EXHIBIT 2
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
PHILADELPHIA SUBURBAN CORPORATION
(PURCHASER)
AND
ALLETE WATER SERVICES, INC.
(SHAREHOLDER)
DATE: NOVEMBER 20, 2003
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS...................................................1
ARTICLE 2 PURCHASE OF STOCK; PURCHASE PRICE............................10
2.1 Purchase and Sale of Stock........................................10
2.2 Purchase Price....................................................10
2.3 Payment of Purchase Price on the Closing Date.....................11
2.4 Closing and Closing Deliveries....................................11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDER..................................................13
3.1 Organization......................................................13
3.2 Capitalization....................................................14
3.3 Due Authorization.................................................14
3.4 No Breach.........................................................14
3.5 Clear Title.......................................................15
3.6 Condition of Assets...............................................15
3.7 Litigation........................................................15
3.8 Labor Matters.....................................................15
3.9 Tax Matters.......................................................16
3.10 Employee Benefits.................................................17
3.11 No Guarantees.....................................................20
3.12 Financial Statements..............................................20
3.13 Absence of Certain Developments...................................21
3.14 Intellectual Property.............................................21
3.15 Compliance with Laws..............................................22
3.16 Operating Contracts...............................................22
3.17 Real Estate.......................................................23
3.18 Accounts Receivable...............................................25
3.19 Books and Records; Bank Accounts..................................25
3.20 Employees.........................................................25
3.21 Permits and Certificate Applications..............................26
3.22 Developer Contracts...............................................26
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3.23 Subsidiaries......................................................26
3.24 Insurance.........................................................26
3.25 Brokers...........................................................27
3.26 Relationship with Related Persons.................................27
3.27 Internal Disclosure Controls and Procedures.......................28
3.28 Environmental Matters.............................................28
3.29 Debt Instruments..................................................28
3.30 Customers and Suppliers...........................................29
3.31 Shareholder Loans.................................................29
3.32 Adequacy of Properties............................................29
3.33 Absence of Certain Business Practices.............................29
3.34 Trade Regulation..................................................30
3.35 Shareholder Ownership of the Stock................................30
3.36 Virginia Operations...............................................30
3.37 Employee Retention................................................30
3.38 Regulation as Utilities...........................................31
3.39 Limitation on Representations and Warranties......................31
3.40 Internal Accounting Controls......................................31
3.41 Water Quality.....................................................31
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER....................................................31
4.1 Organization......................................................32
4.2 Due Authorization.................................................32
4.3 No Breach.........................................................32
4.4 Investment Representations........................................32
4.5 Brokers...........................................................32
ARTICLE 5 PERFORMANCE AND COVENANTS PENDING CLOSING....................33
5.1 Continuing Due Diligence..........................................33
5.2 Conduct of Business...............................................33
5.3 Encumbrances......................................................33
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5.4 Pay Increases.....................................................34
5.5 Restrictions on New Contracts.....................................34
5.6 Preservation of Business..........................................34
5.7 Payment and Performance of Obligations............................34
5.8 Restrictions on Sale of Assets....................................34
5.9 Prompt Notice.....................................................34
5.10 Consents..........................................................35
5.11 Copies of Documents...............................................35
5.12 No Solicitation of Other Offers...................................35
5.13 Accounts Receivable and Payable...................................35
5.14 Title Matters; Surveys............................................35
5.15 Insurance.........................................................37
5.16 Filing Reports and Making Payments................................37
5.17 Capital Expenditures..............................................37
5.18 Monthly and Year-End 2003 Financials..............................37
5.19 Litigation........................................................38
5.20 Notification of Inaccuracy........................................38
5.21 Debt Instruments..................................................38
5.22 Guarantees........................................................38
5.23 Environmental Assessment..........................................39
5.24 Cooperation with Respect to Permits, Licenses and
Regulatory Matters................................................39
5.25 Performance and Other Bonds.......................................39
5.26 Absence of Certain Developments...................................40
5.27 Certain Accounting Matters........................................40
5.28 Capital Expenditures..............................................41
ARTICLE 6 MUTUAL CONDITIONS PRECEDENT TO THE PARTIES'
OBLIGATIONS..................................................41
6.1 Proceedings.......................................................41
6.2 Consents and Approvals............................................42
6.3 Antitrust Matters.................................................42
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ARTICLE 7 ADDITIONAL CONDITIONS PRECEDENT TO THE
PURCHASER'S OBLIGATIONS......................................43
7.1 Accuracy of Representations and Warranties........................43
7.2 Compliance with Covenants and Agreements..........................43
7.3 No Material Adverse Effect........................................43
7.4 Legal Opinion.....................................................43
ARTICLE 8 ADDITIONAL CONDITIONS PRECEDENT TO THE
SHAREHOLDER'S OBLIGATIONS....................................43
8.1 Accuracy of Representations and Warranties........................43
8.2 Compliance with Covenants and Agreements..........................43
8.3 Legal Opinion.....................................................44
8.4 Delivery of Purchase Price and Other Consideration................44
ARTICLE 9 INDEMNIFICATION..............................................44
9.1 Indemnification by the Shareholder................................44
9.2 Indemnification by the Purchaser..................................45
9.3 Procedure for Indemnification.....................................46
9.4 Dispute Resolution................................................47
9.5 Effect of Insurance...............................................48
9.6 Effect of Taxes...................................................49
ARTICLE 10 TAX MATTERS..................................................50
10.1 Tax Returns.......................................................50
10.2 Controversies.....................................................50
10.3 Transfer Taxes....................................................51
10.4 Amended Tax Returns...............................................51
10.5 Non-foreign Person Affidavit......................................51
10.6 Tax Indemnification...............................................51
10.7 Section 338 Election..............................................52
10.8 Post-Closing Access and Cooperation...............................52
ARTICLE 11 PERFORMANCE FOLLOWING THE CLOSING DATE.......................52
11.1 Further Acts and Assurances.......................................52
11.2 Non-Competition Agreement.........................................53
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11.3 Non-Solicitation Agreement........................................53
11.4 Reasonableness of Covenants.......................................53
11.5 Injunctive Relief.................................................53
11.6 Blue Pencil Doctrine..............................................54
11.7 Guarantees........................................................54
11.8 Employee Matters..................................................54
11.9 Indemnification of Officers and Directors of the Company and the
Subsidiaries......................................................56
ARTICLE 12 TERMINATION..................................................57
12.1 Termination.......................................................57
12.2 Return of Documents and Nondisclosure.............................57
ARTICLE 13 MISCELLANEOUS................................................58
13.1 Survival of Representations and Warranties, Covenants and
Agreements........................................................58
13.2 Preservation of and Access to Records.............................58
13.3 Cooperation.......................................................58
13.4 Public Announcements..............................................58
13.5 Notices...........................................................59
13.6 Entire Agreement..................................................59
13.7 Remedies..........................................................59
13.8 Amendments........................................................60
13.9 Successors and Assigns............................................60
13.10 Fees and Expenses.................................................60
13.11 Governing Law and Jurisdiction....................................60
13.12 Counterparts and Facsimile Signature..............................61
13.13 Headings..........................................................61
13.14 Scope of Agreement................................................61
13.15 Number and Gender.................................................61
13.16 Severability......................................................61
13.17 Parties in Interest...............................................61
13.18 Waiver............................................................62
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13.19 Construction......................................................62
13.20 Specific Performance..............................................62
13.21 Supplementation of Schedules......................................62
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
as of the 20th day of November, 2003, by and between PHILADELPHIA SUBURBAN
CORPORATION, a Pennsylvania corporation (the "PURCHASER"), and ALLETE WATER
SERVICES, INC., a Minnesota corporation (the "SHAREHOLDER").
RECITALS
--------
A. The Shareholder is the sole owner of 6,000 issued and outstanding shares
of capital stock (the "STOCK") of Heater Utilities, Inc., a South Carolina
corporation (the "COMPANY").
B. The Company owns all of the issued and outstanding capital stock of its
two subsidiary corporations: (i) Brookwood Water Corporation, a North Carolina
corporation ("BROOKWOOD"), and (ii) LaGrange Waterworks Corporation, a North
Carolina corporation ("LAGRANGE") (individually, each of Brookwood and LaGrange
may herein be referred to as a "SUBSIDIARY," and collectively, may be referred
to herein as the "SUBSIDIARIES").
C. The Company owns and operates approximately 450 community water systems
and 33 wastewater utility systems within the State of North Carolina, and also
owns and operates 2 small community water systems located in ▇▇▇▇▇▇▇ County,
Virginia.
D. Brookwood owns and operates approximately 10 community water systems in
and about Fayetteville, North Carolina (in Cumberland and ▇▇▇▇ Counties) and
LaGrange owns and operates 3 community water systems in and about Fayetteville,
North Carolina (in Cumberland County). Neither of the Subsidiaries owns or
operates any wastewater utility systems.
E. The Purchaser desires to purchase the Stock held by the Shareholder and
the Shareholder desires to sell the Stock to the Purchaser on the terms and
subject to the conditions set forth in this Agreement.
F. Upon consummation of the purchase and sale of the Stock pursuant to this
Agreement, the Purchaser will own all of the issued and outstanding capital
stock of the Company.
AGREEMENT
---------
In consideration of the foregoing Recitals and the mutual promises
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Purchaser and the
Shareholder agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified:
1
"ACQUISITION PROPOSAL" means any proposal relating to the possible
acquisition of the Company, Brookwood and/or LaGrange, whether by way of (i)
merger, (ii) purchase of any capital stock of any of the foregoing, or (iii)
purchase of all or substantially all of the assets of the foregoing.
"AFFILIATE" when used in reference to a specified Person, means any Person
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under common control with the specified Person.
"AGREEMENT" has the meaning set forth in the introductory paragraph of this
Agreement.
"ALLETE, INC." means ALLETE, Inc., a Minnesota corporation, the ultimate
corporate parent of the Shareholder, Company and its Subsidiaries.
"ALLETE, INC. GUARANTEE" means that certain ALLETE, Inc. Guarantee executed
and delivered on the date hereof by ALLETE, Inc., the form of which is set forth
as EXHIBIT B to this Agreement, and which will become effective only upon the
Closing of this Agreement and shall be applicable only to obligations of the
Shareholder that arise after the Closing Date.
"ANCILLARY DOCUMENTS" has the meaning set forth in Section 3.3 of this
Agreement.
"APPLICABLE LAWS" means any and all laws (including Environmental Laws),
ordinances, constitutions, regulations, statutes, treaties, rules, codes,
licenses, certificates, franchises, permits, requirements and Injunctions
adopted, enacted, implemented, promulgated, issued, entered or deemed applicable
by or under the authority of any Governmental Body having jurisdiction over a
specified Person or any of such Person's properties or assets.
"BALANCE SHEETS" has the meaning set forth in Section 3.12 of this
Agreement.
"BALANCE SHEET DATE" has the meaning set forth in Section 3.12 of this
Agreement.
"BASKET AMOUNT" has the meaning set forth in Section 9.1(a) of this
Agreement.
"BENEFIT PLAN" means any and all bonus, stock option, restricted stock,
stock purchase, stock appreciation, phantom stock, profit participation,
profit-sharing, deferred compensation, severance, retention, pension,
retirement, disability insurance, medical insurance, dental insurance, health
insurance, or life insurance, death benefit, incentive, welfare and/or other
benefit, compensation and/or retirement plan, policy, arrangement and/or
Contract maintained, sponsored or participated in by the Company or any
Subsidiary.
"BROOKWOOD" has the meaning set forth in the Recitals to this Agreement.
"BUSINESS" means the ownership and/or operation of community water and
wastewater utility systems which serve primarily residential customers and, to a
much lesser extent, serve a commercial customer base. With respect to the
Company, the Business refers to community water utility systems and wastewater
utility systems, and with respect to the Subsidiaries, the Business refers to
community water utility systems.
2
"▇▇▇▇ PROPERTY" has the meaning set forth in Section 5.14(a) of this
Agreement.
"CLOSING" has the meaning set forth in Section 2.4(a) of this Agreement.
"CLOSING DATE" has the meaning set forth in Section 2.4(a) of this
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, or rules and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"COMPANY" has the meaning set forth in the Recitals to this Agreement.
"COMPANY PLAN" has the meaning set forth in Section 11.8(b) of this
Agreement.
"COMPETING BUSINESS" has the meaning set forth in Section 3.26 of this
Agreement.
"CONFIDENTIAL INFORMATION" means any information or compilation of
information not generally known to the public or the industry or which the
Company or the Subsidiaries have not disclosed to third parties without a
written obligation of confidentiality, which is proprietary to the Company or
the Subsidiaries, relating to the Company's or the Subsidiaries' procedures,
techniques, methods, concepts, ideas, affairs, products, processes and services,
including, but not limited to, information relating to marketing, merchandising,
selling, research, development, manufacturing, purchasing, accounting,
engineering, financing, costs, customers, plans, pricing, billing, needs of
customers and products and services used by customers, all lists of customers
and their addresses, prospects, sales calls, products, services, prices and the
like as well as any specifications, formulas, plans, drawings, accounts or sales
records, sales brochures, code books, manuals, trade secrets, knowledge,
know-how, pricing strategies, operating costs, sales margins, methods of
operations, invoices or statements and the like.
"CONTRACT" means any agreement, lease of personal or mixed property,
license, contract, obligation, promise, commitment, arrangement, understanding
or undertaking, instrument, document (whether written or oral and whether
express or implied) of any type, nature or description that is legally binding
but excluding leases of Leased Real Estate. As used herein, the word "Contract"
shall be limited in scope if modified by an adjective specifying the type of
contract to which this Agreement or a Section hereof refers.
"CONVERTIBLE SECURITIES" means any and all securities convertible or
exchangeable for any shares of capital stock of the Company or either
Subsidiary, including, without limitation, common stock.
"DOJ" means the United States Department of Justice.
"DEBT INSTRUMENTS" has the meaning set forth in Section 3.29 of this
Agreement.
"DEBT SECURITIES" means any and all indebtedness issued by or on behalf of
the Company or either Subsidiary which constitutes a security under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
"DEVELOPER CONTRACTS" has the meaning set forth in Section 3.16 of this
Agreement.
3
"DIRECTOR INDEMNIFIED PARTY" or "DIRECTOR INDEMNIFIED PARTIES" has the
meaning set forth in Section 11.9(a) of this Agreement.
"DISCLOSE" means to reveal, deliver, divulge, disclose, publish, copy,
communicate, show or otherwise make known or available to any other Person, or
in any way to copy, any of the Confidential Information of the Company and/or
its Subsidiaries.
"EMPLOYEES" has the meaning set forth in Section 3.20(a) of this Agreement.
"ENCUMBRANCE" means and includes:
(i) with respect to any personal property, any intangible property or
any property other than real property, any security or other property
interest or right, claim, lien, pledge, option, charge, security interest,
contingent or conditional sale, or other title claim or retention agreement
or lease or use agreement in the nature thereof whether voluntarily
incurred or arising by operation of law, and including any agreement to
grant or submit to any of the foregoing in the future; and
(ii) with respect to any real property (whether and including Owned
Real Estate or Leased Real Estate), any mortgage, lien, easement, interest,
right-of-way, condemnation or eminent domain proceeding, encroachment, any
building, use or other form of restriction, encumbrance or other claim
(including adverse or prescriptive) or right of third parties (including
Governmental Bodies), any lease or sublease, boundary dispute, and
agreements with respect to any real property including: purchase, sale,
right of first refusal, option, construction, building or property service,
maintenance, property management, conditional or contingent sale, use or
occupancy, franchise or concession, whether voluntarily incurred or arising
by operation of law, and including any agreement to grant or submit to any
of the foregoing in the future.
"ENVIRONMENTAL ASSESSMENT" has the meaning set forth in Section 5.23 of
this Agreement.
"ENVIRONMENTAL ASSESSMENT FIRM" has the meaning set forth in Section 5.23
of this Agreement.
"ENVIRONMENTAL LAWS" means any and all Applicable Laws (i) regulating the
use, treatment, generation, transportation, storage, control, management,
recycling or disposal of any Hazardous Material, including, but not limited to,
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 ET SEQ.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 ET SEQ.), the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 ET SEQ.), the Federal Water Pollution Control Act (33 U.S.C.
Section 1251 ET SEQ.), the Clean Water Act (33 U.S.C. Section 1251 ET SEQ.),
the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances
Control Act (15 U.S.C. Section 2601 ET SEQ.), and/or (ii) relating to the
protection, preservation or conservation of the environment, all as existing,
defined or interpreted as of the date hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" has the meaning set forth in Section 3.10(b) of this
Agreement.
4
"EXISTING POLICY" has the meaning set forth in Section 5.14(a) of this
Agreement.
"FINAL ORDER" has the meaning set forth in Section 6.2 of this Agreement.
"FTC" means the United States Federal Trade Commission.
"GAAP" means generally accepted accounting principles in the United States.
"GOVERNMENTAL BODY" means any:
(i) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign or other government;
(iii) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, board, commission, department,
instrumentality, office or other entity, and any court or other tribunal);
(iv) multinational organization or body; and/or
(v) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory or
taxing authority or power of any nature.
"HSR" means the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended.
"HAZARDOUS MATERIALS" means any and all (i) dangerous, toxic or hazardous
pollutants, contaminants, chemicals, wastes, materials or substances listed or
identified in, or directly or indirectly regulated by, any Environmental Law,
and (ii) any of the following, whether or not included in the foregoing:
polychlorinated biphenyls, asbestos in any form or condition, urea-formaldehyde,
petroleum (including crude oil or any fraction thereof), natural gas, natural
gas liquids, liquefied natural gas, synthetic gas usable for fuel or mixtures
thereof, nuclear fuels or materials, chemical wastes, radioactive materials,
explosives and known possible carcinogens.
"IRS" means the United States Internal Revenue Service.
"INACTIVE EMPLOYEES" has the meaning set forth in Section 3.20(a) of this
Agreement.
"INDEMNIFIED PARTY" has the meaning set forth in Section 9.3 of this
Agreement.
"INDEMNIFYING PARTY" has the meaning set forth in Section 9.3 of this
Agreement.
"INJUNCTION" means any and all writs, rulings, awards, directives,
injunctions (whether temporary, preliminary or permanent), judgments, decrees or
orders (whether executive, judicial or otherwise) adopted, enacted, implemented,
promulgated, issued, entered or deemed applicable by or under the authority of
any Governmental Body.
5
"INTELLECTUAL PROPERTY" means any and all (i) inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, continuations in
part, revisions, extensions and reexaminations thereof; (ii) trademarks, service
marks, trade dress, logos, trade names, assumed names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith; (iii) copyrightable works,
all copyrights and all applications, registrations and renewals in connection
therewith; (iv) mask works and all applications, registrations and renewals in
connection therewith; (v) trade secrets and confidential business information
(including ideas, research and development, know-how, technology, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals); (vi)
computer software (including data and related software program documentation in
computer-readable and hard-copy forms); (vii) other intellectual property and
proprietary rights of any kind, nature or description, including web sites, web
site domain names and other e-commerce assets and resources of any kind or
nature; and (viii) copies of tangible embodiments thereof (in whatever form or
medium).
"KNOWLEDGE" means, with respect to an individual who is a natural being, an
individual's actual knowledge (following due inquiry and investigation) of a
fact or other matter. With respect to an entity that is a party to this
Agreement, "Knowledge" shall be solely attributed to the Knowledge of an
officer, director, or the Senior Management Employees of the Purchaser, the
Shareholder, the Company or the Subsidiaries, respectively, and as applicable to
the context used in this Agreement. As used herein, the Knowledge of the
Subsidiaries shall be attributed to the Company for purposes of this Agreement
and, as a consequence, the "Knowledge of the Company" shall be deemed to include
the Knowledge of the Subsidiaries.
"LAGRANGE" has the meaning set forth in the Recitals to this Agreement.
"LEASED REAL ESTATE" has the meaning set forth in Section 3.17 of this
Agreement.
"LEASES" has the meaning set forth in Section 3.17(a) of this Agreement.
"LIABILITY" or "LIABILITIES" means any and all debts, liabilities and/or
obligations of any type, nature or description (whether known or unknown,
asserted or unasserted, secured or unsecured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become due).
"LOSS" or "LOSSES" has the meaning set forth in Section 9.1 of this
Agreement.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means, in connection
with the Company and the Subsidiaries (evaluated on the basis of the three (3)
companies taken as a whole and not on an individual company-by-company basis)
with due consideration to the size and complexity of the Business and
transactions contemplated by this Agreement, any event, change or effect that is
materially adverse, individually or in the aggregate, to the condition
(financial or otherwise), properties, assets, Liabilities, revenues, income,
business, operations,
6
results of operations of such Persons, taken as a whole; PROVIDED, HOWEVER, that
in no event shall any of the following constitute a material adverse change, or
be deemed to have a material adverse effect, in the business, operations,
assets, results of operations or condition of the Company and the Subsidiaries:
(i) any change or effect resulting from conditions affecting the industry in
which the Company and the Subsidiaries operate or from changes in general
business or economic conditions, (ii) any change or effect resulting from the
announcement or pendency of any of the transactions contemplated by this
Agreement, (iii) any change or effect resulting from compliance by the Company
and/or the Subsidiaries with the terms of, or the taking of any action
contemplated or permitted by, this Agreement and any Ancillary Document, or (iv)
any change or effect resulting from any change in Applicable Law. In furtherance
of the foregoing, and notwithstanding anything to the contrary set forth in this
Agreement, any Material Adverse Effect or any Material Adverse Change with
respect to the Company and/or either of the Subsidiaries shall be evaluated on
the basis of the Company and the Subsidiaries taken as a whole (in the
aggregate) and not on an individual company-by-company basis.
"NCDEH" means the Division of Environmental Health of the Department of
Environment and Natural Resources, a regulatory agency of the state of North
Carolina which, among other things, regulates the issuance of water system
permits and compliance with federal and state Applicable Laws.
"NCDWQ" means the Division of Water Quality of the Department of
Environment and Natural Resources, a regulatory agency of the state of North
Carolina which, among other things, regulates the issuance of wastewater permits
and compliance with federal and state Applicable Laws.
"NCUC" means the North Carolina Utilities Commission, a regulatory agency
of the state of North Carolina which, among other things, regulates rates,
service and PCN Certificates of entities that own and/or operate water systems
and wastewater utility systems.
"OPERATING CONTRACTS" has the meaning set forth in Section 3.16 of this
Agreement.
"ORDINARY COURSE OF BUSINESS" means an action taken by a Person only if:
(i) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person; and
(ii) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons constituting
a governing body of a Person exercising similar authority).
"OVERLAP PERIOD" has the meaning set forth in Section 10.2 of this
Agreement.
"OWNED REAL ESTATE" has the meaning set forth in Section 3.17 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PCBs" has the meaning set forth in Section 3.28 of this Agreement.
7
"PCN CERTIFICATES" means the certificates of public convenience and
necessity that are issued and regulated by the NCUC.
"PERMITS" means all right, title and interest in and to any permits,
licenses, filings, authorizations, approvals, or other indicia of authority (and
any pending applications for approval or renewal of a Permit), to own,
construct, operate, sell, inventory, disburse or maintain any asset or conduct
any business as issued by any Governmental Body.
"PERMITTED ENCUMBRANCES" has the meaning set forth in Section 3.17(c) of
this Agreement.
"PERMITTED EXCEPTIONS" has the meaning set forth in Section 5.14(b) of this
Agreement.
"PERSON" means any individual, corporation (including any non-profit
corporation), general, limited or limited liability partnership, limited
liability company, joint venture, estate, trust, association, organization, or
other entity or Governmental Body.
"PRE-CLOSING PERIOD" has the meaning set forth in Section 3.9(b) of this
Agreement.
"PROCEEDING" means any suit, litigation, arbitration, hearing, audit,
investigation, order, or other action (whether civil, criminal, administrative
or investigative) noticed, commenced, brought, conducted, or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"PURCHASE PRICE" has the meaning set forth in Section 2.2 of this
Agreement.
"PURCHASER" has the meaning set forth in the introductory paragraph of this
Agreement.
"PURCHASER PLAN" has the meaning set forth in Section 11.8(b) of this
Agreement.
"REAL ESTATE" has the meaning set forth in Section 3.17 of this Agreement.
"RELATED PERSON" or "RELATED PERSONS" means, with respect to a particular
individual,
(i) each other member of such individual's Family (as hereafter
defined); and
(ii) any Affiliate of one or more members of such individual's Family.
With respect to a specified Person other than an individual:
(i) any Affiliate of such specified Person; and
(ii) each Person that serves as a director, governor, officer,
manager, general partner, executor or trustee of such specified Person (or
in a similar capacity).
For purposes of this definition, the "FAMILY" of an individual includes
(i) such individual, (ii) the individual's spouse, (iii) any lineal ancestor or
lineal descendant of the individual, or (iv) a trust for the benefit of any of
the foregoing.
8
"REQUIRED CONSENT" has the meaning set forth in Section 3.17(k) of this
Agreement.
"RETENTION AND SEVERANCE AGREEMENTS" has the meaning set forth in Section
3.37 of this Agreement.
"RETENTION PAYMENT" has the meaning set forth in Section 3.37 of this
Agreement.
"RIGHTS" means any and all outstanding subscriptions, warrants, options, or
other arrangements or commitments obligating or which may obligate (with or
without notice or passage of time or both) the Company or either Subsidiary to
issue or dispose of any of their respective (as opposed to third party)
securities including, without limitation, Convertible Securities and Debt
Securities.
"SCHEDULES" has the meaning set forth in the introductory paragraph to
Article 3 of this Agreement.
"SECURITIES ACT" has the meaning set forth in the definition of "Debt
Securities" in Article 1 of this Agreement.
"SENIOR MANAGEMENT EMPLOYEE(S)" means the chief executive officer,
president, any vice president, the chief financial officer, treasurer or
secretary of a party to this Agreement. With respect to the Company and the
Subsidiaries, the Senior Management Employees shall mean and be limited solely
to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇.
"SEVERANCE PAYMENT" has the meaning set forth in Section 11.8(f) of this
Agreement.
"SHAREHOLDER" has the meaning set forth in the introductory paragraph of
this Agreement.
"SHAREHOLDER GUARANTEE" has the meaning set forth in Section 5.22(b) of
this Agreement.
"SHAREHOLDER'S REPRESENTATIVE" has the meaning set forth in Section 10.2 of
this Agreement.
"STOCK" has the meaning set forth in the Recitals to this Agreement.
"SUBSIDIARY" OR "SUBSIDIARIES" has the meaning set forth in the Recitals to
this Agreement.
"SUPPLEMENT" has the meaning set forth in Section 13.21 of this Agreement.
"TAX" or "TAXES" means any and all net income, gross income, gross revenue,
gross receipts, net receipts, ad valorem, franchise, profits, transfer, sales,
use, social security, employment, unemployment, disability, license,
withholding, payroll, privilege, excise, value-added, severance, stamp,
occupation, property, customs, duties, real estate and/or other taxes,
assessments, levies, fees or charges of any kind whatsoever imposed by any
Governmental Body, together with any interest or penalty relating thereto.
9
"TAX MATTER" has the meaning set forth in Section 10.2 of this Agreement.
"TAX RETURN" or "TAX RETURNS" means any return, declaration, report, claim
for refund or information return or statement relating to Taxes, including,
without limitation, any schedule or attachment thereto, any amendment thereof,
and any estimated report or statement.
"THIRD PARTY PLANS" has the meaning set forth in Section 11.8(d) of this
Agreement.
"THREATENED" means a claim, Proceeding, dispute, action, or other matter
for which any demand or statement has been made, orally or in writing, or any
oral or written notice has been given, that would lead a reasonably prudent
Person to conclude that such a claim, Proceeding, dispute, action, or other
matter may, with reasonable certainty, be asserted, commenced, taken or
otherwise pursued in the future; PROVIDED, HOWEVER, that the foregoing shall not
include customer billing or service disputes in the Ordinary Course of Business.
"TITLE DOCUMENTS" has the meaning set forth in Section 5.14(a) of this
Agreement.
"TITLE POLICY" has the meaning set forth in Section 5.14(c) of this
Agreement.
"TRANSACTIONAL EXPENSES" has the meaning set forth in Section 13.10 of this
Agreement.
"USE" means to appropriate any of the Confidential Information of the
Company and/or its Subsidiaries for the benefit of oneself or any other Person
other than the Company.
"VDH" means the Office of Water Programs of the Virginia Department of
Health, a regulatory agency of the Commonwealth of Virginia which, among other
things, regulates the issuance of water system permits and compliance with
federal and state Applicable Laws.
"WARN ACTS" has the meaning set forth in Section 3.10(k) of this Agreement.
ARTICLE 2
PURCHASE OF STOCK; PURCHASE PRICE
2.1 PURCHASE AND SALE OF STOCK. In reliance upon the representations,
warranties and covenants contained in this Agreement as of the date hereof and
on the Closing Date, the Purchaser agrees to purchase the Stock from the
Shareholder, and the Shareholder agrees to sell, transfer, convey, assign and
deliver the Stock to the Purchaser on the terms and conditions set forth in this
Agreement. Such sale, transfer, conveyance, assignment and delivery of the Stock
shall convey good and marketable title to the Stock, free and clear of any and
all Rights and Encumbrances, and at such time the Stock will be fully paid and
non-assessable. At the Closing the Shareholder will deliver to the Purchaser
certificate(s) evidencing the Stock duly endorsed in blank or with stock powers
duly executed by the Shareholder.
2.2 PURCHASE PRICE. The purchase price to be paid to the Shareholder by the
Purchaser for the Stock (the "PURCHASE PRICE") shall be Forty-Eight Million
Dollars ($48,000,000).
10
2.3 PAYMENT OF PURCHASE PRICE ON THE CLOSING DATE. The Purchase Price shall
be paid on the Closing Date by wire transfer of immediately available funds to
an account (or accounts) designated by the Shareholder at least two (2) business
days prior to the Closing.
2.4 CLOSING AND CLOSING DELIVERIES.
(a) CLOSING AND CLOSING DATE. Subject to the satisfaction or waiver of
the conditions precedent contained in Articles 6, 7 and 8 hereof, the
closing of the transactions contemplated by this Agreement (the "CLOSING")
shall be held at a mutually agreed time, but in no event no more than ten
(10) business days after (i) all consents and approvals (including the Final
Order(s) described and defined in Section 6.2 of this Agreement) required to
consummate the transactions contemplated hereby have been received from any
Governmental Body, including the FTC, DOJ, the NCUC and the VDH, and (ii)
all other conditions to the Closing have been duly satisfied or waived in
writing, at the offices of ▇▇▇▇▇▇ and ▇▇▇▇▇▇, Professional Association, ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇. The Closing shall be effective as
of 11:59 P.M. on the date of Closing and such date is referred to in this
Agreement as the "CLOSING DATE."
(b) CLOSING DELIVERIES BY THE SHAREHOLDER. At the Closing, the
Shareholder shall execute, where necessary or appropriate, and deliver to
the Purchaser each and all of the following:
(i) A certificate in the form of EXHIBIT A hereto signed by a
duly authorized officer of the Shareholder, and dated as of the Closing
Date, to the effect that the representations and warranties made by the
Shareholder in this Agreement (as modified by the Schedules and any
Supplement(s)) and in any document, instrument and/or agreement to be
executed and delivered by the Shareholder pursuant to this Agreement
are true and correct in all material respects at and as of the Closing
and the Shareholder has performed and complied with all of its
covenants, agreements and obligations under this Agreement which are to
be performed and complied with by the Shareholder on or prior to the
Closing Date;
(ii) The certificates evidencing the Stock duly endorsed by the
Shareholder in blank or accompanied by stock powers duly executed by
the Shareholder;
(iii) A copy certified by the Secretary of the Shareholder of the
duly adopted resolutions of the Board of Directors of the Shareholder
approving this Agreement, including the Ancillary Documents,
authorizing the execution and delivery of this Agreement and the
Ancillary Documents, and the consummation of the transactions
contemplated hereby and thereby;
(iv) The corporate minute books, the corporate seals, and
stock books for the Company and the Subsidiaries;
(v) A satisfaction of debt in a form satisfactory to the
Purchaser executed by the Shareholder with respect to the payment of
intercompany
11
liabilities and obligations between the Shareholder and its Affiliates
(other than the Company and the Subsidiaries) and the Company and the
Subsidiaries;
(vi) Delivery of any and all documents relating to Permits;
(vii) A duly executed written opinion letter by counsel for the
Shareholder, dated as of the Closing Date, addressed to the Purchaser,
as contemplated by Section 7.4 of this Agreement;
(viii) Duly executed resignations of (A) the officers of the
Company and the Subsidiaries who are also officers of the Shareholder,
and (B) the directors of the Company and the Subsidiaries, effective as
of the Closing Date;
(ix) Certificates of good standing for the Shareholder, the
Company and each of the Subsidiaries dated within five (5) days of the
Closing Date issued by the Secretary of State of their respective
states of incorporation;
(x) The non-foreign person affidavit required by Section 1445
of the Code;
(xi) The termination documents for the guarantees described in
Section 5.22;
(xii) Evidence reasonably satisfactory to the Purchaser that the
Company and the Subsidiaries have arranged for the payment of the
Retention Payments concurrently upon the Closing; and
(xiii) Such other documents and items as are reasonably necessary
or appropriate to effect the consummation of the transactions
contemplated hereby or which may be customary under local law.
(c) CLOSING DELIVERIES BY THE PURCHASER. At the Closing, the Purchaser
shall execute, where necessary or appropriate, and deliver to the
Shareholder each and all of the following:
(i) Payment of the Purchase Price in the manner set forth in
Section 2.3 of this Agreement;
(ii) A certificate in the form of EXHIBIT C hereto signed by a
duly authorized officer of the Purchaser, and dated as of the Closing
Date, to the effect that the representations and warranties made by the
Purchaser in this Agreement (as modified by the Schedules and any
Supplement(s)) and in any document, instrument and/or agreement to be
executed and delivered by the Purchaser pursuant to this Agreement are
true and correct in all material respects at and as of the Closing and
the Purchaser has performed and complied with all of its covenants,
agreements and obligations under this Agreement which are to be
performed and complied with by the Purchaser on or prior to the Closing
Date;
12
(iii) A copy certified by the Secretary of the Purchaser of the
duly adopted resolutions of the Board of Directors of the Purchaser
approving this Agreement, including the Ancillary Documents, and
authorizing the execution and delivery of this Agreement, including the
Ancillary Documents, and the consummation of the transactions
contemplated hereby and thereby;
(iv) A duly executed written opinion letter by counsel for the
Purchaser, dated as of the Closing Date, addressed to the Shareholder,
as contemplated by Section 8.3 of this Agreement;
(v) Evidence reasonably satisfactory to the Shareholder that the
performance and other bonds required by Section 5.25 have been secured
in accordance with the provisions of such section;
(vi) A certificate of good standing of the Purchaser dated within
five (5) days of the Closing Date issued by the Secretary of State of
the Purchaser's state of incorporation; and
(vii) Such other documents and items as are reasonably necessary
or appropriate to effect the consummation of the transactions
contemplated hereby or which may be customary under local law.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
As an inducement for the Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, the Shareholder represents and
warrants to the Purchaser that each and all of the following representations and
warranties (as modified by the Schedules to this Agreement (the "SCHEDULES") and
any Supplement delivered by the Shareholder pursuant to Section 13.21 of this
Agreement) are true and correct as of the date of this Agreement and will be
true and correct as of the Closing Date. The Schedules shall be arranged in
paragraphs corresponding to the sections and subsections contained in this
Article 3.
3.1 ORGANIZATION.
(a) THE SHAREHOLDER. The Shareholder is a Minnesota corporation and is
duly organized, validly existing and in good standing under the laws of
Minnesota. The Shareholder has all requisite power and authority to own,
operate and lease its properties and assets (including the Stock) and to
conduct its business as it is now being conducted.
(b) THE COMPANY AND THE SUBSIDIARIES. The Company and the Subsidiaries
each (i) are a corporation duly organized, validly existing and in good
standing under the laws of their respective states of incorporation, (ii)
have all requisite power and authority, corporate and otherwise, to own,
operate and lease its properties and assets and to conduct the Business as
it is now being conducted by each entity. The Business is the only business
conducted by the Company and the Subsidiaries. As set forth in SCHEDULE
3.1(b), each of the Company and the Subsidiaries is duly qualified to
transact
13
business as a foreign corporation and is in good standing under the laws of
every state or jurisdiction in which the nature of their activities or of
their properties (owned, leased or operated) makes such qualification
necessary and in which the failure to be so qualified could not reasonably
be expected to have a Material Adverse Effect.
3.2 CAPITALIZATION. The authorized capital stock of the Company consists
solely of 6,000 shares of common voting stock, One Dollar ($1.00) par value, of
which 6,000 shares are issued and outstanding on the date hereof, and are owned
beneficially and of record by the Shareholder, free and clear of all liens and
Encumbrances. The Company is the sole legal, beneficial and equitable
shareholder of all of the equity interests in and with respect to the
Subsidiaries. None of the Stock has been issued in violation of the rights of
any Person. Except as set forth in SCHEDULE 3.2 hereto, as of the date hereof,
(i) there are no Convertible Securities or Debt Securities outstanding, (ii)
there are no Rights outstanding, and (iii) there are no shareholder agreements
or other agreements, understandings or commitments relating to the rights of the
Shareholder to vote or dispose of the Stock.
3.3 DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement, including the documents, instruments and agreements to be executed
and delivered by the Shareholder pursuant to this Agreement (the "ANCILLARY
DOCUMENTS"), and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Shareholder. This Agreement and the Ancillary Documents have
been, or will be on or before the Closing Date, duly and validly authorized,
executed and delivered by the Shareholder, and the obligations of the
Shareholder hereunder and thereunder are or will be, upon such execution and
delivery, valid, legally binding and enforceable against the Shareholder in
accordance with their respective terms.
3.4 NO BREACH. The Shareholder has full power and authority, corporate and
otherwise, to sell, assign, transfer, convey and deliver the Stock to the
Purchaser and to otherwise perform its obligations under this Agreement and the
Ancillary Documents. The execution and delivery of this Agreement and the
Ancillary Documents to be executed and delivered by the Shareholder pursuant to
this Agreement, and the consummation of the transactions contemplated hereby and
thereby will not: (i) violate any provision of the Articles of Incorporation or
Bylaws of the Shareholder, (ii) except as set forth in SCHEDULE 3.4, or as
contemplated by clause (iii) immediately following, violate any Applicable Laws
or Injunction applicable to the Shareholder, the Company or the Subsidiaries,
(iii) other than the filings required by HSR, the NCUC, and the VDH, and except
as provided in SCHEDULE 3.4 hereto, require any filing with, Permits from,
authorization, consent or approval of, or the giving of any notice to, any
Person, (iv) except as provided in SCHEDULE 3.4 hereto, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give another party any rights of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, franchise, Permit (including, but not
limited to, any Permits, approvals or authorizations of any Governmental Body),
lease or other Contract to which the Company and/or the Shareholder is a party,
or by which they or any of their properties or assets may be bound, or (v)
result in the creation or imposition of any Encumbrance on any of the properties
or assets of the Company or the Subsidiaries, such that in the case of any
violation or the absence of Permit, consent or approval
14
described in clauses (ii), (iii) and (iv) above, the occurrence or omission of
which would not be reasonably likely to have a Material Adverse Effect.
3.5 CLEAR TITLE. Except as otherwise set forth in SCHEDULE 3.5 or the
leased property disclosed in SCHEDULE 3.16 hereto, on the Closing Date, (i) the
Company and each of the Subsidiaries will hold good title to their respective
personal property, and (ii) such personal property is and shall be free and
clear of any and all Encumbrances of any kind, nature and description
whatsoever, except for Encumbrances which are disclosed, reflected or reserved
for or against in the Balance Sheets.
3.6 CONDITION OF ASSETS. Except as set forth in SCHEDULE 3.6 hereto, all of
the properties and assets of the Company and the Subsidiaries (i) have been
maintained in accordance with industry standards in all material respects, (ii)
are in reasonable operating condition and repair, and (iii) are the assets used
to operate the Company's Business as currently conducted.
3.7 LITIGATION. Except as set forth in SCHEDULE 3.7 hereto, and except for
any Proceeding which generally affects the business of all Persons conducting
business similar to the Company and the Subsidiaries and in which the Company
and/or the Subsidiaries are not a named defendant, there is no Proceeding:
(a) that has been commenced by or served upon the Company, the
Subsidiaries or the Shareholder, or of which the Shareholder or the Company
have Knowledge; or
(b) to the Knowledge of the Company or the Shareholder, that
challenges, or that will have, the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the transactions contemplated
hereby.
To the Knowledge of the Shareholder or the Company, no such Proceeding has been
Threatened. Except as provided in SCHEDULE 3.7 hereto, to the Knowledge of the
Shareholder or the Company, the Company and the Subsidiaries are not
(individually or otherwise) a party to or subject to the provisions of any
Injunction which could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect, or impair the ability of the Shareholder to
consummate the transactions contemplated hereby.
3.8 LABOR MATTERS. Except as set forth in SCHEDULE 3.8 hereto, the Company
and the Subsidiaries, individually or collectively, have never been a party to
any collective bargaining agreement or other labor Contract and there has never
been, and there is not presently pending or existing, and to the Knowledge of
the Shareholder or the Company, there is not Threatened (i) any strike,
slowdown, walkout, picketing, work stoppage, labor arbitration or other
Proceeding in respect of the grievance of any employee, (ii) any application or
complaint filed by any employee or union with the National Labor Relations
Board, or any comparable Governmental Body, (iii) any organizational activity or
other labor dispute against or affecting the Company or the Subsidiaries, and no
application for certification of a collective bargaining agreement is pending
or, to the Knowledge of the Shareholder or the Company, is Threatened. There is
no lockout of any employees by the Company or the Subsidiaries and no such
action is
15
contemplated by either the Company or the Subsidiaries. Except as set forth in
SCHEDULE 3.8 hereto, there is no Proceeding pending or, to the Knowledge of the
Shareholder or the Company, Threatened by any Person against the Company or the
Subsidiaries or any of their current or former officers, directors or employees
relating to employment, equal employment opportunity, discrimination,
harassment, wrongful discharge, unfair labor practices, immigration, wages,
hours, benefits, collective bargaining, the payment of social security or
similar Taxes, occupational safety and health or plant closing.
3.9 TAX MATTERS.
(a) TAX RETURNS. The Company and the Subsidiaries have timely filed, or
caused to be timely filed, or will timely file or cause to be timely filed
with the appropriate taxing authorities, all Tax Returns that are required
to be filed by, or with respect to, the Company and the Subsidiaries on or
prior to the Closing Date. The Returns have accurately reflected and will
accurately reflect all Liability for Taxes of the Company and the
Subsidiaries for the periods covered thereby. SCHEDULE 3.9(a) lists all
income Tax Returns filed with any Governmental Body with respect to the
Company and the Subsidiaries for the taxable periods ended on or after
December 31, 1999.
(b) PAYMENT OF TAXES. All Taxes and Tax Liabilities of the Company and
the Subsidiaries for all taxable years or periods that end on or before the
Closing Date and, with respect to any taxable year or period beginning
before and ending after the Closing Date, the portion of such taxable year
or period ending on the day immediately preceding the Closing Date
("PRE-CLOSING PERIOD") have been timely paid.
(c) OTHER TAX MATTERS. Except as set forth in SCHEDULE 3.9(c):
(i) the Company and the Subsidiaries have not been the subject
of a dispute or claim or an audit or other examination of Taxes by the
Tax authorities of any Governmental Body, nor have the Company or the
Subsidiaries received any notices from any such Taxing authority
relating to any issue which could have a Material Adverse Effect.
SCHEDULE 3.9(c) also includes a list of all Tax examination reports and
statements of deficiencies assessed against or agreed to by the Company
and/or the Subsidiaries since January 1, 1998, each of which has been
provided to the Purchaser.
(ii) the Shareholder, the Company and the Subsidiaries have not
(A) entered into an agreement or waiver or been requested to enter into
an agreement or waiver extending any statute of limitations relating to
the payment or collection of Taxes of the Company or the Subsidiaries,
or (B) is presently contesting the Tax Liability of the Company or the
Subsidiaries before any Governmental Body.
(iii) the Company and the Subsidiaries have not been included in
any "consolidated," "unitary" or "combined" Tax Return provided for
under Applicable Law with respect to Taxes for any taxable period for
which the statute of limitations has not expired.
16
(iv) all Taxes which the Company or the Subsidiaries are (or have
been) required by law to withhold or collect have been duly withheld or
collected, and have been timely paid over to the proper authorities to
the extent due and payable.
(v) neither the Company nor either of the Subsidiaries is a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(vi) there are no Tax sharing, allocation, indemnification or
similar agreements in effect as between the Company and/or the
Subsidiaries or any predecessor or Affiliate thereof and any other
party (including the Shareholder and any predecessors or Affiliates
thereof) under which the Purchaser, the Company or either of the
Subsidiaries could be liable for any Taxes or other claims of any
Person.
(vii) none of the Company or the Subsidiaries have applied for,
been granted, or agreed to any accounting method change for which it
will be required to take into account any adjustment under Section 481
of the Code or any similar provision of the Code or the corresponding
Tax laws of any nation, state or locality.
(viii) no election under Section 341(f) of the Code has been made
or shall be made prior to the Closing Date to treat the Company or the
Subsidiaries as a consenting corporation, as defined in Section 341 of
the Code.
(ix) neither the Company nor the Subsidiaries are, individually
or collectively, a party to any agreement that would require any of
them to make any payment that would constitute an "excess parachute
payment" for purposes of Sections 280G and 4999 of the Code.
(x) there are no requests for rulings in respect of any Taxes
pending between the Company or the Subsidiaries and any Tax authority.
3.10 EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. Except as set forth in SCHEDULE 3.10 hereto, the
Company and the Subsidiaries do not maintain or contribute to any Benefit
Plans. Without limiting the generality of the foregoing provision of this
Section, except as described in SCHEDULE 3.10 hereto, there are no pension
plans, welfare plans, or any employee benefit plans qualified under Section
401(a) of the Code, to which the Company or either of the Subsidiaries are
required to contribute. Except as described in SCHEDULE 3.10 hereto, the
Company and the Subsidiaries do not and will not have any unfunded Liability
for services rendered prior to the Closing Date under any Benefit Plans. The
Company and the Subsidiaries are not in any material default under any
Benefit Plan. Other than claims for benefits in ordinary course, there are
no actions, suits, disputes, arbitrations or other material claims pending
or, to the Knowledge of the Shareholder or the Company, Threatened with
respect to any Benefit Plan.
17
(b) EMPLOYEE PENSION BENEFIT PLANS. Except as set forth in SCHEDULE
3.10, none of the Company, the Subsidiaries, or any Person required to be
aggregated with the Company and the Subsidiaries under Section 414(b), (c),
(m), or (o) of the Code ("ERISA AFFILIATE"), maintains or has ever
maintained an Employee Pension Benefit Plan as defined in Section 3(2) of
ERISA, that is subject to Section 412 of the Code and Section 302 of ERISA.
With respect to each such Employee Pension Benefit Plan maintained or ever
maintained by the Company, by either Subsidiary, or by any ERISA Affiliate:
(i) no unsatisfied liabilities to participants, the IRS, the United States
Department of Labor, the PBGC, or to any other Person or entity have been
incurred as a result of the termination of any Employee Pension Benefit
Plan, (ii) no Employee Pension Benefit Plan, which is subject to the minimum
funding requirements of Part 3 of Subtitle B of Title I of ERISA or subject
to Section 412 of the Code, has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code and there has been no waived funding deficiency within the meaning of
Section 303 of ERISA or Section 412 of the Code, (iii) all premiums to the
PBGC have been timely paid in full, and (iv) the PBGC has not instituted
proceedings to terminate any such Plan and no condition exists that presents
a risk that such proceedings will be instituted or that would constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Plan. Neither the Company
nor the Subsidiaries currently sponsor, maintain, contribute to, or are
required to contribute to an Employee Pension Benefit Plan subject to Title
IV of ERISA.
(c) MULTIEMPLOYER PLANS. Except as set forth in SCHEDULE 3.10 hereto,
neither the Company nor any of its Subsidiaries contributes to, or has or
could have, any Liability (including but not limited to withdrawal
Liability) with respect to any multiemployer plan (as defined in Section
4064(a) of ERISA or Section 4001(a)(3) of ERISA).
(d) OTHER PLANS. Except as otherwise set forth in SCHEDULE 3.10, there
are no present or former employees of the Company or the Subsidiaries who
are entitled to (i) any pensions, group health, or other benefits to be paid
upon or after termination of employment, including termination on account of
disability (except as otherwise required under Section 601 of ERISA), or
(ii) deferred compensation payments.
(e) DOCUMENTS. The Shareholder has made available to the Purchaser the
following documents, as they may have been amended to the date hereof,
embodying or relating to each Benefit Plan of the Company and the
Subsidiaries set forth in SCHEDULE 3.10 hereto: (i) all written plan
documents for each such Benefit Plan, including all amendments to each such
Benefit Plan, any related trust agreements, group annuity contracts,
insurance policies or other funding agreements or arrangements, (ii) the
most recent determination letter received from the IRS, if any, as to the
qualified status of any such Benefit Plan under Section 401(a) of the Code,
(iii) the current summary plan description, if any, for each such Benefit
Plan, and (iv) the most recent annual return/report on form 5500, 5500-C or
5500-R, if any, for each such Benefit Plan.
(f) PROHIBITED TRANSACTIONS. The Company and the Subsidiaries have not,
nor has any other "disqualified person" or "party in interest", as defined
in Section 4975(e)(2)
18
of the Code and Section 3(14) of ERISA, respectively, engaged in a
"prohibited transaction," as such term is defined in Section 4975 of the
Code and Section 406 of ERISA, with respect to any Benefit Plan of the
Company or any Subsidiary subject to ERISA, which could reasonably be
expected to subject the Company or any Subsidiary to a Tax or penalty on
prohibited transactions imposed by either Section 502(i) of ERISA or Section
4975 of the Code. The execution and delivery by the Shareholder of this
Agreement and the consummation of the transactions contemplated hereby will
not (i) involve any prohibited transaction within the meaning of Section 406
of ERISA or Section 4975 of the Code with respect to any Benefit Plan set
forth in SCHEDULE 3.10 hereto, or (ii) accelerate the payment of any
benefits under any Benefit Plan set forth in SCHEDULE 3.10 hereto.
(g) FIDUCIARY DUTY. None of the Company, the Subsidiaries, nor any
other fiduciary of any Benefit Plan set forth in SCHEDULE 3.10 hereto are
engaged in any transaction with respect to such Benefit Plan or failed to
act in a manner with respect to such Benefit Plan which could reasonably be
expected to subject the Company or any Subsidiary to any material Liability
for a breach of fiduciary duty under ERISA or any other Applicable Law.
(h) GROUP HEALTH PLANS. Except as set forth in SCHEDULE 3.10, the
Company, the Subsidiaries and all ERISA Affiliates have complied in all
material respects with the coverage continuation requirements of all
Applicable Laws, including Sections 601 through 609 of ERISA, Section 4980B
of the Code, and the requirements of any similar state law regarding
continued health coverage, and the Company and the Subsidiaries have
incurred no material Liability with respect to its failure to offer or
provide continued coverage in accordance with the foregoing requirements,
nor is there any suit or other action pending, or to the Knowledge of the
Shareholder or the Company, Threatened, with respect to such requirements.
Except as set forth in SCHEDULE 3.10, (i) there has been no violation of the
obligations imposed by Section 9801 of the Code and Part 7 of Subtitle B of
Title I of ERISA with respect to any Benefit Plan to which such obligations
apply, (ii) none of the Company, the Subsidiaries or any ERISA Affiliate has
contributed to a nonconforming group health plan (as defined in Section
5000(c) of the Code), and (iii) none of the Company, the Subsidiaries or any
ERISA Affiliate has incurred a Tax under Section 5000(a) of the Code which
is, or is reasonably expected to become, a Liability of the Company, the
Subsidiaries or an ERISA Affiliate.
(i) TRIGGERING OF OBLIGATION AND OTHER BINDING COMMITMENTS. Except for
the claims set forth in SCHEDULE 3.10, the consummation of the transactions
described in this Agreement, in and of themselves, or in conjunction with
any other event which has occurred on or prior to the date hereof (excluding
the Retention and Severance Agreements), will not entitle any current or
former employee of the Company or the Subsidiaries to severance pay,
unemployment compensation or any other similar payment, or accelerate the
time of payment or vesting, or increase the amount of compensation due to
any such employee or former employee.
(j) OPERATIONAL COMPLIANCE. Each Benefit Plan has been administered
in all material respects in accordance with its terms and all Applicable
Laws, and, except as set
19
forth in SCHEDULE 3.10, each Benefit Plan intended to be qualified under
Section 401(a) of the Code is so qualified and is, as most recently amended,
the subject of a favorable determination letter as to its qualification. No
event has occurred and no condition or set of circumstances exists in
connection with which the Company or any Subsidiary could be directly or
indirectly subject to any Encumbrance or loss of Tax deduction under ERISA
or the Code or under any agreement, instrument, statute, rule of law or
regulations pursuant to or under which the Company or any Subsidiary has
indemnified or is required to indemnify any Person against any such
liability (except liability for benefit claims and funding obligations
payable in the ordinary course).
(k) WARN COMPLIANCE. The Company and the Subsidiaries have complied in
all respects with the Worker Adjustment and Retraining Notification Act, 29
U.S.C. ss. 2101 et seq., and its corresponding regulations, and any similar
state law, rule or regulation or local ordinance, rule or regulation, in
each case in effect as of the date hereof, providing for notification to
employees affected by closing, relocation, sale of business, mass layoff or
similar event (collectively, the "WARN ACTS") on account of closings,
relocations, sales of businesses, mass layoffs or similar events occurring
on or prior to the Closing and all related notices, payments, fines or
assessments due to any Government Body pursuant to such WARN Acts.
(l) ABSENCE OF TERMINATION RESTRICTIONS. Except as set forth in
SCHEDULE 3.10, (i) each Benefit Plan may be terminated by the Company or
either Subsidiary, as applicable, in accordance with its terms and without
the Company or any Subsidiary incurring any obligation or liability arising
or resulting from such termination, and (ii) neither the Company, either
Subsidiary nor the Shareholder has made any representations to employees of
the Company or either Subsidiary that any Benefit Plan would be continued
without change for any period of time on and after the Closing Date. The
foregoing shall not be applicable to the Retention and Severance Agreements
described in Section 3.37 and 11.8 hereof.
3.11 NO GUARANTEES. Except as set forth in SCHEDULE 3.11, (i) none of the
obligations of the Company or the Subsidiaries is guaranteed by, or subject to a
similar contingent Liability to, any Person, and (ii) neither the Company nor
the Subsidiaries have, individually or collectively, guaranteed, or otherwise
become contingently liable for, any Liability of any Person. To the Knowledge of
the Shareholder or the Company, no event has arisen that would give rise to any
obligation under any guarantee set forth in SCHEDULE 3.11 or under any of the
bonds set forth in SCHEDULE 5.25.
3.12 FINANCIAL STATEMENTS. The Shareholder has caused the Company and the
Subsidiaries to furnish true and correct copies of the financial statements
identified in SCHEDULE 3.12 hereto to the Purchaser. All of said financial
statements, including any notes thereto, fairly present the consolidated
financial position and condition of the Company and the Subsidiaries as of their
respective dates and the results of their operations for the periods covered in
accordance with GAAP applied by the Company and the Subsidiaries on a consistent
basis throughout the periods covered thereby and on a basis consistent with that
of prior years and periods; PROVIDED, HOWEVER, that any unaudited and/or interim
financial statements listed on such SCHEDULE 3.12 are subject to year-end
adjustments and lack footnotes and other required
20
presentation items. Except for Liabilities (i) reflected or reserved against in
the consolidated balance sheets (the "BALANCE SHEETS") of the Company and the
Subsidiaries as of December 31, 2002 (the "BALANCE SHEET DATE") or in the notes
thereto, (ii) incurred in the Ordinary Course of Business since the BALANCE
SHEET DATE (none of which resulted from, arose out of, is related to, or was
caused by any breach of Contract), (iii) arising under Contracts entered into in
the Ordinary Course of Business to which the Company or the Subsidiaries are a
party, and/or (iv) set forth in SCHEDULE 3.12 hereto, the Company and the
Subsidiaries do not have any Liabilities which, individually or in the
aggregate, would have a Material Adverse Effect. The reserves reflected in the
Balance Sheets are adequate.
3.13 ABSENCE OF CERTAIN DEVELOPMENTS. Except for the transactions
contemplated by this Agreement or as otherwise set forth on SCHEDULE 3.13
hereto, since the Balance Sheet Date, (i) there has not been any development or
combination of developments affecting the Company or the Subsidiaries of which
the Shareholder, the Company or the Subsidiaries have Knowledge that has had, or
is likely to have, a Material Adverse Effect, and (ii) the Company and the
Subsidiaries have conducted the Business in the Ordinary Course of Business and
have not:
(a) declared, set aside or paid a dividend or made any other
distribution with respect to any class of capital stock of the Company or
the Subsidiaries;
(b) changed accounting methods or practices (including, without
limitation, any change in depreciation, amortization or cost accounting
policies or rates);
(c) except as set forth in SCHEDULE 3.37, entered into any employment
contract or collective bargaining agreement, written or oral, or modified
the terms of any existing employment contract or agreement or adopted,
amended, modified or terminated any Benefit Plan;
(d) made any change or amendment in its articles of incorporation or
bylaws;
(e) issued or sold any securities; acquired, directly or indirectly, by
redemption or otherwise, any securities; or granted or entered into any
options, warrants, calls or commitments of any kind with respect thereto;
(f) made any capital expenditure exceeding One Hundred Thousand Dollars
($100,000); and/or
(g) incurred any obligations for borrowed money or purchase money debt
other than that incurred pursuant to the Debt Instruments described and set
forth in SCHEDULE 3.29 of this Agreement.
3.14 INTELLECTUAL PROPERTY. SCHEDULE 3.14 hereto contains a list and
description of all Intellectual Property owned by the Company and the
Subsidiaries or used by the Company or the Subsidiaries in the operation of the
Business. Except as set forth in SCHEDULE 3.14, the Company and the Subsidiaries
have all rights necessary to use such Intellectual Property, and the Shareholder
and the Company have no Knowledge of any asserted claim to the effect that the
operation of the Business or the possession or use in the Business of any of the
Intellectual Property listed and set forth in SCHEDULE 3.14 hereto, infringes
the Intellectual Property rights of
21
any other Person. Except as set forth in SCHEDULE 3.14, the Shareholder and the
Company have no Knowledge of any claim that any of the Intellectual Property set
forth in SCHEDULE 3.14 is invalid; and, except as set forth in SCHEDULE 3.14
hereto, neither the Company nor any Subsidiary is obligated under any Contract
or otherwise to pay royalties, fees or other payments with respect to any of the
Intellectual Property listed and set forth in SCHEDULE 3.14 hereto. Except as
set forth in SCHEDULE 3.14, the consummation of the transactions contemplated by
this Agreement will not adversely affect the use by the Company or the
Subsidiaries of any of the Intellectual Property set forth in SCHEDULE 3.14
hereto.
3.15 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 3.15, (i) the
Business has been operated and the Company and the Subsidiaries are in
compliance in all respects with the requirements of Applicable Laws to which the
Company and the Subsidiaries are subject such that any lack of compliance would
not have a Material Adverse Effect, and (ii) neither the Company nor the
Subsidiaries have received any notice of, and neither the Shareholder nor the
Company have Knowledge of, any violation of a material nature of any Applicable
Laws respecting the Company or the Subsidiaries.
3.16 OPERATING CONTRACTS. Except as disclosed in SCHEDULE 3.16 and the
developer Contracts set forth in SCHEDULE 3.22 (the "DEVELOPER CONTRACTS"), and
except with respect to (i) Contracts that have been fully performed as of the
date hereof and have no further force or effect, (ii) Contracts for capital
expenditures having a remaining balance of Fifty Thousand Dollars ($50,000) or
less, (iii) leases of personal property having a term of less than one (1) year
or which require payments on an annual basis of Twenty Five Thousand Dollars
($25,000) or less per annum, (iv) Contracts for services, raw materials,
supplies or equipment involving payments of Ten Thousand Dollars ($10,000) or
less per annum, or (v) Contracts for the sale of any properties or services
involving a value of Fifty Thousand Dollars ($50,000) or less per annum,
excluding properties or services sold in the Ordinary Course of Business, the
Company and the Subsidiaries are not a party to any oral or written Contract.
All of the Contracts set forth in SCHEDULE 3.16 hereto are referred to in this
Agreement as the "OPERATING CONTRACTS." All of the Operating Contracts and the
Developer Contracts were made in the Ordinary Course of Business, and, to the
Knowledge of the Shareholder or the Company, are valid, binding and currently in
full force and effect. Except as set forth in SCHEDULE 3.16 hereto, neither the
Company nor the Subsidiaries are in material default under any of the Operating
Contracts or the Developer Contracts, and, to the Knowledge of the Shareholder
or the Company, no event has occurred which, through the passage of time or the
giving of notice, or both, would constitute a default by the Company or the
Subsidiaries, or give rise to a right of termination or cancellation by another
party under any of the Operating Contracts or the Developer Contracts, or cause
the acceleration of any Liability of the Company or the Subsidiaries, or result
in the creation of any Encumbrance upon any of the properties or assets of the
Company or the Subsidiaries. Except as set forth in SCHEDULE 3.16 hereto, to the
Knowledge of the Shareholder or the Company, no other party is in default under
any of the Operating Contracts or the Developer Contracts. Except as set forth
in SCHEDULE 3.16 hereto, none of the Operating Contracts or the Developer
Contracts have been canceled, terminated, amended or modified. Except as set
forth in SCHEDULE 3.4 hereto, the consummation of the transactions contemplated
hereby will not require the consent or approval of any Person under any of the
Operating Contracts or the Developer Contracts.
22
3.17 REAL ESTATE. With respect to real estate (including fixtures and
improvements) owned by the Company or the Subsidiaries (the "OWNED REAL
ESTATE"), and real estate (including fixtures and improvements) leased by the
Company or the Subsidiaries (the "LEASED REAL ESTATE") (collectively, Owned Real
Estate and Leased Real Estate shall be referred to herein as "REAL ESTATE"):
(a) SCHEDULE 3.17 contains a description (including system name, county
internal identification numbers and deed and map references) segregated by
each of the Company and the Subsidiaries of each parcel of Owned Real Estate
and a listing and description (including the parties, term, expiration
date(s), address, and the general use description of the leased premises) of
each written or oral lease regarding Leased Real Estate which is not
otherwise set forth in SCHEDULE 3.16 hereto (the leases of Leased Real
Estate described in SCHEDULE 3.16 and SCHEDULE 3.17 are collectively, the
"LEASES");
(b) Except as set forth in SCHEDULE 3.17 hereto, there are no deferred
property Taxes or assessments with respect to the Real Estate which may or
will become due and payable as a result of the consummation of the
transaction contemplated hereby;
(c) The Company, and each Subsidiary, respectively, is the sole owner
in fee simple title of each parcel of Owned Real Estate and each such parcel
is free and clear of any and all Encumbrances, except (A) those parcels of
Owned Real Estate that are held in fee simple determinable, fee simple
subject to condition subsequent or are held solely pursuant to easement
(perpetual or otherwise), and (B) (i) those Encumbrances set forth in
SCHEDULE 3.17 hereto, (ii) municipal zoning ordinances, recorded or platted
easements for public utilities and recorded building and use restrictions
and covenants, (iii) general Real Estate Taxes and installments of special
assessments payable in the year of Closing, and (iv) minor survey
exceptions, Encumbrances, licenses, easements or reservations of, or rights
of others for, oil, gas minerals, ores or metals, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions on the use of real property, minor defects in
title or other similar charges or Encumbrances not interfering in any
material respect with the Ordinary Course of Business of the Company or with
the use or ownership of the Owned Real Estate (collectively the "PERMITTED
ENCUMBRANCES"). To the Knowledge of the Company or the Shareholder, the
Permitted Encumbrances and those Encumbrances set forth in SCHEDULE 3.17
hereto do not individually or in the aggregate materially impair or prohibit
the current use or operation of the Owned Real Estate by the Company or the
Subsidiaries;
(d) Except as set forth in SCHEDULE 3.17 hereto, there are no
condemnation Proceedings pending or, to the Knowledge of the Company or the
Shareholder, Threatened with respect to all or any part of any parcel of
Real Estate. SCHEDULE 3.17 hereto sets forth all private condemnation
proceedings that have been initiated by the Company under a statutory power
of condemnation granted by the North Carolina General Statutes (Chapter 40A,
Section 40A-3(a)(1));
(e) To the Knowledge of the Company or the Shareholder, except for the
Permitted Encumbrances and those Encumbrances set forth in SCHEDULE 3.17
hereto,
23
there are no Encumbrances which materially and adversely affect the use or
occupancy of all or any part of any parcel of Owned Real Estate or any
easements;
(f) Except as set forth in SCHEDULE 3.17 hereto, to the Knowledge of
the Company or the Shareholder, the improvements located on each parcel of
Real Estate, including fences, driveways and other structures occupied, used
or claimed by the Company or the Subsidiaries, are wholly within the
boundary lines of such parcels of Real Estate and such improvements and the
present uses thereof by the Company and the Subsidiaries, as applicable, do
not in any material respect infringe upon the rights of any other Person;
(g) Except as set forth in SCHEDULE 3.17 hereto, to the Knowledge of
the Company or the Shareholder, no buildings, fences, driveways or other
structures of any adjoining owner encroach, in any material respect which
interferes with the operation of the Business, upon any part of any parcel
of Real Estate or any easements;
(h) Except as set forth in SCHEDULE 3.17, the Company and the
Subsidiaries, as applicable, have all easements (or access through public
utility easements) on to private property, construction permits, highway
encroachment agreements and permits (and other similar licenses and permits)
and right-of-way-licenses reasonably necessary to conduct the Business and
to use and operate the Real Estate in the manner it is currently being used
and operated by the Company and the Subsidiaries, except where the failure
to have any such easements or access, construction permits, highway
encroachment agreements and permits (and other similar licenses and
permits), and right-of-way licenses would not have a Material Adverse
Effect;
(i) Neither the Company nor any Subsidiary is in default in the
performance of any material obligation under the Leases or easements, and to
the Knowledge of the Company or the Shareholder, none of the other parties
to the Leases or easements are in default in performance of their material
obligations thereunder, the Leases and easements are in full force and
effect, and neither the Company nor any of the Subsidiaries has assigned its
rights under the Leases or easements;
(j) Except as set forth in SCHEDULE 3.17 neither the Company nor any
Subsidiary has leased or granted to any other Person or entity the right to
use or occupy all or any portion of the Owned Real Estate, and the Owned
Real Estate is not subject to an option or right to purchase in favor of any
Person or entity;
(k) Except as set forth in SCHEDULE 3.17, no consents to or approval of
the transactions contemplated by this Agreement are required from any Person
or entity under the terms of the easements or Leases, and to the extent a
consent or approval is required (each, a "REQUIRED CONSENT"), on or before
Closing, the Shareholder shall, at its sole cost, obtain the Required
Consent, in form reasonably satisfactory to the Purchaser; and
(l) Except as set forth in SCHEDULE 3.17, each of the parcels of Owned
Real Estate constitutes a separate tax parcel, and is not taxed with any
other real property.
24
The Purchaser acknowledges and agrees that the title commitment and survey
work and documentation provided in Section 5.14 of this Agreement may contain
additional information regarding the Owned Real Estate of which the Shareholder
does not have Knowledge as of the date of this Agreement and, as a result, may
be properly included in a Supplement submitted by the Shareholder in accordance
with the terms of Section 13.21 of this Agreement.
3.18 ACCOUNTS RECEIVABLE. The accounts receivable of the Company and the
Subsidiaries, and other rights to the payment of money represent, and on the
Closing Date will represent, valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business.
3.19 BOOKS AND RECORDS; BANK ACCOUNTS. All of the books of account and other
financial and corporate records of the Company and the Subsidiaries have been
made available to the Purchaser and its representatives (or will be so made
available prior to the Closing Date). Such books of account and records are
current and complete in all material respects. All such books and records are
consistent with the financial statements set forth in SCHEDULE 3.12 hereto.
3.20 EMPLOYEES.
(a) SCHEDULE 3.20 sets forth a complete and accurate list of all the
employees of the Company and each Subsidiary as of the date hereof (the
"EMPLOYEES"), together with the following information for each such
Employee: name, position held, current salary, 2002 bonus, commission and
incentive amounts (if any), Fair Labor Standards Act status, date of hire,
current salary grade, annual vacation entitlement, accrued, but unused
vacation, service date for employee benefit plan purposes, social security
number, work locations and any other information the Purchaser may
reasonably request. SCHEDULE 3.20 will indicate which Employees are not
actively at work due to an approved medical, family, military, or personal
leave under the policies of the Company or any Subsidiary (the "INACTIVE
EMPLOYEES") and, to the extent known, the date on which each Inactive
Employee is expected to return to active employment. SCHEDULE 3.20 will be
updated as of five (5) business days prior to the Closing Date and will be
true and correct in all material respects as of that date.
(b) Except as set forth in SCHEDULE 3.20, none of the Employees have
informed the Company or either of the Subsidiaries that he/she intends to
terminate employment with the Company or either of the Subsidiaries, as
applicable. SCHEDULE 3.20 also sets forth a description of any written
Contract, other than the Benefit Plans set forth in SCHEDULE 3.10 hereto,
with respect to the conditions of employment of any of the Employees. All
Employees are employed on an "at-will" basis.
(c) Except as set forth in SCHEDULE 3.20, none of the Employees are
working based upon a non-resident visa and the Company and the Subsidiaries
have complied with their respective obligations under the Immigration Reform
Control Act.
(d) Based on the Contracts to which the Company and each of the
Subsidiaries is a party, neither the Company nor either of the Subsidiaries
is presently subject to the requirements of Executive Order 11246.
25
3.21 PERMITS AND CERTIFICATE APPLICATIONS.
(a) ISSUED PERMITS. Except as set forth in SCHEDULE 3.21, (i) the
Company and each Subsidiary have timely obtained, or applied and meet the
requirements for, all Permits of each Governmental Body, including, without
limitation, the NCDEH, the NCDWQ, the NCUC and the VDH, having jurisdiction
over the Company and/or the Subsidiaries, or any of their respective
properties or assets, required to operate and carry on the Business as now
being conducted and have timely applied to renew any such Permits for which
such renewal application is required, and (ii) the Permits of the Company
and the Subsidiaries are in full force and effect such that the absence of
or compliance with the requirements of any such Permit, restrictions upon or
lack of force or effect of any such Permits (either obtained or applied for)
would not have a Material Adverse Effect. Neither the Company nor the
Subsidiaries have received notice that any Permit is being considered for
non-renewal, termination, revocation or suspension.
(b) PERMIT APPLICATIONS. The Company and/or the Subsidiaries have
several pending applications for Permits and Permit extensions pending
before Governmental Bodies, including the NCUC and the VDH, as set forth in
SCHEDULE 3.21, for their respective water and/or wastewater utility system
extension(s). In connection therewith, the Person applying for every Permit
certificate may be required to post a performance or other bond, which
posted bonds are included in SCHEDULE 5.25 of this Agreement (or a
Supplement thereto).
3.22 DEVELOPER CONTRACTS. Except for Contract agreements which have no
further executory obligations other than compliance with Applicable Laws, or
which are terminated or expired, SCHEDULE 3.22 sets forth the agreements with
developers to which either the Company and/or the Subsidiaries are a party,
including (i) agreements for installation and acquisition by the Company or any
Subsidiary of new water and/or wastewater utility systems which require future
payments by the Company or any Subsidiary to certain developers based upon
prospective customer/system connections, and (ii) agreements whereby the
developer has reserved portions of water and wastewater utility systems
production facility capacity for the period of years specified in the applicable
Contract.
3.23 SUBSIDIARIES. Except for the Subsidiaries, the Company has no
subsidiaries and does not own any shares of stock or other securities or equity
interests, directly or indirectly, in any other Person. Except as disclosed or
described in this Agreement or as set forth in SCHEDULE 3.23 hereto, the Company
is not subject to any obligation or requirement to provide funds to, or invest
in, any such Person.
3.24 INSURANCE.
(a) The Shareholder, the Company and the Subsidiaries, as applicable,
have individually or jointly maintained, and will continue to maintain until
the Closing Date, the insurance set forth in SCHEDULE 3.24, which insurance
covers some of the tangible real and personal property and assets of the
Company and the Subsidiaries, whether owned or leased, against loss or
damage by fire or other casualty. All such insurance is in full force
26
on the date of this Agreement and is either self-insured or carried with
insurers licensed in the states affected by such policies.
(b) The Company and the Subsidiaries are presently insured for general
liability, vehicle liability and worker's compensation risks through a third
party insurance company, which insurance covers claims made against the
Company or any Subsidiary related to occurrences arising on or after
February 1, 2003.
(c) The Company and the Subsidiaries have in the past self-insured for
general liability, vehicle liability and worker's compensation risks with a
pool of entities through ALLETE, Inc., which self-insurance covers claims
made against the Company or any Subsidiary related to occurrences arising
prior to February 1, 2003.
(d) The Company and the Subsidiaries do not maintain, and have not in
the past maintained, any form of environmental insurance coverage.
(e) The Company and the Subsidiaries have promptly and adequately
notified the insurance carriers of any and all claims known with respect to
the operations, products or services of the Company or the Subsidiaries for
which the Company or the Subsidiaries are insured and no insurance carrier
has denied coverage or reserved its rights with respect to such claims. The
Company and the Subsidiaries have not been refused any insurance coverage by
any insurance carrier to which they, individually or collectively, have
applied for insurance during the past three (3) years.
3.25 BROKERS. Except for the engagement of UBS Securities LLC by the
Shareholder, neither the Company, the Subsidiaries, the Shareholder nor their
respective Affiliates has employed or engaged any broker, finder, agent, banker
or third party, nor have they otherwise dealt with anyone purporting to act in
the capacity of a finder or broker in connection with the transactions
contemplated hereby. No commissions, finder's fees or like charges have been or
will be incurred by the Company or the Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. Any such commissions, finders' fees or like charges shall
be directly chargeable to and will be paid by the Shareholder as contemplated by
the terms of this Agreement.
3.26 RELATIONSHIP WITH RELATED PERSONS. Except as set forth in SCHEDULE 3.26
hereto, and except for benefits set forth in SCHEDULE 3.10, the Shareholder,
directors, officers, and employees of the Company and the Subsidiaries, and
their Related Persons do not have any interest in any of the properties or
assets of or used by the Company or the Subsidiaries and do not own, of record
or as a beneficial owner, an equity interest or any other financial or profit
interest in any Person that (i) has had business dealings or a material
financial interest in any transaction with the Company or the Subsidiaries or,
(ii) has engaged or is engaged in competition with the Company or the
Subsidiaries with respect to any line of products or services of the Company or
the Subsidiaries in any market presently served by the Company or the
Subsidiaries (a "COMPETING BUSINESS") (except for less than five percent (5%) of
the outstanding capital stock of any Competing Business that is publicly traded
on any recognized exchange or in the over-the-counter market). To the Knowledge
of the Company or the Shareholder, and except as set forth in SCHEDULE 3.26
hereto, neither the Shareholder, nor any
27
director or officer of the Company or any Subsidiary, and none of their Related
Persons, is a party to any Contract with, or has any claim or right against, the
Company or the Subsidiaries, other than the rights the officers and directors of
the Company and the Subsidiaries have with respect to indemnification under
state law. All money owed by the Company and the Subsidiaries to their
respective shareholders, directors or officers, or their Related Persons, (other
than for salary) are for bona fide debts and are set forth in SCHEDULE 3.26
hereto.
3.27 INTERNAL DISCLOSURE CONTROLS AND PROCEDURES. ALLETE, Inc. has
established and maintains disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended); such disclosure controls and procedures are designed to
ensure that material information relating to the Company and the Subsidiaries is
made known to ALLETE, Inc.'s Chief Executive Officer and its Chief Financial
Officer by others within those entities, and such disclosure controls and
procedures are effective to perform the functions for which they were
established; ALLETE, Inc.'s auditors and the Audit Committee of ALLETE, Inc.'s
Board of Directors have been advised of: (i) any significant deficiencies and/or
material weaknesses in the design or operation of internal controls which could
adversely affect the Company's and/or the Subsidiaries' ability to record,
process, summarize, and report financial data, and (ii) any fraud, whether or
not material, that involves Senior Management Employees or other employees of
ALLETE, Inc. and/or its Subsidiaries who have a significant role in ALLETE,
Inc.'s internal control over financial reporting; and since the date of the most
recent evaluation of such disclosure controls and procedures, there have been no
changes in internal control over financial reporting or in other factors that
could materially affect internal control over financial reporting.
3.28 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.28 and except
as would not have a Material Adverse Effect, the Company and its Subsidiaries:
(i) have not transported, stored, and/or disposed of any Hazardous Materials
handled by the Company and its Subsidiaries, (ii) do not have Knowledge
(including Knowledge by the Shareholder) that the Real Estate is now being used,
or has ever been used, as a landfill, dump or other disposal, storage, transfer,
treating or handling area for any Hazardous Materials, (iii) do not have
Knowledge (including Knowledge by the Shareholder) that asbestos, "PCBs"
(polychlorinated biphenyls) or urea formaldehyde has been placed, stored,
located, or disposed on the Real Estate, (iv) excluding storage tanks (whether
underground or above ground) which are and have been utilized solely for storage
of potable water, do not have Knowledge (including Knowledge by the Shareholder)
that there are currently or ever have been any underground and/or above ground
storage tanks (whether or not currently in use) on the Real Estate, (v) do not
have Knowledge (including Knowledge by the Shareholder) that the Real Estate
contains Hazardous Materials that require remediation under Environmental Laws,
and (vi) have not agreed to assume and, to the Knowledge of the Company or the
Shareholder, have not assumed by operation of law, any environmental Liability
of any other Person. Except as set forth in SCHEDULE 3.28 hereto, the Real
Estate is not listed on the National Priorities List, the Comprehensive
Environmental Response Compensation and Liability Information System, the
Resource Conservation and Recovery Information System or any other governmental
list of potentially contaminated properties.
3.29 DEBT INSTRUMENTS. SCHEDULE 3.29 is a true, correct and complete list
showing the names of the parties and outstanding indebtedness as of the
respective dates set forth in
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SCHEDULE 3.29 under all mortgages, indentures, notes, guarantees and other
obligations for or relating to borrowed money, purchase money debt (including
conditional sales contracts and capital leases) or covenants not to compete (the
"DEBT INSTRUMENTS") for which the Company or a Subsidiary is primarily or
secondarily obligated. The Shareholder has previously delivered to the Purchaser
true, complete and correct copies of each of the Debt Instruments, other than
the increase in the CoBank, ACB line of credit described in Section 5.26. Except
as described in SCHEDULE 3.29, the Company and each Subsidiary have performed
all of the material obligations required to be respectively performed by them,
and are not in material default under any of the provisions of any of the Debt
Instruments, and there has not occurred any event which, (with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute such a default.
3.30 CUSTOMERS AND SUPPLIERS. Except as set forth in SCHEDULE 3.30, (i) to
the Knowledge of the Company or the Shareholder, and except in the Ordinary
Course of Business, no material customer, subscriber or a material (in the
aggregate) group of customers or subscribers of the Company or the Subsidiaries
have notified the Company or any Subsidiary on or after the Balance Sheet Date,
that the customer intends to terminate, cancel, limit or modify their business
relationship with the Company or any Subsidiary, except such terminations,
cancellations, limitations or modifications as occur in the Ordinary Course of
Business of the Company or the applicable Subsidiary, and (ii) no vendor or
supplier of the Company or a Subsidiary which is material to the Business has
notified the Company or any such Subsidiary after the Balance Sheet Date, that
it intends to terminate, cancel, limit or modify its business relationship with
the Company or the applicable Subsidiary in any material respect.
3.31 SHAREHOLDER LOANS. Except as set forth in SCHEDULE 3.31, there are no
loans, advances or other obligations for borrowed money owing by the Company or
the Subsidiaries to the Shareholder or its Affiliates (other than the Company
and the Subsidiaries) as of the date hereof. Except as set forth in SCHEDULE
3.31, the Shareholder and its Affiliates (other than the Company and the
Subsidiaries) do not have any claim of any kind against the Company or the
Subsidiaries.
3.32 ADEQUACY OF PROPERTIES. Except as set forth in SCHEDULE 3.32, the
Company and each Subsidiary, respectively, owns, leases or otherwise has
adequate rights to use the tangible and intangible personal property necessary
for the conduct of their Business in the manner in which such Business is
presently being conducted with no material conflict with or infringement of the
rights of others such that the absence of such ownership or rights could not
reasonably be expected to have a Material Adverse Effect.
3.33 ABSENCE OF CERTAIN BUSINESS PRACTICES. Except as disclosed in SCHEDULE
3.33, none of the Company, the Subsidiaries nor any Person acting on their
behalf has, directly or indirectly, within the past six (6) years given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other Person who is or may be in a position to help or
hinder the Business of the Company or a Subsidiary (or assist the Company or a
Subsidiary in connection with any actual or proposed transaction) which (i)
might subject the Company or a Subsidiary to any damage or penalty in any civil,
criminal or governmental litigation or Proceeding, (ii) if not given in the
past, might have had a Material Adverse Effect, or
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(iii) if not continued in the future, could reasonably be expected to have a
Material Adverse Effect.
3.34 TRADE REGULATION. Except as set forth in SCHEDULE 3.34, (i) all of the
prices charged by the Company and the Subsidiaries in connection with the
marketing, sale or distribution of services have been in compliance with all
Applicable Laws, and (ii) no claims have been communicated or, to the Knowledge
of the Company or the Shareholder, Threatened against the Company or the
Subsidiaries with respect to wrongful termination of any third party independent
contractor, discriminatory pricing, price fixing, unfair competition, false
advertising, or any other violation of any Applicable Laws relating to
anti-competitive practices or unfair trade practices of any kind, and to the
Knowledge of the Company or the Shareholder, no specific situation, set of
facts, or occurrence provides any basis for any such claim.
3.35 SHAREHOLDER OWNERSHIP OF THE STOCK. The Shareholder represents and
warrants that the Shareholder is the lawful owner of 6,000 shares of Stock, free
and clear of all Rights and Encumbrances. The Shareholder has the full legal
right, power and authority to enter into this Agreement and to sell, assign,
transfer and convey the shares of Stock so owned by the Shareholder pursuant to
this Agreement, and the delivery to the Purchaser of the Stock pursuant to the
provisions of this Agreement will transfer to the Purchaser good title thereto,
free and clear of all Rights and Encumbrances.
3.36 VIRGINIA OPERATIONS. The operations of the Company in the Commonwealth
of Virginia consist solely of two (2) water systems located in ▇▇▇▇▇▇▇ County,
Virginia. These water systems are subject to the oversight and regulation of
VDH.
3.37 EMPLOYEE RETENTION. On or about the date hereof, the Company and the
Subsidiaries have entered into certain legal, binding and enforceable retention
and severance agreements in the form of EXHIBIT D hereto (the "RETENTION AND
SEVERANCE AGREEMENTS") with their respective employees as set forth in SCHEDULE
3.37 to this Agreement, which agreements entitle such employees to, among other
things, one or more retention payments (the "RETENTION PAYMENT") by their
applicable employer entity in the event, among other things, of their continued
employment to and on the Closing Date. Promptly following the date of this
Agreement, the Shareholder shall deliver to the Purchaser true, complete and
correct copies of each Retention and Severance Agreement that is executed and
delivered by the Company and its Subsidiaries. SCHEDULE 3.37 also sets forth the
Retention Payment that may become payable pursuant to the Retention and
Severance Agreements to each such employee in the event the employee complies
with the terms of the retention provisions of the Retention and Severance
Agreement. The Shareholder represents and warrants that it shall concurrently at
and upon the Closing, (i) provide and remit to the Company and the Subsidiaries
funds sufficient to pay (x) any interim payments on or for a Retention Payment
obligation, (y) any remaining Retention Payment obligations, if not previously
paid, as such exist, in the sole discretion of the Shareholder as provided in
the Retention and Severance Agreements, on the Closing Date, and (z) any
applicable employment taxes associated therewith, and (ii) cause the Company and
the Subsidiaries to make the required Retention Payment on the Closing Date in
accordance with the terms of the Retention and Severance Agreements.
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3.38 REGULATION AS UTILITIES. The Company and the Subsidiaries are regulated
as public utilities in North Carolina, and the Company is also regulated as a
public utility in Virginia. Neither the Company, the Subsidiaries nor any
"subsidiary company" or "affiliate" (as such terms are defined in the Public
Utility Holding Companies Act of 1935, as amended) of the Shareholder is subject
to regulation as a public utility or public service company (or similar
designation) by any other state in the United States, by the United States or
any agency or instrumentality of the United States or by any foreign country.
3.39 LIMITATION ON REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties contained in this Article III, neither the
Shareholder, the Company, the Subsidiaries nor any of their Affiliates, nor any
other Person acting on behalf of the Shareholder, the Company, the Subsidiaries
or any of their Affiliates, makes any representation or warranty, express or
implied, concerning, without limitation, the Stock, the Business, the Company
and its Subsidiaries or any other matter.
3.40 INTERNAL ACCOUNTING CONTROLS. The Company and each Subsidiary maintains
a system of internal accounting controls sufficient to provide reasonable
assurances that in all material respects: (i) transactions are executed in
accordance with the general or specific authorization of Senior Management
Employees, (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with the general
or specific authorization of Senior Management Employees, and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.41 WATER QUALITY. Except as set forth in SCHEDULE 3.41 hereto, the quality
of the drinking water supplied by the Company and the Subsidiaries to their
respective customers is in compliance with the maximum contaminant levels for
primary contaminants established by the Safe Drinking Water Act, as amended, the
U.S. Environmental Protection Agency, DEH (for North Carolina only), and VDH
(for Virginia only), in effect, defined, interpreted and enforceable on the date
hereof. Specifically excluded from this representation and warranty are any
secondary drinking water standards and all maximum contaminant levels not in
effect and enforceable on the date of the execution of this Agreement, including
the promulgated but not yet effective and enforceable Groundwater Rule,
Radionuclide Rule and Disinfectant/Disinfection Byproducts Rule.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement for the Shareholder to enter into this Agreement and to
consummate the transactions contemplated hereby, the Purchaser represents and
warrants to the Shareholder that each and all of the following representations
and warranties (as modified by the Schedules and any Supplement delivered by the
Purchaser pursuant to Section 13.21 of this Agreement) are true and correct as
of the date of this Agreement and will be true and correct as of the Closing
Date. The Schedules shall be arranged in paragraphs corresponding to the
sections and subsections contained in this Article 4.
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4.1 ORGANIZATION. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has all requisite power and authority, corporate and otherwise, to own,
operate and lease its properties and assets and to conduct its business as it is
now being conducted. The Purchaser is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of every state or
jurisdiction in which the nature of its activities or of its properties owned,
leased or operated makes such qualification necessary and in which the failure
to be so qualified could reasonably be expected to have a Material Adverse
Effect on the Purchaser.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Ancillary Documents to be executed and delivered by the
Purchaser pursuant to this Agreement, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Purchaser. This Agreement and the
Ancillary Documents have been, or will be on or before the Closing Date, duly
and validly authorized, executed and delivered by the Purchaser and the
obligations of the Purchaser hereunder and thereunder are or will be, upon such
execution and delivery, valid, legally binding and enforceable against the
Purchaser in accordance with their respective terms.
4.3 NO BREACH. The Purchaser has full power and authority, corporate and
otherwise, to purchase the Stock being purchased hereunder and to otherwise
perform its obligations under this Agreement and the Ancillary Documents to be
executed and delivered by the Purchaser pursuant hereto. The execution and
delivery of this Agreement and the Ancillary Documents to be executed and
delivered by the Purchaser pursuant to this Agreement, and the consummation of
the transactions contemplated hereby and thereby will not: (i) violate any
provision of the Articles of Incorporation or Bylaws (or comparable governing
documents or instruments) of the Purchaser, (ii) violate any Applicable Laws or
Injunction applicable to the Purchaser, (iii) other than filings and approvals
required to comply with Applicable Laws, including (A) any filing required by
HSR, and (B) applicable requirements of the NCUC, the VDH and/or any
Governmental Body, require any filing with, Permits from, authorization, consent
or approval of, or the giving of any notice to, any Person, (iv) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give another party any rights of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, franchise, Permit (including,
but not limited to, any Permits, appeals or authorizations of any Governmental
Body), lease or other Contract to which the Purchaser is a party, or by which it
or any of its assets or properties may be bound.
4.4 INVESTMENT REPRESENTATIONS. The Purchaser understands that the Stock
has not been registered under the Securities Act, or under the securities laws
of any jurisdiction, by reason of reliance upon certain exemptions.
4.5 BROKERS. The Purchaser has not employed or engaged any broker, finder,
agent, banker or third party, nor has it otherwise dealt with anyone purporting
to act in the capacity of a finder or broker, in connection with the
transactions contemplated hereby.
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ARTICLE 5
PERFORMANCE AND COVENANTS PENDING CLOSING
The Shareholder covenants and agrees that from and after the date of this
Agreement and until the earlier of the Closing Date or the termination of this
Agreement in accordance with Article 12 hereof:
5.1 CONTINUING DUE DILIGENCE. At the request of the Purchaser, the
Shareholder shall, from time to time, give or cause to be given to the
Purchaser, its officers, employees, counsel, accountants and other
representatives, upon reasonable notice to the Shareholder, reasonable access
during normal business hours, without undue disruption to the Business of the
Company or any Subsidiary, to the properties and assets and all of the books,
minute books, title papers, records, files, Contracts, insurance policies,
environmental records and reports, licenses and documents of every character
solely to conduct continuing due diligence investigations of the Company and the
Subsidiaries relating to the Business for the purpose of monitoring the Business
until and through the Closing Date and to plan for transitional matters after
the Closing. For these purposes, the Shareholder shall furnish or cause to be
furnished to the Purchaser, its officers, employees, counsel, accountants and
other representatives the information with respect to the properties or assets
of the Company and the Subsidiaries as any of them may reasonably request. The
Purchaser, its officers, employees, counsel, accountants and other
representatives shall have the authority to interview, as reasonably necessary
and without undue disruption to the Business of the Company or any Subsidiary,
all employees, customers, vendors, suppliers and other parties having
relationships with the Company and/or the Subsidiaries, and the Shareholder
shall make such introductions as may be requested; PROVIDED, HOWEVER, that
access to customers for investigatory purposes shall, if granted by the
Shareholder, be undertaken in a commercially reasonably manner consistent with
the best interests of the Company and the Subsidiaries and shall be subject to
the prior consent of the Shareholder, which consent shall not be unreasonably
withheld.
5.2 CONDUCT OF BUSINESS. The Shareholder shall cause the Company and the
Subsidiaries to carry on their respective Business diligently, only in the
Ordinary Course of Business and substantially in the same manner as heretofore
conducted. The Company and the Subsidiaries shall not make any regulatory
filings with any Governmental Body, except in the Ordinary Course of Business or
with the prior written consent of the Purchaser (which consent shall not be
unreasonably withheld, delayed or conditioned). The Shareholder shall cause the
Company and each Subsidiary to provide to the Purchaser copies of each such
regulatory filing made by the Company or such Subsidiary. The Shareholder shall
not cause or permit any amendment of the Articles of Incorporation or Bylaws of
the Company or any Subsidiary (or other governing instrument).
5.3 ENCUMBRANCES. The Shareholder shall not, directly or indirectly,
perform or fail to perform any act which would result in the creation or
imposition of any Encumbrance on any of the properties or assets of the Company
or any Subsidiary, or otherwise adversely affect the marketability of the
Company's or a Subsidiary's title to any of its properties or assets, outside of
the Ordinary Course of Business.
33
5.4 PAY INCREASES. Except for payments pursuant to the Retention and
Severance Agreements and normal increases in the Ordinary Course of Business,
the Shareholder shall not permit the Company or a Subsidiary, and the Company
and the Subsidiaries shall not, without the prior written consent of the
Purchaser, grant any increase in the salaries or rate of pay to any of its
employees, grant any increase in any benefits or establish, adopt, enter into,
make any new grants or awards under, or amend any collective bargaining
agreement, employment agreement or Benefit Plan for the benefit of any of its
employees.
5.5 RESTRICTIONS ON NEW CONTRACTS. Except with the prior written consent of
the Purchaser, which consent shall not be unreasonably withheld, delayed or
conditioned, the Shareholder shall not permit the Company and the Subsidiaries
to, and the Company and the Subsidiaries shall not, enter into any Contract,
incur any Liability, assume, guarantee or otherwise become liable or responsible
for any Liability of any other Person, make any loans, advances or capital
contributions to any other Person (except for extensions of credit to its
customers in the Ordinary Course of Business), or waive any right or enter into
any other transaction, in each case other than in the Ordinary Course of
Business and consistent with normal business practices of the Company and the
Subsidiaries. Without limiting the foregoing, for the purposes of this
Agreement, any Contract other than Contracts for capital improvements described
in Section 5.17 hereof involving the sum of One Hundred Thousand Dollars
($100,000) or more shall be deemed to be outside the Ordinary Course of
Business; PROVIDED, HOWEVER, for purposes of this Agreement, Developer Contracts
involving a purchase price paid by the Company or any Subsidiary of Seventy-five
Thousand Dollars ($75,000) or less shall be considered to have been entered into
in the Ordinary Course of Business.
5.6 PRESERVATION OF BUSINESS. The Shareholder shall use commercially
reasonable efforts (i) to preserve intact the Business of the Company and the
Subsidiaries, (ii) to keep available to the Purchaser the Employees, and (iii)
to preserve for the Purchaser the present goodwill and relationship of the
Company and the Subsidiaries with their respective vendors, suppliers, customers
and others having business relationships with the Company and the Subsidiaries.
5.7 PAYMENT AND PERFORMANCE OF OBLIGATIONS. The Company and the
Subsidiaries shall, and the Shareholder shall cause the Company and the
Subsidiaries to, timely pay and discharge all invoices, bills and other monetary
Liabilities.
5.8 RESTRICTIONS ON SALE OF ASSETS. Except for sales or transfers
contemplated on the date of this Agreement and set forth in SCHEDULE 5.8, the
Shareholder shall not permit the Company and the Subsidiaries to, and the
Company and the Subsidiaries shall not, sell, assign, transfer, lease, sublease,
pledge or otherwise encumber or dispose of any of its properties or assets,
except for the provision of services in the Ordinary Course of Business and at
regular prices.
5.9 PROMPT NOTICE. The Shareholder and the Purchaser shall promptly notify
the other in writing upon becoming aware of any of the following: (i) any claim,
demand or other Proceeding that may be brought, Threatened, asserted or
commenced against the Company or any Subsidiary or the Purchaser, or their
respective officers or directors, (ii) any changes in the accuracy of the
representations and warranties made by the Shareholder or the Purchaser in this
34
Agreement, (iii) any Injunction or any complaint praying for an Injunction
restraining or enjoining the consummation of the transactions contemplated
hereby, or (iv) any notice from any Person of its intention to institute an
investigation into, or institute a Proceeding to restrain or enjoin the
consummation of the transactions contemplated hereby or to nullify or render
ineffective this Agreement or such transactions if consummated.
5.10 CONSENTS. As soon as reasonably practicable and in any event on or
before the Closing Date, the Shareholder and the Purchaser shall work
cooperatively and will use commercially reasonable efforts to obtain or cause to
be obtained all of the consents and approvals of all Persons necessary to
consummate the transactions contemplated hereby, including the consents and
approvals set forth in SCHEDULE 3.4 hereto.
5.11 COPIES OF DOCUMENTS. The Shareholder has furnished or made available to
the Purchaser a true, complete and accurate copy of each Operating Contract set
forth in SCHEDULE 3.16 hereto and any Developer Contract set forth in SCHEDULE
3.22 hereto.
5.12 NO SOLICITATION OF OTHER OFFERS. The Shareholder, the Company and the
Subsidiaries will not, and will not permit their respective representatives,
investment bankers, agents and Affiliates of any of the foregoing to, directly
or indirectly, (i) solicit or encourage submission of or any inquiries,
proposals or offers by, (ii) participate in any negotiations with, (iii) afford
any access to the properties, books or records of the Company or the
Subsidiaries, (iv) accept or approve, or (v) otherwise assist, facilitate or
encourage, or enter into any Contract with, any Person or group (other than the
Purchaser and its Affiliates, agents and representatives), in connection with
any Acquisition Proposal. In addition, the Shareholder, the Company and the
Subsidiaries will not, and will not permit their respective representatives,
investment bankers, agents and Affiliates of any of the foregoing to, directly
or indirectly, make or authorize any statement, recommendation or solicitation
in support of any Acquisition Proposal made by any Person or group (other than
the Purchaser). In addition, the Shareholder shall immediately cease, and shall
cause the Company and the Subsidiaries to immediately cease, any and all
existing activities, discussions or negotiations with any parties with respect
to any of the foregoing.
5.13 ACCOUNTS RECEIVABLE AND PAYABLE. Except for payments to the Shareholder
or its Affiliates (other than the Company and the Subsidiaries), the Company and
the Subsidiaries shall not, and the Shareholder shall not cause the Company or
any Subsidiary to, accelerate the collection of its accounts receivable or delay
the payments of its accounts payable or other Liabilities, in each case arising
out of the operation of the Business in a manner which would be inconsistent
with past practice.
5.14 TITLE MATTERS; SURVEYS.
(a) TITLE DOCUMENTS. As soon as practicable following the execution of
this Agreement, the Shareholder, at its sole cost, shall provide to the
Purchaser: (i) a current A.L.T.A. Form 1992 title insurance commitment, with
extended coverage endorsements, from a title insurance company reasonably
acceptable to the Purchaser (or if there is an existing title policy
("EXISTING POLICY") for such parcel issued by a title insurance company
reasonably acceptable to the Purchaser, from such title insurance company)
for
35
the parcel of Owned Real Estate which serves as the Cary, North Carolina
operations center of the Company and which is more fully described in
SCHEDULE 3.17 of this Agreement ("CARY PROPERTY") agreeing to insure the
title of the owner in amounts reasonably satisfactory to the Purchaser for
such parcel, but in no event in excess of an insurable amount reasonably
determined by the title insurance company, with standard exceptions waived,
together with copies of all documents mentioned in said title insurance
commitment, as well as a copy of the Existing Policy, if any, and (ii) a
current-on-the-ground ALTA survey for the Cary Property, prepared by a
reputable licensed surveyor in the State of North Carolina, containing a
certification in form reasonably satisfactory to the Purchaser, in favor of
the Purchaser, the title insurance company and the owner of the Cary
Property (collectively, with the items described in clause (i), the "TITLE
DOCUMENTS").
(b) REVIEW OF TITLE DOCUMENTS. The Purchaser shall be allowed twenty
(20) days after receipt of the Title Documents for examination thereof and
the making and delivering of any written objections to the condition of
title. If no title objection is made within such period, any objection shall
be deemed to have been waived by the Purchaser. If there is a written
objection to the condition of title to the Cary Property and such objection
is made by the Purchaser within said twenty (20) day period, the Shareholder
shall use commercially reasonable efforts, at its sole cost and expense, to
cure said title objections within thirty (30) days after said objections
have been raised by the Purchaser. If the Purchaser's title objections are
not cured or endorsed over to the Purchaser's reasonable satisfaction within
such thirty (30) day period, then the Purchaser shall have the right for a
period of five (5) business days following the termination of such thirty
(30) day cure period, (i) to terminate this Agreement by giving written
notice of termination to the Shareholder, or (ii) if there is a title
objection that can be stated in monetary terms, and if the Shareholder and
the Purchaser mutually agree to such monetary terms, the Purchaser may
accept the title objection and the Purchase Price shall be reduced by the
mutually agreed upon amount. If the Purchaser does not exercise its right to
terminate or if the parties cannot agree upon a reduction of the Purchase
Price, the Purchaser shall be deemed to have waived all such uncured
objections to the condition of title disclosed by the Title Documents. The
title matters approved or deemed approved by the Purchaser pursuant to this
Section 5.14(b) are referred to as "PERMITTED EXCEPTIONS").
(c) TITLE POLICY. It shall be a condition to the Purchaser's
obligations to close the transactions contemplated herein that the
Shareholder shall, at Closing, cause the title insurance company approved by
the Purchaser pursuant to Section 15.4(a), to issue and deliver to the
Purchaser (i) an ALTA owners extended coverage policy of title insurance on
the 1970 form (or 1992 form, so long as all creditors rights, fraudulent
conveyance and other similar exceptions are deleted), in an amount
satisfactory to the Purchaser, showing title to the Cary Property vested in
the Company and/or applicable Subsidiary, subject only to the Permitted
Exceptions, and containing such endorsements as may be reasonably required
by the Purchaser (the "TITLE POLICY"), or (ii) if there is an Existing
Policy from a title insurance company satisfactory to the Purchaser, an
endorsement or endorsements to the Existing Policy in each case in form
reasonably satisfactory to the Purchaser, increasing the liability amounts
thereunder to an amount satisfactory to the
36
Purchaser, but in no event in excess of an insurable amount reasonably
determined by the title insurance company. The Purchaser shall be
responsible for paying the costs of the foregoing and providing the title
insurance company with such documentation and indemnifications as may be
reasonably required to issue such coverage.
(d) OTHER OWNED REAL ESTATE. In addition to the Cary Property, the
Company and the Subsidiaries own approximately nine hundred fifty (950)
water well lots, thirty-three (33) wastewater treatment plant lots, fourteen
(14) elevated tank lots, and approximately eighty (80) wastewater pump
(lift) station lots. While most of these properties are either (i) owned in
fee simple absolute title (with several titled in fee simple determinable or
fee simple subject to a condition subsequent), or (ii) are leased, some of
the properties, as indicated, have perpetual easements only. The Shareholder
shall be under no obligation pursuant to the terms of this Agreement to
provide any title commitment, title insurance, survey or other documentation
to the Purchaser unless such documentation is presently available in the
files of the Shareholder, the Company or the Subsidiaries.
5.15 INSURANCE. The Shareholder shall maintain in full force and effect, for
the benefit of the Company and the Subsidiaries, all insurance coverages for the
Company and the Subsidiaries substantially comparable to coverages existing on
the date hereof.
5.16 FILING REPORTS AND MAKING PAYMENTS. The Company and the Subsidiaries
shall, and the Shareholder shall cause the Company and the Subsidiaries to,
timely file all required reports and notices with applicable Governmental Bodies
and timely make all uncontested payments due and owing to each such Governmental
Body, including, but not by way of limitation, any filings, notices and/or
payments required by reason of the transactions contemplated by this Agreement.
5.17 CAPITAL EXPENDITURES. The Company and the Subsidiaries shall not, and
the Shareholder shall not permit the Company or any Subsidiary to, make any
capital expenditures in excess of its approved capital expenditures budget
(which has been previously provided to the Purchaser) without the Purchaser's
prior written consent, which consent shall not be unreasonably withheld, delayed
or conditioned.
5.18 MONTHLY AND YEAR-END 2003 FINANCIALS. Within fifteen (15) days of the
close of each month after the execution of this Agreement by all parties hereto,
the Shareholder shall deliver to the Purchaser a consolidated balance sheet and
income statement for the Company and the Subsidiaries disclosing the financial
position and results of operations of the Company and the Subsidiaries for the
preceding month and year-to-date which shall be prepared on a basis consistent
with the interim financial statements of the Company and the Subsidiaries, and
consistent with the prior months and year-to-date financial statements. At least
ten (10) days prior to Closing, the Shareholder shall deliver to the Purchaser
audited consolidated financial statements, including a balance sheet and income
statement, for the Company and the Subsidiaries which, including any notes
thereto, fairly present the consolidated financial position and condition of the
Company and the Subsidiaries as of December 31, 2003 and the results of their
operations for the period then ended in accordance with GAAP applied by the
Company and the Subsidiaries on a consistent basis throughout the periods
covered.
37
5.19 LITIGATION. From the date hereof and through the Closing Date, the
Shareholder will notify the Purchaser in writing of any actions or Proceedings
of the type required to be described in Section 3.7 of this Agreement, that,
from the time hereof, are, to the Knowledge of the Shareholder or the Company,
Threatened or commenced against the Company or either Subsidiary or against any
officer, director or Employee of the Company or either Subsidiary.
5.20 NOTIFICATION OF INACCURACY. The Shareholder agrees to promptly notify
the Purchaser in writing of any material inaccuracy made by the Shareholder in
this Agreement of which the Shareholder becomes aware prior to the Closing Date
and which could result in a Material Adverse Effect. The Purchaser agrees to
promptly notify the Shareholder in writing of any material inaccuracy made by
the Purchaser in this Agreement of which the Purchaser becomes aware prior to
the Closing Date. The foregoing shall not limit the ability of the Shareholder
to Supplement the Schedules.
5.21 DEBT INSTRUMENTS. The Shareholder has provided the Purchaser with
copies of all Debt Instruments of the Company and the Subsidiaries which are
described in Section 3.29 of this Agreement and which are set forth in SCHEDULE
3.29. Upon payment of the Purchase Price at the Closing, any and all
indebtedness of the Company and the Subsidiaries to ALLETE, Inc., the
Shareholder and/or any of their Affiliates shall be deemed paid in full.
5.22 GUARANTEES.
(a) COMPANY AND SUBSIDIARY GUARANTEES. All guarantees set forth in
SCHEDULE 3.11 hereof and all other guarantees made by the Company or the
Subsidiaries, contingent or otherwise, of any kind or nature made for or on
behalf of ALLETE, Inc., the Shareholder, any Affiliate of ALLETE, Inc. or
the Shareholder (other than the Company and the Subsidiaries), or any of
their respective officers, directors, employees or other representatives
shall be fully and finally terminated, without recourse, and delivered to
the Purchaser at and upon the Closing.
(b) SHAREHOLDER AND AFFILIATE GUARANTEES. SCHEDULE 5.22(b) sets forth
a list of guarantees made by the Shareholder and/or its Affiliates
(excluding the Company and the Subsidiaries) with respect to the Business.
Each of the parties shall use all commercially reasonable efforts prior to
the Closing to cause the Shareholder and its Affiliates to be released from
any and all such guarantees, contingent or otherwise, of any kind or nature,
made for or on behalf of the Company or any of the Subsidiaries (each a
"SHAREHOLDER GUARANTEE"). The release of the Shareholder Guarantee(s) shall
be evidenced by the return of the original guarantee at the Closing or by
delivery of an irrevocable release executed by the named guarantee or
beneficiary of the Shareholder Guarantee. In the event that such a release
is not obtained at or prior to the Closing, the Purchaser, the Company and
the Subsidiaries shall make continuous commercially reasonable efforts to
terminate, extinguish or otherwise obtain the release of any such remaining
Shareholder Guarantee(s) (along with all documents and instruments to
evidence such binding termination extinguishment or release). In furtherance
of the foregoing, the Purchaser shall defend, indemnify and hold the
Shareholder and its Affiliates harmless from and against any Shareholder
and/or Affiliate Guarantee.
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5.23 ENVIRONMENTAL ASSESSMENT. The Shareholder shall permit and cooperate
with the Purchaser or any reasonably qualified environmental consultant
designated by the Purchaser (the "ENVIRONMENTAL ASSESSMENT FIRM") to conduct a
Phase I environmental site assessment (the "ENVIRONMENTAL ASSESSMENT") of any
Owned Real Estate or other Real Estate used in the Business prior to the
Closing. The Purchaser shall pay all fees and expenses of the Environmental
Assessment Firm. Any and all written report(s) of the Environmental Assessment
Firm shall be concurrently delivered to the Shareholder with and upon the
delivery of such report(s) to the Purchaser. The Shareholder shall have the
right to Supplement its Schedules to this Agreement with specific information
contained in the report(s) of the Environmental Assessment Firm in accordance
with the Supplement provisions of Section 13.21 of this Agreement.
5.24 COOPERATION WITH RESPECT TO PERMITS, LICENSES AND REGULATORY MATTERS.
(a) PERMITS. The Shareholder shall at its sole cost and expense
promptly perform such lawful acts and execute and deliver to the Purchaser
such documents as the Purchaser may request to obtain the full benefits of
the transfer of ownership of the Stock, and the Shareholder shall use
commercially reasonable efforts to and shall cooperate with the Purchaser to
obtain for the Purchaser all transferable and nontransferable Permits issued
by a Governmental Body necessary or appropriate to continue the operation of
the Company and the Subsidiaries in the Ordinary Course of Business from and
after the Closing Date.
(b) REGULATORY MATTERS. Upon execution of this Agreement, the Purchaser
and the Shareholder shall promptly proceed, and the Shareholder shall cause
the Company and each Subsidiary to file, all applications, consent requests
and associated documentary material required by or necessary to obtain all
approvals of any Governmental Body necessary to complete or satisfy the
conditions to Closing with respect to the transactions contemplated by this
Agreement, including those required by HSR (if applicable), and the North
Carolina General Statutes, the VDH and other Applicable Laws. Each party
shall bear its own costs with respect to such applications and consent
requests.
5.25 PERFORMANCE AND OTHER BONDS. As of or immediately following the Closing
the Purchaser shall arrange to obtain replacement performance and other bonds
which have been posted by the Company, the Subsidiaries and/or the Shareholder
(in the coverage amounts and for the term(s) set forth on such bonds) for
delivery at the Closing (and to the appropriate Governmental Body, including
those required by the NCUC and the VDH) which are set forth in SCHEDULE 5.25.
All such bonds to be obtained by the Purchaser shall be effective as of the
Closing Date for events arising on or after the Closing Date. Evidence
satisfactory to the Shareholder of compliance with Applicable Law (including
North Carolina General Statute 62-110.3 and NCUC rules R7-37 (water) and R10-24
(wastewater)) with respect to such bonds shall also be provided at the Closing
by the Purchaser. The Purchaser acknowledges that (i) it shall have no right or
claim to the performance and other bonds presently in existence and which are
executed by the Shareholder, and (ii) the Shareholder shall cause the
termination and cancellation of each such performance and other bond as of the
Closing Date, and the Shareholder shall have the right to any and all proceeds
and rebates, if any, therefrom with respect to such termination and
cancellation; PROVIDED, HOWEVER, that the cost for such
39
performance and other bonds was not previously charged to (and paid by) the
Company and/or the Subsidiaries by the Shareholder.
5.26 ABSENCE OF CERTAIN DEVELOPMENTS. Except for the transactions
contemplated by this Agreement or as otherwise set forth on SCHEDULE 5.26
hereto, the Company and the Subsidiaries will conduct the Business only in the
Ordinary Course of Business and will not:
(a) Declare, set aside or pay a dividend or make any other distribution
with respect to any class of capital stock of the Company or the
Subsidiaries;
(b) Change accounting methods or practices (including, without
limitation, any change in depreciation, amortization or cost accounting
policies or rates);
(c) Except for the transactions contemplated by this Agreement and as
otherwise set forth in SCHEDULE 3.37, enter into any employment contract or
collective bargaining agreement, written or oral, or modify the terms of any
existing employment contract or agreement or adopt, amend, modify or
terminate any Benefit Plan;
(d) Make any change or amendment in its articles of incorporation or
bylaws;
(e) Issue or sell any securities; acquire, directly or indirectly, by
redemption or otherwise, any securities; or grant or enter into any options,
warrants, calls or commitments of any kind with respect thereto;
(f) Make any capital expenditure exceeding One Hundred Thousand Dollars
($100,000) which are not in the capital expenditure operating budgets of the
Company and its Subsidiaries; and/or
(g) Incur any obligations for borrowed money (as opposed to purchase
money debt) other than pursuant to the existing credit facilities under the
Debt Instruments described and set forth in SCHEDULE 3.29 of this Agreement;
PROVIDED, HOWEVER, the Purchaser (i) acknowledges that the Company is
presently in the process of expanding its line of credit with CoBank, ACB
from an $8.5 million maximum principal amount available under such line of
credit to a maximum principal amount of $11.0 million, and (ii) hereby
consents to such expansion of the CoBank, ACB line of credit.
5.27 CERTAIN ACCOUNTING MATTERS.
(a) UNAMORTIZED ACQUISITION COSTS. As an affirmative response and
accommodation to the Purchaser's request, the Company has agreed to
write-off in the November 30, 2003 and December 31, 2003, interim financial
statements of the Company and its Subsidiaries certain capitalized
preliminary investigation costs arising from development of a wastewater
treatment system which would be permitted for discharge in ▇▇▇▇▇▇▇▇▇▇
County, Tennessee. The write-off will approximate $97,000, or $59,000 on an
after-tax basis. The Company will also propose this write-off adjustment for
the December 31, 2003, audited financial statements by including the
write-off in the year-end trial balance prepared for the Company's auditor.
40
(b) INTERIM ACCRUAL OF VACATION LIABILITY. As a further affirmative
response and accommodation to the Purchaser's request, the Company shall
present an accrual of vacation pay liability for each interim financial
statement of the Company and the Subsidiaries, to be prepared by the Company
for delivery to the Purchaser, pursuant to and in accordance with Section
5.18 of this Agreement.
In furtherance of the foregoing, the Shareholder shall cause the
Company to, and the Company shall, as of January 1, 2004, accrue in
accordance with the Company's vacation pay policy, a full year of vacation
pay liability anticipated and calculated by the Company for the calendar
year 2004. The amount shall be (i) initially recorded by a debit to
"Vacation Pay Deferred Asset" (a balance sheet account) and by a credit to
"Vacation Pay Liability" (a balance sheet account), and (ii) amortized on a
monthly basis based on actual use of vacation time by all employees by an
entry that debits "Vacation Pay Liability" and credits "Vacation Pay
Deferred Asset". In the event an employee terminates employment in 2004, the
full amount paid to such employee for accrued but unused vacation time shall
be recorded as expense in the period incurred as a consequence of the cash
payment to the employee, with a corresponding entry (in the same gross
amount of the gross vacation pay liability which was remitted to such
employee) that debits "Vacation Pay Liability" and credits Vacation Pay
Deferred Asset". In the event an employee has carry-over vacation from 2003,
the use of that vacation shall be recorded as a debit to "Vacation Pay
Liability" and a credit to "Vacation Pay Deferred Asset".
5.28 CAPITAL EXPENDITURES. The Company and its Subsidiaries shall make best
reasonable commercial efforts to continue their investment in capital resources
in the Ordinary Course of Business consistent with the capital budget(s)
established for the Company and the Subsidiaries.
ARTICLE 6
MUTUAL CONDITIONS PRECEDENT TO THE PARTIES' OBLIGATIONS
Unless waived in writing by the parties, each and every obligation of the
Purchaser and the Shareholder to be performed at the Closing shall be subject to
the satisfaction at or prior thereto of each and all of the following conditions
precedent:
6.1 PROCEEDINGS. There being no (i) Proceedings which have been brought,
asserted or commenced against the Purchaser, the Company, the Subsidiaries
and/or the Shareholder by any Person which enjoins or otherwise materially and
adversely affects the Purchaser's, the Company's, the Subsidiaries' or the
Shareholder's ability to consummate the transactions contemplated hereby or
which could reasonably be expected to have a Material Adverse Effect if the
transactions contemplated hereby were consummated, (ii) Proceedings that have
been Threatened against the Purchaser, the Company, the Subsidiaries and/or the
Shareholder by any Person which would enjoin or materially and adversely affect
the Purchaser's, the Company's, the Subsidiaries' or the Shareholder's ability
to consummate the transactions contemplated hereby or which could reasonably be
expected to have a Material Adverse Effect in the event the transactions
contemplated hereby were consummated, or (iii) Applicable Laws restraining or
enjoining or which may reasonably be expected to nullify or render ineffective
this Agreement or
41
the consummation of the transactions contemplated hereby or which otherwise
could reasonably be expected to have a Material Adverse Effect if the
transactions contemplated hereby were consummated.
6.2 CONSENTS AND APPROVALS. The Purchaser and the Shareholder shall have
received evidence, in form and substance reasonably satisfactory to the
respective counsel for the Purchaser and the Shareholder, that all material
consents, waivers, releases, authorizations, approvals, licenses, certificates,
Permits and franchises of all Persons (including each and every Governmental
Body) as may be necessary to lawfully consummate the transactions contemplated
by this Agreement and for the Purchaser to carry on and continue the operations
of the Company and the Subsidiaries as they are now conducted have been
obtained. All consents of a Governmental Body shall be by Final Order; PROVIDED,
HOWEVER, that if the Purchaser and the Shareholder waive the condition of
Governmental Body consent by Final Order, the parties shall consider the
Governmental Body consent without Final Order sufficient to proceed to Closing
according to the other terms of this Agreement. All Final Orders shall impose no
conditions that could have a Material Adverse Effect on the Company or the
Subsidiaries after giving effect to the consummation of this Agreement. "FINAL
ORDER" means an action or decision of the Governmental Body as to which (i) no
request for a stay is pending, no stay is in effect, and any deadline for filing
such request that may be designated by Applicable Law has passed, (ii) no
petition for rehearing or reconsideration or application for review is pending
and the time for the filing of such petition or application has passed, (iii)
the Governmental Body does not have the action or decision under reconsideration
on its own motion and the time within which it may effect such reconsideration
has passed, and (iv) no judicial appeal is pending or in effect and any deadline
for filing any such appeal that may be designated by statute or rule has passed.
6.3 ANTITRUST MATTERS. All waiting periods under HSR have expired, no
temporary restraining order, preliminary Injunction or permanent Injunction
enjoining the consummation of the transactions contemplated herein has been
entered by any court, no action seeking to enjoin the consummation of this
transaction has been commenced by any Person, and neither the FTC, the DOJ nor
any State Attorney General has Threatened to take any action to enjoin or
challenge the transaction contemplated herein. Promptly after the execution of
this Agreement, the Purchaser and the Shareholder shall make all filings and
submit information requested or required under HSR with the FTC and the DOJ.
Neither party hereto shall initiate any substantive discussion with the FTC or
DOJ concerning the transactions contemplated by this Agreement without giving
the other party reasonable prior notice of such discussion and a reasonable
opportunity to participate therein. Each party shall promptly report to the
other the fact and general nature of any substantive discussion initiated with
it by the FTC or DOJ concerning the transactions contemplated by this Agreement.
Notwithstanding the foregoing, the parties hereto have presently determined that
filings under HSR are not required due to the amount of the Purchase Price for
the Stock.
42
ARTICLE 7
ADDITIONAL CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
Unless waived by the Purchaser in writing, each and every obligation of
the Purchaser to be performed at the Closing shall be subject to the
satisfaction at or prior thereto of each and all of the following conditions
precedent:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties (as amended by any Supplement) made by the Shareholder in this
Agreement, and the Ancillary Documents to be executed and delivered by the
Shareholder pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing with the same force and effect as
though such representations and warranties had been made or given at and as of
the Closing.
7.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. The Shareholder, the Company
and the Subsidiaries shall have performed and complied with all of their
covenants, agreements and obligations under this Agreement and the Ancillary
Documents which are to be performed or complied with by them at or prior to the
Closing, including the execution and delivery of the Ancillary Documents
specified in Section 2.4(b) hereof, all of which shall be reasonably
satisfactory in form and substance to the Purchaser.
7.3 NO MATERIAL ADVERSE EFFECT. As of the Closing Date, nothing shall have
occurred which would, individually or in the aggregate, have a Material Adverse
Effect on the Company and/or the Subsidiaries.
7.4 LEGAL OPINION. The Purchaser shall have received an opinion from the
counsel for the Shareholder, dated as of the Closing Date, in form and substance
satisfactory to the Purchaser in the Purchaser's reasonable commercial
discretion.
ARTICLE 8
ADDITIONAL CONDITIONS PRECEDENT TO THE SHAREHOLDER'S OBLIGATIONS
Unless waived by the Shareholder in writing, each and every obligation
of the Shareholder to be performed at the Closing shall be subject to the
satisfaction at or prior thereto of each and all of the following conditions
precedent:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties (as amended by any Supplement) made by the Purchaser in this
Agreement and the Ancillary Documents to be executed and delivered by the
Purchaser pursuant to this Agreement, shall be true and correct in all material
respects at and as of the Closing with the same force and effect as though such
representations and warranties had been made or given at and as of the Closing.
8.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. The Purchaser shall have
performed and complied with all of its covenants, agreements and obligations
under this
43
Agreement and the Ancillary Agreements which are to be performed or complied
with by it at or prior to the Closing, including the execution and delivery of
the Ancillary Documents specified in Section 2.4(c) hereof.
8.3 LEGAL OPINION. The Shareholder shall have received an opinion from the
counsel for the Purchaser, dated as of the Closing Date, in form and substance
satisfactory to the Shareholder in the Shareholder's reasonable commercial
discretion.
8.4 DELIVERY OF PURCHASE PRICE AND OTHER CONSIDERATION. The Purchaser shall
have delivered to the Shareholder, against receipt of the certificates for the
Stock, the Purchase Price.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE SHAREHOLDER. The Shareholder hereby covenants
and agrees to indemnify and hold the Purchaser, its officers, directors,
employees, Affiliates, shareholders and agents, and each of their respective
successors and assigns, harmless from, against and in respect of any and all
losses, costs, expenses (including without limitation, reasonable attorneys'
fees and disbursements of counsel), Liabilities, damages, fines, penalties,
charges, assessments, judgments, settlements, claims, causes of action and other
obligations of any nature whatsoever (excluding, however, Purchaser claims
against the Shareholder for incidental, consequential or special damages,
including punitive damages, other than those claims which arise from a third
party claim against the Company) (individually, a "LOSS" and collectively
"LOSSES") that any of them may at any time, directly or indirectly, suffer,
sustain, incur or become subject to, arising out of, based upon or resulting
from or on account of each of the following:
(a) the breach or falsity of any representation or warranty made
by the Shareholder in this Agreement and the Ancillary Documents to be
executed and delivered by the Shareholder pursuant hereto and thereto;
PROVIDED, HOWEVER, that the Shareholder shall not be required to provide
such indemnification for the breach or falsity of any such representation or
warranty (other than representations or warranties contained in Sections
3.1, 3.2, 3.3, 3.4, 3.9, 3.10, 3.23, 3.29, 3.31, 3.33 and 3.35) unless and
until the Purchaser, its officers, directors, employees, Affiliates and
other representatives shall have sustained cumulative Losses as a result of
one or more such breaches or falsities of Five Hundred Thousand Dollars
($500,000) (the "BASKET AMOUNT"). Once the aggregate of Losses exceeds the
Basket Amount, the Shareholder shall provide indemnification for all Losses
sustained as a result of such breach(es) or falsity(ies) of the applicable
representations and warranties in excess of the Basket Amount; or
(b) the breach of any covenant or agreement made by the Shareholder in
this Agreement and the Ancillary Documents to be executed and delivered by
the Shareholder or its representatives pursuant hereto or thereto; or
44
(c) any incurrence by the Purchaser, the Company or the Subsidiaries of
an amount or amounts for Transactional Expenses of the Shareholder; or
(d) any claim (i) for Retention Payments, severance pay, bonus, unpaid
wages or salaries accruing, incurred or triggered by a termination of
employment (voluntary or involuntary) of any employee of the Shareholder,
the Company or the Subsidiaries which occurred at any time prior to the
Closing or which arises immediately upon and as a consequence of the
occurrence of the Closing (but not as a consequence of a hiring and
subsequent termination by the Purchaser), or (ii) relating to any claim or
Proceeding of any employee of the Shareholder, the Company or the
Subsidiaries arising from any act, occurrence, or event, the basis of which
is dated at any time prior to, or attributable to, the Closing; or
(e) any and all Losses that arise from, in connection with or incident
to any claim, obligation, cost or expense under a guarantee made by the
Company or the Subsidiaries on behalf of the Shareholder as described in
Section 5.22(a) that are not within the scope of the indemnity from the
Purchaser to the Shareholder; or
(f) any and all Losses that arise from, are in connection with, or are
incident to any claims set forth in SCHEDULE 3.24 to the extent such Losses
would otherwise be covered under any insurance or self-insurance
arrangement.
Notwithstanding the foregoing, any Loss or aggregate Losses to be
indemnified by the Shareholder to the Purchaser under this Agreement shall not
exceed Seven Million Five Hundred Thousand Dollars ($7.5 Million). Any claim of
indemnification by the Purchaser from, in connection with or incident to any
Loss or Losses related to Taxes shall be governed by Article 10 of this
Agreement.
9.2 INDEMNIFICATION BY THE PURCHASER. The Purchaser covenants and agrees to
defend, indemnify and hold the Shareholder and its respective officers,
directors, successors and assigns, harmless from, against and in respect of any
and all Losses that it may at any time, directly or indirectly, suffer, sustain,
incur or become subject to, arising out of, based upon or resulting from or on
account of each or all of the following:
(a) the breach or falsity of any representation or warranty made by the
Purchaser in this Agreement and the Ancillary Documents to be executed and
delivered by the Purchaser pursuant hereto and thereto; or
(b) the breach of any covenant or agreement made by the Purchaser in
this Agreement and the Ancillary Documents to be executed and delivered by
the Purchaser pursuant hereto or thereto;
(c) any and all Losses arising from, in connection with or incident to
the Shareholder and Affiliate Guarantees described in Section 5.22; or
(d) any and all Losses arising from, in connection with or incident to
the Severance Payments.
45
9.3 PROCEDURE FOR INDEMNIFICATION. In the event a party, including its
trustees, officers, directors, employees, Affiliates and other representatives,
intends to seek indemnification pursuant to the provisions of Sections 9.1 or
9.2 hereof (the "INDEMNIFIED PARTY"), the Indemnified Party shall promptly give
notice hereunder to the other party (the "INDEMNIFYING PARTY") of a claim or
after obtaining written notice of any claim, investigation, or the service of a
summons or other initial or continuing legal or administrative process or
Proceeding in any action instituted against the Indemnified Party as to which
recovery or other action may be sought against the Indemnified Party because of
the indemnification provided for in Section 9.1 or 9.2 hereof, and, if such
indemnity shall arise from the claim of a third party, the Indemnified Party
shall permit the Indemnifying Party to assume the defense of any such claim and
any litigation resulting from such claim; PROVIDED, HOWEVER, that the
Indemnified Party shall not be required to permit such an assumption of the
defense of any claim or Proceeding which, if not first paid, discharged or
otherwise complied with, would result in a material interruption or disruption
of the business of the Indemnified Party, or any material part thereof.
Notwithstanding the foregoing, the right to indemnification hereunder shall not
be affected by any failure of the Indemnified Party to give such notice (or by
delay by the Indemnified Party in giving such notice) unless, and then only to
the extent that, the rights and remedies of the Indemnifying Party shall have
been prejudiced as a result of the failure to give, or delay in giving, such
notice. Failure by the Indemnifying Party to notify the Indemnified Party of its
election to defend any such claim or action by a third party within twenty (20)
days after notice thereof shall have been given to the Indemnifying Party shall
be deemed a waiver by the Indemnifying Party of its right to defend such claim
or action.
If the Indemnifying Party assumes the defense of such claim, investigation
or Proceeding resulting therefrom, the obligations of the Indemnifying Party
hereunder as to such claim, investigation or Proceeding shall include taking all
steps necessary in the defense or settlement of such claim, investigation or
Proceeding and holding the Indemnified Party harmless from and against any and
all Losses arising from, in connection with or incident to any settlement
approved by the Indemnifying Party or any judgment entered in connection with
such claim, investigation or Proceeding, except where, and only to the extent
that, the Indemnifying Party has been prejudiced by the actions or omissions of
the Indemnified Party. The Indemnifying Party shall not, in the defense of such
claim or any Proceeding resulting therefrom, consent to entry of any judgment
(other than a judgment of dismissal on the merits without costs) except with the
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld, delayed or conditioned) or enter into any settlement
(except with the written consent of the Indemnified Party, which consent shall
not be unreasonably withheld, delayed or conditioned) unless (i) there is no
finding or admission of any violation of Applicable Law and no material effect
on any claims that could reasonably be expected to be made by or against the
Indemnified Party, (ii) the sole relief provided is monetary damages that are
paid in full for Losses which are or may be properly applied against the Basket
Amount, and (iii) the settlement shall include the giving by the claimant or the
plaintiff to the Indemnified Party a release from all Liability in respect to
such claim or litigation.
If the Indemnifying Party assumes the defense of such claim, investigation
or Proceeding resulting therefrom, the Indemnified Party shall be entitled to
participate in the defense of the claim, but solely by observation and comment
to the Indemnifying Party, and the counsel selected by the Indemnified Party
shall not appear on its behalf in any Proceeding arising
46
hereunder. The Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it to participate in its defense unless any of
the following shall apply: (i) the employment of such counsel shall have been
authorized in writing by the Indemnifying Party, or (ii) the Indemnifying
Party's legal counsel shall advise the Indemnifying Party in writing, with a
copy to the Indemnified Party, that there is a conflict of interest that would
make it inappropriate under applicable standards of professional conduct to have
common counsel. If clause (i) or (ii) in the immediately preceding sentence is
applicable, then the Indemnified Party may employ separate counsel at the
expense of the Indemnifying Party to represent the Indemnified Party, but in no
event shall the Indemnifying Party be obligated to pay the costs and expenses of
more than one such separate counsel for any one complaint, claim, action or
Proceeding in any one jurisdiction.
If the Indemnifying Party does not assume the defense of any such claim by a
third party or litigation resulting therefrom after receipt of notice from the
Indemnified Party, the Indemnified Party may defend against such claim or
litigation in such manner as it reasonably deems appropriate, and unless the
Indemnifying Party shall deposit with the Indemnified Party a sum equivalent to
the total amount demanded in such claim or litigation plus the Indemnified
Party's estimate of the cost (including attorneys' fees) of defending the same,
the Indemnified Party may settle such claim or Proceeding on such terms as it
may reasonably deem appropriate and the Indemnifying Party shall, subject to its
defenses and the applicability of any remaining threshold loss amount provided
for in Section 9.1(a) hereof, promptly reimburse the Indemnified Party for the
amount of such settlement and for all reasonable costs (including attorneys'
fees), expenses and damages incurred by the Indemnified Party in connection with
the defense against or settlement of such claim, investigation or litigation, or
if any such claim or litigation is not so settled, the Indemnifying Party shall,
subject to its defenses and the applicability of any remaining Basket Amount
provided for in Section 9.1(a) hereof, promptly reimburse the Indemnified Party
for the amount of any final nonappealable judgment rendered with respect to any
claim by a third party in such litigation and for all costs (including
attorneys' fees), expenses and damage incurred by the Indemnified Party in
connection with the defense against such claim or litigation, whether or not
resulting from, arising out of, or incurred with respect to, the act of a third
party.
Each party shall cooperate in good faith and in all respects with each
Indemnifying Party and its representatives (including without limitation its
counsel) in the investigation, negotiation, settlement, trial and/or defense of
any Proceedings (and any appeal arising therefrom) or any claim. The parties
shall cooperate with each other in any notifications to and information requests
of any insurers. No individual representative of any Person, or their respective
Affiliates shall be personally liable for any Loss or Losses under this
Agreement, except as specifically agreed to by said individual representative.
9.4 DISPUTE RESOLUTION. In the event a dispute arises under this Agreement,
except with respect to Section 2.2 or equitable remedies pursued under this
Agreement, such disputes shall be resolved in the manner set forth in this
Section 9.4.
(a) If a dispute arises under this Agreement, including any question
regarding the existence, validity, interpretation or termination hereof,
which is not described as an exception in this Section 9.4, the Purchaser
and the Shareholder may invoke the dispute
47
resolution procedure set forth in this Section 9.4 by giving written notice
to the other party. The parties shall enter into discussions concerning this
dispute. If the dispute is not resolved as a result of such discussion in
ten (10) days, an attempt will be made to resolve the matter by a formal
nonbinding mediation with an independent neutral mediator agreed to by the
parties. If the parties cannot agree on a mediator within a period of ten
(10) days after expiration of the ten (10) day period for resolution by
discussion, then either party may apply to any court of competent
jurisdiction for appointment of a mediator, which appointment shall be
binding and nonappealable. Upon commencement of the mediation process, the
parties shall promptly communicate with respect to a procedure and schedule
for the conduct of the Proceeding and for the exchange of documents and
other information related to the dispute. The mediation process shall be
deemed ended if the dispute has not been resolved within thirty (30) days
after appointment of the mediator.
(b) All claims, disputes or other matters in question between the
parties to this Agreement arising out of or relating to this Agreement which
are not resolved by mediation in accordance with Section 9.4(a) within
thirty (30) days after appointment of a mediator may be resolved pursuant to
Section 9.4(c).
(c) The Shareholder and the Purchaser agree and consent that any
legal action, suit or Proceeding seeking to enforce this Section 9.4 shall
be instituted and adjudicated solely and exclusively in any court of general
jurisdiction in North Carolina, or in the United States District Court
having jurisdiction in North Carolina and the Shareholder and the Purchaser
agree that venue will be proper in such courts and waive any objection which
they may have now or hereafter to the venue of any such suit, action or
Proceeding in such courts, and irrevocably consent and agree to the
jurisdiction of said courts in any such suit, action or Proceeding. The
Shareholder and the Purchaser further agree to accept and acknowledge
service of any and all process which may be served in any such suit, action
or Proceeding in said courts, and also agree that service of process or
notice upon them shall be deemed in every respect effective service of
process or notice upon them, in any suit, action or Proceeding, if given or
made: (i) by a Person over the age of eighteen who personally serves such
notice or service of process on the Shareholder or the Purchaser, as the
case may be, or (ii) by certified mail, return receipt requested, mailed to
the Shareholder or the Purchaser, as the case may be, at their respective
addresses set forth in this Agreement.
(d) In the event of a Proceeding filed or instituted between the
parties pursuant to this Section 9.4, the prevailing party will be entitled
to receive from the adverse party all costs, damages and expenses, including
reasonable attorney's fees, incurred by the prevailing party in connection
with that action or Proceeding, whether or not the controversy is reduced to
judgment or award.
9.5 EFFECT OF INSURANCE. An Indemnified Party who has a right to make a
claim under any policy of insurance with respect to an indemnified claim made by
the Indemnified Party shall use commercially reasonable efforts to make such
claim on a prompt and competent basis in the manner required by the insurer. The
Indemnified Party shall use commercially reasonable efforts to promptly and
diligently pursue such claim and shall cooperate fully with the
48
insurer and the Indemnifying Party in the prosecution of the claim or claims. In
the event an Indemnified Party receives insurance proceeds with respect to
Losses for which the Indemnified Party has made an indemnification claim prior
to the date on which the Indemnifying Party is required pursuant to this Article
9 to pay such indemnification claim, the indemnification claim shall be reduced
by an amount equal to such insurance proceeds received by the Indemnified Party
less all reasonable out-of-pocket costs incurred by the Indemnified Party in its
pursuit of such insurance proceeds. If such insurance proceeds are received by
the Indemnified Party after the date on which the Indemnifying Party is required
pursuant to this Article 9 to pay such indemnification claim, the Indemnified
Party shall, no later than five (5) days after the receipt of such insurance
proceeds, reimburse the Indemnifying Party in an amount equal to such insurance
proceeds (but in no event in an amount greater than the Losses theretofore paid
to the Indemnified Party by the Indemnifying Party) less all reasonable
out-of-pocket costs incurred by the Indemnified Party in obtaining such
insurance proceeds. In either case, the Indemnifying Party shall compensate the
Indemnified Party for all costs incurred by the Indemnified Party subsequent to
either the reduction of any indemnification claim as provided above, or the
delivery of any such insurance proceeds to the Indemnifying Party as provided
above, as the case may be, as a result of any such insurance, including, but not
limited to, retrospective premium adjustments, experience-based premium
adjustments (whether retroactive or prospective) and indemnification or surety
obligations of the Indemnified Party to any insurer. A claim for such costs
shall be made by an Indemnified Party by delivery of a written notice to the
Indemnifying Party requesting compensation and specifying this Section 9.5 as
the basis on which compensation for such costs is sought, and the Indemnifying
Party shall pay such costs no later than thirty (30) days after receiving the
written notice requesting such compensation. Notwithstanding the foregoing,
except to the extent set forth in the first two sentences of this Section 9.5,
the Indemnified Party is not required to pursue a recovery from an insurer as a
precondition to the Indemnifying Party's obligation to pay any indemnification
claim as required by this Article 9, and the Indemnifying Party shall not be
entitled to delay any payment beyond the respective payment dates for any
indemnification claims referred to in this Article 9 for the purpose of awaiting
receipt of insurance proceeds or credits therefor as provided herein.
9.6 EFFECT OF TAXES. The amount of indemnification payment due hereunder
shall be reduced by the amount of any Income Tax benefit that the Purchaser, the
Company and the Subsidiaries (or their Affiliates) realizes (or will realize) as
a result of incurring such Loss. The amount of the Income Tax benefit realized
(or that will be realized) as a result of incurring a Loss shall be computed on
a hypothetical basis and shall equal the product of (i) the sum of (A) the
amount of each Income Tax deduction (or similar benefit) of the Purchaser, the
Company and the Subsidiaries (or their Affiliates) resulting from the Loss that
is reasonably anticipated to be deductible (or used) in the tax year including
the date of indemnification payment (or in any prior tax years) plus (B) the
present value as of the date of the indemnification payment of each Income Tax
deduction (or similar benefit) of the Purchaser, the Company and the
Subsidiaries (or their Affiliates) resulting from the Loss that is reasonably
anticipated to be deductible (or used) in any tax year after the tax year of the
indemnification payment multiplied by (ii) forty percent (40%). For purposes of
clause (B), the present value of a future Income Tax deduction (or similar
benefit) shall be determined using a discount rate of five percent (5%) and
assuming that all Tax benefits from the deduction (or similar benefit) are
realized on the 182nd day of the Company's tax year for the year in which the
deduction (or similar benefit) is reasonably anticipated to be claimed.
49
ARTICLE 10
TAX MATTERS
The following provisions shall govern the allocation of responsibility
as between the Purchaser and the Shareholder for certain Tax matters following
the Closing Date:
10.1 TAX RETURNS.
(a) The Shareholder has the exclusive authority and obligation to
prepare, execute on behalf of the Company and the Subsidiaries and timely
file, or cause to be prepared and timely filed, all Tax Returns of the
Company and the Subsidiaries that are due with respect to any taxable year
or other taxable period ending prior to or ending on and including the
Closing Date. Such authority shall include, but not be limited to, the
determination of the manner in which any items of income, gain, deduction,
Loss or credit arising out of the income, properties and operations of the
Company and the Subsidiaries shall be reported or disclosed in such Tax
Returns; PROVIDED, HOWEVER, that such Tax Returns shall be prepared by
treating items on such Tax Returns in a manner consistent with the past
practices with respect to such items and in a manner consistent with all
applicable IRS regulations.
(b) Except as provided in Section 10.1(a), the Purchaser shall have
the exclusive authority and obligation to prepare, execute on behalf of the
Company and the Subsidiaries and timely file, or cause to be prepared and
timely filed, all Tax Returns of the Company and the Subsidiaries that are
due with respect to any taxable year or other taxable period ending after
the Closing Date; PROVIDED, HOWEVER, with respect to Tax Returns to be filed
by the Purchaser pursuant to this Section 10.1 for taxable periods beginning
before the Closing Date and ending after the Closing Date, items set forth
on such Tax Returns shall be treated in a manner consistent with the past
practices with respect to such items. Such authority shall include, but not
be limited to, the determination of the manner in which any items of income,
gain, deduction, Loss or credit arising out of the income, properties and
operations of the Company shall be reported or disclosed on such Tax
Returns.
10.2 CONTROVERSIES. The Purchaser shall promptly notify the Shareholder in
writing upon receipt by the Purchaser or any Affiliate of the Purchaser
(including the Company and the Subsidiaries after the Closing Date) of written
notice of any inquiries, claims, assessments, audits or similar events with
respect to Taxes relating to a taxable period ending prior to or ending on and
including the Closing Date for which the Shareholder may be liable under this
Agreement (any such inquiry, claim, assessment, audit or similar event, a "TAX
MATTER"). The Shareholder, or its duly appointed representative (the
"SHAREHOLDER'S REPRESENTATIVE"), at its sole expense, shall have the authority
to represent the interests of the Company and the Subsidiaries with respect to
any Tax Matter before the IRS, any other taxing authority, any other
governmental agency or authority or any court and shall have the sole right to
control the defense, compromise or other resolution of any Tax Matter, including
responding to inquiries, filing Tax Returns and contesting, defending against
and resolving any assessment for additional Taxes or notice of Tax deficiency or
other adjustment of Taxes of, or relating to, a Tax Matter; PROVIDED, HOWEVER,
that
50
neither the Purchaser nor any of its Affiliates shall enter into any settlement
of or otherwise compromise any Tax Matter that affects or may affect the Tax
Liability of the Shareholder, the Company, the Subsidiaries or any Affiliate of
the foregoing for any period ending after the Closing Date, which includes a
portion of a period beginning before the Closing Date and ending after the
Closing Date (the "OVERLAP PERIOD"), without the prior written consent of the
Shareholder or the Shareholder's Representative, which consent shall not be
unreasonably withheld, delayed or conditioned. The parties hereto shall keep the
other fully and timely informed with respect to the commencement, status and
nature of any Tax Matter.
Except as otherwise provided in this Section 10.2, the Purchaser shall have
the sole right to control any audit or examination by any taxing authority,
initiate any claim for refund or amend any Tax Return, and contest, resolve and
defend against any assessment for additional Taxes, notice of Tax deficiency or
other adjustment of Taxes of, or relating to, the income, assets or operations
of the Company and the Subsidiaries for all taxable periods; PROVIDED, HOWEVER,
that the Purchaser shall not, and shall cause its Affiliates (including the
Company and the Subsidiaries) not to, enter into any settlement of any contest
or otherwise compromise any issue with respect to the portion of the Overlap
Period ending on or prior to the Closing Date without the prior written consent
of the Shareholder, which consent shall not be unreasonably withheld, delayed or
conditioned.
10.3 TRANSFER TAXES. All transfer, documentary, stamp, registration, sales
and use and similar Taxes and fees (including all penalties and interest)
imposed in connection with the sale of the Stock or any other transaction that
occurs pursuant to this Agreement shall be the obligation of the Shareholder.
10.4 AMENDED TAX RETURNS. The Shareholder, the Company and the Subsidiaries
shall not file or cause to be filed any amended Tax Return or claims for refund
without the prior written consent of the Purchaser, which consent shall not be
unreasonably withheld, delayed or conditioned, except for such amended Tax
Returns or claims for refund filed in connection with the resolution of any Tax
Matter in accordance with Section 10.2.
10.5 NON-FOREIGN PERSON AFFIDAVIT. The Shareholder shall furnish to the
Purchaser on or before the Closing Date a non-foreign Person affidavit as
required by Section 1445 of the Code.
10.6 TAX INDEMNIFICATION.
(a) TAX INDEMNIFICATION. The Shareholder hereby covenants and agrees
to indemnify, defend and hold harmless the Purchaser, its Affiliates
(including the Company and the Subsidiaries) and the successors to the
foregoing (and their respective shareholders, officers, directors, employees
and agents) against (i) all Losses with respect to any claims that may be
asserted by any party based upon the breach of any representation or
warranty made with respect to Taxes in this Agreement, including those made
pursuant to Section 3.9, (ii) all Taxes imposed on or asserted against the
properties, income or operations of the Company or the Subsidiaries for all
Pre-Closing Periods to the extent such Taxes have not been fully reserved
for in the financial statements of the Company as of the last day of the
month preceding the Closing Date, and (iii) all Taxes
51
imposed on the Company or the Subsidiaries, or for which the Company or the
Subsidiaries may be liable, as a result of any transaction contemplated by
this Agreement. The Purchaser shall promptly give the Shareholder or its
respective representatives written notice of all Taxes, Losses, claims and
expenses which the Purchaser has reasonably determined may give rise to a
right of indemnification under this Section 10.6(a), including a computation
of the amount of the claimed indemnification with sufficient detail and
particularity to enable the Shareholder to reasonably determine the amount
of such required indemnification.
(b) NOTIFICATION OF CLAIMS. In the event that the Purchaser fails to
notify the Shareholder with respect to a Tax Matter in accordance with the
provisions of Section 10.2, the Shareholder shall not be obligated to
indemnify the Purchaser under this Section 10.6 to the extent that such
failure to notify the Shareholder has a Material Adverse Effect on the
Shareholder's ability to defend against such Tax Matter.
10.7 SECTION 338 ELECTION. The Shareholder and the Purchaser have agreed
that an election under Section 338(h)(10) of the Code, and any comparable state
or local Tax provision, shall be made by the Purchaser and the Shareholder with
respect to the Purchaser's acquisition of the Stock of the Company and each
Subsidiary. In this regard, the Purchaser shall prepare, and the Shareholder
shall assist in the preparation of, Forms 8883 or comparable state or local Tax
forms in a manner consistent with the allocation of the Purchase Price to assets
reflected in SCHEDULE 10.7. Upon presentation of any such Form 8883 or
comparable state or local Tax form by the Purchaser, the Shareholder shall
promptly execute and return such forms to the Purchaser for inclusion with the
Purchaser's Tax Return and, if necessary, the Shareholder shall include a copy
of such form with its own Tax Return for the Tax period that includes the
purchase of the Stock.
10.8 POST-CLOSING ACCESS AND COOPERATION. From and after the Closing Date,
the Purchaser agrees, and agrees to cause the Company and the Subsidiaries, to
permit the Shareholder and its representatives to have reasonable access, during
normal business hours, to the books and records of the Company and the
Subsidiaries, to the extent that such books and records relate to a Pre-Closing
Period, and personnel, for the purpose of enabling the Shareholder to: (i)
prepare Tax Returns, (ii) investigate or contest any Tax Matter which the
Shareholder has the authority to conduct, and (iii) evaluate any claim for
indemnification.
ARTICLE 11
PERFORMANCE FOLLOWING THE CLOSING DATE
The following covenants and agreements are to be performed after the Closing
by the parties and shall continue in effect for the periods respectively
indicated or, where no indication is made, until performed:
11.1 FURTHER ACTS AND ASSURANCES. The parties agree that, at any time and
from time to time, on and after the Closing Date, upon the reasonable request of
the other party, they will do or cause to be done all such further acts and
things and execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered any and all papers, documents, instruments,
52
agreements, assignments, transfers, assurances and conveyances as may be
necessary or desirable to carry out and give effect to the provisions and intent
of this Agreement. In addition, from and after the Closing Date, the Purchaser
will afford to the Shareholder and its attorneys, accountants and other
representatives access, during normal business hours, to such personnel, books
and records relating to the Company and/or the Subsidiaries as may reasonably be
required in connection with the preparation of financial information or the
filing of Tax Returns and will cooperate in all reasonable respects in
connection with claims and Proceeding asserted by or against third parties,
relating to or arising from the transactions contemplated hereby.
11.2 NON-COMPETITION AGREEMENT. During the period of thirty-six (36) months
from and after the Closing Date, the Shareholder, on behalf of itself and its
Affiliates (other than the Company and the Subsidiaries), covenants and agrees
that it will not, without the Purchaser's prior written consent, which may be
withheld or given in its sole discretion, directly or indirectly, or
individually or collectively within the State of North Carolina, lend any
material credit, advice or assistance, or engage in any activity or act in any
manner, including but not limited to, as a founder, promoter, partner, joint
venturer, shareholder other than as a less than five percent (5%) shareholder of
a publicly traded corporation, officer, director, trustee, manager, licensor,
licensee, principal, agent, broker, representative, consultant, advisor,
investor or otherwise for the purpose of establishing, operating or managing any
business or entity that is engaged in activities competitive with the Business
of the Company or the Subsidiaries.
11.3 NON-SOLICITATION AGREEMENT. During the period of thirty-six (36) months
from and after the Closing Date, the Shareholder covenants and agrees that it
will not, whether for its own account or for the account of any other Person,
directly or indirectly interfere with the relationship of the Company or the
Subsidiaries with, or endeavor to divert or entice away from, the Company or the
Subsidiaries any Person who or which at any time during the term of the
Shareholder's affiliation with the Company or the Subsidiaries is an employee,
vendor, supplier or customer of the Company or the Subsidiaries. The foregoing
shall not apply to employees, vendors, suppliers or customers who do not, at the
time of any solicitation, have a relationship with the Company or a Subsidiary
in such capacity.
11.4 REASONABLENESS OF COVENANTS. The Shareholder, on behalf of itself, its
trustees, shareholders and Affiliates, acknowledges and agrees that the
geographic scope and period of duration of the restrictive covenants contained
in Sections 11.2 and 11.3 of this Agreement are both fair and reasonable and
that the interests sought to be protected by the Purchaser, the Company and the
Subsidiaries are legitimate business interests entitled to be protected. The
Shareholder further acknowledges and agrees that the Purchaser would not have
purchased the Shareholder's Stock in the Company pursuant to this Agreement
unless the Shareholder agreed to the covenants contained in such Sections.
11.5 INJUNCTIVE RELIEF. The parties agree that the remedy of damages at law
for the breach by any party of any of the covenants contained in Sections 11.2
and 11.3 is an inadequate remedy. In recognition of the irreparable harm that a
violation by the Shareholder, its officers, directors, shareholders or
Affiliates, of any of the covenants, agreements or obligations arising under
Sections 11.2 and 11.3 would cause the Purchaser and the Company, the
Shareholder, on behalf of itself, its officers, directors, shareholders and
Affiliates, agrees that in addition to any other remedies or relief afforded by
law, an Injunction against an actual or threatened violation
53
or violations may be issued against it and/or them and every other Person
concerned thereby, it being the understanding of the parties that both damages
and Injunction shall be proper modes of relief and are not to be considered
alternative remedies.
11.6 BLUE PENCIL DOCTRINE. In the event that any of the restrictive
covenants contained in this Article shall be found by a court of competent
jurisdiction to be unreasonable by reason of its extending for too great a
period of time or over too great a geographic area or by reason of its being too
extensive in any other respect, then such restrictive covenant shall be deemed
modified to the minimum extent necessary to make it reasonable and enforceable
under the circumstances.
11.7 GUARANTEES. In furtherance of the provisions of Section 5.22 hereof,
the Shareholder shall (i) have a continuing obligation after the Closing to
terminate, extinguish or otherwise remove any and all of the guarantees
described in Section 5.22 hereof, and (ii) defend and indemnify the Purchaser
with respect to such guarantees in accordance with Article 9 of this Agreement,
including Section 9.1.
11.8 EMPLOYEE MATTERS.
(a) EMPLOYMENT. Each Employee who is employed by the Company or either
Subsidiary on the Closing Date shall continue to be employed by the Company
or the Subsidiary, as applicable, on and after the Closing Date at
substantially the same base wage or salary as in effect immediately prior to
the Closing Date. Such continued employment shall be employment at-will, and
nothing in this Section 11.8 is intended to create, or shall create or
confer, any right of employment after the Closing Date for any Employee.
(b) BENEFIT PLANS. Prior to the Closing Date, the Company shall have
(i) with respect to the Benefit Plans sponsored by the Company as set forth
in SCHEDULE 3.10(a)(1), (2), (3), (4) AND (11) THROUGH (23) (the "COMPANY
PLANS"), terminated the participation in any such Company Plan of any
individual who is not an employee of the Company, (ii) with respect to the
Company Plan set forth in SCHEDULE 3.10(a)(4), timely amended such Company
Plan to lower the health care spending account maximum annual election for
the 2004 plan year to $3,600, and (iii) with respect to the Company Plan set
forth in SCHEDULE 3.10(a)(13), prepared and made any necessary 5500 filings
and, to the extent necessary, entered into the Department of Labor
Delinquent Filers Voluntary Compliance Program to assure plan compliance.
The Purchaser shall, in its sole discretion, decide (i) whether benefits for
the Employees shall be provided under benefit plans designated by the
Purchaser which are maintained by the Purchaser and its Affiliates for their
employees (each a "PURCHASER PLAN") or (ii) whether such benefits shall
continue to be provided under one or more of the Company Plans. The
Shareholder shall cause the Company and the Subsidiaries to cooperate with
the Purchaser, and the Purchaser shall cooperate with the Company and the
Subsidiaries, in making arrangements to terminate on the Closing Date those
Company Plans designated by the Purchaser and any contracts with respect to
the provision of benefits under such Company Plans, in accordance with the
terms of such Company Plans and contracts. Notwithstanding the foregoing, in
the event that arrangements cannot be made to ensure that termination of a
Company Plan (which is to be replaced in whole or in part by a
54
corresponding Purchaser Plan) cannot occur without a period of non-coverage
or interruption in coverage, then arrangements for the termination of such
Company Plan shall not occur until it is ensured that there will be no
period of non-coverage or interruption of coverage in the transition from
the applicable Company Plan to the corresponding Purchaser Plan. The
Purchaser shall waive any waiting periods for coverage under a Purchaser
Plan which replaces a Company Plan for Employees covered under such replaced
Company Plan. The Purchaser shall credit the Employees with any amounts
credited under the Company's medical plan toward an out-of-pocket maximum
with respect to satisfaction of an out-of-pocket maximum under Purchaser's
medical plan. The Purchaser shall also cause the Company and the
Subsidiaries to continue to recognize and honor each Employee's accrued but
unused vacation days as of the Closing Date and in the event of an
Employee's termination of employment, to provide for payment of any such
accrued vacation days which remain unused and to which the Employee remains
entitled upon termination of employment.
(c) ROLLOVER OF ACCOUNTS. With respect to the Benefit Plan set forth
in SCHEDULE 3.10(a)(5) (i) the Company shall, and/or shall cause its
Affiliate: (A) to submit to the IRS, prior to the end of the remedial
amendment period, an application for a determination letter with respect to
such Benefit Plan as adopted effective January 1, 1997 and as amended
thereafter and (B) to take such action, prior to the Closing Date, as may be
necessary or appropriate to terminate the Company's and the Subsidiaries'
participation in such Benefit Plan, and (ii) the Purchaser shall take such
action, prior to the Closing Date, as may be necessary or appropriate to
enable the Employees, effective immediately following the Closing Date, to
rollover account balances and outstanding plan loans under such Benefit
Plan, to a comparable pension benefit plan sponsored by the Purchaser.
(d) DISCONTINUE PARTICIPATION IN THIRD PARTY PLANS. Prior to the
Closing Date, the Company and the Subsidiaries shall, and shall cause their
Affiliates, to take such action as may be necessary or appropriate to
discontinue the Company's and the Subsidiaries' participation in the Benefit
Plans sponsored by the Shareholder or Florida Water Services Corporation as
set forth in SCHEDULE 3.10(a)(6), (7), (8), (9) AND (10) (collectively the
"THIRD PARTY PLANS"). The parties understand and agree that (i) the Company
and/or its Affiliates may amend such Third Party Plans prior to the Closing
Date as may be necessary or appropriate, in the discretion of the Company
and/or its Affiliates, to discontinue the Company's participation in such
Third Party Plans or for other reasons, (ii) the Purchaser is not assuming
any of such Third Party Plans nor the liabilities associated therewith, and
(iii) the Shareholder shall assume all liabilities under such Third Party
Plans with respect to Employees or former employees of the Company and the
Subsidiaries and shall indemnify and hold the Purchaser, the Company and the
Subsidiaries and their officers, directors, employees, Affiliates,
shareholders and agents and each of their respective successors and assigns,
harmless from, against and in respect of all such liabilities and any costs
or expenses (including without limitation, reasonable attorneys' fees) and
any and all other Losses with respect to such Third Party Plans.
(e) SERVICE CREDIT. All past service of the Employees with the Company
and/or the Subsidiaries shall be taken into account for purposes of
eligibility and vesting
55
under the benefit plans provided by the Purchaser and for purposes of
calculating vacation benefits and severance benefits under the vacation plan
and severance plan maintained by the Purchaser. Nothing in this Section
11.8(e) shall abrogate or otherwise affect any Employee's right under the
Employee severance provisions set forth in the Retention and Severance
Agreements.
(f) EMPLOYEE SEVERANCE. The Purchaser acknowledges and agrees that the
Company and each of the Subsidiaries have entered into legal, binding and
enforceable Retention and Severance Agreements with each of the Employees as
set forth in Exhibit D to this Agreement. The "SEVERANCE PAYMENT" (as
defined in EXHIBIT D) is calculated in accordance with the Employee's
employment position, term of service and is capped at a specified level, as
set forth in SCHEDULE 11.8. The Company or the applicable Subsidiary shall
be responsible for funding and payment of any and all Severance Payments,
without recourse to the Shareholder.
11.9 INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE COMPANY AND THE
SUBSIDIARIES.
(a) INDEMNIFICATION. After the Closing, the Company will, and the
Purchaser will cause the Company and each of the Subsidiaries to: (i)
indemnify, defend and hold harmless the present and former officers,
directors, employees, representatives and agents of the Company and each of
the Subsidiaries (collectively, the "DIRECTOR INDEMNIFIED PARTIES" and
individually, a "DIRECTOR INDEMNIFIED PARTY") in respect of acts or
omissions occurring on or prior to the Closing Date to the extent provided
under Applicable Law or under the organizational documents of the Company or
the Subsidiaries, in each case as in effect on the date hereof, and (ii)
advance expenses as incurred by such officers, directors, employees,
representatives and agents of the Company and/or the Subsidiaries to the
fullest extent permitted under Applicable Law or under the organizational
documents of the Company and/or the Subsidiaries, whichever is greater, in
each case as in effect on the date hereof; PROVIDED, that such
indemnification and advancement of expenses shall be subject to any
limitation imposed from time to time under Applicable Law.
(b) NO CLAIMS. Except as set forth in SCHEDULE 11.9, there are no
pending, nor, to the Knowledge of the Company, Threatened, claims as
described in Section 11.9(a) for indemnification by any Director Indemnified
Party.
(c) INSURANCE PROCEEDS. If the Company and/or the Subsidiaries provide
indemnification and/or advancement of expenses as provided for in Section
11.9(a) above, the Company and/or the Subsidiaries shall be entitled to all
of the proceeds of any insurance providing coverage under any policies
maintained by the Parent, the Shareholder, the Company, the Subsidiaries, or
any of their Affiliates for such acts or omissions prior to the Closing
Date.
(d) THIRD PARTY BENEFICIARIES. Notwithstanding any contrary provision
set forth in this Agreement or any Ancillary Document, the provisions of
this Section 11.9
56
are intended for the benefit of, and shall be directly enforceable by, each
of the Director Indemnified Parties, their heirs and personal
representatives.
ARTICLE 12
TERMINATION
12.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated herein may be abandoned after the date of this Agreement, but not
later than the Closing:
(a) by mutual written consent of all parties hereto;
(b) by the Purchaser or the Shareholder if (i) any of the conditions
provided for in Article 6 of this Agreement have not been met and have not
been waived in writing by the party seeking to terminate on or before the
Closing Date, and (ii) any party seeking to terminate this Agreement was not
the cause of the failure of the condition to be satisfied;
(c) by the Purchaser if (i) any of the conditions provided for in
Article 7 of this Agreement have not been met and have not been waived in
writing by the Purchaser on or before the Closing Date, and (ii) the
Purchaser was not the cause of the failure of the condition to be satisfied;
(d) by the Shareholder if (i) any of the conditions provided for in
Article 8 of this Agreement have not been met and have not been waived in
writing by the Shareholder on or before the Closing Date, and (ii) the
Shareholder was not the cause of the failure of the condition to be
satisfied;
(e) by either the Purchaser or the Shareholder if the Closing shall not
have occurred on or before September 30, 2004; and
(f) by a party who objects to a Supplement and meets the criteria for
the exercise of a termination right under and pursuant to Section 13.21.
In the event of termination or abandonment by any party as provided in this
Section 12.1, written notice shall forthwith be given to the other party and,
except as otherwise provided herein, each party shall pay its own expenses
incident to preparation or consummation of this Agreement and the transactions
contemplated hereunder and neither party shall have any Liability to the other
hereunder except such Liability as may arise as a result of a breach hereof.
12.2 RETURN OF DOCUMENTS AND NONDISCLOSURE. If this Agreement is terminated
for any reason pursuant to Section 12.1 hereto, each party and its counsel shall
return all documents and materials which shall have been furnished by or on
behalf of the other party, and all copies thereof, and each party hereby
covenants that it will not Use or Disclose to any Person any Confidential
Information about the other party or any information about the transactions
contemplated hereby, except insofar as may be necessary to comply with the
requirements of any Governmental Body or Order or to assert its rights
hereunder.
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ARTICLE 13
MISCELLANEOUS
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, COVENANTS AND AGREEMENTS.
Each of the (i) representations and warranties of the parties contained in this
Agreement and in any Ancillary Documents delivered by or on behalf of any of the
parties hereto pursuant to this Agreement and the transactions contemplated
hereby, and (ii) indemnification covenants set forth in Sections 9.1 and 9.2
hereof, shall survive the Closing of the transactions contemplated hereby and
any investigation made by the parties or their agents for a period of eighteen
(18) months after the Closing, after which no claim for indemnification for any
breach of any representation or warranty under this Agreement or covenants to
indemnify under Sections 9.1 and 9.2 hereof (i) may be brought, (ii) no action
with respect thereto may be commenced, and (iii) no party shall have any
Liability or obligation with respect thereto, unless (i) the Indemnified Party
gave written notice to the Indemnifying Party specifying with particularity the
breach of representation or warranty or indemnification covenants set forth in
either of Sections 9.1 or 9.2 claimed on or before the expiration of such
eighteen (18) month period, (ii) the claim relates to a breach of any
representations or warranties contained in Sections 3.9, 3.10, 3.11 or 3.25, in
which case the right to indemnification shall survive until the expiration of
the applicable statute of limitations, or (iii) the claim relates to any
representation or warranty in Sections 3.2 or 3.35, in which case the
representation or warranty shall indefinitely survive the Closing. The covenants
and agreements arising from, incident to or in connection with this Agreement,
other than the indemnification covenants set forth in Section 9.1 and 9.2 hereof
shall survive the Closing indefinitely, until such covenants and agreements are
fully satisfied and require no performance or forbearance, or the rights of a
party hereto expire on a specific date by the terms hereof.
13.2 PRESERVATION OF AND ACCESS TO RECORDS. The Purchaser shall preserve or
cause the Company and the Subsidiaries to preserve all books and records of the
Company and the Subsidiaries for a period of six (6) years after the Closing
Date, or any later date of retention required by Applicable Law; PROVIDED,
HOWEVER, the Purchaser may destroy any part or parts of such records upon
obtaining written consent of the Shareholder for such destruction, which consent
may be withheld in the Shareholder's absolute discretion. Such records shall be
made available to the Shareholder and its representatives at all reasonable
times during normal business hours of the Company and/or the Subsidiaries, as
applicable, during said six-year period with the right at the Shareholder's
expense to make abstracts from and copies thereof.
13.3 COOPERATION. The parties hereto shall cooperate with each other in all
respects, including using commercially reasonable efforts to assist each other
in satisfying the conditions precedent to their respective obligations under
this Agreement, to the end that the transactions contemplated hereby will be
consummated.
13.4 PUBLIC ANNOUNCEMENTS. The timing and content of all public
announcements relating to the execution of this Agreement and the consummation
of the transactions contemplated hereby shall be approved by both the Purchaser
and the Shareholder prior to the release of such public announcements, and each
party agrees to cooperate with the other party as appropriate to comply with all
Applicable Laws.
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13.5 NOTICES. All notices, demands and other communications provided for
hereunder shall be in writing and shall be given (i) by personal delivery, (ii)
via facsimile transmission (receipt telephonically confirmed), (iii) by
nationally recognized overnight courier (prepaid), or (iv) by certified or
registered first class mail, postage prepaid, return receipt requested, sent to
each party, at its and its representative's address as set forth below or at
such other address or in such other manner as may be designated by such party or
the respective representative in a written notice to each of the other parties.
All such notices, demands and communications shall be effective (i) when
personally delivered, (ii) one (1) business day after delivery to the overnight
courier, (iii) upon telephone confirmation of facsimile transmission, or (iv)
upon receipt after dispatch by mail to the party to whom the same is so given or
made:
If to the Purchaser: Philadelphia Suburban Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chairman, President and Chief
Executive Officer
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
3400 Two ▇▇▇▇▇ Square
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
If to the Shareholder: ALLETE Water Services, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
With a copy to: ▇▇▇▇▇▇ and ▇▇▇▇▇▇, Professional Association
2400 IDS Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
13.6 ENTIRE AGREEMENT. Except for any confidentiality agreement executed by
a party hereto (which shall, by the terms hereof, expire upon the Closing), this
Agreement, including the Ancillary Documents to be executed by the parties
pursuant hereto, contains the entire agreement of the parties hereto and
supersedes all prior or contemporaneous agreements and understandings, oral or
written, between the parties hereto with respect to the subject matter hereof.
13.7 REMEDIES. The respective indemnification obligations of the parties set
forth in Article 9 of this Agreement are the exclusive remedies of the parties
and their successors, assigns or others seeking to claim by, through, or on
behalf of a party, under this Agreement, and no
59
other remedy or remedies, whether arising under any Applicable Law, common law
or otherwise, may be used, asserted or prosecuted in connection with this
Agreement and any transaction, occurrence, or omission arising from, in
connection with or otherwise based upon this Agreement; PROVIDED, HOWEVER, that
all equitable remedies shall remain available other than rescission, which shall
not be an available remedy of either party hereto, or their respective
successors and assigns, under or pursuant to this Agreement. This Section 13.7
shall not be applicable in the specific instances in which a party hereto has
committed fraud.
13.8 AMENDMENTS. No purported amendment, modification or waiver of any
provision of this Agreement or any of the documents, instruments or agreements
to be executed by the parties pursuant hereto shall be effective unless in a
writing specifically referring to this Agreement and signed by all of the
parties hereto.
13.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns, but except as hereinafter
provided in this Section, nothing in this Agreement is to be construed as an
authorization or right of any party to assign its rights or delegate its duties
under this Agreement without the prior written consent of the other parties
hereto. In its sole discretion the Purchaser may assign its rights in and/or
delegate its duties under this Agreement to an Affiliate of the Purchaser. In
the event of such an assignment of rights and/or delegation of duties, all
references to the Purchaser or the Shareholder, as applicable to the assignment
in this Agreement shall also be deemed to be references to the Person to which
this Agreement is assigned; provided that no such assignment and/or delegation
shall relieve the assignor of any of its duties or obligations hereunder.
13.10 FEES AND EXPENSES. Each party hereto shall pay their own fees and
expenses incurred in connection with negotiating and preparing this Agreement
and consummating the transactions contemplated hereby, including but not limited
to fees and disbursements of their respective attorneys, accountants and
investment bankers. If the transaction is consummated, all fees and expenses,
including legal, accounting, investment banking, broker's and finder's fees and
expenses incurred by the Shareholder in connection with this transaction (the
"TRANSACTIONAL EXPENSES") shall be deemed expenses of the Shareholder and shall
be borne by the Shareholder.
13.11 GOVERNING LAW AND JURISDICTION. This Agreement, including the
Ancillary Documents to be executed and/or delivered by the parties pursuant
hereto, shall be construed, governed by and enforced in accordance with the
internal laws of the State of North Carolina, without giving effect to the
principles of comity or conflicts of laws thereof. The Shareholder and the
Purchaser agree and consent that any legal action, suit or Proceeding seeking to
enforce any provision of this Agreement with the exception of Section 9.4 (which
is governed by Section 9.4(c)) shall be instituted and adjudicated solely and
exclusively in any court of general jurisdiction in North Carolina, or in the
United States District Court having jurisdiction in North Carolina and the
Shareholder and the Purchaser agree that venue will be proper in such courts and
waive any objection which they may have now or hereafter to the venue of any
such suit, action or Proceeding in such courts, and each hereby irrevocably
consents and agrees to the jurisdiction of said courts in any such suit, action
or Proceeding. The Shareholder and the Purchaser further agree to accept and
acknowledge service of any and all process which may be
60
served in any such suit, action or Proceeding in said courts, and also agree
that service of process or notice upon them shall be deemed in every respect
effective service of process or notice upon them, in any suit, action,
Proceeding, if given or made (i) according to Applicable Law, (ii) by a Person
over the age of 18 who personally served such notice or service of process on
the Shareholder or the Purchaser, as the case may be, or (iii) by certified
mail, return receipt requested, mailed to the Shareholder or the Purchaser, as
the case may be, at their respective addresses set forth in this Agreement.
13.12 COUNTERPARTS AND FACSIMILE SIGNATURE. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same Agreement. The counterparts
of this Agreement and all Ancillary Documents may be executed and delivered by
facsimile signature by any of the parties to any other party and the receiving
party may rely on the receipt of such document so executed and delivered by
facsimile as if the original had been received.
13.13 HEADINGS. The headings of the articles, sections and subsections of
this Agreement are intended for the convenience of the parties only and shall in
no way be held to explain, modify, construe, limit, amplify or aid in the
interpretation of the provisions hereof. The terms "this Agreement," "hereof,"
"herein," "hereunder," "hereto" and similar expressions refer to this Agreement
as a whole and not to any particular article, section, subsection or other
portion hereof and include the Schedules and Exhibits hereto and any document,
instrument or agreement executed and/or delivered by the parties pursuant
hereto.
13.14 SCOPE OF AGREEMENT. Unless the context otherwise requires, all
references in this Agreement or in any Schedule or Exhibit hereto, to the
assets, properties, operations, business, financial statements, employees, books
and records, accounts receivable, accounts payable, Contracts or other
attributes of the Business shall mean such items or attributes as they are used
in, apply to, or relate to the Business.
13.15 NUMBER AND GENDER. Unless the context otherwise requires, words
importing the singular number shall include the plural and vice versa and words
importing the use of any gender shall include all genders.
13.16 SEVERABILITY. In the event that any provision of this Agreement is
declared or held by any court of competent jurisdiction to be invalid or
unenforceable, such provision shall be severable from, and such invalidity or
unenforceability shall not be construed to have any effect on, the remaining
provisions of this Agreement, unless such invalid or unenforceable provision
goes to the essence of this Agreement, in which case the entire Agreement may be
declared invalid and not binding upon any of the parties.
13.17 PARTIES IN INTEREST. Except for the third party beneficiaries
specifically identified as a class in Section 11.9 hereof, nothing implied in
this Agreement is intended or shall be construed to confer any rights or
remedies under or by reason of this Agreement upon any Person other than the
Purchaser and the Shareholder and their respective representatives, successors
and permitted assigns. Nothing in this Agreement is intended to relieve or
discharge the Liabilities of any third Person to the Purchaser or the
Shareholder.
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13.18 WAIVER. The terms, conditions, warranties, representations and
indemnities contained in this Agreement, including the documents, instruments
and agreements executed and delivered by the parties pursuant hereto, may be
waived only by a written instrument executed by the party waiving compliance.
Any such waiver shall only be effective in the specific instance and for the
specific purpose for which it was given and shall not be deemed a waiver of any
other provision hereof or of the same breach or default upon any recurrence
thereof. No failure on the part of a party hereto to exercise and no delay in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
13.19 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 the authorship of any of the
provisions of this Agreement. The words "including," "include" or "includes"
shall mean including without limitation. The parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
13.20 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to injunctive relief to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
13.21 SUPPLEMENTATION OF SCHEDULES. The Shareholder or the Purchaser may
elect to deliver a supplement ("SUPPLEMENT") to one or more of the Schedules
previously delivered to the other in accordance with the procedures set forth in
this Section 13.21 as follows:
(a) Prior to the Closing Date, any and all Supplements must be in
writing and must be delivered to the other party as soon as practicable, but
in no event later than the date that is five (5) business days prior to the
scheduled Closing Date. The other party shall be given the opportunity
during the five (5) business days following the delivery of the proposed
Supplement to consider that Supplement. If the recipient does not object to
the contents of the Supplement within such period, the Schedule in question
shall be deemed amended as of the date of this Agreement by the Supplement.
If the recipient objects to a proposed Supplement, the sole remedy of such
objecting party shall be termination of this Agreement in accordance Section
12.1(f) of this Agreement, PROVIDED, HOWEVER, such termination right shall
only be available if the matter(s) disclosed in the Supplement could
reasonably be determined to have a Material Adverse Effect (and, if the
foregoing prevents a termination due to the determination that the matter(s)
disclosed in the Supplement could not reasonably be determined to have a
Material Adverse Effect,
62
the Schedule in question shall be deemed amended, as described above); and
PROVIDED, FURTHER, the right to provide the Supplement shall only be
available if (i) the Supplement was prepared in connection with or was made
necessary by a change in circumstance of which the party proposing the
Supplement was unaware from the date of this Agreement to the date of the
proposed Supplement, or (ii) the omission from the original Schedule(s) was
ministerial in nature and the Supplement is not material to the Company and
the Subsidiaries taken as a whole; and
(b) Any and all Supplements delivered within five (5) business days
prior to the scheduled Closing Date must be in writing and delivered to the
other party pursuant to Section 13.5 of this Agreement, and will only be
deemed to amend a Schedule with the written consent of the recipient of the
Supplement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by duly authorized representatives as of the day, month and year first
above written.
SHAREHOLDER: PURCHASER:
ALLETE WATER SERVICES, INC. PHILADELPHIA SUBURBAN
CORPORATION
By By
--------------------------------- ---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Financial Officer Its Chairman, President and
Chief Executive Officer
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
64