SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-493
CONSUMERS WATER COMPANY
(Exact name of registrant as specified in its Charter)
Maine 01-0049450
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
Three Canal Plaza, Portland, ME 04101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (207) 773-6438
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
The number of common shares of Consumers Water Company outstanding as of
October 31, 1997 was 8,920,399.
Consumers Water Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
PART I ITEM I
-------------
September 30, December 31,
1997 1996
------------------------
ASSETS (Unaudited)
- ------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Plant in service $491,317 $476,067
Less - Accumulated depreciation 90,422 83,833
------------------------
400,895 392,234
Construction work in progress 10,631 12,567
------------------------
Net property, plant and equipment 411,526 404,801
------------------------
Assets of Discontinued Operations, Net 3,865 5,213
------------------------
Investments, at cost 1,626 1,706
------------------------
CURRENT ASSETS:
Cash and cash equivalents 2,534 1,775
Accounts receivable, net of reserves of
$930 in 1997 and $982 in 1996 9,482 8,971
Unbilled revenue 5,186 5,015
Inventories 2,194 2,054
Prepayments and other 2,292 6,848
------------------------
Total current assets 21,688 24,663
------------------------
OTHER ASSETS:
Funds restricted for construction activity 1,124 2,380
Deferred charges and other assets 16,025 17,219
------------------------
17,149 19,599
------------------------
$455,854 $455,982
========================
SHAREHOLDERS' INVESTMENT AND LIABILITIES
- ----------------------------------------
CAPITALIZATION:
Common Stock, $1 par value
Authorized: 15,000,000 shares
Issued: 8,916,933 shares in 1997 and
8,732,202 in 1996 $8,917 $8,732
Amounts in excess of par value 78,656 75,686
Reinvested Earnings 20,922 21,597
------------------------
108,495 106,015
Preferred shareholders' investment 1,044 1,054
Minority interest 2,369 2,352
Long-term debt 173,196 172,917
------------------------
Total capitalization 285,104 282,338
------------------------
Contributions in Aid of Construction 75,418 73,208
------------------------
CURRENT LIABILITIES:
Notes payable 18,005 17,354
Sinking fund requirements and current
maturities 637 645
Accounts payable 1,777 5,871
Accrued taxes 5,157 8,103
Accrued interest 4,127 3,873
Dividends payable 2,729 2,629
Accrued expenses 10,545 10,395
------------------------
Total current liabilities 42,977 48,870
------------------------
COMMITMENTS AND CONTINGENCIES
- -----------------------------
DEFERRED CREDITS:
Customers' advances for construction 22,431 22,378
Deferred income taxes 25,351 24,506
Unamortized investment tax credits 4,573 4,682
-----------------------
52,355 51,566
-----------------------
$455,854 $455,982
=======================
Book Value Per Share of Common Stock $12.17 $12.14
=======================
The accompanying notes are an integral part of these consolidated financial
statements.
Consumers Water Company and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
For the three months ended September 30,
1997 1996
-------------------------
Operating Revenue $27,226 $25,423
COSTS AND EXPENSES:
Operations and maintenance 10,889 10,559
Depreciation 2,846 2,612
Taxes other than income 3,164 2,935
-------------------------
Operating Expenses 16,899 16,106
-------------------------
Operating Income 10,327 9,317
-------------------------
OTHER INCOME AND (EXPENSE):
Interest expense (3,845) (3,783)
Construction interest capitalized 63 237
Preferred dividends and minority
interest of subsidiaries (51) (47)
Gains on sales of properties 571 0
Other 296 227
-------------------------
(2,966) (3,366)
-------------------------
Earnings From Continuing Operations:
Before Income Taxes 7,361 5,951
Income Taxes 2,618 2,091
-------------------------
Total from Continuing Operations 4,743 3,860
-------------------------
LOSS FROM DISCONTINUED OPERATIONS:
Before Discontinuance, net of tax 0 (201)
Provision for Loss on Disposal of
Discontinued Operations, net of tax 0 0
-------------------------
Total from Discontinued Operations 0 (201)
-------------------------
Net Income $4,743 $3,659
=========================
Weighted Average Shares Outstanding 8,888 8,654
EARNINGS PER COMMON SHARE:
Continuing Operations - Total $0.53 $0.44
-------------------------
Discontinued Operations -
Before Discontinuance $0.00 ($0.02)
Loss from Disposal of Discontinued
Operations $0.00 $0.00
-------------------------
Total $0.00 ($0.02)
-------------------------
Total $0.53 $0.42
=========================
Dividends Declared Per Common Share $0.305 $0.30
=========================
The accompanying notes are an integral part of these consolidated financial
statements.
Consumers Water Company and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
For the nine months ended September 30,
1997 1996
------------------------
Operating Revenue $74,375 $70,398
COSTS AND EXPENSES:
Operations and maintenance 32,076 31,743
Depreciation 8,525 7,582
Taxes other than income 9,461 8,905
------------------------
Operating Expenses 50,062 48,230
------------------------
Operating Income 24,313 22,168
------------------------
OTHER INCOME AND (EXPENSE):
Interest expense (11,409) (10,916)
Construction interest capitalized 254 632
Preferred dividends and minority interest
of subsidiaries (121) (107)
Gains (losses) on sales of properties 587 (498)
Other 809 512
-----------------------
(9,880) (10,377)
-----------------------
Earnings From Continuing Operations:
Before Income Taxes 14,433 11,791
Income Taxes 5,170 4,197
-----------------------
Total from Continuing Operations 9,263 7,594
-----------------------
LOSS FROM DISCONTINUED OPERATIONS:
Before Discontinuance, net of tax (387) (471)
Provision for Loss on Disposal of
Discontinued Operations, net of tax (1,500) 0
----------------------
Total from Discontinued Operations (1,887) (471)
-----------------------
Net Income $7,376 $7,123
=======================
Weighted Average Shares Outstanding 8,830 8,600
EARNINGS PER COMMON SHARE:
Continuing Operations - Total $1.04 $0.88
------------------------
Discontinued Operations -
Before Discontinuance ($0.04) ($0.06)
Loss from Disposal of Discontinued Operations ($0.17) $0.00
----------------------
Total ($0.21) ($0.06)
----------------------
Total $0.83 $0.82
======================
Dividends Declared Per Common Share $0.905 $0.90
========================
The accompanying notes are an integral part of these consolidated financial
statements.
Consumers Water Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
For the nine months ended September 30,
1997 1996
------------------------
OPERATING ACTIVITIES:
Net income $7,376 $7,123
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 10,031 8,731
Deferred income taxes and investment tax credits 740 1,342
(Gains)losses on sales of properties (587) 499
Changes in assets and liabilities:
Increase in accounts receivable and
unbilled revenue (682) (1,177)
Increase in inventories (140) (72)
Decrease in prepaid expenses 4,556 3,412
Decrease in accounts payable and accrued expenses (3,866) (4,348)
Change in other assets, net of change in
other liabilities of continuing operations (274) (1,082)
Change in assets, net of change in liabilities
of discontinued operations (152) (261)
Loss on disposal of discontinued operations 1,500 -
------------------------
Total adjustments 11,126 7,044
------------------------
Net cash provided by operating activities 18,502 14,167
------------------------
INVESTING ACTIVITIES:
Capital expenditures (16,170) (21,588)
Payment received on a note receivable - 1,330
(Increase) decrease in funds restricted for
construction activity 1,256 (11)
Decrease in construction accounts payable (2,245) (1,551)
Net cash cost of acquisitions - (595)
Proceeds from sales of properties 73 144
-----------------------
Net cash used in investing activities (17,086) (22,271)
------------------------
FINANCING ACTIVITIES:
Net borrowings of short-term debt 651 9,565
Proceeds from issuance of long-term debt 1,059 -
Repayment of long-term debt (788) (780)
Proceeds from issuance of stock 3,145 3,270
Advances and contributions in aid of
construction 4,108 4,915
Repayments of advances (877) (1,082)
Deferred taxes paid by developers on advances and
contributions in aid of construction (4) (309)
Cash dividends paid (7,951) (7,776)
------------------------
Net cash provided by financing activities (657) 7,803
------------------------
Net increase (decrease) in cash and cash equivalents 759 (301)
Cash and cash equivalents at beginning of year 1,775 2,417
------------------------
Cash and cash equivalents at end of period $2,534 $2,116
========================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
FROM CONTINUING OPERATIONS:
Cash paid during the period for:
Interest (net of amounts capitalized) $10,677 $10,360
Income taxes $2,170 $2,084
NON-CASH INVESTING AND FINANCING ACTIVITIES
FOR THE PERIOD:
Property advanced or contributed $968 $870
The accompanying notes are an integral part of these consolidated financial
statements.
CONSUMERS WATER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
PART I ITEM 1
A. PREPARATION OF FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by the
registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the registrant believes that
the disclosures which are made are adequate to make the information presented
not misleading, particularly when read in conjunction with the financial
statements and notes thereto included in the registrants' latest annual
report on Form 10-K. In management's opinion, the attached interim financial
statements reflect all adjustments which are necessary for a fair statement
of the results for the periods presented. All adjustments made were of a
normal and recurring nature except for the discontinued operations described
below.
B. EARNINGS PER SHARE
Earnings per common share are based on the weighted average number of shares
and common share equivalents actually outstanding during the period. The
effect of employee stock options which are included as common share
equivalents is not material.
C. GAINS AND LOSSES
Income from continuing operations includes gains (losses) net of taxes as
follows:
Three Months Nine Months
1997 1996 1997 1996
Miscellaneous Land Sales - - 10,000 85,000
Reversal of Illinois Gain 354,000 - 354,000 <394,000>
--------------------------------------------
354,000 - 364,000 <309,000>
============================================
Per Share .04 - .04 <.04>
Miscellaneous land sales include small tracts of land sold in Ohio and
Pennsylvania.
In 1994, Consumers Illinois Water Company (Consumers Illinois) recorded a
gain, net of taxes of $394,000 from the sale of nine acres of land. In 1996,
as part of a rate hearing, the Illinois Commerce Commission ordered Consumers
Illinois to return the gain from this sale to customers through reduced
rates. Therefore, the gain was reversed in the second quarter of 1996.
Consumers Illinois challenged this decision in court. On July 8, 1997, the
Appellate Court for the Third District of Illinois reversed the Illinois
Commerce Commission's decision to treat the gain from the sale of land as an
adjustment to water operating revenue. Therefore Consumers Illinois recorded
a gain in the third quarter of 1997.
D. DISCONTINUED OPERATIONS
On April 29, 1997, the Company announced its intention to dispose of its
technical services company, Consumers Applied Technologies, Inc (CAT). To
date the Company has been unsuccessful in selling CAT as an on-going business
and is proceeding with its liquidation. Estimated losses on the disposal
equal $1.5 million, net of tax benefits of $543,000. This disposal is
expected to be completed in 1998. The operating results of CAT prior to the
date of discontinuance are shown under Discontinued Operations on the
accompanying consolidated statements of income and all financial statements
of prior periods have been restated. Total sales for the discontinued
operations for the first nine months of 1997 and 1996 were $4,039,000 and
$10,688,000, respectively. Net assets of the discontinued operations
approximate realizable value. A summary of the net assets of discontinued
operations follows:
September 30, December 31,
1997 1996
------------ -----------
Cash $364,000 $439,000
Receivables, net 2,991,000 5,125,000
Inventory - 402,000
Income taxes receivable 1,785,000 2,032,000
Other current assets - 371,000
Property, plant and equipment - 480,000
--------- ----------
Total assets $5,140,000 $8,849,000
--------- ----------
Note payable $ - $1,200,000
Accounts payable 4,000 554,000
Accrued expenses 1,271,000 1,788,000
Other - 94,000
--------- ----------
Total liabilities $1,275,000 $3,636,000
--------- ----------
Net assets of
discontinued operations $3,865,000 $5,213,000
========= ==========
E. RECLASSIFICATIONS
Certain amounts for 1996 have been reclassified to conform with the 1997
presentation.
PART I ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF
OPERATIONS
The following discussion and analysis sets forth certain factors relative to
the Company's financial condition at September 30, 1997 and the results of
its operations for the nine months and the three months then ended as
compared to the same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
CONSTRUCTION PROGRAM
Capital construction expenditures totaled $12.9 million, net of contributions
and advances in the first nine months of 1997, substantially all of which
relates to the Company's utility subsidiaries.Projects included $1.3 million
spent on system improvements to a newly acquired system in Maine, which are
substantially complete at a cost of $3.0 million; and many smaller projects
around the Company.
The Company expects capital expenditures for 1997 through 1999 to be $89
million, net of contributions and advances. The capital construction budget
is down from its peak of $103 million for the 1995-1997 planning period as a
result of the completion of many of the improvements required by the Safe
Drinking Water Act (SDWA), the Clean Water Act, and other regulations. With
the reduced capital spending due to regulatory requirements, the Company has
increased its focus on replacing aging infrastructure.
The Company is engaged in a project that will replace a major plant at
Consumers Pennsylvania Water Company - Shenango Valley Division. The cost of
this project is estimated at $32 million when it is completed in 2000. This
will replace one of the Company's oldest water treatment plants. Current and
future quality regulations along with future demand projections require that
the existing plant be retired and replaced with a new facility. The design is
substantially complete and construction is expected to commence by the end of
1997. The Company expects to finance this project with tax exempt debt and
equity.
Several of the Company's water utility subsidiaries have filed or plan to file
rate cases in their respective jurisdictions for recovery of and return on
capital used to fund their capital expenditure programs. Costs which have
been prudently incurred in the judgment of the appropriate public utility
commission have been, and are expected to continue to be, recognized in rate
setting. Given the large rate increases in recent years, Management expects
the current increased scrutiny of rate requests by state public utility
commissions, and delays in obtaining rate relief to continue, even with
decreasing capital construction budgets.
FINANCING AND CAPITALIZATION
Water utilities now require higher equity ratios than in the past to maintain
favorable debt ratings due to the recognition by Standard & Poor's rating
system of the additional risk of the SDWA requirements and the uncertainty of
future regulatory treatment of the cost of these requirements. This, coupled
with the size of the Company's capital expenditure program, makes it likely
that the Company will return to the equity market again in the next few years.
The Company anticipates continuing to fund its immediate cash flow needs with
short-term lines of credit until a subsidiary's short-term debt level is high
enough to warrant placement of long-term debt, generally, in the $4-6 million
range. The Company's subsidiaries had unused lines of credit available at
September 30, 1997 of $66 million. In addition, the Company has three
revolving credit agreements totaling $35 million, including one for $10
million obtained in March, 1997. These agreements are committed until mid-
1999. At September 30, 1997, $18.1 million was outstanding on these
agreements, which is recorded as long-term debt on the balance sheet. These
borrowings were used primarily to provide equity infusions to the
subsidiaries. In addition, the Company is using funds generated through its
Dividend Reinvestment Plan. The Dividend Reinvestment Plan generated $2.7
million in new equity in the first nine months of 1997. In addition to the
short-term debt, the Company's water utility subsidiaries plan to continue to
use tax-exempt, long-term debt financing in appropriate situations. Retained
earnings declined by $675,000 in the first nine months of 1997 as a result of
dividends in excess of earnings.
DISCONTINUED OPERATIONS
On April 29, 1997, the Company announced its intention to dispose of its
technical services company, Consumers Applied Technologies, Inc (CAT). To
date the Company has been unsuccessful in selling CAT as an on-going business
and is proceeding with its liquidation. Estimated losses on the disposal
equal $1.5 million, net of tax benefits of $543,000. The operating results of
CAT prior to the date of discontinuance are shown under Discontinued
Operations on the accompanying consolidated statements of income and all
financial statements of prior periods have been restated.
ACQUISITIONS AND DISPOSITIONS
Over the past five years, the Company has acquired nine water systems.
Management anticipates continuing the acquisition policy of recent years.
The Company has sold five divisions with customers totaling approximately
15,000 under the threat of eminent domain since 1991. The gain on these sales
totaled over $7 million. In 1996, the Town of Hudson, New Hampshire,
initiated condemnation proceedings to acquire the distribution system assets
of Consumers New Hampshire Water Company (Consumers New Hampshire), located in
Hudson. In order to settle the condemnation proceeding, the Company has agreed
to a $34.5 million sales price for all the assets of Consumers New Hampshire.
This represents about 8% of the Company's total assets. A purchase and sale
agreement was signed by the Town and Consumers New Hampshire on October 24,
1997. The sale was approved by the New Hampshire Public Utilities Commission
on October 24, 1997 and is contingent upon the Town of Hudson getting voter
approval for the acquisition and for financing in the form of a general
obligation bond issue. The sale, if approved, is expected to close during the
first half of 1998. The Company continues to work with the local communities
in its other service areas in an effort to prevent future eminent domain
proceedings.
OTHER
Income from continuing operations includes gains (losses) net of taxes as
follows:
Three Months Nine Months
1997 1996 1997 1996
Miscellaneous Land Sales - - 10,000 85,000
Return (Reversal) of
Illinois Gain 354,000 - 354,000 <394,000>
--------------------- --------------------
354,000 - 364,000 <309,000>
===================== ====================
Per Share .04 - .04 <.04>
===================== ====================
Miscellaneous land sales include small tracts of land sold in Ohio and
Pennsylvania
In 1994, Consumers Illinois Water Company (Consumers Illinois) recorded a
gain, net of taxes, of $394,000 from the sale of nine acres of land. In 1996,
as part of a rate hearing, the Illinois Commerce Commission ordered Consumers
Illinois to return the gain from this sale to customers through reduced rates.
Therefore, the gain was reversed in the second quarter of 1996. Consumers
Illinois challenged this decision in court. On July 8, 1997, the Appellate
Court for the Third District of Illinois reversed the Illinois Commerce
Commission's decision to treat the gain from the sale of land as an adjustment
to water operating revenue. Therefore, Consumers Illinois recorded a gain in
the third quarter of 1997.
In 1985, the Company's subsidiary, Consumers Maine Water Company (Consumers
Maine) started construction of a transmission main to Fish and Hobbs ponds,
which are located in Hope, Maine, to increase the available water supply of
its Camden and Rockland Division. Due to local opposition related to the
uncertainty about the environmental impact of withdrawing water from these
ponds, the project was delayed. In 1989, final legislation was passed that
imposed a moratorium on the withdrawal of water from these ponds. The Maine
Public Utilities Commission (MPUC) ordered Consumers Maine to defer the costs
of the project, the legal costs of defending its water rights and carrying
costs until its first rate case after June 1, 1997. Consumers Maine currently
has approximately $600,000 on its balance sheet related to this project and
expects to file a rate case with the MPUC in 1998 seeking recovery of these
costs.
The Company has completed a review of the computer programs and systems used
in its business to determine the risk that those systems might fail due to the
so-called "millennium bug," which causes computer systems to fail or
malfunction as a result of their inability to distinguish dates after December
31, 1999 using a two digit entry field. As a result of this review, the
Company will replace its current financial systems package and upgrade its
customer service system and certain other computer programs. The Company
believes that its plan will result in the risk of failure in its computer
systems being minimal and that the expected efficiency gains will partially
offset the cost of the new systems.
The Company recently announced that it intended to form Consumers Services
Company to provide financial support services to the Company's water utilities
beginning in 1998. These services are now provided by the Company in part and
by each water utility subsidiary in part. Other support services such as
engineering and human resources may be added in the future.
RESULTS OF OPERATIONS
First Nine Months 1997, Compared to First Nine Months, 1996
OPERATING REVENUE
Revenues increased $3,977,000 or 5.6% for the nine months ended September 30,
1997 compared to the same period in 1996 due primarily to rate increases of
$2,462,000, revenues from newly acquired systems of $364,000 and increased
consumption due to a drier summer in 1997 than the wet summer in 1996 of
$1,151,000. Currently, three additional rate cases have been filed with
annual revenue requests totaling $6.9 million. In addition, two more rate
cases are expected to be filed in 1997 with annual revenue requests totaling
$709,000.
OPERATING EXPENSES
Operating expenses increased $1,832,000 or 3.8%. Depreciation increased
$943,000 due to higher plant balances and higher depreciation rates. Taxes
other than income taxes, increased $556,000 predominantly due to increases in
property taxes due to higher plant balances. Operations and maintenance
expense increased $333,000. Pension expense has decreased approximately
$450,000 due to the investment performance of the pension fund investments.
This was offset by normal expense increases.
Third Quarter, 1997 versus Third Quarter, 1996
OPERATING REVENUE
Operating revenues increased $1,803,000, or 7.1%, for the three months ended
September 30, 1997, as compared to the same period in 1996, due primarily to
$729,000 in rate increases, revenues from newly acquired systems of $117,000,
and increased consumption of $957,000 due to a drier summer in 1997 than the
wet summer in 1996.
OPERATING EXPENSES
Operating expenses increased $793,000 or 4.9% for the three months ended
September 30, 1997, as compared to the same period in 1996. Depreciation
increased $234,000 due to higher plant balances. Taxes other than income has
increased $229,000 predominantly due to increased property taxes due to higher
plant balances. Operations and maintenance expense increased $330,000.
Pension expense has decreased approximately $150,000 due to the investment
performance of the pension fund investments. This was offset by normal
expense increases.
PART II
Item 1. Legal Proceedings.
Schiavi Homes Litigation.
As noted in the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, the United States First Circuit of Appeals (the First Circuit)
affirmed the granting of Summary Judgement to the Company, its current and
former subsidiaries and its Director, John H. Schiavi, by the United States
District Court for the District of Maine with respect to a complaint filed by
the Penobscot Indian Nation. The complaint filed by the Penobscot Indian
Nation alleged, among other things, that one or all of the defendants had
defrauded the Penobscot Indian Nation by breaching their duty of good faith
and fair dealing and by making misrepresentations in connection with the
acquisition of the assets of SHC Corporation, then a subsidiary of the
Company, by a Maine limited partnership in which the Penobscot Indian Nation
held a limited partnership interest. On or about August 1, 1997, the Penobscot
Indian Nation filed a petition for certiorari with the United States Supreme
Court seeking a review of the First Circuit's affirmation of the granting of
summary judgement to the Company and the other Defendants. On October 14,
1997, the Supreme Court denied the Penobscot Indian Nation's petition.
Illinois Regulatory Appeal.
As previously reported in the Company's Form 10-Q for the quarter ending June
30, 1997, the Company's subsidiary, Consumers Illinois Water Company
(Consumers Illinois), had filed in the Appellate Court for the Third District
of Illinois (the Court) a Notice of Appeal and Petition for Review of an Order
of the Illinois Commerce Commission entered on May 8, 1996 (the Order). The
Order required the transfer of the net gain of approximately $394,000
resulting from the sale of land by Consumers Illinois from the shareholders of
Consumers Illinois to the rate payers in the Consumers Illinois Kankakee
District in the form of reduced rates over a seven year period. On July 8,
1997, the Court reversed the Illinois Commerce Commission's decision to treat
the gain from the sale of the land as an adjustment to water operating
revenue. The Court remanded the case to the Illinois Commerce Commission for
purposes of modifying water rates to reflect the elimination of the adjustment
and to allow Consumers Illinois to file for new rates consistent with the
Court's decision. The Illinois Commerce Commission decided not to appeal the
Court's decision and held a hearing on October 23, 1997 to review tariff
changes that will increase annual revenues by about $92,000. The Company
expects an appropriate order to issue from the Illinois Commerce Commission in
the near future.
Management believes that these matters will not have a significant adverse
effect on the Company's future results of operations, financial position or
cash flows.
Item 4. Submission of Matters to Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement for Purchase and Sale of assets dated October 24, 1997 by
and between Consumers New Hampshire Water Company and the Town of Hudson is
submitted herewith as Exhibit 2.1.
27. Financial Data Schedule is submitted herewith as Exhibit 27.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended September
30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSUMERS WATER COMPANY
(Registrant)
/s/ Peter L. Haynes
11/6/97 ----------------------
- ---------------------- Peter L. Haynes
Date Chief Executive Officer
/s/ John F. Isacke
11/6/97 ----------------------
- ---------------------- John F. Isacke
Date Chief Financial Officer
Exhibit Index
2.1 Agreement for Purchase and Sale of assets dated October 24, 1997 by
and between Consumers New Hampshire Water Company and the Town of Hudson is
submitted herewith as Exhibit 2.1.
27. Financial Data Schedule is submitted herewith as Exhibit 27.
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS (this "Agreement") is dated
as of October 24, 1997 by and between CONSUMERS NEW HAMPSHIRE WATER
COMPANY (hereinafter referred to as "CNHWC"), a New Hampshire corporation with
its principal office at 322 Nashua Road, Londonderry, New Hampshire 03053
("Seller"); and the TOWN OF HUDSON, New Hampshire, a municipal corporation
existing under the laws of the State of New Hampshire, with its principal
place of business at 12 School Street, Hudson, New Hampshire 03051
("Purchaser");
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
WHEREAS, Seller owns properties and assets constituting water service
territories which provide water service to residents within a number of
different municipalities in the State of New Hampshire; and
WHEREAS, Chapter 38 of Title III of the New Hampshire Statutes (the
"Eminent Domain Statute") gives the Purchaser the right to acquire the plant
and property of the Seller by condemnation or by compelling the Seller to sell
the same;
WHEREAS, the Purchaser has commenced the necessary steps under the
Eminent Domain Statute to take, or compel the sale of, the Purchaser's plant
and property.
WHEREAS, the Purchaser has indicated its intention to complete the
actions necessary under the Eminent Domain Statute to effect a taking of, or
to compel the sale of the Seller's plant and property;
WHEREAS, the Purchaser and the Seller wish to negotiate and agree upon
the price to be paid for such plant and property pursuant to the Eminent
Domain Statute, as provided for thereunder;
WHEREAS, Seller and Purchaser have engaged in extensive negotiations to
avoid the time and expense of a condemnation proceeding, which in the absence
of any agreement between the parties would otherwise follow; and
WHEREAS, Purchaser desires to purchase such properties and assets from
Seller, and Seller desires to sell the same to Purchaser, on the terms and
conditions herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereby agree as follows:
1. PURCHASE AND SALE OF BUSINESS AND ASSETS.
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1.1 Transfer of Seller's Assets. Subject to and upon the terms and
conditions set forth in this Agreement, Seller will sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser will purchase, at the Closing
hereunder (as defined herein), all of the business, assets, properties,
goodwill and rights of Seller as a going concern as of the Closing Date, of
every nature, kind and description, tangible and intangible, wheresoever
located and whether or not carried or reflected on the books and records of
Seller, related to the business (the "CNHWC Business",) now or heretofore
conducted by Seller in providing water service within the State of New
Hampshire (collectively "Seller's Assets"), including, without limitation, (i)
any real estate assets located in New Hampshire and specifically identified on
Exhibit "1.1" attached hereto (the "Real Estate Assets"), (ii) the personalty,
fixtures and other assets of Seller referred to in Schedule 5.11 attached
hereto as updated as of the Closing Date (as hereinafter defined) pursuant to
the form of a Bill of Sale in a form reasonably acceptable to the parties and
customary for transactions of this type, (iii) Seller's accounts receivable as
of the Closing Date, (iv) certain books, records and computer data in Seller's
possession relating to or arising out of the conduct of its business,
including but not limited to all plans, diagrams, blueprints, as-built plans,
specifications, inventories, capital improvement schedules and progress
reports, environmental surveys and legal notices relating to the Business (the
"Records"), (v) all rights and causes in action of Seller, whether arising by
contract or otherwise, arising out of Seller's conduct of the CNHWC Business,
(vi) all deposits and deposit accounts held by Seller which were paid to
Seller by Seller's customers and others relative to the CNHWC Business, and
(vii) such other assets of Seller not specifically referred to herein as are
necessary or appropriate for the conducting of the CNHWC Business, with only
such dispositions of such assets and write-offs of accounts as shall have
occurred in the ordinary course of Seller's business between the date hereof
and the Closing Date and which are permitted by the terms hereof. The
transfer of Seller's Assets to Purchaser shall exclude (a) Seller's cash on
hand, bank account balances and bank accounts, (b) Seller's insurance
policies, (c) the computer equipment not listed on Schedule 5.22 attached
hereto which is part of Seller's central computer system, (d) all other
business assets of Seller not specifically related to the operation of
CNHWC Business, (e) the Corporate name, minute books, corporate seal and stock
records of Seller, and (f) Seller's rights arising under or related to this
Agreement or any related agreements.
1.2 Liabilities and Encumbrances. Seller's Assets shall be
conveyed to the Purchaser free and clear of all liabilities, obligations,
liens and encumbrances excepting only those liabilities and obligations which
are expressly to be assumed by Purchaser hereunder and those liens and
encumbrances securing the same which are expressly permitted by the terms
hereof.
1.3 Accounts Payable. Seller shall retain responsibility for all
accounts payable and other bills arising prior to closing.
2. PURCHASE PRICE.
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2.1 Assets Purchase Price. In consideration of the sale, transfer,
conveyance, assignment and delivery of Seller's Assets as existing as of the
Closing Date by Seller to Purchaser, and in reliance upon the representations
and warranties made herein by Seller and the delivery of the Bill of Sale in
the form attached hereto as Exhibit "2.1", Purchaser will, in full payment
thereof, pay to Seller at the Closing a total purchase price of Thirty-Four
Million Dollars ($34,000,000.00) (the "Assets Purchase Price"). The Thirty-
Four Million Dollars ($34,000,000.00) Assets Purchase Price referenced herein
reflects the amount of monies to be paid by the Purchaser for the assets of
Seller acquired hereunder as of December 31, 1996.
2.1.1 Cash In Hand Excluded From Sale of Assets. Without
limiting the enumerated list of excluded assets in Section 1.1, the sale of
assets shall exclude Seller's cash on hand in the normal course of business,
bank account balances and bank accounts.
2.2 Additional Assets Purchase Price. To the extent that Seller
adds additional physical plant and property through either scheduled service
additions, budgeted capital outlays, repairs and maintenance or contributions
in aid to construction between January 1, 1997 and the first legally
permissible date for closing (namely, April 1, 1998), the Purchaser shall pay
to Seller the book value of these additions, but in no event shall the value
paid for these additions exceed Five Hundred Thousand Dollars ($500,000.00).
The Five Hundred Thousand Dollars ($500,000.00) cap upon post-12/31/96
property additions shall extend only to the first legally permissible date for
closing, which shall be defined as the first date upon which the Town of
Hudson can gain Town meeting ratification authorizing the consummation of the
transactions contemplated hereunder and subsequent thereto (or contemporaneous
therewith, if possible) Town meeting authorization to issue general obligation
bonds to finance the purchase. The first legally permissible date anticipates
that not only must the statutory notice and authorization provisions of RSA 38
must be met, but also the requirements of RSA 33 as applicable and the
requirements of RSA 41 [whatever the Senate Bill 2 requirements are that
Hudson has to meet]. The failure of Hudson to obtain authorization by such
time that the closing is not or cannot be held on or about the first legally
permissible date (namely, April 1, 1998)shall mean that the $500,000.00 cap on
payment for post-12/31/96 plant additions is waived and Hudson shall pay the
costs and expenses actually incurred by Seller for property, plant and
equipment on a dollar per dollar basis (exclusive, however, of assets paid for
by third parties without any obligation of Seller to reimburse).
2.3 Aggregate Purchase Price. The Assets Purchase Price and the
Additional Assets Purchase Price identified in Section 2.2 are collectively
referred to herein as the "Aggregate Purchase Price". The Aggregate Purchase
Price shall be payable by Purchaser to Seller as of the Closing by the wire
transfer of immediately available funds to bank accounts as per written
instructions of Seller given to Purchaser at least 24 hours prior to the
Closing.
2.4 Assumed Liabilities. In partial consideration for the
transfer of the Seller's Assets, Purchaser hereby agrees to assume the
obligations of Seller after the Closing Date arising under (a) the contracts
for performance of obligations arising in whole or in part (but only as to
that part arising) after the Closing Date and payments due after the Closing
Date under the Contracts for services rendered and/or work performed in whole
or in part prior to and after the Closing Date identified in Schedule 2.4; and
(b) any liabilities under Customer Advance Contracts and/or the developer
agreements identified in Schedule 2.4 attached hereto. All liabilities and
obligations to be assumed by Purchaser pursuant to this Section 2.4 are
hereinafter referred to collectively as the "Assumed Liabilities."
2.5 Liabilities Undertaking. In addition to the foregoing,
Purchaser and Seller will execute at the Closing a Liabilities Undertaking in
a form reasonably acceptable to the parties and customary for transactions of
this type relating to the contractual obligations of Seller identified on
Annex A attached thereto.
2.6 Allocation of Purchase Price Among the Purchased Assets. The
Purchase Price shall be allocated among the Seller's Assets as provided in
Schedule 2.6, which shall be delivered by Seller at closing. Seller and
Purchaser each hereby covenant and agree that the allocation of the Purchase
Price shall be reported on their respective tax returns or filings with
governmental authorities and any other similar filings, if any, as to
indicated in such Schedule.
3. CLOSING AND PRECLOSING.
----------------------
3.1 Closing. The purchase and sale and other transactions
contemplated by this Agreement shall be consummated at a Closing (the
"Closing") which shall take place at 10:00 a.m., on April 1, 1998, at the
offices of Donahue, Tucker & Ciandella, 225 Water Street, Exeter, New
Hampshire 03833, or at such other time and place as the parties may agree.
The day on which the Closing shall occur is herein sometimes referred to as
the "Closing Date". If any party is entitled not to close on the Closing Date
because a condition to the Closing set forth in Section 11 or 12 hereof has
not been met (or waived by the party or parties entitled to waive it), such
party may postpone the Closing from time to time, by giving at least five days
prior notice to the other party, until the condition has been met (which all
parties will use their best efforts to cause to happen), but in no event to a
date later than July 31, 1998.
3.2 Preclosing. On a date no later than ten business days prior to
the date on which the parties expect the Closing to occur, the parties shall
hold a preclosing relating to the transactions contemplated by this Agreement
(the "Preclosing"), at the offices of Donahue, Tucker & Ciandella, 225 Water
Street, Exeter, New Hampshire 03833, or at such other time and place as the
parties may agree. At the Preclosing, the parties shall review and agree
upon the forms of all documents to be delivered at the Closing pursuant to
Article 4 and Sections 11 and 12 of this Agreement, and shall execute a
Preclosing Agreement in a form reasonably acceptable to the parties and
customary for transactions of this type to the effect that the specific
conditions to Closing referenced therein have been satisfied or waived to the
satisfaction of the parties, and that the only conditions remaining to be
satisfied as of the Closing Date are those specifically referenced therein.
4. SELLER'S OBLIGATIONS AT CLOSING: FURTHER ASSURANCES.
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4.1 Deliveries at Closing. At the Closing, Seller will deliver to
Purchaser:
4.1.1 A Bill of Sale duly executed by Seller in a form
reasonably acceptable to the parties and customary for transactions of this
type conveying all of Seller's Assets to Purchaser (other than the Real Estate
Assets);
4.1.2 Deeds conveying all of the Real Estate Assets to
Purchaser, in each case the type of deed to be of the same type given to
Seller in connection with the conveyance of such Real Estate Assets to Seller,
in form and substance reasonably satisfactory to Purchaser, duly executed by
Seller, together with the Policy (as defined in Section 7.4.2 hereof), the
surveys contemplated by Section 7.4.2 hereof, and the affidavits contemplated
by Section 7.4.3 hereof, with real estate taxes on the Real Estate Assets to
be prorated between Purchaser and Seller through the Closing Date, and with
Seller to pay (or pro-rate) all charges for gas, electricity, telephone,
water, sewer, trash removal and street cleaning through the Closing Date (it
being understood that Seller shall have paid any delinquent real estate taxes
and assessments);
4.1.3 Such other good and sufficient instruments of conveyance,
assignment and transfer, such as Bills of Sale (including certificates of
title for all motor vehicle transfers), in form and substance satisfactory to
Purchaser's counsel, as shall be effective to vest in Purchaser good and
marketable title to Seller's Assets;
4.1.4 All contracts, files and other data and documents
pertaining to the CNHWC Business (which may be delivered at the Londonderry,
New Hampshire offices of Seller), except Seller may elect to retain originals
of any such records if true and correct copies thereof certified by the
President and Secretary of Seller are delivered to Purchaser at the Closing;
and
4.1.5 All updated Schedules, closing certificates and other
documents required to be delivered to Purchaser under the provisions of this
Agreement.
4.2 At the closing, Purchaser will deliver cash in the amount of the
Aggregate Purchase Price and will execute and deliver the liability
undertaking in a form mutually agreeable to the parties.
4.3 Further Assurances. At any time and from time to time after the
Closing, at Purchaser's request without further consideration, Seller will
execute and deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as Purchaser may reasonably
deem necessary or desirable in order to more effectively transfer, convey and
assign to Purchaser, and to confirm Purchaser's title to, all of Seller's
Assets, to put Purchaser in actual possession and operating control thereof
and to assist Purchaser in exercising all rights with respect thereto, all at
no additional cost or expense to Seller. After the Closing, at reasonable
times and on reasonable notice Seller shall have access to the books and
records pertaining to its operations of Seller which have been transferred to
Purchaser, and Purchaser shall retain such books and records for a period of
seven years after the Closing. With respect to any original records retained
by Seller pursuant to Section 4.1.4 of this Agreement, at reasonable times and
on reasonable notice Seller shall make such original records available to
Purchaser for any proper purpose after the Closing.
4.4 Collection of Accounts and Other Items. Beginning on the
Closing Date, Purchaser shall have the right and authority to collect for its
own account all Accounts which shall be transferred to Purchaser as provided
herein and to endorse with the name of Seller any checks received on account
of any such Accounts. Seller will promptly transfer and deliver to Purchaser
any cash or other property which Seller may receive after the Closing in
respect of any such Accounts or other items relative to the CNHWC Business
other than any amounts due and owing to Seller hereunder.
5. REPRESENTATIONS AND WARRANTIES BY SELLER.
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Seller represents and warrants to Purchaser, which representations and
warranties shall be true and correct as of the date hereof, as follows:
5.1 Organization, Standing and Qualification. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New Hampshire; it has all requisite corporate power and
authority and is entitled to carry on its business as now being conducted, and
to own, lease or operate its properties in connection with the CNHWC Business
as and in the places where such business is now conducted and such properties
are now owned, leased or operated. Seller has delivered to Purchaser true and
complete copies of the Seller's certificate of incorporation and all
amendments thereto, certified by the Secretary of the State of New Hampshire,
and the by-laws of Seller as presently in effect, certified as true and
correct by Seller's Secretary.
5.2 Parents and Subsidiaries. Consumers Water Company is the sole
shareholder of Seller. Seller has no subsidiaries. The CNHWC Business
carried on by Seller has not been conducted through any other direct or
indirect subsidiary or affiliate of the Shareholder or any other person.
5.3 Transactions with Certain Persons. Except as set forth on
Schedule 5.3 attached hereto, in its conduct of the CNHWC Business, Seller has
not during the past three years, directly or indirectly, purchased, leased
from others or otherwise acquired any property or obtained any services from,
or sold, leased to others or otherwise disposed of any property or furnished
any services to, or otherwise dealt with (except with respect to remuneration
for services rendered as a director, officer or employee of Seller), in the
ordinary course of business or otherwise, (i)any shareholder of Seller, or(ii)
any person, firm or corporation which, directly or indirectly, alone or
together with others, controls, is controlled by or is under common control
with Seller. Except as set forth on Schedule 5.3, in connection with its
conduct of the CNHWC Business, Seller does not owe any amount to, or have any
contract with or commitment to, the Shareholder, or any directors, officers,
employees or consultants (other than compensation for current services not yet
due and payable and-reimbursement of expenses arising in the ordinary course
of business, all of which shall be paid in full as of the Closing Date), and
none of such persons owes any amount to Seller in connection with the CNHWC
Business.
5.4 Execution, Delivery and Performance of Agreement; Authority.
Seller has the full corporate power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby. This Agreement is duly
executed and delivered by Seller. All corporate and other proceedings
required to be taken by Seller or its stockholders to authorize the execution,
delivery and performance of this Agreement and the agreements relating hereto
have been properly taken, and this Agreement and each other agreement
contemplated to be executed and delivered by Seller hereby constitutes a valid
and binding obligation of Seller enforceable against it in accordance with its
terms.
5.5 Financial Statements. Seller has delivered or will deliver to
Purchaser copies of the following financial statements (hereinafter
collectively referred to as the "Financial Statements"), all of which are or
will be as of the Closing complete and correct, have been or will be prepared
from the books and records of Seller in accordance with generally accepted
accounting principles consistently applied and maintained throughout the
periods indicated and fairly present the financial condition of Seller as at
their respective dates and the results of its operations for the periods
covered thereby:
5.5.1 The audited balance sheet of Seller (the "Balance Sheet")
as at December 31, 1996 (the "Balance Sheet Date") and December 31, 1995, and
audited statements of income, shareholder's investment and cash flows for the
years then ended, and the reports thereon of Arthur Andersen Co., certified
public accountants;
5.5.2 The unaudited balance sheet of Seller as at August 31,
1997; and
5.5.3 The unaudited statements of income relating only to the
CNHWC Business for each calendar month thereafter prior to the Closing Date
(it being understood that such interim income statements shall not be
available until at least twenty-five (25) days following the end of each
calendar month).
Such statements of income do not contain any material items of special or
nonrecurring income or any other material income not earned in the ordinary
course of business except as expressly specified therein, and such interim
financial statements include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation.
5.6 Absence of Undisclosed Liabilities. Except as and to the
extent reflected or reserved against on the face of the Balance Sheet
(including the notes thereto) or expressly disclosed in the Schedules attached
hereto, as of the Balance Sheet Date (namely December 31, 1996) Seller had
(and as of the Closing Date Seller shall have) no debts, liabilities or
obligations (whether absolute, accrued, contingent or otherwise) in any way
affecting Seller's Assets or the CNHWC Business of any nature whatsoever,
including, without limitation, any foreign or domestic tax liabilities or
deferred tax liabilities incurred in respect of or measured by Seller's
income, or its period prior to the close of business on the Balance Sheet Date
or any other debts, liabilities or obligations relating to or arising out of
any act, omission, transaction, circumstance, sale of goods or services, state
of facts or other condition which occurred or existed on or before the Balance
Sheet Date, whether or not then known, due or payable, which relate to or
could become a lien upon Seller's Assets or the CNHWC Business.
5.7 Taxes. All taxes relating to operating the Business prior to
the Closing which could become a lien upon Seller's Assets or result in any
liability to the Purchaser, including, without limitation, income, property,
sales, use, franchise, added value, employees' income withholding and social
security taxes, imposed by the United States or by any foreign country or by
any state, municipality, subdivision or instrumentality of the United States
or of any foreign country, or by any other taxing authority, which are or will
be due and payable by Seller, and all interest and penalties thereon, whether
disputed or not, have been or will be paid in full, all tax returns required
to be filed in connection therewith have been or will be accurately prepared
and duly and timely filed and all deposits required by law to be made by
Seller with respect to employees' withholding taxes have been or will be duly
made.
5.8 Absence of Changes or Events. Except as set forth an Schedule
5.8 attached hereto, since the Balance Sheet Date Seller has conducted its
business only in the ordinary course and has not:
5.8.1 incurred any obligation or liability related to the CNHWC
Business or Seller's Assets, absolute, accrued, contingent or otherwise,
whether due or to become due, except current liabilities for trade or business
obligations incurred in connection with the purchase of goods and services in
the ordinary course of business and consistent with its prior practice, none
of which liabilities, in any case or in the aggregate, materially and
adversely affects the business, liabilities or financial condition of the
CNHWC Business or Seller's Assets;
5.8.2 discharged or satisfied any lien, charge or encumbrance
related to the CNHWC Business or Seller's Assets, other than those then
required to be discharged or satisfied, or paid any obligation or liability,
absolute, accrued, contingent or otherwise, whether due or to become due,
other than current liabilities shown on the Balance Sheet and current
liabilities incurred since the Balance Sheet Date in the ordinary course of
business and consistent with its prior practice in conducting the CNHWC
Business;
5.8.3 mortgaged, pledged or subjected to lien, charge, security
interest or any other encumbrance or restriction any of Seller's Assets,
tangible or intangible;
5.8.4 sold, transferred, leased to others or otherwise disposed
of any of Seller's Assets, except for inventory sold in the ordinary course of
business, or canceled or compromised any material debt or claim, or waived or
released any right of substantial value;
5.8.5 received any notice of termination of any contract, lease
or other agreement or suffered any damage, destruction or loss (whether or not
covered by insurance) related to the CNHWC Business or Seller's Assets which,
in any case or in the aggregate, has had a materially adverse effect on the
assets, operations or prospects of the CNHWC Business;
5.8.6 in connection with or affecting the CNHWC Business,
encountered any labor union organizing activity, had any actual or threatened
employee strikes, work stoppages, slow-downs or lock-outs, or had any material
change in its relations with its employees, agents, customers or suppliers;
5.8.7 made any material change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable, or paid or
agreed or orally promised to pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, to any employee or agent
of Seller related to the CNHWC Business;
5.8.8 instituted, settled or agreed to settle any litigation,
action or proceeding before any court or governmental body relating to Seller
or its properties, other than the Town of Hudson's condemnation proceeding
before the New Hampshire Public Utilities Commission entitled: In re Consumers
New Hampshire Water Company, Docket No. DE 96-227;
5.8.9 failed to replenish its inventories and supplies relative
to the CNHWC Business in a normal and customary manner consistent with its
prior practice and prudent business practices prevailing in the industry, or
made any purchase commitment affecting the CNHWC Business in excess of the
normal, ordinary and usual requirements of its business or at any price in
excess of the then current market price or upon terms and conditions more
onerous than those usual and customary in the industry, or made any change in
its service, selling, pricing, advertising or personnel practices inconsistent
with its prior practice and prudent business practices prevailing in the
industry;
5.8.10 suffered any change, event or condition which, in any
case or in the aggregate, has had a materially adverse effect on Seller's
Assets or the CNHWC Business (financial or otherwise), or the operations or
prospects of the CNHWC Business, including, without limitation, any material
change in the CNHWC Business' revenues, costs or relations with its employees,
agents, customers or suppliers;
5.8.11 entered into any transaction, contract or commitment
affecting the CNHWC Business other than in the ordinary course of business or
paid or agreed to pay any brokerage or finder's fee, taxes or other expenses
in connection with, or incurred any severance pay obligations by reason of,
this Agreement or the transactions contemplated hereby; or
5.8.12 entered into any agreement or made any commitment to take
any of the types of action described in subparagraphs 5.8.1 through 5.8.11
above.
5.9 Litigation. Except as set forth in Schedule 5.9 attached
hereto, there is no claim, legal action, suit, arbitration, governmental
investigation or other legal or administrative proceeding, nor any order,
decree or judgment in progress, pending or in effect, or to the knowledge of
Seller threatened, against or relating to Seller, its officers, directors or
employees, the CNHWC Business, Seller's Assets, or the transactions
contemplated by this Agreement, and Seller does not know or have reason to be
aware of any basis for the same. Schedule 5.9 also identifies each civil,
criminal or administrative proceeding or investigation to which Seller has
been a party during the three year period prior to the date hereof which
sought (i) payment of any criminal or administrative fines or penalties by
Seller in connection with the operation of the CNHWC Business, (ii) civil
damages in excess of $5,000.00 in connection with the operations of the CNHWC
Business, or (iii) injunctive relief of any type or nature against Seller as a
result of or connected with the CNHWC Business.
5.10 Regulatory Matters; Compliance with Laws and Other
Instruments. Except as set forth on Schedule 5.10 attached hereto, neither
the ownership nor use of Seller's Assets nor the conduct of the CNHWC Business
nor the transfer of Seller's Assets to Purchaser pursuant hereto conflicts
with the rights of any other person, firm or entity or violates, or with or
without the giving of notice or the passage of time, or both, will violate,
conflict with or result in a default, right to accelerate or loss of rights
under, any terms or provisions of its articles of incorporation or bylaws as
presently in effect, or any lien, encumbrance, mortgage, deed of trust, lease,
license, agreement, understanding, law, ordinance, rule or regulation, or any
order, judgment or decree to which Seller is a party or by which it may be
bound or affected.
5.11 Title to Properties; Encumbrances.
5.11.1 All Real Estate Assets of Seller are listed on Exhibit
"1" attached hereto. All personal property of Seller included in Seller's
Assets, including inventory and supplies, is listed on Schedule 5.11 attached
hereto.
5.11.2 None of Seller's Assets are subject to any mortgage,
pledge, lien, charge, security interest, encumbrance, restriction, lease,
license, easement, liability or adverse claim of any nature whatsoever, direct
or indirect, whether accrued, absolute, contingent or otherwise, except (i) as
disclosed on Schedule 5.11 attached hereto, (ii) as expressly set forth in the
Balance Sheet (including the notes thereto) as securing specific liabilities
or as otherwise expressly permitted by the terms hereof, or (iii) those
imperfections of title and encumbrances, if any, which (A) are not substantial
in character, amount or extent and do not materially detract from the value of
the properties for use in connection with the operation of the Business
subject thereto, (B) do not interfere with either the present and continued
use of such property or the conduct of the normal operations of the CNHWC
Business, and (C) have arisen only in the ordinary course of business.
5.11.3 With respect to each of the buildings, structures or
appurtenances included within the Real Estate Assets, Seller has adequate
rights of ingress and egress thereto for operation of the CNHWC Business, and
none of such buildings, structures or appurtenances (or any equipment
therein), nor the operation or maintenance thereof, violates any restrictive
covenant binding upon Seller. To the knowledge of the Seller, all of Seller's
Assets owned, leased or used by Seller and required for the ordinary operation
of Seller's business are in good operating condition and repair, are suitable
for the purposes used, are adequate and sufficient for all current operations
of Seller and are directly related to the CNHWC Business. Seller has provided
to Purchaser complete copies of the most recent owner's title insurance
policies, binders and certificates or opinions of title heretofore issued to
Seller with respect to each parcel of owned real estate included in the Real
Estate Assets.
5.12 Schedules. Attached hereto as Schedule 5.12 is a separate
schedule containing, to the knowledge of the Seller, an accurate and complete
list and description of:
5.12.1 Other than the Real Estate Assets, all real property
material to the operation of Seller's business owned by Seller or in which
Seller has a leasehold or other interest which is used by Seller in connection
with the operation of the CNHWC Business, together with a description of each
lease, sublease, license, or any other instrument under which Seller claims or
holds such leasehold or other interest or right to the use thereof or pursuant
to which Seller has assigned, sublet or granted any rights therein,
identifying the parties thereto, the rental or other payment terms, expiration
date and cancellation and renewal terms thereof;
5.12.2 All of Seller's receivables related to the CNHWC Business
(which shall include all accounts receivable as the end of the most recent
calendar month, all loans receivable and any customer advances made by
Seller);
5.12.3 Other than those items of personal property owned by
Seller and listed on Schedule 5.11, all machinery, tools, equipment, motor
vehicles, rolling stock and other tangible personal property (other than
inventory and supplies), leased or used by Seller, except for individual items
having a value of less than $1,000 which do not, in the aggregate, have a
total value of more than $10,000.00, setting forth with respect to all such
listed property a summary description of all leases, liens, claims,
encumbrances, charges, restrictions, covenants and conditions relating
thereto, identifying the parties thereto, the rental or other payment terms,
expiration date and cancellation and renewal terms thereof;
5.12.4 All agreements or arrangements providing for the services
of any independent contractor performing services for Seller with respect to
Seller's Assets and to which Seller is a party or by which it is bound;
5.12.5 All individual contracts, agreements and commitments or
other understandings or arrangements to which Seller is or has been a party
since January 1, 1997, which relate to the CNHWC Business and which call for
(i) payments or receipts of more than $10,000, and (ii) all water treatment
chemical purchases aggregating more than $10,000;
5.12.6 The names and current annual or hourly salary rates of
all persons directly employed by Seller in any way relating to the CNHWC
Business (including independent agents) and showing separately for each such
person the amounts paid or payable as salary, bonus payments and any indirect
compensation for the year ended December 31, 1996, and as of June 30, 1997 for
calendar 1997 (year to date) to be updated through the month end prior to
closing; and
5.12.7 A list of all of Seller's Assets relating to the CNHWC
Business acquired by Seller since December 31, 1996 (as referred to in Section
2.2).
All of the contracts, agreements, leases, licenses and commitments required to
be listed on Schedule 5.12 (other than those which have been fully
performed) are valid and binding, enforceable in accordance with their
respective terms, in full force and effect and, except as otherwise specified
in Schedule 5.12, are validly assignable to Purchaser without the consent of
any other party so that, after the assignment thereof to Purchaser pursuant
hereto, Purchaser will be entitled to the full benefits thereof; provided that
the obligations of Seller thereunder shall, after the Closing Date, constitute
Assumed Liabilities hereunder. Except as disclosed in Schedule 5.12, none of
the payments required to be made under any such contract, agreement, lease,
license and commitment has been prepaid more than 30 days prior to the due
date of such payment thereunder, and there is not thereunder any existing
default, or event which, after notice or lapse of time, or both, would
constitute a default or result in a right to accelerate or loss of rights.
None
of Seller's existing or completed contracts relating to or affecting the
CNHWC Business is subject to renegotiation with any governmental body. True|
and complete copies of all such contracts, agreements, leases, licenses and
other documents listed on Schedule 5.12 (together with any and all amendments
thereto) have been delivered to Purchaser and identified with a reference to
this Section of this Agreement.
5.13 No Guaranties. Except as set forth on Schedule 5.13 attached
hereto, none of the obligations or liabilities of Seller relating to the CNHWC
Business is guaranteed by any other person, firm or corporation.
5.14 Inventory. To the knowledge of Seller, Seller's Assets
include a sufficient quantity of each type of inventory and supplies necessary
to meet the normal requirements of the CNHWC Business and its operations. All
such inventory and supplies are readily useable in the current operations of
the CNHWC Business. Since December 31, 1996, Seller has added to its
inventory and supplies only in the ordinary course of business, replenishing
such inventory and supplies only with items of like quality and cost as those
existing at December 31, 1996.
5.15 Records. The books of account relative to the CNHWC Business
are complete and correct in all material respects, and there have been no
transactions involving the CNHWC Business which properly should have been set
forth therein and which have not been accurately so set forth.
5.16 Employee Benefit Plans. Schedule 5.16 attached hereto
contains a true and complete list of all employee benefit plans ("Employee
Benefit Plans") within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not any such
plans are otherwise exempt from the provisions of ERISA, established,
maintained, sponsored or contributed to by Seller and all other employers,
whether or not incorporated, which by reason of a control group, a group under
common control or an affiliated service group are treated together with Seller
and/or the Shareholder as a single employer within the meaning of Section
414(b), (c) or (m) of the Code. No activities of, or failure to act by,
Seller in connection with any Employee Benefit Plan shall result in any
liability to Purchaser following the Closing, and Purchaser shall not be
obligated to assume any liabilities of Seller pursuant to any Employee Benefit
Plan. There has not been any (i) termination of any "defined benefit plan"
within the meaning of ERISA maintained by Seller or any person, firm or entity
("Affiliate") which is under "common control" (within the meaning of Section
4001(b) of ERISA) with Seller, or (ii) commencement of any proceeding to
terminate any such plan pursuant to ERISA, or otherwise, or (iii) written
notice given to Seller or any Affiliate of the intention to commence or seek
the commencement of any such proceeding. Seller has not incurred any
withdrawal liability within the meaning of Section 420l and 4204 of ERISA to
any pension plan which is a Multiemployer Plan (as defined in Section 4001 of
ERISA), and no event has occurred, and there exists no condition or set of
circumstances (as a result of the execution, delivery and performance of this
Agreement or otherwise) which presents any risk of the occurrence of any
withdrawal from or the partition, termination, reorganization or insolvency of
any Multiemployer plan which could result in any liability to Purchaser.
5.17 Absence of Certain Business Practices. Neither Seller nor any
officer, employee or agent of Seller, nor any other person acting on its
behalf, has, directly or indirectly, within the past five 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 Seller (or assist Seller in connection with any
actual or proposed transaction) which (i) might subject Seller to any damage
or penalty in any civil, criminal or governmental litigation or proceeding,
(ii) if not given in the past, might have had an adverse effect on Seller's
Assets or the CNHWC Business or (iii) if not continued in the future, might
adversely affect Seller's Assets or the CNHWC Business or its operations or
prospects, or which might subject Seller or Purchaser to suit or penalty in
any private or governmental litigation or proceeding.
5.18 Environmental Matters.
5.18.1 Except as set forth on Schedule 5.18 attached hereto, to
the knowledge of Seller (i) no "Hazardous Substance" (as hereinafter defined)
has been disposed of on, generated on, treated on, buried beneath, or
percolated beneath, (ii) no such disposal, generation, treatment, burial or
percolation has been threatened, and (iii) there has been no "Release" (as
hereafter defined) thereof on or near, any real estate owned or leased by
Seller in connection with the CNHWC Business, or any improvements thereon
(collectively the "Real Property"). Except as set forth an Schedule 5.18, to
the knowledge of Seller, Seller is and has been in compliance with all
applicable federal, state and local laws, administrative rulings and
regulations of any court, administrative agency or other governmental or
quasi-governmental authority, relating to the protection of the environment
(including but not limited to laws prohibiting the creation of a public
nuisance), the non-compliance with which would have a material adverse effect
on Seller's Assets or the Business. Attached to Schedule 5.18 are copies of
all correspondence between Seller and either the United States Environmental
Protection Agency or the New Hampshire Environmental Protection Agency
relating to Seller's Assets or the CNHWC Business since January 1, 1989. To
the knowledge of Seller, Seller is not a potentially responsible party under
Section 107 of the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended ("CERCLA"), or is or has been subject to an
action under Section 7003 of the Resource Conservation and Recovery Act of
1976, as amended ("RCRA"), and has not received notification from any federal,
state or local government, agency or regulatory body, of a violation under any
federal, state or local law regulating the Release, disposal or discharge of
any toxic, explosive or other Hazardous Substance. To the knowledge of
Seller, no Environmental Condition (as hereafter defined) exists in the Real
Property.
5.18.2 Except as disclosed in Schedule 5.18, the Real Property
is free from the harmful effects of asbestos or asbestos-containing materials.
5.18.3 Except as disclosed in Schedule 5.18, no Underground
Storage Tanks (as hereafter defined) are now present on or beneath the
premises of the Real Estate Assets.
5.18.4 For purposes of this Agreement: (i) "Hazardous Substance"
means any one or more of (A) any substance defined as a hazardous substance
under Section 101(14) of CERCLA, (B) any other substance deemed hazardous by
the United States Environmental Protection Agency pursuant to Section 102(a)
of CERCLA, (C) petroleum (including crude oil or any fraction thereof), (D)
any substance deemed hazardous pursuant to Section 1004(5) of RCRA, (E) any
substance regulated under the Toxic Substance Control Act, as amended, or (F)
any other hazardous or toxic substance, materials, compound, mixture,
solution, element, pollutant or waste regulated under any federal, state or
local statute, ordinance or regulation; (ii) "Release" shall have the meaning
given to such term in Section 101(22) of CERCLA; (iii) "Underground Storage
Tanks" shall be as defined in applicable New Hampshire regulations or statutes
and shall further include all other underground storage tanks not included in
the foregoing definition because of size, content or purpose thereof; and (iv)
"Environmental Condition" shall mean conditions of the environment, including
natural resources (including flora and fauna), soil, surface water,
groundwater, any present or potential drinking water supply, subsurface strata
or the ambient air, relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, spilling, leaking, pumping,
pouring, emptying, discharging, injecting, escaping, leaching, disposal,
dumping, Release or threatened Release of Hazardous Substances upon or near
the Real Property by Seller or Seller's agents, lessees, representatives,
employees, independent contractors or (to the best of Seller's knowledge)
predecessors in interest.
5.19 Mechanics and Other Liens. Seller will pay for all labor,
services and material which was made or furnished to Seller by any person or
entity, including, without limitation, contractors, subcontractors, mechanics
or materialmen, which could give rise to any lien upon Seller's Assets as
provided under the laws of the State of New Hampshire and will provide an
affidavit to that effect at closing for title insurance purposes.
5.20 Permits, Franchises, Certificates and Licenses. Schedule 5.20
attached hereto sets forth all licenses, franchises, certificates and permits
issued by applicable governmental authorities presently held by Seller with
respect to the CNHWC Business, including all licenses and certificates of
authority or public convenience and necessity issued by the Public Utilities
Commission of New Hampshire or various New Hampshire municipalities relating
to the CNHWC Business. Such licenses and permits constitute all of the
licenses and permits necessary or appropriate to operate the CNHWC Business in
the manner in which the same is operated as of the date hereof.
5.21 Data Processing Matters.
5.21.1 Except as set forth in Schedule 5.21 attached hereto,
Seller does not have any of its respective records, systems, controls, data or
information relating to the CNHWC Business recorded, stored, maintained,
operated or otherwise wholly or partly dependent upon or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and
therefrom) are not under the exclusive ownership and control of Seller.
5.21.2 Seller owns, leases or licenses certain computer
equipment, associated peripheral devices, and related operating and
application systems and other software utilized in connection with the CNHWC
Business and operations (the "Data Processing Systems"). The Data Processing
Systems adequately meet the data processing needs of Seller and its CNHWC
Business as presently conducted. That portion of the Data Processing Systems
assets which will be transferred to Purchaser as part of Seller's Assets are
listed an Schedule 5.21, and all agreements and licenses relating to leased or
licensed Data Processing Systems which are being transferred are identified on
Schedule 5.21 and are freely assignable or transferable to Purchaser by Seller
on the same terms as leased or licensed by Seller and without requiring the
payment of any additional fee by Purchaser.
5.22 Finder's Fees. Neither Seller nor any person acting on behalf
of Seller is a party to any contract, arrangement or understanding pursuant to
which any third person or entity is entitled to any brokerage commission,
finder's fee or similar compensation from any party in connection with the
execution and delivery of this Agreement or the consummation of the
transactions herein contemplated.
5.23 Disclosure. No representation or warranty by Seller contained
in this Agreement nor any statement or certificate furnished or to be
furnished by Seller to Purchaser or its representatives in connection herewith
or pursuant hereto contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact required to make the
statements herein or therein contained not misleading. The representations
and warranties contained in this Section 5 or elsewhere in this Agreement or
any document delivered pursuant hereto shall not be affected or deemed waived
by reason of the fact that Purchaser and/or its representatives knew or should
have known that any such representation or warranty is or might be inaccurate
in any respect.
6. REPRESENTATIONS AND WARRANTIES BY PURCHASER.
-------------------------------------------
Purchaser represents and warrants to Seller, which representations and
warranties shall be true and correct as of the date hereof, as follows:
6.1 Organization. Purchaser is a municipal corporation and
political subdivision in and of the State of New Hampshire, duly organized and
validly existing under the laws of the State of New Hampshire and its charter
and has full municipal power and authority to enter into this Agreement and
the related agreements referred to herein and to carry out the transactions
contemplated by this Agreement.
6.2 Authorization and Approval of Agreement. The Board of
Selectmen has been authorized to enter into this Agreement by action of the
1996 Hudson town meeting and has voted to do so, subject to certain conditions
which are contained in this Agreement. This Agreement is a valid and binding
obligation of the Purchaser subject to ratification as is set forth in
Sections 10 and 11 hereof.
6.3 Execution, Delivery and Performance of Agreement. Neither the
execution, delivery nor performance of this Agreement by Purchaser will, with
or without the giving of notice or the passage of time, or both, conflict
with, result in a default, right to accelerate or loss of rights under, or
result in the creation of any lien, charge or encumbrance pursuant to, any
provision of Purchaser's municipal charter or of any franchise, mortgage, deed
of trust, lease, license, agreement, understanding, law, ordinance, rule or
regulation or any order, judgment or decree to which Purchaser is a party or
by which it may be bound. Purchaser has full municipal power and authority to
enter into this Agreement and to carry out the transactions contemplated
hereby, all municipal governmental proceedings required to be taken by
Purchaser to authorize the execution, delivery and performance of this
Agreement and the agreements relating hereto have been properly taken and this
Agreement constitutes a valid and binding obligation of Purchaser enforceable
against it in accordance with its terms.
6.4 Litigation. There is no legal action, suit, arbitration,
governmental investigation or other legal or administrative proceeding, nor
any order, decree or judgment in progress, pending or in effect, or to the
knowledge of Purchaser threatened, against or relating to Purchaser in
connection with or relating to the transactions contemplated by this
Agreement, and Purchaser does not know or have any reason to be aware of any
basis for the same.
6.5 Finder's Fees. Neither Purchaser nor any person acting on
behalf of Purchaser is a party to any contract, arrangement or understanding
pursuant to which any third person Or entity is entitled to any brokerage
commission, finder's fee or similar compensation from any party in connection
with the execution and delivery of this Agreement or the consummation of the
transactions herein contemplated.
6.6 Disclosure. No representation or warranty by Purchaser
contained in this Agreement nor any statement or certificate furnished or to
be furnished by Purchaser to Seller or its representatives in connection
herewith or pursuant hereto contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact required to
make the statements herein or therein contained not misleading. The
representations and warranties contained in this Section 6 or elsewhere in
this Agreement or any document delivered pursuant hereto shall not be affected
or deemed waived by reason of the fact that Seller and/or its representatives
knew or should have known that any such representation or warranty is or might
be inaccurate in any respect.
6.7 Consents. No further municipal consents to this Agreement need
be obtained by the Purchaser, other than those disclosed in Section 2.2, and
applicable PUC authorization.
7. OTHER OBLIGATIONS OF THE PARTIES.
--------------------------------
7.1 Conduct of Business. Prior to the Closing, Seller shall conduct
its business and affairs related to the CNHWC Business only in the ordinary
course and consistent with its prior practice and shall maintain, keep and
preserve Seller's Assets required or reasonably convenient for the operation
of the Business in good condition and repair and maintain insurance thereon in
accordance with present practices, and Seller and the Shareholder will use
reasonable efforts (i) to preserve the CNHWC Business intact, (ii) to keep
available to Purchaser the services of Seller's present employees, agents and
independent contractors related to the CNHWC Business, (iii) to preserve for
the benefit of Purchaser the goodwill of Seller's suppliers, customers,
landlords and others having business relations with the CNHWC Business, (iv)
to cooperate with Purchaser and use reasonable efforts to assist Purchaser in
obtaining the consent of any landlord or other party to any lease or contract
with Seller related to the CNHWC Business (including but not limited to those
identified on Schedules 5.11 and 5.12) where the consent of such landlord or
other party may be required by reason of the transactions contemplated hereby
and (v) to cooperate with Purchaser (but at no cost or risk to Seller) in its
efforts to obtain the financing of the purchase price by the sale of the Bonds
(as defined in Section 10.8 below) in accordance with the provisions of
Section 10.8 hereof. Without limiting the generality of the foregoing, from
the date hereof prior to the Closing Seller will not without Purchaser's prior
written approval, which consent will not be unreasonably withheld, delayed or
conditional:
7.1.1 enter into any material contract, agreement, commitment or
other understanding or arrangement related to or affecting Seller's Assets or
the CNHWC Business; or
7.1.2 perform, take any action or incur or permit to exist any
of the acts, transactions, events or occurrences of the type (i) described in
Section 5.8 of the Agreement which would have been inconsistent with the
representations and warranties set forth therein had the same occurred after
the Balance Sheet Date and prior to the date hereof or (ii) described in
Section 5.3 of this Agreement which would be required to be set forth on
Schedule 5.3 hereof if it had taken place during the past three years.
At or prior to the Closing, Seller shall cause all contracts, licenses and
leases which relate to the CNHWC Business to which Seller is a party and which
are to be assigned to Purchaser hereunder (including the advance contracts
disclosed on the Schedules attached to this Agreement but excluding the
Assumed Liabilities), which by their terms will require future payments by
Seller (or by Purchaser following the assignment thereof) to a third party, to
be paid in full through the Closing Date or prorated through the Closing Date.
If Seller elects to have such payment amounts thereunder prorated, Seller
shall notify Purchaser in writing at or prior to the Closing such that the
Aggregate Purchaser Price may be adjusted with a credit to Purchaser
reflecting the amounts which shall be owed thereunder through the Closing
Date.
7.2 Changes in Information. Seller shall give Purchaser prompt
written notice of any material change in any of the information contained in
the representations and warranties made in Section 5 or elsewhere in this
Agreement or the Schedules referred to herein which occurs prior to the
Closing.
7.3 Consultation with Purchaser. Seller shall consult with Purchaser
with respect to (i) the cancellation of contracts, agreements, commitments or
other understandings or arrangements to which Seller is a party and which
relate to the CNHWC Business, including, without limitation, purchase orders
and commitments for capital expenditures or improvements, (ii) the
discontinuance of any CNHWC Business operations, and (iii) purchasing, pricing
or selling policies with respect to the CNHWC Business.
7.4 Certain Matters Affecting the Real Estate Assets.
7.4.1 Seller shall provide to Purchaser within thirty (30) days
of this Agreement a list of all real estate to be conveyed under this
Agreement and a copy of a title insurance policy if one has previously been
secured on said real estate.
7.4.2 Purchase is contingent on Purchaser being able to obtain:
(1) Marketable and insurable title to the aforesaid real estate
assets subject to no liens or encumbrances other than those permitted under
Section 5.11.2 and current taxes and assessments not yet due and payable of
the utilities of record, which in the Purchaser's opinion do not materially
affect the operation of the CNHWC Business.
(2) Purchaser shall be permitted to enter upon Seller's Property at
its own risk, upon reasonable notice and under circumstances so as not to
interfere with Seller's Business, to conduct such property surveys as may be
deemed necessary by Purchaser in order to delete the survey exception on a
standard title insurance policy. Seller will provide copies of any surveys or
plans in its files relating to said properties within thirty (30) days of this
Agreement.
7.4.3 At Closing, Seller shall execute and deliver to Purchaser
in the foregoing title insurance company an affidavit as to each real estate
asset certifying that (i) there are no mortgages, judgment liens or other
encumbrances of record affecting such property except as set forth in the
Policy, (ii) there are no rights of possession, use or otherwise, outstanding
in third parties by reasons of unrecorded leases, land contracts, sale
contracts, options or other documents, and (iii) no unpaid-for improvements
have been made, or materials, machinery or fuel delivered to such property
within the one hundred twenty (120) days immediately preceding the Closing
which might form the basis for a mechanics' lien thereon.
7.4.4 Purchaser shall obtain at its expense currently certified
(dated subsequent to the date of this Agreement) "as built" surveys and legal
descriptions of the Real Estate Assets for which the Commitment is to be
obtained pursuant to Section 7.4.1. prepared by a surveyor registered in the
State of New Hampshire, prepared in accordance with ALTA standards. Such
surveys shall include the locations of all improvements, encroachments,
easements and rights of way, and shall be delivered to Purchaser and the title
company at or prior to the Preclosing. Seller shall have no obligation to
obtain surveys for any Real Estate Assets other than those to be covered by
the Commitment. Purchaser may waive the survey requirement prior to the
Closing with respect to one or more parcels upon which there are currently no
aboveground improvements if Purchaser determines that the failure to obtain a
current survey therefor will not materially affect the protection of the title
insurance thereon.
7.5 Inventory. Prior to the Closing Purchaser may review and
inspect Seller's Assets to determine whether, in Purchaser's opinion, such
Seller's Assets will be readily useable by Purchaser in the operation of the
CNHWC Business following the Closing.
7.6 Resolution of Proceeding Pending Before New Hampshire Public
Utilities Commission and Compliance with Provisions of N.H. RSA 38. It is
understood that this Agreement, when fully performed, shall conclude all
issues presently pending in Docket # DE 96-227, Petition of Town of Hudson
(the Proceeding), presently pending before the New Hampshire Public Utilities
Commission (NHPUC). To that end:
A. The parties shall jointly present to the NHPUC a Stipulation for
Settlement of the Proceeding (Stipulation) incorporating the relevant terms of
this Agreement and shall jointly request an order from the NHPUC approving the
Stipulation as the final determination, in accordance with N.H. RSA 38:9 and
10, of the amount of, and price to be paid for, CNHWC plant and property to be
acquired by the Purchaser. The parties shall use their best efforts to obtain
such an order, without revision or condition. In the event the NHPUC declines
to issue such an order, or issues an order containing some revision or
condition not mutually acceptable to the parties, then notwithstanding
anything to the contrary herein, this Purchase and Sale Agreement shall be of
no further force or effect.
B. Following the entry of such an order by the NHPUC, the Purchase
shall promptly take all necessary steps to procure votes of ratification and
appropriation in accordance with N.H. RSA 38:11. In the event such votes are
in the affirmative, the parties shall promptly proceed with tender of payment,
conveyance of the subject plant and property and all other steps necessary for
full performance of this Agreement. In the event such affirmative votes are
not obtained: (1) there shall be no further action by Hudson in the
Proceeding, but CNHWC shall be entitled to seek an order from the NHPUC to
recover its costs of the Proceeding, which Hudson shall be at liberty to
oppose; (2) Hudson shall take no other action under RSA Chapter 38 involving
CNHWC or its property during the ensuing period of two years following a vote
which is not in the affirmative.
7.7 Transferred Employees. Prior to the Closing, Purchaser shall
endeavor to negotiate in good faith with any water system operator with whom
the Purchaser may contract, or any prospective purchaser of CNHWC assets, to
obtain offers of continued employment for Seller's employees (excluding
CNHWC's President and its Treasurer). The Purchaser shall not be obliged to
hire any employees.
7.8 Special Covenant of Purchaser. Purchaser shall use its best
efforts to promptly call or take all required actions in connection with
securing a vote from the Town relating to the consummation of the transactions
contemplated by this Agreement and the related financing of the same as
contemplated by Section 7.6 and 11.8 hereof. The vote shall take place no
later than 4/1/98, and, if the acquisition and the related financing
contemplated hereunder is approved, the Purchaser shall take all action
reasonably required in connection with the effectuation of the financing
contemplated by Section 11.8 so as to provide for a closing date on or before
July 31, 1998. In addition, the Purchaser shall use its reasonable best
efforts to obtain, and to cooperate with Seller in obtaining all
authorizations and consents, approvals, permits and clearances necessary for
the consummation of the transactions contemplated hereby, including, without
limitation, consents to the assumption of all Contracts relating to the
Assumed Liabilities, the transfer of any and all licenses and permits
contemplated hereunder and joining together in seeking approval from the New
Hampshire PUC to the transfers contemplated hereunder and the consummation of
the transactions contemplated hereby, including, without limitation,
cooperation between Seller and Purchaser with respect to the legal proceedings
contemplated by Section 7.6 hereof.
7.9 Special Covenant of Seller. Subject to such confidentiality
requirements as Seller may reasonably require, after the date hereof, Seller
shall cooperate with Buyer in making available to third party purchasers who
may be interested in acquiring portions of the Seller's Assets from Purchaser
after the closing due diligence materials and other information regarding such
Assets and/or the CNHWC Business.
7.10 Updated Financial Statements. Seller will deliver to Purchaser
updated financial statements for the year ending 12/31/97 prepared from the
books and records of Seller in accordance with generally accepted accounting
principles consistently applied and maintained throughout the periods
indicated which present the financial condition of the Seller as of such date
and the results of its operations for the period covered thereby through Date
of Closing.
8. ACCESS TO SELLER'S ASSETS, INFORMATION AND DOCUMENTS.
----------------------------------------------------
Upon reasonable notice and during regular business hours, Seller will
give Purchaser and Purchaser's assignee's attorneys, accountants and other
representatives full access to Seller's personnel and all properties,
documents, contracts, books and records of Seller and will furnish Purchaser
with copies of such documents (certified by Seller's officers if so requested)
and with such information with respect to the affairs of Seller as Purchaser
may from time to time request, and the Purchaser will not improperly disclose
the same prior to the Closing. Upon reasonable notice and during regular
business hours, Purchaser may conduct or cause to be conducted inspections of
the Real Estate Assets (and all improvements thereon) as to insect
infestation, engineering, structural, roofing, heating, plumbing, electrical,
mechanical and similar matters at Purchaser's sole expense, and reasonable
inspections of all other Seller's Assets. Any such inspection and furnishing
of such information to Purchaser or any investigation by Purchaser shall not
affect Purchaser's right to rely on any representations and warranties made in
this Agreement.
9. BULK SALES COMPLIANCE.
---------------------
This section has been omitted.
10. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS.
-----------------------------------------------
All obligations of Purchaser hereunder are subject, at the option of
Purchaser, to the fulfillment of each of the following conditions at or prior
to the Closing, and Seller shall use best efforts to cause each such condition
to be so fulfilled:
10.1 Representations and Warranties. All representations and
warranties of Seller contained herein or in any document delivered pursuant
hereto shall be true and correct in all material respects when made and shall
be deemed to have been made again at and as of the Closing Date, and shall
then be true and correct in all material respects except for changes in the
ordinary course of business after the date hereof in conformity with the
covenants and agreements contained herein. Updated disclosure schedules which
are true and correct shall be delivered by Seller to Purchaser as of the
Closing Date.
10.2 Covenants. All covenants, agreements and obligations required
by the terms of this Agreement to be performed by Seller at or before the
Closing shall have been duly and properly performed in all material respects.
10.3 No Material Adverse Change. Since the date of this Agreement
there shall not have occurred any material adverse change in the condition of
Seller Assets.
10.4 Closing Certificate. There shall be delivered to Purchaser a
certificate duly executed by the President and Secretary of Seller,
individually, dated the Closing Date, certifying that the conditions set forth
in Sections 10.1, 10.2 and 10.3 have been fulfilled.
10.5 Schedules and Other Documents. All documents, schedules,
reports and consents required to be delivered to Purchaser at or prior to the
Closing shall have been so delivered, including the schedules referred to in
Section 5 which shall have been updated as of the Closing Date.
10.6 Opinion of Counsel. Purchaser shall have received an opinion
of Seller's counsel, Drummond, Woodsum & MacMahon, dated the Closing Date, in
form and substance reasonably satisfactory to the parties and customary for
transactions of this type.
10.7 Written Consents. Seller shall have obtained at no cost to
Purchaser written consents to the transfer or assignment to Purchaser of all
consignment agreements, licenses, leases and other material contracts of
Seller related to the CNHWC Business or Seller's Assets (other than immaterial
purchase and sales orders in the ordinary course of business) where the
consent of any other party to any such contract may, in the opinion of
Purchaser's counsel, be required for such assignment or transfer.
10.8 Financing/Approvals.
A. Purchaser shall have obtained financing for the Aggregate Purchase
Price referred to in Section 2 of this Agreement by the issue of General
Obligation Municipal Bonds, in an aggregate principal amount of up to
$34,500,000.00 (the "Bonds"), with an average coupon rate on such bonds not to
exceed six-and-one-half percent (6.5%) per annum, and on such other terms and
conditions satisfactory to Purchaser.
B. Purchaser shall have obtained a vote ratifying the purchase of
Seller's Assets in accordance with the terms hereof.
10.9 Title Insurance. The Policy with respect to the Real Estate
Assets, insuring title and the Trustee subject to no other exceptions, liens
or encumbrances other than as permitted by section 7.4 hereof, shall have been
issued at Purchaser's cost by the title insurance company selected by
Purchaser, pursuant to the Commitment obtained by Purchaser in accordance with
Section 7.4.1 hereof.
10.10 Evidence of Liens. Seller shall certify to Buyer that no
financing statements showing Seller as "debtor" thereon, and describing any
lien or security interest with respect to Seller's Assets, are on file with
the Town in which any of the Assets of Seller are located, the County Registry
of Deeds of any county in which the Assets of Seller are located, or the
Office of the New Hampshire Secretary of State, as of the business day
immediately prior to the Closing Date, or evidence satisfactory to Purchaser
that such liens and/or security interests shown thereon have been released by
the secured party.
11. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
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All obligations of Seller at the Closing are subject, at the option of
Seller, to the fulfillment of each of the following conditions at or prior to
the Closing, and Purchaser shall exert its best efforts to cause each such
condition to be so fulfilled:
11.1 Representations and Warranties. All representations and
warranties of Purchaser contained herein or in any document delivered pursuant
hereto shall be true and correct in all material respects when made and as of
the Closing.
11.2 Covenants. All obligations required by the terms of this
Agreement to be performed by Purchaser at or before the Closing shall have
been duly and properly performed in all material respects.
11.3 Closing Certificate. There shall be delivered to Seller a
certificate executed by the Board of Selectmen and the Finance Director of
Purchaser, dated the Closing Date, certifying that the conditions set forth in
Section 11.1 and 11.2 have been fulfilled.
11.4 Opinion of Counsel. Seller shall have received opinions of
the Town Attorney of the Purchaser, and of Donahue, Tucker & Ciandella,
Purchaser's counsel, dated the Closing Date, in form and substance reasonably
satisfactory to the parties and customary for transactions of this type.
11.5 New Hampshire PUC Order. Seller shall have received an order
of the New Hampshire PUC, in form and substance reasonably satisfactory to
Seller, acknowledging that after the Closing Date Seller shall have no further
obligation to the New Hampshire PUC to provide water service to its customers,
permitting Seller to abandon the Business, and consenting to the
discontinuance of such service by Seller, all on terms reasonably satisfactory
to Seller.
11.6 Written Consents. Seller shall have obtained at no cost to
Purchaser for any such consent to the transfer or assignment to Purchaser of
all consignment agreements, licenses, leases and other material contracts
constituting Assumed Liabilities hereunder (other than immaterial purchase and
sales orders in the ordinary course of business) where the consent of any
other party to any such contract may, in the opinion of Seller's counsel, be
required for such assignment, transfer and assumption.
12. INDEMNIFICATION.
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12.1 Indemnification by Seller. Seller hereby indemnifies and
agrees to hold Purchaser harmless from, against and in respect of (and shall
on demand reimburse Purchaser for):
12.1.1 any and all loss, liability or damage suffered or
incurred by Purchaser by reason of any breach of representation, breach of
warranty or nonfulfillment of any covenant by Seller or the Shareholder
contained herein or in any certificate, document or instrument delivered to
Purchaser pursuant hereto or in connection herewith;
12.1.2 any and all loss, liability or damage suffered or
incurred by Purchaser in respect of or in connection with any liabilities of
Seller not expressly assumed by Purchaser pursuant to the terms of the
Liabilities Undertaking;
12.1.3 any and all debts, liabilities or obligations of Seller,
direct or indirect, fixed, contingent or otherwise, which exist at or as of
the Closing Date or which arise after the Closing Date but which relate to or
specifically arise from operation of the Business before the Closing Date,
whether or not then known, due or payable, except to the extent expressly
assumed by Purchaser pursuant to the terms of the Liabilities Undertaking;
12.1.4 any and all loss, liability or damage suffered or
incurred by Purchaser by reason of or in connection with any claim for
finder's fee or brokerage or other commission arising by reason of any
services alleged to have been rendered to or at the instance of Seller or the
Shareholder with respect to this Agreement or any of the transactions
contemplated hereby;
12.1.5 any and all loss, liability or damage suffered or
incurred by Purchaser by reason of any claim for severance pay accruing or
incurred at any time on or after the date hereof but prior to the Closing
except to the extent any one or more specific employees are discharged prior
to the Closing hereunder with the prior written consent of Purchaser and such
consent contains the name(S) of such specific employees);
12.1.6 any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without limitation,
legal, accounting and other professional fees and expenses, incident to any of
the foregoing or incurred in investigating or attempting to avoid the same or
to oppose the imposition thereof, or in enforcing this indemnity.
12.2 Indemnification. Purchaser hereby indemnifies and holds
harmless from, against and in respect of (and shall on demand reimburse Seller
for):
12.2.1 any and all loss, liability or damage resulting from an
untrue representation, breach of warranty or non-fulfillment of any covenant
or agreement by either party to the other contained herein or in any
certificate, document or instrument delivered to Seller hereunder;
12.2.2 any and all Assumed Liabilities pursuant to the
Liabilities undertaken by Purchaser.
12.2.3 any and all debts, liabilities or obligations of
Purchaser, direct or indirect, fixed, contingent or otherwise, which exist at
or as of the Closing Date or which arise after the Closing Date but known, due
or payable;
12.2.4 any and all loss, liability or damage suffered or
incurred by Seller by reason of or in connection with any claim for finder's
fee or brokerage or other commission arising by reason of any services alleged
to have been rendered to or at the instance of Purchaser with respect to this
Agreement or any of the transactions contemplated hereby;
12.2.5 any and all loss, liability or damage suffered or
incurred by Seller by reason of any claim for severance pay accruing or
incurred at any time on or after the date of Closing; and
12.2.6 any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without limitation,
legal fees and expenses, incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
12.3 Certain Limitations on Claims.
(a) Any claim or cause of action arising out of this Agreement must
be instituted within two years of the Closing Date, except for claims under
the representations and warranties set forth in Sections 5.19 hereof (the
"Excepted Claims"), as to which any claim or cause of action must be
instituted within five years of the Closing Date. The failure to institute a
claim or cause of action within such period shall constitute an absolute bar
to the institution of any proceedings or actions based upon, and will
constitute a waiver of, all the claims and/or causes of action not so
asserted.
(b) Anything herein to the contrary notwithstanding, neither party
shall be entitled to recover from the other party with respect to any
indemnifiable loss arising under Sections 12.1 or 12.2, or otherwise, unless
and until the amount of such loss suffered, sustained or incurred by the
asserting party, or to which such party becomes subject, shall exceed $50,000
calculated on a cumulative and not a per item basis, and then only with
respect to the excess over said $50,000 threshold.
13. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
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All statements, representations, warranties, indemnities, covenants and
agreements made by each party hereto shall survive the Closing.
14. NOTICES.
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Any and all notices or other communications required or permitted to be
given under any of the provisions of this Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered or mailed by
first class mail, return receipt requested, addressed (i) if to Seller, to
President, Consumers New Hampshire Water Company, 322 Nashua Road,
Londonderry, New Hampshire 03053, with a copy to John F. Isacke, Senior Vice
President, Consumers Water Company, Three Canal Plaza, Portland, Maine 04112,
and to Michael E. High, Esq., Drummond, Woodsum & MacMahon, P.O. Box 9781,
Portland, Maine 04104-5081, and (ii) if to Purchaser, to the Town of Hudson,
12 School Street, Hudson, New Hampshire 03051, Attention: Paul D. Sharon, Town
Administrator, with a copy to John J. Ratigan, Esq., Donahue, Tucker &
Ciandella, 225 Water Street, Exeter, New Hampshire 03833. If any party
desires to change the address at which it is to receive notice, such party may
change the address at which it is to receive notice under this Agreement by
written notice to each other party set forth herein given as aforesaid.
15. TERMINATION.
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15.1 Termination. Notwithstanding anything to the contrary herein,
this Agreement and the transactions contemplated hereby may be terminated in
the following manner: (a) by Purchaser, if the conditions set forth in Section
10 shall not have been met or waived by the Purchaser at or prior to the
Closing Date or if Purchaser fails to obtain the necessary approvals
contemplated by Section 10.8 following municipal votes in respect of the same;
or (b) by Seller if the conditions set forth in Section 11 hereof shall not
have been met or waived by Seller at or prior to the Closing Date; or (c) by
either party if the Closing does not occur by July 31, 1998.
15.2 Effect of Termination. If any party terminates this Agreement
pursuant to this Section 15, all rights and obligations of the parties
hereunder shall terminate without any liability of any party, except for any
liability of a party that is in breach or as otherwise provided herein.
Notwithstanding anything in this Agreement to the contrary, if on the Closing
Date (which shall in no event beyond July 31, 1998 without the consent of the
parties) the Seller or Purchaser, as applicable, has complied with all of the
conditions to closing contained for its benefit herein, has notified the other
party of its intention to consummate the transactions contemplated hereby, and
is ready and able to perform its obligations hereunder and furnish evidence to
that effect, if on the Closing Date the closing does not occur due to the
refusal of a party to consummate the transactions contemplated hereunder, the
party that defaults in its obligations under this Agreement (the "Defaulting
Party") and, as a result thereof, the other party (the "Non-Defaulting Party")
seeks to legally enforce its rights hereunder against the Defaulting Party,
then, in addition to all damages and other remedies to which the Non-
Defaulting Party is entitled by reason of such default, the Defaulting Party
shall promptly pay to the Non-Defaulting Party an amount equal to all costs
and expenses (including reasonable attorneys' fees) paid or incurred by the
Non-Defaulting Party in connection with such enforcement.
15.3 Failure to obtain the required votes or to obtain bond
issuance at 6.5% or less shall not constitute default under this Section.
15.4 Interest Obligations of Defaulting Party. If the Non-
Defaulting Party is entitled to receive an amount of money by reason of the
Defaulting Party's default hereunder, then, in addition to such amount of
money, the Defaulting Party shall promptly pay to the Non-Defaulting Party a
sum equal to interest on such amount of money accruing at the prime rate
charged by Bank of Boston, to its preferred business clients as of the date of
the default.
16. MISCELLANEOUS.
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16.1 Entire Agreement. This Agreement (including the exhibits
hereto and the schedules, annexes and other documents delivered pursuant
hereto, which are a part hereof) constitutes the entire agreement of the
parties with respect to the subject matter hereof, and supersedes any and all
prior understandings written or oral, among the parties. This Agreement may
not be modified, amended or terminated except by a written agreement
specifically referring to this Agreement signed by all of the parties hereto.
16.2 Waivers. No waiver of any breach or default hereunder shall
be considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent breach
or default of the same or similar nature.
16.3 Supplementing of Schedules. Seller shall have the right to
supplement the disclosure schedules attached to this Agreement at any time
prior to the Preclosing, without liability for failing to have provided a
complete disclosure schedule as of the date hereof. If any schedule which is
so updated by Seller after the date hereof but prior to the Preclosing
contains any new information which, in Purchaser's opinion, is materially
adverse, Purchaser may terminate this Agreement without liability as of the
Preclosing by delivery of a writing to Seller referring to this Section.
16.4 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of each party hereto, its successors and assigns.
16.5 Headings. The paragraph headings contained herein are for the
purposes of convenience only and are not intended to define or limit the
contents of said paragraphs.
16.6 Further Actions. Each party hereto shall cooperate, shall
take such further action and shall execute and deliver such further documents
as may be reasonably requested by any other party in order to carry out the
provisions and purposes of this Agreement.
16.7 Transfer Taxes. Purchaser will pay any transfer taxes payable
in connection with the sale, conveyance, assignments and transfers to be made
to Purchaser hereunder.
16.8 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one original.
16.9 Governing Law. This Agreement and all amendments hereto shall
be governed by and construed in accordance with the laws of the State of New
Hampshire applicable to contracts made and to be performed therein.
The remainder of this page has intentionally been
left blank. The next page is the signature page.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
CONSUMERS NEW HAMPSHIRE WATER COMPANY
By: /s/ Sharon E. Schulman
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Its: President
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ATTEST:
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Secretary
THE TOWN OF HUDSON BOARD OF SELECTMEN
/s/ E. Lorraine Madison
---------------------------------
/s/ Shawn N. Jasper
---------------------------------
/s/ Ann Seabury
---------------------------------
/s/ Rhonda Charbonneau
---------------------------------
ATTEST:
/s/ Barbara A. Locke
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Deputy Town Clerk
INDEX OF SCHEDULES & EXHIBITS
Exhibit 1.1 Real Estate Assets
Exhibit 2.1 Form Bill of Sale
Exhibit 2.6 Form Liabilities Undertaking
Exhibit 3.2 Form Pre-Closing Agreement
Exhibit 11.6 Form of Opinion of Seller's Counsel
Schedule 2.4 - Assumed Liabilities (Including Assumed Services
Contracts, Customer Advance Contracts
and/or Developer Agreements)
Schedule 2.6 Allocation of Purchase Price Among the
Purchased Assets
Schedule 5.3 Transactions with Certain Persons
Schedule 5.8 Absence of Changes or Events
Schedule 5.9 Litigation
Schedule 5.10 Regulatory Matters; Compliance with Laws
And Other Instruments
Schedule 5.11 Personal Property of Seller
Schedule 5.11.2 Mortgages, Liens and Other Encumbrances
On Seller's Assets
Schedule 5.12.1 Other Real Property Material to or used in Connection
with the Operation Of Seller's Business
Schedule 5.12.2 Seller's Receivables Related to the CNHWC Business
Schedule 5.12.3 Other Personal Property (Machinery, Tools, Equipment
and other Tangible Personal Property Leased or
Used by Seller other Than Personal Property Owned
by Seller and Listed On Schedule 5.11)
Schedule 5.12.4 Arrangements with Independent Contractors Not in the
Ordinary Course of Seller's Business
Schedule 5.12.5 Certain Contracts, Agreements, Commitments and Other
Understandings to which Seller is a Party
Schedule 5.12.6 Employees of Seller Relating to the CNHWC Business
Schedule 5.12.7 Certain Assets of Seller Acquired Since December 31, 1996
Which will Require an Adjustment to the Purchase Price
Schedule 5.13 Guaranties of Liabilities of Seller
Schedule 5.16 Employee Benefit Plans
Schedule 5.18 Environmental Matters
Schedule 5.20 Permits, Franchises, Certificates & Licenses
Schedule 5.21 Data Processing Matters
The Registrant agrees to furnish supplementally a copy of these omitted
Schedules to the Commission upon request.