Document/Exhibit Description Pages Size
1: 10-K 2002 Form 10-K 89 543K
2: EX-3.200.3 Amendment to By-Laws 1 6K
3: EX-10.11 Material Contract -- kauaiagreement 52 239K
4: EX-10.12 Asset Purchase Agreement Hawaii 84 340K
5: EX-10.13 Arizona Gas Asset Purhcase Agreement 80 319K
6: EX-10.14 Arizona Electric Asset Purchase Agreement 80 320K
7: EX-10.15 Building Purchase Agreement 29 105K
8: EX-12 Exhibit 12 Comp of Ratio 2 17K
9: EX-21 Subsidiary List 3 16K
10: EX-23 Consent of Experts or Counsel -- kpmgconsent 1 9K
11: EX-99 Miscellaneous Exhibit -- certification906 3 12K
Execution copy
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Exhibit 10.12
-------------
ASSET PURCHASE AGREEMENT
by and between
CITIZENS COMMUNICATIONS COMPANY, as SELLER,
and
K-1 USA VENTURES, INC., as BUYER,
Dated as of December 19, 2002
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[Enlarge/Download Table]
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.................................................................................. 1
ARTICLE II PURCHASE AND SALE........................................................................... 15
2.1 Transfer of Assets............................................................................ 15
2.2 Excluded Assets............................................................................... 16
2.3 Assumed Liabilities........................................................................... 18
2.4 Excluded Liabilities.......................................................................... 20
2.5 Control of Litigation......................................................................... 21
ARTICLE III THE CLOSING................................................................................ 22
3.1 Closing....................................................................................... 22
3.2 Closing Payment............................................................................... 22
3.3 Adjustment to Base Purchase Price............................................................. 22
3.4 Prorations.................................................................................... 25
3.6 Deliveries by Seller.......................................................................... 25
3.5 Deliveries by Buyer........................................................................... 27
3.7 Work in Progress.............................................................................. 27
ARTICLE IV REPRESENTATIONS, WARRANTIES AND DISCLAIMERS
OF SELLER .............................................................................................. 28
4.1 Incorporation; Qualification.................................................................. 28
4.2 Authority..................................................................................... 28
4.3 Consents and Approvals; No Violation.......................................................... 28
4.4 Insurance..................................................................................... 29
4.5 Real Property Leases.......................................................................... 29
4.6 Environmental Matters......................................................................... 29
4.7 Labor Matters................................................................................. 30
4.8 Benefit Plans: ERISA......................................................................... 30
4.9 Real Property................................................................................. 32
4.10 Condemnation.................................................................................. 32
4.11 Assigned Agreements........................................................................... 32
4.12 Legal Proceedings............................................................................. 33
4.13 Permits ...................................................................................... 33
4.14 Taxes......................................................................................... 33
4.15 Intellectual Property......................................................................... 34
4.16 Capital Expenditures.......................................................................... 34
4.17 Compliance With Laws.......................................................................... 34
4.18 Title......................................................................................... 34
4.19 DISCLAIMERS................................................................................... 34
4.20 Financial Statements.......................................................................... 35
4.21 SEC Filings; Financial Statements............................................................. 35
4.22 Sufficiency of Assets......................................................................... 36
4.23 Easements..................................................................................... 36
4.24 Tangible Personal Property.................................................................... 36
4.25 Regulatory Matters............................................................................ 36
i
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...................................................... 36
5.1 Organization.................................................................................. 36
5.2 Authority..................................................................................... 37
5.3 Consents and Approvals; No Violation.......................................................... 37
5.4 Availability of Funds......................................................................... 38
5.5 Public Company Filings; Financial Statements.................................................. 38
5.6 Legal Proceedings............................................................................. 38
5.7 No Knowledge of Seller's Breach............................................................... 38
5.8 Qualified Buyer............................................................................... 39
5.9 Inspections................................................................................... 39
5.10 WARN Act...................................................................................... 39
5.11 Public Utility Holding Company Status; Regulation as a Public Utility......................... 39
5.12 Ownership and Control of Buyer................................................................ 39
ARTICLE VI COVENANTS OF THE PARTIES.................................................................... 40
6.1 Conduct of Business and Operation of Assets................................................... 40
6.2 Access to Information......................................................................... 41
6.3 Additional Inspections and Information........................................................ 42
6.4 Confidentiality............................................................................... 44
6.5 Public Statements............................................................................. 45
6.6 Expenses...................................................................................... 45
6.7 Further Assurances............................................................................ 45
6.8 Consents and Approvals........................................................................ 46
6.9 Fees and Commissions.......................................................................... 49
6.10 Tax Matters................................................................................... 49
6.11 Advice of Changes............................................................................. 51
6.12 Seller Employees.............................................................................. 51
6.13 Risk of Loss.................................................................................. 56
6.14 Tax Exempt Financing.......................................................................... 57
6.15 Seller Guarantees and Surety Instruments...................................................... 61
6.16 Citizens and Gasco Marks...................................................................... 61
6.17 Title Commitments............................................................................. 62
6.18 Post-Execution Delivery of Schedules.......................................................... 62
6.19 Transition Plan............................................................................... 62
6.20 Certain Transactions.......................................................................... 63
ARTICLE VII CONDITIONS................................................................................. 63
7.1 Conditions to Obligations of Buyer............................................................ 63
7.2 Conditions to Obligations of Seller........................................................... 64
ARTICLE VIII POST-CLOSING INDEMNIFICATION............................................................... 65
8.1 Indemnification of Seller by Buyer............................................................ 65
8.2 Indemnification of Buyer by Seller............................................................ 65
8.3 Certain Limitations on Indemnification........................................................ 66
8.4 Defense of Claims............................................................................. 69
8.5 BHP Indemnity Arrangements.................................................................... 70
ii
ARTICLE IX TERMINATION................................................................................. 72
9.1 Termination................................................................................... 72
9.2 Procedure and Effect of Termination........................................................... 73
9.3 Liquidated Damages............................................................................ 73
ARTICLE X MISCELLANEOUS............................................................................... 74
10.1 Amendment and Modification.................................................................... 74
10.2 Waiver of Compliance; Consents................................................................ 74
10.3 [Intentionally Omitted]....................................................................... 74
10.4 Notices....................................................................................... 74
10.5 Assignment.................................................................................... 76
10.6 Governing Law................................................................................. 76
10.7 Counterparts.................................................................................. 77
10.8 Interpretation................................................................................ 77
10.9 Schedules and Exhibits........................................................................ 77
10.10 Entire Agreement.............................................................................. 77
10.11 U.S. Dollars.................................................................................. 77
10.12 Bulk Sales Laws............................................................................... 77
10.13 Construction of Agreement..................................................................... 77
10.14 Severability.................................................................................. 78
10.15 Third Party Beneficiary....................................................................... 78
iii
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of December 19, 2002 (this "Agreement"),
by and among Citizens Communications Company, a Delaware corporation ("Seller"),
and K-1 USA Ventures, Inc. ("K-1 USA" and until the effective time of the
assignment of this Agreement to the k1 Designee as required by Section
6.8(f)(i), the "Buyer"), a Delaware corporation and a wholly-owned subsidiary of
k1 Ventures Limited, a Singapore corporation. Seller and Buyer are referred to,
individually, as a "Party" and, together, as the "Parties."
W I T N E S S E T H
-------------------
WHEREAS, Seller owns all of the Assets (as defined below); and
WHEREAS, Buyer desires to purchase and assume, and Seller desires to sell
and assign, the Assets, and certain associated liabilities, upon the terms and
conditions hereinafter set forth in this Agreement; and
WHEREAS, (i) on the date hereof k1 Ventures Limited and Seller have entered
into a letter agreement wherein k1 Ventures Limited undertakes certain
obligations to provide financial support to enable Buyer to satisfy certain of
Buyer's financial obligations under this Agreement (the "Support Agreement"),
and (ii) Kephinance Investments Pte Ltd and PCG Greenstreet Venture I, L.P. have
entered into Voting Agreements with Seller pursuant to which such shareholders
of k1 Ventures Limited have agreed to vote, in accordance with the terms of such
Voting Agreements, all shares of voting securities of k1 Ventures Limited over
which they have the power to control the voting thereof (which shares in the
aggregate exceed the number of shares that are needed to approve the matters
addressed in such Voting Agreements).
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have the
meanings specified in this Section 1.1.
"Affiliate" of any Person means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Person specified.
"Agreement" means this Asset Purchase Agreement together with the Schedules
and Exhibits attached hereto, as the same may be from time to time amended.
"Allocation" has the meaning set forth in Section 6.10(f).
"ALTA" has the meaning set forth in Section 6.17.
"Ancillary Agreements" means the agreements, contracts, documents,
instruments and certificates provided for in this Agreement to be entered into
by one or more of the Parties or any of their Affiliates in connection with the
transactions contemplated by this Agreement.
"Assets" has the meaning set forth in Section 2.1.
"Asset Material Adverse Effect" means any occurrence or condition, arising
after the date hereof, that has or would reasonably be expected to have an
aggregate adverse economic impact, taking into account all relevant
considerations, in excess of $10,000,000 on the condition of the Assets, taken
as a whole, or on the business, operations, financial condition or results of
operations of the Business, taken as a whole, other than any such occurrence or
condition (a) arising from business, economic or financial market conditions,
considered generally, (b) arising from the conditions in the gas utility
industry, considered generally and not specifically as to the Business, (c)
which is remedied, cured or otherwise reversed (including by the payment of
money or application of insurance proceeds) before the Termination Date, or (d)
arising from entering into this Agreement or the announcement of the
transactions contemplated by this Agreement; it being understood that the
occurrences and/or conditions which could, depending on the nature and extent
thereof, be deemed to result in an Asset Material Adverse Effect shall include,
without limitation, (x) the terms or conditions of a Final Order with respect to
any Required Regulatory Approval, considered individually or together with any
other such Final Order(s) with respect to any other Required Regulatory
Approval(s), other than Regulatory Exceptions, and (y) facts or circumstances
relating to the Assets and/or the Business which come to the attention of Buyer
between the date of this Agreement and the Closing Date, whether as a result of
Buyer's Inspection of the Assets or its examination of information and data
relating to the Assets and/or the Business, as contemplated by Section 6.2 or
6.3, or otherwise.
"Assigned Agreements" means any contracts, agreements, software licenses
and related contracts, Easements, Real Property Leases and personal property
leases entered into by Seller or any of its Affiliates (and any amendment to any
of the foregoing) with respect to the ownership, operation or maintenance of the
Assets or the Business, including without limitation, the CBA and those
disclosed on Schedules 4.5 and 4.11(a) and excluding those disclosed on Schedule
2.2.
"Assignment and Assumption Agreement" means the Assignment and Assumption
Agreement between Seller and Buyer substantially in the form of Exhibit A
attached hereto.
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Balance Sheet" has the meaning set forth in Section 4.20.
"Base Purchase Price" has the meaning set forth in Section 3.2.
2
"Benefit Plans" means each of Seller's deferred compensation and each bonus
or other incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of Section 3(1) of ERISA);
each profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA); each employment, termination or
severance agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by such Party or by any ERISA
Affiliate, in any case maintained for employees of Seller connected with the
Business, or in which such employees participate.
"BHP" means collectively BHP Hawaii, Inc. and The Broken Hill Proprietary
Company Limited, and any successors thereof.
"BHP Stock Sale Agreement" has the meaning set forth in Section 8.5.
"Bill of Sale" means the Bill of Sale, substantially in the form of Exhibit
B attached hereto, to be delivered at the Closing by Seller with respect to the
Tangible Personal Property included in the Assets transferred to Buyer.
"Bond Counsel" has the meaning set forth in Section 6.14(c)(i).
"Business" -- means collectively:
(a) the regulated utility business of manufacturing, selling and
distributing synthetic natural gas on the island of Oahu, Hawaii, and of
propane gas within the State of Hawaii, conducted by Seller through The Gas
Company division of Seller;
(b) the non-utility business of purchasing, marketing and selling
propane gas conducted by Seller within the State of Hawaii through The Gas
Company division of Seller;
(c) the appliance repair and service business and propane vehicle
conversion business conducted by Seller within the State of Hawaii through
The Gas Company division of Seller; and
(d) the provision of related services and products and the engagement
in related activities by Seller within the State of Hawaii through The Gas
Company division of Seller.
"Business Day" means any day other than Saturday, Sunday and any day which
is a day on which banking institutions in the States of Hawaii and New York are
authorized by law or other governmental action to remain closed.
"Buyer" has the meaning set forth in the Preamble.
3
"Buyer Indemnifiable Loss" has the meaning set forth in Section 8.2.
"Buyer Indemnitee" has the meaning set forth in Section 8.2.
"Buyer Material Adverse Effect" means a Material Adverse Effect with
respect to Buyer.
"Buyer Required Regulatory Approvals" means the Required Regulatory
Approvals set forth in Schedule 5.3(b).
"CBA" has the meaning set forth in Section 6.12(a).
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended.
"Capital Expenditures" means capital additions to or replacements of
property, plants and equipment included in the Assets or otherwise relating to
the Business and other expenditures or repairs on property, plants and equipment
included in the Assets or otherwise relating to the Business that are
customarily capitalized by Seller in accordance with GAAP and its normal
accounting policies.
"Capital Expenditures Schedule" has the meaning set forth in Section 4.16.
"Citizens Marks" has the meaning set forth in Section 2.2(c).
"Classified Plan" means the Pension Plan for Classified Employees of Gasco,
Inc.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" means one minute after 11:59 p.m. on the date which is five
(5) Business Days following the date on which the last of the conditions
precedent to the Closing set forth in Article VII of this Agreement have been
either satisfied or waived by the Party for whose benefit such conditions
precedent exist, subject to such extensions (not to exceed six (6) months) as
may be required by Seller to repair or replace lost or damaged Assets in
accordance with Section 6.13(c), or such other date as the Parties may mutually
agree.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1984.
"COBRA Continuation Coverage" means the requirements of Section 4980B(f) of
the Code.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercially Reasonable Efforts" means efforts by a Party which are
reasonably within the contemplation of the Parties at the time of executing this
Agreement and which do not require the performing Party to expend any funds
other than expenditures which are customary and reasonable in transactions of
the kind and nature contemplated by this Agreement in order for the performing
Party to satisfy its obligations hereunder.
4
"Current Retirees" has the meaning set forth in Section 6.12(d)(iii)(G).
"Direct Claim" has the meaning set forth in Section 8.4(c).
"Easements" means all easements, rights of way, permits, licenses,
prescriptive rights and other ways of necessity, and other similar real property
grants, whether or not of record, relating to real property.
"Encumbrances" means any mortgages, pledges, liens, security interests,
conditional and installment sale agreements, activity and use limitations,
conservation easements, deed restrictions, encumbrances and charges of any kind.
"Environmental Claim" means any and all pending and/or threatened
administrative, regulatory or judicial actions, suits, orders, claims, demands,
liens, notices, notices of violations, investigations, complaints, requests for
information, proceedings, or other written communication, whether criminal or
civil, pursuant to or relating to any applicable Environmental Law or pursuant
to a common law theory, by any Person (including, but not limited to, any
Governmental Authority, private person and citizens' group) based upon,
alleging, asserting, or claiming any actual or potential (a) violation of, or
liability under any Environmental Law, (b) violation of any Environmental
Permit, or (c) liability for investigatory costs, cleanup costs, removal costs,
remedial costs, response costs, natural resource damages, property damage,
personal injury, fines, or penalties arising out of, based on, resulting from,
or related to any Environmental Condition or any Release or threatened Release
into the environment of any Regulated Substances at any location related to the
Assets, including, but not limited to, any Off-Site Location to which Regulated
Substances, or materials containing Regulated Substances, were transported for
handling, storage, treatment, or disposal.
"Environmental Condition" means the presence or Release of a Regulated
Substance (other than a naturally-occurring substance) on or in environmental
media, or structures on Real Property, at an Off-Site Location or other property
(including the presence in surface water, groundwater, soils or subsurface
strata, or air), including the subsequent migration of any such Regulated
Substance, regardless of when such presence or Release occurred or is
discovered.
"Environmental Data" has the meaning set forth in Section 6.3(d).
"Environmental Laws" means all federal, state, local, provincial, foreign
and international civil and criminal laws, regulations, rules, ordinances,
codes, decrees, judgments, directives, or judicial or administrative orders, and
any judicial or administrative interpretations thereof, relating to pollution or
the regulation and protection of the environment, natural resources or human
health and safety, including, without limitation, laws relating to Releases or
threatened Releases of Regulated Substances (including, without limitation,
Releases to ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport, disposal or handling
of Regulated Substances. "Environmental Laws" include: (a) with respect to
federal law, CERCLA, the Hazardous Materials Transportation Act (49 U.S.C.ss.ss.
1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.ss.ss. 6901
et seq.), the Federal Water Pollution Control Act (33 U.S.C.ss.ss. 1251 et
seq.), the Clean Air Act (42 U.S.C.ss.ss. 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C.ss.ss. 2601 et seq.), the Oil Pollution Act (33 U.S.C.
ss.ss. 2701 et seq.), the Emergency Planning and Community Right-to-Know Act (42
U.S.C.ss.ss. 11001 et seq.), the Occupational Safety and Health Act (29
U.S.C.ss.ss. 651 et seq.), the Safe Drinking Water Act (42 U.S.C.ss. 300f et.
seq.), the Surface Mine Conservation and Reclamation Act (30 U.S.C.ss.ss.
1251-1279), and regulations adopted pursuant thereto, and counterpart state and
local laws, regulations adopted pursuant thereto; and (b) with respect to Hawaii
law, laws comparable to such federal statutes and regulations adopted pursuant
thereto.
5
"Environmental Liabilities" means any liabilities, responsibilities or
obligations arising under Environmental Laws or relating to Environmental
Conditions or Regulated Substances (including Environmental Claims and common
law liabilities relating to Environmental Conditions and Regulated Substances)
including but not limited to:
(i) costs of compliance (including capital, operating and other costs)
relating to any violation or alleged violation of Environmental Laws with
respect to the ownership of the Assets or operation of the Business;
(ii) property damage or natural resource damage arising from Environmental
Conditions or Releases of Regulated Substances at, on, in, under, adjacent to,
or migrating from any Assets;
(iii) any Remediation of Environmental Conditions or Regulated Substances
that are present or have been Released at, on, in, adjacent to or migrating from
the Assets;
(iv) any Environmental Claims with respect to the ownership of any Assets
or operation of the Business;
(v) any bodily injury or loss of life arising from Environmental Conditions
or Releases of Regulated Substances at, on, in, under, adjacent to or migrating
from any Asset;
(vi) any bodily injury, loss of life, property damage, or natural resource
damage arising from the storage, transportation, treatment, disposal, discharge,
recycling or Release, at any Off-Site Location, or arising from the arrangement
for such activities, of Regulated Substances generated in connection with the
ownership of the Assets or the operation of the Business; and
(vii) any Remediation of any Environmental Condition or Release of
Regulated Substances arising from the storage, transportation, treatment,
disposal, discharge, recycling or Release, at any Off-Site Location, or arising
from the arrangement for such activities, of Regulated Substances generated in
connection with the ownership or operation of the Assets.
6
"Environmental Permits" means any permits, registrations, certificates,
certifications, licenses and authorizations, consents and approvals of
Governmental Authorities issued under Environmental Laws held by Seller with
respect to the Assets or the Business.
"Environmental Reports" has the meaning set forth in Section 4.6.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means a trade or business, whether or not incorporated,
that together with a Party would be deemed a "single employer" within the
meaning of Section 4001(b) of ERISA.
"Estimated Adjustment" has the meaning set forth in Section 3.3(b).
"Estimated Closing Statement" has the meaning set forth in Section 3.3(b).
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.4.
"Exempt Facilities" means those facilities listed in Exhibit A to the Loan
Agreement included in the IDRB Documents.
"Final Order" means an action by the relevant Governmental Authority that
has not been reversed, stayed, enjoined, set aside, annulled or suspended and/or
with respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired and the time
period permitted by statute or regulation for filing any request for a stay,
petition for rehearing, reconsideration or application for review of the action
or for filing a court appeal has passed.
"Financial Statements" has the meaning set forth in Section 4.20(a).
"FIRPTA Affidavit" means the Foreign Investment in Real Property Tax Act
Certification and Affidavit to be executed by Seller.
"GAAP" means U.S. generally accepted accounting principles.
"Gas Franchise Act" means The Gas Franchise Act (Act 262, Session Laws of
Hawaii 1967), as unamended.
"Good Utility Practices" means those practices, methods, standards, guides,
or acts, as applicable, that (a) are generally accepted in the region during the
relevant time period for use in the gas, transmission and distribution industry,
(b) are commonly used in prudent gas, transmission and distribution engineering,
construction, project management and operations, and (c) would be expected if
the Business is to be conducted at a reasonable cost in a manner consistent with
laws, rules and regulations applicable to the Business and the objectives of
reliability, safety, environmental protection, economy and expediency. Good
Utility Practice is intended to be acceptable practices, methods, or acts
generally accepted in the region, and is not intended to be limited to the
optimum practices, methods, or acts to the exclusion of all others.
7
"Governmental Authority" means any foreign, federal, state, local or other
governmental, regulatory or administrative agency, court, commission,
department, board, or other governmental subdivision, legislature, rulemaking
board, court, tribunal, arbitrating body or other governmental authority.
"Grandfathered Active Employees" has the meaning set forth in Section
6.12(d)(iii)(G).
"Grandfathered Individuals" has the meaning set forth in Section
6.12(d)(iii)(G).
"HTAWU" means Hawaii Teamsters and Allied Workers Union Local 996.
"HPUC" means the Public Utilities Commission of the State of Hawaii.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"IDRB Documents" has the meaning set forth in Section 6.14(l).
"IDRB Indebtedness" means the indebtedness of Seller owing to the
Department of Budget and Finance of the State of Hawaii, as the issuer of the
Revenue Bonds and arising under the Loan Agreement included among the IDRB
Documents.
"Income Tax" means any federal, state, local or foreign Tax (a) based upon,
measured by or calculated with respect to gross or net income, profits or
receipts (including, without limitation, capital gains Taxes and minimum Taxes)
or (b) based upon, measured by or calculated with respect to multiple bases
(including, without limitation, corporate franchise taxes) if one or more of the
bases on which such Tax may be based, measured by or calculated with respect to,
is described in clause (a), in each case together with any interest, penalties,
or additions to such Tax.
"Indemnifying Party" means a Party obligated to provide indemnification
under this Agreement.
8
"Indemnitee" means a Person entitled to receive indemnification under this
Agreement.
"Independent Accounting Firm" means such independent accounting firm of
national reputation as is mutually appointed by the Buyer and Seller.
"Inspection" means all tests, reviews, examinations, inspections,
investigations, interviews, verifications, samplings and similar activities
conducted by Buyer or its Representatives prior to the Closing with respect to
the Assets, including "Phase I" and/or "Phase II" environmental assessments.
"Intellectual Property" means patents and patent rights, trademarks and
trademark rights, service marks and rights to service marks, inventions,
copyrights and copyright rights, and all pending applications for registrations
of patents, trademarks, and copyrights.
"Inventories" means materials, spare parts, consumable supplies, fuel
supplies and chemical inventories relating to the Assets or the operation of the
Business.
"Iwilei Property" means that certain parcel of real property formerly owned
by Gasco, Inc. located at 432 Pacific Street (formerly known as 616 Iwilei
Road), Honolulu, Hawaii, and which is the same parcel of real property defined
as the "Iwilei Property" in the BHP Stock Sale Agreement.
"k1 Designee" has the meaning set forth in Section 6.8(f)(i).
"K-1 USA" means K-1 USA Ventures, Inc., a Delaware corporation.
"Knowledge" means the actual knowledge, as of the date hereof or, with
respect to any certificate delivered pursuant to this Agreement, the date of
delivery of such certificate, of the Persons identified on Schedule 1.1 and
successors to each such Person's employment responsibilities.
"Loss" means any claim, demand, suit, proceeding, investigation by a
Governmental Authority, loss, liability, fine, levy, damage, obligation,
payment, cost or expense (including, without limitation, the cost and expense of
any action, suit, proceeding, assessment, judgment, settlement or compromise
relating thereto and reasonable attorneys' fees and reasonable disbursements in
connection therewith).
"Material Adverse Effect" means any occurrence or condition, arising after
the date hereof, that has or would reasonably be expected to have an aggregate
adverse economic impact, taking into account all relevant considerations, in
excess of $10,000,000 on the business, operations, properties, financial
condition or results of operations of any Party (including its Affiliates, taken
as a whole) or on the ability of either Party to perform in all material
respects its obligations under this Agreement and the Ancillary Agreements.
"Material Taking" has the meaning set forth in Section 6.13(b).
"Non-Union Employees" has the meaning set forth in Section 6.12(b).
"Off-Site Location" means any real property or location other than the Real
Property.
"Order" means any award, decision, injunction, judgment, order, consent
order, writ, decree, consent decree, ruling, subpoena, or verdict entered,
issued, made or rendered by any court, administrative agency, other Governmental
Authority, or by an arbitrator, each of which possesses competent jurisdiction.
9
"Party" has the meaning set forth in the Recitals.
"Permitted Encumbrances" means any of the following:
(a) mechanics', carriers', workers' and other similar liens arising in the
ordinary course of business for charges that are not delinquent or that are
being contested in good faith and have not proceeded to judgment;
(b) liens for current Taxes and assessments not yet due and payable;
(c) with respect to the Real Property, usual and customary nonmonetary
Encumbrances, covenants, Easements, restrictions and other title matters
(whether or not recorded) that do not and are not reasonably likely to interfere
materially with the operation of that portion of the Business conducted on such
Real Property or the Business as a whole;
(d) Encumbrances securing the payment or performance of any of the Assumed
Liabilities;
(e) all applicable zoning ordinances and land use restrictions in effect as
of the date of this Agreement and all changes to or new adoptions of zoning
ordinances and land use restrictions prior to the Closing Date that do not and
are not reasonably likely to interfere materially with the operation of that
portion of the Business conducted on such Real Property or the Business as a
whole;
(f) with respect to any Asset which consists of a leasehold or other
possessory interests in real property, all Encumbrances, covenants, Easements,
restrictions and other title matters (whether or not recorded) to which the
underlying fee estate in such real property is subject that do not and are not
reasonably likely to interfere materially with the operation of that portion of
the Business currently conducted on such property or the Business as a whole;
and
(g) any other Encumbrances, obligations, defects or irregularities of any
kind whatsoever affecting title to the Assets that will be terminated, released
or waived on or before the Closing Date or that are not, individually or in the
aggregate, reasonably likely to interfere materially with the present use of the
Assets or to interfere materially with the operation of the Business as a whole.
"Permits" means any permits, licenses, registrations, certificates,
franchises and other authorizations, consents and approvals of Governmental
Authorities held by Seller with respect to the Assets or the Business.
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"Person" means any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization, or governmental
entity or any department or agency thereof.
"Post-Closing Adjustment" has the meaning set forth in Section 3.3(d).
"Post-Retirement Life Insurance Benefits" has the meaning set forth in
Section 6.12(d)(iii)(G).
"Proposed Post-Closing Adjustment" has the meaning set forth in Section
3.3(c).
"Proprietary Information" of a Party means all information about the Party
or its Affiliates, including their respective properties or operations,
furnished to the other Party or its Representatives by the Party or its
Representatives, before or after the date hereof, regardless of the manner or
medium in which it is furnished and all analyses, reports, tests or other
information created or prepared by, or on behalf of, a Party during the
performance of "Phase I" or "Phase II" environmental site assessments.
Proprietary Information does not include information that: (a) is or becomes
generally available to the public, other than as a result of a disclosure by the
other Party or its Representatives; (b) was available to the other Party on a
nonconfidential basis prior to its disclosure by the Party or its
Representatives; (c) becomes available to the other Party on a nonconfidential
basis from a person, other than the Party or its Representatives, who is not
otherwise bound by a confidentiality agreement with the Party or its
Representatives, or is not otherwise under any obligation to the Party or any of
its Representatives not to transmit the information to the other Party or its
Representatives; or (d) is independently developed by the other Party.
"PUHCA" has the meaning set forth in Section 4.25.
"PUHCA Staff Concurrence" has the meaning set forth in Section 6.8(f)(ii).
"Purchase Price" has the meaning set forth in Section 3.2.
"Qualifying Offer" means an offer to a Transferred Employee of the same or
similar job that is at least 100% of such employee's current total cash
compensation at the time the offer was made (consisting of base salary and
participation in 2003 incentive bonus as contemplated in Section 6.12(i)
hereof), and does not require, as a condition of acceptance, a relocation of
residence as described in Section 6.12(f).
"Real Property" has the meaning set forth in Section 2.1(a). Any reference
to the Real Property includes, by definition, Seller's right, title and interest
in and to the surface and subsurface elements, including the soils and
groundwater present at the Real Property, and any reference to items "at the
Real Property" includes all items "at, on, in, upon, over, across, under and
within" the Real Property.
"Real Property Leases" has the meaning set forth in Section 4.5.
"Recovery Costs" has the meaning set forth in Section 8.4(d).
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"Regulated Substances" means (a) any petrochemical or petroleum products,
oil or coal ash, radioactive materials, radon gas, asbestos in any form that is
or could become friable, urea formaldehyde foam insulation and dielectric fluid
containing polychlorinated biphenyls; (b) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory effect under any applicable Environmental Law; and (c) any other
chemical, material or substance, exposure to which or whose discharge, emission,
disposal or Release is prohibited, limited or regulated by any applicable
Environmental Law.
"Regulations" has the meaning set forth in Section 6.14(a)(iii).
"Regulatory Exceptions" means any of the following:
(a) an imposition by the HPUC of a reasonable rate moratorium for the
Business or a requirement by the HPUC of the filing of a rate case for the
Business;
(b) an imposition by the HPUC requiring Buyer to provide service, or to
improve service, to Persons located in any authorized service area of the
Business, provided such requirement has a corresponding rate recovery
opportunity; and
(c) terms and conditions imposed by any Governmental Authority that is
required to issue a Required Regulatory Approval that are either (i) usual and
customary; (ii) applicable to the Business as of the date of this Agreement,
including the terms and conditions of the tariffs applicable to the Business; or
(iii) contemplated by this Agreement, including the understandings of the
Parties referenced in Section 6.8(c)(i).
"Regulatory Material Adverse Effect" means, with respect to any Party, a
Material Adverse Effect resulting from the effect on such Party of the terms and
conditions of a Final Order with respect to any Required Regulatory Approval
other than Regulatory Exceptions, and additionally with respect to Buyer, a
Regulatory Material Adverse Effect also shall result from a denial by the HPUC
of the Parties' joint request for Buyer to republish and file, in Buyer's name,
Seller's existing rates and tariffs for the Business upon Closing except to the
extent any required changes would not have a material effect on Buyer after
taking into account all relevant considerations.
"Release" means release, emission, spill, leak, discharge, dispose of,
pump, pour, emit, empty, inject, leach, dump or allow to escape into or through
the environment.
"Remediation" means any action taken in the investigation, removal,
confinement, mitigation, cleanup, treatment, or monitoring of a Release or an
Environmental Condition on Real Property or Off-Site Location, including,
without limitation, (a) obtaining any Permits or Environmental Permits required
for such remedial activities, and (b) implementation of any engineering controls
and institutional controls. The term "Remediation" includes, without limitation,
any action which constitutes "removal action" or "remedial action" as defined by
Section 101 of CERCLA, Section 6901(23) and (24); or any action which
constitutes "remedial action" as defined by Hawaii Revised Statutes Sections
128D-1.
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"Representatives" of a Party means such Party's authorized representatives,
including without limitation, its professional and financial advisors.
"Required Regulatory Approvals" means with respect to a Party, any consent
or approval of, filing with, or notice to, any Governmental Authority that is
necessary for the execution and delivery of this Agreement and the Ancillary
Agreements by such Party or the consummation thereby of the transactions
contemplated hereby, other than such consents, approvals, filings or notices (i)
which are not required in the ordinary course to be obtained or made prior to
the Closing and the transfer of the Assets, (ii) which, if not obtained or made,
will not prevent such Party from performing its material obligations hereunder,
or (iii) that relate to a Permit or an Assigned Agreement that is not material
to the Business, taken as a whole.
"Required Shareholder Actions" has the meaning set forth in Section 5.3(c).
"Revenue Bonds" has the meaning set forth in Section 6.14(a)(i).
"Savings Plan" has the meaning set forth in Section 6.12(d)(iii)(H).
"SEC" means the Securities and Exchange Commission and any successor agency
thereto.
"Seller" has the meaning set forth in the Preamble.
"Seller Indemnifiable Loss" has the meaning set forth in Section 8.1.
"Seller Indemnitee" has the meaning set forth in Section 8.1.
"Seller Material Adverse Effect" means a Material Adverse Effect with
respect to Seller.
"Seller Required Regulatory Approvals" means the Required Regulatory
Approvals set forth in Schedule 4.3(b).
"Seller SEC Reports" has the meaning set forth in Section 4.21.
"Seller's Pension Plan" has the meaning set forth in Section
6.12(d)(iii)(E).
"Seller's 401(k) Plan" means the Citizens 401(k) Savings Plan.
"Special Warranty Deed" means a special warranty deed substantially in the
form of Exhibit C attached hereto.
"Subsidiary" when used in reference to any Person means any entity of which
outstanding securities having ordinary voting power to elect a majority of the
Board of Directors or other Persons performing similar functions of such entity
are owned directly or indirectly by such Person.
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"Sufficient Notice" has the meaning set forth in Section 6.14(c)(ii).
"Support Agreement" has the meaning set forth in clause (i) of the third
recital to this Agreement.
"Taking" has the meaning set forth in Section 6.13(b).
"Tangible Personal Property" has the meaning set forth in Section 2.1(c).
"Taxes" means all taxes, charges, fees, levies, penalties or other
assessments imposed by any federal, state, local or foreign taxing authority,
including, but not limited to, income, excise, property, sales, transfer,
franchise, payroll, withholding, social security, gross receipts, license,
stamp, occupation, employment or other taxes, including any interest, penalties
or additions attributable thereto.
"Tax Impact" has the meaning set forth in Section 6.14(a)(vi).
"Tax Return" means any return, report, information return, declaration,
claim for refund or other document (including any schedule or related or
supporting information) required to be supplied to any taxing authority with
respect to Taxes including amendments thereto.
"Termination Date" has the meaning set forth in Section 9.1(b).
"Third Party Claim" means any claim, action, or proceeding made or brought
by any Person who is not (a) a Party to this Agreement, or (b) an Affiliate of a
Party to this Agreement.
"Title Commitment" has the meaning set forth in Section 6.17.
"Title Company" has the meaning set forth in Section 6.17.
"Title Policies" has the meaning set forth in Section 6.17.
"Transfer Taxes" means any real property transfer or gains tax, sales tax,
conveyance fee, use tax, stamp tax, stock transfer tax or other similar tax,
including any related penalties, interest and additions to tax, but excluding
any Income Tax.
"Transferable Permits" means those Permits and Environmental Permits with
respect to the Assets or the Business which may be transferred to Buyer with or
without a filing with, notice to, consent of or approval of any Governmental
Authority, and excluding those Permits and Environmental Permits with respect to
the Assets or the Business which are non-transferable to Buyer and with respect
to which Buyer must apply for and obtain replacements.
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"Transferred Employees" means Transferred Non-Union Employees and
Transferred Union Employees.
"Transferred Employee Records" means records related to Seller's employees
who become employees of Buyer but only to the extent such records pertain to (A)
skill and development training and biographies, (B) seniority histories, (C)
salary and benefit information, (D) Occupational, Safety and Health
Administration reports, or (E) subject to the limitation of the Health Insurance
Portability and Accountability Act of 1996 and any applicable state privacy
legislation and regulations, active medical restriction forms.
"Transferred Non-Union Employees" has the meaning set forth in Section
6.12(b).
"Transferred Union Employees" has the meaning set forth in Section 6.12(a).
"Union Employees" has the meaning set forth in Section 6.12(a).
"WARN Act" means the Federal Worker Adjustment Retraining and Notification
Act of 1988, as amended.
1.2 Certain Interpretive Matters. In this Agreement, unless the context
otherwise requires, the singular shall include the plural, the masculine shall
include the feminine and neuter, and vice versa. The term "includes" or
"including" shall mean "including without limitation." 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. References to a Section, Article, Exhibit or Schedule shall mean a
Section, Article, Exhibit or Schedule of this Agreement, and reference to a
given agreement or instrument shall be a reference to that agreement or
instrument as modified, amended, supplemented or restated through the date as of
which such reference is made.
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Assets. Upon the terms and subject to the satisfaction of
the conditions contained in this Agreement, at the Closing, Seller will sell,
assign, convey, transfer and deliver to the k1 Designee, as Buyer, and the k1
Designee, as Buyer, will purchase, assume and acquire from Seller, free and
clear of all Encumbrances (except for Permitted Encumbrances), all of Seller's
right, title and interest in and to all the assets (except for Excluded Assets),
real, personal or mixed, tangible, or intangible, used or held for use by Seller
in or in connection with, or otherwise necessary for, the conduct of the
Business, each as in existence on the Closing Date (such assets, collectively,
the "Assets"), including, without limitation, those assets described below, each
as in existence on the Closing Date:
(a) those certain parcels of real property owned by Seller together with
all fixtures, buildings, facilities, storage tanks, and other improvements
thereon and all appurtenances thereto as described in Schedule 4.9 (the "Real
Property");
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(b) all accounts receivable and earned but unbilled revenues attributable
to the Business, and all Inventories;
(c) all machinery (mobile or otherwise), equipment (including
communications equipment and computers), vehicles, rolling stock, transport
vessels, barges, tools, furniture and furnishings and other personal property
related to the Business, owned by Seller and located on the Real Property on the
Closing Date, together with all the personal property of Seller used principally
in the operation of the Business that are in the possession of Seller and
whether or not located on the Real Property (collectively, the "Tangible
Personal Property"), and all transmission, distribution and other pipelines used
by Seller in the operation of the Business, and all fixtures, facilities,
storage tanks and other improvements related to the Business, owned by Seller
and located on any real property leased by Seller on the Closing Date;
(d) subject to the provisions of Section 6.7(c), all rights of Seller under
all Assigned Agreements;
(e) subject to the provisions of Section 6.7(c), all rights of Seller under
all Real Property Leases;
(f) all rights of Seller under all Transferable Permits and all rights of
Seller, and the franchise granted to Seller, under the Gas Franchise Act;
(g) all books, customer lists and customer information databases, meter
reading and service data, accounts payable and receivable data, operating and
maintenance records, warranty information, operating, safety and maintenance
manuals, engineering design plans, blueprints and as-built plans,
specifications, procedures and similar items of Seller relating specifically to
the Assets and necessary for the operation of the Assets and the Business
(subject to the right of Seller to retain copies of same for its use) other than
such items which are proprietary to third parties and accounting records, and
the books and records of Gasco, Inc. to the extent reasonably available;
(h) all unexpired, transferable warranties and guarantees from third
parties with respect to any Asset as of the Closing Date;
(i) Seller prepaid expenses;
(j) petty cash held locally for the benefit of the Business; and
(k) to the extent transferable, the insurance policies of Seller (or
designated rights of Seller thereunder, as the case may be) described in
Schedule 2.1(k).
2.2 Excluded Assets. Nothing in this Agreement will constitute a transfer
to Buyer of, or be construed as conferring on Buyer, and Buyer is not acquiring,
any right, title or interest in or to the following specific assets which are
associated with the Assets or the Business, but which are hereby specifically
excluded from the sale and the definition of Assets herein (the "Excluded
Assets"):
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(a) assets that Seller uses in both the Business and Seller's electric or
communications businesses, the material items of which are identified in
Schedule 2.2 hereto, and any contracts or agreements regarding the procurement
of goods or services by Seller other than primarily for use in the Business;
(b) cash and cash equivalents (including checks) in transit, in hand or in
bank accounts, other than petty cash held locally for the benefit of the
Business;
(c) the rights of Seller and its Affiliates to the names "Citizens
Communications Company", "Citizens Energy Services", "Citizens Utilities", "CZN"
or "Citizens" or any other trade names, trademarks, service marks, corporate
names, corporate symbols or logos or any part, derivative or combination thereof
(the "Citizens Marks");
(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
analyses relating to the Business and all original documents relating to the
Revenue Bonds (provided that copies of such documents relating to the Revenue
Bonds have been furnished to Buyer);
(e) assets disposed of by Seller after the date of this Agreement to the
extent such dispositions are not prohibited by this Agreement;
(f) the rights of Seller in and to any causes of action against third
parties (including indemnification and contribution) relating to any Real
Property or Tangible Personal Property, Permits, Environmental Permits, Taxes,
Real Property Leases or the Assigned Agreements, if any, and not relating to any
of the Assumed Liabilities (subject to the proviso in Section 2.3(f) and to the
provisions of Section 8.5, to the extent applicable), including any claims for
refunds, prepayments, offsets, recoupment, insurance proceeds (subject to
Section 6.13(c)), condemnation awards (subject to Section 6.13(b)), judgments
and the like, whether received as payment or credit against future liabilities,
relating specifically to the Real Property or any improvements thereon and
relating to any period prior to the Closing Date;
(g) all personnel records of Seller and its Affiliates relating to the
Transferred Employees other than Transferred Employee Records or other records,
the disclosure of which is required by law or legal or regulatory process or
subpoena;
(h) any and all of Seller's rights and interests in any contract that is
not an Assigned Agreement or that is an intercompany transaction between Seller
and an Affiliate of Seller and all accounts owing by and among Seller and any of
its Affiliates, whether or not any such intercompany transaction or account
relates to the provision of goods and services, payment arrangements,
intercompany charges or balances, or the like;
(i) except to the extent set forth in Section 3.4, rights to refunds of
Taxes payable with respect to the Business, the Assets, or any other assets,
properties or operations of Seller or any Affiliate thereof, including without
limitation all rights to refunds of the overpayment of public utility Taxes paid
prior to the Closing Date;
(j) all deferred tax assets or collectibles;
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(k) any insurance policy, bond, letter of credit or similar item, and any
cash surrender value in regard thereto, other than the insurance policies (or
the designated rights of Seller thereunder, as the case may be) described in
Section 2.1(k);
(l) except as otherwise set forth in Section 6.12 (including Section
6.12(d)(iii)(D) with respect to the Classified Plan), assets attributable to or
related to a Benefit Plan; and
(m) all other assets listed in Schedule 2.2 hereto.
2.3 Assumed Liabilities. On the Closing Date, the k1 Designee, as Buyer,
shall deliver to Seller the Assignment and Assumption Agreement pursuant to
which the k1 Designee, as Buyer, shall assume and agree to discharge when due,
without recourse by Buyer against Seller, in accordance with the respective
terms and subject to the respective conditions thereof, all of the Assumed
Liabilities. The following liabilities and obligations of Seller or Buyer which
relate to, or arise by virtue of Seller's or Buyer's ownership of the Assets or
operation of the Business (other than Excluded Liabilities as provided in
Section 2.4) are referred to collectively as the "Assumed Liabilities":
(a) except as otherwise provided in Section 6.7(c), all liabilities and
obligations of Seller or Buyer arising on or after the Closing Date under the
Assigned Agreements, the Real Property Leases, and the Transferable Permits in
accordance with the terms thereof, including, without limitation, the Assigned
Agreements entered into by Seller (i) prior to the date hereof and (ii) after
the date hereof consistent with the terms of this Agreement, except in each case
to the extent such liabilities and obligations, but for a breach or default by
Seller, would have been paid, performed or otherwise discharged on or prior to
the Closing Date and are not otherwise included among the items causing an
adjustment to the Base Purchase Price contemplated in Section 3.3 or to the
extent such liabilities or obligations arise out of any such breach or default
or out of any event which after the giving of notice or passage of time or both
would constitute a default by Seller;
(b) all liabilities and obligations of Seller for accounts payable, other
taxes accrued, and other current and accrued liabilities to the extent included
among the items included in the adjustment to the Base Purchase Price
contemplated in Section 3.3;
(c) all liabilities and obligations associated with the Assets or the
Business in respect of Taxes for which Buyer is liable pursuant to Section 3.4
or 6.10(a) hereof;
(d) all liabilities and obligations of Seller or Buyer with respect to the
Transferred Employees incurred prior to, on or after the Closing Date for which
Buyer is responsible pursuant to Section 6.12;
(e) all Environmental Liabilities, in each case, to the extent that such
liability, responsibility, obligation, Environmental Claim or Remediation is
attributable to or arises from an act, event, occurrence or Environmental
Condition transpiring, occurring or arising on or after the Closing Date. For
purposes of clarity and subject to Section 2.3(f), (i) a liability,
responsibility, obligation, Environmental Claim or Remediation attributable to
or arising from an Environmental Condition or an Environmental Claim arising or
asserted on or after the Closing Date, but relating to an act, event, Release or
occurrence that transpired or occurred prior to the Closing Date shall not be an
Assumed Liability under this Section 2.3(e), and (ii) a liability,
responsibility, obligation, Environmental Claim or Remediation attributable to
or arising from an Environmental Condition or Release that commenced or occurred
prior to the Closing Date and continued after the Closing Date shall be deemed
to be an Assumed Liability under this Section 2.3(e) in such proportion as is
reasonably allocable to the post-Closing period taking into account all the
relevant facts and circumstances relating thereto;
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(f) until Buyer has incurred at least but not more than $1,150,000 of
otherwise indemnifiable Losses (determined after giving effect to the provisions
of Section 8.3) and thereby has become entitled to indemnification by Seller
under Section 8.2 and in accordance with Section 8.3(c), all Environmental
Liabilities of Seller, in each case, to the extent that such liability,
responsibility, obligation, Environmental Claim or Remediation is attributable
to or arises from an act, event, occurrence or Environmental Condition
transpiring, occurring or arising prior to the Closing Date, it being understood
and agreed that a liability, responsibility, obligation, Environmental Claim or
Remediation attributable to or arising from an Environmental Condition or
Release that commenced or occurred prior to the Closing Date and continued after
the Closing Date shall be deemed to be an Assumed Liability under this Section
2.4(f) in such proportion as is reasonably allocable to the pre-Closing period
taking into account all the relevant facts and circumstances relating thereto;
provided, that nothing set forth in this Section 2.3(f) shall require Buyer to
assume any liabilities, responsibilities or obligations of Seller that are
expressly excluded in Section 2.4(h) (relating to the Iwilei Property) or,
subject to Section 8.5, for any Losses which either Party, as a "Buyer
Indemnified Party" under the BHP Stock Sale Agreement, is entitled to and
actually receives indemnification recovery from BHP as contemplated in Section
8.5;
(g) any Tax that may be imposed by any federal, state or local government
on the ownership, sale (except as otherwise provided in Section 3.4 or 6.10(a)),
operation of the Business or use of the Assets on or after the Closing Date,
except for any Income Taxes attributable to the income of Seller;
(h) all liabilities and obligations of Seller or Buyer arising on and after
the Closing Date pursuant to the tariff applicable to the Business or under
those Orders specifically relating to the Assets or the Business issued by or
entered into with any Governmental Authority and listed in Schedule 2.3(h) or
imposed on Buyer in any Required Regulatory Approval;
(i) customer advances, customer deposits, customer contributions in aid of
construction, 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 directly related to the Business and outstanding on or arising after the
Closing Date; and
(j) actions and proceedings based on conduct, actions, circumstances or
conditions arising or occurring on or after the Closing Date, actions and
proceedings described in Schedule 2.3(j), actions and proceedings arising from
or directly related to any other Assumed Liability, and generic or industry-wide
actions and proceedings outstanding on or arising on or after the Closing Date
that are applicable to the Business.
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2.4 Excluded Liabilities. Notwithstanding anything to the contrary in this
Agreement, Buyer shall not assume or be obligated to pay, perform or otherwise
discharge the following liabilities or obligations of Seller (collectively, the
"Excluded Liabilities"):
(a) any liabilities or obligations of Seller that are not Assumed
Liabilities, including in respect of any Excluded Assets or other assets of
Seller that are not Assets;
(b) any liabilities or obligations with respect to Taxes attributable to
Seller's ownership, or use of the Assets or operation of the Business for
taxable periods, or portions thereof, ending before the Closing Date, except for
Taxes for which Buyer is liable pursuant to Section 3.4 or 6.10(a) hereof;
(c) any liabilities or obligations of Seller accruing under any of the
Assigned Agreements prior to the Closing Date or any liability, other than an
Assumed Liability, underlying a Permitted Encumbrance, in each case to the
extent not included among the items causing an adjustment to the Base Purchase
Price contemplated in Section 3.3;
(d) without duplication of any of the liabilities and obligations relating
to environmental matters addressed in Section 2.4(g) or Section 2.4(h), which
shall be the exclusive expression of all Excluded Liabilities relating to
environmental matters, any and all asserted or unasserted liabilities or
obligations to third parties (including employees) for injuries or damages,
whether arising from tortious conduct or otherwise, or similar causes of action
relating to the Assets or the Business arising during or attributable to the
period prior to the Closing Date, other than such that relate to any of the
Assumed Liabilities;
(e) all obligations and liabilities of Seller relating to any accrual
included among the other current and accrued liabilities of Seller attributable
to the Business that Seller excludes, or that Buyer requires Seller to exclude,
from the adjustment to the Base Purchase Price contemplated in Section
3.3(a)(ii);
(f) any payment obligations of Seller pursuant to the Assigned Agreements
accruing prior to the Closing Date, including, but not limited to, rental
payments pursuant to the Real Property Leases, in each case to the extent not
included among the items included in the adjustment to the Base Purchase Price
contemplated in Section 3.3;
(g) subject to Section 2.3(f), all Environmental Liabilities of Seller, in
each case, to the extent that such liability, responsibility, obligation,
Environmental Claim or Remediation is attributable to or arises from an act,
event, occurrence or Environmental Condition transpiring, occurring or arising
prior to the Closing Date, it being understood and agreed that, subject to
Section 2.3(f), a liability, responsibility, obligation, Environmental Claim or
Remediation attributable to or arising from an Environmental Condition or
Release that commenced or occurred prior to the Closing Date and continued after
the Closing Date shall be deemed to be an Retained Liability under this Section
2.4(g) in such proportion as is reasonably allocable to the pre-Closing period
taking into account all the relevant facts and circumstances relating thereto;
(h) any and all asserted or unasserted liabilities or obligations of Seller
with respect to the Iwilei Property;
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(i) subject to Section 6.12, any liabilities or obligations of Seller, any
Seller Subsidiary or any ERISA Affiliate of Seller relating to any Benefit Plan
including but not limited to any such liability (i) relating to benefits payable
under any Benefit Plan; (ii) relating to the Pension Benefit Guaranty
Corporation under Title IV of ERISA; (iii) relating to a multi-employer plan;
(iv) with respect to non-compliance with the notice and benefit continuation
requirements of COBRA; (v) with respect to any noncompliance with ERISA, the
Code or any other applicable laws; or (vi) with respect to any suit, proceeding
or claim which is brought against Seller, Buyer, any Benefit Plan, or any
fiduciary or former fiduciary of any such Benefit Plan;
(j) subject to Section 6.12, any liabilities or obligations arising from
facts or circumstances prior to the Closing Date relating to the employment or
termination of employment, including discrimination, wrongful discharge, unfair
labor practices, or constructive termination by Seller of any individual,
attributable to any actions or inactions by Seller prior to the Closing Date
other than actions or inactions taken at the written direction of Buyer (it
being understood and agreed that Buyer shall have no liability for action taken
by Seller pursuant to Section 6.12 except as expressly provided therein);
(k) subject to Section 6.12, any obligations of Seller for wages, overtime,
employment taxes, severance pay, transition payments in respect of compensation
or similar benefits accruing or arising prior to the Closing under any term or
provision of any contract, plan, instrument or agreement relating to any of the
employees of Seller;
(l) all obligations of Seller with respect to the Revenue Bonds and any
other indebtedness for money borrowed by Seller (including items due to Seller's
Affiliates) other than payment obligations arising on or after the Closing Date
under any equipment lease of the kind listed in Schedule 4.11(a) 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; and
(m) any liability of Seller arising out of a breach by Seller of any of its
obligations under this Agreement or the Ancillary Agreements.
2.5 Control of Litigation.
(a) The Parties agree and acknowledge that, from and after the Closing
Date, Seller shall be entitled exclusively to control, defend and settle any
litigation, administrative or regulatory proceeding, and any investigation or
Remediation activity (including without limitation any environmental mitigation
or Remediation activities), arising out of or related to any Excluded
Liabilities, and Buyer agrees to cooperate reasonably in connection therewith
and in connection therewith, shall comply with the provisions of Section 6.2,
provided that, in no event shall Seller's exercise of its rights under this
Section 2.5(a) either (i) unreasonably interfere with Buyer's conduct or
operation of the Business, (ii) place any environmental liens or deed
restrictions on the Real Property, (iii) cause Buyer to be responsible for
maintaining any institutional or engineering controls that may be part of a
Remediation activity, or (iv) cause Buyer to expend any material amount of money
that is not subject to reimbursement by Seller.
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(b) The Parties agree and acknowledge that, from and after the Closing
Date, Buyer shall be entitled exclusively to control, defend and settle any
litigation, administrative or regulatory proceeding, and any investigation
or Remediation activity (including without limitation any environmental
mitigation or Remediation activities), arising out of or related to any
Assumed Liabilities, and Seller agrees to cooperate reasonably in
connection therewith and in connection therewith, shall comply with the
provisions of Section 6.2; provided that, in no event shall Buyer's
exercise of its rights under this Section 2.5(b) cause Seller to expend any
material amount of money that is not subject to reimbursement by Buyer.
ARTICLE III
THE CLOSING
3.1 Closing. Upon the terms and subject to the satisfaction of the
conditions in Article VII of this Agreement, each of (i) the sale, assignment,
conveyance, transfer and delivery of the Assets to Buyer by Seller, (ii) the
payment of the Purchase Price to Seller by Buyer, (iii) the assumption of the
Assumed Liabilities by Buyer, and (iv) the consummation of the other respective
obligations of the Parties contemplated by this Agreement to be consummated on
the Closing Date shall take place at a closing (the "Closing"), to be held at
the offices of Seller's Hawaii regulatory counsel in Honolulu, Hawaii, or
another mutually acceptable location, at 9:00 a.m. local time on the Closing
Date.
3.2 Closing Payment. Upon the terms and subject to the satisfaction of the
conditions contained in this Agreement, in consideration of the aforesaid sale,
assignment, assumption, conveyance, transfer and delivery of the Assets, Buyer
will pay or cause to be paid to Seller at the Closing an aggregate amount in
U.S. dollars of one hundred fifteen million dollars ($115,000,000) (the "Base
Purchase Price") plus or minus any adjustments pursuant to the provisions of
this Agreement (the "Purchase Price"), by wire transfer of immediately available
funds denominated in U.S. dollars or by such other means as are agreed upon by
Seller and Buyer.
3.3 Adjustment to Base Purchase Price.
(a) Subject to Section 3.3(b), at the Closing, the Base Purchase Price
shall be adjusted to account for the items set forth in this Section 3.3(a):
(i) the Base Purchase Price shall be increased by the aggregate amount of
all accounts receivable and earned but unbilled revenues (other than any amounts
that are due from any of Seller's Affiliates or that otherwise are Excluded
Assets) attributable to the Business as of day immediately preceding the Closing
Date net of Seller's reserve for allowance for bad debt (as reflected in
Seller's written policy for allowance for bad debt as of the date hereof);
(ii) the Base Purchase Price shall be decreased by all accounts payable,
other taxes accrued, other current and accrued liabilities, and the financial
cost of the accrued vacation time of the Transferred Employees, in each case of
Seller and attributable to the Business as of the day immediately preceding the
Closing Date (other than any liability that is an Excluded Liability);
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(iii) the Base Purchase price shall be decreased by the aggregate amount of
customer deposits (including interest accrued on customer deposits) relating to
the Business outstanding as of the day immediately preceding the Closing Date;
(iv) the Base Purchase Price shall be increased by the aggregate amount of
Inventories (exclusive of spare parts and net of (x) fifty (50) percent of the
aggregate amount of the consumable supplies included in Inventories other than
fuel supplies and (y) $22,000 for "line pack") recorded on Seller's books and
records in accordance with Seller's historic practice as it relates to the
Business as of day immediately preceding the Closing Date;
(v) the Base Purchase Price shall be adjusted to account for the net
balance payable to or by Seller, if any, for items prorated pursuant to Section
3.4, other than the items addressed in Section 3.4(a);
(vi) the Base Purchase Price shall be increased or decreased if and to the
extent required by Section 6.13; and
(vii) the Base Purchase Price will be increased or decreased, as
appropriate, to the extent (A) the aggregate amount of all (i) Capital
Expenditures that result from expenditures made by Seller between December 31,
2002 and the latest month-end arising prior to the Closing Date (including
expenditures made during such period and recorded in the Construction Work in
Progress account of the Business as of the day immediately preceding the Closing
Date and relating to such Capital Expenditures), (ii) without duplication,
expenditures made during such period 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 and relating
to such Capital Expenditures and (iii) without duplication, other expenditures
made during such period and recorded as an asset of the Business as of the day
immediately preceding the Closing Date and relating to such Capital
Expenditures, is greater than (resulting in an increase to the Base Purchase
Price) or is less than (resulting in a decrease to the Base Purchase Price) (B)
the amount of depreciation booked by Seller in accordance with prior practice
and GAAP with respect to the Assets during such period (pro-rated as
appropriate); provided, that for purposes of such adjustment, the following
Capital Expenditures and related expenditures and related depreciation shall be
disregarded: (x) expenditures in excess of $500,000 in the aggregate that are
not included in the Capital Expenditure Schedule and are not otherwise approved
in writing by Buyer; (y) expenditures incurred to repair or replace Assets that
are affected by any casualty loss or damage; and (z) the amount of depreciation
otherwise included in subclause (B) above that relates to any depreciable Assets
resulting from the expenditures described in subclause (x) above or, with
respect to the Assets described in clause (y) above, to the extent such
depreciation exceeds the amount of depreciation that otherwise would have been
incurred on the lost or damaged Assets described in subclause (y) above had they
not been lost or damaged.
(b) At least ten (10), but no more than thirty (30) days prior to the
Closing Date, Seller shall prepare in good faith and deliver to Buyer an
estimated closing statement (the "Estimated Closing Statement") that shall set
forth Seller's best estimate of the estimated adjustments to the Base Purchase
Price required by Section 3.3(a) (the "Estimated Adjustment"). Within five (5)
Business Days following the delivery of an Estimated Closing Statement to Buyer,
Buyer may object in good faith to such Estimated Closing Payment in writing. In
the event of any such objection, the Parties shall attempt to resolve their
differences by negotiation. If the Parties are unable to do so before three (3)
days prior to the Closing Date, then (i) the full amount of the Estimated
Adjustment shall be used to adjust the Base Purchase Price at the Closing if the
amount in dispute is less than $500,000, or (ii) the undisputed portion of the
Estimated Adjustment shall be used to adjust the Base Purchase Price at the
Closing if the amount in dispute is $500,000 or more. The disputed portions
shall be paid as a Post-Closing Adjustment if and to the extent required by
Section 3.3(d).
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(c) Within sixty (60) days following the Closing Date, Seller shall prepare
and deliver to Buyer a final closing statement setting forth the final
adjustments to the Base Purchase Price required by Section 3.3(a) (the "Proposed
Post-Closing Adjustment"). All calculations of the Proposed Post-Closing
Adjustments shall be prepared using the same accounting principles, policies and
methods as Seller has historically used in connection with the calculation of
the items reflected on such Proposed Post-Closing Adjustments.
(d) Within thirty (30) days following the delivery of a Proposed
Post-Closing Adjustment to Buyer, Buyer may object to such Proposed Post-Closing
Adjustment in writing. Seller agrees to cooperate with Buyer to provide Buyer
and Buyer's Representatives information used to prepare the Proposed
Post-Closing Adjustments and information relating thereto. If Buyer objects to a
Proposed Post-Closing Adjustment, the Parties shall attempt to resolve such
dispute by negotiation. If such Parties are unable to resolve such dispute
within thirty (30) days of any such objection by Buyer, the Parties shall
appoint an Independent Accounting Firm. The fees and expenses of such
Independent Accounting Firm 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 successfully disputed by Buyer (as finally determined by
such auditor) bears to the total amount of such remaining disputed amounts so
submitted by Buyer to such auditor. The Independent Accounting Firm shall review
such Proposed Post-Closing Adjustment and Buyer's written objection thereto and
determine the appropriate adjustment to the Base Purchase Price, if any, within
thirty (30) days of such appointment. The Parties agree to cooperate with the
Independent Accounting Firm and provide it with such information as it
reasonably requests to enable it to make such determination. The finding of such
Independent Accounting Firm shall be binding on the Parties hereto. Upon
determination by agreement of the Parties or by binding determination of the
Independent Accounting Firm of the appropriate adjustment to the Base Purchase
Price (in either case, the "Post-Closing Adjustment"), if such Post-Closing
Adjustment results in a change to the Base Purchase Price, as previously
adjusted pursuant to Section 3.3(b), the Party owing the difference shall
deliver such difference to the Party owed such amount no later than two (2)
Business Days after the determination of such Post Closing Adjustment, in
immediately available funds or in any other manner as reasonably requested by
the Party owed such amount, plus interest at 6.0% per annum on such determined
amount from the Closing Date to (but not including) the date of payment.
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3.4 Prorations. Buyer and Seller agree that all of the items normally
prorated, including those listed below (but not including Income Taxes),
relating to the Business and operation of the Assets shall be prorated as of the
Closing Date, with Seller liable for such items to the extent such items relate
to any time period prior to the Closing Date, and Buyer liable for such items to
the extent such items relate to periods commencing with the Closing Date
(measured in the same units used to compute the item in question, otherwise
measured by calendar days). The Base Purchase Price shall be increased to the
extent Buyer will benefit financially due to Seller's payment prior to the
Closing Date of the portion of any such item allocable to Buyer under this
Section , and (except with respect to the items addressed in clause (a) below)
shall be decreased to the extent Seller will benefit financially due to Buyer's
payment prior to the Closing Date of the portion of any such item allocable to
Seller under this Section. The items subject to proration include the following:
(a) Subject to Section 6.10(b), personal property, real estate and
occupancy Taxes, assessments and other charges, if any, on or with respect to
the Business and operation of the Assets;
(b) rent, Taxes (other than Income Taxes) and all other items (including
prepaid services or goods not included in Inventories) payable by or to Seller
under any of the Assigned Agreements to the extent not included in the account
payables and other taxed accrued of the Business outstanding as of the day
immediately preceding the Closing Date;
(c) any permit, license, registration, compliance assurance fees or other
fees with respect to any Transferable Permit or other Asset;
(d) sewer rents and charges for water, telephone, electricity and other
utilities with respect to the Assets;
(e) rent and Taxes payable by or to Seller under the Real Property Leases
assigned to Buyer to the extent not included in the account payables and other
taxes accrued of the Business outstanding as of the day immediately preceding
the Closing Date;
(f) deposits made by Seller to the extent transferred to Buyer;
(g) prepaid expenses paid by Seller to the extent transferred to Buyer and
prepaid employee benefits with respect to Transferred Employees; and
(h) petty cash held locally for the benefit of the Business to the extent
transferred to Buyer.
3.5 Deliveries by Seller. At the Closing, Seller will deliver, or cause to
be delivered, the following to Buyer:
(a) The Bill of Sale, duly executed by Seller;
(b) Copies (or originals if reasonably feasible) of any and all consents,
waivers or approvals obtained or required to be obtained by Seller from
Government Authorities or non-governmental Persons with respect to the transfer
of the Assets, or the consummation of the transactions contemplated by this
Agreement;
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(c) One or more Special Warranty Deeds conveying title to the Real Property
to Buyer, duly executed and acknowledged by Seller and in recordable form;
(d) An opinion from Seller's general counsel, dated the Closing Date,
substantially in the form of Exhibit D attached hereto, and an opinion from
Seller's Bond Counsel, dated the Closing Date, substantially in the form of
Exhibit E attached hereto;
(e) The Assignment and Assumption Agreement, duly executed by Seller;
(f) A FIRPTA Affidavit and a HARPTA Certificate (Form N-289 -- Certificate
for Exemption from the Withholding of Tax on Disposition of Hawaii Real
Property), each duly executed by Seller;
(g) Copies, certified by the Secretary or Assistant Secretary of Seller, of
corporate resolutions authorizing the execution and delivery of this Agreement
and all of the agreements and instruments to be executed and delivered by Seller
in connection herewith, and the consummation of the transactions contemplated
hereby;
(h) A certificate of the Secretary or Assistant Secretary of Seller
identifying the name and title and bearing the signatures of the officers of
Seller authorized to execute and deliver this Agreement and the other agreements
and instruments contemplated hereby;
(i) Certificate of Good Standing with respect to Seller, issued by the
Secretary of State of the State of Delaware;
(j) To the extent available, originals of all Assigned Agreements, Real
Property Leases and Transferable Permits and, if not available, true and correct
copies thereof (delivery of the foregoing documents will be deemed made in the
case of any such documents then located at any of the offices included in the
Assets, but only to the extent that Seller delivers to Buyer a schedule
generally identifying each such office and the general categories of documents
located in each such office);
(k) All such other instruments of assignment, transfer or conveyance and
certificates of title or vessel documentation as shall, in the reasonable
opinion of Buyer and its counsel, be necessary to transfer the Assets to Buyer
or to register Buyer as the owner of the Assets, in accordance with this
Agreement and where necessary or desirable in recordable form;
(l) Such other agreements, documents, instruments and writings as are
required to be delivered by Seller at or prior to the Closing Date pursuant to
this Agreement (including a Bulk Sales Tax Clearance Certificate and a Tax
Clearance Certificate from the Department of Taxation of the State of Hawaii, as
contemplated in Sections 6.8 and 10.12) or otherwise reasonably requested by
Buyer in connection herewith; and
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(m) A certificate dated the Closing Date executed by Seller's President,
Public Services Sector, to the effect that, to such officer's Knowledge, the
conditions set forth in Sections 7.1(e) and (f) have been satisfied by Seller.
3.6 Deliveries by Buyer. At the Closing, Buyer will deliver, or cause to be
delivered, the following:
(a) The Purchase Price, as adjusted pursuant to Section 3.3, by wire
transfer of immediately available funds denominated in U.S. dollars in
accordance with Seller's instructions or by such other means as are agreed upon
by Seller and Buyer;
(b) The Assignment and Assumption Agreement, duly executed by Buyer;
(c) All such other instruments of transfer or assumption as shall, in the
reasonable opinion of Seller and its counsel, be necessary for the sale,
conveyance, assignment and transfer of the Assets to, or the assumption of the
Assumed Liabilities by, Buyer in accordance with this Agreement;
(d) Copies, certified by the Secretary or Assistant Secretary of Buyer, of
resolutions authorizing the execution and delivery of this Agreement and all of
the agreements and instruments to be executed and delivered by the Buyer in
connection herewith, and the consummation of the transactions contemplated
hereby;
(e) A certificate of the Secretary or Assistant Secretary of Buyer,
identifying the name and title and bearing the signatures of the officers of
Buyer authorized to execute and deliver this Agreement and the other agreements
and instruments contemplated hereby;
(f) An opinion from Buyer's legal counsel reasonably acceptable to Seller,
dated the Closing Date, substantially in the form of Exhibit F attached hereto;
(g) Certified copies of any and all consents, waivers or approvals obtained
or required to be obtained by Buyer from Government Authorities or
non-governmental Persons with respect to the transfer of the Assets or the
consummation of the transactions contemplated by this Agreement;
(h) Such other agreements, documents, instruments and writings as are
required to be delivered by Buyer at or prior to the Closing Date pursuant to
this Agreement or otherwise reasonably requested by Seller in connection
herewith;
(i) Certificate of Good Standing with respect to Buyer, issued by the
Secretary of State of Hawaii; and
(j) A certificate dated the Closing Date executed by Buyer's Chief
Financial Officer to the effect that, to such officer's knowledge, the
conditions set forth in Sections 7.2(e), (f) and (g) have been satisfied by
Buyer.
3.7 Work in Progress. The Parties agree to work together before the Closing
Date to effect on the Closing Date an orderly transition with respect to work in
progress.
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Incorporation; Qualification. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own, lease,
and operate its material assets and properties and to carry on its business as
is now being conducted. Seller is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
its business, as now being conducted, shall require it to be so qualified,
except where the failure to be so qualified would not have a Seller Material
Adverse Effect.
4.2 Authority. Seller has full corporate power and authority to execute and
deliver this Agreement and each of the Ancillary Agreements to which Seller is a
signatory and to consummate the transactions contemplated hereby or thereby. The
execution and delivery by Seller of this Agreement and each of the Ancillary
Agreements to which Seller is a signatory and the consummation by Seller of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action required on the part of Seller and
this Agreement has been duly and validly executed and delivered by Seller. Each
of this Agreement and the Ancillary Agreements to which Seller is a signatory
constitutes the legal, valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).
4.3 Consents and Approvals; No Violation.
(a) Neither the execution, delivery and performance of this Agreement nor
the execution, delivery and performance of the Ancillary Agreements by Seller
will (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws of Seller, (ii) result in a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
material agreement or other instrument or obligation to which Seller is a party
or by which it, or any of the Assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained and for such rights of termination or
cancellation of Permits and Assigned Agreements that purport to be
non-transferable by their terms, in each case that would not, individually or in
the aggregate, result in a Seller Material Adverse Effect or an Asset Material
Adverse Effect or (iii) subject to obtaining the Seller Required Regulatory
Approvals, constitute violations of any law, regulation, order, judgment or
decree applicable to Seller, which violations, individually or in the aggregate,
would result in a Seller Material Adverse Effect or an Asset Material Adverse
Effect.
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(b) Except as set forth in Schedule 4.3(b) (the filings and approvals
referred to in Schedule 4.3(b) are collectively referred to as the "Seller
Required Regulatory Approvals"), no consent or approval of, filing with, or
notice to, any Governmental Authority is necessary for the execution and
delivery of this Agreement and the Ancillary Agreements by Seller or the
consummation by Seller of the transactions contemplated hereby and thereby,
other than those the failure to obtain which would not result in a Seller
Material Adverse Effect or an Asset Material Adverse Effect and would not
otherwise result in a material violation of law by Buyer.
4.4 Insurance. Schedule 4.4 lists, as of the date of this Agreement, all
material policies of fire, liability, workers' compensation and other forms of
insurance (if any) owned or held by, or on behalf of, Seller with respect to the
Assets and the Business. Except as set forth in such Schedule, all such policies
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the date hereof have been paid (other than
retroactive premiums which may be payable with respect to auto, general
liability and workers' compensation insurance policies), and no notice of
cancellation or termination has been received with respect to any such policy
which was not replaced on substantially similar terms prior to the date of such
cancellation. Except as described in Schedule 4.4, within the thirty-six (36)
months preceding the date of this Agreement, Seller has not been refused any
insurance with respect to the Assets or the Business nor has its coverage been
limited with respect to the Assets or the Business other than due to insurance
limitations generally applicable to property or businesses located in Hawaii by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance during the last twelve (12) months.
4.5 Real Property Leases. Schedule 4.5 lists, as of the date of this
Agreement, all material real property leases under which Seller is a lessee or
lessor and which relate to the Assets, including all leases of office space used
by Seller in the conduct of the Business (the "Real Property Leases"). Seller
has delivered to Buyer true, correct and complete copies of each of the Real
Property Leases.
4.6 Environmental Matters. Seller has heretofore delivered to Buyer all
environmental reports and all environmental site assessments relating to the
Assets that have been identified by Seller after diligent inquiry, which reports
are identified in a schedule delivered to Buyer on or prior to the date hereof
("Environmental Reports"). Notwithstanding the immediately preceding sentence,
Seller shall not be required to make available to Buyer any information
regarding the condition or remediation of the Iwilei Property. Except as
disclosed in Schedule 4.6 or in the Environmental Reports:
(a) Seller holds, and is in substantial compliance with, all Environmental
Permits that are required for Seller to conduct the Business and operate the
Assets, and Seller is otherwise in compliance with applicable Environmental Laws
with respect to the Business and operation of the Assets, except for such
failures to hold or comply with required Environmental Permits, or such failures
to be in compliance with applicable Environmental Laws, as would not,
individually or in the aggregate, result in an Asset Material Adverse Effect;
(b) Seller has not received (i) any written request for information, or
been notified that it is a potentially responsible party, under CERCLA or any
similar state law with respect to any of the Real Property, or (ii) any written
notification from a Governmental Authority with respect to pending or ongoing
investigations or enforcement actions related to alleged or potential violations
of any applicable Environmental Law with respect to any of the Real Property;
29
(c) Seller has not entered into or agreed to any consent decree or order
relating to the Assets, and is not subject to any outstanding judgment, decree,
or judicial order relating to compliance with any Environmental Law or to
Remediation of Regulated Substances under any Environmental Law relating to the
Assets; and
(d) To Seller's Knowledge, no Release of Regulated Substances has occurred
at, from, in, on, or under the Real Property, and, except as legally permitted,
no Regulated Substances are present in, on, about or migrating from the Real
Property, in each case that would give rise to an Environmental Claim related to
the Assets for which Remediation would reasonably be required, except in any
such case to the extent that any such Release or Environmental Claim would not,
individually or in the aggregate, result in an Environmental Claim in excess of
$50,000.
4.7 Labor Matters. Schedule 4.7 sets forth all collective bargaining
agreements, and amendments thereto, to which Seller is a party in connection
with the Business. Seller has previously delivered to Buyer true and correct
copies of all such collective bargaining agreements and amendments thereto. With
respect to the Assets and the Business, except to the extent set forth in
Schedule 4.7 and except for such matters as would not, individually or in the
aggregate, result in an Asset Material Adverse Effect, (a) Seller is in
compliance with all applicable laws respecting employment and employment
practices, occupational safety and health, plant closing, mass layoffs, terms
and conditions of employment and wages and hours; (b) Seller has not received
any written notice of any unfair labor practice complaint against Seller pending
before the National Labor Relations Board; (c) no arbitration proceeding arising
out of or under any collective bargaining agreement is pending against Seller;
and (d) Seller has not experienced any work stoppage within the three-year
period prior to the date hereof and to Seller's Knowledge none is currently
threatened.
4.8 Benefit Plans: ERISA.
(a) Schedule 4.8 lists all material Benefit Plans. True and complete copies
of all such Benefit Plan documents, amendments and summary plan descriptions
have been made available to Buyer. With respect to the Classified Plan, Seller
has provided to Buyer true and complete copies of the following documents: (i)
all documents embodying or governing the Classified Plan and any funding medium
for such plan (including, without limitation, trust agreements) as they may have
been amended to the date hereof; (ii) the most recent IRS determination letter;
(iii) the most recently filed Form 5500, with all applicable schedules and
accountants' opinions attached thereto; and (iv) the summary plan description
for such plan (or other descriptions of such plan provided to employees) and all
modifications thereto.
(b) No liability under Title IV or Section 302 of ERISA has been incurred
by Seller or any ERISA Affiliate of Seller that has not been satisfied in full,
no condition exists that presents a material risk to Seller or any ERISA
Affiliate of Seller of incurring any such liability, other than liability for
premiums due to the Pension Benefit Guaranty Corporation (which premiums have
been paid when due). Insofar as the representation made in this Section 4.8
applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made with
respect to any employee benefit plan, program, agreement or arrangement subject
to Title IV of ERISA to which Seller or any ERISA Affiliate of Seller made, or
was required to make, contributions during the five (5)-year period ending on
the last day of the most recent plan year ended prior to the Closing Date.
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(c) The Classified Plan is not a "multiemployer plan" as defined in Section
3(37) of ERISA. As of November 30, 2002, the market value of assets under the
Classified Plan exceeded the present value of liabilities thereunder (determined
under FAS 35 by Deloitte and Touche using the interest crediting rate for the
funding standard account as described in Section 412(b)(5)(A) of the Code).
Prior to the Closing Date all required contributions to the Classified Plan will
be made. The Classified Plan has not incurred an accumulated funding deficiency
(whether or not waived) within the meaning of Section 302 of ERISA or Section
412 of the Code. With respect to the Classified Plan there have been no
"reportable events," within the meaning of ERISA Section 4043, or the
regulations thereunder, for which the notice requirement is not waived under 29
C.F.R. Part 4043. The Classified Plan is not presently under audit or
examination (nor has notice been received of a potential audit or examination)
by the Internal Revenue Service, the Department of Labor, or any other
governmental agency or entity, and no matters are pending under the IRS Employee
Plans Compliance Resolution System, the IRS closing agreement program, or other
similar program.
(d) Except as expressly provided in this Agreement, the consummation of the
transactions contemplated by this Agreement will not, either alone or in
combination with another event, (i) entitle any current or former employee or
officer of Seller or any ERISA Affiliate of Seller to severance pay,
unemployment compensation or any other payment, or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such employee
or officer.
(e) There has been no material failure of any of the Benefit Plans that is
a group health plan (as defined in Section 5000(b)(1) of the Code) to meet the
requirements of Section 4980B(f) of the Code with respect to a qualified
beneficiary (as defined in Section 4980B(g) of the Code). Neither Seller nor any
ERISA Affiliate of Seller has contributed to a nonconforming group health plan
(as defined in Section 5000(c) of the Code) and no ERISA Affiliate of Seller has
incurred a tax under Section 5000(e) of the Code that is or could become a
liability of Buyer.
(f) To the Knowledge of Seller, the Classified Plan has been maintained,
funded and administered substantially in accordance with the terms of such plan
and substantially complies in form and in operation with the applicable
requirements of ERISA and the Code. To the Knowledge of Seller, the Classified
Plan is qualified under Section 401(a) of the Code.
(g) Prior to the Closing Date, full payment will be made of all amounts
that the Seller is required to have paid as premiums or contributions, for all
periods prior to Closing, to the Hawaii Teamsters Health and Welfare Trust.
(h) There are no pending, or to Seller's Knowledge, threatened claims by or
on behalf of any Benefit Plans, by any employee or beneficiary covered under any
such Benefit Plans, or otherwise involving any such Benefit Plans (other than
routine claims for benefits).
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(i) Seller's Pension Plan, the Classified Plan, and Seller's 401(k) Plan
(as such terms are defined in Section 6.12 hereof) are the only Employee Plans
which are intended to be qualified under Section 401(a) of the IRC.
4.9 Real Property. Schedule 4.9 contains a description of the Real Property
included in the Assets. True and correct copies of any current surveys,
abstracts, title commitments and title opinions identified by Seller after
diligent inquiry to be in Seller's possession and all policies of title
insurance currently in force and identified by Seller after diligent inquiry to
be in the possession of Seller with respect to the Real Property have heretofore
been made available to Buyer.
4.10 Condemnation. Except as set forth in Schedule 4.10, Seller has not
received any written notices of and otherwise has no Knowledge of any pending or
threatened proceedings or actions by any Governmental Authority to condemn or
take by power of eminent domain all or any part of the Assets.
4.11 Assigned Agreements.
(a) Schedule 4.11(a) lists each Assigned Agreement (other than Real
Property Leases, line extension agreements and similar construction
arrangements, propane and synthetic natural gas supply contracts with customers
of the Business, and Easements held by Seller) which is material to the
Business, other than those (i) that are listed or described on another Schedule,
(ii) that provide for annual payments by Seller after the date hereof of less
than $100,000 or (iii) that, when aggregated with all other Assigned Agreements
not listed on Schedule 4.5 or 4.11(a), provide for payments by Seller after the
date hereof of less than $500,000 in the aggregate. Schedule 4.11(a) also lists
each agreement that is material to the Assets or the Business that may expire or
that Seller expects to terminate prior to the Closing Date other than any
agreement that is an Excluded Asset.
(b) Except as disclosed in Schedule 4.11(b), (i) each Assigned Agreement
listed on Schedule 4.5 or 4.11(a) constitutes a legal, valid and binding
obligation of Seller and, to Seller's Knowledge, constitutes a valid and binding
obligation of the other parties thereto, and (ii) may be transferred to Buyer as
contemplated by this Agreement without the consent of the other parties thereto
and will continue in full force and effect thereafter, unless in any such case
the impact of such lack of legality, validity or binding nature, or inability to
transfer, would not, individually or in the aggregate, result in an Asset
Material Adverse Effect.
(c) Except as set forth in Schedule 4.11(c), there is not, under the
Assigned Agreements listed on Schedule 4.5 or 4.11(a), any default or event
which, with notice or lapse of time or both, would constitute a default on the
part of the Seller or to Seller's Knowledge, any of the other parties thereto,
except such events of default and other events which would not, individually or
in the aggregate, result in an Asset Material Adverse Effect.
4.12 Legal Proceedings. Except as set forth in Schedule 4.12, there is no
action or proceeding pending or, to Seller's Knowledge, threatened against
Seller before any court, arbitrator or Governmental Authority, which would,
individually or in the aggregate, reasonably be expected to result in a Seller
Material Adverse Effect or an Asset Material Adverse Effect. Except as set forth
in Schedule 4.12 Seller is not subject to any outstanding Order that would,
individually or in the aggregate, result in a Seller Material Adverse Effect or
an Asset Material Adverse Effect.
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4.13 Permits. Seller has all Permits (other than Environmental Permits,
which are addressed in Section 4.6 hereof) necessary to own and operate the
Assets except where the failure to have such Permits would not, individually or
in the aggregate, create a Seller Material Adverse Effect or an Asset Material
Adverse Effect. Except as disclosed on Schedule 4.13, Seller has not received
any written notification that it is in violation of any such Permits, except
notifications of violations which would not, individually or in the aggregate,
result in a Seller Material Adverse Effect or an Asset Material Adverse Effect.
Seller is in compliance with all Permits except where such non-compliance would
not, individually or in the aggregate, result in a Seller Material Adverse
Effect or an Asset Material Adverse Effect.
4.14 Taxes.
(a) Seller has filed or caused to be filed all Tax Returns that are
required to be filed by it with respect to any Tax relating to the Assets or the
Business, and has paid or caused to be paid all Taxes that have become due as
indicated thereon, except where such Tax is being contested in good faith by
appropriate proceedings, or where the failure to so file or pay would not result
in a Seller Material Adverse Effect or an Asset Material Adverse Effect. Seller
has complied in all material respects with all applicable laws, rules and
regulations relating to withholding Taxes relating to Transferred Employees. All
Tax Returns relating to the Assets or the Business are true, correct and
complete in all material respects. There are no liens for Taxes upon the Assets
except for liens for Taxes not yet due and Permitted Encumbrances.
(b) Except as set forth in Schedule 4.14, no notice of deficiency or
assessment has been received from any taxing authority with respect to
liabilities for Taxes of Seller in respect of the Assets or the Business, which
have not been fully paid or finally settled, and any such deficiency shown in
Schedule 4.14 is being contested in good faith through appropriate proceedings.
(c) Except as set forth in Schedule 4.14, there are no outstanding
agreements or waivers extending the applicable statutory periods of limitation
for Taxes associated with the Assets or the Business that will be binding upon
Buyer after the Closing.
(d) Except as set forth on Schedule 4.14, none of the Assets is property
that is required to be treated as being owned by any other person pursuant to
the so-called safe harbor lease provisions of former Section 168(f) of the Code,
and none of the Assets is "tax-exempt use" property within the meaning of
Section 168(h) of the Code.
(e) Schedule 4.14 sets forth the taxing jurisdictions in which Seller owns
assets or conducts business that require a notification to a taxing authority of
the transactions contemplated by this Agreement, if the failure to make such
notification, or obtain Tax clearance certificates in connection therewith,
would either require Buyer to withhold any portion of the consideration or
subject Buyer to any liability for any Taxes of Seller.
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4.15 Intellectual Property. The Citizens Marks, the Gasco Marks and the
software licenses and related contracts described in Schedules 2.2 and 4.11(a)
constitute all of the material Intellectual Property necessary for the operation
and maintenance of the Assets or the conduct of the Business, each of which
Seller either has all right, title and interest in or valid and binding rights
under contract to use in connection with the operation of the Assets and the
Business. Except as disclosed in Schedule 4.15, (a) Seller is not, nor has it
received any notice that it is, in default (or with the giving of notice or
lapse of time or both, would be in default), under any contract to use such
Intellectual Property, and (b) to Seller's Knowledge, such Intellectual Property
is not being infringed by any other Person. Except as disclosed in Schedule
4.15, Seller has not received notice that it is infringing any Intellectual
Property of any other Person in connection with the Assets or the Business, and
Seller, to its Knowledge, is not infringing any Intellectual Property of any
other Person which, individually or in the aggregate, would have an Asset
Material Adverse Effect.
4.16 Capital Expenditures. Seller has heretofore delivered to Buyer a
schedule of all Capital Expenditures that, as of the date of this Agreement, are
planned by Seller from the date hereof through December 31, 2003 (the "Capital
Expenditures Schedule").
4.17 Compliance With Laws. Seller is in compliance with all applicable
laws, rules and regulations with respect to its ownership of the Assets and
operation of the Business except where the failure to be in compliance would
not, individually or in the aggregate, result in a Seller Material Adverse
Effect or an Asset Material Adverse Effect.
4.18 Title. Seller has, and will have as of the Closing Date, good, valid
and indefeasible title to the Real Property and the other Assets owned or
purported to be owned by Seller, free and clear of all Encumbrances except
Permitted Encumbrances.
4.19 DISCLAIMERS. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH
IN THIS ARTICLE IV, THE ASSETS ARE TRANSFERRED "AS IS, WHERE IS", AND SELLER
EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE,
EXPRESS OR IMPLIED, AS TO LIABILITIES, OPERATIONS OF THE ASSETS, CONDITION,
VALUE OR QUALITY OF THE ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS
AND OTHER INCIDENTS OF THE ASSETS AND SELLER SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS, OR ANY PART THEREOF, OR AS TO
THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT
OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR THE APPLICABILITY
OF ANY GOVERNMENTAL REQUIREMENTS, INCLUDING BUT NOT LIMITED TO ANY ENVIRONMENTAL
LAWS, OR WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY OR PERSONAL PROPERTY
TO OPERATE THE ASSETS. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER
FURTHER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING THE
ABSENCE OF HAZARDOUS SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY ARISING
UNDER ENVIRONMENTAL LAWS WITH RESPECT TO THE ASSETS.
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4.20 Financial Statements.
(a) Schedule 4.20 sets forth the unaudited balance sheet for the Business
as of December 31, 2001 (the "Balance Sheet") and the unaudited statement of
income of the Business for the twelve-month period ended December 31, 2001
(collectively, the "Financial Statements"). Except as set forth in Schedule
4.20, 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 for the omission of full footnotes to such Financial
Statements. Except as set forth in Schedule 4.20, 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 derived were complete and accurate in all material
respects at the time of such preparation.
(b) Schedule 4.20 also sets forth property level financial statements for
the Business as of and for the period ending September 30, 2002, as extracted
from Seller's SAP financial statement software. Such property level reports have
been prepared on a basis consistent with prior periods, were derived from the
books and records of Seller, and present fairly in all material respects the
financial information of the Business presented therein as of the dates and for
the periods covered thereby, subject to normal course adjustments and corporate
adjustments and consolidations consistent with the corporate adjustments and
consolidations made in the Financial Statements.
4.21 SEC Filings; Financial Statements.
(a) Seller has filed, or caused to be filed, all forms, reports and
documents required to be filed by Seller with the SEC since January 1, 2001, and
has heretofore delivered or made available to Buyer in the form filed with the
SEC, together with any amendments thereto, its (i) Annual Reports on Form 10-K
for the fiscal year ended December 31, 2000 and 2001, (ii) Quarterly Reports on
Form 10-Q for the fiscal quarter ended March 31 and June 30, 2002, and (iii) all
other reports or registration statements filed by Seller with the SEC since
January 1, 2001 (collectively, the "Seller SEC Reports"). The Seller SEC Reports
were prepared substantially in accordance with the requirements of the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, as the case may be, and the rules and regulations promulgated under
each of such respective acts, and did not at the time they were filed contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements, including all related notes and schedules,
contained in the Seller SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of Seller as at the
respective dates thereof and the consolidated results of operations and cash
flows of Seller for the periods indicated in accordance with GAAP applied on a
consistent basis throughout the periods involved (except for changes in
accounting principles disclosed in the notes thereto) and subject in the case of
interim financial statements to normal year-end adjustments.
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4.22 Sufficiency of Assets. The Assets and the Excluded Assets are the only
assets owned, used, or held for use by Seller in, or in connection with, or
otherwise necessary for, the conduct of the Business as presently conducted,
except for such assets the failure to own, use, or hold for use, as would not
have an Asset Material Adverse Effect or a Material Adverse Effect for Buyer.
4.23 Easements. To Seller's Knowledge, except as set forth in Schedule 4.13
(Seller Permit Violations), Seller owns or possesses all Easements necessary to
conduct the Business as now being conducted without any known conflict with the
right of others, in each case except to the extent that the failure to own or
possess such Easements would not have an Asset Material Adverse Effect.
4.24 Tangible Personal Property. Except for normal wear and tear, and with
such exceptions as are not, individually or in the aggregate, reasonably likely
to have an Asset Material Adverse Effect, the Tangible Personal Property is in
normal operating condition and in a state of reasonable maintenance and repair.
4.25 Regulatory Matters. The Gas Franchise Act serves as the operating
authority for Seller rather than a Certificate of Public Convenience and
Necessity otherwise required of public utilities pursuant to Chapter 269, Hawaii
Revised Statutes. The Gas Franchise Act does not obligate Seller to serve the
entire area of the State of Hawaii. Seller operates the Business, and the
Business is regulated as a public utility, only in the State of Hawaii. As of
the date of this Agreement, Seller has no present intention to make any rate
filing or take any other action seeking to change the rates, charges, standards
of service or accounting of Seller with respect to the regulated portion of the
Business from those in effect on the date of this Agreement, or seeking to
effect with the HPUC any agreement, commitment, arrangement or consent with
respect thereto. Seller is not a "Holding Company," a "Subsidiary Company" or an
"Affiliate" of a "Holding Company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended ("PUHCA").
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 Organization. K-1 USA is a Delaware corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
the Assets and to carry on the Business as is now being conducted.
5.2 Authority. Buyer has full corporate power and authority to execute and
deliver this Agreement and each of the Ancillary Agreements to which Buyer is a
signatory and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by Buyer of this Agreement and the Ancillary
Agreements to which Buyer is a signatory and the consummation by Buyer of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate and, except as set forth in Schedule
5.3(a), shareholder action required on the part of Buyer and this Agreement and
the Ancillary Agreements have been duly and validly executed and delivered by
Buyer. Each of this Agreement and the Ancillary Agreements to which Buyer is a
signatory, constitute the legal, valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).
36
5.3 Consents and Approvals; No Violation.
(a) Except as set forth in Schedule 5.3(a), neither the execution, delivery
and performance of this Agreement by Buyer nor the execution, delivery and
performance of the Ancillary Agreements by Buyer or any of its Affiliates nor
the consummation by Buyer of the transactions contemplated hereby and thereby
will (i) conflict with or result in any breach of any provision of the
organizational and governing documents of Buyer, or any of its Affiliates, or
(ii) result in a default (or give rise to any right of termination, cancellation
or acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, material agreement or other instrument or obligation
to which Buyer or any of its Affiliates is a party or by which any of their
respective assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained or which would not, individually or in the
aggregate, have a Buyer Material Adverse Effect or (iii) subject to obtaining
the Buyer Required Regulatory Approvals and the assignment of this Agreement to
the k1 Designee in accordance with Section 6.8(f), constitute violations of any
law, regulation, order, judgment or decree applicable to Buyer, which
violations, individually or in the aggregate, would result in a Buyer Material
Adverse Effect.
(b) Except as set forth in Schedule 5.3(b) (the filings and approvals
referred to in such Schedule are collectively referred to as the "Buyer Required
Regulatory Approvals"), no consent or approval of, filing with, or notice to,
any Governmental Authority is necessary for Buyer's execution and delivery of
this Agreement and the Ancillary Agreements or the consummation by the k1
Designee, as the Buyer, of the transactions contemplated hereby and thereby,
other than such consents, approvals, filings or notices, which, if not obtained
or made, will not (i) prevent Buyer from performing its obligations under this
Agreement and the Ancillary Agreements or (ii) result in a Buyer Material
Adverse Effect.
(c) The affirmative votes of a simple majority of the votes entitled to be
cast by holders of outstanding ordinary shares of S$0.10 each of k1 Ventures
Limited that are present in person or by proxy and voting at a duly convened
meeting of shareholders of k1 Ventures Limited at which a quorum is present are
the only votes of the holders of any class or series of capital stock of k1
Ventures Limited necessary to approve k1 Ventures Limited's provision of funding
to Buyer in connection with this Agreement, participation (directly or
indirectly) in the transactions contemplated in this Agreement (including
pursuant to the Support Agreement) or taking any other corporate action by any
direct or indirect subsidiary of k1 Ventures Limited in connection with such
transactions (the "Required Shareholder Actions"). To Buyer's knowledge, the
shareholders of k1 Ventures Limited that have executed the Voting Agreements
described in clause (ii) of the third recital to this Agreement own or are able
to direct the voting of the shares of voting securities of k1 Ventures Limited
described in such Voting Agreements and such shares, when voted in favor of the
Required Shareholder Actions, will be sufficient to approve the Required
Shareholder Actions. The execution and delivery of, and the performance by k1
Ventures Limited of its obligations under the Support Agreement have been duly
authorized by all Board action of k1 Ventures Limited, and the Support Agreement
constitutes the legal, valid and binding obligation of k1 Ventures Limited,
enforceable against k1 Ventures Limited in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
37
5.4 Availability of Funds. Buyer acknowledges and agrees that on the
Closing Date, it will have sufficient funds to pay the Purchase Price under this
Agreement 5.5
5.5 Public Company Filings; Financial Statements.
(a) Buyer heretofore delivered or made available to Seller the Annual
Report of k1 Ventures Limited for the fiscal year ended June 30, 2002 (the "k1
Ventures Annual Report"). The k1 Ventures Annual Report did not as of the date
of such report contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) The financial statements, including all related notes and schedules,
contained in the k1 Ventures Annual Report fairly present the consolidated
financial position of k1 Ventures Limited as at the date thereof and the
consolidated results of operations and cash flows of k1 Ventures Limited for the
periods indicated in accordance with the Singapore Companies Act and Singapore
Statements of Accounting Standard applied on a consistent basis throughout the
periods involved (except for changes in accounting principles disclosed in the
notes thereto).
5.6 Legal Proceedings. There are no actions or proceedings pending or, to
Buyer's knowledge threatened against Buyer or any of its Affiliates before any
court or arbitrator or Governmental Authority, which, individually or in the
aggregate, would result in a Buyer Material Adverse Effect. Neither Buyer nor
any of its Affiliates is subject to any outstanding Orders, which would,
individually or in the aggregate, result in a Buyer Material Adverse Effect.
5.7 No Knowledge of Seller's Breach. Buyer has no knowledge of any breach
by Seller of any representation or warranty of Seller or of any other condition
or circumstance that would excuse Buyer from its timely performance of its
obligations hereunder. Buyer shall notify promptly Seller if any such
information comes to Buyer's attention prior to the Closing.
5.8 Qualified Buyer. Buyer will be qualified to obtain any Permits and
Environmental Permits necessary for Buyer to own and operate the Assets as of
the Closing.
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5.9 Inspections. Buyer is knowledgeable about the Business as engaged in by
Seller and of the usual and customary practices of companies engaged in
businesses similar to the Business 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 its decision to execute this
Agreement, and to purchase the Assets, and without derogation to any of Buyer's
rights to indemnification under Section 8.2, Buyer has relied on and will
continue to rely upon the results of its Inspections, the Environmental Reports
and Seller's representations and warranties in Section 4.6. Buyer acknowledges
and agrees that the representations and warranties set forth in Article IV of
this Agreement constitute the sole and exclusive representations and warranties
of Seller to Buyer in connection with the transactions contemplated hereby and
by the Ancillary Agreements, and there are no representations, warranties,
covenants, understandings or agreements, oral or written, in relation thereto
between the Parties other than those incorporated herein, including Section 6.3,
and therein. Except for the representations and warranties expressly set forth
in Article IV of this Agreement, Buyer disclaims reliance on any representations
or warranties, either express or implied, by or on behalf of Seller or its
Affiliates or Representatives. Without limiting the generality of the foregoing,
Buyer acknowledges and agrees that, except as provided in Section 4.6, there are
no representations or warranties of Seller with respect to the Environmental
Condition of the Assets, compliance with Environmental Laws and Environmental
Permits of 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 Assets.
5.10 WARN Act. Buyer does not intend to engage in a "Plant Closing" or
"Mass Layoff" as such terms are defined in the WARN Act, or to take any action
that would require the giving of any notice under Chapter 394B, Hawaii Revised
Statutes, as amended, within sixty days after the Closing Date.
5.11 Public Utility Holding Company Status; Regulation as a Public Utility.
Following the assignment of this Agreement to the k1 Designee and on the Closing
Date, neither Buyer nor any of its "affiliates" (within the meaning of such term
in PUHCA) will be a "holding company," a "subsidiary company," or an "affiliate"
of a "public utility company" or of a "holding company," within the meaning of
such terms in PUHCA and regulations and rules issued by the SEC pursuant to
PUHCA. No approval or other action by the SEC will be required under PUHCA for
the k1 Designee or any of its "affiliates" (within the meaning of such term in
PUCHA) to consummate the transactions contemplated in this Agreement.
5.12 Ownership and Control of Buyer.
(a) K-1 USA is a wholly-owned indirect subsidiary of k1 Ventures Limited, a
Singapore corporation. The ownership and control of k1 Ventures is as set forth
in the k1 Ventures Annual Report.
(b) The k1 Designee will be organized, owned and controlled in accordance
with the provisions of the Section 6.8(f).
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Conduct of Business and Operation of Assets.
(a) Except as described in Schedule 6.1(a), as required by an applicable
law or by any Governmental Authority, as expressly contemplated by this
Agreement or to the extent Buyer otherwise consents in writing (such consent not
to be unreasonably withheld), during the period from the date of this Agreement
to the Closing Date, Seller shall (i) operate the Assets in the ordinary course
of business consistent with its past practices and Good Utility Practices, (ii)
use all Commercially Reasonable Efforts to preserve intact the Assets in all
material respects, and endeavor to preserve the goodwill and relationships with
customers, suppliers and others having business dealings with it, (iii) maintain
insurance described in Section 4.4 (or replacements thereto providing for
substantially the same coverage), and (iv) comply with all applicable laws
relating to the Assets, including without limitation, all Environmental Laws,
except where the failure to so comply would not result in an Asset Material
Adverse Effect.
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(b) Without limiting the generality of Section 6.1(a) and, except as
contemplated in this Agreement or as described in Schedule 6.1(a), or as
required under applicable law or by any Governmental Authority, prior to the
Closing Date, without the prior written consent of Buyer (such consent not to be
unreasonably withheld), Seller shall not:
(i) Make any material change in the levels of Inventories customarily
maintained by Seller with respect to the Business, other than changes which are
consistent with Good Utility Practices;
(ii) Sell, lease (as lessor), encumber, pledge, transfer or otherwise
dispose of, any Asset (except for Inventories used, consumed or replaced in the
ordinary course of business consistent with past practices of Seller or with
Good Utility Practices) other than to encumber any such Asset with Permitted
Encumbrances;
(iii) Modify, amend or voluntarily terminate, prior to the respective
expiration date of any of the Assigned Agreements or Real Property Leases or any
of the Permits or Environmental Permits with respect to such Assets in any
material respect, other than (A) in the ordinary course of business, to the
extent consistent with the past practices of Seller or Good Utility Practices,
(B) with cause, to the extent consistent with past practices of Seller or Good
Utility Practices, or (C) as may be required in connection with transferring
Seller's rights or obligations thereunder to Buyer pursuant to this Agreement;
(iv) Except as otherwise provided herein and except for propane sale
agreements entered into in the ordinary course of business and containing market
terms, enter into any commitment for the purchase, sale, or transportation of
fuel for the Business having a term greater than six months and not terminable
on or before the Closing Date either (A) automatically, or (B) by option of
Seller (or, after the Closing, by Buyer) in its sole discretion, if the
aggregate payment under such commitment for fuel and all other outstanding
commitments for fuel for the Business not previously approved by Buyer would
exceed $1,000,000;
(v) Except as otherwise provided herein, enter into any contract,
agreement, commitment or arrangement for the Business that individually exceeds
$250,000 or in the aggregate exceeds $1,000,000 unless it is terminable by
Seller (or, after the Closing Date, by Buyer) without penalty or premium upon no
more than sixty (60) days notice;
40
(vi) Except as otherwise required by the terms of the CBA or as otherwise
provided in Section 6.12, (A) hire, or transfer any employees of or for the
Business prior to the Closing, other than to fill vacancies in existing
positions in the reasonable discretion of Seller, (B) materially increase
salaries or wages of employees employed in connection with such Asset prior to
the Closing, (C) take any action prior to the Closing to affect a material
change in the CBA or (D) take any action prior to the Closing to enhance the
aggregate benefits payable to the employees (considered as a group), or
materially to enhance the aggregate benefits payable to any individual employee,
employed in connection with the Business;
(vii) Not terminate the employment of any member of the senior management
of the Business except for cause; and
(viii) Except as otherwise provided herein, enter into any written or oral
contract, agreement, commitment or arrangement with respect to any of the
proscribed transactions set forth in the foregoing paragraphs (i) through (vii).
6.2 Access to Information.
(a) Between the date of this Agreement and the Closing Date, Seller will,
at reasonable times and upon reasonable notice, provide Buyer and its
Representatives:
(i) reasonable access to their respective managerial personnel, to all
books, records, plans, equipment, offices and other facilities and properties
constituting part of the Assets;
(ii) such historical financial and operating data and other information
with respect to the Assets or the Business as Buyer may from time to time
reasonably request, to the extent reasonably available;
(iii) upon request, a copy of each material report, schedule or other
document, if any, filed by Seller with respect to the Assets or the Business
with the SEC, HPUC or any other Governmental Authority;
(iv) access to all Assets for Inspection by Buyer and its Representatives
at reasonable times during regular business hours scheduled for such
Inspections, and shall provide qualified management, engineering, operations and
maintenance and other personnel to make presentations as required, to escort
such Persons and to assist in all aspects of conducting the Inspections,
provided that each of Buyer and Seller shall bear their own costs of
participating in the Inspections; and
(v) access to all such other information in the possession or control of
Seller as shall be reasonably necessary to enable Buyer or its Representatives
to verify the accuracy of the representations and warranties of Seller contained
in this Agreement; provided, however, that any such Inspections shall be
conducted in such a manner as not to interfere unreasonably with the operation
of the Assets. In the event that Seller's provision of information under this
Section 6.2 would (A) constitute a waiver of any legal privilege, including the
attorney-client privilege or work product privilege, or (B) violate any legal or
contractual obligation of Seller to a third party, then Seller shall first
notify Buyer with respect to the existence and general nature of the restricted
information. If the restricted information relates to the Assets, the Parties
shall thereupon mutually agree upon a reasonable procedure in order to provide
Buyer with access to the information while protecting the legitimate interests
of Seller thereto. The mutually agreed procedure may include, without
limitation, a limited waiver by Seller of the relevant privilege, Buyer's
agreement to maintain the information in strict confidence, limited review or
inspection of the information by specified individuals, or any combination of
the foregoing.
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Notwithstanding anything in this Section 6.2(a) to the contrary, with respect to
employee records Seller will only furnish or provide such access to Transferred
Employee Records and will not furnish or provide access to other employee
personnel records or medical information unless required by law or specifically
authorized by the affected employee.
(b) The Parties shall cooperate to schedule Buyer's Inspections of the
Assets so that, to the extent reasonably feasible, any interference with the
operation of the Business is minimized, and Buyer may complete its Inspections
of the Assets within ninety (90) working days of commencement of Inspections and
within six (6) months after the execution of this Agreement.
(c) Until the conclusion of Buyer's next rate case for the Business (or
such longer period as may be required by applicable law), each Party and its
Representatives shall have reasonable access to all of the books and records
relating to the Assets and the Business (for the Seller, only to the extent
relating to periods prior to the Closing Date), including all Transferred
Employee Records in the possession of Buyer or Seller to the extent that such
access may reasonably be required in connection with the Assumed Liabilities or
the Excluded Liabilities, or other matters relating to or affected by the
operation of the Business or the Assets. Such access shall be afforded by the
Party in possession of any such books and records upon receipt of reasonable
advance notice and during normal business hours. The Party exercising this right
of access shall be solely responsible for any costs or expenses incurred by it
or the holder of the information with respect to such access pursuant to this
Section 6.2(c). If the Party in possession of such books and records shall
desire to dispose of any books and records upon or prior to the expiration of
such above-stated period (or any such longer period), such Party shall, prior to
such disposition, give the other Party a reasonable opportunity, at the latter's
expense, to segregate and remove such books and records as it may select.
(d) Buyer agrees that, prior to the Closing Date, neither it nor its
Representatives will contact any vendors, suppliers, employees, or other
contracting parties of Seller or its Affiliates with respect to any aspect of
the Assets or the transactions contemplated hereby, without the prior written
consent of Seller, which consent shall not be unreasonably withheld.
6.3 Additional Inspections and Information.
(a) Seller will deliver to Buyer by June 30, 2003, a balance sheet for the
Business as of December 31, 2002, and a statement of income for the Business for
the twelve-month period ending December 31, 2002, together with an auditor's
report thereon by KPMG LLP, Seller's independent accounting firm. Seller will
bear the cost of such audit. If Buyer requires any additional financial
statement(s) of the Business to be prepared and audited, then Seller will
deliver to Buyer such additional audited financial statement(s) within a
reasonable period of time following Buyer's request therefore, provided that
Buyer will reimburse Seller for the costs and expenses incurred by Seller in
connection therewith, including reasonable overhead costs of Seller's employees
relating to the preparation and audit of such additional financial statement(s).
Nothing in this Section 6.3(a) shall obligate Seller to execute or deliver any
document that affects, in a manner adverse to Seller, Seller's liability to
Buyer as expressed herein.
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(b) 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. Seller
acknowledges that, between the date of this Agreement and the Closing Date,
Buyer will continue to conduct Inspections with respect to environmental
matters, including "Phase I" environmental assessments to the extent Buyer
reasonably concludes that such assessments are warranted by the Environmental
Reports or the findings of Buyer's assessments prior to the date of this
Agreement. Any such Inspections shall be conducted as provided in Section 6.2.
Buyer may not conduct any "Phase II" environmental assessment activities with
respect to the Assets other than the taking and analysis of hand auger soil
samples from locations on Real Property that are identified by Buyer's
environmental consultant as areas with recognized Environmental Conditions in
accordance with the ASTM protocol for Phase I environmental assessments. If, as
a result of Buyer's environmental assessment activities, Buyer reasonably
concludes that additional "Phase II" environmental assessment activities are
required to determine the extent of a recognized Environmental Condition on Real
Property, then Seller and Buyer shall design a mutually acceptable Phase II
environmental assessment plan and Seller shall engage an environmental
consulting firm reasonably acceptable to Buyer to conduct such assessment. Buyer
shall reimburse Seller for the fees and expenses of such consultant, and of any
laboratory used by such consultant, incurred by Seller in connection with such
assessment. Seller will provide to Buyer, promptly following Seller's receipt
thereof, copies of all reports, laboratory results and other information
composed or compiled by such consultant in connection with any such assessment.
(c) Buyer shall provide to Seller, promptly following Buyer's receipt
thereof, copies of all audits, reports, studies, assessments and other
information composed or compiled, or to be composed or compiled, by Buyer or
Buyer's Representatives in connection with environmental assessment activities.
Buyer shall treat all such information delivered to, or composed or compiled by,
Buyer or Buyer's Representative as Environmental Data in accordance with the
procedures of Section 6.3(d).
(d) All audits, reports, studies, assessments and other information
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, dated October 14, 2002, between Seller and Buyer (the
"Confidentiality Agreement"), except as otherwise expressly provided in this
Section 6.3(d). Except to the extent necessary to fulfill any reporting
obligation under any Environmental Law, neither Buyer nor its Representatives
shall disclose or release any Environmental Data without the prior written
consent of Seller and all such information shall be kept strictly confidential.
To the extent reasonably practicable, the Environmental Data shall be prepared
at the request of counsel to Buyer or Seller, as appropriate, 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 Representatives in a manner that will
preserve, to the extent reasonably practicable, 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 (such consent not to be
unreasonably withheld). After the Closing, Buyer agrees that it will not
distribute the Environmental Data to any third party without Seller's prior
written consent, except as required by law or by express provisions of Buyer's
corporate compliance program if Seller is provided written notice at least ten
(10) days prior to such distribution; provided, however, that Buyer may
distribute the Environmental Data to any potential purchaser of any of the
Assets or an ownership interest therein (either directly or through the purchase
of an ownership interest in an entity holding any of the Assets) only after
first notifying the Seller.
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6.4 Confidentiality.
(a) Each Party shall, and shall use its reasonable best efforts to cause
its Representatives to, (i) keep all Proprietary Information of any other Party
confidential and not to disclose or reveal any such Proprietary Information to
any person other than such Party's Representatives and (ii) not use such
Proprietary Information other than in connection with the consummation of the
transactions contemplated hereby. After the Closing Date and except as provided
in Section 6.3(d), any Proprietary Information, to the extent related to the
Assets acquired by Buyer, shall no longer be subject to the restrictions set
forth herein. The obligations of the Parties under this Section 6.4(a) shall be
in full force and effect for three (3) years from the date hereof and will
survive the termination of this Agreement, the discharge of all other
obligations owed by the Parties to each other and the Closing Date.
(b) Notwithstanding the terms of Section 6.4(a) above, the Parties agree
that prior to the Closing, Buyer may reveal or disclose Proprietary Information
to any other Persons in connection with (i) the financing of Buyer's purchase of
the Assets or any equity participation in Buyer's purchase of the Assets, (ii)
obtaining insurance for the Assets and (iii) performing Inspections; provided
that such Persons agree in writing to maintain the confidentiality of the
Proprietary Information in accordance with this Agreement and the
Confidentiality Agreement.
(c) Upon the other Party's prior written approval (which shall not be
unreasonably withheld), any of the Parties may provide Proprietary Information
of the other Parties to the SEC, HPUC or any other Governmental Authority with
jurisdiction or any securities exchange, as may be necessary to obtain Required
Regulatory Approvals or to comply generally with any relevant law or regulation.
The disclosing Party will seek confidential treatment for the Proprietary
Information provided to any Governmental Authority and the disclosing Party will
notify the other Party as far in advance as is practicable of its intention to
release to any Governmental Authority any Proprietary Information.
6.5 Public Statements. Subject to the requirements imposed by law, any
Governmental Authority or securities exchange, prior to the Closing Date, no
press release or other public announcement or public statement or comment in
response to any inquiry relating to the transactions contemplated by this
Agreement shall be issued or made by any Party without the prior approval of the
other Party (which approval shall not be unreasonably withheld). The Parties
agree to cooperate in preparing any such announcements.
44
6.6 Expenses. Except to the extent specifically provided herein, whether or
not the transactions contemplated hereby are consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be borne by the Party incurring such costs and expenses.
Notwithstanding anything to the contrary herein, Buyer will be responsible for
all filing fees under the HSR Act relating to the Assets it would acquire
hereunder.
6.7 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each Party shall
use its Commercially Reasonable Efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the purchase, sale, transfer and delivery of the Assets and the assumption of
the Assumed Liabilities pursuant to this Agreement. Such actions shall include,
without limitation, each Party using its Commercially Reasonable Efforts to
ensure satisfaction of the conditions precedent to its obligations hereunder,
including obtaining all necessary consents, approvals, and authorizations of
third parties and Governmental Authorities required to be obtained in order to
consummate the transactions hereunder, and to effectuate a transfer of the
Transferable Permits to Buyer. Seller shall cooperate with Buyer in its efforts
to obtain all other Permits and Environmental Permits necessary for Buyer to
operate the Assets. None of the Parties hereto shall, without prior written
consent of the other Party, take or fail to take any action, which might
reasonably be expected to prevent or materially impede, interfere with or delay
the transactions contemplated by this Agreement.
(b) In the event that any Asset shall not have been assigned, conveyed,
transferred and delivered hereunder to Buyer at the Closing, Seller shall,
subject to Section 6.7(c), use Commercially Reasonable Efforts to assign,
convey, transfer and deliver such Assets to Buyer as promptly as is practicable
after the Closing.
(c) (i) To the extent that Seller's rights under any Assigned Agreement or
Real Property Lease may not be assigned without the consent of another Person
which consent has not been obtained by the Closing Date, this Agreement shall
not constitute an agreement to assign the same, if an attempted assignment would
constitute a breach thereof or be unlawful.
(ii) Seller agrees that if any consent to an assignment of any Assigned
Agreement or Real Property Lease shall not be obtained or if any attempted
assignment would be ineffective or would impair the Buyer's rights and
obligations under the Assigned Agreement or Real Property Lease in question, so
that Buyer would not in effect acquire the benefit of all such rights and
obligations, Seller, at the Buyer's option and to the maximum extent permitted
by law and such Assigned Agreement or Real Property Lease, shall, after the
Closing Date, appoint Buyer to be Seller's agent with respect to such Assigned
Agreement or Real Property Lease, or, to the maximum extent permitted by law and
such Assigned Agreement or Real Property Lease, enter into such reasonable
arrangements with Buyer or take such other actions as are necessary to provide
Buyer with the same or substantially similar rights and obligations of such
Assigned Agreement or Real Property Lease as Buyer may reasonably request.
Seller shall cooperate and shall use Commercially Reasonable Efforts prior to
and after the Closing Date to obtain an assignment to Buyer of each Assigned
Agreement or Real Property Lease.
45
(d) To the extent that Seller's rights under any warranty or guaranty
described in Section 2.1(h) may not be assigned without the consent of another
Person, which consent has not been obtained by the Closing Date, this Agreement
shall not constitute an agreement to assign the same, if an attempted assignment
would constitute a breach thereof, or be unlawful. Seller agrees that if any
consent to an assignment of any such warranty or guaranty shall not be obtained,
or if any attempted assignment would be ineffective or would impair Buyer's
rights and obligations under the warranty or guaranty in question, so that Buyer
would not in effect acquire the benefit of all such rights and obligations,
Seller, at Buyer's option and expense, shall use Commercially Reasonable
Efforts, to the extent permitted by law and by such warranty or guaranty, to
enforce such warranty or guaranty for the benefit of Buyer so as to provide
Buyer to the maximum extent possible with the benefits and obligations of such
warranty or guaranty.
6.8 Consents and Approvals.
(a) As promptly as advisable after the execution of this Agreement, Buyer
and Seller shall each file or cause to be filed with the appropriate
Governmental Authority any notifications required to be filed under the HSR Act
and the rules and regulations promulgated thereunder with respect to the
transactions contemplated hereby. Buyer and Seller shall use their respective
reasonable best efforts to respond promptly to any requests for additional
information made with respect to such HSR Act filings, and to cause the waiting
periods under the HSR Act to terminate or expire at the earliest possible date
after the date of filing of such notification. Buyer will pay all filing fees
under the HSR Act relating to the Assets, but each of Seller and Buyer will bear
its own costs of the preparation of any such filing.
(b) The Parties shall cooperate and use all Commercially Reasonable Efforts
to promptly prepare and file all necessary documentation, to effect all
necessary applications, notices, petitions, filings and other documents, and to
obtain all necessary permits, consents, approvals and authorizations of all
Governmental Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement, including, without limitation, the Required
Regulatory Approvals and the PUHCA Staff Concurrence. Buyer shall have the right
to review and approve in advance all the information relating to Buyer, on the
one hand, and Seller shall have the right to review and approve in advance all
the information relating to Seller, on the other hand, in either case, which
appear in any filing made in connection with the transactions contemplated by
this Agreement. Buyer and Seller agree that they will consult and cooperate with
each other with respect to the obtaining of all such necessary permits,
consents, approvals and authorizations of Governmental Authorities and the PUHCA
Staff Concurrence.
(c) In connection with applications and other filings for the Required
Regulatory Approvals, and the prosecution of any pending regulatory proceedings
material to the Business Buyer and Seller shall jointly, and on an equal basis,
coordinate the overall development of the positions to be taken and the
regulatory actions to be requested in such applications and filings for approval
of the sale by the Seller and the purchase by the Buyer of the Assets and the
Business, of all other matters contemplated by this Agreement which require
regulatory approval and of all other regulatory matters incidental thereto which
are to be addressed in such applications and filings. Efforts to obtain any
necessary approvals (including from the HPUC) shall be prosecuted by counsel
mutually agreed upon by the Parties, and acting as joint counsel to the Parties,
it being understood, however, that (i) all positions taken in the filings with
such Governmental Authorities shall be consistent with the mutual understandings
of the Parties, including the Parties' agreement that their joint application
filed with the HPUC shall seek, among other things, permission for Buyer to
republish and file, in Buyer's name, Seller's existing rates and tariffs for the
Business to be effective upon Closing, and (ii) Buyer's efforts to obtain the
PUHCA Staff Concurrence shall be the responsibility of Buyer's counsel, with
Seller's special PUHCA counsel providing such support and assistance as may be
appropriate taking into account all relevant facts and circumstances.
46
(d) Seller and Buyer shall cooperate with each other and promptly prepare
and file notifications with, and request Tax clearances from, state and local
taxing authorities in any jurisdictions in which a portion of the Purchase Price
may be required to be withheld or in which Buyer would otherwise be liable for
any Tax liabilities of Seller pursuant to such state and local Tax law.
(e) Seller shall have the primary responsibility for securing the transfer
and assignment of the Transferable Permits, effective as of the Closing Date.
Buyer shall have the primary responsibility for securing the transfer,
reissuance or procurement of the Permits and Environmental Permits (other than
Transferable Permits) effective as of the Closing Date. Seller shall cooperate
with Buyer's efforts in this regard and assist in any transfer or reissuance of
a Permit or Environmental Permit held by Seller, or the procurement of any other
Permit or Environmental Permit when so requested by Buyer.
(f) (i) As soon as reasonably practicable, but in any event by the date the
Parties' joint application is filed with the HPUC, K-1 USA will assign this
Agreement to a newly formed limited liability company organized under the Hawaii
limited liability company statute and owned, controlled and governed in a manner
consistent with this Section 6.8 (the "k1 Designee"), pursuant to assignment and
assumption documentation reasonably acceptable to Seller and its counsel. Upon
the effective time of such assignment, (x) the kl Designee will be deemed to
have assumed, ratified and agreed to be bound by and to perform all obligations
of Buyer in this Agreement, (y) all references in this Agreement and in any
Ancillary Agreement to "Buyer" shall thereafter be deemed to be references to
the k1 Designee, in each case without the necessity for further act or evidence
by the Parties hereto or the k1 Designee and (z) K-1 USA shall be released from
Buyer's obligation to pay the Purchase Price at Closing; provided, however, that
except as provided in the foregoing clause (z), no such assignment shall relieve
or discharge K-1 USA from any of its obligations under this Agreement arising on
or before the Closing Date or k1 Ventures Limited from its obligations under
that certain letter agreement with Seller dated as of the date of this Agreement
wherein k1 Ventures Limited agrees to provide such financial support to Buyer as
may be required to enable Buyer to pay the Purchase Price at Closing or the
liquidated damages payment if required by Section 9.3(b).
(ii) As soon as reasonably practicable, but not later than January 17,
2003, K-1 USA shall review with the staff of the SEC which administers PUHCA the
proposed ownership, control and governance of the k1 Designee and any other
facts relevant to PUHCA compliance by the k1 Designee and its "affiliates"
(within the meaning of such term in PUHCA) and seek the verbal concurrence or
non-objection of such SEC staff that, based on the information presented to such
SEC staff, (x) no approval from the SEC is required for Buyer and its
"affiliates" (within the meaning of such term under PUHCA) to consummate the
transactions contemplated in this Agreement and (y) that either the PUHCA
"holding company" provisions are inapplicable, or one or more exemptions under
PUHCA are available, to the k1 Designee and such "affiliates" of the k1 Designee
(the "PUHCA Staff Concurrence"). If the PUHCA Staff Concurrence is not obtained
at the time of such SEC review, then K-1 USA promptly (and in event within ten
(10) Business Days after the date of such SEC review) will reformulate the
proposed arrangements regarding the k1 Designee to satisfy the concerns
expressed by such SEC staff (and taking into account any guidance provided by
such SEC staff or by Seller's special PUHCA counsel) and review with such SEC
staff such reformulation in another attempt to receive the PUHCA Staff
Concurrence. K-1 USA agrees not to participate , or to permit its Affiliates or
representatives to participate, in any substantive meeting or discussion, either
in person or by telephone, with such SEC staff in connection with the PUHCA
Staff Concurrence unless it consults with Seller in advance and, to the extent
not prohibited by such SEC staff, gives Seller the opportunity to attend and
participate with counsel. The k1 Designee shall be owned, controlled and
governed in a manner consistent with the information presented to such SEC staff
on which the PUHCA Staff Concurrence was based.
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(iii) As soon as reasonably practicable after the date on which the PUHCA
Staff Concurrence is obtained, the organizational documents of the k1 Designee,
including its operating agreement, will be amended to the extent necessary or
desirable to be consistent with the information forming the basis for obtaining
the PUHCA Staff Concurrence and pursuant to documentation reasonably acceptable
to Seller and its counsel.
(iv) Buyer agrees that the k1 Designee shall be owned, controlled and
governed such that the k1 Designee and its "affiliates" (within the meaning of
such term under PUHCA), either singly or collectively, either will not be deemed
a "holding company" under PUHCA or will be entitled to one or more exemptions
from the registration requirements of PUHCA. Accordingly, none of such
"affiliates" of the k1 Designee shall own five percent (5%) or more, directly or
indirectly, of the outstanding voting securities of any other "public utility
company" (within the meaning of such term under PUHCA).
(v) K-1 USA presently intends that the Persons identified in the letter
from Buyer's counsel to Mr. Jim R. Yates dated October 25, 2002, will own and/or
hold the voting interests, beneficial ownership interests and governing
interests or other positive or negative control rights described in such letter.
K-1 USA may make such changes to such proposed k1 Designee structure as may be
necessary or desirable to obtain or to facilitate the obtaining of the PUHCA
Staff Concurrence and the approval of the HPUC and such other changes as are not
prohibited by the next succeeding sentence. K-1 USA may not change such proposed
k1 Designee structure in any way that Seller reasonably concludes is reasonably
likely either (w) to affect adversely the legal validity, enforceability or
binding nature of the Support Agreement or to result in any breach of the
representations and warranties made by k1 Ventures Limited in the Support
Agreement, (x) to cause a delay in obtaining the PUHCA Staff Concurrence or the
HPUC approval, (y) to require any approval by the SEC under PUHCA or (z) to
result in the k1 Designee or any of its "affiliates" either singly or
collectively being deemed a "holding company" (within the meaning of such terms
under PUHCA), and not entitled to an exemption from the registration
requirements of PUHCA.
48
6.9 Fees and Commissions. Each of Seller and Buyer represent and warrant to
the other that, except for Morgan Stanley & Co. Incorporated, which is acting
for and at the expense of Seller, and Credit Suisse First Boston Corporation,
which is acting for and at the expense of Buyer, no broker, finder or other
Person is entitled to any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated hereby by reason of any action
taken by the Party making such representation. Each of Seller and Buyer will pay
to the others or otherwise discharge, and will indemnify and hold the others
harmless from and against, any and all claims or liabilities for all brokerage
fees, commissions and finder's fees (other than the fees, commissions and
finder's fees payable to the party listed above) incurred by reason of any
action taken by the indemnifying party.
6.10 Tax Matters.
(a) All Transfer Taxes incurred in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, (A) Hawaii
sales tax; (B) the Hawaii transfer tax, conveyance fees or conveyances of
interests in real and/or personal property; and (C) Hawaii sales tax and
transfer tax on deeds shall be borne as follows: fifty percent (50%) by the
Buyer and fifty percent (50%) by the Seller. Seller shall file, to the extent
required by, or permissible under, applicable law, all necessary Tax Returns and
other documentation with respect to all such Transfer Taxes, and, if required by
applicable law, Buyer shall join in the execution of any such Tax Returns and
other documentation. Prior to the Closing Date, to the extent applicable, Buyer
shall provide to Seller appropriate certificates of Tax exemption from each
applicable taxing authority.
(b) With respect to Taxes to be prorated in accordance with Section 3.4 of
this Agreement and except as provided in Section 6.10(c), Buyer shall prepare
and timely file all Tax Returns required to be filed after the Closing Date with
respect to the Assets and the Business, and shall duly and timely pay all such
Taxes shown to be due on such Tax Returns. Buyer's preparation of any such Tax
Returns shall be subject to Seller's approval, which approval shall not be
unreasonably withheld. Buyer shall make such Tax Returns available for Seller's
review and approval no later than fifteen (15) Business Days prior to the due
date for filing each such Tax Return. Upon receipt by Buyer of the tax bill,
invoice or other statement regarding such real and personal property Taxes,
Buyer shall calculate the pro rata share of such tax bill, invoice or other
statement attributable to Buyer and Seller. Buyer shall then forward, as soon as
possible, to Seller a copy of such tax bill, invoice or statement along with the
supporting documentation relating to the calculation of the pro rata share to
Seller and Seller will promptly pay to Buyer Seller's pro rata share of such tax
bill, invoice or statement. In the event Seller first receives a tax bill,
invoice or statement relating to the Assets from a taxing authority, Seller
shall promptly forward such tax bill, invoice or statement to Buyer.
(c) All Taxes arising with respect to the Assets and the Business that as
of the day immediately preceding the Closing Date are accrued for by Seller in
its SAP financial reporting system account styled "Other Taxes Accrued" shall be
included in the calculation of Adjusted Working Capital and shall be Assumed
Liabilities. Upon receipt by Buyer of the tax bill, invoice or other statement
regarding such Taxes, Buyer promptly shall forward to Seller a copy of such tax
bill, invoice or statement. In the event Seller first receives a tax bill,
invoice or statement relating to such Taxes, Seller shall immediately forward
such tax bill, invoice or statement to Buyer. Buyer will pay the full amount of
the tax bill, invoice or statement to the applicable taxing authority no later
than the due date of the tax bill, invoice or statement and in time to avoid the
incurrence of penalties or interest.\
49
(d) Buyer and Seller shall provide the other with such assistance as may
reasonably be requested by the other Party in connection with the preparation of
any Tax Return, any audit or other examination by any taxing authority, or any
judicial or administrative proceedings relating to liability for Taxes, and each
shall retain and provide the requesting Party with any records or information
which may be relevant to such return, audit, examination or proceedings. Any
information obtained pursuant to this Section 6.10(d) or pursuant to any other
Section hereof providing for the sharing of information or review of any Tax
Return or other instrument relating to Taxes shall be kept confidential by the
Parties hereto.
(e) In the event that a dispute arises between Buyer and Seller, with
respect to Taxes in Sections 6.10(a) and 6.10(b), or concerning any amount due
under this Section 6.10, the Parties shall attempt in good faith to resolve such
dispute and any agreed upon amount shall be paid to the appropriate Party. If
such dispute is not resolved within thirty (30) days, the Parties to such
dispute shall submit the dispute to the Independent Accounting Firm for
resolution, which resolution shall be final, conclusive and binding on such
Parties. Notwithstanding anything in this Agreement to the contrary, the fees
and expenses of such Independent Accounting Firm shall be allocated between the
Parties so that the non-disputing Party'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 the disputing Party to such auditor that is successfully
disputed by the disputing Party (as finally determined by such auditor) bears to
the total amount of such remaining disputed amount so submitted by the disputing
Party to such auditor. Any payment required to be made as a result of the
resolution of the dispute by the Independent Accounting Firm shall be made
within ten days after such resolution, together with any interest determined by
the Independent Accounting Firm to be appropriate.
(f) Buyer agrees that Seller may, at Seller's election prior to the Closing
Date, direct that all or a portion of the Purchase Price be delivered to a
"qualified intermediary" (as defined in Treasury Regulation Section 1.1031(k) -
(g)(4)) as to enable Seller's relinquishment of the Assets to qualify as part of
a like-kind exchange of property covered by Section 1031 of the Code. If Seller
so elects, Buyer shall cooperate with Seller (but without being required to
incur any out-of-pocket costs in the course thereof) in connection with Seller's
efforts to effect such like-kind exchange, which cooperation shall include,
without limitation, taking such actions as Seller requests in order to enable
Seller to qualify such transfer as part of a like-kind exchange of property
covered by Section 1031 of the Code (including any actions required to
facilitate the use of a "qualified intermediary"), and Buyer agrees that Seller
may assign all or part of its rights and delegate all or part of its obligations
under this Agreement to a person or entity acting as a qualified intermediary to
qualify the transfer of the Assets as part of like-kind exchange of property
covered by Section 1031 of the Code. Any such assignment shall not reduce
Seller's 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 that such efforts are not required to include an unreasonable delay in
the consummation of the transactions contemplated by this Agreement.
50
(g) Prior to the Closing Date, Buyer and Seller shall use their good faith
efforts to agree upon the allocation (the "Allocation") of the Purchase Price,
the Assumed Liabilities and other relevant items (including, for example,
adjustments to the Base Purchase Price) to the individual assets or classes of
assets within the meaning of Section 1060 of the Code. If Buyer and Seller agree
to such Allocation prior to Closing, Buyer and Seller covenant and agree that
(i) the values assigned to the assets by the Parties' mutual agreement shall be
conclusive and final for all purposes, and (ii) neither Buyer nor Seller will
take any position before any Governmental Authority or in any Proceeding that is
in any way inconsistent with such Allocation. Notwithstanding the foregoing, if
Buyer and Seller cannot agree to an Allocation, Buyer and Seller covenant and
agree to file, and to cause their respective Affiliates to file, all Tax Returns
and schedules thereto (including, for example, amended returns, claims for
refund, and those returns and forms required under Section 1060 of the Code and
any Treasury regulations promulgated thereunder) consistent with each of such
Party's good faith Allocations, unless otherwise required because of a change in
any applicable law.
6.11 Advice of Changes. Prior to the Closing, each Party will timely advise
the other in writing with respect to any matter arising after execution of this
Agreement which becomes known to that Party and which either constitutes a
breach of such Party's covenants in this Agreement or, if existing or occurring
at the date of this Agreement, would have been required to be set forth in this
Agreement, including any of the Schedules or Exhibits hereto. Any such written
notice will not be deemed to have amended this Agreement, including the
appropriate Schedule or Exhibit, or to have qualified any representation or
warranty contained in this Agreement, or to have cured any misrepresentation or
breach of warranty that otherwise might have existed hereunder by reason of the
development.
6.12 Seller Employees.
(a) On a date reasonably prior to the Closing Date, Buyer shall give
Qualifying Offers of employment to all employees of Seller who are covered by
the Hawaii Teamsters and Allied Workers Union Local 996 collective bargaining
agreement with Seller (the "CBA") and are employed in positions relating to the
Business (collectively, "Union Employees"). Each such person who becomes
employed by Buyer pursuant to this section shall be referred to herein as a
"Transferred Union Employee".
(b) On a date reasonably prior to the Closing Date, Buyer shall give
Qualifying Offers of employment to all salaried employees of Seller who are
employed in positions relating to the Business (collectively, "Non-Union
Employees"). Each such person who becomes employed by Buyer pursuant to this
section shall be referred to herein as a "Transferred Non-Union Employee."
(c) All offers of employment made by Buyer pursuant to Sections 6.12(a) and
(b) shall be made in accordance with all applicable laws and regulations, and
for Union Employees, in accordance with the CBA, shall remain open for a period
of ten (10) working days, and shall specify that employment by Buyer shall
commence on the Closing Date. Any such offer which is accepted within such ten
(10) working day period shall thereafter be irrevocable, except for good cause,
until the earlier of the Closing Date or the termination of this Agreement
pursuant to its terms. Following acceptance of such offers, Buyer shall provide
written notice thereof to Seller and Seller shall provide Buyer with access to
the files and records of employees accepting such offers, to the extent
permitted by contract, the CBA and/or applicable law.
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(d) The following shall be applicable with respect to Transferred
Employees:
(i) From and after the Closing Date, Transferred Employees shall accrue no
additional benefits under any employee benefit plan, policy, program or
arrangement of Seller or its Affiliates.
(ii) For such Transferred Union Employees, Buyer shall recognize the HTAWU
as the exclusive collective bargaining representative and shall assume the terms
and conditions of the CBA, to the extent applicable to such Transferred Union
Employees, until the expiration of said agreement, and will further comply with
all applicable legal obligations with respect to collective bargaining under
federal labor law thereafter.
(iii) As of the Closing Date, Buyer shall include each Transferred
Non-Union Employee in a benefit package providing benefits (including a cash
incentive compensation plan) that are in the aggregate substantially similar to
those provided by Seller to such Transferred Employees as of the Closing Date,
and shall cause Transferred Union Employees to be provided with benefits that
are consistent with the terms of the CBA or are otherwise acceptable to the
applicable union. The commitments under this paragraph shall require the
following:
(A) Buyer shall take all action necessary and appropriate to ensure
that, as of the Closing Date, Buyer maintains medical, health, dental,
flexible spending account, accident, life, short-term disability, long-term
disability and other employee welfare benefit plans for the benefit of
Transferred Non-Union Employees that are substantially similar to those
benefits provided by Seller under the corresponding non-union welfare
benefit plans maintained by the Seller as in effect as of the Closing Date.
(B) With respect to health care plans, Buyer agrees to waive or to
cause the waiver of all limitations as to pre-existing conditions and
actively-at-work exclusions and waiting periods for such employees, except
that Buyer may require the employee or his/her dependents who, on the
Closing Date, is then in the process of satisfying any similar exclusion or
waiting period under the Seller health care plans to satisfy fully the
balance of the applicable time period for such exclusion or waiting period
under the applicable Buyer plan. With respect to the calendar year in which
the Closing Date occurs, all health care expenses incurred by any such
employees and/or any eligible dependent thereof, including without
limitation any alternate recipient pursuant to qualified medical child
support orders, in the portion of the calendar year preceding the Closing
Date that were qualified to be taken into account for purposes of
satisfying any deductible or out-of-pocket limit under any Seller health
care plans shall be taken into account for purposes of satisfying any
deductible or out-of-pocket limit under the health care plan of Buyer for
such calendar year.
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(C) With respect to service and seniority, Buyer shall recognize each
such employee's service and seniority with Seller and any affiliate of
Seller for all non-pension purposes, including the determination of
eligibility and extent of service or seniority-related welfare benefits
such as vacation and sick pay benefits. From and after the Closing Date,
Buyer shall provide to each Transferred Employee vacation in an amount
equal to the Transferred Employee's vacation entitlement for the year of
the Closing reduced by the number of vacation days for the year of the
Closing that such Transferred Employee has taken before the Closing Date.
(D) As of the Closing Date, Buyer shall assume the Pension Plan for
Classified Employees of GASCO, Inc. (the "Classified Plan") and continue to
accrue benefits thereunder pursuant to the terms of any applicable
collective bargaining agreement. Thereafter, Seller shall have no
obligation or liability (contingent or otherwise) to provide pension
benefits to any participant in the Classified Plan. Buyer and Seller shall
cooperate in causing such steps to be taken as may be necessary to effect
the provisions of this Section 6.12(d)(iii)(D), including without
limitation the transfer of the Classified Plan's assets currently held in a
master trust to a separate trust of which Buyer is the grantor.
(E) The Citizens Pension Plan ("Seller's Pension Plan") shall retain
all liabilities and assets for pension benefits accrued by Transferred
Non-Union Employees through the day immediately preceding the Closing Date,
and Seller shall cause all such accrued benefits to become fully vested as
of the Closing Date. Seller shall, within 90 days following the Closing
Date, notify Transferred Non-Union Employees who are entitled to deferred
vested benefits under Seller's Pension Plan of the amount of such benefits.
(F) On and after the Closing Date, Buyer shall perform all obligations
imposed on the employer by Articles 26 and 27 of the collective bargaining
agreement between Seller and Hawaii Teamsters and Allied Workers Union,
Local 996 with respect to the provision of health care and group life
insurance coverage for Transferred Union Employees and retired union
employees of the Business.
(G) Buyer shall assume all liabilities, obligations and
responsibilities with respect to providing post-retirement life insurance
benefits ("Post-Retirement Life Insurance Benefits") to (i) non-union
retirees of the Business as of the Closing Date (the "Current Retirees")
and (ii) Transferred Non-Union Employees who as of the Closing Date have
satisfied the age and service eligibility requirements for Post-Retirement
Life Insurance Benefits under the applicable Seller plans (the
"Grandfathered Active Employees" and, together with the Current Retirees,
the "Grandfathered Individuals"). The Grandfathered Individuals are listed
in Schedule 6.12(d)(iii)(G). Buyer shall continue to provide to the Current
Retirees Post-Retirement Life Insurance Benefits that are comparable to
those Post-Retirement Life Insurance Benefits provided to such Current
Retirees immediately prior to the Closing Date, under cost-sharing
structures that are at least as favorable as the cost-sharing structures in
effect for and available to the Current Retirees immediately prior to the
Closing Date. Buyer shall provide to the Grandfathered Active Employees
Post-Retirement Life Insurance Benefits that are comparable to those
Post-Retirement Life Insurance Benefits provided to such Grandfathered
Active Employees immediately prior to the Closing Date, commencing at the
time such Grandfathered Active Employees retire.
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(H) With respect to the Seller's 401(k) Savings Plan (the "Savings
Plan"), Seller shall vest Transferred Employees in their Savings Plan
account balances as of the Closing Date. Seller hereby represents to Buyer
that the Savings Plan is intended to be qualified within the meaning of
Section 401 of the Code. Buyer shall take all actions necessary to ensure
that, as of the Closing Date, it includes all Transferred Employees in a
qualified 401(k) plan ("Buyer's 401(k) Plan") providing for matching
contributions (if any) at least equivalent in value to those provided to
the Transferred Employee under the Savings Plan immediately prior to the
Closing Date. Buyer shall take all actions necessary to cause Buyer's
401(k) Plan (x) to recognize the service that the Transferred Employees had
in the Savings Plan for purposes of determining such Transferred Employees'
eligibility to participate, vesting, attainment of retirement dates,
contribution levels, and, if applicable, eligibility for optional forms of
benefit payments, and (y) to accept direct-rollover transfers of
Transferred Employees' account balances in the Savings Plan, including
transfers of loan balances and related promissory notes, provided that such
loans would not be treated as taxable distributions at any time prior to
such transfer.
(I) Within sixty (60) days after the Closing Date, Seller shall
transfer to Buyer's flexible benefits plan any balances standing to the
credit of Transferred Employees under Seller's flexible benefits plan as of
the day immediately preceding the Closing Date. As soon as practicable
after the Closing Date, Seller shall provide to Buyer a list of those
Transferred Employees that have participated in the health or dependent
care reimbursement accounts of Seller, together with their elections made
prior to the Closing Date with respect to such account, and balances
standing to their credit as of the day immediately preceding the Closing
Date.
(e) With respect to severance benefits, Buyer shall provide to any
Transferred Non-Union Employee who is terminated by Buyer (other than for cause)
prior to the date which is one year following the Closing Date, severance
benefits at the level set forth in a schedule provided to Buyer prior to the
date hereof. Any employee provided severance benefits under this section may be
required to execute a release of claims against Seller and Buyer, in such form
as Buyer shall prescribe, as a condition for the receipt of such benefits.
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(f) Each Transferred Non-Union Employee who is initially assigned, or
assigned within twelve (12) months of the Closing Date, by Buyer to a principal
place of work that requires such employee to relocate his residence will be
reimbursed by Buyer for all relocation expenses in accordance with the
relocation benefits plans set forth in a schedule provided to Buyer prior to the
date hereof. For purposes of the foregoing a required relocation of residence
shall include a change in the principal place of work that is more than 30 miles
farther from such employee's principal place of work immediately prior to the
Closing Date and requires an average commute from his current residence of at
least one hour in each direction.
(g) Seller shall be responsible, with respect to the Business, for
performing and discharging all requirements under the WARN Act and under
applicable state and local laws and regulations for the notification of its
employees of any "employment loss" within the meaning of the WARN Act which
occurs on or prior to the Closing Date. Seller shall give all notices required
to be given by Seller under Chapter 394B, Hawaii Revised Statutes, as amended.
(h) Buyer shall not be responsible for, but Seller shall be responsible
for, extending COBRA Continuation Coverage to any employees and former employees
of Seller, or to any qualified beneficiaries of such employees and former
employees, who become or became entitled to COBRA Continuation Coverage on or
before the Closing Date, including those for whom the Closing Date occurs during
their COBRA election period.
(i) Seller or its Affiliates shall pay or cause to be paid to all
Transferred Employees, all compensation (excluding vacation pay), workers'
compensation or other employment benefits to which they are entitled under the
terms of the applicable compensation or Seller benefit plans or programs as of
the Closing Date. Buyer shall pay to each Transferred Employee all unpaid salary
or other compensation or employment benefits which have accrued to such
employees following the Closing Date, at such times as provided under the terms
of the applicable compensation or benefit programs. Notwithstanding the
foregoing, Seller and Buyer shall pro-rate the obligation to pay any bonuses
declared by Seller on or after the Closing Date (but prior to March 1 of the
calendar year following the year in which the Closing Date occurs) 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 the cash
incentive compensation plan of Seller under which such bonus would have been
paid. Buyer shall be obligated to pay that portion of each such bonus determined
by multiplying the amount of such bonus by a fraction, the numerator of which is
the number of days from and after the Closing Date through the end of the
calendar year in which the Closing Date occurs, and the denominator of which is
365.
(j) Seller shall be responsible for maintaining workers' compensation
coverage for all Union Employees and Non-Union Employees for claims relating to
occurrences prior to the Closing Date.
(k) Individuals who are otherwise Union Employees or Non-Union Employees
but who on any date are not actively at work due to a leave of absence covered
by the Family and Medical Leave Act (FMLA), or due to any other authorized leave
of absence, including, without limitation, short-term disability, or who are on
long-term disability, shall nevertheless be treated as "Union Employees" or as
"Non-Union Employees", as the case may be, on such date if they are able (i) to
return to work within the protected period under the FMLA or such other leave
(which in any event shall not extend more than twelve (12) weeks after the
Closing Date), whichever is applicable, and (ii) to perform the essential
functions of their job, with or without a reasonable accommodation.
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(l) Buyer shall be responsible, with respect to the Business, for
performing and discharging all requirements under the WARN Act and under
applicable state and local laws and regulations (including Chapter 394B, Hawaii
Revised Statutes, as amended) for the notification of its employees of any
"employment loss" within the meaning of the WARN Act or as required by Hawaii
law which occurs following the Closing Date.
(m) Buyer is responsible for extending and continuing to extend COBRA
Continuation Coverage to all Transferred Employees, and qualified beneficiaries
of such employees who become entitled to such COBRA Continuation Coverage
following the Closing Date.
(n) The provisions of this Section 6.12 shall not be construed as being for
the benefit for any person other than the Parties hereto, and shall not be
enforceable by persons other than such Parties (including, without limitations,
the Transferred Employees).
6.13 Risk of Loss.
(a) From the date hereof through the Closing Date, all risk of loss or
damage to the assets included in the Assets shall be borne by Seller, other than
loss or damage caused by the acts or negligence of Buyer or any Buyer
Representative, which loss or damage shall be the responsibility of Buyer.
(b) If, before the Closing Date, all or any portion of the Assets are taken
by eminent domain, municipalization or condemnation or are the subject of a
pending taking which has not been consummated, (such event being called, in
either case, a "Taking"), then Seller shall notify Buyer promptly in writing of
such Taking.
(i) If such Taking relates to Assets of Seller having an aggregate net book
value in excess of $10,000,000, then such Taking shall be a "Material Taking."
Upon a Material Taking, Seller and Buyer shall negotiate to settle the loss, if
any, resulting from such Material Taking (and such negotiation shall include,
without limitation, the negotiation of a fair and equitable reduction in the
Base Purchase Price to offset such loss, if any, based on consideration of all
relevant circumstances). If Seller and Buyer shall fail to agree to settle the
loss, if any, resulting from said Material Taking, said Material Taking shall be
conclusively deemed to be an Asset Material Adverse Effect.
(ii) If such Taking is not a Material Taking, then (A) Buyer may elect to,
in the name of Seller, negotiate for, claim, contest and receive the portion of
the award properly allocable to those Assets that are the subject of the Taking,
(B) to the extent the Taking shall have been consummated prior to the Closing,
Seller shall be relieved of its obligation to convey to Buyer those Assets that
were the subject of the Taking, (C) at the Closing, Seller will assign to Buyer
all of its rights to damages payable as a result of the Taking, and will pay to
Buyer all damages previously paid to it in connection with the Taking, in each
case to the extent properly allocable to those Assets that are the subject of
the Taking, and (D) following the Closing, Seller will give to Buyer any further
assurances of such rights and assignment with respect to the Taking as Buyer
reasonably may request from time to time.
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(c) (i) If any casualty loss or damage to the Assets shall occur before the
Closing Date, then the Base Purchase Price shall be reduced, to the extent such
loss or damage is not remedied prior to the Closing Date, by an amount mutually
acceptable to the Parties, which amount shall be equal to the estimated
out-of-pocket costs and expenses which Buyer reasonably can be expected to incur
to repair or replace, in accordance with Good Utility Practices, such lost or
damaged Assets after Closing. If the actual out-of-pocket costs and expenses
which Buyer reasonably incurred to repair or replace, in accordance with Good
Utility Practices, such lost or damaged Assets exceeds such estimated amount,
Seller shall reimburse Buyer for such excess costs. If the Parties do not agree
to an adjustment to the Base Purchase Price in respect of the casualty loss,
then the Closing shall be postponed for such period of time (not to exceed six
(6) months), and Seller shall repair or replace the lost or damaged Assets in
accordance with Good Utility Practices and Buyer or its Representatives will
have the right to inspect and observe and approve, all repairs or replacements
made by Seller to remedy such casualty loss.
(ii) Notwithstanding anything to the contrary in Section 6.13(c)(i) above,
if Seller shall have failed to remedy, cure or otherwise reverse by the Closing
Date any casualty loss or damage to the Assets such that the estimated
out-of-pocket costs and expenses that Buyer reasonably can be expected to incur
to repair or replace such lost or damaged Assets exceeds $10,000,000, such loss
or damage shall be conclusively deemed to be an Asset Material Adverse Effect.
6.14 Tax Exempt Financing
(a) Seller represents that:
(i) The Exempt Facilities have been financed, in whole or in part, with the
proceeds of the issuance and sale by the Department of Budget and Finance of the
State of Hawaii of private activity bonds the interest on which, with certain
exceptions, is excluded from gross income for purposes of Federal income
taxation (such bonds, as currently outstanding, the "Revenue Bonds"); and Seller
is the economic obligor in respect of such Revenue Bonds;
(ii) The Revenue Bonds are described in Schedule 6.14(a);
(iii) The basis for the exclusion of interest on the Revenue Bonds from
gross income for Federal income tax purposes is the use of the Exempt Facilities
for "the local furnishing of electric energy or gas" under Sections 142(a)(8)
and 142(f) of the Code and the applicable Treasury Regulations (the
"Regulations") thereunder;
(iv) The use of the Exempt Facilities for a purpose other than a qualifying
purpose indicated in subsection (iii) above could impair (A) such exclusion from
gross income of the interest on the Revenue Bonds, possibly with retroactive
effect, unless appropriate remedial action were taken (which could include
prompt defeasance or redemption of the Revenue Bonds) and/or (B) the
deductibility of payments by Seller or Buyer of interest based on the
restrictions in Section 150(b) of the Code;
57
(v) After August 20, 1996, at least the following bonds exempt from tax
under Section 103 of the Code and in whole or in part described in Section
142(a)(8) of the Code have been issued with respect to facilities of Seller for
the "local furnishing of electric energy or gas": $19,600,000 Department of
Budget and Finance of the State of Hawaii Special Purpose Revenue Bonds (The Gas
Company Project) Series 2000; and
(vi) Any breach by Buyer of its obligations under this Section 6.14 could
result in the incurrence by Seller of additional costs and expenses with respect
to the Revenue Bonds, including, without limitation, increased interest costs,
loss of the interest deduction for tax purposes and transaction costs relating
to any refinancing, redemption and/or defeasance of all or part of the Revenue
Bonds (cumulatively, the "Tax Impact").
(b) Buyer agrees that Buyer will indemnify Seller for costs incurred by
Seller in respect of any Tax Impact that would not have arisen but for Buyer's
breach of its obligations under Section 6.14(c) (except as excused elsewhere in
this Section 6.14).
(c) Buyer represents that it has not made an election pursuant to Section
142(f)(4)(B) of the Code to terminate tax exempt bond financing by Buyer of
facilities described by Section 142(a)(8) of the Code. So long as any Revenue
Bonds remain outstanding with respect to Exempt Facilities in any county, Buyer
agrees that it shall not (I) use, or take any deliberate act to permit the use
of, or fail to take any act within its control that would prevent the use of,
the Exempt Facilities within that county for any purpose or in any manner other
than as shall be consistent with the Exempt Facility Operating Protocol (as such
Exempt Facility Operating Protocol may have been updated, amended or corrected
by Seller for the purpose of its accuracy on or before the Closing Date;
provided that such changes do not materially impact Buyer's operation of the
Assets) delivered by Seller to Buyer on or before the date of this Agreement, or
(II) make an election pursuant to Section 142(f)(4)(B) of the Code to terminate
tax exempt bond financing by Buyer of facilities described by Section 142(a)(8)
of the Code, unless in either case Buyer:
(i) has obtained at its own expense an opinion addressed to Seller of
nationally recognized bond counsel reasonably acceptable to Seller ("Bond
Counsel") that such use will not impair (x) the exclusion from gross income of
the interest on any issue of Revenue Bonds for Federal income tax purposes and
(y) the deductibility of Seller's payments of interest based on the restrictions
in Section 150(b) of the Code; or
(ii) has provided written notice to Seller of any election, act or failure
to act not later than 45 days after the effective date of such action
("Sufficient Notice"). (Reference is made to Schedule 6.14(a) for the optional
redemption provisions applicable to the Revenue Bonds.)
(d) Notwithstanding any other provision of this Agreement, it is expressly
understood and agreed that the provisions of Section 6.14(c) shall not prohibit
Buyer from (and Buyer shall incur no liability to Seller for or in connection
with Buyer) suspending the operation of the Exempt Facilities (in whole or in
part) on a temporary basis, or from terminating the operation of the Exempt
Facilities (in whole or in part) on a permanent basis and shutting down,
retiring, abandoning and/or decommissioning the Exempt Facilities (in whole or
in part); provided, however, that if the Exempt Facilities, in whole or in part,
are dismantled and sold, including any sale for scrap, at any time when any
Revenue Bonds remain outstanding, then the proceeds of such sale of Exempt
Facilities shall within six months from the date of sale be expended to acquire
replacement property to be used as described in the Exempt Facility Operating
Protocol, unless (I) Buyer has obtained at its own expense an opinion addressed
to Seller of Bond Counsel that the failure to take this action will not impair
(x) the exclusion from gross income of the interest on any issue of Revenue
Bonds for Federal income tax purposes and (y) the deductibility of Seller's
payments of interest based on the restrictions in Section 150(b) of the Code;
(II) the proceeds of such sales are less than $50,000 in a calendar year; or
(III) Buyer has provided Sufficient Notice of such action to Seller.
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(e) Buyer agrees that it shall not issue, or have issued on its behalf, any
tax-exempt bonds to finance or refinance its acquisition of the Exempt
Facilities, provided that it is expressly understood and agreed that this clause
(e) shall not prohibit Buyer's use of tax-exempt bonds to finance or refinance
any improvement to the Exempt Facilities made after the date of acquisition or
to any assets other than the Exempt Facilities.
(f) Buyer agrees to provide prompt written notice to Seller of any
condemnation of, or casualty loss with respect to, the Exempt Facilities, in
whole or in substantial part, to cooperate in good faith with Seller in Seller's
efforts to ascertain the consequences of any such eminent domain proceeding or
casualty loss for the (A) exclusion of interest on the Revenue Bonds from gross
income for Federal income tax purposes and (B) the deductibility of Seller's
payments of interest based on the restrictions in Section 150(b) of the Code.
(g) Seller hereby represents that it has performed all duties and
obligations of "Company" under the documents relating to the Revenue Bonds, that
the representations and warranties under the documents relating to the Revenue
Bonds remain true and correct, and that there has been no breach of any covenant
or agreement by Seller under the documents relating to the Revenue Bonds. Seller
hereby covenants that, until all of the Revenue Bonds have been paid upon the
stated maturity thereof or have been redeemed in advance of the stated maturity
date, Seller will perform all duties and obligations of "Company" under the
documents relating to the Revenue Bonds, that Seller's representations and
warranties under such documents will remain true and correct and that Seller
will not breach any covenant or agreement of Seller under such documents;
provided that Seller's covenant in this sentence shall not extend to any such
duties, obligations, representations, warrantees, covenants or agreements the
necessary predicate for which is Seller's actual ownership, possession or
control of the Exempt Facilities from and after the Closing Date. Seller
acknowledges and agrees that although Seller from and after the Closing Date
will not own, possess or control the Exempt Facilities, Seller shall remain
primarily obligated under the documents relating to the Revenue Bonds and, as
between itself and each issuer of the Revenue Bonds, shall remain subject to
each of Seller's representations, warranties, covenants and agreements
thereunder. Buyer shall have no liability under this Section 6.14 unless
interest on the Revenue Bonds would be excluded from gross income for Federal
income tax purposes absent an act or failure to act by Buyer in contravention of
the terms of Section 6.14(c).
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(h) In any case where Buyer has provided notice to Seller under this
Section 6.14, Buyer agrees that it will join and cooperate with Seller with
respect to any request by Seller to the Internal Revenue Service to obtain a
private letter ruling regarding any Tax Impacts of the act or failure to act by
Buyer that prompted such notice. Seller will join and cooperate with Buyer with
respect to any request by Buyer to the Internal Revenue Service to obtain a
private letter ruling regarding any Tax Impacts. The Party seeking the private
letter ruling shall bear all costs of the filing, legal and related
out-of-pocket expenses incurred in the course of such request.
(i) Seller agrees that it has sole responsibility to make any required
payments of principal and interest on the Revenue Bonds and that Buyer has no
responsibility to make such payments. Seller agrees that it will indemnify,
protect, defend and hold harmless Buyer from and against any claim that Buyer
owes any payment of principal or interest on the Revenue Bonds. Seller agrees
that Buyer shall retain any payments with respect to any casualty event or any
condemnation of the Exempt Facilities and that, except as Buyer has otherwise
agreed under Section 6.14(c), Buyer shall not be restricted in its use of any
such proceeds.
(j) If Buyer shall sell, exchange, transfer or otherwise dispose of the
Exempt Facilities in whole or substantial part (aggregate price of $500,000 or
more in a calendar year) to one or more third parties, Buyer shall cause to be
included in the documentation relating to such transaction covenants and
agreements on the part of such third party substantially identical to those on
the part of Buyer contained in this Section 6.14, and effective upon the
consummation of such disposition Buyer shall have no further obligations under
this Section 6.14 with respect to the Exempt Facilities which have been so
disposed.
(k) The covenants and agreements on the part of Buyer and Seller contained
in this Section 6.14 shall continue in effect so long as any of the Revenue
Bonds shall remain outstanding. Seller shall notify Buyer promptly when there
shall be no Revenue Bonds outstanding.
(l) Buyer acknowledges and agrees that Seller's bond counsel may rely on
Buyer's representations, warranties and covenants as hereinabove provided for
the purpose of rendering a legal opinion or opinions, as required by the
Indenture of Trust, the Loan Agreement and the Tax Regulatory Agreement relating
to the Revenue Bonds ("IDRB Documents") as a precondition to the sale by Seller
of such Exempt Facilities, to the effect that the sale of such Exempt Facilities
will not result in (I) the inclusion of the interest on the Revenue Bonds in the
gross income of the recipient for purposes of Federal income taxation, and (II)
disallowance of interest expense to Seller under Section 150(b) of the Code.
Seller acknowledges and agrees that Buyer shall be an addressee of the
above-described opinion letters of Seller's bond counsel or shall receive a
reliance letter from Seller's bond counsel authorizing Buyer to rely on such
opinion letters.
(m) Nothing in this Agreement is intended to nor shall it be interpreted as
(i) an assignment to, and assumption by, Buyer of any of the IDRB Documents, or
(ii) as an undertaking or agreement by Buyer to assume, guarantee or pay any of
Seller's loan or other payment obligations pursuant to the IDRB Documents. Other
than as stated in this Section 6.14, Buyer shall have no liability in respect of
the Revenue Bonds.
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(n) Each of Buyer and Seller shall use its Commercially Reasonable Efforts,
and shall cooperate with the other Party in the other Party's efforts, to obtain
all consents, bond counsel opinions and IRS rulings as may be required under the
IDRB Documents and the Code to enable Seller, at its option, to defease, prepay,
redeem or retain until the stated maturity date the IDRB Indebtedness and to
sell the Assets to Buyer without the result that the interest on the Revenue
Bonds will be included in the gross income of the recipient for purposes of
Federal income taxation; provided, however, that Buyer shall have no obligation
in respect of its ownership or operation of the Exempt Facilities (including but
not limited to rates imposed by Buyer in respect of utility service provided by
the Exempt Facilities or by any other facilities of Buyer or affiliates of
Buyer) other than to comply with the Exempt Facility Operating Protocol.
6.15 Seller Guarantees and Surety Instruments. Buyer shall use Commercially
Reasonable Efforts to assist Seller in obtaining full and complete releases of
the guarantees, letters of credit, bonds and other surety instruments listed in
Schedule 6.15. In this connection, Buyer agrees to provide a guaranty, letter of
credit, bond or other surety instrument at Closing to replace those listed in
Schedule 6.15.
6.16 Citizens and Gasco Marks.
(a) Buyer acknowledges and agrees with Seller that Seller has the absolute
and exclusive proprietary right to 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 Mark and shall remove from the Assets any and all Citizens Marks.
Thereafter, Buyer shall not use any Citizens Mark in connection with the sale of
any products or services or otherwise in the conduct of the businesses. In the
event that Buyer breaches this Section 6.16(a), Seller shall be entitled to
specific performance and to injunctive relief against further violations, as
well as any other remedies at law or in equity available to Seller.
(b) The parties acknowledge and agree that the Assets include the absolute
and exclusive proprietary right to all names, marks, trade names, trademarks and
corporate symbols and logos incorporating "The Gas Company," "TGC," or "Honolulu
Gas Equipment Company" (collectively, the "Gasco Marks"). All rights to the
Gasco Marks and the goodwill represented thereby and pertaining thereto shall be
assigned and transferred to Buyer at Closing. After the Closing Date, neither
Seller nor any of its Affiliates shall use any of the Gasco Marks in any
corporate name or in connection with the sale of any products or services or
otherwise in the operation of any business. This Section 6.16(b) shall not be
construed to prohibit Seller from using the name "Gasco" or "The Gas Company" in
connection with the filing of any Tax Returns for periods prior to the Closing
Date or the filing of any other documents required by any Governmental Body.
6.17 Title Commitments. Prior to Closing, Seller shall cooperate with Buyer
and use Commercially Reasonable Efforts to assist Buyer if Buyer desires to
obtain American Land Title Association ("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 issue ALTA
(or its local equivalent) form of title insurance policies in an amount
acceptable to the Buyer and the Title Company insuring good, valid, indefeasible
fee simple title to the Real Property 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, evidence of corporate existence and authority, 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 Buyer's request for Title Policies or Title Commitments shall, in no
event, result in any delay in the consummation of the transactions contemplated
by this Agreement, except to the extent caused by or resulting from Seller's
breach of this Agreement; and provided further, that nothing in this Section
6.17 shall obligate Seller to execute or deliver any document that affects, in a
manner adverse to Seller, Seller's liability to Buyer as expressed herein and in
the Special Warranty Deed.
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6.18 Post-Execution Delivery of Schedules. By March 31, 2003, Seller shall
deliver to Buyer a schedule, to be identified as Schedule 6.18, which sets forth
all of the following identified by Seller after reasonable investigation (i) all
Permits, (ii) all material items of Tangible Personal Property (other than
Inventories), (iii) quantities of Inventories recorded in Seller's books and
records for the Business as of the last day of the month preceding the date of
this Agreement, together with the net book values of such Inventories as of such
date, (iv) all Easements held by Seller in connection with the Business, and (v)
all line extension agreements and similar construction arrangements. Schedule
6.18 will also (x) designate those Permits that require the consent of the
respective Governmental Authority to transfer and those that purport to be
non-transferable and (y) describe the current status of each such Permit.
6.19 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 individuals with 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. 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.
6.20 Certain Transactions. Buyer shall not, and shall not permit any of its
Affiliates to, acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets if the entering into of a definitive agreement relating to,
or the consummation of such acquisition, merger or consolidation would
reasonably be expected to (i) impose any material delay in the obtaining of, or
significantly increase the risk of not obtaining, any authorizations, consents,
orders, declarations or approvals of any Governmental Authority necessary to
consummate the transactions contemplated by this Agreement or the expiration or
termination of any applicable waiting period, (ii) significantly increase the
risk of any Governmental Authority entering an order prohibiting the
consummation of the transactions contemplated by this Agreement, (iii)
significantly increase the risk of not being able to remove any such order on
appeal or otherwise or (iv) materially delay or prevent the consummation of the
transactions contemplated by this Agreement.
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ARTICLE VII
CONDITIONS
7.1 Conditions to Obligations of Buyer. The obligation of Buyer to effect
purchase of the Assets and the other transactions contemplated by this Agreement
shall be subject to the fulfillment of the following conditions, or waiver
thereof, by Buyer at or prior to the Closing Date:
(a) The waiting period under the HSR Act applicable to the consummation of
the sale of the Assets contemplated hereby shall have expired or been
terminated;
(b) No preliminary or permanent injunction or other order or decree by any
Governmental Authority which prevents the consummation of the sale of the Assets
contemplated herein shall have been issued and remain in effect (each Party
agreeing to use its reasonable best efforts to have any such injunction, order
or decree lifted) and no statute, rule or regulation shall have been enacted by
any state or federal government or Governmental Authority prohibiting the
consummation of the sale of the Assets;
(c) Buyer shall have received all of Buyer's Required Regulatory Approvals
by Final Order, and such Required Regulatory Approvals shall not contain terms
and conditions that would result in a Regulatory Material Adverse Effect for
Buyer or an Asset Material Adverse Effect;
(d) Seller shall have received all of Seller's Required Regulatory
Approvals by Final Order, and such Required Regulatory Approvals shall not
contain terms and conditions that would result in a Regulatory Material Adverse
Effect for Buyer or an Asset Material Adverse Effect;
(e) Seller shall have performed and complied with each of its covenants and
agreements contained in this Agreement which are required to be performed and
complied with by Seller on or prior to the Closing Date except where the failure
to so perform or comply, when taken in the aggregate, would not have a Buyer
Material Adverse Effect or an Asset Material Adverse Effect;
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(f) The representations and warranties of Seller set forth in this
Agreement shall be true and correct as of the Closing Date as though made at and
as of the Closing Date, except (i) subject to Section 6.11, to the extent due to
changes expressly permitted by this Agreement or otherwise in writing by Buyer,
(ii) that representations and warranties made as of, or in respect of, only a
specified date or period shall be true and correct as of, or in respect of, such
date or period and (iii) 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 Buyer Material Adverse Effect or an Asset Material Adverse
Effect;
(g) No Asset Material Adverse Effect shall have occurred and be continuing;
(h) Seller shall have delivered, caused to be delivered, or be standing
ready to deliver, to Buyer at the Closing, Seller's closing deliveries described
in Section 3.5; and
(i) Buyer shall have received consents of third parties required for the
assignment to Buyer of the Assigned Agreements described in a schedule delivered
by Buyer to Seller prior to the execution of this Agreement and entitled, "Third
Party Consent Required for Closing," and such consents shall be in form and
substance reasonably acceptable to Buyer, it being understood and agreed that no
such third party consent shall be unacceptable to Buyer because it requires
commercially reasonably security arrangements for Buyer's payment obligations.
7.2 Conditions to Obligations of Seller. The obligations of Seller to
effect the sale of the Assets and the other transactions contemplated by this
Agreement shall be subject to the fulfillment of the following conditions, or
the waiver thereof, by Seller at or prior to the Closing Date:
(a) The waiting period under the HSR Act applicable to the consummation of
the sale of the Assets contemplated hereby shall have expired or been
terminated;
(b) No preliminary or permanent injunction or other order or decree by any
Governmental Authority which prevents the consummation of the sale of the Assets
contemplated herein shall have been issued and remain in effect (each of Seller
and Buyer agreeing to use its reasonable best efforts to have any such
injunction, order or decree lifted) and no statute, rule or regulation shall
have been enacted by any state or federal government or Governmental Authority
in the United States prohibiting the consummation of the sale of the Assets;
(c) Seller shall have received all of Seller's Required Regulatory
Approvals by Final Order, and such Required Regulatory Approvals shall not
contain terms and conditions that would have an Asset Material Adverse Effect or
a Seller Material Adverse Effect;
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(d) Seller shall have received any consents of third parties required for
the assignment to Buyer of any of the Assigned Agreements other than consents
that, if not obtained, would not have a Seller Material Adverse Effect;
(e) Buyer shall have performed and complied with each of its covenants and
agreements contained in this Agreement which are required to be performed and
complied with by Buyer on or prior to the Closing Date except where the failure
to so perform or comply, when taken in the aggregate, would not have a Seller
Material Adverse Effect;
(f) The representations and warranties of Buyer set forth in this Agreement
shall be true and correct as of the Closing Date as though made at and as of the
Closing Date, except (i) subject to Section 6.11, to the extent due to changes
expressly permitted by this Agreement or otherwise in writing by Seller, (ii)
that representations and warranties made as of, or in respect of, only a
specified date or period shall be true and correct as of, or in respect of, such
date or period and (iii) 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 Seller Material Adverse Effect;
(g) Buyer shall have assumed, as set forth in and subject to Section 6.12,
all of the applicable obligations under the CBA;
(h) Buyer shall have delivered, caused to be delivered or standing ready to
deliver, to Seller at the Closing, Buyer's closing deliveries described in
Section 3.6; and
(i) Seller shall have received an opinion letter from Seller's Bond
Counsel, dated the Closing Date, substantially in the form attached hereto as
Exhibit E.
ARTICLE VIII
POST-CLOSING INDEMNIFICATION
8.1 Indemnification of Seller by Buyer. After Closing, and subject to
Section 8.3, Buyer shall indemnify, defend and hold harmless Seller, its
officers, directors, employees, shareholders, Affiliates and agents (each, a
"Seller Indemnitee") from and against any and all Losses asserted against or
paid or incurred by any Seller Indemnitee (each, a "Seller Indemnifiable Loss")
in any way relating to, resulting from or arising out of or in connection with
(i) any breach by Buyer of any covenant or agreement of Buyer contained in this
Agreement or any failure or inaccuracy of any representation or warranty of
Buyer contained in this Agreement, (ii) the Assumed Liabilities, (iii) any loss
or damages resulting from or arising solely out of any Inspection of the Assets,
and (iv) any Third Party Claims against a Seller Indemnitee to the extent
arising out of or in connection with Buyer's ownership or operation of the
Assets on or after the Closing Date.
8.2 Indemnification of Buyer by Seller. After Closing, and subject to
Section 8.3, Seller shall indemnify, defend and hold harmless Buyer, its
officers, directors, employees, shareholders, Affiliates and agents (each, a
"Buyer Indemnitee") from and against any and all Losses asserted against or paid
or incurred by any Buyer Indemnitee (each, a "Buyer Indemnifiable Loss") in any
way relating to, resulting from or arising out of or in connection with (i) any
breach by Seller of any covenant or agreement of Seller contained in this
Agreement or failure or inaccuracy of any representation or warranty of Seller
contained in this Agreement, (ii) the Excluded Liabilities, (iii) noncompliance
by Seller with any bulk sales or transfer laws as provided in Section 10.12, and
(iv) any Third Party Claims against a Buyer Indemnitee arising out of or in
connection with Seller's ownership or operation of the Excluded Assets on or
after the Closing Date.
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8.3 Certain Limitations on Indemnification.
(a) Notwithstanding anything to the contrary contained herein:
(i) any Indemnitee shall use Commercially Reasonable Efforts to mitigate
all Losses relating to a claim under these indemnification provisions, including
availing itself of any defenses, limitations, rights of contribution, claims
against third persons and other rights at law or equity. The Indemnitee's
Commercially Reasonable Efforts shall include the reasonable expenditure of
money to mitigate or otherwise reduce or eliminate any Loss for which
indemnification would otherwise be due, and the Indemnifying Party shall
reimburse the Indemnitee for the Indemnitee's reasonable expenditures in
undertaking the mitigation; and
(ii) any indemnifiable Loss shall be net of the dollar amount of any
insurance or other proceeds actually received by the Indemnitee or any of its
Affiliates with respect to the indemnifiable Loss. Any Party seeking indemnity
hereunder shall use Commercially Reasonable Efforts to seek coverage (including
both costs of defense and indemnity) under applicable insurance policies with
respect to any such indemnifiable Loss.
(b) Except as otherwise provided in this Section 8.3(b), the
representations, warranties, covenants and agreements of the Parties set forth
in this Agreement shall survive the Closing Date for a period of eighteen (18)
months, and all representations, warranties, covenants and agreements of the
Parties under this Agreement and the related indemnities granted in this Article
VIII shall terminate at 5:00 p.m., local time in New York City, New York, on the
day that is eighteen (18) months after the Closing Date; provided, however, that
(i) Seller's representations and warranties set forth in Section 4.8
(Benefit Plans; ERISA) and Section 4.14 (Taxes) shall survive the Closing Date
until the expiration of the statute of limitations applicable to such ERISA
matters or applicable for each Tax and taxable year, as the case may be;
(ii) Seller's indemnification obligation arising under Section 8.2(ii)
relating to Excluded Liabilities (other than the Excluded Liabilities referred
to in Sections 2.4(g) and 2.4(m), which are the subject of Section 8.3(b)(iii),
and the Excluded Liabilities referred to in Sections 2.4(h), which are the
subject of Section 8.3(b)(iv)) shall terminate and be extinguished on the day
that is thirty-six (36) months after the Closing Date;
(iii) Seller's indemnification obligations arising under Section 8.2(ii)
and relating to the Excluded Liabilities referred to in Section 2.4(g) or in
Section 2.4(m) shall terminate and be extinguished on the day that is eighteen
(18) months after the Closing Date;
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(iv) Seller's indemnification obligations arising under Section 8.2(iv) or
under Section 8.2(ii) and relating to the Excluded Liabilities referred to in
Section 2.4(h) relating to the Iwilei Property shall not terminate or be
extinguished at any time and will survive Closing in perpetuity; and
(v) Buyer's indemnification obligations arising under Section 8.1(ii) or
Section 8.1(iv) shall not terminate or be extinguished at any time and will
survive Closing in perpetuity.
Notwithstanding the foregoing clauses (ii) and (iii), if after the relevant date
of termination and extinguishment, a Buyer Indemnitee successfully defends
against a Third Party Claim relating to the Excluded Liabilities that are the
subject of such clauses on the basis that the matter giving rise to such Third
Party Claim was not an Assumed Liability, then Seller, regardless of when such
Third Party Clause was asserted or resolved, promptly shall reimburse such Buyer
Indemnitee for the reasonable attorneys' fees and reasonable disbursements paid
by such Buyer Indemnitee in connection with such defense, but no other Losses
with respect to such Third Party Claim or the matter giving rise to such Third
Party Claim shall be indemnifiable by Seller. The expiration, termination or
extinguishment of any representation, warranty, covenant or agreement shall not
affect the Parties' obligations under Section 8.1 or 8.2 hereof if the
Indemnitee provided the Indemnifying Party with proper notice of the claim or
event for which indemnification is sought prior to such expiration, termination
or extinguishment. Notwithstanding the foregoing provisions of this Section
8.3(b), the representations, warranties, covenants and agreements contained in
Sections 3.3(e), 6.2(c), 6.3(d), 6.4(a), 6.10, 6.12, 6.14, 6.16, 8.3, 8.4, 8.5
and in Article X, will survive the Closing in accordance with their terms.
(c) Notwithstanding anything to contrary in this Agreement, in no event
shall Buyer indemnify Seller Indemnitees or Seller indemnify Buyer Indemnitees,
or otherwise be liable in any way whatsoever to said Indemnitees, for any Losses
otherwise subject to indemnification by the Indemnifying Party (determined after
giving effect to the other provisions of this Section 8.3) until the Buyer
Indemnitees or the Seller Indemnitees, as the case may be, have incurred
otherwise indemnifiable Losses that in the aggregate exceed a deductible amount
equal to $1,150,000 (the "Deductible"), after which Buyer or Seller, as the case
may be, shall then be liable for all Losses in excess of the Deductible incurred
by the Seller Indemnitees or the Buyer Indemnitees, as applicable. The
limitations on indemnification set forth in this Section 8.3(c) shall not apply
to any Losses asserted against or suffered by an Indemnitee in any way relating
to, resulting from or arising out of or in connection with the failure of (i)
the appropriate Party to make the payment required to be made by it in
accordance with Section 3.3(d), (ii) Buyer to discharge Assumed Liabilities,
(iii) Seller to discharge Excluded Liabilities other than those specified in
Sections 2.4(g) and 2.4(m), and (iv) Seller to make any payment to Buyer if and
to the extent required by Section 6.10(b) or 6.13(c), and any such Losses also
shall be disregarded when determining whether the Deductible has been exceeded.
Losses incurred by Buyer in the performance or satisfaction of the Assumed
Liabilities described in Section 2.3(f) shall be included when determining
whether the Deductible has been exceeded.
(d) Losses of a Buyer Indemnitee relating to a particular breach of
Seller's representations and warranties or any performance, satisfaction or
discharge of a particular Excluded Liability described in Section 2.4(g) shall
not constitute indemnifiable Losses, and therefore shall not be applied towards
the Deductible or be indemnifiable by Seller hereunder (and, as a consequence,
shall constitute an Assumed Liability under Section 2.3(f) to the extent such
Losses relate to a breach of Section 4.6 (Environmental Matters) or an Excluded
Liability described in Section 2.4(g)), unless such Losses relating to such
particular breach or Excluded Liability described in Section 2.4(g) exceed
$50,000.
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(e) Notwithstanding anything to the contrary in this Agreement, in no event
shall Seller indemnify the Buyer Indemnitees or Buyer indemnify Seller
Indemnitees, or be otherwise liable in any way whatsoever to said Indemnitees,
for any Losses otherwise subject to indemnification by the Indemnifying Party
(determined after giving effect to the other provisions of this Section 8.3)
that in the aggregate exceed an amount equal to sixty-five percent (65%) of the
Purchase Price; provided, however, that the limitation set forth in this Section
8.3(e) shall not apply to Losses of a Buyer Indemnitee relating to a breach by
Seller of Section 6.14 (Revenue Bonds), and therefore such Losses shall be fully
indemnifiable by Seller hereunder.
(f) For purposes of this Article VIII only and except as provided below,
the existence of a breach of a Party's representation or warranty in this
Agreement and the calculation of Losses arising out of a Party's breach of a
representation or warranty in this Agreement shall be determined without giving
effect to any exception or qualification of such representation or warranty as
to the Asset Material Adverse Effect of such breach or the Material Adverse
Effect on any Person of such breach; provided that this Section 8.3(f) shall not
apply to a breach of Seller's representations and warranties set forth in
Section 4.22 or Section 4.24. Notwithstanding the foregoing, the Parties
acknowledge and agree that effect shall be given to any exception or
qualification of any representation or warranty in this Agreement of either
Party that is based on use of the term "materiality" or the phrase "in all
material respects" and similar undefined terms and phrases.
(g) Except to the extent otherwise provided in Section 3.3 (relating to
adjustments to the Base Purchase Price), Section 6.10(b) (relating to
post-Closing reimbursements for Taxes), Section 6.13(c) (relating to
post-Closing reimbursement of excess costs and expenses of repairing lost or
damaged Assets), and Section 6.16 (relating to specific performance and
injunctive relief with respect to Citizens Marks and Gasco Marks), after Closing
the rights and remedies of Seller and Buyer under this Article VIII are
exclusive and in lieu of any and all other rights and remedies which each of
Seller and Buyer may have under this Agreement or otherwise for monetary relief,
with respect to (i) all post-Closing claims relating to this Agreement, the
events giving rise to this Agreement and the transactions provided for herein or
contemplated hereby or thereby, or (ii) the Assumed Liabilities or the Excluded
Liabilities, as the case may be. Notwithstanding any language contained in any
Ancillary Agreement (including the Special Warranty Deed), the representations
and warranties of Seller set forth in this Agreement will not be merged into any
such Ancillary Agreement 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 Ancillary Agreement shall be deemed to enlarge,
alter or amend the terms or provisions of this Agreement.
(h) Notwithstanding anything to the contrary contained herein, no Party
(including an Indemnitee) shall be entitled to recover from any other Party
(including an Indemnifying Party) for any liabilities, damages, obligations,
payments, losses, costs, or expenses under this Agreement any amount in excess
of the actual compensatory damages, court costs and reasonable attorney's and
other advisor fees suffered by such Party. Each of Buyer and Seller waive any
right to recover punitive, incidental, special, exemplary and consequential
damages arising in connection with or with respect to this Agreement. The
provisions of this Section 8.3(h) shall not apply to indemnification for a Third
Party Claim.
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(i) The limitations set forth in this Section 8.3 do not apply to fraud or
willful misconduct of a Party.
(j) No amount shall be recovered from a Party for the breach or untruth of
any of such Party's representations, warranties, covenants or agreements, or for
any other matter, to the extent that the other Party had knowledge of such
breach, untruth or other matter at or prior to the Closing, nor shall the other
Party be entitled to rescission with respect to any such matter.
8.4 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion or commencement of
any Third Party Claim made or brought by any Person who is not a Party to this
Agreement or any Affiliate of a Party to this Agreement with respect to which
indemnification is to be sought from an Indemnifying Party, the Indemnitee shall
give such Indemnifying Party reasonably prompt written notice thereof, but in
any event such notice shall not be given later than ten (10) calendar days after
the Indemnitee's receipt of notice of such Third Party Claim. Such notice shall
describe the nature of the Third Party Claim in reasonable detail (as it is then
known to the Indemnitee) and shall indicate the estimated amount, if
practicable, of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have the right to participate in or, by
giving written notice to the Indemnitee, to elect to assume the defense of any
Third Party Claim at such Indemnifying Party's expense and by such Indemnifying
Party's own counsel, provided that the counsel for the Indemnifying Party who
shall conduct the defense of such Third Party Claim shall be reasonably
satisfactory to the Indemnitee. The Indemnitee shall cooperate in good faith in
such defense at such Indemnitee's own expense. If an Indemnifying Party elects
not to assume or to participate in the defense of any Third Party Claim, the
Indemnitee may compromise or settle such Third Party Claim over the objection of
the Indemnifying Party, which settlement or compromise shall conclusively
establish the Indemnifiable Loss for which the Indemnified Party may seek
indemnification from the Indemnifying Party pursuant to this Agreement.
(b) (i) If, within ten (10) calendar days after an Indemnitee provides
written notice to the Indemnifying Party of any Third Party Claims, the
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in Section 8.4(a), the Indemnifying Party will not be liable for any
legal expenses subsequently incurred by the Indemnitee in connection with the
defense thereof; provided, however, that if the Indemnifying Party shall fail to
take reasonable steps necessary to defend diligently such Third Party Claim
within twenty (20) calendar days after receiving notice from the Indemnitee that
the Indemnitee believes the Indemnifying Party has failed to take such steps,
the Indemnitee may assume its own defense and the Indemnifying Party shall be
liable for all reasonable expenses thereof.
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(ii) Without the prior written consent of the Indemnitee, the Indemnifying
Party shall not enter into any settlement of any Third Party Claim which would
lead to liability, constitute an admission of a criminal act or create any
financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder. If a firm offer is made
to settle a Third Party Claim without leading to liability, the admission of
criminal fault or liability or the creation of a financial or other obligation
on the part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder and the Indemnifying Party desires to accept and agree
to such offer, the Indemnifying Party shall give written notice to the
Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer
within ten (10) calendar days after its receipt of such notice, the Indemnifying
Party shall be relieved of its obligations to defend such Third Party Claim and
the Indemnitee may contest or defend such Third Party Claim at its own expense.
In such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will be the amount of such settlement offer plus reasonable costs
and expenses paid or incurred by Indemnitee up to the date of said notice.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss which
does not result from a Third Party Claim (a "Direct Claim") shall be asserted by
giving the Indemnifying Party reasonably prompt written notice thereof, stating
the nature of such claim in reasonable detail and indicating the estimated
amount, if practicable, but in any event such notice shall not be given later
than ten (10) calendar days after the Indemnitee becomes aware of such Direct
Claim, and the Indemnifying Party shall have a period of thirty (30) calendar
days within which to respond to such Direct Claim. If the Indemnifying Party
does not respond within such thirty (30) calendar day period, the Indemnifying
Party shall be deemed to have accepted such claim. If the Indemnifying Party
rejects such claim, the Indemnitee will be free to seek enforcement of its right
to indemnification under this Agreement.
(d) If the amount of any indemnifiable Loss, at any time subsequent to the
making of an indemnity payment in respect thereof, is reduced by recovery,
settlement or otherwise under or pursuant to any insurance coverage or pursuant
to any claim, recovery, settlement or payment by, from or against any other
entity, the amount of such reduction (less any out-of-pocket costs incurred in
connection therewith and the cost of any adjusted premium charges to the extent
directly relating to the claim for such indemnifiable Loss ("Recovery Costs"),
together with interest thereon from the date of payment thereof at the publicly
announced prime rate then in effect of Citibank, shall promptly be repaid by the
Indemnitee to the Indemnifying Party.
(e) A failure to give timely notice as provided in this Section 8.4 shall
not affect the rights or obligations of any Party hereunder except if, and only
to the extent that, as a result of such failure, the Party which was entitled to
receive such notice was actually prejudiced as a result of such failure.
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8.5 BHP Indemnity Arrangements. Seller acquired Gasco, Inc., the
predecessor owner and operator of the Business, from BHP Hawaii, Inc. pursuant
to a Stock Sale Agreement between Seller and BHP Hawaii, Inc., dated as of
January 9, 1997, as amended on October 30, 1997 (as amended, the "BHP Stock Sale
Agreement"). In Section 9.2 of the BHP Stock Sale Agreement, BHP agreed to
indemnify the "Buyer Indemnified Parties" for a "Buyer Loss" (as such terms are
defined in Section 9.2 of the BHP Stock Sale Agreement) arising out of or
resulting from the environment matters described in Sections 9.2(c), (d), (e)
and (g) of the bhp Stock Sale Agreement. Upon Closing, Buyer will become the
successor and assign of Seller with respect to the Business and the Assets and
one of the "Buyer Indemnified Parties" (as defined in Section 9.2 of the BHP
Stock Sale Agreement). Buyer has agreed to assume the environmental liabilities,
responsibilities and obligations described in Sections 2.3(e) and (f), some of
which may be covered by BHP's indemnity. The parties' intent with respect to the
foregoing is that to the extent any Losses incurred by Buyer may be reduced by
recovery, settlement or otherwise under or pursuant to any claim, recovery,
settlement or payment by or against BHP under Section 9.2 of the BHP Stock Sale
Agreement, then appropriate action under and consistent with the BHP Stock Sale
Agreement should be taken to seek to obtain the benefits of BHP's indemnity
under the BHP Stock Sale Agreement. Buyer shall use its Commercially Reasonable
Efforts to give timely and effective written notice to Seller of any occurrence
or circumstances that have given or could give rise to a claim against BHP under
Section 9.2 of the BHP Stock Sale Agreement. Buyer and Seller, acting jointly,
or Buyer and/or Seller acting separately, as the Parties may determine from time
to time, then shall use their respective Commercially Reasonable Efforts to give
BHP timely and effective notice in accordance with Section 9.4(b) of the BHP
Stock Sale Agreement. To the extent a Buyer Indemnitee also is an "Indemnitee"
as defined in Section 9.4(b) of the BHP Stock Sale Agreement, then Buyer shall,
and shall cause each other Buyer Indemnitee that may be such an "Indemnitee"
under the BHP Stock Sale Agreement, to comply with the pertinent provisions of
the BHP Stock Sale Agreement relating to any claim notice submitted to BHP by or
on behalf of such Buyer Indemnitee, including the provisions of Sections 9.4(b)
and 9.5(c) of the BHP Stock Sale Agreement, and to cooperate with Seller in
connection with Seller's compliance with such provisions and the submission and
prosecution of any such claim notice submitted to BHP. In the submission and
prosecution of any claim made by or on behalf of a Buyer Indemnitee against BHP
under Sections 9.2, 9.4(b) and/or 9.5(c) of the BHP Stock Sale Agreement, the
Parties in good faith will endeavor mutually to select counsel, to control the
prosecution of such claim and to make decisions concerning the settlement of
such claim, provided that if the Parties fail to mutually agree on any such
matter, Buyer will have the exclusive right to select counsel, to control such
prosecution and to make such settlement decisions after consultation with Seller
and with the understanding that Buyer will keep Seller timely and fully informed
of any plans or developments regarding such matters. Subject to Section 9.5(c)
of the BHP Stock Sale Agreement, Losses relating to the underlying occurrence or
circumstances giving rise to any such claim and to the prosecution and
settlement of any such claim shall be borne by Buyer (directly or, if necessary
or desirable to preserve better the Parties' ability to recover against BHP, by
loan advances to Seller on terms mutually acceptable to the Parties, it being
understood that a Party shall not be required to enter into such loan
arrangements if such Party would incur adverse financial or tax consequences as
a result) until such time, if ever, that such Losses become indemnifiable by
Seller in accordance with this Agreement. Each Party agrees to cooperate with
the other Party in providing assistance and access to personnel and records to
facilitate either Party's prosecution of claims against BHP under the BHP Stock
Sale Agreement, and neither Party will take any action to hinder the other
Party's efforts to submit and to prosecute claims for indemnification by BHP
under the BHP Stock Sale Agreement.
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ARTICLE IX
TERMINATION
9.1 Termination.
(a) This Agreement may be terminated at any time prior to the Closing Date
by mutual written consent of Seller and Buyer.
(b) This Agreement may be terminated by Seller or Buyer if (i) any federal
or state court of competent jurisdiction shall have issued an order, judgment or
decree permanently restraining, enjoining or otherwise prohibiting the Closing,
and such order, judgment or decree shall have become final and nonappeallable;
(ii) any statute, rule, nonappeallable order or regulation shall have been
enacted or issued by any Governmental Authority which prohibits the consummation
of the Closing; or (iii) the Closing shall have not occurred on or before the
day which is fifteen (15) months from the date of this Agreement, subject to
such extensions (not to exceed six months) as may be required by Seller to
repair or replace lost or damaged Assets in accordance with Section 6.13(c) (the
"Termination Date"); provided that the right to terminate this Agreement under
this Section 9.1(b)(iii), and any other Section, shall not be available to any
Party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in the event giving rise to the applicable termination
right.
(c) Except as otherwise provided in this Agreement, this Agreement may be
terminated by Buyer if any of the Buyer Required Regulatory Approvals, the
receipt of which is a condition to the obligation of Buyer to consummate the
Closing as set forth in Section 7.1(c), shall have been denied (and a petition
for rehearing or refiling of an application initially denied without prejudice
shall also have been denied) or, if such Required Regulatory Approval is
obtained, contains terms or conditions that would have a Regulatory Material
Adverse Effect for Buyer or an Asset Material Adverse Effect (after Buyer's
petition for rehearing objecting to such terms and conditions has been denied),
in either case that is not cured or otherwise addressed in a manner reasonably
acceptable to Buyer by the Closing Date.
(d) Except as otherwise provided in this Agreement, this Agreement may be
terminated by Seller if any of the Seller Required Regulatory Approvals, the
receipt of which is a condition to the obligation of Seller to consummate the
Closing as set forth in Section 7.2(c), shall have been denied (and a petition
for rehearing or refiling of an application initially denied without prejudice
shall also have been denied) or, if such Required Regulatory Approval is
obtained, contains terms or conditions that would have a Regulatory Material
Adverse Effect for Seller (after Seller's petition for rehearing objecting to
such terms and conditions has been denied), in either case that is not cured or
otherwise addressed in a manner reasonably acceptable to Seller by the Closing
Date.
(e) This Agreement may be terminated by Buyer if there has been a violation
or breach by Seller of any covenant, representation or warranty contained in
this Agreement provided that such violation or breach would have an Asset
Material Adverse Effect or a Buyer Material Adverse Effect that is not cured or
otherwise addressed by Seller in a manner reasonably acceptable to Buyer by the
Closing Date and such violation or breach has not been waived by Buyer.
72
(f) This Agreement may be terminated by Seller, if there has been a
violation or breach by Buyer of any covenant, representation or warranty
contained in this Agreement provided that such violation or breach would have a
Seller Material Adverse Effect (it being agreed by Buyer that Buyer's failure to
pay the Purchase Price on the Closing Date shall be deemed to have a Seller
Material Adverse Effect) and such violation or breach is not cured or otherwise
addressed by Buyer in a manner reasonably acceptable to Seller by the Closing
Date, and such violation or breach has not been waived by Seller.
(g) This Agreement may be terminated by either Party if either (i) a
special meeting of the shareholders of k1 Ventures Limited is duly convened and
the requisite vote of such shareholders required to approve the Required
Shareholder Actions is not obtained at such special meeting or any adjournment
thereof or (ii) a special meeting of the shareholders of k1 Ventures Limited
called for the purpose of voting upon the Required Shareholder Actions is not
duly convened by April 30, 2003.
9.2 Procedure and Effect of Termination. In the event of termination of
this Agreement by either or both Seller and Buyer pursuant to this Article IX,
written notice thereof shall forthwith be given by the terminating Party to the
other Party, whereupon the liabilities of the Parties hereunder will terminate,
except as otherwise expressly provided in this Agreement (including Section
9.3), and thereafter none of the Parties shall have any recourse against any
other Party by reason of this Agreement. If prior to Closing either Party
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
9.3 Liquidated Damages.
(a) Seller shall pay to Buyer $5,750,000 if Buyer terminates this Agreement
pursuant to Section 9.1(e).
(b) Buyer shall pay to Seller $5,750,000 if (i) Seller terminates this
Agreement pursuant to Section 9.1(f), (ii) Seller terminates this Agreement
pursuant to Section 9.1(d) because the requisite Required Regulatory Approval
from the HPUC has not been obtained due in whole or in substantial part to the
HPUC's findings about Buyer's financial, legal or operational qualifications or
capabilities, (iii) Buyer terminates this Agreement pursuant to Section 9.1(c),
because the requisite Required Regulatory Approval from the HPUC has not been
obtained, due in whole or in substantial part to the HPUC's findings about
Buyer's financial, legal or operational qualifications or capabilities, or (iv)
either Party terminates this Agreement pursuant to Section 9.1(g).
73
(c) In view of the difficulty of determining the amount of damages which
may result from a termination pursuant to Sections 9.3(a) or 9.3(b) or pursuant
to any of the Sections of this Agreement referenced in Section 9.3(a) or 9.3(b),
and the failure to consummate the transactions contemplated by this Agreement,
Buyer and Seller have mutually agreed that each of the payments set forth in
Sections 9.3(a) and 9.3(b) shall be made to the appropriate Party as liquidated
damages, and not as a penalty, and this Agreement shall thereafter become null
and void except for those provisions which by their terms survive termination of
this Agreement. In the event of any such termination, the Parties have agreed
that each of the payments set forth in Sections 9.3(a) and 9.3(b) shall be the
sole and exclusive remedy of the Party entitled to receive any such payment.
ACCORDINGLY, THE PARTIES HEREBY ACKNOWLEDGE THAT (1) THE EXTENT OF DAMAGES TO A
PARTY CAUSED BY THE FAILURE OF THIS TRANSACTION TO BE CONSUMMATED WOULD BE
IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN, (2) THE AMOUNT OF THE LIQUIDATED
DAMAGES PROVIDED FOR IN EACH OF SECTIONS 9.3(a) AND 9.3(b) ARE FAIR AND
REASONABLE ESTIMATES OF SUCH DAMAGES UNDER THE CIRCUMSTANCES AND (3) RECEIPT OF
SUCH LIQUIDATED DAMAGES BY THE APPROPRIATE PARTY DOES NOT CONSTITUTE A PENALTY.
THE PARTIES HEREBY FOREVER WAIVE AND AGREE TO FOREGO TO THE FULLEST EXTENT UNDER
APPLICABLE LAW ANY AND ALL RIGHTS THEY HAVE OR IN THE FUTURE MAY HAVE TO BRING
ANY ACTION OR ARBITRAL PROCEEDING DISPUTING OR OTHERWISE OBJECTING TO ANY OR ALL
OF THE FOREGOING PROVISIONS OF THIS SECTION 9.3.
(d) All payments under this Section 9.3 shall be from payor to payee by
wire transfer of immediately available funds to a bank account in the United
States of America designated in writing by payee not later than three (3)
business days following payor's receipt of such account designation from payee.
ARTICLE X
MISCELLANEOUS
10.1 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by written agreement of the Parties.
10.2 Waiver of Compliance; Consents. Except as otherwise provided in this
Agreement, any failure of any of the Parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the Party entitled to
the benefits thereof only by a written instrument signed by the Party granting
such waiver, but any such waiver of such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent failure to comply therewith.
10.3 [Intentionally Omitted]
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission with completed transmission acknowledgment, or mailed by overnight
delivery via a nationally recognized courier or registered or certified first
class mail (return receipt requested), postage prepaid, to the recipient Party
at its address (or at such other address or facsimile number for a Party as
shall be specified by like notice; provided; however, that notices of a change
of address shall be effective only upon receipt thereof):
74
(a) If to Seller, to:
Citizens Communications Company
High Ridge Park
Stamford, CT 06905
Attention: Jerry Elliott
Telephone: (203) 614-6722
Telecopier: (203) 614-4661
with a copy to:
Citizens Communications Company
High Ridge Park
Stamford, CT 06905
Attention: L. Russell Mitten
Telephone: (203) 614-5047
Telecopier: (203) 614-4651
and:
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Attention: Jeffry L. Hardin
Telephone: (202) 939-7914
Telecopier: (202) 387-3467
(b) if to Buyer, to:
c/o K-1 USA Ventures, Inc.
2601 Bayshore Drive
Suite 1775
Coconut Grove, FL 33133
Attention: Jeff Safchik
Telephone: (305) 858-4225
Telecopier: (305) 858-2334
75
with a copy to:
K-1 USA Ventures, Inc.
1880 Century Park East
Suite 213
Los Angeles, CA 90067
Attention: Cary Meadow
Telephone: (310) 201-6861
Telecopier: (310) 201-6858
and:
Jones Walker Waechter Poitevent Carrere & Denegre
201 St. Charles Avenue
New Orleans, LA 70170
Attention: Curtis R. Hearn
Telephone: (504) 582-8308
Telecopier: (504) 589-8308
10.5 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns, but, except to the extent permitted by this
Section 10.5, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any Party hereto, including by
operation of law, without the prior written consent of each other Party, nor is
this Agreement intended to confer upon any other Person except the Parties
hereto any rights, interests, obligations or remedies hereunder; provided,
however, in the event of any such assignment by a Party by operation of law
without the consent of the other Party, this Agreement and all the provisions
hereof shall be binding upon the Person receiving such assignment by operation
of law. Notwithstanding the foregoing, (i) K-1 USA shall assign this Agreement
to the k1 Designee in accordance with Section 6.8(f), and such assignment shall
have the legal effect provided in Section 6.8(f), and (ii) Buyer may make a
security assignment to any lender providing financing in respect of Buyer's
acquisition of the Assets.
10.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Hawaii (without giving effect to
conflict of law principles) as to all matters, including but not limited to
matters of validity, construction, effect, performance and remedies (except to
such matters of real estate law that must be governed by the law of the State of
Hawaii). THE PARTIES HERETO AGREE THAT VENUE IN ANY AND ALL ACTIONS AND
PROCEEDINGS RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE IN THE
STATE AND FEDERAL COURTS IN AND FOR HONOLULU, HAWAII, WHICH COURTS SHALL HAVE
EXCLUSIVE JURISDICTION FOR SUCH PURPOSE, AND THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND IRREVOCABLY WAIVE THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
PROCEEDING. SERVICE OF PROCESS MAY BE MADE IN ANY MANNER RECOGNIZED BY SUCH
COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
76
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 Interpretation. The articles, section and schedule headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the Parties and shall not in any way affect the meaning or
interpretation of this Agreement.
10.9 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are specifically made a part of this Agreement. Any matter or item
disclosed on any Schedule shall not be deemed to give rise to circumstances
which result in an Asset Material Adverse Effect or a Material Adverse Effect
solely by reason of it being so disclosed. Any matter or item disclosed pursuant
to any Schedule shall be deemed to be disclosed for all purposes under this
Agreement reasonably related thereto and any matter disclosed in one Schedule
will be deemed disclosed with respect to another Schedule if such disclosure is
made in such a way as to make its relevance with respect to such other Schedule
readily apparent.
10.10 Entire Agreement. This Agreement, the Ancillary Agreements and the
Exhibits, Schedules, documents, certificates and instruments referred to herein
or therein, embody the entire agreement and understanding of the Parties hereto
in respect of the transactions contemplated by this Agreement. There are no
restrictions, promises, representations, warranties, covenants or undertakings,
other than those expressly set forth or referred to herein or therein. This
Agreement and the Ancillary Agreements supersede all prior agreements and
understandings between the Parties other than the Confidentiality Agreement with
respect to such transactions.
10.11 U.S. Dollars. Unless otherwise stated, all dollar amounts set forth
herein are United States (U.S.) dollars.
10.12 Bulk Sales Laws. Buyer acknowledges that, notwithstanding anything in
this Agreement to the contrary and except for Seller's delivery of the
certificates specified in Section 3.5(l), Seller will not comply with the
provision of the bulk sales laws of any jurisdiction in connection with the
transactions contemplated by this Agreement. Buyer hereby waives compliance by
Seller with the provisions of the bulk sales laws of all applicable
jurisdictions to the extent permitted by law.
10.13 Construction of Agreement. The terms and provisions of this Agreement
represent the results of negotiations between Buyer and Seller, each of which
has been represented by counsel of its own choosing, and neither of which has
acted under duress or compulsion, whether legal, economic or otherwise.
Accordingly, the terms and provisions of this Agreement shall be interpreted and
construed in accordance with their usual and customary meanings, and Buyer and
Seller hereby waive the application in connection with the interpretation and
construction of this Agreement of any rule of law to the effect that ambiguous
or conflicting terms or provisions contained in this Agreement shall be
interpreted or construed against the Party whose attorney prepared the executed
draft or any earlier draft of this Agreement. It is understood and agreed that
neither the specification of any dollar amount in the representations and
warranties contained in this Agreement nor the inclusion of any specific item in
the Schedules or Exhibits is intended to imply that such amounts or higher or
lower amounts, or the items so included or other items, are or are not material,
and none of the Parties shall use the fact of the setting of such amounts or the
fact of any inclusion of any such item in the Schedules or Exhibits in any
dispute or controversy between the Parties as to whether any obligation, item or
matter is or is not material for purposes hereof.
77
10.14 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 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.
10.15 Third Party Beneficiary. No provision of this Agreement shall create
any third party beneficiary rights in any employee or former employee of Seller
(including any beneficiary or dependant thereof) in respect of continued
employment or resumed employment, and no provision of this Agreement shall
create any rights in any such Persons in respect of any benefits that may be
provided, directly or indirectly, under any employee benefit plan or
arrangement.
78
IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
K-1 USA VENTURES, INC. CITIZENS COMMUNICATIONS COMPANY
By: /s/ Jeffrey A. Satchik By: /s/ Michael A. Zarrella
----------------------- --------------------------
Name: Jeffrey A. Satchik Name: Michael A. Zarrella
-------------------- -----------------------
Title: Chief Executive Officer Title: Vice President Corporate
----------------------- Development
------------------------
79
LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Bill of Sale
Exhibit C Special Warranty Deed
Exhibit D Form of Seller General Counsel Opinion
Exhibit E Form of Seller Bond Counsel Opinion
Exhibit F Form of Buyer General Counsel Opinion
SCHEDULES
1.1 Seller Employees on Whose Knowledge Buyer May Rely
2.1(k) Certain Seller Insurance Policies
2.2 Excluded Assets
2.3(h) Governmental Orders
2.3(j) Assumed Actions and Proceedings
4.3(b) Seller Required Regulatory Approvals
4.4 Seller Insurance
4.5 Seller Real Property Leases
4.6 Seller Environmental Matters
4.7 Seller Labor Matters
4.8 Seller Benefit Plans
4.9 Seller Real Property
4.10 Seller Condemnation Matters
4.11(a) Certain Seller Material Agreements
4.11(b) Certain Seller Material Agreements Requiring Consent to Transfer
4.11(c) Defaults Under Certain Material Agreements
4.12 Legal Proceedings Involving Seller
4.13 Seller Permit Violations
4.14 Seller Tax Matters
4.15 Seller Intellectual Property Exceptions
4.20 Seller Financial Statements
5.3(a) Buyer's Conflicts, Defaults and Violations
5.3(b) Buyer Required Regulatory Approvals
6.1(a) Exceptions to Conduct of Business and Operation of the Assets
6.12(d)(iii)(D) Retirees
6.14(a) Seller Revenue Bonds
6.15 Seller Surety Instruments
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘10-K’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 12/31/03 | | 38 | | | | | 10-K, 8-K |
| | 6/30/03 | | 46 | | | | | 10-Q, 10-Q/A, 11-K, 4, 8-K |
| | 4/30/03 | | 77 |
| | 3/31/03 | | 66 | | | | | 10-Q, 10-Q/A, 8-K |
| Filed on: | | 3/24/03 |
| | 1/17/03 | | 51 |
| For Period End: | | 12/31/02 | | 27 | | 46 | | | 10-K/A, 4, 4/A, 8-K |
| | 12/19/02 | | 1 | | 5 | | | 4 |
| | 11/30/02 | | 35 |
| | 10/25/02 | | 52 |
| | 10/14/02 | | 47 |
| | 9/30/02 | | 39 | | | | | 10-Q |
| | 6/30/02 | | 39 | | 42 | | | 10-Q |
| | 12/31/01 | | 39 | | | | | 10-K, 11-K |
| | 1/1/01 | | 39 |
| | 12/31/00 | | 39 | | | | | 10-K, 11-K, 8-K |
| | 10/30/97 | | 75 |
| | 1/9/97 | | 75 | | | | | 8-K |
| | 8/20/96 | | 62 |
| List all Filings |
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