LLC PURCHASE AGREEMENT by and between AQUASOURCE, INC. and FUDD & DUDD ACQUISITION LLC Dated as of March 14, 2003
Exhibit 10.17
by and between
AQUASOURCE, INC.
and
FUDD & DUDD ACQUISITION LLC
Dated as of March 14, 2003
TABLE OF CONTENTS
ARTICLE I |
1 | |||||
Section 1.1 |
Sale and Transfer of Membership Interests. |
1 | ||||
Section 1.2 |
The Purchase Price. |
1 | ||||
Section 1.3 |
Purchase Price Adjustment. |
2 | ||||
Section 1.4 |
Accounts Receivable and Accounts Payable. |
3 | ||||
ARTICLE II |
THE CLOSING |
3 | ||||
Section 2.1 |
Closing. |
3 | ||||
Section 2.2 |
Closing Transactions. |
3 | ||||
ARTICLE III |
3 | |||||
Section 3.1 |
Organization and Qualification. |
4 | ||||
Section 3.2 |
Subsidiaries. |
4 | ||||
Section 3.3 |
Ownership and Possession of Membership Interests; Capitalization. |
5 | ||||
Section 3.4 |
Authority; Non-Contravention; Statutory Approvals; Compliance. |
5 | ||||
Section 3.5 |
Financial Statements. |
7 | ||||
Section 3.6 |
Absence of Certain Changes or Events. |
7 | ||||
Section 3.7 |
Litigation. |
7 | ||||
Section 3.8 |
Tax Matters. |
7 | ||||
Section 3.9 |
Employee Benefits; ERISA. |
8 | ||||
Section 3.10 |
Labor and Employee Relations. |
9 | ||||
Section 3.11 |
Environmental Matters. |
10 | ||||
Section 3.12 |
No Breaches or Defaults. |
11 | ||||
Section 3.13 |
Insurance. |
11 | ||||
Section 3.14 |
Brokers or Finders. |
11 | ||||
Section 3.15 |
Real Property. |
11 | ||||
Section 3.16 |
Title to Assets. |
12 | ||||
Section 3.17 |
Limitation on Representations and Warranties. |
12 | ||||
ARTICLE IV |
12 | |||||
Section 4.1 |
Organization and Qualification. |
12 | ||||
Section 4.2 |
Authority; Non-Contravention; Statutory Approvals; Compliance. |
12 | ||||
Section 4.3 |
Litigation. |
14 | ||||
Section 4.4 |
Investigation by the Buyer; the Seller’s Liability. |
14 | ||||
Section 4.5 |
Acquisition of Membership Interests for Investment; Ability to Evaluate and Bear Risk. |
15 | ||||
Section 4.6 |
Financing. |
15 | ||||
Section 4.7 |
Brokers or Finders. |
15 | ||||
Section 4.8 |
Xxxxxxx Lease. |
15 | ||||
ARTICLE V |
15 | |||||
Section 5.1 |
Covenants of the Seller. |
15 | ||||
Section 5.2 |
Covenants of the Buyer. |
17 |
i
Section 5.3 |
Covenants of Xxxxxxx and Xxxxxxx. |
18 | ||||
ARTICLE VI |
ADDITIONAL AGREEMENTS |
18 | ||||
Section 6.1 |
Access to Company Information. |
18 | ||||
Section 6.2 |
Regulatory Matters. |
19 | ||||
Section 6.3 |
Consents. |
19 | ||||
Section 6.4 |
Reserved. |
19 | ||||
Section 6.5 |
Public Announcements. |
19 | ||||
Section 6.6 |
Workforce Matters. |
20 | ||||
Section 6.7 |
Employee Company Plans. |
21 | ||||
Section 6.8 |
Tax Treatment; Allocation of Consideration. |
22 | ||||
Section 6.9 |
Tax Indemnity and Tax Returns. |
23 | ||||
Section 6.10 |
Transfer Taxes. |
25 | ||||
Section 6.11 |
Financial Information. |
25 | ||||
Section 6.12 |
Transition Services. |
25 | ||||
Section 6.13 |
Update of Seller Disclosure Schedule. |
26 | ||||
Section 6.14 |
AquaSource Name. |
26 | ||||
Section 6.15 |
Integrated Assets. |
26 | ||||
Section 6.16 |
Excluded Assets. |
27 | ||||
Section 6.17 |
Further Assurances. |
27 | ||||
Section 6.18 |
Sole-Source. |
27 | ||||
Section 6.19 |
Work in Progress. |
28 | ||||
Section 6.20 |
Post-Closing Earn-Out. |
28 | ||||
ARTICLE VII |
CONDITIONS |
29 | ||||
Section 7.1 |
Conditions to Each Party’s Obligation to Effect the Closing. |
29 | ||||
Section 7.2 |
Conditions to Obligation of the Buyer to Effect the Closing. |
29 | ||||
Section 7.3 |
Conditions to Obligation of the Seller to Effect the Closing. |
30 | ||||
ARTICLE VIII |
TERMINATION |
31 | ||||
Section 8.1 |
Termination. |
31 | ||||
Section 8.2 |
Effect of Termination. |
32 | ||||
ARTICLE IX |
INDEMNIFICATION |
32 | ||||
Section 9.1 |
Indemnification Obligations. |
32 | ||||
Section 9.2 |
Certain Definitions. |
33 | ||||
Section 9.3 |
Limitations on Indemnification. |
33 | ||||
Section 9.4 |
Defense of Claims. |
36 | ||||
Section 9.5 |
Control of Pending Litigation. |
38 | ||||
ARTICLE X |
GENERAL PROVISIONS |
38 | ||||
Section 10.1 |
Survival of Obligations. |
38 | ||||
Section 10.2 |
Amendment and Modification. |
39 | ||||
Section 10.3 |
Extension; Waiver. |
39 | ||||
Section 10.4 |
Expenses. |
39 | ||||
Section 10.5 |
Notices. |
39 | ||||
Section 10.6 |
Entire Agreement; No Third Party Beneficiaries. |
40 | ||||
Section 10.7 |
Severability. |
40 | ||||
Section 10.8 |
Governing Law. |
41 | ||||
Section 10.9 |
Venue. |
41 |
ii
Section 10.10 |
Waiver of Jury Trial and Certain Damages. |
41 | ||||
Section 10.11 |
Assignment |
41 | ||||
Section 10.12 |
Interpretation |
41 | ||||
Section 10.13 |
No Specific Enforcement. |
41 | ||||
Section 10.14 |
Counterparts; Effect. |
42 |
iii
INDEX OF PRINCIPAL TERMS
Term |
Page | |
Adjustment Schedule |
22 | |
Affected Employees |
19 | |
Agreement |
1 | |
Allocation Dispute Notice |
22 | |
Allocation Revision Notice |
22 | |
Allocation Schedule |
22 | |
Audit |
24 | |
Brittmoore Sublease |
25 | |
Business Employees |
8 | |
Business Plan |
15 | |
Xxxxxxx |
1 | |
Buyer |
1 | |
Buyer Disclosure Schedule |
12 | |
Buyer Indemnifiable Loss |
31 | |
Buyer Indemnified Liabilities |
32 | |
Buyer Indemnitee |
31 | |
Buyer Material Adverse Effect |
12 | |
Buyer Required Consents |
13 | |
Buyer Required Statutory Approvals |
13 | |
Buyer Subsidiary |
12 | |
Closing |
3 | |
Closing Date |
3 | |
COBRA |
20 | |
Code |
8 | |
Company |
1 | |
Company Financial Statements |
7 | |
Company Material Adverse Effect |
4 | |
Company Plans |
8 | |
Company Subsidiary |
5 | |
Confidentiality Agreement |
19 | |
Construction I |
1 | |
Construction II |
1 | |
Construction, LP |
1 | |
Contracts |
11 | |
December 31, 2002 Balance Sheet |
7 | |
Deficiency |
2 | |
Direct Claim |
36 | |
DQE |
6 | |
Earn-Out Payment |
27 | |
Encumbrances |
3 | |
Environmental Laws |
10 |
iv
Term |
Page | |
ERISA |
8 | |
ERISA Affiliate |
8 | |
Estimated Purchase Price Adjustment |
2 | |
Excess |
2 | |
Exchange Act |
6 | |
Excluded Assets |
26 | |
Final Allocation Schedule |
22 | |
Final Closing Statement |
2 | |
Final Order |
28 | |
Governmental Authority |
6 | |
Hazardous Substances |
10 | |
Xxxxxxx Claims |
32 | |
Xxxxxxx Lease |
15 | |
Indemnifiable Loss |
32 | |
Indemnity Basket |
33 | |
Indemnity Cap |
33 | |
Indemnity Period |
32 | |
Initial Termination Date |
30 | |
Integrated Assets |
26 | |
Membership Interests |
1 | |
Xxxxxxx |
1 | |
Permitted Encumbrances |
3 | |
Purchase Price |
1 | |
Real Property |
11 | |
Representatives |
14 | |
SEC |
6 | |
Securities Act |
3 | |
Seller |
1 | |
Seller Disclosure Schedule |
4 | |
Seller Indemnifiable Loss |
32 | |
Seller Indemnified Liabilities |
32 | |
Seller Indemnitee |
32 | |
Seller Required Consents |
6 | |
Seller Required Statutory Approvals |
6 | |
Seller SEC Reports |
6 | |
Straddle Period |
23 | |
Subsidiary |
4 | |
Tax |
8 | |
Tax Claim |
23 | |
Tax Return |
8 | |
Third Party Claim |
35 | |
Violation |
5 | |
WARN Act |
19 |
v
This LLC Purchase Agreement, dated as of March 14, 2003 (this “Agreement”), is entered into by and between AquaSource, Inc., a Delaware corporation (the “Seller”), and Fudd & Dudd Acquisition LLC, a Texas limited liability company (the “Buyer”).
ARTICLE I
PURCHASE AND SALE OF MEMBERSHIP INTERESTS
Section 1.1 Sale and Transfer of Membership Interests. Subject to the terms and conditions of this Agreement, on the Closing Date (as defined in Section 2.1), the Seller agrees to sell, convey, assign, transfer and deliver to the Buyer, and the Buyer agrees to purchase and accept from the Seller, all of the Seller’s rights, title and interest in and to the Membership Interests.
1
Section 1.3 Purchase Price Adjustment.
(a) The parties acknowledge that the Purchase Price of $7,091,059 set forth in Section 1.2 hereof reflects the sum of $2,446,521 and the aggregate value, as of December 31, 2002, of the Company’s (i) inventory (ii) accounts receivable, (iii) work in progress, (iv) net amount of prepayments and payables, and (v) outstanding long-term notes receivables (lease purchase notes) (items (i) through (v), collectively, the “Purchase Price Components”), with the value of each Purchase Price Component determined as contemplated by Exhibit 1.3 attached hereto. The parties agree that at the Closing, the Purchase Price of $7,091,059 shall be adjusted by an amount of dollars, positive or negative, as the case may be, to reflect the difference between $7,091,059 and the sum of $2,446,521 and the aggregate value, as of the Closing Date, of the Company’s Purchase Price Components, with the value of each Purchase Price Component determined as contemplated by Exhibit 1.3 attached hereto (the net amount of any such adjustment, the “Purchase Price Adjustment”). At least ten (10) calendar days prior to the Closing Date, the Seller shall prepare and deliver to the Buyer in good faith its estimate of the Purchase Price Adjustment, if any, (the “Estimated Purchase Price Adjustment”) showing the adjustments contemplated by this Section 1.3 for the Buyer’s review and comment. At the Closing, the Purchase Price shall be adjusted to reflect the Estimated Purchase Price Adjustment, subject to further adjustment post-Closing as contemplated by Section 1.3(b).
(b) Within thirty (30) calendar days following the Closing Date, the Seller shall prepare and deliver to the Buyer in good faith a final closing statement setting forth the Purchase Price Adjustment in accordance with this Section 1.3 (the “Final Closing Statement”). Within thirty (30) calendar days following the Buyer’s receipt of the Final Closing Statement, the Buyer may object in good faith to the Purchase Price Adjustment (as reflected on the Final Closing Statement) in writing. In the event of any such objection, the Buyer and the Seller shall attempt to resolve their differences by negotiation. If such Parties are unable to do so within thirty (30) calendar days following Seller’s receipt of the Buyer’s objection, the Seller and the Buyer shall appoint a nationally recognized accounting firm mutually acceptable to each of the Seller and the Buyer, which shall, at the Seller’s and the Buyer’s joint expense, review the Final Closing Statement and determine the Purchase Price Adjustment, if any, within thirty (30) calendar days of such appointment. The Seller and the Buyer agree to cooperate with such accounting firm and provide it with such information as it reasonably requests to enable it to make such determination. The finding of such accounting firm shall be binding on the Parties hereto. Upon determination by agreement of the Seller and the Buyer or by binding determination of said accounting firm of the Purchase Price Adjustment, (i) if the Purchase Price Adjustment exceeds the Estimated Purchase Price Adjustment (such excess amount, the “Deficiency”), the Buyer shall pay to the Seller the Deficiency, or (ii) if the Estimated Purchase Price Adjustment exceeds the Purchase Price Adjustment (such excess amount, the “Excess”), the Seller shall pay to the Buyer the Excess. Any portion of any Deficiency or Excess owed hereunder shall be paid to the Party or Parties owed the same by the Party or Parties owing the same by wire transfer in immediately available funds to an account designated by the Party or Parties owed the same no later than five (5) business days following the determination by agreement of the Seller and the Buyer or by binding determination of said accounting firm of the Purchase Price Adjustment, and such payment shall be accompanied by an additional payment of interest, calculated with a 4% annual interest rate from the date of Closing to the date of payment
2
under this provision.
ARTICLE II
Section 2.2 Closing Transactions. At the Closing:
(a) The Seller shall deliver to the Buyer (i) free and clear of any liens, claims, security interests and other encumbrances of any nature whatsoever (collectively, “Encumbrances”), except for those Encumbrances arising under the Securities Act of 1933, as amended (the “Securities Act”) or any applicable state securities laws and those Encumbrances created by this Agreement or the Buyer (collectively, Permitted Encumbrances”), certificates representing the Membership Interests, each such certificate to be duly and validly endorsed in favor of the Buyer or accompanied by a separate instrument of assignment sufficient to vest in the Buyer good title to the Membership Interests and (ii) such other documents or payments as are required to be delivered or made by the Seller to the Buyer pursuant hereto;
(b) The Buyer shall deliver to the Seller (i) the Purchase Price, as adjusted as contemplated by Section 1.3 hereof, by promissory note and wire transfer in immediately available funds to an account designated by the Seller prior to Closing, as contemplated by Section 1.2 and (ii) such other documents or payments as are required to be delivered or made by the Buyer to the Seller pursuant hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
3
The Seller represents and warrants to the Buyer as follows, provided, however, that notwithstanding any other provision of this Agreement to the contrary, the Seller makes no representations or warranties with respect to any of the Excluded Assets (as defined in Section 6.16) and all representations and warranties of the Seller contained herein expressly exclude such Excluded Assets and shall not be read or deemed to be a representation or warranty regarding any Excluded Asset, consequently, as used in this Article III, the terms “Company”, “Company Subsidiary” and “Company Subsidiaries” shall not be read or deemed to include the Excluded Assets.
4
directors or similar members of the governing body of such corporation or entity (or, if there are no such voting interests, 50% or more of the equity interests in such corporation or entity) shall at the time be held, directly or indirectly, by such Person. The term “Company Subsidiary” shall mean a Subsidiary of Construction, LP.
Section 3.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
5
acceleration, loss or creation, is referred to herein as a “Violation” with respect to the Seller, the Company and any Company Subsidiary, and such term when used in Article V has a correlative meaning with respect to the Buyer and the Buyer Subsidiaries) pursuant to any provisions of (i) the articles of incorporation, by-laws or similar governing documents of the Seller, the Company or any Company Subsidiary, (ii) subject to obtaining the Seller Required Statutory Approvals, any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any Governmental Authority applicable to the Seller, the Company or any Company Subsidiary or any of their respective properties or assets, or (iii) subject to obtaining the third-party consents set forth in Section 3.4(b)(iii) of the Seller Disclosure Schedule (the “Seller Required Consents”), any material note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind to which the Seller, the Company or any Company Subsidiary is a party or by which they or any of their respective properties or assets may be bound or affected, except in the case of clause (ii) or (iii) for any such Violation which is not reasonably likely to prevent, materially delay or materially impair the Seller’s ability to consummate the transactions contemplated by this Agreement.
(d) Compliance. Except as set forth in Section 3.4(d)(i), Section 3.7, Section 3.10 or Section 3.11 of the Seller Disclosure Schedule, neither the Company nor any Company Subsidiary is in violation of or has been given notice of or is currently being charged with any violation of, or to the knowledge of the Seller is under investigation with respect to any violation of, any law, statute, order, rule, regulation, ordinance or judgment of any Governmental Authority. Except as set forth in Section 3.4(d)(ii) or Section 3.12 of the Seller Disclosure Schedule, or as disclosed in the Seller SEC Reports (as defined below) filed prior to the date hereof, the Company and each Company Subsidiary have all material permits, licenses, franchises and other governmental authorizations, consents and approvals necessary to conduct their businesses as presently conducted. Except as set forth in Section 3.4(d)(iii) of the Seller Disclosure Schedule, neither the Company nor any Company Subsidiary is in breach or violation of any term or provision of their respective articles of incorporation or by-laws. As used in this Agreement, the “Seller SEC Reports” shall mean each report, schedule, registration statement and definitive proxy statement filed with the Securities and Exchange Commission (the “SEC”) by the Seller’s parent, DQE, Inc., a Pennsylvania corporation (“DQE”), since December 31, 1999, pursuant to the requirements of the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
6
7
full in all material respects; (iii) there are no liens for Taxes upon any property or assets of the Company or any Company Subsidiary, except for liens for Taxes not yet due and payable; (iv) there are no outstanding requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment or collection of any Taxes or deficiencies against the Company or any Company Subsidiary; (v) neither the Company nor any Company Subsidiary has been a member of any affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which is the Seller or DQE); and (vi) the Company and each Company Subsidiary has qualified as, and been treated as, an entity disregarded as separate from its owner for federal and state income tax purposes at all times since the date of its formation.
(b) As used in this Agreement: (i) the term “Tax” includes all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severance, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect thereto; and (ii) the term “Tax Return” includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to Taxes.
8
full, and, to the knowledge of the Seller, no condition exists that presents a material risk to the Company of incurring any such liability, other than liability for premiums due the Pension Benefit Guaranty Corporation (which premiums have been paid when due).
9
indemnification from the Company or any Company Subsidiary pursuant to its articles of incorporation, by-laws or any
indemnification agreement. At the Closing, the Company shall deliver to the Buyer copies of the personnel files for each Affected Employee who is hired by the Buyer.
(a) Environmental Matters. Except as set forth in Section 3.11 of the Seller Disclosure Schedule:
(i) The Company and each Company Subsidiary are, and since January 1, 2000 have been, in compliance with all applicable Environmental Laws (as defined in Section 3.11(b)(i)), including, but not limited to, possessing all permits and other governmental authorizations required for their operations under applicable Environmental Laws.
(ii) (A) There is no pending or, to the knowledge of the Seller, threatened written claim, lawsuit, or administrative proceeding against the Company or any Company Subsidiary under or pursuant to any Environmental Law; (B) neither the Company nor any Company Subsidiary is subject to any administrative or judicial consent order or decree in connection with any Environmental Laws or the release of Hazardous Substances (as defined in Section 3.11(b)(ii)); and (C) neither the Company nor any Company Subsidiary has received written notice from any Person, including but not limited to any Governmental Authority, alleging that the Company or any Company Subsidiary is in violation or potentially in violation of any applicable Environmental Law or otherwise may be liable under any applicable Environmental Law.
(iii) With respect to the real property that was formerly or is currently owned or leased by the Company or any Company Subsidiary, there have been no spills or discharges of Hazardous Substances on or underneath any of such real property in violation of any applicable Environmental Law.
(b) For purposes of this Agreement:
(i) “Environmental Laws” shall mean all federal, state and local laws, regulations, rules and ordinances relating to pollution or protection of the environment, including, without limitation, laws relating to releases or threatened releases of Hazardous Substances into the environment (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata). Such laws include the common law to the extent relating to injuries caused by the release or presence of Hazardous Substances.
(ii) “Hazardous Substances” shall mean any chemicals, materials or substances defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “hazardous constituents”, “restricted hazardous materials”, “extremely hazardous substances”, “toxic substances”, “contaminants”, “pollutants”, “toxic pollutants”,
10
or words of similar meaning and regulatory effect under any applicable Environmental Law including, without limitation, petroleum and asbestos.
(c) The representations and warranties set forth in this Section 3.11 are the sole and exclusive representations and warranties relating to environmental matters made by the Seller in this Agreement.
11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
Section 4.2 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. The Buyer has all requisite corporate power and authority
12
to enter into this Agreement and, subject to the receipt of the applicable Buyer Required Statutory Approvals (as defined in Section 4.2(c)) and applicable Buyer Required Consents (as defined in Section 4.2(b)), to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation by the Buyer of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Buyer. No vote of, or consent by, the holders of any class or series of stock issued by the Buyer is necessary to authorize the execution and delivery by the Buyer of this Agreement or the consummation by it of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Buyer and, assuming the due authorization, execution and delivery hereof by the Seller, constitutes the valid and binding obligation of the Buyer enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
13
neither the Buyer nor any Buyer Subsidiary is in breach or violation of or in default in the performance or observance of any term or provision of, and no event has occurred which, with lapse of time or action by a third party, could result in a default by the Buyer or any Buyer Subsidiary under (i) their respective certificates of incorporation or by-laws or (ii) any contract, commitment, agreement, indenture, mortgage, loan agreement, note, lease, bond, license, approval or other instrument to which they are a party or by which the Buyer or any Buyer Subsidiary is bound or to which any of their property is subject.
(a) acknowledges that none of the Seller, the Company, the Company Subsidiaries or any of their respective directors, officers, shareholders, employees, affiliates, controlling Persons, agents, advisors or Representatives makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information (including in materials furnished in the Seller’s data room, in presentations by the Seller’s management, on site visits or otherwise) provided or made available to the Buyer or its directors, officers, employees, affiliates, controlling Persons, agents or Representatives, and
(b) agrees, to the fullest extent permitted by law, that none of the Seller, the Company, the Company Subsidiaries or any of their respective directors, officers, employees, shareholders, affiliates, controlling Persons, agents, advisors or Representatives shall have any liability or responsibility whatsoever to the Buyer or its directors, officers, employees, affiliates, controlling Persons, agents or Representatives on any basis (including in contract or tort, under federal or state securities laws or otherwise) based upon any information provided or made available, or statements made (including in materials furnished in the Seller’s data room, in
14
presentations by the Seller’s management, on site visits or otherwise) to the Buyer or its directors, officers, employees, affiliates, controlling Persons, advisors, agents or Representatives (or any omissions therefrom), including in respect of the specific representations and warranties of the Seller set forth in this Agreement, except that the foregoing limitations shall not apply to the Seller insofar as the Seller makes the specific representations and warranties set forth in Article III of this Agreement, but always subject to the limitations and restrictions contained in Article IX.
(b) The Buyer is able to bear the economic risk of holding the Membership Interests for an indefinite period, and has knowledge and experience in financial and business matters such that it is capable of evaluating the risks of the investment in the Membership Interests.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE CLOSING
15
prior to the Closing or earlier termination of this Agreement, the Seller agrees that, except as set forth in Section 5.1 of the Seller Disclosure Schedule and except as expressly contemplated in or permitted by (i) this Agreement, (ii) the business plan for the Company and each Company Subsidiary in the form delivered to the Buyer by the Seller on the date hereof (as the same may be amended from time to time, but only to the extent that any such amendments do not result, or are not reasonably likely to result, in a Company Material Adverse Effect, the “Business Plan”), or (iii) to the extent the Buyer shall otherwise consent in writing, which decision regarding consent shall be made as soon as reasonably practical, and which consent shall not be unreasonably withheld, conditioned or delayed:
(a) the business of the Company and each Company Subsidiary shall be conducted in the ordinary and usual course in substantially the same manner as heretofore conducted and, to the extent consistent therewith, the Company and each Company Subsidiary shall use its respective commercially reasonable efforts to preserve its business organization intact and maintain its existing relations and goodwill with customers, suppliers, creditors, regulators, lessors, employees and business associates;
(b) the Company shall not (i) amend its certificate of formation, operating agreement or other operating documents; (ii) issue any new membership interests of the Company; (iii) declare, set aside or pay any dividend payable in cash, stock or property in respect of any Membership Interests of the Company; or (iv) repurchase, redeem or otherwise acquire any membership interests of the Company or any securities convertible into or exchangeable or exercisable for any membership interests of the Company;
(c) neither the Company nor any Company Subsidiary shall (i) issue, sell, pledge, dispose of or encumber any equity interests of, or securities convertible into or exchangeable or exercisable for, or options, warrants, calls, commitments or rights of any kind to acquire, any equity interests of the Company or any Company Subsidiary; (ii) other than in the ordinary and usual course of business, except for intercompany indebtedness, long-term indebtedness incurred in connection with the refinancing of existing indebtedness either at its maturity or at a lower cost of funds, or obtaining additional tax exempt financing, transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any other property or assets (including equity interests of any Company Subsidiary) or incur or modify any material indebtedness or other liability; or (iii) other than in the ordinary and usual course of business, make any commitments for, make or authorize any capital expenditures (other than (A) those contemplated by the Business Plan, (B) capital expenditures not in excess of $500,000 aggregate incurred in connection with the repair or replacement of facilities destroyed or damaged due to casualty or accident (to the extent not covered by insurance), (C) as required by law or by any consent agreement with a Governmental Authority by which the Company or any Company Subsidiary, or its or their assets, is bound, or (D) in amounts less than $500,000 in the aggregate in any calendar year); or (iv) other than the ordinary and usual course of business, make any acquisition of, or investment in, assets or stock of any other Person or entity in excess of $500,000 in the aggregate in any calendar year;
(d) neither the Company nor any Company Subsidiary shall terminate, establish, adopt, enter into, make any new grants or awards of stock-based or membership-based
16
compensation or other benefits under, amend or otherwise modify any Company Plan or increase the salary, wage, bonus or other compensation of any directors, officers or employees except (i) for grants or awards to directors, officers and employees under existing Company Plans in such amounts and on such terms as are consistent with past practice, (ii) in the normal and usual course of business (which shall include normal periodic performance reviews and related plans and the provision of individual Company Plans consistent with past practice for newly hired or appointed officers and employees), or (iii) for actions necessary to satisfy existing contractual obligations under Company Plans existing as of the date hereof; provided, however, that the Seller shall have satisfied its obligations with respect to the Company Plans under this provision if DQE maintains the Company Plans in such a manner as to comply with this provision;
(e) the Seller, on behalf of the Company and each Company Subsidiary, shall maintain insurance in such amounts and against such risks and losses as are consistent with the insurance heretofore maintained by the Seller or DQE on behalf of the Company and each Company Subsidiary; provided, however, that the Seller shall have satisfied its obligations under this provision if DQE maintains such insurance on behalf of the Seller;
(f) the Seller shall promptly provide the Buyer with copies of all filings made by the Seller, the Company or any Company Subsidiary with, and inform the Buyer of any communications received from, any state or federal court, administrative agency, commission or other Governmental Authority in connection with this Agreement and the transactions contemplated hereby; and
(g) the Seller shall, and shall cause the Company and each Company Subsidiary to, use all commercially reasonable efforts to promptly obtain all of the Seller Required Consents and the Seller Required Statutory Approvals. The Seller shall promptly notify the Buyer of any failure or prospective failure to obtain any such consents or approvals and, if requested by the Buyer, shall provide copies of all of the Seller Required Consents and the Seller Required Statutory Approvals obtained by the Seller, the Company and each Company Subsidiary to the Buyer.
(a) the Buyer shall promptly provide the Seller with copies of all filings made by the Buyer or any of the Buyer Subsidiaries with, and inform the Seller of any communications received from, any state or federal court, administrative agency, commission or other Governmental Authority in connection with this Agreement and the transactions contemplated hereby;
(b) the Buyer shall, and shall cause the Buyer Subsidiaries to, use all commercially reasonable efforts to promptly obtain all of the Buyer Required Consents and the
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(c) the Buyer shall not, and the Buyer shall not permit any of the Buyer Subsidiaries to, willfully take any action that would or is reasonably likely to result in a material breach of any provision of this Agreement or in any of its representations and warranties set forth in this Agreement being untrue on and as of the Closing Date or to unduly delay the Closing.
(a) issue invoices in the ordinary course and consistent with past practice for all completed work and work in progress performed by the Company, use all commercially reasonable measures in the ordinary course and consistent with past practice to collect all accounts receivable due and payable to the Company, and promptly deliver, or place in the U.S. mail postage prepaid and addressed, to the designated lockbox or to the Seller all checks and monies received in respect of accounts receivable of the Company within one business day of receipt of the same;
(b) not to take or authorize any action that would impair or delay the Company’s ability to issue invoices or collect accounts receivable; and
(c) deliver to AquaSource Utility, Inc. and AquaSource Development Company, as the case may be, copies of drawings, including electronic drawings and blueprints (as appropriate), and associated material in their or the Company’s possession in respect of all projects performed or to be performed by the Company for AquaSource Utility, Inc. or AquaSource Development Company.
The parties agree that the failure of Xxxxxxx and/or Xxxxxxx to comply with the immediately preceding sentence shall be attributable to the Buyer and that should any such failure occur, the Buyer shall be deemed to be in breach of this Agreement.
ARTICLE VI
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Subsidiary pursuant to the requirements of federal or state securities laws or filed with or sent to any federal or state regulatory agency or commission and (ii) access to all information concerning the Company or any Company Subsidiary and its or their respective directors and officers and such other matters as may be reasonably requested by the Buyer or its Representatives in connection with any filings, applications or approvals required or contemplated by this Agreement or for any other reason related to the transactions contemplated by this Agreement; provided, however, that (i) any such access shall be granted only in such a manner as not to interfere unreasonably with the Seller’s business operations in respect of the Company and the Company Subsidiaries or otherwise, (ii) upon being granted such access, the Buyer shall not interfere with the Seller’s business operations in respect of the Company and the Company Subsidiaries or otherwise, (iii) in granting any such access the Seller, the Company and the Company Subsidiaries shall not be required to take any action that would constitute a waiver of any legal privilege, including the attorney-client privilege, the work product privilege and the self critical investigation privilege, (iv) in granting any such access, the Seller, the Company and the Company Subsidiaries shall not be required to provide the Buyer with access to any information which the Seller, the Company or any Company Subsidiary is under a legal or contractual obligation to withhold from disclosure, and (v) in granting such access, the Seller, the Company and the Company Subsidiaries shall not be required to provide the Buyer with access to any information that relates exclusively to the Excluded Assets, provided that, in all cases, the Seller shall be entitled to redact information relating to the Excluded Assets from any information to which the Buyer is granted access. The Buyer shall, and shall cause its Subsidiaries and Representatives to, hold in strict confidence all documents and information concerning the Seller, the Company or any Company Subsidiary furnished or made available to it in connection with the transactions contemplated by this Agreement in accordance with the Confidentiality Agreement entered into by and between DQE, Inc., on the one hand, and Xxxxx X. Xxxxxxx and Xxxx Xxxxxxx, on the other hand, and by which the Buyer is bound as an affiliate of Messrs. Xxxxxxx and Xxxxxxx (the “Confidentiality Agreement”).
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employed by the Seller on the date hereof or on the Closing Date and who is not an Affected Employee, and (ii) from the Closing Date until the first anniversary of the Closing Date, it will cause the Company and the Company Subsidiaries not to directly or indirectly solicit for employment or employ any person who is employed by the Seller on the date hereof or on the Closing Date and who is not an Affected Employee.
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(b) Within ninety (90) calendar days after the Closing Date, the Buyer shall deliver to the Seller a schedule (the “Allocation Schedule”) allocating the sum of the Purchase Price and all of the liabilities of the Company and the Company Subsidiaries among the assets of the Company and the Company Subsidiaries, in compliance with Section 1060 of the Code and the regulations promulgated thereunder. Within ninety (90) calendar days after the determination of the adjustments pursuant to Section 1.3(b) of this Agreement, the Buyer shall deliver to the Seller a schedule (the “Adjustment Schedule”) revising the Allocation Schedule to take into account any such adjustments pursuant to Article I of this Agreement.
(c) The Seller may revise any allocation set forth on the Adjustment Schedule; provided, however, that the Seller shall notify the Buyer in writing (the “Allocation Revision Notice”) of each revised item within thirty (30) calendar days of the Seller’s receipt of the Adjustment Schedule. The Seller shall submit only one Allocation Revision Notice containing all revised items. The Buyer may dispute any revision set forth in the Allocation Revision Notice; provided, however, that the Buyer shall notify the Seller in writing (the “Allocation Dispute Notice”) of each disputed item, specifying the allocation in dispute and setting forth, in reasonable detail, the basis for such dispute within thirty (30) calendar days of the Buyer’s receipt of the Adjustment Schedule. The Buyer shall submit only one Allocation Dispute Notice containing all disputed allocations. In the event of such a dispute, the Seller and the Buyer shall attempt to reconcile their differences and any resolution by them as to any disputed allocations shall be final, binding and conclusive. If the Seller and the Buyer are unable to reach a resolution with such effect within thirty (30) calendar days of the receipt by the Seller of the
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Allocation Dispute Notice, the Seller and the Buyer shall submit the items remaining in dispute for resolution to a nationally recognized accounting firm, mutually acceptable to both the Seller and the Buyer, which shall, within thirty (30) calendar days after submission, determine and report to the Parties upon such remaining disputed allocations, and such report shall be final, binding and conclusive on the Parties hereto. All costs and expenses of the nationally recognized accounting firm relating to the disputed allocations shall be borne equally by the Seller and the Buyer.
(d) Upon agreement of the Parties with respect to the Adjustment Schedule, or the completion of a report prepared by a nationally recognized accounting firm pursuant to Section 6.8(c) of this Agreement with respect to the Adjustment Schedule, a schedule (the “Final Allocation Schedule”) setting forth the allocation among the assets of the Company and the Company Subsidiaries as specified in Section 6.8(b) and modified pursuant to Section 6.8(c) shall be prepared by the Parties. Each of the Buyer and the Seller shall (i) timely file with each relevant Tax authority all forms and Tax Returns required to be filed in connection with the allocation set forth in the Final Allocation Schedule (including Internal Revenue Service Form 8594), (ii) be bound by such allocation for purposes of determining Taxes, (iii) prepare and file, and cause their respective affiliates to prepare and file, their Tax Returns on a basis consistent with such allocation, and (iv) not take any position, or cause their respective affiliates to take any position, inconsistent with such allocation on any Tax Return, in any audit or proceeding before any Tax authority or in any report made for Tax purposes; provided, however, that, notwithstanding anything in this Section 6.8 to the contrary, the Parties shall be permitted to take a position inconsistent with that set forth in this Section 6.8 if required to do so by a final and unappealable decision, judgment, decree or other order by any court of competent jurisdiction. In the event that any of such allocations are disputed by any Tax authority, the Buyer or the Seller, as the case may be, receiving notice of the dispute shall promptly notify the Buyer or the Seller, as the case may be, not receiving notice of the dispute.
(b) The Buyer shall be liable for, shall pay to the appropriate Tax authorities, and shall hold the Seller harmless against all Taxes of the Company that relate to (i) the taxable periods that begin after the Closing Date (including, for this purpose, any Taxes attributable to transactions not in the ordinary course of business occurring after the Closing
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which are effectuated or initiated by the Buyer) and (ii) the portion of any Straddle Period commencing with the first day after the Closing Date. The Buyer shall be entitled to any Tax refund (including interest) attributable to the taxable periods for which it is so liable.
(c) The obligations of the parties to indemnify each other pursuant to this Section 6.9 shall continue until the statutory period of limitations (taking into account any extensions or waivers thereof) for the assessment of Taxes, covered by this Section 6.9, has expired. Any payment due to an indemnified party pursuant to this Section 6.9 shall be paid promptly by the indemnifying party upon receipt of written notice.
(d) Neither party shall take any action the purpose and intent of which is to prejudice the defense of any claim subject to indemnification hereunder or to induce a third party to assert a claim subject to indemnification hereunder.
(e) After the Closing, each of the Seller and the Buyer shall notify the chief tax officer of the other party in writing (including by telecopier) within 10 days of the receipt of any written notice of any pending or threatened Audit (as defined below) which, if determined adversely, could be grounds for indemnification under this Section 6.9 (a “Tax Claim”); provided, however, that any failure to give such notice shall not affect the rights of the parties hereunder unless and to the extent such failure materially and adversely affects the indemnifying party’s right to participate in and defend such Tax Claim. The Seller shall have the right at its expense to participate in and control the conduct of any Tax Claim of or attributable to the Company relating to taxable periods ending on or before the Closing Date and to employ counsel of its own choice at its expense; provided, however, that the Seller shall not settle any such Tax Claim or make or agree to any adjustment in any manner without the consent of the Buyer, which consent shall not be unreasonably withheld, conditioned or delayed; and provided, further, that the Buyer shall have the right to participate in (but not to control) such Tax Claim. If the Seller fails to participate in any Tax Claim of the Company relating to taxable periods ending on or before the Closing Date for which notice was provided pursuant to this Section 6.9(e), the Buyer may defend and settle such Tax Claim in such manner as it may deem appropriate in its sole discretion. Except as set forth above in the first sentence of this Section 6.9(e), the Buyer shall control the conduct of any Tax Claim of the Company relating to any taxable period ending after the Closing Date and may defend and settle such Tax Claim in such manner as it may deem appropriate in its sole discretion. The term “Audit” means any audit, assessment of Taxes, reassessment of Taxes, or other examination by any Governmental Authority or any judicial or administrative proceedings or appeal of such proceedings.
(f) All indemnity payments made by the Seller to the Buyer, or by the Buyer to the Seller, pursuant to this Agreement shall, to the maximum extent permitted under the Code (or other applicable Tax law), be treated for all Tax purposes as adjustments to the consideration paid with respect to the Membership Interests.
(g) The Seller shall prepare and file, or cause to be prepared and filed, when due all Tax Returns that are required to be filed by or with respect to the Company or any Company Subsidiary for taxable years or periods ending on or before the Closing Date. The Buyer shall prepare and file, or cause to be prepared and filed, when due all Tax Returns that are
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required to be filed by or with respect to the Company or any Company Subsidiary for taxable years or periods ending after the Closing Date. Any Tax Return required to be filed by the Buyer relating to any Straddle Period shall be prepared based on past practice and submitted (with copies of any relevant schedules, work papers and other documentation then available) to the Seller for the Seller’s approval not less than 30 days prior to the due date for the filing of such Tax Return, which approval shall not be unreasonably withheld. The Seller and the Buyer shall make available all books and records and cooperate with each other as reasonably necessary for the preparation and filing of any Tax Returns relating to the Company or any Company Subsidiary.
(b) The Buyer shall retain all of the books and records of the Company and the Company Subsidiaries for a period of ten years after the Closing Date or such longer time as may be required by law. After the end of such period, before disposing of such books or records, the Buyer shall give notice to such effect to the Seller and give the Seller an opportunity to remove and retain all or any part of such books or records as the Seller may select.
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Xxxxxxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxx, in the form attached hereto as Exhibit 6.12 (the “Brittmoore Sublease”). The parties further agree that following the Closing and during the term of the Brittmoore Sublease, the Seller will, or will cause AquaSource Utility, Inc. to, make available to the Company local and long distance phone service at the property leased by the Company under the Brittmoore Sublease, and in consideration therefor, the Company shall pay to the Seller: (i) five percent (5%) of the actual cost of local phone service incurred by the Seller or AquaSource Utility, Inc., as the case may be, at the Brittmoore building, and (ii) one hundred percent (100%) of the actual cost of long distance phone service incurred by the Seller or AquaSource Utility, Inc., as the case may be, at the Brittmoore building that is attributable to the Company (provided, that the Company is responsible for calculating such actual cost from applicable phone bills, subject to verification by the Seller) plus an additional ten percent (10%) system administration fee.
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obligations set forth in this Section 6.18 with respect to a particular project identified on Exhibit 6.18 to either of such companies so long as either Xxxxxxx or Xxxxxxx is the principal or principal shareholder of such company and such company then holds those assets of the Company that, as of the date hereof, would be used to perform the work and service required by such project.
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ARTICLE II
Section 7.1 Conditions to Each Party’s Obligation to Effect the Closing. The respective obligations of each party to effect the Closing shall be subject to the satisfaction on or prior to the Closing Date of the following conditions, except, to the extent permitted by applicable law, that such conditions may be waived in writing pursuant to Section 10.3 by the joint action of the parties hereto:
(a) No Injunction. No temporary restraining order or preliminary or permanent injunction or other order by any federal or state court preventing consummation of the transactions contemplated hereby shall have been issued and be continuing in effect, and the transactions contemplated hereby shall not have been prohibited under any applicable federal or state law or regulation.
(b) Statutory Approvals. The Seller Required Statutory Approvals and the Buyer Required Statutory Approvals shall have been obtained at or prior to the Closing Date, such approvals shall have become Final Orders (as defined below) and such Final Orders shall not, individually or in the aggregate, impose terms or conditions (other than the preclusion of recovery of an acquisition premium) which would have a material adverse effect on the business, operations, properties, assets, financial condition, or results of operations of the Company and the Buyer and their respective Subsidiaries taken as a whole. A “Final Order” means action by the relevant regulatory authority which has not been reversed, stayed, enjoined, set aside, annulled or suspended, with respect to which any waiting period prescribed by law before the transactions contemplated hereby may be consummated has expired, and as to which all conditions to the consummation of such transactions prescribed by law, regulation or order have been satisfied.
(a) Performance of Obligations of the Seller. The Seller (and/or the Company and the Company Subsidiaries) will have performed in all material respects its agreements and covenants contained in or contemplated by this Agreement which are required to be performed by it at or prior to the Closing.
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materiality qualification or standard contained in any such representations and warranties) which, individually or in the aggregate, would not result in a Company Material Adverse Effect.
Section 7.3 Conditions to Obligation of the Seller to Effect the Closing. The obligation of the Seller to effect the Closing shall be further subject to the satisfaction, on or prior to the Closing Date, of the following conditions, except as may be waived by the Seller in writing pursuant to Section 10.3:
(a) Performance of Obligations of the Buyer. The Buyer (and/or its appropriate Subsidiaries) will have performed in all material respects its agreements and covenants contained in or contemplated by this Agreement which are required to be performed by it at or prior to the Closing Date.
(b) Representations and Warranties. The representations and warranties of the Buyer set forth in this Agreement shall be true and correct (i) on and as of the date hereof and (ii) on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (except for representations and warranties that expressly speak only as of a specific date or time which need only be true and correct as of such date or time) except in each of cases (i) and (ii) for such failures of representations or warranties to be true and correct (without giving effect to any materiality qualification or standard contained in any such representations and warranties) which, individually or in the aggregate, would not result in a Buyer Material Adverse Effect.
(c) Closing Certificates. The Seller shall have received a certificate signed by a duly authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officer’s knowledge, the conditions set forth in Section 7.3(a) and Section 7.3(b) have been satisfied.
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(d) Buyer Material Adverse Effect. No Buyer Material Adverse Effect shall have occurred and there shall exist no fact or circumstance that would result in a Buyer Material Adverse Effect.
(e) Buyer Required Consents. The Buyer Required Consents, the failure of which to obtain would have a Buyer Material Adverse Effect, shall have been obtained.
ARTICLE VII
Section 8.1 Termination. This Agreement may be terminated at any time prior to the Closing Date:
(a) by mutual written consent of the Seller and the Buyer;
(b) by the Buyer or the Seller, if any state or federal law, order, rule or regulation is adopted or issued, which has the effect, as supported by the written opinion of outside counsel for such party, of prohibiting the Closing, or by the Buyer or the Seller, if any court of competent jurisdiction in the United States or any state shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the Closing, and, in either case, if such order, rule, regulation, judgment or decree shall have become final and nonappealable.
(c) by the Buyer or the Seller, by written notice to the other party, if the Closing Date shall not have occurred on or before the date that is forty-five (45) calendar days from the date hereof (the “Initial Termination Date”); provided, however, that the right to terminate the Agreement under this Section 8.1(c) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have proximately contributed to the failure of the Closing Date to occur on or before such date; and provided, further, that if on the Initial Termination Date the conditions to the Closing set forth in Sections 7.1(b), 7.2(e) and/or 7.3(e) shall not have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be capable of being fulfilled, then the Initial Termination Date shall be extended to the date that is ninety (90) calendar days from the date hereof;
(d) by the Buyer, by written notice to the Seller, if there shall have been any breach of any representation or warranty, or any breach of any covenant or agreement of the Seller hereunder, which breaches individually or in the aggregate would result in a Company Material Adverse Effect, and such breach shall not have been remedied within thirty (30) days after receipt by the Seller of notice in writing from the Buyer, specifying the nature of such breach and requesting that it be remedied, or the Buyer shall not have received adequate assurance of a cure of such breach within such thirty (30) day period;
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(e) by the Seller, by written notice to the Buyer, if (i) there shall have been a breach of any of the covenants contained in Section 5.3(c), or (ii) there shall have been any breach of any representation or warranty, or any breach of any other covenant or agreement of the Buyer hereunder, which breaches individually or in the aggregate would result in a Buyer Material Adverse Effect, and, in the case of either (i) or (ii), such breach shall not have been remedied within thirty (30) days after receipt by the Buyer of notice in writing from the Seller, specifying the nature of such breach and requesting that it be remedied, or the Seller shall not have received adequate assurance of a cure of such breach within such thirty (30) day period;
(f) by the Buyer if a supplement to or amendment of any section of the Seller Disclosure Schedule made by the Seller pursuant to Section 6.13 results in a Company Material Adverse Effect; or
(g) by the Seller if the Buyer shall not have satisfied, by April 1, 2003, its condition to close set forth in Section 7.2(f).
ARTICLE IX
(b) Subject to the limitations set forth in Sections 9.3 and 9.4 hereof, the Buyer shall, jointly and severally, indemnify, defend and hold harmless the Seller and its Subsidiaries, officers, directors, employees, shareholders, affiliates and agents (each, a “Seller Indemnitee”) from and against any and all Indemnifiable Losses asserted against or suffered by any Seller Indemnitee (each, a “Seller Indemnifiable Loss“) and for which a Seller Indemnitee
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makes a claim during the Indemnity Period in any way relating to, resulting from or arising out of (i) any breach by the Buyer of the representations and warranties contained in Article IV hereof, and (ii) the Seller Indemnified Liabilities (as defined below).
Section 9.2 Certain Definitions. As used in this Agreement:
(a) the term “Indemnity Period” shall mean the period of time commencing with the Closing Date and continuing until the second (2nd) anniversary of the Closing Date, provided, however, that (i) with respect to indemnity obligations in respect of Taxes, as set forth in Section 6.9 hereof, the term “Indemnity Period” shall continue until the expiration of the applicable statutory period of limitations, (ii) with respect to indemnity obligations in respect of any litigation that is set forth on Section 3.7 of the Seller Disclosure Schedule, any breach of the representations and warranties set forth in Section 3.11 hereof, and any breach of the representations and warranties set forth in Section 3.9 hereof, the term “Indemnity Period” shall continue until the sixth (6th) anniversary of the Closing Date; and, (iii) with respect to indemnity obligations in respect of COBRA Claims, the term “Indemnity Period” shall continue until the 18-month anniversary of the Closing Date.
(b) the term “Indemnifiable Loss” shall mean any claim, demand, suit, loss, liability, damage, obligation, payment, fine, penalty, cost or expense (including, without limitation, the cost and expense of any action, suit, proceeding, assessment, judgment, settlement or compromise relating thereto and reasonable attorneys’ fees and reasonable disbursements in connection therewith);
(c) the term “Buyer Indemnified Liabilities” shall mean: any Indemnifiable Loss attributable to (i) any litigation that is set forth on Section 3.7 of the Seller Disclosure Schedule, (ii) indemnity obligations of the Seller in respect of Taxes, as set forth in Section 6.9 of this Agreement, (iii) any fraud committed by the Seller or the Company (provided that the foregoing reference to the Company refers to fraud committed prior to the Closing Date), (iv) any costs and damages attributable to the period of time prior to the Closing and for which the Company is responsible pursuant to paragraph 24 of the Xxxxxxx Lease (any such costs and damages, the “Xxxxxxx Claims”), (v) claims in respect of Excluded Assets, and (vi) claims in respect those matters disclosed on Section 3.9(i) of the Seller Disclosure Schedule; and
(d) the term “Seller Indemnified Liabilities” shall mean: any Indemnifiable Loss attributable to (i) indemnity obligations of the Buyer in respect of Taxes, as set forth in Section 6.9 of this Agreement, (ii) any fraud committed by the Buyer or the Company (provided that the foregoing reference to the Company refers to fraud committed on or after the Closing Date), (iii) any violations of Environmental Laws or claims relating to spills or discharges of Hazardous Substances in respect of the underground fuel storage tanks located on or under the Real Property, and (iv) any claims experienced on or after May 1, 2003 under the Seller’s (or DQE’s) continuation coverage required under COBRA in respect of Affected Employees who continue such continuation coverage because the Buyer has failed to provide such Affected Employees with comparable coverage (any such claims, the “COBRA Claims”).
Section 9.3 Limitations on Indemnification. Notwithstanding any other
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provision of this Agreement to the contrary, the parties’ obligations pursuant to this Article IX are, and at all times shall be, subject to the limitations set forth in this Section 9.3. The parties shall not be required to indemnify, defend or hold harmless any Buyer Indemnitee or Seller Indemnitee, as the case may be, until the aggregate dollar amount of the Buyer Indemnifiable Losses or Seller Indemnifiable Losses, as the case may be, as determined by taking into account all Indemnifiable Losses (except for Indemnified Losses to which the Indemnity Cap does not apply) asserted against or suffered by the Buyer Indemnitees or the Seller Indemnitees, as the case may be, exceeds the Indemnity Basket (as defined in Section 9.3(b)), following which the indemnifying party shall indemnify, defend and hold harmless the Buyer Indemnitees or the Seller Indemnitees, as the case may be, only to the extent that the aggregate amount of Buyer Indemnifiable Losses or the Seller Indemnifiable Losses, as the case may be, exceeds the Indemnity Basket. In addition, the Seller’s liability for Buyer Indemnifiable Losses and the Buyer’s liability for Seller Indemnifiable Losses, in either case, as contemplated by this Article IX, shall in no event exceed an aggregate amount of dollars equal to the Indemnity Cap (as defined in Section 9.3(b)); provided, however, that (i) in determining whether the Seller’s liability for Buyer Indemnifiable Losses exceeds an aggregate amount of dollars equal to the Indemnity Cap, the parties shall include in such aggregate amount of dollars the amount, if any, of the Seller’s liability for Buyer Indemnifiable Losses in respect of the Xxxxxxx Claims, if any, and (ii) in determining whether the Buyer’s liability for Seller Indemnifiable Losses exceeds an aggregate amount of dollars equal to the Indemnity Cap, the parties shall include in such aggregate amount of dollars the amount, if any, of the Buyer’s liability for Seller Indemnifiable Losses in respect of the COBRA Claims, if any.
(b) As used in this Agreement, (i) the term “Indemnity Basket” shall mean One Hundred Thousand Dollars ($100,000), and (ii) the term “Indemnity Cap shall mean One Million, Two Hundred Fifty Thousand Dollars ($1,250,000). Notwithstanding any other provision of this Agreement to the contrary, (i) the Seller’s liability for Buyer Indemnifiable Losses in respect of Taxes, as set forth in Section 6.9 of this Agreement, shall not be limited by, nor taken into account in determining whether Buyer Indemnifiable Losses exceed the Indemnity Cap, shall not be limited by the requirement to make a claim during the Indemnity Period and shall not be limited by any requirement to meet or exceed the Indemnity Basket, and (ii) the Seller’s liability for Buyer Indemnifiable Losses in respect of Xxxxxxx Claims shall not be limited by the Indemnity Cap and shall not be limited by any requirement to meet or exceed the Indemnity Basket. In addition, notwithstanding any other provision of this Agreement to the contrary, (i) the Buyer’s liability for Seller Indemnifiable Losses in respect of Taxes, as set forth in Section 6.9 of this Agreement, shall not be limited by, nor taken into account in determining whether Seller Indemnifiable Losses exceed the Indemnity Cap, shall not be limited by the requirement to make a claim during the Indemnity Period, and shall not be limited by any requirement to meet or exceed the Indemnity Basket, and (ii) the Buyer’s liability for Seller Indemnifiable Losses in respect of COBRA Claims shall not be limited by the Indemnity Cap and shall not be limited by any requirement to meet or exceed the Indemnity Basket.
(c) For the avoidance of doubt, if at any time during the Indemnity Period, the amount of the Seller’s aggregate dollar amount of liability for Buyer Indemnifiable Losses, taking into account all liability for Buyer Indemnifiable Losses incurred by the Seller since the Closing Date (other than those Buyer Indemnifiable Losses that are not limited by the
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Indemnity Cap as contemplated by Section 9.3(b)), equals the Indemnity Cap, then the Seller shall have no further obligation whatsoever to indemnify, defend or hold harmless any Buyer Indemnitee in respect of any Buyer Indemnifiable Losses that are subject to the Indemnity Cap; similarly, if at any time during the Indemnity Period, the amount of the Buyer’s aggregate liability for Seller Indemnifiable Losses, taking into account all liability for Seller Indemnifiable Losses incurred by the Buyer since the Closing Date (other than those Seller Indemnifiable Losses that are not limited by the Indemnity Cap as contemplated by Section 9.3(b)), equals the Indemnity Cap, then the Buyer shall have no further obligation whatsoever to indemnify, defend or hold harmless any Seller Indemnitee in respect of any Seller Indemnifiable Losses that are subject to the Indemnity Cap.
(d) Notwithstanding any other provision of this Agreement to the contrary, any Buyer Indemnitee or Seller Indemnitee shall use commercially reasonable efforts to mitigate all losses, damages and the like relating to a claim under these indemnification provisions, including availing itself of any defenses, limitations, rights of contribution, claims against third Persons and other rights at law or equity. The Buyer Indemnitee’s or Seller Indemnitee’s, as the case may be, commercially reasonable efforts shall include the reasonable expenditure of money to mitigate or otherwise reduce or eliminate any loss or expenses for which indemnification would otherwise be due, and the indemnifying party shall, to the extent that Buyer Indemnifiable Losses or Seller Indemnifiable Losses, as the case may be, exceed the Indemnity Basket, reimburse the Buyer Indemnitee or Seller Indemnitee, as the case may be, for its reasonable expenditures (except for any portion of the wages, salary, benefits, overhead or other costs attributable to Buyer Indemnitee or Seller Indemnitee, as the case may be, and its officers, directors, employees and agents) in undertaking the mitigation and, subject to Section 9.3(b) shall, to such extent, take such expenses into account in calculating the aggregate amount of the Seller’s liability for the Buyer Indemnifiable Losses or the Buyer’s liability for the Seller Indemnifiable Losses, as the case may be. Notwithstanding any other provision of this Agreement to the contrary, any Buyer Indemnifiable Loss or Seller Indemnifiable Loss shall be net of (i) the dollar amount of any insurance or other proceeds actually received by the Buyer Indemnitee or any of its affiliates with respect to the Buyer Indemnifiable Loss or by the Seller or any of its affiliates with respect to the Seller Indemnifiable Loss, and (ii) income tax benefits to the Buyer Indemnitee, to the extent realized by the Buyer Indemnitee, or to the Seller Indemnitee, to the extent recognized by the Seller Indemnitee. Any Person seeking indemnity hereunder shall, to the extent they have the right to do so under an insurance policy, use commercially reasonable efforts to seek coverage (including both costs of defense and indemnity) under applicable insurance policies with respect to any such Buyer Indemnifiable Loss or Seller Indemnifiable Loss, as the case may be.
(e) Notwithstanding any other provision of this Agreement to the contrary, (i) the rights and remedies of the parties under this Article IX are exclusive and in lieu of any and all other rights and remedies which the parties may have under this Agreement for monetary relief with respect to (A) any breach by the parties of their respective representations and warranties and (B) the Indemnified Liabilities, and (ii) no party (nor any Buyer Indemnitee or Seller Indemnitee) shall be entitled to recover from any other party for any liabilities, damages, obligations, payments, losses, costs, or expenses under this Agreement any amount in excess of the actual compensatory damages, court costs and reasonable attorneys’ and other
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advisor fees suffered by such party (or Buyer Indemnitee or Seller Indemnitee, as the case may be). Each party waives any right to recover incidental, special, exemplary and consequential damages arising in connection with or with respect to this Agreement.
(ii) If any Seller Indemnitee receives notice of the assertion or commencement of a Third Party Claim with respect to which indemnification is to be sought from the Buyer, the Seller Indemnitee shall give the Buyer reasonably prompt written notice thereof, but in any event such notice shall not be given later than forty-five (45) calendar days after the Seller Indemnitee’s receipt of written notice of such Third Party Claim. To the extent known, such written notice shall describe the nature of the Third Party Claim in reasonable detail and shall indicate the estimated amount, if practicable, of the Seller Indemnifiable Loss that has been or may be sustained by the Seller Indemnitee. The Buyer will have the right to participate in or, by giving written notice to the Seller Indemnitee, to elect to assume the defense of any Third Party Claim by the Buyer’s own counsel, the cost for which shall be borne by the Buyer to the extent that Seller Indemnifiable Losses exceed the Indemnity Basket and shall, to such extent, be taken into account in calculating the aggregate amount of the Buyer’s liability for Seller Indemnifiable Losses under the Indemnity Cap. The Seller Indemnitee shall cooperate in good faith in such defense at such Seller Indemnitee’s own expense. If the Buyer elects not to assume the defense of any Third Party Claim, the Seller Indemnitee may compromise or settle such Third Party Claim over the objection of the Buyer, which settlement or compromise shall conclusively establish the Buyer’s liability pursuant to this Agreement.
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(b) (i) If, after a Buyer Indemnitee provides written notice to the Seller of any Third Party Claims, the Buyer Indemnitee receives written notice from the Seller that the Seller has elected to assume the defense of such Third Party Claim, the Seller will not be liable for any legal expenses subsequently incurred by the Buyer Indemnitee in connection with the defense thereof. Without the prior written consent of the Buyer Indemnitee, the Seller shall not enter into any settlement of any Third Party Claim that would lead to liability or create any financial or other obligation on the part of the Buyer Indemnitee for which the Buyer Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Buyer Indemnitee for which the Buyer Indemnitee is not entitled to indemnification hereunder and the Seller desires to accept and agree to such offer, the Seller shall give written notice to the Buyer Indemnitee to that effect. If the Buyer Indemnitee fails to consent to such firm offer within thirty (30) calendar days after its receipt of such notice, the Seller shall be relieved of its obligations to defend such Third Party Claim and the Buyer Indemnitee may contest or defend such Third Party Claim. In such event, the maximum liability of the Seller as to such Third Party Claim will be the amount of such settlement offer plus reasonable costs and expenses paid or incurred by the Buyer Indemnitee up to the date of said notice, at all time subject to the additional limitations on the Seller’s liability contained in this Article IX.
(ii) If, after a Seller Indemnitee provides written notice to the Buyer of any Third Party Claims, the Seller Indemnitee receives written notice from the Buyer that the Buyer has elected to assume the defense of such Third Party Claim, the Buyer will not be liable for any legal expenses subsequently incurred by the Seller Indemnitee in connection with the defense thereof. Without the prior written consent of the Seller Indemnitee, the Buyer shall not enter into any settlement of any Third Party Claim that would lead to liability or create any financial or other obligation on the part of the Seller Indemnitee for which the Seller Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Seller Indemnitee for which the Seller Indemnitee is not entitled to indemnification hereunder and the Buyer desires to accept and agree to such offer, the Buyer shall give written notice to the Seller Indemnitee to that effect. If the Seller Indemnitee fails to consent to such firm offer within thirty (30) calendar days after its receipt of such notice, the Buyer shall be relieved of its obligation to defend such Third Party Claim and the Seller Indemnitee may contest or defend such Third Party Claim. In such event, the maximum liability of the Buyer as to such Third Party Claim will be the amount of such settlement offer plus reasonable costs and expenses paid or incurred by the Seller Indemnitee up to the date of said notice, at all time subject to the additional limitations on the Buyer’s liability contained in this Article IX.
(c) (i) Any claim that does not result from a Third Party Claim (a “Direct Claim“) by a Buyer Indemnitee on account of a Buyer Indemnifiable Loss shall be asserted by giving the Seller reasonably prompt written notice thereof after the Buyer Indemnitee becomes aware of such Direct Claim, stating, to the extent known, the nature
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of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event such notice shall not be given later than forty-five (45) calendar days after the Buyer Indemnitee becomes aware of such Direct Claim, and the Seller shall have a period of thirty (30) calendar days from receipt of such notice within which to respond to such Direct Claim. If the Seller does not respond within such thirty (30) calendar day period, the Seller shall be deemed to have accepted, and shall be liable for, such claim. If the Seller rejects such claim, the Buyer Indemnitee will be free to seek enforcement of its right to indemnification under this Agreement.
(ii) Any Direct Claim by a Seller Indemnitee on account of a Seller Indemnifiable Loss shall be asserted by giving the Buyer reasonably prompt written notice thereof after the Seller Indemnitee becomes aware of such Direct Claim, stating, to the extent known, the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event such notice shall not be given later than forty-five (45) calendar days after the Seller Indemnitee becomes aware of such Direct Claim, and the Buyer shall have a period of thirty (30) calendar days from receipt of such notice within which to respond to such Direct Claim. If the Buyer does not respond within such thirty (30) calendar day period, the Buyer shall be deemed to have accepted, and shall be liable for, such claim. If the Buyer rejects such claim, the Seller Indemnitee will be free to seek enforcement of its right to indemnification under this Agreement.
(d) If the amount of any Buyer Indemnifiable Loss or Seller Indemnifiable Loss, as the case may be, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by, from or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the publicly announced prime rate then in effect of The Chase Manhattan Bank) shall promptly be repaid by the Buyer Indemnitee to the Seller or by the Seller Indemnitee to the Buyer, as the case may be.
ARTICLE X
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Article III and the representations and warranties of the Buyer contained in Article IV shall survive the Closing until the earlier of the expiration of the applicable Indemnity Period or the date on which the party making such representations and warranties is no longer obligated to indemnify the other party in respect of such representations and warranties, as contemplated by Article IX.
(i) If to the Seller, to
AquaSource, Inc.
c/o DQE, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: General Counsel
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
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with a copy to
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0000 Xxx Xxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxx, Esq.
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
and
(ii) if to the Buyer, to
Fudd & Dudd Acquisition LLC
00000 Xxxxxxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Telecopier No: 000-000-0000
Telephone No: 000-000-0000
with a copy to
Xxxxxxx Xxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. XxXxxx
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
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or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.
Section 10.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without giving effect to the principles of conflicts of law thereof.
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6.11, 6.12, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19, 6.20, 8.2, 10.1, 10.4, 10.7, 10.8, 10.9, 10.10, 10.11 and all of Article IX the parties agree that in the event of a breach of this Agreement, the parties shall not be entitled to specific performance of the terms hereof.
SIGNATURES FOLLOW ON NEXT PAGE
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AQUASOURCE, INC. | ||
By: |
/s/ Xxxxx X. Xxxxxxx | |
Name: |
Xxxxx X. Xxxxxxxx | |
Title: |
President |
FUDD & DUDD ACQUISITION LLC By All of Its Members: | ||
/s/ Xxxxx X. Xxxxxxx | ||
Xxxxx X. Xxxxxxx |
/s/ Xxxx Xxxxxxx | ||
Xxxx Xxxxxxx |
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