Agreement and Plan of Merger by and among Verengo, Inc., Mace Merger Sub., Inc., U.S. Gas & Electric, Inc., MVC Capital, Inc., James B. Wiser, Crius Energy Trust, and Crius Solar Fulfillment, LLC dated as of May 30, 2017

This AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of May 30, 2017 (the “Agreement Date”), is made and entered into by and among Verengo, Inc., a Delaware corporation (“Buyer”); Mace Merger Sub, Inc., a Delaware corporation (“Merger Sub”); U.S. Gas & Electric, Inc., a Delaware corporation (the “Company”); MVC Capital, Inc., a Delaware corporation, in its capacity as a Seller (“MVC”) and as the representative of the Company Holders (the “Holder Representative”); James B. Wiser, solely in his capacity as representative of the Company Holders other than the Sellers with respect to the matters described in Section 12.2 (the “Legacy Holder Representative”); and solely for the limited purposes in this Agreement in which their names are referenced, Crius Energy Trust, an unincorporated open-ended limited purpose trust established under the laws of the Province of Ontario (“Crius Energy Trust”) and Crius Solar Fulfillment, LLC a Delaware limited liability company (“CSF”). In this Agreement, Buyer, Merger Sub, the Company, MVC, the Holder Representative and the Legacy Holder Representative are sometimes referred to individually as a “Party” and collectively as the “Parties.”

A.           Crius Energy Trust indirectly owns a controlling interest in CSF, which owns 100% of the capital stock of Buyer, which owns 100% of the capital stock of Merger Sub.

B.            The Company owns all of the issued and outstanding capital stock of Energy Services Providers, Inc., a New York corporation (“ESPI”).  ESPI owns all of the outstanding capital stock of Creative Marketing Resources, Inc., a Delaware corporation (“CMRI”), Massachusetts Gas & Electric, Inc., a Massachusetts corporation (“MAG&E”), Connecticut Gas & Electric, Inc., a Delaware corporation (“CTG&E”), Kansas State Gas & Electric, Inc., a Kansas corporation (“KSG&E”), USG&E Solar, Inc., a Delaware corporation (“USG&E Solar”) and Texas Gas & Electric, Inc., a Delaware corporation (“TXG&E”).  In this Agreement, the Company, ESPI, CMRI, MAG&E, CTG&E, KSG&E, USG&E Solar and TXG&E are sometimes referred to individually as a “USG&E Company” and collectively as the “USG&E Companies.”  In this Agreement, CMRI, MAG&E, CTG&E, KSG&E and TXG&E are sometimes referred to individually as an “ESPI Subsidiary” and collectively as the “ESPI Subsidiaries.”  The USG&E Companies engage in the businesses of providing natural gas to commercial and residential customers in Indiana, Kentucky and Michigan, marketing electricity to mass-market customers in Connecticut, the District of Columbia, Illinois and Massachusetts, and both such services in Maryland, New York, New Jersey, Ohio and Pennsylvania (such business collectively, the “Business”).  The Company also owns 20% of the issued and outstanding equity interests of each of USG&E Drilling I, LLC, USG&E Drilling II, LLC and USG&E Drilling III, LLC, each a Delaware limited liability company (the “Drilling Companies”).

C.            The respective Boards of Directors or member, as applicable, of (i) Crius Energy Administrator Inc. (“Administrator”), as administrator for and on behalf of Crius Energy Trust, (ii) CSF, (iii) Buyer, (iv) Merger Sub and (v) the USG&E Companies have approved this Agreement and declared advisable the transactions contemplated hereby upon the terms and subject to the conditions of this Agreement.

D.            The Board of Directors of the Company has determined that the Merger is in furtherance of and in accordance with the USG&E Companies’ business strategy and is advisable and fair to, and in the best interest of, the Company Holders.

E.            The Board of Directors of the Company has resolved to recommend to the Company Holders the approval and adoption of this Agreement and the approval of the transactions contemplated in this Agreement, including the Merger, upon the terms and subject to the conditions set forth in this Agreement.

 

F.            Pursuant to the Company’s Certificate of Incorporation dated November 4, 1999, as amended, the Merger requires the approval of the Company Stockholders holding a majority interest.

G.            In connection with entering into the Merger Agreement, MVC and David Phillips have entered into a support agreement with Buyer in the form attached hereto as Exhibit A  (each, a “Support Agreement”), representing, in the aggregate, 39.9% of the outstanding capital stock of the Company.

H.            Following the execution of this Agreement, the Company intends to solicit the approval of the Company Stockholders at a special meeting of the Company Stockholders as set forth herein, together with the approval of a majority of the Legacy Holders.

I.             As a condition for Buyer and Merger Sub to enter into this Agreement, simultaneous with the execution of this Agreement, MVC is executing a noncompetition agreement in the form of Exhibit B.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows:

1.	DEFINITIONS

(a)           “Acquisition Proposal” means any proposal or offer (whether or not in writing), with respect to any (A) merger, consolidation, share exchange, other business combination or similar transaction involving the Company or any of the USG&E Companies pursuant to which the holders of the voting power of the Company immediately prior to such transaction own less than 90% of the voting power of the surviving or resulting entity immediately following the transaction, (B) sale, lease, contribution or other disposition, directly or indirectly of any business or assets of the Company or any of the USG&E Companies representing 10% or more of the consolidated revenues, net income or assets of the Company and the USG&E Companies, taken as a whole, other than any such sales, leases, contributions or other dispositions in the Ordinary Course of Business (C) issuance, sale or other disposition, directly or indirectly, to any Person (or the stockholders of any Person) or group of securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for, such securities) representing 10% or more of the voting power of the Company, (D) transaction in which the holders of the voting power of the Company immediately prior to such transaction own less than 90% of the voting power of the Company immediately following the transaction, (E) transaction in which any Person (or the stockholders of any Person) shall acquire, directly or indirectly, beneficial ownership, or the right to acquire beneficial ownership, or formation of any group which beneficially owns or has the right to acquire beneficial ownership of, 10% or more of any class of capital stock of the Company or (F) any combination of the foregoing.

(b)           “Adjusted Net Merger Consideration” means (i) the Merger Consideration, minus (ii) the Holder Representative Fund Amount, minus (iii) the Indebtedness to be paid at Closing as set forth on Schedule 3.3(a)(i), minus (iv) the Third Party Transaction Expenses, minus (v) the Company Employee Payments, minus (vi) the aggregate amount of Preferred Share Liquidation Preferences, plus (vii) the aggregate amount of the grant prices with respect to the Company SARs, plus (viii) the aggregate amount of the exercise prices of the Company Warrants.

 

(c)           “Affiliate” means with respect to any Person, (i) if such Person is an individual, a member of such Person’s immediate family as defined in Rule 16(a)-1(e) promulgated under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and (ii) if such Person is a corporation, partnership, limited liability company, trust or other entity, then as defined in Rule 12b-2 promulgated under the 1934 Act.

(d)          “Aggregate Company Transaction Expenses” means (i) the Company Employee Payments; (ii) the Third Party Transaction Expenses; and (iii) any (A) payments to Company Warrantholders, and (B) payments to Company SAR Grantees, each to the extent that the payment or exercise of which would result in a Tax deduction.

(e)           “Aggregate Fully-Diluted Capital Stock” means (a) the aggregate number of shares of Common Stock outstanding immediately prior to the Effective Time (excluding any Dissenting Shares), plus (b) the aggregate number of shares of Common Stock that would be issuable upon conversion to Common Stock of all of the shares of Preferred Stock outstanding immediately prior to the Effective Time in accordance with the applicable Preferred Conversion Ratios, plus (c) the aggregate number of shares of Common Stock that would be issuable upon the exercise in full of all Company Warrants outstanding immediately prior to the Effective Time, plus (d) the aggregate number of shares of Common Stock represented by all Company SARs outstanding immediately prior to the Effective Time.

(f)           “Ancillary Documents” means the Exchange Agent Agreement, the Seller Notes, the Seller Notes Security Agreement, the Crius Trust Guaranty, the Legacy Escrow Agreement and any other certificate, agreement, document or other instrument required to be executed and delivered in connection with the transactions contemplated by this Agreement.  Where the term Ancillary Documents is used in the context of a given Party to this Agreement, it shall be deemed to refer only to those Ancillary Document to which such Party is a party unless otherwise provided in the relevant provision.

(g)          “Assets and Properties” means, with respect to any Person, all assets and properties of every kind, nature, characteristic and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person, including cash, cash equivalents, investments, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, inventory, goods and Intellectual Property.

(h)          “Benefit Arrangement” shall mean each material employee benefit plan, program, contract or arrangement that (i) is not an Employee Plan and (ii) provides benefits or compensation to any employee or former employee of the Company or any of its subsidiaries as a result of such employee’s or former employee’s employment with the Company or such subsidiary.

 

(i)            “Business Day” means any day except Saturday, Sunday or any day on which banks are generally not open for business in New York, New York.

(j)            “Capital Leases” means all obligations of a Person under leases that have been or should be, in accordance with GAAP, recorded as capital leases.

(k)          “Class A Common” means the Company’s class A common stock, par value $0.0001 per share.

(l)            “Class B Common” means the Company’s class B common stock, par value $0.0001 per share.

 

(m)          “Closing Net Working Capital” shall mean Net Working Capital as of the close of business on the Economic Closing Date (without giving effect to any changes, including any purchase accounting adjustments, which arise solely as a result of the Merger).

(n)          “Code” means the Internal Revenue Code of 1986, as amended.

(o)          “Common Stock” means the Class A Common and the Class B Common.

(p)          “Company Employee Payments” means (i) any and all transaction bonuses paid or payable by the Company to employees or service providers of the USG&E Companies in connection with the Closing, (ii) any and all other bonuses or sales incentive payments payable to employees or service providers of the USG&E Companies as of the Closing with respect to periods prior to the Closing, and (iii) (A) any and all severance payments, and related out-of-pocket severance costs and expenses, arising out of termination of employees or service providers of the USG&E Companies or the Continuing Employees or (B) relocation costs and retention costs incurred in connection with offers made for employment or service with Buyer or any Affiliate thereof, in each case, concurrently with, prior to, or within ninety (90) days following, the Closing, as contemplated in Section 7.14 and Schedule 4.21, provided that the aggregate amount of such payments or costs and expenses in this clause (iii) shall not exceed $1,000,000.

(q)          “Company Holder” means any Company Stockholder, Company SAR Grantee or Company Warrantholder.

(r)            “Company Organizational Documents” means, with respect to each USG&E Company, the certificate of incorporation, charter, by-laws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement, operating agreement or other similar organizational instrument or document governing such entity, as applicable.

(s)          “Company SAR” or “Company SARs” means stock appreciation rights granted to a Company SAR Grantee by the Company pursuant to an agreement between the Company and a Company SAR Grantee as described in Schedule 1.1(s).

(t)           “Company SAR Grantee” means an individual to whom the Company has awarded a Company SAR, which Company SAR is outstanding immediately prior to the Effective Time (without giving effect to vesting or forfeiture restrictions).

(u)          “Company Stock” means the Common Stock and the Preferred Stock.

(v)          “Company Stockholder” means a holder of any Company Stock.

(w)         “Company Warrant” means (i) the Class A Common Stock Purchase Warrant issued to Macquarie on October 23, 2014, and (ii) the Amended and Restated Class A Common Stock Purchase Warrant issued to Macquarie on October 23, 2014.

(x)           “Company Warrantholder” means any Person who holds a Company Warrant.

(y)          “Crius Stock” means the trust units of Crius Energy Trust.

(z)            “Customer” means any customer of any USG&E Company that has an executory contract to receive “residential”, “commercial” or “industrial” natural gas or electric service, in any retail natural gas or electricity customer program for the purchase and sale of natural gas or electricity related to the Business and under contract as of the Closing Date.

 

(aa)         “Customer Book” has the meaning set forth in the definition of “Mace Book”.

 

(bb)         “Customer Contract” means any retail natural gas or electricity contract with any Customer under any retail natural gas or electricity customer program for the purchase and sale of natural gas or electricity related to the Business as of the Closing Date, each form of which used at any time in the past two years is attached hereto as Exhibit C.

(cc)         “DGCL” means the Delaware General Corporation Law, as amended.

(dd)         “Disclosure Schedules” means the disclosure schedules dated the date hereof regarding this Agreement.

(ee)         “Dollars” or “$” means United States dollars, unless otherwise indicated.

(ff)          “Employee Plan” means each “employee benefit plan” as such term is defined in Section 3(3) of ERISA, that (A)(i) is subject to ERISA and (ii) is maintained or contributed to by the Company, or (B)(i) is subject to any provision of Title IV of ERISA and (ii) is maintained or contributed to by any ERISA Affiliate.

(gg)        “Environmental Laws” means all local, state and federal Laws governing pollution or the release of or exposure to Hazardous Materials as in effect on the date of this Agreement.

(hh)        “Environmental Permits” means all permits, licenses, registrations and other governmental authorizations required under applicable Environmental Laws.

(ii)           “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(jj)           “ERISA Affiliate” means any trade or business (whether incorporated or unincorporated) which is a member of a controlled group described in Section 414(b), (c), (m) or (o) of the Code, of which the Company is also a member.

(kk)         “Excess Regulatory Liabilities” means any Liabilities relating to or arising from the matters set forth on Schedule  9.4(b) (notwithstanding that they are included in the Disclosure Schedules), solely to the extent such Liabilities are in excess of the Specified Settlement Amount.

(ll)           “Exchange Agent” means Computershare Limited.

(mm)       “FERC” means the U.S. Federal Energy Regulatory Commission, or any successor entity.

(nn)        “FPA” means the Federal Power Act, as amended.

(oo)        “Fully-Diluted Common Shares” means, with respect to any Company Holder, the sum of (1) the number of shares of Common Stock held by such Company Holder immediately prior to the Effective Time, (2) the number of shares of Common Stock issuable upon the conversion of all Preferred Stock held by such Company Holder immediately prior to the Effective Time in accordance with the applicable Preferred Conversion Ratios, (3) the number of shares of Common Stock issuable upon the exercise of all Company Warrants held by such Company Holder immediately prior to the Effective Time, and (4) the number of shares of Common Stock represented by the Company SARs held by such Company Holder immediately prior to the Effective Time.  The Fully-Diluted Common Shares with respect to each Company Holder are set forth on Exhibit D.

 

(pp)        “Fully-Diluted Percentage” means, with respect to any Company Holder, a fraction (expressed as a percentage), prepared by the Company, (i) the numerator of which equals the sum of (1) the number of shares of Common Stock held by such Company Holder immediately prior to the Effective Time, (2) the number of shares of Common Stock issuable upon the conversion of all Preferred Stock held by such Company Holder immediately prior to the Effective Time in accordance with the applicable Preferred Conversion Ratios, (3) the number of shares of Common Stock issuable upon the exercise of all Company Warrants held by such Company Holder immediately prior to the Effective Time, and (4) the aggregate number of shares of Common Stock represented by all Company SARs held by such Company Holder and outstanding immediately prior to the Effective Time, and (ii) the denominator of which equals the Aggregate Fully-Diluted Capital Stock.  The Fully-Diluted Percentages with respect to each Company Holder are set forth on Exhibit D.

(qq)        “Fundamental Capitalization Representation” means the representations and warranties in Section 4.3 of this Agreement.

(rr)          “Fundamental Representations” means the representations and warranties in Sections 4.1, 4.2, 4.4, 4.5(a)(i), 4.7(b), 4.22, 6.1, 6.2(a)(i), 6.3 and 6.4 of this Agreement.

(ss)         “GAAP” means generally accepted accounting principles as in force in the United States of America at the date of the determination thereof, consistently applied.

(tt)          “Governmental Authority” means any foreign, federal, state, local, county, municipal, provincial, multinational government or other governmental or quasi-governmental authority or regulatory body, court, tribunal, arbitrating body, governmental department, commission, board, body, self-regulating authority, bureau, agency, independent system operator, regional transmission organization or reliability council or authority, as well as any other instrumentality or entity designated to act for or on behalf of any of the foregoing.

(uu)        “Hazardous Materials” means (i) any substance that is regulated as hazardous or toxic or a pollutant or contaminant under any Environmental Laws; or (ii) any petroleum product or by product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive material, toxic molds or radon.

(vv)         “Hedge Book” has the meaning set forth in the definition of “Mace Book”.

(ww)      “Holder Representative Fund Amount” means an amount equal to $1,000,000.

(xx)         “Indebtedness” means, as to any Person, (i) all short-term or long-term obligations of such Person for borrowed money, whether absolute, contingent, matured, unmatured, liquidated, unliquidated, or whether due or to become due (including all associated accrued and unpaid interest, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers’ acceptances), including senior and subordinated indebtedness, but excluding (x) indemnification obligations incurred in connection with this Agreement, and (y) trade and other accounts payable in the Ordinary Course of Business in accordance with ordinary course trade terms or payment plans, (ii) all Capital Leases, (iii) any income Taxes due for Pre-Closing Tax Periods, (iv) in connection with the USG&E Companies, any indebtedness, fees or expenses due to MVC or its Affiliates (with respect to MVC or its Affiliates, either before or after the Closing), (v) any amounts due to Macquarie or its Affiliates in connection with accrued dividend rights or arising out of the transactions contemplated by this Agreement and (vi) to the extent the USG&E Companies’ cash balances and cash deposits immediately prior to Closing, if any, as set forth on the Payment Schedule, are below the Specified Settlement Amount, the amount of such deficit.  For the avoidance of doubt, none of (i) the Seller Notes, (ii) trade payables and other expenses included in the calculation of Net Working Capital, or (iii) surety bonds and letters of credit issued by, for the benefit of, or in connection with, Macquarie or its Affiliates or any pipeline operations, shall constitute Indebtedness unless the beneficiary has made a claim under such bonds or letters of credit prior to Closing.

 

(yy)       “Intellectual Property” means with respect to the USG&E Companies, all patents, patent applications, patent disclosures and inventions; trademarks, service marks, trade dress, logos, trade names, corporate names and Internet domain names; copyrights and copyrightable works; information systems, databases and software, websites; licenses, registrations, applications and renewals for any of the forgoing; and Trade Secrets.

(zz)          “IRS” means the Internal Revenue Service, or any successor entity.

(aaa)       “Knowledge” with respect to the Company, means that (i) Puneet Sanan has actual knowledge of the fact or other matter at issue or (ii) one or more of David Weinberg, Eric Hansen, Kevin McMinn, Michelle Mann or Anthony Zannini (1) has actual knowledge of the fact or other matter at issue or (2) should have had actual knowledge of such fact or other matter assuming reasonable investigation; provided, however, the term “Knowledge” as used in Section 4.12 shall only include the actual knowledge of Puneet Sanan, David Weinberg, Eric Hansen or Kevin McMinn.

(bbb)      “Laws” means all statutes, rules, codes, regulations, restrictions, ordinances, orders, decrees, approvals, directives, judgments, injunctions, writs, awards and decrees of, or issued by, all Governmental Authorities.

(ccc)       “Legacy Escrow Amount” means $1,500,000.

(ddd)      “Legacy Holder Representative Fund Amount” means an amount equal to $100,000.

(eee)       “Legacy Holders” means all Company Stockholders other than the Sellers.

(fff)         “Liability” or “Liabilities” means any direct or indirect Indebtedness, liability, obligation, commitment, claim, settlement payment obligation, award, judgment, or deficiency, fixed or unfixed, asserted or unasserted, due or to become due, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent, direct or indirect or otherwise, including costs and expenses, and whether or not accruing after the giving of notice or the lapse of time or both and any interest or penalties thereon or with respect thereto.

(ggg)      “Liens” means any mortgage, pledge, security interest, encumbrance, restriction, lien, limitation, or charge of any kind or nature (including, any conditional sale or other title retention agreement or lease in the nature thereof), any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute, or any subordination arrangement in favor of any Person.

(hhh)          “Mace Book” means, as of a specified date (which date shall be reflected in the applicable electronic file name), (i) a list of all Customers, including the following information in respect of such Customers: Customer’s historical usage for the past 12 months, utility service territory or zone if applicable, if a fixed Customer, the start and end date of the term and the corresponding fixed price, installed capacity tags for Customers in the New York Independent System Operator, Inc., PJM Interconnection, L.L.C., Midcontinent Independent System Operator, Inc. and ISO New England Inc., most recent invoice price (if known) for variable price, and Customer start or drop date (this clause (i), the “Customer Book”), and (ii) a list of the Company’s wholesale market hedged supply contracts that support the Customer Book (this clause (ii), the “Hedge Book”), each of which are delivered concurrently with the execution of this Agreement and pursuant to Section 7.18.

 

(iii)          “Macquarie” means Macquarie Energy LLC, a Delaware limited liability company.

(jjj)          “Macquarie Financing Agreements” means (i) Trade Energy Supply Contract by and between the Company and Macquarie dated as of December 29, 2016, (ii) the Master Transaction Agreement among Macquarie, the Company and certain other parties thereto, dated as of March 31, 2010, as amended up to December 29, 2016, and the documents entered into in connection therewith, including the following (in each case, as may be amended, restated, supplemented or otherwise modified from time to time): (a) Common Terms Agreement, dated as of March 31, 2010, among Macquarie, the Company and certain other parties thereto, and any other agreements, documents or instruments executed in connection therewith (b) Credit Agreement, dated as of March 31, 2010, among Macquarie, the Company and certain other parties thereto, (c) Subordination Agreement dated as of March 31, 2010 among Macquarie, the Company and certain other parties thereto, (d) Collateral Agency and Intercreditor Agreement (First Lien), dated as of March 31, 2010, among Macquarie, the Company and certain other parties thereto, (e) Pledge and Security Agreement (First Lien), dated as of March 31, 2010, among Macquarie, the Company and certain other parties thereto, (f) ISDA 2002 Master Agreement, dated as of March 31, 2010, between Macquarie and the Company, and any other agreements, documents or instruments executed in connection therewith, (g) ISDA 2002 Master Agreement, dated as of October 1, 2010, between Macquarie and ESPI, and any other agreements, documents or instruments executed in connection therewith, and (h) Guaranty and Contribution Agreement, dated as of October 1, 2010, given by CMRI, Energy Services Providers of Texas, Inc., MAG&E, and ESPI Wholesale, Inc.

(kkk)       “Material Adverse Effect” means any event, condition or circumstance that could reasonably be expected to have a material adverse effect on the assets, Liabilities, results of operations or financial condition of the Company or any of its subsidiaries but does not include effects resulting from: (i) any change in the general business or economic conditions relating to the industry or territory in which such Party operates, (ii) any natural or international political or social conditions including the outbreak of hostilities or terrorist actions, (iii) any fluctuations in the financial, banking or securities markets, (iv) any adverse change relating to changes in GAAP, (v) any change in Law, or (vi) the announcement of this Agreement and the transactions contemplated hereby; provided, however, that any such matter described in the foregoing clauses (i), (ii), (iii), (iv) and (v) shall be a “Material Adverse Effect” to the extent disproportionately affecting the Business as compared to other similarly situated electric retail companies doing business in the same territories.

(lll)          “Minority Approval” means the affirmative vote (in person or by proxy) of a majority of the aggregate voting power of Company Stock held by the Legacy Holders entitled to vote, to approve this Agreement and the transactions contemplated hereby.

(mmm)    “MVC” means MVC Capital, Inc., a Delaware corporation.

(nnn)      “Necessary Stockholder Approval” means the approval of Company Stockholders holding the number of outstanding shares of Company Stock entitled to vote necessary to adopt this Agreement, including the approval of the Merger, pursuant to the terms of the certificate of incorporation of the Company and in accordance with the DGCL.

 

(ooo)      “Net Working Capital” shall mean, as of any date (without giving effect to any changes, including any purchase accounting adjustments, which arise solely as a result of the Merger), and as calculated in accordance with Exhibits E and E.1, (i) the current assets of the USG&E Companies, including billed and unbilled accounts receivable net of an allowance for doubtful accounts, prepaid storage gas and other current assets, excluding net derivative (mark-to-market) assets and cash and marketable securities plus (ii) any net deferred Tax assets and the Other Agreed Upon Assets, minus (iii) the current portion of the Liabilities of the USG&E Companies, including any Taxes and deferred Tax Liabilities but excluding (A) any net derivative (mark-to-market) liabilities, (B) any Indebtedness, fees or expenses due to MVC or its Affiliates, (C) the current portion of short-term borrowings (including any obligations under Capital Leases), (D) the Other Agreed Upon Excluded Liabilities, (E) the Aggregate Company Transaction Expenses, (F) any Taxes included in the definition of Indebtedness, (G) any indemnification obligations to Buyer, (H) any Liabilities of the USG&E Companies to be paid at Closing, (I) the Macquarie warrant liability and (J) the Seller Notes.

(ppp)     “Non-MVC Holders” means all Company Holders other than MVC.

(qqq)      “Ordinary Course of Business” means the ordinary course of business consistent with past practice in the past twelve (12) months prior to the Agreement Date (including with respect to collection of accounts receivable, purchases of supplies, repairs and maintenance, payment of accounts payable and accrued expenses, terms of sale, Customer Contracts and pricing policies, levels of capital expenditures, and operation of cash management practices).

(rrr)         “Other Agreed Upon Assets” means the specific items listed on Exhibit E.

(sss)       “Other Agreed Upon Excluded Liabilities” means the specific items listed on Exhibit E.

(ttt)         “Payment Schedule” means the schedule that sets forth (i) the formula for calculating the Adjusted Net Merger Consideration, (ii) the Preferred Share Liquidation Preferences for each series of Preferred Stock, (iii) the Preferred Conversion Ratios for each series of Preferred Stock, and (iv) as of the Closing Date, shall be amended by the Company and the Holder Representative to include: (1) the calculation as of the Closing of the Per Share Closing Consideration; (2) the calculation of the amount which each Legacy Holder, Seller, Company SAR Grantee and Company Warrantholder is entitled to receive in accordance with Section 3.6 hereof; and (3) a true, correct and complete screenshot of all bank accounts or other sources of cash of the Company which shall identify the Cash Deposit Amount.

(uuu)      “Per Share Closing Consideration” means the quotient of the Adjusted Net Merger Consideration divided by the aggregate number of Fully-Diluted Common Shares.

(vvv)      “Permit” means any permit, license, accreditation, consent, certificate, approval, exemption, order, franchise, permission, agreement, qualification, authorization or registration.

(www)    “Permitted Liens” means (i) Liens for Taxes that are not yet due and payable or are being contested in good faith through appropriate proceedings, in each case, for which adequate reserves are established in accordance with GAAP, (ii) Liens in effect as of the Closing as set forth on Schedule 1.1(www), (iii) statutory Liens of landlords, (iv) Liens of carriers, warehousemen, mechanics, materialmen and repairmen incurred in the Ordinary Course of Business and not yet delinquent, (v) Liens in favor of utility and local distribution companies securing interests in accounts receivable in connection with “purchase of receivables” or other similar programs conducted by such utility and local distribution companies and (vi) in the case of owned or leased real property, zoning, building, or other restrictions, variances, covenants, rights of way, encumbrances, easements and other minor irregularities in title, none of which, individually or in the aggregate, (a) interfere in any material respect with the present use of or occupancy of the affected parcel by the relevant entity, (b) have more than an immaterial effect on the value thereof (if such parcel is owned by the relevant entity) or its use (if such parcel is leased by the relevant entity) or (c) would impair the ability of such parcel to be sold for its present use (if such parcel is owned by the relevant entity).

 

(xxx)        “Person” means an individual, a partnership, a corporation, a limited liability company, any other entity, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a Governmental Authority.

(yyy)      “Preferred Conversion Ratio” means the ratio at which one share of a particular series of Preferred Stock converts into Class A Common, as set forth on the Payment Schedule.

(zzz)        “Preferred Share” means each share of the Preferred Stock that is issued and outstanding immediately prior to the Effective Time (excluding any Preferred Stock cancelled or deemed cancelled upon the exercise of any Preferred Stock conversion rights).

 

(aaaa)     “Preferred Share Liquidation Preference” means the liquidation preference afforded to a particular series of Preferred Stock, as set forth on the Payment Schedule.

(bbbb)    “Preferred Stock” means the Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred, Series E Preferred, Series F Preferred, Series G Preferred, Series H Preferred, Series I Preferred, Series J Preferred, Series K Preferred, Series L Preferred and Series M Preferred.

(cccc)      “Pro Rata Sharing Event” means, with respect to an event in which all Company Holders are liable for Losses under this Agreement on a pro rata basis, whether in respect to adjustments set forth in Article 3, indemnification obligations under Article 9, or otherwise, then, such amounts shall be obtained solely by, and on a pro rata basis based on their Fully-Diluted Percentages, (i) in the case of the Sellers, reduction of the aggregate amount outstanding under the Seller Notes including any accrued and unpaid interest under the Seller Notes and (ii) in the case of the Legacy Holders, reduction of the aggregate amount outstanding under the Legacy Escrow; provided, that for the avoidance of doubt, if any Seller, together with its Affiliates or permitted transferees, holds more than one Seller Note, all such Seller Notes of such Seller or any of its Affiliates or permitted transferees shall be reduced equally and on a pro rata basis for any such obligations of such Seller, notwithstanding any several liability provisions in this Agreement.

(dddd)    “QRCE” means, as of any measurement date, the sum of (i) with respect to electricity customers, (A) the aggregate annual usage in kWh of the Qualified Customers, divided by (B) 10,000 kWh, plus (ii) with respect to natural gas customers, (A) the aggregate annual usage in MMBtu of the Qualified Customers, divided by (B) 100 MMBtu, in each case as calculated (x) by Buyer in a commercially reasonable manner and in accordance with industry practice based on weather-normalized historical data, and (y) to the extent that historical data for a customer is not available, using the average annual weather normalized usage for the applicable customer rate class as reported by the applicable local distribution company and/or public utilities commission.

(eeee)     “Qualified Customer” means, as of any date, a customer of any USG&E Company (i) with respect to which the applicable USG&E Company has not received a pending drop request that has not been revoked, whether formally or by continuation of service past the intended drop date; (ii) that is active with a USG&E Company as its registered supplier pursuant to a valid contract and is receiving natural gas or electricity services from a USG&E Company; and (iii) for non-purchase of receivables customers or purchase of receivables customers in Public Service Electric and Gas Company and Jersey Central Power and Light Company territories in New Jersey and Commonwealth Edison territories in Illinois, which the USG&E Companies do not have an outstanding receivable balance in excess of 60 days as of such date.

 

(ffff)         “Run-out Schedule” shall mean the information set forth in Schedule 7.15, including for each Customer Contract, a description of the price, product, contract start and end date, commission, profiled usage, and account number.

(gggg)     “Run-out Update Date” shall mean the date that is five (5) Business Days prior to the Economic Closing Date.

(hhhh)    “Sellers” means MVC, Phillip George, Franklin Lewis, James Pinto, Victor Ferreira and Big Apple Energy, LLC.

(iiii)         “Series A Preferred” means the Company’s series A preferred stock, par value $0.0001 per share.

(jjjj)         “Series B Preferred” means the Company’s series B preferred stock, par value $0.0001 per share.

(kkkk)     “Series C Preferred” means the Company’s series C preferred stock, par value $0.0001 per share.

(llll)         “Series D Preferred” means the Company’s series D preferred stock, par value $0.0001 per share.

(mmmm) “Series E Preferred” means the Company’s series E preferred stock, par value $0.0001 per share.

(nnnn)    “Series F Preferred” means the Company’s series F preferred stock, par value $0.0001 per share.

(oooo)    “Series G Preferred” means the Company’s series G preferred stock, par value $0.0001 per share.

(pppp)    “Series H Preferred” means the Company’s series H preferred stock, par value $0.0001 per share.

(qqqq)    “Series I Preferred” means the Company’s series I preferred stock, par value $0.0001 per share.

(rrrr)        “Series J Preferred” means the Company’s series J preferred stock, par value $0.0001 per share.

(ssss)     “Series K Preferred” means the Company’s series K preferred stock, par value $0.0001 per share.

(tttt)        “Series L Preferred” means the Company’s series L preferred stock, par value $0.0001 per share.

(uuuu)    “Series M Preferred” means the Company’s series M preferred stock, par value $0.0001 per share.

(vvvv)    “Special Representations” means the representations and warranties of the Company in Sections 4.12 and 4.14 of this Agreement.

 

(wwww)  “Specified Settlement Amount” means $4,050,000 less any amounts paid by the USG&E Companies until the Closing in respect of the actions set forth on Schedule 9.4(b).

(xxxx)       “Superior Proposal” means an unsolicited, bona fide written Acquisition Proposal (except that for purposes of this definition, references therein to 10% shall be 50%) made by a third party that the Board of Directors of the Company concludes in good faith, after consultation with its financial and outside legal advisors, taking into account all legal, financial, regulatory and other aspects of such proposal and including the terms and conditions of this Agreement (i) is more favorable to the Company Holders from a financial point of view, than the transactions contemplated by this Agreement, (ii) is reasonably likely to be consummated in accordance with its terms, taking into account all the terms and conditions of such proposal and the Person making such proposal that are deemed relevant by the Board of Directors and (iii) is fully financed or contains no financing contingency and reasonably likely to receive all required approvals of Governmental Authorities and otherwise reasonably capable of being completed on the terms proposed.

(yyyy)    “Target Net Working Capital” means Nineteen Million U.S. Dollars ($19,000,000).

(zzzz)       “Tax” or “Taxes” means (A) all taxes, including any premiums, taxes, assessments, charges, duties, fees, levies or other governmental charges (including interest, penalties or additions associated therewith) in the nature of a tax, whether disputed or not including federal, state, provincial, city, county, foreign or other income, branch, franchise, capital, capital stock, real property, ad valorem, personal property, tangible, intangible, payroll, employment, withholding, FICA, unemployment compensation, disability, employment insurance, transfer, registration, sales, use, goods and services, excise, gross receipts, severance, stamp, occupation, windfall profits, environmental, customs duties, value-added, alternative or add-on minimum, estimated and all other taxes imposed by any Governmental Authority, and also including interest, penalties or additions to Tax associated therewith, and (B) Liability for payment of any amounts described in the preceding clause (A) by reason of being a member of a consolidated, combined, unitary, affiliated or similar group for Tax purposes, as a transferee or successor, or pursuant to a Tax sharing, indemnity, allocation or similar agreement.

(aaaaa)   “Tax Act” means the Income Tax Act (Canada) and the regulations thereunder.

(bbbbb)  “Tax Return” means a declaration, statement, report, return or other document or information required to be filed or supplied to a Governmental Authority with respect to Taxes including, where permitted or required, combined or consolidated or similar returns for any group of entities.

(ccccc)   “Third Party Transaction Expenses” means (i) all fees and expenses of outside professionals (including legal, accounting, tax advisory and investment banking fees and expenses) incurred and unpaid by the USG&E Companies in connection with the transactions contemplated by this Agreement, (ii) any unpaid termination fee payable with respect to the USG&E Companies’ trade credit and supply facility with Macquarie and (iii) any unpaid termination fee, consent fee or other fee payable to a third party by the USG&E Companies, the Sellers, or its or their Affiliate or its or their representatives in connection with the transactions contemplated by this Agreement.

(ddddd)  “Trade Secrets” means information, including, but not limited to, technical or non-technical data, a formula, pattern, compilation, program, including, without limitation, computer software and related source codes, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers, ideas, formulas, compositions, business methods, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, business and marketing plans, and related information, or other information similar to any of the foregoing, which derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use.

 

(eeeee)    “USG&E Holder Approval” means the Necessary Stockholder Approval together with the Minority Approval.

 

2.	THE MERGER; CLOSING

(a)           Structure and Effects of the Merger.  Merger Sub will merge with and into the Company, and the separate existence of Merger Sub shall thereupon cease (the “Merger”).  The Company will be the surviving corporation in the Merger (sometimes referred to herein as the “Surviving Corporation”) and will continue to be governed by the laws of Delaware, and the separate existence of the Company with all its rights, privileges, immunities, powers and franchises will continue unaffected by the Merger, except as set forth in Sections 2.1.(b) and 2.1.(c).  The Merger will have the effects specified in Subchapter IX of the DGCL.

(b)           Certificates of Incorporation.  At the Effective Time, the certificate of incorporation of the Surviving Corporation will be amended and restated in its entirety and will be the certificate of incorporation of the Surviving Corporation effective as of the Effective Time until duly amended in accordance with the terms thereof and applicable Law.  At the Effective Time, the certificates of incorporation of ESPI and each of the ESPI Subsidiaries will be amended and restated in their entirety and will be the certificates of incorporation of ESPI or the respective ESPI Subsidiary effective as of the Effective Time until duly amended in accordance with the terms thereof and applicable Law.

(c)           Bylaws.  The bylaws of the Surviving Corporation will be the bylaws of Merger Sub as in effect immediately prior to the Effective Time, until duly amended in accordance with the terms thereof and the certificate of incorporation of the Surviving Corporation.  The bylaws of ESPI and each of the ESPI Subsidiaries will be amended and restated in their entirety and will be the bylaws of such entity effective as of the Effective Time until duly amended in accordance with the terms thereof and applicable Law.

(d)           Directors.  The Parties shall take all actions necessary so that the directors of Merger Sub at the Effective Time shall be, from and after the Effective Time, the directors of each of the USG&E Companies until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with each of the USG&E Companies’ respective certificate of incorporation and bylaws.

 

(e)           Officers.  The Parties shall take all actions necessary so that the officers of Merger Sub at the Effective Time shall be, from and after the Effective Time, the officers of each of the USG&E Companies until their successors shall have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with each of the USG&E Companies’ respective certificate of incorporation and bylaws.

2.2.          Effective Time of Merger.  On the Closing Date, the Parties shall cause the Merger to be consummated by filing, in the offices of the Secretary of State of the State of Delaware, the certificate of merger (the “Merger Certificate”) in accordance with applicable Law, and the Merger will become effective upon such filing of the Merger Certificate or at such later date and time as may be set forth in the Merger Certificate (the “Effective Time”).

 

2.3.          Closing, Closing Date and Economic Closing Date .

 

(a)           The consummation of the transactions contemplated by this Agreement (the “Closing”) will take place remotely by the exchange of documents and signatures or at the offices of Baker Botts L.L.P. at 1299 Pennsylvania Avenue NW, Washington, D.C. at 10:00 A.M., Eastern Time, two (2) Business Days following the satisfaction or waiver of the conditions set forth in Article 7 that are contemplated to be satisfied at or prior to the Closing, but subject to the terms included in Section 2.3(b) and (c) below, or on such other date as Buyer and the Company may agree (such date, the “Closing Date”).

(b)           If the Closing Date occurs on any date from July 1, 2017 through July 21, 2017, or August 1, 2017 through August 16, 2017, or September 1, 2017, the Parties will calculate certain events as specifically referenced in this Agreement as if the Closing occurred on the first day of the month in which such Closing occurred (July 1, 2017, August 1, 2017 and September 1, 2017, respectively) (the “Economic Closing Date”) notwithstanding that the transactions contemplated herein may be consummated as of a date subsequent to the Economic Closing Date.

(c)           If the Closing Date would otherwise occur on any date from July 22, 2017 through July 31, 2017 or, August 17, 2017 through August 31, 2017, the Closing will be delayed until the first day of the next succeeding calendar month for all purposes of this Agreement (August 1, 2017 and September 1, 2017, respectively).  In this event the “Economic Closing Date” as used in this Agreement will be the same date as the actual Closing Date.

(d)           If the Closing Date occurs on a date not specifically provided for in Section 2.3(b) or (c) above, the “Economic Closing Date” as used in this Agreement will be the same date as the actual Closing Date.

3.	CONSIDERATION; PAYMENT AND DELIVERIES

3.1.          Merger Consideration.

 

(a)           The consideration in respect of the Merger consists of the Cash Purchase Price, plus the Debt Purchase Price, plus the Cash Deposit Amount, plus the Equity Consideration (each as defined below in Section 3.1(b), and in each case subject to adjustment in accordance with this Section 3.1 and Section 3.3) (collectively, the “Merger Consideration”), for an aggregate of (x) US$152,500,000, together with US$20,000,000 in working capital, for an expected aggregate transaction value of US$172,500,000, plus (y) the Cash Deposit Amount.

 

(b)           The Merger Consideration consists of (i) the sum of (inclusive of all payments or adjustments set forth in Section 3.3): (x) US$95,000,000 (the “Cash Purchase Price”), plus (y) US$47,500,000 in Seller Notes (the “Debt Purchase Price”), plus (z) the aggregate amount of deposits of the USG&E Companies at Closing that are not current assets (inclusive of all adjustments as set forth in Section 3.1(c)(i)), minus amounts of Indebtedness that are not paid to holders of Indebtedness at the Closing as agreed by Buyer and remaining as Indebtedness as set forth on the Payment Schedule (the “Cash Deposit Amount”) (the sum of (x) plus (y) plus (z), as adjusted, collectively, the “Cash Consideration”), and (ii) 3,847,870 trust units of Crius Stock (the “Equity Consideration”). The Merger Consideration shall be paid by Merger Sub in accordance with Section 3.3.

(c)           In determining the amount of the Cash Consideration, (i) to the extent the USG&E Companies’ cash balances immediately prior to Closing, if any, as set forth on the Payment Schedule, are in excess of the Specified Settlement Amount (such excess amount being, the “Excess Cash”), the amount of such Excess Cash shall be added to and included as a part of the Cash Deposit Amount for purposes of determining the Cash Consideration and the amount of such Excess Cash shall not be added to or included in the calculation of Net Working Capital, and (ii) the Cash Consideration shall be calculated based on the representative example set forth on Exhibits E and E.1 (which also includes a representative example calculation of Net Working Capital).

3.2.          Payment Schedule.  No later than 6:00 p.m., Eastern Time on the date that is three (3) Business Days prior to the Closing Date, the Company shall deliver to Buyer a draft of the Payment Schedule.  After such delivery and prior to the Closing, Buyer, Company and Holder Representative will work in good faith to determine the amounts and other matters to be included in the Payment Schedule.  To the extent that the Payment Schedule assumes a Closing Date that is different than the actual Closing Date, the Company shall, on the day prior to the Closing Date, provide an updated version of the Payment Schedule that reflects the correct Closing Date (and Buyer, Company and Holder Representative will again work in good faith to determine the amounts and other matters to be included in such schedule).

 

3.3.          Payment of Consideration.

 

(a)           Subject to Section 3.5, upon the Closing, Merger Sub will pay the Merger Consideration as set out below, and upon such payment will be deemed to have satisfied its obligation to pay the Merger Consideration to the Company Holders:

(i)           Pay to the respective holders of Indebtedness set forth on Schedule 3.3(a)(i) the aggregate amount of such Indebtedness outstanding as of the Closing, minus amounts agreed by Buyer to be retained in the Company set forth on Schedule 3.3(a)(i); any such Indebtedness (other than amounts agreed to be retained by Buyer) shall be paid pursuant to payoff letters from each holder of such outstanding Indebtedness indicating the amount required to discharge such Indebtedness in full and terminate all lines of credit thereunder at the scheduled Closing and agreeing to release any and all Liens upon receipt of the applicable payoff amount;

(ii)           Pay the Holder Representative Fund Amount, via wire transfer of immediately available funds, to an account designated by the Holder Representative;

 

(iii)          Pay the Legacy Holder Representative Fund Amount, via wire transfer of immediately available funds, to an account designated by the Legacy Holder Representative;

(iv)          Pay all Third Party Transaction Expenses and Company Employee Payments, in each case, as set forth on the Payment Schedule;

(v)           Deposit with Computershare Trust Company, N.A. (the “Legacy Escrow Agent”), via wire transfer of immediately available funds, the Legacy Escrow Amount for the purposes of securing the Legacy Holders’ obligations pursuant to a Pro Rata Sharing Event to be held in an escrow account (the “Legacy Escrow Account”) and disbursed by the Legacy Escrow Agent in accordance with terms and conditions of an escrow agreement in the form attached hereto as Exhibit F (the “Legacy Escrow Agreement”);

(vi)          Deposit with the Exchange Agent, via wire transfer of immediately available funds, an amount equal to (A) the Cash Purchase Price, plus (B) the Cash Deposit Amount, minus (C) all Indebtedness set forth on Schedule 3.3(a)(i) (to be paid or agreed to be retained by Buyer), minus (D) the Holder Representative Fund Amount, minus (E) the Legacy Holder Representative Fund Amount, minus (F) the Legacy Escrow Amount, minus (G) the aggregate Third Party Transaction Expenses and Company Employee Payments paid pursuant to Section 3.3(a)(iv), which amount shall be distributed by the Exchange Agent in accordance with the Exchange Agent Agreement;

(vii)         Deliver to each Seller, a promissory note in the form of Exhibit G issued by the Surviving Corporation as the successor in interest to Merger Sub in the aggregate principal amount of the Debt Purchase Price allocated to such Seller as set forth on the Payment Schedule (collectively, the “Seller Notes”), which Seller Notes shall (A) bear interest, payable in cash quarterly in arrears, at the rate of 9.5% per annum, (B) mature on the eight-year anniversary of the Closing, (C) be secured by a second priority lien on the assets of the Company, junior only to the lien of Macquarie pursuant to a security agreement substantially in the form of the Pledge and Security Agreement (First Lien), dated as of March 31, 2010, among USG&E, each grantor from time to time a party thereto, and Macquarie (the “Seller Notes Security Agreement”) and (D) be guaranteed by Crius Energy Trust pursuant to a guaranty substantially in the form of Exhibit H (the “Crius Trust Guaranty”). At the option of all of the holders of the Seller Notes, delivered after the Closing, the Surviving Corporation shall execute a Note Agency Administration Agreement under which the holders of the Seller Notes may designate an agent to administer all of the Seller Notes which activity shall include collection, enforcement and undertaking day-to-day ministerial duties associated with the Seller Notes and all collateral and guarantees issued in connection therewith. In such event, the holders of the Seller Notes may assign the Seller Notes as often as they choose and may assign or participate the Seller Notes in whole or in part; it being understood that the Surviving Corporation shall only be obligated to execute new/replacement Seller Notes for amounts in excess of $5,000,000; and

(viii)        Deliver to the Exchange Agent, a number of trust units of Crius Stock sufficient to pay the aggregate Equity Consideration.

(b)           Notwithstanding the foregoing, in the event that there are any Dissenting Shares, Merger Sub shall deduct and withhold from each of the amounts and number of shares that would otherwise be paid or delivered by Merger Sub pursuant to this Section 3.3 the portion of the Merger Consideration attributable to such Dissenting Shares if such Dissenting Shares were not Dissenting Shares.

 

(c)           Working Capital.

(i)            Post-Closing.  Within one-hundred twenty (120) calendar days after the Closing Date, Buyer will deliver to the Holder Representative a written statement setting forth (A) the Closing Net Working Capital of the USG&E Companies as of the Economic Closing Date (the “Proposed Closing Balance Sheet”) and (B) as of the Closing, the Cash Deposit Amount, amounts under Capital Leases, Indebtedness, Third Party Transaction Expenses and Company Employee Payments (together with the Proposed Closing Balance Sheet, the “Post-Closing Statement”), in each case, prepared in accordance with the methodology set forth on Exhibits E and E.1 (and which methodology, for the avoidance of doubt, will control in the event of a conflict between amounts or other matters set forth in the Payment Schedule).  If the Holder Representative disputes any items included in the Post-Closing Statement, the Holder Representative shall deliver to Buyer written notice of such dispute (the “Objection Notice”) within thirty (30) days of receipt of the Post-Closing Statement, which shall list with reasonable specificity the Holder Representative’s points of disagreement with, and proposed revisions to, the Post-Closing Statement.

(ii)           Dispute Resolution.  In the event of a dispute regarding the Post-Closing Statement (which for the avoidance of doubt, shall include any dispute regarding (i) data underlying the Post-Closing Statement as derived from financial statements or financial data or (ii) the financial statements or financial data itself and the preparation thereof under GAAP or otherwise), Buyer and the Holder Representative will work in good faith to resolve such dispute within thirty (30) days of Holder Representative’s timely delivery of an Objection Notice.  If they are unable to resolve all matters subject to dispute within 30 days, any matters that remain disputed will be identified in writing and submitted to an independent accounting firm mutually selected by Buyer and the Holder Representative (the “Independent Accountants”), which firm will make a final and binding determination as to such matter or matters.  If Buyer and the Holder Representative are unable to agree on the Independent Accountants, then the Independent Accountants will be one of the “Big Four” accounting firms other than PriceWaterhouseCoopers (i.e., Deloitte, Ernst & Young or KPMG) selected by the Holder Representative and reasonably satisfactory to Buyer.  As soon as practicable, the Independent Accountants will send to the Holder Representative and Buyer its written determination as to such disputed matter or matters, which, absent manifest error having a material effect, will be binding on the Parties and deemed final as of the date delivered to the Holder Representative and Buyer.  The fees, expenses and costs of the Independent Accountants in connection with such review and report shall be borne by Holder Representative and Buyer in proportion to the amounts by which their respective proposed calculations as initially submitted to the Independent Accountant differed from the Independent Accountant’s final calculations.

(iii)          Payments.  Upon the earlier of (A) resolution of all disagreements, if any, related to the Post-Closing Statement and (B) if the Holder Representative does not deliver an Objection Notice to Buyer within thirty (30) days of receipt of the Post-Closing Statement, the date that is thirty-one (31) days after the Holder Representative’s receipt of the Post-Closing Statement (such date, the “Final Closing Balance Sheet Date”), (x) the Proposed Closing Balance Sheet, as and if modified by Buyer and the Holder Representative pursuant to written agreement between Buyer and the Holder Representative, or as modified by the Independent Accountants pursuant to a written report, will be binding on the Parties and will be referred to as the “Final Closing Balance Sheet” and (y) the Cash Deposit Amount and amounts under Capital Leases at Closing, as and if modified by Buyer and the Holder Representative pursuant to written agreement between Buyer and the Holder Representative, or as modified by the Independent Accountants pursuant to a written report, will be binding on the Parties.

 

(A)         If the USG&E Companies’ Net Working Capital on the Final Closing Balance Sheet (the “Final Working Capital”) is less than the Target Net Working Capital, then one hundred percent (100%) of the amount of the entire difference will be paid by the Company Holders to the Surviving Corporation pursuant to a Pro Rata Sharing Event on the Final Closing Balance Sheet Date.

(B)         If the Final Working Capital is the same as, or greater than, the Target Net Working Capital, there shall be no payment or other adjustment by any Party.

(C)         If the Cash Deposit Amount is (i) less than the amount calculated at Closing, then one hundred percent (100%) of the amount of the entire difference will be paid by the Company Holders to the Surviving Corporation pursuant to a Pro Rata Sharing Event on the Final Closing Balance Sheet Date or (ii) greater than the amount calculated at Closing, then one hundred percent (100%) of the amount of the entire difference will be paid by Buyer to the Exchange Agent for distribution to the Company Holders in accordance with their Fully-Diluted Percentages.

(D)         If the amounts due under Capital Leases at Closing is (i) less than the amount calculated at Closing, then one hundred percent (100%) of the amount of the entire difference will be paid by Buyer to the Exchange Agent for distribution to the Company Holders in accordance with their Fully-Diluted Percentages or (ii) greater than the amount calculated at Closing, then one hundred percent (100%) of the amount of the entire difference will be paid by the Company Holders to the Surviving Corporation pursuant to a Pro Rata Sharing Event on the Final Closing Balance Sheet Date.

(E)          If there are any Third Party Transaction Expenses or Company Employee Payments that have not been paid at Closing, then the Company Holders shall pay the Surviving Corporation for such Third Party Transaction Expenses and Company Employee Payments pursuant to a Pro Rata Sharing Event on the Final Closing Balance Sheet Date.

(F)          If the Indebtedness after Closing is greater than the amount calculated at Closing, then one hundred percent (100%) of the amount of the difference shall be paid by the Company Holders to the Surviving Corporation pursuant to a Pro Rata Sharing Event on the Final Closing Balance Sheet Date, to the extent not included in the Net Working Capital adjustment described in this Section 3.3(c).

 

(d)           Special One-Year Adjustments.

(i)            Post-Closing.  On or before the one (1) year anniversary of the Closing Date, Buyer will deliver to the Holder Representative a written statement (the “Proposed Adjustment Statement”) setting forth all ISO settlement amounts, utility invoices, imbalance amounts, customer refunds and all supply-related items, including rebates and renewable energy certificates of the USG&E Companies that relate to operations of the USG&E Companies prior to the Economic Closing Date and if included in the initial calculation of Final Working Capital would have changed the Final Working Capital.  The Adjustment Statement shall include a calculation of the aggregate net adjustment to the Final Working Capital represented by items described in the immediately preceding sentence (the “Adjustment Amount”).  If the Holder Representative disputes any items included in the Adjustment Statement, the Holder Representative shall deliver to Buyer written notice of such dispute (the “Adjustment Objection Notice”) within thirty (30) days of receipt of the Proposed Adjustment Statement, which shall list with reasonable specificity the Holder Representative’s points of disagreement with, and proposed revisions to, the Proposed Adjustment Statement.

(ii)           Dispute Resolution.  In the event of a dispute regarding the Proposed Adjustment Statement, Buyer and the Holder Representative will work in good faith to resolve such dispute within thirty (30) days of Holder Representative’s timely delivery of an Adjustment Objection Notice.  If they are unable to resolve all matters subject to dispute within 30 days, any matters that remain disputed will be identified in writing and submitted to Independent Accountants selected in accordance with the procedure set forth in Section 3.3.(c)(ii), which Independent Accountants will make a final and binding determination as to such matter or matters.  As soon as practicable, the Independent Accountants will send to the Holder Representative and Buyer its written determination as to such disputed matter or matters, which, absent manifest error having a material effect, will be binding on the Parties and deemed final as of the date delivered to the Holder Representative and Buyer.  The fees, expenses and costs of the Independent Accountants in connection with such review and report shall be borne by Holder Representative and Buyer in proportion to the amounts by which their respective proposed calculations of the Adjustment Amount as initially submitted to the Independent Accountant differed from the Independent Accountant’s final calculation of the Adjustment.

(iii)          Payments.  Upon the earlier of (A) resolution of all disagreements, if any, related to the Proposed Adjustment Statement and (B) if the Holder Representative does not deliver an Adjustment Objection Notice to Buyer within thirty (30) days of receipt of the Proposed Adjustment Statement, the date that is thirty-one (31) days after the Holder Representative’s receipt of the Proposed Adjustment Statement (such date, the “Final Adjustment Date”), the Proposed Adjustment Statement, as and if modified by Buyer and the Holder Representative pursuant to written agreement between Buyer and the Holder Representative, or as modified by the Independent Accountants pursuant to a written report, will be binding on the Parties and will be referred to as the “Final Adjustment Statement.”  If the Adjustment Amount on the Final Adjustment Statement is a positive number (i.e., an increase in Final Working Capital), the Surviving Corporation will deposit with the Exchange Agent the entire Adjustment Amount for distribution and payment to the Company Holders in accordance with their Fully-Diluted Percentages within five (5) Business Days after the Final Adjustment Date.  If the Adjustment Amount on the Final Adjustment Statement is a negative number (i.e., a decrease in Final Working Capital), then the entire Adjustment Amount will be paid by the Company Holders to the Surviving Corporation pursuant to a Pro Rata Sharing Event on the Final Adjustment Date.

 

3.4.          Mailings to Company Holders and Related Matters.

 

(a)           Company Stockholders.  Pursuant to Section 7.21 of this Agreement, promptly following the Agreement Date and, in accordance with Section 262(d)(1) of the DGCL, not less than 20 days prior to the Company Meeting at which the Merger is submitted to the Company Stockholders for approval, the Company will mail or cause to be mailed to each Company Stockholder that has not signed this Agreement, the Proxy Statement  that, among other disclosures set forth therein, (i) notifies such Company Stockholders of the Company Meeting for purposes of approving this Agreement, (ii) provides instructions for the execution and delivery thereof to surrender such Company Stockholder’s stock certificates (or, in lieu thereof, a lost certificate indemnity agreement), in exchange for the applicable portion of the Adjusted Net Merger Consideration in accordance with the terms of this Agreement, and (iii) in compliance with Section 262 of the DGCL, notifies Company Stockholders that are entitled to appraisal rights with respect to the Merger that appraisal rights are available pursuant to Section 262 of the DGCL.

(b)           Company Warrantholders.  Promptly following the Agreement Date, the Company shall provide each Company Warrantholder with any notice required under the terms of the Company Warrant.

3.5.          Exchange Procedures.

 

(a)            Exchange Procedure.

(i)            On the date hereof, the Company and the Exchange Agent shall enter into an exchange agent agreement substantially in the form attached hereto as Exhibit I (the “Exchange Agent Agreement”).

(ii)           Upon providing to the Exchange Agent certificates representing Company Stock and such other documents as may be reasonably required by Buyer or the Exchange Agent, a Company Stockholder, at the Effective Time, shall be entitled to receive in exchange therefor a portion of the Adjusted Net Merger Consideration in accordance with Sections 3.6(b) and 3.6(c) (and reflected on the Payment Schedule), and the certificates so surrendered shall forthwith be cancelled.  No interest shall be paid or shall accrue on any amounts payable upon surrender of any Company Stock.  There shall be no further registration or transfers on the records of the Surviving Corporation of the shares of Company Stock that were outstanding immediately prior to the Effective Time.

(iii)          Upon providing to the Exchange Agent all documents as may be reasonably required by Buyer or the Exchange Agent, a Company SAR Grantee, at the Effective Time, shall be entitled to receive in exchange therefore, a portion of the Adjusted Net Merger Consideration in accordance with Section 3.6(d) (and reflected on the Payment Schedule), and all of such Company SAR Grantee’s Company SARs shall forthwith be cancelled.  No interest shall be paid or shall accrue on any amounts payable upon cancellation of any Company SARs.

 

(iv)          Upon providing to the Exchange Agent with such documents as may be reasonably required by Buyer or the Exchange Agent, a Company Warrantholder shall, at the Effective Time, be entitled to receive in exchange therefor a portion of the Adjusted Net Merger Consideration in accordance with Section 3.6(e) (and reflected on the Payment Schedule).  No interest shall be paid or shall accrue on any amounts payable upon assignment of any Company Warrants.

(b)           Lost Certificates.  If any certificate or other instrument representing Company Stock has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate to be lost, stolen or destroyed and subject to such other reasonable conditions as may be imposed by the Exchange Agent, and, if required by the Exchange Agent, the posting by such Person of a bond in such reasonable amount as the Exchange Agent may reasonably direct as indemnity against any claim that may be made against it with respect to such certificate or instrument, the Exchange Agent shall pay and deliver in respect of such lost, stolen or destroyed certificate or other instrument the applicable portion of the Adjusted Net Merger Consideration without interest.

(c)           Withholding Rights.  To the extent required by the Code or other applicable Tax Law, (i) Buyer may deduct and withhold from amounts otherwise payable to Company Holders under this Agreement and (ii) the Company or the Surviving Corporation, as applicable, shall deduct and withhold from amounts otherwise payable to recipients of Company Employee Payments, such amounts (if any) that the Company, Buyer or any Affiliate of Buyer (including the Surviving Corporation) may be required to deduct and withhold.  Prior to withholding by Buyer or any Affiliate of Buyer (including the Surviving Corporation), Buyer shall inform and use commercially reasonable efforts to consult with the Holder Representative to ensure withholding is required by the Code or other applicable Tax Law.  To the extent amounts are so withheld by the Company, Buyer or any Affiliate of Buyer (including the Surviving Corporation), such withheld amounts shall be treated for purposes of this Agreement as having been paid to the Company Holders or the recipients of Company Employee Payments, as applicable.

(d)           Unclaimed Funds.  Any portion of the Adjusted Net Merger Consideration that remains unclaimed by Company Holders 12 months after the Closing Date shall be delivered to the Surviving Corporation, and thereafter any Company Holders who have not theretofore complied with this Article 3 shall thereafter look only to Buyer and the Surviving Corporation for payment of their claim for Adjusted Net Merger Consideration as unsecured creditors.  None of Buyer, the Surviving Corporation or the Exchange Agent shall be liable to any Person in respect of any Adjusted Net Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

3.6.          Effect of the Merger on Securities of Merger Sub and the Company.

 

(a)           Merger Sub.  At the Effective Time, each share of stock of Merger Sub that is outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holders thereof, be converted into and become one share of Class A Common of the Surviving Corporation.

(b)           Preferred Stock.  At the Effective Time, each share of Preferred Stock that is outstanding immediately prior to the Effective Time (other than Dissenting Shares) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive:

(i)            the Preferred Share Liquidation Preference applicable to such series of Preferred Stock;

 

(ii)           the product of the Per Share Closing Consideration multiplied by the applicable Preferred Conversion Ratio, which amount (A) in the case of Legacy Holders, shall be satisfied out of (I) the Legacy Holder Representative Fund Amount deposited with the Legacy Holder Representative pursuant to Section 3.3(a)(iii), in accordance with Section 3.9, (II) funds deposited with the Legacy Escrow Agent pursuant to Section 3.3(a)(v), in accordance with the terms of the Legacy Escrow Agreement, and (III) funds deposited with the Exchange Agent pursuant to Section 3.3(a)(vi), in accordance with the terms of the Exchange Agent Agreement, in each case in the proportions set forth on the Payment Schedule, and (B) in the case of the Sellers, shall be satisfied out of (I) funds deposited with the Exchange Agent pursuant to Section 3.3(a)(vi), in accordance with the terms of the Exchange Agent Agreement, (II) the Sellers Notes delivered to the Exchange Agent pursuant to Section 3.3(a)(vii), and (III) the trust units of Crius Stock delivered to the Exchange Agent pursuant to Section 3.3(a)(viii), in each case in the proportions set forth on the Payment Schedule;

(iii)          the product of (1) the amount released from the Holder Representative Fund Amount and payable to the Company Holders (if any) divided by the Aggregate Fully-Diluted Capital Stock, multiplied by (2) the applicable Preferred Conversion Ratio.

(c)           Common Stock.  At the Effective Time, each share of Common Stock that is outstanding immediately prior to the Effective Time (other than Dissenting Shares) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive:

(i)            the Per Share Closing Consideration, which amount (A) in the case of Legacy Holders, shall be satisfied out of (I) the Legacy Holder Representative Fund Amount deposited with the Legacy Holder Representative pursuant to Section 3.3(a)(iii), in accordance with Section 3.9, (II) funds deposited with the Legacy Escrow Agent pursuant to Section 3.3(a)(v), in accordance with the terms of the Legacy Escrow Agreement, and (III) funds deposited with the Exchange Agent pursuant to Section 3.3(a)(vi), in accordance with the terms of the Exchange Agent Agreement, in each case in the proportions set forth on the Payment Schedule, and (B) in the case of the Sellers, shall be satisfied out of (I) funds deposited with the Exchange Agent pursuant to Section 3.3(a)(vi), in accordance with the terms of the Exchange Agent Agreement, (II) the Sellers Notes delivered to the Exchange Agent pursuant to Section 3.3(a)(vii), and (III) the trust units of Crius Stock delivered to the Exchange Agent pursuant to Section 3.3(a)(viii), in each case in the proportions set forth on the Payment Schedule; and

(ii)           the amount released from the Holder Representative Fund Amount and payable to the Company Holders (if any) divided by the Aggregate Fully-Diluted Capital Stock.

(d)           Company SARs.  At the Effective Time, each Company SAR that is outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive:

(i)            the Per Share Closing Consideration minus the grant price specified in the award agreement granting the Company SAR Grantee the Company SAR; and

 

(ii)           the amount released from the Holder Representative Fund Amount and payable to the Company Holders (if any) divided by the Aggregate Fully-Diluted Capital Stock.

(e)           Company Warrants.  At the Effective Time, each Company Warrant that is outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive:

(i)            the Per Share Closing Consideration minus the exercise price for such Company Warrant; and

(ii)           the amount released from the Holder Representative Fund Amount and payable to the Company Holders (if any) divided by the Aggregate Fully-Diluted Capital Stock.

(f)            Dissenting Shares.  Notwithstanding anything in this Agreement to the contrary, shares of Company Stock that are issued and outstanding immediately prior to the Effective Time and that are held by a Company Stockholder who is entitled to demand and properly demands payment for such Company Stockholder’s shares pursuant to, and who has complied in all material respects with Sections 262 of the DGCL, including without limitation, making a written demand on the Company for appraisal within twenty (20) days after the mailing of the Proxy Statement in accordance with Section 262(d)(2) of the DGCL (“Dissenting Shares”) shall not be converted into or be exchangeable for the right to receive the Adjusted Net Merger Consideration, but instead shall be only entitled to such rights as are provided by the DGCL with respect to such Dissenting Shares, unless and until such Company Stockholder shall have failed to perfect or shall have effectively withdrawn, waived or lost such Company Stockholder’s right under the DGCL.  If any such Company Stockholder shall have failed to perfect or shall have effectively withdrawn or lost such right, each Dissenting Share held by such Company Stockholder shall be treated, at the Company’s sole discretion, as a share of Company Stock that had been converted as of the Effective Time into the right to receive, and become exchangeable for, the applicable portion of the Adjusted Net Merger Consideration in accordance with Sections 3.6.(b) and (c).  Any payments made in respect of Dissenting Shares shall be made by the Surviving Corporation.  The Company shall give prompt notice to Buyer of any demands received by the Company for appraisal of shares of the Company Stock and of attempted withdrawals of such notice and any other instruments provided pursuant to applicable Law, and Buyer shall have the right to participate in and direct all negotiations and proceedings with respect to such demands.  The Company shall not, except with the prior written consent of Buyer make any payment with respect to, or settle or offer to settle, any such demands or approve any withdrawal of any such demands.

3.7.          Tax Treatment.  Buyer and the Company Holders agree and intend that, to the extent permitted by applicable Law, (a) the Merger shall be treated as a taxable purchase by Buyer of the Company Stock, Company Warrants and Company SARs and (b) Sellers will report the recognition of gain on the disposition of Company Stock in the Merger under the installment sale method of reporting pursuant to Code Section 453.  All Parties shall report the transactions under this Agreement consistently with the intended Tax treatment for all Tax purposes unless otherwise required by applicable Law.

3.8.          Holder Representative Fund Amount.

 

(a)           Notwithstanding anything to the contrary contained in this Article 3, the Holder Representative Fund Amount shall be funded at Closing in accordance with Section 3.3(a) from the portion of the Cash Consideration otherwise payable to the Company Holders hereunder. Accordingly, the portion of the Cash Consideration payable at Closing to the Company Holders shall be reduced by their proportionate share of the Holder Representative Fund Amount (as set forth in the calculation of the Adjusted Net Merger Consideration). Any amount released from the Holder Representative Fund Amount and payable to the Company Holders shall be allocated among the Company Holders in proportion to the shares of the Aggregate Fully-Diluted Capital Stock held by them.

(b)           The Holder Representative Fund Amount shall be held by the Holder Representative as agent and for the benefit of the Company Holders in a segregated client account. As soon as practicable following the final resolution of all claims for indemnification and the expiration of all applicable periods in which claims for indemnification may be brought, the Holder Representative shall distribute the remainder of the Holder Representative Fund Amount (if any) to the Company Holders in accordance with their Fully-Diluted Percentages. For Tax purposes, the Holder Representative Fund Amount shall be treated as having been received and voluntarily set aside by the Company Holders at the time of Closing.

3.9.         Legacy Holder Representative Fund Amount and Legacy Escrow Amount.

 

(a)           Notwithstanding anything to the contrary contained in this Article 3, each of the Legacy Holder Representative Fund Amount and the Legacy Escrow Amount shall be funded at Closing in accordance with Section 3.3(a) from the portion of the Cash Consideration otherwise payable to the Legacy Holders hereunder.  Accordingly, the portion of the Cash Consideration payable at Closing to the Legacy Holders shall be reduced by their proportionate share of (i) the Legacy Holder Representative Fund Amount and (ii) the Legacy Escrow Amount (as set forth in the Payment Schedule).  Any amount released from either the Legacy Holder Representative Fund Amount or the Legacy Escrow Account and payable to the Legacy Holders shall be allocated among the Legacy Holders in proportion to the shares of Aggregate Fully-Diluted Capital Stock held by them.

(b)           The Legacy Holder Representative Fund Amount shall be held by the Legacy Holder Representative as agent and for the benefit of the Legacy Holders in a segregated client account. As soon as practicable following the expiration of all applicable periods in which claims for indemnification against the Legacy Holders may be brought (or earlier if otherwise agreed by the Legacy Holders), the Legacy Holder Representative shall distribute the remainder of the Legacy Holder Representative Fund Amount (if any) to the Legacy Holders.  For Tax purposes, the Legacy Holder Representative Fund Amount shall be treated as having been received and voluntarily set aside by the Legacy Holders at the time of Closing.

(c)           Following the completion of any payments required to be made pursuant to Section 3.3(c) (Working Capital) and Section 3.3(d) (One Year Adjustment), to the extent that amounts incurred and paid by the Legacy Holders under such sections in the aggregate have not exceeded $450,000, then Buyer and the Legacy Holder Representative will issue joint written instructions to the Legacy Escrow Agent to release to the Legacy Holder Representative for the benefit of the Legacy Holders an amount equal to $450,000 minus such payments.

(d)           Following the five (5) year anniversary of the Closing, to the extent that there are remaining funds included in the Legacy Escrow Account and there are no active claims in respect of such account, Buyer and the Legacy Holder Representative will issue joint written instructions to the Legacy Escrow Agent to release any remaining funds in the Legacy Escrow Account to the Legacy Holder Representative for the benefit of the Legacy Holders.

 

3.10.        Dividends and Distributions.  No dividends or other distributions with respect to trust units of Crius Stock issued pursuant to the Merger shall be paid to the holder of any unsurrendered certificates of Company Stock until such certificates are properly surrendered in accordance with the provisions of Section 3.5.  Following such surrender, there shall be paid, without interest, to the record holder of the trust units of Crius Stock issued in exchange therefor (i) at the time of such surrender, all dividends and other distributions payable in respect of such trust units of Crius Stock with a record date equal to the date of the Effective Time and a payment date on or prior to the date of such surrender and not previously paid and (ii) at the appropriate payment date, the dividends or other distributions payable with respect to such trust units of Crius Stock with a record date after the Effective Time but with a payment date subsequent to such surrender.  For purposes of dividends or other distributions in respect of trust units of Crius Stock, all trust units of Crius Stock to be issued pursuant to the Merger shall be entitled to dividends pursuant to the immediately preceding sentence as if issued and outstanding as of the Effective Time.

 

3.11.        Fractional Unit.  No fraction of a trust unit in respect of the Equity Consideration will be issued by virtue of the Merger, and any fractional trust unit shall be rounded down to the nearest whole trust unit.

4.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as otherwise noted in this Article 4, the Company hereby represents and warrants to Buyer and Merger Sub as follows:

4.1.          Organization.  Each USG&E Company is a corporation duly formed and validly existing under the laws of its state of incorporation.  Each USG&E Company (a) has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and (b) is duly qualified or registered as a foreign corporation to transact business under the laws of each jurisdiction where the character of its activities or the location of the properties owned or leased by it requires such qualification or registration.  Schedule 4.1 contains a true and correct list of the jurisdictions in which each USG&E Company is qualified or registered to do business as a foreign corporation.

 

4.2.          Authorization.  The Company has full power and authority to execute and deliver this Agreement and any Ancillary Document to which it is a party and to perform its obligations under this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby, subject, in the case of consummation of the Merger, to the USG&E Holder Approval.  The Company represents and warrants that this Agreement has been, and the Ancillary Documents will be as of the Closing Date, duly executed and delivered by the Company and do or will, as the case may be, constitute valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

 

4.3.          Capital Stock.  As of the Agreement Date, the entire authorized capital stock of the Company consists of: 100,000,000 shares of Class A Common, 507,500 shares of Class B Common, 708,891 shares of Series A Preferred, 32,200.362 shares of Series B Preferred, 8,216.191 shares of Series C Preferred, 8,216.191 shares of Series D Preferred, 6,349.106 shares of Series E Preferred, 1,534.884 shares of Series F Preferred, 1,534.884 shares of Series G Preferred, one share of Series H Preferred, 32,200.362 shares of Series I Preferred, 8,216.191 shares of Series J Preferred, 1,534.884 shares of Series K Preferred, 10,000 shares of Series L Preferred and one (1) share of Series M Preferred. All of the issued and outstanding shares of each USG&E Company have been duly authorized and are validly issued, fully paid and non-assessable.  Except as provided on Schedule 4.3, there are no (i) outstanding options, warrants, rights, calls, commitments, conversion rights, rights of exchange, rights of first refusal, preemptive rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other plans or commitments, contingent or otherwise, relating to the capital stock of any USG&E Company, other than as contemplated by this Agreement; (ii) outstanding contracts or other agreements of any USG&E Company to purchase, redeem or otherwise acquire any outstanding shares of the capital stock of any USG&E Company, or securities or obligations of any kind convertible into any shares of the Company Stock; (iii) dividends that have accrued or been declared but are unpaid on the Company Stock; and (iv) outstanding or authorized stock appreciation, phantom stock, stock plans or similar rights with respect to the Company.  The number of Fully-Diluted Common Shares with respect to each Company Holder and the Fully-Diluted Percentage associated with such Company Holder, in each case, set forth on Exhibit D, are true, correct and complete.  The information and amounts set forth in clause (iv) of the definition of Payment Schedule, as delivered by the Company to Buyer prior to the Closing pursuant to Section 3.2 is, as of the Closing, true, correct and complete.

4.4.          Subsidiaries.  Except as set forth on Schedule 4.4, no USG&E Company currently owns, directly or indirectly, any capital stock or other equities, securities or interests in any other Person.  The Company is the true, lawful record and beneficial owner of all of the issued and outstanding capital stock of ESPI.  ESPI is the true, lawful record and beneficial owner of each of the ESPI Subsidiaries.  The Company is the true, lawful record and beneficial owner of its respective shares of issued and outstanding capital stock of the Drilling Companies.

 

4.5.          Absence of Restrictions and Conflicts.

 

(a)           Except as set forth on Schedule 4.5(a), the execution, delivery and performance by the Company of this Agreement and the Ancillary Documents to which the Company is a party, the consummation of the transactions contemplated by this Agreement and the Ancillary Documents, and the fulfillment by the Company of and compliance by the Company with the terms and conditions of this Agreement and the Ancillary Documents do not or will not (as the case may be), with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under (i) any term or provision of the Company Organizational Documents; (ii) any judgment, decree or order of any Governmental Authority to which a USG&E Company is a party or by which a USG&E Company or its Assets and Properties are bound; or (iii) any Law applicable to a USG&E Company, excluding from the foregoing clauses (i), (ii) and (iii), any violation, breach, default, acceleration or creation of a right which would not reasonably be expected to be material, individually or in the aggregate, to the USG&E Companies, taken as a whole.

(b)           Except as provided on Schedule 4.5(b), no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or third party is required with respect to any USG&E Company in connection with the execution, delivery or performance by the Company of this Agreement or the Ancillary Documents or the consummation of the transactions contemplated thereby, except where the failure to obtain such consent would not reasonably be expected to be material, individually or in the aggregate, to the USG&E Companies or the ability of the USG&E Companies to fulfill and comply with the terms and conditions of this Agreement and the Ancillary Documents.

4.6.         Title to Properties.  Each USG&E Company has valid title to, or valid leasehold or sublease interests or other comparable contract rights in or relating to, all of its material real properties and other tangible assets necessary for the conduct of its business in the Ordinary Course of Business and except for Permitted Liens.  With respect to all leases under which any USG&E Company leases any real property, there is not any existing default by the applicable USG&E Company or, to the Knowledge of the Company, the counterparties thereto or any event that, with notice or lapse of time or both, would become a default by the applicable USG&E Company or the counterparties thereto, other than defaults under such leases that would not reasonably be expected to be material, individually or in the aggregate, to the USG&E Companies, taken as a whole.  Schedule 4.6 contains a list of all (i) owned real property of any USG&E Company and (ii) leases for real property of any USG&E Company, in each case, including the name of the lessee, lessor, a description of the property, and lease payments, as applicable.

4.7.          Financial Statements.

 

(a)           The Company has provided to Buyer (i) the consolidated audited balance sheet of the USG&E Companies as of December 31, 2016, December 31, 2015 and December 31, 2014 and the related states of income and cash flows (or the equivalent) for the fiscal years then ended and (ii) the unaudited consolidated balance sheet of the USG&E Companies as of March 31, 2017, and the related statements of income and cash flows (or the equivalent) for the three month period then ended (clauses (i) and (ii) collectively, the “Financial Statements”).  The Financial Statements have been prepared in accordance with GAAP in all material respects throughout the periods covered thereby, subject in the case of the unaudited financial statements to the absence of footnote disclosures and changes resulting from normal year-end adjustments for recurring accruals and income Taxes (none of which footnote disclosures or changes would, alone or in the aggregate, be material to the Business, operations, Assets and Properties, liabilities, financial condition, operating results, value, cash flow or net worth of the USG&E Companies taken as a whole),  and present fairly in all material respects the financial condition of the USG&E Companies and their assets and Liabilities as of such dates and the results of operations of the USG&E Companies for such periods.  Except as set forth in the Financial Statements or on Schedule 4.7(a), there are no extraordinary or material non-recurring items of income or expense (other than items occurring in the Ordinary Course of Business) during the periods covered by the Financial Statements, and the balance sheets included in the Financial Statements do not reflect any write-up or revaluation increasing the book value of any assets, except as specifically disclosed in the notes thereto.

(b)           Immediately following the Closing, the Company will have no Indebtedness other than as specifically set forth in Schedule 3.3(a)(i), which Indebtedness shall remain with the Company through the Closing.

4.8.          Absence of Certain Changes.  Since December 31, 2016 and except as set forth in Schedule 4.8, there has not been (i) any Material Adverse Effect on the USG&E Companies, or (ii) any damage, destruction, loss or casualty to property or assets of the Company with a value in excess of One Hundred Thousand Dollars ($100,000.00).

 

4.9.          Legal Proceedings.

 

(a)           Except as set forth in Schedule 4.9, there are no suits, actions, claims, arbitration, proceedings or investigations pending or, to the Knowledge of the Company, threatened against, relating to or involving any USG&E Company, the Business, or the Assets and Properties of any USG&E Company before any Governmental Authority or other third party, which, if finally determined adversely, are reasonably likely to be material, individually or in the aggregate, to the USG&E Companies, taken as a whole.  No USG&E Company is subject to any judgment, decree, injunction, rule or order of any court or arbitration panel that is reasonably likely to be material, individually or in the aggregate, to the USG&E Companies, taken as a whole.  No USG&E Company is a debtor in a bankruptcy proceeding.  There is no involuntary bankruptcy petition pending against any USG&E Company.

 

(b)           Any suits, actions, claims, arbitration, proceedings or investigations active at any time during 2015 or 2016 between the Company, on the one hand, and the Pennsylvania Public Utility Commission or Merrill Corporation (or any Affiliate thereof), on the other hand, have been settled.

(c)           To the Knowledge of the Company, the office of the Attorney General of the State of New York has not offered, proposed or discussed any specific settlement amount to the Company or any of its Affiliates in respect of the subpoena from the Attorney General of the State of New York and requests of information to New York Gas & Electric and related tolling agreements and draft Assurance of Discontinuance.

4.10.        Compliance with Law and Permits.  As of the date of this Agreement, each USG&E Company is in possession of all Permits necessary for it to own, lease and operate its Business, Assets and Properties or to carry on its business as it is now being conducted consistent with past practice in compliance with applicable Laws, and all such Permits are in full force and effect, except where the failure to hold any such Permit, or the failure of such Permits to be in full force and effect, would not be reasonably expected to be material, individually or in the aggregate, to the USG&E Companies, taken as a whole.  Except as set forth on Schedule 4.10, no suspension or cancellation of any of the Permits is pending or, to the Knowledge of the Company, threatened, except where such suspension or termination would not be reasonably expected to be material, individually or in the aggregate, to the USG&E Companies, taken as a whole.  Except as set forth on Schedule 4.10, no USG&E Company is in violation of, and since December 31, 2013, no USG&E Company has violated any applicable Law, except for any violation or possible violation that has not and would be material, individually or in the aggregate, to the USG&E Companies, taken as a whole.  Except as set forth on Schedule 4.10, to the Knowledge of the Company, there is no pending or threatened investigation with respect to any actual or alleged violation of any applicable Law.  This Section 4.10 does not relate to matters with respect to Taxes; labor, employment and benefits Laws; Environmental Laws or energy regulatory and marketing compliance, which are exclusively the subject of Sections 4.12, 4.13 through 4.15, 4.18, and 4.19, respectively.

 

4.11.        Company Contracts.

 

(a)           Schedule 4.11(a) sets forth a true, correct and complete list of the following contracts to which any USG&E Company is a party (the “Company Contracts”):

(i)            all bonds, surety bonds, Capital Leases, letters of credit, debentures, notes, loans, credit or loan agreements or loan commitments, mortgages, indentures, guarantees or other contracts relating to the borrowing of money, hedging arrangements or otherwise evidencing Indebtedness of any USG&E Company;

(ii)           all leases relating to real property or other leases or licenses involving any Assets or Properties involving an annual commitment or payment of more than Seventy-Five Thousand Dollars ($75,000) individually by any USG&E Company;

(iii)          any contract or agreement requiring the payment by any USG&E Company of a sum in excess of One Hundred Fifty Thousand Dollars ($150,000) for capital expenditures or the acquisition or construction of fixed assets;

(iv)          any contract or agreement with any agent, broker, distributor or similar representative that (A) is not terminable without penalty on thirty (30) calendar days or less notice or which have a term of at least twelve (12) months or (B) requires payments by the USG&E Companies in an aggregate amount greater than One Hundred Thousand Dollars ($100,000);

 

(v)           all Customer Contracts or contracts with vendors or suppliers (other than utilities included in subsection (vi) below) that involve an amount in excess of Five Hundred Thousand Dollars ($500,000) (for Customer Contracts) and Two Hundred Fifty Thousand Dollars ($250,000) (for vendor contracts) per year;

(vi)          any contract with any Governmental Authority or with a public utility company or any other Person (A) for the sale or purchase of electric power, (B) for the sale of electric power or other energy-related product or service to any residential, commercial or industrial customer, (C) that is a master agreement for electric power supply, (D) that is a hedging or derivative instrument or agreement or (E) that is an agreement for the purchase or sale of natural gas, renewable energy certificates, environmental attributes, or any other energy-related product or service;

(vii)         any contract or agreement for employment of any Person with a USG&E Company or providing for retention bonuses, severance, termination or similar pay to any employee of any USG&E Company;

(viii)        any contract or agreement that materially limits or restricts the ability of any USG&E Company to compete or otherwise conduct its business, offer or sell certain products, provide services on an exclusive basis or granting a most favored nation status or similar rights;

(ix)          any contract or agreement between any USG&E Company and its Affiliate;

(x)           any contract pursuant to which any USG&E Company (i) obtains any right to use, or covenant not to be sued under, any Intellectual Property (other than any license for commercial off-the shelf computer software that is generally available on nondiscriminatory pricing terms) or (ii) grants any right to use, or covenant not to be sued under, any Intellectual Property;

(xi)          all guarantees, letters of credit, bonds, cash deposits, cash margining agreements and similar instruments given by (x) any USG&E Company or (y) a third party for the benefit of any USG&E Company and in the case of this clause (y), a list of the total credit support obligations therein;

(xii)         any partnership, joint venture or other similar arrangement involving a sharing of profits, losses, costs, or Liabilities;

(xiii)        any contract relating to the acquisition or disposition of any corporation, partnership, limited liability company or other business organization or division thereof or collection of assets constituting all or substantially all of a business or business unit (whether by merger, sale of stock, sale of assets or otherwise);

(xiv)        any contract relating to the voting of shares or other equity interests of any of the USG&E Companies or the election of managers or directors of any of the USG&E Companies;

 

(xv)         any settlement, conciliation or similar contract requiring payments in excess of $100,000 with respect to the resolution of claims with any Person and pursuant to which outstanding obligations must be satisfied by any of the USG&E Companies after the Agreement Date; and

(xvi)        any contract or agreement that is material to the business of the USG&E Companies, taken as a whole, and is not otherwise disclosed pursuant to the foregoing clauses (i) through (xv).

(b)           True, correct and complete copies of all Company Contracts have been made available to Buyer; provided, however, that in the case of forms of Customer Contracts as provided to Buyer, the terms and conditions included therein reflect, in all material respects, the terms and conditions in executed Customer Contracts which are based on such forms.  The Company Contracts are legal, valid, binding and enforceable in accordance with their respective terms with respect to the rights of the applicable USG&E Company thereunder.  There are no existing material defaults, or breaches by the applicable USG&E Company, under any Company Contract and, to the Knowledge of Company, there are no such material defaults with respect to any third party to any Company Contract.

4.12.        Tax Returns; Taxes.  Except as set forth on Schedule 4.12:

 

(a)           All Tax Returns required to be filed by or with respect to the USG&E Companies have been properly and timely prepared and filed, and all such Tax Returns are true, correct and complete in all material respects.  There are no liens on any of the assets of the Company for Taxes that are not Permitted Liens.  No claim has ever been made in writing by any Governmental Authority that any USG&E Company is or may be subject to Tax in a jurisdiction where such USG&E Company does not file Tax Returns.

(b)           Each USG&E Company has timely paid all Taxes (whether or not shown to be due on the Tax Returns) required to be paid by it (unless such USG&E Company is contesting such Taxes in good faith through proper proceedings).

(c)           There are no outstanding agreements extending or waiving the statutory period of limitations applicable to any claim for, or the period for the collection, assessment or reassessment of, Taxes due from any USG&E Company for any taxable period and, to the Knowledge of the Company, no request for any such waiver or extension is currently pending.

(d)           No audit or other proceeding by any Governmental Entity is ongoing with respect to any Taxes due from any USG&E Company and no USG&E Company has received any written notice threatening such an audit or other proceeding.

(e)           No USG&E Company is a party to any Tax sharing or similar Tax agreement (other than an agreement exclusively between or among the USG&E Companies or a commercial agreement the primary subject matter of which is not Taxes) pursuant to which it will have any obligation to make any payments on account of indemnification for Taxes of another Person after the Closing Date.  No USG&E Company has any Liability as a result of being or having been before the Closing Date a member of an affiliated, consolidated, combined or unitary group, other than a group of which the Company is the parent, or as a transferee or successor.

 

(f)            No USG&E Company has been, at any time, a “United States real property holding corporation” (as defined in Section 897(c)(2) of the Code).

(g)           No USG&E Company has been either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) with respect to a transaction that was described in, or intended to qualify as a tax-free transaction pursuant to, Section 355 of the Code in the preceding five (5) years.

(h)           No USG&E Company will be required to include in income, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) adjustment under either Code §§481(a) or 482 (or any corresponding or similar provision of federal, state, local or foreign Tax Law) by reason of a change in method of accounting or otherwise for a taxable period ending on or prior to the Closing Date; (ii) “closing agreement” described in Code §7121 (or any corresponding or similar provision of federal, state, local or foreign Tax Law); (iii) installment sale or open transaction disposition made on or prior to the Closing Date; (iv) prepaid amount received on or prior to the Closing Date; or (v) election under Code §108(i) (or any corresponding or similar provision of federal, state, local or foreign Tax Law).  Neither the Company nor its Subsidiaries is or has been a party to any "reportable transaction" as defined in Code §6707A and Regulation §1.6011-4.

(i)             No USG&E Company has applied for a Tax ruling, request for ruling or closing agreement relating to such USG&E Company that could affect such Company’s Liability for any Tax for any period prior to, on or after the Closing Date.

All matters listed on Schedule 4.12 shall constitute Indemnified Taxes subject to indemnification, notwithstanding that they are included in the Disclosure Schedules.

4.13.        Officers and Employees.  Schedule 4.13 contains a true and complete list as of the Agreement Date of (a) all of the officers of the USG&E Companies, specifying their position, date of hire, work location, and current annual rate of compensation and (b) all of the employees (whether full-time, part-time or otherwise) and independent contractors of the USG&E Companies, specifying their position, date of hire, work location and current annual rate of compensation.  Except as set forth on Schedule 4.13 and except for the Employee Plans and Benefit Arrangements, no USG&E Company is a party to or bound by any employment contracts, consulting agreements, termination or severance agreements, change of control agreements or any other agreements respecting the terms and conditions of employment or of an independent contractor relationship in respect to any officer, employee or former employee, consultant or independent contractor.

 

4.14.        Employee Plans and Benefit Arrangements.  Schedule 4.14 sets forth a list of each Employee Plan and each Benefit Arrangement, copies or descriptions of which have previously been made available to Buyer.  Additionally, the Company has made available to Buyer (i) the most three recent Annual Reports Form 5500 series for each applicable Employee Plan, and (ii) the most recent IRS determination or opinion letter for each applicable Employee Plan.  Neither the Company nor any ERISA Affiliate, either currently or at any time during the six (6) year period ending on the date hereof, maintains, sponsors, contributes to, has any obligation to contribute to, or has any Liability or potential Liability under or with respect to (i) a “multiemployer plan” (as defined in Section 3(37) of ERISA) or (ii) any plan subject to Title IV of ERISA. Neither any USG&E Company nor any ERISA Affiliate has incurred or reasonably expects to incur any Liability under Title IV of ERISA.  To the Knowledge of the Company, no nonexempt “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any Employee Plan that could subject any USG&E Company to any tax or penalty under Section 4975 of the Code or Section 502 of ERISA that has a Material Adverse Effect on the USG&E Companies.  Each Employee Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination or opinion letter from the Internal Revenue Service as to qualified status and, to the Knowledge of the Company, no event has occurred that is likely to adversely affect such qualified status.  Each Employee Plan and each Benefit Arrangement has been maintained in substantial compliance with its terms and all applicable law, except any such violation that does not have a Material Adverse Effect on the USG&E Companies.  No Employee Plan is a “multiple employer welfare plan” or “multiple employer welfare arrangement” within the meaning of Section 514(b)(6) of ERISA.  Except as required under Section 4980B of the Code or similar state law, the USG&E Companies do not have any obligation to provide health benefits to any current or former employee post-retirement. Since January 1, 2005, each Employee Plan and each Benefit Arrangement that is a nonqualified deferred compensation plan or arrangement has been maintained in good faith operational compliance and, for all periods after December 31, 2008, in documentary compliance with Section 409A of the Code.  Except for the Company Employee Payments (exclusive of any dollar limitation set forth in the definition thereof) and as otherwise set forth on Schedule 4.14, the  consummation of transaction contemplated by this Agreement alone, or in combination with any additional or subsequent events, will not give rise to any Liability under any Employee Plan or Benefit Arrangement, including Liability for severance pay, unemployment compensation, termination pay or withdrawal Liability, or accelerate the time of payment or vesting or increase the amount of compensation or benefits due to any employee, officer, director, stockholder or other service provider of the Company (whether current, former or retired) or their beneficiaries. No amount that could be received (whether in cash or property or the vesting of property) as a result of the consummation of the transactions contemplated by this Agreement by any employee, officer, director, stockholder or other service provider of the Company under any Employee Plan or Benefit Arrangement or otherwise would not be deductible by reason of Section 280G of the Code or would be subject to an excise tax under Section 4999 of the Code.

4.15.        Labor Relations and Employees.  There have never been collective bargaining or other labor union contracts applicable to any employees of the USG&E Companies.  There is no labor dispute, strike, work stoppage or lockout or, to the Knowledge of the Company, threat thereof by or with respect to any employee of the USG&E Companies.  To the Knowledge of the Company, there are no grievances or complaints outstanding or threatened against any USG&E Company, except in each case such as would not reasonably be expected to have a Material Adverse Effect on the USG&E Companies. Since January 1, 2013, there have not been any “plant closings” or “mass layoffs” (as those terms are defined in the Worker Adjustment and Retraining Notification Act, or any local or state Law, hereinafter the “WARN Act”), by any USG&E Company that would create any obligations under the WARN Act in relation to any plant closings or mass layoffs of employees. Each USG&E Company has been and is in compliance in all material respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment, wages and hours and workplace health and safety at its facilities and work sites and in other work areas, and no USG&E Company is liable for any arrears of wages or penalties for failure to comply with any of the foregoing, in each case, that would reasonably be expected to cause any USG&E Company to incur any material Liability.  No USG&E Company has engaged in any unfair labor practice or discriminated on the basis of race, color, religion, sex, sexual orientation, national origin, age, disability or handicap in its employment conditions or practices that would reasonably be expected to cause any USG&E Company to incur any material Liability.  Except as described on Schedule 4.15, there are no racial, color, religious, sex, sexual orientation, national origin, age, disability or handicap discrimination charges or complaints pending or, to the Knowledge of the Company, threatened against any USG&E Company before any Governmental Entity (nor, to the Knowledge of the Company, does any valid basis therefor exist), in each case, that would reasonably be expected to cause any USG&E Company to incur any material Liability.  Each USG&E Company has complied, and remains in compliance, in all material respects with all applicable federal and state Laws mandating the provision of programs offering hazard recognition training to its employees or employees of its customers.  No USG&E Company is in violation of any Laws concerning retention or classification of independent contractors that would reasonably be expected to cause any USG&E Company to incur any material Liability.

4.16.        Intellectual Property.

 

(a)           Schedule 4.16(a) identifies: (a) each patent or registration that has been issued to any USG&E Company with respect to any of the Intellectual Property; (b) each pending patent application or application for registration which the Company has made with respect to any of the Intellectual Property; and (c) each material license or similar agreement that any USG&E Company has granted to any third party with respect to any of the Intellectual Property; and (d) each registered trademark and service mark and trade name owned by any USG&E Company.  Except as set forth on Schedule 4.16(a), with respect to each item of Intellectual Property required to be identified on Schedule 4.16(a): (i) the item is not subject to any outstanding injunction, judgment, order, decree or ruling prohibiting the USG&E Companies’ use thereof; (ii) no action, suit or proceeding is pending that challenges the legality, validity, enforceability, use or ownership of the item; and (iii) the USG&E Companies are the owner of all right, title and interest in such Intellectual Property free and clear of any Liens.

(b)           Schedule 4.16(b) identifies each item of Intellectual Property that any third party owns and that the Company uses pursuant to a written license or agreement.  Copies of all such material licenses and agreements have been made available to Buyer.  With respect to each such item of Intellectual Property required to be identified on Schedule 4.16(b): (x) the license or agreement covering the item is legal, valid, binding, enforceable by the applicable USG&E Company, and in full force and effect in all material respects; and (y) the applicable USG&E Company is not in default or material breach of the license or agreement and has not received any notice that any USG&E Company is in default or material breach; and (z) no USG&E Company has granted any sublicense or similar right with respect to the license or agreement.  To the Knowledge of the Company, the Intellectual Property owned by the USG&E Companies and the business methods and operations of the USG&E Companies as in effect prior to Closing do not violate, breach or infringe the patent, trademark, copyright or other intellectual property rights of any other Person.

(c)           Except as set forth on Schedule 4.16(c), the USG&E Companies own, free of Liens (other than Permitted Liens), or have a valid and binding license or right to use, all Intellectual Property material to the conduct of the Business as currently conducted.

(d)           To the Knowledge of the Company: (i) none of the USG&E Companies have experienced any incident in which personally identifiable information of the USG&E Companies’ customers was stolen or improperly accessed and there are no facts indicating the occurrence of such an incident, including any breach of security suffered by the USG&E Companies with respect to such information or any written notices or complaints received by the USG&E Companies from any Person regarding improper use or disclosure of personally identifiable information, except as individually or in the aggregate would not reasonably be expected to be material to the Business of the USG&E Companies; and (ii) the collection, use, storage, processing, import, export and disclosure of personally identifiable information or other protected information relating to individuals by the USG&E Companies have complied with, and are currently in compliance with, their respective privacy policies and all Laws relating to data collection, use, privacy or protection, except as individually or in the aggregate would not reasonably be expected to be material to the Business of the USG&E Companies.

4.17.        Customer Relations.  To the Knowledge of the Company, no USG&E Company has received any notice to the effect that any (i) customer whose business is material to such USG&E Company, or (ii) group of customers, in either case, intends to terminate its business relations with such USG&E Company: (a) as a result of the transactions contemplated by this Agreement, or (b) otherwise, other than any terminations that would not have a Material Adverse Effect on such USG&E Company or USG&E Companies taken as a whole.  To the Knowledge of the Company, no events or circumstances have occurred which would be reasonably likely to result in (A) any material customer or (B) material group of customers, terminating its or their business relations with a USG&E Company.

4.18.        Environmental Liability.  As of the date of this Agreement, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, or as set forth on Schedule 4.18, (a) each USG&E Company is in material compliance with all Environmental Permits and Environmental Laws for the operation of such USG&E Company as presently conducted; (b) during the past three (3) years, each USG&E Company has held all Environmental Permits and materially complied with the terms of all Environmental Laws applicable to the operations of such USG&E Company as conducted at such time; (c) no USG&E Company has received any written notice that it is or may be potentially responsible with respect to any investigation or cleanup of any threatened or actual release of Hazardous Materials, nor is any USG&E Company participating as a potentially responsible party in connection with any such investigation or cleanup; (d) to the Knowledge of the Company, there have been no Hazardous Materials generated by any USG&E Company that are the subject of a response action pursuant to Environmental Law; (e) to the Knowledge of the Company, no USG&E Company has caused a release of Hazardous Materials at properties that it has owned or leased, for which response actions are required pursuant to Environmental Law; and (f) the Company has made available to Buyer all environmental assessment reports currently in the possession of the USG&E Companies that address properties the USG&E Companies have owned or leased.

 

4.19.        Regulatory Matters.  Except as set forth on Schedule 4.9 or Schedule 4.19:

 

(a)           No USG&E Company is engaged, or has been engaged, in any activity, including wholesale sales of electricity or natural gas, that could subject the USG&E Company to: (a) regulation as a “gas corporation”, an “electric corporation”, an “electric utility”, an “electric utility company”, a “gas utility”, a “gas utility company”, a “public utility”, a “public utility company” or similar entity under the laws administered by or the regulations of any state, (b) regulation as a “public utility” under the FPA, except to the extent that the USG&E Company, as of the date of this Agreement, is a “public utility” under the FPA by reason of any FERC consent or approval that permits the USG&E Company, as applicable, to charge market-based rates for its wholesale sale of energy, capacity or ancillary services, (c) regulation as a “natural gas company” under the Natural Gas Act, as amended, and the regulations and orders thereunder (all collectively, the “NGA”), (d) regulation as a “public utility company”, “gas utility company”, an “electric utility company” or a “holding company,” as those terms are defined under the Public Utility Holding Company Act of 2005, and the regulations and orders thereunder (all collectively, “PUHCA”), (e) an actual violation of any rule, regulation, order, tariff, or requirement under any of the FPA, the NGA or the PUHCA, or (f) regulation under any public utilities code or any other applicable law regarding its authority to incur indebtedness or grant liens on, or otherwise transfer, sell, lease, license or otherwise dispose of, its property.

(b)           Each of the Company, ESPI, MAG&E and CTG&E is, and is duly authorized to be, an “energy service company” or other retail electric or natural gas supplier (an “ESCO”) under the law of the jurisdiction(s) in which it conducts, or is authorized to conduct, business, and holds all necessary approvals and authorizations to sell electricity and/or natural gas at retail for delivery in such jurisdictions and to be and act as an ESCO consistent with all applicable law.  Schedule 4.19(b) sets forth (i) all retail electric and natural gas supplier licenses and (ii) each FERC market-based tariff for each such USG&E Company. Such USG&E Companies are in material compliance with such licenses and tariffs and the Laws related thereto and no such USG&E Company is subject to any material refund liability with respect to such licenses and tariffs.

 

(c)           Each of the Company, ESPI, MAG&E and CTG&E is in material compliance with the governmental regulations and orders applicable to it as an ESCO in all jurisdictions in which it conducts, or is authorized to conduct, business as an ESCO (all collectively, the “ESCO Requirements”).

(d)           The status and standing of each of the Company, ESPI, MAG&E and CTG&E as an ESCO consistent with the ESCO Requirements is not subject to review, challenge, termination, revocation, decertification, discipline, or penalty in any proceeding, whether pending, threatened, or anticipated (and whether or not such USG&E Company, as applicable, has received formal or written or other notice thereof).

(e)           No USG&E Company has been advised or received notice of any kind (whether formal or informal or written or verbal) or has any Knowledge of any proceeding, investigation, or inquiry, whether pending, threatened, or asserted, in which it is or is expected to be claimed that the Company’s, ESPI’s, MAG&E’s or CTG&E’s authorization to be and to act as an ESCO is subject to challenge, non-renewal, termination, or limitation not otherwise generally applicable to an ESCO or otherwise relates to the sales or marketing practices of the Business.

(f)            Each USG&E Company is not, and has not been advised or received notice of any kind (whether formal or written or not) of any proceeding, whether pending, threatened, or asserted, in which it is, or is expected to be claimed that the USG&E Company is, subject to: (a) regulation as a “gas corporation”, an “electric corporation”, an “electric utility”, an “electric utility company”, a “gas utility”, a “gas utility company”, a “public utility”, a “public utility company” or similar entity under the laws administered by or the regulations of any state, (b) regulation as a “public utility” under the FPA, except to the extent that the USG&E Company, as of the date of this Agreement, is a “public utility” under the FPA by reason of FERC consent or approval that permits the USG&E Company to charge market-based rates for its wholesale sale of energy, capacity or ancillary services, (c) regulation as a “natural gas company” under the NGA, (d) regulation as a “public utility company”, “gas utility company”, an “electric utility company” or a “holding company,” as those terms are defined under PUHCA, (e) an actual violation of any rule, regulation, order, tariff, or requirement under any of the FPA, the NGA or the PUHCA, or (f) regulation under any public utilities code or any other applicable law regarding its authority to incur Indebtedness or grant liens on, or otherwise transfer, sell, lease, license or otherwise dispose of, its property.

4.20.        Transactions with Affiliates.  Except as set forth in Schedule 4.20, no officer or director of any USG&E Company, or any Affiliate of an officer or director of any USG&E Company (other than a publicly held corporation whose stock is traded on a national securities exchange or quotation market in the over-the-counter market and less than five percent (5%) of the stock of which is beneficially owned by all such Persons in the aggregate) has any interest in: (a) any contract, arrangement or understanding with, or relating to, any USG&E Company or its Assets and Properties; (b) any loan, arrangement, understanding, agreement or contract for or relating to any USG&E Company or its Assets and Properties; or (c) any property (real, personal or mixed), tangible or intangible, used or currently intended to be used by any USG&E Company.  Schedule 4.20 sets forth a complete list of all contracts between any USG&E Company and another USG&E Company or any other Affiliate.

4.21.        Company Employee Payments.  Schedule 4.21 contains a detailed listing of all Company Employee Payments (exclusive of any severance and other payments described in clause (iii) of the definition thereof, and subject to additional payments to be determined following the Effective Time and within ninety (90) days following the Closing), including, with respect to each Company Employee Payment, the payee, the amount of such bonus or payment (if a fixed amount), and the name of the plan under which such Company Employee Payment is being granted or paid.  Except for the Company Employee Payments set forth on Schedule 4.21 or any severance or other payments required to be made as a result of Buyer’s determination as to whose employment should or should not be continued as provided in Section 7.14(a) hereof, there are no special bonuses, severance or other similar compensation (discretionary or otherwise) payable to any employee of the Company in connection with or arising out of the transactions contemplated hereby.

 

4.22.        Brokers, Finders and Investment Bankers.  Except as provided on Schedule 4.22, none of the USG&E Companies have employed any broker, finder or investment banker or incurred any Liability for any investment banking fees, financial advisory fees, brokerage fees or finders’ fees in connection with the transactions contemplated by this Agreement.

 

4.23.        Insurance.  Each insurance policy covering any of the USG&E Companies or any of the Assets and Properties is set forth on Schedule 4.23 (the “Insurance Policies”) and is in full force and effect.  None of the USG&E Companies have received written notice from any insurer or agent of any intent to cancel, cancellation or termination of any such Insurance Policy.  Except as set forth on Schedule 4.23, there is no claim by any of the USG&E Companies pending under any Insurance Policy.  None of the Insurance Policies or the coverages provided thereunder has been denied or disputed by the underwriters of such policies or in respect of which such underwriters have reserved their rights in writing.

 

4.24.        Customers.

 

(a)           Except as provided on Schedule 4.24(a), none of the USG&E Companies have in effect any rebate, concession or similar promotion, program, plan or policy in which any Customer participated that would require the payment of an award in the future of any benefit to such Customer in respect of service in a prior period.

(b)           Except as set forth on Schedule 4.24(b), no material commissions or payments reasonably likely to exceed $25,000 with respect to all Customer Contracts in the aggregate are owed to any Person except those arising in the Ordinary Course of Business.

(c)           Except as set forth on Schedule 4.24(c), each of the USG&E Companies has performed all Customer Contracts in material compliance with their terms and each such Contract is in compliance with all applicable Laws.

(d)           Except for any deviations that would reasonably be expected to result in a change of Liabilities or valuation of less than $5,000 or $500,000 in the aggregate, the Run-out Schedule, as of the date hereof and as of the Run-out Update Date, is true, correct and complete in all material respects.

(e)           The Mace Book, delivered concurrently with this Agreement, is true, correct and complete in all material respects as of April 30, 2017, except that such schedule redacts all individual names, account numbers, service numbers and service addresses for each Customer.

(f)            The Mace Book provided to Buyer pursuant to Section 7.18 is true, correct and complete in all material respects as of the Closing Date.

 

4.25.        APP. As of the date hereof and as of the Closing Date, American Power Partners, LLC, a Delaware limited liability company (“APP”), has no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise).  As of the Closing Date, APP, and the business and assets of such entity, have been discontinued in all respects.

 

4.26.        Agents and Brokers. Schedule 4.26 includes a list of the name of each agent, broker, distributor or similar representative of the Company and amounts paid to such Person within the 12 months prior to the Agreement Date.

 

4.27.        USG&E Solar and TXG&E.  USG&E Solar and TXG&E have no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise).

 

Except for the representations and warranties set forth in Article 5, or any representations or warranties set forth in any Ancillary Document, the Company hereby acknowledges and agrees that none of Buyer, CSF or Crius Energy Trust, their respective Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person:

(a)           has made or is making any other express or implied representation or warranty with respect to any such entity or any of its subsidiaries or their respective business or operations, including with respect to any information provided or made available to the Company or any of its Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person, including any information, documents, estimates, projections, forecasts or other forward-looking information, business plans or other material provided or made available to the Company or any of its Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person, in “data rooms,” confidential information memoranda or management presentations in anticipation or contemplation of the transactions contemplated by this Agreement; or

(b)           will, other than for fraud or willful misconduct, have or be subject to any Liability or indemnification obligation or other obligation of any kind or nature to the Company or any of its Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person, resulting from the delivery, dissemination or any other distribution to, or the use by, the Company or any of its Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person, of any information provided or made available to any of them by Buyer, CSF or Crius Energy Trust or any of their respective Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person, including any information, documents, estimates, projections, forecasts or other forward-looking information, business plans or other material provided or made available in “data rooms,” confidential information memoranda, management presentations or otherwise in anticipation or contemplation of any transaction contemplated by this Agreement.

 

5.1.         Organization of Crius Energy Trust, Buyer and Merger Sub.  Crius Energy Trust is an unincorporated open-ended limited purpose trust duly established, settled, organized and validly existing and in good standing under the laws of the Province of Ontario and has all requisite power and authority to own its properties and assets, and to carry on its business as now being conducted. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction set forth in the introductory paragraph of this Agreement and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted.  Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction set forth in the introductory paragraph of this Agreement and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted.

5.2.          Authorization.  Each of the Administrator, Crius Energy Trust, Buyer and Merger Sub has full corporate power and authority to execute and deliver this Agreement and any Ancillary Documents to which it is a party, to perform its obligations under this Agreement and any Ancillary Documents to which it is a party and to consummate the transactions contemplated by this Agreement and any Ancillary Documents to which it is a party.  The execution and delivery by Crius Energy Trust, Buyer and Merger Sub of this Agreement and Ancillary Documents to which it is a party, the performance by Crius Energy Trust, Buyer and Merger Sub of their obligations under this Agreement and the Ancillary Documents to which it is a party, and the consummation of the transactions provided for in this Agreement and the Ancillary Documents to which it is a party have been duly and validly authorized by all necessary organizational action on the part of Crius Energy Trust, Buyer and Merger Sub respectively.  This Agreement has been and, as of the Closing Date, the Ancillary Documents to which each of Crius Energy Trust , Buyer and Merger Sub are a party will be, duly executed and delivered by Crius Energy Trust, Buyer and Merger Sub and do or will, as the case may be, constitute the valid and binding agreements of Crius Energy Trust, Buyer and Merger Sub, enforceable against Crius Energy Trust, Buyer and Merger Sub in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

 

5.3.          Capital Stock.

 

(a)           As of the Agreement Date, the entire authorized capital stock of Crius Energy Trust consists of an unlimited number of trust units of Crius Stock, and the other types of securities of Crius Energy Trust, including notes (including redemption notes), options, rights, warrants or other securities convertible into or exercisable for trust units of Crius Stock or other securities of Crius Energy Trust (including convertible debt securities, subscription receipts and installment receipts which are authorized and may be issued by the trustee of Crius Energy Trust is unlimited. As of the Agreement Date, the entire authorized and outstanding capital stock of Crius Energy Trust consists of 40,086,451 trust units of Crius Stock and 72,728 deferred trust units convertible into 72,728 trust units of Crius Stock.  All of the issued and outstanding trust units of Crius Stock have been duly authorized and are validly issued, fully paid and non-assessable.  Other than the subscription receipts in connection with transactions contemplated by this Agreement and except as provided on Schedule 5.3(a), there are no (i) outstanding options, warrants, rights, calls, commitments, conversion rights, rights of exchange, rights of first refusal, preemptive rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other plans or commitments, contingent or otherwise, relating to the Crius Stock, other than as contemplated by this Agreement; (ii) outstanding contracts or other agreements of Crius Energy Trust to purchase, redeem or otherwise acquire any outstanding units of the Crius Stock, or securities or obligations of any kind convertible into any units of the Crius Stock; (iii) distributions that have accrued or been declared but are unpaid on the Crius Stock; and (iv) outstanding or authorized stock appreciation, phantom stock, stock plans or similar rights with respect to Crius Energy Trust.

 

(b)           All trust units of Crius Stock to be issued as the Equity Consideration in connection with the Merger, when issued pursuant to this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and not subject to any preemptive or similar rights.

5.4.          No Voting Agreement.  Except as disclosed to MVC in writing, no agreement is in force or effect which in any manner affects the voting or control of any of the securities of Crius Energy Trust.

 

5.5.          Required Filings and Consents.  The execution, delivery and performance of this Agreement by Crius Energy Trust, Buyer and Merger Sub and the consummation by Crius Energy Trust,  Buyer and Merger Sub of the transactions contemplated by this Agreement do not and will not require any material consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or third party other than as set forth on Schedule 5.5 and filings pursuant to Regulation D under the 1933 Act and applicable state securities laws, which have been made or will be made in a timely manner.

 

5.6.          Licensed, Registered or Qualified.  Each of  the Administrator, Crius Energy Trust, Buyer and Merger Sub is licensed, registered or qualified as an extra-provincial, foreign corporation or an extra-provincial partnership, as the case may be, in all jurisdictions where the character of the property or assets thereof owned or leased or the nature of the activities by it make such licensing, registration or qualification necessary and is carrying on the business thereof in compliance with all applicable Laws, rules and regulations of each such jurisdiction.

 

5.7.          Legal Proceedings.  There are no actions, suits, proceedings, inquiries or investigations existing, pending or, to the knowledge of the Administrator, Crius Energy Trust, Buyer or Merger Sub, threatened against any of the property or assets thereof, at law or equity, or before or by any court, federal, provincial, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which may result in Crius Energy Trust, Buyer or Merger Sub having a Material Adverse Effect, and none of Crius Energy Trust, Buyer or Merger Sub is subject to any judgement, order, writ, injunction, decree, award, rule, policy or regulation of any Governmental Authority, which, either separately or in the aggregate, may result in a Material Adverse Effect or the ability of Crius Energy Trust, Buyer or Merger Sub to perform its obligations under this Agreement.

 

5.8.         Non-Contravention.  The execution, delivery and performance of this Agreement by Crius Energy Trust, Buyer and Merger Sub and the consummation by Crius Energy Trust, Buyer and Merger Sub of the transactions contemplated by this Agreement do not and will not:

 

(a)           conflict with, or result in any breach of any provision of the organizational documents of Crius Energy Trust, Buyer or Merger Sub;

(b)           result in any violation of or the breach of or constitute a default (with notice or lapse of time or both) under (or give rise to any right of termination, cancellation or acceleration or guaranteed payments under or to, a loss of a material benefit or result in the creation or imposition of a lien under) any of the terms, conditions or provisions of any contract to which Crius Energy Trust, Buyer or any of its subsidiaries, including Merger Sub, is a party or may be bound except for such violations, breaches, defaults, or rights of termination, cancellation or acceleration, losses or the imposition of Liens as to which requisite waivers or consents have been obtained or will be obtained prior to the Closing  or which would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the consummation of the transactions contemplated hereby or Crius Energy Trust’s, Buyer’s or Merger Sub’s ability to perform its obligations hereunder; or

 

(c)           violate the provisions of any Law applicable to either Crius Energy Trust, Buyer or its subsidiaries, including Merger Sub, in such a manner as would reasonably be expected to prevent or materially delay the consummation of the transaction contemplated hereby or the ability of Crius Energy Trust, Buyer or Merger Sub to perform its obligations hereunder.

5.9.         Financing.  Buyer has or will have at Closing available funds sufficient to consummate the transactions contemplated by this Agreement upon the terms contemplated by this Agreement and to pay all related fees and expenses associated therewith. There are no conditions precedent or other contingencies to such funding.

 

5.10.        Financial Statements and Canadian Securities Filings.

(a)           Each of the consolidated balance sheets of Crius Energy Trust and the related consolidated statements of income (loss), statements of unitholders’ equity and comprehensive income (loss) and cash flows, together with the notes thereto, filed for the last three (3) financial years by Crius Energy Trust with the Canadian Securities Administrators under Canadian Securities Regulations (collectively, “Crius Securities Reports”) as of the date filed  (A) complied in all material respects with the applicable requirements under applicable Canadian Securities Regulations and (B) each of the balance sheets or statements of condition contained in or incorporated by reference into any such Crius Securities Report (including the related notes and schedules thereto) fairly presents the consolidated financial position of Crius Energy Trust as of its date, and each of the statements of income or results of operations and changes in unitholders’ equity and cash flows in such Crius Securities Reports (including any related notes and schedules thereto) fairly presents the consolidated results of operations, changes in stockholders’ equity and cash flows, as the case may be, of Crius Energy Trust for the periods to which they relate, in each case in accordance with IFRS consistently applied during the periods involved, except in each case as may be noted therein, subject to normal year-end audit adjustments and the absence of footnotes in the case of unaudited statements.

(b)           For the last three (3) years, Crius Energy Trust has filed all Crius Securities Reports required to be filed under applicable Law.  As of their respective filing dates or the filing dates of amendments, the Crius Securities Reports complied as to form in all material respects with the requirements of applicable Canadian Securities Regulations, and none of the Crius Securities Reports as of such respective dates or the respective filing dates of amendments contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(c)           Crius Energy Trust is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of the Toronto Stock Exchange and no order ceasing or suspending trading in any securities of Crius Energy Trust or prohibiting the trading of any of Crius Energy Trust issued securities has been issued and no proceedings for such purpose are pending or, to the knowledge of Crius Energy Trust, threatened.

5.11.        Reporting Issuer.  Crius Energy Trust is a reporting issuer under applicable Laws in each of the provinces and territories of Canada; Crius Energy Trust is not in default in any material respect of any requirement of applicable Laws nor is it included in a list of defaulting reporting issuers maintained by the Canadian Securities Administrators. In particular, without limiting the foregoing, Crius Energy Trust is in compliance at the date hereof with its obligations to make timely disclosure of all material changes relating to it and, other than in respect of material change reports previously filed on a confidential basis and thereafter made public or material change reports previously filed on a confidential basis and in respect of which no material change ever resulted, no such disclosure has been made on a confidential basis and there is no material change relating to Crius Energy Trust which has occurred and with respect to which the requisite material change statement has not been filed, except to the extent that the transaction contemplated by this Agreement constitutes a material change.

5.12.       Ownership of Properties.  Crius Energy Trust and Buyer are the legal and beneficial owners, free of all mortgages, liens, charges, pledges, security interests, encumbrances, claims or demands whatsoever of the properties, business and assets or the interests in the properties, business or assets referred to as owned by it in the Crius Securities Reports, and all agreements under which Crius Energy Trust holds an interest in a property, business or asset are in good standing according to their terms.

 

5.13.       Absence of Undisclosed Liabilities.  Except as reflected in the Crius Securities Reports (including the financial statements included therein) and except as arising hereunder, Crius Energy Trust has no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) at December 31, 2016, other than liabilities and obligations that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.  Except as set forth in the Crius Securities Reports or in connection with this Agreement, all debts, liabilities, guarantees and obligations of Crius Energy Trust incurred since December 31, 2016 to the date hereof have been incurred in the Ordinary Course of Business and are usual and normal in amount, both individually and in the aggregate.

 

5.14.        Status as a Unit Trust and Mutual Fund Trust.  Crius Energy Trust qualifies as a “unit trust” and a “mutual fund trust” within the meaning of the Tax Act. Crius Energy Trust, Buyer and Merger Sub have no intention to conduct their affairs other than in a manner consistent so as to continue to qualify Crius Energy Trust as a “unit trust” and a “mutual fund trust” under the Tax Act, and in the case of the Crius Energy Trust, in property in which a “mutual fund trust” is permitted by the Tax Act to invest, and Crius Energy Trust has no intention to have any other undertaking or carry on any other activity or business. Crius Energy Trust is not, and intends to conduct its affairs after the Closing Date so as to not be, a “SIFT trust” within the meaning of the Tax Act.

 

5.15.       Absence of Changes.  Except as set forth in the Crius Securities Reports, since December 31, 2016, (a) Crius Energy Trust has conducted its businesses, in all material respects, only in the ordinary course consistent with past practice; and (b) there has not been any fact, event, change, occurrence, condition, development, circumstance or effect that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on Crius Energy Trust.

 

5.16.        Continuous Disclosure.  All information which has been prepared by Crius Energy Trust relating to Crius Energy Trust, Buyer, Merger Sub and the business, property and liabilities of Crius Energy Trust and publicly disclosed, including in the Crius Securities Reports was, as of the respective dates of such information, true and correct in all material respects, and no fact or facts have been omitted therefrom which would make such information materially misleading, and to the knowledge of Crius Energy Trust, all information which has been prepared by Crius Energy Trust relating to Crius Energy Trust, Buyer and Merger Sub and the business, property and liabilities of Crius Energy Trust and provided to the Company was, as of the respective dates of such information, true and correct in all material respects, and no fact or facts have been omitted therefrom which would make such information materially misleading. All disclosure filings required to be made by Crius Energy Trust pursuant to applicable Laws have been made and such disclosure and filings were true and accurate in all material respects as at the respective dates thereof.

5.17.        No Other Representations or Warranties

Except for the representations and warranties set forth in Article 4 and Article 6 or any representations or warranties set forth in any Ancillary Document, the Administrator, Crius Energy Trust, Buyer and Merger Sub hereby acknowledge and agree that none of the USG&E Companies or MVC (in respect of Article 6), or their respective Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person:

(a)           has made or is making any other express or implied representation or warranty with respect to any USG&E Company or Seller or any of its subsidiaries or their respective business or operations, including with respect to any information provided or made available to Buyer, Merger Sub, or any of their respective Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person, including any information, documents, estimates, projections, forecasts or other forward-looking information, business plans or other material provided or made available to Buyer, Merger Sub, or any of their respective Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person, in “data rooms,” confidential information memoranda or management presentations in anticipation or contemplation of the transactions contemplated by this Agreement; or

(b)           will, other than for fraud or willful misconduct, have or be subject to any Liability or indemnification obligation or other obligation of any kind or nature to Buyer, Merger Sub, or any of their respective Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person, resulting from the delivery, dissemination or any other distribution to, or the use by, Buyer, Merger Sub, or any of their respective Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person, of any information provided or made available to any of them by the Company, MVC, the USG&E Companies or any of their respective Affiliates, equity holders, directors, officers, employees, agents, representatives or advisors, or any other Person, including any information, documents, estimates, projections, forecasts or other forward-looking information, business plans or other material provided or made available in “data rooms,” confidential information memoranda, management presentations or otherwise in anticipation or contemplation of any transaction contemplated by this Agreement.

5.18.        Brokers, Finders and Investment Bankers.  Other than as set forth on Schedule 5.18, none of Buyer, Merger Sub or any of their respective officers, directors, employees or Affiliates, has employed any broker, finder or investment banker or incurred any Liability for any investment banking fees, financial advisory fees, brokerage fees or finders’ fees in connection with the transactions contemplated by this Agreement.

 

6.	REPRESENTATIONS AND WARRANTIES OF MVC

Except as otherwise noted in this Article 6, MVC hereby represents and warrants to Buyer and Merger Sub as follows:

6.1.          Authorization.  MVC has full power and authority to execute and deliver this Agreement and any Ancillary Document to which it is a party and to perform its obligations under this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby, subject, in the case of consummation of the Merger, to the USG&E Holder Approval.  MVC represents and warrants that this Agreement has been, and the Ancillary Documents to which it is a party will be as of the Closing Date, duly executed and delivered by MVC and do or will, as the case may be, constitute valid and binding agreements of MVC, enforceable against MVC in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

 

6.2.          Absence of Restrictions and Conflicts.

 

(a)           The execution, delivery and performance by MVC of this Agreement and the Ancillary Documents to which MVC is a party, the consummation of the transactions contemplated by this Agreement and such Ancillary Documents, and the fulfillment by MVC of and compliance by MVC with the terms and conditions of this Agreement and such Ancillary Documents do not or will not (as the case may be), with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under (i) any term or provision of the governing documents of MVC (if applicable); (ii) any judgment, decree or order of any Governmental Authority to which MVC is a party or by which MVC or its Assets and Properties are bound; or (iii) any Law applicable to MVC, excluding from the foregoing clauses (i), (ii) and (iii), any violation, breach, default, acceleration or creation of a right which would not reasonably be expected to be material, individually or in the aggregate, to MVC, taken as a whole.

(b)           No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or third party is required with respect to MVC in connection with the execution, delivery or performance by MVC of this Agreement or the Ancillary Documents to which it is a party or the consummation of the transactions contemplated thereby, except where the failure to obtain such consent would not reasonably be expected to be material, individually or in the aggregate, to MVC or the ability of MVC to fulfill and comply with the terms and conditions of this Agreement and such Ancillary Documents.

6.3.          Title to Interests. MVC is the beneficial and record owner of the Company Stock as set forth opposite MVC’s name on Schedule 6.3, free and clear of all Liens (other than restrictions on transfer arising under securities Laws). Other than as set forth on Schedule 6.3, MVC does not have any (a) outstanding options, warrants, rights, calls, commitments, conversion rights, rights of exchange, rights of first refusal, rights of first offer, preemptive rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other plans or commitments, contingent or otherwise, relating to the capital stock of any USG&E Company; or (b) outstanding Contracts or other agreements of any USG&E Company to purchase or otherwise acquire any outstanding shares of the capital stock of any USG&E Company, or securities or obligations of any kind convertible into any shares of the capital stock of any USG&E Company.

 

6.4.          Brokers, Finders and Investment Bankers.  Except as provided on Schedule 6.4, MVC has not employed any broker, finder or investment banker or incurred any Liability for any investment banking fees, financial advisory fees, brokerage fees or finders’ fees in connection with the transactions contemplated by this Agreement.

 

6.5.         Securities Laws Matters.  MVC (i) is acquiring its portion of the Equity Consideration and Seller Notes (collectively, the “Securities”) solely for investment with no present intention to distribute any of such Securities to any Person in violation of applicable securities Laws, (ii) will not sell or otherwise dispose of any such Securities, except in compliance with the registration requirements or exemption provisions of the Securities Act of 1933, as amended (the “1933 Act”) and any other applicable securities Laws, (iii) is an “accredited investor” (as that term is defined by Rule 501(a) of Regulation D under the 1933 Act), and (iv) (x) has had access to and has received such financial and other information regarding Crius Energy Trust and the Securities, as applicable, that it deems necessary to make an informed investment decision regarding such Securities and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment and (y) can bear the economic risk of an investment in the Securities indefinitely (including total loss of its investment).