PURCHASE AND SALE AGREEMENT
(VERMONT ELECTRIC)
between
CITIZENS UTILITIES COMPANY,
CAP ROCK ELECTRIC COOPERATIVE
and
CAP ROCK ENERGY CORPORATION
Dated as of February 11, 2000
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
Section 1.1 Certain Defined Terms 1
Section 1.2 Other Defined Terms 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 Deposit 13
Section 3.3 Calculation of Purchase Price 13
Section 3.4 Prorations and Adjustments as of the Closing Date 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 15
Section 4.1 Organization, Existence and Qualification 15
Section 4.2 Authority Relative to this Agreement and Binding Effect 15
Section 4.3 Governmental Approvals 15
Section 4.4 Availability of Funds 16
Section 4.5 Filings 16
Section 4.6 Brokers 16
Section 4.7 Independent Investigation 16
Section 4.8 Public Utility Holding Company Status; Regulation as a Public Utility 16
Section 4.9 Buyer's Financial Statements 17
Section 4.10 Buyer's Insurance 17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER 17
Section 5.1 Organization, Existence and Qualification 17
Section 5.2 Authority Relative to this Agreement and Binding Effect 17
Section 5.3 Governmental and Other Required Consents 17
Section 5.4 Public Utility Holding Company Status; Regulation as a Public
Utility 18
Section 5.5 Title to Assets; Liens 18
Section 5.6 Financial Statements 18
Section 5.7 Compliance with Legal Requirements; Governmental Permits 19
Section 5.8 Legal Proceedings; Outstanding Orders 19
Section 5.9 Taxes 20
Section 5.10 Intellectual Property 20
Section 5.11 Personal Property 20
Section 5.12 Material Contracts; Existing Loan Documents 20
Section 5.13 Employee Benefit Matters 21
Section 5.14 Environmental Matters 21
Section 5.15 No Material Adverse Change 22
Section 5.16 State and Federal Regulatory Matters 22
Section 5.17 Brokers 23
Section 5.18 Employee Relations 23
Section 5.19 Insurance 23
Section 5.20 Accounts Receivable 23
Section 5.21 Appropriate Knowledge Persons 24
Section 5.22 Disclaimer 24
ARTICLE VI COVENANTS 24
Section 6.1 Covenants of Seller 24
Section 6.2 Covenants of Buyer 27
Section 6.3 Governmental Filings 28
Section 6.4 Citizens Marks 28
Section 6.5 Acknowledgment by Buyer 29
Section 6.6 Transition Plan 29
Section 6.7 Title Insurance 30
Section 6.8 Sale of Generating Assets 30
Section 6.9 Hydro-Quebec Step-up Indemnity Agreement 31
ARTICLE VII CONDITIONS PRECEDENT 31
Section 7.1 Seller's Conditions Precedent to Closing 31
Section 7.2 Buyer's Conditions Precedent to Closing 33
ARTICLE VIII CLOSING 34
Section 8.1 Closing 34
ARTICLE IX TERMINATION 35
Section 9.1 Termination Rights 35
Section 9.2 Limitation on Right to Terminate: Effect of Termination 36
ARTICLE X EMPLOYEE MATTERS 37
Section 10.1 Employment of Transferred Employees 37
Section 10.2 Assumption of Collective Bargaining Agreement Obligations 38
Section 10.3 Cessation of Participation in Seller's Plans; Proration of Bonuses 38
Section 10.4 Similarity of Benefit Packages 38
Section 10.5 Defined Benefit Pension Plan 39
Section 10.6 401(k) Plan 39
Section 10.7 Welfare Benefits 40
Section 10.8 Flexible Spending Accounts 41
Section 10.9 Employment Agreements 41
Section 10.10 Vacation 41
Section 10.11 Severance 41
ARTICLE XI TAX MATTERS 41
Section 11.1 Purchase Price Allocation 41
Section 11.2 Cooperation with Respect to Like-Kind Exchange 42
Section 11.3 Transaction Taxes 42
ARTICLE XII ENVIRONMENTAL MATTERS 43
Section 12.1 Environmental Due Diligence 43
ARTICLE XIII INDEMNIFICATION
Section 13.1 Indemnification by Seller 44
Section 13.2 Indemnification by Buyer 45
Section 13.3 Limitations on Liability 45
Section 13.4 Claims Procedure 48
Section 13.5 Exclusive Remedy 49
Section 13.6 Indemnification for Negligence 49
Section 13.7 Waiver and Release 50
ARTICLE XIV GENERAL PROVISIONS 50
Section 14.1 Expenses 50
Section 14.2 Notices 50
Section 14.3 Assignment 51
Section 14.4 Successor Bound 52
Section 14.5 Governing Law 52
Section 14.6 Dispute Resolution 52
Section 14.7 Cooperation 53
Section 14.8 Construction of Agreement 53
Section 14.9 Publicity 54
Section 14.10 Waiver 54
Section 14.11 Parties in Interest 54
Section 14.12 Section and Paragraph Headings 54
Section 14.13 Amendment 54
Section 14.14 Entire Agreement 54
Section 14.15 Counterparts 54
Section 14.16 Severability 55
LIST OF EXHIBITS
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(a) Excluded Assets
Schedule 1.1(b) Related Purchase Agreements
Schedule 2.2(b) 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 5.11 Extraordinary Required Repairs
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 and Federal Regulatory Matters
Schedule 5.19 Seller's Insurance
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"
PURCHASE AND SALE AGREEMENT
(VERMONT ELECTRIC)
This PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the 1
day of February, 2000, by and between CITIZENS UTILITIES COMPANY, a Delaware
corporation ("Seller"), and CAP ROCK ELECTRIC COOPERATIVE, a Texas corporation,
and CAP ROCK ENERGY CORPORATION, a Texas corporation ("Cap Rock Energy"). Cap
Rock Cooperative and Cap Rock Energy are sometimes referred to in this Agreement
individually as a "Buyer Entity" and collectively as the "Buyer". Capitalized
terms used herein shall have the meanings ascribed to them in Article I, unless
otherwise provided.
WITNESSETH:
WHEREAS, Seller owns all of the Assets; and
WHEREAS, Buyer desires to purchase, and Seller desires to sell, the
Assets, subject in all respects to the provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Article I
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
"Affiliates " or "Affiliated Entities" - entities shall be deemed
"Affiliated as to each other to the extent (i) one of the entities directly or
indirectly controls the other, or the direct or indirect control of one of the
entities is exercised by the officers, directors, stockholders, or partners of
the other entity (whether or not such persons exercise such control in their
capacities as officers, directors, stockholders, or partners) or (ii) is deemed
to be an Affiliate under existing statutes or regulations of the SEC.
"Assets" -- all of the assets, property and interests of every type and
description, real, personal or mixed, tangible and intangible, owned by Seller
and relating primarily to the Business, other than the Excluded Assets.
"Assumed Environmental Liabilities" -- means any of the following:
(a) All Environmental Liabilities of Seller relating to the
Business or the Assets and arising from or relating to the environmental matters
or incidents disclosed by Seller on Schedule 5.14 as of the date of execution of
this Agreement that remain outstanding as of the Closing Date, it being
understood by the parties that the unadjusted Purchase Price reflects Buyer's
estimate of any Losses that could arise after the Closing Date with respect to
such Environmental Liabilities;
(b) All Environmental Liabilities of Seller relating to the
Business or the Assets and arising from or relating to environmental matters or
incidents that are disclosed to Buyer by Seller after the date of execution of
this Agreement (including any additional disclosures appearing on - Schedule
5.14 as revised by Seller and delivered to Buyer prior to the Closing Date) but
prior to the Closing Date that remain outstanding as of the Closing Date,
PROVIDED that any Losses incurred by Buyer in connection with any such
Environmental Liability in any year in excess of $200,000 or in the aggregate
(when-combined with all other Losses incurred by Buyer in connection with its
performance or discharge of other Disclosed Pre-Closing Liabilities) in excess
of $2,000,000 shall be Retained Environmental Liabilities and Seller shall be
obligated to indemnify Buyer pursuant to Section 13.1 (but subject to the
applicable limitations on such obligations provided in Section 13.3(f)) for such
Losses incurred by Buyer in the amount of such excess; and
(c) Any other Environmental Liability relating to the
Business, the Assets, Buyer or any Affiliate, successor or assign of Buyer, to
the extent arising or relating to the period 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.
"Business" - means collectively:
(a) the electricity, generation, transmission and distribution
business conducted by Seller within the State of Vermont through its Vermont
Electric division; and
(b) the provision of related services and products and the
engagement in related activities by Seller within the State of Vermont through
its Vermont Electric division.
"Capital Budget" - means the capital budget for the Business
approved by the Board of Directors of Seller for the year 2000.
"Claim Notice" - means a written notice of a claim given by a
party seeking indemnification pursuant to the terms of this Agreement that
specifies in reasonable detail the nature of the Losses and the estimated amount
of such Losses.
"Confidentiality Agreement" - means that certain confidentiality
agreement dated October 21, 1999, between Buyer and Seller.
"Consent" -- any approval, consent, ratification, waiver, license,
permit, registration, certificate, exemption, legal statute, order,
determination 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.
"Disclosed Pre-Closing Liabilities" means any and all liabilities and
obligations relating to or arising from Seller's ownership of the Assets or
Seller's conduct or operation of the Business on or prior to the Closing Date
that were not disclosed in any Schedule to this Agreement as of the date of
execution of this Agreement (and with respect to which Seller had no Knowledge
as of the date of execution of this Agreement) and that are disclosed to Buyer
by Seller after the date of execution of this Agreement to the extent remaining
outstanding or undischarged as of the Closing Date, including the Environmental
Liabilities described in clause (b) of the definition of Assumed Environmental
Liabilities and the Proceedings described in Section 2.2(c), but expressly
excluding any such liabilities and obligations that are Retained Liabilities
pursuant to Section 2.3(a), (b), (c) or (d) or with respect to which the
Purchase Price is reduced (but only to the extent reduced).
"Easements" - means all easements, rights of way, permits, licenses,
and other ways of necessity, whether or not of record.
"Encumbrances" - any charge, adverse claim, lien, mortgage, pledge or
security interest.
"Environmental Law"- any Order or Legal Requirement, and any judicial
and administrative interpretation there of and related policies, guidelines and
standards, relating to pollution or protection of the environment and natural
resources, including those relating to (a) emissions, discharges, Releases or
threatened Releases of Hazardous Material into the environment (including
ambient air, surface water, groundwater or land), and (b) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Material, each as in effect as of the date of
determination.
"Environmental Liability" -- means any liability, responsibility or
obligation arising out of or relating to:
(a) the presence of any Hazardous Material in the fixtures,
Structures, soils, groundwater, surface water or air on, under or about or
emanating from the assets and properties currently or formerly used, operated,
owned, leased, controlled,
possessed, occupied or maintaIned by a Person, and any such Hazardous
Material emanating to adjoining or other properties;
(b) the use, generation, production, manufacture, treatment,
storage, disposal, Release, threatened Release, discharge, spillage, loss,
seepage or filtration of Hazardous Materials by a Person or its employees,
agents or contractors from, on, under or about the assets or properties
currently or formerly used, operated, owned, leased, controlled, possessed,
occupied or maintained by such Person or the presence therein or thereunder of
any underground or above-ground tanks for the storage of fuel oil, gasoline
and/or other petroleum products or by-products or other Hazardous Material;
(c) the violation or noncompliance or alleged violation or
noncompliance by a Person or its employees, agents or contractors of any
Environmental Law arising from or related to its or their conduct, actions or
operations or the former or current use, operation, ownership, lease,
possession, control, occupancy, maintenance or condition of any of such Person's
former or current assets or properties;
(d) the failure by a Person or its employees, agents, or
contractors to have obtained or maintained in effect any Consent 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 sit; 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, communications or water businesses, and which are
described generally on Schedule 1.1(a), 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 an Employee Benefit Plan of Sell&;
(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);
(e) assets disposed of by Seller after the date of this
Agreement to the extent such dispositions are not prohibited by this Agreement;
(f) except to the extent set forth in Section 3.4, rights to
refunds of Taxes payable for periods prior to the Closing 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 for periods prior
to the Closing;
(i) any insurance policy, bond, letter of credit or other
similar item, and any cash surrender value in regard thereto;
(j) the Citizens Marks; and
(k) the other assets listed on Schedule 1.1(a).
"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,
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 4 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 state or
federal regulatory commission or local franchising authority, including with
respect to all Proceedings of any state regulatory commission relating to the
Assets or the Business commenced before or after the Closing Date, regardless of
whether the Legal Requirement or other action is or purports to be based on
conduct, actions, facts, circumstances or conditions arising, existing or
occurring at any time on or prior to the Closing Date, but other than
liabilities, responsibilities and obligations (i) relating to any Retained
Environmental Liability or (ii) arising out of Seller's violation of any Order
or Legal Requirement of such Governmental Body, as in effect and as reasonably
interpreted by common industry practice as of the date such violation occurred,
that is found by Final Order to have occurred prior to Closing and that is
reasonably likely to have a material adverse effect on the Business or the
Assets, taken as a whole.
"GAAP" - generally accepted United States accounting principles,
applied on a consistent basis.
"Generating Assets" -- all of Seller's generating facilities and dams
located in the State of Vermont, including the NeWport Generating Facility Units
1, 2, 3 and 11, the ▇▇▇▇ Generating Facility, and the West Charleston Generating
Facility (collectively, the "Generating Facilities"), together with (a) the Real
Property associated with such Generating Facilities and dams, including the
buildings and other improvements located thereon and approximately 500 acres of
unimproved Real Property located around the Generating Facilities; (b) the
diesel generator sets of Seller located at the Newport Generating Facility Units
1, 2 and 3; (c) all other tangible personal property located on or relating to
the Generating Facilities; and (d) Easements and Consents (to the extent
transferrable) relating to such Generating Facilities.
"Governmental Body" -- any of the following that possesses competent
jurisdiction:
(a) federal, state, county, local, municipal or other
governmental body;
(b) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department,
official or entity and any court or other tribunal); or
(c) any governmental body entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature.
"Hazardous Materials" -- any waste or other chemical, material or
substance that is listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, toxic, or a pollutant or a
contaminant, or words of similar import, under or pursuant to any Environmental
Law, including any admixture or solution thereof, and specifically including
oil, natural gas, petroleum and all derivatives thereof or synthetic substitutes
therefor, asbestos or asbestos containing materials, any flammable substances or
explosives, any radioactive materials, any toxic wastes of substances, urea
formaldehyde foam insulation, toluene or polychlorinated biphenyls.
"HSR Act" -- the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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.
"Hydro-Quebec Contracts" -- means (a) the Firm Power and Energy
Contract between Hydro-Quebec and Vermont Joint Owners, dated as of December 4,
1987, as amended (as amended, the "H-Q/VJO Contract"), and (b) the Hydro-Quebec
Participation Agreement among the electric utilities named therein, dated as of
April 1, 1988, as amended and restated pursuant to Amendment No. 5 to
Hydro-Quebec Participation Agreement made as of October 21, 1993 (as amended and
restated, the "H-Q Participation Agreement").
"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; President, Citizens Public Services; Vice
President of Arizona Energy Operations; and Vice President and General Manager,
Vermont Electric Division, or their respective successor.
"Legal Requirement" -- any federal, state, county, local, municipal,
foreign, international, multinational, or other administrative Order,
constitution, law, ordinance, adopted code, principle of common law, regulation,
rule, directive, approval, notice, tariff, franchise agreement, statute or
treaty.
"Losses" -- shall mean all claims, losses, liabilities, causes of
action, costs and expenses (including, without limitation, involving theories of
negligence or strict liability and including court costs and reasonable
attorneys' fees and
disbursements in connection therewith).
"Material Adverse Effect" -- an occurrence or condition that has a
material adverse effect on the operation, financial condition or results of
operations of the Business when combined with the businesses and assets being
acquired by Buyer or Affiliates of Buyer pursuant to the Related Purchase
Agreements, taken as a whole. For purposes of this Agreement, an occurrence or
condition shall not constitute a Material Adverse Effect (a) if it arises from
general business, economic or financial market conditions, from conditions
generally affecting the industries in which the Business competes, or from the
transactions contemplated by this Agreement, (b) if it is of the type normally
recoverable by the Business through rates, or (c) to the extent that the
Business may realize the benefit of insurance maintained by Seller or to the
extent that Seller or Buyer may receive or recover payments m respect of such
occurrence from any other source (whether in a lump sum or stream of payments).
In addition, for purposes of this Agreement any increase in Seller's pro-rata
obligations under the Hydro-Quebec Contracts, or any occurrence or condition
that could result in such an increase, shall not constitute a Material Adverse
Effect.
"Material Contract" - a Contract relating primarily to the Business and
involving a total commitment by or to and party thereto of at least $100,000 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 red property, all usual and customary nonmonetary
real property 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 and will not 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, do not have a Material Adverse Effect or that will be
terminated, released or waived on or before the Closing Date.
"Person" -- any individual, corporation (including any nonprofit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization or Governmental Body.
"Proceeding" -- any claim, action, arbitration, hearing, litigation or
suit commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PUHCA "-- the Public Utility Holding Company Act of 1935, as amended,
or any successor law, and regulations and rules issued by the SEC pursuant to
that act or any successor law.
"Real Property" -- all real property owned, leased or under Contract by
Seller in the operation of the Business, together with all interests in red
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.
"Related Purchase Agreements" -- means those certain purchase
agreements between Seller and Buyer or Affiliates of Buyer described on Schedule
1.1(b).
"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 all Environmental
Liabilities of Seller that are described in this Agreement as Retained
Environmental Liabilities or that are otherwise not being assumed by Buyer under
this Agreement as Assumed Environmental Liabilities.
"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,
property tax or transfer 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 relating to the foregoing, 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 or for which Seller has any liability as a transferee,
pursuant to Treasury Regulation Section 1.1502-6, or pursuant to any other Legal
Requirement.
"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
and Tax, or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"Threatened" -- a claim, dispute, or other matter will be deemed to
have been "Threatened" if any demand or statement has been made in writing or
orally or any notice has been given in writing or orally, 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 Sections
---- --------
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
Deposit 3.2
Employee Plans 5.13
Environmental Data 12.1(c)
Estimated Purchase Price 3.3(a)
Financial Statements 5.6
Purchase Price 3.1
Retained Liabilities 2.3
Seller Indemnitees 13.2
Seller's Pension Plan 10.5
Seller's 401(k) Plan 10.6
Seller Welfare Plan 10.7
Transaction Taxes 11.3
Transferred Employee 10.1
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) Buyer's ownership or use of the Assets and the conduct or
operation of the Business by Buyer, in each case after the Closing Date,
including all liabilities, responsibilities and obligations relating to or
arising from the following:
(i) Transferred Employees (except to the extent
otherwise provided in Article X), including any termination of any Transferred
Employee for any reason (including constructive
dismissal) and Buyer's hiring practices or decisions;
(ii) Performance of the Contracts included among
the Assets (except that Buyer shall not assume any liabilities or obligations
for any breach or default by, or payment obligations of, Seller under any such
Contract occurring or arising or accruing on or prior to the Closing Date);
(iii) Customer advances, customer deposits and
construction advances, unperformed service obligations, Easement relocation
obligations, and engineering and construction required to complete scheduled
construction, construction work in progress, and other capital expenditure
projects, in each case relating to the Business and outstanding on or arising
after the Closing Date;
(iv) Future Regulatory Obligations;
(v) Assumed Environmental Liabilities;
(vi) One-half of the Transaction Taxes arising out
of the sale of the Assets to Buyer hereunder;
(vii) Proceedings based on conduct, actions, facts,
circumstances or conditions arising or occurring after the Closing Date,
Proceedings in respect of Future Regulatory Obligations regardless of when
filed, and Proceedings arising from or related to any other Assumed Liability;
and
(viii) Items addressed in Section 3.1(d) to the
extent resulting in a decrease in the Purchase Price;
(b) the Proceedings described as Assumed Liabilities in
Schedule 2.2(b) and Proceedings affecting other Persons engaged in a business
similar to the Business such as generic or industry-wide Proceedings; and
(c) all Proceedings involving Seller, the Assets o? the
Business based on conduct, actions, facts, circumstances or conditions arising
or occurring on or before the Closing Date that are pending or threatened as of
the Closing Date and that are disclosed to Buyer by Seller after the date of
execution of this Agreement but prior to the Closing Date (except any such
Proceedings described as Retained Liabilities in Schedule 2.2(b) 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 or in
connection with all such Proceedings in excess of $2,000,000 in the aggregate
(when combined with all other Losses incurred by Buyer in connection with its
performance or discharge of other Disclosed Pre-Closing Liabilities) shall be
Retained Liabilities and Seller shall be obligated to indemnify Buyer pursuant
to Section 13.1 (but subject to the applicable limitations on such obligations
provided in Section 13.3(D) for such Losses incurred by Buyer in
the amount of such excess;
The liabilities, responsibilities and obligations to be assumed by Buyer
pursuant to this Section 2.2 are hereinafter collectively referred to as the
"Assumed Liabilities." Buyer hereby irrevocably and unconditionally waives and
releases Seller from all Assumed Liabilities and all liabilities or obligations
relating to the Business or the Assets to the extent arising from events or
occurrences after the Closing or to the extent otherwise relating to the period
after the Closing, including any liabilities created or which arise by statute
or common law, including CERCLA (it being understood that this shall not
constitute a waiver and release of any claims arising out of the contractual
relationships and indemnification arrangements between Buyer and Seller).
Notwithstanding anything in this Section 2.2 to the contrary, "Assumed
Liabilities" shall not include any liabilities, responsibilities or obligations
expressly stated to be Retained Liabilities pursuant to Section 2.3.
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 Seller's ownership of
the Assets and Seller's conduct or operation of the Business on and prior to the
Closing Date, except to the extent any such liability or obligation is included
among the Assumed Liabilities, including liabilities and obligations relating to
or arising from the following (collectively referred to herein as the "Retained
Liabilities"):
(a) all indebtedness for money borrowed by Seller (including
items due to Seller's Affiliates) other than payment obligations arising after
the Closing Date under any equipment lease listed in Part VII of Schedule 5.12
or under any line extension Contracts or similar construction arrangements, it
being understood and agreed that such leases, Contracts and similar arrangements
do not create indebtedness for money borrowed;
(b) Taxes of Seller or the Business with respect to ownership
or use of the Assets and Seller's conduct and operation of the Business on and
prior to the Closing Date;
(c) Excluded Assets;
(d) Non-Transferred Employees, the Seller's Employee Benefit
Plans and Employee Plans (except to the extent otherwise provided in Article X)
and any breach or default by, or payment obligations of; Seller with respect to
any Transferred Employee occurring or arising or accruing on or prior to the
Closing Date (except to the extent any such payment obligation becomes the
responsibility and obligation of Buyer in accordance with Article X);
(e) Proceedings involving Seller, the Assets or the
Business based on conduct (including Seller's performance under any Contract
included among the Assets), action, facts, circumstances or conditions
arising or occurring on or before the Closing Date, including Proceedings
described as Retained Liabilities on Schedule 2.2(b) but expressly excluding
any such liabilities or obligations relating to any Proceeding described as
Assumed Liabilities on Schedule 2.2(b) and any Proceeding relating to (x)
Assumed Liabilities (subject to the proviso set forth in Section 2.2(c) with
respect to the Proceedings described in Section 2.2(c)), (y) Future
Regulatory Obligations and (z) Proceedings affecting other Persons engaged in
a business similar to the Business such as generic or industry-wide
Proceedings;
(f) Retained Environmental Liabilities; and
(g) One-half of the Transaction Taxes arising out of the sale
of the Assets, to Buyer hereunder.
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, at its
expense, 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 o?
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(a)(ii).
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
$38,000,000 in cash, as adjusted in accordance with the following provisions and
with such adjustments determined pursuant to Section 3.3:
(a) Such amount will be increased by the aggregate amount of
all accounts receivable, earned but unbilled revenue, and materials and supplies
inventory of the Business, in each case outstanding as of the Closing Date and
other than any such items that are due from Seller's Affiliates.
(b) Such amount will be decreased by the aggregate amount of
all accounts payable, customer deposits and unexpended cash from customer
advances for construction, in each case to the extent relating to the Business
and outstanding as of the Closing Date and other than any such items that are
due to Seller's Affiliates.
(c) Such amount will be increased by the aggregate amount of
all (i) capital expenditures relating to the Business that are accrued by Seller
between the date of the Balance Sheet and the Closing Date (including
expenditures recorded in the Construction Work in Progress account of the
Business as of the Closing Date and relating to such period), (ii) without
duplication, expenditures to purchase materials, supplies and other capital
items that are dedicated to, but as of Closing have not been used in, the
construction or improvement of the property, plant or equipment relating to the
Business and (iii) without duplication, other expenditures recorded as an asset
of the Business as of the Closing Date and relating to such period to the extent
such expenditures are normally recoverable through rates, including expenditures
recorded in the Preliminary Survey and Investigation account of the Business, in
each case to the extent such expenditures are not prohibited by this Agreement.
(d) Such amount will be decreased or increased, as
appropriate, by an aggregate amount equal to the total amount payable to or by
Buyer pursuant to Section 3.4.
(e) Such amount will be decreased by $3,000,000 if Seller
sells the Generating Assets on or prior to the Closing Date.
Section 3.2 Deposit. Concurrently with its execution of this Agreement,
Buyer has deposited with Seller $380,000 in cash. By 5:00 p.m. East Coast Time
on Wednesday, March 15, 2000, Buyer shall deliver to Seller an irrevocable
letter of credit from a reputable financial institution with an expiration date
of at least 21 months after the date of execution of this Agreement (the "Letter
of Credit"), as and for an ▇▇▇▇▇▇▇ money deposit, in the amount of $1,900,000
(the "Deposit") and appropriately conditioned in accordance with the terms of
Section 9.2(c). If Seller receives the Letter of Credit by such deadline, then
Seller promptly shall
refund to Buyer the $380,000 in cash previously provided by Buyer. If Buyer
shall fail to deliver the Letter of Credit by such deadline, then (i) Buyer
shall continue using its best efforts to arrange for the Letter of Credit to
be delivered to Seller and (ii) Seller may retain, as liquidated damages, the
$380,000 in cash previously delivered to Seller, free of any claims by Buyer
or any other Person with respect thereto. The parties hereby acknowledge that
the extent of damages to Seller occasioned by Buyer's failure to deliver the
Letter of Credit to Seller by March 15, 2000, would be impossible or
extremely difficult to ascertain and that $380,000 is a fair and reasonable
estimate of such damages under the circumstances.
Section 3.3 Calculation of Purchase Price.
(a) Any of the items included in clauses (a) through (e) of
Section 3.1 that cannot be calculated in a timely fashion as of the Closing Date
shall be estimated by Seller in good faith based upon the account balance of
such item at the end of the month for which Seller's books are closed next
preceding the Closing Date, with such adjustments as may be appropriate to
reflect changes in such account balance occurring between such month-end and the
Closing Date. Any such estimated amounts shall be set forth in a certificate of
Seller delivered to Buyer at least five (5) business days prior to the Closing
Date, which certificate shall set forth an estimate of the Purchase Price (the
"Estimated Purchase Price"), including such estimated amounts and shall be
accompanied by reasonably detailed supporting documentation.
(b) Within one hundred twenty (120) days after the Closing
Date, Seller shall notify Buyer of the actual amount as recorded on Seller's
books and records for the Business of any items that were estimated in arriving
at the Estimated Purchase Price, as well as the prorations and adjustments
required to be made under Section 3.4 below. Buyer may dispute any amount so
determined by Seller, by written notice to Seller within fifteen (15) days after
receipt of Seller's notice. If Buyer does not so dispute any item, the party
owing the difference between the Estimated Purchase Price and the Purchase Price
shall pay such difference to the other party within ten (10) days after the
expiration of such fifteen (15) day period, plus interest at 8.25% per annum on
such amount from the Closing Date to (but not including) the date of payment If
Buyer disputes the actual amount of any item, the undisputed amount plus
interest at 8.25% per annum on such amount from the Closing Date to (but not
including) the date-of-payment shall be paid promptly by the owing party. If
such dispute cannot be resolved within sixty (60) days after the giving of
Buyer's notice that there exists a disputed amount, then an independent auditor
mutually agreeable to Buyer and Seller shall, upon written notice from either
Buyer or Seller, resolve such dispute within sixty (60) days after receipt of
such notice. The fees and expenses of such independent auditor shall be
allocated between Buyer and Seller so that Seller's share of such
fees and expenses shall be in the same proportion that the aggregate amount
of such remaining disputed amounts so submitted by Buyer to such auditor that
is unsuccessfully disputed by Buyer (as finally determined by such auditor)
bears to the total amount of such remaining disputed amounts so submitted by
Buyer to such auditor. Any determination by such independent auditor shall be
binding and conclusive upon the parties without further appeal therefrom.
Within ten (10) days after the independent auditor shall have resolved such
dispute, the party owing the determined amount shall pay such determined
amount to the other parry, plus interest at 8.25% per annum on such
determined amount from the Closing Date to (but not including) the date of
payment.
Section 3.4 Prorations and Adjustments as of the Closing Date.
(a) Buyer and Seller agree that the following items relating
to the Assets and the Business shall be adjusted and allocated as of the Closing
Date, with Seller to be responsible for and to receive the benefit of the same
for the period through and including the Closing Date and Buyer to be
responsible for and to receive the benefit of the same after the Closing Date;
(i) real and personal property taxes, assessments
and annual registration fees;
(ii) water, sewer and other similar types of taxes,
and installments on special benefit assessments and regulatory assessments;
(iii) electric, gas, telephone and other utility
charges;
(iv) payroll expenses, payroll taxes, reimbursable
employee business expenses and the financial cost of the accrued vacation time
of the Transferred Employees, in each case as recorded on Seller's books for the
Business as of the Closing Date;
(v) rents under leases transferred to or assumed
by Buyer;
(vi) charges under maintenance, service and other
Contracts and fees under licenses transferred to or assumed by Buyer and not
included in the items described in Section 3. 1(a);
(vii) deposits of Seller to the extent transferable
to Buyer;
(viii) prepaid and accrued expenses;
(ix) sales, franchise, gross receipts and other
similar Taxes based upon revenues; and
(x) ▇▇▇▇▇ cash.
(b) The items listed in Section 3.4(a) above shall be
estimated item by item by Seller and reflected on the certificate and supporting
documentation to be delivered to Buyer pursuant to Section 3.3(a) and finally
determined in accordance with Section 3.3(b).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 Organization, Existence and Qualification. Each Buyer
Entity is a corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Texas, 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 it is a party. Buyer
Entity is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state in which the failure to be so qualified or
in good standing would materially adversely affect the business or properties of
Buyer. By Closing, Cap Rock Energy will be, duly qualified and in good standing
as a foreign corporation licensed to do business in the State of Vermont.
Section 4.2 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by Buyer have been duly authorized by Buyer's Board of Directors,
which constitutes all necessary corporate action required on the part of Buyer
for such authorizations. The execution, delivery and performance of this
Agreement and the Related Documents by Buyer will not result in (a) any conflict
with or breach or violation of or default under the Organizational Documents of
Buyer, or (b) a violation or breach of any term or provision of, or constitute a
default or accelerate the performance required under, any indenture, mortgage,
deed of trust, security agreement, loan agreement, or Contract to which Buyer is
a party or by which its assets are bound, or (c) a violation of any Order of any
Governmental Body. This Agreement constitutes, and the Related Documents to be
executed by Buyer when executed and delivered will constitute, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, except as such enforceability may be limited by (i) bankruptcy
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally or (ii) the availability of equitable remedies
generally.
Section 4.3 Governmental Approvals. Except for those Consents described
in Schedule 5.3 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 will have available on the
Closing Date sufficient funds to enable it to consummate the transactions
contemplated by this Agreement, and Buyer or the Affiliates of Buyer that are
buyers of the assets and businesses being acquired pursuant to the Related
Purchase Agreements will have available at the Closing Date sufficient funds to
enable them to consummate the transactions contemplated by the Related Purchase
Agreements. Buyer understands and agrees that its failure to arrange for such
funding by May 15, 2000 (which date shall be extended by Seller for up to three
consecutive thirty-day periods if Buyer can reasonably demonstrate to Seller at
the end of such period that Buyer is making reasonable progress towards
arranging such funding), or to have such funds available by the Closing, will
permit Seller in either case to terminate this Agreement under Section 9.1 and
to exercise its rights under Section 9.2(c).
Section 4.5 Filings. No statement furnished by Buyer for inclusion in
any filing with any Governmental Body in connection with obtaining such
Governmental Body's Consent for the consummation of the transactions
contemplated by this Agreement will contain, as of the date such information is
so provided, any untrue statement of a material fact or will omit to state, as
of the date such information is so provided, any material fact which is
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
Section 4.6 Brokers. No broker or finder has acted for or on behalf of
Buyer or any Affiliate of Buyer in connection with this Agreement or the
transactions contemplated by this Agreement. No broker or finder is entitled to
any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Buyer or any
Affiliate of Buyer for which Seller or any Affiliate of Seller has or will have
any liability or obligations (contingent or otherwise).
Section 4.7 Independent Investigation. Buyer is knowledgeable about the
businesses engaged in by Seller through its Vermont 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 this Agreement and in any other
document or instrument delivered by Seller pursuant
hereto. 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. Buyer is a "public utility company" (as such term is defined in
PUHCA). Neither Buyer nor any of its Affiliates is 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 4.9 Buyer's Financial Statements. The consolidated financial
statements of Buyer for its most recently ended fiscal year heretofore delivered
to Seller were prepared in accordance with GAAP applied on a consistent basis,
except for changes concurred in by Buyer's accountants and disclosed in said
financial statements, throughout the periods specified, and present fairly in
all material respects the financial condition and results of operations of the
businesses of Buyer as of the dates thereof and for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments).
Section 4.10 Buyer's Insurance. Within five (5) business days after the
date of execution of this Agreement, 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 and deductible amounts.
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 Vermont 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,
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. No Person has any
agreement, option, warrant, subscription, understanding, or commitment, or
any right or privilege capable of becoming an agreement, option or commitment
for the purchase of the Assets of any other interest in the Business.
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 material to the operation or conduct of the Business after Closing and (ii)
any Consent that is obtained or made on or prior to the Closing Date. Seller has
no Knowledge of any facts or circumstances relating to Seller or its Affiliates,
other than those relating to the auction process in which Buyer was selected,
and other bidders were not selected, to acquire the Business or relating to the
matters disclosed in any Schedule referred to in this Agreement, that would be
reasonably likely to preclude or prolong the receipt of such required Consents.
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, including the
Assets reflected in the Financial Statements, except 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 parcel of Real Property owned in fee simple that is a
part of the Assets. To Seller's Knowledge, except as set forth in 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.
Except as set forth in Schedule 5.5, (a) Seller enjoys peaceful and
undisturbed possession under all real property leases included in the Assets,
and to the Knowledge of Seller, all such leases are valid and In full force
and effect; (b) all rents due to date from Seller on each such lease have
been paid; (c) Seller has not received notice that it is in default under any
such lease; and (d) to the Knowledge of Seller, there exists no event,
occurrence, condition or act (including the consummation of the transactions
contemplated by this Agreement) which, with the giving of notice, the lapse
of time or the happening of any further event or condition, would become a
default by Seller under such lease. Except as set forth in Schedule 5.5, all
buildings, structures and equipment that are a part of the Assets lie wholly
within the boundaries of the Real Property and do not encroach upon the
property of, or otherwise conflict with the property rights of, any other
Person. Seller has adequate rights of ingress and egress for operation of the
Business in the ordinary course consistent with past practices. None of the
buildings, structures or equipment that are a part of the Assets, nor the
operation and maintenance thereof, violates any restrictive covenant.
Section 5.6 Financial Statements.
(a) Schedule 5.6(a) sets forth the unaudited balance sheet for
the Business as at September 30, 1999 (the "Balance Sheet") and unaudited
statement of income of the Business for the nine-month period ended September
30, 1999 (collectively, the "Financial Statements"). Except as set forth in
Schedule 5.6(a), the Financial Statements have been prepared on a pre-tax basis
in accordance, in all material respects, with GAAP applied on a basis consistent
with prior periods. Except as set forth in Schedule 5.6(a), the Balance Sheet
presents fairly in all material respects the financial condition of the Business
as of its date and the income statement included in the Financial Statements
presents fairly in all material respects the results of operations of the
Business for the periods covered thereby. The books and records of Seller from
which the Financial Statements were prepared were complete and accurate in all
material respects at the time of such preparation.
(b) Except as disclosed in Schedule 5.6(b), Seller has no
liabilities with respect to the Business or the Assets which would constitute
Assumed Liabilities, either direct or indirect, matured or unmatured or
absolute, contingent or otherwise, except:
(1) those liabilities set forth in the Financial
Statements or referred to in the notes to the Financial Statements and not
heretofore paid or discharged;
(2) those liabilities relating to or arising from
matters disclosed in any other Schedule hereto;
(3) liabilities arising in the ordinary course of
business consistent with past practices under any Contract or Legal
Requirements;
(4) those liabilities incurred, consistent with past
practices, in or as a result of the ordinary course of business since the
Balance Sheet Date which do not and could not be reasonably expected to, in the
aggregate, result in a Material Adverse Effect;
(5) those liabilities and obligations that are the
subject of Article X; and
(6) those liabilities, which, if outstanding as of
the Closing Date, would result in a decrease to the Purchase Price in accordance
with Section 3.1(b) or (d).
Section 5.7 Compliance with Legal Requirements; Governmental Permits.
Except as set forth in Schedule 5.7: (a) Seller is in substantial compliance
with each 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; (b)
Seller possesses all Consents 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; (c)
all such Consents are in full force and effect; and (d) Seller has not received
notice from any Governmental Body of its intent to revoke or terminate of such
Consent.
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 or the Business other than Proceedings affecting other
Persons engaged in a business similar to the Business such as generic or
industry-wide Proceedings, or (b) as of the date of this Agreement, that
challenges, or that may have the effect of preventing, delaying, making illegal,
restricting or otherwise interfering with, the transactions contemplated hereby.
Schedule 5.8 lists each outstanding Order against Seller which relates to or
arises out of the conduct of the Business or the ownership, condition or
operation of the Business or the Assets which would be considered material to a
reasonably prudent purchaser of the Business in its reasonable business
judgment, other than any Orders relating to rates, tariffs and similar matters
arising in the ordinary course of business and other than any Order applicable
to other Persons engaged in a business similar to the Business such as generic
or industry-wide Orders.
Section 5.9 Taxes. All Tax Returns required to be filed by or on behalf
of 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 that are required to be paid or remitted by or on behalf of Seller. There
are no pending audits or other examinations relating to any Tax matters relating
to the Business or the Assets except as set forth in Schedule 5.9. There are no
Tax Encumbrances on the Assets, except for liens for Taxes not yet due and
payable or for Taxes that Seller is contesting in good faith through appropriate
proceedings. As of the date of this Agreement, Seller has not grunted any waiver
of any statute of limitations with respect to, or any extension of a period for
the assessment of, any Tax relating to the Business or the Assets except as set
forth in Schedule 5.9. Except as set forth in Schedule 5.9, none of the Assets
include stock of a corporation or interests in a partnership or limited
liability company. Seller is not a party to any safe harbor lease within the
meaning of IRC Section 168(f)(8), as in effect prior to amendment by the Tax
Equity and Fiscal Responsibility Act of 1982. Seller is not a "foreign person"
as defined in IRC Section 1445(f)(3) and Buyer is not required to withhold tax
on the purchase of the Assets of Seller by reason of IRC Section 1445. Seller
has not entered into any agreement with respect to the performance of services
that would require a payment, and Seller is not requiring Buyer pursuant to this
Agreement to make any payment (including but not limited to the payments
described in Section 10.11 of this Agreement), that would result in a
nondeductible expense pursuant to IRC Section 280G or an excise tax to the
recipient of such payment pursuant to IRC Section 4999.
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.
Section 5.11 Personal Property. Except for normal wear and tear, the
tangible Assets, taken as a whole, are in good operating condition and in a
state of reasonable maintenance and-repair. The buildings, structures and
equipment that are a part of the Assets are structurally sound, are in good
operating condition and repair and are adequate for the uses to which they are
being put, and none of such buildings, structures or equipment is in need of
maintenance or repairs, except in each case, for the Assets described in
Schedule 5.11 and for Assets in need of ordinary and routine maintenance and
repairs that will not, individually or in the aggregate, have a Material Adverse
Effect.
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, (i) each Material Contact is in kill force
and effect and enforceable against the parties thereto, (ii) there are no
defaults and Seller has not rescinded nor given notice of a default or
claimed default under any such Material Contract, and (iii) no event has
occurred which with notice or lapse of time, or both, would constitute a
default thereunder. 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 5.15 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,or contributed to by Seller or its Affiliates
for the-benefit of the Active Employees; (ii) each other material fringe benefit
plan, policy or arrangement currently maintained or contributed to by Seller or
its Affiliates for the benefit of Active Employees which provides for pension,
retirement, deferred compensation, bonuses, incentive compensation, profit
sharing, stock options, 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, change-in-control agreement,
employee confidentiality agreement, and all other material agreements, policies,
or arrangements maintained or contributed to by Seller or its Affiliates for the
Active Employees or by which Seller is bound with respect to the Business.
Seller has made available to Buyer accurate and complete copies 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) Each Employee Benefit Plan has been established and
administered in all material respects in accordance with its terms, 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.
(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. To Seller's
Knowledge, there is no reasonable basis for any such Proceeding that would
impose any liability or obligation that would have or would reasonably be
expected to have a Material Adverse Effect.
(c) Except as listed in Schedule 5.14, Seller possesses 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.
(d) Except as set forth in Schedule 5.14, no environmental
remediation of any Release is occurring on any Real Property included in the
Assets nor has Seller issued a request for proposal or otherwise asked an
environmental remediation contractor to begin plans for any such environmental
remediation. Except as set forth in Schedule 5.14, to Seller's Knowledge, during
or prior to the period of Seller's ownership or operation of the Business there
were no Releases or threatened Releases which would reasonably be expected to
have a Material Adverse Effect.
(e) Except as set forth in Schedule 5.14, none of the Real
Property is (i) situated in a federal "Superfund" site or, to Seller's
Knowledge, in any federal "Superfund" study area designated under the federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA",
or (ii) to Seller's Knowledge, situated in any site or study area designated
under any state statute comparable to CERCLA.
Section 5.15 No Material Adverse Change. Except as set forth in
Schedule 5. 15, between the date of the Balance Sheet and the date of execution
of this Agreement:
(a) no Material Adverse Effect has occurred;
(b) except for actions taken in connection with the
contemplated sale of the Business and this Agreement and except for conversion
to the SAP financial reporting system, between the date of the Balance Sheet and
the date of execution of this Agreement, the Business has been conducted in the
ordinary course, consistent with past practices;
(c) There has not been any increase in the salary, wage,
bonus, grants, awards, benefits or other compensation payable or that could
become payable by Seller to its officers, directors and employees with respect
to the Business or any amendment of any of the Employee Plans, Seller's Pension
Plan and Seller's 401(k) Plan other than increases or amendments in the
ordinary course of the Business, consistent with past practices (which may
include normal periodic performance reviews and related compensation and
benefit increases and the provision of new individual compensation and
benefits for promoted or newly hired officers and employees on terms
consistent with past practice), nor has Seller granted any severance or
termination pay, entered into any contract to make or grant any severance or
termination pay, or paid any bonus, in each case to any such officer,
director, or employee, other than pursuant to preexisting agreements,
arrangements or bonus plans, or taken any action that would result in the
payment of any amounts, or the accelerated vesting of any rights or benefits,
under any Employee Plan, Seller's Pension Plan or Seller's 401(k) Plan;
(d) There has been no change in any method of accounting or
accounting practice of the Business;
(e) Seller has not sold, mortgaged, pledged or encumbered the
Business or the Assets, other than sales of Assets in the ordinary course of
business; and
(f) no agreement or commitment to do any of the actions
contemplated by clauses (c), (d) or (e) above has been entered into.
Section 5.16 State and Federal Regulatory Matters.
(a) Schedule 5.16 reflects all of the currently pending
filings relating to the Business heretofore made by Seller before state or
federal regulatory commissions and each other currently pending Proceeding of
such state or federal regulatory commission which would be considered material
to a reasonably prudent purchaser of the Business in its reasonable business
judgment, other than any currently pending Proceeding that also is applicable to
other Persons engaged in a business similar to the Business such as generic or
industry-wide Proceedings.
(b) All currently effective material filings relating to the
Business heretofore made by Seller with state or federal 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 Employee Relations. Except as disclosed in Schedule 5.18,
as of the execution of this Agreement (i) there is no strike, slowdown, picket,
work stoppage or other labor dispute or disturbance on the part of the employees
of Seller with respect to the Business pending or threatened, and Seller has not
experienced any such strike, slowdown, picket, work stoppage or other labor
dispute or disturbance with respect to the Business within the past two years,
(ii) no grievance, unfair labor practice charge or any arbitration Proceeding
arising out of or under any collective bargaining agreement relating to the
Business exists or is pending on the date hereof, (iii) Seller is not the
subject of a Proceeding asserting that it has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to compel it
to bargain with any labor organization as to wages or conditions of employment
with respect to the Business, (iv) Seller is not aware of any activity involving
Seller's employees seeking to certify a collective bargaining unit or engaging
in other organizational activity with respect to the Business, (v) Sealer is
currently in compliance in all material respects with respect to the Business
with all applicable Legal Requirements relating to the employment of labor,
including those related to wages, hours and collective bargaining, and is not
liable for any arrearages of wages, penalties or other sums for failure to
comply with any of the foregoing and (A) there is no claim with respect to
payment of wages, salary or overtime pay that has been asserted or is now
pending or threatened before any Governmental Body regarding any person or
entity currently or formerly employed by Seller with respect to the Business.
Section 5.19 Insurance. Schedule 5.19 lists the Seller's property and
casualty insurance policies and contracts in effect as of the date hereof in
connection with the Business. Except as disclosed in Schedule 5.19, (i) each
material insurance policy thereof is in full force and effect, (ii) Seller is
not in default with respect to its obligations under any such policy and (iii)
Seller has not received any notice of cancellation or termination with respect
to any material insurance policy thereof.
Section 5.20 Accounts Receivable. All accounts receivable and earned
but unbilled revenue reflected in the Financial Statements represent actual
indebtedness to Seller incurred by the applicable account debtors in the
ordinary course of business consistent with past practices. To Seller's
Knowledge, all accounts receivable and earned but unbilled revenue reflected in
the Financial Statements are good and collectible at the aggregate recorded
amounts thereof, net of any reserve for doubtfUl accounts reflected therein.
Section 5.21 Appropriate Knowledge Persons. The individuals identified
in the definition of "Knowledge" are agents, employees or officers of Seller and
certain of such individuals have primary decision making responsibility for the
day-to-day operations, management, maintenance and repair of the Assets and the
Business, and they have served in such capacities for more than twelve (12)
months.
Section 5.22 Disclaimer. Except as otherwise expressly set forth in
this Agreement or in any other document or instrument delivered by Seller
pursuant hereto, Seller expressly disclaims any representations or warranties of
any kind or nature, express or implied, as to the condition, value or quality of
the assets or properties currently or formerly used, operated, owned, leased,
controlled, possessed, occupied or maintained by Seller, and Seller SPECIFICALLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH ASSETS OR PROPERTIES,
OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD THAT SUCH ASSETS
AND PROPERTIES ARE BEING ACQUIRED, "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN
THEIR PRESENT CONDITION, WITH ALL FAULTS AND THAT BUYER SHALL RELY ON ITS OWN
EXAMINATION AND INVESTIGATION THEREOF.
ARTICLE VI
COVENANTS
Section 6.1 Covenants of Seller. Seller agrees to observe and
perform the following covenants and agreements:
(a) CONDUCT OF THE BUSINESS PRIOR TO THE CLOSING DATE. With
respect to the Business, except (i) as contemplated in this Agreement or in
Schedule 6.1, (ii) as required by any Legal Requirement or Order or (iii) as
otherwise expressly consented to in writing by Buyer which consent will not be
unreasonably withheld or delayed, prior to the Closing, Seller will, with
respect to the Business.
(1) Not make or permit any material change in the
general nature of the Business;
(2) Maintain and conduct 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, use all reasonable efforts to preserve intact
the present business organization and the relationship with customers, suppliers
and others having business dealings with the Business;
(3) Not enter into any material transaction or
Material Contract other than in the ordinary course of business in accordance
with prudent business judgment and consistent with past practice and policy;
(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 in
accordance with prudent business judgment and consistent with past practice
and policy;
(5) Not hire any new employee unless such employee
is a BONA FIDE replacement for either a presently-filled position or a vacancy
in an authorized position with the Business;
(6) Not make any capital expenditure or capital
expenditure commitment in excess of $200,000 in the aggregate that is not
included in the Capital Budget except in the event of service interruption,
emergency or casualty loss, and use commercially reasonable efforts to make
capital expenditures in accordance with the Capital Budget;
(7) Comply in all material respects with all
applicable Legal Requirements and Orders, including without limitation those
relating to the filing of reports, the timely filing of Tax Returns and the
payment of Taxes due to be paid prior to the Closing, other than those Taxes
contested in good faith;
(8) Except in the ordinary course of business
consistent with past practices 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, except as permitted by Section 10.2,
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;
(9) Not terminate any Material Contract;
(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; or
(11) Not make any material filings with any
Governmental Body prior to consulting with Buyer except for filings made in the
ordinary course of business consistent with past practices.
(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 the Business,
the Assets and 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 the negligence or willful misconduct of
Buyer or its Representatives in connection with Buyer's access provided pursuant
to this Section 6.1(b)(1). 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 and
all Consents listed in Schedule 5.3.
(d) EXCLUSIVITY. Until consummation of the transactions
contemplated hereby or termination of this Agreement pursuant to Section 9.1,
neither Seller nor its Affiliates, representatives, officers, directors,
employees or agent will, directly or indirectly, (1) submit, solicit, initiate,
encourage or discuss any proposal or offer from any Person (other than Buyer or
its Affiliates) or enter into any agreement or accept any offer relating to any
(i) reorganization, liquidation or dissolution of the Business; (ii) merger or
consolidation involving the Business; (iii) purchase or sale of substantially
all of the Assets; or (iv) similar transaction or business combination involving
the Business or the Assets, or (2) furnish any information with respect to,
assist or participate in or facilitate in any other manner any effort or attempt
by any Person or do or seek to do any of the foregoing. Seller shall notify
Buyer promptly if any Person makes any proposal, offer, inquiry or contact with
respect to an action described in clauses (i) through (iv) above.
(e) NONCOMPETITION.
(i) From the Closing Date through the third (3rd)
anniversary thereof, Seller agrees that neither it nor any of its Affiliates
will (i) directly, or indirectly through one or more entities, own, manage,
operate, control, be employed by or
participate in the ownership, management, operation or control, or have a
financial interest in, any Person which is engaged in the Business within the
State of Vermont, provided, however, that the foregoing shall not prevent the
purchase or ownership of shares which constitute less than five percent (5%)
of the outstanding equity securities of a publicly-held company; or (ii)
divert or direct any Person who is, at that time, a customer or supplier of
the Business away from the Business.
(ii) Seller acknowledges that it has carefully read
all the terms of this Section 6.1(e), and agrees that (A) the same are necessary
for the reasonable and proper protection of the value of the Business, (B) each
and every covenant is reasonable with respect to such matter, length of time and
the geographical area described, and (C) that irrespective of all other
conditions, the covenants and restrictions in clause (i) above shall be
operative daring the full period and throughout the geographical area described.
In the event any court finds any such restraint or limitation to be
unreasonable, then it is the intent of the parties that such court should
determine the maximum restraint or limitation which is reasonable and
enforcement will be of that restraint or limitation.
(iii) Because of the immediate and irreparable
damage that would be caused to Buyer as a result of the breach of the covenants
of Seller contained in this Section 6.1(e), for which Buyer would not have other
adequate remedy, Seller agrees that, in the event of any such breach, Buyer
shall be entitled to seek, from any court of competent jurisdiction, an
injunction against any further breach by Seller. In addition, Buyer shall be
entitled to pursue any other remedies available under applicable laws or
equitable principles. Each party waives any requirements for security of the
posting of any bond or other surety in connection with any temporary or
permanent award or injunctive, mandatory or other equitable relief.
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 and Schedule 4.3.
(b) ACCESS TO INFORMATION. After Closing, Buyer will, and will
cause its Representatives to, afford to Seller, including its Representatives,
at Seller's expense, reasonable access to all books, records, files and
documents related to the Business to the extent necessary to permit Seller to
prepare and file its tax returns and to prepare for and participate in any
investigation with respect thereto, to prepare for and participate in any other
investigation and defend any Proceedings relating to or involving Seller or the
Business for which Seller may be responsible, to discharge its obligations under
this Agreement and the other Related Documents to which its is a party and for
other reasonable purposes and will afford Seller reasonable assistance in
connection therewith. Buyer will cause such records to be maintained for not
less than seven years from the Closing Date and will not dispose of such records
without first offering in writing to deliver them to Seller; provided, however,
that in the event that Buyer transfers all or a portion of the Business to any
third party during such period, Buyer may transfer to such third party all or a
portion of the books, records, files and documents related thereof, provided
such third party transferee expressly assumes in writing the obligations of
Buyer under this Section 6.2(b). In addition, after the Closing Date, at
Seller's request, Buyer shall make available to Seller and its Affiliates,
employees, representatives and agents, those employees of Buyer requested by
Seller in connection with any Proceeding, including to provide testimony, to be
deposed, to act as witnesses and to assist counsel; provided, however, that (x)
such access to such employees shall not unreasonably interfere with the normal
conduct of the operations of Buyer and (y) Seller shall reimburse Buyer for the
allocated time charges of such employees and the out-of-pocket costs reasonably
incurred by Buyer in making such employees available to Seller.
(c) CITIZENS GUARANTEES AND SURETY INSTRUMENTS. Buyer shall
use its commercially 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 appropriate state regulatory commission to the same extent as
such state regulatory commission currently regulates Seller in connection with
the Business. 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.
Section 63 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
commercially reasonable efforts, and Seller shall cooperate fully with Buyer,
to prevent the entry in any Proceeding brought by an Antitrust Authority or
any Governmental Body which would prohibit, make unlawful or delay the
consummation of the transactions contemplated by this Agreement. Seller shall
not oppose any efforts of Buyer, including Buyer's proffer of consent to any
Order, to complete lawfully the transactions contemplated by this Agreement,
and shall cooperate in good faith with Buyer and the Antitrust Authorities to
the same effect.
(b) OTHER REGULATORY FILINGS. Buyer and Seller will, as soon
as reasonably practicable following the execution of this Agreement, prepare and
file with each Governmental Body, including the appropriate state regulatory
commission, requests for such Consents as may be necessary for the transfer of
the Assets 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.
(c) ACTIONS NOT REQUIRED. Notwithstanding anything to the
contrary contained in this Agreement, in connection with or as a condition to
receiving any Consent, neither Seller nor Buyer shall be required (A) to divest,
abandon, license or take similar action with respect to any assets (tangible or
intangible) of it or any of its respective Affiliates, or (B) to expend material
sums of money or grant any material financial or other accommodations (other
than as contemplated hereby).
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
ninety (90) 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 extent any representation or warranty of Seller
made herein is, to the knowledge of Buyer acquired prior to the date of
execution of this Agreement, untrue or incorrect, (i) Buyer shall have no rights
under this Agreement or any Related Documents by reason of such untruth or
inaccuracy, and (ii) any such representation or warranty by Seller shall be
deemed to be amended to the extent necessary to render it consistent with such
knowledge of Buyer. As used in this Agreement, the "knowledge of Buyer" means
the actual knowledge of ▇▇▇▇ ▇. ▇▇▇▇▇▇, Buyer's Chief Financial Officer.
(b) EXCEPT AS SET FORTH IN THIS AGREEMENT AND ANY OTHER
DOCUMENT OR INSTRUMENT DELIVERED BY SELLER PURSUANT HERETO, 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.
(c) THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
AGREEMENT AND IN ANY OTHER DOCUMENT OR INSTRUMENT DELIVERED BY SELLER PURSUANT
HERETO 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 THIS AGREEMENT AND IN ANY
OTHER DOCUMENT OR INSTRUMENT DELIVERED BY SELLER PURSUANT HERETO, 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. Within 30 days after the execution date of
this Agreement, Buyer shall deliver to Seller a list of its proposed
representatives to a joint transition team, which shall include expertise from
various functional specialties associated or involved in providing billing,
payroll and other support services provided to the Business by any automated or
manual process using facilities or employees that are not included among the
Assets or Transferred Employees. Seller will add its representatives to such
team within 15 days after receipt of Buyer's list Such team will be responsible
for preparing as soon as reasonably practicable after the execution date of this
Agreement and at least 60 days prior to the Closing Date, and timely
implementing, a transition plan which will identify and describe substantially
all of the various transition activities that the parties will cause to occur
before and after the Closing and any other transfer of control matters that any
party reasonably believes should be addressed in such transition plan, including
(i) the payment, collection, remittance and/or other appropriate arrangements
with respect to the items addressed in Sections 3.1(a), 3.1(b) and 3.4; and (ii)
identification, selection and hiring by Buyer on or after the Closing Date of
employees of Seller who provide support services to the Business but who are not
included among the Active Employees. If requested by either party, the terms and
conditions governIng such transition activities will be more fully set forth in
a Transition Agreement reasonably satisfactory to the parties. Buyer and Seller
shall use their commercially reasonable efforts to cause their Representatives
on such transition team to cooperate in good faith and take all reasonable steps
necessary to develop a mutually acceptable transition plan by no later than 120
days after the date of this Agreement.
Section 6.7 Title Insurance. Prior to Closing, Seller shall cooperate
with Buyer and use commercially reasonable efforts to assist Buyer if Buyer
desires to obtain ALTA title insurance commitments (collectively, the "Title
Commitments," and each a "Title Commitment"), in final form, from one or more
title insurance companies (collectively, the "Title Company"), committing the
Title Company (subject only to the satisfaction of any industry standard
requirements contained in the Title Commitment) to issuing ALTA (or its local
equivalent) form of title insurance policies insuring good, valid, indefeasible
fee simple title to the owned Real Estate in Buyer, in all cases, at Buyer's
sole expense and in the respective amounts that Buyer requests prior to Closing,
subject to no Encumbrances or other exceptions to title other than Permitted
Encumbrances (collectively the "Title Policies"). On or prior to the Closing
Date, Seller shall execute and deliver, or cause to be executed and delivered,
to the Title Company, at no cost to Seller, any customary affidavits, standard
gap indemnities and similar documents reasonably requested by the Title Company
in connection with the issuance of the Title Commitments or the Title Policies;
provided that such efforts and Buyers' request for Title Policies or Title
Commitments shall, in no event, result in any delay in the consummation of the
transactions contemplated by this Agreement.
Section 6.8 Sale of Generating Assets. Seller shall use its
commercially reasonable efforts, prior to Closing, to negotiate, to enter into
and to consummate, prior to Closing, a definitive purchase and sale agreement,
containing terms and conditions
reasonably acceptable to Seller and for an adjusted purchase price of at
least $3,000,000, with a third Person regarding the sale to and purchase by
such third Person of the Generating Assets and the assumption by such third
Person of related obligations and liabilities of Seller. Upon the full
execution of such an agreement, the Generating Assets shall automatically be
deemed to be Excluded Assets for all purposes of this Agreement and Seller
shall deliver to Buyer revised Schedules reflecting changes that result as a
consequence of the Generating Assets becoming Excluded Assets. Buyer shall
cooperate fully with Seller, and shall not oppose Seller's efforts to sell
the Generating Assets separately from the other Assets. Seller also may enter
into, and Buyer agrees to assume at Closing or separately to enter into at
Closing, any power purchase agreement that Seller and the buyer of the
Generating Assets may agree to enter into as part of such purchase and sale
transaction, provided such power purchase agreement is approved by the
Vermont Public Services Board.
Section 6.9 Hydro-Quebec Step-up Indemnity Agreement. Within 30 days
after the execution date of this Agreement, the parties jointly shall establish
a working group of appropriate subject matter experts who shall be instructed to
prepare, within 120 days after the date of execution of this Agreement, a
comprehensive agreement (the "Hydro-Quebec Step-Up Indemnity Agreement, for
execution by the parties at Closing, setting forth the following terms and
procedures together with any other appropriate arrangements that either party
believes should be included in such agreement:
(a) It is the intention of the parties that Seller's
obligations under the Hydro Quebec Contracts shall not be increased or enlarged
as a result of the sale of the Assets hereunder or by any act or omission of
Buyer, but shall remain to the same extent and in the same amount as if such
sale of the Assets did not occur. Accordingly, Seller shall agree to indemnify
and hold harmless Buyer from and against any and all Losses arising out of or
resulting from Section 17.3 of H-7Q/VJO Contract or Sections 6.1, 6.2, 6.3 or
6.4 of the H-Q Participation Agreement to the same extent (but only to such
extent) that Seller would have incurred such Losses had Seller continued to own
the Assets as of the time the event giving rise to such Losses occurred.
(b) Without the prior written consent of Seller (which may be
withheld in Seller's sole discretion), Buyer shall not amend, modify, waive or
agree to the waiver of any provision of the Hydro-Quebec Contracts if such
action could adversely affect the rights or obligations of Seller.
(c) Buyer shall notify Seller as promptly as practicable of
any significant change or development with respect to the Hydro-Quebec Contracts
or the parties thereto.
(d) Buyer shall take all commercially reasonable steps
to mitigate such Losses, including exercising all rights available to it
under the Hydro-Quebec Contracts to resell the additional power it purchases
thereunder and enforcing its rights against the other purchasing parties to
the Hydro-Quebec Contracts. Such rights shall be exercised by Buyer in good
faith and in a manner consistent with its business practices involving claims
for which no third party contractual indemnification is available.
(e) To the fullest extent permitted, Seller shall be
subrogated to any rights or claims that Buyer may have against any of the other
power purchasing parties under the Hydro-Quebec Contacts in connection with the
event giving rise to such Losses.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Seller's Conditions Precedent to Closing. the
obligation of Seller to consummate the transactions contemplated by this
Agreement shall be subject to fulfillment at or prior to the Closing of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING
DATE. Buyer's representations and warranties in this Agreement shall have been
true and correct in all material respects (except for representations and
warranties that contain a qualification as to materiality, which shall have been
true and correct in all respects) as of the date of this Agreement and shall be
true and correct in all material respects (except for representations and
warranties that contain a qualification as to materiality, which shall be true
and correct in all 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 Vermont
Public Services Board 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
Vermont (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, including all Consents required by the Hydro-Quebec Contracts to
assign such Contracts to Buyer.
(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 without there being in effect a Legal Requirement enjoining or
restraining consummation of such transaction.
(f) INJUNCTIONS. On the Closing Date, there shall be no
Proceedings pending which seek, and no Orders which operate, to restrain, enjoin
or otherwise prevent the consummation of the transactions contemplated by this
Agreement.
(g) OPINION OF COUNSEL. On the Closing Date, Seller shall
have received from counsel to Buyer an opinion in the form of Exhibit 7.1(g).
(h) DOCUMENTS. Buyer shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder on or before the Closing Date, including pursuant to
Section 8.1, and shall have taken such actions as Seller may have requested
pursuant to Section 11.2 hereof.
(i) SALE OF GENERATING ASSETS. Any agreement entered into by
Seller in accordance with Section 6.8 shall have been consummated prior to the
Closing Date or Seller shall be satisfied that such transaction will be
consummated concurrently with the Closing.
Section 7.2 Buyer's Conditions Precedent to Closing. The obligation of
buyer to consummate transactions contemplated by this Agreement shall be subject
to fulfillment at or prior -to the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING
DATE. Seller's representations and warranties in this Agreement shall have been
true and correct in all material respects (except for representations and
warranties that contain a qualification as to materiality, which shall have been
true and correct in all respects) as of the date of this Agreement and shall be
true and correct in all material respects (except for representations and
warranties that contain a qualification as to materiality, which shall be true
and correct in all 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 Vermont Public Services Board
shall have issued an Order approving the transactions contemplated hereby, such
Order shall not contain any restrictions or conditions (other than those in
effect on the date of this Agreement or requiring that the regulatory treatment
with respect to the Business in existence as of the date of this Agreement
applicable to Seller be continued following the Closing) which would have a
material adverse effect on the operation, financial condition or results of
operations of the Business, 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 on the operation, financial condition or results
of operations of the Business.
(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
Proceedings pending which seek, and 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 date of execution
of this Agreement, no Material Adverse Effect shall have occurred that has
continuing effect as of the Closing Date.
(j) HYDRO-QUEBEC STEP-UP INDEMNITY AGREEMENT. Seller shall
have executed and delivered to Buyer the Hydro-Quebec Step-Up Indemnity
Agreement contemplated by Section 6.9 and such agreement shall be reasonably
satisfactory to Buyer.
ARTICLE VII
CLOSING
Section 8.1 Closing. The closing of the purchase and sale of the Assets
(the "Closing") will take place at the offices of ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, on the last
calendar day of the month in which the conditions specified in Sections 7.1(d)
and 7.2(d) have been satisfied, unless another time, date and place is agreed to
in writing by the parties. The date of the Closing is referred to in this
Agreement as the "Closing Date." the transactions to be consummated on the
Closing Date shall be deemed to have been consummated as of 11:59 p.m. on the
Closing Date. At the Closing the following events shall occur, each event being
deemed to have occurred simultaneously with the other events.
(a) ▇▇▇▇ 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. As provided below, Buyer will
pay to Seller an amount equal to the Estimated Purchase Price by wire
transferring such amount, in lawful money of the United States of America in
immediately available funds, to such account as Seller shall have designed by
notice to Buyer. If the Closing Date is not a business day on which financial
institutions are open and operating, then on or before the last business day on
which financial institutions are open and operating before the Closing Date,
Buyer shall deliver the Estimated Purchase Price to Buyer's lead bank (the
"Escrow Agent") in immediately available funds in U.S. dollars. Upon receipt,
the Escrow Agent shall invest the Estimated Purchase Price in an
interest-bearing account mutually agreed upon by Seller and Buyer. At Closing,
Buyer shall sign and deliver to Seller a statement which confirms that the
Closing has occurred and which instructs the Escrow Agent to transfer to Seller
the funds representing the Estimated Purchase Price, plus an amount representing
the interest earned after the
Closing Date until the date the funds are transferred, to an account that
Seller shall designate at least two (2) business days prior to the date the
funds are required to be transferred hereunder. The Escrow Agent shall refund
the balance to Buyer. The fees and expenses of Escrow Agent shall be paid
one-half by Seller and one-half by 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, assignment and assumption instruments and FIRPTA affidavits) 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 Vermont 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 effects, in a manner adverse to Seller and
in manner not required by the terms of this Agreement, Seller's liability to
Buyer as expressed herein and in the ▇▇▇▇ of Sale.
(d) FIRPTA CERTIFICATE. Seller shall execute and deliver to
Buyer a certification of nonforeign status within the meaning of Treasury
Regulations Section 1.1445-2.
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
,enjoining or restricting 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 fifteen (15) months after the execution date of this Agreement; provided,
however, that the right to terminate this Agreement under this Section 9.1(e)
will not be available to any party that is in material breach of its
representations, warranties, covenants or agreements contained herein; and
provided, further, that if Closing has not occurred within such period of time
because the conditions precedent to Closing set forth in Sections 7. 1(d) and
7.2(d) have not been fulfilled, then such period of time shall be automatically
extended by an additional six (6) months;
(f) By Seller or Buyer, as appropriate, if any Governmental
Body whose Consent is required to fulfill a condition precedent to Closing set
forth in Section 7.1(d) (with respect to Seller) or in Section 7.2(d) (with
respect to Buyer) has affirmatively indicated that such Consent will not be
given or will contain terms or conditions (or, if such Consent has been
obtained, contains terms or conditions) that, in the reasonable business
judgment of Seller or Buyer, as appropriate, will result in a condition
precedent to Closing set forth in Section 7.1(d) (with respect to Seller) or in
Section 7.2(d) (with respect to Buyer) not being satisfied;
(g) By Seller if by the deadline set forth in Section 4.4 (as
such deadline may have been extended by Seller), Buyer fails to obtain from a
reputable financial institution a binding commitment letter, in form and
substance reasonably satisfactory to Seller, obligating such financier to
provide the necessary funds to Buyer at Closing to enable Buyer to consummate
the transactions contemplated by this Agreement; or
(h) By Seller if both (i) Buyer's financier fails to advance
loan proceeds to Buyer with which to fund the payments required to be made by
Buyer at Closing or such financier affirmatively indicates, for no reason or for
any reason other than the proper termination of this Agreement pursuant to any
other provision of this Section 9.1, that such funding will not be provided to
Buyer by such financier and (ii) Buyer is unable to
arrange, to Seller's reasonable satisfaction, replacement funding from any
other source within forty-five (45) days after the occurrence of the event
described in the preceding clause (i).
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 parry 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 parry. If prior to Closing either party to this Agreement resorts to legal
proceedings to enforce this Agreement, the prevailing party in such proceedings
shall be entitled to recover all costs incurred by such party including
reasonable attorney's fees, in addition to any other relief to which such party
may be entitled; provided, however, and notwithstanding anything to the contrary
in this Agreement, in no event shall either party be entitled to receive any
punitive, indirect or consequential damages.
(c) If (i) Seller terminates this Agreement pursuant to
Section 9.1(d), Section 9.1(g) or Section 9.1(h) or (ii) this Agreement is
terminated by either party pursuant to Section 9.1(e) or 9.1(f) because the
requisite Consent from the applicable state regulatory commission has not been
obtained, or because such Governmental Body has affirmatively indicated that its
Consent will not be given, due in whole or in part to concerns about Buyer's
qualifications or capabilities, unless such Governmental Body also has
affirmatively indicated that its Consent is being withheld due in part to
concerns. about Seller's operation of the Business or ownership of the Assets,
then Seller may present a sight draft under the Letter of Credit, and thereby
retain either all of the Deposit (if clause (i) is applicable) or $380,000 (if
clause (ii) is applicable), (or, if there is no Letter of Credit or if the
Letter of Credit does not permit Seller to present a sight draft in such
circumstances, then Buyer shall pay to Seller in cash an amount equal to the
Deposit or $380,000, as the case may be, within five (5) business days after the
effective date of
termination of this Agreement), in either case, as liquidated damages free of
any claims by Buyer or any other Person with respect thereto (the parties
hereby acknowledging that the extent of damages to Seller occasioned by such
breach or default or failure by Buyer would be impossible or extremely
difficult to ascertain and that the amount to be paid to Seller is a fair and
reasonable estimate of such damages under the circumstances). If this
Agreement is terminated for any reason other than as set forth in the
preceding sentence, then Seller shall promptly deliver the Letter of Credit
to Buyer, free of any claims by Seller or any other Person with respect
thereto.
ARTICLE X
EMPLOYEE MATTERS
Section 10.1 Employment of Transferred Employees.
(a) Schedule 10.1 lists each division, and the total number of
salaried and hourly, nonunion and union, employees actively employed as of the
date of this Agreement in each division by Seller or its Affiliates whose
primary duties relate to the Business ("Active Employees"). As of the Closing
Date, Buyer shall employ all Active Employees of Seller employed in the Business
being acquired ("Transferred Employees") in the same comparable positions, and
at the same compensation level (including wages, salary and bonuses) as were in
effect with Seller immediately prior to the Closing Date. Buyer reserves the
right to restructure positions and functions as it deems appropriate so long as
reassignment does not result in materially diminished responsibilities or a
reduction in compensation. 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. Notwithstanding the foregoing, nothing in this Agreement shall
operate to prevent or prohibit Buyer from making changes in compensation of
Transferred Employees based on demotions arising for cause.
(b) Prior to the execution date of this Agreement, Seller has
delivered to Buyer a list of the persons who would have been Transferred
Employees had the Closing Date occurred on December 31, 1999, showing the
following information for each such person: (i) the name of each such person;
(ii) the name of his or her current employer; (iii) his or her current base pay,
1998 bonus that was paid in 1999 and the projected 1999 bonus that will be paid
in 2000; (iv) his or her hire date, any rehire date (if available) and years of
service; (v) his or her then-current position and job title; (vi) whether such
employee is subject to a collective bargaining agreement or represented by a
labor organization.and, if so, the name of the union and local, (vii) whether
such employee is on military leave, maternity leave, leave
under the Family and Medical Leave Act of 1993, short-term disability, on
layoff with recall rights, or on other leave of absence with a legal or
contractual right to reinstatement. Seller shall update such list as of the
end of each calendar quarter occurring between the execution date hereof and
the Closing Date, in each case assuming the Closing Date had occurred on such
date, and shall deliver such updated lists to Buyer within ten (10) days
after the end of each such calendar quarter.
Section 10.2. Assumption of Collective Bargaining Agreement
Obligations. On and after the Closing Date, Buyer, shall assume all of the
Seller's obligations under, and be bound by the provisions of; each collective
bargaining agreement to the extent of provisions covering Transferred Employees.
Each collective bargaining agreement shall be identified on a Schedule 10.2 to
be prepared by Seller and submitted to Buyer on or before the Closing Date.
Seller shall cooperate with Buyer in Buyer's efforts to contact the unions
representing Transferred Employees. Seller may extend, renew or enter into a new
Contract to replace any collective bargaining agreement that will expire prior
to December 31, 2000, provided that Seller shall consult with Buyer regarding
the terms and conditions of any such extension, renewal or replacement of any
such collective bargaining agreement. Notwithstanding the foregoing provisions
of this Section 10.2, Buyer shall not be obligated to assume any new collective
bargaining agreement that contains terms and conditions that, when taken as a
whole, are materially more onerous on the employer than the terms and
conditions, taken as a whole, of the collective bargaining agreement that was
replaced by such new collective bargaining agreement.
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, or Employee Plan of Seller
or its Affiliates. Seller and Buyer shall pro-rate the.obligation to pay any
bonuses declared by Seller after the Closing Date that would have been payable
to the Transferred Employees had the Transferred Employees remained employed by
Seller or its Affiliates throughout the calendar year in which the Closing Date
occurs, in accordance with the provisions of any Employee Benefit Plan or
Employee Plan of Seller under which such bonus would have been paid. For
Transferred Employees entitled to such bonus, 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. Seller shall be obligated to pay
the balance of any such bonuses.
Section 10.4 Similarity of Benefit Packages. As of the Closing Date,
and except as otherwise expressly provided in this Article X, Buyer shall
include each Transferred Employee in a benefit package providing benefits that
are in the aggregate
substantially similar to those provided by Seller to such Transferred
Employees immediately prior to the Closing Date. Notwithstanding the
foregoing, to the extent that one or more collective bargaining agreements
being assumed by Buyer contains provisions pertaining to employee benefits,
Buyer shall provide the Transferred Employees covered by such agreements with
benefits that are identical to those required to be provided under the terms
of such agreements. Except as otherwise expressly provided in this Article X,
Buyer shall treat all service and compensation credited to each such
Transferred Employee as if such service and compensation had been rendered
to, and paid by, Buyer for all purposes under Buyer's benefit plans,
arrangements, and policies.
Section 10.5 Defined Benefit Pension Plan.
(a) At least fifteen days prior to the Closing Date, Seller
shall take any and all actions necessary to cease benefit accruals and fully
vest all Transferred Employees in their accrued benefits under the Citizens
Pension Plan ("Seller's Pension Plan"). Seller shall retain all liabilities and
assets for pension benefits accrued through the Closing Date by Transferred
Employees and retirees of the Business under Seller's Pension Plan.
(b) As of the Closing Date, Buyer shall cause all union
Transferred Employees to be included in a qualified defined benefit pension plan
providing benefits identical to the benefits provided under the Seller's Pension
Plan ("Buyer's Pension Plan"). Buyer shall take all actions necessary to cause
Buyer's Pension Plan to recognize the service that all union Transferred
Employees had under Seller's Pension Plan for purposes of such Employees'
eligibility to participate, vesting, attainment of retirement dates, subsidized
benefits, and entitlement to optional forms of payment.
Section 10.6 401(k) Plan.
(a) Buyer shall take all action necessary to ensure that, as
of the Closing Date, it includes Transferred Employees in a qualified 401(k)
plan providing for matching contributions at least equivalent to that provided
to the Transferred Employee under Citizens 401(k) Savings Plan ("Seller's 401(k)
Plan") immediately prior to the Closing Date. Buyer shall take all actions
necessary to cause Buyer's 401 (k) Plan to recognize the service that the
Transferred Employees had in Seller's 401(k) Plan for purposes of determining
such Employees' eligibility to participate, vesting, attainment of retirement
dates, contribution levels and, if applicable, eligibility for optional forms of
benefit payments. Buyer shall cause the trustee of Buyer's 401(k) Plan to accept
transfers and direct rollovers from Seller's 401(k) Plan of the vested account
balances of Transferred Employees, including transfers of outstanding loan
balances and related promissory notes, subject to compliance with applicable
law.
(b) Seller shall vest Transferred Employees in their
account balances under Seller's 401(k) Plan as of the Closing Date. Seller
shall direct the trustee of Seller's 401(k) Plan to transfer to the trustee
of Buyer's 401(k) Plan an amount of cash equal to the value of the account
balances of the Transferred Employees under Seller's 401(k) Plan; except that
to the extent that the account balances consist of outstanding loans, Seller
shall direct the trustee of Seller's 401(k) Plan to transfer to the trustee
of Buyer's 401(k) Plan the promissory notes and related documents evidencing
such loans.
(c) Alter the transfer of assets and liabilities pursuant to
this Section, Buyer shall assume all liabilities for the benefits payable with
respect to Transferred Employees under Seller's 401(k) Plan, and Seller and
Seller's 401(k) Plan shall have no liability for such benefits.
(d) In connection with the transfer of assets and liabilities
under this Section, Seller and Buyer shall cooperate in making all appropriate
filings, and providing all applicable notices, required by the IRC or ERISA.
Buyer shall deliver to Seller a copy of Buyer's 401(k) Plan, and a copy of the
most recent determination letter from the IRS with respect to such Plan,
together with a certification to the effect that no events have occurred since
the date of the determination letter that would adversely affect the Plan's
qualified status.
Section 10.7 Welfare Benefits.
(a) Buyer shall take all action necessary and appropriate to
ensure that, as of the Closing Date, Buyer maintains employee welfare benefit
plans (including retiree medical benefits) for the benefit of Transferred
Employees that, in the case of nonunion Transferred Employees are, in the
aggregate, comparable to those benefits provided by Seller under its
corresponding welfare benefit plans (the "Buyer's Nonunion Welfare Plans"), and
in the case of union Transferred Employees are identical to those benefits
provided to union Transferred Employees under Seller's corresponding welfare
benefit plans (the "Buyer's Bargained Welfare Plans"), as in effect immediately
prior to the Closing Date. the Buyer's Nonunion Welfare Plans and the Buyer's
Bargained Welfare Plans are hereinafter referred to collectively as the "Buyer
Welfare Plans." For purposes of determining eligibility to participate, and
entitlement to benefits, in each Buyer Welfare Plan, each Transferred Employee
shall be credited with service, determined under the terms of the corresponding
welfare plans maintained by Seller on the Closing Date (hereinafter referred to
collectively as the "Seller Welfare Plans"). Any restrictions on coverage for
pre-existing conditions, actively at work requirements, waiting periods, and
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived in the Buyer Welfare Plans for Transferred Employees, and Transferred
Employees shall receive credit under the Buyer Welfare Plans for co-payments,
payments under a deductible limit made by them, and for out-of-pocket maximums
applicable to them during the plan year of the Seller Welfare Plan in which the
Closing Date occurs. As soon as practicable after the Closing Date, Seller shall
deliver to Buyer a list of the Transferred Employees who had credited service
under a Seller Welfare Plan, together with each such Transferred Employee's
service, co-payment, deductible and out-of-pocket payment amounts under such
plan.
(b) Buyer shall provide or cause to be provided retiree
medical, dental, and life benefits to each retiree of the Business identified in
Schedule 10.7 as updated as of the Closing Date (the "Retirees"), to each
Transferred Employee who is considered to be a "grandfathered employee" (as
hereinafter defined), and to each union Transferred Employee who otherwise is
eligible for such retiree benefits, under the same terms and conditions as
applied to such Retiree or Transferred Employee immediately prior to' the
Closing Date, and Seller shall have no obligation or liability, contingent or
otherwise, to provide retiree medical, dental or life benefits to any such
Retiree or Transferred Employee on or after the Closing Date. For purposes of
this Section 10.7, a "grandfathered employee" is a union or nonunion Transferred
Employee, who was at least age 55 with at least 10 years of service as defined
in the Seller's Pension Plan by December 31, 1997, and who retires after
December 31, 1997. Schedule 10.7 identifies each Active Employee who is a
"grandfathered employee" and each union Active Employee who otherwise is
eligible for such retiree benefits. Buyer agrees not to terminate or materially
modify those post-retirement benefit provisions covering "grandfathered"
Transferred Employees, eligible union Transferred Employees, Retirees, their
spouses and dependents that are in effect immediately prior to the Closing Date.
(c) Within sixty (60) days after the Closing, Seller agrees to
transfer to an exempt trust established by Buyer under Section 501 (c)(9) of the
IRC ("Buyer's VEBA") the amount held under any trust established by Seller under
Section 501 (c)(9) of the IRC ("Seller's VEBA") to fund post-retirement health
care and life insurance benefits for the Business. Such amount shall be
determined based upon Seller's internal recordkeeping. Buyer agrees that Buyer's
VEBA will apply an amount at least equal to the sum of the assets transferred
from Seller's VEBA (and earnings thereon calculated at the rate of return
generated by Buyer's VEBA) to provide post-retirement health care and life
insurance benefits after the Closing Date to the Retirees and, as applicable,
the Transferred Employees who become eligible for such benefits after Closing.
Upon Closing, Buyer shall be responsible for all obligations of Seller to
provide post-retirement health care and life insurance benefits to such
Transferred Employees and Retirees, and Seller and Seller's VEBA shall cease to
have any liability, contingent or otherwise, for such benefits.
Section 10.8 Flexible Spending Accounts. Seller shall transfer to
Buyer's flexible benefits plan any balances standing
to the credit of Transferred Employees under Seller's flexible benefits plan
as of the Closing Date. Seller shall provide to Buyer prior to the Closing
Date a list of those Transferred Employees that have participated in the
health or dependent care reimbursement accounts of Seller, together with
their elections made prior to the Closing Date with respect to such account,
and balances standing to their credit as of the Closing Date.
Section 10.9 Employment Agreements. Buyer shall assume all obligations
of each employment agreement to which Seller or its Affiliates is a party and
which covers any Transferred Employee immediately prior to the Closing Date.
Section 10.10 Vacation. Seller shall pay to Transferred Employees any
"banked" vacation credited to them on or prior to the Closing Date. On or after
the Closing Date, Buyer shall provide to each Transferred Employee vacation in
an amount equal to the Transferred Employee's vacation entitlement for the year
of the Closing reduced by the number of vacation days that such Transferred
Employee has taken on or before the Closing.
Section 10.11 Severance. In the event that Buyer terminates the
services of any Transferred Employee within twelve (12) 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 benefits
that would have been paid by Seller had Seller continued to employ such
Transferred Employee through such twelve month period ending on the employee's
date of termination from Buyer; provided, however, that if a collective
bargaining agreement that is applicable to a union Transferred Employee would
provide for a greater benefit to be paid by Buyer, the terms and conditions of
such agreement shall instead be applicable. "Cause" for termination shall
consist oft (a) any act of dishonesty or fraud; (b) an employee's conviction of
a crime involving fraud, embezzlement or any other act of moral turpitude; (c)
an employee's gross negligence or willful misconduct in the performance of his
duties; (d) an employee's engagement in acts seriously detrimental to the
Business or reputation of Buyer; (e) an employee's failure to abide by lawful
policies of Buyer; and (f) the employee's failure to abide by the directives of
the employee's superior.
ARTICLE XI
TAX MATTERS
Section 11.1 Purchase Price Allocation. 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 as required by Section 1060 of the IRC and the Treasury Regulations
promulgated thereunder. If Buyer and Seller agree to such Allocation, Buyer and
Seller covenant and agree that, except to the extent that the IRS or other
Governmental Body successfully
challenges such Allocation, (i) the values assigned to the assets by the
parties' mutual agreement shall be conclusive and final for all purposes,
(ii) Buyer and Seller shall file all federal T&x Returns, including IRS Form
8594, in accordance with such Allocation, and (iii) neither Buyer nor Seller
will take any position before any Governmental Body or in any Proceeding that
is in any way inconsistent with such Allocation. Notwithstanding the
foregoing, if Buyer and Seller cannot agree to an Allocation, Buyer and
Seller covenant and agree to file, and to cause their respective Affiliates
to file, all Tax Returns and schedules thereto (including, for example,
amended returns, claims for refund, and those returns and forms required
under Section 1060 of the IRC and any Treasury regulations promulgated
thereunder) consistent with each of such party's good faith Allocations,
unless otherwise required because of a change in any Legal Requirement.
Section 11.2 Cooperation with Respect to Like-Kind Exchange. Buyer
agrees that Seller may, at Seller's election prior to the Closing Date, direct
Buyer to acquire any portion of the Assets by delivering all or a portion of the
Purchase Price to a "qualified intermediary" (as defined in Treasury Regulations
ss. 1.1031 (k) - (1)(g)(4)) as to assist Seller in structuring the
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 reasonably requests in order to enable Seller to qualify
such transfer as part of a like-kind exchange of property covered by Section
1031 of the 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 the extent necessary
to qualify the transfer of the Assets as part of a like-kind exchange of
property covered by Section 1031 of the IRC, provided, however, lat no such
assignment shall relieve Seller of any of its obligations under this Agreement.
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 lat such efforts are not required to
include an unreasonable delay in the consummation of the transactions
contemplated by this Agreement. Seller agrees to pay any additional Transaction
Taxes that may be imposed as a result of any like-kind exchange contemplated by
this Section 11.2 and to reimburse Buyer for any additional out-of-pocket legal
fees and expenses incurred by Buyer in connection with any such exchange.
Section 11.3 Transaction Taxes. Buyer and Seller shall each bear and be
responsible for paying one-half of any sales, use, transfer, documentary,
registration (other than any annual
registration fees), business and occupation and other similar Taxes
(including related penalties (civil or criminal), additions to tax and
interest) imposed by any Governmental Body with respect to the transfer of
Assets (including the Real Property) to Buyer ("Transaction Taxes"),
regardless of whether the 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). Fifteen
(IS) days prior to making such filings, the filing party shall provide to the
nonfiling party the filing party's workpapers for the nonfiling party's
review and approval. the nonfiling party shall provide to the filing party
approval or disapproval of such workpapers within ten (10) days of delivery
by the filing party. the filing party shall be responsible for (i)
administering the payment of such Transaction Taxes, (ii) defending or
pursuing any Proceedings related thereto, and (iii) paying any expenses
related thereto, in each case subject to reimbursement by the nonfiling party
for one-half of such payments and expenses. Each party shall give prompt
written notice to the other of any proposed adjustment or assessment of any
Transaction Taxes with respect to the transaction, or of any examination of
said transaction in a sales, use, transfer or similar tax audit. In any
Proceedings, whether formal or informal, the filing party shall control the
defense of such Proceedings, but shall permit the nonfiling party to
participate in the defense of such proceeding and shall take all actions and
execute all documents required to allow such participation. Neither party
shall negotiate a settlement or compromise of any Transaction Taxes without
the prior written consent of the other, which consent shall not be
unreasonably withheld.
ARTICLE XII
ENVIRONMENTAL MATTERS
Section 12.1 Environmental Due Diligence.
(a) RIGHT TO CONDUCT ENVIRONMENTAL DUE DILIGENCE. Regarding
environmental matters, Buyer has completed its initial environmental due
diligence prior to execution of this Agreement, including a review of the
Environmental Data. Buyer also has required Seller to make the representations
concerning environmental matters set forth in Section 5.14, upon which Buyer is
relying. In light of these actions, Buyer agrees not to conduct additional
environmental due diligence (including employee interviews and sampling of any
media or wastewater) except in accordance with this Section 12.1. All activities
of Buyer regarding environmental due diligence shall be conducted to minimize
any inconvenience or interruption of the normal use and enjoyment of the
Business and the Assets.
(b) DELIVERY OF ENVIRONMENTAL REPORTS. Seller has made
available to Buyer before the date of execution of this Agreement
copies of all written environmental audits, reports or studies in Seller's
possession of which Seller has Knowledge and which were prepared after
December 31, 1996, concerning the existence or possible existence of
Hazardous Materials on, or under or adjacent to any of the Real Property or
relating to potential Environmental Liability of Seller in connection with
the Business or the Assets. Buyer shall provide to Seller copies of all
reports, assessments and other information composed or compiled by Buyer or
Buyer's environmental consultant(s) promptly following Buyer's receipt
thereof. Buyer shall treat all such information delivered to, or composed or
compiled by, Buyer or Buyer's environmental consultant(s) as Environmental
Data in accordance with the procedures of Section 12.1(c).
(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, each
Party agrees that it will not distribute the Environmental Data to any third
party without the other's prior written consent, except as required by law or by
express provisions of its corporate compliance program if the other Party is
provided written notice at least ten (10) days prior to such distribution,
provided, however, that for a period of two (2) years after the Closing Date,
Buyer may distribute the Environmental Data to any potential purchaser of the
Assets only after first notifying the Seller.
(d) ENVIRONMENTAL CONSULTANTS Buyer may retain one or more
outside environmental consultants to assist in its environmental due diligence
concerning the Assets and shall notify Seller of the environmental consultant or
consultants Buyer intends to retain. Thereafter, Seller shall have five (5) days
after receipt of such notification to notify Buyer in writing of Seller's
objection (which must be for good cause) and substantiate the basis for that
objection. If Seller does not object for good cause and substantiate that
objection within said five (5) day period, Seller shall be deemed to have
consented to Buyer's selection.
(e) PHASE I REVIEWS. Buyer has conducted various environmental
assessment activities with respect to the Assets, including reviewing existing
environmental reports, correspondence, permits and related materials regarding
the Assets, but excluding inspecting individual sites. Buyer may not conduct any
further Phase I environmental assessment activities with respect to the Assets
without the prior written consent of Seller, which consent may be withheld,
conditioned or delayed by Seller in its sole discretion. Any permitted Phase I
environmental assessment activities shall not include any sampling or intrusive
testing.
(f) PHASE II REVIEWS. Buyer may not conduct any Phase II
environmental assessment activities with respect to the Assets (including, but
not limited to, the taking and analysis of soil, surface water and groundwater
samples, testing of buildings, drilling ▇▇▇▇▇, taking soil borings and
excavating) without the prior written consent of Seller, which consent may be
withheld, conditioned or delayed by Seller in its sole discretion.
(g) ADDITIONAL DUE DILIGENCE. Notwithstanding the foregoing,
if prior to Closing Seller receives notice of any Proceeding or threatened
Proceeding arising under Environmental Laws or if Seller otherwise acquires
Knowledge that is reasonably likely to require a change to Schedule 5.14, Seller
promptly shall notify Buyer of the same and Buyer may request that Seller
authorize Buyer to conduct specific additional environmental due diligence
measures if and to the extent that such measures are required Co 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.
(h) INDEMNITY FOR DUE DILIGENCE ACTIVITIES. Buyer hereby
agrees to indemnify and hold harmless Seller, Seller's Affiliates and their
respective officers, directors, employees, agents, successors and assigns from
and against any and all Losses with respect to persons or property arising out
of or resulting from any site visit by Buyer or its environmental consultant(s)
and resulting from an act or omission of Buyer or its environmental
consultant(s), provided, however, that such indemnity shall not extend to Losses
resulting from the discovery of pre-existing damage or other pre-existing
conditions of the Assets.
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; and
(c) Assumed Liabilities, including the Assumed Environmental
Liabilities.
Section 133 Limitations on Liability. Notwithstanding anything to the
contrary m this Agreement, the liability of Seller and Buyer under this
Agreement and any documents delivered in connection herewith or contemplated
hereby shall be limited as follows:
(a) IN NO EVENT SHALL SELLER BE LIABLE TO THE BUYER
INDEMNITIES, OR SHALL BUYER BE LIABLE TO THE SELLER INDEMNITIES, FOR ANY
EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE
DAMAGES; provided, however, That if Buyer or Seller is held liable to a third
party for any of such damages and Seller or Buyer, respectively is obligated to
indemnify the other for the matter that gave rise to such damages, then Seller
or Buyer, as appropriate, shall be liable for, and obligated to reimburse the
other for, such damages.
(b) Except as provided below, the representations, warranties,
covenants and agreements of Seller and Buyer set forth in this Agreement shall
survive the Closing for the applicable period of time set forth below in this
Section 13.3(b), and all representations, warranties, covenants and agreements
of Seller and Buyer under this Agreement and the indemnities granted by Seller
and Buyer in Section 13.1 or Section 13.2, respectively, shall terminate at 5:00
p.m., local time in Stamford, Connecticut, on the appropriate anniversary of the
Closing Date or on the expiration of the applicable statute of limitations (or
extensions or waivers thereof), as the case may be, as set forth below in this
Section 13.3(b); provided, however, that 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.
(1) The representations and warranties of Seller
contained in Section 5.9 (Taxes), the covenants and agreements of Seller
relating to Taxes, and the related indemnity obligations of Seller contained in
Section 13.1 shall terminate on, and no action or claim with respect thereto may
be brought following, the expiration of the applicable statute of limitations
(or extensions or waivers thereof).
(2) The representations and warranties of Seller
contained in Section 5.5 (Title to Assets; Liens) and the related indemnity
obligations of Seller contained in Section 13.1 shall terminate on, and no
action or claim with respect thereto may be brought after, the third anniversary
of the Closing Date.
(3) The representations and warranties of Sellers
contained in Section 5.14 (Environmental Matters) and the related indemnity
obligations of Sellers contained in Section 13.1 shall terminate on, and no
action or claim with respect thereto may be brought after, the fourth
anniversary of the Closing Date.
(4) All other representations and warranties of
Seller and Buyer contained in this Agreement and the related indemnity
obligations of Buyer and Seller contained in this Agreement shall terminate on,
and no further action or claim with respect thereto may be brought after, the
second anniversary of the Closing Date.
(5) Except as set forth in the proviso to this
clause (5), the indemnity obligations of Seller contained in Section 13.1 with
respect to any Retained Liability shall terminate on, and no action or claim
with respect thereto may be brought after, the second anniversary of the Closing
Date, provided that the indemnity obligations of Seller contained in
Section 13.1 for (i) Retained Liabilities relating to Taxes shall survive
until the expiration of the applicable statute of limitations (or extensions
or waivers thereof); (ii) Retained Environmental Liabilities with respect to
which Seller had no Knowledge as of the Closing Date shall survive until the
fourth anniversary of the Closing Date; and (iii) Retained Liabilities
described in Sections 2.3(a), (c) and (d), Retained Liabilities relating to
the Proceedings listed in Schedule 2.2(b) as Retained Liabilities, and any
Disclosed Pre-Closing Liability (and any liability or obligation that would
have been a Disclosed Pre-Closing Liability had Seller disclosed such
liability or obligation to Buyer if Seller had Knowledge of such liability or
obligation as of the Closing Date) shall survive for an unlimited period of
time. the Retained Liabilities described in clauses (i) and (iii) of this
Section 13 .3(b)(5) are collectively referred to hereinafter as the
"Specified Retained Liabilities.
(6) The indemnity obligations of Buyer contained
in Section 13.2 with respect to any Assumed Liability shall survive for an
unlimited period of time.
(7) Notwithstanding the foregoing, the Parties
acknowledge that Buyer shall be entitled to indemnification by Seller for
Losses incurred by Buyer in respect of any intentional or reckless
misrepresentation or omission or fraud by Seller without any time limitation
(it being understood that the failure to cure a breach shall not, by itself,
be an intentional or reckless act or omission).
In no event shall any amounts be recovered from Seller or Buyer under Section
13.1 or Section 13.2, respectively, or otherwise for any matter for which a
Claim Notice is not delivered to Seller or Buyer, as the case may be, prior
to the close of business on the applicable date set forth above.
(c) Notwithstanding anything to the contrary in this
Agreement, Seller shall not be required to indemnify the Buyer Indemnities,
or be otherwise liable in any way whatsoever to the Buyer Indemnitees, for
any Losses (other than Losses incurred by Buyer in respect of the Specified
Retained Liabilities and any intentional or reckless misrepresentation or
omission or fraud by Seller, it being understood that the failure to cure a
breach shall not, by itself, be an intentional or reckless act or omission
(the "First-Dollar Losses") until the Buyer Indemnitees have suffered Losses
(determined after giving effect to the provisions of Section 13.3(f) and
other than First-Dollar Losses) that, when taken together with all other
claims for Losses (other than First-Dollar Losses) under Section 13.1 of each
of the Related Purchase Agreements, are in excess of a deductible in an
amount equal to two percent (2%) of the total of the Purchase Price plus the
aggregate gross purchase price set forth in each Related Purchase Agreement
that is consummated, after which point Seller will be obligated only to
indemnify the Buyer Indemnitees from and against further Losses other than
First Dollar Losses in
excess of such deductible. Buyer shall be entitled to indemnification for all
First Dollar Losses.
(d) Notwithstanding anything to the contrary in this
Agreement, Seller shall not be required to indemnify the Buyer Indemnitees,
or be otherwise liable in any way whatsoever to the Buyer Indemnitees, for
any Losses (other than First-Dollar Losses) that, when combined with the
aggregate amount of Losses (other than First-Dollar Losses) that are subject
to indemnification by Seller under Section 13.1 of the Related Purchase
Agreements, are in excess of an amount equal to five percent (5%) of the
total of the Purchase Price plus the aggregate gross purchase price set forth
in each Related Purchase Agreement that is consummated. Buyer shall be
entitled to indemnification for all First-Dollar Losses.
(e) Except to the extent otherwise expressly provided in
this Agreement, no right to indemnification under this Article XIII shall be
limited by reason of any investigation conducted by any Party at any time or
by the decision by a Party to complete the Closing. Notwithstanding the
foregoing, Buyer acknowledges that Seller's indemnity obligations contained
in Section 13.1 are subject to the applicable limitations set forth in
Section 13.3, and that certain obligations and liabilities of Seller are
included among the Assumed Liabilities.
(f) Neither Party shall have liability for any claim or
Loss (A) that is covered by insurance for which the other Party recovers
payments in respect of such Loss or with respect to which the other Party
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, but in each case only to
the extent of such payments or recovery. With respect to insurance proceeds
only, such recovery shall be calculated net of the insured party's
out-of-pocket costs relating to claim preparation and settlement. With
respect to recovery through rates, if the amount of the Losses that is
included in rates is not specifically adjudicated in the related Final Order,
the amount of the Losses included in rates will be calculated as follows: (i)
if the cost associated with the Losses is booked as an item of operating
expense, the amount of such expense included in rates will be the result of
the ratio where total test period operating expenses allowed for ratemaking
purposes in such Final Order is the numerator and Buyer's total requested
test period operating expenses (including the Losses) is the denominator;
(ii) if the cost associated with the Losses is booked as an item of rate
base, the amount of such rate base included in rates will be the result of
the ratio where total test period rate base allowed for ratemaking purposes
in such Final Order is the numerator and Buyer's total requested test period
rate base (including the Losses) is the denominator. 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 recovery reduces the amount of Losses actually
incurred by the Buyer Indemnitees to an amount that is then below the
deductible amount set forth in Section 13.3(c) 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 cost or expense relating to any such recovery shall reduce the amount
of such payment to Seller.
(g) Notwithstanding any language contained in any Related
Document (including deeds and other conveyance documents relating to the Real
Property), the representations and warranties of Seller set forth in this
Agreement will not be merged into any such Related Document and the
indemnification obligations of Seller, and the limitations on such
obligations, set forth in this Agreement shall control. No provision set
forth in any such Related Document shall be deemed to enlarge, alter or amend
the terms or provisions of this Agreement.
Section 13.4 Claims Procedure.
(a) All claims for indemnification under Section 13.1 or
13.2, or any other provision of this Agreement except as otherwise expressly
provided in this Agreement, shall be asserted and resolved pursuant to this
Article XIII. Any Person claiming indemnification hereunder referred to as
the "Indemnified Party" and any Person against whom such claims are asserted
hereunder is
hereinafter referred to as the "Indemnifying Party." In the event that any
Losses are asserted against or sought to be collected from an Indemnified
Party by a third party, said Indemnified Party shall with reasonable
promptness provide to the Indemnifying Party a Claim Notice. The Indemnifying
Party shall be relieved of its obligations to indemnify the Indemnified Party
with respect to any such Losses only to the extent the Indemnified Party's
delay in notifying the Indemnifying Party thereof in accordance with the
provisions of this Agreement so prejudice the Indemnifying Party's ability to
defend against the Losses. The Indemnifying Party shall have twenty (20) 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 both the Indemnifying Party
and the Indemnified Party.
(b) The Indemnified Party shall provide reasonable
assistance to the Indemnifying Party and provide access to its books, records
and personnel as the Indemnifying Party reasonably requests in connection
with the investigation or defense of the Losses. The Indemnifying Party shall
promptly upon receipt of reasonable supporting documentation reimburse the
Indemnified Party for out-of-pocket costs and expenses incurred by the latter
in providing the requested assistance.
(c) With regard to third party claims for which Buyer or
Seller is entitled to indemnification under Section 13.1 or 13.2 such
indemnification shall be paid by the Indemnifying Party
upon: (i) the entry of an Order against the Indemnified Party and the
expiration of any applicable appeal period; or (ii) a settlement with the
consent of the Indemnifying Party, provided that no such consent need be
obtained if the Indemnifying Party fails to respond to the Claim Notice as
provided in Section 13.4(a). Notwithstanding the foregoing but subject to
Section 13.4(a), and provided that there is no dispute as to the
applicability of indemnification, expenses of counsel to the Indemnified
Party shall be reimbursed on a current basis by the Indemnifying Party as if
such expenses are a liability of the Indemnifying Party.
Section 13.5 Exclusive Remedy. Except as otherwise provided in
Section 6.4, the rights, remedies and obligations of the Buyer Indemnitees
and the Seller Indemnitees set forth in this Article XIII will be the
exclusive rights, remedies and obligations of such Persons after the Closing
with respect to this Agreement, the events giving rise to this Agreement and
the transactions provided for herein or contemplated hereby or thereby. No
Proceeding for termination or rescission, or claiming repudiation, of this
Agreement or the ▇▇▇▇ of Sale may be brought or maintained by either party
against the other following the Closing Date no matter how severe, grave or
fundamental any breach, default or nonperformance may be by one party.
Accordingly, the parties hereby expressly waive and forego any and all rights
they may possess to bring any such Proceeding.
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.
(a) Buyer, on behalf of itself and each other Buyer
Indemnitee, hereby forever waives, relieves, releases and discharges the
Seller Indemnitees and their successors and assigns from any and all rights,
liabilities, Proceedings (including future Proceedings) and Losses of any
Buyer Indemnitee, whether known or unknown at the Closing Date, which any
Buyer Indemnitee has or incurs, or may in the future have or incur, arising
out of or related to any Assumed Environmental Liability.
(b) Seller, on behalf of itself and each other Seller
Indemnitee, hereby forever waives, relieves, releases and discharges to Buyer
Indemnitees and their successors and assigns from any and all rights,
liabilities, Proceedings (including future Proceedings) and Losses of any
Seller Indemnitee, whether
known or unknown at the Closing Date, which any Seller Indemnitee has or
incurs, or may in the future have or incur, arising out of or related to any
Retained Environmental Liabilities.
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 cater or (d) by facsimile with
completed transmission acknowledged:
If to Seller, to:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and:
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and:
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer, to:
Cap Rock Energy
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇ 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 la otherwise, by any party hereto without the prior written
consent of the other party hereto, 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 provisions hereof shall be binding upon
the Person receiving such assignment by operation of 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 (provided that no
such assignment by Seller shall in any way operate to enlarge, alter or
change any obligations due to Buyer or relieve Seller of its obligations
hereunder if such qualified intermediary fails to perform such obligations,
with the understanding that Seller shall be jointly and severally liable with
such qualified intermediary for any nonperformance of Seller's obligations
hereunder).
Section 14.4 Successor Bound. Subject to the provisions of Section
14.3, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
permitted assigns.
Section 14.5 Governing Law. The validity, performance, and
enforcement of this Agreement and all Related Documents, unless expressly
provided to the contrary, shall be governed by the laws of the State of
Delaware without giving effect to the principles of conflicts of law of such
state.
Section 14.6 Dispute Resolution. Except as otherwise provided in
Sections 3.3(c) and 6.4, and this Section 14.6, any dispute, controversy or
claim between the parties relating to, arising out of or in connection with
this Agreement (or any subsequent agreements or amendments thereto) including
as to its existence, enforceability, validity, interpretation, performance or
breach or as to indemnification or damages, including claims in tort, whether
arising before or after the termination of this Agreement (any such dispute,
controversy or claim being herein referred to as a "Dispute") shall be
settled without litigation and only by use of the following alternative
dispute resolution procedure:
(a) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Dispute. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt
from discovery and production, and without the concurrence of both parties
shall not be admissible in the arbitration described below, or in any
lawsuit. Documents identified in or provided with such communications, which
are not prepared for purposes of the negotiations, are not so exempted and
may, if otherwise admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties
do not resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules, as then amended and in effect, of
the American Arbitration Association (the "Rules"). Either party may demand such
arbitration in accordance with the procedures set out in the Rules. The
arbitration shall take place in Phoenix, Arizona. 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 m;y make written and oral presentations to the arbitrator, present
testimony and written evidence and examine witnesses. No party shall be
eligible to receive, and the arbitrator shall not have the authority to
award, exemplary or punitive damages. The arbitrator shall rule on the
Dispute by issuing a written opinion within 30 days after the close of
hearings. The arbitrator's decision shall be binding and final. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction.
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrator; provided, however, that if the arbitrator determines that the
position taken in the Dispute by the non-prevailing party taken as a whole is
unreasonable, the arbitrator may order the non prevailing party to bear such
fees and expenses, and reimburse the prevailing party for all or such portion
of its reasonable costs and expenses in submitting and presenting its
position. as the arbitrator 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 commercially 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. The word "including" in this Agreement shall mean including
without limitation. Words in the singular shall be held to include the plural
and vice versa and words of one gender shall be held to include the other
genders as the context requires. The terms "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole (including all of the Schedules and
Exhibits hereto) and not to any particular provision of this Agreement, and
Article, Section, paragraph, Exhibit and Schedule references are to the
Articles, Sections, paragraphs Exhibits and Schedules to this Agreement
unless otherwise specified.
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 and
disclosures relating thereto, without the prior written consent of the other
party, such consent not to be unreasonably withheld or delayed; provided,
however, that such consent shall not be required where such release or
announcement is required by applicable law or the rules or regulations of a
securities exchange, in which event the party so required to issue such
release or announcement shall endeavor, wherever possible, to furnish an
advance copy of the proposed release to the other party.
Section 14.10 Waiver. Except as otherwise expressly provided in this
Agreement, neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such
right, power or privilege preclude any other or further exercise thereof, or
the exercise of any other right, power or privilege available to each party
at law or in equity.
Section 14.11 Parties in Interest. This Agreement (including the
documents and instruments referred to herein) is not intended to confer upon
any Person, other than the parties hereto and their successors and permitted
assigns, any rights or remedies hereunder; provided, however, that the
indemnification provisions in Article XIII shall inure to the benefit of the
Buyer Indemnitees and the Seller Indemnitees as provided therein.
Section 14.12 Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Section 14.13 Amendment. This Agreement may be amended only
by an instrument in writing executed by the parties hereto.
Section 14.14 Entire Agreement. This Agreement, the Exhibits and
Schedules hereto and the documents specifically referred to herein and the
Confidentiality Agreement constitute the entire agreement, understanding,
representations and warranties of the parties hereto, and supersede all prior
agreements, both written and oral, between Buyer and Seller. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Disclosure of
any fact or item in any Schedule referenced by a particular paragraph or
Section in this Agreement shall, should such fact or item or its contents be
expressly or obviously related to any other paragraph or Section, be deemed
to be disclosed with respect to that other paragraph or Section whether or
not any explicit cross-reference appears therein.
Section 14.15 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
Section 14.6 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]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
CITIZENS UTILITY COMPANY
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial
Officer and Vice President
CAP ROCK ELECTRIC COOPERATIVE
By:
----------------------------------------
Name:
Title:
CAP ROCK ENERGY CORPORATION
By:
----------------------------------------
Name:
Title:
[(Signature page to Purchase and Sale Agreement (Vermont Electric) between
Citizens Utilities Company, Cap Rock Electric Cooperative and Cap Rock Energy
Corporation, dated as of February 11, 2000.]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
CITIZENS UTILITY COMPANY
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial
Officer and Vice President
CAP ROCK ELECTRIC COOPERATIVE
By:
----------------------------------------
Name:
Title:
CAP ROCK ENERGY CORPORATION
By:
----------------------------------------
Name:
Title:
[(Signature page to Purchase and Sale Agreement (Vermont
Electric) between Citizens Utilities Company, Cap Rock Electric
Cooperative and Cap Rock Energy Corporation,
dated as of February 11, 2000.]
EXHIBIT 7.1(g)
[Closing Date]
Citizens Utilities Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have acted as counsel to Cap Rock Electric Cooperative, a Texas
corporation, and Cap Rock Energy Corporation, a Texas corporation
(collectively, the "Company"), in connection with the execution and delivery
by the Company, and Citizens Utilities Company, a Delaware corporation
("Seller"), of the Purchase and Sale Agreement, dated as of February___, 2000
(the "Agreement"). Ml capitalized terms used herein without definition shall
have the respective meanings ascribed to them in the Agreement.
In connection with the opinions expressed below, I have made such
examination of law and have examined originals, or copies certified or
otherwise identified to my satisfaction, of the Agreement, the ▇▇▇▇ of Sale
and Assignment and Assumption Agreement, and the other documents delivered by
the Company at Closing pursuant to the Agreement dated the date hereof
(collectively, the "Transaction Documents"), and such corporate documents and
records of the Company, certificates of public officials and of officers of
the Company, and such other documents as I have deemed necessary or
appropriate. With respect to the matters set forth in Paragraph I, I have
relied upon certain documentation received from public officials.
In making such examination and rendering the opinions set forth
below, I have assumed the genuineness of all signatures, the authenticity of
all documents submitted to me as originals and the conformity to authentic
original documents of all documents submitted to me as certified, conformed
or photostatic copies and the authenticity of the originals of such
documents. As to factual matters material to my opinion, I have had such
discussions with the officers of the Company as I have deemed relevant or
necessary, and, I have assumed, with your permission and without independent
investigation, the truthfulness of all recitals, representations, warranties
and factual matters set forth in all documents, instruments, certificates and
reports I have examined.
In rendering the opinions set forth below, I have also assumed that
(a) each of the parties to the Agreement and the Transaction Documents other
than the Company is duly organized, validly existing and in good standing
under the laws of the
jurisdiction of its organization, (b) each of such other parties to the
Agreement and the Transaction Documents has the requisite corporate power and
corporate authority and has taken the corporate action necessary to execute
and deliver the Agreement and the Transaction Documents and to consummate the
transactions contemplated thereby; (c) the Agreement and Transaction
Documents have been duly executed and delivered by each of such other parties
thereto; and (d) the Agreement and the Transaction Documents constitute the
legal, valid and binding obligations of each such other party thereto,
enforceable against such other party in accordance with its respective terms.
I am a member of the bar of the State of _____, and I express,
subject to the qualifications herein, no opinion as to the laws of any
jurisdiction except the [General Corporation Law] of the State of Texas, the
federal laws of the United States of America (with the exception of federal
antitrust laws and regulations, federal securities laws and regulations,
matters relating to the Communications Act of 1934, as amended, and the rules
and regulations of the Federal Communications Commission), and the laws of
the State of_______ (with the exception of state antitrust or unfair
competition laws and regulations, state securities laws and other statutes,
ordinances, administrative decisions and rules and regulations of counties,
towns, municipalities and special political subdivisions). To the extent that
any matter with respect to which an opinion is rendered herein is governed by
the laws of another jurisdiction other than the [General Corporation Law] of
the State of Texas, I have, with your permission, assumed that the laws of
such other jurisdiction are identical to the laws of the State of_______.
"Actual Knowledge" as used in this letter means the conscious
awareness of facts or other information by myself or any lawyer in the employ
of the Company who has had active involvement in negotiating the Agreement,
preparing the Transaction- Documents or preparing this letter.
The opinions hereinafter expressed are subject to the
following further qualifications:
(i) My opinion is subject to the effect of bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or
otherwise similar laws now or hereafter relating to or affecting debtors'
obligations and the rights of creditors generally.
(ii) My opinion is subject to limitations imposed by
general principles of equity upon the specific enforceability of any of the
remedies, covenants or other provisions of the Transaction Documents and upon
the availability of injunctive relief or other equitable remedies, and the
application of principles of equity (regardless of whether enforcements is
considered in proceedings in law or in equity).
(iii) The opinions stated herein are as of the date hereof
and are limited to laws, facts and circumstances in existence on the date
hereof, and I assume no undertaking to advise Seller of any change in the
opinions expressed herein, whether or not material, as a result of any change
in any laws, facts or circumstances pertaining to the Transaction Documents
which may come to my attention after the date hereof.
Based upon and subject to the foregoing, it is my opinion that as of
the date hereof:
1. The Company is validly existing and in good standing under the
laws of the State of Texas. The Company has all necessary corporate power to
perform its obligations under the Transaction Documents, and the Company has
all requisite corporate power and authority to own, lease and operate the
Assets and the Business.
2. All corporate proceedings required to be taken by or on the part
of the Company and the shareholders of the Company to authorize the
execution, delivery and performance of the Transaction Documents, and the
consummation of the transactions contemplated thereby, have been duly and
properly taken. Each of the Transaction Documents has been duly and validly
executed and delivered.
3. Neither the execution and delivery of the Transaction Documents
by the Company nor the consummation of the transactions contemplated thereby
will: (a) violate or conflict with any provision of the certificate or
articles of incorporation or bylaws of the Company, as amended to date; or
(b) to my Actual Knowledge, violate or conflict with any Legal Requirement or
Order.
4. The Agreement and other agreements and documents to be executed
pursuant thereto, when executed and delivered by the Company, will constitute
legal, valid and binding obligations of the Company, enforceable against it
in accordance with their respective terms.
The opinions expressed herein are intended only for your benefit and
use, and may not, without my written consent, be used or relied upon in any
manner for any purpose by any other person or entity.
Very truly yours,
EXHIBIT 7.2(g)
[Closing Date]
Cap Rock Electric Cooperative
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Cap Rock Energy Corporation
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have acted as counsel for Citizens Utilities Company, a Delaware
corporation (the "Company"), in connection with the execution and delivery by
the Company, and Cap Rock Electric Cooperative, a Texas corporation, and Cap
Rock Energy Corporation, a Texas corporation (collectively, "Buyer"), of the
Purchase and Sale Agreement, dated as of February___, 2000 (;he "Agreement").
All capitalized terms used herein without definition shall have the
respective meanings ascribed to them in the Agreement.
In connection with the opinions expressed below, I have made such
examination of law and have examined originals, or copies certified or
otherwise identified to our satisfaction, of the Agreement, the ▇▇▇▇ of Sale
and Assignment and Assumption Agreement, and the other documents delivered by
the Company at Closing pursuant to the Agreement dated the date
hereof(collectively, the "Transaction Documents ); and such corporate
documents and records of the Company, certificates of public officials and of
officers of the Company, and such other documents as I have deemed necessary
or appropriate. With respect to the matters set forth in Paragraph I, I have
relied upon certain documentation received from public officials.
In making such examination and rendering the opinions set forth
below, I have assumed the genuineness of all signatures, the authenticity of
all documents submitted to me as originals and the -conformity to authentic
original documents of all documents submitted to me as certified, conformed
or photostatic copies and the authenticity of the originals of such
documents. As to factual matters material to our opinion, I have had such
discussions with the officers of the Company as I have deemed relevant or
necessary, and, l have assumed, with your permission and without independent
investigation, the truthfulness of all recitals, representations, warranties
and factual matters set forth in all documents, instruments, certificates and
reports I have examined.
In rendering the opinions set forth below, I have also assumed that
(a) each of the parties to the Agreement and the Transaction Documents other
than the Company is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization; (b) each of such
other parties to the Agreement and the Transaction Documents has the
requisite corporate power and corporate authority and has taken the corporate
action necessary to execute and deliver the Agreement and the Transaction
Documents and to consummate the transactions contemplated thereby; (c) the
Agreement and Transaction Documents have been duly executed and delivered by
each of such other parties thereto; and (d) the Agreement and the Transaction
Documents constitute the legal, valid and binding obligations of each such
other party thereto, enforceable against such other party in accordance with
its respective terms.
I am a member of the bar of the State of New York, and I express,
subject to the qualifications herein, no opinion as to the laws of any
jurisdiction except the General Corporation Law of the State of Delaware, the
federal laws of the United States of America (with the exception of federal
antitrust laws and regulations, federal securities laws and regulations,
matters relating to the Communications Act of 1934, as amended, and the rules
and regulations of the Federal Communications Commission), and the laws of
the State of New York (with the exception of state antitrust or unfair
competition laws and regulations, state securities laws and other statutes,
ordinances, administrative decisions and rules and regulations of counties,
towns, municipalities and special political subdivisions). I am not admitted
to practice in the State of Delaware. To the extent that any matter with
respect to which an opinion is rendered herein is governed by the laws of
another jurisdiction other than the General Corporation Law of the State of
Delaware, I have, with your permission, assumed that the laws of such other
jurisdiction are identical to the laws of the State of New York.
"Actual Knowledge" as used in this letter means the conscious
awareness of facts or other information by myself or any lawyer in the employ
of the Company who has had active involvement in negotiating the Agreement,
preparing the Transaction Documents or preparing this letter.
The opinions hereinafter expressed are subject to the following
further qualifications:
(i) This opinion is subject to the effect of bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or
otherwise similar laws now or hereafter relating to or affecting debtors'
obligations and the rights of creditors generally.
(ii) This opinion is subject to limitations imposed by
general principles of equity upon the specific enforceability of any of the
remedies, covenants or other provisions of the
Transaction Documents and upon the availability of injunctive relief or other
equitable remedies, and the application of principles of equity (regardless
of whether enforcements is considered in proceedings in law or in equity).
(iii) The opinions stated herein are as of the date hereof
and are limited to laws, facts and circumstances in existence on the date
hereof, and we assume no undertaking to advise Buyer of any change in the
opinions expressed herein, whether or not material, as a result of any change
in any laws, facts or circumstances pertaining to the Transaction Documents
which may come to our attention after the date hereof.
Based upon and subject to the foregoing, it is my opinion that as of
the date hereof:
1. The Company is validly existing and in good standing
under the laws of the State of Delaware. The Company has all necessary
corporate power to perform its obligations under the Transaction Documents,
and the Company has all requisite corporate power and authority to own, lease
and operate the Assets and the Business as presently being conducted.
2. All corporate proceedings required to be taken by or on
the part of the Company and the shareholders of the Company to authorize the
execution, delivery and performance of the Transaction Documents, and the
consummation of the transactions contemplated thereby, have been duly and
properly taken. Each of the Transaction Documents has been duly and validly
executed and delivered.
3. Neither the execution and delivery of the Transaction
Documents by the Company nor the consummation of the transactions
contemplated thereby will: (a) violate or conflict with any provision of the
certificate or articles of incorporation or bylaws of the Company, as amended
to date; or (b) to my Actual Knowledge, violate or conflict with any Legal
Requirement or Order.
4. The Agreement and other agreements and documents to be
executed pursuant thereto, when executed and delivered by the Company, will
constitute legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms.
The opinions expressed herein are intended only for your
benefit and use, and may not, without my written consent, be used or relied
upon in any manner for any purpose by any other person or entity.
Very truly yours,
L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Vice President-General Counsel,
Citizens Utilities Company
EXHIBIT 8.1(a)
▇▇▇▇ OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT
This ▇▇▇▇ of Sale and Assignment and Assumption Agreement (this
"Assignment and Assumption") is made as of _______________, between Citizens
Utilities Company, a Delaware corporation ("Transferor"), and Cap Rock Energy
Corporation, a Texas corporation ("Transferee").
This Assignment and Assumption is entered into pursuant to, and is
subject to, the terms of the Purchase and Sale Agreement, dated as of
February ___, 2000, by and between Transferor and Transferee (the
"Agreement"). Capitalized terms not otherwise defined in this Assignment and
Assumption shall have the meanings given to such terms in the Agreement.
In consideration of the foregoing premises, the transactions
contemplated by the Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Transferor does
hereby sell, transfer, assign and convey unto Transferee, its successors and
assigns, all of the Assets, and Buyer does hereby assume and agrees to pay,
perform and discharge when due, all Assumed Liabilities.
No provisions set forth in this Assignment and Assumption shall be
deemed to enlarge, alter or amend the terms and provisions of the Agreement.
In the event of any conflict between the provisions of this Assignment and
Assumption and the provisions of the Agreement, the Agreement shall control.
This Assignment and Assumption is made solely for the benefit of
Transferor and Transferee and no third party shall have any right to enforce
its terms or to rely on it.
This instrument and the rights of the parties under it shall be
governed by and construed in accordance with laws of the State of Delaware,
without regard to its conflicts of laws rules.
This Assignment and Assumption may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY IS LEFT BLANK:
SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the undersigned have executed this Assignment
and Assumption effective as of the date first written above.
TRANSFEROR:
CITIZENS UTILITIES COMPANY
By:
-------------------------------------
Name:
Title:
TRANSFEREE:
CAP ROCK ENERGY CORPORATION
By:
-------------------------------------
Name:
Title:
114581
Signature Page of ▇▇▇▇ of Sale and Assignment and Assumption Agreement between
Transferor and Transferee, dated _______________________
Cap Rock Electric Corporative
Cap Rock Energy Corporation
Vermont Electric
LIST OF SCHEDULES
Schedule 1.1(a) Excluded Assets
Schedule 1.1(b) Related Purchase Agreements
Schedule 2.2(b) 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 5.11 Extraordinary Required Repairs
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 and Federal Regulatory Matters
Schedule 5.19 Seller's Insurance
Schedule 6.1 Conduct of Business Prior to Closing Date
Schedule 6.2(c) Citizens' Guarantees and Surety Instruments
Schedule 10.1 Active Employees
Schedule 10.7 Retirees and "Grandfathered Employees"
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 1.1(a)
EXCLUDED ASSETS
1. R/3 Software End-User Value License Agreement, dated February 28, 1997,
by and between SAP America, Inc. and Citizens Utilities Company,
together with the licenses for SAP GUI clients that are installed on
desktop machines.
2. Software License and Services Agreement, dated September 17, 1996, by
and between PeopleSoft and Citizens Utilities Company, as amended.
3. Netscape, Novell, and any other network, Internet and email software
packages and related licenses owned by Citizens Utilities Company.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 1.1(b)
RELATED PURCHASE AGREEMENTS
1. Purchase and Sale Agreement (Arizona Electric), dated February 11,
2000, by and among Citizens Utilities Company, Cap Rock Electric
Cooperative and Cap Rock Energy Corporation.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 2.2(b)
CERTAIN ASSUMED PROCEEDINGS
I. Proceedings to be Assumed Liabilities:
1. Arbitration of claim by Vermont Joint Owners for breach of
Firm Energy Contract by Hydro-Quebec as a result of failure to
provide power during and after January, 1998, ice storm.
2. Appeal by Citizens to Vermont Supreme Court of VPSB Order
(Docket Nos. 5841/5859) establishing a 5.25 percent return on
equity. (See Schedule 5.7, Item I.I).
3. There is a Threatened Proceeding regarding an ownership
dispute over a vacant parcel of Owned Real Property located
adjacent to the ▇▇▇▇▇▇▇ ▇▇▇▇ dam site. (See Schedule 5.5,
Items I.7 and II.37.).
4. There is a Threatened Proceeding regarding whether the
easement that Citizens possesses effectively permits Citizens
to run a transmission line across the property of a customer
in Island Pond. (See Schedule 5.5, Item III.1.)
II. Proceedings to be Retained Liabilities:
1. ▇▇▇▇▇▇ VILLAGE. INC.. ET. AL. V. CITIZENS UTILITIES COMPANY.
VERMONT ELECTRIC DIVISION. (FERC
Docket No. EL 92-33-000). This
proceeding was initiated by ▇▇▇▇▇▇
Village, Inc. and several
other Vermont villages complaining
jointly that Vermont Electric failed
to file rates with the FERC for
services it provided to the Villages
during the period, 1963 to 1982.
Citizens' motion to-dismiss is
pending before FERC.
2. Employee compensation claims for the following:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Maeie
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Gatos
▇▇▇▇▇▇ ▇▇▇▇ (3) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (2)
▇▇▇▇▇▇▇ ▇▇▇▇▇ (2) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (2)
▇▇▇▇▇ ▇▇▇▇▇▇ (2) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (2)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (2) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ Montming ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ Blow (2) ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ (2)
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.2
SELLER'S AUTHORITY
1. Failure to obtain certain Consents listed on Schedule 5.3 or to provide
notice to certain parties listed on Schedule 5.3 may result in a breach
of the related Contracts or Legal Requirements upon assignment to
Buyer.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.3
SELLER'S GOVERNMENTAL AND OTHER REQUIRED CONSENTS
I. Federal Governmental Bodies
A. U.S. Federal Trade Commission and the U.S. Department
of Justice, pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended.
B. Federal Communications Commission, with respect to
the following FCC licenses:
1. WNTF692 - Radio Station License (Private
Operational Fixed Microwave), expires
June 13, 2001.
2. KCD288 - Radio Station License (IW Power),
expires June 4, 2000.
C. Department of Energy, Office of Fossil Energy, with
respect to the following:
1. Permit Authorizing Citizens Utilities
Company to Construct, Connect, Operate
and Maintain Electric Transmission
Facilities at the International Border
between the United States and Canada, ERA
Docket No. PP-66, dated June 21, 1979.
2. Presidential Permit PP-80 Authorizing
Citizens Utilities Company to Construct,
Connect, Operate and Maintain Electric
Transmission Facilities Across the
International Border between the United
States and Canada, dated August 5, 1983.
D. Federal Energy Regulatory Commission, for the
sale or transfer of the following:
1. License for the ▇▇▇▇▇ River Project,
No. 2306, dated November 6, 1963. [Note:
Renewed for the year 2000.]
2. Certain transmission facilities and
hydroelectric licenses included among the
Assets.
II. Vermont Public Service Board
A. Certificate of Consent of VPSB pursuant to 30 V.S.A.
Section 109 for sale of greater than ten percent of
in-state property in one year.
B. Certificate of Public Good issued by VPSB to operate
within the state of Vermont pursuant to
30 V.S.A. Section 102 and/or Section 231.
C. Buyer may require a Certificate of Consent of VPSB
pursuant to 30 V.S.A. Section 108 for the Issuance
of stocks, bonds, notes or other evidences of
indebtedness.
III. Local and Other State Governmental Bodies
B. State of Vermont, Agency of Natural Resources, Department of
Environmental Conservation, Waste Management Program,
Categorical Certification, dated August 20, -1996, re: wood
waste dump pile. (Note: Completion of a transfer form
required.)
B. State of Vermont, Agency of Natural Resources, Department of
Environmental Conservation, Wastewater Management Division,
Discharge Permit #3-1040, dated November 9, 1998. (Note:
Nontransferable; Buyer needs to apply for a new permit.)
C. State of Vermont, Agency of Natural Resources, Department of
Environmental Conservation, Air Pollution Control Permit to
Operate #OP-95-132, dated May 4, 1999. (Note: Nontransferable;
Buyer needs to apply for a new permit.)
IV. Non-Governmental Third Party Contracts
A. Power Purchase and Supply Agreements
1. Amendment No. 5 to Hydro-Quebec Participation
Agreement, dated as of October 21, 1993, among
various electric utilities, amending and restating
Hydro-Quebec Participation Agreement, dated April,
1988.
2. Agreement, dated February 25, 1998, between Citizens
Utilities Company and Swanton Village Electric
Department, re: Swanton's provision of power
(Connected Load).
3. Master , dated ____, 1999 by and between Citizens and
PG&E Energy Trading - Power, L.P. [Note: No consent
required for transfer to an entity succeeding to
substantially all the assets of assignor. Assignee
must agree to assume all obligations. The Citizens
contracting entity,
however, is not clearly defined in Agreement.]
4. Agreement, dated August 1, 1983, by and between
Citizens Utilities Company and Public Service Company
of New Hampshire. [Note: No consent required for
transfer to an entity succeeding to substantially all
the assets of assignor; such assignee must be an
electric utility and must assume all obligations.]
5. Agency Agreement, effective as of January 14, 2000,
between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Group, Inc. and
Citizens Utilities Company, re: management, purchase
and sale of Energy and Operating Capability on behalf
of Citizens.
B. Customer Supply Agreements
None.
C. Interconnection and Transmission Agreements
1. Agreement for Transmission Service, dated September
13, 1996, between Citizens Utilities Company and
Swanton Village Electric Department.
2. Phase I Vermont Transmission Line Support Agreement,
dated December 1, 1981, among VETCO and various New
England utilities, as amended. [Note: Written consent
of the other parties is required to assign unless
assets are acquired and obligations assumed by
another electric utility member of New England Power
Pool ("NEPOOL"). Written notice to other parties is
required for any assignment.]
3. Phase I Terminal Facility Support Agreement, dated
December 1, 1981, among New England Electric
Transmission Corporation and various New England
utilities, as amended. [Note: Written consent of the
other panics is required to assign unless assets are
acquired and obligations assumed by another electric
utility member of NEPOOL. Written notice to other
parties is required for any assignment.]
4. Agreement With Respect To Use Of Quebec
Interconnection, dated December 1, 1981, among
various New England utilities each of which is a
member of NEPOOL. [Note: Written consent of the other
parties is required to assign unless assets are
acquired and obligations assumed by another electric
utility member of NEPOOL. Written notice
to other parties is required for any assignment.]
5. Preliminary Vermont Support Agreement re: Quebec
Interconnection, dated May 1, 1981, between VELCO and
various Vermont electric distribution utilities.
[Note: Written consent of VELCO is required to
assign.]
6. Vermont Participation Agreement for Quebec
Interconnection, dated July 15, 1982, between VELCO
and the Vermont Participants, as amended. [Note:
Written consent of the other parties is required to
assign unless assets are acquired and obligations
assumed by an electric utility that is a member of
NEPOOL.]
7. VETCO Capital Funds Support Agreement, dated July 15,
1982, between VETCO and the Vermont Participants.
[Note: Written consent of the other parties is
required to release Citizens of its obligations under
the agreement.]
8. Stock Purchase Agreement, dated August 11, 1986,
among VELCO and each of the Vermont electric
companies participating in Phase I. [Note: Written
consent of VELCO is required to release Citizens of
its obligations under the agreement. Stock my not be
transferred or sold except (1) pursuant to an
effective registration statement or (2) pursuant to
an opinion of counsel that an exemption from
registration is available. (See Schedule 5.9,
Item III.2.)]
9. Energy Banking Agreement, dated _______, 1982, among
Hydro-Quebec, VELCO, NEET and NEPOOL. [Note: Written
notice must be given to Hydro-Quebec in the event a
NEPOOL participant terminates its participation in
NEPOOL.]
10. Interconnection Agreement, dated _______, 1982,
between NEPOOL and Hydro-Quebec, as amended. [Note:
Written notice must be given to Hydro-Quebec in the
event a NEPOOL participant terminates its
participation in NEPOOL.]
11. Phase II New Hampshire Transmission Facilities
Support Agreement dated June 1, 1985, between New
England Hydro-Transmission Corporation and the New
England utilities (VELCO signed on behalf of Citizens
Utilities Company), as amended. [Note: written
consent of the other parties is required to assign
unless (1) sale or merger is approved by New
Hampshire Hydro, (2) such sale results in the
transfer of substantially all of the assets, and
(3) all obligations are assumed by an electric
utility that is a member of NEPOOL. Written notice
to other parties is required for any assignment.]
12. Phase II Massachusetts Transmission Facilities
Support Agreement dated June 1, 1985; between New
England Hydro-Electric Company, Inc. and the New
England utilities (VELCO signed as agent for Citizens
Utilities Company), as amended. [Note: Written
consent of the other parties is required to assign
unless (1) sale or merger is approved by New England
Hydro, (2) such sale results in the transfer of
substantially all of the assets, and (3) all
obligations are assumed by an electric utility that
is a member of NEPOOL. Prior written notice to other
parties is required for any assignment.]
13. Phase II New England Power AC Facilities Support
Agreement, dated as of June 1, 1985, between New
England Power Company and the New England utilities
(VELCO signed as agent for Citizens Utilities
Company), as amended. [Note: Written consent of the
other parties is required to assign if obligations
are not assumed by an electric utility which is a
member of NEPOOL. Prior written notice to other
parties is required for any assignment.]
14. Phase II Boston Edison AC Facilities Support
Agreement, dated as of June 1, 1985, between Boston
Edison Company and the New England utilities (VELCO
signed as agent for Citizens Utilities Company), as
amended. [Note: Written consent of the other parties
is required to assign if obligations are not assumed
by an electric utility which is a member of NEPOOL.
Prior written notice to other parties is required for
any assignment.]
15. Amended and Restated Agreement With Respect To Use
Of Quebec Interconnection, dated September 1, 1985,
among various New England electric utilities. [Note:
Written consent of the other parties is required to
assign if assets are not acquired and obligations
assumed by an electric utility which is a member of
NEPOOL. Prior written notice to other parties is
required for any assignment.]
16. Equity Funding Agreement for New England
Hydro-Transmission Corporation, dated June 1, 1985,
among various New England utilities (VELCO signed on
behalf of Citizens Utilities Company), as
amended. [Note: Written consent of the other parties
is required to relieve assignor of its obligations
under the agreement. Prior written notice to other
parties is required for any assignment.] (See
Schedule 5.5, Item I.10, re: restriction on transfer
of common stock.)
17. Equity Funding Agreement for New England
Hydro-Transmission Electric Company, Inc., dated
June 1, 1985, among various New England utilities
(VELCO signed as agent for Citizens Utilities
Company), as amended. [Note: Written consent of the
other parties is required to relieve assignor of its
obligations under the agreement. Prior written
notice to other parties is required for any
assignment.] (See Schedule 5.5, Item I.11, re:
restriction on transfer of common stock.)
18. Letter of Assurances, Consents and Agreements by
Citizens Utilities Company to Westminister National
Bank PLC, dated February 7, 1989, re: payment
obligations under the Facility Support Agreements
and Equity Funding Agreements. [Note: Assurance
shall not be assignable with the consent of the
agent acting for the Majority Banks.]
19. Preliminary Vermont Support Agreement re: Quebec
Interconnection - Phase II, dated September 1, 1984,
between VELCO and various Vermont utilities. [Note:
Written consent of VELCO is required to assign.]
20. Vermont Support Agency Agreement re: Quebec
Interconnection - Phase II, dated June 1, 1985,
between VELCO and various Vermont electric utilities,
as amended. [Note: Written consent of New England
Hydro, New England Power Company, Boston Edison
Company and VELCO is required to relieve assignor of
its obligations unless substantially all its
obligations are assumed by an electric utility which
is a member of NEPOOL.]
21 Vermont Equity Funding and Credit Enhancement Agency
Agreement for New England Hydro-Transmission
Electric Company, Inc. and New England Hydro
Transmission Corporation, dated June 1, 1985,
between VELCO and various Vermont utilities, as
amended. [Note: Written consent of New England Hydro
and VELCO is required to relieve assignor of its
obligation. Prior written notice to other parties is
required for any assignment.]
22. Phase II Vermont DMNRC Joint-Ownership Agreement,
dated January 1, 1988, between Citizens Utilities
Company and Green Mountain Power Corporation. [Note:
Notice specifying Ownership Shares to be transferred
and the proposed terms and conditions of the sale
shall be given to other party no less than three
months prior to the consummation of the sale.] (See
Schedule 5.5, Item 1.3.)
23. Phase II Vermont DMNRC Support Agreement, dated
January 1, 1988, among New England
Hydro-Transmission Corporation, Citizens Utilities
Company, and Green Mountain Power Corporation.
[Note: Written consent of the other parties is
required to relieve assignor of its obligation.
Prior written notice to other parties is required
for any assignment.]
24. Phase II Vermont DMNRC Construction Agreement, dated
January 1, 1988, among Vermont Electric Power
Company, Inc. and Citizens Utilities Company and
Green Mountain Power Corporation. [Note: 30 days'
prior written notice to VELCO is required for any
assignment. Assignee must provide VELCO written
notice within such 30 days that it will assume
assignor's obligations.
25. License Agreement, dated January 1, 1988, among
Citizens Utilities Company and Green Mountain Power
Corporation (collectively "Licensee") and Vermont
Electric Transmission Company, Inc., re: operation
and maintenance of DMNRC. [Note: Written approval of
VETCO is required to assign any portion of
agreement. No such approval will release Licensee
from any obligation or liability under the
agreement.]
26. Prudential Agreement, dated January 1, 1988 among
Citizens Utilities Company, Green Mountain Power
Corporation, Vermont Electric Transmission Company,
Inc. and the Prudential Insurance Company of
America, regarding the Mortgage securing notes sold
to finance the Vermont portion of Phase 1 and
stipulating that the DMNRC does not constitute
property subject to the lien of the Mortgage. [Note:
Written consent of Prudential Insurance Company is
required to transfer Citizens' obligations under
this agreement, unless transferring to another Joint
Owner who shall assume all such obligations.]
27. 1985 Option Agreement, dated December 27, 1985, by
and among VELCO, Central Vermont Public Service
Corporation, Green Mountain Power Corporation and
Citizens Utilities Company.
28. 1985 Four Party Agreement, dated July 1, 1985, by
and among VELCO, Central Vermont Public Service
Corporation, Green Mountain Power Corporation and
Citizens Utilities Company.
29. Substation Participation Agreement, between VELCO
and various Vermont utilities.
30. Highgate Operating and Management Agreement, dated
August 1, 1984, by and among VELCO and the various
Vermont electric utilities.
31. Agreement for Joint Ownership, Construction and
Operation of Highgate Transmission Interconnection,
dated August 1, 1984, as amended, by and among
various electric distribution companies. (See
Schedule 5.5, Item I.5.)
32. Highgate Construction Agreement, dated August 1,
1984, as amended, by and among VELCO and various
electric distribution companies.
33. Highgate Transmission Agreement, dated August 1,
1984, as amended, by and among various electric
distribution companies.
34. Letter Agreement, dated June 26, 1985, between
Village of Orleans Electric Department and Citizens
Utilities Company, re: power transmission contract,
as amended.
35. Letter Agreement, dated June 26, 1985, between
Swanton Village Electric Light Department and
Citizens Utilities Company, re: power transmission
contract, as amended.
36. Letter Agreement, dated June 26, 1985, between
Village of Enosberg Falls, Inc. and Citizens
Utilities Company, re: power transmission contract,
as amended.
37. Letter Agreement, dated June 26, 1985, between
Village of ▇▇▇▇▇▇, Inc. and Citizens Utilities
Company, re: power transmission contract, as
amended.
D. Software Licenses
1. Software License and Services Agreement, dated April
30, 1997, as amended, between Citizens Utilities
Company and H.T.E., Inc.
2. Windmil and Light Table for Windows Engineering
Analysis Software Agreement, dated July 17, 1998,
between Citizens Utilities Company and Milsoft
Integrated Solutions, Inc.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.5
ENCUMBRANCES: REAL PROPERTY
I. Encumbrances
1. There is a right of first refusal in the Joint User Agreement,
dated November 15, 1994, as amended, between Citizens
Utilities Company and Mountain Cable Company d/b/a Adelphia
Cable Communications involving the sale or assignment of pole
space to a non-electric company entity. An assignment to Buyer
would not trigger this right of first refusal.
2. The deed for the Border Substation contains a restrictive
covenant mandated by the VTDEC as part of the remediation
required for PCBs discovered on the parcel. (See Schedule
5.14, Item IV.C and Schedule 5.5, Item II.11.)
3. Pursuant to the Phase II Vermont DMNRC Joint-Ownership
Agreement, dated January 1, 1988, between Citizens Utilities
Company and Green Mountain Power Corporation ("GMPC"), GMPC
has a right a first refusal to purchase pro rata the Ownership
Share to be transferred on equal or better terms than those
offered to the Buyer. No right of first refusal applies from a
transfer by merger or acquisition of substantially all the
electric utility property or generating facilities of a Joint
Owner. (See Schedule 5.3, Item IV.C.22 and Schedule 5.12, Item
III.R.1.)
4. Seller's shares of common stock in VELCO may not be
transferred, unless they are first offered to the holders of
common stock in VELCO in proportion to such holders
holdings.(See Schedule 5.9, Item III.1 and 2.)
5. Pursuant to the Agreement for Joint Ownership, Construction
and Operation of Highgate Transmission Interconnection, dated
August 1, 1984, as amended, by and among various electric
distribution companies, the other parties have a right a first
refusal to purchase pro rata the Ownership Share to be
transferred on equal or better terms than those offered to the
Buyer. No right of first refusal applies from a transfer by
merger or acquisition of substantially all the electric
utility property or generating facilities of a Joint Owner.
(See Schedule 5.3, Item IV.C.31 and Schedule 5.12, Item
III.S.5.)
6. The Mortgage and Security Agreement, dated September 1, 1986,
between Vermont Electric Transmission Company, Inc. and the
Prudential Insurance Company of America, re: Phase I HVDC,
encumbers the Vermont portion of the HVDC with a mortgage
lien. (See Schedule 5.12, Item III.K.2.)
7. There is a Threatened Proceeding regarding an ownership
dispute over a vacant parcel of Owned Real Property located
adjacent to the ▇▇▇▇▇▇▇ ▇▇▇▇ dam site. (See Item II.37, hereof
and Schedule 5.8, Item I.5.)
8. There is a Threatened Proceeding regarding whether the
easement that Citizens possesses effectively permits Citizens
to run a transmission line across the property a customer in
Island Pond. (See Schedule 5.8, Item I.6.)
9. The State of Vermont possesses a right of first
refusal to purchase parcels it leases from Citizens pursuant
to the Lease, dated February 17, 1956, between Citizens
Utilities Company and the Fish and Game Service of the State
of Vermont. [Note: the Led pertains to a portion of the owned
Real Property referenced in Schedule 5.5, Items II.36, 37 and
38, and a portion of the owned Real Property referenced in
Schedule 5.5; Items II.43.] (See Schedule 5.12, Item X.G.)
10. Seller may not transfer any of its common stock in New England
Hydro-Transmission Corporation (1.1588% equity ownership
interest) to any other person unless such person is an Equity
Sponsor or meets the requirements for being an Equity Sponsor
undo Sections 4B, 4C or 4D of the Equity Funding Agreement
(See Schedule 5.9, Item III. Schedule 5.12, Item III.N.8 and
Schedule 5.3, Item IV.C.16)
11. Seller may not transfer any of its common stock in New England
Hydro-Transmission Company, Inc. (1.1588% equity ownership
interest) to any other person unless such person is an Equity
Sponsor or meets the requirements for being an Equity Sponsor
under Sections 4B, 4C or 4D of the Equity Funding Agreement.
(See Schedule 5.9, Item III.4, Schedule 5.12, Item III.N.9 and
Schedule 5.3, Item IV.C.17)
II Owned Real Property
1. Address: 0.5 acres in Alburg, Vermont (Book 36, Page 180)
Use: Alburg Sub station.
2. Address: 0.97 acres in Barton, Vermont (Book 77, Page
322-324)
Use: ▇▇▇▇▇▇ ▇▇▇▇ Substation.
3. Address: 0.057 acres in Barton, Vermont (Book C, Page 242)
Use: ▇▇▇▇▇▇ ▇▇▇▇ Sub station.
4. Address: 0.4 acres in Berkshire, Vermont, (Book 28, Page 238)
Use: Berkshire Sub station.
5. Address: 0.93 acres in Berkshire, Vermont (Book 30, Page None)
Use: Berkshire Substation.
6. Address: 1.41 acres in Brighton, Vermont (Book 44,
Page 233-234)
Use: Brighton Substation.
7. Address: 0.29 acres in Canaan, Vermont (Book 30, Page 593)
Use: Canaan Substation.
8. Address: 0.06 acres in Derby, Vermont (Book 37, Page 453)
Use: Derby Substation.
9. Address: 0.31 acres in Derby, Vermont (Book 122, Page 270)
Use: Derby Substation.
10. Address: 0.046 acres in Derby, Vermont (Book 74, Page 212)
Use: Derby Line Substation.
11. Address: 0.25 acres in Derby, Vermont (Book 37, Page 3 16)
Use: Derby Line Substation. [Note: Deed contains
Restrictive covenant.] (See Schedule 5.5, Item I.2 and
Schedule 5.14, Item IV.C.)
12. Address: 0.46 acres in Enosburg, Vermont (Book 49,
Page 396-397)
Use: ROW
13. Address: 0.4 acres in Glover, Vermont (Book 15, Page 109)
Use: Former Stockroom.
14. Address: 1 acre in Grand Isle, Vermont (Book 43, Page 683)
Use: Stockroom.
15. Address: 1.52 acres in Highgate, Vermont (Book 52, Page
405)
Use: Former Substation.
16. Address: 8 acres in Highgate, Vermont (Book 52, Page 57)
Use: ROW.
17. Address: 9.1 acres in Highgate, Vermont (Book 52, Page 102)
Use: ROW.
18. Address: 20.6 acres in Highgate, Vermont (Book 36, Page 497)
Use: ROW.
19. Address: 0.2 acres in Irasburg, Vermont (Book 28, Page 458)
Use: Irasburg Substation.
20. Address: 0.01 acres in Irasburg, Vermont (Book 23, Page 19)
Use: ROW
21. Address: 100 acres in Jay, Vermont (Book 14, Page 295)
Use: Jay Substation.
22. Address: 5.34 acres in Newport, Vermont (Book 38, Page 436)
Use: ROW.
23. Address: 125 acres in Newport, Vermont (Book 85, Page 268)
Use: ROW.
24. Address: 0;5 acres in Newport, Vermont (Book 68, Page 478480)
Use: Coventry St. Substation.
25. Address: 0.229 acres in Newport, Vermont (Book 47, Page 217)
Use: Newport Substation.
26. Address: 0.22 acres in Newport Ctr., Vermont (Book 7,
Page 364)
Use: Newport Ctr. Sub station.
27. Address: 0.36 acres in Rich, Vermont (Book 47, Page 322)
Use: Stockroom.
28. Address: 0.25 acres in Richford, Vermont (Book 31, Page 196)
Use: Former Sub station.
29. Address: 0.23 acres in Richford, Vermont (Book 49, Page 145)
Use: Former Substation.
30. Address: 2.0 acres in Richford, Vermont (Book 47, Page 458459)
Use: Richford Substation.
31. Address: 0.003 acres in Richford, Vermont (Book 31, Page 460)
Use: Former Switchyard.
32. Address: 0.4 acres in Richford, Vermont (Book 64, Page 394)
Use: ▇▇ ▇▇▇▇▇▇▇ Substation.
33. Address: 0.01 acres in Sheldon, Vermont (Book 26, Page 305)
Use: None.
34. Address: 3.71 acres in South Hero, Vermont (Book 40, Page 193)
Use: South Hero Substation.
35. Address: 0.2 acres in Troy, Vermont (Book 32, Page 408)
Use: Troy Substation.
36. Address: 0.50 acres in Charleston, Vermont (Book 23, Page 554)
Use: Charleston Hydro. (See Schedule 5.5, Item I.9.)
37. Address: 2.00 acres in Charleston, Vermont (Book 23, Page 554)
Use: Charleston Hydro. (See Schedule 5.5, Item I.9.)
38. Address: 0.25 acres in Charleston, Vermont (Book 23,
Page 554)
Use: Charleston Hydro. (See Schedule 5.5, Item I.9.)
39. Address: 100 acres in Charleston, Vermont (Book 23, Page 101)
Use: Charleston Hydro.
40. Address: 1.83 acres in Charleston, Vermont (Book 43, Page 233)
Use: Charleston Hydro.
41. Address: 0.33 acres in Charleston, Vermont (Book 44, Page 101)
Use: Charleston Hydro.
42. Address: 3.3 acres in Charleston, Vermont (Book 17, Page 219)
Use: Charleston Hydro. (See Schedule 5.5, Item I.9.)
43. Address: 10.0 acres in Charleston, Vermont (Book 26, Page 262)
Use: Charleston Hydro.
44. Address: 200 acres in Derby, Vermont (Book 41, Page 590)
Use: ▇▇▇▇▇ ▇▇▇▇ Hydro. (See Schedule 6.1, Item 3.)
45. Address: 1.4 acres in Derby, Vermont (Book 41, Page 590)
Use: ▇▇▇▇▇ ▇▇▇▇ Hydro. (See Schedule 6.1, Item 3.)
46. Address: 1.3 acres in Derby, Vermont (Book 41, Page 590)
Use: ▇▇▇▇▇ ▇▇▇▇ Hydro. (See Schedule 6.1, Item 3.)
47. Address: 4.5 acres in Derby, Vermont (Book 38, Page 51)
Use: Potential Hydro.
48. Address: 3.4 acres in Derby, Vermont (Book 89, Page 399)
Use: ▇▇▇▇▇ ▇▇▇▇.
49. Address: 6.7 acres in Derby, Vermont (Book 89, Page 401)
Use: ▇▇▇▇▇ ▇▇▇▇.
50. Address: 7.2 acres in Derby, Vermont (Book 89, Page 402-404)
Use: ▇▇▇▇▇ ▇▇▇▇.
51. Address: 16.6 acres in Derby, Vermont (Book 79, Page 337-338)
Use: ▇▇▇▇▇ ▇▇▇▇.
52. Address: Derby, Vermont (Book 49, Page 24)
Use: ▇▇▇▇▇ ▇▇▇▇
53. Address: 4.2 acres in Derby, Vermont (Book 118, Page 219-241)
Use: ▇▇▇▇▇ ▇▇▇▇.
54. Address: .046 acres in Derby, Vermont (Book 74, Page 214)
Use: ▇▇▇▇▇ ▇▇▇▇.
55. Address: 63 acres in Derby, Vermont (Book 50, Page 363)
Use: ▇▇▇▇▇ ▇▇▇▇ Hydro.
56. Address: 0.68 acres in Derby, Vermont (Book 37, Page 326)
Use: Potential Hydro.
57. Address: Derby, Vermont (Book 45, Page 134)
Use: Potential Hydro.
58. Address: 67 acres in Derby, Vermont (Book 54, Page 456)
Use: ▇▇▇▇▇ ▇▇▇▇ Hydro.
59. Address: Derby, Vermont (Book 41, Page 374)
Use: ▇▇▇▇▇ ▇▇▇▇ Hydro.
60. Address: No acreage (Flowage rights) in Derby, Vermont (Book
47, Page 308)
Use: ▇▇▇▇▇ ▇▇▇▇ Hydro.
61. Address: 20 acres in Derby, Vermont (Book 88, Page 119-121)
Use: ▇▇▇▇▇ ▇▇▇▇.
62. Address: 19.9 acres in Derby, Vermont (Book 88, Page 119-121)
Use: ▇▇▇▇▇ ▇▇▇▇.
63. Address: 10 acres in Derby, Vermont (Book 37, Page 548)
Use: Potential Hydro.
64. Address: 5 acres in Derby, Vermont (Book 129, Page 327)
Use: ▇▇▇▇▇ River.
65. Address: 4.0 acres in Derby, Vermont (Book 37, Page 325)
Use: Potential Hydro.
66. Address: Derby, Vermont (Book 37, Page 319)
Use: ▇▇▇▇▇ River.
67. Address: 56 acres in Derby, Vermont (Book 50, Page 448)
Use: ▇▇▇▇▇ ▇▇▇▇. (See Schedule 5.12, Item X.F.)
68. Address: 50 acres in Derby, Vermont (Book 98, Page 262-263)
Use: ▇▇▇▇▇ ▇▇▇▇.
69. Address: 1.0 acres in Newport, Vermont (Book 5, Page 154)
Use: ▇▇▇▇▇ River Hydro.
70. Address: 0.5 acres in Newport, Vermont (Book 8, Page 125)
Use: ▇▇▇▇▇ River.
71. Address: 6.0 acres in Newport, Vermont (Book 23, Page 152)
Use: ▇▇▇▇▇ River Hydro.
72. Address: 1.0 acres in Newport, Vermont (Book 22, Page 380)
Use: ▇▇▇▇▇ River.
73. Address: 50 acres in Newport, Vermont (Book 23, Page 230)
Use: ▇▇▇▇▇ River Hydro.
74. Address: 0.1 acres in Newport, Vermont (Book 6, Page 383)
Use: ▇▇▇▇▇ River Hydro.
75. Address: 6.0 acres in Newport, Vermont (Book 11, Page 583)
Use: ▇▇▇▇▇ River.
76. Address: 4.0 acres in Newport, Vermont (Book 11, Page 242)
Use: ▇▇▇▇▇ River Hydro.
77. Address: 0.5 acres in Newport, Vermont (Book 11, Page 242)
Use: ▇▇▇▇▇ River Hydro.
78. Address: 4.2 acres in Newport, Vermont (Book 42, Page 213)
Use: ▇▇▇▇▇ River Hydro.
79. Address: 1.0 acres in Newport, Vermont (Book 34, Page 382)
Use: ▇▇▇▇▇ River.
80. Address: 10 acres in Newport, Vermont (no Book or Page listed)
Use: ▇▇▇▇▇ River Hydro.
81. Address: 29.75 acres in Troy, Vermont (Book 34, Page 143)
Use: Potential Hydro.
82. Address: 1.5 acres in Troy, Vermont (Book 24, Page 200)
Use: Troy Hydro.
83. Address:. 2.5 acres in Grand Isle, Vermont (Book 57, Page 480)
Use: Former Stockroom.
84. Address: .1 acre in Morgan, Vermont (Book 23, Page 554)
Use: Charleston Hydro.
[Note: Citizens Resources Company is willing to sell to the Buyer of
Vermont Electric the following two parcels located in Derby, Vermont
for the fair market value of such parcels, if such parcels remain
available for sale on the Closing Date:
1. 19.9 acres located at the junction of the 1-91 access
road and Town Highway 41, near ▇▇▇▇▇ ▇▇▇▇;
and
2. 20 acres located West of 1-91 and South and East of
▇▇▇▇▇ ▇▇▇▇ and North of the access road leading from
the City of Newport to Exit 27 of 1-91.] (See
Schedule 6.1, Item 1.)
III. Missing Easements
1. There is a Threatened Proceeding regarding whether the
easement that Citizens possesses effectively permits Citizens
to run a transmission line across the property of a customer
in Island Pond. (See Schedule 5.8, Item 1.6.)
IV. Lease Defaults
None.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.6(a)
FINANCIAL STATEMENTS
see Attached.
Citizens Energy Services
Proforma Balance Sheet- Vermont Electric
September 30, 1999
(Unaudited)
Consolidated
Property Level Corporate Consolidated Electric
Subtotal Adjustments Sector Total
Cash and Cash Equivalents 10,310 (10,310) -
Accounts Receivable-Utilities 2,815,992 - 2,815,992
Accounts Receivable-Other 1,543,821 20,066 1,563,887
Reserve for Doubtful Accounts (55,891) - (55,891)
Materials & Supplies 661,328 - 661,328
Prepayments 6,380 1,464 7,844
Other Current Assets 10,225 - 10,225
Total Current Assets 4,991163 11,220 5,003,385
Property, Plant and Equipment 65,983,452 7,500 63,990,952
Construction Work in Process 2,212,469 15,045 2,227,514
Accumulated Depreciation (22,575,690) - (22,575,690)
Total Fixed Assets 45,620,231 22,545 45,642,776
Preliminary Survey and Investigation 494,124 - 494,124
Clearing Account (26,228) 26,227 (0)
Deferred Debits 12,924,168 (12,588)15) 335,853
Regulatory Assets 176,013 12,586,065 12,762,078
Other Assets - (12,145) (12,145)
Total Non-Current 13,568,078 1,832 13,579,910
Total Assets 64,180,474 45,597 64,226,071
Accounts Payable 1,741,345 (217,294) 1,524,051
Customer Deposits 105,584 - 105,5114
Incense Taxes Accrued (695,840) (120,405) (816,245)
Other Taxes Accrued 324,504 986 325,490
Interest Accrued 60,400 - 60,400
Other Current and Accrued Liabilities (0) 643,745 643,745
Current portion of LTD (CR) - 3,000 3,000
Total Current and Accrued Liabilities 1,535,994 310,032 1,846,025
Subordinate Investment Notes 4,071 - 4,071
Current Portion of LTD (DR) - (3,000) (3,000)
Total Long Term Debt 4,071 (3,000) 1,071
Customer Advances for Construction - - -
Regulatory Liabilities - - -
Other Deferred Credits 23,116 13,208 36,924
Other Payables - 621,133 621,133
Total Non-Current Liabilities 23,716 634,341 658,057
Total Shareholder's Equity 62,616,693 (895,776) 61,720,917
Total Liabilities and Equity 64,180,474 45,597 64,226,071
NOTES TO FINANCIAL STATEMENT:
1. For the Proforma Balance Sheet, Deferred Income Taxes, Contributions In
Aid of Construction and FASB 109 adjustments recorded as Regulatory
Assets and Regulatory Liabilities have been eliminated for statement
presentation.
2. FASB 106 liability allocation based on actuarial report as of 12/31/98.
3. Pension liability allocation based on 1998 expense calculation.
4. All assets which are non exclusive have been removed for presentation
purposes.
Citizens Energy Services
Proforma Balance Sheet Property Subtotal By State
September 30, 1999
(Unaudited)
State of Vermont
Vermont
Electric
Property, Plant and Equipment 65,983,452
Construction work In Process 2,212,469
Accumulated Depreciation (22,575,690)
Net Fixed Assets 45,620,231
Cash and Cash Equivalents 10,310
Accounts Receivable-Utilities 2,815,992
Accounts Receivable-Other 1,543,821
Reserve for Doubtful Accounts (55,891)
Materials & Supplies 661,328
Special Deposits -
Prepayments 6,380
Other Current Assets 10,225
Total Current Assets 4,992,165
Preliminary Survey and Investigation 494,124
Clearing Assets (26,228)
Deferred Debits 12,924,168
Regulatory Assets 176,013
Total Non-Current 13,568,078
Total Assets 64,180,474
Total Shareholder's Equity 62,616,693
Subordinate Investment Notes 4,071
Total Long Term Debt 4,071
Accounts Payable 1,741,345
Customer Deposits 105,584
Income Taxes Accrued (695,840)
Other Taxes Accrued 324,504
Interest Accrued 60,400
Other Current and Accrued Liabilities (0)
Total Current and Accrued Liabilities 1,535,994
Minority Interest -
Convertible Securities -
Customer Advances for Construction -
Deferred Income Taxes (0)
Regulatory Liabilities -
Other Deferred Credits 23,716
Other Payables -
Total Non-Current Liabilities 23,716
Balance Account -
Total Liabilities and Equity 64,180,474
Citizens Energy Services
Proforma Income Statement- Vermont Electric (A)
For the Nine Months Ended September 30, 1999
(Unaudited)
Consolidations/ Consolidated
Property Level Corporate Electric
Subtotal Adjustments Sector Total
Electric Revenue 19,177343 708,899 19,886242
Electric Energy & Fuel Oil Purchased 12,270,659 - 12,270,659
Other O&M Expenses 4,686,869 (2,049,957) 2,636,912
Taxes Other Than Income 1,182,230 - 1,182,230
Total operating Expenses 18,139,758 (2,049,957) 16,089,801
EBITDA 1,037,585 2,758,856 3,796,441
Depreciation & Amortization Expense 2,190,092 (12,995) 2,177,097
Income From operations (1,152,507) 2,771,851 1,619,344
Allowance for Funds Used
During Construction 17,787 (6,636) 11,151
Investment Income 35,424 - 35,424
Interest & Dividends From
Associated Companies - - -
Miscellaneous Non-Operating Income 1,304 (1,304) 0
Other Income(Deductions) (486,186) - (486,186)
Total Other Income(Deductions) (431,670) (7,940) (439,610)
Operating Income Before Interest
Expense and Income Taxes (1,584,178) 2,763,911 1,179,733
Interest on Long Term Debt - - -
Amortization of Debt Discount - - -
Other Interest Expense 9,466 - 9,466
Allowance for Borrowed Funds (Cr.) - (6,636) (6,636)
Total Interest Expense 9,466 (6,636) 2,830
Operating Income Before Income Taxes (1,593,644) 2,770,547 1,176,903
NOTES TO THE FINANCIAL STATEMENTS:
(A) The following consolidated Income Statement and the consolidating
Income Statement have been prepared excluding special items related to
separation and Y2K costs.
Citizens Energy Services
Proforma Income Statement Property Subtotal By State
For the 9 Months Ended September 30, 1999
(Unaudited)
State of Vermont
Vermont
Electric
Water & Wastewater Revenue -
Electric Revenue 19,177,343
Gas Revenue -
Other Revenue -
Total Operating Revenue 19,177,343
Electric Energy & Fuel Oil Purchased 12,270,659
Natural Gas Purchased -
Other O&M Expenses 4,686,869
Total Operation & Maintenance Expenses 16,957,528
Depreciation & Amortization Expense 2,190,092
Taxes Other Than Income 1,182,230
Total Operating Expenses 3,372,322
Income From Operations (1,152,507)
Allowance for Funds Used During Construction 17,787
Investment Income 35,424
Interest & Dividends From Associated Companies -
Miscellaneous Non-Operating Income 1,304
Other Income(Deductions) (436,186)
Tax Effect (Dr.) -
Total Other Income (431,670)
Operating Income Before Interest Expense
and Income Taxes (1,584,178)
Interest on Long Term Debt -
Amortization of Debt Discount -
Other Interest Expense 9,466
Allowance for Borrowed Funds (Cr.) -
Total Interest Expense 9,466
Operating Income Before Income Taxes (1,593,644)
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.6(b)
CERTAIN LIABILITIES
1. The Hydro-Quebec Contracts contains "step-up" provisions that state
that if any party defaults on its obligations under the Contracts to
purchase power front Hydro-Quebec, the other parties will assume
responsibility for the defaulting party's share on a pro-rata basis.
(See Schedule 5.12 , Items I.C. and D.) The H-Q/JVO Contract provides
for up to 350 MW of power and associated energy to be delivered to the
Vermont utilities, in varying amounts under several schedules, between
1990 and 2020. Currently, the H-Q/VJO Contract's pricing exceeds market
level. As of December 31, 1999, Citizens' obligation under the
Hydro-Quebec Contracts is approximately 10% of the total.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.7
COMPLIANCE WITH LEGAL REQUIREMENTS: GOVERNMENTAL PERMITS
I. Violations.
1. By VPSB Orders entered on June 16, July 21, and August 28,
1997, and September 15, 1998, Citizens was placed on
regulatory probation. Such probation is continuing.
II. Missing Permits.
1. Item III.A set forth on Schedule 5.14 (Environmental Matters)
is incorporated herein by reference.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.8
LEGAL PROCEEDINGS; OUTSTANDING ORDERS
I. Proceedings
1. Arbitration of claim by Vermont Joint Owners for breach of
Firm Energy Contract by Hydro-Quebec as a result of failure to
provide power during and after January, 1998, ice storm.
2. Appeal by Citizens to Vermont Supreme Court of VPSB Order
(Docket Nos. 584115859) establishing a 5.25 percent return on
equity. (See Schedule 5.7, Item I.1).
3. ▇▇▇▇▇▇ VILLAGE, INC., ET. AL. V. CITIZENS UTILITIES COMPANY,
VERMONT ELECTRIC DIVISION. (FERC Docket No. EL 92-33-000).
This proceeding was initiated by ▇▇▇▇▇▇ Village, Inc. and
several other Vermont villages complaining jointly that
Vermont Electric failed to file rates with the FERC for
services it provided to the Villages during the period, 1963
to 1982. Citizens' motion to dismiss is pending before FERC.
4. Employee compensation claims for the following:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Maeie
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Gatos
▇▇▇▇▇▇ ▇▇▇▇ (3) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (2)
▇▇▇▇▇▇▇ ▇▇▇▇▇ (2) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (2)
▇▇▇▇▇ ▇▇▇▇▇▇ (2) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (2)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (2) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ Montming ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ Blow (2) ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ (2)
5. There is a Threatened Proceeding regarding an ownership
dispute over a vacant parcel of Owned Real Property located
adjacent to the ▇▇▇▇▇▇▇ ▇▇▇▇ dam site. (See Schedule 5.5,
Items I.7 and II.37.)
6. There is a Threatened Proceeding regarding whether the
easement that Citizens possesses effectively permits Citizens
to run a transmission line across the property of a customer
in Island Pond. (See Schedule 5.5, Item III.1.)
7. The Proceedings listed on Schedule 5. 16 (State and Federal
Regulatory Matters) are incorporated by reference.
II Outstanding Orders
1 FERC DOCKET 94-1561, re: settlement of the FERC wholesale
distribution proceedings. The Settlement established an
Independent Audit procedure designed to ensure that rates are
based on an appropriate level of transmission plant, and to
determine whether additional refunds by Citizens, or
repayments by the customers, should be made. The Independent
Audit is currently being conducted by Management Resources
International, Inc. ("MRI"). The parties have agreed to use
this same Independent Audit procedure to address the June 16,
1997 Order of the VPSB (Docket No. 5841).
2. VPSB DOCKET NOS. 5841/5859. Citizens was placed on probation
in Vermont and issued a conditional certificate of public good
to operate in Vermont.
3. YPSB DOCKET NO 6332. Memorandum of Understanding, dated
January 27, 2000, between the Vermont Department of Public
Service and Citizens Utilities Company, re: grant of temporary
rate increase pending final determination of permanent rates.
(See Schedule 5.16, Item I.A)
4. FERC DOCKET NOS. ER95-1586-000, EL96-17-000. AND OA96-184-000.
Settlement Agreement among Citizens Utilities Company,
Burlington Electric Department, The Vermont VillAges, Vermont
Marble Power Division of OMYA, Inc., the Vermont Department of
Public Service, Central Vermont Public Service Corporation,
and Vermont Public Power Supply Authority, approved by the
Federal Energy Regulatory Commission on November 13, 1997,
tendered for filing with the FERC on December 15, 1997, and
January 23, 1998, as amended, and relating to Open Access
Transmission Tariff of the Vermont Electric Division of
Citizens Utilities Company, conformed to reflect provisions of
the Settlement Agreement, and Tariff Amendment tendered for
filing with the FERC on March 28, 1997, effective March 31,
1997. (See Schedule 5.12, Items III.B through G.)
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.9
TAXES
I. Pending Audits or Examinations: None.
II. Waivers of Statutes of Limitations:
FEDERAL: 1 Seller has signed a waiver that extends the statute of
limitations until December 31, 2000 for the tax year
ending December 31, 1995.
STATE: 1. Seller has signed a waiver that extends the statute of
limitations until March 31, 2000 relating to the State of
Connecticut tax filings for the years ending
December 31, 1993 and December 31, 1994.
2. Seller has signed a waiver that extends the statute of
limitations until December 31, 2000 relating to the State
of Louisiana tax filings for the years ending
December 31, 1991 through December 31, 1996.
III. Equity Interests:
1. Seller owns 2,135 shares of Vermont Electric Power Company,
Inc. ("VELCO") Class B Common Stock. (See Schedule 5.5, Item
I.4.)
2. Seller has an interest in Vermont Electric Transmission
Company, Inc. ("VETCO") through its ownership of 4,503 shares
of Class C Common Stock of VELCO. (See Schedule 5.5, Item 1.4,
Schedule 5.3, Item IV.C.8, and Schedule 5.12, Item III.L.3.)
[Note: Stock my not be transferred or sold except (1) pursuant
to an effective registration statement or (2) pursuant to an
opinion of counsel that an exemption from registration is
available.]
3. Seller has a 1.1588% equity ownership interest in New England
Hydro-Transmission Corporation. (See Schedule 5.5, Item I.10,
re: restriction on transfer of common stock, Schedule 5.3,
Item IV.C.16 and Schedule 5.12, Item III.N.8)
4. Seller has a 1.1588% equity ownership interest in New
England Hydro-Transmission Electric Company, Inc. (See
Schedule 5.5, Item I.10, re: restriction on transfer of common
stock, Schedule 5.3, Item IV.C.17 and Schedule 5.12,
Item III.N.9).
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.10
INTELLECTUAL PROPERTY
I. PATENTS, TRADEMARKS, SERVICE MARKS AND COPYRIGHTS: See attached.
II. INFRINGEMENTS:
1. Applications identified with a "+" (plus sign) on the attached
chart have been refused registration by the U.S. Patent and
Trademark Office due to the possible confusion with Citizens
Gas Light & Coke (not affiliated with Seller).
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.11
EXTRAORDINARY REQUIRED REPAIRS
None.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.12
MATERIAL CONTRACTS
I. POWER PURCHASE AND SUPPLY AGREEMENTS
A. Operating Agreement No. 8, dated August 1, 1993, between
Hydro-Quebec and Citizens Utilities Company, re: tertiary
energy.
B. Amendment No. 5 to Hydro-Quebec Participation Agreement, dated
as of October 21, 1993, among various electric utilities,
amending and restating Hydro-Quebec Participation Agreement,
dated April, 1988.
C. Firm Power and Energy Contract, dated December 4, 1987,
between Hydro-Quebec and Vermont Joint Owners, as amended.
D. Letter Agreement, dated August 17, 1999, between Citizens
Utilities Company and Burlington Electric Department, re:
lease of BED's share of HVDC Phase 1 Interconnection.
E. Agreement, dated February 25, 1998, between Citizens Utilities
Company and Swanton Village Electric Department, re: Swanton's
provision of power (Connected Load).
F. Master Agreement, dated ____, 1999 by and between Citizens and
PG&E Energy Trading - Power, L.P.
G. Agreement, dated August 1, 1983, by and between Citizens
Utilities Company and Public Service Company of New Hampshire.
H. Service Agreement, dated September 23, 1999, by and between
Citizens Utilities Company, Vermont Division and PECO Energy
Company, pursuant to PECO's FERC Electric Tariff Volume 1.
I. Operating Agreement No. 11 (Assured Tertiary Energy),
effective July 1, 1994, between Hydro-Quebec and Citizens
Utilities.
J. Operating Agreement (CITIZ-1999-01 Tertiary Energy
(Seasonal)), effective October 1, 1999, between Hydro-Quebec
and Citizens Utilities.
K. Agency Agreement, effective as of January 14, 2000, between
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Group, Inc. and Citizens Utilities
Company, re: management, purchase and sale of Energy and
Operating Capability on behalf of Citizens.
II. CUSTOMER SUPPLY AGREEMENTS
A. Special Contract #356 between Citizens and Barrup Farms, Inc.
d/b/a Green Mountain Mulch, dated November 24, 1998, approved
by the Public Service Board on February 5, 1999.
B. Special Contract # 322 between Citizens and ▇▇▇▇▇▇▇▇▇ Lumber
Company approved by the Public Service Board on September 9,
1998.
III. INTERCONNECTION AND TRANSMISSION AGREEMENTS
A. Agreement for Transmission Service, dated September 13, 1996,
between Citizens Utilities Company and Swanton Village
Electric Department.
B. Letter Agreement, dated June 26, 1985, between Village of
Orleans Electric Department and Citizens Utilities Company,
re: power transmission contract.
C. Letter Agreement, dated June 26, 1985, between Swanton
Electric Light Department and Citizens Utilities Company, re:
power transmission contract.
D. Letter Agreement, dated June 26, 1985, between Village of
Enosberg Falls, Inc. and Citizens Utilities Company, re: power
transmission contract.
E. Letter Agreement, dated June 26, 1985, between Village of
▇▇▇▇▇▇, Inc. and Citizens Utilities Company, re: power
transmission contract.
F. Block Loading Facilities Transmission Agreement, dated
February 15, 1989, by and among Central Vermont Public Service
Corporation, Vermont Marble Company, Village of ▇▇▇▇▇▇
Electric Department, Village of Enosburg Water and Light
Department, Village of Swanton Electric Department and
Citizens Utilities Company.
G. Open Access Transmission Tariff of the Vermont Electric
Division of Citizens Utilities Company, conformed to reflect
provisions of the Settlement Agreement, and Tariff Amendment
tendered for filing with the FERC on March 28, 1997, effective
March 31, 1997. (See Schedule 5.8, Item II.4.)
H. Agreement, dated May 31, 1989, between Citizens
Utilities Company (successor-in-interest to Franklin Electric
Light Company, Inc.) and Vermont Marble Company, re: Highgate
Transmission Interconnection.
I. Phase I Basic Participation Agreements:
1. Phase I Vermont Transmission Line Support Agreement,
dated December 1, 1981, among VETCO and various New
England utilities, as amended.
2. Phase I Terminal Facility Support Agreement dated
December 1, 1981, among New England Electric
Transmission Corporation and various New England
utilities, as amended.
3. Agreement With Respect To Use Of Quebec
Interconnection, dated December 1, 1981, among
various New England utilities each of which is a
member of NEPOOL.
4. Agreement Amending NEPOOL Power Pool Agreement,
dated December 1, 1981, among NEPOOL participants.
J. Vermont Phase I Participation Agreements:
1. Preliminary Vermont Support Agreement re: Quebec
Interconnection, dated May 1, 1981, between VELCO
and various Vermont electric distribution utilities.
2. Preliminary Quebec Interconnection Support Agreement,
dated May 1, 1981, among various New England electric
utilities and NEPOOL, as amended.
K. Vermont Phase I Debt-Financing Documentation:
1. $37,000 Note Agreement, dated September 1, 1986,
between VETCO and the Prudential Insurer Company.
2. Mortgage and Security Agreement, dated September 1,
1986, between Vermont Electric Transmission Company,
Inc. and the Prudential Insurance Company of America.
(See Schedule 5.5, Item 1.6.)
3. VELCO Assignment Letter to VETCO and NEET of Certain
Rights Into and Under the VELCO Participation
Agreement.
L. VETCO Equity Support Agreements:
1. VETCO Capital Funds Agreement, dated July 15, 1982.
2. VETCO Capital Funds Support Agreement, dated July 15,
1982, between VETCO and the Vermont Participants.
3. Stock Purchase Agreement, dated August 11, 1986,
among VELCO and each of the Vermont electric
companies participating in Phase I. (See Schedule
5.9, Item III.2.)
M. Phase I Agreements between NEPOOL and Hydro-Quebec:
1. Vermont Participation Agreement for Quebec
Interconnection, dated July 15, 1982, between VELCO
and the Vermont Participants, as amended.
2. Energy Contract, dated _______, 1982, between
Hydro-Quebec and NEPOOL.
3. Energy Banking Agreement, dated , 1982,
among Hydro-Quebec, VELCO, MET and NEPOOL.
4. Interconnection Agreement, dated _______, 1982,
between NEPOOL and Hydro-Quebec, as amended.
N. Phase II Basic Participation Agreements:
1. Preliminary Quebec Interconnection Support Agreement,
dated September 1, 1984, among NEPOOL participants,
as amended.
2. Phase II New Hampshire Transmission Facilities
Support Agreement dated June 1, 1985, between New
England Hydro-Transmission Corporation and the New
England utilities (VELCO signed on behalf of Citizens
Utilities Company), as amended by Amendment Nos. 1-8.
3. Phase II Massachusetts Transmission Facilities
Support Agreement dated June 1, 1985, between New
England Hydro-Transmission Corporation and the New
England utilities (VELCO signed as agent for Citizens
Utilities Company), as amended by Amendment No. 7.
4. Phase II New England Power AC Facilities Support
Agreement, dated as of June 1, 1985, between New-
England Power Company and the New England utilities
(VELCO signed as agent for Citizens Utilities
Company), as amended by Amendment Nos. 1-5.
5. Phase II Boston Edison AC Facilities Support
Agreement, dated as of June 1, 1985, between New
England Power Company and the New England
utilities (VELCO signed as agent for Citizens
Utilities Company), as amended by Amendment
Nos. 1-5.
6. Amended and Restated Agreement With Respect To
Use Of Quebec Interconnection, dated September 1,
1985, among various New England electric utilities.
7. Agreement Amending NEPOOL Agreement, dated
September 1, 1985, among NEPOOL members.
8. Equity Funding Agreement for New England
Hydro-Transmission Corporation, dated June 1, 1985,
among various New England utilities (VELCO signed on
behalf of Citizens Utilities Company), as amended.
(See Schedule 5.5, item I.10, re: restriction on
transfer of common stock.)
9. Equity Funding Agreement for New England
Hydro-Transmission Electric Company, Inc., dated
June 1, 1985, among various New England utilities
(VELCO signed as agent for Citizens Utilities
Company), as amended. (See Schedule 5.5, Item I.11,
re: restriction on transfer of common stock.)
O. Phase U Credit Agreements:
1. Credit Agreement, dated February 9, 1989, among
New England Hydro Finance Company, Inc., New England
Hydro-Transmission Electric Company, Inc. and New
England Hydro-Transmission Corporation, the Banks
named therein, and the National Westminister Bank,
PLC, as agent for such Banks.
2. Letter of Assurances, Consents and Agreements
by Citizens Utilities Company to Westminister
National Bank PLC, dated February 7, 1989, re:
payment obligations under the Facility Support
Agreements and Equity Funding Agreements.
P. Vermont Phase II Participation Agreements:
1. Preliminary Vermont Support Agreement re: Quebec
Interconnection - Phase II, dated September 1, 1984,
between VELCO and various Vermont utilities.
2. Vermont Support Agency Agreement re: Quebec
Interconnection - Phase II, dated June 1, 1985,
between VELCO and various utilities, as amended.
3. Vermont Equity Funding and Credit Enhancement Agency
Agreement for New England Hydro-Transmission Electric
Company, Inc. and New
England Hydro Transmission Corporation, dated June 1,
1985, between VELCO and various Vermont utilities, as
amended.
Q. Phase II Agreement between NEPOOL and Hydro-Quebec:
1. Firm Energy Contract, dated October 4, 1984, between
Hydro-Quebec and NEPOOL Phase II Participants.
R. Vermont DMNRC Agreements:
1. Phase II Vermont DMNRC Joint-Ownership Agreement,
dated January 1, 1988, between Citizens Utilities
Company and Green Mountain Power Corporation. (See
Schedule 5.5, Item 1.3.)
2. Phase II Vermont DMNRC Support Agreement, dated
January 1, 1988, among New England Hydro-Transmission
Corporation and Citizens Utilities Company and Green
Mountain Power Corporation.
3. Phase II Vermont DMNRC Operating and Management
Agreement, dated January 1, 1988, among Vermont
Electric Power Company, Inc. and Citizens Utilities
Company and Green Mountain Power Corporation.
4. Phase II Vermont DMNRC Construction Agreement,
dated January 1, 1988, among Vermont Electric Power
Company, Inc. and Citizens Utilities Company and
Green Mountain Power Corporation.
5. License Agreement, dated January 1, 1988, among
Citizens Utilities Company and Green Mountain Power
Corporation (collectively "Licensee") and Vermont
Electric Transmission Company, Inc., re: operation
and maintenance of DMNRC.
6. Prudential Agreement, dated January 1, 1988, among
Citizens Utilities Company, Green Mountain Power
Corporation, Vermont Electric Transmission Company,
Inc. and the Prudential Insurance Company of America,
regarding the Mortgage securing notices sold to
finance the Vermont portion of Phase I and
stipulating that the DMNRC does not constitute
property subject to the lien of the Mortgage.
R. VELCO and Citizens Utilities Company Agreements:
1. 1985 Option Agreement, dated December 27, 1985, by
and among VELCO, Central Vermont Public Service
Corporation, Green Mountain Power Corporation and
Citizens Utilities Company.
2. 1985 Four Party Agreement, dated July 1, 1985, by
and among VELCO, Central Vermont Public Service
Corporation, Green Mountain Power Corporation and
Citizens Utilities Company.
3. Substation Participation Agreement, between VELCO
and various Vermont utilities.
4. Highgate Operating and Management Agreement, dated
August 1, 1984, by and among VELCO and the various
Vermont electric utilities.
5. Agreement for Joint Ownership, Construction and
Operation of Highgate Transmission Interconnection,
dated August 1, 1984, as amended, by and among
various electric distribution companies. (See
Schedule 5.5, Item 1.5.)
6. Highgate Construction Agreement, dated August 1,
1984, as amended, by and among VELCO and various
electric distribution companies.
7. Highgate Transmission Agreement, dated August 1,
1984, as amended, by and among various electric
distribution companIes.
IV. REAL PROPERTY LEASE AGREEMENTS
None.
V. CONSTRUCTION AND OUTSOURCING AGREEMENTS
A. Consultant Services Master Agreement, dated April 18, 1999,
between Energy Initiatives, Inc. and Citizens Utilities
Company.
B. Consultant Services Master Agreement, dated March 5, 1996,
between Citizens Utilities Company and Power Systems
Engineering, Inc.
C. Contract to Deliver Residential Energy Services, dated June 4,
1998, between Vermont Energy Investment Corporation, Inc. and
Citizens Utilities Company.
D. Letter Agreement, dated July 23, 1999, between Citizens
Utilities Company and Navigant Consulting, Inc./▇▇▇▇, re:
consulting services.
E. Letter Agreement, dated July 24, 1998, between Citizens
Utilities Company and the State of Vermont Office of Economic
Opportunity, re: piggybacking weatherization assistance
program activities with the residential
retrofit program.
F. Amended and Restated Consultant Agreement, dated September 30,
1994, by and among Citizens Utilities Company and ▇▇▇▇ ▇▇▇▇▇
Merriam, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Irish and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇.
G. Letter Agreement, dated September 9, 1994, between FELCO
Foundation and Citizens Utilities Company, re: contribution
pledge.
VI. EQUIPMENT LEASES
None.
VIII. INTELLECTUAL PROPERTY LICENSES
A. H.T.E., Inc. Software License and Services Agreement, dated
April 30, 1997, as amended, between Citizens Utilities Company
and H.T.E., Inc.
B. Software Sublicense Agreement, dated __, 19__, between Vermont
Electric Power Company, Inc. and Citizens Utilities Company.
C. Windmil and Light Table for Windows Engineering Analysis
Software Agreement, dated July 17, 1998, between Citizens
Utilities Company and Milsoft Integrated Solutions, Inc.
D. Technical Services Agreement, dated April 18, 1994, as
amended, between Citizens Utilities Company and Phoenix
Engineering, Inc.
IX. COLLECTIVE BARGAINING AGREEMENTS
A. The Collective Bargaining/Union Agreement described in
Schedule 5.13 (Employee Matters) is hereby incorporated herein
by reference.
X. OTHER CONTRACTS
A. Joint Pole Ownership Agreement, dated January 26, 1995,
between Franklin Telephone Company, Inc. and Citizens
Utilities Company.
B. Joint User Agreement, dated November 15, 1994, as amended,
between Citizens Utilities Company and Mountain Cable Company
d/b/a Adelphia Cable Communications.
C. Joint Ownership Agreement, dated February 1, 1984, between
Citizens Utilities Company and New England
Telephone and Telegraph Company.
D. Memorandum of Understanding in Docket No. 5980, dated April
30, 1999, among Citizens, the Vermont Department of Public
Service and other Vermont electric utilities.
E. Bilateral Agreement between the Department of Public Service
and Citizens Utilities Company in Docket No. 5980, dated May
6, 1999.
F. Lease, dated September 22, 1986, between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
Citizens Utilities Company, re: residence adjacent to ▇▇▇▇▇
River Hydro Electric Project. (Concerns a two acre portion on
the parcel listed on Schedule 5.5, Item II.67.)
G. Lease, dated February 17, 1956, between Citizens
Utilities Company and the Fish and Game Service of the State
of Vermont re: Echo and Pensioner hydro facilities. (See
Schedule 5.5, Items 1.9 and II.36, 37, 38 and 42.)
XI. IDRB DOCUMENTS
None.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.13 EMPLOYEE MATTERS
I. EMPLOYEE PLANS PROVIDERS OF SERVICE
Citizens Pension Plan N/A
Citizens 401k Savings ▇▇▇▇▇▇
Plan
Citizens Utilities Company ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney
1992 Employee Stock Purchase
Plan
Health Care Plan North American Benefits (third
party administrator)
Citizens Utilities Company North American Benefits (third
Dental Plan party administrator)
Vision Service Plan Vision Service Provider
Long Term Salary Continuance CIGNA
Plan
Travel Accident Insurance Continental
Basic Group Life Insurance CIGNA
CUC Flexible Spending North American Benefits
Accounts (third part administrator)
Citizens Incentive Plan N/A
Equity Incentive Plan N/A
Citizens Executive Deferred ▇▇▇▇▇▇
Savings Plan
Employee Manuals for Vermont N/A
Citizens Retiree Medical Plan NABN (third party administrator)
II. COLLECTIVE BARGAINING/UNION AGREEMENTS:
A. Labor Agreement, dated December 18, 1996, between
International Brotherhood of Electrical Workers Local 300 and
Citizens Utilities Company, expiring March 31, 2000.
III. EMPLOYMENT/MANAGERIAL/ADVISORY/CONSULTING/CONFIDENTIALITY/ OTHER
AGREEMENTS:
None.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.14
ENVIRONMENTAL MATTERS
I. NOTICES OF VIOLATIONS.
None.
II. PROCEEDINGS.
None.
III. NOTICES OF MISSING PERMITS.
A. Section 401 Water Quality Certificate from the Vermont Agency
of Natural Resources is needed to complete the relicensing of
the ▇▇▇▇▇ River Hydroelectric Project. [Note: Application is
pending.]
IV. REMEDIATION ACTIVITY.
A. PINE HILL WAREHOUSE. As a result of an EPA investigation,
contamination was detected in several areas. Citizens
participated in a voluntary clean up action. Regular
monitoring of PCB-bioremediation is continuing by Citizens,
which reports to the Vermont Department of Environmental
Conservation ("VTDEC"). (See Schedule 5.5, Item II.58)
B. GRAND ISLE PROPERTY. Investigations revealed that portions of
the property were contaminated with low levels of PCBs. After
removal and disposal of soil and debris, VTDEC issued a
designation of "Site Management Activity Completed" for that
site. (See Schedule 5.5, Item II.14)
C. BORDER SUBSTATION. A release of transformer oil containing
PCBs occurred. VTDEC determined that the contamination did not
pose a threat to human health or the environment. Thus,
subject to a restrictive covenant being placed in the deed for
the parcel, the site was given a designation of "Site
Management Activity Completed." (See Schedule 5.5, Items 1.2
and II.11)
V. SUPERFUND SITES.
None.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.15
MATERIAL ADVERSE CHANGE
None.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.16
STATE AND FEDERAL REGULATORY MATTERS
I. Pending Filings
A. VPSB Docket No. 6332, re: tariff filing of Citizens Utilities
Company requesting a 10.48% rate increase to take effect
January 14, 2000. [Note: A Memorandum of Understanding, dated
January 27, 2000, between the Vermont Department of Public
Service and Citizens Utilities Company, grants a temporary
rate increase pending final determination of permanent rates.
(See Schedule 5.8, Item II.3)]
II. Other Pending Regulatory Proceedings
A. VPSB DOCKET NOS. 5841/5859. Citizens placed on probation in
Vermont and issued a conditional certificate of public good to
operate in Vermont.
B. VPSB DOCKET NO. 6290. Investigation into the establishment of
guidelines for distributed utility planning by Vermont
electric distribution utilities.
C. VPSB DOCKET NO. 6270. Investigation into petition of sixteen
(16) Vermont electric utilities for alteration, modification
and construction of power purchase agreements between
qualifying facilities and Vermont Electric Power Producers,
Inc., and for amendment of Vermont Public Service Board Rule
4.100.
D. VPSB DOCKET NO 6181. Investigation into the use of a net
metering system for the purchase and sale of electricity from
small electrical generating systems to and from electric
companies.
E. VPSB DOCKET NOS. 6140/6140-A. Investigation into the reform of
Vermont's electric power supply.
F. VPSB DOCKET NO. 5980. Investigation into the Department of
Public Service's proposed Energy Efficiency Plan.
G. VPSB DOCKET NO. 5854. Investigation into the restructuring of
the electric utility industry in Vermont.
H. VPSB DOCKET NO 5496. Investigation into the electric
distribution line extension policies for the purpose of
developing Board rules related to line extensions.
I. Pending application with the Vermont Agency of Natural
Resources for a Section 401 Water Quality Certificate for the
▇▇▇▇▇ River Hydroelectric Project. (See Schedule 5.14, Item
III.A.)
J. Application to Amend License for the ▇▇▇▇▇ River Project, No.
2306, filed with FERC on June]6, 1999. (See Schedule 5.3, Rem
1.C.1.)
K. Application for new License for the ▇▇▇▇▇ River; Project, No.
2306, filed with FERC in December, 1991. (See Schedule 5.3,
Item I.C.1.)
L. Citizens received a jurisdictional ruling from the District
Commission (a local, multi-county, environmental commission)
which requires the Company to consider the entire road
right-of-way (50 feet) in determining whether proposed line
construction is of sufficient magnitude to trigger Act 250
jurisdiction.
M. The Proceedings that resulted in Orders of the VPSB and FERC
listed in Schedule 5.8, Item II are incorporated herein by
reference.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 5.19
SELLER'S INSURANCE
Insurance Policy No. Broker Company Limits of Deductible Expiration
(Consultant) Liability Date
All Risk 24020010.00 Direct Writer Arkwright Property Damage: See Schedule Various. Refer to 10/01/2001
(including Boiler Mutual Ins. on Page 1 for Sub-limits Schedule on Page 1
& machinery, (▇▇▇▇▇ USA Co.
EDP & Fine Arts Inc.)
Comprehensive ▇▇▇-▇▇-▇▇ ▇▇▇▇▇ USA National Union $10,000.000 except; $100.000 $25.000; None for 09/01/20
Blanket Crime Inc. Fire Ins. Co. Securities Forgery Credit Card Credit Card
Forgery and $19.000 Loss of Forgery Money
Accounting Records Orders &
Counterfeit
Currency. Loss of
Accounting
Records or
Securities Forgery.
Workers WC189158667 ▇▇▇▇▇ USA CNA WC: Statutory Benefits $500,000 per 06/01/2001
Compensation & Inc. Employers Liability: $500,000 occurrence
Employers each accident $509,000 each
Liability employee (Disease); $500.000
policy limit (Disease):
Unlimited where required by
law
General Liabilty GL 166793803 ▇▇▇▇▇ USA CNA $500.000 each occurrence N/A: all claims 06/01/2000
Inc. combined single limit for bodily reimbursed 100%
injury & property damage by Citizens
Auto Liability BUA166793817 ▇▇▇▇▇ USA CNA $500.000 each occurrence N/A: all claims 06/01/2000
Inc. combined single limit for bodily reimbursed 100%
injury & property damage by Citizens
(including Auto Physical
Damage - Comprehensive
Coverage only - collision
coverage is excluded)
Excess Liability X0187A1A99 ▇▇▇▇▇ USA AEGIS $35,000,000 in excess of $500,000 Pollution 06/01/2000
Employers Liability, General Liability.
Liability & Auto Liability $5,000,000 Non-
policy deductibles owned Aviation.
$250,000 each
claimant/$1MM
any one occ. -
Employment
Practices
2nd Layer Excess 878153100 Self-Procured Lexington $25,000,000 in excess of $35,000,000 06/01/2000
Lability (▇▇▇▇▇ USA Insurance $35,000,000 underlying retention per
(Non-Gas Operations Inc.) Company occurrence
Only) (Bermuda)
Non-Owned Aircraft 360AC-255186 ▇▇▇▇▇ USA USAIG $5,000.000 None 06/01/2000
Liability
Directors & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇-▇ ▇▇▇▇▇ ▇▇▇ Federal $35,000,000 $5,000 each Officer 05/01/2000
Liability Insurance & Director:
Company $ 10,000 aggregate;
$250,000 Corporate
reimbursement
Fiduciary/Pension 811534-70-C ▇▇▇▇▇ USA Federal $15.000,000 None 05/01/2000
Trust Liability Insurance
Company
Special Coverage GA06096650 ▇▇▇▇▇ USA Gulf $20,000,000 None 01/19/01
Insurance
Company
Other Broker Policy
Group Travel 5R83080860 AON Continental 5x salary for all Officers & None 02/01/00
Consulting, Casualty- Co. Employee Directors, Non
Inc. Employee Directors & all
(Not Marsh) other Employees subject to a
$150,000 minimum and a
$1,500,000 maximum.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 6.1
CONDUCT OF BUSINESS PRIOR TO CLOSING DATE
1. Citizens may convey to the North Country Career Center (with the Town
of Derby acting as interim agent) approximately 62 acres of real
property consisting of approximately 40 of the 67 acres in Derby,
Vermont (Book 54, Page 456; see Schedule 5.5, Item II.58),
approximately 2 acres in Derby, Vermont (Book 41, Page 590; see
Schedule 5.5, Items II.45 and 46), and 20 acres located West of I-91
and South and East of ▇▇▇▇▇ ▇▇▇▇ (see Schedule 5.5, Item II, Note No.
2)
2. Citizens may sell its Generation Assets located in the State of
Vermont.
3. Citizens may sell a portion of its owned Real Property' in Derby,
Vermont (identified on Schedule 5.5, Items II.44, 45 and 46) to the
State of Vermont for the relocation of the Route 105 Bridge.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 6.2.(c)
CITIZENS GUARANTEES AND SURETY INSTRUMENTS
None.
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 10.1
ACTIVE EMPLOYEES
Description Annual Salary
Mgr, VT Electric 97,850.00
Supt, Production 82,400.00
Supt, T&D Ops 83,162.25
Office Manager & Chief Acct 60,000.00
Coord, Compliance 61,750.00
Coord, Compliance 48,000.00
Residential Services Admin 44,032.50
E/S Admin/Key Accts Rep 45,421.00
Coord, Special Project 41,869.50
Mgr, Customer Service 43,878.00
Admin Assistant & Asst Supt 43,157.00
Coord, Special Project 41.419.00
Analyst, Operations 53,000.00
Clerical 7,696.00
Clerical 27,788.80
Sys Dispatcher 1St Class 41,704.00
Sys Dispatcher 1St Class 41,704.00
Sys Dispatcher 1St Class 41,704.00
Sys Dispatcher 1St Class 41,704.00
Sys Dispatcher 1St Class 41,704.00
Sys Dispatcher 1St Class 41,704.00
Sr Clerk. Office 28,246.40
Sr Clerk, Office 28,246.40
Rep, Cust Svc 27,331.20
Rep, Cust Svc 27,331.20
Rep, Cust Svc 25,750.40
Meter Reader/Install 31,491.20
Meter Reader/Install 31,491.20
Meter Reader/Install 31,491.20
Lineman 1st Class 41,932.80
Lineman 1st Class 41,932.80
Lineman 1st Class 41,932.80
District Rep 44,928.00
▇▇▇▇▇▇▇ 43,534.40
District Pep 44,928.00
Lineman 1st Class 41,932.80
Lineman 1st Class 41,932.80
Lineman 1st Class 41,932.80
Lineman 1st Class 41,932.80
District Rep 44,928.00
Lineman 1st Class 41,932.80
▇▇▇▇▇▇▇ 43,534.40
Lineman 1st Class 41,932.80
Linenan 3rd Class 38,251.20
Lineman 1st Class 41,932.80
District Rep 44,928.00
Mechanic 31,158.40
▇▇▇▇▇▇▇, Electrical Maintenance 44,262.40
Representative,DSM 23,750.40
Pt - Assist Secretary 18,540.00
Cap Rock Electric Cooperative
Cap Rock Energy Corporation
Vermont Electric
SCHEDULE 10.7
RETIREES AND "GRANDFATHERED EMPLOYEES"
I Retirees
FIRST BIRTH HIRE RETIRE SPOUSE MEDICAL DENTAL
LAST NAME NAME SEX DATE DATE DATE COVERED COVERAGE COVERAGE LIFE DEP LIFE
--------- ---- --- ---- ---- ---- ------- -------- -------- ---- --------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇ ▇ 6/5/33 11/9/70 7/6/93 Y Y N 10,000 0
▇▇▇▇ ▇▇▇▇▇ A M 5/31/23 4/8/58 12/31/95 Y Y N 10,000 0
HAMMMOND ▇▇▇▇▇▇▇ B F 9/10/32 8/14/78 12/31/94 N Y N 10,000 0
▇▇▇▇▇ ▇▇▇▇▇ ▇ ▇ 3/30/23 3/24/47 10/30/93 N Y N 10,000 0
II. Grandfathered Employees
Name Hire Date Birthdate
---- --------- ---------
▇▇▇▇▇▇▇,▇▇▇▇▇▇▇ ▇. 03/07/77 06/07/40
III. Eligible Union Employees
[Note: Retiree Medical may be eliminated prior to Closing. The union employees
that have asterisks following their names below will become "grandfathered
employees" upon the elimination of such benefits.]
Name Hire Date Birthdate
---- --------- ---------
▇▇▇▇▇▇,▇▇▇▇▇▇▇ ▇. 05/03/1976 12/21/1953
▇▇▇▇▇,▇▇▇▇ ▇. 12/16/1985 05/13/1952
▇▇▇▇▇▇▇,▇▇▇▇▇ ▇. 04/21/1994 03/31/1969
Blow,▇▇▇▇▇▇▇ ▇.* 10/13/1970 01/28/1940
▇▇▇▇,▇▇▇▇▇▇▇▇ ▇. 08/19/1985 03/25/1968
▇▇▇▇▇▇▇▇▇▇▇,▇▇▇▇ ▇. 10/21/1992 04/01/1960
▇▇▇▇▇▇,▇▇▇▇ ▇. 07/06/1992 02/06/1959
▇▇▇▇▇▇▇,▇▇▇▇▇▇ ▇. 08/19/1985 07/23/1957
▇▇▇▇▇▇▇,▇▇▇▇▇ F 11/02/1987 04/26/1948
▇▇▇▇▇,▇▇▇▇▇▇▇ ▇.* 10/02/1965 04/03/1939
▇▇▇▇,▇▇▇▇▇ ▇.* 02/16/1970 06/13/1941
▇▇▇▇,▇▇▇▇▇▇ ▇.* 12/09/1983 12/19/1944
▇▇▇▇▇▇▇▇,▇▇▇▇▇▇ ▇.* 04/21/1969 09/03/1944
▇▇▇▇▇▇,▇▇▇▇ ▇. 02/05/1990 04/05/1952
Gates,▇▇▇▇▇▇ ▇▇▇▇▇ 08/30/1993 05/29/1965
Gates,▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 08/30/1993 05/10/1961
▇▇▇▇,▇▇▇▇▇ ▇. 03/30/1998 09/17/1951
▇▇▇▇▇▇▇▇▇,▇▇▇▇▇ ▇. 09/22/1997 01/01/1955
▇▇▇▇▇▇▇▇,▇▇▇▇▇▇▇▇ ▇. 12/01/1991 10/12/1953
▇▇▇▇▇▇,▇▇▇▇ ▇. 11/19/1990 09/11/1960
▇▇▇▇▇▇,▇▇▇▇▇ ▇. 04/01/1991 12/08/1965
▇▇▇▇▇,▇▇▇▇▇▇▇ J 08/02/1993 08/08/1946
▇▇▇▇▇▇,▇▇▇▇▇ W 09/21/1987 07/25/1958
▇▇▇▇▇▇▇▇▇ Jr,▇▇▇▇▇▇ 01/15/1993 09/09/1966
▇▇▇▇▇▇,▇▇▇▇▇ ▇▇▇▇▇ 09/26/1994 01/14/1959
▇▇▇▇▇▇▇,▇▇▇▇▇▇▇ ▇. 06/10/1991 04/09/1968
▇▇▇▇▇▇▇,▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 08/30/1993 03/14/1964
▇▇▇▇▇▇▇▇,▇▇▇▇▇ ▇. 10/31/1966 07/16/1945
▇▇▇▇▇▇▇▇,▇▇▇▇▇ ▇. 08/15/1971 10/07/1955
Mercy,▇▇▇▇ ▇. 10/27/1986 12/24/1959
▇▇▇▇▇▇▇▇▇▇,▇▇▇▇▇ ▇. 11/03/1980 06/11/1950
▇▇▇▇▇▇▇▇,▇▇▇▇▇▇▇ ▇ 03/01/1989 05/30/1967
▇▇▇▇▇,▇▇▇▇▇▇▇▇ 08/13/1993 12/05/1964
▇▇▇▇▇▇▇,▇▇▇▇▇ ▇▇▇▇▇ 04/01/1996 10/12/1951
▇▇▇▇▇,▇▇▇▇ ▇. 02/17/1987 09/13/1960
