ELECTRIC UTILITY ASSET PURCHASE AND SALE AGREEMENT DRAFT 8 (SELLERS) RECITALS

Transcription

1 ELECTRIC UTILITY ASSET PURCHASE AND SALE AGREEMENT DRAFT 8 (SELLERS) This ELECTRIC UTILITY ASSET PURCHASE AND SALE AGREEMENT (the Agreement ), entered into as of the date of the last signature below, is among Alaska Village Electric Cooperative, Inc. (hereinafter AVEC or Purchaser ), an Alaska Statute cooperative corporation organized and existing under the laws of the State of Alaska with offices in Anchorage, Alaska, and the City and Borough of Yakutat ( Borough ), a home rule borough under the laws of Alaska, and Yakutat Power, Inc. ( YPI ), an Alaska corporation, (and with the Borough, collectively referred to in this Agreement as the Sellers ). AVEC, Borough and YPI are referred to in this Agreement collectively as the Parties or individually as Party. RECITALS WHEREAS, Purchaser is a non-profit electric cooperative corporation providing electric service to numerous communities throughout western Alaska; and WHEREAS, Borough is a municipal corporation engaged in, among other things, the function of providing public electric utility service in and around the vicinity of Yakutat, Alaska, and is the holder of Certificate of Public Convenience and Necessity (CPCN ) No. 53 from the Regulatory Commission of Alaska ( RCA ) authorizing Borough to provide such service, and YPI is a corporation whose shares are 100% owned by Borough and who leases certain assets to Borough for the provision of public electric utility service; and WHEREAS, Purchaser desires to acquire, and Sellers desire to sell, substantially all the tangible and intangible Assets (as defined below in Section 1.1) owned or held in connection with the public electric utility business operations in and around the vicinity of Yakutat, commonly known as Yakutat Power and referenced in this Agreement as the Public Electric Utility, upon the terms and conditions set forth herein, and Purchaser intends to operate such Public Electric Utility in the normal course of business within Yakutat indefinitely, and for no less than ten (10) years prior to considering sale of the Assets or the Public Electric Utility; NOW, THEREFORE, in consideration of the respective representations, warranties, covenants and agreements contained herein, the Parties agree as follows: A G R E E M E N T ARTICLE I PURCHASE AND SALE OF ASSETS Section 1.1. Purchase and Sale of Assets/Purchase is As Is. On and subject to the terms and conditions set forth in this Agreement, at the Closing, Sellers shall sell, assign, transfer, convey, set over and deliver to Purchaser free and clear of all liens and encumbrances except those set forth in Schedule 2.1.5, and Purchaser shall purchase, acquire and accept from Sellers all of the following assets, properties, and rights of Sellers that it holds as of the Closing fs\avec\yakutat\ D-7 (AVEC)\

2 (collectively, the Assets ). Purchaser understands that, except for the limited representations and warranties set forth in Article II of this Agreement, it is purchasing the Assets AS IS/WHERE IS in its present condition and with all faults, and is not relying upon any representations of Seller regarding the condition of any of the Assets but rather is relying on its own inspection of the Assets, of the Public Electric Utility, and of the review of related records. Purchaser shall have the opportunity to inspect all of the Assets, the Public Electric Utility and related records before the Closing, as set out in Article V below: Right to Provide Public Electric Service. All of Sellers interest in and rights pursuant to CPCN No. 53, subject to approval by the RCA; Customer Contracts, Deposits and Accounts Receivable. All of Sellers rights under request for service contracts and line extension agreements with electric utility customers ( Customer Contracts ), including customer deposits, and accounts receivable, as described in Schedule This includes the 2008 Utility Service Application between the Public Electric Utility and the US Department of Transportation, Federal Aviation Administration ( FAA ), and the related funds remaining on deposit in Key Bank in the amount of $288,637.40; provided that 1) the FAA does not demand and receive a refund or partial refund of those funds prior to the Closing, and 2) the FAA agrees to assignment of the Application and those funds to Purchaser. Accounts Receivable includes amounts receivable for sales of electricity, service work, pro-rated amounts due under annual pole rental agreements, contributions-in-aid-of-construction, any deferred payment arrangements, any amounts receivable from the State of Alaska Power Cost Equalization program but only for the month during which Closing occurs and for the immediately preceding month, and amounts receivable from employees and vendors, including deposits held by vendors for the benefit of Sellers. Accounts receivable does not include delinquent sums due that have already been reduced to a judgment in favor of Sellers; Electric Generation and Distribution Systems. All of Sellers electric generation and distribution systems, including all generators, poles, conductors, transformers, associated spare parts and inventory, all system mapping documents, including supporting material, not otherwise included in Assets, and all other power plant plans and drawings, and including but not limited to the items described in Schedule as well as any other supporting documentation not specifically listed or known at this time; Fuel Storage Facilities. All of Sellers interests in the fuel storage tanks located in Yakutat, Alaska on the power plant parcel described in Section below ( the fuel tanks ), and including all associated spare parts, inventory, pipelines and fuel transport equipment used in connection with the operation of the Public Electric Utility, including but not limited to the items described in Schedule The Purchaser recognizes and agrees that Sellers are not representing that all of the fuel tanks located on the parcel are usable or approved for use by appropriate governmental authorities, subject to Purchaser s rights to decline to purchase certain assets, or request remediation or removal by Sellers under subsection ; Page 2

3 1.1.5 Equipment. Sellers equipment owned and held for use in conducting the Public Electric Utility, including without limitation all machinery, equipment, tools, motor vehicles and rolling stock, supplies, furnishings, and fixtures of every kind associated with the Public Electric Utility, including but not limited to the items described in Schedule 1.1.5; Intangibles. All intangible assets, rights and claims of Sellers of every kind and nature, all to the extent that they are used or held by Sellers in connection with the operation of the Public Electric Utility and are assignable by Sellers, including without limitation, goodwill, trade names, trademarks, copyrights, licenses, customer lists, advertising and marketing programs and plans, referral relationships, and business information used by Sellers in connection with the operation of the Public Electric Utility; causes of action (but not including judgments already entered in favor of Sellers for past delinquent service charges), claims, and demands of whatever nature, memberships, agencies and permits, claims for refunds and rights of offsets and credits, all to the extent that they are used or held by Sellers in connection with the operation of the Public Electric Utility and are assignable by Sellers; and, to the extent they are not included as Assets elsewhere and to the further extent that they are not specifically listed on Schedule 1.2 as Excluded Assets being used by the Borough for other municipal functions, all software associated with Sellers billing and customer accounting programs (Utility Star), computer hardware located on the Public Electric Utility premises, and general ledger accounting programs, including a hard copy and electronic copy of Seller s continuing property records ( CPRs ), if any. To the extent any such program or records are specifically identified on Schedule 1.2 as used by the Borough for other municipal functions, Sellers shall take all actions necessary to provide copies to Purchasers to the fullest extent allowed by law; Assigned Contracts. All of Sellers rights under contracts, leases, and other agreements, as listed and described on the Schedule 1.1.7, and further including, without limitation, all Special Contracts, all rights, claims and privileges of Sellers arising under all unexpired warranties, representations and guarantees (express, implied or otherwise) made by manufacturers, suppliers or others in connection with the Assets or the Public Electric Utility (collectively the Assigned Contracts ). If consent to such assignment signed by the other parties to the Assigned Contract is required, Sellers shall use its best efforts to obtain such consent. The parties agree that if despite using its best efforts, Sellers are unable to obtain the consent necessary to assign the Delta Western contract described in Schedule to Purchaser three (3) days prior to the Closing Date, such failure will not constitute a breach or default by Sellers of this Agreement; however, Purchaser shall then be entitled, at its sole discretion, to terminate the Agreement and such action will not constitute a breach or default by Purchasers of this Agreement. In the event Purchaser terminates the Agreement per this subsection, the return of Purchaser s deposit and the parties rights to any other damages will be the same as set forth in subsections and for an automatic termination. Nothing in this subsection is intended to limit the Parties in anyway from discussing or agreeing to any other resolution; Books and Records. Copies of all books and records relating to Page 3

4 the Assets and the operation of the Public Electric Utility; Fuel Inventory. All fuel contained in Sellers fuel tanks on the Closing Date (the Fuel Inventory ); Prepaid Expenses. Prepaid taxes, expenses, premiums, advances, lease or rental payments, dividends or other payments in lieu of taxes and any tax refunds arising from taxes that accrued during any period prior to Closing; Easements. All of Sellers easements, rights-of-way, permits, licenses, operating rights and franchises, whether such rights arise by agreement or operation of law, permitting Public Electric Utility facilities on property not owned by Sellers to be maintained in their current locations, including those more specifically described in Schedule ,If consent to such assignment signed by the other parties is required, Sellers shall use its best efforts to obtain such consent. The Parties agree that if despite using its best efforts, Sellers are unable to obtain the required consent to the assignment of any easement, right-of-way, permit, license, operating right, and/or franchise including those described in Schedule to Purchaser three (3) days prior to the Closing Date, such failure will not constitute a breach or default by Sellers under this Agreement; provided however, that Purchaser shall then be entitled, at its sole discretion, to terminate the Agreement and such action will not constitute a breach or default by Purchaser under this Agreement. In the event Purchaser terminates the Agreement per this subsection, the return of Purchaser s deposit and the parties rights to any other damages will be the same as set forth in subsections and for an automatic termination. Nothing in this subsection is intended to limit the Parties in anyway from discussing or agreeing to any other resolution. If said easement, right-of-way, permit, license, operating right or franchise grants rights to the Borough in addition to those relating to the Public Electric Utility, Sellers will take all actions necessary to have Purchaser included on said easement, right-of-way, permit, license, operating right or franchise for purposes of operating the Public Electric Utility; Real Property. All of Sellers interests in the real property upon which the Sellers Public Electric Utility power plant is located, including buildings, structures, and fixtures located thereon and therein, and any leaseholds, and leasehold improvements, as more specifically described in Schedule The parties have agreed, in writing, to waive completion of any required residential real property disclosure statement ARECA Insurance Balances. All of Sellers interests in the ARECA Subscriber Equity Balance Accounts and ARECA Subscriber Capital Accounts, with the approval of the ARECA Insurance Exchange. Section 1.2 Excluded Assets. Excluded Assets are those Assets identified with specificity by Sellers in Schedule 1.2 as assets used in connection with the Public Electric Utility that are also used or needed for other non-electric utility Borough functions (the Excluded Assets ). Despite any language to the contrary in the preceding paragraphs , Excluded Assets are not included in the Assets being sold by Sellers and purchased by Purchaser under this Agreement. Page 4

5 Section 1.3 Assumption of Liabilities Liabilities Assumed. Contemporaneously with the purchase of the Assets, Purchaser shall assume the liabilities and thereafter perform the obligations of Sellers arising under the following, which will be collectively referenced as the Assumed Liabilities: CPCN No. 53; (Section 1.1.2); Any Customer Contract, Deposit or Account Receivable Any Assigned Contract (Section 1.1.7); Any easement, right-of-way, permit, license, or operating right or franchises, (Section ); Any lease or leasehold interest (Section ); The indebtedness remaining due, as of the Closing Date, under two promissory notes executed by Sellers to lender agencies of the State of Alaska as follows: 1) Loan Agreement No (Department of Community & Regional Affairs) and 2) Loan Agreement No (Alaska Energy Authority). The parties shall execute an assignment and assumption agreement in the form required by the lenders; Any condition imposed under an approval or consent obtained under Sections and Payment of any insurance claims incurred, but not yet billed or submitted by, or paid to, providers or subscribers (also referred to as run-out claims ) and administrative fees, which the Public Electric Utility would be required to contribute to the Alaska Public Utility Insurance Trust (APUIT) as a result of the Public Electric Utility s voluntary termination of group health insurance coverage provided through APUIT Any debt, liability or obligation relating to or arising from Sellers termination of participation in the National Rural Electric Cooperative Association ( NRECA ) retirement plan Liabilities Not Assumed. Purchaser does not assume any liabilities of Sellers unless Purchaser s responsibility for such liability is expressly specified in this Agreement. Without limiting the generality of the foregoing, Purchaser does not assume the following obligations or liabilities of Sellers: Any cost, expense, or tax liabilities of Sellers arising from or growing out of the sale provided for by the Agreement; Page 5

6 Any debt, obligation, or liabilities of Sellers arising from the operations prior to the Closing, to any employee, agent, officer, or director of Sellers or any entity owned or controlled in whole or in part by Sellers under any employment, representation or similar agreement not identified as an Assigned Contract, or under any employee stock option plan, stock purchase plan, bonus plan or arrangement, pension plan or other benefit plan, health plan, or other employee welfare plan or arrangement; Any debt, liability or obligation of Sellers (or costs, and expenses in connection therewith) that is covered by an insurance policy or policies issued to Sellers: Any federal, state, or local income tax or other tax liabilities of Sellers, known or unknown, existing or arising from the operations prior to Closing; and Any accounts payable existing as of Closing Schedules. The Parties recognize that the schedules listing assets and excluded assets referenced in Sections 1.1 and 1.2 will need to be updated after the date of execution of this Agreement. Except as stated otherwise, these schedules shall be completed and agreed to between the Parties, in good faith and in accordance with the intent of this Agreement to transfer all Assets, no later than three (3) days prior to Closing. The Parties recognize that the schedules listed in Section 1.1 are not exclusive lists of property transferred in accordance with this Agreement, except as otherwise noted. Section 1.4 Purchase Price Purchase Price. In consideration for the sale, conveyance, transfer, and delivery of the Assets and upon the terms and subject to the condition set forth in this Agreement, Purchaser shall assume the Assumed Liabilities and shall pay to the Sellers the Purchase Price, which shall be: The value of Public Electric Utility s Accounts Receivable, less any amounts more than sixty (60) days past due, as of the Closing Date, plus ($300,000); plus The sum of Three Hundred Thousand US Dollars The original book cost of the Fuel Inventory that is transferred from Sellers to Purchaser at Closing, plus Purchaser s assumption of Sellers remaining indebtedness due, as of the Closing Date, under the two promissory notes executed by Sellers to lender agencies of the State of Alaska as follows: 1) Loan Agreement No (Department of Community & Regional Affairs) and 2) Loan Agreement No (Alaska Energy Authority). Page 6

7 1.4.2 Payment Terms. At Closing, Purchaser shall pay to Sellers the full amount of the purchase price, and assume Seller s remaining indebtedness under the two promissory notes identified above, with the respective amounts calculated in accordance with Section above Recovered Heat. The parties further agree that as additional consideration for the Purchase and Sale hereunder, as long as Purchaser owns the Public Electric Utility Assets, Purchaser shall, in perpetuity, use its best efforts to provide recovered heat to the following municipal buildings at no charge: School Building, 596 Forest Highway 10: School Building, 620 Forest Highway 10: and Public Safety Building, 609 Forest Highway 10. Purchaser reserves the right to charge the building owner(s), at the standard commercial rate or less, for any substantial increase in the amount of recovered heat provided to any of the abovelisted buildings, as compared to the amount of recovered heat provided to the respective building as of the Effective Date of this Agreement, when the increase is caused by a change in the square footage of the building. Purchaser shall be responsible for measuring any such change and for informing the building owner(s) when a substantial change has occurred. Sellers or building owners may elect, at their own expense or pursuant to a separately negotiated reimbursement agreement with Purchaser, to meter the heat usage at each building to determine any relevant utilization rates. Any subsequent sale agreement regarding the Assets entered into by Purchaser (see, Section ) shall contain a provision requiring the buyer to use its best efforts to provide recovered heat to Sellers, at no cost, in accordance with the provisions of this subsection Payment of Deposit. Within ten (10) days after the Effective Date of this Agreement, Purchaser shall deliver to a mutually agreed upon Escrow Agent or other third party a Deposit of Thirty Thousand Dollars ($30,000) ( the Deposit ). At Closing, the Deposit shall be paid to Sellers and credited against the Purchase Price. In the event this transaction does not proceed to Closing, disposition of the Deposit is governed by the provisions of Article 7 below Future Property Transfer or Use. The Borough agrees to consider transferring, selling or otherwise making available to the Purchaser municipal property for purposes of construction of a bulk fuel tank farm, on the terms and conditions as agreed to between the Parties at the time of said transfer, sale or use. Section 1.5 Pro-rations and Other Payment Obligations. Sellers shall pay personal property sales or use taxes arising from the transaction contemplated by this Agreement, if any, and Sellers shall pay all other taxes incurred by Sellers arising from or related to such Page 7

8 transaction. Section 1.6 Employee Matters. Sellers and Purchaser s obligations regarding Sellers employees are as set forth in this section Sellers Obligations. Sellers will perform all obligations in connection with its employees arising from the operations of the Public Electric Utility by Sellers prior to Closing. Sellers shall terminate, as of Closing, all employees whose employment by Sellers is exclusively for the Public Electric Utility. Except as provided in subsection , Sellers shall be responsible for all obligations to such employees in connection with such termination, including without limitation giving any required notices; paying all compensation due such employees, including compensation for accrued vacation and benefits; satisfying all Sellers obligations to such employees on account of their employment by Sellers; and performing any obligations required by the Worker Adjustment and Retraining Notification Act, the Fair Labor Standards Act of 1938, the Equal Pay Act, applicable wage and hour laws, or any other applicable laws, amendments, and regulations. Following the Effective Date of this Agreement, Sellers will timely provide Purchaser information regarding Sellers employees who work for the Public Electric Utility, including: name, position, pay rate, date of hire, and a description of the duties and responsibilities of each employee, and will update this information at least three (3) days prior to Closing (Schedule 1.6.1) Sellers Liabilities. Sellers shall retain all liability and Purchaser shall have no liability for: accrued wages (including salaries and commissions), severance benefits, vacation pay, pension and profit sharing contributions, seniority rights, other forms of benefits of any type or nature on account of such employees employment by Sellers, any COBRA health plan continuation coverage to such employees, or their dependents, and any obligations to former employees arising from their employment and termination with Sellers Purchaser s Obligations and Exceptions Hiring of Employees. Subject to the conditions below, Purchaser will offer employment for at least six (6) months (the Initial Hire Period ) to the employees of Sellers who work at the Public Electric Utility in the following full-time regular positions as of the Closing Date, for the number of positions specified: manager (1 position), operator (2 positions), lead lineman (1 position), and lineman (1 position). These positions are referenced hereinafter as designated position(s). Purchaser s obligations to offer employment to any of Sellers employees for one of these designated positions is subject to the following conditions and exceptions: Purchaser is not obligated to offer employment to any of Sellers employees who are not employed in a designated position, or to any of Sellers employees who have been in a designated position for less than 1 year (365 days) before the Closing Date, or to hire for or fill any designated position that is vacant as of the Closing Date Purchaser will follow its regular procedures Page 8

9 for pre-hire drug and alcohol testing and pre-hire paperwork requirements for those employees who accept Purchaser s conditional offer of employment. Purchaser is not obligated to hire any employee in a designated position who does not successfully complete and pass drug and alcohol testing, or who does not comply with pre-hire paperwork requirements. Sellers employees who are eligible for hire by Purchaser after meeting the conditions in Section and in this paragraph are referenced hereinafter as designated employees. Any standard fitness for duty examination or background check shall be completed at the conclusion of the Initial Hire Period Purchaser s employment of the designated employees that Purchaser hires commences at 12:00 o clock a.m. on the day following the Closing Date Upon commencement of Purchaser s hiring of designated employees, such employees shall receive a salary or wage rate similar to that currently paid by Sellers as identified for each designated position in Schedule This salary or wage rate shall be evaluated at the conclusion of the Initial Hire Period. Benefits, including paid time off and paid holidays, health insurance, and a retirement plan will be in accordance with the policies and practices of Purchaser that apply to Purchaser s other employees, except that designated employees shall not be required to make a health care premium cost share contribution during the Initial Hire Period During the Initial Hire Period, Purchaser will not terminate any designated employee except for cause, as determined in accordance with the personnel policies and practices of Purchaser that apply to Purchaser s other employees. At the expiration of the Initial Hire Period, the employment status of the designated employees is atwill in accordance with the personnel policies and practices of Purchaser that apply to Purchaser s other employees Any of the designated employees may freely decline employment with the Purchaser COBRA Insurance Coverage. Purchaser agrees to offer group health insurance continuation coverage as required by the Consolidated Omnibus Budget Reconciliation Act ( COBRA ) to a) any qualified full-time employee of the Public Electric Utility who, following the Closing Date, is not to be employed by Purchaser under the provisions of Section and b) any former Public Electric Utility employee who, at the Closing Date, is already obtaining extended coverage under COBRA that would otherwise terminate due to Sellers voluntary termination of participation in APUIT. The coverage to be offered these employees shall be available to any qualifying spouse and/or qualifying dependent children of such employees, shall be substantially similar to the coverage available to Purchaser s employees, and the premium cost and due date (including for any disability extension of coverage) shall be as provided for COBRA coverage generally under federal law. Section 1.7 Closing Closing. Unless otherwise agreed to by the Parties, the closing of Page 9

10 the asset purchase and sale contemplated by this Agreement (the Closing ) shall take place on a date selected by Purchaser (the Closing Date ), at a location selected and agreed upon by the Parties, which may include the offices of an Escrow Agent, with such Closing Date occurring no later than forty-five (45) days after the issuance of a final non-appealable order by the RCA approving the transfer of CPCN No. 53 from the Borough to Purchaser Closing Deliveries by Sellers. At the Closing, Sellers shall take the following actions and completion of each action shall be a further Condition to Closing: Sellers shall deliver to Purchaser duly executed Bills of Sale substantially in the form of Exhibit for all personal property conveyed under this Agreement, including fuel inventory; Sellers shall deliver to Purchaser a duly executed assignment and assumption agreement in a recordable format substantially in the form of Exhibit for the assignment of the Assigned Contracts listed in Schedule 1.1.7, and for the assignment of operating rights, permits, licenses, and franchises listed in Schedule , and, if required under the contract or the document evidencing the operating right, license, permit, or franchise, a consent to such assignment signed by the other parties to the Assigned Contract or by the parties who grant the license, permit, operating right, or franchise to Sellers; Sellers shall deliver to Purchaser a duly executed standard form statutory warranty deed conveying the fee interest in the Real Property to Purchaser in recordable form for the real property conveyed under this Agreement; Sellers shall deliver to Purchaser a duly executed assignment of lease in recordable form for all real property leasehold interests conveyed under this Agreement and, if required under the lease, a consent to such assignment signed by the other parties to the lease; Sellers shall deliver to Purchaser a duly executed assignment and assumption agreement in a recordable format substantially in the form of Exhibit for the assignment of the easements and other land use rights included in the Assets and, if required under the easement or specific land use right, a consent to such assignment signed by the other parties to the easement or land use right; Sellers shall deliver to Purchaser a duly executed assignment and assumption agreement in a recordable format substantially in the form of Exhibit for the assignment of Sellers Accounts Receivables and Seller s Customer Contracts and deposits; and, if required, a consent to such assignment signed by the other parties to the account receivable; Page 10

11 Sellers shall deliver to Purchaser such other endorsements, contracts, leases, vehicle title transfer and registration documents, receipts, and other instruments, as shall be sufficient to vest in Purchaser all right, title and interest of Sellers in and to the Assets, free and clear of all liens and encumbrances, except for the exceptions set forth in Schedule 2.1.5; Sellers shall deliver Sellers payment for their share of the obligations described in Section 1.5, if any Closing Deliveries by Purchaser. At the Closing, Purchaser shall take the following actions and completion of each action shall be a further Condition to Closing: Payment of the Purchase Price. At the Closing, Purchaser shall deliver to Sellers the Closing Payment established by Section with a certified check payable jointly to Sellers, unless payment is directed by Sellers to be made wholly to either the Borough or YPI Purchaser shall execute the Bills of Sale delivered to Purchaser by Sellers under Section ; Purchaser shall execute the assignment and assumption agreements delivered to Purchaser by Sellers under Sections and ; Purchaser shall execute the assignment and assumption documents relating to any lease, easement or other land use right document delivered to Purchaser by Sellers under Sections and ; Purchaser shall execute assignment and assumption documents relating to Loan Agreement No (Department of Community & Regional Affairs) and Loan Agreement No (Alaska Energy Authority), as contemplated under Section ; and Purchaser shall execute such documents as are required by the entities listed in Sections and in connection with consents/approvals. Section 1.8 Further Documents or Necessary Action. Sellers and Purchaser, respectively, shall take all such action as may be necessary or appropriate in order to effectuate the transactions contemplated hereby. On or after the Closing Date, if any further action is necessary to vest Purchaser with full title to the Assets, the Sellers shall take all such necessary or appropriate action; each Party shall bear its own costs and expenses in connection with any such further necessary actions. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties of Sellers. Sellers hereby represent Page 11

12 and warrant to Purchaser that the following statements are true and correct on the date hereof and will be true and correct on the Closing Date as though made on such date. Authority Corporate Organization and Standing of Sellers; Power and Borough is a home rule Borough duly organized, validly existing and in good standing under the laws of the State of Alaska. YPI is an Alaska corporation in good standing under the laws of the State of Alaska and whose shares are 100% owned by Borough. Sellers have the corporate and individual power and authority to own and convey to Purchaser the Assets; Sellers shall make available to Purchaser true, correct and complete copies of the following documents: (1) YPI s Articles of Incorporation and By- Laws, with all amendments through the Effective Date of this Agreement; (2) any shareholder agreements or other agreements by or between YPI s shareholders; and (3) any resolutions by YPI s shareholders or board of directors that address transfers of YPI s assets; (4) any resolutions or ordinances by the City and Borough of Yakutat Assembly addressing the transfer of any of Sellers Assets Corporate Authorization. All corporate action on the part of Sellers necessary for the authorization, execution, delivery, and performance by Sellers of this Agreement and the consummation of the transactions contemplated hereby have been taken or, prior to Closing, will be taken. This Agreement has been duly executed and delivered by Sellers and is a valid and binding obligation enforceable against each Party in accordance with its terms; No Conflict. Neither the execution and delivery of this Agreement by Sellers nor the consummation of the transactions contemplated hereby will (a) conflict with or result in a breach of any provision of Sellers charter or ordinances; (b) conflict with any existing provision of applicable law or any existing order, rule, regulation, judgment or decree of any court, arbitrator or agency of government, (c) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Sellers or to any of the Assets, (d) violate, be in conflict with, result in a breach of, or constitute (with or without notice or lapse of time or both) a default under (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which Sellers are a party, or by which Sellers may be bound, except for such default (or right of termination, cancellation or acceleration) as to which requisite waivers or consents shall either have been obtained by Sellers prior to Closing or the obtaining of which shall have been waived by Purchaser; Consents. Except for the approval of the RCA, the approvals/consents of the Alaska Energy Authority and/or the Denali Commission and/or the USDA, the agreement of the Rural Utilities Service that the Sellers system is eligible for financing by the Rural Utilities Service, the City and Borough of Yakutat Assembly s enactment of a resolution or ordinance authorizing the transfer of the Assets identified in this Agreement, no consent, approval or authorization of, or declaration, filing or registration with, any Page 12

13 governmental authority is required in connection with the execution and delivery by Sellers of this Agreement or the consummation by Sellers of the transactions contemplated hereby except as to any waivers or consents contemplated under Sections , , and ; Title to Assets. Sellers have, or will have prior to Closing, good and marketable title to the Real Property conveyed herein and good and marketable title to the other Assets, free and clear of all mortgages, liens, pledges, charges, encumbrances, equities or claims, except as has been disclosed to Purchaser on Schedule All Persons supplying labor, materials and equipment to the Real Property at the request of Sellers have been paid and there are no claims, liens, or potential liens against the Real Property; Compliance with Laws. To the best of Sellers knowledge, the use of the Real Property and operation of the Public Electric Utility thereon are (a) in compliance with applicable laws, statutes, ordinances, rules, regulations and requirements of any governmental authorities, including without limitation zoning and land use laws, building and fire codes, and other laws and regulations over the Assets, Public Electric Utility or Real Property, and (b) are not subject to any leases, tenancies or rights of persons in possession; Litigation and Claims. There is no action, suit, investigation, or litigation pending or, to the knowledge of Sellers, threatened, against Sellers that will have a Material Adverse Effect on the Purchaser s ownership, use or operation of any of the Assets as used in the operation of the Public Electric Utility or the ability of Sellers to perform its obligations under this Agreement; Contracts. Accurate and complete copies of all Assigned Contracts have been delivered or made available to Purchaser. Each Assigned Contract is valid and in full force and effect, is enforceable in accordance with its terms, and constitutes the legal, valid and binding obligation of Sellers and the other party or parties to such contracts. To the best of Sellers knowledge, Sellers have complied in all material respects with the terms of each such Assigned Contract; Employees. To the best of Sellers knowledge, Sellers have complied with all applicable federal and state laws relating to the employment of labor, including but not limited to, the provisions of such laws relating to equal employment opportunity, wages, hours and the payment of social security taxes, and are not liable for any arrears of wages or any tax or penalties for failure to comply with any of the foregoing; Labor Matters. Sellers have no union contracts or collective bargaining agreements with, or any other obligations to, employee organizations or groups with respect to its ownership and operation of the Public Electric Utility, nor are Sellers currently engaged in any labor negotiations, nor are Sellers the subject of any union organization effort. There is no pending or threatened labor dispute, strike or work stoppage affecting the Public Electric Utility; Environmental Matters. Except as disclosed on Schedule : Page 13

14 To the best of Sellers knowledge, Sellers are currently in compliance with all federal, state and local environmental or health or safety laws, regulations and ordinances as such laws may be amended or modified through the Closing Date ( Environmental Laws ) relating to its ownership and/or operation of the Assets, the Public Electric Utility and the Real Property; To the best of Sellers knowledge, there have been no material releases of any substance or material defined or designated as (a) hazardous, dangerous or toxic waste, (b) hazardous or toxic material, (c) a hazardous, toxic or radioactive substance, or (d) a hazardous or toxic chemical, by any federal, state or local statute, regulation or ordinance in effect and applicable to the Real Property as of the Closing Date ( Hazardous Substances ) on the Real Property except as listed on Schedule ; All releases listed on Schedule have been properly reported to the appropriate regulating agency, if required, and cleaned up to its satisfaction; With respect to all known potential environmental hazards and releases of Hazardous Substances, to the best of Sellers knowledge Sellers have made all notifications required under Environmental Laws, including but not limited to underground tank registration, and notification of the burning of any hazardous waste fuel or used oil; To the best of Sellers knowledge and except for fuel storage facilities, there are no on-site locations installed by Sellers or its predecessors where Hazardous Substances have been stored, treated, recycled, or disposed of; To the best of Sellers knowledge, Sellers have not disposed of any Hazardous Substances off-site; There is no ongoing or threatened litigation with any persons relating to Sellers failure to comply with any Environmental Laws; Sellers have not received any notice that either Seller or the Real Property is the subject of any current investigation pertaining to the release of any Hazardous Substances; and Except as referenced on Schedule , to the best of Sellers knowledge, there have been no environmental investigations, studies, audits, tests, reviews or other analyses ( Environmental Investigations ), the purpose of which was to discover, identify or otherwise characterize the condition of the soil, groundwater, air, or presence of asbestos on the Real Property, and, to the best of Sellers knowledge, there were no such Environmental Investigations prior to the execution of this Agreement; Absence of Certain Changes. Since November 30, 2015, the Public Electric Utility has been operated only in the ordinary course and Sellers has not, with respect to it, had any Material Adverse Effect in its condition (financial or otherwise), assets, Page 14

15 properties or liabilities; Assets of Public Electric Utility. Except for the Excluded Assets, the Assets constitute all of the assets owned by Sellers and used in connection with the Public Electric Utility; No Broker s or Finder s Fees. No agent, broker, investment banker, Person or firm has acted directly or indirectly on behalf of Sellers in connection with this Agreement or the transaction contemplated herein, and no such Person or Entity is or will be entitled to any broker s or finder s fee or any other commission or similar fee or expense, directly or indirectly, in connection with this Agreement or the transaction contemplated herein Special Contracts. Except as disclosed on Schedule 1.1.7, there are no Special Contracts in force with customers of Sellers Disclosure of Information. To the best of Sellers knowledge, all materials and information made available by Sellers to Purchaser in the course of Purchaser s due diligence and the Schedules attached hereto are complete and accurate in all material respects Undisclosed Liabilities. Except as set forth in Schedule 2.1.5, to the best of Sellers knowledge, Sellers do not have any liability that would be required to be reflected in its most recent balance sheet in accordance with GAAP or standard utility accounting requirements, if any, (and there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against or involving the Assets giving rise to any such liability), except for (a) liabilities set forth on the face of the most recent balance sheet; (b) liabilities which have arisen after the most recent fiscal month end in the ordinary course of business (none of which relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law); and (c) liabilities disclosed in this Agreement or in schedules or exhibits hereto Condemnation. No governmental body having the power of eminent domain over Sellers property has commenced or, to the knowledge of Sellers, threatened, or taken publicly disclosed steps to exercise the power of eminent domain or a similar power with respect to all or any part of Sellers property Reclassification of Assets. No items of property or other assets reflected in Sellers records as of January 31, 2016, has been reclassified from utility plant to non-utility plant or otherwise been reclassified in a manner that would change such item of property from an Asset that is to be sold to Purchaser to an Excluded Asset that is not to be sold to Purchaser, other than the items listed on Schedule Accuracy and Completeness of Representations and Warranties. To the best of Sellers knowledge, no representation or warranty made by Sellers in this Agreement or any schedules attached hereto contains or will contain any untrue statement of a material fact, or omits or will omit a material fact necessary to make the statements Page 15

16 contained herein or therein not misleading No Other Representations. Sellers are not making any representations or warranties, expressed or implied, of any nature whatsoever except as specifically set forth in this Agreement. Section 2.2. Representations and Warranties of Purchaser. Purchaser represents and warrants to Sellers that the following statements are true and correct on the date hereof and will be true and correct on the Closing Date as though made on such date Organization and Standing. Purchaser is a cooperative corporation duly organized, validly existing and in good standing under the laws of the State of Alaska Power and Authority. Purchaser has the corporate power and authority to enter into, execute, and deliver this Agreement and to consummate the transactions contemplated by this Agreement Corporate Authorization. All corporate action on the part of Purchaser and its directors necessary for the authorization, execution, delivery and performance by Purchaser of this Agreement and the consummation of the transactions contemplated by this Agreement has been taken or will be taken prior to Closing Binding and Enforceable Agreement. Subject to the approval of Purchaser s Board of Directors, this Agreement has been duly executed and delivered by Purchaser and is a valid and binding agreement of Purchaser, enforceable in accordance with its terms Consents. All consents, approvals, qualifications, licenses, orders or authorizations of, or filings with, any governmental authority required in connection with Purchaser s valid execution, delivery or performance of this Agreement have been obtained, given or made or will, as of the Closing Date, have been obtained, given, or made. No consent, approval or authorization of any party to any agreement or other instrument to which Purchaser is a party is required for the execution, delivery, and performance of this Agreement by Purchaser and the consummation of the transactions contemplated by this Agreement No Conflict. Neither the execution and delivery of this Agreement by Purchaser nor the consummation of the transactions contemplated by this Agreement will (a) conflict with or result in a breach of any provision of Purchaser s articles of incorporation or bylaws, (b) conflict with any existing provision of applicable law or any existing order, rule, regulation, judgment or decree of any court, arbitrator or agency of government, (c) violate, be in conflict with, result in a breach of, or constitute (with or without notice or lapse of time or both) a default under (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which Purchaser is a party, or by which Purchaser may be bound, except for such default (or right of termination, cancellation or acceleration) as to which Page 16

17 requisite waivers or consents shall either have been obtained by Purchaser prior to Closing or the obtaining of which shall have been waived by Sellers, or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Purchaser Litigation and Claims. There is no action, suit, investigation, or litigation pending or, to the knowledge of Purchaser, threatened against Purchaser, that may have a material impact on Purchaser s authority, power, or ability to execute and deliver this Agreement or to consummate the transactions contemplated by this Agreement Accuracy and Completeness of Representations and Warranties. No representation or warranty made by Purchaser in this Agreement contains or will contain any untrue statement of material fact, or omits or will omit a material fact necessary to make the statements contained herein not misleading No Broker s or Finder s Fees. No agent, broker, investment banker, Person or firm has acted directly or indirectly on behalf of Sellers in connection with this Agreement or the transaction contemplated herein, and no such Person or Entity is or will be entitled to any broker s or finder s fee or any other commission or similar fee or expense, directly or indirectly, in connection with this Agreement or the transaction contemplated herein Financial Status of Purchaser. Purchaser has the financial capability to purchase and operate the Public Electric Utility in the fashion contemplated by this Agreement, and to provide safe and reliable electric service to the community of Yakutat, Alaska No Other Representations. Purchaser is not making any representations or warranties, expressed or implied, of any nature whatsoever except as specifically set forth in this Agreement. Section 2.3 Survival of Warranties. The terms, covenants, representations and warranties in this Agreement shall survive Closing. ARTICLE III COVENANTS Closing: Section 3.1 Conduct of Sellers Preservation of Public Electric Utility. Sellers shall, until Maintain the Assets and the Real Property in their present state of repair, order and condition, reasonable wear and tear excepted; Page 17

18 Preserve and protect the goodwill and advantageous relationships of Sellers with its customers, suppliers and all other persons having business dealings with Sellers in connection with the Public Electric Utility; Maintain Sellers books, accounts and records of the Public Electric Utility in the usual and regular manner, in accordance with Sellers past accounting practices, consistently applied and in compliance with GAAP; Preserve and maintain in force all of Sellers licenses, permits, registrations, franchises, and bonds used in connection with the Public Electric Utility; and Public Electric Utility Comply with all laws applicable to the conduct of the Ordinary Course. Sellers shall conduct the Public Electric Utility business only in the usual, regular and ordinary course, in substantially the same manner as previously conducted, and shall not make any substantial change to its methods of management, purchase, sale, accounting or operation in respect of the Public Electric Utility, or engage in any transaction or activity, enter into or amend any agreement or make any commitment except in the ordinary course of business and consistent with past practice. Without limiting the foregoing and without the prior written consent of Purchaser, Sellers shall not: Become a party to any plan, contract, guaranty, or agreement affecting the Public Electric Utility except as conducted in the ordinary course of business; Sell, mortgage, pledge or encumber or agree to sell, mortgage, pledge or encumber any of the Assets, except as required by the Rural Utility Service; Incur any obligation (contingent or otherwise) or purchase, acquire, transfer, or convey, any material assets or property or enter into any transaction or make or enter into any contract or commitment except in the ordinary course of business; or Do any act or omit to do any act, or permit any act or omission to occur, which will cause a breach of any contract or commitment of Sellers, or modify or amend any Assigned Contract Access to Information. Sellers shall give to Purchaser and its accountants, counsel and other representatives reasonable access during normal business hours to the properties, books, records, officers, directors, employees and agents of Sellers relating to the Assets, including Sellers accounting firms, and shall furnish promptly to Purchaser, upon written request, (a) a copy of each report, notice, return or other document filed or received by, or on behalf of, Sellers relating to the Assets or the Public Electric Utility and, (b) all other information pertaining to the Assets or the Public Electric Utility. Page 18