide post-retirement health care and
life insurance benefits "incurred" (within the meaning of Section 5.9.4) after
the Closing and the Seller Parties shall cease to have any liability, contingent
or otherwise, for such benefits. In consideration of such transfer, Buyer agrees
not to terminate or materially modify those post-retirement health and life
benefit provisions applicable to such grandfathered Transferred Employees and
Water Sector Retirees as such provisions are in effect immediately prior to the
Closing Date.
5.12.2 Buyer shall take all action necessary and appropriate
to ensure that, as of the Closing Date, Buyer provides medical, health, dental,
flexible spending account, accident, life, short-term disability, long-term
disability and other employee welfare benefits (including retiree medical
benefits) to Transferred Employees that, in the case of Non-Union Transferred
Employees and Union Transferred Employees are substantially similar to those
benefits provided by Buyer under its corresponding welfare benefit plans (the
"Buyer's Welfare Plans"). For purposes of determining eligibility to
participate, and entitlement to benefits, in each Buyer Welfare Plan, each
Transferred Employee shall be credited with service, determined under the terms
of the corresponding welfare plans maintained by Seller on the Closing Date
(hereinafter referred to collectively as the "Seller Welfare Plans"). Any
restrictions on coverage for pre-existing conditions, waiting periods, and
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived in Buyer's Welfare Plans for Transferred Employees and retirees of the
Water Sector and their respective Beneficiaries, and Transferred Employees and
retirees of the Water Sector and their respective Beneficiaries shall receive
credit under the Buyer Welfare Plans for co-payments, payments under a
deductible limit made by them, and for out-of-pocket maximums applicable to them
during the plan year of the Seller Welfare Plan in which the Closing Date
occurs. As soon as practicable after the Closing Date, Seller shall deliver to
Buyer a list of the Transferred Employees and retirees of the Water Sector and
their respective Beneficiaries who had credited service under
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a Seller Welfare Plan, together with each such individual's service, copayment,
deductible and out-of-pocket payment amounts under such plan.
5.12.3 Seller shall transfer to Buyer's flexible benefits plan
any balances standing to the credit of Transferred Employees under Seller's
flexible benefits plan as of the Closing Date. Seller shall provide to Buyer
prior to the Closing Date a list of those Transferred Employees that have
participated in the health or dependent care reimbursement accounts of Seller,
together with their elections made prior to the Closing Date with respect to
such Account, and balances standing to their credit as of the Closing Date.
5.13 Taxes. The Seller Parties, on the one hand, and Parent and
Buyer, on the other, shall (a) each provide the other with such assistance as
may reasonably be requested by either of them in connection with the preparation
of any Tax return, any audit or other examination by any taxing authority or any
judicial or administrative proceeding with respect to Taxes; (b) each retain and
provide the other with any records or other information which may be relevant to
such return, audit, examination or proceeding, and (c) each provide the other
with any final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Tax return of
the other for any period (which shall be maintained confidentially). Without
limiting the generality of the foregoing, Parent and Buyer, on the one hand, and
the Seller Parties, on the other, shall retain, until the applicable statutes of
limitations (including all extensions) have expired, copies of all Tax returns,
supporting workpapers, and other books and records or information which may be
relevant to such returns for all Tax periods or portions thereof ending before
or including the Closing Date, and shall not destroy or dispose of such records
or information without first providing the other party with a reasonable
opportunity to review and copy the same.
5.14 Intentionally Omitted.
5.15 Citizens' Guarantees and Surety Instruments. Each of Parent and
Buyer shall use its reasonable efforts to assist Citizens in obtaining full and
complete releases on the guarantees, letters of credit, bonds and other surety
instruments listed on Schedule 5.15. For purposes of this Section 5.15 and
Section 5.16, reasonable efforts: (a) shall include Parent's or Buyer's
assumption of the Assumed Indebtedness, the Contracts and the Permits on the
terms set forth in this Agreement; (b) shall include an obligation on the part
of Parent or Buyer to provide a guarantee, letter of credit, bond or other
required surety instrument at Closing to the extent required by any Contract or
Permit and in general to provide an equivalent surety instrument to be
substituted for any surety instrument provided by Citizens to any beneficiary in
connection with the Business; and (c) shall include the obligation of Buyer
and/or Parent to provide a debt obligation (including obtaining a minimum credit
rating necessary to prevent any change to the tax-exempt status of any of the
Assumed Indebtedness and providing credit enhancements such as bond insurance)
to the issuer of any Bonds relating to the Assumed Indebtedness satisfactory to
such issuer in replacement of and in substitution for Citizens' obligations to
such issuer under the Assumed Indebtedness, all to enable Parent or Buyer to
assume the Assumed Indebtedness.
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5.16 Assumption of Seller Debt.
5.16.1 Each of Buyer and Parent shall use its reasonable
efforts (as defined in Section 5.15) to assist Seller in obtaining all consents
and opinions and taking such other actions as may be required to enable Buyer or
Parent, as the case may be, to assume at the Closing all of Seller's liabilities
and obligations under the Assumed Indebtedness to the extent provided in Section
2.3. If, after using such reasonable efforts, the parties reasonably conclude
that all such required consents and opinions will not be obtained by the date
that the conditions to Closing set forth in the first sentences of Sections
6.1.4 and 6.2.4 are expected to be satisfied, then Citizens, Parent and Buyer
will use their reasonable efforts and take such other actions as may be required
to enable Citizens to assign at the Closing all of Seller's liabilities and
obligations under the Assumed Indebtedness to the extent provided in Section
2.3, including complying with the provisions of Section 5.24 to the extent
applicable to such assignment of the Assumed Indebtedness.
5.16.2 Representations Re: Assumed Indebtedness.
(a) The Seller Parties represent that each of the Bonds
which make up the Assumed Indebtedness is a bond issue which was used to finance
sewage facilities within the meaning of Section 103(b)(4)(E) of the Internal
Revenue Code of 1954 as amended ("1954 Code") or Section 142(a)(5) of the Code,
as the case may be, or facilities for the furnishing of water within the meaning
of Section 103(b)(4)(G) of the 1954 Code or Section 142(a)(4) and Section 142(e)
of the Code, as the case may be, and that the interest of such Bonds was as of
their date of issue, excludable from the gross income of the holders of such
Bonds for federal or state (other than Illinois) income tax purposes pursuant to
such sections of the IRC or the Code. In the case of the facilities for the
furnishing of water (a) the water is or will be made available to members of the
general public (including electric utility, industrial, agricultural, or
commercial users) and (b) either the facility is operated by a governmental unit
or the rates for the furnishing or sale of the water have been established or
approved by a State or political subdivision thereof, by an agency or
instrumentality of the United States, or by a public service or public utility
commission or other similar body of any State or political subdivision thereof.
(b) The Seller Parties represent that they have complied
with all of their duties and obligations under the IDRB Documents, including
their obligations relating to the use of the proceeds of the bonds and the
ownership, operation, use and maintenance of the Assets financed with the
proceeds of the Bonds. Citizens and the other Seller Parties represent that the
representations and warranties of "Company" in the IDRB Documents remain true
and correct, and that they have not taken nor permitted to be taken any action
which would have the effect of subjecting the interest on any of such Bonds to
federal or state (other than Illinois) income taxation, except as otherwise
contemplated or permitted by the IDRB Documents.
(c) The Seller Parties represent that as of Closing all
the proceeds of the Bonds will have been spent in accordance with the IDRB
Documents, the construction of the
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projects to be financed with the Bonds will have been completed, that there are
no reserve funds associated with the Trust Indentures for such Bonds, and that
all of the proceeds of such Bonds were invested in tax-exempt obligations of
state and local governments (except to the extent used to acquire or construct
the facilities financed by such Bonds) and, that therefore, the Seller Parties
do not have any arbitrage profits subject to the rebate requirements of Section
148 of the Code.
(d) The Seller Parties represent that there is and has
been no audit or other examination by any taxing authority relating to the
Bonds.
(e) The Seller Parties further represent the following
with respect to the Bonds:
(1) The Assets financed by the Bonds are sewage facilities or
facilities for the furnishing of water, which means that (a)
the water is or will be made available to members of the
general public (including electric utility, industrial,
agricultural, or commercial users) and (b) either the facility
is operated by a governmental unit or the rates for the
furnishing or sale of the water have been established or
approved by a State or political subdivision thereof, by an
agency or instrumentality of the United States, or by a public
service or public utility commission or other similar body of
any State or political subdivision thereof;
(2) They have not caused or permitted to be caused any reissuance
of the Bonds under Section 1001 of the Code, without first
obtaining a "no adverse effect" opinion of bond counsel;
(3) They have not caused an extension of the maturity of such
Bonds without first obtaining a "no adverse effect" opinion of
bond counsel;
(4) They have not taken or caused to be taken any action that
would cause the Bonds to be arbitrage bonds under Section 148
of the Code, including, but not limited to, the failure to
rebate arbitrage profits, if any, as required by Section
148(f) of the Code;
(5) They have not taken any action that would cause the Bonds not
to be registered in accordance with Section 149(a) of the
Code; and
(6) They have not permitted the Bonds to become directly or
indirectly "federally guaranteed" under Section 149 of the
Code.
5.16.3 Covenants of Parent and Buyer. Parent and Buyer
covenant and agree, so long as any Assumed IDRB Indebtedness is outstanding, to
cause the Assets that were acquired,
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constructed, improved or equipped with the proceeds of such Assumed IDRB
Indebtedness to be used as sewage facilities within the meaning of Section
103(b)(4)(E) of the 1954 Code or Section 142(a)(5) of the Code, as the case may
be, and facilities for the furnishing of water within the meaning of Section
103(b)(4)(G) of the 1954 Code or 142(a)(4) and Section 142(e) of the Code, as
the case may be, which means in the case of the facilities for the furnishing of
water that (a) the water is or will be made available to members of the general
public (including electric utility, industrial, agricultural, or commercial
users) and (b) either the facility is operated by a governmental unit or the
rates for the furnishing or sale of the water have been established or approved
by a State or political subdivision thereof, by an agency or instrumentality of
the United States, or by a public service or public utility commission or other
similar body of any State or political subdivision thereof. Each of Parent and
Buyer further covenants and agrees, so long as any Assumed IDRB Indebtedness is
outstanding, the following:
(a) It will not cause or permit to be caused any
reissuance under Section 1001 of the Code without first obtaining a "no adverse
effect" opinion of bond counsel;
(b) It will not cause an extension of the maturity of
the Bonds without first obtaining a "no adverse effect" opinion of bond counsel;
(c) It will not take or cause to be taken any action
that would cause the Bonds to be arbitrage bonds under Section 148 of the Code,
including, but not limited to, the failure to rebate arbitrage profits, if any,
as required by Section 148(f) of the Code;
(d) It will not take any action that would cause the
Bonds not to be registered in accordance with Section 149(a) of the Code;
(e) It will not permit the Bonds to become directly or
indirectly "federally guaranteed" under Section 149 of the Code; and
(f) It will comply with each representation, warranty,
covenant or other agreement or obligation set out by the IDRB Documents as in
effect on the date of execution of this Agreement.
5.17 Schedule of Permits. No later than March 13, 2000, Citizens
shall deliver to Buyer a schedule, to be identified as Schedule 5.17, which sets
forth all material Permits required for the use of the Acquired Assets and the
operation of the Business by Buyer substantially in the manner as it was
conducted prior to the date hereof. For purposes of this Section 5.17, material
Permits shall include those required for the service of all utility customers at
substantially the same service levels as provided by Seller on the date of this
Agreement. All Permits listed on Schedule 5.17 that are required to be listed on
Schedule 3.3 or Schedule 3.9 shall be so designated. Seller has made or will
make prior to the Closing Date timely applications for renewals of all such
Permits
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listed on Schedule 5.17, which under applicable law must be filed prior to the
Closing Date to maintain the Permits listed on Schedule 5.17 in full force and
effect.
5.18 Title Information. No later than March 13, 2000, Seller shall
use its reasonable efforts to deliver to Buyer true, correct and complete copies
of all existing title policies, surveys, leases, deeds, instruments and
agreements relating to title to the Real Estate in Seller's possession.
5.19 Transaction with Related Parties. Effective as of the Closing
Date, except as otherwise provided in Sections 5.9 through 5.12, 5.15, 5.24,
5.26, 5.27 and 2.7.1(j) of this Agreement, Seller shall have terminated and
canceled all contracts, commitments and agreements (including employment
relationships) relating to the Acquired Assets or the Business, between Seller,
any Affiliate of Seller (including Citizens), any officer or director of any
Seller Party, or any Affiliate of the foregoing. Seller shall be solely liable
for any contractual or other claims, express or implied arising out of the
termination and cancellation of any of the foregoing raised by any party
thereto.
5.20 Approval by Citizens. Citizens shall, as the sole owner of
common stock of each other Seller Party, vote all of such shares of common stock
to approve this Agreement and the transactions contemplated hereby.
5.21 Supplemental Information.
5.21.1 Citizens shall provide Buyer, within fifteen (15) days
after the execution or the date of receipt thereof, a copy of (a) each Contract
(other than with respect to which the Business' total annual liability or
expense is less than $100,000 per such Contract) entered into by Seller after
the date hereof and prior to the Closing Date; (b) a copy of any written notice
for assessments for public improvements against the Real Estate received after
the date hereof and prior to the Closing Date; (c) a copy of the filing of any
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any of the Real Estate received after the date hereof but
prior to the Closing Date; and (d) a copy of any Contract where Seller is a
lessee relating to the use or occupancy of the Real Estate and where such
Contract involves annual payments in excess of $100,000 entered into by Seller
after the date hereof and prior to the Closing Date.
5.21.2 Within fifteen (15) days after the receipt of notice of
violation, Citizens shall notify Buyer of any violations of state or federal
drinking water standards which, if such violations existed on the date hereof,
would be required to be disclosed pursuant to Section 3.8.10 hereof, and shall
promptly notify Buyer of the actions proposed to be taken by Seller to correct
or otherwise respond to such violations.
5.22 Non-Competition. The Seller Parties agree that for a period of
fifteen (15) years after the Closing Date no Seller Party nor any Affiliate of a
Seller Party shall directly or indirectly own, manage, operate, control or
participate in the ownership, management, operation or
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control of or be otherwise connected in any substantial manner with any entity
(other than Buyer and its successors and assigns) engaged in the business of
storing, supplying and distributing water in the States in which Buyer acquires
any Acquired Assets, whether or not such business is subject to regulation by a
PUC (it being understood that the individual directors of Seller and Citizens
are not Affiliates of a Seller Party).
5.23 Intentionally Omitted.
5.24 IDRB Obligations.
(a) Buyer's IDRB Obligations. Each party acknowledges that (x)
Citizens is and after the Closing Date shall continue to be and shall remain the
primary obligor with respect to the Retained IDRB Indebtedness outstanding
immediately after the Closing Date to the same extent as though no sale of the
Acquired Assets had been made and that Parent and Buyer shall have no payment
obligations with respect to such Retained IDRB Indebtedness and (y) the IDRB
Documents require Citizens not to take or permit to be taken any action which
would have the effect, directly or indirectly, of subjecting the interest on any
of the Bonds to federal or state (other than Illinois) income taxation.
Accordingly, Parent and Buyer covenant and agree (i) at Closing to execute and
deliver to Citizens an agreement substantially in the form attached hereto as
Exhibit D, with respect to each issuer of Bonds relating to Retained IDRB
Documents that will be outstanding after the Closing Date, and (ii) so long as
any such Bonds are outstanding, to cause the Acquired Assets that were acquired,
constructed, improved or equipped with the proceeds of such Bonds to be used as
facilities for the furnishing of water (that is, (a) the water is or will be
made available to members of the general public (including electric utility,
industrial, agricultural, or commercial users) and (b) either the facility is
operated by a governmental unit or the rates for the furnishing or sale of the
water have been established or approved by a State or political subdivision
thereof, by an agency or instrumentality of the United States, or by a public
service or public utility commission or other similar body of any State or
political subdivision thereof) or sewage facilities within the meaning of
Section 103(b)(4)(E) of the 1954 Code, or Section 142(a)(5) of the Code as the
case may be.
(b) IDRB Construction Funds. Citizens hereby represents that
there will be no construction funds or unspent bond proceeds available after the
Closing Date that are held by the trustees of the Bonds relating to the Retained
IDRB Indebtedness.
(c) Consents and Opinions. The parties shall use their
respective best commercially reasonable efforts to obtain all consents and legal
opinions as may be required under the Retained IDRB Documents to enable Seller
to retain all Retained IDRB Indebtedness and to sell the Acquired Assets to
Buyer.
5.25 Cooperation with Respect to Like-Kind Exchange. Buyer agrees
that Seller may, at Seller's written election delivered to Buyer no later than
five (5) days prior to the Closing
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Date, direct that all or a portion of the Initial Cash Payment be delivered to a
"qualified intermediary" as defined in Treasury Regulation ss.1.1031(k) - (g)(4)
as to enable Seller's relinquishment of the Acquired Assets to qualify as part
of a like-kind exchange of property covered by Section 1031 of the Code. If
Seller so elects, Buyer shall reasonably cooperate with Seller (but without
being required to incur any out-of-pocket costs in the course thereof) in
connection with Seller's efforts to effect such like-kind exchange, which
cooperation shall include, without limitation, taking such actions as Seller
reasonably requests in order to enable Seller to qualify such transfer as part
of a like-kind exchange of property covered by Section 1031 of the Code
(including any actions reasonably required to facilitate the use of a "qualified
intermediary"), and Buyer agrees that Seller may assign all or part of its
rights (but no obligations) under this Agreement to a person or entity acting as
a qualified intermediary to qualify the transfer of the Assets as part of a
like-kind exchange of property covered by Section 1031 of the Code. Buyer and
Seller agree in good faith to use reasonable efforts to coordinate the
transactions contemplated by this Agreement with any other transactions engaged
in by either Buyer or Seller; provided that such efforts shall, in no event,
result in any delay in the consummation of the transactions contemplated by this
Agreement. Seller shall indemnify and hold Buyer harmless from any cost, expense
or liability arising from its cooperating under this Section 5.25.
5.26 Transition Plan. Within 30 days after the execution date of
this Agreement, the parties jointly shall establish a transitional services
team, which shall include expertise from various functional specialties
associated with or involved in providing billing, payroll and other support
services provided to Seller by any automated or manual process using facilities
or employees that are not included among the Acquired Assets or Transferred
Employees. Such team will be responsible for preparing, 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 Closing and any other transfer of control matters that any party
reasonably believes should be addressed in such transition plan. The transition
plan will set forth reasonable arrangements providing Buyer, at Buyer's sole
expense, with appropriate access to Seller's relevant computer systems to allow
for a full conversion of the relevant data and functionality to Buyer's systems
on the Closing Date. Buyer and Seller shall use their commercially reasonable
efforts to cause their representatives on such transition team to cooperate in
good faith and take all reasonable steps necessary to develop a mutually
acceptable transition plan no later than 60 days prior to the Closing Date.
5.27 Procedures regarding Refunds of Advances. Within 30 days after
the execution date of this Agreement, the parties jointly shall establish a
working group of appropriate subject matter experts to determine the appropriate
obligations of Parent and Buyer regarding notification and the provision of
other accurate and timely data to Citizens to enable Citizens timely and
accurately to satisfy the refund obligations described in Section 2.3.3(b). Such
working group will be responsible for preparing a comprehensive agreement no
later than March 13, 2000, which agreement shall be executed by the parties at
Closing. Among other arrangements, the parties would require that the customers
and developers owed refunds provide joint notices to Buyer and Citizens.
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5.28 Title Insurance. Prior to Closing, Seller shall cooperate with
Buyer and use commercially reasonable efforts to assist Buyer if Buyer desires
to obtain ALTA title insurance commitments (collectively, the "Title
Commitments," and each a "Title Commitment"), in final form, from one or more
title insurance companies (collectively, the "Title Company"), committing the
Title Company (subject only to the satisfaction of any industry standard
requirements contained in the Title Commitment) to issuing ALTA (or its local
equivalent) form of title insurance policies insuring good, valid, indefeasible
fee simple title to the Real Estate in Buyer, in all cases, at Buyer's sole
expense and in the respective amounts that Buyer requests prior to Closing,
subject to no Liens or other exceptions to title other than Permitted Exceptions
(collectively the "Title Policies"). On or prior to the Closing Date, Seller
shall execute and deliver, or cause to be executed and delivered, to the Title
Company, at no cost to Seller, any customary affidavits, standard gap
indemnities and similar documents reasonably requested by the Title Company in
connection with the issuance of the Title Commitments or the Title Policies;
provided that such efforts and Buyers' request for Title Policies or Title
Commitments shall, in no event, result in any delay in the consummation of the
transactions contemplated by this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT; TERMINATION
6.1 Conditions Precedent to Obligations of Buyer and Parent. The
obligations of Buyer and Parent to cause the purchase of the Acquired Assets and
the assumption of the Assumed Liabilities and to consummate the other
transactions contemplated hereby are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions (any one or more of which
may be waived in writing in whole or in part by Buyer and Parent in their sole
discretion):
6.1.1 Performance of Agreements; Representations and
Warranties. Seller shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by them at or prior to the Closing; and the representations and
warranties set forth in this Agreement made by Seller shall be true and correct
on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date,
except for representations and warranties that speak as of a specific date or
time other than the Closing Date (which need only be true and correct as of such
date or time), other than, in all such cases (except Section 3.25), such
failures to be true and/or correct as would not in the aggregate reasonably be
expected to have a Material Adverse Effect; provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso); and provided further, that
the representation and
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warranty set forth in Section 3.5.1 shall be deemed to be true and correct on
and as of the Closing Date if any Material Adverse Effect that may have arisen
or occurred between the execution date of this Agreement and the Closing Date
shall have been cured or remedied such that such Material Adverse Effect is not
continuing as of the Closing Date. Buyer shall have been furnished with a
certificate of the Chief Financial Officer or other Vice President of Citizens
dated the Closing Date, certifying to the foregoing.
6.1.2 Opinion of Counsel. Buyer shall have received from L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, Vice President and General Counsel of Seller, an opinion
dated the Closing Date, in form and substance satisfactory to Buyer, to the
effect set forth in Exhibit E hereto.
6.1.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.1.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby, and such order
shall not contain any restrictions or conditions (other than those in effect on
the date hereof or requiring that the regulatory treatment with respect to the
Business in existence as of the date of this Agreement applicable to Seller be
continued following the transactions contemplated hereby) which would have a
Material Adverse Effect or a material adverse effect on any other regulated
business of Buyer in the state in which the PUC has jurisdiction, and such order
shall be final and unappealable; Seller shall have obtained all statutory,
regulatory and other consents and approvals which are required in order to
consummate the transactions contemplated hereby and to permit Buyer to conduct
the Business in the manner contemplated by Section 3.25 hereof other than those
the failure of which to obtain would not have a Material Adverse Effect. Seller
shall have also obtained (i) all consents and legal opinions required to enable
Parent or Buyer to assume (or for Citizens to assign to Parent or Buyer) the
Assumed Indebtedness (without any change in the tax-exempt status of such
Assumed Indebtedness and without any event of taxability relating to the matters
set forth in Sections 7.4.1(a)(D) and 7.4.1(b)(F)) and all other consents and
legal opinions required to enable Seller to sell the Acquired Assets to Buyer at
the Closing (without any change in the tax-exempt status of such Assumed
Indebtedness and without any event of taxability relating to the matters set
forth in Sections 7.4.1(a)(D) and 7.4.1(b)(F)), free and clear of all Liens
other than Permitted Exceptions (and specifically free and clear of any Lien
arising under or pursuant to the Mortgage Indenture) and (ii) all consents
required under Contracts and Permits relating to Seller's water appropriation
and flowage rights to the extent reasonably sufficient to enable Buyer to
service the customers of the Business and to service future commitments under
such Contracts.
6.1.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Buyer's ownership of all or any material portion
of the Acquired Assets, nor (ii) shall there be pending or threatened any
litigation,
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suit, action or proceeding by any party which would reasonably be expected to
materially limit or materially adversely affect Buyer's ownership of the
Acquired Assets.
6.1.6 Documents. Seller and Citizens shall have delivered all
of the certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 2.7 hereof 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.
6.1.7 Related Closings. Buyer shall be reasonably satisfied
that the consummation of each of the asset purchase and sale transactions
contemplated by those certain purchase agreements described on Schedule 6.1.7
(the "Related Purchase Agreements") will occur concurrently with the Closing.
6.2 Conditions Precedent to Obligations of Seller Parties. The
obligations of the Seller Parties to cause the sale of the Acquired Assets and
to consummate the other transactions contemplated hereby are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions (any one or more of which may be waived in writing in whole or in
part by the Seller Parties in their sole discretion):
6.2.1 Performance of Agreements; Representations and
Warranties. Parent and Buyer shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them at or prior to the Closing; and the
representations and warranties set forth in this Agreement made by Buyer and
Parent shall be true and correct on and as of the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date, except for representations and warranties that speak
as of a specific date or time other than the Closing Date (which need only be
true and correct as of such date or time), other than, in all such cases (except
Section 4.2), such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a material adverse effect on the
respective ability of Buyer and Parent to perform their obligations under this
Agreement and the Transaction Documents, provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso). Seller shall have been
furnished with a certificate of the President or Vice President of Parent and
Buyer, dated the Closing Date, certifying to the foregoing.
6.2.2 Opinion of Counsel. Seller shall have received from
Dechert Price & ▇▇▇▇▇▇, counsel to Parent and Buyer, an opinion dated the
Closing Date, in form and substance satisfactory to Seller, to the effect set
forth in Exhibit F hereto.
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6.2.3 HSR Act. The applicable waiting period under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.2.4 Required PUC and Other Consents. The PUC shall have
issued an order approving the transactions contemplated hereby and such order
shall not contain any restrictions or conditions which would have a material
adverse effect on Seller's business activities in the State in which the PUC has
jurisdiction or any significant adverse effect on Citizens' acquisition and
divestiture activities in that State (including divestiture of the Acquired
Assets), and such order shall be final and unappealable; Seller shall have
obtained all statutory and regulatory consents and approvals which are required
in order to consummate the transactions contemplated hereby, other than those
the failure of which to obtain would not have a material adverse effect on the
Seller after the Closing. Seller shall have obtained (i) all consents and legal
opinions required to enable Parent or Buyer to assume (or Citizens to assign to
Parent or Buyer) the Assumed Indebtedness without any change in the tax-exempt
status thereof and without any event of taxability relating to the matters set
forth in Sections 7.4.1(a)(D) and 7.4.1(b)(F), (ii) all consents and legal
opinions required under the Retained IDRB Documents to enable Seller to retain
the Retained IDRB Indebtedness until maturity and to sell the Acquired Assets to
Buyer at the Closing (in each case without any change in the tax-exempt status
of the Assumed Indebtedness or the Retained IDRB Indebtedness and without any
event of taxability relating to the matters set forth in Sections 7.4.1(a)(D)
and 7.4.1(b)(F)), free and clear of all Liens other than Permitted Exceptions
(and specifically free and clear of any Lien arising under or pursuant to the
Mortgage Indenture), and (iii) all other consents required or advisable in order
for Seller to transfer Acquired Assets without incurring material liability
under any Contract, Permit or Real Estate instrument.
6.2.5 Injunction; Litigation. (i) No statute, rule, regulation
or order of any court or Authority shall be in effect which restrains or
prohibits the transactions contemplated by this Agreement or which would limit
or materially adversely affect Seller's ownership of all or any material portion
of its properties, nor (ii) shall there be pending or threatened any litigation,
suit, action or proceeding by any party which could reasonably be expected to
materially limit or materially adversely affect Seller's ownership of any of its
properties.
6.2.6 Documents. Parent and Buyer shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Sections 2.7, 5.24 and 5.27,
and shall have taken such actions as Seller may have requested pursuant to
Section 5.25 hereof.
6.2.7 Related Closings. Seller shall be reasonably satisfied
that the consummation of each of the Related Purchase Agreements will occur
concurrently with Closing.
6.3 Termination. This Agreement may be terminated at anytime prior
to the Closing Date:
6.3.1 by mutual written consent of the Seller Parties, Buyer
and Parent;
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6.3.2 by any of the Seller Parties, Parent or Buyer if: (i)
any governmental or regulatory body the consent of which is a condition to the
obligations of the Seller Parties, Parent and Buyer to consummate the
transactions contemplated hereby shall have determined not to grant its consent
and all appeals of such determination shall have been taken and have been
unsuccessful; (ii) any court of competent jurisdiction shall have issued an
order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have become final and
nonappealable; or (iii) the Closing shall not have occurred on or before March
31, 2001; provided, however, that the right to terminate this Agreement under
this Section 6.3.2(iii) will not be available to any party that is in material
breach of its representations, warranties, covenants or agreements contained
herein; and provided, further, that if Closing has not occurred by such date
because the conditions precedent to Closing set forth in the first sentence of
Section 6.1.4 and the first sentence of Section 6.2.4 have not been fulfilled,
then such date shall be automatically extended to September 30, 2001; or
6.3.3 If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 6.3, this
Agreement shall become void and of no further force and effect, except for the
provisions of Section 5.6 relating to publicity, Sections 3.24 and 4.6 relating
to brokerage and Section 7.1 relating to expenses. Nothing in this Section 6.3
shall be deemed to release either party from any liability for any willful
breach by such party of the terms and provisions of this Agreement.
ARTICLE 7
CERTAIN ADDITIONAL COVENANTS
7.1 Certain Taxes and Expenses. Citizens shall be solely responsible
for all state and local sales, use, transfer, real property transfer and other
similar taxes, fees and charges that are calculated based on the value of the
Acquired Assets being transferred arising from and with respect to the sale and
purchase of the Acquired Assets and Buyer shall be solely responsible for all
transfer, registration, documentary stamp, recording and other similar fees and
charges arising from and with respect to the transfer and recording of title
documentation relating to the Acquired Assets. Parent shall be responsible for
all costs and expenses relating to the assumption by or assignment to Parent or
Buyer of the Assumed Indebtedness. Except as otherwise provided in this
Agreement, each of the parties hereto shall each bear its respective accounting,
legal and other expenses incurred in connection with the transactions
contemplated by this Agreement.
7.2 Maintenance of Books and Records. The Seller Parties, on the one
hand, and Buyer and Parent, on the other hand, shall cooperate fully with each
other after the Closing so that (subject to any limitations that are reasonably
required to preserve any applicable attorney-client privilege) each party has
access to the business records, contracts and other information existing at the
Closing Date and relating in any manner to the Acquired Assets or the Assumed
Liabilities or
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the conduct of the Business (whether in the possession of the Seller Parties or
Buyer or Parent). No files, books or records existing at the Closing Date and
relating in any manner to the Acquired Assets or the conduct of the Business
shall be destroyed by any party for a period of six years after the Closing Date
without giving the other party at least 30 days prior written notice, during
which time such other party shall have the right (subject to the provisions
hereof) to examine and to remove any such files, books and records prior to
their destruction. The access to files, books and records contemplated by this
Section 7.2 shall be during normal business hours and upon not less than two (2)
business days prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the party entitled to claim the same.
7.3 Survival.
7.3.1 Subject to this Section 7.3, Section 7.4.2(g) and
Section 7.4.2(j), all representations, warranties, covenants and agreements
contained in this Agreement or the Transaction Documents shall survive (and not
be affected in any respect by) the Closing, any investigation conducted by any
party hereto and any information which any party may receive. Notwithstanding
the foregoing:
(a) the covenants contained in Sections 5.1, 5.3, 5.4,
5.5, 5.8.2 through 5.8.4 and 5.21 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
(b) the covenants contained in Section 5.2 and the
related indemnity obligations contained in Section 7.4 shall terminate on, and
no action or claim with respect thereto may be brought after, the Closing Date;
(c) the representations and warranties contained in
Sections 3.12 and 3.16 and the related indemnity obligations contained in
Section 7.4 shall terminate on, and no action or claim with respect thereto may
be brought following the expiration of the applicable statute of limitations (or
extensions or waivers thereof);
(d) the representations and warranties contained in
Section 3.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(e) the representations and warranties contained in
Section 3.10 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
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(f) the representations and warranties contained in
Section 3.7 and 3.17 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(g) the representations and warranties contained in
Sections 3.3, 3.5, 3.6, 3.8, 3.9 and 3.25 and the related indemnity obligations
contained in Section 7.4 shall terminate on, and no action or claim with respect
thereto may be brought after, the third anniversary of the Closing Date;
(h) the representations and warranties contained in
Section 3.11 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
after, the third anniversary of the Closing Date;
(i) the representations and warranties contained in
Section 4.2 and the related indemnity obligations contained in Section 7.4 shall
survive for an unlimited period of time;
(j) the representations and warranties contained in
Sections 4.3 and 4.4 and the related indemnity obligations contained in Section
7.4 shall terminate on, and no action or claim with respect thereto may be
brought after, the third anniversary of the Closing Date;
(k) the representations and warranties contained in
Section 4.5 and the related indemnity obligations contained in Section 7.4 shall
terminate on, and no action or claim with respect thereto may be brought after,
the Closing Date; and
(l) all other representations and warranties contained
in this Agreement and the related indemnity obligations contained in Section 7.4
shall terminate on and no further action or claim with respect thereto may be
brought after, the second anniversary of the Closing Date;
(m) such representations and warranties specified in the
foregoing clauses (c) through (k), and the covenants contained in Section 5.1,
5.2, 5.3, 5.4, 5.5, 5.8.2 through 5.8.4 and 5.21 and the liability of any party
with respect thereto, shall not terminate with respect to any claim, whether or
not fixed as to liability or liquidated as to amount, with respect to which such
party has been given written notice setting forth the facts upon which the claim
for indemnification is based and, if possible, a reasonable estimate of the
amount of the claims prior to the relevant anniversary of the Closing Date or
the 30th day after the expiration of the applicable statute of limitations (or
extensions or waivers thereof), as the case may be. If any claim for
indemnification is asserted or could be asserted with respect to a breach or
asserted breach of Section 3.17 (Undisclosed Liabilities) and the Buyer or
Parent is also entitled to indemnification in respect of that claim for breach
or asserted breach of any other representation or warranty in this Agreement for
which there is a shorter survival period, such shorter period will apply to such
claim except to the
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extent that such claim is a product liability, toxic tort or similar claim (as
described in Section 2.3.3(a)) brought by a private party litigant.
7.3.2 No claim for indemnity under Section 7.4 shall be
brought or made by Buyer or Parent pursuant to Sections 7.4.1(a)(B) or
7.4.1(a)(C):
(a) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), for any action or claim with respect to the Pre-Existing Conditions;
(b) after the tenth anniversary of the Closing Date (the
seventh anniversary of the Closing Date in the event of a Change of Control of
Citizens), with respect to the presence of Hazardous Substances at any locations
other than the Real Estate; and
(c) after the third anniversary of the Closing Date, for
any action or claim with respect to any other Retained Liability;
Provided, however, that the foregoing time limitations shall not apply to
any such claims which have been the subject of a written notice from Parent
and/or Buyer to the Seller Parties prior to such period setting forth the facts
upon which the claim for indemnification is based and, if possible, a reasonable
estimate of the amount of the claims; and, provided, further, that the foregoing
time limitations shall also not apply to any such claims: (u) with respect to
Taxes; (v) with respect to any liability of the types that appear as "Trade
Payables" or "Other Current and Accrued Liabilities" on the financial statements
of Seller; (w) not exclusively related to the Acquired Assets or not exclusively
related to the Business; and (x) with respect to any of the matters discussed in
Section 3.16 hereof.
For purposes of Sections 7.3.2(a) and (b), a "Change of Control of
Citizens" shall be deemed to have occurred if: (i) any "person" (as such term is
used in Section 13(d) and 14(d) of the Exchange Act of 1934, as amended (the
"Exchange Act"), other than an underwriter engaged in a firm commitment
underwriting on behalf of Citizens, is or becomes the beneficial owner (as such
term is used in Rule 13D-3 and 13D-5 under the Exchange Act, except that for
purposes of this clause (i) a person shall be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding shares of common stock of
the Company; (ii) all or substantially all of Citizens' and its Subsidiaries'
assets are sold, leased, exchanged or otherwise transferred to any person or
group of persons acting in concert; (iii) Citizens is merged or consolidated
with any other person, whether or not Citizens is the surviving corporation in
such merger or consolidation; or (iv) Citizens is liquidated or dissolved or
adopts a plan of liquidation.
7.4 Indemnification. Seller, Parent and Buyer agree as follows:
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7.4.1 General Indemnification Obligations.
(a) Seller shall indemnify Buyer and its directors,
officers and other Affiliates (including Parent) and hold Buyer and such other
parties harmless from and against any and all Damages arising out of or
resulting from (A) any breach of any representation, warranty, covenant or
agreement made by the Seller Parties in this Agreement or in any document or
certificate required to be furnished to Buyer by any of the Seller Parties
pursuant to this Agreement (including the Transaction Documents); (B) subject to
Section 7.3.2, any Excluded Assets or Retained Liabilities; (C) subject to
Section 7.3.2, the ownership, operation or use of any of the businesses or
assets of the Seller Parties or their Affiliates (other than the Business and
the Acquired Assets) whether before, on or after the Closing Date; and (D) an
event of taxability, as such term is customarily used in municipal securities
transactions, relating to the Retained IDRB Indebtedness and arising from the
sale of the Acquired Assets pursuant to this Agreement.
(b) Buyer and Parent shall indemnify Seller, and their
directors, officers and other Affiliates (including Citizens) and hold Seller
and such other parties harmless from and against any and all Damages arising out
of or resulting from (A) any breach of any representation, warranty, covenant or
agreement made by Parent or Buyer in this Agreement or in any document or
certificate required to be furnished to Seller by Parent or Buyer pursuant to
this Agreement (including the Transaction Documents), including the Buyer's IDRB
Obligations; (B) any Assumed Liabilities after the Closing Date, including the
Assumed Indebtedness; (C) the ownership, operation or use of the Business or the
Acquired Assets after the Closing Date (except to the extent resulting from
Retained Liabilities or to the extent resulting from breaches by the Seller
Parties of representations, warranties, covenants or agreements hereunder or in
the other Transaction Documents); (D) any claim by a Transferred Employee or a
Former Employee referred to on Schedule 5.12 or the Beneficiary of any such
employee or former employee for post-retirement health care or life insurance
benefits "incurred" (within the meaning of Section 5.9.4) after the Closing; (E)
any violation by Parent or Buyer, or any assignee, lessee or successor of Parent
or Buyer, of the covenants and agreements as provided by Section 5.16.3 hereof
and Section 5 of Exhibit D hereto; and (F) an event of taxability, as such term
is customarily used in municipal securities transactions, relating to the
Assumed Indebtedness and arising from the sale of the Acquired Assets pursuant
to this Agreement and/or the assignment or assumption of the Assumed
Indebtedness.
(c) For purposes of this Agreement, "Damages" shall mean
any and all losses, liabilities, obligations, damages (including any
governmental penalty or punitive damages assessed or asserted against the party
seeking indemnification and including costs of investigation, clean-up and
remediation), deficiencies, interest, costs and expenses and any claims,
actions, demands, causes of action, judgments, costs and reasonable expenses
(including reasonable attorneys' fees and all other reasonable expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened, incident to the successful enforcement of this Agreement). For
purposes of this Section 7.4, the determination of whether any breach of any
representation, covenant or agreement has occurred, and the calculation of the
amount of Damages
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incurred by the Indemnified Party arising out of or resulting from any breach of
a representation, covenant or agreement by any party hereto, the references to a
"Material Adverse Effect" or materiality (or other correlative terms) shall be
disregarded, provided that no such breach shall be found to have occurred due to
facts or circumstances arising from an occurrence or condition described in
Section 1.1.61(a). Notwithstanding the foregoing, Damages shall not include the
loss of profits of the party seeking indemnification, or punitive damages unless
the party seeking indemnification has had punitive damages assessed or asserted
against it.
(d) Notwithstanding any language contained in any
Transaction Document (including deeds to Real Estate and instruments delivered
by Seller to the Title Company), representations and warranties as to Real
Estate set forth in Section 3.10 and 3.11 will not be merged into any
Transaction Document and the indemnification obligations of Seller, and the
limitations on such obligations, set forth in this Agreement, shall control. No
provision set forth in any Transaction Document shall be deemed to enlarge,
alter or amend the terms or provisions of this Agreement.
7.4.2 General Indemnification Procedures.
(a) A party seeking indemnification pursuant to this
Section 7.4 (an "Indemnified Party") shall give prompt written notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of the
assertion of any claim, the incurrence of any Damages, or the commencement of
any action, suit or proceeding, of which it has knowledge and in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but failure to give such required notice shall relieve the Indemnifying
Party of any liability hereunder only to the extent that the Indemnifying Party
has suffered actual prejudice thereby. The Indemnifying Party shall have the
right, exercisable by written notice to the Indemnified Party after receipt of
notice from the Indemnified Party of the commencement of or assertion of any
claim or action, suit or proceeding by a third party in respect of which
indemnity may be sought hereunder (a "Third Party Claim"), to assume the defense
of such Third Party Claim which involves (and continues to involve) solely
monetary damages; provided, that (A) the Indemnifying Party expressly agrees in
such notice that, as between the Indemnifying Party and the Indemnified Party,
solely the Indemnifying Party shall be obligated to satisfy and discharge the
Third Party Claim, (B) such Third Party Claim does not include a request or
demand for injunctive or other equitable relief by an Authority and (C) the
Indemnifying Party makes reasonably adequate provision to assure the Indemnified
Party of the ability of the Indemnifying Party to satisfy the full amount of any
adverse monetary judgment that is reasonably likely to result. The Indemnifying
Party shall be deemed to have satisfied the condition set forth in clause (C) of
the proceeding sentence if it is a regulated utility.
(b) Neither the Indemnified Party nor the Indemnifying
Party shall settle any Third Party Claim without the prior written consent of
the other, which consent shall not be unreasonably withheld or delayed.
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(c) The Indemnifying Party or the Indemnified Party, as
the case may be, shall have the right to participate in (but not control), at
its own expense, the defense of any Third Party Claim which the other party is
defending as provided in this Agreement.
(d) Amounts paid in respect of indemnification
obligations of the parties shall be treated as an adjustment to the Purchase
Price.
(e) Subject to Section 7.4.2(f) and Section 7.4.2(i),
neither Parent nor Buyer (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages incurred
unless the aggregate amount of Damages incurred by Parent or Buyer (or the other
Persons for which they can claim indemnification), together with all other
claims for Damages under Section 7.4.2(e) of each of the Related Purchase
Agreements, exceeds $6,123,000 in the aggregate (the "Threshold Amount"), in
which case Seller shall then be liable for Damages in excess of the Threshold
Amount. Subject to Section 7.4.2(f) and Section 7.4.2(i), the cumulative
aggregate indemnity obligation of Citizens and its Affiliates under Section 7.4
of this Agreement and the Related Purchase Agreements shall not exceed
$60,000,000 (the "Ceiling").
(f) Notwithstanding the foregoing, the parties
acknowledge that Parent or Buyer (and the other Persons for which they can claim
indemnity hereunder) shall be entitled to indemnification for Damages in respect
of intentional and wilful breaches of covenants or agreements in this Agreement
or any of the Retained Liabilities other than the Specified Liabilities
irrespective of the Threshold Amount or the Ceiling (it being understood that
the failure to cure a breach shall not, by itself, be an intentional and wilful
breach). As used herein, the "Specified Liabilities" shall mean the Retained
Liabilities arising from claims made after the Closing Date which (i) do not
relate to matters within the scope of clauses (u), (v), (w) and (x) of Section
7.3.2; (ii) were not known to the Seller Parties on or prior to Closing; and
(iii) relate exclusively to the Acquired Assets or the Business prior to the
Closing Date. Notwithstanding anything to the contrary in this Section 7.4,
Parent or Buyer (or the other Persons for which they can claim indemnification)
shall be entitled to indemnification for Damages in respect of a breach of
Section 3.2, 3.12 or 3.16 irrespective of the Threshold Amount or the Ceiling.
(g) The rights and remedies of Seller, Parent and Buyer
under this Section 7.4 are exclusive and in lieu of any and all other rights and
remedies which Seller, Parent and Buyer may have under this Agreement or
otherwise for monetary relief with respect to (x) the inaccuracy of any
representation, warranty, certification or other statement made (or deemed made)
by Seller, Parent or Buyer in or pursuant to this Agreement or any of the
Transaction Documents or (y) any breach or failure to perform any covenant or
agreements set forth in this Agreement or any of the Transaction Documents.
(h) Except to the extent provided in Section 7.4.2(j)
below, no right to indemnification under this Section 7.4 shall be limited by
reason of any investigation or audit conducted before or after the Closing of
any party hereto including, without limitation, the
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knowledge of such party of any breach of any representation, warranty, agreement
or covenant by the other party at any time, or the decision by such party to
complete the Closing.
(i) No party shall have any liability to another party
under this Section 7.4 for Damages (and no cost or expense relating to such
Damages shall be included in determining the extent of Damages incurred by such
party for purposes of Section 7.4.2(e)) to the extent that:
(A) the Indemnified Party recovers insurance
proceeds covering the Damages or otherwise recovers payments in respect of such
Damages from any other source (whether in a lump sum or stream of payments); or
(B) the Indemnified Party's Tax liability is
actually reduced as a result of a tax benefit to which the Indemnified Party
becomes entitled in respect of the Damages.
(j) Seller shall have no liability or obligation under
this Section 7.4 for any Damages resulting from the inaccuracy or breach of any
representation or warranty if such inaccuracy or breach is disclosed by Seller
pursuant to and in accordance with Sections 5.3 and 8.4 hereof;
(k) Buyer agrees to use its commercially reasonable
efforts to give timely and effective written notice to the appropriate insurance
carrier(s) of any occurrence or circumstances which, in the judgment of Buyer
consistent with its customary risk management practices, appear likely to give
rise to a claim against Buyer that is likely to involve one or more insurance
policies of Buyer. Any such notice shall be given in good faith by Buyer without
regard to the possibility of indemnification payments by Seller under this
Section 7.4, and shall be processed by Buyer in good faith and in a manner
consistent with its risk management practices involving claims for which no
third party contractual indemnification is available. Buyer agrees that (i) if
it is entitled to receive payment from Seller for Damages arising under or
pursuant to a breach of the representation and warranty set forth in Section
3.10, and (ii) if Buyer has obtained title insurance which may cover the claim
or matter giving rise to such Damages, then (iii) such title insurance shall be
primary coverage and Buyer will make a claim under the title insurance if such
claim can be made in good faith before enforcing its right to receive payment
from Seller. Buyer shall be under no obligation to obtain title insurance or
prosecute such claim (other than the initial filing of such claim).
(l) If at any time subsequent to the receipt by an
Indemnified Party of an indemnity payment hereunder, such Indemnified Party (or
any Affiliate thereof) receives any recovery, settlement or other similar
payment with respect to the Damages for which it received such indemnity payment
(including insurance proceeds and other payments pursuant to Section 7.4.2(i)(A)
and a tax benefit pursuant to Section 7.4.2(i)(B)) (the "Recovery"), such
Indemnified Party shall promptly pay to the Indemnifying Party an amount equal
to the amount of such Recovery,
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less any expense incurred by such Indemnified Party (or its Affiliates) in
connection with such Recovery, but in no event shall any such payment exceed the
amount of such indemnity payment;
(m) In the event of any indemnification claim under this
Section 7.4 involving the claim of any third party, the Indemnified Party shall
cooperate fully (and shall cause its Affiliates to cooperate fully) with the
Indemnifying Party in the defense of any such claim under this Section 7.4.
Without limiting the generality of the foregoing, the Indemnified Party shall
furnish the Indemnifying Party with such documentary or other evidence as is
then in its or any of its Affiliates' possession as may reasonably be requested
by the Indemnifying Party for the purpose of defending against any such claim.
Whether or not the Indemnifying Party chooses to defend or prosecute any claim
involving a third party, all the parties hereto shall cooperate in the defense
or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith.
7.4.3 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.
7.5 UCC Matters. From and after the Closing Date, Seller will
promptly refer all inquiries with respect to ownership of the Acquired Assets or
the Business to Buyer. In addition, Seller will execute such documents and
financing statements as Buyer may reasonably request from time to time to
evidence transfer of the Acquired Assets to Buyer in accordance with this
Agreement, including any necessary assignment of financing statements.
7.6 Financial Statements. In connection with the preparation and
filing of any registration statement or periodic report of Buyer or its
Affiliates pursuant to Rule 3-05, Article 11 of Regulation S-X or other rule or
regulation promulgated under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, Seller, at Buyer's expense, shall
provide Buyer (a) by April 30, 2000 or within 120 days after Buyer's written
request therefor if made after January 1, 2000, with the following audited
financial statements: (i) a statement of net assets of the Business as of the
end of the last fiscal year prior to Closing; and (ii) a statement of income of
the Business and a statement of cash flows or its equivalent of the Business for
the last fiscal year prior to Closing (in each case combined with the businesses
being acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements), including opinions thereon of Seller's Accountants, and (b) within
90 days after Buyer's written request made therefor (provided such request is
made after the end of the fiscal quarter described below), the following
unaudited
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statements: (i) a statement of net assets of the Business as of the end of the
last fiscal quarter prior to Closing (but only if such quarter is subsequent to
the last fiscal year prior to Closing); and (ii) a statement of income of the
Business and a statement of cash flows or its equivalent of the Business, for
the period from the end of the last fiscal year through the end of the last
fiscal quarter prior to Closing (in each case combined with the businesses being
acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements).
7.7 Collection of Receivables. Seller agrees that it shall promptly
(and in any event no later than five (5) Business Days following receipt)
deliver all such payments with respect to accounts receivable from customers of
the Business received on and after the Closing Date (including but not limited
to negotiable instruments tendered in payment of accounts receivable assigned to
Buyer hereunder which shall be duly endorsed by Seller to the order of Buyer) to
Buyer. Seller shall cooperate with Buyer in coordinating the transfer of
collection agents and customers of the Business who pay their bills through the
Automated Clearinghouse (ACH) process to Buyer.
ARTICLE 8
MISCELLANEOUS
8.1 Construction. Parent, Buyer and the Seller Parties have
participated jointly in the negotiation and drafting of this Agreement and the
Transaction Documents. In the event any ambiguity or question of intent or
interpretation arises, this Agreement and the Transaction Documents shall be
construed as if drafted jointly by Parent, Buyer and the Seller Parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" in this Agreement shall mean
including without limitation. Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
genders as the context requires. The terms "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole (including all of the Schedules and Exhibits
hereto) and not to any particular provision of this Agreement, and Article,
Section, paragraph, Exhibit and Schedule references are to the Articles,
Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise
specified. The word "or" shall not be exclusive. Provisions of this Agreement
shall apply, when appropriate, to successive events and transactions. Section
references refer to this Agreement unless otherwise specified.
8.2 Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy, by registered or certified
mail (return receipt requested) with postage and registration or certification
fees thereon prepaid, or by any nationally recognized overnight courier
addressed to the party at its address set forth below:
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If to Parent:
American Water Works Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Buyer:
Pennsylvania-American Water Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Counsel
with a copy to Parent and a copy to:
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Seller:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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with copies to:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that no party
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other party hereto; provided
that Seller may assign its rights or delegate its duties under this Agreement to
a qualified intermediary chosen by Seller to structure the transactions
contemplated hereby as a like-kind exchange of property covered by Section 1031
of the Code.
8.4 Exhibits and Schedules. All Exhibits and Disclosure Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Disclosure of any fact or item
in any Schedule referenced by a particular paragraph or Section in this
Agreement shall, should the existence of the fact or item or its contents be
clearly related to any other paragraph or section, be deemed to be disclosed
with respect to that other paragraph or section.
8.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the conflicts of laws principles thereof.
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8.6 Dispute Resolution. Except as otherwise provided herein, any
dispute, controversy or claim between the parties relating to, arising out of or
in connection with this Agreement (or any subsequent agreements or amendments
thereto), including as to its existence, enforceability, validity,
interpretation, performance or breach or as to indemnification or damages,
including claims in tort, whether arising before or after the termination of
this Agreement (any such dispute, controversy or claim being herein referred to
as a "Dispute") shall be settled without litigation and only by use of the
following alternative dispute resolution procedure:
(a) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Dispute. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties shall not
be admissible in the arbitration described below, or in any lawsuit. Documents
identified in or provided with such communications, which are not prepared for
purposes of the negotiations, are not so exempted and may, if otherwise
admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties
do not resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules, as then amended and in effect, of
the American Arbitration Association (the "Rules"); provided, however, that at
the election of either party, the arbitration shall take place before three (3)
arbitrators, one arbitrator being selected by Parent, one arbitrator being
selected by Citizen, and the third arbitrator, knowledgeable in the general
subject matter of the dispute, controversy or claim, being selected by the other
two arbitrators. Either party may demand such arbitration in accordance with the
procedures set out in the Rules. The parties hereto shall use reasonable efforts
to coordinate any arbitration commenced under this Agreement with any
arbitration on the same or similar issues commenced under any of the Related
Purchase Agreements so that the resolution of the arbitration under this
Agreement and the similar issues under the Related Purchase Agreements can be
resolved as expeditiously and efficiently as reasonably practicable. Reasonable
efforts shall include use of a common arbitrator or panel of arbitrators where
practicable. The arbitration shall take place in Newark, New Jersey. The
arbitration hearing shall be commenced within 60 days of such party's demand for
arbitration. The arbitrator(s) 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(s) 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(s), present testimony and written
evidence and examine witnesses. No party shall be eligible to receive, and the
arbitrator(s) shall not have the authority to award, exemplary or punitive
damages. The
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arbitrator(s) shall rule on the Dispute by issuing a written opinion within 30
days after the close of hearings. The arbitrators' majority decision shall be
binding and final. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator(s); provided, however, that if the arbitrator(s) determines that the
position taken in the Dispute by the non-prevailing party taken as a whole is
unreasonable, the arbitrator(s) may order the non-prevailing party to bear such
fees and expenses, and reimburse the prevailing party for all or such portion of
its reasonable costs and expenses in submitting and presenting its position, as
the arbitrator(s) 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(s) 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 8.6
and (ii) if any party, as party 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 8.6.
8.7 Severability. The parties agree that (a) the provisions of this
Agreement shall be severable in the event that any provision hereof is held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
(b) such invalid, void or otherwise unenforceable provision shall be
automatically replaced by another provision which is as similar as possible in
terms to such invalid, void or otherwise unenforceable provision but which is
valid and enforceable and (c) the remaining provisions shall remain enforceable
to the fullest extent permitted by law.
8.8 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or should be construed to confer upon or give to any Person
other than the parties hereto and their successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
8.9 Entire Agreement. This Agreement, the Schedules and Exhibits
hereto and the other Transaction Documents, and the Confidentiality Agreement
dated August 2, 1999, between Citizens and Parent, (i) together constitute the
entire understanding of the parties (and their affiliates) with respect to the
subject matter hereof, and any related matter, (ii) supercede all prior
agreements or understandings, written or oral, entered into by any of the
parties that concern the subject matter hereof and (iii) are not intended to
confer upon any Person other than the parties hereto any benefit, right or
remedy.
8.10 Amendment and Waiver. The parties may, by mutual agreement,
amend this Agreement in any respect, and any party, as to such party, may (i)
extend the time for the performance of any of the obligations of the other
party; (ii) waive any inaccuracies in
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representations and warranties by the other party; (iii) waive compliance by the
other party with any of the covenants or agreements contained herein and
performance of any obligations by the other party; and (iv) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party providing such
waiver or extension, as the case may be. The waiver by any party hereto of any
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach, whether or not similar.
8.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
8.12 Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
8.13 Definitions. For purposes of this Agreement, references to the
knowledge of the Seller Parties (including a reference to "the best of the
knowledge of the Seller Parties" and similar references) shall mean the actual
knowledge possessed by any of the following officers or employees of Citizens:
Chief Financial Officer, Vice President and Treasurer; President, Citizens
Public Services; Vice President, Corporate Human Resources; Secretary; Vice
President, Water; and the general manager of the Business.
8.14 No Implied Representation. NOTWITHSTANDING ANYTHING CONTAINED
IN THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT NEITHER
OF THE SELLER PARTIES ARE MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT, ANY SCHEDULE
HERETO, THE TRANSACTION DOCUMENTS, OR ANY DOCUMENT, EXHIBIT, CERTIFICATE,
INSTRUMENT OR STATEMENT TO BE DELIVERED HEREUNDER OR THEREUNDER INCLUDING, BUT
NOT LIMITED TO, ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO ANY OF
THE ACQUIRED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IT IS
UNDERSTOOD AND AGREED THAT ANY COST ESTIMATES, PROJECTIONS OR OTHER PREDICTIONS
CONTAINED OR REFERRED TO IN THE SCHEDULES AND ANY COST ESTIMATES, PROJECTIONS OR
PREDICTIONS OR ANY OTHER INFORMATION CONTAINED OR REFERRED TO IN OTHER MATERIALS
THAT HAVE BEEN OR SHALL HEREINAFTER BE PROVIDED TO PARENT, BUYER OR ANY OF THEIR
AFFILIATES, AGENTS OR REPRESENTATIVES ARE NOT AND SHALL NOT BE DEEMED TO BE
REPRESENTATIONS OR WARRANTIES OF ANY OF THE SELLER PARTIES.
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8.15 Construction of Certain Provisions. 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.
8.16 Bulk Sales. Buyer agrees that it shall not make any filings
under any tax bulk sales provisions with respect to the transactions
contemplated by this Agreement.
[Signatures appear on following page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
CITIZENS UTILITIES COMPANY
By:________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer,
Vice President and Treasurer
CITIZENS BUSINESS SERVICES COMPANY
CITIZENS RESOURCES COMPANY
CITIZENS UTILITIES WATER COMPANY OF PENNSYLVANIA
By:________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
AMERICAN WATER WORKS COMPANY, INC.
By:_________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Treasurer
PENNSYLVANIA-AMERICAN WATER COMPANY
By:_________________________________________________
▇. ▇. ▇▇▇▇, President