Exhibit 2.4
Hampton Water Works Company
EXECUTION COPY
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PURCHASE AGREEMENT
among
AMERICAN WATER WORKS COMPANY, INC.
(a Delaware corporation),
GREENWICH WATER SYSTEM, INC.
(a Delaware corporation),
and
AQUARION COMPANY
(a Delaware corporation)
Dated as of August 29, 2001
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Table of Contents
Page
ARTICLE I DEFINITIONS.....................................................1
1.1. Certain Definitions.........................................1
1.2. Other Definitions...........................................2
ARTICLE II THE TRANSACTION................................................4
2.1. The Purchase and Sale......................................4
2.2. Closing....................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................7
3.1. Corporate Status...........................................7
3.2. Authorization and Enforceability...........................7
3.3. Consents and Approvals.....................................8
3.4. Capitalization and Stock Ownership.........................8
3.5. Financial Statements.......................................9
3.6. Taxes..................................................... 9
3.7. Properties................................................12
3.8. Real Estate...............................................12
3.9. Contracts.................................................13
3.10. Litigation; Compliance with Laws..........................14
3.11. Benefit Plans.............................................15
3.12. Absence of Changes or Events..............................18
3.13. Licenses; Permits.........................................18
3.14. Environmental Matters.....................................18
3.15. Employee and Labor Relations..............................20
3.16. Brokerage.................................................20
3.17. Regulation as a Utility...................................20
3.18. Insurance.................................................21
3.19. Intellectual Property.....................................21
3.20. Property; Franchises......................................21
3.21. Condition of Assets.......................................21
3.22. All Assets................................................21
3.23. Product Liability.........................................22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.......................22
4.1. Corporate Status...........................................22
4.2. Authorization and Enforceability...........................22
4.3. Consents and Approvals.....................................22
4.4. Investment Intent..........................................23
4.5. Sufficient Funds...........................................23
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4.6. Investigation..............................................23
4.7. Brokerage..................................................23
ARTICLE V COVENANTS......................................................23
5.1. Conduct of Business.......................................23
5.2. Corporate Actions.........................................24
5.3. Access....................................................26
5.4. Confidentiality...........................................26
5.5. Consents..................................................26
5.6. Filing; Other Actions.....................................27
5.7. Further Assurances........................................27
5.8. Payment of Expenses; Transfer Taxes.......................27
5.9. Publicity.................................................27
5.10. Employee Matters..........................................28
5.11. Violations................................................33
5.12. Transition Plan...........................................34
5.13. Tax Matters...............................................34
5.14. Intercompany Payables and Receivables.....................36
5.15. Post-Closing Access to Information........................37
5.16. Disclosure Schedules......................................37
5.17. Corporate Name............................................37
5.18. Negotiations..............................................37
5.19. Maintenance of Books and Records..........................38
5.20. Salisbury Facilities......................................38
5.21. WARN......................................................38
5.22. Bondholder Consents.......................................38
ARTICLE VI CONDITIONS....................................................39
6.1. Conditions to Each Party's Obligations.....................39
6.2. Conditions Precedent to Obligations of Buyer...............40
6.3. Conditions Precedent to Obligations of the Sellers.........40
ARTICLE VII TERMINATION..................................................41
7.1. Termination of Agreement...................................41
7.2. Effect of Termination......................................42
7.3. Survival of Representations, Warranties and Covenants......42
ARTICLE VIII INDEMNIFICATION.............................................42
8.1. Indemnification by the Sellers.............................42
8.2. Indemnification by Buyer...................................43
8.3. Limitations................................................44
8.4. Other Limitations..........................................44
8.5. Termination of Indemnification.............................44
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8.6. Procedures Relating to Indemnification.....................44
ARTICLE IX MISCELLANEOUS.................................................47
9.1. Entire Agreement...........................................47
9.2. Amendment; Severability; Waiver............................47
9.3. Interpretation.............................................47
9.4. Notices....................................................48
9.5. Succession and Assignment..................................49
9.6. Governing Law..............................................49
9.7. Submission to Jurisdiction.................................49
9.8. Counterparts...............................................49
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Hampton Water Works Company
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made as of August 29, 2001
by and among American Water Works Company, Inc., a Delaware corporation
("AWW"), Greenwich Water System, Inc., a Delaware corporation and wholly-owned
subsidiary of AWW ("GWS" and together with AWW, the "Sellers") and Aquarion
Company, a Delaware corporation ("Buyer").
Background
X. Xxxxxxx Water Works Company, a New Hampshire corporation (the
"Company"), is a public utility engaged in, among other things, the business
of storing, supplying, distributing and selling water to the public in the
state of New Hampshire.
B. The Sellers are the holders of all of the issued and outstanding
shares of common stock, $25.00 par value per share (the "Common Stock"), and
1,778 of its 1,872 shares of preferred stock, par value $100 per share (the
"Preferred Stock"), of the Company as set forth on Schedule I hereto.
C. Buyer desires to acquire from the Sellers, and the Sellers desire to
sell to Buyer, for the consideration hereinafter provided, all of the
outstanding shares of the Common Stock and Preferred Stock of the Company
owned by the Sellers (collectively, the "Shares").
Terms
NOW, THEREFORE, in consideration of the respective representations,
warranties and covenants contained herein and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Certain Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Affiliate" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as in effect as of the
date of this Agreement.
"Business Day" means a day on which banks are open for business (other
than solely for trading and settlement in euro) in London and New York.
"Hazardous Substances" means (a) the meaning set forth in Section 101(14)
of CERCLA, 42 U.S.C. Section 9601(14) and (b) petroleum and petroleum
byproducts.
"Knowledge" means the actual knowledge after reasonable inquiry with
respect to the matter involved of the following individuals: Xxxxxxx X. Xxxxx,
Vice President - Finance, Xxxxxx
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X. Xxxxx, President, Xxxx Xxxxxx, Vice President - Operations, Xxxx
Xxxxxx, Vice President - Human Resources, Xxxxx Xxxxxxxxxx, Vice President and
Controller, Xxxxxxx Xxxxxxx, Director of Engineering and Xxx Xxxxxxxxxxx,
Director - Rates and Revenue and Xxxxx Xxxxxxx, Vice President and Manager. No
further due diligence or investigation shall be attributed to or required of
such persons.
"Material Adverse Effect" means a material adverse effect on the
financial condition, business, properties, assets or results of operations of
(a) when used in respect of the Company or when not otherwise modified, the
Company and the companies to be sold pursuant to the Related Purchase
Agreements (the "Related Companies"), taken as a whole, (b) when used in
respect of Buyer, Buyer and any regulated businesses of Buyer located in
Connecticut, Massachusetts, New Hampshire or New York (including, after the
Closing, the Company and the Related Companies), taken as a whole and (c) when
used in respect of the Sellers, on any regulated businesses of the Sellers
located in Connecticut, Massachusetts, New Hampshire or New York (not
including the Company and the Related Companies), taken as a whole, in the
case of (a), (b) or (c) above other than with respect to any adverse effects
which, directly or indirectly, relate to or result from (i) public or industry
knowledge relating to the transactions contemplated by this Agreement, (ii)
economic, legislative, regulatory or other conditions generally affecting the
water utility industry, (iii) general economic conditions, or (iv) reductions
in consumer demand or reductions in supply sources solely as a result of
unusual climate conditions in the watersheds or in the areas serviced or
supplied by the Company. AWW and the Company may, however, at their option,
include in the schedules to this Agreement (each, a "Schedule") or elsewhere
items which would not have a Material Adverse Effect within the meaning of the
previous sentence to avoid any misunderstanding, and such inclusion shall not
be deemed to be an acknowledgment by AWW or the Company that such items would
have a Material Adverse Effect or further define the meaning of such term for
the purpose of this Agreement.
"Person" means any natural person, corporation, partnership, trust,
limited liability company or other collective legal entity.
"Related Purchase Agreements" means those certain purchase agreements
described on Schedule 1.1.
1.2. Other Definitions. The following defined terms shall have the
meaning set forth in the referenced Section:
Defined Term As Defined in Section
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Adjusted GAAP.....................................................2.1(c)
Agreement.......................................................Preamble
Annual Financial Statements.......................................3.5(a)
Annual Report........................................................3.7
APBO..........................................................5.10(e)(v)
AWCC Debt.........................................................2.1(b)
AWW.............................................................Preamble
Balance Sheet.....................................................3.5(a)
Balance Sheet Date................................................3.5(a)
Benefit Plans....................................................3.11(a)
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Buyer...........................................................Preamble
Buyer Tax Act....................................................5.13(c)
Buyer's Group Insurance Plan..................................5.10(e)(i)
Buyer's Pension Plan..........................................5.10(c)(i)
Buyer's Returns..................................................5.13(a)
Buyer's Savings Plan..........................................5.10(b)(i)
Buyer's VEBA..................................................5.10(e)(i)
Call Centers.....................................................5.20(a)
Ceiling..............................................................8.3
CERCLA...........................................................3.14(c)
Closing..............................................................2.2
Closing Agreement...........................................3.6(b)(viii)
Closing Date.........................................................2.2
Closing Differential.......................................2.1(e)(ii)(B)
Closing Total Stockholders' Equity Amount..................2.1(e)(ii)(A)
Code..............................................................3.6(a)
Collective Bargaining Agreements.................................5.10(a)
Common Stock..................................................Background
Company.......................................................Background
Company Intellectual Property.......................................3.19
Confidentiality Agreement............................................5.4
Contracts.........................................................3.9(h)
Damages...........................................................8.1(c)
Designated Amount..........................................2.1(e)(ii)(B)
employee benefit plans...........................................3.11(a)
Employees........................................................5.10(a)
Environmental Laws............................................3.14(k)(B)
Environmental Permits............................................3.14(a)
ERISA Affiliate..................................................3.11(a)
Exhibit..............................................................9.1
GWS.............................................................Preamble
HSR Act...........................................................3.3(c)
Indemnified Party.................................................8.6(a)
Indemnifying Party................................................8.6(a)
Initial Cash Payment..............................................2.1(d)
Interim Balance Sheet.............................................3.5(a)
Interim Financials................................................3.5(a)
IRS..............................................................3.11(b)
MOA..............................................................5.10(a)
NHPUC................................................................3.7
Non-Union Employees..............................................5.10(a)
Participating Employees......................................5.10(b)(ii)
PCBs.............................................................3.14(g)
Pension Participating Employees...............................5.10(c)(i)
Post-Closing Statement.....................................2.1(e)(ii)(A)
Pre-Closing Statement..........................................2.1(e)(i)
Prior Period Returns.............................................5.13(a)
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Pro Forma Balance Sheet...........................................2.1(c)
Pro Forma GAAP....................................................2.1(c)
Proposed Closing Differential..............................2.1(e)(ii)(B)
PUC...............................................................3.3(c)
Purchase Price....................................................2.1(c)
Real Estate.......................................................3.8(a)
Recovery..........................................................8.6(l)
Related Companies....................................................1.1
Released.........................................................3.14(k)
Remedial Action..................................................3.14(k)
Schedule.............................................................1.1
Securities Act.......................................................4.4
Sellers.........................................................Preamble
Sellers' ESOP....................................................5.10(d)
Sellers' 401(k) Plan.........................................5.10(b)(ii)
Sellers' Pension Plan............................................5.10(c)
Sellers' Returns.................................................5.13(a)
Sellers' VEBA.................................................5.10(e)(i)
Shares........................................................Background
Tax Return........................................................3.6(a)
Tax Ruling..................................................3.6(b)(viii)
Tax or Taxes......................................................3.6(a)
Taxing Authority..................................................3.6(a)
Third Party Claim.................................................8.6(a)
Threshold Amount.....................................................8.3
Total Stockholders' Equity........................................2.1(c)
Total Stockholders' Equity Estimate............................2.1(e)(i)
Transaction Documents................................................3.2
Transition Services Agreement.......................................5.12
Union Employees..................................................5.10(a)
Welfare Participating Employees...............................5.10(e)(i)
WARN.............................................................5.21(a)
ARTICLE II
THE TRANSACTION
2.1. The Purchase and Sale.
(a) Purchase and Sale of Shares. Subject to the terms and conditions
of this Agreement, at the Closing, the Sellers, jointly and severally, agree
to sell, assign and convey the Shares to Buyer, and Buyer agrees to purchase,
acquire and accept the Shares from the Sellers.
(b) American Water Capital Corp. Debt. At the Closing, Buyer shall
pay to American Water Capital Corp. by wire transfer of immediately available
funds an amount equal to all liabilities and obligations owed by the Company
to American Water Capital Corp. as of the Closing Date as stated in the
pay-off letter from American Water Capital Corp. dated as of the Closing Date
(the "AWCC Debt").
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(c) Purchase Price. In addition to the payment of the AWCC Debt, the
aggregate purchase price for the Shares (the "Purchase Price") shall be equal
to two (2) times the Total Stockholders' Equity of the Company as of the
Closing Date. "Total Stockholders' Equity" shall mean the amount equal to the
common stockholders' equity of the Company plus the amount of all preferred
stocks of the Company owned by the Sellers as such items are properly accrued
and reflected on the books and records of the Company in accordance with Pro
Forma GAAP. "Pro Forma GAAP" means Adjusted GAAP as specifically adjusted as
set forth on Schedule 2.1(c) hereto and reflected in the July 31, 2001 balance
sheet previously delivered by the Sellers and agreed to by Buyer (the "Pro
Forma Balance Sheet"). "Adjusted GAAP" means generally accepted accounting
principles, consistently applied, (i) using the same accounting methods,
policies, practices, procedures, with consistent classification, judgments,
estimation methodology, as were used by the Company in preparing the December
31, 2000 balance sheet of the Company, (ii) without taking into account the
pay-off of the AWCC Debt and any changes in circumstances or events occurring
after the opening of business on the Closing Date and (iii) after giving
effect to the elimination of intercompany payables and receivables pursuant to
Section 5.14.
(d) Payment of Initial Cash Payment. Subject to the terms and
conditions of this Agreement, the Initial Cash Payment shall be paid by Buyer
on the Closing Date by wire transfers of immediately available funds to the
account(s) designated by the Sellers in writing at least two (2) business days
prior to the Closing Date. The "Initial Cash Payment" shall mean an amount in
cash equal to two (2) times the Total Stockholders' Equity Estimate as defined
in Section 2.1(e)(i). Payments shall be allocated between AWW and GWS in
accordance with Schedule 2.1(d) hereto.
(e) Adjustment to Purchase Price.
(i) Pre-Closing Statement. At least ten (10) business days
prior to the Closing Date, AWW shall furnish to Buyer a statement of the
Company (the "Pre-Closing Statement"), prepared as of the last day of the
latest month ending at least 20 days prior to the Closing Date, reflecting the
Sellers' good faith estimate of the Total Stockholders' Equity of the Company
immediately prior to the Closing Date (the "Total Stockholders' Equity
Estimate").
(ii) Post-Closing Statement.
(A) As soon as practicable, but in no event more than 60
business days after the Closing Date, AWW shall furnish to Buyer a statement
(the "Post-Closing Statement") reflecting the Total Stockholders' Equity of
the Company immediately prior to the Closing (the "Closing Total Stockholders'
Equity Amount") prepared in accordance with Pro Forma GAAP. Each of Buyer and
the Sellers shall, and shall cause their respective auditors to, provide the
other party and their representatives with reasonable access to any
information, including work papers, necessary to prepare or review the
Post-Closing Statement. Buyer shall make available any employees of the
Company reasonably necessary to assist in the timely preparation of the
Post-Closing Statement. Each of Buyer and AWW shall, and shall cause its
auditors (if used), agents and representatives to, cooperate and assist in the
preparation of the Post-Closing Statement and in the conduct of any reviews
and dispute resolution process referred to in this Section 2.1.
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(B) Within 30 business days after the delivery of the
Post-Closing Statement to Buyer, Buyer shall either accept the amount (whether
a positive or negative number) equal to the difference between the Closing
Total Stockholders' Equity Amount minus the Total Stockholders' Equity
Estimate (the "Proposed Closing Differential") as reflected on the
Post-Closing Statement as correct or object to the Proposed Closing
Differential, specifying in reasonable detail in writing the nature of its
objection(s) (including any supporting schedules, analyses, working papers and
other documentation); provided, however, that Buyer may only include
objections based on mathematical errors or a claim that Total Stockholders'
Equity was not determined in accordance with Pro Forma GAAP; provided further,
that Buyer's objections to any matters other than mathematical errors must
equal at least a $550,000 adjustment to the Purchase Price (the "Designated
Amount"). In the event Buyer does not object to the Proposed Closing
Differential within said 30-business day period, Buyer shall be deemed to have
accepted the Proposed Closing Differential as the "Closing Differential." In
the event Buyer objects to the Proposed Closing Differential, then, during a
15-business day period subsequent to the receipt by AWW of notice of Buyer's
objection(s), Buyer and AWW shall attempt in good faith to resolve the
differences respecting such Proposed Closing Differential. In the event Buyer
and AWW are unable to resolve their differences within said 15-business day
period, the parties agree that the matter shall be submitted to Xxxxxx
Xxxxxxxx LLP or such other independent accountants mutually agreed to by the
Sellers and Buyer, the costs and expenses of which firm shall be allocated
between Buyer and AWW so that Buyer's share of such costs and expenses shall
be in the same proportion that the aggregate amount of disputed amounts so
submitted by Buyer to Xxxxxx Xxxxxxxx LLP or such other independent
accountants mutually agreed to by the Sellers and Buyer that is unsuccessfully
disputed by Buyer (as finally determined by Xxxxxx Xxxxxxxx LLP or such other
independent accountants mutually agreed to by the Sellers and Buyer) bears to
the total amount of the disputed amounts so submitted by Buyer. Such certified
public accountants shall determine the Closing Differential pursuant to this
Section 2.1 and such determination shall be final and binding upon the
parties; provided, however, that such accountants shall (x) limit their review
to those issues specifically disputed by Buyer in its notice of objections,
(y) further limit their review to whether the Post-Closing Statement contained
mathematical errors or the Proposed Closing Differential was calculated in
accordance with Pro Forma GAAP and (z) not assign a value to any item greater
than the greatest value for such item claimed by Buyer and AWW or less than
the smallest value for such item claimed by Buyer or AWW.
(C) Based on the Post-Closing Statement, within three
(3) business days after the final determination of the Closing Differential,
the Purchase Price shall be adjusted and any differential shall be paid as
follows: If the amount of the Closing Differential is a positive amount which
is greater than the Designated Amount, then the Purchase Price shall be
adjusted upward by an amount equal to two (2) times the Closing Differential,
with interest thereon at a rate equal to five percent (5%) per annum from the
Closing Date to the date of payment. In such case, Buyer shall make a payment
by wire transfer of immediately available funds to the Sellers in the amount
of the increase of the Purchase Price resulting from such adjustment.
Conversely, if the amount of the Closing Differential is a negative amount
which is greater than the Designated Amount, then the Purchase Price shall be
adjusted downward by an amount equal to two (2) times the Closing Differential
(expressed as a positive amount), with interest thereon at a rate equal to
five percent (5%) per annum from the Closing Date to the date of payment. In
such case, the Sellers shall make a payment by wire transfer of immediately
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available funds to Buyer in the amount of the decrease in the Purchase Price
resulting from such adjustment.
2.2. Closing. Unless this Agreement is earlier terminated pursuant to
Section 7, the closing of the purchase and sale of the Shares (the
"Closing") will take place as promptly as practicable, but no later than two
(2) business days following the satisfaction or waiver of the conditions set
forth in Section 6, at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx unless another place or time is agreed to
in writing by Buyer and AWW. The date upon which the Closing actually occurs
is herein referred to as the "Closing Date."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
For purposes of this Agreement, the exceptions, modifications,
descriptions and disclosures in any Schedule attached hereto are made for all
purposes of this Agreement and are exceptions to all representations and
warranties set forth in this Agreement or in any agreement or instrument
delivered pursuant to or in connection with this Agreement. Disclosure of an
item in response to one Section of this Agreement shall constitute disclosure
in response to every Section of this Agreement notwithstanding the fact that
no express cross-reference is made. AWW and GWS, jointly and severally, hereby
represent and warrant to Buyer as follows:
3.1. Corporate Status. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and is qualified to do business as a foreign corporation in
any jurisdiction where it is required to be so qualified, except where the
failure so to qualify would not, individually or in the aggregate, have a
Material Adverse Effect. The Sellers have heretofore made available to Buyer
complete and correct copies of the Company's certificate of incorporation and
by-laws as amended through the date hereof, each of which is in full force and
effect. The Company has no subsidiaries.
3.2. Authorization and Enforceability. The Company has the requisite
power and authority to own its property and to carry on its business in all
material respects as now being conducted. Each of AWW and GWS has the
requisite power and authority to execute and deliver this Agreement, the
Related Purchase Agreements and any other certificates, agreements and
documents contemplated hereby or thereby (the "Transaction Documents") to
which it is a party and to perform the transactions contemplated hereby and
thereby. Such execution, delivery and performance by each of AWW and GWS have
been duly authorized by all necessary corporate action. Each Transaction
Document to which it is a party executed and delivered by AWW or GWS has been
duly executed and delivered by AWW or GWS, as the case may be, and constitutes
a valid and legally binding obligation of AWW or GWS, as the case may be,
enforceable against each of them in accordance with its terms. As of the
Closing Date, each of the other Transaction Documents to which AWW, GWS or the
Company is a party will be duly executed and delivered by such party and will
constitute the valid and legally binding obligation of such party enforceable
against such party in accordance with its terms.
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3.3. Consents and Approvals.
(a) Except as set forth on Schedule 3.3(a), neither the execution
and delivery by AWW or GWS of the Transaction Documents to which it is a
party, nor the performance by each of them of the transactions contemplated
hereby, will (i) violate any provision of law, rule or regulation to which AWW
or GWS is subject, (ii) violate or conflict with any order, judgment,
injunction, award or decree applicable to AWW or GWS, and (iii) violate or
conflict with the Certificate of Incorporation, Bylaws or other similar
governing documents of AWW or GWS, except in the case of any of the foregoing
clauses (i)-(iii) for any such violation or conflict which would not
individually or in the aggregate have a Material Adverse Effect or prevent or
render impracticable the consummation of the transactions contemplated
hereunder.
(b) Except as set forth on Schedule 3.3(b), neither the execution
and delivery by AWW or GWS of the Transaction Documents to which it is a
party, nor the performance by each of them or by the Company of the
transactions contemplated hereby, will (i) violate any provision of law, rule
or regulation to which the Company is subject, (ii) violate or conflict with
any order, judgment, injunction, award or decree applicable to the Company,
(iii) violate or conflict with the Certificate of Incorporation, Bylaws or
other similar governing documents of the Company, (iv) constitute a default
under or give rise to a right of termination, cancellation or acceleration of
any right or obligation of the Company (including without limitation, the
obligation of the Company to prepay any outstanding indebtedness) under any
provision of any agreement, contract or other instrument binding upon the
Company or any license, franchise, permit or similar authorization held by the
Company, or (v) result in the creation or imposition of any lien, encumbrance,
charge or claim upon any of the assets of the Company, except in the case of
any of the foregoing clauses (i)-(v) for any such violation, conflict,
default, right or lien which would not individually or in the aggregate have a
Material Adverse Effect or prevent or render impracticable the consummation of
the transactions contemplated hereunder.
(c) Except as set forth on Schedule 3.3(c), the execution, delivery
and performance by AWW and GWS of this Agreement and the consummation by each
of them or of the Company of the transactions contemplated hereby do not
require any consent from or filing with any person or governmental body,
agency or official except for (i) the filing of a report under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 and the regulations
promulgated thereunder (the "HSR Act") and the expiration or early termination
of the applicable waiting period thereunder; (ii) any consent or filing that
Buyer is required to obtain or make or any consent or filing required by any
foreign government or governmental agency; (iii) filings by Buyer or the
Company (with the cooperation of the Sellers and the Company) with any state
public utility control or public service commissions or similar state
regulatory bodies ("PUCs"), each of which is identified on Schedule 3.3(c);
and (iv) consents and filings which, if not obtained or made, will not
individually or in the aggregate have a Material Adverse Effect or prevent or
render impracticable the consummation of the transactions contemplated
hereunder.
3.4. Capitalization and Stock Ownership.
(a) The total authorized capital stock of the Company consists of
5,700 shares of Preferred Stock, 1,872 shares of which are issued and
outstanding as of the date hereof and 100,000 shares of Common Stock, 87,483
shares of which are issued and outstanding as of the date hereof. Except as
specified in Schedule 3.4(a), there are no existing options, warrants, calls,
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commitments or other rights of any character (including conversion or
preemptive rights) relating to the acquisition of any issued or unissued
capital stock or other securities of the Company. All of the outstanding
shares of Common Stock and Preferred Stock are duly and validly authorized and
issued, fully paid and non-assessable.
(b) The Company does not have any direct or indirect equity
participation in any corporation, partnership, trust, or other business,
including the ownership of any securities or other rights exchangeable for or
convertible into equity.
(c) Except as set forth in Schedule 3.4(c), there are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of, or which impose any restrictions upon the sale or disposition of,
any capital stock of the Company.
3.5. Financial Statements.
(a) Schedule 3.5(a) sets forth (i) the audited balance sheet of the
Company as of December 31, 2000, and the related audited statements of income
and cash flow for the fiscal year ended on such date, together with the notes
to such financial statements (collectively, the "Annual Financial Statements")
and (ii) the unaudited balance sheet as of July 31, 2001 (the "Interim Balance
Sheet") and the related statements of income for the 7-month period ended July
31, 2001 (collectively, the "Interim Financials"). The Annual Financial
Statements and the Interim Financials have been prepared in accordance with
the books and records of the Company. Except as set forth on Schedule 3.5(a),
(A) the Annual Financial Statements fairly present, in all material respects,
the financial position of the Company as of December 31, 2000 and the results
of operations and cash flow of the Company for the year then ended, in
conformity with Adjusted GAAP and (B) the Interim Financials fairly present,
in all material respects, the financial position of the Company as of July 31,
2001 and the results of operations of the Company for the 7-month period then
ended in conformity with Adjusted GAAP (except for the absence of footnotes
and for normal year end adjustments). All references in this Agreement to the
"Balance Sheet" shall mean the Interim Balance Sheet and all references to the
"Balance Sheet Date" shall mean July 31, 2001.
(b) The Company has no material liabilities or obligations of any
nature that would be required to be set forth on a balance sheet in accordance
with Adjusted GAAP, except for (i) liabilities or obligations set forth on the
face of the Interim Balance Sheet, (ii) liabilities which have arisen after
the date of the Interim Balance Sheet in the ordinary course of business and
(iii) liabilities identified in Schedule 3.5(b) or which have otherwise been
specifically disclosed in the Schedules.
(c) Except as eliminated by Pro Forma GAAP as set forth on Schedule
2.1(c), the December 31, 2000 Balance Sheet does not include any deferred
costs or capitalized amounts associated with the accounting consolidation or
billing and shared services and comparable items undertaken by Sellers or
their affiliates since January 1, 1999.
3.6. Taxes.
(a) For purposes of this Agreement: (i) "Code" shall mean the
Internal Revenue Code of 1986, as amended (the "Code"); (ii) "Tax" or "Taxes"
means any federal, state,
9
county, local or foreign taxes, charges, fees, levies or other assessments,
including, without limitation, all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real and personal
property, gross receipts, capital stock, production, business and occupation,
disability, employment, payroll, license, estimated, stamp, custom duties,
severance or withholding taxes or charges imposed by any federal, state,
local, or foreign taxing authority ("Taxing Authority"), and includes any
interest and penalties (civil or criminal) on or additions to any such taxes;
(iii) "Tax Return" means a report, return or other written information
required to be supplied to a Taxing Authority with respect to Taxes including,
where permitted or required, combined or consolidated returns for any group of
entities that includes the Sellers and the Company, on the one hand, or Buyer
and any subsidiaries it may have, on the other hand.
(b) Except as disclosed in Schedule 3.6 or as would not have a
Material Adverse Effect:
(i) Filing of Timely Tax Returns. The Company has duly filed (or
there has been filed on its behalf), within the time prescribed by law
(including extensions) all Tax Returns required to be filed by it under
applicable law (including federal, state, local, and foreign statutes,
regulations and ordinances). All such Tax Returns were and are, and the
Company's state Tax Returns for the year 2000, when filed, will be, true,
complete, and correct.
(ii) Payment of Taxes. The Company, within the time (including
extensions) and in the manner prescribed by law (including federal, state,
local, and foreign statutes, regulations, ordinances, administrative decisions
and guidance, and case law), paid all Taxes that are currently due and payable
except for those contested in good faith or for which adequate reserves have
been taken.
(iii) Tax Reserves. The Company has established on its books and
records adequate reserves for all Taxes and for any liability for deferred
income taxes in accordance with Adjusted GAAP.
(iv) Extensions of Time for Filing Tax Returns. The Company has
not requested any extension of time within which to file any Tax Return, which
Tax Return has not since been filed.
(v) Waivers of Statute of Limitations. The Company does not have
in effect any extension, outstanding waivers, or comparable consents regarding
the application of the statute of limitations with respect to any Taxes or Tax
Returns.
(vi) Expiration of Statute of Limitations. The federal and state
income Tax Returns of the Company either have been examined and settled with
the appropriate taxing authority or closed by virtue of the expiration of the
applicable statute of limitations for all years, and no deficiency for any
Taxes has been proposed, asserted, or assessed against the Company that has
not been resolved and paid in full, except for those contested in good faith
and for which adequate reserves have been established.
(vii) Audit, Administrative and Court Proceedings. No audits or
other administrative proceedings are presently pending or threatened in
writing with regard to any
10
Taxes or Tax Returns of the Company and no currently pending issue has been
raised in writing by any Taxing Authority in connection with any Tax or Tax
Returns (other than those being contested in good faith and for which adequate
reserves have been established).
(viii) Tax Rulings. The Company has not received a Tax Ruling
(as defined below) or entered into a Closing Agreement (as defined below) with
any Taxing Authority that would have a continuing adverse effect after the
Closing Date. "Tax Ruling," as used in this Agreement, shall mean a written
ruling of a Taxing Authority relating to Taxes. "Closing Agreement," as used
in this Agreement, shall mean a written and legally binding agreement with a
Taxing Authority relating to Taxes.
(ix) Availability of Tax Returns. The Sellers have provided
or made available to Buyer complete and accurate copies of (i) all Tax
Returns, and any amendments thereto, filed by the Company, (ii) all audit
reports received from any Taxing Authority relating to any Tax Return filed by
the Company, (iii) any Closing Agreements entered into by the Company and (iv)
any Tax Ruling received by the Company from any Taxing Authority.
(x) Tax Sharing Agreements. The Company is not a party to any
agreement relating to allocating or sharing of Taxes.
(xi) Liability for Others. The Company has no liability for any
Taxes of any person other than the Company (i) under U.S. Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign law),
(ii) as a transferee or successor, (iii) by contract or (iv) otherwise other
than with respect to the consolidated group of corporations the common parent
of which is AWW.
(xii) Code Section 481 Adjustments. The Company is not required
to include in income any adjustment pursuant to Code Section 481(a) by reason
of a voluntary change in accounting method initiated by the Company for any
tax year, and, to the Knowledge of the Sellers, the IRS has not proposed in
writing any such adjustment or change in accounting method for any tax year
for which the statute of limitations remains open.
(xiii) Indebtedness. No indebtedness of the Company is
"corporate acquisition indebtedness" within the meaning of Code Section
279(b).
(xiv) Intercompany Transactions. The Company has not engaged
in any intercompany transactions within the meaning of U.S. Treasury
Regulations Section 1.1502-13 for which any income or gain will remain
unrecognized as of the close of the last taxable year prior to the Closing
Date.
(xv) Code Section 897. To the Sellers' Knowledge, no foreign
person owns or has owned beneficially more than five percent of the total fair
market value of the Company's common stock during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(xvi) Code Section 355. The Company has not constituted a
"distributing corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code in the past 24-month period or in a
distribution which could otherwise
11
constitute part of a "plan" or a series of "related transactions" (within the
meaning of Code Section 355(e)).
(xvii) Withholding. All Taxes that the Company is or was legally
required to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the proper Taxing Authority or
other proper person.
(xviii) Normalization Accounting. If the Company uses or has
used a normalization method of accounting, the selection and application of
such normalization method is, and has been, in full compliance with all
applicable provisions of the Code and Treasury Regulations, and to the
Knowledge of the Sellers such selection and application have not resulted in
any violation or alleged violation of such provisions.
3.7. Properties.
The Company has good and, in the case of real property, valid title
(fee or leasehold) to all of its real and personal properties and assets
(including those reflected in the Company's Annual Report to the New Hampshire
Public Utilities Commission ("NHPUC) for the year ended December 31, 2000
(except for real property which is set forth on Schedule 3.7) (the "Annual
Report") or on the Interim Balance Sheet or acquired by the Company since the
date of such Annual Report or the Balance Sheet Date, except property sold or
otherwise disposed of since the date of such Annual Report or Balance Sheet
Date), free and clear of all mortgages, liens, attachments, pledges,
encumbrances or security interests of any nature whatsoever, except (a) those
disclosed in the Interim Balance Sheet, (b) any liens for current Taxes not
yet due and payable or which may thereafter be paid without penalty, (c)
encumbrances described in Schedule 3.7 hereto, (d) zoning, building and other
similar governmental restrictions and liens imposed by operation of law
(including without limitation mechanics', carriers', workmen's, repairmen's,
landlord's or other similar liens arising from or incurred in the ordinary
course of business and for which the underlying payments are not yet
delinquent), (e) easements, covenants, rights-of-way or other similar
restrictions and imperfections of title and (f) those (including those covered
by (d) and (e) above) that would not, individually or in the aggregate, have a
Material Adverse Effect. Set forth on Schedule 3.7 hereto is a list of all
real estate owned or leased by the Company.
3.8. Real Estate.
(a) As of the date hereof, the Company has not received any written
or, to Sellers' Knowledge, oral notice for material assessments for public
improvements against its real property or improvements, material easements or
material rights of way used in its business (collectively, the "Real Estate")
which remains unpaid, and to the Knowledge of the Sellers no such assessment
has been proposed in writing. Except as set forth on Schedule 3.8, as of the
date hereof, there is no pending condemnation, expropriation, eminent domain
or similar proceeding affecting the Company or all or any material portion of
any of the Real Estate, and to the Knowledge of the Sellers no such proceeding
is threatened.
(b) Except as disclosed on Schedule 3.8, as of the date hereof, the
Company is not a lessee under any Contract relating to the use or occupancy of
the Real Estate involving annual payments in excess of $10,000.
12
(c) Each parcel of the Real Estate has physical and, to Seller's
Knowledge, legal vehicular and pedestrian access to and from public roadways
as may be reasonably necessary to the operation of the Company's business as
currently conducted except where the failure to have such access does not have
a Material Adverse Effect. To Seller's Knowledge, no fact or condition exists
which would result in the termination of (a) the current access from each
parcel of the Real Estate, and (b) continued use, operation, maintenance,
repair and replacement of all existing and currently committed water lines
used by the Company in connection with its business, except where such
termination would not have a Material Adverse Effect.
3.9. Contracts. Except as described in Schedule 3.9 or the other
Schedules hereto (and except for non-material contracts in the ordinary course
of business), the Company is not as of the date of this Agreement party to or
bound by any of the following written agreements:
(a) employee collective bargaining agreements or other contracts
(including the MOA) with any labor union;
(b) employment agreements with any director, officer or employee
(excluding any such contracts or arrangements for which the total compensation
during each of the last two years was less than $50,000 per person);
(c) (i) lease or similar agreements under which the Company is
lessee of, or holds or uses, any machinery, equipment, vehicle or other
tangible personal property owned by a third party, (ii) continuing contracts
for the future purchase of materials, supplies or equipment, or (iii)
management, service, consulting or other contracts, which have, in the
aggregate, future liability (not including any contingent liability or
liability for refunds) in excess of $150,000 or which is not terminable by the
Company on not more than 90 days' notice without penalty or premium;
(d) agreements or contracts under which the Company has borrowed or
loaned any money or issued any note, bond, indenture or other evidence of
indebtedness or guaranteed indebtedness, liabilities or obligations of others,
for an aggregate amount currently outstanding in excess of $150,000 (other
than (i) endorsements for the purpose of collection in the ordinary course of
business, and (ii) advances to employees of the Company in the ordinary course
of business);
(e) mortgages, pledges, security agreements, deeds of trust or other
documents, in each case granting a lien (including liens upon properties
acquired under conditional sales, capital leases or other title retention or
security devices) securing aggregate obligations in excess of $150,000;
(f) contracts containing covenants that in any way purport to
restrict the business activity or otherwise limit the freedom of the Company
to engage in any line of business in any geographic area or to compete with
any person or entity;
(g) joint venture or partnership agreements; and
(h) contracts providing for the payment of severance or other
compensation in respect of a termination of employment to any employee,
director or consultant or which grants
13
compensation or other rights contingent upon or triggered by a change in the
share ownership, membership of the board of directors or control of the
Company.
Except for such breaches or defaults which would not, individually or in the
aggregate, have a Material Adverse Effect, the Company is not (with or without
the lapse of time or the giving of notice, or both) in breach or default under
any agreement, contract, lease, license, commitment or instrument of the
Company described on Schedule 3.9 or the other Schedules hereto (collectively,
the "Contracts") and, to the Knowledge of the Sellers, no other party to any
of the Contracts is (with or without the lapse of time or the giving of
notice, or both) in breach or default thereunder. To the Sellers' Knowledge,
there are no material disputes pending or threatened in writing under or in
respect of any of the Contracts.
3.10. Litigation; Compliance with Laws. Except with respect to
environmental matters, which matters are covered by Section 3.14 of this
Agreement:
(a) Except as set forth in Schedule 3.10(a) hereto, there is no
action, suit, proceeding, investigation, grievance proceeding or arbitration
pending or, to the Knowledge of the Sellers, threatened in writing, against or
involving the Company or its assets (whether or not covered by insurance)
which would, individually or in the aggregate, be reasonably expected to
result in a judgment against the Company in excess of $150,000. Except as set
forth on Schedule 3.10(a), there is no outstanding judgment, order, writ,
injunction, or decree of any court or governmental body, arbitrator, agency or
official relating to or affecting the Company or its assets.
(b) There is no action, suit, investigation or proceeding pending
against, or to the Knowledge of the Sellers, threatened in writing against or
affecting, the Company before any court or arbitrator or any governmental
body, agency or official which in any manner challenges or seeks to prevent,
enjoin, alter or delay the consummation of the transactions contemplated by
this Agreement.
(c) Except as set forth on Schedule 3.10(c), to the Knowledge of the
Sellers, the Company is in compliance with all applicable laws, statutes,
rules, regulations, codes, ordinances, orders, judgments and decrees, local,
federal, state, domestic or foreign (including, without limitation, applicable
insurance requirements, requirements of any Board of Fire Underwriters or
similar body, building, zoning, pension, fair employment, equal opportunity,
safety, health, procurement, reimbursement, consumer protection or similar
laws, rules, regulations and ordinances), other than any such failure which
would not, individually or in the aggregate have a Material Adverse Effect.
(d) Except as set forth in Schedule 3.10(d) or as would not,
individually or in the aggregate, be reasonably expected to result in a
judgment or judgments against the Company in excess of $200,000:
(i) to the Sellers' Knowledge, the Company is in compliance with
all collective bargaining agreements and applicable laws respecting employment
and employment practices, terms and conditions of employment, wages and hours,
and occupational safety and health, and is not engaged in any unfair labor
practice within the meaning of Section 8 of the National Labor Relations Act,
and there is no action, suit, administrative, arbitral, grievance or
14
other proceeding pending or, to the Sellers' Knowledge, threatened and reduced
to writing, nor to the Sellers' Knowledge is there any investigation pending
or threatened and reduced to writing against the Company relating to any of
the foregoing, and, to the Sellers' Knowledge, no reasonable basis exists for
any such action, suit, administrative, arbitral, grievance or other proceeding
or governmental investigation;
(ii) to the Sellers' Knowledge, the Company has not engaged in
any discriminatory employment practice and there are no charges,
administrative proceedings or formal complaints of discrimination (including
but not limited to discrimination based upon sex, age, marital status, race,
national origin, sexual preference, handicap or veteran status) pending or, to
the Sellers' Knowledge, threatened against the Company before the Equal
Employment Opportunity Commission or any federal, state or local agency or
court; there have been no audits of the equal employment opportunity practices
of the Company and, to the Sellers' Knowledge, no basis for any claim relating
to the foregoing exists;
(iii) to the Sellers' Knowledge, all of the Company's employees
and consultants are either U.S. citizens or resident aliens specifically
authorized to engage in employment in the United States in accordance with all
applicable laws.
3.11. Benefit Plans.
(a) Schedule 3.11(a) contains a true and complete list of each
material "employee benefit plan," as defined in Section 3(3) of ERISA
(including any "multiemployer plan" as defined in Section 3(37) of ERISA),
bonus, incentive, deferred compensation, excess benefit, employment contract,
stock purchase, stock ownership, stock option, supplemental unemployment,
vacation, sabbatical, sick-day, severance or other material employee benefit
plan, program or arrangement (other than those required to be maintained or
contributed to by law, and excluding any collective bargaining agreement, side
letter, memorandum of understanding or other agreement with a labor
organization), whether written or unwritten, qualified or nonqualified, funded
or unfunded, foreign or domestic, (i) maintained by, or contributed to by AWW
or any entity which together with AWW would be deemed a "single employer"
within the meaning of Section 4001 of ERISA or Code Sections 414(b), (c), (m)
or (o) (an "ERISA Affiliate") in respect of any Employee or former employee of
the Company, or (ii) with respect to which AWW or any of its ERISA Affiliates
has any liability in respect of any Employee or former employee of the Company
(the "Benefit Plans"). Except as disclosed on Schedule 3.11(a), neither AWW
nor any of its ERISA Affiliates maintains any, or has any unsatisfied
liability with respect to any previously maintained bonus, pension or welfare
benefit plan, program or arrangement, including any deferred compensation
arrangement, for current or former directors, consultants or independent
contractors of the Company (excluding any collective bargaining agreement,
side letter, memorandum of understanding or other agreement with a labor
organization).
(b) The Sellers have furnished or made available to Buyer a true and
complete copy of each Benefit Plan included on Schedule 3.11(a) together with
a copy, if applicable, of (i) the current summary plan description and any
summaries of material modification (if applicable and only to the extent not
included in a summary plan description) and related trust agreements and
insurance contracts; (ii) in the case of an unwritten Benefit Plan, a written
description thereof; (iii) the actuarial reports for such Benefit Plans (if
applicable) for the last three years;
15
(iv) the most recent Internal Revenue Service ("IRS") determination letter
issued to any Benefit Plan; (v) the IRS Forms 5500 together with all schedules
and accountants' statements filed on behalf of any Benefit Plan for the
preceding three plan years; (vi) all material agreements with fiduciaries and
service providers relating to the Benefit Plans; (vii) all material and
substantive correspondence relating to any Benefit Plan addressed to or
received from the IRS, the Department of Labor, the Pension Benefit Guaranty
Corporation or any other governmental agency during the last year; and (viii)
a description of any established past practices with respect to any Benefit
Plan which would reasonably be expected to enhance benefits under such Benefit
Plan.
(c) Each Benefit Plan which is intended to be qualified under
Section 401(a) of the Code (as designated on Schedule 3.11(a)) has received a
favorable determination letter from the IRS as to such Benefit Plan's
qualification under Section 401(a) of the Code or has remaining a period of
time under an applicable remedial amendment period in which to apply for such
letter and to the Knowledge of the Sellers nothing has occurred whether by
action or failure to act, which is reasonably likely to cause the loss or
denial of such qualification. Neither AWW nor the Company has received
correspondence from the IRS relating to the failure of any such Benefit Plan
to be qualified or the failure to be otherwise in compliance with Section
401(a) of the Code.
(d) Except as disclosed in Schedule 3.11(d), each Benefit Plan has
been operated and administered in all material respects in compliance with its
terms and all applicable laws, including ERISA and the Code except for such
noncompliance as would not reasonably be expected to have a Material Adverse
Effect.
(e) None of the properties of the Company is subject to a Lien under
Section 412(n) of the Code.
(f) Neither AWW nor any ERISA Affiliate and, to the knowledge of the
Sellers, no other Person, has taken any action or failed to take any action
with respect to any Benefit Plan that may subject Buyer or any Benefit Plan
under which liabilities may be assumed by Buyer under Section 5.10 ("Assumed
Benefit Liabilities") to any material liability or Tax under the Code or ERISA
(other than claims for benefits in the ordinary course).
(g) No Benefit Plan is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA. All contributions that AWW or any ERISA Affiliate have
been obliged to make to any Benefit Plan have been duly and timely made except
for such failure as would not have a Material Adverse Effect.
(h) Except as disclosed on Schedule 3.11(h), there are no pending
or, to the knowledge of the Sellers, threatened material claims (other than
routine claims for benefits), assessments, complaints, proceedings or
investigations of any kind in any court or governmental agency with respect to
any Benefit Plan.
(i) No liability under Title IV of ERISA related to the termination
of or withdrawal from any plan has been incurred by AWW or any ERISA Affiliate
that has not been satisfied in full, and, to the Knowledge of the Sellers, no
condition exists that presents a material
16
risk to AWW or any ERISA Affiliate of incurring a material liability under
Title IV of ERISA related to the termination of or withdrawal from any plan.
(j) None of AWW, the Company nor, to the Knowledge of the Sellers,
any ERISA Affiliate has engaged in a transaction in connection with which AWW
or any ERISA Affiliate is subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant
to Section 4975 or 4976 of the Code.
(k) No "accumulated funding deficiency," as defined in Section
302(a)(2) of ERISA or Section 412 of the Code, whether or not waived, exists
with respect to any Benefit Plan.
(l) No Benefit Plan has experienced a "Reportable Event" (as such
term is defined in Section 4043(c) of ERISA) that is not subject to an
administrative or statutory waiver from the reporting requirement which would
be reasonably likely to result in a Material Adverse Effect.
(m) With respect to each Benefit Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been paid
to date under the insurance policy have been paid, all premiums required to be
paid under the insurance policy through the Closing Date will have been paid
on or before the Closing Date, in each case except for such failure as would
not be reasonably likely to result in a Material Adverse Effect and, as of the
Closing Date, there will be no material liability of the Company under any
insurance policy or ancillary agreement with respect to such insurance policy
in the nature of a retroactive rate adjustment, loss sharing arrangement or
other actual or contingent liability arising wholly or partially out of events
occurring prior to the Closing Date.
(n) Except as disclosed on Schedule 3.11(n), neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby (either alone or in conjunction with any other event
(i.e., a "double trigger") will pursuant to the terms of any Benefit Plan (i)
restrict or prohibit AWW or any ERISA Affiliate from amending any Benefit
Plan, (ii) result in any material payment (except for severance payments
required by the terms of this Agreement) (including, without limitation,
severance, unemployment compensation, "Excess Parachute Payments" (within the
meaning of Section 280G of the Code), forgiveness of indebtedness or
otherwise) becoming due to any Employee or former Employee of the Company
under any Benefit Plan, (iii) materially increase any benefits otherwise
payable under any Benefit Plan, or (iv) result in any acceleration of the time
of payment or vesting of any benefits under any Benefit Plan.
(o) Except as disclosed on Schedule 3.11(o), no Benefit Plan
provides welfare benefits, including without limitation, death or medical
benefits, beyond termination of service or retirement other than (i) coverage
mandated by law, or (ii) death benefits under a Benefit Plan qualified under
Section 401(a) of the Code or a nonqualified pension or retirement plan.
Seller has made available to Buyer all such Benefit Plans (or written
summaries of any such unwritten Benefit Plan) disclosed on Schedule 3.11(o).
(p) With respect to plans subject to Title IV of ERISA, AWW and its
ERISA Affiliates have made all required minimum funding contributions, as
required by ERISA and the
17
Code, other than failures to contribute that do not present a material
risk to AWW or any ERISA Affiliate of incurring a material liability under
ERISA or the Code.
3.12. Absence of Changes or Events. Except as set forth in Schedule 3.12
or in any other Schedule to this Agreement, since the Balance Sheet Date, the
Company's business has been conducted in the ordinary course consistent with
past practice and there has not been any change in the business, financial
condition or results of operations of the Company which has had a Material
Adverse Effect on the Company. Without limiting the foregoing and except as
set forth on Schedule 3.12, the Company has not taken any of the actions set
forth in Section 5.2 herein.
3.13. Licenses; Permits. To the Knowledge of the Sellers, all material
governmental licenses, permits or authorizations of the Company are validly
held by the Company, the Company has complied in all material respects with
all requirements in connection therewith and the same will not be subject to
suspension, modification or revocation as a result of this Agreement or the
consummation of the transactions contemplated hereby, except as set forth on
Schedule 3.13. To the Knowledge of the Sellers, the Company has all of the
governmental licenses, permits or authorizations which are required to carry
on the Company's business as such business is now conducted, except for such
licenses, permits or authorizations the failure to obtain which would not have
a Material Adverse Effect.
3.14. Environmental Matters. Except as set forth on Schedule 3.14 hereto
and except as would not have a Material Adverse Effect:
(a) The Company has all permits, licenses, and other authorizations
required for the operations or conduct of the Company's business under
applicable Environmental Laws (the "Environmental Permits") and the Company is
in compliance with all terms and conditions of the Environmental Permits and
with all applicable Environmental Laws.
(b) The Company has not disposed of or arranged for the disposal of
or Released any Hazardous Substances at any Real Estate, or, in connection
with the Company's business, at any other facility, location, or other site,
regarding each of the foregoing, in violation of Environmental Laws or in a
manner that would reasonably be expected to result in liability under
Environmental Laws.
(c) The Company has not received any written notice or request for
information with respect to, and neither the Sellers nor the Company have been
designated a potentially liable party for Remedial Action in connection with,
any Real Estate, or, as of the date hereof, with respect to the Company's
business, at any other facility, location, or other site under the federal
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or comparable state statutes.
(d) Except for such use or storage of Hazardous Substances as is
incidental to the conduct of the Company's business, which use and storage is
or has been in compliance with Environmental Laws, and which use and storage
has not caused any condition that requires Remedial Action, no Real Estate has
been used for the storage, treatment, generation, processing, production or
disposal of any Hazardous Substances or as a landfill or other waste disposal
site, in any case in violation of any Environmental Law.
18
(e) To Sellers' Knowledge, underground storage tanks owned or
operated by the Company are not, and have not in the past been, located on or
under any Real Estate.
(f) There are no pending or unresolved claims against the Sellers or
the Company for investigatory costs, cleanup, removal, remedial or response
costs, or natural resource damages arising out of any Releases or threat of
Release of any Hazardous Substances at any Real Estate or, as of the date
hereof, which respect to the Company or at any other facility, location, or
other site.
(g) No polychlorinated biphenyls ("PCBs") or friable
asbestos-containing materials are located at or in any Real Estate in amounts
or condition that would reasonably be expected to result in liability under
Environmental Laws.
(h) To Sellers' Knowledge, no Hazardous Substance managed or
generated by or on behalf of the Company on real property owned by the Company
or in connection with the Company's business has come to be located at any
site that is listed or formally proposed for listing under the Comprehensive
Environmental Response, Compensation and Liability Information System
("CERCLIS") list, or any similar state list or that is the subject of federal,
state, or local enforcement actions or investigations.
(i) The Sellers have provided Buyer with copies of, or made
available to Buyer, all material written environmental audits or
investigations of which they have custody or control prepared for the Real
Estate or the Company's business or operations within the past three years.
(j) Except as set forth in Schedule 3.14, as of the date of this
Agreement:
(i) The Company is and has been for the past three years in
full compliance with all federal and state primary drinking water standards;
(ii) The Company is and has been for the past three years in
full compliance with all federal and state secondary drinking water standards;
and
(iii) As to all outstanding violations of state or federal
drinking water standards, the Company has completed or is in the process of
completion in accordance with all applicable deadlines, all actions required
by any Environmental Laws to correct or otherwise respond to such violations.
(k) Except as set forth in Schedule 3.14, the Company is not and has
not been required to place any notice or restriction relating to the presence
of Hazardous Substances in the deed to any Real Estate, or in any written
instrument accompanying this Agreement, and no Real Estate has such a notice
or restriction in its deed or any other written instrument relating to the
purchase, lease or rental of such property.
For the purposes of this Section 3.14: (A) "Remedial Action" means all actions
to (x) clean up, remove, treat or in any other way respond to any presence,
Release or threat of Release of Hazardous Substances; (y) prevent the Release
or threat of Release, or minimize the further Release of any Hazardous
Substances so it does not endanger or threaten to endanger public or
19
employee health or welfare or the environment; or (z) perform studies,
investigations or monitoring necessary or required to investigate the
foregoing; (B) "Environmental Laws" means any federal, state or local law,
statutes, rule, regulation, ordinance, code, judgment or order relating to the
protection of the environment or, as relating to exposure to Hazardous
Substances, human health and safety and includes, but is not limited to,
CERCLA (42 U.S.C. section 9601, et seq.), the Clean Water Act (33 U.S.C.
section 1251 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
section 6901 et seq.), the Toxic Substances Control Act (15 U.S.C. section
2601 et seq.), the Safe Drinking Water Act of 1990 (33 U.S.C. section 2701 et
seq.), each as it has been interpreted or amended as of the Closing Date and
the regulations promulgated pursuant thereto and in effect as of the Closing
Date; and (C) "Released" means released, spilled, leaked, discharged, disposed
of, pumped, poured, emitted, emptied, injected, leached, dumped or allowed to
escape.
3.15. Employee and Labor Relations. Except as set forth in Schedule 3.15
hereto:
(a) the Company is not a party to any collective bargaining
agreement, side letter, memorandum of understanding or other written agreement
with a labor organization;
(b) .there is no pending labor strike, work stoppage or slow down by
the Employees (including, without limitation, any organizational drive);
(c) there is no pending representation petition respecting the
Employees;
(d) the Company has no outstanding commitment or agreement to
institute any general wage or salary increase for any class or category of its
Non-Union Employees other than in the ordinary course of business and
consistent with past practice;
(e) the Sellers and the Company have no "established past practices"
(as that term is used in any of the Company's collective bargaining
agreements) with respect to the Union Employees that would alter or add to the
express terms of the applicable Collective Bargaining Agreements; and
(f) the Sellers and the Company have no "established past practices"
(as that term is used in any of the Company's collective bargaining
agreements) with respect to the Non-Union Employees the result of which would
be to make their employment other than terminable at will.
3.16. Brokerage. The Company has not made any agreement or taken any
other action which might cause any person or entity to become entitled to a
broker's fee or commission as a result of the transaction contemplated
hereunder.
3.17. Regulation as a Utility. The Company is regulated as a public
utility in New Hampshire. The Company is not subject to regulation as a public
utility or public service company (or similar designation) by any other state
in the United States, by the United States or any agency or instrumentality of
the United States or by any foreign country. The Company is not a holding
company under the Public Utility Holding Company Act of 1935, as amended.
20
3.18. Insurance. The Company is, and has been continuously since January
1, 1996, insured with financially qualified insurers. The Company has not
received any notice of cancellation or termination with respect to any
material insurance policy of the Company. The insurance policies of the
Company are valid and enforceable policies in all material respects.
3.19. Intellectual Property. The Company owns or has adequate rights to
use all material trademarks, trade names, patents, service marks, brand marks,
brand names, computer programs, databases, industrial designs and copyrights
used in the operation of their businesses (collectively, the "Company
Intellectual Property"). All of the Company Intellectual Property owned by the
Company is free and clear of any and all encumbrances, and the Company has not
forfeited or otherwise relinquished any Company Intellectual Property which
forfeiture or relinquishment could reasonably be expected to have a Material
Adverse Effect. To the Knowledge of the Sellers, the use of the Company
Intellectual Property by the Company does not infringe upon, violate or
constitute a misappropriation of any right, title or interest in any
intellectual property right (including, without limitation, any trademark,
trade name, patent, service xxxx, brand xxxx, brand name, computer program,
database, industrial design or copyright) of any other person, and the Company
has not received written notice of any claim that any of the Company
Intellectual Property is invalid or infringes the asserted rights of any other
person, and, to the Knowledge of the Sellers, the Company Intellectual
Property owned by the Company has not been used or enforced or has failed to
be used or enforced in a manner that would reasonably be expected to result in
the abandonment, cancellation or unenforceability of any of such Company
Intellectual Property, except for such conflicts, infringements, violations,
interferences, claims, invalidity, abandonments, cancellations or
unenforceability that would not, individually or in the aggregate, have a
Material Adverse Effect.
3.20. Property; Franchises. The Company owns or has sufficient rights and
consents to use under existing franchises, easements, leases, and license
agreements all properties, rights and assets necessary for the conduct of its
businesses and operations as currently conducted, except where the failure to
own or have sufficient rights and consents to use such properties, rights and
assets would not, individually or in the aggregate, have a Material Adverse
Effect. The Company is duly authorized and franchised by the state of New
Hampshire to carry on its utility operations as presently being conducted and
such franchise is unlimited as to time and subject to no burdensome
restrictions. Except as set forth on Schedule 3.20, since December 31, 1990,
no state regulatory body has denied the request of the Company to include in
rate base for recovery any asset then in utility service in the amount of
$100,000 or more.
3.21. Condition of Assets. Except as set forth on Schedule 3.21, the
buildings, machinery, equipment, tools, furniture, improvements and other
fixed tangible assets of the Company's business, taken as a whole and taken
together with the similar assets included among the assets being acquired by
Buyer pursuant to the Related Purchase Agreements, are in serviceable
operating condition and repair, reasonable wear and tear excepted.
3.22. All Assets. Except as set forth on Schedule 3.22, the Company owns,
and will provide to Buyer at the Closing, all assets, rights, facilities,
properties, contracts, books, records and other data necessary for the
continued conduct of the Company's business by Buyer substantially in the
manner as it was conducted prior to the Closing Date. The tangible assets
reflected on the Interim Balance Sheet are all the material assets used in the
past year in the
21
conduct of the Company's business, except for additions and dispositions
thereto in the ordinary course of business.
3.23. Product Liability. Except as disclosed in Schedule 3.23 and except
for those liabilities which individually or in the aggregate would not have a
Material Adverse Effect, there are no (a) liabilities of the Company, fixed or
contingent, asserted in writing with respect to any product liability or
similar claim that relates to any product or service sold by the Company to
others or (b) liabilities of the Company, fixed or contingent, asserted in
writing with respect to any claim for the breach of any express or implied
product warranty or a similar claim with respect to any product or service
sold by the Company to others.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers as follows:
4.1. Corporate Status. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation.
4.2. Authorization and Enforceability. Buyer has the requisite power and
authority to own its property and to carry on its business in all material
respects as now being conducted. Buyer has the requisite power and authority
to execute and deliver the Transaction Documents to which it is a party and to
perform the transactions performed or to be performed by it. Such execution,
delivery and performance by Buyer have been duly authorized by all necessary
corporate action. Each Transaction Document executed and delivered by Buyer
has been duly executed and delivered by Buyer and constitutes a valid and
legally binding obligation of Buyer, enforceable against Buyer in accordance
with its terms. As of the Closing Date, each of the other Transaction
Documents to which Buyer is a party will be duly executed and delivered by
Buyer and will constitute the valid and legally binding obligation of Buyer
enforceable against Buyer in accordance with its terms.
4.3. Consents and Approvals. Except for the consents specified in
Schedule 4.3, neither the execution and delivery by Buyer of the Transaction
Documents to which it is a party, nor the performance by Buyer or the Company
of the transactions contemplated hereby, will (i) violate any provision of
law, rule or regulation to which Buyer is subject, (ii) conflict or violate
any order, judgment, injunction, award or decree applicable to Buyer, and
(iii) violate or conflict with the Certificate of Incorporation, Bylaws or
other similar governing documents of Buyer, except in the case of any of the
foregoing clauses (i)-(iii) for any such violation or conflict which would not
individually or in the aggregate have a Material Adverse Effect or prevent or
render impracticable the consummation of the transactions contemplated
hereunder. The execution, delivery and performance by Buyer of this Agreement
and the consummation by Buyer or the Company of the transactions contemplated
hereby do not require any consent from or filing with any governmental body,
agency or official except for (i) the filing of a report under the HSR Act and
the expiration of the applicable waiting period; (ii) any consent or filing
that the Sellers are required to obtain or make; and (iii) filings by Buyer or
the Company (with the cooperation of the Sellers and the Company) with any
PUCs, each of which is identified on
22
Schedule 4.3; and (iv) consents and filings which, if not obtained or made,
will not individually or in the aggregate have a Material Adverse Effect or
prevent or render impracticable the consummation of the transactions
contemplated hereunder.
4.4. Investment Intent. The Shares are being acquired by Buyer solely for
its own account, for investment and not with a view to any distribution
thereof that would violate the Securities Act of 1933, as amended (the
"Securities Act"), or the applicable state securities laws of any state; and
Buyer will not distribute the Shares in violation of the Securities Act, or
the applicable state securities laws of any state.
4.5. Sufficient Funds. Buyer has sufficient funds to pay in full the
Purchase Price and to enable it to consummate the transactions contemplated by
this Agreement.
4.6. Investigation. Buyer has conducted such investigation of the Company
as it has deemed sufficient to make an informed decision concerning the
transactions contemplated hereby. Buyer acknowledges that it has (a) had an
opportunity to review all materials and information requested by it, (b) had
an opportunity to review all of the documents, records, reports and other
materials identified in the Schedules hereto, and (c) has been given access to
the properties and assets of the Company and is familiar with the condition
thereof. In connection with its investigation of the Company and all matters
relating to the transactions contemplated hereby, Buyer has solely relied upon
the advice and opinions of its own agents, representatives, experts,
consultants, employees and officers as it has deemed sufficient to make an
informed decision concerning the transactions contemplated hereby. Buyer
acknowledges that the Sellers have made no representation, warranty or
agreement except as expressly set forth in this Agreement. Buyer is not
relying on any representation, warranty, agreement, statement, document,
record, report, material or information made or provided by the Sellers or any
of their Affiliates, or their respective representatives or agents except as
expressly set forth in this Agreement. Buyer further acknowledges that (a) no
promise or inducement for this Agreement has been made to Buyer except as set
forth herein, (b) this Agreement is executed by Buyer freely and voluntarily
and without reliance upon any statement or representation of the Sellers, the
Sellers' Affiliates or any of their attorneys or agents except as set forth
herein, (c) Buyer has read and fully understands this Agreement and the
meaning of its provisions, (d) Buyer is legally able to enter into this
Agreement and to accept full responsibility therefor, and (e) Buyer has
consulted with counsel before entering into this Agreement.
4.7. Brokerage. Buyer has not made any agreement or taken any other
action which might cause any person or entity to become entitled to a broker's
fee or commission as a result of the transaction contemplated hereunder.
ARTICLE V
COVENANTS
5.1. Conduct of Business. From and after the date hereof and pending the
Closing Date, except with the consent of Buyer (which shall not be
unreasonably withheld) or as set forth on Schedule 5.1 or as otherwise
specifically permitted by this Agreement, the Sellers will take such action as
may be necessary to insure that the Company will not (a) engage in any
practice, take any action or enter into any transaction outside the ordinary
course of business, and (b) fail
23
to use its commercially reasonable efforts to maintain all current business
relationships of its business.
5.2. Corporate Actions. From and after the date hereof and pending the
Closing Date, except (i) as otherwise specifically permitted by this Agreement
or (ii) with the prior written consent of Buyer (which shall not be
unreasonably withheld), the Sellers will take such action as may be necessary
to insure that the Company will not take or permit any of the following
actions:
(a) amend its Certificate of Incorporation or Bylaws;
(b) issue, sell or otherwise dispose of any of its capital stock or
other securities, accept any capital contribution or create or suffer to be
created any encumbrance thereon, or create, sell or otherwise dispose of any
options, rights, conversion rights or other agreements or commitments of any
kind relating to the issuance, sale or disposition of any of its capital stock
or other equity securities;
(c) reclassify, split up or otherwise change any of its capital
stock or other equity securities;
(d) declare or pay any dividend on, or make any other distribution
with respect to any share or shares of its capital stock or other equity
securities other than in the ordinary course of business and consistent with
past practice, or fail to pay or make any such dividends or distributions
consistent with past practice;
(e) other than in the ordinary course of business and consistent
with past practice, transfer, lease, license, guarantee, sell, mortgage,
pledge, dispose of or encumber any other property or assets;
(f) by any means, make any acquisition of, or investment in, assets
(other than in the ordinary course of business and consistent with past
practice) or capital stock (whether by way of merger, consolidation, tender
offer, share exchange or other activity) in any transaction or any series of
transactions (whether or not related);
(g) other than in the ordinary course of business and consistent
with past practice, (i) modify, amend, or terminate any material Contract,
(ii) waive, release, relinquish or assign any material Contract (or any of the
material rights of the Company thereunder), right or claim, (iii) cancel or
forgive any indebtedness owed to the Company in an amount aggregating in
excess of $10,000 or (iv) fail to use commercially reasonable efforts to
collect any indebtedness or accounts receivable owed to the Company;
(h) (i) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, recapitalization or other similar
reorganization of the Company, or (ii) accelerate or delay collection of notes
or accounts receivable in advance of or beyond their regular due dates, other
than in the ordinary course of business and consistent with past practice;
(i) other than in the ordinary course of business and consistent
with past practice or as requested or agreed to by Buyer and after providing
notice to Buyer of such action,
24
(i) hire any new employees, either full- or part-time (subject to the
transfers referred to on Schedule 5.10(a)); (ii) enter into or amend any
employment, severance or special pay arrangement with respect to the
termination of employment or other similar contract, agreement or arrangement
with any director or officer or other employee; (iii) terminate, establish,
adopt, enter into, make any new grants or awards under, amend or otherwise
modify any Benefit Plans or Collective Bargaining Agreements; (iv) voluntarily
accelerate the vesting of, or the lapsing of restrictions with respect to, any
stock options or other stock-based compensation; or (v) increase the salary,
wage, bonus or other compensation of any Employees except, in each case, for
(1) grants or awards, including incentive bonuses, or increases occurring in
the ordinary and usual course of business (which shall include normal periodic
performance reviews and related compensation and benefit increases consistent
with past practice with respect to Employees), (2) annual reestablishment of
Benefit Plans or (3) actions necessary to satisfy existing contractual
obligations under Benefit Plans or agreements existing as of the date hereof
or applicable law;
(j) fail to maintain with financially responsible insurance
companies insurance in such amounts and against such risks and losses as are
consistent with the insurance maintained by the Company in the ordinary course
of business and consistent with past practice;
(k) except in the ordinary course of business and consistent with
past practice or as may be required by applicable Law or changes in generally
accepted accounting principles, change any accounting principle, practice or
method in a manner that is inconsistent with past practice or inconsistent
with Adjusted GAAP;
(l) except as may be required by law (including, without limitation,
pursuant to existing consent orders listed on Schedule 3.14), make capital
expenditures other than in the ordinary course of business and consistent with
past practice on any item (i) not in accordance with Schedule 5.2(l) or (ii)
in any calendar year in excess of 115% of the amount budgeted by the Company
for such item in such year as set forth in Schedule 5.2(l), and in any event
the Sellers shall provide to Buyer a notice on or prior to the 25th day
following the end of each calendar quarter commencing after the date hereof
setting forth the Company's capital spending for the prior calendar quarter;
(m) incur or guarantee any indebtedness for borrowed money
(including any such debt guaranteed or otherwise assumed including, without
limitation, the issuance of debt securities or warrants or rights to acquire
debt) or enter into any "keep well" or other agreement to maintain any
financial statement condition of another person other than (i) short-term
indebtedness and "keep well" or similar assurances for the benefit of
customers, in each case in the ordinary course of business consistent with
past practice; or (ii) in connection with the refunding of existing
indebtedness at a lower cost of funds;
(n) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice (which includes the payment
of final and unappealable judgments) or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the Annual
Financial Statements (or the notes thereto), or incurred in the ordinary
course of business consistent with past practice;
25
(o) (A) make or rescind any express or deemed material election
relating to Taxes, (B) except as set forth on Schedule 5.2(o), settle or
compromise any material claim, audit, dispute, controversy, examination,
investigation or other proceeding relating to Taxes that affects the Company
after the Closing, (C) materially change any of its methods of reporting
income or deductions for federal income Tax purposes from those employed in
the preparation of its federal income Tax Return and state Tax Returns for the
taxable year ending December 31, 2000, except as may be required by a change
in applicable law after the date hereof, (D) file any material Tax Return
other than in a manner consistent with its federal income Tax Return and state
Tax Returns for the taxable year ending December 31, 2000, (E) change its
fiscal year, or (F) make or rescind any material tax election;
(p) subject to applicable law and except for nonmaterial filings in
the ordinary course of business consistent with regulatory orders or past
practice or changes consistent with existing regulatory orders, fail to
consult with Buyer prior to implementing any changes in the Company's rates or
charges (other than automatic cost pass-through rate adjustment clauses),
standards of service or accounting or executing any agreement with respect
thereto that is otherwise permitted under this Agreement, or fail to deliver
to Buyer a copy of each such filing or agreement at least three days prior to
the filing or execution thereof so that Buyer may comment thereon; or
(q) authorize or enter into an agreement to do anything prohibited
by the foregoing.
5.3. Access. During the period prior to the Closing Date, the Sellers
will cause the Company to permit representatives of Buyer to have reasonable
access at all reasonable times during normal business hours to the personnel,
facilities, books and records of the Company as Buyer and its representatives
may reasonably request in connection with the transactions contemplated by
this Agreement; provided, however, that such access does not interfere with
the normal business operations of the Company. The Sellers or the Company are
under no obligation to disclose to Buyer any information the disclosure of
which is restricted by contract or applicable law and the grant of such access
does not include access to conduct any environmental sampling or testing
without the Sellers' prior written consent.
5.4. Confidentiality. Buyer acknowledges that the information being
provided to it in connection with the transactions contemplated hereby is
subject to the terms of a confidentiality agreement dated March 30, 2001 among
the Sellers and Buyer (the "Confidentiality Agreement"), the terms of which
are incorporated herein by reference. Effective upon, and only upon, the
Closing, the Confidentiality Agreement shall terminate.
5.5. Consents. Each of the parties hereto shall use its best efforts to
(a) obtain as promptly as practicable all consents, authorizations, approvals
and waivers required in connection with the consummation of the transactions
contemplated by this Agreement under, any federal, state, local or foreign law
or regulation, (b) lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties hereto to
consummate the transactions contemplated hereby and (c) effect all necessary
registrations and filings including, but not limited to, filings under the HSR
Act and submissions of information requested by any governmental authority.
The parties hereto further covenant and agree, with respect to any threatened
or pending preliminary or permanent injunction or other order, decree
26
or ruling or statute, rule, regulation or executive order that would adversely
affect the ability of the parties hereto to consummate the transactions
contemplated hereby, to respectively use their best efforts to prevent the
entry, enactment or promulgation thereof, as the case may be.
5.6. Filing; Other Actions. Each of AWW and Buyer agree to file or cause
to be filed all necessary documentation with the appropriate governmental
authorities as soon as practicable to obtain as soon as possible all consents
required by any governmental authorities to consummate the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, (i) Buyer agrees to file as soon as practicable after the date
hereof all filings with PUCs, including those filings identified on Schedule
3.3(c), and the Sellers agree to cooperate in making such filings, and (ii)
each of AWW and Buyer agree to file or cause to be filed, respectively, as
soon as practicable after the date hereof, an acquired person's and acquiring
person's HSR Act notification and report form with respect to the transactions
contemplated by this Agreement required by the HSR Act. Buyer shall pay the
filing fee incurred in connection with such filings under the HSR Act. Each of
AWW and Buyer further agree to use their best efforts to comply promptly with
and, where appropriate, to respond in cooperation with each other to, all
requests or requirements which applicable federal, state, local, foreign or
other applicable law or governmental officials may impose on them with respect
to the transactions which are the subject of this Agreement; provided that
nothing in this Section 5.6 shall require either party or their respective
Affiliates to sell, hold separate or otherwise dispose of or take any action
or suffer an event to exist if such sale, holding separate, disposition,
action or event would have a Material Adverse Effect on the Company or either
party.
5.7. Further Assurances. Upon the terms and subject to the conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take or cause to be taken all action, to do or cause to be done, and to assist
and cooperate with the other party hereto in doing, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including, but not limited to, (a) the
satisfaction of the conditions precedent to the obligations of any of the
parties hereto, (b) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
performance of the obligations hereunder or thereunder, and (c) the execution
and delivery of such instruments, and the taking of such other actions as the
other party hereto may reasonably require in order to carry out the intent of
this Agreement.
5.8. Payment of Expenses; Transfer Taxes. Except as otherwise provided
herein, each of the parties hereto shall pay its own costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby. All transfer, documentary, sale, use, registration, value-added and
other similar Taxes and related amounts (including any penalties, interest and
additions) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Sellers.
5.9. Publicity. Each of the parties hereto agrees that no public release
or announcement concerning the transactions contemplated hereby shall be
issued by any of them without the prior consent (which consent shall not be
unreasonably withheld) of AWW (in the case of Buyer) or Buyer (in the case of
AWW or GWS), except as such release or announcement may be required by law or
the rules or regulations of any United States or foreign securities exchange,
in which case the party required to make the release or announcement shall
allow
27
AWW or Buyer, as the case may be, reasonable time to comment on such
release or announcement in advance of such issuance.
5.10. Employee Matters.
(a) Employees - Continued Employment; Compensation and Benefits.
Subject to the following sentence, Buyer agrees to continue the employment
immediately following the Closing Date of each employee covered under the
collective bargaining agreements (the "Collective Bargaining Agreements")
between the Company and the United Steelworkers of America,
A.F.L.-C.I.O.-C.L.C., in effect on the Closing Date (the "Union Employees")
and each employee of the Company who is not covered under the Collective
Bargaining Agreements and the employee(s) of American Water Works Service
Company identified on Schedule 5.10(a) who will be transferred to the Company
on or before the Closing Date (the "Non-Union Employees"; collectively with
the Union Employees, the "Employees"). Union Employees who are laid off or on
disability leave, authorized leave of absence or military service as of the
Closing Date shall be offered employment by, or have their employment continue
with, Buyer to the same extent, if any, as the Sellers would be required to
offer employment in accordance with the Collective Bargaining Agreements, any
Benefit Plan or applicable law. Non-Union Employees who are on disability
leave or authorized leave of absence or in military service as of the Closing
Date shall be offered employment by, or shall have their employment continue
with, Buyer to the same extent, if any, as the Sellers would be required to
offer employment or continue employment in accordance with applicable law or
any Benefit Plan. With respect to the Union Employees, Buyer shall continue
their employment and provide pay and benefits and benefit plans, programs and
policies in accordance with the Collective Bargaining Agreements and the
American Water Works Benefits Negotiations Memorandum of Agreement, dated
March 7, 2001 (the "MOA"). With respect to the Non-Union Employees (and former
employees to the extent applicable), Buyer shall provide and continue in
effect for one year following the Closing Date, compensation and benefit
plans, programs and policies which are substantially comparable to those
provided to the Employees (and former employees to the extent applicable) by
the Sellers, the Company or their Affiliates on the date hereof (excluding the
Dividend Reinvestment and Stock Purchase Plan). For the one-year period
following the Closing Date, such Non-Union Employees' employment shall be
continued in the same or substantially comparable positions and at rates of
pay at least equal to the rates of pay in effect on the Closing Date. For
purposes of this Section 5.10(a), references to "pay" with respect to such
Non-Union Employees shall include base pay plus any commission, bonus or
incentive pay. In addition, for one year following the Closing Date, the
principal worksite of each such Employee shall be at a location within a
35-mile radius of such Employee's location of employment as of the Closing
Date subject, in the case of Union Employees, to any applicable Collective
Bargaining Agreements and the MOA. Schedule 5.10(a) (which shall be updated by
the Sellers on the Closing Date) shall set forth the name of each Employee,
and his or her current rate of pay, position and date of hire, and in the case
of those Employees on disability leave, military service or leave of absence,
the period of, or cause for, such leave. Employees shall be provided credit by
Buyer for all service with the Company and its ERISA Affiliates (and any other
entity to the extent credit has been given by a plan of either the Sellers or
their ERISA Affiliates), to the same extent as such service was credited for
such purpose by the Company and its ERISA Affiliates, under (x) all employee
benefit plans, programs, policies and fringe benefits of Buyer for all
purposes including, without limitation, of eligibility, vesting and benefit
accrual
28
and (y) severance plans, programs and policies for all purposes including,
without limitation, calculating the amount of each Employee's severance
benefits, except in each case to the extent duplication of benefits would
result. Notwithstanding the foregoing, nothing in this Agreement shall cause
any Employee to be other than an employee at will and nothing expressed or
implied in this Agreement will obligate Buyer to provide continued employment
to any individual Employee for any specified period of time following the
Closing Date. Buyer will be the sole judge of the number, identity and
qualifications of employees necessary for the conduct of its business
operations and reserves the right to take any personnel action it deems
necessary or appropriate with respect to the Employees, subject, in the case
of Union Employees, to any applicable Collective Bargaining Agreements and the
MOA. Except as otherwise provided in this Section 5.10(a), with respect to pay
and benefits for Non-Union Employees, Sections 5.10(b), (c), (e) and (f) and
as may be required under any Benefit Plan or applicable law, Buyer shall be
under no obligation to provide or continue any Benefit Plan or any other plan
or arrangement after the Closing Date and may amend or terminate any such plan
or arrangement in whole or in part and may modify any provision thereof. Buyer
shall only be obligated to provide Union Employees with the pay and benefits
specified in the Collective Bargaining Agreements and the MOA, as such
agreements may be amended, modified or terminated consistent with Buyer's
obligations under applicable law.
(b) Savings Plan Account Transfer.
(i) As soon as practicable, but in no event more than 90 days
after the Closing Date, Buyer will designate an existing or establish a new
savings plan qualified under Code Section 401(a) and including a cash or
deferred feature under Code Section 401(k) and a related trust thereunder
which shall be exempt under Code Section 501(a) ("Buyer's Savings Plan"). With
respect to the Non-Union Employees, benefits under Buyer's Savings Plan will
be substantially comparable in all respects to the Sellers' Savings Plan (as
defined below) as in effect immediately prior to the Closing, except that new
contributions to Buyer's Savings Plan after the Closing Date will not be
invested in the common stock of AWW.
(ii) The Sellers will, as soon as practicable after Buyer
establishes or designates Buyer's Savings Plan and provides the Sellers with
an opinion of counsel reasonably satisfactory to the Sellers that Buyer's
Savings Plan is qualified under Code section 401(a), cause the Savings Plan
for Employees of American Water Works Company, Inc. and its Designated
Subsidiaries ("Sellers' 401(k) Plan") to transfer to Buyer's Savings Plan, the
full account balances of the Employees and former employees of the Company who
are participating in Sellers' 401(k) Plan immediately prior to the Closing
Date (including for purposes of such transfer any balance held for an
Alternate Payee, as that term is defined by section 414(p) of the Code, of any
Employee or former employee of the Company, who is entitled to any benefit
thereunder pursuant to the terms of a domestic relations order that has been
determined by the administrator of Sellers' 401(k) Plan to be qualified within
the meaning of section 414(p) of the Code) (herein, the "Participating
Employees"), determined as of the date of transfer, and determined without
regard to any applicable vesting schedule under Sellers' 401(k) Plan. That
transfer shall be made in kind based on those investment funds (including the
AWW common stock fund) in which such account balances are then invested;
provided, however, that any loans from Sellers' 401(k) Plan to the
Participating Employees shall be transferred in the form of
29
notes. The Sellers and Buyer shall make all required filings and submissions
to the appropriate governmental agencies in connection with such transfer.
(iii) In consideration for the transfer of assets described
herein, Buyer shall, effective as of the date of transfer described herein,
assume all of the obligations of Sellers' Savings Plan and the Sellers and
their ERISA Affiliates in respect of the account balances accumulated by the
Participating Employees under Sellers' Savings Plan as of such date of
transfer; provided that Buyer shall not assume, and the Sellers shall retain,
any other obligations arising under or attributable to Sellers' Savings Plan.
(iv) If the account balances transferred as provided in (ii)
above are determined, within one year after Closing, to have been incorrect,
the Sellers and Buyer agree to make appropriate payments or asset transfers to
correct such error (appropriately adjusted for subsequent investment
experience and expenses incurred).
(c) Pension Plan Spin-off.
(i) Effective as of the Closing Date, Buyer will designate an
existing, or establish a new, pension plan qualified under Code Section 401(a)
and a related trust thereunder which shall be exempt under Code Section 501(a)
("Buyer's Pension Plan"). With respect to the Non-Union Employees, benefits
under Buyer's Pension Plan shall be substantially comparable in all respects
to Sellers' Pension Plan (as defined below) as in effect immediately prior to
the Closing. As soon as practicable after the Closing Date, and subject to the
Sellers' receipt of an opinion of counsel reasonably satisfactory to the
Sellers that Buyer's Pension Plan is qualified under Section 401(a) of the
Code, the Sellers shall cause the trustee of the Pension Plan for Employees of
American Water Works, Inc. and its Designated Subsidiaries ("Sellers' Pension
Plan") to segregate, in accordance with the spinoff provisions set forth under
Section 414(l) of the Code, and to transfer to Buyer's Pension Plan, the
assets of Sellers' Pension Plan allocable under ERISA Section 4044 (determined
using the Pension Benefit Guaranty Corporation assumptions set forth in 29
C.F.R. Part 4044 and the assumptions set forth on Schedule 5.10(c)) to the
Employees who were participants in Sellers' Pension Plan immediately prior to
the Closing Date (including, for purposes of such transfer, benefits held for
an Alternate Payee, as that term is defined by Section 414(p) of the Code, of
any Employee who is entitled to benefits thereunder pursuant to the terms of a
domestic relations order that has been determined by the administrator of
Sellers' Pension Plan to be qualified within the meaning of Section 414(p) of
the Code) and former employees of the Company (other than those for whom an
annuity has been purchased) (herein, the "Pension Participating Employees"),
such amount to be calculated as of the Closing Date, but adjusted for benefit
payments and reasonable administrative expenses attributable to such Pension
Participating Employees between the Closing Date and the transfer date. Unless
otherwise agreed to by the Sellers and Buyer, the form of the assets to be
transferred shall consist of cash. The Sellers and Buyer shall make all
required filings and submissions to the appropriate governmental agencies in
connection with such asset transfer.
(ii) In consideration for the transfer of assets
described herein, Buyer shall, effective as of the date of transfer described
herein, assume all of the obligations of Sellers' Pension Plan and the Sellers
and their ERISA Affiliates in respect of benefits accrued by Pension
Participating Employees under Sellers' Pension Plan on or prior to the Closing
Date; provided
30
that Buyer shall not assume, and the Sellers shall retain, any other
obligations arising under or attributable to Sellers' Pension Plan.
(iii) If the assets transferred are thereafter determined,
within one year after Closing, to have been incorrect, the Sellers and Buyer
agree to make appropriate payments or asset transfers to correct such error
(appropriately adjusted for subsequent investment experience and expenses
incurred).
(iv) The Sellers shall, at their own cost and expense, take such
corrective actions with respect to the Sellers' Pension Plan as the IRS may
require as a condition to continuing the qualified status of the Sellers'
Pension Plan in connection with its audit of the Sellers' Pension Plan for the
1998 plan year and shall notify Buyer of any such corrective actions so
required by the IRS or so taken by the Sellers. In the event that any such
corrective actions have not been taken or completed as of the date of the
transfer of assets described herein and such corrective actions affect the
assets transferred to or the obligations assumed by Buyer as provided herein,
the Sellers shall reimburse Buyer upon demand for Buyer's reasonable cost of
taking or completing such corrective actions with respect to such assets or
obligations, without regard to the limitations set forth in Article 8 of this
Agreement.
(d) Employee Stock Ownership Plan. The Sellers and the Employee
Stock Ownership Plan for Employees of American Water Works, Inc. and its
Designated Subsidiaries ("Sellers' ESOP") shall retain all liabilities for
benefits accrued under Sellers' ESOP for any Employees or former employees and
shall cause those benefits to be paid for Employees, former employees and
their beneficiaries in accordance with the terms of Sellers' ESOP.
(e) Medical and Welfare Plan Obligations.
(i) Effective as of the Closing Date, Buyer shall designate an
existing, or establish or cause to be established a new, group insurance plan
("Buyer's Group Insurance Plan") and one or more related trusts (Buyer's VEBA)
for the purpose of funding claims under Buyer's Group Insurance Plan, which
trust or trusts shall meet the requirements of Code Sections 419, 419A, 501
and 501(c)(9), in order to provide medical and dental coverage, group-term
life insurance coverage, Code Section 125 cafeteria plan coverage, medical and
dependent care expense reimbursement account coverage, short- and long-term
disability coverage, retiree medical and dental coverage and post-retirement
life insurance coverage for the benefit of the Employees and former employees
of the Company who were participants in Sellers' Group Insurance Plan (as
described on Schedule 3.11(a)) and related trust or trusts ("Sellers' VEBA")
immediately prior to the Closing Date (herein, the "Welfare Participating
Employees"); provided that a Non-Union Employee who is on disability leave or
authorized leave of absence or in military service on the Closing Date shall
become a Welfare Participating Employee as of the date such Employee returns
to work with Buyer or its affiliates. With respect to the Non-Union Employees,
benefits under Buyer's Group Insurance Plan shall be substantially comparable
to Sellers' Group Insurance Plan as in effect immediately prior to the
Closing.
(ii) Effective as of the Closing Date, all liabilities to or
relating to Welfare Participating Employees under Sellers' Group Insurance
Plan and VEBA with respect to medical and dental coverage, group-term life
insurance coverage, Code Section 125 cafeteria plan coverage, medical and
dependent care expense reimbursement account coverage and short-
31
and long-term disability coverage shall cease to be liabilities of Sellers'
Group Insurance Plan and VEBA and shall be assumed by Buyer's Group Insurance
Plan and VEBA.
(iii) Notwithstanding the foregoing, all claims incurred by a
Welfare Participating Employee prior to the Closing Date shall be paid by
Seller's Group Insurance Plan and VEBA but Buyer shall be responsible for all
liabilities relating to, arising out of or resulting from such claims on or
after the Closing Date. For purposes hereof, a claim is deemed incurred when
the services that are the subject of the claim are performed; in the case of
life insurance, when the death occurs; in the case of a hospital stay, when
the person first enters the hospital; and in the case of continuation coverage
under the Consolidated Omnibus Budget Reconciliation Act of 1985, when the
person first becomes eligible for such continuation coverage.
(iv) The Sellers shall use reasonable efforts to assist Buyer to
enter into such group insurance policies and contracts with third-party
administrators as Buyer considers appropriate, such policies and contracts to
become effective as of the Closing Date.
(v) The Sellers shall provide Buyer with a list of all Employees
who are eligible as of the Closing Date to receive retiree medical or dental
coverage or post-retirement life insurance coverage under Sellers' Group
Insurance Plan and the type of retiree medical or dental coverage and the
level of life insurance coverage for which they are eligible, as applicable.
Effective as of the Closing Date, Buyer shall assume full liability for the
foregoing coverages under Sellers' Group Insurance Plan with respect to such
Employees and shall assume full liability for such coverages for the Employees
who have not satisfied the requirements for such retiree medical or dental
coverage or post-retirement life insurance coverage under Sellers' Group
Insurance Plan as of the Closing Date. As soon as practicable after the
Closing Date, the Sellers shall cause the trustee of Sellers' VEBA to transfer
to the trustee of Buyer's VEBA assets equal to the amount of assets in the
Sellers' VEBA as of the Closing Date, multiplied by a fraction the numerator
of which is equal to the Accumulated Post-Retirement Benefit Obligation under
FAS 106 ("APBO") for the current and former employees of the Company and the
denominator of which is the APBO for the Sellers as a whole. APBO shall be
calculated by the Sellers' actuary using the actuarial assumptions set forth
on Schedule 5.10(e). For at least one year after the Closing Date, Buyer shall
maintain retiree medical and dental coverage and post-retirement life
insurance coverage that is substantially identical to that provided by
Sellers' Group Insurance Plan for all Employees (and former employees of the
Company covered by Sellers' Group Insurance Plan who retire on or before the
Closing Date). Thereafter, subject to the terms of any applicable plan and
applicable law, all Employees and former employees (other than Employees hired
after any discontinuation after the date of this Agreement of the Sellers'
policy of offering retiree welfare benefits to new hires) shall be entitled to
receive retiree welfare benefits no less favorable than those provided to
Buyer's retirees who were hired prior to July 1, 1996. Set forth on Schedule
5.10(e) is a list of all former Company employees who, as of the date of this
Agreement, are receiving retiree medical or dental coverage or post-retirement
life insurance coverage under Sellers' Group Insurance Plan and the type and
level of coverage that each is receiving, and the Sellers shall provide Buyer
with an update of such list on or prior to the Closing Date providing such
information as of the Closing Date. Buyer shall assume liability for providing
retiree medical and dental coverage and post-retirement life insurance
coverage to such former Company employees in accordance with this Section.
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(vi) Buyer shall cause Buyer's Group Insurance Plan to recognize
and give credit for all amounts applied to deductibles, out-of-pocket
maximums, and other applicable benefit coverage limits with respect to which
such expenses have been incurred by the Welfare Participating Employees under
Sellers' Group Insurance Plan. Buyer shall waive any waiting periods or
limitations for preexisting conditions under Buyer's Group Insurance Plan with
respect to the Welfare Participating Employees.
(vii) To the extent any Welfare Participating Employee
contributed to a dependent care or medical expense reimbursement account under
Sellers' Group Insurance Plan during the calendar year that includes the
Closing Date, the Sellers shall transfer to Buyer's Group Insurance Plan the
account balances of Welfare Participating Employees for such calendar year
under the dependent care and medical expense reimbursement accounts maintained
under Sellers' Group Insurance Plan, and Buyer's Group Insurance Plan shall
provide dependent care and medical expense reimbursement account programs
substantially comparable to those provided under Sellers' Group Insurance Plan
to the Welfare Participating Employees at least through the end of the plan
year in effect as of the Closing Date; provided, that notwithstanding
paragraph (iii) above, the Buyer shall be responsible for all liability for
and administration of reimbursement claims that have not been received by
Sellers as of the date Sellers transfer assets to Buyer, regardless of when
the claim was incurred.
(viii) Subject to any confidentiality limitations reasonably
required by Sellers, both the Sellers and Buyer shall, to the extent
reasonably available, have access to claims data, eligibility data and
disability, medical and demographic data for all historical periods for all
vendors administering Sellers' and Buyer's Group Insurance Plan and VEBAs with
respect to the Welfare Participating Employees. Both the Sellers and Buyer
shall have the right to access and use such data for such purposes as each
determines is reasonably necessary. Each party shall pay the cost, if any, of
collection and delivery of such data requested by it.
(f) Severance Plans. For a period of at least one year following the
Closing Date, Buyer will continue in effect, in accordance with their terms on
the date hereof, the severance plans included on Schedule 5.10(f) (including
the Enhanced Severance Plan and the Severance Policy), or provide
substantially comparable benefits under a severance plan maintained by Buyer.
Except for employees terminated or laid off as a result of the actions
contemplated by Section 5.20, Buyer or Buyer's severance plan will pay all
severance benefits to which the Employees become entitled on or after the
Closing Date including, without limitation, any entitlement arising under the
Sellers' or the Company's severance plans on account of the transactions
contemplated by this Agreement.
(g) Collective Bargaining Agreements. Buyer will assume and honor
the terms of the Collective Bargaining Agreements and the MOA and will
recognize any labor organization or other collective bargaining representative
of such Employees, subject to and to the extent required by the National Labor
Relations Act or any other applicable law.
5.11. Violations. Within fifteen (15) days after the receipt of notice of
violation, the Sellers shall notify Buyer of any violations of state or
federal drinking water standards which, if such violations existed on the date
hereof, would be required to be disclosed pursuant to Section 3.14(j) hereof,
and shall promptly notify Buyer of the actions proposed to be taken by the
Sellers to correct or otherwise respond to such violations.
33
5.12. Transition Plan. Within 30 days after the execution date of this
Agreement, the parties jointly shall establish a transitional services team,
which shall include expertise from various functional specialties associated
with or involved in providing rate regulation, human resources, accounting,
engineering, laboratory, billing, payroll and other support services provided
to the Company by any automated or manual process using facilities or
employees that are not included among the Company's assets or Employees. Such
team will be responsible for preparing, and timely implementing, a transition
plan which will identify and describe substantially all of the various
transition activities that the parties will cause to occur before and after
Closing and any other transfer of control matters that any party reasonably
believes should be addressed in such transition plan. The transition plan will
set forth reasonable arrangements providing Buyer, at Buyer's sole expense,
with appropriate access to the Sellers' relevant computer systems to allow for
a full conversion of the relevant data and functionality to Buyer's systems on
the Closing Date and for the provision by the Sellers or their Affiliates of
appropriate services to the Buyer as may be necessary or desirable to effect a
reasonable transition on the Closing Date, including the transfer to Buyer of
originals or copies of engineering, laboratory, human resources, accounting
and other data and records in advance of the Closing Date. The Sellers shall
make arrangements satisfactory to Buyer for the transfer to Buyer on or prior
to the Closing Date, of originals or copies of all books and records and other
data and information relating to the Company, its properties, business and
operations, which is in the possession or control of the Sellers and their
Affiliates. Buyer and the Sellers shall use their commercially reasonable
efforts to cause their representatives on such transition team to cooperate in
good faith and take all reasonable steps necessary to develop a mutually
acceptable transition plan no later than 60 days prior to the Closing Date,
and if requested by Buyer, on or prior to the Closing Date, the parties hereto
agree to use their commercially reasonable efforts to negotiate and execute on
or prior to the Closing Date an agreement with respect to those transition
services specified by Buyer (the "Transition Services Agreement"). The term of
each transitional service shall be as agreed between the parties in such
Transition Services Agreement but in no event shall extend beyond December 31,
2002.
5.13. Tax Matters.
(a) AWW shall cause to be prepared and filed all federal, state,
foreign or local corporation income tax returns required to be filed by the
Company for taxable periods ending prior to or on the Closing Date or which
include the Closing Date (including consolidated, combined or unitary federal,
state and local income tax returns which include the Company and including
amended returns, applications for loss carryback refunds (Forms 1139) and
applications for estimated tax refunds (Forms 4466)) (all such income tax
returns, amended returns and refund applications, whether separate,
consolidated, combined or unitary, are referred to as the "Seller's Returns").
The Seller's Returns shall be prepared, where relevant, in a manner consistent
with the Company's past practices except to the extent counsel for AWW
reasonably determines that under applicable law there is no reasonable basis
therefor. Buyer shall cause the Company to submit pro-forma federal, state,
and local income tax returns (tax return packages) for calendar year 2001 and
for the taxable year ending on the Closing Date to AWW. AWW shall advise of
the date or dates on which it intends to file Seller's Returns and Buyer shall
provide AWW with the related pro forma return within 45 days prior to the
intended filing date, but Buyer shall not be required to deliver a pro forma
return sooner than 45 days after AWW's request therefor. AWW and Buyer shall,
unless prohibited by applicable law, elect to close the
34
taxable period of the Company (for federal, state and local income Tax
purposes) as of the close of the Closing Date, subject to the application of
the "next day rule" provided in Treas. Reg. Section. 1.1502-76(b)(1)(ii)(B).
In any case where applicable law does not permit the Company to close its
taxable period on the Closing Date, any Taxes attributable to a taxable period
that includes but does not end on the Closing Date shall be allocated (i) for
the account of the Sellers for the period up to and including the Closing
Date, and (ii) for the account of the Company and Buyer for the period
subsequent to the Closing Date, and such allocation of Taxes shall apply in
all events, including where applicable law does not permit the Company to
close its taxable period on the Closing Date, and the Sellers shall reimburse
the Company to the extent that such Taxes allocated to the Sellers exceed the
provision therefor reflected in the Post-Closing Statement and Buyer shall
cause the Company to reimburse the Sellers to the extent that any Taxes
allocated hereunder to the Sellers are less than the provision therefor
reflected in the Post-Closing Statement. For purposes of this section, Taxes
for the period up to and including the Closing Date will be determined on the
basis of an interim closing of the books of the Company. If reasonably
requested by AWW, Buyer will cause a duly authorized officer of the Company
(or any successors) timely to execute and file the Sellers' Returns as
prepared by AWW. Buyer shall promptly notify AWW following receipt of any
notice of audit or other proceeding relating to any of the Seller's Returns or
any other federal, state, foreign or local corporation income or franchise tax
return of the Company filed on or before the Closing Date (together with all
of the Seller's Returns, the "Prior Period Returns"). AWW shall have the right
to control any and all audits or other proceedings relating to any Prior
Period Return, including the filing of an amended return or claim for refund;
provided, however, that AWW shall not agree to the resolution of any audit or
other proceeding relating to any Prior Period Return or file an amended Prior
Period Return or refund claim that would have any Material Adverse Effect on
the Company without Buyer's consent, which consent shall not be unreasonably
withheld. Buyer shall make available or shall cause the Company to make
available to AWW any and all books and records of the Company and other
documents requested by AWW and shall make available employees of the Company
reasonably necessary to enable AWW to defend any audit or other proceeding or
to prosecute any refund claim with respect to any Prior Period Return and
shall cooperate with AWW, at their expense, in defense of such audits or
refund claims. Buyer shall cause the Company to file any and all other tax
returns of the Company, which are not Seller's Returns and which are to be
filed after the Closing Date ("Buyer's Returns"). Buyer shall cause the
Company to pay to AWW the amount of any refund, credit or offset (including
any interest paid or credited or any offset allowed with respect thereto but
reduced by any Taxes that the Buyer or the Company shall be required to pay
with respect thereto) received or used, in the case of a credit or offset, by
the Buyer or the Company of Taxes relating to the Prior Period Returns. Buyer
and the Company shall elect not to carry back any Tax losses of the Company
arising in a Buyer's Return to any Tax period included in a Prior Period
Return.
(b) The Sellers, on the one hand, and Buyer, on the other, shall (a)
each provide the other with such assistance as may reasonably be requested by
either of them in connection with the preparation of any Tax Return, any audit
or other examination by any Taxing Authority or any judicial or administrative
proceeding with respect to Taxes; (b) each provide the other or its
representatives with any records or other information which may be relevant to
such return, audit, examination or proceeding, and (c) each provide the other
with any final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Tax Return
of the other for any period (which shall be
35
maintained confidentially). Without limiting the generality of the foregoing,
Buyer, on the one hand, and the Sellers, on the other, shall retain, until the
applicable statutes of limitations (including all extensions) have expired,
copies of all Tax Returns, supporting workpapers, and other books and records
or information which may be relevant to such returns for all Tax periods or
portions thereof ending before or including the Closing Date, and shall not
destroy or dispose of such records or information without first providing the
other party with a reasonable opportunity to review and copy the same. Any
information obtained under this Section 5.13(b) shall be kept confidential,
except as otherwise may be necessary in conjunction with the filing of any Tax
Return, claims for refunds or conducting an audit or other proceeding.
(c) Following the Closing Date, the Buyer shall, and shall cause the
Company to, indemnify and hold harmless the Sellers and their affiliates from
(i) all liability for Taxes of the Company for any taxable period ending after
the Closing Date, (ii) all liability for Taxes attributable to a Buyer Tax Act
(as defined below) or to a breach by the Buyer of any representation, warranty
or covenant with respect to Taxes under this Agreement, and (iii) all
liability for Taxes of the Company to the extent of the accrual, if any,
established therefore in the Post-Closing Statement. "Buyer Tax Act" means any
action taken after the Closing Date by the Buyer, any of its affiliates
(including the Company), or any transferee of the Buyer or any of its
affiliates (other than any such action expressly required by applicable law or
by this Agreement) which causes a liability for Taxes. The Sellers' rights to
indemnification set forth in this Section 5.13(c) shall be in addition to the
indemnification rights set forth in Article 8 and shall not be subject to
limitations set forth in such Article 8.
(d) Following the Closing Date, the Sellers shall jointly and
severally indemnify and hold harmless (i) the Buyer and its affiliates from
all liability for (A) Taxes of the Company for any taxable period ending prior
to or on the Closing Date and (B) any Taxes of the Company described in
Section 5.13(a) that are attributable to any taxable period that includes but
does not end on the Closing Date for the period up to and including the
Closing Date and (ii) each of Buyer's officers from any liability of such
officer resulting from such officer's signing any of the Sellers' Returns
pursuant to Section 5.13(a) unless and to the extent such Sellers' Returns
reflect information provided by Buyer. Buyer's right to indemnification set
forth in this Section 5.13(d) shall be in addition to the indemnification
rights set forth in Article 8 and shall not be subject to limitations set
forth in such Article 8. Notwithstanding the foregoing, the Sellers shall not
indemnify and hold harmless any of the Buyer, its affiliates or their
respective officers, directors, employees and agents from any liability for
Taxes attributable to Taxes of the Company to the extent of the accrual, if
any, established therefor or for a Buyer Tax Act. Estimated Taxes paid by or
on behalf of the Companies and their Subsidiaries on or prior to the Closing
Date shall be credited to Taxes with respect to the Pre-Closing Tax Period.
The Seller's responsibility under this Section 5.13(d) to indemnify and hold
harmless the Buyer and its affiliates (including, after the Closing, the
Company) against, or to pay or cause to be paid, any Taxes shall not include
any such responsibility with respect to any Taxes collected or withheld by the
Company, if any (including, without limitation, all sales and use taxes and
all withholding or employment taxes) with respect to events occurring through
the Closing Date, the proceeds of which are held by the Company on the Closing
Date.
5.14. Intercompany Payables and Receivables. As of the Closing Date, AWW
shall cause all outstanding intercompany payables and receivables of the
Company outstanding on the
Closing Date owing to or from any of their Affiliates to be eliminated, except
for (i) the AWCC Debt and (ii) outstanding intercompany payables and
receivables of the Company owing to or from the entities being sold pursuant
to the Related Purchase Agreements.
5.15 Post-Closing Access to Information. At all times after the Closing
Date, each party will permit the others and its representatives (including its
counsel and auditors) upon written notice and during normal business hours, to
have reasonable access to and examine and make copies, at the expense of the
copying party, of all books, records, files and documents in its possession
which relate to the conduct of the Company's business prior to the Closing
Date.
5.16. Disclosure Schedules. As promptly as practicable, the Sellers will
provide Buyer with a supplement or amendment to the Schedules hereto with
respect to any matter, condition or occurrence which is required to be set
forth or described in the Schedules. For the avoidance of doubt, a matter,
condition or occurrence shall only be "required" to be set forth or described
in the Schedules if the failure to be so disclosed would result in a breach of
the applicable representation or warranty (qualified by materiality or
Material Adverse Effect where applicable) on the date hereof or on the Closing
Date. In addition, the Sellers shall have the right at any time and from time
to time prior to the Closing to supplement or amend the Schedules. The Sellers
may provide Disclosure Schedules with respect to any representation or
warranty of this Agreement whether or not a specific schedule is referred to
therein. In the event that any supplement or amendment of such Schedules shall
be provided later than five (5) business days prior to the Closing Date, the
Buyer shall have the right to delay the Closing for a period of five (5)
business days in order for Buyer to review such supplement or amendment. No
such supplement or amendment shall be deemed to cure any breach of or alter
any representation or warranty made in this Agreement unless Buyer
specifically agrees thereto in writing. The Sellers shall promptly inform
Buyer, and Buyer will promptly inform the Sellers of any fact or event which
comes to their attention, the existence of which constitutes or likely will
constitute a breach in any material respects of any representation or warranty
in this Agreement.
5.17. Corporate Name. Buyer shall not acquire, nor shall the Company
retain, any rights to the names "Hampton Water Works," "Hampton," "American,"
"American Water," or "American Water Works" (or any variations thereof) or any
trademarks, trade names or symbols related thereto. As soon as practicable
after the Closing (and in any event, no later than the 90th day thereafter),
Buyer will cause the Company to amend its organizational documents to the
extent necessary to remove the "Hampton Water Works Company" name (and any
variations thereof) from the name of the Company and to remove all trademarks,
trade names and symbols related to the names "Hampton Water Works Company,"
"Hampton," "American," "American Water," or "American Water Works" (or any
variations thereof) from the properties and assets (including all signs) of
the Company.
5.18. Negotiations. Neither the Sellers nor any Person controlled by the
Sellers under common control with the Sellers (each such Person being a
"Section 5.19 Affiliate"), nor any officer, director, employee, representative
or agent of the Seller or any of their Section 5.19 Affiliates, shall,
directly or indirectly, solicit or initiate or participate in any way in
discussions or negotiations with, or provide any information or assistance to,
or enter into an agreement with any Person or group of Persons (other than
Buyer or any Person controlled by Buyer or under common control with Buyer or
any Persons providing financing to the parties hereto in connection with
facilitating the consummation of the transactions contemplated by this
37
Agreement) concerning any acquisition, merger, consolidation, liquidation,
dissolution, disposition or other transactions (or series of such
transactions) that would (a) result in the transfer to any such Person or
group of Persons of any of the Shares or substantially all of the Company's
properties or assets or (b) prevent the consummation of the transactions
contemplated by this Agreement.
5.19. Maintenance of Books and Records. The Sellers and Buyer shall
cooperate fully with each other after the Closing so that (subject to any
limitations that are reasonably required to preserve any applicable
attorney-client privilege) each party has access to the business records,
contracts and other information existing at the Closing Date and relating in
any manner to the Company or the conduct of the Company's business (whether in
the possession of the Sellers or Buyer). No files, books or records existing
at the Closing Date and relating in any manner to the Company or the conduct
of the Company's business shall be destroyed by any party for a period of six
years after the Closing Date without giving the other party at least 30 days'
prior written notice, during which time such other party shall have the right
(subject to the provisions hereof) to examine and to remove any such files,
books and records prior to their destruction. The access to files, books and
records contemplated by this Section 5.20 shall be during normal business
hours and upon not less than two (2) business days' prior written request,
shall be subject to such reasonable limitations as the party having custody or
control thereof may impose to preserve the confidentiality of information
contained therein, and shall not extend to material subject to a claim of
privilege unless expressly waived by the party entitled to claim the same.
5.20. Salisbury Facilities. In view of the pending takeover of the
Sellers' Salisbury, Massachusetts facilities by the Town of Salisbury, the
parties agree that the Company shall, prior to the Closing Date, terminate
those employees currently servicing such facilities who are determined by the
Company to be surplus.
5.21. WARN.
(a) Neither the Sellers nor the Company shall, at any time within
the 90-day period prior to the Closing Date, effectuate a "plant closing" or
"mass layoff" as those terms are defined in the Worker Adjustment and
Retraining Notification Act of 1988, as amended, ("WARN") or any state law,
affecting in whole or in part any site of employment, facility, operating unit
or employee of the Sellers without notifying Buyer in advance and without
complying with the notice requirements and all other provisions of WARN and
any similar state law.
(b) Buyer agrees that between the Closing Date and a period ninety
(90) calendar days thereafter it will comply with WARN in all respects and,
with respect to the Company, not effect a "plant closing" or "mass layoff" as
those terms are defined in WARN without complying with the notice requirements
and all other provisions of WARN and any applicable state law.
5.22. Bondholder Consents. The Sellers shall use commercially reasonable
efforts to obtain or to cooperate with Buyer in obtaining the consent of the
holders of the Company's General Mortgage Bonds, 7.48% Series Due September 1,
2027 (the "Bonds") issued pursuant to the Seventh Supplemental Indenture of
Mortgage from Hampton Water Works Company to First Union
38
National Bank dated as of December 1, 1997 agreeing to the consummation of the
transactions contemplated by the Agreement and waiving the applicability to
said transactions of the Change of Control provisions relating to said Bonds,
provided that any direct monetary costs incurred to obtain such consent shall
be paid by Buyer.
ARTICLE VI
CONDITIONS
6.1. Conditions to Each Party's Obligations. All obligations of each
party to consummate the transactions are subject to satisfaction (or waiver in
writing, where permissible, by the party to which the condition relates) at or
prior to the Closing Date of each of the following conditions:
(a) Governmental Approvals. Any waiting period applicable to the
consummation of the transactions contemplated hereby shall have expired or
been terminated and all consents, approvals, authorizations, waivers and
amendments from any governmental authority which are necessary for the
consummation of the transactions contemplated hereby set forth on Schedule
3.3(c) and Schedule 4.3 shall have been obtained. Without limiting the
generality of the foregoing, (i) the waiting period under the HSR Act with
respect to the transactions contemplated hereby shall have expired or
terminated without the imposition of any restrictions or conditions by the
Federal Trade Commission or the United States Department of Justice which
would have a Material Adverse Effect on the Company or either of the parties
and (ii) the appropriate PUC shall have issued a final and unappealable order
approving the transactions contemplated hereby, and such order shall not
contain any restrictions or conditions (other than those in effect on the date
hereof or requiring that the regulatory treatment with respect to the Company
in existence as of the date of this Agreement be continued following the
transactions contemplated hereby) which would have a Material Adverse Effect
on the Company or either of the parties.
(b) No Injunctions or Restraints. No applicable law or injunction
enacted, entered, promulgated, -enforced or issued by any governmental
authority or other legal restraint or prohibition preventing the consummation
of the transactions contemplated hereby shall be in effect; provided, however,
that each of the AWW, GWS and Buyer shall have used its best efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered.
(c) Notices and Consents. All notices required to be given prior the
Closing Date to, and all consents, approvals, authorizations, waivers and
amendments required to be obtained prior to the Closing Date from, any third
party in connection with the consummation of the transactions contemplated
hereby set forth on Schedule 3.3(c) and Schedule 4.3, have been made and/or
obtained, other than those consents, approvals, authorizations, waivers and
amendments the failure of which to obtain would not have a Material Adverse
Effect.
(d) Related Purchase Agreements. The conditions to the consummation
of the purchase and sale transactions contemplated by the Related Purchase
Agreements shall have been satisfied prior to or concurrently with the
Closing.
39
6.2. Conditions Precedent to Obligations of Buyer. All obligations of
Buyer to consummate the transactions are subject to satisfaction (or waiver in
writing by Buyer) at or prior to the Closing Date of each of the following
conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Sellers set forth in Article III not qualified as to
materiality shall be true and correct in all material respects and such
representations and warranties qualified as to materiality shall be true and
correct in all respects, in each case as if made on and as of the Closing Date
except for any representation or warranty made as of a specific date which
shall be true and correct as of such date. Buyer shall have received a
certificate signed by the chief financial officer or vice president of AWW
dated the Closing Date certifying as to the foregoing.
(b) Performance of Obligations. AWW and GWS shall have performed or
complied in all material respects with all covenants and agreements that are
to be performed by or complied with by them under this Agreement at or prior
to the Closing; and shall have delivered to Buyer certificates signed by an
authorized officer of each of AWW and GWS certifying as to fulfillment of the
conditions set forth in this Section 6.2 with respect to each of AWW and GWS.
(c) Secretary's Certificates. Buyer shall have received
certificates, dated as of the Closing Date, signed by the Secretary of each of
AWW and GWS and certifying as to (i) its certificate of incorporation and
bylaws, (ii) the incumbency of officers executing this Agreement, and (iii)
the resolutions of the Board of Directors of each of AWW and GWS authorizing
the execution, delivery and performance by each of them of this Agreement.
(d) Opinion of Counsel. Buyer shall have received from Xxxxxxx Xxxx,
counsel to the Company, Xxxxxxx Xxxx, counsel to the Sellers, and Xxxxxxx
Xxxxxxx & Xxxxxxxx, special New York counsel to the Sellers or, in each case,
other counsel to the Company or the Sellers reasonably satisfactory to Buyer,
opinions dated the Closing Date, in form and substance reasonably satisfactory
to Buyer, collectively covering the matters set forth in Exhibit A hereto.
(e) Shares. The Sellers shall have delivered to Buyer either (i)
certificates for the Shares, free and clear of any liens, restrictions or
encumbrances or (ii) certificates representing all of the capital stock of a
holding corporation that has no other asset or liabilities other than the
Shares (which shall be free and clear of any liens, restrictions or
encumbrances) and the capital stock of the corporations being sold pursuant to
the Related Purchase Agreements.
6.3. Conditions Precedent to Obligations of the Sellers. All obligations
of the Sellers to consummate the transactions are subject to satisfaction (or
waiver in writing by the Sellers) at or prior to the Closing Date of each of
the following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Buyer set forth in Article III not qualified as to
materiality shall be true and correct in all material respects and such
representations and warranties qualified as to materiality shall be true and
correct in all respects, in each case as if made on and as of the Closing Date
except for any representation or warranty made as of a specific date which
shall be true and correct as of
40
such date. The Sellers shall have received a certificate signed by an
authorized officer of Buyer dated the Closing Date certifying as to the
foregoing.
(b) Performance of Obligations. Buyer shall have performed or
complied in all material respects with all covenants and agreements that are
to be performed by or complied with by it under this Agreement at or prior to
the Closing, including delivery of the Purchase Price specified in Section
2.1; and shall have delivered to the Sellers a certificate signed by an
authorized officer of Buyer certifying as to fulfillment of the conditions set
forth in this Section 6.3 with respect to Buyer.
(c) Secretary's Certificates. The Sellers shall have received a
certificate, dated as of the Closing Date, signed by the Secretary of Buyer
certifying as to (i) its certificate of incorporation and bylaws, (ii) the
incumbency of officers executing this Agreement, and (iii) the resolutions of
the Board of Directors of Buyer authorizing the execution, delivery and
performance by each of them of this Agreement.
(d) Opinion of Counsel. The Sellers shall have received from one or
more counsel to Buyer an opinion or opinions dated the Closing Date, in form
and substance reasonably satisfactory to the Sellers, covering the matters set
forth in Exhibit B hereto.
ARTICLE VII
TERMINATION
7.1. Termination of Agreement.
(a) Subject to the provisions of Section 7.2, this Agreement may be
terminated and the transactions contemplated by this Agreement abandoned at
any time prior to the Closing:
(i) by mutual written consent of the Sellers and Buyer; or
(ii) by either the Sellers or Buyer, if the Closing does not
occur on or prior to December 31, 2002; provided, however, that this right of
termination shall not be available to any party whose material breach has
caused the failure of the consummation of the Agreement by such date;
(iii) by the Sellers or Buyer if any of the conditions set
forth in Section 6.1 shall have become incapable of fulfillment; provided,
however, that this right of termination shall not be available to any party
whose material breach has caused such conditions to be incapable of
fulfillment;
(iv) by Buyer if any of the conditions set forth in Section 6.2
shall have become incapable of fulfillment, and shall not have been waived by
Buyer; provided, however, that this right of termination shall not be
available to Buyer if Buyer's material breach has caused such conditions to be
incapable of fulfillment; or
(v) by the Sellers if any of the conditions set forth in
Section 6.3 shall have become incapable of fulfillment, and shall not have
been waived by the Sellers; provided,
however, that this right of termination shall not be available to the Sellers
if the Sellers' material breach has caused such conditions to be incapable of
fulfillment.
(b) In the event of termination by the Sellers or Buyer pursuant to
this Section 7.1, written notice thereof shall forthwith be given to the other
and the transactions contemplated by this Agreement shall be terminated,
without further action by any party. If the transactions contemplated by this
Agreement are terminated as provided herein:
(i) Buyer shall return all documents and other material received
from the Sellers relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the Sellers; and
(ii) all confidential information received by Buyer with respect
to the business of the Sellers and the Company shall be treated in accordance
with the Confidentiality Agreement, which shall remain in full force and
effect notwithstanding the termination of this Agreement.
7.2. Effect of Termination. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in Section 7.1,
this Agreement shall become null and void and of no further force and effect,
except for the provisions of Sections 5.4, 5.9 and this Article 7. Nothing in
this Section 7.2 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or to
impair the right of any party to compel specific performance by any other
party of its obligations under this Agreement.
7.3. Survival of Representations, Warranties and Covenants. The
representations and warranties contained in this Agreement and in the
certificates delivered pursuant to Sections 6.2 and 6.3 shall terminate
eighteen (18) months after the Closing, except that the representations
contained in Section 3.6 and the related indemnity obligations contained in
Article 8 shall terminate on, and no action or claim with respect thereto may
be brought following the expiration of, the applicable statute of limitations
(or extensions or waivers thereof). The covenants to be performed prior to the
Closing pursuant to this Agreement shall terminate upon the Closing. All other
covenants shall survive the Closing and remain in effect indefinitely.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification by the Sellers.
(a) Subject to the limitations contained in this Article 8, after
the Closing, the Sellers, jointly and severally, hereby agree to indemnify
Buyer and its respective officers, directors and Affiliates against and hold
them harmless from and against any and all Damages arising out of or resulting
from any breach of any representation, warranty, covenant or agreement made by
the Sellers or the Company in this Agreement or in any document or certificate
required to be furnished to Buyer by any of the Sellers or the Company
pursuant to this Agreement (including the Transaction Documents).
42
(b) Buyer acknowledges and agrees that the Sellers shall not have
any liability under any provision of this Agreement for any Damages to the
extent that such Damages relate to actions taken by or omitted to be taken by
Buyer or the Company after the Closing Date.
(c) For purposes of this Agreement, "Damages" shall mean any and all
losses, liabilities, obligations, damages (including costs of investigation,
clean-up and remediation), deficiencies, interest, costs and expenses and any
claims, actions, demands, causes of action, judgments, costs and reasonable
expenses (including reasonable attorneys' fees and all other reasonable
expense incurred in investigating, preparing or defending any litigation or
proceeding, commenced or threatened, incident to the successful enforcement of
this Agreement). Damages shall not include the loss of profits of the party
seeking indemnification, or punitive damages unless the party seeking
indemnification has had punitive damages assessed or asserted against it.
(d) Buyer shall take all commercially reasonable steps to mitigate
any Damages upon becoming aware of any event which would reasonably be
expected to, or does, give rise to Damages, including incurring costs only to
the minimum extent necessary to remedy the breach which gives rise to such
Damages.
8.2. Indemnification by Buyer.
(a) Subject to the limitations contained in this Article 8, after
the Closing, Buyer hereby agrees to indemnify the Sellers and their respective
officers, directors and Affiliates against and hold them harmless from any
Damages suffered or incurred by any such indemnified party (i) as a direct
consequence of (A) any breach of any representation or warranty of Buyer
contained in this Agreement or in the certificates delivered to the Sellers
pursuant to Section 6, (B) any breach of any covenant of Buyer contained in
this Agreement, (C) any obligation or liability of the Company regardless of
when such obligation or liability arose to the extent such liability or
obligation does not give rise to a claim against the Sellers under Section
8.1(a), and (D) any claim, proceeding or suit brought against AWW or GWS under
WARN or any other local, state, Federal or foreign law, which relates to
actions taken by Buyer or the Company at any time after the Closing with
regard to the employment of the Company's employees or (ii) arising out of or
otherwise in respect of: (A) termination by the Buyer or the Company of any
Employee of the Company at any time after the Closing; (B) failure of Buyer or
the Company to comply with its obligations under Section 5.10(a) hereof; (C)
failure of Buyer or, after the Closing, the Company to comply with its
obligations including, but not limited to, any statutory bargaining
obligations, with respect to or under the Collective Bargaining Agreements or
the MOA; (D) liability on the part of either Seller or any of their Affiliates
resulting from any failure of Buyer to obtain the consent of the Union to the
substitution of Buyer's compensation and employee benefit plans for the
Sellers' compensation and employee benefit plans, or (E) any claim by any
Employee of the Company for severance pay on account of this Agreement (except
for employees terminated or laid off as a result of the actions contemplated
by Section 5.20).
(b) The Sellers shall take all commercially reasonable steps to
mitigate any Damages upon becoming aware of any event which would reasonably
be expected to, or does, give rise to Damages, including incurring costs only
to the minimum extent necessary to remedy the breach which gives rise to such
Damages.
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8.3. Limitations. The Sellers shall not be liable under Sections 8.1 for
Damages thereunder unless the aggregate of all Damages, for which the Sellers
would (but for this Section 8.3) be liable, together with all other claims for
Damages under Section 8.1 of each of the Related Purchase Agreements, exceeds
on a cumulative basis $1,000,000 (the "Threshold Amount"), and then only to
the extent of any such aggregate excess and in no event shall the liability of
the Sellers under Section 8.1 of this Agreement and the Related Purchase
Agreements exceed $25,000,000 in the aggregate (the "Ceiling").
8.4. Other Limitations. From and after the Closing, no claim for
indemnity shall be made by either Buyer or the Sellers if such claim is based
on or related to (a) an event or facts disclosed to such party in writing
prior to the Closing or of which the party seeking indemnification otherwise
was aware prior to the Closing, or (b) to the extent and in the dollar amount
such matter is reflected in the Post-Closing Statement.
8.5. Termination of Indemnification. The obligations to indemnify and
hold harmless a party hereto, (i) pursuant to Sections 8.1(a) and 8.2(a)(i),
shall terminate when the applicable representation or warranty terminates
pursuant to Section 7.3, and (ii) pursuant to the other clauses of Sections
8.1 and 8.2, shall not terminate; provided, however, that as to clauses (i)
and (ii) above such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the person to be indemnified
shall have, before the expiration of the applicable period, previously made a
claim by delivering a notice (stating in reasonable detail the basis of such
claim) to the party providing the indemnification; provided, further that any
such claim shall be deemed to have been withdrawn and waived eighteen (18)
months after being made, unless (A) court proceedings shall have been
commenced with respect to such claim within such 18-month period, or (B) such
claim shall have been waived or satisfied within such 18-month period.
8.6. Procedures Relating to Indemnification.
(a) A party seeking indemnification pursuant to this Article 8 (an
"Indemnified Party") shall give prompt written notice to the party from whom
such indemnification is sought (the "Indemnifying Party") of the assertion of
any claim, the incurrence of any Damages, or the commencement of any action,
suit or proceeding of which it has knowledge and in respect of which indemnity
may be sought hereunder (a "Third Party Claim"), and will give the
Indemnifying Party such information with respect thereto as the Indemnifying
Party may reasonably request, but failure to give such required notice shall
relieve the Indemnifying Party of any liability hereunder only to the extent
that the Indemnifying Party has suffered actual prejudice thereby. Thereafter,
the Indemnified Party shall deliver to the Indemnifying Party, within ten (10)
business days after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified
Party relating to such Third Party Claim. The Indemnifying Party shall have
the right, exercisable by written notice to the Indemnified Party after
receipt of notice from the Indemnified Party of the commencement of or
assertion of any claim or action, suit or proceeding by a third party in
respect of which indemnity may be sought hereunder, to assume the defense of
such Third Party Claim which involves (and continues to involve) solely
monetary damages using counsel reasonably satisfactory to the Indemnified
Party; provided, that (A) the Indemnifying Party expressly agrees in such
notice that, as between the Indemnifying Party and the Indemnified Party,
solely the Indemnifying Party shall be obligated to satisfy and discharge the
Third Party
44
Claim, (B) such Third Party Claim does not include a request or demand for
injunctive or other equitable relief and (C) the Indemnifying Party makes
reasonably adequate provision to assure the Indemnified Party of the ability
of the Indemnifying Party to satisfy the full amount of any adverse monetary
judgment that is reasonably likely to result. The Indemnifying Party shall be
deemed to have satisfied the condition set forth in clause (C) of the
preceding sentence if it is a regulated utility. Should the Indemnifying Party
elect to assume the defense of a Third Party Claim pursuant to this Section
8.6, the Indemnifying Party will not be liable to the Indemnified Party for
legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof.
(b) Neither the Indemnified Party nor the Indemnifying Party shall
admit any liability with respect to, or settle, compromise or discharge any
Third Party Claim without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed.
(c) The Indemnifying Party or the Indemnified Party, as the case may
be, shall have the right to participate in (but not control), at its own
expense, the defense of any Third Party Claim which the other party is
defending as provided in this Agreement.
(d) The Indemnifying Party, if it shall have assumed the defense of
any Third Party Claim in accordance with the terms hereof, shall have the
right, upon 30 days prior written notice to the Indemnified Party, to consent
to the entry of judgment with respect to, or otherwise settle such Third Party
Claim.
(e) In the event of any indemnification claim under this Article 8
involving a Third Party Claim, the Indemnified Party shall cooperate fully
(and shall cause its Affiliates to cooperate fully) with the Indemnifying
Party in the defense of any such claim under this Article 8. Without limiting
the generality of the foregoing, the Indemnified Party shall furnish the
Indemnifying Party with such documentary or other evidence as is then in its
or any of its Affiliates' possession as may reasonably be requested by the
Indemnifying Party for the purpose of defending against any such claim.
Whether or not the Indemnifying Party chooses to defend or prosecute any claim
involving a third party, all the parties hereto shall cooperate in the defense
or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings,
trials and appeals, as may be reasonably requested in connection therewith.
Such cooperation shall include access during normal business hours afforded to
the Indemnifying Party to, and reasonable retention by the Indemnified Party
of, records and information which are reasonably relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder, and the Indemnifying Party shall reimburse the Indemnified Party
for all its reasonable out-of-pocket expenses in connection therewith.
(f) The parties acknowledge that Buyer (and the other Persons for
which they can claim indemnity hereunder) shall be entitled to indemnification
for Damages in respect of intentional and willful breaches of covenants or
agreements in this Agreement irrespective of the Threshold Amount or the
Ceiling (it being understood that the failure to cure a breach shall not, by
itself, be an intentional and willful breach). Notwithstanding anything to the
contrary in this Article 8, Buyer (or the other Persons for which they can
claim indemnification) shall be entitled
45
to indemnification for Damages in respect of a breach of Section 3.2 and 3.6
irrespective of the Threshold Amount or the Ceiling.
(g) Each of the parties hereto agrees that its sole and exclusive
remedy after the Closing with respect to any and all claims relating to this
Agreement, the Company, the events giving rise to this Agreement and the
transactions provided for herein or contemplated hereby, shall be pursuant to
the indemnification provisions contained in this Article 8. Without limiting
the generality or effect of the foregoing, as a material inducement to the
other parties hereto entering into this Agreement, Buyer hereby waives, from
and after the Closing, any claim or cause of action, known and unknown,
foreseen and unforeseen, which it or any of its Affiliates (including after
the Closing, the Company) may have against the other parties hereto, including
without limitation under the common law or federal or state securities laws,
trade regulation laws or other laws (including CERCLA and any other
Environmental Laws), by reason of this Agreement, the events giving rise to
this Agreement and the transactions provided for herein or contemplated hereby
or thereby, except for claims or causes of action brought under and subject to
the terms and conditions of the indemnification provisions contained in this
Article 8.
(h) Indemnification for any claim under this Article 8 shall not be
available to any Indemnified Party unless such Indemnified Party, if requested
to do so by the Indemnifying Party, first seeks recovery from any Collateral
Source for such claim before making any claim for indemnification by the
Indemnifying Party; provided that the Indemnifying Party shall pay the costs
and expenses incurred by the Indemnified Party in seeking such recovery from
such Collateral Source. Any Indemnifying Party may, in its sole discretion,
require any Indemnified Party to grant an assignment of the right of such
Indemnified Party to assert a claim against any Collateral Source if the
Indemnifying Party has first fully satisfied the claim by the Indemnified
Party. In the event of such assignment, the Indemnifying Party will pursue
such claim at its own expense.
(i) No right to indemnification under this Article 8 shall be
limited by reason of any investigation or audit, conducted before or after the
Closing, of any party hereto including, without limitation, the knowledge of
such party of any breach of any representation, warranty, agreement or
covenant by the other party at any time, or the decision by such party to
complete the Closing provided that such party has informed the breaching party
of its desire to preserve its rights in respect of such breach despite the
Closing and the Indemnifying Party has waived in writing Section 8.4(a)
hereof.
(j) No party shall have any liability to another party under this
Article 8 for Damages (and no cost or expense relating to such Damages shall
be included in determining the extent of Damages incurred by such party for
purposes of Section 8.3) to the extent that:
(A) the Indemnified Party recovers insurance proceeds covering
the Damages or otherwise recovers payments in respect of such
Damages from any other source (whether in a lump sum or stream of
payments); or
(B) the Indemnified Party's Tax liability is actually reduced
as a result of a tax benefit to which the Indemnified Party becomes
entitled in respect of the Damages.
46
(k) Buyer agrees to use its commercially reasonable efforts to give
timely and effective written notice to the appropriate insurance carrier(s) of
any occurrence or circumstances which, in the judgment of Buyer consistent
with its customary risk management practices, appear likely to give rise to a
claim against Buyer that is likely to involve one or more insurance policies
of Buyer. Any such notice shall be given in good faith by Buyer without regard
to the possibility of indemnification payments by the Sellers under this
Article 8, and shall be processed by Buyer in good faith and in a manner
consistent with its risk management practices involving claims for which no
third party contractual indemnification is available.
(l) If at any time subsequent to the receipt by an Indemnified Party
of an indemnity payment hereunder, such Indemnified Party (or any Affiliate
thereof) receives any recovery, settlement or other similar payment with
respect to the Damages for which it received such indemnity payment (including
insurance proceeds and other payments pursuant to Section 8.6(h)(A) and a tax
benefit pursuant to Section 8.6(h)(B)) (the "Recovery"), such Indemnified
Party shall promptly pay to the Indemnifying Party an amount equal to the
amount of such Recovery, less any expense incurred by such Indemnified Party
(or its Affiliates) in connection with such Recovery, but in no event shall
any such payment exceed the amount of such indemnity payment.
ARTICLE IX
MISCELLANEOUS
9.1. Entire Agreement. This Agreement, together with the Confidentiality
Agreement, Schedules, exhibits hereto (each, an "Exhibit") and other
Transaction Documents, sets forth the entire agreement and understanding of
the parties hereto with respect to the transactions contemplated herein and
the other matters set forth herein and supersedes all prior agreements or
understandings, oral or written, among the parties regarding those matters.
9.2. Amendment; Severability; Waiver. This Agreement may be amended,
modified or supplemented only by a written instrument duly executed by the
parties hereto. If any provision of this Agreement shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision hereof,
and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. Any term or provision
of this Agreement may be waived at any time by Buyer, in the case of
compliance by the Sellers, or the Sellers, in the case of compliance by Buyer,
with any term or provision of this Agreement that the Sellers, on the one
hand, or Buyer, on the other hand, was or is obligated to perform or comply
with, by a written instrument duly executed by Buyer or the Sellers. The
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such party at a later
time to enforce the same or any other provision of this Agreement. No waiver
of any condition or of the breach of any provision of this Agreement in one or
more instances shall operate or be construed as a waiver of any other
condition or subsequent breach.
9.3. Interpretation. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, the part the whole, (b) references to any gender include
all genders, (c) "or" has the inclusive meaning frequently identified with the
phrase "and/or," (d) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to," (e) references to "hereby,"
"hereunder" or
47
"herein" relate to this Agreement and (f) any references to any federal,
state, local or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder. The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section, subsection, Exhibit and Schedule references
are to this Agreement unless otherwise specified. The parties acknowledge and
agree that (i) each party and its counsel have reviewed the terms and
provisions of this Agreement and have contributed to its drafting, (ii) the
normal rule of drafting, to the effect that any ambiguities are resolved
against the drafting party, shall not be employed in the interpretation of
this Agreement, and (iii) the terms and provisions of this Agreement shall be
constructed fairly as to all parties hereto and not in favor of or against any
party, regardless of which party was generally responsible for the preparation
of the Agreement.
9.4. Notices. All notices that are required or permitted hereunder shall
be in writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or Federal Express or other nationally recognized delivery
service. Any notices shall be deemed given upon the earlier of the date when
received at, or the third day after the date when sent by registered or
certified mail or the day after the date when sent by Federal Express to, the
address or fax number set forth below, unless such address or fax number is
changed by notice in accordance herewith to the other parties hereto:
If to Buyer:
Aquarion Company
000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
Attention: Xx. Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
with a copy to:
Day, Xxxxx & Xxxxxx XXX
XxxxXxxxx X
Xxxxxxxx, XX 00000-0000
Fax: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxxx
If to AWW or GWS:
American Water Works Company, Inc.
0000 Xxxxxx Xxx Xxxx
X.X. Xxx 0000
Xxxxxxxx, Xxx Xxxxxx 00000
Fax: 000-000-0000
Attention: W. Xxxxxxx Xxxx,
General Counsel and Secretary
48
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Attention: Xxxx X. Xxxxxxxx
9.5. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto. No party hereto may assign either
this Agreement or any of its rights, interests, benefits or obligations
hereunder without the prior written approval of the other parties, provided,
however, that either party may assign its rights, but not its obligations, to
any of its respective Affiliates; provided further that GWS may assign its
obligations to AWW or another wholly-owned subsidiary of AWW.
9.6. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of New York.
9.7. Submission to Jurisdiction. EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF,
TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM
ANY THEREOF, AND CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS, AND WAIVES TRIAL BY JURY.
9.8. Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first written above.
BUYER:
AQUARION COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
SELLERS:
AMERICAN WATER WORKS COMPANY, INC.
By: /s/ Xxxxx X. Xxxx
-----------------------------------------
Name: Xxxxx X. Xxxx
Title: Vice President and Chief Financial Officer
GREENWICH WATER SYSTEM, INC.
By: /s/ Xxxxx X. Xxxx
-----------------------------------------
Name: Xxxxx X. Xxxx
Title: Vice President and Chief Financial Officer
50
