LIMITED LIABILITY INTEREST PURCHASE AGREEMENT
THIS
LIMITED LIABILITY INTEREST PURCHASE AGREEMENT (this “Agreement”) is entered into
as
of this 5th day of May, 2008 by and among Artesian Water Maryland, Inc., a
Delaware corporation (the “Buyer”), Mountain Hill Water
Company, LLC, a Maryland limited liability company (the “Company”), and Sunrise
Holdings L.P., a Pennsylvania limited partnership and the Company’s sole member
(the “Member” and
together with the Company, collectively the “Sellers”). Artesian
Resources Corporation, a Delaware corporation and the sole stockholder of the
Buyer (“Artesian”),
joins in this Agreement for the limited purposes herein set forth.
WHEREAS,
the Company is a private water utility company that provides potable water
and
fire suppression service (the “Business”) in the areas known
as Principio Business Park (current service) and Charlestown Crossing (future
service) each in ▇▇▇▇▇ County, Maryland as more fully described in the map
(the
area in orange) attached to Schedule
1.1 (the “Existing
Service Territory”), and has the ability, upon approval of the applicable
governmental authorities and the purchase and installation of the necessary
infrastructure, to provide water service to areas located outside of the
Existing Service Territory and in ▇▇▇▇▇ County, Maryland as more fully described
in the map (the area in red) attached to Schedule
1.1 (the “Potential
Expansion Service Territory”), which together with the Existing Service
Territory comprises a service territory located in ▇▇▇▇▇ County, Maryland of
approximately 8,000 acres (the Existing Service Territory and the Potential
Expansion Service Territory collectively comprise the “Service Territory”);
and
WHEREAS,
the Company contracted with the Buyer to install the Water Plant (as defined
on
Exhibit
A hereto); and
WHEREAS,
from the time that the Company first commenced operation of the Business on
October 1, 2007, the
Company has contracted with Buyer to perform both the day-to-day field
operations of the Business (namely operation of the Water Plant, transmission
lines and systems), as well as to handle certain administrative functions of
the
Business (namely billing of customers collections of accounts receivable,
reporting to the PSC, and reporting to the applicable governmental sewer
authorities); and
WHEREAS,
the Buyer desires to purchase from the Member, and the Member desires to sell,
assign, transfer and convey to the Buyer, all of the Company’s issued and
outstanding LLC Interests (as hereinafter defined) (the “Acquired Interests”),
free and clear of all Liens (as hereinafter defined), but excluding the Member
Lien (as hereinafter defined), on the terms and conditions herein set
forth.
NOW,
THEREFORE, in consideration of the representations, warranties, covenants and
agreements of the parties hereinafter set forth, as well as for other good
and
valuable consideration, the receipt and adequacy is hereby acknowledged, the
Buyer, the Sellers and Artesian, intending to be legally bound hereby, do hereby
agree as follows:
ARTICLE
I
DEFINITIONS
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Section
1.1
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Definitions.
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Except
as
otherwise expressly provided in this Agreement, the capitalized terms used
in
this Agreement shall have the meanings specified in Exhibit
A hereto and
shall be equally applicable to both the singular and plural forms.
ARTICLE
II
SALE
AND DELIVERY OF ACQUIRED INTERESTS
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Section
2.1
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Sale
and Delivery of
Acquired Interests.
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Subject
to the terms and conditions of this Agreement, at the Closing, the Member shall
sell, assign, transfer, convey and deliver to the Buyer, free and clear of
all
Liens (excluding the Member Lien, as hereinafter defined), all of its right,
title and interest in and to the Acquired Interests as of the Effective Date
(as
hereinafter defined).
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Section
2.2
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Purchase
Price; Payment Thereof; Adjustment
Thereto.
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In
consideration of the sale,
assignment, transfer, conveyance and delivery of the Acquired Interests by
the
Member to the Buyer and in reliance on the representations, warranties,
covenants and agreements made by the Member and the Company in this Agreement,
at the Closing, the Buyer shall pay to the Member a sum equal to the following
(the
“Purchase
Price”): (i) Five Million
Nine Hundred Fifty-Three Thousand Five Hundred Thirty-Six and 67/100 Dollars
($5,953,536.67), representing the Total Asset Value as of 12/31/07, less
(ii) an amount sufficient to pay the amounts set forth on Schedule
2.2, which shall include, without limitation all debt of the Company
and/or Transaction Expenses that have not been paid by or on behalf of the
Company at or prior to the Closing (collectively “Closing Debt”), plus
(or
minus, as applicable) (iii) an amount equal to the sum of the net change
in the Total Asset Value from the Effective Date through the Closing Date
(including but not limited to accrued interest on the aggregate Total Asset
Value for the time period commencing on the Effective Date and ending on the
Closing Date, and an administrative fee on any increase in the value of the
Property, Plant and Equipment for the time period commencing on the Effective
Date and ending on the Closing Date). At the Closing, the
Purchase Price shall be paid by the Buyer to the Company as
follows:
(a) an
amount
equal to twenty percent (20%) of the Purchase Price (the “Down Payment”);
and
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(b)
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the
balance of the Purchase Price, if any, by a promissory note to be
paid in
four (4) equal annual installments of principal, plus interest accruing
at
a rate equal to the London Interbank Offering Rate (“LIBOR”) (determined
as
set forth in the Note, as such term is defined below) plus 150 basis
points, compounded annually using the average outstanding and unpaid
balance for the previous twelve (12) month period, on the terms and
conditions of the promissory note in substantially the form attached
hereto as Exhibit
B (the “Note”). Subject
to the terms of this Agreement, the parties hereto agree that the
obligations of the Buyer under the Note shall be secured by a first
priority lien and security interest perfected by executing the Security
Agreement (as hereinafter defined) and filing a Financing Statement
on
Form UCC-1 against the all of the assets of the Company (as defined
on
Exhibit
A) in favor of the Member (“Member Lien”). In addition,
Artesian shall guarantee the obligations of the Buyer under the Note
on
the terms and conditions set forth in the guaranty substantially
in the
form attached hereto as Exhibit
C (the “Guaranty”).
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(c)
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The
Closing Debt amount shall be paid by the Buyer, at Buyer’s sole expense,
at the Closing directly to the creditors set forth on Schedule
2.2 in accordance with the instructions set forth in the applicable
payoff or release letters in respect of such amounts, by certified
or
cashier’s check or wire transfer of immediately available funds to an
account or accounts designated in writing by the applicable creditor
at
Closing. Buyer agrees and acknowledges that the full and
complete satisfaction of the Closing Debt by the Buyer is a prerequisite
to the Member being in a position to convey the Acquired Interests
to the
Buyer free and clear of all Liens (excluding the Member
Lien).
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ARTICLE
III
CLOSING
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Section
3.1
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Closing.
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The
closing of the transactions
contemplated by this Agreement (the “Closing”)
shall take place at the offices of
DLA Piper US LLP, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, commencing
at
10:00 a.m. local time on a date that is three (3) Business Days following the
satisfaction or waiver of the conditions to Closing set forth in Articles
VIII and IX
of this Agreement, or
such
other date as the Buyer and the Company shall mutually agree upon in writing,
but in no event later than August 1, 2008. The date of the Closing is
herein referred to as the “Closing
Date.”Notwithstanding
the
Closing Date, the parties hereto agree that the transfer of the Acquired
Interests from the Member to the Buyer shall have an effective transfer date
as
of 11:59 p.m. on December 31, 2007 (“Effective Date”)
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Section
3.2
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Closing
Deliveries.
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(a)
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At
the Closing, the Sellers shall deliver, or cause to be delivered,
to the
Buyer each of the following:
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(i)
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an
instrument of assignment, duly endorsed by the Member, transferring
the
Acquired Interests to the Buyer as of the Effective
Date;
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(ii)
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an
easement agreement in substantially the form of Exhibit
D attached hereto (the “Easement
Agreement”),
duly executed by the Sellers and their Affiliates party
thereto;
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(iii)
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all
Required Consents (as defined below in Section
8.4)
listed on Schedule
4.4;
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(iv)
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the
certificates required by Sections
9.1
and 9.2;
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(v)
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a
certificate of an authorized officer or the managing member
of the
Company certifying the truth and correctness of attached copies of
the articles of organization, operating agreement and resolutions
of the
managing member (both as managing member and in its capacity as the
sole
member of the Company) approving the execution and delivery of this
Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby, in substantially the form of Exhibit
E attached hereto;
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(vi)
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a
certificate of an authorized officer of the general partner of the
Member certifying
the truth
and correctness of attached copies of the articles or certificate
of
formation or organization, operating agreement and resolutions of
the
general partner of the Member approving the execution and delivery
of this
Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby, in substantially the form of Exhibit
F attached hereto;
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(vii)
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a
certificate, dated as of a date no earlier than three days prior
to the
Closing Date, duly issued by the applicable Governmental Authority
in the
State of Maryland, showing that the Company is in good standing and
authorized to do business in such
jurisdiction;
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(viii)
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a
certificate, dated as of a date no earlier than three days prior
to the
Closing Date, duly issued by the applicable Governmental Authority
in the
Commonwealth of Pennsylvania, showing that the Member is in good
standing
and authorized to do business in such
jurisdiction;
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(ix)
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duly
executed payoff
letters or release letters from the creditors set
forth
Schedule
2.2 and from
any other lenders of the Company, all in form and substance
reasonably acceptable to the Buyer (the “Payoff
Letters”);
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(x)
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duly
executed UCC-3 termination
statements, lien releases or such other release and termination
instruments (or copies thereof), as the Buyer shall reasonably request,
including but not limited to, with respect to the Liens set forth
on
Schedule
2.2, in order
to vest
all right, title and interest in and to the Acquired Interests free
and
clear of all Liens; and
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(xi)
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such
other documents and
instruments as may be reasonably necessary to effect the intent of
this
Agreement and consummate the transactions contemplated
hereby.
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(b)
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At
the Closing, the Buyer shall deliver, or cause to be delivered, each
of
the following:
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(i)
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the
Down Payment;
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(ii)
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the
Note duly executed by the Buyer;
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(iii)
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the
full payment of the Closing Debt;
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(iv)
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the
Easement Agreement duly executed by the
Buyer;
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(v)
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the
certificates required by Sections
8.1
and 8.2;
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(vi)
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a
certificate signed by the Secretary or Assistant Secretary of the
Buyer
certifying the truth and correctness of attached copies of the certificate
of incorporation and bylaws, and that the board of directors of the
Buyer
has approved the execution, delivery of this Agreement, the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated hereby;
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(vii)
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a
certificate, dated as of a date no earlier than three days prior
to the
Closing Date, duly issued by the applicable Governmental Authority
in the
State of Delaware, showing that the Buyer is in good standing and
authorized to do business in such
jurisdiction;
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(viii)
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the
“Security
Agreement” duly executed by Buyer in substantially in a form
attached hereto as Exhibit
G and UCC-1 financing statement duly executed by the
Buyer representing a first lien security interest in all of the Company’s
assets in favor of the Member.
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(c)
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At
the Closing, Artesian shall deliver, or cause to be delivered, to
the
Company each of the following:
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(i)
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the
Guaranty, duly executed by Artesian;
and
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(ii)
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a
certificate signed by the Secretary or Assistant Secretary of Artesian
certifying the truth and correctness of attached copies of the certificate
of incorporation and bylaws, and that the board of directors of Artesian
has approved the execution, delivery of this Agreement, the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated hereby.
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ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE SELLERS
The
Sellers hereby jointly and severally
represent and warrant to the Buyer that the following representations and
warranties are, as of the date hereof, and will be, as of the Closing Date,
true
and correct:
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Section
4.1
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Organization
and Good Standing.
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(a)
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The
Company is a limited liability company duly organized, validly existing
and in good standing under the Laws of the State of Maryland, and
is duly
authorized and qualified to do business under all applicable Laws,
regulations, ordinances and orders of public authorities with full
corporate power and authority to carry on its business in the places
and
in the manner as now conducted, to own or hold under lease the properties
and assets it now owns or holds under lease, and to perform all of
its
obligations under the Material Contracts. The Company is not
qualified to do business in any jurisdiction other than its state
of
organization. The Company has not conducted business under any
name other than “Mountain Hill Water Company, LLC” and “Principio Water
Company, LLC” since its date of
formation.
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(b)
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The
Member is a limited partnership duly organized, validly existing
and in
good standing under the Laws of the Commonwealth of
Pennsylvania.
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Section
4.2
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Capitalization;
Title to Limited Liability Company
Interests.
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(a)
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Schedule
4.2 sets forth
the authorized Limited Liability Company Interests of the Company
(the
“LLC Interests”),
the name of each Person holding any such LLC Interests (including
any
options, warrants or other rights to purchase any equity securities
of the
Company or LLC Interests) and any securities convertible into or
exchangeable for LLC Interests and the amount and type of such securities
held by such Person as of the date of this
Agreement. Immediately after the Closing, all of the issued and
outstanding LLC Interests shall be held beneficially and of record
by the
Buyer, free and clear of all Liens (excluding the Member Lien and
subject
to the Buyer’s full and complete payment and satisfaction of the Closing
Debt). Except as set forth on Schedule 4.2, the
Company has no issued and outstanding LLC Interests or securities
convertible into or exchangeable for LLC Interests or any other ownership
interest or containing any profit participation features, nor does
the
Company have outstanding any rights or options to subscribe or to
purchase
its LLC Interests or other ownership interest or any equity appreciation
rights or phantom equity plans. The Company is not subject to
any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any of its LLC Interests or other ownership interest
or
any warrants, options or other rights to acquire its LLC
Interests. All of the outstanding LLC Interests have been duly
authorized and are validly issued, fully paid and nonassessable and
were
not issued in violation of any statutory or contractual or preemptive
rights or similar restrictions.
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(b)
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The
Company does not own as of the date hereof and will not own as of
the
Closing Date, of record or beneficially, or control, directly or
indirectly, any capital stock, securities convertible into capital
stock
or any other equity interest in any corporation, limited association
or
other business entity. The Company is not directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity (including any limited liability
company).
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(c)
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There
are no statutory or contractual or preemptive rights, rights of first
refusal or similar rights or restrictions with respect to the sale
of any
LLC Interests hereunder. The Company has not violated any
applicable federal or state securities laws in connection with the
offer,
sale or issuance of any of its LLC Interests, and the offer and sale
of
the Acquired Interests hereunder does not require any registration
under
any applicable federal or state securities laws. There are no
agreements with respect to the voting or transfer of the LLC
Interests.
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(d)
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The
Company has no Indebtedness having the right to vote (or convertible
into
or exchangeable for, securities having the right to vote) on matters
on
which the holder(s) of the LLC Interests may
vote.
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(e)
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The
Member has good and marketable title to the Acquired Interests and,
at the
Closing, will transfer good and marketable title to the Acquired
Interests, free and clear of all Liens (excluding the Member Lien
and
subject to the Buyer’s full and complete payment and satisfaction of the
Closing Debt), to the Buyer.
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Section
4.3
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Authority
and
Validity.
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The
execution and delivery by each Seller, the performance by each Seller under,
and
the consummation by each Seller of the transactions contemplated by, this
Agreement and each of the agreements, instruments and documents contemplated
hereby (the “Transaction
Documents”) to which such Seller is a party, has been duly and validly
authorized by all required action by or on behalf of each
Seller. This Agreement and each of the Transaction Documents has been
duly and validly executed and delivered by each Seller party thereto, and
constitutes the valid and binding obligation of each Seller party thereto,
enforceable against such Seller in accordance with its terms, except as the
same
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar Laws now or hereafter in effect relating to the enforcement of
creditors’ rights generally or by principles governing the availability of
equitable remedies.
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Section
4.4
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No
Conflict; Required Consents.
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Except
for, and subject to receipt of, the Required Consents (as defined in Section 8.4), all of
which are listed on Schedule 4.4,
neither the execution and delivery of this Agreement or any of the Transaction
Documents, nor the carrying out of any of the transactions contemplated hereby,
will (a) result in any violation, termination or modification of, or be in
conflict with, the Company's articles of organization or operating agreement,
each as amended to date, (b) result in any breach of or constitute a default
(or
with notice or lapse of time or both would become a default) under, or give
to
others any rights of termination, amendment, acceleration or cancellation,
or
result in the creation of any lien upon any of its properties or assets pursuant
to any Permit or any Contract to which the Company is a party or by
which it or any of the Acquired Interests are bound or affected, or (c) result
in any violation of, or be in conflict with, any Law or Permit applicable to
the
Company or by which the Acquired Interests are bound or affected.
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Section
4.5
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Total
Asset Value.
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Attached
to Schedule
4.5 is a true, complete and correct list of the aggregate value of all
of
the Company’s assets as of December 31, 2007, (collectively, “Total Asset Value”).
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Section
4.6
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Title
to and Condition of Assets.
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Schedule
4.5, Schedule
4.7,
and
Schedule
4.8, sets forth all of the assets, properties and rights (in each case
whether real or personal or tangible or intangible) of the Company as of the
date of this Agreement and as of the Closing Date. The assets,
properties and rights set forth on Schedule
4.5, Schedule
4.7,
and
Schedule
4.8 constitute
all
assets, properties and rights (in each case whether real or personal or tangible
or intangible) necessary for the Company to conduct the Business after the
Closing as it is presently being conducted. Except as set forth on
Schedule
4.5, no Affiliate of the Company owns or leases from or to the Company
any of the assets, properties and rights set forth on Schedule
4.5, Schedule
4.7, and Schedule
4.8. The Company has good and marketable title to, or a valid
leasehold interest in, or a valid license to use, all of the assets, properties
and rights (in each case whether real or personal or tangible or intangible)
set
forth on Schedule
4.5, Schedule
4.7,
and
Schedule
4.8 used by the Company in the Business or located on any property owned,
leased or used by the Company, free and clear of all Liens and defects of
title. To the best of the Sellers’ Knowledge, all of the tangible
assets of the Company (collectively,“Property,
Plant and
Equipment”) are in good condition and repair, ordinary wear and tear
excepted, and has been maintained and repaired in a good and workmanlike manner
in accordance with industry standards.
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Section
4.7
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Real
Property.
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The
Company does not hold, and has never held, any real property in fee
simple. The Company does not lease any real property (“Leased Property”) or have a
right to access or use any other real property (including by easement) (each,
an
“Easement”) except as
described on Schedule
4.7. The Company has valid and enforceable leasehold interest
or easement in each Leased Property and Easement, respectively, listed on Schedule
4.7, free and clear of all Liens. None of the Easements will
terminate as a result of the execution and delivery of this Agreement or any
of
the Transaction Documents nor the carrying out of the transactions contemplated
hereby.
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Section
4.8
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Contracts.
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(a)
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The
Company is not a party to any instruments, documents, contracts,
agreements, arrangements, commitments, bids, leases, licenses or
any other
contract rights (whether written or oral) (collectively, “Contracts”) other
than
the Contracts set forth on Schedule
4.8 (the “Material
Contracts”). True and complete copies, or, in the case
of oral Contracts, written summaries of all Material Contracts have
been
delivered to the Buyer. All Material Contracts are in full
force and effect and constitute the valid, legal, binding and enforceable
obligation of the Company, and, to the Sellers’ Knowledge, the
counterparties thereto in accordance with their terms, except as
the same
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar Laws now or hereafter in effect relating to
the
enforcement of creditors’ rights generally or by principles governing the
availability of equitable remedies. No act or omission has
occurred which, through the passage of time or the giving of notice,
or both, would with respect to any Material Contract set forth on
Schedule
4.8: (a) constitute a material breach or default under any such
Material Contract or cause the acceleration of any obligations of
the
Company thereunder, (b) result in the creation of any Lien on any
of the
Acquired Interests, or (c) give rise to or automatic termination
thereof. Except as set forth on Schedule
4.8), the Company has not been notified that any party to any
Material Contract that it intends to cancel, terminate, not renew
or
exercise an option under any Material Contract, whether in connection
with
the transactions contemplated hereby or otherwise and no such action
has
been threatened or contemplated.
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Section
4.9
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Litigation.
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There
are
no outstanding Orders of any Governmental Authority involving the Business
or
the Acquired Interests. There is no Litigation and there are no other
actions, suits, or legal, administrative or arbitral proceedings or
investigations (collectively, “Claims”) (whether or not
the
defense thereof or Liabilities in respect thereof are covered by insurance),
pending or, to the Sellers’s Knowledge, threatened against or involving the
Business or the Acquired Interests, and no material Claims have been instituted
or, to the Sellers’ Knowledge, threatened against or involving the Business or
the Acquired Interests.
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Section
4.10
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Environmental.
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(a)
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To
the best of Sellers’ Knowledge, no real property currently or formerly
owned or leased or used by the Company or any of its Affiliates
(collectively, “Real
Property”) is or has been listed on the National Priorities List,
the Comprehensive Environmental Response, Compensation, Liability
Information System (“CERCLIS”) or any
similar
state list, or is or has been the subject of any “Superfund” evaluation or
investigation, or any other investigation or proceeding of any
Governmental Authority or unaffiliated third party (each, a “Third Party”) or of
the
Sellers evaluating whether any remedial action is necessary to respond
to
any release of any Hazardous Substance, pollutant or contaminant
on or in
connection with such Real Property.
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(b)
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To
the best of Sellers’ Knowledge, the Business of the Company and its
Affiliates are and at all times have been operated in compliance
with all
applicable Laws concerning the protection of the public health, public
safety or the environment (“Environmental
Laws”). To the best of Sellers’ Knowledge, none of the
Company’s assets or properties are required to be upgraded or modified in
order to comply with applicable Environmental Laws. Neither the
Company nor any of its Affiliates has ever received any claims or
notices,
oral or written, (i) (A) alleging that the Company or any of its
Affiliates is liable under any Environmental Law, or (B) ordering
the
Company or any of its Affiliates to remedy or recommending that the
Company or any of its Affiliates remediate, any environmental damage
to
any Real Property or modify or upgrade its assets to comply with
Environmental Laws, and (ii) to the Sellers’ Knowledge, no such claims or
notices are threatened or pending and there are no facts or circumstances
that would reasonably be expected to give rise to any such claim
or
notice.
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(c)
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Except
in compliance with applicable Environmental Laws, to the Sellers’
Knowledge there has been no release or threatened release of any
Hazardous
Substance, pollutant or contaminant to any soil, groundwater, surface
water, building component, wastewater, air or other media: (i) on
or from
any Real Property during the ownership, occupation or use of such
Real
Property by the Company or any of its Affiliates, or at or from any
other
location where the Company or any of its Affiliates arranged for
the
storage, treatment, disposal or handling of any Hazardous Substance,
pollutant or contaminant, or (ii) by the Company or any of its Affiliates
on any other real property.
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(d)
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Except
as set forth on Schedule
4.10(d), there are no and have not been any underground storage
tanks, above-ground storage tanks, underground piping (except for
water or
sewer), asbestos-containing materials, polychlorinated biphenyls
or
Hazardous Substances used, stored, treated or disposed of at any
Real
Property.
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(e)
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Schedule
4.10(f) lists all environmental audits, assessments or reports and
any other written information concerning the Company’s actual or potential
liability under any Environmental Law (collectively, “Environmental Reports”)
in the possession or control of the Sellers or any of their Affiliates,
including, without limitation, all Phase I, II and III environmental
assessment reports with respect to the Real Property in the possession
or
control of the Sellers or any of their Affiliates. A true and
complete copy of each Environmental Report listed on Schedule
4.10(f) has previously been delivered by the Company to the
Buyer.
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Section
4.11
|
Taxes.
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(a)
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The
Sellers have no unpaid liability for any Taxes in respect of any
taxable
period ending on or before the Effective Date. As used in this
Agreement, the term “Pre-Closing Tax
Period”
shall mean any taxable period ending on or before the Effective
Date.
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(b)
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Each
of the Sellers has filed or will cause to be timely filed all Tax
Returns
required to have been filed by it prior to or with respect to the
Effective Date (subject to any timely extensions permitted by Law)
with
the appropriate taxing authority with respect to Taxes for any period
ending on or before the Effective Date. The Sellers have paid,
or made provision for the payment of, all Taxes that have or may
have
become due for all periods covered by the Tax Returns or otherwise,
or
pursuant to any assessment received by the Sellers. Schedule
4.11 sets forth all of the jurisdictions in which Tax Returns
are
filed by or on behalf of the Company and a description of such Tax
Returns
filed in each such jurisdiction is listed opposite the name of each
jurisdiction listed on Schedule
4.11.
|
|
(c)
|
(i)
No deficiency for any amount of Tax has been asserted or assessed
by a
taxing authority against the Sellers that remains unpaid, (ii) no
notice
of audit or possible assessment has been received from any taxing
authority by the Sellers, and (iii) the Sellers have not agreed to
any
waiver or extension of the statute of limitations applicable to the
assessment or collection of any Tax imposed in respect of a Pre-Closing
Tax Period.
|
|
(d)
|
The
Sellers have withheld or
otherwise collected all Taxes or other amounts it was required to
withhold
or collect under any applicable federal, state or local Law, including,
without limitation, any amounts required to be withheld or collected
with
respect to employee, state and federal income tax withholding, social
security, unemployment compensation, sales or use taxes (excluding
any
sales or use taxes applicable to the transfer of the Acquired Interests
as
contemplated by this Agreement), workmen’s compensation or other similar
Taxes, and all such amounts have been timely remitted to the proper
authorities.
|
|
(e)
|
The
Company has not been a member
of an affiliated group that files or filed consolidated federal income
Tax
Returns. The Company is not a party to any tax allocation, tax sharing
or
other Contract pursuant to which it is obligated to pay the Taxes
of
another Person.
|
|
Section
4.12
|
Compliance
with Laws;
Permits.
|
|
(a)
|
The
ownership and operation of the Company and its assets, properties
and
rights and the operation of the Business as it is currently conducted
and
operated do not violate or infringe any Law in any material
respect. The Sellers have not received written notice (or, to
the Sellers’ Knowledge, oral notice) of any violation by the Company of
any Law applicable to the operation of the Business as currently
conducted
or ownership and operation of the company and its assets, properties
and
rights as currently operated. The Company has timely paid all
applicable fees or other Taxes, including registration fees and
maintenance fees, required by any Governmental Authority to maintain
the
Permits in good standing.
|
|
(b)
|
Schedule
4.12 lists all approvals, consents, licenses, permits, waiver
or
other authorizations issued, granted, given or otherwise made available
by
or under the authority of any Governmental Authority (collectively,
“Permits”) that are
used
by the Company and its Affiliates in the ownership, maintenance or
operation of the assets, properties or rights of the Company or the
conduct of the Business, as presently conducted. A true and
complete copy of each Permit listed on Schedule
4.12 has previously been delivered by the Company or the Member
to
the Buyer. All such Permits are in full force and effect, and
the Company is not in default under any such Permit. The
Company and its Affiliates have taken all necessary actions to maintain
the effectiveness of the Permits. No written notice (or, to the
Sellers’ Knowledge, any oral notice) of default, suspension, revocation,
or cancellation of any Permit from any Governmental Authority has
been
received by the Company or any of its Affiliates and, to the Sellers’
Knowledge, there is no proposed or threatened issuance of any such
notice
or basis for any such action. The Permits listed in Schedule
4.12 are all of the material Permits necessary for the Company
to
conduct the Business as currently
conducted.
|
|
Section
4.13
|
Employees
and Employee Benefits.
|
There
are
no, and have never been, any employees of the Company. There are no, and have
never been any, employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended) or other plans,
Contracts or policies established or maintained for the benefit of or affecting
any employees, consultants, independent contractors, agents or other service
providers for the Company (collectively, “Benefit Plans”) sponsored,
maintained or contributed to by the Company or any ERISA Affiliate or to which
the Company or any ERISA Affiliate is or was at any time obligated to make
payments or contributions, or with respect to which the Company or any ERISA
Affiliate has or may have any liability.
|
Section
4.14
|
Undisclosed
Liabilities.
|
The
Company has no liabilities or obligations of any type (whether accrued,
contingent, unliquidated or otherwise and regardless of when asserted) arising
out of or which could reasonably be expected to arise out of any acts or
omissions relating to the Company, its predecessors or the conduct of the
Business at or prior to the date hereof, or at or prior to the Closing Date,
other than liabilities set forth in the Financial Statements or, as of the
Closing Date, as will be set forth on Schedule
4.14. The Company has no Indebtedness as of the date of this
Agreement other than the Indebtedness described on Schedule
4.14 and will have no Indebtedness as of the Closing Date other than as
set forth on Schedule
2.2.
|
Section
4.15
|
Service
Territory
|
All
of
the Company’s approvals from ▇▇▇▇▇ County, Maryland and the PSC to operate a
private water company are attached as Schedule 4.15. To the best of
the Sellers’ Knowledge, the Company has: (a) valid and enforceable rights to use
and access the Existing Service Territory and to use, access, operate and
otherwise conduct its Business and own and operate its assets, properties and
other rights in the Existing Service Territory, including the right to access
and maintain and the assets, properties and rights of the Company located within
the Existing Service Territory, and (b) to the best of Sellers’ Knowledge, the
Company’s Business and the assets, properties and rights of the Company within
the Existing Service Territory conform: (i) to all applicable Laws, including
material zoning requirements, without reliance upon a variance issued by a
Governmental Authority or a classification of the parcel in question as a
nonconforming use, and (ii) to all restrictive covenants, if any, or other
liens
affecting all or part of the Existing Service Territory. To the best
of Sellers’ Knowledge, upon receipt of the applicable approvals and
authorizations from Governmental Authorities, the Buyer will have valid and
enforceable rights to use and access the Potential Expansion Service Territory
and to use, access, operate and otherwise conduct the Business and own and
operate the Company and the assets, properties and rights of the Company within
the Potential Expansion Service Territory. There is no pending or, to
the Sellers’ Knowledge, threatened, Litigation by any Governmental Authority
involving the Company’s ability to provide services or otherwise conduct its
operations within the Service Territory, including any Claims by any
Governmental Authority to annex all or any portion of the Company’s Business,
assets or properties within the Existing Service Territory.
|
Section
4.16
|
Absence
of Material Adverse Change.
|
Since
January 1, 2008 there has been no Material Adverse Change or, to the Sellers’
Knowledge, any event or circumstance, or liability or obligation of any nature
(whether accrued, contingent, absolute, determined, determinable or otherwise),
that, individually or in the aggregate, would reasonably be expected to result
in a Material Adverse Change.
|
Section
4.17
|
Transactions
with Related Parties.
|
Except
as
set forth on Schedule
4.17, there is no Contract between the Company and (a) any current or
former officer, member, general or limited partner, employee, independent
contractor, agent of the Sellers (b) any parent, spouse, child, brother, sister
or other family relation (by blood or marriage) of any such officer, member,
general or limited partner, employee, independent contractor, agent of the
Sellers; (c) any corporation, partnership or other entity of which any such
officer, member, general or limited partner, employee, independent contractor,
agent of the Sellers or any such family relation is an officer, director,
manager, partner, trustee or greater than 10% equity owner or beneficiary;
or
(d) any Affiliate of the Sellers. Each of the transactions set
forth on Schedule
4.17 is on terms no less favorable to the Company than could reasonably
be obtained by the Company from an unrelated third party in an arm’s length
negotiation.
|
Section
4.18
|
Certain
Payments.
|
The
Company has not, nor has and officer, manager, member, general or limited
partner, employee or agent of the Sellers, directly or indirectly on behalf
of
the Company, (a) made any payment in violation of any federal, state,
local, municipal, foreign or other Law to any person or entity, private or
public, regardless of form, whether in money, property, or services, or
(b) established or maintained any fund or asset that has not been recorded
in the Records.
|
Section
4.19
|
Customer
and Supplier Relationships.
|
Schedule
4.19 lists all the customers of the Company as of the date hereof (the
“Customers”) and all of
the suppliers of the Company as of the date hereof (the “Suppliers”). Except
as set forth on Schedule
4.19, the Company has not received any written notice from any Customer
regarding its intent to, or its attempt or threat to, cancel its Contract or
its
other relationship with the Company or to substantially reduce its purchases
from the Company, whether as a result of the transactions contemplated by this
Agreement or otherwise. To the Sellers’ Knowledge, the Company is not
engaged in any disputes with any Customer the outcome of which could result
in a
Material Adverse Change.
|
Section
4.20
|
Officers
and
Directors; Bank Accounts.
|
Schedule
4.20 lists all of the
officers and managers of the Company and all bank accounts of the Company
(designating each authorized signatory and the level of each signatory’s
authorization).
|
Section
4.21
|
No
Brokers.
|
No
Seller
nor any Person acting on behalf of any Seller or any Representative of the
Sellers has agreed to pay a commission, finder’s or investment banking fee, or
similar payment in connection with this Agreement or any matter related hereto
to any Person, nor has any such Person taken any action on which a claim for
any
such payment could be based, other than payments for which the Buyer will have
no liability or obligation.
|
Section
4.22
|
Disclosure.
|
All
agreements, schedules, exhibits,
certificates or reports furnished or to be furnished to the Buyer by or on
behalf of the Sellers in connection with this Agreement or the transactions
contemplated hereby are true, complete and accurate in all material
respects. None of the representations and warranties set forth in
this Agreement (as modified by the disclosure schedules thereto), the schedules
and certificates furnished by the Sellers to the Buyer pursuant hereto, taken
as
a whole, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained herein or therein
not
misleading.
|
Section
4.23
|
No
Other
Representations and
Warranties.
|
Except
for the representations and warranties contained in this Article IV, the
Sellers make no other representations or warranty with respect to the Company,
the Business or the Acquired Interests.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF THE BUYER AND ARTESIAN
The
Buyer and Artesian, jointly and
severally, hereby represent and warrant to the Sellers that the following
representations and warranties are, as of the date hereof, and will be, as
of
the Closing Date, true and correct:
|
Section
5.1
|
Organization
and Good Standing.
|
The
Buyer and Artesian are each a
corporation duly organized, validly existing and in good standing under the
Laws
of the State of Delaware. The Buyer and Artesian each has full
corporate power and authority to own its properties and carry on its business
as
it is now being conducted.
|
Section
5.2
|
Authority
and Validity.
|
The
execution and delivery by the Buyer and Artesian, the performance by the Buyer
and Artesian under, and the consummation by the Buyer and Artesian of the
transactions contemplated by, this Agreement and the Transaction Documents
to
which the Buyer and/or Artesian is a party, have been duly and validly
authorized by all required corporate action by or on behalf of the Buyer and/or
Artesian. This Agreement and the Transaction Documents to which the
Buyer and/or Artesian are a party have been, duly and validly executed and
delivered by the Buyer and/or Artesian and constitute valid and binding
obligations of the Buyer and/or Artesian, enforceable against the Buyer and/or
Artesian in accordance with their respective terms, except as the same may
be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws now or hereafter in effect relating to the enforcement of
creditors’ rights generally or by principles governing the availability of
equitable remedies.
|
Section
5.3
|
No
Violation.
|
There
is
no legal action, proceeding or investigation pending or, to the knowledge of
the
Buyer and/or Artesian, threatened against the Buyer and/or Artesian, nor is
there any Judgment outstanding against the Buyer and/or Artesian or to or by
which the Buyer and/or Artesian is subject or bound that materially adversely
affects the ability of the Buyer to consummate any of the transactions
contemplated hereby.
|
Section
5.4
|
Consents.
|
Except
as set forth on Schedule
5.4, no consent, approval,
permit, authorization of, declaration to or filing with any Governmental
Authority or any other Person on the part of the Buyer and/or
Artesian is required in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
|
Section
5.5
|
No
Brokers.
|
Neither
the Buyer and/or
Artesian nor any Person acting on
behalf of the Buyer and/or Artesian has agreed to pay a
commission,
finder’s fee, investment banking fee or similar payment in connection with this
Agreement or any matter related hereto nor has the Buyer and/or
Artesian taken any action on which
a claim for any such payment could be based.
|
Section
5.6
|
Environmental.
|
|
(a)
|
To
the best of Buyer’s Knowledge, the Plant, Property and Equipment are
being, and at all times during the Buyer’s operation have been, operated
in compliance with all applicable Environmental Laws. To the
best of Buyer’s Knowledge, none of the Plant, Property and Equipment is
required to be upgraded or modified in order to comply with existing
applicable Environmental Laws. Neither the Buyer nor Artesian
has ever received any claims or notices, oral or written, (i) (A)
alleging
that the Buyer or any of its Affiliates is liable under any Environmental
Law with respect to the operation of the Business, or (B) ordering
the
Buyer or any of its Affiliates to remedy or recommending that the
Buyer or
any of its Affiliates remediate, any environmental damage to any
of the
Plant, Property and Equipment or modify or upgrade the Plant, Property
and
Equipment to comply with Environmental Laws, and (ii) to the Buyer’s
Knowledge, no such claims or notices are threatened or pending and
there
are no facts or circumstances that would reasonably be expected to
give
rise to any such claim or notice.
|
|
(b)
|
Except
in compliance with applicable Environmental Laws, there has been
no
release or threatened release of any Hazardous Substance, pollutant
or
contaminant to any soil, groundwater, surface water, building component,
wastewater, air or other media on or from any Real Property during
the
Buyer’s operation of the Business.
|
|
Section
5.7
|
Disclosure.
|
None
of
the representations and warranties set forth in this Agreement (as modified
by
the disclosure schedules thereto), the schedules and certificates furnished
by
the Buyer and/or Artesian to the Company pursuant hereto, taken as a whole,
contain any untrue statement of a material fact or omit to state a material
fact
necessary to make the statements contained herein or therein not
misleading.
|
Section
5.8
|
No
Other
Representations and
Warranties.
|
Except
for the representations and warranties contained in this Article V, neither
the Buyer nor Artesian makes any other representations or warranty with respect
to the Buyer, Artesian or the Company, the Business or the Acquired
Interests.
ARTICLE
VI
PRE-CLOSING
COVENANTS
During
the period from the date of this
Agreement through and including the Closing Date:
|
Section
6.1
|
Conduct
of the Business of the Company Pending Closing. Except
as set forth in Schedule
6.1, as otherwise performed by Buyer pursuant to the operating
agreement between Buyer and the Company, or as may be first consented
to
by Buyer in writing, during the period from the date of this Agreement
through and including the Closing Date, the Company shall, and the
Member
shall cause the Company to, conduct the Business according to its
ordinary
and usual course of business and to preserve intact the Business,
assets,
properties and rights of the Company and will not sell, lease, transfer,
assign, convey or make any dividend or distribution in respect of
any LLC
Interests (whether in cash, securities or in kind property) amend
modify,
cancel or terminate any Assumed Contract, will not amend any Tax
Return
and will otherwise maintain satisfactory relationships with respect
to the
Business and the assets, properties and rights of the Company with
Governmental Authorities, Suppliers, agents, Customers, and others
having
business relationships with the Company. In addition, the
Company shall promptly notify the Buyer in writing of any notice
or other
communication that it receives (written or oral) respecting any Litigation
or Audit involving or affecting the Company. Without limiting
the foregoing and except as set forth on Schedule
6.1 or as may be first consented to by Buyer in writing, the
Company shall not, and the Member shall cause the Company not
to:
|
|
(a)
|
enter
into any Contract other than with Customers or Suppliers in the ordinary
course of business substantially as conducted
heretofore;
|
|
(b)
|
cause
any Material Adverse Change or perform or not perform any action
the
performance or non-performance of which would reasonably be expected
to
result in a Material Adverse
Change;
|
|
(c)
|
make
any loan or advance to any Person other than for services provided
to
Customers on credit in the ordinary course of business consistent
with
past practice;
|
|
(d)
|
(i)
incur any Indebtedness, except expenses and current liabilities incurred
in connection with or for services rendered or goods supplied in
the
ordinary course of business or obligations or liabilities incurred
by
virtue of the execution of this Agreement, or (ii) create any Lien
on any
asset of the Company or the Acquired
Interests;
|
|
(e)
|
issue
or transfer the Acquired Interests or any other equity interests
of the
Company or securities or indebtedness convertible into or exchangeable
for
equity interests of the Company;
|
|
(f)
|
cancel,
waive or release any debt, right or claim, except, in each case,
in the
ordinary course of business consistent with past
practice;
|
|
(g)
|
change
the accounting principles, methods or practices (including, without
limitation, any change in depreciation or amortization policies or
rates)
utilized by the Company;
|
|
(h)
|
make
any capital expenditure or commitment
therefor;
|
|
(i)
|
hire
any employees or adopt any Benefit Plan;
or
|
|
(j)
|
make,
revoke or change any Tax election, or settle any matter relating
to
Taxes;
|
|
(k)
|
take
any action that if taken after the date of this Agreement would constitute
a variance from or breach of the representations and warranties set
forth
in Article
4 of this Agreement
|
|
Section
6.2
|
Supplements
to Schedules. The
Sellers, on the one hand, and the Buyer, on the other, shall promptly
give
to the other notice with respect to any matter or change hereafter
arising
which, if existing or occurring on or before the date hereof, would
have
been required to be set forth or described in any of the Schedules
hereto
or which is necessary to correct or make the representations and
warranties contained herein correct and complete as of the Closing
Date
and shall supplement or amend the Schedules hereto as appropriate
with
respect to such matters. If pursuant to this Section
6.2 the
Sellers disclose any such change that constitutes a Material Adverse
Change, or relates to any material and adverse events, facts or
circumstances, then the Buyer shall have the right and option, exercisable
at any time prior to Closing, to terminate this Agreement upon giving
written notice to the Seller.
|
|
Section
6.3
|
Access;
Cooperation. The Sellers shall provide the Buyer and its
Representatives with all information that the Buyer may reasonably
request
in auditable form. Upon reasonable prior written notice, the
Sellers shall provide the Buyer and its Representatives with access
during
regular business hours to the assets and properties, Records and
Customers
and Suppliers of the Company. The Sellers and their
Representatives will also cooperate with the Buyer and its
Representatives, including the Buyer’s auditors and counsel, in the
preparation of any documents or other materials required in connection
with the transactions contemplated by this Agreement. In
addition, the Sellers and the Buyer shall use their respective reasonable
good faith efforts to satisfy all conditions to Closing and all other
matters relating to the consummation of the transactions contemplated
by
this Agreement and the Transaction Documents. The Sellers and
the Buyer shall cooperate with each other in connection with any
filings
with any Governmental Authority and shall use their reasonable good
faith
efforts to furnish to each other all information required for any
such
filing to be made with any Governmental Authority in connection with
the
transactions contemplated by this
Agreement.
|
|
Section
6.4
|
Due
Diligence/Exclusive Dealing; Confidentiality Prior to
Closing.
|
The
confidentiality provisions under the caption “Due Diligence” and the provisions
of the first paragraph under the caption “Non-Solicitation” of the Basic Terms
of letter of intent, dated January 28, 2008, between the Buyer and the Company
(as may be subsequently amended or modified from time to time in accordance
with
its terms, the “Letter of
Intent”) shall continue in full force and effect until Closing, at which
time such agreement shall terminate and be of no further force or
effect. In addition, the parties will not disclose, and will take
reasonable steps to prevent the disclosure to others, of the terms and existence
of this Agreement and the Transaction Documents (including drafts thereof)
and
all negotiations leading thereto, unless (i) compelled to do so by Law or valid
legal process, or (ii) the other parties to this Agreement shall have consented
to such disclosure. No party, however, shall be prohibited from
disclosing any such information to its legal and financial
advisors.
|
Section
6.5
|
Cooperation
Obtaining
Approvals from Governmental
Authorities.
|
On
or
before May 10, 2008, the Buyer shall, at Buyer’s sole cost, prepare any and all
necessary applications to be filed with the PSC to approve the transfer of
the
Acquired Interests from the Member to the Buyer, and Buyer shall cause said
application(s) (together with any filing fees) to be delivered to the Member
on
or before May 15, 2008. The Member’s counsel shall be responsible for
filing these PSC application(s) and generally interfacing with the PSC on the
approval of said applications. From the date of this Agreement
through the Closing Date, upon request by the Buyer, the Sellers shall support
in writing and otherwise reasonably cooperate with the Buyer to assist the
Buyer
in the obtaining of, any other authorizations or other Permits, excluding any
franchise, from any Governmental Authority, sought by the Buyer in the Existing
Service Territory or the Potential Expansion Service
Territory. Reasonable costs incurred by Sellers, except for costs or
expenses of any legal counsel engaged by Sellers, shall be borne by the
Buyer.
ARTICLE
VII
POST-CLOSING
COVENANTS
|
Section
7.1
|
Payment
of Taxes; Tax
Returns.
|
|
(a)
|
The
Buyer shall pay in a timely manner any transfer, stamp, sales and
use, and
recordation Taxes resulting from or payable in connection with the
sale of
the Acquired Interests pursuant to this
Agreement.
|
|
(b)
|
From
and after the Closing through and including the date that is the
seventh
(7th) anniversary of the Closing Date, the Member, on the one hand,
and
the Company and the Buyer, on the other, shall cooperate fully with
each
other and make available or cause to be made available to each other
in a
timely fashion such data relating to Taxes, prior Tax Returns and
filings
and other information as may be reasonably requested for the preparation
by the Buyer or the Company, on the one hand, or the Member, on the
other,
of any Tax Returns, elections, consents or certificates required
to be
prepared and filed by the Buyer, the Company or the Member and any
audit
or other examination by any Governmental Authority, or judicial or
administrative proceeding relating to liability for Taxes. The
Buyer, the Company and the Member will each retain, and cause their
respective Affiliates to retain, and provide to the other party all
records and other information which may be relevant to any such Tax
Return, audit or examination, proceeding or determination, and will
each
provide the other party 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 party for any
period. Without limiting the generality of the foregoing, each
of the Buyer and the Company, on the one hand, and the Member, on
the
other, shall retain copies of all Tax Returns, supporting work schedules
and other records relating to tax periods or portions thereof ending
prior
to or on the Closing Date.
|
|
(c)
|
With
respect to any Pre-Closing Tax Period for which Tax Returns are required
to be filed by or on behalf of the Company after the Closing Date,
the
Member shall timely prepare and file (or cause to be prepared and
filed)
all Tax Returns for such Pre-Closing Tax Period, and will pay when
due all
Taxes for all Pre-Closing Tax Periods (whether or not shown on such
Tax
Returns). The Member shall be liable for all Taxes arising from
any Tax imposed with respect to any Pre-Closing Tax Period, whether
or not
shown on a Tax Return with respect to such period. The Member
shall provide the Buyer with photocopies of the Tax Returns relating
to a
Pre-Closing Tax Period.
|
|
(d)
|
The
Buyer shall timely prepare and file (or cause to be so prepared and
filed)
all Tax Returns that are required to be filed by the Company after
the
Effective Date other than any Tax Return the Member is required to
file
pursuant to Section
7.1(c)
of this Agreement (the “Buyer’s Tax Returns”)
and will pay the Taxes for the periods covered by the Buyer’s Tax Returns,
when due.
|
|
(e)
|
Any
Tax refunds that are actually received by the Buyer or the Company
and
relate to a Pre-Closing Tax Period or portions thereof in respect
of Taxes
actually paid by the Company or the Member at or prior to the Closing
shall be for the account of the Member and the Buyer shall promptly
pay
any such refunds (or portions thereof) to the
Member.
|
|
Section
7.2
|
Audits.
|
|
(a)
|
The
Buyer shall notify the Member in writing within ten (10) Business
Days
after receipt by the Buyer or the Company of any written notice of
examination, audit or proceeding (an “Audit”) regarding
any
Tax Return relating to any Pre-Closing Tax Period or other period
with
respect to which the Member may have an indemnification obligation
under
Section
10. Upon written notice to the Buyer within five (5)
Business Days after the Buyer gives the Member notice of any Audit
and at
the Member’s expense, the Member shall have the right to exercise control
over the handling, disposition and/or settlement of any issue raised
in
any Audit regarding any Tax Return relating to any Pre-Closing Tax
Period,
and shall consult and notify the Buyer on any positions taken during
such
Audit and any proposed or resulting settlement (subject to the terms
of
this Section
7.2(a)). If the Member shall not timely assume the
defense of any Audit or diligently defend against any Audit (as determined
by the Buyer in its sole discretion) or the Buyer or the Member shall
otherwise mutually agree, then the Buyer shall have the right to
exercise
control at any time over the handling, disposition and/or settlement
of
any issue raised in any Audit regarding any Tax Return of the Company
relating to any Pre-Closing Tax Period (including the right to settle
or
otherwise terminate any contest with respect thereto). The
right of the Buyer, the Company or any Subsidiary to be indemnified
hereunder will not, however, be adversely affected by their failure
to
give notice hereunder, except to the extent that the Member is materially
adversely affected from such failure. The Member shall not
settle any issue or claim or otherwise terminate any contest with
respect
to any such Audit without the prior written consent of the
Buyer.
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|
(b)
|
The
Buyer shall have the right to exercise control at any time over the
handling, disposition and/or settlement of any issue raised in any
official inquiry or Audit regarding any Tax Return of the Company
(including the right to settle or otherwise terminate any contest
with
respect thereto) without any adverse effect on the Buyer’s right to
indemnification under this Agreement, except as otherwise set forth
in
Section
7.2(a).
|
|
Section
7.3
|
Access
to Water Services by the Member and its
Affiliates.
|
|
(a)
|
From
and after the Closing Date and through and including the twentieth
(20th)
anniversary of the Closing Date, the Member and its Affiliates, all
of
which are identified on the attached Schedule
7.3 (collectively, the “Member’s Affiliates”)
will provide the Company and its Affiliates with a right of
first refusal to provide water capacity (potable water and fire
suppression) at rates based upon standard cost of services principles
and
approved by the Maryland Public Service Commission (the “PSC”) and any
other
applicable Governmental Authority to any user to which any of Member’s
Affiliates reasonably requests in any territory within ▇▇▇▇▇ County,
Maryland that is now being or is hereafter serviced with water by
the
Company or its Affiliates, which territory shall include the Service
Territory and the land currently owned by one or more of the Member’s
Affiliates within ▇▇▇▇▇ County as identified on the map attached
to Schedule
7.3. In addition, the Company, together with its
Affiliates, hereby agrees that for the period of time that Company
or its
Affiliates (and/or their successors and assigns) own water infrastructure
within ▇▇▇▇▇ County, Maryland, the Company (or its Affiliates) will,
at
the election of the Member’s Affiliates (subject to the right of first
refusal terms of this Section
7.3(a)), provide water capacity (potable water and fire
suppression) at rates based upon standard cost of services principles
and
approved by the PSC and any other applicable Governmental Authority
to any
user to which any of the Member’s Affiliates reasonably requests in any
territory within ▇▇▇▇▇ County, Maryland that is now being or is hereafter
serviced with water by the Company or its Affiliates, which territory
shall include but not be limited to the Existing Service Territory
and the
land currently owned by one or more of Member’s Affiliates within ▇▇▇▇▇
County as identified on the map attached to Schedule
7.3. Following the Closing Date, the Member’s Affiliates
will reasonably cooperate with the Company and its Affiliates, pursuant
to
the provisions of Section
7.7 of
this Agreement in obtaining all franchises or other Permits from
any
Governmental Authority required for the Company to comply with the
provisions of this Section
7.3. The Company's agreement to serve any user
reasonably requesting service under this subsection may not apply:
(i) if the Company cannot obtain authority for necessary real
property, rights-of-way or other physical access to users, (ii) in
developments or buildings that are subject to exclusive arrangements
with
other providers, or (iii) when the water service cannot be
reasonably provided in a manner to assure acceptable water quality,
or in a manner that the PSC finds not to be economically feasible so
that the cost of such service cannot be recovered in rates as approved
by
the PSC.
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|
(b)
|
From
and after the Closing Date, the Company will construct any future
transmission mains (or spine lines), pumping stations or storage
tanks for
fire suppression to be constructed within the Service Territory at
its own
cost.
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|
(c)
|
On
or before the commencement of site work on the 252+
acre
residential/commercial development known as Charlestown Crossing,
LLC, the
Company shall install, at the Company’s own cost, the connector line to
Charlestown Crossing (the “Charlestown
Connector”).
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|
(d)
|
From
and after the Closing Date, with the exception of the Charlestown
Connector (which shall be installed by the Company, at its own cost),
the
construction of distribution or service lines within the Service
Territory
for specific users shall be the sole and exclusive responsibility
of the
developer or applicable end user for such distribution or service
line(s)
and shall not in any manner be the responsibility or at the cost
of the
Company or its Affiliates.
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|
(e)
|
Notwithstanding
anything to the contrary in this Section
7.3,
the Company or its Affiliates shall be entitled at all times (including,
without limitation, with respect to the Company’s obligations under Section
7.3(c))
to assess customer or developers connecting to any transmission main
a
proportionate share (per EDU upon connection) of the cost to install
such
transmission mains (or spine lines), pumping stations or storage
tanks for
fire suppression based upon principles and approved by the PSC and
any
other applicable Governmental Authority. For purposes of this
Section
7.3, costs to install a transmission main shall consist solely
of
materials, labor and reasonable overhead to construct and shall
specifically exclude profit accruing to the benefit of the Company
or its
Affiliate in respect of such
construction.
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|
(f)
|
Artesian
shall guarantee the obligations of the Company under this Section
7.3 on
the terms and conditions set forth in the
Guaranty.
|
|
(g)
|
The
rights and benefits of the Company and its Affiliates under this
Section
7.3 and
the Company’s obligations under this Section
7.3
shall, in each case, inure to and be binding upon their respective
successors or assigns (including third party purchasers of the Company’s
of its Affiliates’ equity or assets). In this regard, the
Company (or its Affiliates) hereby agrees, represents and covenants
that
in the event that the Company (or its Affiliates) contracts to sell
its
assets to a third party purchaser that would necessitate the sale,
license
and/or lease of all or substantially all of the assets of the Company
(or
any other presently owned or future acquired water infrastructure
by the
Company or its Affiliates within ▇▇▇▇▇ County, Maryland) to a third
party,
the Company (or its Affiliates) shall include an affirmative covenant
in
the asset purchase agreement, lease agreement or license agreement
with
the third party purchaser, lessee and/or licensee, whereby this third
party shall be required to assume the Company’s (or its Affiliates’)
contractual liabilities, duties and obligations under Section
7.3 of
this Agreement.
|
|
Section
7.4
|
Buyer
Permits.
|
|
(a)
|
Between
the Closing Date and December 31, 2008, the Company will, and the
Buyer
will cause the Company to, prepare and submit application(s) to the
Maryland Department of the Environment (“MDE”) and the
PSC (as
well as any other necessary Governmental Authority) to authorize
the
expansion of the Water Plant to a production capacity of Six Hundred
Thousand (600,000) gallons per day. Following the submittal of
the application(s), the Company will, and the Buyer will cause the
Company
to, use commercially reasonable efforts to pursue the approval of
the
application(s), said efforts to include, without limitation: (i)
the
Company responding to any requests for information by any Governmental
Authority within the time period required by the requesting Governmental
Authority, and (ii) in the event that any Governmental Authority
has not
formally approved the Company’s application (as may be amended based on
comments and feedback from any other Governmental Authority) before
the
first anniversary of the Company submitting its application(s) to
each
respective Governmental Authority, the Company exercising its due
process
rights to have its application reviewed, appealed or otherwise
decided.
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|
(b)
|
Between
January 1, 2009 and December 31, 2010, the Company will, and the
Buyer
will cause the Company to, prepare and submit an application to the
MDE
and the PSC (as well as any other necessary Governmental Authority)
to
authorize the expansion of the Water Plant to a production capacity
of One
Million (1,000,000) gallons per day. Following the submittal of
the application(s), the Company will, and the Buyer will cause the
Company
to, use commercially reasonable efforts to pursue the approval of
the
application(s), said efforts to include, without limitation: (i)
the
Company responding to any requests for information by any Governmental
Authority within the time period required by the requesting Governmental
Authority, and (ii) in the event that any Governmental Authority
has not
formally approved the Company’s application (as may be amended based on
comments and feedback from any other Governmental Authority) before
the
first anniversary of the Company submitting its application(s) to
each
respective Governmental Authority, the Buyer exercising its due process
rights to have its application reviewed, appealed or otherwise
decided.
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|
(c)
|
The
Member shall, and shall cause its Affiliates to, reasonably cooperate
with
the Company and the Buyer, at the Company’s expense, in connection with
the application(s) pursuant to this Section
7.3
(such costs of preparing and filing the application(s) to be borne
by the
Company) and will furnish to the Company and the Buyer any information
in
the possession of the Member or its Affiliates required for such
applications to be made with the Governmental
Authority. Nothing set forth in this Agreement shall require
Company or its Affiliates to defend against any governmental challenges
or
denials of any application made by the Company pursuant to this Section
7.4;
provided, however, that in the event that any such application is
met with
any governmental challenges and/or denials, the Company will, and
the
Buyer will cause the Company to, work in good faith with the Member
to
amend any such application(s) in an effort to address any issues
raised in
the governmental challenges and/or
denials.
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|
(d)
|
The
rights and benefits of the Company and its Affiliates under this
Section
7.4 and
the obligations of the Company and the Buyer under this Section
7.4
shall, in each case, inure to and be binding upon their respective
successors or assigns (including third party purchasers of the Company’s
of its Affiliates’ equity or assets). In this regard, the
Company (or its Affiliates) hereby agrees, represents and covenants
that
in the event that the Company (or its Affiliates) contracts to sell
its
assets to a third party purchaser that would necessitate the sale,
license
and/or lease of all or substantially all of the assets of the Company
(or
any other presently owned or future acquired water infrastructure
by the
Company or its Affiliates within ▇▇▇▇▇ County, Maryland) to a third
party
at or prior to the termination or expiration of the Company’s and the
Buyer’s covenants under this Section
7.4,
the Company (or its Affiliates) shall include an affirmative covenant
in
the asset purchase agreement, lease agreement or license agreement
with
the third party purchaser, lessee and/or licensee, whereby this third
party shall be required to assume the Company’s (or its Affiliates’)
contractual liabilities, duties and obligations under Section
7.4 of
this Agreement.
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|
Section
7.5
|
Mandatory
Partial
Prepayment of the Note.
|
If
at any
time after the Closing Date and prior to the satisfaction and discharge in
full
of all of the Buyer’s obligations to the Member under the Note, the Buyer shall
directly or indirectly through the Company actually collect connection fees
or
contributions in aid of construction for new customers within the Service
Territory (collectively “Connection Fees”) that in the
aggregate equal the Purchase Price, then thereafter the Buyer shall remit to
the
Member in partial prepayment of the Note (without incurring any penalties or
premiums or requiring advance notice) all Connection Fees actually paid to
the
Buyer directly or indirectly through the Company until the satisfaction and
discharge in full of all of the Buyer’s obligations to the Member under the
Note, which Connection Fees shall be remitted by the Buyer to the Member within
thirty (30) days of the Buyer’s or the Company’s receipt of
payment. Any such prepayments shall be applied to the last payments
due under the Note.
|
Section
7.6
|
Further
Assurances.
|
At
any time and from time to time after
the Closing, at the reasonable request of the Buyer or the Company and without
further consideration (but at the Company’s or the Buyer’s cost of preparation
and filing), the Member promptly shall execute and deliver such confirmatory
instruments of sale, transfer, conveyance, assignment and confirmation, and
take
such other reasonable action, as the Buyer may reasonably request to transfer,
convey and assign to the Buyer, and to confirm the Buyer’s right, title and
interest in and to, all of the Acquired Interests or any assets, properties
or
rights of the Company and otherwise to carry out the purposes and intent of
this
Agreement.
|
Section
7.7
|
Cooperation
Obtaining
Approvals from Governmental
Authorities.
|
Subsequent
to the Closing Date, upon request by the Buyer or the Company, the Member shall
support in writing and otherwise reasonably cooperate with the Buyer, at the
Company’s expense, to assist the Buyer or the Company, as the case may be, in
the obtaining of, any authorizations or other Permits, including a franchise,
from any Governmental Authority sought by the Buyer in the Existing Service
Territory or the Potential Expansion Service Territory. Reasonable
costs incurred by Member, except for costs or expenses of any legal counsel
engaged by the Member, shall be borne by the Buyer or the Company.
ARTICLE
VIII
CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF THE SELLERS
The
obligations of the Sellers with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of each of the conditions
set forth in this Article
VIII.
|
Section
8.1
|
Representations
and
Warranties.
|
All
representations and warranties of the Buyer contained in this Agreement shall
be
true and correct as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; and a
certificate to the foregoing effect dated the Closing Date and signed by an
authorized officer of the Buyer shall have been delivered to the
Sellers.
|
Section
8.2
|
Performance
of
Obligations.
|
Each
and all of the agreements of the
Buyer to be performed on or before the Closing Date pursuant to the terms of
this Agreement shall have been duly performed in all material respects, each
of
the documents, agreements, consents and other items to be delivered to the
Sellers pursuant to Section
3.2(b)shall have been
delivered, and the Buyer shall have delivered to the Sellers a certificate,
dated as of the Closing Date, to such effect.
|
Section
8.3
|
No
Litigation
|
No
Litigation
before a court or any
other Governmental Authority shall have been instituted or threatened seeking
to
restrain or prohibit the transactions contemplated by this Agreement, and no
Governmental Authority shall have taken any other action prohibiting the Sellers
from proceeding with the transactions hereunder.
|
Section
8.4
|
Consents
and Approvals.
|
All
necessary consents of and filings required to be obtained or made with any
Person or any Governmental Authority relating to the consummation of the
transactions contemplated herein (collectively, “Required Consents”) by the
Buyer shall have been obtained and made, including those described on Schedule
5.4.
|
Section
8.5
|
Satisfaction
of
Indebtedness; Release of
Liens.
|
The
Buyer
shall have paid and satisfied in full all obligations of the Company for the
Closing Debt, and fully and finally released and terminated all Liens in respect
thereof and provided the Seller with evidence of such satisfaction and discharge
and release and termination, as requested by the Seller, including, without
limitation, the Payoff Letters and UCC-3s or other releases to be delivered
pursuant to Section
3.2(a)(xi).
ARTICLE
IX
CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF THE BUYER
The
obligations of the Buyer with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of all of the conditions
set forth in this Article
IX.
|
Section
9.1
|
Representations
and Warranties.
|
All
the representations and warranties
of the Sellers contained in this Agreement shall be true and correct as of
the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; and Sellers shall have each delivered
to
the Buyer a certificate to such effect, dated as of the Closing Date, that,
with
respect to the Company, shall have been signed by the Managing Member of the
Company and, with respect to the Member, shall have been signed by the General
Partner of the Member.
|
Section
9.2
|
Performance
of Obligations.
|
Each
and all of the agreements of the
Sellers to be performed on or before the Closing Date pursuant to the terms
of
this Agreement shall have been duly performed in all material respects, each
of
the documents, agreements, consents and other items to be delivered to the
Sellers pursuant to Section
3.2(a)shall have been
delivered, and the Sellers shall have each delivered to the Buyer a certificate
to such effect, dated as of the Closing Date, that, with respect to the Company,
shall have been signed by the Managing Member of the Company and, with respect
to the Member, shall have been signed by the General Partner of the
Member.
|
Section
9.3
|
No
Litigation.
|
No
Litigation
before a court or any
other Governmental Authority shall have been instituted or threatened seeking
to
restrain or prohibit the transactions contemplated by this Agreement, and no
Governmental Authority shall have taken any other action prohibiting the Buyer
or Artesian from proceeding with the transactions hereunder.
|
Section
9.4
|
Consents
and Approvals.
|
All
Required Consents to have been obtained or made by the Sellers shall have been
obtained and made, including those described on Schedule
4.4. All necessary approvals of the PSC shall have been
obtained and shall be in full force and effect.
|
Section
9.5
|
Absence
of Certain Changes.
|
No
change
that constitutes or results in a Material Adverse Change shall have occurred
or
arisen.
ARTICLE
X
INDEMNIFICATION
|
Section
10.1
|
Obligations
of the Seller and the
Member.
|
|
(a)
|
As
consideration for the commitment of the Buyer hereunder, the Member
shall
indemnify and hold harmless the Buyer, its successors and assigns,
and
each of its Affiliates, equity owners, directors, officers, agents,
Representatives and employees and each other Person, if any, controlling
such person (each a “Buyer Indemnified
Person”), from and against all Liabilities to which such Buyer
Indemnified Person may become subject as a result of, or based upon
or
arising out of, directly or indirectly, (i) any material inaccuracy
in, or
breach or nonperformance of, any of the representations, warranties,
covenants or agreements made by the Sellers in or pursuant to this
Agreement (regardless of any notification pursuant to Section
6.2
that corrects any representation or warranty of the Sellers that
was
incorrect or inaccurate as of the date hereof and reading out any
materiality qualifications), (ii) acts or omissions of the Company
or its
predecessors prior to the Closing, (iii) Liability under any Environmental
Laws arising from any activity of the Sellers or any of their predecessors
prior to the Closing, (iv) the Company’s ownership or operation of the
Company, the Business or the assets, properties or rights of the
Company
prior to the Closing Date (excluding any negligent acts or omissions
of
the Buyer or its Affiliates as the contracted operator of the Business),
(v) Liability with respect to any Lien on or in respect of any of
the
assets, properties or rights of the Company that is not released
by the
Closing Date (excluding the Member’s Lien or any lien associated with the
Closing Debt), (vii) Liability arising out of or relating to any
Litigation by the Town of North East, Maryland, against the Company,
or
(viii) the matters disclosed on Schedule 4.14; and (in
each case) will reimburse any Buyer Indemnified Person for all reasonable
expenses (including the reasonable fees of counsel) as they are incurred
by any such Buyer Indemnified Person in connection with investigating,
preparing or defending any such action or claim pending or threatened,
whether or not such Buyer Indemnified Person is a party
hereto.
|
|
(b)
|
The
Member and its Affiliates hereby release and discharge the Company
of all
Liabilities and obligations of the Member and its Affiliates arising
from
or relating to the period prior to the Closing, excluding any Liabilities
arising from the negligent acts or omissions of the Buyer or its
Affiliates, whether pursuant to this Agreement or
otherwise. Neither the Member nor any of its Affiliates shall
seek or otherwise be entitled to seek contribution or any other payments
from the Company for any or all Liabilities that the Member or its
Affiliates is or shall be obligated to pay arising from or relating
to the
period prior to the Closing, excluding any Liabilities arising from
the
negligent acts or omissions of the Buyer or its Affiliates, whether
pursuant to this Agreement or
otherwise.
|
|
Section
10.2
|
Obligations
of the Buyer and Artesian.
|
As
consideration for the commitment of
the Sellers hereunder, the Buyer and Artesian shall, jointly and severally,
release, waive claims against, indemnify and hold harmless the Member and its
Affiliates, equity owners, directors, officers, agents and employees and each
other Person, if any, controlling the Member or any of its Affiliates (each
a
“Seller
Indemnified Person”) from
and against any Liability to which such Seller Indemnified Person may become
subject as a result of, or based upon or arising out of, directly or indirectly:
(a) any material inaccuracy in, or breach or nonperformance of, any of the
representations, warranties, covenants or agreements made by the Buyer and/or
Artesian in or pursuant to this Agreement, (b) all Liabilities directly
resulting from the Buyer’s installation of the Water Plant or the Buyer’s
operation of the assets of the Company prior to the Closing, (c) any
sales and use and/or transfer Tax related to the transfer of the Acquired
Interests from the Company to Buyer, or (d) the Buyer’s ownership or operation of
the Company, Business or assets, properties or rights of the Company following
the Closing Date, and (in each case) will reimburse any Seller Indemnified
Person for all reasonable expenses (including the reasonable fees of counsel)
as
they are incurred by any such Seller Indemnified Person in connection with
investigating, preparing or defending any such action or claim pending or
threatened, whether or not such Seller Indemnified Person is a party
hereto.
|
Section
10.3
|
Tax
Indemnification.
|
The
Member and its Affiliates
shall be responsible for, and the Member and its Affiliates, jointly and severally, shall
indemnify and hold harmless each Buyer Indemnified Person in respect of, any
Liability, (or actions or claims in respect thereof) attributable to any
breach by the Member or its Affiliates of the covenants set forth in Sections 7.1 or 7.2
or any and all
Taxes relating to any Pre-Closing Tax Period, including any Tax that is or
results in a Lien upon the Acquired Interests, but excluding any sales and
use
tax, any bulk sales or transfer Tax arising from the transfer of the Acquired
Interests. The Member and its Affiliates shall not enter into any
settlement or agreement in compromise of any claim relating to Taxes with any
Governmental Authority which purports to bind the Company or its Affiliates
with
respect to any tax period without the Buyer’s prior written
consent.
|
Section
10.4
|
Procedure.
|
(a)
Each Buyer Indemnified Person
and
Seller Indemnified Person shall be referred to collectively herein as an
“Indemnified
Person.” Any
Indemnified Person seeking indemnification with respect to any actual or alleged
Liability shall give notice to the Person from whom indemnification is sought
(each, an “Indemnifying
Person”) on or before the
date specified in Section
10.5. Failure to
provide the specified notice, however, will not affect the Indemnified Person’s
rights to indemnity hereunder from the Indemnifying Person, unless the
Indemnifying Person can show actual material prejudice resulting from such
failure and then only to the extent of such actual material
prejudice.
(b)
If any Liability is asserted
by
any third party against any Indemnified Person, the Indemnifying Person shall
have the right, unless otherwise precluded by applicable Law, to conduct and
control the defense, compromise or settlement of any action or threatened action
brought against the Indemnified Person in respect of matters addressed by the
indemnity set forth in this Article
X (an “Action”).
(c)
The Indemnified Person shall
have
the right to employ counsel separate from counsel employed by the Indemnifying
Person in connection with any such Action or threatened Action and to
participate in the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Person shall be at the sole expense of the
Indemnified Person, unless(i)
the Indemnifying Person shall have
elected not, or, after reasonable written notice of any such Action or
threatened Action, shall have failed (within ten (10) days after the
Indemnifying Persons’ receipt of such written notice), to assume or participate
in the defense thereof, (ii) the employment thereof has been specifically
authorized by the Indemnifying Person in writing, or (iii) the parties to
any such Action or threatened Action (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and the Indemnifying
Person shall have been advised in writing by counsel for the Indemnified Person
that there may be one or more defenses available to the Indemnified Person
that
are not available to the Indemnifying Person or legal conflicts of interest
pursuant to applicable rules of professional conduct between the Indemnifying
Person and the Indemnified Person (in which case, the Indemnifying Person shall
not have the right to assume the defense of such Action on behalf of the
Indemnified Person), in any of which events referred to in clauses (i), (ii)
and
(iii) the fees and expenses of one such separate counsel employed by the
Indemnified Person shall be at the expense of the Indemnifying
Person.
(d)
The Indemnifying Person shall
not,
without the written consent of the Indemnified Person, settle or compromise
any
such Action or threatened Action or consent to the entry of any judgment which
does not include as an unconditional term thereof the giving by all other
participants to the Indemnified Person a release from all liability in respect
of such Action or threatened Action. In addition, the Indemnifying
Person shall not, without the prior written consent of the Indemnified Person,
settle or compromise any such Action or threatened Action or consent to the
entry of any judgment which provides for injunctive or equitable relief with
respect to any Indemnified Person. Unless the Indemnifying Person
shall have elected not, or shall have after reasonable written notice of any
such Action or threatened Action failed, to assume or participate in the defense
thereof, the Indemnified Person may not settle or compromise any Action or
threatened Action without the written consent of the Indemnifying Person, such
consent not to be unreasonably withheld, conditioned, or
delayed.
(e)
If, after reasonable written
notice of any such Action or threatened Action, the Indemnifying Person does
not
affirmatively undertake to defend the Indemnified Person, a recovery against
the
Indemnified Person for damages suffered by it in good faith, is conclusive
in
its favor against the Indemnifying Person; provided,
however,
that no such conclusive presumption
shall be made if the Indemnifying Person has not received reasonable written
notice of the Action against the Indemnified Person.
|
Section
10.5
|
Survival
of Certain Provisions.
|
|
(a)
|
The
representations and warranties and indemnification and other obligations
of the Sellers and the Buyer and Artesian set forth set forth in
Article
IV,
Article
V
and Sections
10.1, 10.2
and 10.3,
as the
case the may be, shall survive the Closing and shall continue in
full
force and effect without limitation after the Closing for a period
of
twenty-four (24) months following the Closing Date, except that:
(a)
claims related to fraud or willful misconduct shall survive until
the
expiration of ten (10) Business Days following the date on which
the
statute of limitations otherwise applicable to such claim has expired,
(b)
claims for indemnification arising from the breach of the representations
and warranties contained in Sections
4.11
(Taxes) or the breach of the covenants contained in Sections
7.1,
7.2,
10.2(b) or
10.3,
shall
survive until the expiration of ten (10) Business Days following
the date
on which the statute of limitations otherwise applicable to such
claim has
expired, and (c) claims for indemnification arising from the breach
of the
representations and warranties contained in Section
4.10
(Environmental Matters) and Section
5.6
(Environmental Matters) or under Sections
10.1(a)(iii) or 10.2(c)
shall
survive until the fifth (5th)
anniversary of the Closing Date; and (e) claims for indemnification
arising from the breach of the representations and warranties contained
in
Sections
4.1 (Organization and Good Standing), 4.2
(Capitalization; Title to Limited Liability Company Interests), 4.20
(No
Brokers), 4.3
(Authority
and Validity), 4.6
(Title to
Assets), 5.1
(Organization and Good Standing), 5.2
(Authority
and Validity) and 5.5
(No
Brokers) or arising under Sections
10.1(a)(iv), (v),
(vi),
(vii)
or (viii)
or Section
10.2(b)
shall survive indefinitely.
|
|
(b)
|
Except
as otherwise set forth in Section
10.5(a), each of the covenants, agreements and obligations of the
parties contained in this Agreement will survive the Closing and
will
continue in full force and effect in accordance with its terms, or,
if not
specific as to duration, for a period of ten (10) Business Days after
the
expiration of the applicable statutes of limitations relating
thereto.
|
|
(c)
|
Each
period of survival of the representations and warranties, covenants
and
agreements prescribed by Section
10.5(a)
and (b)
above is referred to as a “Survival
Period.” The liabilities of each party under its
respective representations and warranties, covenants and agreements
will
expire as of the expiration of the applicable Survival Period; provided,
however, that such expiration will not include, extend or apply to
any
representation or warranty or covenant the breach of which has been
asserted by a party in a written notice to the other party before
such
expiration.
|
|
Section
10.6
|
Limitations
on
Indemnification
|
|
(a)
|
No
Indemnified Person shall be permitted to seek indemnification from
the
Indemnifying Person for any Liabilities of or to the Indemnifying
Person
or any other Person entitled to indemnification from the Indemnified
Person (the “Indemnifiable
Liabilities”) arising out of or resulting from any breach of any
Basket-Eligible Representations and Warranties (as hereinafter defined)
unless the amount for which the Indemnifying Person would be liable
to the
Indemnified Person, but for the provisions of this Section
10.6,
would exceed Ten Thousand Dollars ($10,000) in the aggregate (the
“Basket”). If
the amount of Indemnifiable Liabilities for which an Indemnifying
Person
would be entitled to seek indemnification against the Indemnified
Person
arising out of or resulting from breaches of the Basket-Eligible
Representations and Warranties exceeds the Basket, the Indemnifying
Person
will be liable to the Indemnified Person, as the case may be, for
the full
amount of such Indemnifiable Liabilities arising out of or resulting
from
breaches of Basket-Eligible Representations and Warranties, dollar
for
dollar from the first dollar of such Indemnifiable
Liabilities. The Basket shall apply to all claims for
indemnification for Indemnifiable Liabilities arising out of or resulting
from any breach of any representation or warranty (“Basket-Eligible
Representations
and Warranties”) other than (i) any breach by the Sellers of any
representation or warranty contained in Sections
4.1,
4.2,
4.4,
4.5,
4.10
or
4.19;
(ii) any breach by the Buyer or Artesian of any representation or
warranty
contained in Sections
5.1,
5.2
or
5.5;
(iii) any claims for Indemnifiable Liabilities by any Buyer Indemnified
Person arising out of or resulting under Sections
10.1(d), (e),
(f),
(g)
or (h)
or Section
10.3;
(iv) any claims for Indemnifiable Liabilities by any Seller Indemnified
Person arising out of or resulting under Sections
10.2(b) or (d);
or (v)
claims related to fraud or willful
misconduct.
|
|
(b)
|
The
maximum liability of any Indemnifying Person pursuant to this Article
X shall
be Six Hundred Thousand Dollars ($600,000) (the “Cap”), except
that
claims for Indemnifiable Liabilities arising out of or resulting
from the
following shall not be subject to the Cap: (i) the breach by the
Sellers
of any representation or warranty contained in Sections
4.1,
4.2,
4.3,
4.5,
4.6,
4.11
or
4.20,
(ii) the breach by the Buyer or Artesian of any representation or
warranty
contained in Sections
5.1,
5.2
or
5.5,
(iii) any claims for Indemnifiable Liabilities by any Buyer Indemnified
Person arising out of or resulting under Sections
7.1,
7.2,
10.1(a)(iv),
(v),
(vi),
(vii)
or
(viii)
or
Section
10.3; (iv) any claims for Indemnifiable Liabilities by any Seller
Indemnified Person arising out of or resulting under Sections
10.2(b) or (d);
(v) any
Liabilities of any Buyer Indemnified Person arising out of or relating
to
any breach of any covenant, agreement or obligation (other than a
representation or warranty) contained in this Agreement to be performed
by
the Company on or prior to Closing; (iv) any Liabilities of any Buyer
Indemnified Person arising out of or relating to any breach of any
covenant, agreement or obligation (other than a representation or
warranty) contained in this Agreement to be performed by the Member
prior
to, at or after Closing; (v) any Liabilities of any Seller Indemnified
Person relating to the Buyer’s of its Affiliates’ negligent operation of
the Business prior to Closing or the Company’s negligent operation of the
Business subsequent to the Closing or (vi) any claim related to fraud
or
willful misconduct. All indemnities provided for in the
Agreement shall apply even in the event of joint and/or concurrent
negligence, strict liability, or other fault of the party whose liability
is indemnified.
|
|
Section
10.7
|
Remedies.
|
(a)
Each party hereto acknowledges
that irreparable damage would result if this Agreement is not specifically
enforced. Therefore, the rights and obligations of the parties under
the Agreement, including, without limitation, their respective rights and
obligations to sell and purchase the Acquired Interests and comply with the
covenants set forth in this Agreement, shall be enforceable by a decree of
specific performance issued by any court of competent jurisdiction, and/or
appropriate injunctive relief may be applied for and granted in connection
therewith. Each party hereto agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it
of
the provisions of this Agreement relating to the Closing and hereby agrees
to
waive the defense that a remedy at law would be adequate in any action for
specific performance or injunctive relief hereunder. Each party
hereto agrees to waive any rights to require the other party hereto to prove
actual damages or post a bond or other security as a condition to the granting
of any equitable relief under this Section
10.7.
|
(a)
|
Except
as otherwise provided herein, no delay of or omission in the exercise
of
any right, power or remedy accruing to any party as a result of any
breach
or default by any other party under this Agreement shall impair any
such
right, power or remedy, nor shall it be construed as a waiver of
or
acquiescence in any such breach or default, or of any similar breach
or
default occurring later; nor shall any waiver of any single breach
or
default be deemed a waiver of any other breach or default occurring
before
or after that waiver. All rights and remedies of any party
described in this Agreement are cumulative of each other and of every
right or remedy such party may otherwise
have.
|
|
Section
10.8
|
Right
of Set
Off.
|
The
Buyer
shall have the rights of recoupment, set-off, defense and counterclaim with
respect to all or any part of any obligation of a Seller Indemnified Person
to
make a payment under this Article
X. The
Buyer may exercise the foregoing rights by notifying the Member that the Buyer
is reducing the amount of any present or future payments under the
Note. Prior to
any such recoupment, set-off, defense or counterclaim, the Buyer shall submit
a
notice to the Member of any claim for which it is entitled to payment,
specifying in reasonable detail (i) the nature of the claim and (ii) the amount
of the claimed liability in respect of each such claim. If within ten
(10) days after receipt of such claim no notice of objection has been filed
by
the Member, the Buyer may offset the amount of such claimed liability against
any
present or future payments under the Note. In the event of any
objection notice with respect to such claim, the amount of such claim shall
be
withheld by the Buyer from any payments otherwise required under the Note and
the amount of such payment shall be deposited into escrow with an escrow agent
mutually acceptable to the parties until such claim is resolved by the
parties.
ARTICLE
XI
TERMINATION
|
Section
11.1
|
Termination.
|
This
Agreement may be terminated at any
time prior to the Closing upon the occurrence of any of the
following:
|
(a)
|
at
any time, by mutual written consent of the Buyer and the
Sellers;
|
|
(b)
|
by
either the Buyer or the Sellers at any time (if such party itself
is not
then in material breach of any of its representations and warranties,
covenants, agreements or other obligations contained in this Agreement),
if the other party is in material breach or default of any of its
representations and warranties, covenants, agreements or other obligations
herein, which breach or default remains uncured for a period of ten
(10)
days after such other party’s receipt of written notice of such breach or
default;
|
|
(c)
|
by
the Buyer at any time pursuant to Section
6.2 of
this Agreement;
|
|
(d)
|
by
either the Buyer, on the one
hand, or the Sellers, on the other, (if such party itself is not
then in
material breach of any of its representations and warranties, covenants,
agreements or other obligations contained in this Agreement) upon
written
notice to the other, if the transactions contemplated by this Agreement
shall not have closed by August 1,
2008.
|
|
Section
11.2
|
Consequences
of Termination; Regulatory
Terminations.
|
|
(a)
|
In
the event that this Agreement shall be terminated pursuant to this
Article
XI,
(a) each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof,
to the
party furnishing the same, and (b) all further obligations of the
parties under this Agreement shall terminate without further liability
of
any party to any other party, except that (i) the provisions of this
Section
11.2
and the expenses provision contained in Section
12.1
shall survive such termination and continue in full force and effect,
(ii)
nothing herein shall relieve any party from Liability for any material
breach of any covenant or any willful breach of any other provision
of
this Agreement prior to such
termination.
|
|
(b)
|
Notwithstanding
anything to the contrary in Section
11.2(a), in the event that this Agreement shall be terminated
pursuant to this Article
XI,
the Buyer shall not
be
liable for any failure to perform its respective obligations hereunder
due
to any request or demand by, or requirement of, or any failure to
obtain
any necessary approval of, the PSC, including without limitation
the Buyer’s obligation to secure its obligations under the Note and
Security Agreement by a first priority lien and security interest
against
all of the Company’s assets.
|
ARTICLE
XII
GENERAL
PROVISIONS
|
Section
12.1
|
Expenses.
|
Except
as
provided in Sections
10.1 and 10.2 or
as otherwise
specifically provided in this Agreement, the parties shall bear their respective
expenses incurred in connection with the preparation, execution and performance
of this Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, all fees and expenses of their respective
Representatives and all fees, expenses and costs for obtaining any Required
Consent of such
party.
|
Section
12.2
|
Confidentiality.
|
|
(a)
|
The
Member recognizes and acknowledges that it and its Affiliates have
in the
past, currently have, and in the future may have, access to certain
non-public confidential information of the Buyer, regarding the Buyer,
the
Company or the Business (collectively, “Confidential
Information”), such as operational policies and pricing and cost
policies, which are valuable, special and unique assets. The
Member agrees that it will not, and will cause its Affiliates not
to,
disclose any Confidential Information to any Person for any purpose
or
reason whatsoever, except
(i) to the authorized Representatives of the Buyer who need to know
information in connection with the transactions contemplated hereby
and
(ii) to its own Representatives, counsel and other advisors who first
agree to the confidentiality provisions of this Section
12.2,
unless
(A) such information becomes known to the public generally through
no
fault of the Member, or (B) disclosure is required by Law or valid
legal
process, provided, that prior to disclosing any information pursuant
to
this clause (B), the Member shall, to the extent permitted by Law
or valid
legal process, give prior written notice thereof to the Buyer and
provide
the Buyer with the opportunity to contest such disclosure. In
the event of a breach or threatened breach of the provisions of this
Section
12.2 by
the Member, the Buyer and the Company shall be entitled to an injunction
restraining the other party from disclosing, in whole or in part,
such
confidential information. Nothing herein shall be construed as
prohibiting the Buyer or the Company from pursuing any other available
remedy for such breach or threatened breach, including the recovery
of
damages.
|
|
(b)
|
Because
of the difficulty of measuring economic losses as a result of the
breach
of the foregoing covenants in this Section
12.2,
and because of the immediate and irreparable damage that would be
caused
for which they would have no other adequate remedy, the Member agrees
that, in the event of a breach by it or any of its Affiliates of
the
foregoing covenants, the covenant may be enforced by the Buyer or
the
Company against the Member and its Affiliates by any equitable remedy,
including, without limitation, injunction, specific performance,
and
restraining order, without the necessity of proving actual damages
or
posting a bond or other security.
|
|
(c)
|
This
Section
12.2 shall survive the termination of, or Closing under, this
Agreement for a period of five (5)
years.
|
|
Section
12.3
|
Amendments
and Waivers.
|
Any
term of this Agreement may be
amended, supplemented or modified only with the written consent of the Buyer
and
the Sellers and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the party against whom the
waiver is sought to be enforced. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute
a
continuing waiver unless otherwise expressly provided.
|
Section
12.4
|
Successors
and Assigns.
|
This
Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective legal
representatives, successors, heirs, executors and assigns; provided,
however,
that this Agreement and all rights and
obligations hereunder may not be assigned or transferred without the prior
written consent of the other parties hereto, except
that the Buyer may assign
its rights hereunder to a direct or indirect wholly-owned subsidiary of the
Buyer, so long as the Buyer remains liable for its obligations
hereunder.
|
Section
12.5
|
Third
Party Beneficiaries.
|
The
rights created by this Agreement are
solely for the benefit of the parties hereto and the respective successors
or
permitted assigns, and no other Person shall have or be construed to have any
legal or equity right, remedy or claim under or in respect of or by virtue
of
this Agreement or any provision herein contained; provided,
however,
that the provisions of Sections
7.3, 7.4,
7.5,
7.6
and 7.7
and Article
X
above are intended for
the
benefit and burden of the parties specified therein, and their respective legal
representatives, successors, heirs, executors and
assigns. Notwithstanding the foregoing, Sellers’Affiliates specified
on the attached Schedule
7.3 shall be third party
beneficiaries of this Agreement.
|
Section
12.6
|
Choice
of Law;
Venue.
|
This
Agreement shall be governed by and
construed under, and the rights of the parties determined, in accordance with
the Laws of the State of Maryland (without reference to the choice of Law
provisions of the State of Maryland). Each of the parties hereto
irrevocably consents to the service of any process, pleading, notices or other
papers by the mailing of copies thereof by registered, certified or first class
mail, postage prepaid, to such party at such party’s address set forth herein,
or by any other method provided or permitted under the Laws of the State of
Maryland. Each party hereby irrevocably submits to the jurisdiction of
any federal or state court located in State of Maryland (and any appellate court
therefrom) over any action or proceeding arising out of or relating to this
Agreement. Each party hereby irrevocably and unconditionally waives
and agrees not to plead, to the fullest extent provided by Law, any objection
it
may have to venue and the defense of an inconvenient forum to the maintenance
of
such action or proceeding in such courts.
|
Section
12.7
|
Waiver
of Jury Trial.
|
EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY
OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.
|
Section
12.8
|
Notices.
|
Unless
otherwise provided in this Agreement, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effectively given
upon the earlier of (a) personal delivery to the party to be notified or
(b) the next Business Day after dispatch via nationally recognized
overnight courier, all addressed to the party to be notified at the address
indicated for such party below, or at such other address as such party may
designate by 10 Business Days’ advance written notice to the other
parties. Notices should be provided in accordance with this Section 12.8 at the
following addresses:
If
to the Buyer, or post-Closing, the
Company
to: With a copy to:
Artesian
Resources
Corporation
DLA Piper US
LLP
▇▇▇
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇
Attn:
▇▇▇▇▇
▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Esq.
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier
▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ Email: ▇▇▇▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
If
to the Member, or pre-Closing, the
Company
to:
With a copy
to:
Mountain
Hill Water Company
LLC The ▇▇▇▇▇▇▇
Companies
Attn: ▇▇▇▇
▇.
▇▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇
▇▇▇
▇▇▇▇▇
▇▇▇
950 Smile Way
York
PA
17404
▇▇▇▇ ▇▇ ▇▇▇▇▇
Tel: (▇▇▇)
▇▇▇-▇▇▇▇ Tel: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇)
▇▇▇-▇▇▇▇
FAX: (▇▇▇)
▇▇▇-▇▇▇▇
EMail: ▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
EMail: ▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
|
Section
12.9
|
Severability.
|
If
one or more provisions of this
Agreement shall be held invalid, illegal or unenforceable, such provision shall,
to the extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and
if
such modification is not possible, such provision shall be severed from this
Agreement. In either case, the balance of this Agreement shall be
interpreted as if such provision were so modified or excluded, as the case
may
be, and shall be enforceable in accordance with its terms.
|
Section
12.10
|
Entire
Agreement.
|
This
Agreement, together with the
exhibits and schedules hereto (which are hereby made a part hereof and
specifically incorporated by reference herein), constitutes the entire agreement
among the parties with respect to the subject matter hereof and, except as
provided in the following sentence, supersedes all prior understandings and
agreements, whether written or oral.
|
Section
12.11
|
Construction.
|
The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring
or
disfavoring any party by virtue of authorship of any provision of this
Agreement. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
|
Section
12.12
|
Counterparts.
|
This
Agreement may be executed in two or
more counterparts, including by means of telefaxed signature pages, each of which shall be
deemed an
original, but all of which together shall constitute one and the same
instrument.
Section
12.13 Time
is of the Essence.
The
parties hereto hereby agree that
time is of the essence with respect to the performance of each party’s
respective obligations and commitments under this Agreement.
[
SIGNATURES APPEAR ON THE FOLLOWING
PAGE. ]
IN
WITNESS WHEREOF, the
parties have executed this Asset Purchase Agreement as of the date first above
written.
BUYER:
ARTESIAN
WATER MARYLAND,
INC.
By:
Name:
Title:
ARTESIAN:
For
the limited purposes set forth in
Sections
2.2, 3.2(c)and
7.3
of the
Agreement
ARTESIAN
RESOURCES
CORPORATION
By:
Name:
Title:
COMPANY:
MOUNTAIN
HILL WATER COMPANY,
LLC
By:
Name:
Title:
MEMBER:
SUNRISE
HOLDINGS,
L.P.
By:
Name:
Title: