Exhibit 10.11
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AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT
(KAUAI ELECTRIC)
between
CITIZENS COMMUNICATIONS COMPANY
and
KAUAI ISLAND UTILITY CO-OP
Dated as of March 5, 2002
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.....................................................................................1
Section 1.1 Certain Defined Terms...................................................................1
Section 1.2 Other Defined Terms.....................................................................9
ARTICLE II PURCHASE AND SALE...............................................................................9
Section 2.1 Purchase and Sale of Assets.............................................................9
Section 2.2 Assumed Liabilities.....................................................................9
Section 2.3 Retained Liabilities...................................................................11
Section 2.4 Condition on Assignment or Assumption of Contracts and Rights..........................12
ARTICLE III PURCHASE PRICE.................................................................................12
Section 3.1 Purchase Price.........................................................................12
Section 3.2 Calculation of Purchase Price..........................................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................................................13
Section 4.1 Organization, Existence and Qualification..............................................13
Section 4.2 Authority Relative to this Agreement and Binding Effect................................14
Section 4.3 Governmental Approvals.................................................................14
Section 4.4 Availability of Funds..................................................................14
Section 4.5 Filings................................................................................14
Section 4.6 Brokers................................................................................14
Section 4.7 Independent Investigation..............................................................15
Section 4.8 Public Utility Holding Company Status; Regulation as a Public Utility..................15
Section 4.9 Buyer's Financial Statements. .........................................................15
Section 4.10 Buyer's Insurance......................................................................15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER.......................................................15
Section 5.1 Organization, Existence and Qualification..............................................15
Section 5.2 Authority Relative to this Agreement and Binding Effect................................15
Section 5.3 Governmental and Other Required Consents...............................................16
Section 5.4 Public Utility Holding Company Status; Regulation as a Public Utility..................16
Section 5.5 Title to Assets; Liens.................................................................16
Section 5.6 Financial Statements...................................................................16
Section 5.7 Compliance with Legal Requirements; Governmental Permits...............................17
Section 5.8 Legal Proceedings; Outstanding Orders. ................................................17
Section 5.9 Taxes..................................................................................17
Section 5.10 Intellectual Property..................................................................17
Section 5.11 Personal Property......................................................................18
Section 5.12 Material Contracts; Existing Loan Documents............................................18
Section 5.13 Employee Benefit Matters...............................................................18
Section 5.14 Environmental Matters..................................................................18
Section 5.15 No Material Adverse Change.............................................................19
Section 5.16 State Regulatory Matters...............................................................19
Section 5.17 Brokers................................................................................19
Section 5.18 Disclaimer.............................................................................20
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ARTICLE VI COVENANTS......................................................................................20
Section 6.1 Covenants of Seller....................................................................20
Section 6.2 Covenants of Buyer.....................................................................22
Section 6.3 Governmental Filings...................................................................23
Section 6.4 Citizens Marks.........................................................................24
Section 6.5 Acknowledgment by Buyer................................................................24
Section 6.6 Transition Plan. .....................................................................25
Section 6.7 IDRB Obligations.......................................................................25
ARTICLE VII CONDITIONS PRECEDENT...........................................................................26
Section 7.1 Seller's Conditions Precedent to Closing...............................................26
Section 7.2 Buyer's Conditions Precedent to Closing................................................27
ARTICLE VIII CLOSING......................................................................................29
Section 8.1 Closing................................................................................29
ARTICLE IX TERMINATION..................................................................................30
Section 9.1 Termination Rights.....................................................................30
Section 9.2 Limitation on Right to Terminate; Effect of Termination................................31
ARTICLE X EMPLOYEE MATTERS.............................................................................31
Section 10.1 Employment of Transferred Employees....................................................31
Section 10.2 Assumption of Collective Bargaining Agreement Obligations..............................32
Section 10.3 Cessation of Participation in Seller's Plans; Proration of Bonuses.....................32
Section 10.4 Similarity of Benefit Packages.........................................................32
Section 10.5 Defined Benefit Pension Plan. .........................................................32
Section 10.6 401(k) Plan............................................................................33
Section 10.7 Welfare Benefits.......................................................................33
Section 10.8 Flexible Spending Accounts.............................................................34
Section 10.9 Employment Agreements..................................................................34
Section 10.10 Vacation...............................................................................34
Section 10.11 Severance..............................................................................35
Section 10.12 Plant Closing Notice...................................................................35
ARTICLE XI TAX MATTERS..................................................................................35
Section 11.1 Purchase Price Allocation..............................................................35
Section 11.2 Cooperation with Respect to Like-Kind Exchange.........................................35
Section 11.3 Transaction Taxes......................................................................36
Section 11.4 Taxes Based on Revenues................................................................36
ARTICLE XII ENVIRONMENTAL MATTERS........................................................................37
Section 12.1 Environmental Due Diligence............................................................37
ARTICLE XIII INDEMNIFICATION..............................................................................39
Section 13.1 Indemnification by Seller..............................................................39
Section 13.2 Indemnification by Buyer...............................................................39
Section 13.3 Limitations on Seller's Liability......................................................40
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Section 13.4 Claims Procedure.......................................................................41
Section 13.5 Exclusive Remedy.......................................................................42
Section 13.6 Indemnification for Negligence.........................................................42
Section 13.7 Waiver and Release.....................................................................43
ARTICLE XIV GENERAL PROVISIONS...........................................................................43
Section 14.1 Expenses...............................................................................43
Section 14.2 Notices................................................................................43
Section 14.3 Assignment.............................................................................44
Section 14.4 Successor Bound........................................................................44
Section 14.5 Governing Law..........................................................................45
Section 14.6 Dispute Resolution.....................................................................45
Section 14.7 Cooperation............................................................................46
Section 14.8 Construction of Agreement..............................................................46
Section 14.9 Publicity. ...........................................................................46
Section 14.10 Waiver.................................................................................46
Section 14.11 Parties in Interest....................................................................47
Section 14.12 Section and Paragraph Headings.........................................................47
Section 14.13 Amendment..............................................................................47
Section 14.14 Entire Agreement.......................................................................47
Section 14.15 Counterparts...........................................................................47
Section 14.16 Severability...........................................................................47
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LIST OF EXHIBITS
Exhibit 6.7 Form of IDRB Obligations Agreement
Exhibit 7.1(g) Form of Buyer's Opinion of Counsel
Exhibit 7.2(g) Form of Seller's Opinion of Counsel
Exhibit 8.1(a) Form of ▇▇▇▇ of Sale
LIST OF SCHEDULES
Schedule 1.1(b) Excluded Assets
Schedule 2.2(d) Certain Assumed Proceedings
Schedule 5.2 Seller's Authority
Schedule 5.3 Seller's Governmental and Other Required Consents
Schedule 5.5 Encumbrances; Owned Real Property
Schedule 5.6(a) Financial Statements
Schedule 5.6(b) Certain Liabilities
Schedule 5.7 Compliance with Legal Requirements; Governmental Permits
Schedule 5.8 Legal Proceedings; Outstanding Orders
Schedule 5.9 Taxes
Schedule 5.10 Intellectual Property
Schedule 5.12 Material Contracts
Schedule 5.13 Employee Matters
Schedule 5.14 Environmental Matters
Schedule 5.15 Material Adverse Changes
Schedule 5.16 State Regulatory Matters
Schedule 6.1 Conduct of Business
Schedule 6.2(c) Citizens' Guarantees and Surety Instruments
Schedule 10.1 Active Employees
Schedule 10.7 Retirees and "Grandfathered Employees"
AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT
(KAUAI ELECTRIC)
This AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT (this "Agreement") is
made as of March 5, 2002 (the "Effective Date"), by and between CITIZENS
COMMUNICATIONS COMPANY (f/k/a Citizens Utilities Company), a Delaware
corporation ("Seller"), and Kauai Island Utility Co-Op, a cooperative
association formed pursuant to the provision of Chapter 421C of the Hawaii
Revised Statutes ("Buyer"). Capitalized terms used herein shall have the
meanings ascribed to them in Article I, unless otherwise provided.
W I T N E S S E T H :
WHEREAS, Seller owns all of the Assets;
WHEREAS, Seller and Buyer entered into that certain Purchase and Sale
Agreement (Kauai Electric), dated as of February 11, 2000, for the purchase and
sale of the Assets (the "Original Agreement");
WHEREAS, Seller and Buyer desire to amend and restate the Original
Agreement to give effect to certain agreements reached between the parties
regarding the purchase and sale of the Assets; and
WHEREAS, Buyer desires to purchase, and Seller desires to sell, the Assets,
subject in all respects to the provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Article I
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
"Affiliates" or "Affiliated Entities" -- entities shall be deemed
"Affiliated" as to each other to the extent (i) one of the entities directly or
indirectly controls the other, or the direct or indirect control of one of the
entities is exercised by the officers, directors, stockholders, or partners of
the other entity (whether or not such persons exercise such control in their
capacities as officers, directors, stockholders, or partners) or (ii) is deemed
to be an Affiliate under existing statutes or regulations of the SEC.
"Assets" -- all of the assets, property and interests of every type and
description, real, personal or mixed, tangible and intangible, owned by Seller
and relating primarily to the Business, other than the Excluded Assets.
"Assumed Environmental Liabilities" -- means any of the following:
(a) All Environmental Liabilities of Seller relating to the Business or the
Assets and arising from or relating to the environmental matters or incidents
either disclosed by Seller on Schedule 5.14 as of the Effective Date or
otherwise known to Buyer on or before the Effective Date that remain outstanding
as of the Closing Date, it being understood by the parties that the unadjusted
Purchase Price reflects Buyer's estimate of any Losses that could arise on and
after the Closing Date with respect to such Environmental Liabilities;
(b) All Environmental Liabilities of Seller relating to the Business or the
Assets and arising from or relating to the environmental matters or incidents
either disclosed to Buyer by Seller after the Effective Date (including any
additional disclosures appearing on Schedule 5.14 as revised by Seller and
delivered to Buyer prior to the Closing Date) or otherwise known to Buyer as of
the Closing Date that remain outstanding as of the Closing Date, other than any
such Environmental Liabilities that are properly designated by Buyer as New
Material Environmental Liabilities in accordance with Section 12.1(g) and that
by the Closing Date have not been remedied or responded to by Seller in a manner
reasonably satisfactory to Buyer;
(c) All Environmental Liabilities of Seller relating to the Business or the
Assets that were outstanding or had arisen prior to the Closing Date but with
respect to which Seller had no Knowledge as of the Closing Date; and
(d) Except for the Retained Environmental Liabilities, any other
Environmental Liability of Seller relating to the Business or the Assets, Buyer
or any Affiliate, successor or assign of Buyer, whether arising or relating to
the period before or after the Closing, including with respect to the removal of
asbestos or asbestos-containing materials in connection with any renovation or
structural change to any Asset conducted after Closing.
"Bonds" -- means any of the bonds issued pursuant to the Indentures of
Trust, the proceeds from the issuance of which were advanced to Seller and used
in connection with the Business or the Assets of the Business pursuant to any of
the IDRB Documents.
"Business" -- means collectively:
(a) the regulated electricity generation, transmission and distribution
business conducted by Seller on the island of Kauai, Hawaii through its Kauai
Electric division; and
(b) the provision of related services and products and the engagement in
related activities by Seller on the island of Kauai, Hawaii through its Kauai
Electric division.
"Buyer's IDRB Obligations" - means the obligations of Buyer set forth in
Section 6.7(a) and in the IDRB Obligations Agreement to be executed and
delivered by Buyer on or prior to the Closing Date in accordance with Sections
6.7(a) and 8.1(d).
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"Capital Budget" -- means the capital budget for the Business for fiscal
year 2001 or 2002, as applicable, as adopted by the Board of Directors of Seller
and provided to Buyer prior to the Effective Date or promptly upon adoption
thereof, if later.
"Claim Notice" -- means a written notice of a claim given by a party
seeking indemnification pursuant to the terms of this Agreement that specifies
in reasonable detail the nature of the Losses and the estimated amount of such
Losses.
"Confidentiality Agreement" -- means that certain confidentiality agreement
dated October 15, 1999, between Buyer and Seller.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization from any Person.
"Contract" -- any agreement, contract, document, instrument, obligation,
promise or undertaking (whether written or oral) that is legally binding,
including Easements.
"Easements"-- means all easements, rights of way, permits, licenses, and
other ways of necessity, whether or not of record.
"Encumbrance" -- any charge, adverse claim, lien, mortgage, pledge or
security interest.
"Environmental Law"-- any Order or Legal Requirement, and any judicial and
administrative interpretation thereof and related policies, guidelines and
standards, relating to pollution or protection of the environment and natural
resources, including those relating to (a) emissions, discharges, Releases or
threatened Releases of Hazardous Material into the environment (including
ambient air, surface water, groundwater or land), and (b) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Material, each as in effect as of the date of
determination.
"Environmental Liability" -- means any liability, responsibility or
obligation arising out of or relating to:
(a) the presence of any Hazardous Material in the fixtures, structures,
soils, groundwater, surface water or air on, under or about or emanating from
the assets and properties currently or formerly used, operated, owned, leased,
controlled, possessed, occupied or maintained by a Person, and any such
Hazardous Material emanating to adjoining or other properties;
(b) the use, generation, production, manufacture, treatment, storage,
disposal, Release, threatened Release, discharge, spillage, loss, seepage or
filtration of Hazardous Materials by a Person or its employees, agents or
contractors from, on, under or about the assets or properties currently or
formerly used, operated, owned, leased, controlled, possessed, occupied or
maintained by such Person or the presence therein or thereunder of any
underground or above-ground tanks for the storage of fuel oil, gasoline and/or
other petroleum products or by-products or other Hazardous Material;
(c) the violation or noncompliance or alleged violation or noncompliance by
a Person or its employees, agents or contractors of any Environmental Law
arising from or related to its or their conduct, actions or operations or the
former or current use, operation, ownership, lease, possession, control,
occupancy, maintenance or condition of any of such Person's former or current
assets or properties;
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(d) the failure by a Person or its employees, agents, or contractors to
have obtained or maintained in effect any certificate, permit or authorization
required by any Environmental Law as a result of its or their conduct, actions
or operations or the use, operation, ownership, lease, control, possession,
occupancy, maintenance or condition of such Person's assets or properties;
(e) any and all Proceedings arising out of any of the above-described
matters, including Proceedings by Governmental Bodies for enforcement, cleanup,
removal, treatment, response, remedial or other actions or damages and
Proceedings by any third Person seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief; and
(f) any and all remedial work and other corrective action (including
investigation or monitoring of site conditions, or any clean-up, containment,
restoration or removal) taken by, or the costs of which are imposed upon, a
Person arising from any of the above-described matters.
"ERISA" - the Employee Retirement Income Security Act of 1974, as amended,
or any successor law, and regulations and rules issued pursuant to that act or
any successor law.
"Excluded Assets" -- means the following assets of Seller, each of which
shall be excluded from the Assets, and not acquired by the Buyer, at Closing:
(a) assets that Seller uses in both the Business and in Seller's other gas,
electric or communications businesses, the material items of which are described
on Schedule 1.1(b), and Contracts regarding the procurement of services or goods
by Seller for use in such in other businesses;
(b) cash and cash equivalents in transit, in hand or in bank accounts;
(c) except as otherwise set forth in Article X, assets attributable to or
related to a Benefit Plan of Seller;
(d) the stock record and minute books of Seller, duplicate copies of all
books and records transferred to Buyer, all records prepared in connection with
the sale of the Business (including bids received from third parties and
analysis relating to the Business) and all IDRB Documents;
(e) assets disposed of by Seller after the Effective Date to the extent
such dispositions are not prohibited by this Agreement;
(f) except to the extent set forth in Section 3.4, rights to refunds of
Taxes payable with respect to the Business, assets, properties or operations of
Seller or any member of any affiliated group of which either of them is a
member;
(g) accounts owing, by and among Seller and its Affiliates;
(h) all deferred tax assets or collectibles;
(i) any insurance policy, bond, letter of credit or other similar item, and
any cash surrender value in regard thereto;
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(j) the Citizens Marks; and
(k) the other assets listed on Schedule 1.1(b).
"Existing Loan Documents"-- means all Contracts relating to the
indebtedness for money borrowed by Seller and used in connection with the
Business or the Assets as of the date hereof to which Seller is a party,
including all IDRB Documents, but excluding line extension agreements or similar
arrangements involving customer advances for construction, it being understood
and agreed that customer advances, customer deposits and construction advances
do not create indebtedness for money borrowed.
"Final Order" -- an action by a Governmental Body as to which: (a) no
request for stay of the action is pending, no such stay is in effect and if any
time period is permitted by statute or regulation for filing any request for
such stay, such time period has passed; (b) no petition for rehearing,
reconsideration or application for review of the action is pending and the time
for filing any such petition or application has passed; (c) such Governmental
Body does not have the action under reconsideration on its own motion and the
time in which such reconsideration is permitted has passed; and (d) no appeal to
a court, or a request for stay by a court of the Governmental Body's action is
pending or in effect and the deadline for filing any such appeal or request has
passed.
"Future Regulatory Obligations" -- means all liabilities, responsibilities
and obligations relating to the Assets or the Business, including capital
expenditure obligations and liabilities of the types that appear as "Accrued
Liabilities" and "Non-Current Liabilities" on the Balance Sheet, arising out of
any Legal Requirement or other action of any Governmental Body, including with
respect to all Proceedings of any state regulatory commission relating to the
Assets or the Business commenced before or after the Closing Date, regardless of
whether the Legal Requirement or other action is or purports to be based on
conduct, actions, facts, circumstances or conditions arising, existing or
occurring at any time prior to the Closing Date, but other than relating to any
Retained Environmental Liability.
"GAAP" -- generally accepted United States accounting principles, applied
on a consistent basis.
"Governmental Body" -- any of the following that possesses competent
jurisdiction:
(a) federal, state, county, local, municipal or other governmental body;
(b) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official or entity and any court or
other tribunal); or
(c) any governmental body entitled to exercise any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
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"Hazardous Materials" -- any waste or other chemical, material or substance
that is listed, defined, designated, or classified as, or otherwise determined
to be, hazardous, radioactive, toxic, or a pollutant or a contaminant, or words
of similar import, under or pursuant to any Environmental Law, including any
admixture or solution thereof, and specifically including oil, natural gas,
petroleum and all derivatives thereof or synthetic substitutes therefor,
asbestos or asbestos-containing materials, any flammable substances or
explosives, any radioactive materials, any toxic wastes of substances, urea
formaldehyde foam insulation, toluene or polychlorinated biphenyls.
"HSR Act" -- the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, or any successor law, and regulations and rules issued by the U.S.
Department of Justice or the Federal Trade Commission pursuant to that act or
any successor law.
"IDRB Documents" -- means the Loan Agreements, the Tax Regulatory
Agreements and Tax Representations and Project Certificates listed in Schedule
5.12.
"IDRB Indebtedness" -- means the indebtedness of Seller owing to the
issuers of the Bonds and arising under the Loan Agreements included among the
IDRB Documents. The IDRB Indebtedness is described further in Schedule 5.12 and
in Exhibit 6.7.
"IRC" -- the Internal Revenue Code of 1986, as amended.
"IRS" -- the Internal Revenue Service or any successor agency.
"Knowledge" -- means, with respect to Seller, the actual knowledge of
Seller's Chief Financial Officer; Vice President and Chief Operating Officer,
Citizens Public Services; Vice President and General Manager, Kauai Electric;
Manager of Power Supply, Kauai Electric; and Manager of Transmission and
Distribution, Kauai Electric; or their respective successors holding such
offices or having comparable duties and responsibilities.
"Legal Requirement" -- any federal, state, county, local, municipal,
foreign, international, multinational, or other administrative Order,
constitution, law, ordinance, adopted code, principle of common law, regulation,
rule, directive, approval, notice, tariff, franchise agreement, statute or
treaty.
"Losses" -- shall mean all claims, losses, liabilities, causes of action,
costs and expenses (including, without limitation, involving theories of
negligence or strict liability and including court costs and reasonable
attorneys' fees and disbursements in connection therewith).
"Mandated Capital Expenditures" -- shall have the meaning set forth in
Section 6.1(a)(6) of this Agreement.
"Material Adverse Effect" -- an occurrence or condition that has a material
adverse effect on the operation, financial condition or results of operations of
the Business, taken as a whole. For purposes of this Agreement, an occurrence or
condition shall not constitute a Material Adverse Effect (a) if it arises from
general business, economic or financial market conditions, from conditions
generally affecting the industries in which the Business competes, or from the
transactions contemplated by this Agreement, (b) if it is of the type normally
recoverable by the Business through rates, (c) to the extent that the Business
may realize the benefit of insurance maintained by Seller or to the extent that
Seller or Buyer may receive or recover payments in respect of such occurrence
from any other source (whether in a lump sum or stream of payments), or (d) if
it relates to or results from a threatened or pending condemnation Proceeding by
the County of Kauai.
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"Material Contract" -- a Contract relating primarily to the Business and
involving a total commitment by or to any party thereto of at least $250,000 on
an annual basis and which cannot be terminated by Seller with notice of ninety
(90) days or less without penalty to Seller.
"Order" -- any award, decision, injunction, judgment, order, writ, decree,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, other Governmental Body, or by any arbitrator, each of
which possesses competent jurisdiction.
"Organizational Documents" -- the articles or certificate of incorporation
and the bylaws of a corporation or the comparable organizational and governing
documents of other Persons.
"Permitted Encumbrances" -- means any of the following:
(a) mechanics', carriers', workers' and other similar liens arising in the
ordinary course of business and which in the aggregate are not substantial in
amount and do not interfere with the present use of the Assets to which they
apply;
(b) liens for current Taxes and assessments not yet due and payable;
(c) usual and customary nonmonetary real property Encumbrances, covenants,
imperfections in title, Easements, restrictions and other title matters (whether
or not the same are recorded) that do not and will not materially interfere with
the operation of that portion of the Business currently conducted on such real
property;
(d) Encumbrances securing the payment or performance of any of the Assumed
Liabilities;
(e) all applicable zoning ordinances and land use restrictions;
(f) with respect to any Asset which consists of a leasehold or other
possessory interests in real property, all Encumbrances, covenants,
imperfections in title, Easements, restrictions and other title matters (whether
or not the same are recorded) to which the underlying fee estate in such real
property is subject that do not currently interfere materially with the
operation of that portion of the Business currently conducted on such property;
and
(g) any other Encumbrances, Contracts, obligations, defects or
irregularities of any kind whatsoever, affecting the Assets that, individually
or in the aggregate, are not such as are reasonably likely to have a Material
Adverse Effect or that will be terminated, released or waived on or before the
Closing Date.
"Person" -- any individual, corporation (including any nonprofit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization or Governmental Body.
"Proceeding" -- any claim, action, arbitration, hearing, litigation or suit
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.
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"PUHCA" - the Public Utility Holding Company Act of 1935, as amended, or
any successor law, and regulations and rules issued by the SEC pursuant to that
act or any successor law.
"Real Property" -- all real property owned or leased by Seller in the
operation of the Business, together with all interests in real property
(including Easements) used or held for use by Seller in the operation of the
Business.
"Related Documents" -- any Contract provided for in this Agreement to be
entered into by one or more of the parties hereto in connection with the
transactions contemplated by this Agreement.
"Release" -- any presence, emission, dispersal, disposal, spilling,
leaking, emitting, discharging, depositing, pumping, pouring, escaping,
leaching, dumping, releasing or migration into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials), or in, into or from any
facility, including the movement of any Hazardous Materials through the air,
soil, surface water, groundwater or property.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Retained Environmental Liabilities" -- means (a) any fines or penalties
imposed under applicable Environmental Laws by a Governmental Body as a result
of Seller's failure to report any incident or condition required to be reported
under applicable Environmental Laws, which shall be subject to the
indemnification by Seller under Section 13.1 without regard to the deductible or
limit on liability otherwise applicable to such indemnification under Sections
13.3(c) and (d); and (b) Environmental Liability of Seller that Buyer has
properly designated to be a New Material Environmental Liability in accordance
with Section 12.1(h) and that has not been remedied or responded to by Seller
prior to Closing in a manner reasonably satisfactory to Buyer.
"SEC" -- the United States Securities and Exchange Commission or any
successor agency.
"Tax" -- any tax (including any income tax, capital gains tax, value-added
tax, sales and use tax, franchise tax, payroll tax, withholding tax or property
tax), levy, assessment, tariff, duty (including any customs duty), deficiency,
franchise fee or payment, payroll tax, utility tax, gross receipts tax or other
fee or payment, and any related charge or amount (including any fine, penalty,
interest or addition to tax), imposed, assessed or collected by or under the
authority of any Governmental Body.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
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"Threatened" -- a claim, dispute, or other matter will be deemed to have
been "Threatened" if any demand or statement has been made in writing or any
notice has been given in writing, and Seller has Knowledge of the same.
Section 1.2 Other Defined Terms. In addition to the terms defined in
Section 1.1, certain other terms are defined elsewhere in this Agreement as
indicated below and, whenever such terms are used in this Agreement, they shall
have their respective defined meanings.
Term Section
---- -------
Active Employees 10.1
Antitrust Authorities 6.3
Assumed Liabilities 2.2
Balance Sheet 5.6(a)
▇▇▇▇ of Sale 8.1
Buyer Indemnitees 13.1
Buyer's Pension Plan 10.5
Buyer Welfare Plans 10.7(a)
CERCLA 5.14(e)
Citizens Marks 6.4
Closing 8.1
Closing Date 8.1
Employee Plans 5.13
Environmental Data 12.1(c)
Estimated Purchase Price 3.3(a)
Financial Statements 5.6
Purchase Price 3.1
Retained Liabilities 2.3
Seller Indemnitees 13.2
Seller's Pension Plan 10.5
Seller's 401(k) Plan 10.6
Seller Welfare Plan 10.7
Transaction Taxes 11.3
Transferred Employee 10.1
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ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Assets. Upon the terms and subject to the
conditions contained herein, at the Closing, Seller shall sell, transfer,
assign, convey and deliver to Buyer, and Buyer shall purchase and accept
delivery from Seller, all of the Assets.
Section 2.2 Assumed Liabilities. In further consideration for the sale of
the Assets at the Closing, Buyer will assume and agree to pay, perform and
discharge when due, all liabilities and obligations, of every kind or nature,
arising out of or relating to:
(a) Seller's ownership of the Assets and Seller's conduct or operation of
the Business, prior to the Closing Date, other than the Retained Liabilities;
(b) all non-delinquent trade payables and other accrued expenses of the
Business outstanding on the Closing Date, including the following:
(i) electric, gas, telephone and other utility charges;
(ii) payroll expenses, payroll taxes, reimbursable employee business
expenses and accrued vacation time of the Transferred Employees;
(iii) accrued non-delinquent payment obligations under the Contracts
assigned to and assumed by Buyer at Closing; and
(iv) subject to Section 11.4, Taxes such as sales, franchise, gross
receipts and similar Taxes based upon revenues of the Business.
(c) Buyer's ownership or use of the Assets and the conduct or operation of
the Business by Buyer, in each case on and after the Closing Date, including all
liabilities, responsibilities and obligations relating to or arising from the
following:
(i) Transferred Employees (except to the extent otherwise provided in
Article X and except for any continuing obligations for any workers compensation
claims where the basis of the claim occurred prior to the Closing Date),
including any termination of any Transferred Employee for any reason (including
constructive dismissal) and Buyer's hiring practices or decisions;
(ii) performance of the Contracts included among the Assets (except that
Buyer shall not assume any liabilities or obligations for any breach or default
by, or delinquent payment obligations of, Seller under any such Contract
occurring or arising or accruing prior to the Closing Date);
(iii) customer advances, customer deposits and construction advances,
unperformed service obligations, Easement relocation obligations, and
engineering and construction required to complete scheduled construction,
construction work in progress, and other capital expenditure projects, in each
case relating to the Business and outstanding on or arising after the Closing
Date;
10
(iv) Future Regulatory Obligations;
(v) Assumed Environmental Liabilities;
(vi) Transaction Taxes arising out of the sale of the Assets to Buyer
hereunder;
(vii) Proceedings based on conduct, actions, facts, circumstances or
conditions arising or occurring on or after the Closing Date, Proceedings in
respect of Future Regulatory Obligations regardless of when filed, and
Proceedings arising from or related to any other Assumed Liability; and
(viii) the Buyer's IDRB Obligations.
(4) the Proceedings described in Schedule 2.2(d) as Assumed Liabilities;
and
(e) all Proceedings involving Seller, the Assets or the Business based on
conduct, actions, facts, circumstances or conditions arising or occurring prior
to the Closing Date that are pending or Threatened as of the Closing Date and
that are disclosed to Buyer by Seller after the Effective Date but prior to the
Closing Date (except any such Proceedings described as Retained Liabilities on
Schedule 2.2(d) and any such Proceedings relating to the Retained Liabilities
described in Sections 2.3(a), (b), (c), (d), and (f)), provided that any Losses
incurred by Buyer in connection with any such individual Proceeding in excess of
$200,000 shall be Retained Liabilities and Seller shall be obligated to
indemnify Buyer pursuant to Section 13.1 (but subject to limitations on such
obligations provided in Section 13.3) for such Losses incurred by Buyer in the
amount of such excess;
The liabilities, responsibilities and obligations to be assumed by Buyer
pursuant to this Section 2.2 are hereinafter collectively referred to as the
"Assumed Liabilities." Buyer hereby irrevocably and unconditionally waives and
releases Seller from all Assumed Liabilities and all liabilities or obligations
relating to the Business or the Assets to the extent arising from events or
occurrences on or after the Closing Date or to the extent otherwise relating to
the period commencing on the Closing Date, including any liabilities created or
which arise by statute or common law, including CERCLA (it being understood that
this shall not constitute a waiver and release of any claims arising out of the
contractual relationships and indemnification arrangements between Buyer and
Seller). Notwithstanding anything in this Section 2.2 to the contrary, "Assumed
Liabilities" shall not include any liabilities, responsibilities or obligations
expressly stated to be Retained Liabilities pursuant to Section 2.3.
Section 2.3 Retained Liabilities. Buyer shall not assume and at the Closing
Seller shall retain and pay, perform and discharge when due, all of the
liabilities and obligations relating to or arising from the following
(collectively referred to herein as the "Retained Liabilities"):
(a) all obligations of Seller under the IDRB Documents except to the extent
also included in Buyer's IDRB Obligations, and any other indebtedness for money
borrowed by Seller (including items due to Seller's Affiliates) other than
payment obligations arising on or after the Closing Date under any equipment
lease listed in Part VII of Schedule 5.12 or under any line extension Contracts
or similar construction arrangements, it being understood and agreed that such
leases, Contracts and similar arrangements do not create indebtedness for money
borrowed;
(b) Taxes of Seller based on income and any motor vehicle registration
Taxes for periods prior to the year in which Closing occurs;
(c) Excluded Assets;
(d) Non-Transferred Employees, the Seller's Employee Benefit Plans and
Employee Plans (except to the extent provided in Article X or Section
2.2(b)(ii)) and any breach or default by, or payment obligations of, Seller with
respect to any Transferred Employee occurring or arising or accruing prior to
the Closing Date (except to the extent any such payment obligation becomes the
responsibility and obligation of Buyer in accordance with Article X or Section
2.2(b)(ii));
11
(e) Proceedings involving Seller, the Assets or the Business based on
conduct (including Seller's performance under any Contract included among the
Assets), action, facts, circumstances or conditions arising or occurring prior
to the Closing Date including Proceedings described as Retained Liabilities in
Schedule 2.2(d), but expressly excluding any such liabilities or obligations
relating to any Proceeding described as Assumed Liabilities in Schedule 2.2(d)
and any Proceeding relating to (x) Assumed Liabilities (subject to the proviso
set forth in Section 2.2(e) with respect to the Proceedings described in Section
2.2(e)), (y) Future Regulatory Obligations and (z) Proceedings affecting the
industries in which the Business competes; and
(f) Retained Environmental Liabilities.
Seller hereby irrevocably and unconditionally waives and releases Buyer from all
Retained Liabilities including any liabilities created or which arise by statute
or common law, including CERCLA (it being understood that this shall not
constitute a waiver and release of any claims arising out of the contractual
relationships and indemnification arrangements between Buyer and Seller).
Section 2.4 Condition on Assignment or Assumption of Contracts and Rights.
Anything in this Agreement to the contrary notwithstanding, this Agreement shall
not constitute an agreement to assign or assume any Contract or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
assignment or assumption thereof, without the Consent of a third party thereto,
would constitute a breach thereof. Any transfer or assignment to Buyer by Seller
of any property or property rights or any Contract which requires the Consent of
any third party shall be made subject to such Consent being obtained. If such
Consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights of Seller thereunder so that Buyer would
not in fact receive all such rights, Seller will cooperate with Buyer in any
arrangement reasonably designed to provide for Buyer, at Buyer's cost, the
benefits under any such Contract including, without limitation, enforcement for
the benefit of Buyer of any and all rights of Seller against a third party
thereto arising out of the breach or cancellation by such third party or
otherwise To the extent that Buyer does receive the benefits of any such
Contract pursuant to the preceding sentence, such Contract shall be a Contract
deemed to have been assigned or transferred to Buyer pursuant to Section
2.2(c)(ii).
12
ARTICLE III
PURCHASE PRICE
Section 3.1 Purchase Price. Subject to the terms and conditions of this
Agreement, the aggregate purchase price for the Assets (the "Purchase Price")
shall be an amount equal to $215,000,000 in cash, subject to increase for
certain Mandated Capital Expenditures (as such term is defined in Section
6.1(a)(6)) in accordance with Section 3.2, and the assumption by Buyer at
Closing of the Assumed Liabilities.
Section 3.2 Calculation of Purchase Price. The Purchase Price shall be
increased by the amount of Mandated Capital Expenditures made by Seller from and
after the Effective Date through the day immediately preceding the Closing Date
and which are not included in the 2001 or 2002 Capital Budget, but only to the
extent that Seller did not have Knowledge of the need to incur the particular
expenditures comprising such Mandated Capital Expenditures at the time the 2002
Capital Budget was adopted by the Board of Directors of Seller. Such increase,
if applicable, shall be determined in accordance with the following:
(a) The amount of Mandated Capital Expenditures by which the Purchase Price
is increased shall be estimated by Seller in good faith based upon the relevant
account balances at the end of the month for which Seller's books are closed
next preceding the Closing Date, with such adjustments as may be appropriate to
reflect changes in such account balances occurring between such month-end and
the Closing Date. Any such estimated amount shall be set forth in a certificate
of Seller delivered to Buyer at least five (5) business days prior to the
Closing Date, which certificate shall set forth an estimate of the Purchase
Price (the "Estimated Purchase Price"), including the estimated amount of any
increase in the Purchase Price pursuant to this Section 3.2, and shall be
accompanied by reasonably detailed supporting documentation.
(b) Within one hundred twenty (120) days after the Closing Date, Seller
shall notify Buyer of the actual amount as recorded on Seller's books and
records for the Business of any Mandated Capital Expenditures that were
estimated in arriving at the Estimated Purchase Price. Buyer may dispute any
amount so determined by Seller, by written notice to Seller within fifteen (15)
days after receipt of Seller's notice. If Buyer does not so dispute any item,
the party owing the difference between the Estimated Purchase Price and the
Purchase Price shall pay such difference to the other party within ten (10) days
after the expiration of such fifteen (15) day period, plus interest at 8.25% per
annum on such amount from the Closing Date to (but not including) the date of
payment. If Buyer disputes the actual amount of any item, the undisputed amount
plus interest at 8.25% per annum on such amount from the Closing Date to (but
not including) the date of payment shall be paid promptly by the owing party. If
such dispute cannot be resolved within sixty (60) days after the giving of
Buyer's notice that there exists a disputed amount, then an independent auditor
mutually agreeable to Buyer and Seller shall, upon written notice from either
Buyer or Seller, resolve such dispute within sixty (60) days after receipt of
such notice. The fees and expenses of such independent auditor shall be
allocated between Buyer and Seller so that Seller's share of such fees and
expenses shall be in the same proportion that the aggregate amount of such
remaining disputed amounts so submitted by Buyer to such auditor that are
successfully disputed by Buyer (as finally determined by such auditor) bears to
the total amount of such remaining disputed amounts so submitted by Buyer to
such auditor. Any determination by such independent auditor shall be binding and
conclusive upon the parties without further appeal therefrom. Within ten (10)
days after the independent auditor shall have resolved such dispute, the party
owing the determined amount shall pay such determined amount to the other party,
plus interest at 8.25% per annum on such determined amount from the Closing Date
to (but not including) the date of payment.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 Organization, Existence and Qualification. Buyer is a
cooperative association duly incorporated, validly existing, and in good
standing under the laws of the State of Hawaii, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, to perform its
obligations under all Contracts to which it is a party, and to execute and
deliver this Agreement and the Related Documents to which Buyer is a party.
Section 4.2 Authority Relative to this Agreement and Binding Effect. The
execution, delivery and performance of this Agreement and the Related Documents
by Buyer have been duly authorized by Buyer's Board of Directors, which
constitutes all necessary corporate action required on the part of Buyer for
such authorizations. The execution, delivery and performance of this Agreement
and the Related Documents by Buyer will not result in (a) any conflict with or
breach or violation of or default under the Organizational Documents of Buyer,
or (b) a violation or breach of any term or provision of, or constitute a
default or accelerate the performance required under, any indenture, mortgage,
deed of trust, security agreement, loan agreement, or Contract to which Buyer is
a party or by which its assets are bound, or (c) a violation of any Order of any
Governmental Body, except for such exceptions to the foregoing clauses (b) and
(c) that, individually or in the aggregate, would not be reasonably likely to
have a material adverse effect on Buyer. This Agreement constitutes, and the
Related Documents to be executed by Buyer when executed and delivered will
constitute, valid and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy or similar laws from time to time in effect affecting
the enforcement of creditors' rights generally or (ii) the availability of
equitable remedies generally.
Section 4.3 Governmental Approvals. Except for those Consents described in
Schedule 5.3 to the extent (but only to the extent) applicable to Buyer, no
Consent of any Governmental Body is required to be obtained by Buyer in
connection with the execution and delivery by Buyer of this Agreement or the
Related Documents or the consummation of the transactions contemplated by this
Agreement or the Related Documents. Buyer has no knowledge of any facts or
circumstances relating to Buyer or its Affiliates that reasonably would be
likely to preclude or prolong the receipt of such required Consents.
Section 4.4 Availability of Funds. Buyer has available, and will have
available on the Closing Date, sufficient funds to enable it to consummate the
transactions contemplated by this Agreement. Buyer has received, and has
provided to Seller a true and complete copy of, that certain commitment letter
dated as of January 7, 2002 for the Purchase Price, including reasonable
flexibility to account for increases in the Purchase Price, duly executed by
Buyer and the National Rural Utilities Cooperative Finance Corporation.
Section 4.5 Filings. No statement furnished by Buyer for inclusion in any
filing with any Governmental Body in connection with obtaining such Governmental
Body's Consent for the consummation of the transactions contemplated by this
Agreement will contain, as of the date such information is so provided, any
untrue statement of a material fact or will omit to state, as of the date such
information is so provided, any material fact which is necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
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Section 4.6 Brokers. Other than the investment banking firm of
▇▇▇▇▇▇▇▇▇▇▇▇▇ Collet & Company, Inc., no broker or finder has acted for or on
behalf of Buyer or any Affiliate of Buyer in connection with this Agreement or
the transactions contemplated by this Agreement. No broker or finder is entitled
to any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Buyer or any
Affiliate of Buyer for which Seller or any Affiliate of Seller has or will have
any liability or obligations (contingent or otherwise). Buyer acknowledges full
responsibility for the fees owed to ▇▇▇▇▇▇▇▇▇▇▇▇▇ Collet & Company, Inc.
Section 4.7 Independent Investigation. Buyer, through its agents or
otherwise, is knowledgeable about the businesses engaged in by Seller through
its Kauai Electric division and of the usual and customary practices of
companies engaged in businesses similar to such businesses and has had access to
the Assets, the officers and employees of Seller, and the books, records and
files of Seller relating to the Business and the Assets. In making the decision
to enter into this Agreement and to consummate the transactions contemplated
hereby, Buyer has relied solely on the basis of its own independent due
diligence investigation of the Business and upon the representations and
warranties made in Article V. Accordingly, Buyer acknowledges that Seller has
not made, and Seller is expressly disclaiming and negating any representation or
warranty (other than those express representations and warranties made in
Article V), express, implied, at common law, by statute or otherwise, relating
to the Business.
Section 4.8 Public Utility Holding Company Status; Regulation as a Public
Utility. Neither Buyer nor any of its Affiliates is a "holding company", a
"subsidiary" of a "public utility company" or of a "holding company," or an
"affiliate" of a "public utility company" or of a "holding company," within the
meaning of such terms in PUHCA.
Section 4.9 Buyer's Financial Statements. As Buyer is not presently doing
business, and has done no business prior to the Effective Date, it has no
historical financial statements. Buyer agrees to deliver to Seller pro forma
financial statements of Buyer, based on the Financial Statements and reflecting
Buyer's financing for the acquisition contemplated by this Agreement, within 30
days after the Effective Date.
Section 4.10 Buyer's Insurance. At least ten (10) days prior to the Closing
Date, Buyer will deliver to Seller a Schedule that lists the Buyer's policies
and contracts in effect as of the date hereof for casualty and property
insurance covering its assets and properties and the operation of its business,
together with the risks insured against, coverage limits, deductible amounts and
carriers.
15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 5.1 Organization, Existence and Qualification. Seller is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Delaware, with full corporate power and authority to
conduct the Business as it is now being conducted, to own or use the Assets, to
perform its obligations under all Contracts to which it is a party, and to
execute and deliver this Agreement and the Related Documents to which Seller is
a party. Seller is duly qualified to do business as a foreign corporation and is
in good standing under the laws of the State of Hawaii and each other state in
which the failure to be so qualified or in good standing would have a Material
Adverse Effect.
Section 5.2 Authority Relative to this Agreement and Binding Effect. The
execution, delivery and performance of this Agreement and the Related Documents
by Seller have been duly authorized by all requisite corporate action. Except as
set forth in Schedule 5.2, the execution, delivery and performance of this
Agreement and the Related Documents by Seller will not result in (a) any
conflict with or breach or violation of or default under the Organizational
Documents of Seller, (b) to Seller's Knowledge, a violation or breach of any
term or provision of, or constitute a default or accelerate the performance
required under, any indenture, mortgage, deed of trust, security agreement, loan
agreement, or Material Contract to which Seller is a party or by which any of
the Assets are bound, or (c) a violation of any Order of any Governmental Body,
except for such exceptions to the foregoing clauses (b) and (c) that,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect or that will be cured, waived or otherwise remedied on
or prior to the Closing Date. This Agreement constitutes and the Related
Documents to be executed by Seller when executed and delivered will constitute
valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except as enforceability may be limited by (i)
bankruptcy or similar laws from time to time in effect affecting the enforcement
of creditors' rights generally or (ii) the availability of equitable remedies
generally.
Section 5.3 Governmental and Other Required Consents. Except as set forth
in Schedule 5.3, no Consent of any Governmental Body or third Person is required
to be obtained by Seller in connection with the execution and delivery by Seller
of this Agreement or the Related Documents or the consummation by Seller of the
transactions contemplated by this Agreement or the Related Documents, other than
(i) any Consent the failure of which to obtain would not be reasonably likely to
have a Material Adverse Effect and (ii) any Consent that is obtained or made on
or prior to the Closing Date.
Section 5.4 Public Utility Holding Company Status; Regulation as a Public
Utility. Seller is a "public utility company" (as such term is defined in
PUHCA). Seller is not a "holding company", a "subsidiary" of a "public utility
company," or an "affiliate" of a "public utility company" or of a "holding
company," within the meaning of such terms in PUHCA.
Section 5.5 Title to Assets; Liens. Seller has good and indefeasible title
to the Assets reflected in the Financial Statements except those that in the
aggregate are not material to the Business and those disposed of since the date
of the Financial Statements in the ordinary course of business or otherwise
disposed of in accordance with this Agreement. None of the Assets are subject to
any Encumbrance except (i) Encumbrances described in Schedule 5.5 and (ii)
Permitted Encumbrances. Schedule 5.5 lists each material parcel of Real Property
owned in fee simple that is a part of the Assets. To Seller's Knowledge, except
as described on Schedule 5.5, Seller owns or possesses all Easements necessary
to conduct the Business as now being conducted without any known conflict with
the rights of others, in each case except to the extent that the failure to own
or possess such Easements would not have a Material Adverse Effect. Seller
enjoys peaceful and undisturbed possession under all material real property
leases included in the Assets, and to the Knowledge of Seller, all such leases
are valid and subsisting and in full force and effect.
16
Section 5.6 Financial Statements.
(a) Schedule 5.6(a) sets forth the unaudited proforma balance sheet for the
Business as of December 31, 2001 (the "Balance Sheet") and unaudited proforma
income statement of the Business for the twelve-month period ended December 31,
2001 (collectively, the "Financial Statements"). Except as set forth in Schedule
5.6(a), the Financial Statements have been prepared on a pre-tax basis in
accordance, in all material respects, with GAAP applied on a basis consistent
with prior periods. To the Knowledge of Seller and except as set forth in the
notes to the Financial Statements, the Balance Sheet presents fairly in all
material respects the financial condition of the Business as of its date and the
income statement included in the Financial Statements presents fairly in all
material respects the results of operations of the Business for the periods
covered thereby. The books and records of Seller from which the Financial
Statements were prepared were complete and accurate in all material respects at
the time of such preparation.
(b) To the Knowledge of Seller, as of the Effective Date, there are no
Liabilities except for Liabilities (i) reflected in the Balance Sheet, (ii)
arising under the Existing Loan Documents, (iii) listed in Schedule 5.6(b), or
(iv) which individually or in the aggregate are not reasonably likely to result
in a Material Adverse Effect. As used in this Section 5.6(b), the term
"Liabilities" shall only mean claims of creditors and Governmental Bodies
against Seller arising out of activities, operations or transactions of Seller
relating to the Business occurring before the Effective Date which have been
Threatened or resulted in a Proceeding against Seller and that have become due
or accrued or could reasonably be expected to become due or accrued within the
twelve-month period following the Effective Date, but excluding any Liabilities
under Legal Requirements, Orders and Contracts where Seller is not currently in
material violation of or default under any provision thereof.
Section 5.7 Compliance with Legal Requirements; Governmental Permits.
Except as set forth in Schedule 5.7, to the Knowledge of Seller: (a) Seller is
not in violation of any Legal Requirement or Order that is applicable to it, to
the conduct or operation of the Business, or to the ownership or use of any of
the Assets, other than such violations, if any, which are not, individually or
in the aggregate, reasonably likely to have a Material Adverse Effect; and (b)
Seller possesses all permits, licenses, and authorizations from Governmental
Bodies required by any applicable Legal Requirement or Order necessary to permit
the operation of the Business in the manner in which it is currently being
conducted by Seller, except where the failure to possess any such permit,
license or authorization is not reasonably likely to result in a Material
Adverse Effect.
Section 5.8 Legal Proceedings; Outstanding Orders. Except as set forth in
Schedule 5.8, there is no pending or Threatened Proceeding (a) that has been
commenced against Seller that is reasonably likely to have a Material Adverse
Effect or (b) as of the Effective Date, that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
the transactions contemplated hereby. Except as disclosed in Schedule 5.8, there
are currently no outstanding Orders against Seller which relate to or arise out
of the conduct of the Business or the ownership, condition or operation of the
Business or the Assets (other than any Order relating to rates, tariffs and
similar matters arising in the ordinary course of business) which individually
or in the aggregate would have a Material Adverse Effect.
Section 5.9 Taxes. Seller has filed all United States federal, state and
local income Tax Returns required to be filed by Seller or requests for
extensions to file such Tax Returns have been timely filed, and Seller has paid
and discharged or made adequate provision for all Taxes except where failure to
so file, pay, discharge or make adequate provision for are not, individually or
in the aggregate, reasonably likely to have a Material Adverse Effect. There are
no pending audits or other examinations relating to any Tax matters except as
set forth in Schedule 5.9. There are no Tax liens on the Assets. As of the
Effective Date, Seller has not granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any Tax
except as set forth in Schedule 5.9.
Section 5.10 Intellectual Property. Schedule 5.10 lists all patents,
trademarks, service marks and copyrights used or held for use by Seller
primarily in the operation of the Business. Seller has no Knowledge of (i) any
infringement or claimed infringement by Seller of any patent, trademark, service
▇▇▇▇ or copyright of others or (ii) any infringement of any patent, trademark,
service ▇▇▇▇ or copyright owned by or under license to Seller except for any
such infringements of the type described in clause (i) or (ii) that are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.
Section 5.11 Personal Property. Except for normal wear and tear, and with
such exceptions as are not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect, the tangible Assets are in normal operating
condition and in a state of reasonable maintenance and repair.
17
Section 5.12 Material Contracts; Existing Loan Documents. Schedule 5.12
contains, to Seller's Knowledge, a complete and correct list as of the date
hereof of all Material Contracts (other than line extension Contracts and
similar construction arrangements), including all Existing Loan Documents. To
Seller's Knowledge, there are no defaults under any such Contracts that,
individually or in the aggregate, will have a Material Adverse Effect. Except as
set forth in Schedule 5.12, Seller is not obligated under any Contract relating
to the Business or the Assets with respect to industrial development bonds or
other obligations with respect to which the interest thereon is excluded from
gross income of the holder for federal or state income tax purposes.
Section 5.13 Employee Benefit Matters.
(a) Schedule 5.13 lists (i) each "Employee Benefit Plan," as such term is
defined in Section 3(3) of ERISA, which is covered by any provision of ERISA and
which is maintained by Seller for the benefit of the Active Employees; (ii) each
other material fringe benefit plan, policy or arrangement currently maintained
by Seller for the benefit of Active Employees which provides for pension,
deferred compensation, bonuses, severance, employee insurance coverage or
similar employee benefits (collectively, "Employee Plans"); and (iii) each
collective bargaining, union or other employee association agreement,
employment, managerial advisory, and consulting agreement, employee
confidentiality agreement, and all other material agreements, policies, or
arrangements maintained by Seller for the Active Employees. Seller has made
available to Buyer copies, which were accurate and complete as of the date so
made available, of all such documents and (if applicable) summary plan
descriptions with respect to such plans, agreements and arrangements, or summary
description(s) of any such plans, agreements or arrangements not otherwise in
writing.
(b) Seller's Pension Plan and Seller's 401(k) Plan are the only Employee
Benefit Plans which are intended to be qualified under Section 401(a) of the
IRC.
(c) To the Knowledge of Seller, each Employee Benefit Plan has been
established and administered in all material respects in accordance with the
material terms of ERISA and the applicable provisions of the IRC.
Section 5.14 Environmental Matters.
(a) Except as listed in Schedule 5.14, since December 31, 1996, Seller has
not received a written notice from a Governmental Body that Seller is in
violation of any Environmental Law arising out of Seller's ownership, use or
operation of the Assets or the operation of the Business, except for any
violation not reasonably likely to result in a Material Adverse Effect.
(b) Except as listed in Schedule 5.14, there are no Proceedings pending or
Threatened with respect to Seller's compliance with Environmental Laws and
relating to the Business or the Assets.
(c) Except as listed in Schedule 5.14, since December 31, 1996, Seller has
not received any written notice from any Governmental Body that Seller does not
have all certificates, permits and authorizations required by any Environmental
Law for Seller's ownership, use or operation of the Assets or the operation of
the Business (other than any such environmental permit the absence of which is
not reasonably likely to result in a Material Adverse Effect).
(d) Except as set forth in Schedule 5.14, to Seller's Knowledge, no
environmental remediation of any Release is occurring on any Real Property
included in the Assets nor has Seller issued a request for proposal or otherwise
asked an environmental remediation contractor to begin plans for any such
environmental remediation.
(e) Except as set forth in Schedule 5.14, none of the Real Property is (i)
situated in a federal "Superfund" site or, to Seller's Knowledge, in any federal
"Superfund" study area designated under the federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), or (ii) to Seller's
Knowledge, situated in any site or study area designated under any state statute
comparable to CERCLA.
Section 5.15 No Material Adverse Change. Except as set forth in Schedule
5.15, between the date of the Balance Sheet and the Effective Date, no Material
Adverse Effect has occurred. Except for actions taken in connection with the
contemplated sale of the Business and this Agreement, between the date of the
Balance Sheet and the Effective Date, the Business has been conducted in
substantially the same manner in which it has been previously conducted.
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Section 5.16 State Regulatory Matters.
(a) To Seller's Knowledge, Schedule 5.16 reflects all of the currently
pending rate filings relating to the Business heretofore made by Seller before
state regulatory commissions and each other currently pending Proceeding of such
state regulatory commission that is reasonably likely to have a Material Adverse
Effect.
(b) To Seller's Knowledge, all currently effective material filings
relating to the Business heretofore made by Seller with state regulatory
commissions were made in compliance with Legal Requirements then applicable
thereto and the information contained therein was true and correct in all
material respects as of the respective dates of such filings.
Section 5.17 Brokers. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, no
broker or finder has acted for or on behalf of Seller or any Affiliate of Seller
in connection with this Agreement or the transactions contemplated by this
Agreement. No broker or finder is entitled to any brokerage or finder's fee, or
to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of Seller or any Affiliate of Seller for
which Buyer has or will have any liabilities or obligations (contingent or
otherwise).
Section 5.18 Disclaimer. Except as otherwise expressly set forth in this
Article V, Seller expressly disclaims any representations or warranties of any
kind or nature, express or implied, as to the condition, value or quality of the
assets or properties currently or formerly used, operated, owned, leased,
controlled, possessed, occupied or maintained by Seller, and Seller SPECIFICALLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH ASSETS OR PROPERTIES,
OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD THAT SUCH ASSETS
AND PROPERTIES ARE BEING ACQUIRED, "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN
THEIR PRESENT CONDITION, WITH ALL FAULTS AND THAT BUYER SHALL RELY ON ITS OWN
EXAMINATION AND INVESTIGATION THEREOF.
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ARTICLE VI
COVENANTS
Section 6.1 Covenants of Seller. Seller agrees to observe and perform the
following covenants and agreements:
(a) Conduct of the Business Prior to the Closing Date. With respect to the
Business, except (i) as contemplated in this Agreement or in Schedule 6.1, (ii)
as required by any Legal Requirement or Order or (iii) as otherwise expressly
consented to in writing by Buyer which consent will not be unreasonably withheld
or delayed, prior to the Closing, Seller will, with respect to the Business:
(1) Not make or permit any material change in the general nature of
the Business;
(2) Maintain the Business in the ordinary course of business in
accordance with prudent business judgment and consistent with past practice
and policy, and maintain the Assets in their present condition, reasonable
wear and tear excepted, subject to retirements in the ordinary course of
business;
(3) Not enter into any material transaction or Material Contract other
than in the ordinary course of business;
(4) Not purchase, sell, lease, dispose of or otherwise transfer or
make any Contract for the purchase, sale, lease, disposition or transfer
of, or subject to Encumbrance, any material Assets other than in the
ordinary course of business;
(5) Not hire any new employee unless such employee is a bona fide
replacement for either a presently-filled position or a vacancy in an
authorized position with the Business;
(6) Continue to make capital expenditures necessary to maintain,
operate or repair the Assets or to replace Assets damaged or destroyed by
casualty loss, and to make Mandated Capital Expenditures, in each case in
the ordinary course of business in accordance with prudent business
judgment and consistent with past practice and policy, including capital
expenditures required to (i) provide service to ensure adequate
transmission or distribution facilities under power supply contracts, and
(ii) fulfill requirements under the Certificate of Public Convenience and
Necessity. Notwithstanding the foregoing, Seller will not be required to
make any capital expenditures relating to any capital project that is not
included in the applicable Capital Budget unless such expenditures are
required to comply with either a tariff for the Business or a mandate by a
Governmental Body (in either case, "Mandated Capital Expenditures"). For
purposes of clarification, Mandated Capital Expenditures also shall
include, without duplication, expenditures to purchase materials, supplies
and other capital items that are dedicated to, but as of Closing have not
been used in, mandated capital projects and other expenditures relating to
mandated capital projects that are recorded as an asset of the Business as
of the Closing Date to the extent such expenditures are normally
recoverable through rates, including all such expenditures recorded in the
Preliminary Survey and Investigation account of the Business. If Seller
becomes obligated to incur any Mandated Capital Expenditures, then Seller
shall provide to Buyer a written description of the mandated capital
project to which the expenditures relate. Seller also shall deliver to
Buyer a copy of the 2002 Capital Budget promptly after it is approved by
the Board of Directors of Seller. If at Closing Seller's actual 2002
capital expenditures for the Business through the day immediately preceding
the Closing Date are less than the capital expenditures proposed in such
approved fiscal year 2002 Capital Budget, then Seller nonetheless shall be
deemed to have complied with this Section 6.1(a)(6) if such actual 2002
capital expenditures reasonably approximate an appropriate proportion of
such approved 2002 budgeted capital expenditures in light of the number of
months in 2002 that have passed prior to the Closing Date, the project
timelines used by Seller to plan for and to complete the various approved
capital projects, and other facts and circumstances relating to when such
approved capital expenditures should reasonably be expected to have been
incurred during the 2002 fiscal year;
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(7) Comply in all material respects with all applicable material Legal
Requirements and Orders, including without limitation those relating to the
filing of reports and the payment of Taxes due to be paid prior to the
Closing, other than those contested in good faith;
(8) Except in the ordinary course of business or in accordance with
the terms of any existing Contract, Employee Plan or collective bargaining
agreement, not grant any material increase or change in total compensation
or benefits (taken as a whole) to any of the Transferred Employees or enter
into any employment, severance or similar Contract with any Person or amend
any such existing Contracts to increase any amounts payable thereunder or
benefits provided thereunder, provided that Seller agrees to consult with
Buyer prior to granting any increase in the aggregate recurring cash
compensation of the non-union Transferred Employees by an amount in excess
of three percent (3%) in any year;
(9) Not terminate any Material Contract except in the case of a breach
of such Contract by the other party thereto; or
(10) Not create, incur, assume, guarantee or otherwise become liable
with respect to any indebtedness for money borrowed other than in the
ordinary course of business (it being understood and agreed that customer
advances, customer deposits and construction advances do not create
indebtedness for money borrowed), except in connection with additional
borrowings under the Existing Loan Documents and any renewal, extension,
rearrangement or refunding of any indebtedness created under or evidenced
by the Existing Loan Documents, and except pursuant to advances made by
Seller to the Business.
(b) Access to the Business, Assets and Records; Updating Information.
(1) From and after the date hereof and until the Closing Date, Seller
shall permit Buyer and its Representatives to have, on reasonable notice
and at reasonable times, reasonable access to all books, papers and records
to the extent that they reasonably relate to the ownership, operation,
obligations and liabilities of the Business and the Assets; provided,
however, that such access shall not unreasonably interfere with the
operation of the Business; and provided, further, that Buyer hereby agrees
to defend, indemnify and hold harmless Seller from and against all Losses
arising out of or relating to Buyer's access provided pursuant to this
Section 6.1(b)(1). Without limiting the application of the Confidentiality
Agreement, all documents or information furnished by Seller hereunder shall
be subject to the Confidentiality Agreement.
(2) Seller will notify Buyer as promptly as practicable of any
significant change in the ordinary course of business for the Business and
of any material Proceedings (Threatened or pending) involving or affecting
the Business or the transactions contemplated by this Agreement, and shall
use reasonable efforts to keep Buyer fully informed of such events.
(c) Consents. Seller will use its commercially reasonable efforts to obtain
all necessary Consents from any Person required to consummate the transactions
contemplated hereby, including the Consent of any Person required under any
Legal Requirement or Contract applicable to the Business.
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Section 6.2 Covenants of Buyer. Buyer agrees to observe and perform the
following covenants and agreements:
(a) Consents. Buyer will use its commercially reasonable efforts to
assist Seller in obtaining all necessary Consents from any Person required
to consummate the transactions contemplated hereby, including the Consent
of any Person required under any Legal Requirement or Contract applicable
to the Business, and will use its commercially reasonable efforts to obtain
all Consents listed in Schedule 4.2 or Schedule 4.3.
(b) Access to Information. After Closing, Buyer will, and will cause
its Representatives to, afford to Seller, including its Representatives,
reasonable access to all books, records, files and documents related to the
Business in order to permit Seller to prepare and file its tax returns and
to prepare for and participate in any investigation with respect thereto,
to prepare for and participate in any other investigation and defend any
Proceedings relating to or involving Seller or the Business for which
Seller may be responsible, to discharge its obligations under this
Agreement and the other Related Documents to which its is a party and for
other reasonable purposes and will afford Seller reasonable assistance in
connection therewith. Buyer will cause such records to be maintained for
not less than seven years from the Closing Date and will not dispose of
such records without first offering in writing to deliver them to Seller;
provided, however, that in the event that Buyer transfers all or a portion
of the Business to any third party during such period, Buyer may transfer
to such third party all or a portion of the books, records, files and
documents related thereof, provided such third party transferee expressly
assumes in writing the obligations of Buyer under this Section 6.2(b). In
addition, on and after the Closing Date, at Seller's request, Buyer shall
make available to Seller and its Affiliates, employees, representatives and
agents, those employees of Buyer requested by Seller in connection with any
Proceeding, including to provide testimony, to be deposed, to act as
witnesses and to assist counsel; provided, however, that (x) such access to
such employees shall not unreasonably interfere with the normal conduct of
the operations of Buyer and (y) Seller shall reimburse Buyer for the
allocated time charges of such employees and the out-of-pocket costs
reasonably incurred by Buyer in making such employees available to Seller.
(c) Citizens Guarantees and Surety Instruments. Buyer shall use its
reasonable efforts to assist Seller in obtaining full and complete releases
on the guarantees, letters of credit, bonds and other surety instruments
listed in Schedule 6.2(c). For purposes of this Section 6.2(c), reasonable
efforts shall include: (i) Buyer's assumption of the Contracts on the terms
set forth in this Agreement; and (ii) an obligation on the part of Buyer to
provide a guaranty, letter of credit, bond or other surety instrument at
Closing to the extent required by any Contract assumed by Buyer at Closing
and, in general, an equivalent surety instrument to be substituted for any
surety instrument provided by Citizens to any beneficiary in connection
with the Business.
(d) Other Covenants of Buyer. Buyer agrees to submit to regulation by
the Hawaii Public Utilities Commission to the same extent as such state
regulatory commission currently regulates Seller in connection with the
Business, it being agreed that this covenant shall terminate and have no
further effect upon Closing. Buyer also agrees to make no filings with such
state regulatory commission or take any other action in connection with any
Proceeding or Legal Requirement relating to any other businesses conducted
by Seller that also are subject to regulation by such state regulatory
commission.
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Section 6.3 Governmental Filings.
(a) HSR Act Filing. Buyer and Seller shall comply promptly with the notice
and reporting requirements of the HSR Act. Buyer and Seller shall comply
substantially with any additional requests for information, including requests
for production of documents and production of witnesses for interviews or
depositions, made by the Antitrust Division of the United States Department of
Justice, the United States Federal Trade Commission or the antitrust or
competition law authorities of any other jurisdiction (the "Antitrust
Authorities"). Buyer shall exercise its best efforts, and Seller shall cooperate
fully with Buyer, to prevent the entry in any Proceeding brought by an Antitrust
Authority or any Governmental Body which would prohibit, make unlawful or delay
the consummation of the transactions contemplated by this Agreement. Seller
shall not oppose any efforts of Buyer, including Buyer's proffer of consent to
any Order, to complete lawfully the transactions contemplated by this Agreement,
and shall cooperate in good faith with Buyer and the Antitrust Authorities to
the same effect.
(b) Other Regulatory Filings. Buyer and Seller will, as soon as reasonably
practicable following the Effective Date, prepare and file with each
Governmental Body, including a joint application with the Hawaii Public
Utilities Commission, requests for such Consents as may be necessary for the
transfer of the Assets (including the transfer of Seller's franchise relating to
the Business) in accordance with the terms of this Agreement. Buyer and Seller
will diligently pursue such Consents and will cooperate with each other in
seeking such Consents. To this end, the parties agree to make available the
personnel and other resources of their respective organizations in order to
accomplish actions reasonably required by them to obtain all such Consents.
Section 6.4 Citizens Marks. Buyer acknowledges and agrees with Seller that
Seller has the absolute and exclusive proprietary right to all names, marks,
trade names, trademarks and corporate symbols and logos incorporating "Citizens"
and "CZN" (collectively and together with all other names, marks, trade names,
trademarks and corporate symbols and logos owned by Seller or any of its
Affiliates, the "Citizens Marks"), all rights to which and the goodwill
represented thereby and pertaining thereto are being retained by Seller. Within
one hundred eighty (180) days after the Closing Date, Buyer shall cease using
any Citizens ▇▇▇▇ and shall remove from the Assets any and all Citizens Marks.
Thereafter, Buyer shall not use any Citizens ▇▇▇▇ in connection with the sale of
any products or services or otherwise in the conduct of its businesses. In the
event that Buyer breaches this Section 6.4, Seller shall be entitled to specific
performance of this Section 6.4 and to injunctive relief against further
violations, as well as any other remedies at law or in equity available to
Seller.
Section 6.5 Acknowledgment by Buyer. In order to induce Seller to enter
into and perform this Agreement and the Related Documents, Buyer acknowledges
and agrees with Seller as follows:
(a) To the knowledge of Buyer, Seller's representations and warranties made
in Article V are true and correct as of the Effective Date. To the extent any
representation or warranty of Seller made herein is, to the knowledge of Buyer
acquired prior to the Effective Date, untrue or incorrect, (i) Buyer shall have
no rights under this Agreement or any Related Documents by reason of such
untruth or inaccuracy, and (ii) any such representation or warranty by Seller
shall be deemed to be amended to the extent necessary to render it consistent
with such knowledge of Buyer.
(b) Other than any additional environmental due diligence that Buyer may
conduct pursuant to Section 12.1 of this Agreement, Buyer has concluded whatever
inspections, studies, tests and investigations Buyer desired to conduct relating
to the Business and the Assets, including economic reviews and analyses, soil
tests, engineering analyses, environmental analyses (including Phase I
environmental assessments of the Assets) and analyses of any applicable records
of any Governmental Body. Buyer is relying solely on its own investigation as to
the Business and the Assets and is assuming the risk that adverse physical,
economic or other conditions or circumstances (including soil and groundwater
conditions) may not have been revealed by such investigation.
(c) NONE OF SELLER OR ANY OF ITS AFFILIATES OR REPRESENTATIVES MAKES ANY
REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR COMPLETENESS OF ANY
INFORMATION, WRITTEN OR ORAL, FURNISHED TO OR PREPARED AT THE REQUEST OF BUYER
OR ANY OF ITS AFFILIATES OR REPRESENTATIVES WITH RESPECT TO THE BUSINESS OR THE
ASSETS.
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(d) THE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE V OF THIS
AGREEMENT CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF
SELLER TO BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND BY
THE RELATED DOCUMENTS THERE ARE NO REPRESENTATIONS, WARRANTIES, COVENANTS,
UNDERSTANDINGS OR AGREEMENTS, ORAL OR WRITTEN, IN RELATION THERETO BETWEEN THE
PARTIES OTHER THAN THOSE INCORPORATED HEREIN AND THEREIN. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE V OF THIS
AGREEMENT, BUYER DISCLAIMS RELIANCE ON ANY REPRESENTATIONS OR WARRANTIES, EITHER
EXPRESS OR IMPLIED, BY OR ON BEHALF OF SELLER OR ITS AFFILIATES OR
REPRESENTATIVES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER
ACKNOWLEDGES AND AGREES THAT, EXCEPT AS PROVIDED IN SECTIONS 5.7, 5.11 AND 5.14,
THERE ARE NO REPRESENTATIONS OR WARRANTIES OF SELLER WITH RESPECT TO THE
CONDITION OF THE ASSETS, COMPLIANCE WITH ENVIRONMENTAL LAWS AND ENVIRONMENTAL
PERMITS OR THE PRESENCE OR RELEASES OF HAZARDOUS MATERIAL IN THE FIXTURES,
SOILS, GROUNDWATER, SURFACE WATER OR AIR ON, UNDER OR ABOUT OR EMANATING FROM
ANY OF THE PROPERTIES OR ASSETS OF SELLER.
Section 6.6 Transition Plan. If Buyer and Seller have not already done so,
then (i) within 30 days after the Effective Date, Buyer shall deliver to Seller
a list of its proposed representatives to a joint transition team, which shall
include expertise from various functional specialties associated or involved in
providing billing, payroll and other support services provided to the Business
by any automated or manual process using facilities or employees that are not
included among the Assets or Transferred Employees, and (ii) Seller will add its
representatives to such team within 15 days after receipt of Buyer's list. Such
team will be responsible for preparing as soon as reasonably practicable after
the Effective Date and at least 60 days prior to the Closing Date, and timely
implementing, a transition plan which will identify and describe substantially
all of the various transition activities that the parties will cause to occur
before and after the Closing and any other transfer of control matters that any
party reasonably believes should be addressed in such transition plan, including
the migration or conversion of the data relating to the Business that is
included among the Assets to Buyers information systems (it being understood and
agreed that such activity will be at Buyer's sole cost and expense and to be
performed by consultants reasonable satisfactory to Seller). If requested by
either party, the terms and conditions governing such transition activities will
be more fully set forth in a Transition Agreement reasonably satisfactory to the
parties. If the parties have not already done so, then Buyer and Seller shall
use their commercially reasonable efforts to cause their Representatives on such
transition team to cooperate in good faith and take all reasonable steps
necessary to develop a mutually acceptable transition plan by no later than 120
days after the Effective Date.
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Section 6.7 IDRB Obligations.
(a) Buyer's Obligations Regarding IDRB Indebtedness. Each party
acknowledges that (x) Seller is and on and after the Closing Date shall continue
to be and shall remain the primary obligor with respect to all IDRB Indebtedness
and related Bonds outstanding immediately on and after the Closing Date to the
same extent as though no sale of the Assets had been made and that Buyer shall
have no payment obligations with respect to such IDRB Indebtedness and related
Bonds and (y) the IDRB Documents require Seller not to take or permit to be
taken any action which would have the effect, directly or indirectly, of
subjecting the interest on any of the Bonds to federal or state income taxation.
Accordingly, Buyer covenants and agrees at Closing to execute and deliver to
Seller an agreement substantially in the form attached hereto as Exhibit 6.7,
with respect to the Bonds that will be outstanding on and after the Closing
Date. Buyer represents, warrants, covenants and agrees, that so long as any
Bonds are outstanding, (a) as the "successor in interest" to Seller (as such
term is used in Section 142(f)(3)(B) of the IRC), Buyer will cause the Assets
that were acquired, constructed, improved or equipped with the proceeds of such
Bonds to be used as facilities for the local furnishing of electric energy
within the meaning of Sections 142(a)(8) and 142(f) of the IRC or, if
applicable, Section 103(b)(4)(E) of the Internal Revenue Code of 1954, as
amended (that is, the local furnishing of electric energy from such Assets shall
only include furnishing solely within the area consisting of (i) a city and one
contiguous county, or (ii) two contiguous counties; provided that such use shall
be to provide service within the same service area as served by Seller on
January 1, 1997 (or within a county or a city any potion of which is within such
area)), (b) Buyer has not made and shall not make an election pursuant to
Section 142(f)(4)(B) of the IRC to terminate tax-exempt bond financing by Buyer
and (c) Buyer shall not otherwise take or permit to be taken any action with
respect to the Assets and its use and operation thereof which would have the
effect, directly or indirectly, of subjecting interest on any of such Bonds to
federal or state income taxation. Buyer acknowledges and agrees that Seller's
bond counsel may rely on Buyer's representations, warranties and covenants as
hereinabove provided for the purpose of rendering legal opinions, as required by
the IDRB Documents as a precondition to the sale by Seller of such Assets, to
the effect that the sale of such Assets will not result in the inclusion of the
interest on the Bonds in the gross income of the recipient for purposes of
federal income taxation. Nothing in this Agreement is intended to nor shall it
be interpreted as (i) an assignment to, and assumption by, Buyer of any of the
IDRB Documents, or (ii) as an undertaking or agreement by Buyer to assume,
guarantee or pay any of Seller's loan or other payment obligations pursuant to
the IDRB Documents.
(b) Consents and Legal Opinions. The parties shall use their respective
commercially reasonable efforts to obtain all Consents and legal opinions as may
be required under the IDRB Documents to enable Seller to retain until maturity
the IDRB Indebtedness and to sell the Assets to Buyer without the result that
the interest on the Bonds will be included in the gross income of the recipient
for purposes of federal income taxation.
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ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Seller's Conditions Precedent to Closing. The obligation of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to fulfillment prior to the Closing of the following conditions:
(a) Representations and Warranties True as of the Closing Date. Buyer's
representations and warranties in this Agreement shall have been true and
correct in all material respects as of the Effective Date and shall be true and
correct in all material respects as of the Closing Date as if made on the
Closing Date, subject to changes expressly contemplated and permitted by this
Agreement, except that representations and warranties made as of, or in respect
of, only a specified date or period shall be true and correct in all material
respects as of, or in respect of, such date or period.
(b) Compliance with Agreements. The covenants, agreements and conditions
required by this Agreement to be performed and complied with by Buyer shall have
been performed and complied with in all material respects prior to or at the
Closing Date.
(c) Certificate. Buyer shall execute and deliver to Seller a certificate of
an authorized officer of Buyer, dated the Closing Date, stating that the
conditions specified in Sections 7.1(a) and 7.1(b) of this Agreement have been
satisfied.
(d) Governmental Approvals and Other Consents. The Hawaii Public Utilities
Commission shall have issued an Order approving the transactions contemplated
hereby, the terms and conditions of such Order shall be acceptable in all
material respects to Seller in its reasonable discretion and shall have no
significant adverse effect on Seller's acquisition and divestiture activities in
the State of Hawaii (including the divestiture of the Assets), and such Order
shall have become a Final Order. Seller also shall have obtained all other
Consents of Governmental Bodies and other Persons which are required in order to
consummate the transactions contemplated hereby and to transfer the Assets to
Buyer without incurring material liability under any Legal Requirement, Order or
Contract.
(e) HSR Act. The applicable waiting period under the HSR Act with respect
to the transactions contemplated hereby shall have expired or have been
terminated.
(f) Injunctions. On the Closing Date, there shall be no Orders which
operate to restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated by this Agreement.
(g) Opinion of Counsel. On the Closing Date, Seller shall have received
from counsel to Buyer an opinion in the form of Exhibit 7.1(g).
(h) Documents. Buyer shall have delivered all the certificates,
instruments, contracts and other documents specified to be delivered by it
hereunder prior to the Closing Date, including pursuant to Section 8.1, and
shall have taken such actions as Seller may have requested pursuant to Section
11.2 hereof.
(i) IDRB Indebtedness. Seller shall have obtained all Consents and legal
opinions required under the IDRB Documents to enable Seller to retain the IDRB
Indebtedness until maturity, and to sell the Assets to Buyer without the result
that the interest on any of the Bonds will be included in the gross income of
the recipient for purposes of federal income taxation and without any event of
taxability (as such term is customarily used in municipal securities
transactions) arising from the sale of the Assets pursuant to this Agreement,
and Buyer shall have duly executed and delivered all of the instruments
contemplated by Section 6.7(a).
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Section 7.2 Buyer's Conditions Precedent to Closing. The obligation of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to fulfillment prior to the Closing of the following conditions:
(a) Representations and Warranties True as of the Closing Date. Seller's
representations and warranties in this Agreement shall have been true and
correct in all material respects as of the Effective Date and shall be true and
correct in all material respects as of the Closing Date as if made on the
Closing Date, subject to changes expressly contemplated and permitted by this
Agreement; except (i) that representations and warranties made as of, or in
respect of, only a specified date or period shall be true and correct in all
material respects as of, or in respect of, such date or period, and (ii) to the
extent that any failure of such representations and warranties to be true and
correct as aforesaid when taken in the aggregate would not have a Material
Adverse Effect.
(b) Compliance with Agreements. The covenants, agreements and conditions
required by this Agreement to be performed and complied with by
Seller shall have been performed and complied with in all material respects
prior to or at the Closing Date, except where the failure to so perform or
comply when taken in the aggregate would not have a Material Adverse Effect.
(c) Certificate. Seller shall execute and deliver to Buyer a certificate of
an authorized officer of Seller, dated the Closing Date, stating that the
conditions specified in Sections 7.2(a) and 7.2(b) of this Agreement have been
satisfied.
(d) Governmental Approvals. The Hawaii Public Utilities Commission shall
have issued an Order approving the transactions contemplated hereby, such Order
shall not contain any restrictions or conditions (other than those in effect on
the Effective Date or requiring that the regulatory treatment with respect to
the Business in existence as of the Effective Date applicable to Seller be
continued following the Closing) which would have a Material Adverse Effect, and
such Order shall have become a Final Order. In addition, Seller shall have
obtained all other Consents of Governmental Bodies and other Persons which are
required in order to consummate the transactions contemplated hereby other than
those the failure of which to obtain would not have a Material Adverse Effect.
(e) HSR Act. The applicable waiting period under the HSR Act with respect
to the transactions contemplated hereby shall have expired or have been
terminated.
(f) Injunctions. On the Closing Date, there shall be no Orders which
operate to restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated by this Agreement.
(g) Opinion of Counsel. On the Closing Date, Buyer shall have received from
L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President and General Counsel of Seller, an opinion in
the form of Exhibit 7.2(g) hereto.
(h) Documents. Seller shall have delivered all of the certificates,
instruments, contracts and other documents specified to be delivered by it
hereunder, including pursuant to Section 8.1, and shall have made arrangements
reasonably satisfactory to Buyer to deliver to Buyer as promptly as practicable
after the Closing such records (including customer and employee records)
necessary to own and operate the Business.
(i) No Material Adverse Change. Since the Effective Date, no Material
Adverse Effect shall have occurred that has continuing effect as of the Closing
Date.
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ARTICLE VIII
CLOSING
Section 8.1 Closing. The closing of the purchase and sale of the Assets
(the "Closing") will take place at the offices of ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, on the first
calendar day of the month immediately following the month in which the
conditions specified in Sections 7.1(d) and 7.2(d) have been satisfied, unless
another time, date and place is agreed to in writing by the parties. The date of
the Closing is referred to in this Agreement as the "Closing Date." The
transactions to be consummated on the Closing Date shall be deemed to have been
consummated as of 12:01 a.m. on the Closing Date. At the Closing the following
events shall occur, each event being deemed to have occurred simultaneously with
the other events.
(a) ▇▇▇▇ of Sale. Seller and Buyer shall execute and deliver the ▇▇▇▇ of
Sale and Assignment and Assumption Agreement in the form of Exhibit 8.1(a)
hereto (the "▇▇▇▇ of Sale").
(b) Payment of Purchase Price. Buyer will pay to Seller an amount equal to
the Estimated Purchase Price by wire transferring such amount, in lawful money
of the United States of America in immediately available funds, to such account
as Seller shall have designed by notice to Buyer. If the Closing Date is not a
business day on which financial institutions are open and operating, then on or
before the last business day on which financial institutions are open and
operating before the Closing Date, Buyer shall deliver the Estimated Purchase
Price to Buyer's lead bank (the "Escrow Agent") in immediately available funds
in U.S. dollars. Upon receipt, the Escrow Agent shall invest the Estimated
Purchase Price in an interest-bearing account mutually agreed upon by Seller and
Buyer. At Closing, Buyer shall sign and deliver to Seller a statement which
confirms that the Closing has occurred and which instructs the Escrow Agent to
transfer to Seller the funds representing the Estimated Purchase Price, plus an
amount representing the interest earned on and after the Closing Date until the
date the funds are transferred, to an account that Seller shall designate at
least two (2) business days prior to the date the funds are required to be
transferred hereunder. The Escrow Agent shall refund the balance to Buyer. The
fees and expenses of Escrow Agent shall be paid equally by Seller and Buyer.
(c) Other Related Documents. To the extent consistent with the other
provisions of this Agreement, Seller (or the appropriate Affiliate of Seller)
and Buyer shall execute and deliver such other Related Documents (including
special warranty deeds, conveyances, certificates of title, bills of sale and
assignment and assumption instruments) reasonably requested by a party that are
necessary in order to satisfy any applicable Legal Requirements relating to the
transfer of the Assets to Buyer or the assumption of the Assumed Liabilities by
Buyer or which are customarily given in the State of Hawaii to accomplish
transfers of assets of the type involved; provided, however, that nothing in
this clause (c) shall obligate Seller or any Affiliate of Seller to execute or
deliver any document that affects, in a manner adverse to Seller, Seller's
liability to Buyer as expressed herein and in the ▇▇▇▇ of Sale.
(d) IDRB Indebtedness. Buyer and Seller shall execute and deliver the IDRB
Obligations Agreement contemplated by Section 6.7(a) to the extent not
previously executed and delivered by Buyer and Seller.
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ARTICLE IX
TERMINATION
Section 9.1 Termination Rights. This Agreement may be terminated in its
entirety at any time prior to the Closing:
(a) By the mutual written agreement of Seller and Buyer;
(b) By Buyer, on the one hand, or Seller, on the other hand, in writing if
there shall be in effect a nonappealable Order prohibiting the transactions
contemplated by this Agreement;
(c) By Buyer, upon the breach in any material respect of any of the
representations and warranties of Seller contained herein or in the failure by
Seller to perform and comply in any material respect with any of the agreements
and obligations required by this Agreement to be performed or complied with by
Seller, provided that such breach or failure is reasonably likely to result in a
Material Adverse Effect and is not cured or otherwise addressed by Seller in a
manner reasonably acceptable to Buyer within 30 days of Seller's receipt of a
written notice from Buyer that such a breach or failure has occurred (or
significant efforts have not been commenced to cure such misrepresentation or
breach if it is susceptible to cure but not capable of being cured within such
30 days);
(d) By Seller, upon the breach in any material respect of any of the
representations and warranties of Buyer contained herein or the failure by Buyer
to perform and comply in any material respect with any of the agreements and
obligations required by this Agreement to be performed or complied with by
Buyer, provided that such breach or failure is not cured or otherwise addressed
by Buyer in a manner reasonably acceptable to Seller within 30 days of Buyer's
receipt of a written notice from Seller that such a breach or failure has
occurred (or significant efforts have not been commenced to cure such
misrepresentation or breach if it is susceptible to cure but not capable of
being cured within such 30 days);
(e) By either party in writing if the Closing has not occurred within
twelve (12) months after the Effective Date; provided, however, that the right
to terminate this Agreement under this Section 9.1(e) will not be available to
any party that is in material breach of its representations, warranties,
covenants or agreements contained herein; provided, however, that if Closing has
not occurred within such period of time, then Seller shall have the unilateral
right to extend such period of time by a further six (6) months, and upon
Seller's exercise of such right, such period of time shall be so extended;
(f) By Seller or Buyer, as appropriate, if any Governmental Body whose
Consent is required to fulfill a condition precedent to Closing set forth in
Section 7.1(d) (with respect to Seller) or in Section 7.2(d) (with respect to
Buyer) has affirmatively indicated that such Consent will not be given or will
contain terms or conditions (or, if such Consent has been obtained, contains
terms or conditions) that, in the reasonable business judgment of Seller or
Buyer, as appropriate, will result in a condition precedent to Closing set forth
in Section 7.1(d) (with respect to Seller) or in Section 7.2(d) (with respect to
Buyer) not being satisfied; or
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(g) By Seller if Buyer shall have failed to pay the Purchase Price at
Closing or if Seller reasonably concludes that Buyer does not have available to
it committed sources of funding with which to pay the Purchase Price.
Section 9.2 Limitation on Right to Terminate; Effect of Termination.
(a) A party shall not be allowed to exercise any right of termination
pursuant to Section 9.1 if the event giving rise to the termination right shall
be due to the willful failure of such party seeking to terminate this Agreement
to perform or observe in any material respect any of the covenants or agreements
hereof to be performed or observed by such party.
(b) If this Agreement is terminated as permitted under Section 9.1, such
termination shall be without liability of or to any party to this Agreement, or
any shareholder or Representative of such party; provided, however, that if such
termination shall result from the willful failure of any party to fulfill a
condition to the performance of any other party or to perform a covenant of this
Agreement or from a material and willful breach by any party to this Agreement
(it being understood that the failure to cure a breach shall not, by itself, be
a willful breach of this Agreement), then such party shall (subject to the
limitation set forth in the last sentence of this Section 9.2(b)) be fully
liable for any and all damages sustained or incurred by the other party. If
prior to Closing either party to this Agreement resorts to legal proceedings to
enforce this Agreement, the prevailing party in such proceedings shall be
entitled to recover all costs incurred by such party including reasonable
attorney's fees, in addition to any other relief to which such party may be
entitled; provided, however, and notwithstanding anything to the contrary in
this Agreement, in no event shall either party be entitled to receive any
punitive, indirect or consequential damages.
ARTICLE X
EMPLOYEE MATTERS
Section 10.1 Employment of Transferred Employees.
(a) Schedule 10.1 lists the total number of salaried and hourly, nonunion
and union, employees actively employed as of the Effective Date by Seller or its
Affiliates whose primary duties relate to the Business ("Active Employees"). As
of the Closing Date, Buyer shall employ all Active Employees of Seller employed
in the Business being acquired ("Transferred Employees") in the same or
substantially equivalent positions, and at the same compensation level
(including wages, salary and bonuses) as were in effect with Seller immediately
prior to the Closing Date. For purposes of the preceding sentence, "Active
Employees" shall include all full-time and part-time employees, employees on
military leave, maternity leave, leave under the Family and Medical Leave Act of
1993, on short-term disability, on layoff with recall rights, and employees on
other leaves of absences where there is a legal or contractual right to
reinstatement.
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(b) Prior to the Effective Date, Seller has delivered to Buyer a list of
the persons who would have been Transferred Employees had the Closing Date
occurred on September 30, 2001, showing the following information for each such
person: (i) the name of each such person; (ii) the name of his or her current
employer; (iii) his or her current base pay and 2000 bonus; (iv) his or her hire
date, any rehire date (if available) and years of service; (v) his or her
then-current position and job title; (vi) whether such employee is subject to a
collective bargaining agreement or represented by a labor organization and, if
so, the name of the union and local, (vii) whether such employee is on military
leave, maternity leave, leave under the Family and Medical Leave Act of 1993,
short-term disability, on layoff with recall rights, or on other leave of
absence with a legal or contractual right to reinstatement. Seller shall update
such list reflecting such information as of a date not more than thirty (30)
days prior to the Closing Date and deliver such updated list to Buyer at least
ten (10) days prior to the Closing Date.
Section 10.2 Assumption of Collective Bargaining Agreement Obligations. On
and after the Closing Date, Buyer, shall assume all of the Seller's obligations
under, and be bound by the provisions of, each collective bargaining agreement
to the extent of provisions covering Transferred Employees. Each collective
bargaining agreement shall be identified on a Schedule 10.2 to be prepared by
Seller and submitted to Buyer prior to the Closing Date. Seller shall cooperate
with Buyer in Buyer's efforts to contact the unions representing Transferred
Employees.
Section 10.3 Cessation of Participation in Seller's Plans; Proration of
Bonuses. From and after the Closing Date, Transferred Employees shall accrue no
additional benefits under any employee benefit plan, policy, program or
arrangement of Seller or its Affiliates. Seller and Buyer shall pro-rate the
obligation to pay any bonuses declared by Seller on or after the Closing Date
that would have been payable to the Transferred Employees had the Transferred
Employees remained employed by Seller or its Affiliates throughout the calendar
year in which the Closing Date occurs, in accordance with the provisions of any
policy, plan, practice or arrangement of Seller under which such bonus would
have been paid. Buyer shall be obligated to pay that portion of each such bonus
determined by multiplying the amount of such bonus by a fraction, the numerator
of which is the number of days from and after the Closing Date through the end
of the calendar year in which the Closing Date occurs, and the denominator of
which is 365.
Section 10.4 Similarity of Benefit Packages. As of the Closing Date, and
except as otherwise expressly provided in this Article X, Buyer shall include
each Transferred Employee in a benefit package providing benefits that are in
the aggregate substantially similar to those provided by Seller to such
Transferred Employees immediately prior to the Closing Date. Notwithstanding the
foregoing, to the extent that one or more collective bargaining agreements being
assumed by Buyer contains provisions pertaining to employee benefits, Buyer
shall provide the Transferred Employees covered by such agreements with benefits
that are consistent with the terms of such agreements or are otherwise
acceptable to the applicable Union. For purposes of the preceding sentence,
Buyer's 401(k) Plan (as defined in Section 10.6) shall not be deemed to fail to
provide benefits that are consistent with the terms of the applicable collective
bargaining agreement merely by reason of the fact that (i) matching
contributions under Buyer's 401(k) Plan are made in cash rather than employer
stock, (ii) Buyer's 401(k) Plan offers comparable, but not identical, investment
options to the investment options (other than employer stock) under Seller's
401(k) Plan, and (iii) Buyer's 401(k) Plan employs a different third-party
administrator than Seller's 401(k) Plan. Except as otherwise expressly provided
in this Article X, Buyer shall treat all service and compensation credited to
each such Transferred Employee as if such service and compensation had been
rendered to, and paid by, Buyer for all purposes under Buyer's benefit plans,
arrangements, and policies.
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Section 10.5 Defined Benefit Pension Plan. Seller shall retain all
liabilities and assets for pension benefits accrued through the day immediately
preceding the Closing Date by Transferred Employees under the Citizens' Pension
Plan (the "Seller's Pension Plan"). Buyer shall cause all Transferred Employees
to be included in Buyer's defined benefit plan to be established prior to
Closing ("Buyer's Pension Plan") providing benefits no less valuable than those
provided in Seller's Pension Plan. Buyer shall take all actions necessary to
cause Buyer's Pension Plan to recognize the service that all Transferred
Employees had under Seller's Pension Plan for purposes of such Employees'
eligibility to participate, vesting, attainment of retirement dates, subsidized
benefits, entitlement to optional forms of payment, and benefit accrual;
provided, however, that a Transferred Employee's benefit under Buyer's Pension
Plan shall be offset by his or her accrued benefit under Seller's Pension Plan,
such offset amount to be based on the benefit that would have been available
with respect to such Transferred Employee under the terms of Seller's Pension
Plan had such Seller's Pension Plan benefit commenced on the Transferred
Employee's annuity starting date under Buyer's Pension Plan and been paid in the
same form as the benefit paid under Buyer's Pension Plan.
Section 10.6 401(k) Plan. Seller shall vest Transferred Employees in their
account balances under Citizens 401(k) Savings Plan ("Seller's 401(k) Plan") as
of the Closing Date. Buyer shall take all action necessary to ensure that, as of
the Closing Date, it includes all Transferred Employees in a qualified 401(k)
plan ("Buyer's 401(k) Plan") providing for matching contributions at least
equivalent in value to those provided to the Transferred Employee under Seller's
401(k) Plan immediately prior to the Closing Date. Buyer shall take all actions
necessary to cause Buyer's 401(k) Plan (i) to recognize the service that the
Transferred Employees had in Seller's 401(k) Plan for purposes of determining
such Employees' eligibility to participate, vesting, attainment of retirement
dates, contribution levels and, if applicable, eligibility for optional forms of
benefit payments, and (ii) to accept direct-rollover transfers of Transferred
Employees' account balances in Seller's 401(k) Plan, including transfers of loan
balances and related promissory notes.
Section 10.7 Welfare Benefits.
(a) Buyer shall take all action necessary and appropriate to ensure that,
on and after the Closing Date, Buyer maintains medical, health, dental, flexible
spending account, accident, life, short-term disability, long-term disability
and other employee welfare benefit plans for the benefit of Transferred
Employees that, in the case of nonunion Transferred Employees are substantially
similar to those benefits provided by Seller under its corresponding welfare
benefit plans as in effect immediately prior to the Closing Date (the "Buyer's
Nonunion Welfare Plans"), and in the case of union Transferred Employees are
consistent with the terms of the applicable collective bargaining agreement or
are otherwise acceptable to the applicable Union (the "Buyer's Bargained Welfare
Plans"). The Buyer's Nonunion Welfare Plans and the Buyer's Bargained Welfare
Plans are hereinafter referred to collectively as the "Buyer Welfare Plans." For
purposes of determining eligibility to participate, and entitlement to benefits,
in each Buyer Welfare Plan, each Transferred Employee shall be credited with
service, determined under the terms of the corresponding welfare plans
maintained by Seller immediately prior to the Closing Date (hereinafter referred
to collectively as the "Seller Welfare Plans"). Any restrictions on coverage for
pre-existing conditions, actively at work requirements, waiting periods, and
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived in the Buyer Welfare Plans for Transferred Employees, and Transferred
Employees shall receive credit under the Buyer Welfare Plans for co-payments,
payments under a deductible limit made by them, and for out-of-pocket maximums
applicable to them during the plan year of the Seller Welfare Plan in which the
Closing Date occurs. As soon as practicable on or after the Closing Date, Seller
shall deliver to Buyer a list of the Transferred Employees who had credited
service under a Seller Welfare Plan, together with each such Transferred
Employee's service, co-payment, deductible and out-of-pocket payment amounts
under such plan.
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(b) Buyer shall provide or cause to be provided retiree medical, dental,
and life benefits to each retiree of the Business identified in Schedule 10.7 as
updated as of the Closing Date (the "Retirees") and to each Transferred Employee
who is considered to be a "grandfathered employee" (as hereinafter defined)
under the same terms and conditions as applied to such Retiree or Transferred
Employee immediately prior to the Closing Date, and Seller shall have no
obligation or liability, contingent or otherwise, to provide retiree medical,
dental or life benefits to any such Retiree or Transferred Employee on or after
the Closing Date. For purposes of this Section 10.7, a "grandfathered employee"
is a union or nonunion Transferred Employee who met "Rule 55" (meaning such
employee's age plus years of service equaled or exceeded fifty-five (55)) as of
November 30, 1998. Schedule 10.7 identifies, as of December 31, 2001, each
Retiree and each Active Employee who is a "grandfathered employee." Seller shall
update and deliver to Buyer an updated Schedule 10.7 concurrently with Seller's
updating and delivery to Buyer of the updated list required by Section 10.1(b).
Buyer agrees not to terminate or materially modify those post-retirement benefit
provisions covering "grandfathered" Transferred Employees, Retirees, their
spouses and dependents that are in effect immediately prior to the Closing Date.
(c) Within sixty (60) days after the Closing Date, Seller agrees to
transfer to an exempt trust established by Buyer under Section 501(c)(9) of the
IRC ("Buyer's VEBA") the amount held under any trust established by Seller under
Section 501(c)(9) of the IRC ("Seller's VEBA") to fund post-retirement health
care and life insurance benefits for the Business. Such amount shall be
determined based upon the records of Seller and any third Person engaged by
Seller to administer Seller's VEBA. Buyer agrees that Buyer's VEBA will apply an
amount at least equal to the sum of the assets transferred from Seller's VEBA
(and earnings thereon calculated at the rate of return generated by Buyer's
VEBA) to provide post-retirement health care and life insurance benefits on and
after the Closing Date to the Retirees and, as applicable, the Transferred
Employees who become eligible for such benefits after Closing. Upon Closing,
Buyer shall be responsible for all obligations of Seller to provide
post-retirement health care and life insurance benefits to such Transferred
Employees and Retirees, and Seller and Seller's VEBA shall cease to have any
liability, contingent or otherwise, for such benefits.
Section 10.8 Flexible Spending Accounts. Within sixty (60) days after the
Closing Date, 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 date immediately prior to the Closing Date. As soon as
practicable after the Closing Date, Seller shall provide to Buyer 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 date immediately prior to the Closing Date.
Section 10.9 Employment Agreements. Buyer shall assume all obligations of
each employment agreement to which Seller or its Affiliates is a party and which
covers any Transferred Employee immediately prior to the Closing Date.
Section 10.10 Vacation. Seller shall pay to Transferred Employees any
"banked" vacation credited to them prior to the Closing Date. On and after the
Closing Date, Buyer shall provide to each Transferred Employee vacation in an
amount equal to the Transferred Employee's vacation entitlement for the year of
the Closing reduced by the number of vacation days that such Transferred
Employee has taken prior to the Closing.
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Section 10.11 Severance. In the event that Buyer terminates the services of
any Transferred Employee within twenty-four (24) months following the Closing
Date without cause, Buyer shall provide to any such Transferred Employee
severance or separation pay benefits that are at least equal to the severance or
separation pay benefits that would have been paid by Seller had Seller continued
to employ such Transferred Employee through the period ending on the employee's
date of termination from Buyer, based on Seller's severance or separation pay
program at the Closing Date; provided, however, that if a collective bargaining
agreement that is applicable to a union Transferred Employee would provide for a
greater benefit to be paid by Buyer, the terms and conditions of such agreement
shall instead be applicable.
Section 10.12 Plant Closing Notice. Upon not less than 60 days' written
notice from Buyer of Buyer's then present intention to terminate any Transferred
Employees after the Closing, Seller shall give any notice required to be given
by Seller under Chapter 394B, Hawaii Revised Statutes, as amended. Buyer shall
have the right to review and approve such notice prior to Seller's release of
the same. Seller shall not be obligated to provide any notice if in Seller's
reasonable opinion, after consultation with counsel and with Buyer, such action
(including the content of such notice) reasonably could result in Seller's
violation of any Legal Requirement or Order.
ARTICLE XI
TAX MATTERS
Section 11.1 Purchase Price Allocation. Prior to the Closing Date, Buyer
and Seller shall use their good faith efforts to agree upon the allocation (the
"Allocation") of the Purchase Price, the Assumed Liabilities and other relevant
items (including, for example, adjustments to the Purchase Price) to the
individual assets or classes of assets within the meaning of Section 1060 of the
IRC. If Buyer and Seller agree to such Allocation prior to Closing, Buyer and
Seller covenant and agree that (i) the values assigned to the assets by the
parties' mutual agreement shall be conclusive and final for all purposes, and
(ii) neither Buyer nor Seller will take any position before any Governmental
Body or in any Proceeding that is in any way inconsistent with such Allocation.
Notwithstanding the foregoing, if Buyer and Seller cannot agree to an
Allocation, Buyer and Seller covenant and agree to file, and to cause their
respective Affiliates to file, all Tax Returns and schedules thereto (including,
for example, amended returns, claims for refund, and those returns and forms
required under Section 1060 of the IRC and any Treasury regulations promulgated
thereunder) consistent with each of such party's good faith Allocations, unless
otherwise required because of a change in any Legal Requirement.
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Section 11.2 Cooperation with Respect to Like-Kind Exchange. Buyer agrees
that Seller may, at Seller's election prior to the Closing Date, direct that all
or a portion of the Purchase Price be delivered to a "qualified intermediary"
(as defined in Treasury Regulation ss.1.1031(k) - (g)(4)) as to enable Seller's
relinquishment of the Assets to qualify as part of a like-kind exchange of
property covered by Section 1031 of the IRC. If Seller so elects, Buyer shall
cooperate with Seller (but without being required to incur any out-of-pocket
costs in the course thereof) in connection with Seller's efforts to effect such
like-kind exchange, which cooperation shall include, without limitation, taking
such actions as Seller requests in order to enable Seller to qualify such
transfer as part of a like-kind exchange of property covered by Section 1031 of
the IRC (including any actions required to facilitate the use of a "qualified
intermediary"), and Buyer agrees that Seller may assign all or part of its
rights and delegate all or part of its obligations under this Agreement to a
person or entity acting as a qualified intermediary to qualify the transfer of
the Assets as part of a like-kind exchange of property covered by Section 1031
of the IRC. Buyer and Seller agree in good faith to use reasonable efforts to
coordinate the transactions contemplated by this Agreement with any other
transactions engaged in by either Buyer or Seller; provided that such efforts
are not required to include an unreasonable delay in the consummation of the
transactions contemplated by this Agreement.
Section 11.3 Transaction Taxes. Buyer shall bear and be responsible for
paying any Hawaii sales, use, transfer, documentary, registration, business and
occupation and other similar Taxes, other than Hawaii General Excise Taxes, if
any, (including related penalties (civil or criminal), additions to tax and
interest) imposed with respect to the transfer of Assets (including the Real
Property) to Buyer ("Transaction Taxes"), regardless of whether the tax
authority seeks to collect such Taxes from Seller or Buyer. Seller shall prepare
all tax filings related to any Transaction Taxes (other than with respect to
Real Property and motor vehicle title transfer and registration, which shall be
prepared by Buyer). Seller shall bear and be responsible for any costs similar
to Transaction Taxes imposed by any Governmental Body other than the State of
Hawaii or one of its political subdivisions. Fifteen (15) days prior to making
any such filings, the filing party shall provide to the nonfiling party the
filing party's work papers for the nonfiling party's review and approval. Ten
(10) days prior to the filing date, the non-filing party shall provide to the
filing party approval of such work papers. Buyer shall also be responsible for
(i) administering the payment of such Transaction Taxes, (ii) defending or
pursuing any Proceedings related thereto, and (iii) paying any expenses related
thereto. Seller shall give prompt written notice to Buyer of any proposed
adjustment or assessment of any Transaction Taxes with respect to the
transaction, or of any examination of said transaction in a sales, use, transfer
or similar tax audit. In any proceedings, whether formal or informal, Seller
shall permit Buyer to participate and control the defense of such proceeding and
shall take all actions and execute all documents required to allow such
participation. Seller shall not negotiate a settlement or compromise of any
Transaction Taxes without the prior written consent of Buyer, which consent
shall not be unreasonably withheld.
Section 11.4 Taxes Based on Revenues. All Taxes arising with respect to the
revenues of the Business shall be prorated between Buyer and Seller, with Seller
being obligated to reimburse Buyer only for the portion of any such Tax that is
applicable to the cash received by Seller prior to the Closing Date that relates
to the revenues of the Business being taxed. Upon receipt by Buyer of the tax
▇▇▇▇, invoice or other statement regarding such Taxes, Buyer shall calculate the
pro rata share of such tax ▇▇▇▇, invoice or other statement attributable to
Buyer and Seller. Buyer then shall forward, as soon as practicable, to Seller a
copy of such tax ▇▇▇▇, invoice or statement along with the supporting
documentation relating to the calculation of the pro rata share to Seller.
Seller then shall forward to Buyer payment in immediately available funds of its
pro rata share of such Taxes as soon as practicable in advance of the due date
of the tax ▇▇▇▇, invoice or statement and in time to avoid the incurrence of
penalties or interest. Upon its receipt of such payment, Buyer will pay the full
amount of the tax ▇▇▇▇, invoice or statement to the applicable taxing authority.
In the event Seller first receives a tax ▇▇▇▇, invoice or statement relating to
the revenues of the Business from a taxing authority, Seller shall immediately
forward such tax ▇▇▇▇, invoice or statement to Buyer.
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ARTICLE XII
ENVIRONMENTAL MATTERS
Section 12.1 Environmental Due Diligence.
(a) Right to Conduct Environmental Due Diligence. Regarding environmental
matters, other than any additional environmental due diligence that Buyer may
conduct pursuant to this Section 12.1, Buyer has completed its reasonable and
prudent environmental due diligence prior to the Effective Date, including a
review of the Environmental Data and Phase I environmental assessments of the
Assets. Buyer also has required Seller to make the representations concerning
environmental matters set forth in Section 5.14, upon which Buyer is relying. In
light of these actions, Buyer agrees not to conduct additional environmental due
diligence (including employee interviews and sampling of any media or
wastewater) except in accordance with this Section 12.1. All activities of Buyer
regarding environmental due diligence shall be conducted to minimize any
inconvenience or interruption of the normal use and enjoyment of the Business
and the Assets.
(b) Delivery of Environmental Reports. Seller has made available to Buyer
before the Effective Date copies of all written environmental audits, reports or
studies in Seller's possession of which Seller has Knowledge and which were
prepared after December 31, 1996 (including any updated environmental audits,
reports and studies regarding the foregoing which were prepared after the date
of execution of the Original Agreement), concerning the existence or possible
existence of Hazardous Materials on, or under or adjacent to any of the Real
Property or relating to potential Environmental Liability of Seller in
connection with the Business or the Assets. Buyer shall provide to Seller copies
of all reports, assessments and other information composed or compiled by Buyer
or Buyer's environmental consultant(s) promptly following Buyer's receipt
thereof. Buyer shall treat all such information delivered to, or composed or
compiled by, Buyer or Buyer's environmental consultant(s) as Environmental Data
in accordance with the procedures of Section 12.1(c).
(c) Confidentiality of Environmental Data. All audits, reports and studies
delivered to or prepared by Buyer and all other information collected and
generated as a result of Buyer's environmental due diligence ("Environmental
Data") will be subject to the terms and conditions of the Confidentiality
Agreement, except as otherwise expressly provided in this Section 12.1. Neither
Buyer nor its environmental consultant(s) shall disclose or release any
Environmental Data without the prior written consent of Seller and all such
information shall be kept strictly confidential. The Environmental Data shall be
prepared at the request of counsel to Buyer and, to the fullest extent permitted
by law, shall be the work product of such counsel and constitute confidential
attorney/client communications. The Environmental Data shall be transferred
among Buyer and its consultant(s) in a manner that will preserve, to the
greatest extent possible, such privileges. Buyer expressly agrees that until the
Closing, it will not distribute the Environmental Data to any third party
without Seller's prior written consent. After the Closing, Buyer agrees that it
will not distribute the Environmental Data to any third party without Seller's
prior written consent, except as required by law or by express provisions of
Buyer's corporate compliance program if Seller is provided written notice at
least ten (10) days prior to such distribution, provided, however, that for a
period of two (2) years after the Closing Date, Buyer may distribute the
Environmental Data to any potential purchaser of the Assets only after first
notifying the Seller.
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(d) Environmental Consultants. Buyer may retain one or more outside
environmental consultants to assist in its environmental due diligence
concerning the Assets and shall notify Seller of the environmental consultant or
consultants Buyer intends to retain. Thereafter, Seller shall have five (5) days
after receipt of such notification to notify Buyer in writing of Seller's
objection (which must be for good cause) and substantiate the basis for that
objection. If Seller does not object for good cause and substantiate that
objection within said five (5) day period, Seller shall be deemed to have
consented to Buyer's selection.
(e) Completed Phase I Reviews. Buyer has completed its Phase I
environmental assessment activities with respect to the Assets, including
reviewing existing environmental reports, correspondence, permits and related
materials regarding the Assets, individual site inspections and all other Phase
I activities as set forth in the ASTM protocol regarding Phase I environmental
assessments, and has delivered to Seller a true and complete copy of the related
Phase I assessment report from Buyer's environmental consultant. The parties
mutually acknowledge that all incidents and conditions addressed in such Phase I
assessment report comprise either incidents and conditions that had been
previously disclosed by Seller in writing to Buyer or, with respect to the
previously undisclosed incidents and conditions, are incidents and conditions
that are not reasonably likely to result in any significant Environmental
Liabilities.
(f) Further Phase I Reviews. Buyer may not conduct any further Phase I
environmental assessment activities with respect to the Assets without the prior
written consent of Seller, which consent may be withheld, conditioned or delayed
by Seller in its sole discretion. Any further Phase I environmental assessment
activities permitted by Seller shall not include any sampling or intrusive
testing and shall be conducted in accordance with ASTM standards regarding Phase
I assessments. As soon as reasonably practicable after completion of any further
Phase I assessment activities, Buyer's environmental consultant shall prepare
and deliver to Buyer a written report with respect thereto.
(g) Phase II Reviews. Buyer may not conduct any Phase II environmental
assessment activities with respect to the Assets (including, but not limited to,
the taking and analysis of soil, surface water and groundwater samples, testing
of buildings, drilling ▇▇▇▇▇, taking soil borings and excavating) without the
prior written consent of Seller, which consent may be withheld, conditioned or
delayed by Seller in its sole discretion.
(h) Additional Due Diligence. Notwithstanding the foregoing, if prior to
Closing Seller receives notice of any Proceeding or Threatened Proceeding
arising under Environmental Laws or if Seller otherwise acquires Knowledge that
is reasonably likely to require a change to Schedule 5.14, Seller promptly shall
notify Buyer of the same and Buyer may request that Seller authorize Buyer to
conduct specific additional environmental due diligence measures if and to the
extent that such measures are required to determine the extent of any potential
Environmental Liability relating thereto. Such authorization shall not be
unreasonably withheld, conditioned or delayed by Seller. Any such additional
environmental due diligence shall be conducted at Buyer's sole expense. Within
ten (10) days following the completion of any additional environmental due
diligence conducted by Buyer pursuant to this Section 12.1(h), Buyer shall
notify Seller of each incident of potential Environmental Liability of Seller
that Buyer in good faith has determined is reasonably likely to result in Losses
in excess of $1,000,000 (each, a "New Material Environmental Liability"). Prior
to Closing, Seller may respond to and remedy any New Material Environmental
Liability. Any New Material Environmental Liability not responded to and
remedied by Seller to Buyer's reasonable satisfaction shall be considered a
Retained Environmental Liability for purposes of this Agreement.
37
(i) Indemnity for Due Diligence Activities. Buyer hereby agrees to
indemnify and hold harmless Seller, Seller's Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and against
any and all Losses with respect to persons or property arising out of or in
connection with any site visit by Buyer or its environmental consultant(s) and
resulting from an act or omission of Buyer or its environmental consultant(s).
ARTICLE XIII
INDEMNIFICATION
Section 13.1 Indemnification by Seller. From and after Closing and subject
to the other provisions of this Article XIII, Seller shall indemnify and hold
harmless Buyer, its Representatives, Affiliates, successors and permitted
assigns (collectively, the "Buyer Indemnitees") from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Seller in this Agreement not
being true and correct when made or when required by this Agreement to be true
and correct, or any breach or default by Seller in the performance of its
covenants, agreements, or obligations under this Agreement required to be
performed prior to Closing;
(b) any breach or default by Seller in the performance of its covenants,
agreements, or obligations under this Agreement required to be performed after
Closing; and
(c) the Retained Liabilities, including the Retained Environmental
Liabilities.
Section 13.2 Indemnification by Buyer. From and after Closing and subject
to the other provisions of this Article XIII, Buyer shall indemnify and hold
harmless Seller, its Representatives, Affiliates, successors and permitted
assigns (collectively, the "Seller Indemnitees") from and against any and all
Losses arising out of or resulting from:
(a) any representations and warranties made by Buyer in this Agreement not
being true and correct when made or when required by this Agreement to be true
and correct, or any breach or default by Buyer in the performance of its
covenants, agreements, or obligations under this Agreement required to be
performed prior to Closing;
(b) any breach or default by Buyer in the performance of its covenants,
agreements, or obligations under this Agreement required to be performed after
Closing, including the Buyer's IDRB Obligations;
(c) Assumed Liabilities, including the Assumed Environmental Liabilities;
and
(d) any event as a result of which the interest on the Bonds may be
included in the gross income of the recipient for purposes of federal income
taxation, to the extent such event arises out of or results from any act,
negligence, fault or failure of Buyer or any assignee, lessee or successor of
Buyer, including any violation of the representations, warranties, covenants and
agreements set forth in Section 6.7(a) or in the IDRB Obligations Agreement
executed and delivered by Buyer in accordance with Sections 6.7(a) and 8.1(d).
38
Section 13.3 Limitations on Seller's Liability. Notwithstanding anything to
the contrary in this Agreement, the liability of Seller under this Agreement and
any documents delivered in connection herewith or contemplated hereby shall be
limited as follows:
(a) IN NO EVENT SHALL SELLER BE LIABLE TO THE BUYER INDEMNITEES FOR ANY
EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE
DAMAGES; provided, however, that if Buyer is held liable to a third party for
any of such damages and Seller is obligated to indemnify Buyer for the matter
that gave rise to such damages, then Seller shall be liable for, and obligated
to reimburse Buyer for, such damages.
(b) The representations, warranties, covenants and agreements of Seller set
forth in this Agreement shall survive the Closing for a period of one year, and
all representations, warranties, covenants and agreements of Seller under this
Agreement and the indemnities granted by Seller in Section 13.1 shall terminate
at 5:00 p.m., local time in Stamford, Connecticut, on the first anniversary of
the Closing Date; provided, however, that such indemnities shall survive with
respect only to the specific matters that is the subject of a proper Claim
Notice delivered in good faith in compliance with the requirements of this
Section 13.3 until the earlier to occur of (A) the date on which a final
nonappealable resolution of the matter described in such Claim Notice has been
reached or (B) the date on which the matter described in such Claim Notice has
otherwise reached final resolution. In no event shall any amounts be recovered
from Seller under Section 13.1 or otherwise for any matter for which a Claim
Notice is not delivered to Seller prior to the close of business on the
applicable date set forth above.
(c) Notwithstanding anything to the contrary in this Agreement, in no event
shall Seller indemnify the Buyer Indemnitees, or be otherwise liable in any way
whatsoever to the Buyer Indemnitees, for any Losses until the Buyer Indemnitees
have suffered Losses (determined after giving effect to the provisions of
Section 13.3(f)) that are in excess of a deductible in an amount equal to
$5,400,000, after which point Seller will be obligated only to indemnify the
Buyer Indemnitees from and against further Losses in excess of such deductible.
(d) Notwithstanding anything to the contrary in this Agreement, in no event
shall Seller indemnify the Buyer Indemnitees, or be otherwise liable in any way
whatsoever to the Buyer Indemnitees, for any Losses that are in excess of an
amount equal to $5,400,000.
(e) No amount shall be recovered from Seller for the breach or untruth of
any of Seller's representations, warranties, covenants or agreements, or for any
other matter, to the extent that Buyer had knowledge of such breach, untruth or
other matter prior to the Closing, nor shall Buyer be entitled to rescission
with respect to any such matter.
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(f) Seller shall have no liability for any claim or Loss (A) that is
covered by insurance maintained by or for the benefit of Buyer or any Affiliate
of Buyer (including any such insurance coverage applicable to the Business the
benefit of which the Buyer will realize) or for which Buyer otherwise recovers
payments in respect of such Loss from any other sources (whether in a lump sum
or stream of payments) or (B) that is the type normally recoverable by the
Business through rates. No cost or expense relating to any such claim or Loss
shall be included in determining the extent of Losses suffered by the Buyer
Indemnitees for purposes of Section 13.3(c) or Section 13.3(d). Buyer agrees to
use its commercially reasonable efforts to give timely and effective written
notice to the appropriate insurance carrier(s) of any occurrence or
circumstances which, in the judgment of Buyer consistent with its customary risk
management practices, appear likely to give rise to a claim against Buyer that
is likely to involve one or more insurance policies of Buyer. Any such notice
shall be given in good faith by Buyer without regard to the possibility of
indemnification payments by Seller under Section 13.1, and shall be processed by
Buyer in good faith and in a manner consistent with its risk management
practices involving claims for which no third party contractual indemnification
is available. Buyer agrees that (i) if it is entitled to receive payment from
Seller for a Loss, and (ii) if Buyer has obtained insurance which may cover the
claim or matter giving rise to such Loss, then (iii) such insurance shall be
primary coverage and Buyer will make a claim under such insurance (if such claim
can be made in good faith) before enforcing its right to receive payment from
Seller. If at any time subsequent to the receipt by a Buyer Indemnitee of an
indemnity payment from Seller hereunder, such Buyer Indemnitee (or any Affiliate
thereof) receives any recovery, settlement or other similar payment with respect
to the Loss for which it receives such indemnity payment, such Buyer Indemnitee
shall promptly pay to Seller an amount equal to the amount of such recovery,
less (for insurance proceeds only) any out-of-pocket costs incurred by such
Buyer Indemnitee (or its Affiliates) in connection with claim preparation and
settlement, but in no event shall any such payment exceed the amount of such
indemnity payment; provided, that if such net recover reduces the amount of
Losses actually incurred by the Buyer Indemnitees below the deductible amount
set forth in Section 13.3(c) and if Seller has made other payments to the Buyer
Indemnitees for other Losses in excess of such deductible amount, then Buyer
also shall promptly pay to Seller an amount equal to the portion of such
payments made by Seller that Seller would not have been obligated to make
pursuant to Section 13.3(c) had the Losses of the Buyer Indemnitees not included
the Losses covered by such net recovery. No other costs or expense relating to
any such recovery shall reduce the amount of such payment to Seller.
(g) Notwithstanding any language contained in any Related Document
(including deeds and other conveyance documents relating to the Real Property),
the representations and warranties of Seller set forth in this Agreement will
not be merged into any such Related Document and the indemnification obligations
of Seller, and the limitations on such obligations, set forth in this Agreement
shall control. No provision set forth in any such Related Document shall be
deemed to enlarge, alter or amend the terms or provisions of this Agreement.
Section 13.4 Claims Procedure.
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(a) All claims for indemnification under Section 13.1 or 13.2, or any other
provision of this Agreement except as otherwise expressly provided in this
Agreement, shall be asserted and resolved pursuant to this Article XIII. Any
Person claiming indemnification hereunder referred to as the "Indemnified Party"
and any Person against whom such claims are asserted hereunder is hereinafter
referred to as the "Indemnifying Party." In the event that any Losses are
asserted against or sought to be collected from an Indemnified Party by a third
party, said Indemnified Party shall with reasonable promptness provide to the
Indemnifying Party a Claim Notice. The Indemnifying Party shall not be obligated
to indemnify the Indemnified Party with respect to any such Losses if the
Indemnified Party fails to notify the Indemnifying Party thereof in accordance
with the provisions of this Agreement in reasonably sufficient time so that the
Indemnifying Party's ability to defend against the Losses is not prejudiced. The
Indemnifying Party shall have 30 days from the personal delivery or receipt of
the Claim Notice (the "Notice Period") to notify the Indemnified Party (i)
whether or not it disputes the liability of the Indemnifying Party to the
Indemnified Party hereunder with respect to such Losses and/or (ii) whether or
not it desires, at the sole cost and expense of the Indemnifying Party, to
defend the Indemnified Party against such Losses; provided, however, that any
Indemnified Party is hereby authorized prior to and during the Notice Period to
file any motion, answer or other pleading that it shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party (and of
which it shall have given notice and opportunity to comment to the Indemnifying
Party) and not prejudicial to the Indemnifying Party. In the event that the
Indemnifying Party notifies the Indemnified Party within the Notice Period that
it desires to defend the Indemnified Party against such Losses, the Indemnifying
Party shall have the right to defend all appropriate proceedings, and with
counsel of its own choosing, which proceedings shall be promptly settled or
prosecuted by them to a final conclusion. If the Indemnified Party desires to
participate in, but not control, any such defense or settlement it may do so at
its sole cost and expense. If requested by the Indemnifying Party, the
Indemnified Party agrees to cooperate with the Indemnifying Party and its
counsel in contesting any Losses that the Indemnifying Party elects to contest
or, if appropriate and related to the claim in question, in making any
counterclaim against the Person asserting the third party Losses, or any
cross-complaint against any Person. No claim may be settled or otherwise
compromised without the prior written consent of the Indemnifying Party.
(b) The Indemnified Party shall provide reasonable assistance to the
Indemnifying Party and provide access to its books, records and personnel as the
Indemnifying Party reasonably requests in connection with the investigation or
defense of the Losses. The Indemnifying Party shall promptly upon receipt of
reasonable supporting documentation reimburse the Indemnified Party for
out-of-pocket costs and expenses incurred by the latter in providing the
requested assistance.
(c) With regard to third party claims for which Buyer or Seller is entitled
to indemnification under Section 13.1 or 13.2, such indemnification shall be
paid by the Indemnifying Party upon: (i) the entry of an Order against the
Indemnified Party and the expiration of any applicable appeal period; or (ii) a
settlement with the consent of the Indemnifying Party, provided that no such
consent need be obtained if the Indemnifying Party fails to respond to the Claim
Notice as provided in Section 13.4(a). Notwithstanding the foregoing but subject
to Section 13.4(a), and provided that there is no dispute as to the
applicability of indemnification, expenses of counsel to the Indemnified Party
shall be reimbursed on a current basis by the Indemnifying Party as if such
expenses are a liability of the Indemnifying Party.
Section 13.5 Exclusive Remedy. Except as otherwise provided in Section 6.4
or 14.6, the rights, remedies and obligations of the Buyer Indemnitees and the
Seller Indemnitees set forth in this Article XIII will be the exclusive rights,
remedies and obligations of such Persons after the Closing with respect to this
Agreement, the events giving rise to this Agreement and the transactions
provided for herein or contemplated hereby or thereby. No Proceeding for
termination or rescission, or claiming repudiation, of this Agreement or the
▇▇▇▇ of Sale may be brought or maintained by either party against the other on
and after the Closing Date no matter how severe, grave or fundamental any
breach, default or nonperformance may be by one party. Accordingly, the parties
hereby expressly waive and forego any and all rights they may possess to bring
any such Proceeding.
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Section 13.6 Indemnification for Negligence. WITHOUT LIMITING OR ENLARGING
THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS AGREEMENT, AN
INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN ACCORDANCE
WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM GIVING RISE TO
SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY, VIOLATION OF ANY LAW OR OTHER LEGAL
FAULT OF OR BY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH
CONSTITUTES A CONSPICUOUS LEGEND.
Section 13.7 Waiver and Release. Buyer, on behalf of itself and each other
Buyer Indemnitee, hereby forever waives, relieves, releases and discharges the
Seller Indemnitees and their successors and assigns from any and all rights,
liabilities, Proceedings (including future Proceedings) and Losses of any Buyer
Indemnitee, whether known or unknown on the Closing Date, which any Buyer
Indemnitee has or incurs, or may in the future have or incur, arising out of or
related to any Assumed Environmental Liability.
ARTICLE XIV
GENERAL PROVISIONS
Section 14.1 Expenses. Except as otherwise specifically provided herein,
each Party will pay all costs and expenses of its performance of and compliance
with this Agreement, except Buyer will pay all real estate transfer taxes and
real estate recording fees, if any, including expenses of counsel associated
with real estate title, transfer and recording issues.
Section 14.2 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been given upon
receipt if either (a) personally delivered, (b) sent by prepaid first class
mail, and registered or certified and a return receipt requested (c) sent by
overnight delivery via a nationally recognized carrier or (d) by facsimile with
completed transmission acknowledged:
If to Seller, to:
Citizens Communications Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Citizens Communications Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and:
42
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer, to:
Kauai Island Utility Co-Op
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ #▇▇▇
▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chairman
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP ▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address or number as shall be given in writing by a party to
the other party.
Section 14.3 Assignment. This Agreement may not be assigned, by operation
of law or otherwise, by any party hereto without the prior written consent of
the other party hereto, such consent not to be unreasonably withheld; provided,
however, in the event of any such assignment by a party by operation of law
without the consent of the other party as required above, such other party may
consent to such assignment after it has occurred and, in such event, this
Agreement and all the provisions hereof shall be binding upon the Person
receiving such assignment by operation of law. Notwithstanding the foregoing,
(a) Buyer may assign this Agreement, without the prior written consent of
Seller, to any direct or indirect wholly-owned subsidiary of Buyer provided such
subsidiary assumes in writing all of the duties and obligations of Buyer
hereunder (provided that no such assignment by Buyer shall in any way operate to
enlarge, alter or change any obligation due to Seller or relieve Buyer of its
obligations hereunder if such subsidiary fails to perform such obligations, with
the understanding that Buyer shall be jointly and severally liable with such
subsidiary for any nonperformance of Buyer's obligations hereunder); and (b)
Seller may assign all or part of its rights or delegate all or part of its
duties under this Agreement, without the prior written consent of Buyer, to a
qualified intermediary chosen by Seller to structure all or part of the
transactions contemplated hereby as a like-kind exchange of property covered by
Section 1031 of the IRC.
Section 14.4 Successor Bound. Subject to the provisions of Section 14.3,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
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Section 14.5 Governing Law. The validity, performance, and enforcement of
this Agreement and all Related Documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of Delaware without giving
effect to the principles of conflicts of law of such state.
Section 14.6 Dispute Resolution. Except as otherwise provided in Sections
3.2(b) and 6.4, and this Section 14.6, any dispute, controversy or claim between
the parties relating to, arising out of or in connection with this Agreement (or
any subsequent agreements or amendments thereto), including as to its existence,
enforceability, validity, interpretation, performance or breach or as to
indemnification or damages, including claims in tort, whether arising before or
after the termination of this Agreement (any such dispute, controversy or claim
being herein referred to as a "Dispute") shall be settled without litigation and
only by use of the following alternative dispute resolution procedure:
(a) At the written request of a party, each party shall appoint a
knowledgeable, responsible representative to meet and negotiate in good faith to
resolve any Dispute. The discussions shall be left to the discretion of the
representatives. Upon agreement, the representatives may utilize other
alternative dispute resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the parties' representatives
for purposes of these negotiations shall be treated as confidential information
developed for the purposes of settlement, exempt from discovery and production,
and without the concurrence of both parties shall not be admissible in the
arbitration described below, or in any lawsuit. Documents identified in or
provided with such communications, which are not prepared for purposes of the
negotiations, are not so exempted and may, if otherwise admissible, be admitted
in the arbitration.
(b) If negotiations between the representatives of the parties do not
resolve the Dispute within 60 days of the initial written request, the Dispute
shall be submitted to binding arbitration by a single arbitrator pursuant to the
Commercial Arbitration Rules, as then amended and in effect, of the American
Arbitration Association (the "Rules"). Either party may demand such arbitration
in accordance with the procedures set out in the Rules. The arbitration shall
take place in San Francisco, California. The arbitration hearing shall be
commenced within 60 days of such party's demand for arbitration. The arbitrator
shall have the power to and will instruct each party to produce evidence through
discovery (i) that is reasonably requested by the other party to the arbitration
in order to prepare and substantiate its case and (ii) the production of which
will not materially delay the expeditious resolution of the dispute being
arbitrated; each party hereto agrees to be bound by any such discovery order.
The arbitrator shall control the scheduling (so as to process the matter
expeditiously) and any discovery. The parties may submit written briefs. At the
arbitration hearing, each party may make written and oral presentations to the
arbitrator, present testimony and written evidence and examine witnesses. No
party shall be eligible to receive, and the arbitrator shall not have the
authority to award, exemplary or punitive damages. The arbitrator shall rule on
the Dispute by issuing a written opinion within 30 days after the close of
hearings. The arbitrator's decision shall be binding and final. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction.
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(c) Each party will bear its own costs and expenses in submitting and
presenting its position with respect to any Dispute to the arbitrator; provided,
however, that if the arbitrator determines that the position taken in the
Dispute by the nonprevailing party taken as a whole is unreasonable, the
arbitrator may order the nonprevailing party to bear such fees and expenses, and
reimburse the prevailing party for all or such portion of its reasonable costs
and expenses in submitting and presenting its position, as the arbitrator shall
reasonably determine to be fair under the circumstances. Each party to the
arbitration shall pay one-half of the fees and expenses of the arbitrator and
the American Arbitration Association.
(d) Notwithstanding any other provision of this Agreement, (i) either party
may commence an action to compel compliance with this Section 14.6 and (ii) if
any party, as part of a Dispute, seeks injunctive relief or any other equitable
remedy, including specific enforcement, then such party shall be permitted to
seek such injunctive or equitable relief in any federal or state court or
competent jurisdiction before, during or after the pendency of a mediation or
arbitration proceed under this Section 14.6.
Section 14.7 Cooperation. Each of the parties hereto agrees to use its
reasonable best efforts to take or cause to be taken all action, and to do or
cause to be done all things necessary, proper or advisable under applicable
laws, regulations or otherwise, to consummate and to make effective the
transactions contemplated by this Agreement, including, without limitation, the
timely performance of all actions and things contemplated by this Agreement to
be taken or done by each of the parties hereto.
Section 14.8 Construction of Agreement. The terms and provisions of this
Agreement represent the results of negotiations between Buyer and Seller, each
of which has been represented by counsel of its own choosing, and neither of
which has acted under duress or compulsion, whether legal, economic or
otherwise. Accordingly, the terms and provisions of this Agreement shall be
interpreted and construed in accordance with their usual and customary meanings,
and Buyer and Seller hereby waive the application in connection with the
interpretation and construction of this Agreement of any rule of law to the
effect that ambiguous or conflicting terms or provisions contained in this
Agreement shall be interpreted or construed against the party whose attorney
prepared the executed draft or any earlier draft of this Agreement. It is
understood and agreed that neither the specification of any dollar amount in the
representations and warranties contained in this Agreement nor the inclusion of
any specific item in the Schedules or Exhibits is intended to imply that such
amounts or higher or lower amounts, or the items so included or other items, are
or are not material, and none of the parties shall use the fact of the setting
of such amounts or the fact of any inclusion of any such item in the Schedules
or Exhibits in any dispute or controversy between the parties as to whether any
obligation, item or matter is or is not material for purposes hereof.
Section 14.9 Publicity. No party hereto shall issue, make or cause the
publication of any press release or other announcement with respect to this
Agreement or the transactions contemplated hereby, or otherwise make any
disclosures relating thereto, without the consent of the other party, such
consent not to be unreasonably withheld or delayed; provided, however, that such
consent shall not be required where such release or announcement is required by
applicable law or the rules or regulations of a securities exchange, in which
event the party so required to issue such release or announcement shall
endeavor, wherever possible, to furnish an advance copy of the proposed release
to the other party.
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Section 14.10 Waiver. Except as otherwise expressly provided in this
Agreement, neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such right,
power or privilege preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege available to each party at law
or in equity.
Section 14.11 Parties in Interest. This Agreement (including the documents
and instruments referred to herein) is not intended to confer upon any Person,
other than the parties hereto and their successors and permitted assigns, any
rights or remedies hereunder; provided, however, that the indemnification
provisions in Article XIII shall inure to the benefit of the Buyer Indemnitees
and the Seller Indemnitees as provided therein.
Section 14.12 Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 14.13 Amendment. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
Section 14.14 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto and the documents specifically referred to herein and the Confidentiality
Agreement constitute the entire agreement, understanding, representations and
warranties of the parties hereto, and supersede all prior agreements, both
written and oral, between Buyer and Seller, including the Original Agreement.
All Exhibits and Schedules annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein. Disclosure of any fact or item in any Schedule referenced by a
particular paragraph or Section in this Agreement shall, should the existence of
the fact or item or its contents be relevant to any other paragraph or Section,
be deemed to be disclosed with respect to that other paragraph or Section
whether or not any explicit cross-reference appears therein.
Section 14.15 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 14.16 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the greatest
extent possible.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
CITIZENS COMMUNICATIONS COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Vice Chairman and Executive Vice President
KAUAI ISLAND UTILITY CO-OP
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Chairman
[Signature page to Amended and Restated Purchase and
Sale Agreement (Kauai Electric) between Citizens
Communications Company and Kauai Island Utility
Co-Op.]
47