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EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
(LOUISIANA GAS OPERATIONS)
among
CITIZENS UTILITIES COMPANY,
LGS NATURAL GAS COMPANY
and
ATMOS ENERGY CORPORATION
Dated as of April 13, 2000
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS 1
Section 1.1 Certain Defined Terms................................................ 1
Section 1.2 Other Defined Terms.................................................. 9
ARTICLE II PURCHASE AND SALE 10
Section 2.1 Purchase and Sale of LGSN Assets..................................... 10
Section 2.2 Purchase and Sale of Division Assets................................. 10
Section 2.3 Assumed Liabilities.................................................. 10
Section 2.4 Retained Liabilities................................................. 11
Section 2.5 Condition on Assignment or Assumption of Contracts and Rights........ 12
ARTICLE III PURCHASE PRICE 12
Section 3.1 Purchase Price....................................................... 12
Section 3.2 Calculation of Purchase Price........................................ 13
Section 3.3 Prorations and Adjustments as of the Closing Date.................... 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 14
Section 4.1 Organization, Existence and Qualification............................ 15
Section 4.2 Authority Relative to this Agreement and Binding Effect.............. 15
Section 4.3 Governmental and other Required Consents............................. 15
Section 4.4 Availability of Funds................................................ 15
Section 4.5 Filings.............................................................. 15
Section 4.6 Brokers.............................................................. 16
Section 4.7 Independent Investigation............................................ 16
Section 4.8 Public Utility Holding Company Status; Regulation as a Public Utility 16
Section 4.9 Buyer's Financial Statements......................................... 16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLERS 16
Section 5.1 Organization, Existence and Qualification............................ 17
Section 5.2 Authority Relative to this Agreement and Binding Effect.............. 17
Section 5.3 Governmental and Other Required Consents............................. 17
Section 5.4 Filings.............................................................. 18
Section 5.5 Title to Assets; Encumbrances........................................ 18
Section 5.6 Financial Statements................................................. 18
Section 5.7 Compliance with Legal Requirements; Governmental Permits;
Business Practices.................................................. 19
Section 5.8 Legal Proceedings; Outstanding Orders................................ 20
Section 5.9 Taxes................................................................ 20
Section 5.10 Intellectual Property................................................ 20
Section 5.11 Y2K Compliance....................................................... 21
Section 5.12 Material Contracts................................................... 21
Section 5.13 Employee Benefit Matters............................................. 21
Section 5.14 Environmental Matters................................................ 23
Section 5.15 Labor Matters........................................................ 25
Section 5.16 State Regulatory Matters............................................. 25
Section 5.17 Public Utility Holding Company Status; Regulation as a Public Utility 26
Section 5.18 Brokers.............................................................. 26
Section 5.19 Insurance............................................................ 26
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Section 5.20 Disclaimer........................................................... 26
ARTICLE VI COVENANTS 26
Section 6.1 Covenants of Sellers................................................. 26
Section 6.2 Covenants of Buyer................................................... 30
Section 6.3 Governmental Filings................................................. 31
Section 6.4 Citizens Marks....................................................... 31
Section 6.5 Transition Plan...................................................... 32
Section 6.7 Schedule of Easements and Interests.................................. 32
Section 6.8 Rhodes Security...................................................... 32
Section 6.9 Certain Proceedings.................................................. 33
Section 6.10 Buyer's Insurance.................................................... 33
ARTICLE VII CONDITIONS PRECEDENT 33
Section 7.1 Sellers' Conditions Precedent to Closing............................. 33
Section 7.2 Buyer's Conditions Precedent to Closing.............................. 34
ARTICLE VIII CLOSING 36
Section 8.1 Closing.............................................................. 36
ARTICLE IX TERMINATION 37
Section 9.1 Termination Rights................................................... 37
Section 9.2 Limitation on Right to Terminate: Effect of Termination.............. 38
ARTICLE X EMPLOYEE MATTERS 38
Section 10.1 Employment of Transferred Employees.................................. 38
Section 10.2 Intentionally Omitted................................................ 39
Section 10.3 Cessation of Participation in Sellers' Plans; Bonuses................ 39
Section 10.4 Similarity of Benefit Packages....................................... 39
Section 10.5 Defined Benefit Pension Plan......................................... 39
Section 10.6 401(k) Plan.......................................................... 40
Section 10.7 Welfare Benefits..................................................... 41
Section 10.8 Flexible Spending Accounts........................................... 42
Section 10.9 Employment Agreements................................................ 42
Section 10.10 Vacation/Time Off.................................................... 42
Section 10.11 Severance............................................................ 42
Section 10.12 Health Care Continuation Coverage.................................... 42
ARTICLE XI TAX MATTERS 43
Section 11.1 Purchase Price allocation............................................ 43
Section 11.2 Cooperation with Respect to Like-Kind Exchange....................... 44
Section 11.3 Transaction Taxes.................................................... 44
Section 11.4 Clearance Certificates............................................... 45
ARTICLE XII ENVIRONMENTAL MATTERS 45
Section 12.1 Environmental Due Diligence.......................................... 45
ARTICLE XIII INDEMNIFICATION 47
Section 13.1 Indemnification by Sellers........................................... 47
Section 13.2 Indemnification by Buyer............................................. 47
Section 13.3 Limitations on Liability............................................. 48
Section 13.4 Claims Procedure..................................................... 51
Section 13.5 Exclusive Remedy..................................................... 53
Section 13.6 Indemnification for Negligence....................................... 53
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ARTICLE XIV GENERAL PROVISIONS 53
Section 14.1 Expenses............................................................. 53
Section 14.2 Notices.............................................................. 53
Section 14.3 Assignment........................................................... 55
Section 14.4 Successor Bound...................................................... 55
Section 14.5 Governing Law........................................................ 55
Section 14.6 Dispute Resolution................................................... 56
Section 14.7 Cooperation.......................................................... 57
Section 14.8 Construction of Agreement............................................ 57
Section 14.9 Publicity............................................................ 58
Section 14.10 Waiver............................................................... 58
Section 14.11 Parties in Interest.................................................. 58
Section 14.12 Section and Paragraph Headings....................................... 58
Section 14.13 Amendment............................................................ 58
Section 14.14 Entire Agreement..................................................... 58
Section 14.15 Counterparts......................................................... 59
Section 14.16 Severability......................................................... 59
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LIST OF EXHIBITS*
Exhibit 6.7 Form of Substitute Agreement
Exhibit 7.1(g) Form of Buyer's Opinion of Counsel
Exhibit 7.2(g) Form of Sellers' Opinion of Counsel
LIST OF SCHEDULES*
Schedule 1.1(a) Certain Assets
Schedule 1.1(b) Certain Excluded Assets
Schedule 4.3 Buyer's Governmental Approvals
Schedule 5.2 Sellers' Authority
Schedule 5.3 Sellers' Governmental and Other Required Consents
Schedule 5.5 Encumbrances; Owned Real Property
Schedule 5.6(a) Financial Statements
Schedule 5.6(b) Certain Liabilities
Schedule 5.6(c) Certain Changes
Schedule 5.7 Compliance with Legal Requirements; Governmental
Permits
Schedule 5.8 Legal Proceedings; Outstanding Orders
Schedule 5.9 Taxes
Schedule 5.10 Intellectual Property
Schedule 5.12 Material Contracts
Schedule 5.13 Employee Matters
Schedule 5.14 Environmental Matters
Schedule 5.15 Labor Matters
Schedule 5.16 State Regulatory Matters
Schedule 5.19 Sellers' Insurance
Schedule 6.1 Conduct of Business Prior to Closing Date
Schedule 6.2(c) Citizens' Guarantees and Surety Instruments
Schedule 10.7 Retirees and "Grandfathered Employees"
Schedule 10.11 Severance Benefits
* Exhibits and Schedules are not filed herewith. Atmos Energy Corporation hereby
agrees to furnish supplementally a copy of any Exhibit or Schedule to the
Commission upon request.
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PURCHASE AND SALE AGREEMENT
(LOUISIANA GAS OPERATIONS)
This PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the 13th
day of April, 2000, by and among CITIZENS UTILITIES COMPANY, a Delaware
corporation ("Citizens"), LGS NATURAL GAS COMPANY, a Louisiana corporation
("LGSN" and, together with Citizens, "Sellers"), and ATMOS ENERGY CORPORATION, a
Texas and Virginia corporation ("Buyer"). Capitalized terms used herein shall
have the meanings ascribed to them in Article I, unless otherwise provided.
W I T N E S S E T H:
WHEREAS, Citizens own all of the Division Assets and LGSN owns all of the
LGSN Assets; and
WHEREAS, Buyer desires to purchase, and Sellers desire to sell, the
Division Assets and the LGSN Assets, subject in all respects to the provisions
of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Article I
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
"Affiliates" or "Affiliated Entities" -- entities shall be deemed
"Affiliated" as to each other to the extent (i) one of the entities directly or
indirectly controls the other, or the direct or indirect control of one of the
entities is exercised by the officers, directors, stockholders, or partners of
the other entity (whether or not such persons exercise such control in their
capacities as officers, directors, stockholders, or partners) or (ii) is deemed
to be an Affiliate under existing statutes or regulations of the SEC.
"Assets" -- means, collectively, all of the Division Assets and all of the
LGSN Assets, including the following (except to the extent included among the
Excluded Assets):
(a) the Real Property described in Schedule 5.5, and all
buildings, structures and other improvements, fixtures and fittings located on
such Real Property, and all Easements, appurtenances and other interests owned
or held by a Seller and necessary for or relating to the Business (including all
gas pipes and pipelines, and all facilities used for storing and delivering
natural gas or propane);
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(b) all inventories of natural gas, propane and other fuels, and all
supplies, materials and critical spares held by a Seller for use in connection
with the Business and located on, in storage for, or in transit to the Real
Property on the Closing Date;
(c) all machinery, equipment, tools, vehicles, furniture and other
tangible personal property used in connection with the Business, including the
items of tangible personal property listed on Schedule 1.1(a); and all
warranties, guarantees, and service and replacement programs of manufacturers,
service providers or other vendors relating thereto, in each case to the extent
that the same are transferable;
(d) all Contracts relating to the Business;
(e) the franchises, ordinances or similar agreements listed on
Schedule 1.1(a) with respect to Citizens' authority to distribute natural gas
and all other licenses, permits and authorizations held by a Seller and relating
to the Business, in each case to the extent the same are assignable;
(f) originals or copies of all records, books, operating records,
operating, safety and maintenance manuals, engineering design plans, blueprints
and as-built plans, specifications, procedures and similar items of Citizens or
LGSN relating to the Assets, including all books of account, customer lists,
billing records and other customer correspondence relating to the Business,
records relating to the Transferred Employees (to the extent such transfer is
not prohibited by any Legal Requirement), all regulatory filings and all other
books and records relating to the rates and services provided by Citizens or
LGSN in connection with the operation of the Business;
(g) all rights or choses in action arising out of occurrences before
or after the Closing Date and related to any of the Assets, including all
related claims, credits, rights of recovery and set-off and other similar
contractual rights (other than with respect to rights to insurance and
condemnation proceeds described in clause (h)), as to third parties held by or
in favor of a Seller; provided, however, that notwithstanding the foregoing
provisions of this clause (g), to the extent that a Seller pays or discharges a
liability related to the Business or any of the Assets that is related to such
right or chose in action (whether by reason of indemnification under this
Agreement or otherwise), Buyer will reassign or reconvey to such Seller such
right or chose in action to the extent that such right or chose in action
relates to a recovery of amounts paid to Buyer;
(h) all rights to insurance and condemnation proceeds outstanding on
the Closing Date to the extent relating to the damage, destruction, taking or
other impairment of the Assets which damage, destruction, taking or other
impairment occurs on or prior to the Closing, but only to the extent of any
proceeds remaining after any repair or replacement of the affected Assets; and
(i) all accounts receivable (including rights to earned but unbilled
revenue) and prepayments, in each case attributable exclusively to the Business
and accrued or outstanding on the Closing Date.
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"Business" -- means collectively:
(a) the regulated natural gas distribution business conducted by
Citizens within the State of Louisiana through its Louisiana Gas Service
division;
(b) the nonregulated natural gas transportation and sales business
conducted by Citizens within the State of Louisiana through its LGS Intrastate
Company division;
(c) the nonregulated natural gas supply, storage and transmission
activities conducted by LGSN within the State of Louisiana; and
(d) the provision of related services and products and the engagement
in related activities by Citizens, through its Louisiana Gas Service division
and its LGS Intrastate Company division, and by LGSN, in each case within the
State of Louisiana.
"Claim Notice" -- means a written notice of a claim given by a party
seeking indemnification pursuant to the terms of this Agreement that specifies
in reasonable detail the nature of the Losses and the estimated amount of such
Losses.
"Confidentiality Agreement" -- means the confidentiality agreement dated
October 20, 1999, between Buyer and Citizens.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization from any Person.
"Contract" -- any agreement, contract, document, instrument, obligation,
promise or undertaking (whether written or oral) that is legally binding,
including Easements.
"Division Assets" -- all of the assets, property and interests of every
type and description, real, personal or mixed, tangible and intangible, of
Citizens and relating primarily to the Business as engaged in by Citizens
through the Louisiana Gas Service (also known as LGS Gas) division of Citizens
or the LGS Intrastate Company division of Citizens, other than the Excluded
Assets.
"Easements"-- means all easements, servitudes, rights of way, permits,
licenses, and other ways of necessity, whether or not of record.
"Encumbrance" -- any charge, adverse claim, lien, mortgage, pledge,
security interest, imperfection in title, limitation, Easement, restriction or
other encumbrance of any kind.
"Environmental Law"-- any Order or Legal Requirement, and any judicial and
administrative interpretation thereof and related policies, guidelines and
standards, relating to pollution or protection of the environment and natural
resources, including those relating to (a) emissions, discharges, Releases or
threatened Releases of Hazardous Material into the environment (including
ambient air, surface water, groundwater or land), and (b) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Material, each as in effect as of the date of
determination.
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"Environmental Liability" -- means any liability, responsibility or
obligation arising out of or relating to:
(a) the presence of any Hazardous Material in the fixtures,
structures, soils, groundwater, surface water or air on, under or about or
emanating from the assets and properties currently or formerly used, operated,
owned, leased, controlled, possessed, occupied or maintained by a Person, and
any such Hazardous Material emanating to adjoining or other properties;
(b) the use, generation, production, manufacture, treatment, storage,
disposal, Release, threatened Release, discharge, spillage, loss, seepage or
filtration of Hazardous Materials by a Person or its employees, agents or
contractors from, on, under or about the assets or properties currently or
formerly used, operated, owned, leased, controlled, possessed, occupied or
maintained by such Person or the presence therein or thereunder of any
underground or above-ground tanks for the storage of fuel oil, gasoline and/or
other petroleum products or by-products or other Hazardous Material;
(c) the violation or noncompliance or alleged violation or
noncompliance by a Person or its employees, agents or contractors of any
Environmental Law arising from or related to its or their conduct, actions or
operations or the former or current use, operation, ownership, lease,
possession, control, occupancy, maintenance or condition of any of such Person's
former or current assets or properties;
(d) the failure by a Person or its employees, agents, or contractors
to have obtained or maintained in effect any certificate, permit or
authorization required by any Environmental Law as a result of its or their
conduct, actions or operations or the use, operation, ownership, lease, control,
possession, occupancy, maintenance or condition of such Person's assets or
properties;
(e) any and all Proceedings arising out of any of the above-described
matters, including Proceedings by Governmental Bodies for enforcement, cleanup,
removal, treatment, response, remedial or other actions or damages and
Proceedings by any third Person seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief; and
(f) any and all remedial work and other corrective action (including
investigation or monitoring of site conditions, or any clean-up, containment,
restoration or removal) taken by, or the costs of which are imposed upon, a
Person arising from any of the above-described matters.
"ERISA" - the Employee Retirement Income Security Act of 1974, as amended,
or any successor law, and regulations and rules issued pursuant to that act or
any successor law.
"ERISA Affiliate" -- any corporation or trade or business (whether or not
incorporated) which is, as of the date of this Agreement or at any time within
the six years preceding the date hereof would be treated as a single employer
under IRC Section 414.
"Excluded Assets" -- means the following assets of Citizens or LGSN, each
of which shall be excluded from the Assets, and not acquired by Buyer, at
Closing:
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(a) assets that Citizens uses in both the Business and in Citizens'
other gas, electric, communications or water businesses that are described
generally in Schedule 1.1(b), and Contracts regarding the procurement of
services or goods by Citizens for use in such other businesses;
(b) cash and cash equivalents in transit, in hand or in bank
accounts;
(c) except as otherwise set forth in Article X, assets attributable
to or related to a Benefit Plan of Citizens;
(d) the stock record and minute books of Citizens and LGSN, all
records prepared in connection with the sale of the Business (including bids
received from third parties and analysis relating to the Business), and
duplicate copies of all books and records transferred to Buyer;
(e) assets disposed of by Citizens or LGSN after the date of this
Agreement to the extent such dispositions are not prohibited by this Agreement;
(f) except to the extent set forth in Section 3.3, rights to refunds
of Taxes payable with respect to the Business, assets, properties or operations
of Citizens, LGSN or any member of any affiliated group of which either of them
is a member;
(g) accounts owing, by and among Citizens, LGSN and their Affiliates;
(h) all deferred Tax assets;
(i) any insurance policy, bond, letter of credit or other similar
item, any cash surrender value in regard thereto, and all rights to insurance or
condemnation proceeds except to the extent provided in clause (h) in the
definition of Assets set forth in Section 1.1;
(j) the Citizens Marks;
(k) the capital stock of LGSN; and
(l) the other assets listed on Schedule 1.1(b).
"Final Order" -- an action by a Governmental Body as to which: (a) no
request for stay of the action is pending, no such stay is in effect and if any
time period is permitted by statute or regulation for filing any request for
such stay, such time period has passed; (b) no petition for rehearing,
reconsideration or application for review of the action is pending and the time
for filing any such petition or application has passed; (c) such Governmental
Body does not have the action under reconsideration on its own motion and the
time in which such reconsideration is permitted has passed; and (d) no appeal to
a court, or a request for stay by a court of the Governmental Body's action is
pending or in effect and the deadline for filing any such appeal or request has
passed.
"GAAP" -- generally accepted United States accounting principles, applied
on a consistent basis.
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"General Order" - means any Order applicable generally to Persons engaged
in a business similar to the Business.
"General Proceeding" - means any Proceeding that is reasonably expected to
result only in a General Order.
"Governmental Body" -- any of the following that possesses competent
jurisdiction:
(a) foreign, federal, state, county, parish, local, municipal or
other governmental body;
(b) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity and
any court or other tribunal); or
(c) any governmental body entitled to exercise any administrative,
executive, judicial, legislative, police, regulatory or Tax authority or power
of any nature.
"Hazardous Materials" -- any waste or other chemical, material or substance
that is listed, defined, designated, or classified as, or otherwise determined
to be, hazardous, radioactive, toxic, or a pollutant or a contaminant, or words
of similar import, under or pursuant to any Environmental Law, including any
admixture or solution thereof, and specifically including oil, natural gas,
petroleum and all derivatives thereof or synthetic substitutes therefor,
asbestos or asbestos-containing materials, any flammable substances or
explosives, any radioactive materials, any toxic wastes of substances, urea
formaldehyde foam insulation, toluene or polychlorinated biphenyls.
"HSR Act" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or any successor law, and regulations and rules issued by the U.S.
Department of Justice or the Federal Trade Commission pursuant to that act or
any successor law.
"IRC" - the Internal Revenue Code of 1986, as amended.
"IRS" -- the Internal Revenue Service or any successor agency.
"Knowledge" -- means, (i) with respect to Sellers, the actual knowledge of
Citizens' Chief Financial Officer; President, Citizens Public Services; or the
Vice President and General Manager of Louisiana Gas Services, or their
respective successor, after reasonable investigation required for the
transactions contemplated hereby, and (ii) with respect to Buyer, the actual
knowledge of Buyer's Chief Financial Officer; Executive Vice President of
Utility Operations; or Vice President and Treasurer, or their respective
successor, after reasonable investigation required for the transactions
contemplated hereby; provided that no party shall be required to perform an
environmental assessment for purposes of this definition.
"Legal Requirement" -- any federal, state, county, parish, local,
municipal, foreign, international, multinational, or other administrative Order,
constitution, law, ordinance, adopted code, principle of common law, regulation,
rule, directive, approval, notice, tariff, franchise agreement, statute or
treaty.
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"LGSN Assets" -- means all of the assets, property and interests of every
type and description, real, personal or mixed, tangible and intangible, of LGSN,
other than the Excluded Assets.
"Losses" -- shall mean all claims, losses, liabilities, damages, causes of
action, costs and expenses (including, involving theories of negligence or
strict liability and including court costs and reasonable attorneys' fees and
disbursements in connection therewith), whether or not involving a third party
claim.
"LPSC" - shall mean the Louisiana Public Service Commission.
"Material Adverse Effect" -- an occurrence or condition that has a material
adverse effect on the Business, the Assets, or the liabilities, operations,
financial condition or results of operations of the Business. In each instance,
whether an occurrence has a material adverse effect will be determined after
taking into account the totality of the facts and circumstances relating to such
occurrence or condition, or to its effect, including mitigating factors such as
insurance, rate or other regulatory relief and third party contribution
obligations. For purposes of this Agreement, an occurrence or condition will not
constitute a Material Adverse Effect if it arises from general business,
economic, or financial market conditions; from conditions generally affecting
the industries in which the Business competes; or from the transactions
contemplated by this Agreement.
"Material Contract" -- a Contract relating primarily to the Business and
involving a total commitment by or to any party thereto of at least $100,000 on
an annual basis and which cannot be terminated by Citizens or LGSN with notice
of ninety (90) days or less without penalty to Citizens or LGSN.
"Order" -- any award, decision, injunction, judgment, order (including any
rule-making order), writ, decree, ruling, subpoena, or verdict entered, issued,
made, or rendered by any court, administrative agency, other Governmental Body,
or by any arbitrator, each of which possesses competent jurisdiction.
"Organizational Documents" -- the articles or certificate of incorporation
and the bylaws of a corporation or the comparable organizational and governing
documents of other Persons.
"Permitted Encumbrances" -- means any of the following:
(a) mechanics', carriers', workers' and other similar liens arising
in the ordinary course of business and which in the aggregate are not
substantial in amount and do not interfere with the present use of the Assets to
which they apply;
(b) liens for current Taxes and assessments not yet due and payable;
(c) with respect to any parcel of owned Real Property or Easements,
all nonmonetary Encumbrances (whether or not the same are recorded) that do not
and will not materially interfere with the operation of that portion of the
Business currently conducted on such real property or result in any absence,
loss or reversion of, or inability to transfer, title or any termination of the
right of use with respect thereto;
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(d) all applicable zoning ordinances and land use restrictions;
(e) with respect to any Asset which consists of a leasehold or other
possessory interest in real property, all Encumbrances, covenants, imperfections
in title, Easements, restrictions and other title matters (whether or not the
same are recorded) to which the underlying fee estate in such real property is
subject that do not currently interfere materially with the operation of that
portion of the Business currently conducted on such property; and
(f) any other Encumbrances affecting the Assets that are disclosed in
Schedule 5.5.
"Person" -- any individual, corporation (including any nonprofit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization or Governmental Body.
"Proceeding" -- any claim, action, arbitration, hearing, noticed
investigation, litigation, suit or other proceeding commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Body
or arbitrator.
"PUHCA" - the Public Utility Holding Company Act of 1935, as amended, or
any successor law, and regulations and rules issued by the SEC pursuant to that
act or any successor law.
"Real Property" -- all real property owned or leased by Citizens or LGSN in
the operation of the Business, together with all interests in real property
(including Easements) used or held for use by Citizens or LGSN in the operation
of the Business.
"Related Documents" -- any Contract provided for in this Agreement to be
entered into by one or more of the parties hereto in connection with the
transactions contemplated by this Agreement.
"Release" -- any presence, emission, dispersal, disposal, spilling,
leaking, emitting, discharging, depositing, pumping, pouring, escaping,
leaching, dumping, releasing or migration into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials), or in, into or from any
facility, including the movement of any Hazardous Materials through the air,
soil, surface water, groundwater or property.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Rhodes Investigation" - means the Proceeding of the LPSC relating to LPSC
Docket No. U-23812, In Re: An investigation into the allegation filed by the
plaintiffs against the defendants in case No. 532-058 in the 24th JDC.
"Rhodes Lawsuit" -- means the Proceeding styled "The Rhodes Company, Inc.
et al. v. Citizens Utilities Company, et al., Case No. 532-058", filed in the
24th JDC, Jefferson Parish,
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Louisiana, and any additional claims made or brought by any other claimant or
class of claimants that alleges claims in respect of the conduct that is the
subject matter of such Proceeding, whether in the periods covered by such
Proceeding or in other periods.
"Rhodes Proceedings" -- means the Rhodes Lawsuit and the Rhodes
Investigation.
"SEC" -- the United States Securities and Exchange Commission or any
successor agency.
"Tax" -- any federal, state, local or foreign tax (including any income
tax, capital gains tax, value-added tax, sales and use tax, franchise tax,
payroll tax, withholding tax or property tax, ad valorem tax, transfer tax,
profits tax, license tax, lease tax, service or use tax, employment tax, excise
tax, severance tax, stamp tax, occupation tax, windfall profits tax, utility tax
or gross receipts tax), levy, assessment, tariff, duty (including any customs
duty), deficiency, franchise fee or payment, any liability in respect of any tax
as a result of being a member of any affiliated, consolidated, combined, unitary
or similar group, or other fee or payment, and any related charge or amount
(including any fine, penalty, interest or addition to tax), imposed, assessed or
collected by or under the authority of any Governmental Body.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threatened" -- a claim, dispute, or other matter will be deemed to have
been "Threatened" if any demand or statement has been made, or any notice has
been given, and either Seller has Knowledge of the same.
Section 1.2 Other Defined Terms. In addition to the terms defined in
Section 1.1, certain other terms are defined elsewhere in this Agreement as
indicated below and, whenever such terms are used in this Agreement, they shall
have their respective defined meanings.
Term Section
---- -------
Act 4.10
Active Employees 10.1
Antitrust Authorities 6.3(a)
Assumed Liabilities 2.3
Balance Sheet 5.6(a)
Buyer Indemnitees 13.1
Buyer's Pension Plan 10.5(b)
Buyer Welfare Plans 10.7(a)
CERCLA 5.14(e)
Citizens Preamble
Citizens Marks 6.4
Citizens' Pension Plan 10.5
Closing 8.1
Closing Date 8.1
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Employee Plans 5.13(a)
Environmental Data 12.1(c)
Estimated Purchase Price 3.3(a)
Financial Statements 5.6(a)
LGSN Preamble
Purchase Price 3.1
Retained Liabilities 2.4
Sellers Indemnitees 13.2
Sellers' 401(k) Plan 10.6(a)
Sellers Welfare Plan 10.7(a)
Sellers Preamble
Transaction Taxes 11.3
Transferred Employee 10.1
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of LGSN Assets. Upon the terms and subject
to the conditions contained herein, at the Closing, LGSN shall sell, transfer,
and deliver to Buyer, and Buyer shall purchase and accept delivery from LGSN,
all of the LGSN Assets free and clear of all Encumbrances other than Permitted
Encumbrances.
Section 2.2 Purchase and Sale of Division Assets. Upon the terms and
subject to the conditions contained herein, at the Closing, Citizens shall sell,
transfer, assign, convey and deliver to Buyer, and Buyer shall purchase and
accept delivery from Citizens, all of the Division Assets free and clear of all
Encumbrances other than Permitted Encumbrances.
Section 2.3 Assumed Liabilities. In further consideration for the sale
of the Division Assets and the LGSN Assets, at the Closing, Buyer will assume
and agree to pay, perform and discharge when due, all liabilities and
obligations relating to or arising from the following:
(a) Performance of (i) the Contracts listed on Schedule 5.12, (ii)
the Contracts that have been entered into in the ordinary course of the Business
that are not required to be listed on Schedule 5.12 by the express terms of
Section 5.12 or other Contracts inadvertently omitted from Schedule 5.12 entered
into in the ordinary course of the business to the extent that the performance
of such contract is reflected in the financial performance of the Business as of
the date hereof, (iii) the Contracts that are entered into in the ordinary
course of the Business after the date hereof in accordance with this Agreement
and (iv) franchises, licenses, permits, authorizations, ordinances and similar
agreements listed on Schedule 1.1(a) or held in the ordinary course of the
Business to the extent included among the Assets (except that Buyer shall not
assume any liabilities or obligations for any breach, default or violation by,
or payment obligations of, Citizens or LGSN under any such Contract, franchise,
license, permit, ordinance or similar agreement occurring or arising or accruing
on or prior to the Closing Date);
(b) Customer advances, customer deposits and construction
advances, unperformed customer service obligations, Easement relocation
obligations, and continuation of construction work in progress and other capital
expenditure projects, in each case relating to the
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Business, arising in the ordinary course of business consistent with past
practices and outstanding on or arising after the Closing Date (except that
Buyer shall not assume any liabilities or obligations for any breach or default
by Citizens or LGSN with respect to any such matters);
(c) Items addressed in Section 3.1(a) or (b) to the extent
resulting in a decrease in the Purchase Price; and
(d) All accounts payable of Sellers relating to the Business,
other than payable to a Seller or any of its Affiliates, and outstanding as of
the Closing Date.
The liabilities, responsibilities and obligations to be assumed by Buyer
pursuant to this Section 2.3 are hereinafter collectively referred to as the
"Assumed Liabilities." Notwithstanding anything in this Section 2.3 to the
contrary, "Assumed Liabilities" shall not include any liabilities,
responsibilities or obligations expressly stated to be Retained Liabilities
pursuant to Section 2.4.
Section 2.4 Retained Liabilities. Buyer shall not assume and at the
Closing Sellers shall retain, be responsible for and pay, perform and discharge
when due, all of the liabilities and obligations relating to or arising from the
following (collectively referred to herein as the "Retained Liabilities"):
(a) any indebtedness for money borrowed by Citizens or LGSN
(including items due to a Seller or its Affiliates) other than payment
obligations arising after the Closing Date (i) under any equipment lease listed
in Part VIII of Schedule 5.12, (ii) under any line extension Contracts or
similar construction arrangements and (iii) in respect of customer deposits or
advances, it being understood and agreed that such leases, Contracts, deposits,
advances and similar arrangements do not create indebtedness for money borrowed;
(b) Taxes of Citizens or LGSN or any of their Affiliates;
(c) Excluded Assets;
(d) Non-Transferred Employees, the Employee Plans and the Employee
Agreements (except in each case to the extent otherwise provided in Article X)
and any breach or default by, or obligations of, Citizens or LGSN with respect
to any Transferred Employee occurring, arising or accruing on or prior to the
Closing Date or occurring, arising or accruing with respect to any event which
occurred on or prior to the Closing Date (except to the extent any such
obligation becomes the obligation of Buyer in accordance with Article X);
(e) the Proceedings listed on Schedule 5.8 and all other
Proceedings, other than General Proceedings, involving Citizens or LGSN, the
Assets or the Business based on conduct (including Citizens' or LGSN's
performance under any Contract included among the Assets), action, facts,
circumstances or conditions existing, arising or occurring on or before the
Closing Date;
(f) Environmental Liabilities with respect to any action, fact,
circumstance or condition to the extent existing, arising or occurring on or
before the Closing Date other than with respect to the existence of non-friable
asbestos and asbestos-containing materials (to the extent the
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same do not violate existing Environmental Law) and any post-Closing activity
that disturbs asbestos or asbestos-containing materials;
(g) any obligation or liability owing to either Seller or any of
their Affiliates; and
(h) all other liabilities or obligations, whether known or
unknown, accrued or contingent, of Citizens or LGSN relating to or arising from
the ownership or use of the Assets or the operation or conduct of the Business
by Citizens or LGSN (or their predecessors in interest) on or before the Closing
Date that is not an Assumed Liability or that becomes the responsibility of
Buyer as provided in Article X.
Section 2.5 Condition on Assignment or Assumption of Contracts and Rights.
Any transfer or assignment to Buyer by a Seller of any property or property
rights or any Contract which requires the Consent of any third party shall be
made subject to such Consent being obtained. If such Consent is not obtained,
or if an attempted assignment thereof would be ineffective or would affect the
rights of a Seller thereunder so that Buyer would not in fact receive all such
rights, such Seller will cooperate with Buyer in any arrangement reasonably
designed to provide for Buyer, at Buyer's cost (to the extent commercially
reasonable), the benefits under any such Contract including, enforcement for the
benefit of Buyer of any and all rights of such Seller against a third party
thereto arising out of the breach or cancellation by such third party or
otherwise. To the extent that Buyer does receive the benefits of any such
Contract pursuant to the preceding sentence, such Contract shall be a Contract
deemed to have been assigned or transferred to Buyer pursuant to Section 2.3.
Notwithstanding the foregoing, the provision under this Section 2.5 of benefits
of any Contract identified with an asterisk on Schedule 5.3 shall not satisfy
the condition required by Section 7.2 (d) for the receipt of a Consent with
respect thereto, unless such condition is expressly waived by Buyer.
ARTICLE III
PURCHASE PRICE
Section 3.1 Purchase Price.
Subject to the terms and conditions of this Agreement, the aggregate
purchase price for the LGSN Assets and the Division Assets (the "Purchase
Price") shall be an amount equal to $375,000,000 in cash (representing the sum
of the purchase price for the LGSN Assets of $19,237,500 and the purchase price
for the Division Assets of $355,762,500), as adjusted in accordance with the
provisions of this Section 3.1 and with such adjustments determined pursuant to
Section 3.2.
(a) Such amount will be decreased by the aggregate amount of all
capitalized lease obligations under the equipment lease listed as item 2 in Part
VIII of Schedule 5.12 or any other capitalized lease.
(b) Such amount will be decreased or increased, as appropriate, by
an aggregate amount equal to the total amount payable to or by Buyer pursuant to
Section 3.3.
Section 3.2 Calculation of Purchase Price.
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(a) The portion of the Purchase Price apportioned to the LGSN
Assets shall be adjusted as provided in clauses (a) and (b) of Section 3.1 to
the extent such adjustments relate to LGSN, and the portion of the Purchase
Price apportioned to the Division Assets shall be adjusted as provided in
clauses (a) and (b) of Section 3.1 to the extent such adjustments relate to the
portion of the Business conducted with the Division Assets. Any of the items
included in clauses (a) and (b) of Section 3.1 that cannot be calculated in a
timely fashion as of the Closing Date shall be estimated by Sellers in good
faith based upon the account balance of such item at the end of the month for
which Sellers' books are closed next preceding the Closing Date, with such
adjustments as may be appropriate to reflect changes in such account balance
occurring between such month-end and the Closing Date. Any such estimated
amounts shall be set forth in a certificate of Sellers delivered to Buyer at
least five (5) business days prior to the Closing Date, which certificate shall
set forth an estimate of the Purchase Price (the "Estimated Purchase Price"),
including such estimated amounts and shall be accompanied by reasonably detailed
supporting documentation.
(b) Within one hundred twenty (120) days after the Closing Date,
Sellers shall notify Buyer of the actual amount as recorded on Sellers' books
and records for the Business of any items that were estimated in arriving at the
Estimated Purchase Price, as well as the prorations and adjustments required to
be made under Section 3.3. Buyer may dispute any amount so determined by
Sellers, by written notice to Sellers within forty-five (45) days after receipt
of Sellers' notice. If Buyer does not so dispute any item, the party owing the
difference between the Estimated Purchase Price and the Purchase Price shall pay
such difference to the other party within ten (10) days after the expiration of
such forty-five (45) day period, plus interest at 8.25% per annum on such amount
from the Closing Date to (but not including) the date of payment. If Buyer
disputes the actual amount of any item, the undisputed amount plus interest at
8.25% per annum on such amount from the Closing Date to (but not including) the
date of payment shall be paid promptly by the owing party. If such dispute
cannot be resolved within sixty (60) days after the giving of Buyer's notice
that there exists a disputed amount, then a nationally recognized independent
accounting firm mutually agreeable to Buyer and Citizens shall, upon written
notice from either Buyer or Citizens, resolve such dispute within sixty (60)
days after receipt of such notice. The fees and expenses of such independent
accounting firm shall be allocated between Buyer and Sellers so that Sellers'
share of such fees and expenses shall be in the same proportion that the
aggregate amount of such remaining disputed amounts so submitted by Buyer to
such accounting firm that is unsuccessfully disputed by Buyer (as finally
determined by such accounting firm) bears to the total amount of such remaining
disputed amounts so submitted by Buyer to such accounting firm. Any
determination by such independent accounting firm shall be binding and
conclusive upon the parties without further appeal therefrom. Within ten (10)
days after the independent accounting firm shall have resolved such dispute, the
party owing the determined amount shall pay such determined amount to the other
party, plus interest at 8.25% per annum on such determined amount from the
Closing Date to (but not including) the date of payment.
Section 3.3 Prorations and Adjustments as of the Closing Date.
(a) Buyer and Sellers agree that the following items relating to
the Assets and the Business shall be adjusted and allocated as of the Closing
Date, with Sellers to be responsible for and to receive the benefit of the same
for the period through and including the Closing Date and Buyer to be
responsible for and to receive the benefit of the same after the Closing Date;
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(i) real and personal property taxes, assessments and
annual registration fees;
(ii) water, sewer and other similar types of taxes, and
installments on special benefit assessments and regulatory assessments;
(iii) electric, gas, telephone and other utility charges;
(iv) expenses relating to Transferred Employees, including
payroll expenses, payroll Taxes, reimbursable employee business expenses and the
financial cost of the accrued vacation time of the Transferred Employees;
(v) rents under leases transferred to or assumed by Buyer
to the extent not included in the accounts payable of the Business;
(vi) charges under maintenance, service and other Contracts
and fees under licenses transferred to or assumed by Buyer to the extent not
included in the accounts payable of the Business;
(vii) deposits of Citizens or LGSN to the extent
transferable to Buyer;
(viii) prepaid expenses and prepayments, and accrued expenses
to the extent not included in the accounts payable of the Business;
(ix) sales, franchise, gross receipts and other similar
Taxes based upon revenues; and
(x) petty cash.
(b) The items listed in Section 3.3(a) above shall be estimated
item by item by Sellers and reflected on the certificate and supporting
documentation to be delivered to Buyer pursuant to Section 3.2(a) and finally
determined in accordance with Section 3.2(b).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
Section 4.1 Organization, Existence and Qualification. Buyer is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Texas and the Commonwealth of Virginia, with full corporate
power and authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, to perform its
obligations under all Contracts to which it is a party, and to execute and
deliver this Agreement and the Related Documents to which Buyer is a party.
Buyer is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state in which the failure to be so qualified or
in good standing would materially adversely affect the business or
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properties of Buyer. Buyer is, or by Closing will be, duly qualified and in good
standing as a foreign corporation licensed to do business in the State of
Louisiana.
Section 4.2 Authority Relative to this Agreement and Binding Effect. The
execution, delivery and performance of this Agreement and the Related Documents
by Buyer have been duly authorized by Buyer's Board of Directors, which
constitutes all necessary corporate action required on the part of Buyer for
such authorizations. The execution, delivery and performance of this Agreement
and the Related Documents by Buyer will not result in (a) any conflict with or
breach or violation of or default under the Organizational Documents of Buyer,
or (b) a violation or breach of any term or provision of, or constitute a
default or accelerate the performance required under, any indenture, mortgage,
deed of trust, security agreement, loan agreement, or Contract to which Buyer is
a party or by which its assets are bound, or (c) a violation of any Order of any
Governmental Body. This Agreement constitutes, and the Related Documents to be
executed by Buyer when executed and delivered will constitute, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, except as such enforceability may be limited by (i) bankruptcy
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally or (ii) the availability of equitable remedies
generally.
Section 4.3 Governmental and other Required Consents. Except for those
Consents described in Schedule 4.3 and except as set forth in Schedule 5.3 to
the extent (but only to the extent) applicable to Buyer, no Consent of any
Governmental Body or third Person is required to be obtained by Buyer in
connection with the execution and delivery by Buyer of this Agreement or the
Related Documents or the consummation of the transactions contemplated by this
Agreement or the Related Documents.
Section 4.4 Availability of Funds. Buyer has available, and will have
available on the Closing Date, or has written commitments from responsible
financial institutions to provide, sufficient funds to enable it to consummate
the transactions contemplated by this Agreement.
Section 4.5 Filings. No statement furnished by Buyer for inclusion in any
filing with any Governmental Body in connection with obtaining such Governmental
Body's Consent for the consummation of the transactions contemplated by this
Agreement will contain, as of the date such information is so provided, any
untrue statement of a material fact or will omit to state, as of the date such
information is so provided, any material fact which is necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
Section 4.6 Brokers. Except for S.G. Barr Devlin, no broker or finder
has acted for or on behalf of Buyer or any Affiliate of Buyer in connection with
this Agreement or the transactions contemplated by this Agreement. No broker or
finder is entitled to any brokerage or finder's fee, or to any commission, based
in any way on agreements, arrangements or understandings made by or on behalf of
Buyer or any Affiliate of Buyer for which a Seller or any Affiliate of a Seller
has or will have any liability or obligations (contingent or otherwise).
Section 4.7 Independent Investigation. Buyer is knowledgeable about the
businesses engaged in by Citizens through its LGS and LGS Intrastate Company
divisions and by LGSN and of the usual and customary practices of companies
engaged in businesses similar to such businesses and has had access to the
Assets, the officers and employees of Sellers, and the books,
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records and files of Sellers relating to the Business, the Assets and LGSN. In
making the decision to enter into this Agreement and to consummate the
transactions contemplated hereby, Buyer has relied solely on the basis of its
own independent due diligence investigation of the Business and upon the
representations and warranties made herein or in any other document or
instrument delivered by Sellers pursuant hereto.
Section 4.8 Public Utility Holding Company Status; Regulation as a Public
Utility. Buyer is a "public utility company" (as such term is defined in
PUHCA). Neither Buyer nor any of its Affiliates is a "holding company" of a
"public utility company" or of a "holding company," within the meaning of such
terms in PUHCA, and Buyer is not a "subsidiary" or an "affiliate" of a "holding
company" within the meaning of the PUHCA.
Section 4.9 Buyer's Financial Statements. Buyer has heretofore delivered
to Sellers complete and correct copies of the following: (a) its annual report
to shareholders of its most recently ended fiscal year, (b) its Annual Report on
Form 10-K for the same fiscal year, as filed with the SEC, (c) its proxy
statement relating to its most recent Annual Meeting of Shareholders and (d) its
quarterly reports on Form 10-Q for any fiscal quarters ended after the fiscal
year described in clause (a). The consolidated financial statements of Buyer
contained therein were prepared in accordance with GAAP applied on a consistent
basis, except for changes concurred in by Buyer's accountants and disclosed in
said financial statements, throughout the periods specified, and present fairly
in all material respects the financial condition and results of operations of
the businesses of Buyer as of the dates thereof and for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments and the omission of footnote disclosure).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to Buyer as follows:
Section 5.1 Organization, Existence and Qualification.
(a) Citizens is a corporation duly incorporated, validly existing,
and in good standing under the laws of the State of Delaware, with full
corporate power and authority to conduct the Business as it is now being
conducted, to own or use the Division Assets, to perform its obligations under
all Contracts to which it is a party, and to execute and deliver this Agreement
and the Related Documents to which Citizens is a party. Citizens is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of the State of Louisiana and each other state in which the failure to
be so qualified or in good standing would have a Material Adverse Effect.
(b) LGSN is a corporation duly organized, validly existing and in
good standing under the laws of the State of Louisiana. LGSN is the only
Affiliate of Citizens engaged in the Business. LGSN has all the requisite
corporate power and corporate authority to own the LGSN Assets which it purports
to own and to own, lease, and operate its portion of the Business as and in the
place where such business is now conducted and where such LGSN Assets are now
owned or leased or operated. Except for LGSN's 18.6% membership interest in Pine
Pipeline Acquisition Company, L.L.C., LGSN does not own any equity or ownership
interest of any other Person and has
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no subsidiaries. The LGSN Assets purported to be owned by LGSN and the portion
of the Business conducted by LGSN are located and conducted only in the State of
Louisiana and LGSN is not required to be qualified to do business as a foreign
corporation in any other state as a result of its ownership of the LGSN Assets
or its conduct of the portion of the Business conducted by LGSN.
Section 5.2 Authority Relative to this Agreement and Binding Effect. The
execution, delivery and performance of this Agreement and the Related Documents
by Sellers have been duly authorized by all requisite corporate action. Except
as set forth in Schedule 5.2, the execution, delivery and performance of this
Agreement and the Related Documents by Sellers will not result in (a) any
conflict with or breach or violation of or default under the Organizational
Documents of Citizens or LGSN, (b) a violation or breach of any term or
provision of, or constitute a default or accelerate the performance required
under, any indenture, mortgage, deed of trust, security agreement, loan
agreement, or other Contract listed or that would be required to be listed in
Schedule 5.12 if in existence on the date hereof to which Citizens or LGSN is a
party or by which any of the Assets are bound, or (c) a violation of any Order
of any Governmental Body. This Agreement constitutes and the Related Documents
to be executed by Sellers when executed and delivered will constitute valid and
binding obligations of Sellers, enforceable against Sellers in accordance with
their terms, except as enforceability may be limited by (i) bankruptcy or
similar laws from time to time in effect affecting the enforcement of creditors'
rights generally or (ii) the availability of equitable remedies generally.
Section 5.3 Governmental and Other Required Consents. Except as set forth
in Schedule 5.3, no material Consent of any Governmental Body, and no Consent of
any other third Person under any Contract listed or that would be required to be
listed in Schedule 5.12 if in existence on the date hereof, is required to be
obtained by Citizens or LGSN in connection with the execution and delivery by
Sellers of this Agreement or the Related Documents or the consummation by
Sellers of the transactions contemplated by this Agreement or the Related
Documents.
Section 5.4 Filings. No statement furnished by Sellers for inclusion in
any filing with any Governmental Body in connection with obtaining such
Governmental Body's Consent for the consummation of the transactions
contemplated by this Agreement will contain, as of the date such information is
so provided, any untrue statement of a material fact or will omit to state, as
of the date such information is so provided, any material fact which is
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
Section 5.5 Title to Assets; Encumbrances.
(a) Except as set forth in Schedule 5.5, Citizens has good and
valid title to the Division Assets and LGSN has good and valid title to the LGSN
Assets, including in each case those reflected in the 1999 Financial Statements,
except, in each case, with respect to Assets disposed of since December 31, 1999
in the ordinary course of business consistent with past practice or otherwise
disposed of in accordance with this Agreement and except for any Permitted
Encumbrances. None of the Assets is subject to any Encumbrance except Permitted
Encumbrances. Schedule 5.5 lists each material parcel of Real Property owned in
fee simple that is a part of the Assets. Except as set forth in Schedule 5.5,
Citizens or LGSN owns or possesses all material Easements necessary to conduct
the Business as now being conducted without any known conflict with the rights
of others. Citizens or LGSN enjoys peaceful and undisturbed possession under all
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material real property leases included in the Assets, neither Citizens nor LGSN
is in default, in any material respect, under any of such leases, and all such
leases are valid and subsisting and in full force and effect.
(b) The Assets, when taken together with the Excluded Assets,
include all assets and properties that are necessary for the supply and
servicing of the customers of the Business in accordance with the historical
supply and service standards of Sellers. The tangible assets included in the
Assets, when taken as a whole, are in good operating condition, reasonable wear
and tear excepted, and are adequate for the use to which they are being put in
the conduct of the Business.
(c) No condemnation, expropriation, eminent domain or similar
Proceeding is pending or, to the Knowledge of Sellers, Threatened with respect
to the Real Property or the Easements. Sellers are in compliance, in all
material respects, with all Easements and similar realty interests benefiting or
encumbering the Real Property. The Real Property, and all improvements thereon,
do not violate, in any material respect, any applicable zoning, construction
code or other restriction of any Governmental Body.
Section 5.6 Financial Statements.
(a) Schedule 5.6(a) sets forth the unaudited balance sheets for
the Business as of December 31, 1998 and December 31, 1999 (the "Balance
Sheets") and unaudited statements of income of the Business for the respective
years then ended (collectively, the "Financial Statements"). Except as set forth
in Schedule 5.6(a), the Financial Statements have been prepared on a pre-tax
basis in accordance, in all material respects, with the books and records of
Sellers and GAAP applied on a basis consistent with prior periods. Except as set
forth in Schedule 5.6(a), the Balance Sheets present fairly in all material
respects the financial condition of the Business as of their respective dates
and the income statements included in the Financial Statements present fairly in
all material respects the results of operations of the Business for the
respective periods covered thereby. The books and records of Sellers from which
the Financial Statements were prepared were complete and accurate in all
material respects at the time of such preparation. The 1999 Financial Statements
are presented on a consolidated pro-forma basis as described therein and the
1998 Financial Statements are presented on a property-level pro-forma basis as
described therein.
(b) There are no material liabilities or obligations (whether
known or unknown and whether absolute, accrued, contingent or otherwise) of the
Business or of Citizens or LGSN arising out of or relating to the Business or
the Assets, except (i) Retained Liabilities, (ii) liabilities and obligations
reflected in the Balance Sheet as of December 31, 1999, (iii) liabilities and
obligations arising since December 31, 1999, in the ordinary course of business
consistent with past practice that are not material or that arise under any
Contract (including as a result of this Agreement) or Legal Requirement (and as
to which Legal Requirement Sellers are in compliance in all material respects),
(iv) liabilities and obligations relating to or arising from matters disclosed
in Schedule 5.6(b) or another Schedule hereto, (v) those liabilities and
obligations that are the subject of Article X, and (vi) those liabilities,
which, if outstanding as of the Closing Date, would result in a decrease to the
Purchase Price in accordance with Section 3.1(b).
(c) Except as set forth in Schedule 5.6(c), since December 31,
1999, (i) the Business has been operated only in the ordinary course consistent
with past practice, except for
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actions taken in connection with the contemplated sale of the Business and this
Agreement, which have not been materially adverse to the Business, and except
for conversion to the SAP financial reporting system, (ii) neither Citizens nor
LGSN has experienced any material damage, destruction or loss (whether or not
covered by insurance) with respect to the Business or the Assets, (iii) neither
Citizens nor LGSN has been materially affected by any material adverse Order
issued by any Governmental Body since such date with respect to the Business
other than General Orders or any material adverse change in the amount or
structure of rates or tariffs applicable to the Business, (iv) Sellers have not
changed their accounting policies or their collection or payment procedures or
practices with respect to their accounts receivable or their accounts payable,
and (v) there has been no fact, circumstance or event existing or occurring
which, either individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect.
Section 5.7 Compliance with Legal Requirements; Governmental Permits;
Business Practices. Except as set forth in Schedule 5.7: (a) neither Citizens
nor LGSN is in violation, in any material respect, of any Legal Requirement or
Order that is applicable to it, to the conduct or operation of the Business, or
to the ownership or use of any of the Assets; and (b) Citizens or LGSN possesses
all material franchises, permits, licenses, and authorizations from Governmental
Bodies required by any applicable Legal Requirement or Order necessary to permit
the operation of the Business in the manner in which it is currently being
conducted by Citizens or LGSN. Neither Citizens, LGSN nor, to the Knowledge of
Sellers, any Affiliate thereof has directly or indirectly given or agreed to
give any gift or similar benefit to any customer, subcontractor, supplier,
government employee, or other Person who was or is in a possible position to
help or hinder Citizens or LGSN with respect to the Business, which gift or
benefit could reasonably be expected to (i) subject Citizens, LGSN or the
Business or the Assets to any damages or penalties in any civil or criminal
Proceeding, or (ii) have, individually or in the aggregate, a Material Adverse
Effect.
Section 5.8 Legal Proceedings; Outstanding Orders. Except as set forth in
Schedule 5.8, there is no pending or Threatened Proceeding (a) that has been
commenced against or affecting either Seller (with respect to the Business or
the Assets) other than General Proceedings, or (b) as of the date of this
Agreement, that challenges, or that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, the transactions contemplated
hereby. No Proceeding listed in Schedule 5.8 is reasonably likely to have a
Material Adverse Effect; provided that no representation or warranty is made in
this sentence with respect to the Proceedings set forth in items I.5 or I.23 in
Schedule 5.8. Except as disclosed on Schedule 5.8, there is no outstanding
material Order against either Seller which relates to or arises out of the
conduct of the Business or the ownership, condition or operation of the Business
or the Assets, other than any Orders relating to rates, tariffs and similar
matters arising in the ordinary course of business (as to which there is no
allegation of a violation) and other than any General Order.
Section 5.9 Taxes. Each of Citizens and LGSN has filed all Tax Returns
required to be filed by Citizens or LGSN or requests for extensions to file such
Tax Returns have been timely filed, such Tax Returns are complete and correct in
all material respects, and Citizens or LGSN has paid and discharged or made
adequate provision for all Taxes and no other Taxes are payable by Citizens or
LGSN with respect to items or periods covered by such Tax Returns. There are no
pending or, to Sellers' Knowledge, Threatened audits or other examinations
relating to any Tax matters, and no deficiencies have been asserted or, to
Sellers' Knowledge, Threatened to be asserted, except as set forth in Schedule
5.9. There are no Tax liens on the Assets. As of the date of this Agreement,
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neither Citizens nor LGSN has granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any Tax or
the filing of any Tax Return except as set forth in Schedule 5.9. None of the
Assets (i) secures any debt the interest on which is tax-exempt under Section
103 of the Code, (ii) is "tax-exempt use property" within the meaning of Section
168(h) of the Code, (iii) is "tax-exempt bond financing property" within the
meaning of Section 168(g)(5) of the Code, (iv) is "limited use property" within
the meaning of Revenue Procedure 76-30, or (v) is required to be treated as
being owned by any other Person pursuant to the provisions of former section
168(f)(8) of the Code.
Section 5.10 Intellectual Property. Schedule 5.10 lists all patents,
trademarks, service marks and copyrights owned by Citizens or LGSN, and all
material third party intellectual property in each case used or held for use by
Citizens or LGSN primarily in the operation of the Business other than the
Excluded Assets. Citizens or LGSN either (a) owns all right, title, and interest
in such intellectual property without any obligation to make any license,
royalty or other payment with respect thereto, including, to the Knowledge of
Sellers, any license, royalty or other payment resulting from any infringement
of any third party rights, or (b) has the right to use pursuant to license,
sublicense, agreement, or permission all such intellectual property necessary
for the operation of the Business or the Assets. Except as set forth on
Schedule 5.10, such ownership rights or rights to use each item of such
intellectual property are valid and in full force and effect and are not subject
to any maintenance fees, due within one year of the date hereof, and, except for
any such intellectual property that is included among the Excluded Assets, will
be owned or available for use in the Business on identical terms and conditions
immediately subsequent to the Closing hereunder. Sellers have no Knowledge of
(i) any infringement or claimed infringement by Citizens or LGSN of any patent,
trademark, service mark, copyright or other intellectual property of others or
(ii) any infringement of any patent, trademark, service mark, copyright or other
intellectual property owned by or under license to Citizens or LGSN.
Section 5.11 Y2K Compliance. The information technology systems used by
Citizens and LGSN with respect to the Business are designed to be used during
and after the calendar year 2000, and will operate during such time period,
without error relating to the date data, specifically including any error
relating to, or the product of, date data which represents or references
different centuries or more than one century, except to the extent any failure
to operate or any such error would not result in a Material Adverse Effect.
Section 5.12 Material Contracts; Customers.
(a) Except for (i) Contracts listed in Schedule 5.12, (ii)
Easements, line extension Contracts and similar construction arrangements and
(iii) Contracts included among the Excluded Assets, as of the date hereof,
neither Citizens nor LGSN is a party to any Contract (1) which is a gas supply,
transportation or storage agreement relating to the Business involving a minimal
annual payment by any party thereto of more than $100,000, (2) the loss of which
would have a Material Adverse Effect, (3) pursuant to which Citizens (with
respect to the Business) or LGSN is subject to take-or-pay obligations with
respect to gas purchases or gas marketing, (4) which constitutes a lease of
material Real Property; (5) which restricts the operation of the Business or the
Assets, (6) which constitutes a guarantee or similar arrangement other than
surety instruments issued in the ordinary course of business, or (7) which
otherwise constitutes a Material Contract. Except as disclosed in Schedule 5.12,
each of the Contracts listed on Schedule 5.12 and each line extension Contract
and
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similar construction arrangement constitutes a valid and binding obligation of
Citizens or LGSN and, to the Knowledge of Sellers, constitutes a valid and
binding obligation of the other parties thereto, is in full force and effect,
and, subject to obtaining any required Consent of the other parties thereto (as
set forth on Schedule 5.3 with respect to the Contracts listed on Schedule
5.12), may be transferred to the Buyer pursuant to this Agreement and will
continue in full force and effect thereafter, in each case without breaching the
terms thereof or resulting in the forfeiture or impairment of any rights
thereunder. Neither Seller has given to or received from any other party to any
of such Contracts or arrangements any notice or other written communication
regarding any actual or alleged material breach of or default under any of such
Contracts or arrangements that has not been withdrawn, settled or otherwise
resolved. Sellers have made available to Buyer copies, which were accurate and
complete as of the date so made available, of all Contracts listed on Schedule
5.12.
(b) Neither Seller has been involved in any material controversy
with any group of similarly situated customers of the Business or with any
material suppliers of gas or transportation for the Business during the last
three (3) years.
Section 5.13 Employee Benefit Matters.
(a) Schedule 5.13 lists (i) each "employee benefit plan," as such
term is defined in Section 3(3) of ERISA, and any related trust or other funding
arrangement, which is covered by any provision of ERISA and which is maintained
by Citizens or LGSN for the benefit of the Active Employees or former employees
of the Business, or for which Citizens or LGSN has any potential liability
("Employee Benefit Plan"); (ii) each other fringe benefit plan, policy or
arrangement, including any related trust or other funding arrangement, currently
maintained by Citizens for the benefit of Active Employees or former employees
of the Business, which provides for pension, profit-sharing, retirement,
deferred compensation, bonuses, severance, incentive compensation, stock
purchase, stock options, change in control, disability, medical, dental, life or
other employee insurance coverage or similar employee benefits (collectively,
together with the Employee Benefit Plans, "Employee Plans"); and (iii) each
collective bargaining, union or other employee association agreement,
employment, managerial advisory, and consulting agreement, employee
confidentiality agreement, and all other material agreements, policies, or
arrangements maintained by Citizens or LGSN for the Active Employees or former
employees of the Business (collectively, "Employee Agreements"). Citizens has
made available to Buyer copies, which were accurate and complete as of the date
so made available, of all such documents and (if applicable) summary plan
descriptions with respect to such Employee Plans and Employee Agreements, or
summary description(s) of any Employee Plans and Employee Agreements, not
otherwise in writing. In addition, Citizens has delivered to Buyer, or will
deliver to Buyer within 30 days of the date of this Agreement:
(i) all employment manuals and policies relating to
Employee Plans, Employee Agreements or other employment practices; and
(ii) with respect to Citizens' Pension Plan and Citizens'
401(k) Plan, the most recent IRS determination letter for each such Plan.
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(b) Except as set forth in Schedule 5.13:
(i) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding involving
Citizens' 401(k) Plan or any Employee Plan is pending or, to Sellers' Knowledge,
is threatened.
(ii) Neither Citizens, nor LGSN, nor any ERISA Affiliate
of Citizens or LGSN has ceased operations at any facility or has withdrawn from
any Employee Benefit Plan subject to Title IV of ERISA ("Title IV Plan") in a
manner that would subject Citizens or LGSN to liability under ERISA (S)4062(e),
(S)4063 or (S)4064.
(iii) Neither Citizens, nor LGSN, nor any ERISA Affiliate
of Citizens or LGSN has filed a notice of intent to terminate any Title IV Plan
or has adopted any amendment to treat any Title IV Plan as terminated, and the
PBGC has not instituted proceedings to treat any Title IV Plan as terminated,
where such termination could result in potential liability to Buyer. No event
has occurred or circumstance exists that may constitute grounds under ERISA
(S)4042 for the termination of, or the appointment of a trustee to administer,
any Employee Plan.
(iv) No funding deficiency exists with respect to any
Employee Plan.
(v) Neither Citizens nor LGSN has Knowledge of any facts
or circumstances that may give rise to any liability of Buyer to the PBGC under
Title IV of ERISA.
(vi) Neither Citizens nor LGSN nor any ERISA Affiliate of
Citizens or LGSN has withdrawn from any Employee Benefit Plan within the meaning
given in ERISA (S)3(37)(A) ("Multi-Employer Plan") with respect to which there
is any outstanding liability as of the date of this Agreement. No event has
occurred or circumstances exists that presents a risk of the occurrence of any
withdrawal from, or the participation, termination, reorganization, or
insolvency of, any Multi- Employer Plan that could result in any liability of
Buyer to a Multi-Employer Plan.
(vii) Except to the extent required under ERISA (S)601 et
seq. and IRC (S)4980B and except with respect to post-retirement benefits for
Retirees and "grandfathered employees" as defined in Section 10.7(b), neither
Citizens nor LGSN provides health or welfare benefits for any retired or former
employee of the Business or is obligated to provide health or welfare benefits
to any active employee of the Business following such employee's retirement or
other termination of service.
(viii) Except with respect to post-retirement medical,
dental and life insurance benefits for the LGS Retirees and "grandfathered
employees" as defined in Section 10.7(b), Citizens has the right to modify and
terminate such post-retirement benefits to retirees with respect to both retired
and active employees of the Business.
(ix) Except with respect to post-retirement medical,
dental and life insurance benefits for the LGS Retirees and "grandfathered
employees" as defined in Section 10.7(b), no commitment or representation has
been made by Seller or any of its Affiliates to any Person with regard to any
plan providing post retirement medical, dental, or life insurance benefits or
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Employee Agreement that was not in accordance with such plan or Employee
Agreement and that could have a material adverse economic consequence to Buyer.
(c) Citizens' Pension Plan and Citizens' 401(k) Plan are the only
Employee Benefit Plans which are intended to be qualified under Section 401(a)
of the IRC.
(d) To the Knowledge of Citizens, each Employee Benefit Plan has
been established and administered in all material respects in accordance with
the terms of ERISA and the applicable provisions of the IRC.
(e) LGSN does not employ and has not at any time since its
acquisition by Citizens employed any employees or maintained, sponsored or
contributed to any Employee Plans.
(f) The LPSC Rate Orders applicable to the Business authorize the
recovery of costs associated with retiree medical, dental and life insurance
benefits referred to in Section 10.7(b) hereof for the retirees of the Business
and Transferred Employees who are "grandfathered employees" as described in
Section 10.7(b) on a "pay-as-you-go" method. True and complete copy of such
Orders have been previously provided by Citizens to Buyer.
Section 5.14 Environmental Matters.
(a) Citizens and LGSN hold, and are in compliance in all material
respects with, all permits, licenses and governmental authorizations required
for the conduct of the Business or the operation of the Assets under applicable
Environmental Laws, and Citizens and LGSN are otherwise in compliance, in all
material respects, with applicable Environmental Laws with respect to the
Business and the Assets.
(b) Except as listed in Schedule 5.14, neither Citizens nor LGSN
has received any notice, demand, letter, claim or request for information
alleging that either Citizens or LGSN is in violation of or subject to liability
under any Environmental Law arising out of Citizens' or LGSN's ownership, use or
operation of the Assets or the operation of the Business, which has not been
resolved or, if resolved, as to which any material obligation or liability
remains outstanding.
(c) Except as listed in Schedule 5.14, there are no Proceedings
pending or Threatened with respect to Citizens' or LGSN's compliance with
Environmental Laws and relating to the Business or the Assets.
(d) Except as listed in Schedule 5.14, neither Citizens nor LGSN
has received any written notice from any Governmental Body that it does not have
all certificates, permits and authorizations required by any Environmental Law
for its ownership, use or operation of the Assets or the operation of the
Business which has not been resolved or, if resolved, as to which any material
obligation or liability remains outstanding.
(e) To Sellers' Knowledge, Citizens has delivered to Buyer copies
of all environmental assessments, audits, studies and other environmental
reports in Sellers' possession or reasonably available to either Seller relating
to the Real Property or any of the other Assets or which concern the existence
or possible existence of Hazardous Materials on, under or adjacent to any of
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the Real Property or relating to potential Environmental Liability of Citizens
or LGSN in connection with the Business or the Assets. Except as set forth in
Schedule 5.14, no environmental remediation of any Release is occurring on any
Real Property included in the Assets nor has Citizens or LGSN issued a request
for proposal or otherwise asked an environmental remediation contractor to begin
plans for any such environmental remediation. Except as set forth in Schedule
5.14, to Sellers' Knowledge, there have been no Releases on any Real Property
included in the Assets that could reasonably be expected to have a Material
Adverse Effect.
(f) Except as set forth in Schedule 5.14, none of the Real Property
is (i) situated in a federal "Superfund" site or, to Sellers' Knowledge, in any
federal "Superfund" study area designated under the federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), or (ii) to
Sellers' Knowledge, situated in any site or study area designated under any
state statute comparable to CERCLA.
(g) Neither Citizens nor LGSN has entered into or agreed to any
Order, and is not subject to any outstanding Order other than a General Order
relating to compliance with or liability under any Environmental Law relating to
the Business or the Assets. Neither Citizens nor LGSN is subject to any
indemnity or other agreement with any third party relating to liability under
any Environmental Law relating to the Business or the Assets, except customary
environmental indemnity arrangements contained in the Contracts described in
Parts I, II, IV through VII and XII of Schedule 5.12.
(h) To Sellers' Knowledge, the Real Property (including soils,
groundwater, surface water, buildings and other structures) is not contaminated,
in any material respect, with any Hazardous Materials, it being understood and
agreed that, for purposes of this Section 5.14(h), Hazardous Materials shall not
include non-friable asbestos or asbestos-containing materials.
(i) To Sellers' Knowledge, there are no circumstances or conditions
involving the Business or the Assets that could reasonably be expected to result
in any material claims, liability, investigations, costs or restrictions on the
ownership, operation, use or transfer of any of the Real Property pursuant to
any Environmental Law other than with respect to any activity after the date
hereof that disturbs asbestos or asbestos-containing materials that causes them
to become friable or the removal of asbestos or asbestos-containing materials in
connection with any renovation or structural change to any Asset after the date
hereof.
Section 5.15 Labor Matters. Schedule 5.15 lists with respect to the
Business any labor disputes that have arisen during the three (3) year period
ending on the date hereof through the grievance and arbitration procedure of any
collective bargaining agreements, any Proceedings that are presently pending or
have been resolved during the three (3) year period ending on the date hereof
through the National Labor Relations Board, and any labor matters that are
presently pending or have been resolved during the three (3) year period ending
on the date hereof through any court with competent jurisdiction over labor
matters. Except to the extent set forth in Schedule 5.8 or in Schedule 5.15, (a)
Citizens and LGSN are in compliance, in all material respects, with all Legal
Requirements applicable to the Active Employees respecting employment and
employment practices, terms and conditions of employment and wages and hours;
(b) neither Citizens nor LGSN has received notice of any pending or Threatened
unfair labor practice complaint against it before the National Labor Relations
Board with respect to any of the Active Employees; (c) neither Citizens nor
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LGSN has received written notice of any representation petition or other
question concerning representation respecting the Active Employees pending or
Threatened to be filed with the National Labor Relations Board; and (d) no
arbitration proceeding arising out of or under any collective bargaining
agreement is pending or Threatened against Citizens or LGSN. No Active Employee
is covered by a collective bargaining agreement.
Section 5.16 State Regulatory Matters.
(a) Schedule 5.16 reflects all of the currently pending rate
filings relating to the Business heretofore made by Citizens or LGSN before
state regulatory commissions and each other currently pending material
Proceeding of such state regulatory commissions, other than any currently
pending General Proceeding.
(b) All currently effective material filings relating to the
Business heretofore made by Sellers with state regulatory commissions were made
in compliance in all material respects with Legal Requirements then applicable
thereto and the information contained therein was true and correct in all
material respects as of the respective dates of such filings.
Section 5.17 Public Utility Holding Company Status; Regulation as a Public
Utility. Citizens is a "public utility company," but is not a "holding company",
a "subsidiary of a public utility," an "affiliate of a public utility company"
or "an affiliate of a holding company." LGSN is not a "public utility company,"
a "holding company" or an "affiliate of a holding company." LGSN is a
"subsidiary" and an "affiliate" of Citizens, a public utility company, but
neither of such relationships requires the registration of Citizens or LGSN as a
holding company under PUHCA. LGSN is not a "subsidiary" or an "affiliate" of any
"public utility company" other than Citizens. Terms in quotations have the same
meaning as such terms in PUHCA.
Section 5.18 Brokers. Except for Morgan Stanley & Co. Incorporated, no
broker or finder has acted for or on behalf of Citizens or LGSN or any of their
Affiliates in connection with this Agreement or the transactions contemplated by
this Agreement. No broker or finder is entitled to any brokerage or finder's
fee, or to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of Citizens or LGSN or any of their
Affiliates for which Buyer or LGSN has or will have any liabilities or
obligations (contingent or otherwise).
Section 5.19 Insurance. Schedule 5.19 identifies each material insurance
casualty and property policy of Citizens or LGSN relating to the Business or the
Assets. All such insurance is sufficient to comply with all regulatory and
contractual requirements relating to the Business or the Assets. Neither
Citizens nor LGSN has received any refusal of coverage or notice of cancellation
or non-renewal with respect to any such insurance.
Section 5.20 Disclaimer. Except as otherwise expressly set forth in this
Agreement or in any other document or instrument delivered by Sellers pursuant
hereto, Sellers expressly disclaim any representations or warranties of any kind
or nature, express or implied, as to the condition, value or quality of the
assets or properties currently or formerly used, operated, owned, leased,
controlled, possessed, occupied or maintained by Citizens or LGSN, and, except
as so otherwise set forth, Sellers SPECIFICALLY DISCLAIM ANY REPRESENTATION OR
WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR
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PURPOSE WITH RESPECT TO SUCH ASSETS OR PROPERTIES, OR ANY PART THEREOF, OR AS TO
THE CONDITION OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN,
WHETHER LATENT OR PATENT.
ARTICLE VI
COVENANTS
Section 6.1 Covenants of Sellers. Sellers jointly agree to observe and
perform the following covenants and agreements:
(a) Conduct of the Business Prior to the Closing Date. During the
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period from the date hereof to the Closing Date, Sellers will operate the Assets
and the Business in the usual, regular and ordinary course consistent with past
practice and will use all commercially reasonable efforts to (i) preserve intact
the Business and preserve the goodwill and relationships with customers,
suppliers and others having business dealings with the Business, (ii) maintain
the properties, machinery and equipment included in the Assets in sufficient
operating condition and repair (subject to retirements in the ordinary course of
business consistent with past practice) to enable Buyer to use them as they have
been used in conduct of the Business, and (iii) conduct the Business in such
manner that the representations and warranties of Sellers contained herein to
the extent relating to the Business or the Assets shall be true and correct in
all material respects as of the Closing Date as if made on the Closing Date,
except for representations and warranties made as of, or in respect of, only a
specified date or period, and except to the extent expressly permitted by the
next sentence hereof. Without limiting the generality of the foregoing, with
respect to the Business, except (i) as contemplated in this Agreement or in
Schedule 6.1, (ii) as required by any Legal Requirement or Order or (iii) as
otherwise expressly consented to in writing by Buyer prior to the Closing,
Sellers will:
(1) Not make or permit any material change in the general
nature of the Business;
(2) Not enter into any material transaction or Contract that
would be required to be described on Schedule 5.12 if in existence on the date
hereof, other than (a) pursuant to the Capital Budget, (b) the purchase of gas
in accordance with the Asset Management Plan described in item II.2 of Schedule
5.8 (the "Asset Management Plan") or (c) in the ordinary course of business
consistent with past practices provided Buyer has consented thereto in writing,
which consent shall not be unreasonably withheld or delayed;
(3) Not purchase, sell, lease, dispose of or otherwise
transfer or make any Contract for the purchase, sale, lease, disposition or
transfer of, any material Assets other than (a) pursuant to the Capital Budget,
(b) the purchase of gas in accordance with the Asset Management Plan or (c) in
the ordinary course of business consistent with past practices provided Buyer
has consented thereto in writing, which consent shall not be unreasonably
withheld or delayed;
(4) Not subject any of the Assets to Encumbrances (other than
Permitted Encumbrances);
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(5) Not hire any new employee unless such employee is a bona fide
---- ----
replacement for either a presently-filled position or a vacancy in an authorized
position with the Business;
(6) Comply in all material respects with all applicable material
Legal Requirements and Orders, including those relating to the filing of reports
and the payment of Taxes due to be paid prior to the Closing, other than those
contested in good faith;
(7) Except in the ordinary course of business consistent with past
practice or in accordance with the terms of any existing Contract or Employee
Plan, not grant any material increase or change in total compensation or
benefits to any of the Transferred Employees; not enter into any employment,
severance or similar Contract with any Person or amend any such existing
Contracts to increase any amounts payable thereunder or benefits provided
thereunder; and not enter into any collective bargaining agreement;
(8) Not terminate any Material Contract or any other Contract
described on Schedule 5.12 except in the case of a breach of such Contract by
the other party thereto;
(9) Not create, incur, assume, guarantee or otherwise become liable
with respect to any indebtedness for money borrowed or capitalized lease other
than in the ordinary course of business consistent with past practice (it being
understood and agreed that customer advances, customer deposits and construction
advances do not create indebtedness for money borrowed), except pursuant to
advances made by Citizens to LGSN or the Business;
(10) Not make any material change in the levels of storage inventory
customarily maintained by Citizens or LGSN with respect to the Business and
taking into account seasonal demands and the requirements of the Asset
Management Plan, including pursuant to the Contract described as item I.4 in
Schedule 5.12; or
(11) Not change accounting policies or collection or payment
procedures or practices with respect to accounts receivable or accounts payable.
(b) Access to the Business, Assets and Records; Updating Information.
----------------------------------------------------------------
(1) From and after the date hereof and until the Closing Date,
Sellers shall (A) permit Buyer and its Representatives to have, on
reasonable notice and at reasonable times, reasonable access to all books,
papers and records to the extent that they reasonably relate to the
ownership, operation, obligations and liabilities of the Business and the
Assets; provided, however, that such access shall not unreasonably
interfere with the operation of the Business; and provided, further, that
Buyer hereby agrees to defend, indemnify and hold harmless Sellers from and
against all Losses arising out of or relating to the negligence or willful
misconduct of Buyer or its Representatives in connection with Buyer's
access provided pursuant to this Section 6.1(b)(1); (B) furnish the Buyer
with such financial and operating data and other information with respect
to the Business as the Buyer may from time to time reasonably request; and
(C) furnish the Buyer a copy of each material report, schedule or other
document filed or received by either Seller with respect to the Business
with any Governmental Body. Without limiting the application of the
Confidentiality Agreement, all
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documents or information furnished by either Seller hereunder shall be
subject to the Confidentiality Agreement.
(2) Sellers will notify Buyer as promptly as practicable of any
significant change in the ordinary course of business for the Business and
of any material Proceedings (Threatened or pending) involving or affecting
the Business or the transactions contemplated by this Agreement, and shall
use reasonable efforts to keep Buyer fully informed of such events.
(3) From and after the Closing, so long as any books, records
and files retained by Sellers relating to the Assets remain in existence
and available, Buyer (at its expense) shall have the right upon prior
notice to inspect and to make copies thereof at any time during business
hours for any proper purpose, including the preparation of Tax returns. For
a period of seven (7) years following the Closing Date, Sellers shall use
reasonable efforts not to destroy or allow the destruction of any such
books, records and files without first offering in writing to deliver them
to Buyer (at Buyer's expense).
(c) Consents. Sellers will use commercially reasonable efforts to
--------
obtain all necessary Consents from any Person required under any Contract
applicable to the Business in connection with the consummation of the
transactions contemplated hereby; provided that nothing in this Section 6.1(c)
shall require any material payment or the incurrence of any material obligation.
(d) Use of Certain Information. Except as required by applicable
--------------------------
Legal Requirements, unless otherwise agreed to in writing by Buyer, for a period
commencing on the Closing Date and terminating five (5) years after such date,
Sellers shall (i) keep all information relating to the Business or the Assets
and all information contained in the Assets (including all information with
respect to the identities, purchasing history and natural gas requirements of
the customers of the Business) confidential and not disclose or reveal any such
information to any Person other than Sellers' Representatives who are actively
and directly participating in the transactions contemplated hereby or who
otherwise need to know such information for such purpose and to cause those
Persons and each of their Affiliates to observe the terms of this Section 6.1(d)
and (ii) not to use, or permit any Affiliate to use, such information for any
other purpose, including the marketing or sale of unregulated natural gas to
customers of the Business. Sellers shall continue to hold all such information
according to the same internal security procedures and with the same degree of
care regarding its secrecy and confidentiality as currently applicable thereto.
Sellers shall notify Buyer of any unauthorized disclosure of any such
information to third parties that it discovers and shall endeavor to prevent any
further such disclosures. Sellers shall be responsible for any breach of the
terms of this Section 6.1(d) by either Seller or any Sellers' Representatives or
any of their Affiliates. After the Closing Date, in the event that a Seller is
requested pursuant to, or required by, applicable Legal Requirements to disclose
any such information, or any other information concerning the Business or the
Assets, or the transactions contemplated hereby, such Seller shall provide Buyer
with prompt notice of such request or requirement in order to enable Buyer to
seek an appropriate protective order or other remedy, to consult with such
Seller with respect to taking steps to resist or narrow the scope of the request
or legal process (it being understood that any such efforts to seek a protective
order or other remedy or to resist or narrow the scope of such request or legal
process shall be at the sole cost and expense of Buyer), or to waive compliance,
in whole or in part, with the terms of this Section 6.1(d). Such Seller agrees
not to oppose any action by Buyer to obtain
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any such protective order or other appropriate remedy after the Closing Date. In
the event that no such protective order or other remedy is obtained, or that
Buyer waives compliance with the terms of this Section 6.1(d), such Seller shall
furnish only that portion of such information which such Seller is advised by
its counsel is legally required. In any such event such Seller shall use its
commercially reasonable efforts to ensure that all such information that is so
disclosed will be accorded confidential treatment. Sellers acknowledge and agree
that Buyer shall be entitled, in addition to all other remedies, to injunctive
relief and specific performance of this Section 6.1(d).
(e) Certain Financial Statements. Sellers shall furnish to
----------------------------
Buyer, at Buyer's expense, the following financial statements for the Business:
(i) audited consolidated balance sheets as at December 31, 1999 (or such later
calendar year-end date as may be required to be filed by Buyer by Regulation S-X
under the Securities Act of 1933, as amended) and related consolidated
statements of income and cash flows for the years then ended and (ii) any
unaudited interim consolidated financial statements (including balance sheet and
statements of income and cash flows) for such later interim period as may be
required by Regulation S-X. Such financial statements shall: (x) be prepared in
accordance with the books and records of Sellers relating to the Business; (y)
be prepared in accordance with generally accepted accounting principles
consistently applied (subject, in the case of unaudited financial statements, to
the omission of footnote disclosure) and the requirements of Regulation S-X; and
(z) fairly present, in all material respects, the financial condition and the
results of operations and cash flows for the Business as at the dates thereof
and for the fiscal periods covered thereby. Buyer shall specify to Sellers such
statements that Buyer will so require. Sellers shall provide such statements to
Buyer within 90 days following such request; provided that if Closing occurs
after December 31, 2000, Sellers will provide such statements within 60 days
after the Closing. Sellers shall cooperate to provide such statements earlier to
the extent reasonably practicable if Buyer shall so request.
Section 6.2 Covenants of Buyer. Buyer covenants and agrees to observe and
perform the following covenants and agreements:
(a) Consents. Buyer will use its commercially reasonable
--------
efforts to assist Sellers in obtaining all necessary Consents from any Person
required under any Contract applicable to the Business in connection with the
consummation of the transactions contemplated hereby; provided that, nothing in
this Section 6.2(a) shall require any material payment or the incurrence of any
material obligation.
(b) Access to Information. After Closing, Buyer will, and will
---------------------
cause its Representatives to, afford to Sellers, including their
Representatives, reasonable access to all books, records, files and documents
related to the Business in order to permit Sellers to prepare and file their Tax
Returns and to prepare for and participate in any investigation with respect
thereto, to prepare for and participate in any other investigation and defend
any Proceedings relating to or involving either Citizens, LGSN or the Business
for which Sellers may be responsible, to discharge their obligations under this
Agreement and the other Related Documents to which they are a party and for
other reasonable purposes and will afford Sellers reasonable assistance in
connection therewith. Buyer will cause such records to be maintained for not
less than seven (7) years from the Closing Date and will not dispose of such
records without first offering in writing to deliver them to Sellers; provided,
however, that in the event that Buyer transfers all or a portion of the Business
to any third party during such period, Buyer may transfer to such third party
all or a portion of the
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books, records, files and documents related thereof, provided such third party
transferee expressly assumes in writing the obligations of Buyer under this
Section 6.2(b). In addition, after the Closing Date, at Sellers' request, Buyer
shall make available to Sellers and their Affiliates, employees, representatives
and agents, those employees of Buyer requested by Sellers in connection with any
Proceeding, including to provide testimony, to be deposed, to act as witnesses
and to assist counsel; provided, however, that (x) such access to such employees
shall not unreasonably interfere with the normal conduct of the operations of
Buyer and (y) Sellers shall reimburse Buyer for the allocated time charges of
such employees and the out-of-pocket costs reasonably incurred by Buyer in
making such employees available to Sellers.
(c) Citizens Guarantees and Surety Instruments. Buyer shall
------------------------------------------
use its reasonable efforts to assist Sellers in obtaining full and complete
releases on the guarantees, letters of credit, bonds and other surety
instruments listed in Schedule 6.2(c). For purposes of this Section 6.2(c),
reasonable efforts shall include: (i) Buyer's assumption of the Contracts on the
terms set forth in this Agreement; and (ii) an obligation on the part of Buyer
to provide (A) a guaranty, letter of credit, bond or other surety instrument at
Closing in lieu of any surety instrument provided by Citizens to any beneficiary
in connection with the Business or the activities of LGSN or (B) if such
beneficiary refuses to accept such replacement surety instrument from Buyer, a
specific indemnity from Buyer to Citizens in respect of Citizens' surety
instrument.
Section 6.3 Governmental Filings.
(a) HSR Act Filing. Buyer and Citizens shall comply promptly
--------------
with the notice and reporting requirements of the HSR Act. Buyer and Citizens
shall comply substantially with any additional requests for information,
including requests for production of documents and production of witnesses for
interviews or depositions, made by the Antitrust Division of the United States
Department of Justice, the United States Federal Trade Commission or the
antitrust or competition law authorities of any other jurisdiction (the
"Antitrust Authorities"). Buyer and Citizens shall each exercise its
commercially reasonable efforts, and each shall cooperate fully with the other
to prevent the entry in any Proceeding brought by an Antitrust Authority or any
Governmental Body which would prohibit, make unlawful or delay the consummation
of the transactions contemplated by this Agreement.
(b) Other Regulatory Filings. Buyer and Sellers will, as soon as
------------------------
reasonably practicable following the execution of this Agreement, prepare and
file with each Governmental Body requests for such Consents as may be necessary
for the transfer of the Assets in accordance with, or as contemplated by, the
terms of this Agreement (including using commercially reasonable efforts to
prepare and file a joint application, in a mutually acceptable form, with the
LPSC by June 1, 2000). Buyer and Sellers will use commercially reasonable
efforts to diligently pursue such Consents and will cooperate with each other in
seeking such Consents. To this end, the parties agree to make available the
personnel and other resources of their respective organizations in order to
accomplish actions reasonably required by them to obtain all such Consents. A
request in the parties joint application for a rate moratorium or for consent to
amortize Buyer's acquisition premium account shall be deemed not to be
inconsistent with the parties commercially reasonable efforts.
(c) Efforts. Nothing contained in this Section 6.3 shall require
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Sellers or Buyer to institute or defend any legal or administrative Proceeding,
make any material payment or incur any
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economic burden, dispose of any material asset or business or suffer any
material detriment, including any change in the applicable rates or tariffs of
the Business or the imposition of any other materially adverse term or condition
on the Business or the Assets.
Section 6.4 Citizens Marks. Buyer acknowledges and agrees that, as
between Buyer and Citizens, Citizens has the absolute and exclusive proprietary
right to all names, marks, trade names, trademarks and corporate symbols and
logos incorporating "Citizens", and "CZN" (collectively, the "Citizens Marks"),
all rights to which and the goodwill represented thereby and pertaining thereto
are being retained by Citizens. Within four (4) months after the Closing Date,
Buyer shall cease using any Citizens 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 its businesses. In the event that Buyer breaches this Section 6.4, Citizens
shall be entitled to specific performance of this Section 6.4 and to injunctive
relief against further violations, as well as any other remedies at law or in
equity available to Citizens.
Section 6.5 Transition Plan. Within thirty (30) days after the
execution date of this Agreement, Buyer shall deliver to Citizens a list of its
proposed representatives to a joint transition team, which shall include
expertise from various functional specialties associated or involved in
providing billing, payroll and other support services provided to the Business
by any automated or manual process using facilities or employees that are not
included among the Assets or Transferred Employees. Citizens will add its
representatives to such team within fifteen (15) days after receipt of Buyer's
list. Such team will be responsible for preparing as soon as reasonably
practicable after the execution date of this Agreement and at least sixty (60)
days prior to the Closing Date, and timely implementing, a transition plan which
will identify and describe substantially all of the various transition
activities that the parties will cause to occur before and after the Closing and
any other transfer of control matters that any party reasonably believes should
be addressed in such transition plan. Transition services to be supplied by
Citizens under such transition plan shall be priced in accordance with inter-
company transfer practices consistent with those historically used for the
Business for a reasonable transition period not to exceed 120 days after the
Closing Date. If requested by any party, the terms and conditions governing
such transition activities will be more fully set forth in a Transition
Agreement reasonably satisfactory to the parties. Buyer and Citizens shall use
their commercially reasonable efforts to cause their Representatives on such
transition team to cooperate in good faith and take all reasonable steps
necessary to develop a mutually acceptable transition plan by no later than 120
days after the date of this Agreement.
Section 6.6 Substitute Agreement. In the event that Sellers, after using
their best commercially reasonable effects, are unable to obtain each of the
Consents identified as items IV.F.1 through IV.F.5 of Schedule 5.3 within 120
days after the date of this Agreement, then promptly upon notice from Sellers to
Buyer, Citizens and Buyer will enter into a substitute agreement relating to the
sale by Citizens of the Division Assets and the capital stock of LGSN
substantially in the form attached as Exhibit 6.6 hereto.
Section 6.7 Schedule of Easements and Interests. Within 180 days
following the date of this Agreement (but in no event later than 60 days prior
to the Closing Date), Citizens shall deliver to Buyer a schedule, to be
identified as Schedule 6.7, which sets forth all Easements and ownership
interests in Real Property included in the Assets, together with such title
descriptions, recorded and unrecorded acts, and other information as shall be
customary in the State of Louisiana to identify and
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convey such Easements and ownership interests. All material Easements that, as a
condition to their assignment, require Consent from the grantor thereof, shall
be so designated on Schedule 6.7.
Section 6.8 Rhodes Security. If at any time Sellers shall have any
financial obligation or liability with respect to the Rhodes Proceedings,
whether due to any Order of the LPSC or an appeal therefrom, that is materially
more than that which is secured by a bond, other surety instrument or other
collateral (including a standby letter of credit) previously provided by
Citizens (or if no such collateral has been previously provided), Citizens shall
promptly deliver to Buyer (or the appropriate Governmental Body, if required) a
bond, other surety instrument or other collateral reasonably acceptable to Buyer
(or, if agreement is not reached as to the form or substance of such bond or
surety instrument, Citizens shall deliver to Buyer a standby letter of credit
from Citibank, N.A., or other financial institution reasonably acceptable to
Buyer) fully securing in all material respects the unsecured amount of such
obligation or liability. If at any time any bond, other security instrument or
other collateral held by Buyer in respect of the Rhodes Proceedings shall be
materially in excess of the amount of such obligation or liability, Buyer shall
cooperate with Citizens in reducing the amount of such collateral to the extent
of such excess, including the release of a surety instrument previously
delivered to Buyer in exchange for a substitute surety instrument in the amount
of such reduced obligation or liability.
Section 6.9 Certain Proceedings. Sellers shall defend the Proceedings
described in items II.2 and II.3 of Schedule 5.16 at their own expense, with
counsel of their own choosing. Sellers shall promptly and diligently pursue to
a settlement or prosecute to a final conclusion the Proceeding described in item
II.2 of Schedule 5.16. Prior to Closing, Buyer shall have the right to
intervene, at Buyer's expense, in the Proceedings listed in items II.2 and II.3
of Schedule 5.16 to protect its interests as the prospective buyer of the
Business, including any resolution of such Proceedings that Buyer believes may
adversely affect the Business or the Assets after the Closing. If either
Proceeding listed in items II.2 and II.3 of Schedule 5.16 continues after the
Closing, Buyer shall take over the prosecution of such Proceeding, provided that
Sellers may continue to participate in such Proceeding, at Sellers' expense, to
protect their interests as the former operators of the Business with the right
to appeal either directly or through Buyer any decision adverse to Sellers.
Section 6.10 Buyer's Insurance. Buyer shall deliver at Closing a
schedule that identifies each material casualty and property insurance policy of
Buyer applicable to its business in Louisiana.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Sellers' Conditions Precedent to Closing. The obligation
of Sellers to consummate the transactions contemplated by this Agreement shall
be subject to fulfillment at or prior to the Closing of the following
conditions:
(a) Representations and Warranties True as of the Closing Date.
----------------------------------------------------------
Buyer's representations and warranties in this Agreement shall have been true
and correct in all material respects as of the date of this Agreement and shall
be true and correct in all material respects as of the Closing Date as if made
on the Closing Date, subject to changes expressly contemplated and permitted by
this Agreement, except that representations and warranties made as of, or in
respect of,
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only a specified date or period shall be true and correct in all material
respects as of, or in respect of, such date or period.
(b) Compliance with Agreements. The covenants, agreements and
--------------------------
conditions required by this Agreement to be performed and complied with by Buyer
shall have been performed and complied with in all material respects prior to or
at the Closing Date.
(c) Certificate. Buyer shall execute and deliver to Sellers a
-----------
certificate of an authorized officer of Buyer, dated the Closing Date, stating
that the conditions specified in Sections 7.1(a) and 7.1(b) have been satisfied.
(d) Governmental Approvals and Other Consents; Rhodes
-------------------------------------------------
Investigation.
-------------
The LPSC shall have issued an Order approving the transactions contemplated
hereby, the terms and conditions of such Order shall not be materially adverse
to Citizens in the context of the transactions contemplated herein, and such
Order shall have become a Final Order. Sellers also shall have obtained all
other Consents of Governmental Bodies and other Persons which are required in
order to consummate the transactions contemplated hereby and to transfer the
Assets to Buyer without incurring material liability under any Legal
Requirement, Order or Contract. The Rhodes Investigation shall have been
resolved pursuant to an Order by the LPSC (which Order does not have to be a
Final Order).
(e) HSR Act. The applicable waiting period under the HSR Act
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with respect to the transactions contemplated hereby shall have expired or have
been terminated.
(f) Injunctions. On the Closing Date, there shall be no Orders
-----------
which operate, to restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated by this Agreement, and no Proceeding to obtain such an
Order shall be pending or Threatened.
(g) Opinion of Counsel. On the Closing Date, Sellers shall have
------------------
received from counsel to Buyer an opinion to the effect set forth in Exhibit
7.1(g); provided that such opinion may contain limitations and exceptions that
are customary for the subject matter addressed thereby.
(h) Documents. Buyer shall have delivered all the certificates,
---------
instruments, contracts and other documents specified to be delivered by it
hereunder on or before the Closing Date, including pursuant to Section 8.1, and
shall have taken such actions as Sellers may have requested pursuant to Section
11.2.
Section 7.2 Buyer's Conditions Precedent to Closing. The obligation of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to fulfillment at or prior to the Closing of the following conditions:
(a) Representations and Warranties True as of the Closing Date.
----------------------------------------------------------
Sellers' representations and warranties in this Agreement (i) shall have been
true and correct in all material respects as of the date of this Agreement and
(ii) shall be true and correct as of the Closing Date as if made on the Closing
Date, subject to changes expressly contemplated and permitted by this Agreement,
except (A) in the case of clauses (i) and (ii) above, that representations and
warranties made as of, or in respect of, only a specified date or period shall
be true and correct in all material
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respects as of, or in respect of, such date or period and (B) in the case of
clause (ii) above, to the extent that any failure of such representations and
warranties to be true and correct on account of events or conditions arising
after the execution date of this Agreement, without regard to any qualification
as to materiality or Material Adverse Effect set forth therein, as of the
Closing Date as if made on the Closing Date, when taken in the aggregate, would
not have a Material Adverse Effect.
(b) Compliance with Agreements. The covenants, agreements and
--------------------------
conditions required by this Agreement to be performed and complied with by
Sellers shall have been performed and complied with in all material respects
prior to or at the Closing Date.
(c) Certificate. Sellers shall execute and deliver to Buyer a
-----------
certificate of authorized officers of Sellers, dated the Closing Date, stating
that the conditions specified in Sections 7.2(a) and 7.2(b) have been satisfied.
(d) Governmental Approvals and Other Consents; Rhodes Investigation.
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The LPSC shall have issued an Order approving the transactions contemplated
hereby; such Order shall not contain any restrictions, conditions or other
provisions (other than those in effect on the date of this Agreement or
requiring that the regulatory treatment with respect to the Business in
existence as of the date of this Agreement applicable to Sellers be continued
following the Closing) that are materially adverse to the conduct of the
Business as operated on the date of this Agreement or on the other operations of
Buyer in the State of Louisiana as operated on the date of this Agreement; the
other terms and conditions of such Order shall not be materially adverse to
Buyer; and such Order shall have become a Final Order. For purposes of this
Section 7.2(d), Buyer's failure to receive from the LPSC any regulatory
treatment requested by Buyer in the parties' joint application to the LPSC that
is different in any material respect from the regulatory treatment in effect
with respect to the Business as of the date of this Agreement shall not be
considered materially adverse to the Business, to Buyer's other operations in
the State of Louisiana or to Buyer. In addition, Sellers shall have obtained
all other Consents of Governmental Bodies and other Persons which are required
by Sellers in order to consummate the transactions contemplated hereby other
than those the failure of which to obtain would not result in Buyer incurring
material liability under any Legal Requirement, Order or Contract. The Rhodes
Investigation shall have been resolved pursuant to an Order of the LPSC (which
Order does not have to be a Final Order). If such LPSC Order imposes any
financial obligation or liability (or any administrative obligation or liability
that could reasonably result in a financial obligation or liability) and such
obligation or liability shall not have been discharged or settled in full by
Citizens, then Citizens shall have delivered to Buyer (or to the appropriate
Governmental Body, if required) a bond or other surety instrument or other
collateral, in either case reasonably acceptable to Buyer (or, if such agreement
is not reached, a standby letter of credit from Citibank N.A., or another
financial institution reasonably acceptable to Buyer) fully securing such
obligations or liability with respect to such Order.
(e) HSR Act. The applicable waiting period under the HSR Act with
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respect to the transactions contemplated hereby shall have expired or have been
terminated.
(f) Injunctions. On the Closing Date, there shall be no Orders
-----------
which operate to restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated by this Agreement, and no Proceeding to obtain such an
Order shall be pending or Threatened.
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(g) Opinion of Counsel. On the Closing Date, Buyer shall have
------------------
received from L. Russell Mitten II, Vice President and General Counsel of
Citizens, an opinion in the form of Exhibit 7.2(g) hereto.
(h) Documents. Citizens and LGSN shall have delivered all of
---------
the certificates, instruments, contracts and other documents specified to be
delivered by them hereunder, including pursuant to Section 8.1, and shall have
made arrangements reasonably satisfactory to Buyer to deliver to Buyer as
promptly as practicable after the Closing such records (including customer and
employee records) necessary to own and operate the Business.
(i) No Material Adverse Change. Since the date of execution of
--------------------------
this Agreement, no Material Adverse Effect shall have occurred that has
continuing effect as of the Closing Date, it being agreed that no Order
resolving or other development in the Proceedings referenced in item I.5 or I.23
in Schedule 5.8 shall be considered, for purposes of this Section 7.2(i) or
Section 7.2(a) with respect to Sellers' representations and warranties set forth
in Section 5.6(c)(v) or Section 7.2(b) with respect to Sellers' covenants in
Section 6.1(a)(iii) (as such covenant relates to such representations and
warranties) to have a Material Adverse Effect.
ARTICLE VIII
CLOSING
Section 8.1 Closing. The closing of the purchase and sale of the Assets
(the "Closing") will take place at the offices of Fleischman and Walsh, L.L.P.,
1400 Sixteenth Street, N.W., Suite 600, Washington, D.C. 20036, on the last
calendar day of the month in which the conditions specified in Sections 7.1(d)
and 7.2(d) have been satisfied, unless another time, date and place is agreed to
in writing by the parties. The date of the Closing is referred to in this
Agreement as the "Closing Date." The transactions to be consummated on the
Closing Date shall be deemed to have been consummated as of 11:59 p.m. on the
Closing Date. At the Closing the following events shall occur, each event being
deemed to have occurred simultaneously with the other events.
(a) Payment of Purchase Price. Buyer will pay to Sellers an
-------------------------
amount equal to the Estimated Purchase Price by wire transferring such amount,
in lawful money of the United States of America in immediately available funds,
to such account(s) as Sellers shall have designated by notice to Buyer. If the
Closing Date is not a business day on which financial institutions are open and
operating, then on or before the last business day on which financial
institutions are open and operating before the Closing Date, Buyer shall deliver
the Estimated Purchase Price to Buyer's lead bank (the "Escrow Agent") in
immediately available funds in U.S. dollars, and each party shall deliver in
escrow to the other party's designated outside legal counsel the instruments and
other documents to be delivered by such party at the Closing. Upon receipt, the
Escrow Agent shall invest the Estimated Purchase Price in an interest-bearing
account mutually agreed upon by Sellers and Buyer. At Closing, upon
satisfaction of the conditions therefor, (i) Buyer shall sign and deliver to
Sellers a statement which confirms that the Closing has occurred and which
instructs the Escrow Agent to transfer to Sellers the funds representing the
Estimated Purchase Price, plus an amount representing the interest earned after
the Closing Date until the date the funds are transferred, to an account that
Sellers shall designate at least two (2) business days prior to the date the
funds are required to be transferred hereunder and (ii) each party shall sign
and deliver to the other party's designated outside legal counsel a statement
which confirms that Closing has occurred and which
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authorizes the release to the other party of the instruments and other documents
previously delivered in escrow to such legal counsel by such party. The Escrow
Agent shall refund the balance to Buyer. If the Closing does not occur on the
appointed Closing Date, the funds shall be returned to Buyer, together with all
interest earned thereon, and all escrowed instruments and documents shall be
returned to the party who delivered them. The fees and expenses of Escrow Agent
shall be paid one-half by Sellers and one-half by Buyer.
(b) Other Related Documents. To the extent consistent with the
-----------------------
other provisions of this Agreement, Sellers (or the appropriate Affiliate of
Sellers) and Buyer shall execute and deliver acts of sale, conveyances,
certificates of title, bills of sale, assignment and assumption instruments and
other documents reasonably requested by a party that are necessary for the
transfer of the Assets to Buyer, or the assumption of the Assumed Liabilities by
Buyer, or the satisfaction of any applicable Legal Requirements relating
thereto, or which are customarily given in the State of Louisiana to accomplish
transfers of assets of the type involved; provided, however, that nothing in
this clause (b) shall obligate Sellers or any Affiliate of Sellers to execute or
deliver any document that affects, in a manner adverse to Sellers or Sellers'
liability to Buyer, or to Buyer or to Buyer's liability to Sellers, as expressed
herein; and provided also that all acts of sale with respect to parcels of Real
Property owned in fee simple shall be with all legal warranties by, through
and/or under the Seller, but not otherwise, with such warranty warranting title
to the property from the date such Seller acquired title to such property to the
Closing Date, subject to Permitted Encumbrances, and with full substitution and
subrogation in and to all rights and actions of warranty that such Seller has or
may have against all preceding owners and venders.
ARTICLE IX
TERMINATION
Section 9.1 Termination Rights. This Agreement may be terminated in its
entirety at any time prior to the Closing:
(a) By the mutual written agreement of Sellers and Buyer;
(b) By Buyer, on the one hand, or Sellers, on the other hand, in
writing if there shall be in effect a nonappealable Order prohibiting the
transactions contemplated by this Agreement;
(c) By Buyer, upon and during the continuation of a breach in
any material respect of any of the representations and warranties of Sellers
contained herein or in the failure by Sellers to perform and comply in any
material respect with any of the agreements and obligations required by this
Agreement to be performed or complied with by Sellers, provided that such breach
or failure is not cured by Sellers in a manner reasonably acceptable to Buyer
within 45 days of Sellers' receipt of a written notice from Buyer that such a
breach or failure has occurred;
(d) By Sellers, upon and during the continuation of a breach in
any material respect of any of the representations and warranties of Buyer
contained herein or the failure by Buyer to perform and comply in any material
respect with any of the agreements and obligations required by this Agreement to
be performed or complied with by Buyer, provided that such breach or failure
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is not cured by Buyer in a manner reasonably acceptable to Sellers within 45
days of Buyer's receipt of a written notice from Sellers that such a breach or
failure has occurred;
(e) By either party in writing if the Closing has not occurred
within twelve (12) months after the date of this Agreement; provided that if
Closing has not occurred within such period of time because the conditions
precedent to Closing set forth in Sections 7.1(d) and 7.2(d) have not been
fulfilled, then such period of time shall be automatically extended to August 1,
2001; or
(f) By Sellers or Buyer, as appropriate, if any Governmental
Body or other Person whose Consent is required to fulfill a condition precedent
to Closing set forth in Section 7.1(d) (with respect to Sellers) or in Section
7.2(d) (with respect to Buyer) has affirmatively indicated that such Consent
will not be given or will contain terms or conditions (or, if such Consent has
been obtained, contains terms or conditions) that, in the reasonable business
judgment of Sellers or Buyer, as appropriate, will result in a condition
precedent to Closing set forth in Section 7.1(d) (with respect to Sellers) or in
Section 7.2(d) (with respect to Buyer) not being satisfied.
Section 9.2 Limitation on Right to Terminate: Effect of Termination.
(a) A party shall not be allowed to exercise any right of
termination pursuant to Section 9.1 if the event giving rise to the termination
right shall be due to the willful failure of such party seeking to terminate
this Agreement to perform or observe in any material respect any of the
covenants or agreements hereof to be performed or observed by such party.
(b) If this Agreement is terminated as permitted under Section
9.1, such termination shall be without liability of or to any party to this
Agreement, or any shareholder or Representative of such party; provided,
however, that if such termination shall result from the willful failure of any
party to fulfill a material condition to the performance of any other party or
to perform a material covenant of this Agreement or from a material and willful
breach by any party to this Agreement (it being understood that the failure to
cure a breach shall not, by itself, be a willful breach of this Agreement), then
such party shall (subject to the limitation set forth in the last sentence of
this Section 9.2(b)) be fully liable for any and all damages sustained or
incurred by the other party. If prior to Closing any party to this Agreement
resorts to legal proceedings to enforce this Agreement, the prevailing party in
such proceedings shall be entitled to recover all costs incurred by such party
including reasonable attorney's fees, in addition to any other relief to which
such party may be entitled; provided, however, and notwithstanding anything to
the contrary in this Agreement, in no such event shall any party be entitled to
receive any consequential, exemplary, punitive, or speculative damages.
ARTICLE X
EMPLOYEE MATTERS
Section 10.1 Employment of Transferred Employees.
(a) As of the Closing Date, Buyer shall employ all employees
actively employed by Citizens whose primary duties relate to the Business
("Active Employees") who as of the Closing Date are classified on Citizens'
payroll records as 070 employees ("070 Active Employees") and who either are
actively at work or are on vacation, bereavement leave, short-term sick leave or
any
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other authorized leave of absence which is scheduled to last not more than
thirty (30) business days after the Closing Date at the same wages or salary as
were in effect with Citizens immediately prior to the Closing Date. Buyer also
shall employ any other 070 Active Employee who is on an authorized leave of
absence scheduled to last more than thirty (30) days where there is a legal or
contractual right to reinstatement, as of the date, if any, within one (1) year
from the Closing Date, on which such employee returns to active work, in
compliance with Buyer's return to work policies and practices, at the same wages
or salary as were in effect with Citizens immediately prior to the Closing Date.
Any such 070 Active Employee employed by Buyer as provided in this Section
10.1(a) is referred to herein as a "Transferred Employee".
(b) Prior to the execution date of this Agreement, Sellers have
delivered to Buyer a list of the persons who would have been Transferred
Employees had the Closing Date occurred on March 31, 2000, showing the following
information for each such person: (i) the name of each employee; (ii) the name
of his or her current employer; (iii) his or her current base pay; (iv) his or
her hire date, any rehire date (if available) and years of service; (v) his or
her then-current position and job title; (vi) whether such employee is subject
to a collective bargaining agreement or represented by a labor organization and,
if so, the name of the union and local, (vii) whether such employee is on
authorized leave of absence scheduled to last more than thirty (30) days with a
legal or contractual right to reinstatement and the nature of such leave of
absence. Sellers shall update such list as of the end of each calendar quarter
occurring between the execution date hereof and the Closing Date, in each case
assuming the Closing Date had occurred on such date, and shall deliver such
updated lists to Buyer within ten (10) days after the end of each such calendar
quarter.
Section 10.2 Intentionally Omitted.
Section 10.3 Cessation of Participation in Sellers' Plans; Bonuses. From
and after the Closing Date, Transferred Employees shall accrue no additional
benefits under any employee benefit plan, policy, program or arrangement of
Sellers or its Affiliates. Citizens shall on a pro rata basis or as otherwise
determined by Citizens in its sole discretion, pay any bonuses declared by
Sellers after the Closing Date that would have been payable to the Transferred
Employees had the Transferred Employees remained employed by Sellers or its
Affiliates throughout the calendar year in which the Closing Date occurs, in
accordance with the provisions of any policy, plan, practice or arrangement of
Sellers under which such bonus would have been paid.
Section 10.4 Similarity of Benefit Packages. As of the Closing Date,
and except as otherwise expressly provided in this Article X, Buyer shall
include each Transferred Employee in a benefit package providing benefits that
are identical to those provided by Buyer to its non-union gas utility employees
(which are deemed by Buyer and Seller to be in the aggregate substantially
similar to those provided by Sellers to such Transferred Employees). Except as
otherwise expressly provided in this Article X, Buyer shall treat all service
and compensation credited to each such Transferred Employee as if such service
and compensation had been rendered to, and paid by, Buyer for all purposes of
eligibility and vesting of benefits but not for purposes of earning benefits
under Buyer's benefit plans, arrangements, and policies.
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Section 10.5 Defined Benefit Pension Plan.
(a) At least fifteen days prior to the Closing Date, Sellers
shall take any and all actions necessary to cease benefit accruals and fully
vest all Transferred Employees in their accrued benefits under the Citizens'
Pension Plan ("Citizens' Pension Plan"). Sellers shall retain all liabilities
and assets for pension benefits accrued through the Closing Date by Transferred
Employees and retirees of the Business under Citizens' Pension Plan.
(b) As of the Closing Date, Buyer shall cause all Transferred
Employees who are otherwise eligible to be included in the Atmos Energy
Corporation Pension Account Plan (the "Buyer's Pension Plan"). Buyer shall take
all actions necessary to cause Buyer's Pension Plan to recognize the service
that all Transferred Employees had under Citizens' Pension Plan for purposes of
such Employees' eligibility to participate, vesting, attainment of retirement
dates, eligibility for early retirement benefits under Buyer's Pension Plan and
entitlement to optional forms of payment.
Section 10.6 401(k) Plan.
(a) Buyer shall take all action necessary to ensure that, as of
the Closing Date, it includes Transferred Employees who are otherwise eligible
in the Atmos Energy Corporation Employee Stock Ownership Plan and Trust (the
"Buyer's 401(k) Plan"). Buyer shall take all actions necessary to cause Buyer's
401(k) Plan to recognize the service that the Transferred Employees had in
Citizens' 401(k) Savings Plan (the "Citizens' 401(k) Plan") for purposes of
determining such Employees' eligibility to participate, vesting, attainment of
retirement dates and, if applicable, contribution levels and eligibility for
optional forms of benefit payments. Buyer shall cause the trustee of Buyer's
401(k) Plan to accept transfers and, to the extent legally permissible, direct
rollovers from Citizens' 401(k) Plan of the vested account balances of
Transferred Employees, including transfers of outstanding loan balances and
related promissory notes, subject to compliance with applicable law.
(b) Citizens shall vest Transferred Employees in their account
balances under Citizens' 401(k) Plan as of the Closing Date.
(c) Citizens shall direct the trustee of Citizens' 401(k) Plan
to transfer to the trustee of Buyer's 401(k) Plan in a trustee-to-trustee
transfer the account balances of the Transferred Employees under Citizens'
401(k) Plan with such transfer to consist of cash and the shares of Citizens'
stock attributable to the former LGS Savings and Investment Plans credited to
the accounts of each Transferred Employee; except that to the extent that the
account balances consist of outstanding loans, Citizens shall direct the trustee
of Citizens' 401(k) Plan also to transfer to the trustee of Buyer's 401(k) Plan
the promissory notes, payroll deduction authorizations for installment payments
and related documents evidencing such loans.
(d) After the transfer of assets and liabilities pursuant to
this Section, Buyer shall assume all liabilities for the benefits payable with
respect to the assets transferred with respect to the Transferred Employees
under Citizens' 401(k) Plan, and Citizens and Citizens' 401(k) Plan shall have
no liability for such benefits.
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(e) In connection with the transfer of assets and liabilities under
this Section, Citizens and Buyer shall cooperate in making all appropriate
filings, and providing all applicable notices, required by the IRC or ERISA.
Buyer shall deliver to Citizens a copy of Buyer's 401(k) Plan, and a copy of the
most recent determination letter from the IRS with respect to such Plan. Buyer
will submit Buyer's 401(k) Plan to the IRS within the current remedial amendment
period for a determination that Buyer's Plan satisfies the requirements of the
Internal Revenue Code of 1986, as amended by the Uniformed Services Employment
and Reemployment Acts of 1999, the Small Business Job Protection Act of 1996,
the Taxpayer Relief Act of 1997 and the Internal Revenue Services Restructuring
and Reform Act of 1998.
Section 10.7 Welfare Benefits.
(a) Buyer shall take all action necessary and appropriate to ensure
that, as of the Closing Date, Buyer includes the Transferred Employees to the
extent they are otherwise eligible in the employee welfare benefit plans
(including retiree medical benefits) applicable to the other non-union gas
utility employees of Buyer (the "Buyer Welfare Plans"). For purposes of
determining eligibility to participate, and entitlement to benefits, in each
Buyer Welfare Plan, each Transferred Employee shall be credited with service,
determined under the terms of the corresponding welfare plans maintained by
Citizens on the Closing Date (hereinafter referred to collectively as the
"Citizens Welfare Plans"). Any restrictions on coverage for pre-existing
conditions, actively at work requirements, waiting periods, and requirements for
evidence of insurability (with respect to life insurance and long term
disability coverage) under the Buyer Welfare Plans shall be waived in the Buyer
Welfare Plans for Transferred Employees to the extent that such Transferred
Employees are covered by Citizens' Welfare Plans immediately prior to Closing,
and Transferred Employees shall receive credit under the Buyer Welfare Plans for
co-payments, payments under a deductible limit made by them, and for out-of-
pocket maximums applicable to them during the plan year of the Citizens Welfare
Plan in which the Closing Date occurs. As soon as practicable after the Closing
Date, Citizens shall deliver to Buyer a list of the Transferred Employees who
had credited service under a Citizens Welfare Plan, together with each such
Transferred Employee's service, co-payment, deductible and out-of-pocket payment
amounts under each such plan.
(b) Buyer shall provide or cause to be provided retiree medical,
dental and life insurance benefits to each retiree of the Business identified in
Schedule 10.7 as updated as of the Closing Date (the "Retirees"), including
those Retirees who were retirees at the time Seller purchased LGS ("LGS
Retirees"), under the same or better terms and conditions as applied to such
Retirees immediately prior to the Closing Date, and shall provide or cause to be
provided retiree medical benefits to each Transferred Employee under the same
terms and conditions as otherwise applied to non-union gas utility employees
retiring from Buyer at the time such Transferred Employee retires from the
Buyer. Citizens shall have no obligation or liability, contingent or otherwise,
to provide retiree medical, dental or life insurance benefits to any Retiree or
Transferred Employee on or after the Closing Date. For purposes of this Section
10.7, a "grandfathered employee" is a Transferred Employee or Retiree who was at
least age 55 with at least 10 years of service as defined in the Citizens'
Pension Plan by December 31, 1997, and who either retired on or after August 1,
1997 and on or prior to December 31, 1997 or was an employee of Citizens on
December 31, 1997 and retires after December 31, 1997. Schedule 10.7 identifies
each "grandfathered employee." Buyer agrees that, in the event it ever
terminates or materially adversely modifies, those retiree medical, dental and
life insurance benefits covering LGS Retirees and
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Retirees who are "grandfathered employees", their spouses and dependents from
those in effect immediately prior to the Closing Date or in the event it ever
terminates or materially adversely modifies those retiree medical benefits
provided to those Transferred Employees who are "grandfathered employees", their
spouses and dependents from those provided by Buyer to Buyer's non-union gas
utility employees immediately prior to the Closing Date, Buyer will indemnify
and hold harmless Sellers Indemnitees from any and all Loss in connection
therewith. Buyer's obligations under this Section 10.7(b) are subject to and
conditioned upon the truth and accuracy of the representation and warranty
contained in Section 5.13(f), and if such representation and warranty is
determined at any time not to be true and accurate, Buyer shall have no further
obligations under this Section 10.7(b).
Section 10.8 Flexible Spending Accounts. As soon as possible following
the Closing Date, Citizens shall transfer to Buyer's flexible benefits plan any
balances standing to the credit of Transferred Employees under Citizens'
flexible benefits plan as of the Closing Date. Citizens shall provide to Buyer
prior to the Closing Date a list of those Transferred Employees who have
participated in the health or dependent care reimbursement accounts of Citizens,
together with their elections made prior to the Closing Date, with respect to
such account, and balances standing to their credit or debit as of the Closing
Date, and a statement of aggregate expenses reimbursed from the plan for each
Transferred Employee during the plan year. Buyer agrees to administer such
accounts (consistent with the terms of the flexible benefits plan applicable to
Buyer's employees) such that Transferred Employees will be able to defer
compensation (in accordance with the terms of the applicable Buyer plan) and to
submit claims against such accounts within the time period permitted by
applicable law.
Section 10.9 Employment Agreements. Buyer shall assume all obligations
of each employment agreement to which Citizens or its Affiliates is a party and
which covers any Transferred Employee immediately prior to the Closing Date
other than any such employment agreement that is identified as a Retained
Liability in Part III of Schedule 5.13.
Section 10.10 Vacation/Time Off. Citizens shall pay to Transferred
Employees any "banked" vacation credited to them on or prior to the Closing
Date. On or after the Closing Date, each Transferred Employee shall be eligible
to participate in the Buyer's Time Off Policy. Buyer shall take all actions
necessary to cause Buyer's Time Off Policy to recognize for all purposes under
said Policy the service, vacation and accrued sick time off that Transferred
Employees had with Citizens. Citizens shall provide Buyer with a list of all
vacation, service and sick time off taken by each Transferred Employee and the
vacation, service and sick time off entitlement for each Transferred Employee
for the year including the Closing Date.
Section 10.11 Severance. In the event that Buyer terminates the
services of any Transferred Employee within twelve (12) months following the
Closing Date without cause, Buyer shall provide to any such Transferred Employee
severance or separation pay benefits in accordance with Schedule 10.11. Buyer
will reimburse Seller at Closing for one-half of any severance or separation pay
benefits provided by Citizens to any Active Employee in connection with the
termination of such employee with which Buyer concurs at any time from the date
of this Agreement through and including the Closing Date.
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Section 10.12 Health Care Continuation Coverage. Citizens shall be
responsible for compliance with all requirements under Section 4980B of the Code
and Section 601 et seq. of ERISA (collectively "COBRA") with respect to any (a)
Transferred Employee and (b) family member of such Transferred Employee, in each
case who becomes a "qualified beneficiary" within the meaning of Section
4980B(g)(1) of the Code as a result of any "qualifying event" within the meaning
of Section 4980B(f)(3) of the Code which occurs on or prior to the Closing Date.
Citizens also shall remain responsible for compliance with COBRA with respect to
any (c) former employee of the Business or current employee of the Business who
is not a Transferred Employee and (d) family member of such former employee or
current employee, in each case who becomes a qualified beneficiary as a result
of any qualifying event, whether such event occurs on, prior to or after the
Closing Date. Citizens covenants and agrees that Buyer shall have no liability
or responsibility for any of Citizens' COBRA obligations as described in this
Section 10.12. Buyer shall be responsible for compliance with COBRA with
respect to any (a) Transferred Employee and (b) family member of such
Transferred Employee, in each case who becomes a qualified beneficiary as a
result of any qualifying event which occurs after the Closing Date. In the
event Seller shall fail or refuse to provide COBRA coverage as described in this
Section 10.12 to the Transferred Employees and their family members who become
qualified beneficiaries, Seller shall immediately so notify Buyer of such
failure or refusal and shall provide Buyer a list of (a) each person employed in
the Business within the 36 months immediately preceding the Closing Date and (b)
each such employee and all dependents of such employee, in each case who had
coverage at any time during such period and the dates during which he or she had
coverage during the 36 months immediately preceding the Closing Date. For each
person who had coverage from any of Seller's group health plans and lost such
coverage at any time during the 36 months immediately preceding the Closing
Date, Seller shall provide to Buyer a copy of the COBRA notice and election
provided to each at the time of his/her qualifying event (as defined in IRC (S)
4980B(f)), copies of procedures used to notify each such qualified beneficiary
of the qualifying event, evidence of any election of COBRA coverage, evidence of
the reason for termination of each such COBRA coverage, evidence of any election
not to take COBRA, and evidence of COBRA premiums paid and any delinquency. The
foregoing sentence shall apply only if Seller shall fail or refuse to provide
coverage to all Transferred Employees and family members who become qualified
beneficiaries, and shall not apply simply because any one or more individual
Transferred Employees and/or family members who become qualified beneficiaries
may not be provided with the appropriate COBRA coverage.
ARTICLE XI
TAX MATTERS
Section 11.1 Purchase Price Allocation. Prior to the Closing Date,
Buyer and Sellers shall use their good faith efforts to agree upon the
allocation (the "Allocation") of the Purchase Price for the Division Assets and
the Purchase Price for the LGSN Assets, the Assumed Liabilities and other
relevant items (including, for example, adjustments to the Purchase Price) to
the individual assets or classes of Citizens or LGSN, respectively, of assets
within the meaning of Section 1060 of the IRC. If Buyer and Sellers agree to
such Allocation prior to Closing, Buyer and Sellers covenant and agree that (i)
the values assigned to the assets by the parties' mutual agreement shall be
conclusive and final for all purposes, and (ii) neither Buyer nor Sellers will
take any position before any Governmental Body or in any Proceeding that is in
any way inconsistent with such Allocation. Notwithstanding the foregoing, if
Buyer and Sellers cannot agree to an Allocation, Buyer and Sellers covenant and
agree to file, and to cause their respective Affiliates to file, all Tax Returns
and
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schedules thereto (including, for example, amended returns, claims for refund,
and those returns and forms required under Section 1060 of the IRC and any
Treasury regulations promulgated thereunder) consistent their respective good
faith Allocations, unless otherwise required because of a change in any Legal
Requirement.
Section 11.2 Cooperation with Respect to Like-Kind Exchange. Buyer
agrees that each Seller may, at its election prior to the Closing Date, direct
that all or a portion of the Purchase Price apportioned to its Assets be
delivered to a "qualified intermediary" (as defined in Treasury Regulation
Section 1.1031(k) - 1(g)(4)) as to enable its relinquishment of its Assets to
qualify as part of a like-kind exchange of property covered by Section 1031 of
the IRC, so long as the portion of the Purchase Price delivered to the qualified
intermediary in exchange for such Assets is consistent with Buyer's Allocation
under Section 11.1 with respect to such Assets. If a Seller so elects, Buyer
shall cooperate with such Seller (at no cost to Buyer) in connection with its
efforts to effect such like-kind exchange, which cooperation shall include
taking such actions as such Seller reasonably requests (but without Buyer being
required to incur any out-of-pocket costs in the course thereof) in order to
enable such Seller to qualify such transfer as part of a like-kind exchange of
property covered by Section 1031 of the IRC (including any actions required to
facilitate the use of a "qualified intermediary"), and Buyer agrees that such
Seller may assign all or part of its rights and delegate all or part of its
obligations under this Agreement to a Person acting as a qualified intermediary
to qualify the transfer of the Assets as part of a like-kind exchange of
property covered by Section 1031 of the IRC, provided, however, that no such
assignment or delegation shall relieve Sellers of any of their obligations under
this Agreement nor shall legal title to any of the Assets transfer other than
directly from a Seller to Buyer. Buyer and Sellers agree in good faith to use
reasonable efforts to coordinate the transactions contemplated by this Agreement
with any other transactions engaged in by either Buyer or Sellers in a manner
consistent with this Section 11.2; provided that such efforts are not required
to include an unreasonable delay in the consummation of the transactions
contemplated by this Agreement.
Section 11.3 Transaction Taxes. Buyer and Citizens shall each bear and
be responsible for paying one-half of any sales, use, transfer, documentary,
registration (other than any annual registration fees), and other similar
transfer type Taxes (including related penalties, additions to Tax and interest)
imposed by any Governmental Body with respect to the transfer of Assets
(including the Real Property) to Buyer ("Transaction Taxes"), regardless of
whether the ax authority seeks to collect such Taxes from Sellers or Buyer.
Citizens shall prepare all Tax filings related to any Transaction Taxes (other
than with respect to Real Property and motor vehicle title transfer and
registration, which shall be prepared by Buyer). Twenty (20) days prior to
making such filings, the filing party shall provide to the nonfiling party the
filing party's workpapers and proposed Tax Return for the nonfiling party's
review and approval. The nonfiling party shall provide to the filing party
approval (which approval shall not be unreasonably withheld) or disapproval of
such workpapers and proposed Tax Return within ten (10) days of delivery by the
filing party. If the filing and nonfiling party are unable to agree on the
workpapers and proposed Tax Return, Buyer and Citizens shall engage a nationally
recognized independent accounting firm mutually satisfactory to both to prepare
the workpapers and proposed Tax Return, which preparation shall be binding and
conclusive on the Buyer and Sellers without further appeal therefrom, and which
fees and expenses shall be borne equally by the Buyer and Citizens. The filing
party shall be responsible for (i) administering the payment of such Transaction
Taxes, (ii) defending or pursuing any Proceedings related thereto, and (iii)
paying any expenses related thereto, in each case subject to reimbursement
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by the nonfiling party for one-half of such payments and expenses. Each party
shall give prompt written notice to the other of any proposed adjustment or
assessment of any Transaction Taxes with respect to the transaction, or of any
examination of said transaction in a sales, use, transfer or similar Tax audit.
In any Proceedings, whether formal or informal, the filing party shall control
the defense of such Proceedings, but shall permit the nonfiling party to
participate in the defense of such proceeding and shall take all actions and
execute all documents required to allow such participation. Neither party shall
negotiate a settlement or compromise of any Transaction Taxes without the prior
written consent of the other, which consent shall not be unreasonably withheld.
Section 11.4 Clearance Certificates. Sellers shall provide Buyer with a
Tax clearance certificate or similar document(s) which may be required by any
state taxing authority in order to relieve Buyer of any obligation to withhold
any portion of the Purchase Price.
ARTICLE XII
ENVIRONMENTAL MATTERS
Section 12.1 Environmental Due Diligence.
(a) Right to Conduct Environmental Due Diligence. All
--------------------------------------------
environmental due diligence (including employee interviews and sampling of any
media or wastewater) conducted by Buyer shall be conducted in accordance with
this Section 12.1. All activities of Buyer regarding environmental due diligence
shall be conducted to minimize any inconvenience or interruption of the normal
use and enjoyment of the Business and the Assets.
(b) Delivery of Environmental Reports. Buyer shall provide to
---------------------------------
Sellers or to Sellers' counsel, copies of all reports, assessments and other
information composed or compiled by Buyer or Buyer's environmental consultant(s)
promptly following Buyer's receipt thereof. Buyer shall treat all such
information delivered to, or composed or compiled by, Buyer or Buyer's
environmental consultant(s) as Environmental Data in accordance with the
procedures of Section 12.1(c).
(c) Confidentiality of Environmental Data. All audits, reports
-------------------------------------
and studies delivered to or prepared by Buyer and any other information
collected and generated as a result of Buyer's environmental due diligence
("Environmental Data") will be subject to the terms and conditions of the
Confidentiality Agreement, except as otherwise expressly provided in this
Section 12.1. Prior to the Closing, neither Buyer nor its environmental
consultant(s) shall disclose or release any Environmental Data without the prior
written consent of Sellers and all such information shall be kept strictly
confidential. Buyer expressly agrees that until the Closing, it will not
distribute the Environmental Data to any third party without Sellers' prior
written consent. After the Closing, Buyer agrees that it will not distribute the
Environmental Data to any third party without Citizens' prior written consent,
except as required by applicable Legal Requirements or by express provisions of
Buyer's corporate compliance program if Sellers are provided written notice at
least ten (10) days prior to such distribution, provided, however, that after
the Closing Date, Buyer may distribute the Environmental Data to any potential
purchaser of any of the Assets but only after first notifying Sellers.
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(d) Environmental Consultants. Buyer may retain one or more outside
-------------------------
environmental consultants to assist in its environmental due diligence
concerning the Assets and shall notify Sellers of the environmental consultant
or consultants Buyer intends to retain. Thereafter, Sellers shall have five (5)
days after receipt of such notification to notify Buyer in writing of Sellers'
objection (which must be for good cause) and substantiate the basis for that
objection. If Sellers do not object for good cause and substantiate that
objection within said five (5) day period, Sellers shall be deemed to have
consented to Buyer's selection.
(e) Phase I Reviews. Buyer may conduct, at its sole expense,
---------------
Phase I environmental assessment activities with respect to the Assets,
including reviewing existing environmental reports, correspondence, permits and
related materials regarding the Assets and all other Phase I activities as set
forth in the ASTM protocol regarding Phase I assessments. Any permitted Phase I
environmental assessment activities shall not include any sampling or intrusive
testing. All Phase I environmental assessment activities shall be conducted in
accordance with ASTM standards regarding Phase I assessments and shall be
completed within sixty (60) days after the date of execution of this Agreement.
Upon completion of such Phase I assessment activities, Buyer's environmental
consultant shall prepare and deliver to Buyer a written report with respect
thereto. All reports from Buyer's environmental consultants shall be delivered
to Sellers or Sellers' counsel within ninety (90) days after the execution of
this Agreement. Buyer shall notify Sellers in writing within ninety (90) days
after the date of execution of this Agreement if it has concluded, based on its
environmental due diligence, that the condition to Closing set forth in Section
7.2(a) will not be satisfied due to the discovery of such potential material
Environmental Liabilities unless environmental remediation of such potential
liabilities occurs prior to Closing. Buyer's failure to provide such notice by
such date shall preclude Buyer from subsequently declaring that the condition to
Closing set forth in Section 7.2(a) has not been satisfied based on the results
of Buyer's environmental due diligence, but shall not preclude the
indemnification or other rights of Buyer from Sellers in respect of the
Environmental Liabilities discovered by Buyer.
(f) Phase II Reviews. Prior to Closing, Buyer may not conduct any
----------------
Phase II environmental assessment activities with respect to the Assets
(including the taking and analysis of soil, surface water and groundwater
samples, testing of buildings, drilling wells, taking soil borings and
excavating) without the prior written consent of Sellers, which consent may be
withheld, conditioned or delayed by Sellers in their sole discretion.
(g) Asbestos. Buyer may conduct, at its sole expense, asbestos
--------
survey activities with respect to the Assets, including reviewing existing
reports, correspondence and other related documents, inspecting individual sites
and collecting samples of suspected asbestos-containing materials. These
asbestos survey activities shall be completed within sixty (60) days after the
date of execution of this Agreement and shall be conducted in accordance with
the provisions of Section 12.1(e).
(h) Additional Due Diligence. Notwithstanding the foregoing, if
------------------------
prior to Closing Citizens or LGSN receives notice of any Proceeding or
Threatened Proceeding arising under Environmental Laws or if Sellers otherwise
acquire Knowledge that is reasonably likely to require a change to Schedule
5.14, Sellers promptly shall notify Buyer of the same and Buyer may request that
Sellers authorize Buyer to conduct specific additional environmental due
diligence measures if and to the extent that such measures are required to
determine the extent of any potential Environmental
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Liability relating thereto. Such authorization shall not be unreasonably
withheld, conditioned or delayed by Sellers. Any such additional environmental
due diligence shall be conducted at Buyer's sole expense.
(i) Indemnity for Due Diligence Activities. Buyer hereby agrees
--------------------------------------
to indemnify and hold harmless Sellers, Sellers' Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and against
any and all Losses with respect to personal injury or property damage arising
out of or in connection with any site visit by Buyer or its environmental
consultant(s) and resulting from an act or omission of Buyer or its
environmental consultant(s) in the course of its environmental inspections.
ARTICLE XIII
INDEMNIFICATION
Section 13.1 Indemnification by Sellers. From and after Closing and
subject to the other provisions of this Article XIII, Sellers shall jointly and
severally indemnify and hold harmless Buyer, its Representatives, Affiliates,
successors and permitted assigns (collectively, the "Buyer Indemnitees") from
and against any and all Losses arising out of or resulting from:
(a) any representations and warranties made by Sellers in or
pursuant to this Agreement not being true and correct when made or when required
by this Agreement to be true and correct, or any breach or default by Sellers in
the performance of their covenants, agreements, or obligations under this
Agreement required to be performed prior to Closing;
(b) any breach or default by Sellers in the performance of their
covenants, agreements, or obligations under this Agreement or any Related
Document delivered pursuant hereto required to be performed on or after Closing;
(c) any Retained Liabilities; and
(d) the Rhodes Proceedings.
Section 13.2 Indemnification by Buyer. From and after Closing and
subject to the other provisions of this Article XIII, Buyer shall indemnify and
hold harmless Sellers, their Representatives, Affiliates, successors and
permitted assigns (collectively, the "Sellers Indemnitees") from and against any
and all Losses arising out of or resulting from:
(a) any representations and warranties made by Buyer in or
pursuant to this Agreement not being true and correct when made or when required
by this Agreement to be true and correct, or any breach or default by Buyer in
the performance of its covenants, agreements, or obligations under this
Agreement required to be performed prior to Closing;
(b) any breach or default by Buyer in the performance of its
covenants, agreements, or obligations under this Agreement or any Related
Document delivered pursuant hereto required to be performed on or after Closing;
and
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(c) any Assumed Liabilities and, except as to Retained
Liabilities and except to the extent Buyer is entitled (without regard to the
time or amount limitations provided in this Article XIII) to indemnification
under Section 13.1 with respect thereto, the operation of the Business after the
Closing Date.
Section 13.3 Limitations on Liability. Notwithstanding anything to the
contrary in this Agreement, the liability of Sellers and Buyer under this
Agreement and any documents delivered in connection herewith or contemplated
hereby shall be limited as follows:
(a) IN NO EVENT SHALL SELLERS BE LIABLE TO THE BUYER INDEMNITEES,
OR BUYER BE LIABLE TO THE SELLERS INDEMNITEES, FOR ANY CONSEQUENTIAL DAMAGES
(OTHER THAN FORESEEABLE DAMAGES INCLUDING FORESEEABLE DIMINUTION IN VALUE AND
FORESEEABLE LOST PROFITS), EXEMPLARY, PUNITIVE, OR SPECULATIVE DAMAGES;
provided, however, that if the Indemnified Party (as such term is hereafter
defined in Section 13.4(a)) is held liable to a third party for any of such
damages and the Indemnifying Party (as such term is hereafter defined in Section
13.4(a)), is obligated to indemnify the Indemnified Party for the matter that
gave rise to such damages, then the Indemnifying Party shall be liable for, and
obligated to reimburse the Indemnified Party for, such damages.
(b) Except as provided below, the representations, warranties,
covenants and agreements of Sellers and Buyer set forth in this Agreement shall
survive the Closing, and all representations, warranties, covenants and
agreements of Sellers and Buyer under this Agreement and the indemnities granted
by Sellers in Section 13.1 and by Buyer in Section 13.2 (except those that
survive without time limit) shall terminate at 5:00 p.m., local time in
Stamford, Connecticut, on the appropriate anniversary of the Closing Date or on
the expiration of the applicable statute of limitations (or extensions or
waivers thereof), as the case may be, as set forth below in this Section
13.3(b); provided, however, that, except in the case of indemnities that survive
without time limit, such indemnities shall survive with respect only to the
specific matters that are the subject of a proper Claim Notice delivered in good
faith in compliance with the requirements of this Section 13.3 until the earlier
to occur of (A) the date on which a final nonappealable resolution of the matter
described in such Claim Notice has been reached or (B) the date on which the
matter described in such Claim Notice has otherwise reached final resolution,
provided that in each case the Indemnifying Party has fully satisfied any
indemnity obligation arising as a result of such resolution of such matter. In
no event, except in the case of indemnities that survive without time limit,
shall any amounts be recovered from Sellers under Section 13.1 or from Buyer
under Section 13.2, respectively, or otherwise for any matter for which a Claim
Notice is not delivered to Sellers or Buyer, as the case may be, prior to the
close of business on the applicable date set forth below.
(1) All representations and warranties of Sellers and Buyer
contained in or made pursuant to this Agreement, and all covenants, agreements
or obligations of Sellers and Buyer contained in or made pursuant to this
Agreement that are required to be performed prior to Closing, and the related
indemnity obligations of Buyer and Sellers contained in Sections 13.1(a) and
13.2(a), respectively, shall survive Closing until and shall terminate on the
second anniversary of the Closing Date.
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(2) The indemnity obligations of Sellers contained in Section
13.1(b) and 13.1(c) with respect to (i) Taxes shall survive until the expiration
of the applicable statute of limitations (or extensions or waivers thereof);
(ii) Environmental Liabilities shall survive until the fifth anniversary of the
Closing Date except with respect to Liabilities arising out of or relating to
non-compliance with a permit or authorization requirement of any Environmental
Law, which shall only survive until the second anniversary of the Closing Date;
(iii) the matters described in Sections 2.4(a), (c), (d), (e) (but only with
respect to Proceedings pending or Threatened as of the Closing Date), and (g)
shall survive without limitation as to time; (iv) the other matters described in
Section 13.1(b) shall survive without limitation as to time except for any
covenant as to title herein (the survival of which is addressed exclusively in
clause (vii) of this Section 13.3(b)(2)) and except in the event any specific
post-Closing covenant, agreement or obligation of Sellers under this Agreement
is expressly limited as to time, in which event such covenant, agreement or
obligation shall survive until the expiration of such specified time period; (v)
Retained Liabilities not otherwise addressed in clauses (i), (ii) and (iii) of
this Section 13.3(b)(2)) shall survive until the third anniversary of the
Closing Date; (vi) any warranty of title included in the acts of sale with
respect to parcels of Real Property owned in fee simple delivered pursuant to
Section 8.1(b) shall survive without time limit; and (vii) any covenant in this
Agreement as to title shall only survive until the second anniversary of the
Closing Date.
(3) The indemnity obligations of Sellers contained in Section
13.1(d) shall survive for an unlimited period of time. (The indemnity
obligations of Sellers described in this Section 13.3(b)(3) together with the
indemnity obligations of Sellers described in clauses (i), (iii) and (iv) of
Section 13.3(b)(2), and exclusive of the indemnity obligations of Sellers
described in clauses (ii), (v), (vi), and (vii) of Section 13.3(b)(2), are
collectively referred to hereinafter as the "Specified Indemnity Obligations.")
(4) The indemnity obligations of Buyer contained in Sections
13.2(b) and (c) shall survive for an unlimited period of time, except in the
event any post-Closing covenant, agreement or obligation of Buyer under this
Agreement is expressly limited as to time, in which event such covenant,
agreement or obligation shall survive until the expiration of such specified
time period.
(5) Notwithstanding the foregoing, the parties acknowledge that
Buyer shall be entitled to indemnification by Sellers for Losses incurred by
Buyer in respect of any intentional misrepresentation or omission or fraud by
Sellers without any time limitation (it being understood that the failure to
cure a breach shall not, by itself, be an intentional act or omission)
(hereinafter referred to as "Sellers' Fraud").
(c) Notwithstanding anything to the contrary in this Agreement,
Sellers shall not be required to indemnify the Buyer Indemnitees, or be
otherwise liable to the Buyer Indemnitees after the Closing with respect to this
Agreement, the transactions provided for herein or contemplated hereby or
Sellers' ownership or use of the Assets or operation of the Business on or
before the Closing Date for any Losses (other than Losses incurred by the Buyer
Indemnitees in respect of Specified Indemnity Obligations or Sellers' Fraud
(hereinafter referred to as "First-Dollar Losses")) until the Buyer Indemnitees
have suffered Losses (determined after giving effect to the provisions of
Section 13.3(f) and other than First-Dollar Losses) that are in excess of a
deductible in an amount equal to $3,000,000, after which point Sellers will be
obligated only to indemnify the
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Buyer Indemnitees from and against further Losses in excess of such deductible.
Buyer shall be entitled to indemnification for all First-Dollar Losses without
regard to the foregoing limitation on Sellers' indemnification liability.
(d) Notwithstanding anything to the contrary in this Agreement,
Sellers shall not be required to indemnify the Buyer Indemnitees, or be
otherwise liable to the Buyer Indemnitees, after the Closing with respect to
this Agreement, the transactions provided for herein or contemplated hereby or
Sellers' ownership or use of the Assets or operation of the Business on or
before the Closing Date for any Losses (other than First-Dollar Losses) that are
in excess of an amount equal to $35,000,000. Buyer shall be entitled to
indemnification for all First-Dollar Losses without regard to the foregoing
limitation on Sellers' indemnification liability.
(e) No right to indemnification under this Article XIII shall be
limited by reason of any investigation conducted by any party at any time or by
the decision by a party to complete the Closing.
(f) Buyer agrees to use its commercially reasonable efforts to give
written notice to the appropriate insurance carrier(s) of any occurrence or
circumstances which, in the judgment of Buyer consistent with its customary risk
management practices, appear likely to be covered by one or more insurance
policies of Buyer. Any such notice shall be given in good faith by Buyer
without regard to the possibility of indemnification payments by Sellers under
Section 13.1, and shall be processed by Buyer in good faith and in a manner
consistent with its risk management practices involving claims for which no
third party contractual indemnification is available. Sellers agree to use
their commercially reasonable efforts to give written notice to the appropriate
insurance carrier(s) of any occurrences or circumstances which, in the judgment
of Sellers consistent with their customary risk management practices, appear
likely to be covered by one or more insurance policies of Sellers; and Buyer
agrees to cooperate with Sellers in connection with Sellers' investigation,
submission, prosecution, defense and settlement of claims under Sellers'
insurance policies, at Sellers' expense. Any such notice shall be given in good
faith by Sellers without regard to the possibility of the limitation on
indemnification payments from Sellers under Sections 13(b) or (c), and shall be
processed by Sellers in good faith and in a manner consistent with its risk
management practices involving claims for which no such limitations are
available. If at any time subsequent to the receipt by a Buyer Indemnitee of an
indemnity payment from a Seller hereunder, such Buyer Indemnitee (or any
Affiliate thereof) receives any recovery, settlement or other similar payment
with respect to the Loss for which it receives such indemnity payment, such
Buyer Indemnitee shall promptly pay to Sellers an amount equal to the amount of
such recovery, less any out-of-pocket costs incurred by such Buyer Indemnitee
(or its Affiliates) in connection with claim preparation, pursuit and
settlement; provided that if such net recovery reduces the amount of Losses
actually incurred by the Buyer Indemnitees to an amount that is then below the
deductible amount set forth in Section 13.3(c), then the amount of such
reduction below such deductible amount shall again be available for Losses in
accordance with Section 13.3(c).
(g) Any limitation on indemnification provided in this Section 13.3
that is expressly applicable to any subsection or clause of Section 13.1 or 13.2
shall not be applicable to any indemnification as may be applicable under any
other subsection or clause of Section 13.1 or 13.2 to which such limitation is
not also expressly applicable.
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(h) Notwithstanding any language contained in any Related Document
(including deeds and other conveyance documents relating to the Real Property),
the representations and warranties of Sellers set forth in this Agreement will
not be merged into any such Related Document and the indemnification obligations
of Sellers, and the limitations on such obligations, set forth in this Agreement
shall control. No provision set forth in any such Related Document shall be
deemed to enlarge, alter or amend the terms or provisions of this Agreement.
(i) For the purposes of this Article XIII, once a determination has
been made that a specific breach of a representation, warranty, covenant or
agreement has occurred for purposes of the indemnification obligation hereunder,
the calculation of Losses with respect to such specific breach shall be made
without regard to any limitation or qualification as to materially set forth in
such representation, warranty, covenant or agreement.
(j) Notwithstanding anything to the contrary in this Agreement,
Sellers shall not be required to indemnify the Buyer Indemnitees or otherwise be
liable to Buyer in respect of the Proceedings described in Section 2.4(e) for
any Losses of any Buyer Indemnitee arising out of or resulting from any
regulatory action affecting the regulatory treatment or requirements of Buyer
with respect to the Business after the Closing Date except to the extent a Buyer
Indemnitee is required by a Governmental Body to refund or otherwise credit
directly to customers revenues collected by Sellers on or prior to the Closing
Date, together with interest or any other amounts identified therewith.
Section 13.4 Claims Procedure.
(a) All claims for indemnification under Section 13.1 or 13.2, or any
other provision of this Agreement except as otherwise expressly provided in this
Agreement, shall be asserted and resolved pursuant to this Article XIII. Any
Person claiming indemnification hereunder is referred to as the "Indemnified
Party" and any Person against whom such claims are asserted hereunder is
referred to as the "Indemnifying Party."
(b) Except in the case of the Rhodes Proceedings, in the event that
any Losses are asserted against or sought to be collected from an Indemnified
Party by a third party, said Indemnified Party shall with reasonable promptness
provide to the Indemnifying Party a Claim Notice. The obligation of the
Indemnifying Party to indemnify the Indemnified Party with respect to any such
Losses shall be reduced to the extent the Indemnifying Party is damaged by the
failure of the Indemnified Party to provide such notice. Any other claim
hereunder shall require the provision of a Claim Notice. The Indemnifying Party
shall have 30 days from the personal delivery or receipt of the Claim Notice
(the "Notice Period") to notify the Indemnified Party (i) whether or not it
disputes the liability of the Indemnifying Party to the Indemnified Party
hereunder with respect to such Losses and/or (ii) whether or not it desires, at
the sole cost and expense of the Indemnifying Party, to defend the Indemnified
Party against such Losses; provided, however, that any Indemnified Party is
hereby authorized prior to and during the Notice Period to file any motion,
answer or other pleading that it shall deem necessary or appropriate to protect
its interests or those of the Indemnifying Party (and of which it shall have
given notice and opportunity to comment to the Indemnifying Party) and not
prejudicial to the Indemnifying Party. In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such Losses, the Indemnifying Party shall
defend all appropriate
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Proceedings, and with counsel of its own choosing, which Proceedings shall be
promptly settled or prosecuted by it to a final conclusion; provided that no
such Proceeding may be settled without the prior written consent of the
Indemnified Party unless a full release is obtained by the Indemnified Party,
all amounts payable pursuant thereto are paid by the Indemnifying Party and the
settlement does not adversely affect the business or assets of the Indemnified
Party, including the Business or the Assets. If the Indemnified Party desires to
participate in, but not control, any such defense or settlement it may do so at
its sole cost and expense. If requested by the Indemnifying Party, the
Indemnified Party agrees to cooperate with the Indemnifying Party and its
counsel in contesting any Losses that the Indemnifying Party elects to contest
or, if appropriate and related to the claim in question, in making any
counterclaim against the Person asserting the third party Losses, or any cross-
complaint against any Person. In the event that the Indemnifying Party fails to
notify the Indemnified Party within the Notice Period that it will defend
against such Losses, the Indemnified Party shall have the right to defend all
appropriate Proceedings, and with counsel of its own choosing, at the
Indemnifying Party's expense, which Proceedings may be settled (without consent
of the Indemnifying Party) or prosecuted by it to a final conclusion.
(c) Sellers shall defend the Rhodes Proceedings at their own expense,
with counsel of their own choosing, which Sellers shall promptly and diligently
pursue to a settlement or prosecute to a final conclusion; provided that neither
of the Rhodes Proceedings may be settled without the consent of Buyer unless
reasonably concurrently therewith any financial obligations or liability payable
pursuant thereto are paid by Sellers or provision for payment is made in
accordance with any related Legal Requirements and this Section 13.4(c) or
Sections 6.8 or 7.2(d), as the case may be. If Buyer becomes obligated to pay
any financial compensation to the plaintiffs in the Rhodes Lawsuit, then
Citizens will pay such compensation in accordance with all applicable Legal
Requirements or deliver to Buyer (or to the Judicial District Court, Jefferson
Parish, Louisiana, if appropriate) a bond or other surety instrument reasonably
acceptable to Buyer fully securing payment of such compensation. Notwithstanding
the delivery of surety instruments pursuant hereto, Citizens shall remain liable
for, and shall pay when due, all obligations secured thereby. If Citizens fails
to pay any such obligations when due, and Buyer is required to pay, Buyer shall
be entitled to draw on such surety instruments in accordance with the terms
thereof. Upon satisfaction of all of Citizens' obligations secured by any such
surety instrument, Buyer shall return such surety instrument to Citizens.
Citizens' obligation to indemnify the Buyer Indemnitees in respect of the Rhodes
Proceedings shall be paid without any right of setoff and notwithstanding any
failure of Buyer to perform any of its obligations under the Agreement or any
other agreement as instrument delivered pursuant hereto.
(d) The Indemnified Party shall provide reasonable assistance to the
Indemnifying Party and provide access to its books, records and personnel as the
Indemnifying Party reasonably requests in connection with the investigation or
defense of the Losses. The Indemnifying Party shall promptly upon receipt of
reasonable supporting documentation reimburse the Indemnified Party for out-of-
pocket costs and expenses incurred by the latter in providing the requested
assistance.
(e) With regard to third party claims for which Buyer is or Sellers
are entitled to indemnification under Section 13.1 or 13.2, but subject to
Section 13.4(c), such indemnification shall be paid by the Indemnifying Party
upon: (i) the entry of an Order against the Indemnified Party and the expiration
of any applicable appeal period; or (ii) a settlement. Notwithstanding the
foregoing but subject to Section 13.4(b) and (c), and provided that there is no
dispute as to the applicability of
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indemnification, expenses of counsel to the Indemnified Party shall be
reimbursed on a current basis by the Indemnifying Party as if such expenses are
a liability of the Indemnifying Party.
Section 13.5 Exclusive Remedy. Except as otherwise provided in Article VI,
Article X and this Section 13.5, the rights, remedies and obligations of the
Buyer Indemnitees and the Sellers Indemnitees set forth in this Article XIII
will be the exclusive rights, remedies and obligations of such Persons after the
Closing with respect to this Agreement, the transactions provided for herein or
contemplated hereby or Sellers' ownership of the Assets or operation of the
Business on or before the Closing Date, except for Sellers' Fraud.
Notwithstanding the foregoing, with respect to Environmental Liabilities and
Retained Liabilities referred to in Section 13.3(b)(2)(v), the indemnification
provisions set forth in this Article XIII are not exclusive and shall be in
addition to any other remedies any Buyer Indemnitee may have pursuant to
statutory or common law, but subject to the limitations provided in Section
13.3(a), (c) and (d).
Section 13.6 Indemnification for Negligence. WITHOUT LIMITING OR ENLARGING
THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS AGREEMENT, AN
INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN ACCORDANCE
WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM GIVING RISE TO
SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY, VIOLATION OF ANY LAW OR OTHER LEGAL
FAULT OF OR BY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH
CONSTITUTES A CONSPICUOUS LEGEND.
ARTICLE XIV
GENERAL PROVISIONS
Section 14.1 Expenses. Except as otherwise specifically provided herein,
each party will pay all costs and expenses of its performance of and compliance
with this Agreement, except (i) Buyer will pay all real estate and motor vehicle
title transfer recording fees, and (ii) all Transaction Taxes relating to the
transfer of real property and motor vehicles will be shared equally between
Buyer, on the one hand, and Sellers, on the other hand.
Section 14.2 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been given upon
receipt if either (a) personally delivered, (b) sent by prepaid first class
mail, and registered or certified and a return receipt requested (c) sent by
overnight delivery via a nationally recognized carrier or (d) by facsimile with
completed transmission acknowledged:
If to either Seller, to:
Citizens Utilities Company/LGS Natural Gas Company
High Ridge Park
Stamford, CT 06905
Attention: Robert J. DeSantis
Telecopier: (203) 614-4625
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with a copy to each of:
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Attention: L. Russell Mitten, II
Telecopier: (203) 614-4651
and:
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Attention: J. Michael Love
Telecopier: (203) 614-5201
and:
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Attention: Jeffry L. Hardin
Telecopier: (202) 387-3467
If to Buyer, to:
Atmos Energy Corporation
1800 Three Lincoln Centre
5430 LBJ Freeway
Dallas, TX 75240
Attention: John P. Reddy
Telecopier: (972) 855-3793
with a copy to each of:
Atmos Energy Corporation
1800 Three Lincoln Centre
5430 LBJ Freeway
Dallas, TX 75240
Attention: Phillip L. Allbritten
Telecopier: (972) 855-3080
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and:
Gibson, Dunn & Crutcher LLP
2100 McKinney Avenue, Suite 1100
Dallas, TX 75201
Attention: Irwin F. Sentilles, III
Telecopier: (214) 698-3400
or at such other address or number as shall be given in writing by a party to
the other party.
Section 14.3 Assignment. This Agreement may not be assigned, by operation
of law or otherwise, by any party hereto without the prior written consent of
the other party hereto; provided, however, in the event of any such assignment
by a party by operation of law without the consent of the other party as
required above, such other party may consent in writing to such assignment after
it has occurred and, in such event, this Agreement and all the provisions hereof
shall be binding upon the Person receiving such assignment by operation of law.
Notwithstanding the foregoing, (a) Buyer may assign this Agreement (or any right
or obligation hereunder), without the prior written consent of Sellers, to any
direct or indirect wholly-owned subsidiary of Buyer provided such subsidiary
assumes in writing all of the duties and obligations of Buyer (or such
obligation) hereunder (provided that no such assignment by Buyer shall in any
way operate to enlarge, alter or change any obligation due to Sellers or relieve
Buyer of its obligations hereunder if such subsidiary fails to perform such
obligations, with the understanding that Buyer shall be jointly and severally
liable with such subsidiary for any nonperformance of such obligations
hereunder); and (b) Sellers may assign all or part of its rights or delegate all
or part of their duties under this Agreement, without the prior written consent
of Buyer, to a qualified intermediary chosen by Sellers to structure all or part
of the transactions contemplated hereby as a like-kind exchange of property
covered by Section 1031 of the IRC, (provided that no such assignment by Sellers
shall in any way operate to enlarge, alter or change any obligations due to
Buyer or relieve Sellers of their obligations hereunder if such qualified
intermediary fails to perform such obligations, with the understanding that
Sellers shall be jointly and severally liable with such qualified intermediary
for any nonperformance of Sellers' obligations hereunder).
Section 14.4 Successor Bound. Subject to the provisions of Section 14.3,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
Section 14.5 Governing Law. THE VALIDITY, PERFORMANCE, AND ENFORCEMENT OF
THIS AGREEMENT AND ALL RELATED DOCUMENTS, UNLESS EXPRESSLY PROVIDED TO THE
CONTRARY, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE THAT WOULD APPLY ANY
OTHER LAW.
Section 14.6 Dispute Resolution. Except as otherwise provided in Sections
3.3(b), 6.4 and 11.3, and this Section 14.6, any dispute, controversy or claim
between the parties relating to, arising out of or in connection with this
Agreement (or any subsequent agreements or amendments thereto), including as to
its existence, enforceability, validity, interpretation, performance or breach
or as to indemnification or damages, including claims in tort, whether arising
before or after the termination
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of this Agreement (any such dispute, controversy or claim being herein referred
to as a "Dispute") shall be settled without litigation and only by use of the
following alternative dispute resolution procedure:
(a) At the written request of a party, each party shall appoint a
knowledgeable, responsible representative to meet and negotiate in good faith to
resolve any Dispute. The discussions shall be left to the discretion of the
representatives. Upon agreement by the parties, the representatives may utilize
other alternative dispute resolution procedures such as mediation (including
through a mediator upon whom the parties mutually agree or selected or
designated by the Washington, DC office of the American Arbitration Association)
to assist in the negotiations. Buyer, on the one hand, and Sellers, on the other
hand, shall bear one-half of the expenses of any such mediator. Discussions and
correspondence among the parties' representatives for purposes of these
negotiations shall be treated as confidential information developed for the
purposes of settlement, exempt from discovery and production, and without the
concurrence of both parties shall not be admissible in the arbitration described
below, or in any lawsuit. Documents identified in or provided with such
communications, which are not prepared for purposes of the negotiations, are not
so exempted and may, if otherwise admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties do not
resolve the Dispute within 60 days of the initial written request, the Dispute
shall be submitted to binding arbitration by a single arbitrator pursuant to the
Commercial Arbitration Rules, as then amended and in effect, of the American
Arbitration Association (the "Rules"). Either party may demand such arbitration
in accordance with the procedures set out in the Rules. The arbitration shall
take place in Washington, D.C. The arbitration hearing shall be commenced within
60 days of such party's demand for arbitration. The arbitrator shall have the
power to and will instruct each party to produce evidence through discovery (i)
that is reasonably requested by the other party to the arbitration in order to
prepare and substantiate its case and (ii) the production of which will not
materially delay the expeditious resolution of the dispute being arbitrated;
each party hereto agrees to be bound by any such discovery order. The arbitrator
shall control the scheduling (so as to process the matter expeditiously) and any
discovery. The parties may submit written briefs. At the arbitration hearing,
each party may make written and oral presentations to the arbitrator, present
testimony and written evidence and examine witnesses. No party shall be eligible
to receive, and the arbitrator shall not have the authority to award, exemplary
or punitive damages. The arbitrator shall rule on the Dispute by issuing a
written opinion within 30 days after the close of hearings. The arbitrator's
decision shall be binding and final. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
(c) Each party will bear its own costs and expenses in submitting and
presenting its position with respect to any Dispute to the arbitrator; provided,
however, that if the arbitrator determines that the position taken in the
Dispute by the nonprevailing party taken as a whole is unreasonable, the
arbitrator may order the nonprevailing party to bear such fees and expenses, and
reimburse the prevailing party for all or such portion of its reasonable costs
and expenses in submitting and presenting its position, as the arbitrator shall
reasonably determine to be fair under the circumstances. Each party to the
arbitration shall pay one-half of the fees and expenses of the arbitrator and
the American Arbitration Association.
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(d) Notwithstanding any other provision of this Agreement, (i) either
party may commence an action to compel compliance with this Section 14.6 and
(ii) if any party, as part of a Dispute, seeks injunctive relief or any other
equitable remedy, including specific enforcement, then such party shall be
permitted to seek such injunctive or equitable relief in any federal or state
court or competent jurisdiction before, during or after the pendency of a
mediation or arbitration proceed under this Section 14.6. Each of the parties
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the United States District Court for the District
of Delaware and any state court sitting in the State of Delaware, and any
appellate court therefrom, in any action or proceeding permitted by this Section
14.6. Each of the parties hereby irrevocably consents to service of process by
registered or certified mail to the address provided for notices in Section
14.2. Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
Section 14.7 Cooperation. Except as otherwise provided herein, each of the
parties hereto agrees to use its commercially reasonable efforts to take or
cause to be taken all action, and to do or cause to be done all things
necessary, proper or advisable under applicable laws, regulations or otherwise,
to consummate and to make effective the transactions contemplated by this
Agreement, including the timely performance of all actions and things
contemplated by this Agreement to be taken or done by each of the parties
hereto.
Section 14.8 Construction of Agreement. The terms and provisions of this
Agreement represent the results of negotiations between Buyer and Sellers, each
of which has been represented by counsel of its own choosing, and neither of
which has acted under duress or compulsion, whether legal, economic or
otherwise. Accordingly, the terms and provisions of this Agreement shall be
interpreted and construed in accordance with their usual and customary meanings,
and Buyer and Sellers hereby waive the application in connection with the
interpretation and construction of this Agreement of any rule of law to the
effect that ambiguous or conflicting terms or provisions contained in this
Agreement shall be interpreted or construed against the party whose attorney
prepared the executed draft or any earlier draft of this Agreement. It is
understood and agreed that neither the specification of any dollar amount in the
representations and warranties contained in this Agreement nor the inclusion of
any specific item in the Schedules or Exhibits is intended to imply that such
amounts or higher or lower amounts, or the items so included or other items, are
or are not material, and none of the parties shall use the fact of the setting
of such amounts or the fact of any inclusion of any such item in the Schedules
or Exhibits in any dispute or controversy between the parties as to whether any
obligation, item or matter is or is not material for purposes hereof. The word
"including" in this Agreement shall mean including without limitation. Words in
the singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires. The
terms "hereof," "herein," and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including all of the Schedules and Exhibits hereto) and not to any particular
provision of this Agreement, and Article, Section, paragraph, Exhibit and
Schedule references are to the Articles, Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified.
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Section 14.9 Publicity. No party hereto shall issue, make or cause the
publication of any press release or other announcement with respect to this
Agreement or the transactions contemplated hereby, or otherwise make any
disclosures relating thereto, without the consent of the other party, such
consent not to be unreasonably withheld or delayed; provided, however, that such
consent shall not be required where such release or announcement is required by
applicable law or the rules or regulations of a securities exchange, in which
event the party so required to issue such release or announcement shall
endeavor, wherever possible, to furnish an advance copy of the proposed release
to the other party.
Section 14.10 Waiver. Except as otherwise expressly provided in this
Agreement, neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such right,
power or privilege preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege available to each party at law
or in equity.
Section 14.11 Parties in Interest. This Agreement (including the documents
and instruments referred to herein) is not intended to confer upon any Person,
other than the parties hereto and their successors and permitted assigns, any
rights or remedies hereunder.
Section 14.12 Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 14.13 Amendment. This Agreement may be amended only by an
instrument in writing executed by duly authorized officers of the parties
hereto.
Section 14.14 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto and the documents specifically referred to herein and the Confidentiality
Agreement constitute the entire agreement, understanding, representations and
warranties of the parties hereto, and supersede all prior agreements, both
written and oral, between Buyer and Sellers. All Exhibits and Schedules annexed
hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Disclosure of any fact or item in any
Schedule referenced by a particular paragraph or Section in this Agreement
shall, should such fact or item or its contents be expressly or obviously
related to any other paragraph or Section, be deemed to be disclosed with
respect to that other paragraph or Section whether or not any explicit cross-
reference appears therein.
Section 14.15 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 14.16 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this
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Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the greatest extent possible.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
CITIZENS UTILITIES COMPANY
By: /s/ ROBERT J. DESANTIS
-----------------------------------
Robert J. DeSantis, Chief Financial Officer
and Vice President
LGS NATURAL GAS COMPANY
By: /s/ ROBERT J. DESANTIS
-----------------------------------
Robert J. DeSantis, Vice President
ATMOS ENERGY CORPORATION
By: /s/ ROBERT W. BEST
-----------------------------------
Robert W. Best, Chairman, President and
Chief Executive Officer
59
