T:\CLG\AWW\PEIAPA.EXE
EXECUTION COPY
ASSET PURCHASE AGREEMENT
among
PENNSYLVANIA ENTERPRISES, INC.,
PENNSYLVANIA GAS AND WATER COMPANY,
AMERICAN WATER WORKS COMPANY, INC.,
AND
PENNSYLVANIA-AMERICAN WATER COMPANY
Dated as of
April 26, 1995
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS 1
1.1 Certain Definitions 1
ARTICLE 2 THE TRANSACTION 11
2.1 Sale and Purchase of Assets 11
2.2 Excluded Assets 12
2.3 Assumption of Certain Liabilities 13
2.4 Consent of Third Parties 16
2.5 Closing 16
2.6 Purchase Price 17
2.7 Deliveries and Proceedings at Closing 19
2.8 Allocation of Consideration 21
2.9 Prorations 21
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER 22
3.1 Qualification; No Interest in Other Entities 22
3.2 Authorization and Enforceability 23
3.3 No Violation of Laws or Agreements 23
3.4 Financial Statements 24
3.5 No Changes 24
3.6 Contracts 25
3.7 Permits and Compliance With Laws Generally 26
3.8 Environmental Matters 26
3.9 Consents 29
3.10 Title 29
3.11 Real Estate 29
3.12 Taxes 30
3.13 Patents and Intellectual Property Rights 30
3.14 Accounts Receivable 30
3.15 Labor Relations 30
3.16 Employee Benefit Plans 31
3.17 Absence of Undisclosed Liabilities 33
3.18 No Pending Litigation or Proceedings 33
3.19 Supply of Utilities 33
3.20 Insurance 33
3.21 Relationship with Customers 34
3.22 WARN Act 34
3.23 Condition of Assets. 34
3.24 Brokerage 34
3.25 All Assets 34
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER 35
4.1 Organization and Good Standing 35
4.2 Authorization and Enforceability 35
4.3 No Violation of Laws or Agreements 36
4.4 Consents 36
4.5 Financing 36
4.6 Brokerage 36
ARTICLE 5 ADDITIONAL COVENANTS 37
5.1 Conduct of Business 37
5.2 Negotiations 38
5.3 Disclosure Schedules 39
5.4 Mutual Covenants 39
5.5 Filings and Authorizations 40
5.6 Public Announcement 40
5.7 Further Assurances 41
5.8 Cooperation 41
5.9 Employees; Employee Benefits 43
5.10 Employee Pension Plan 46
5.11 Employee Savings Plan 47
5.12 Post-Retirement Health Care and Life Insurance 48
5.13 Taxes 48
5.14 Survey 49
5.15 PEI Guarantees 49
5.16 Assumption of Seller Debt 50
5.17 Schedule of Permits 50
5.18 Title Information 50
5.19 Transaction with Related Parties 50
5.20 Approval by PEI 51
5.21 Supplemental Information 51
5.22 Non-Competition 51
5.23 Insurance 51
ARTICLE 6 CONDITIONS PRECEDENT; TERMINATION 52
6.1 Conditions Precedent to Obligations of Buyer and Parent 52
6.2 Conditions Precedent to Obligations of Seller Parties 54
6.3 Termination 56
6.4 Termination Payments 57
ARTICLE 7 CERTAIN ADDITIONAL COVENANTS 58
7.1 Certain Taxes and Expenses 58
7.2 Maintenance of Books and Records 58
7.3 Survival 59
7.4 Indemnification 61
7.5 UCC Matters 66
7.6 Financial Statements 66
7.7 Collection of Receivables 66
ARTICLE 8 MISCELLANEOUS 66
8.1 Construction 66
8.2 Notices 67
8.3 Successors and Assigns 68
8.4 Exhibits and Schedules 68
8.5 Governing Law 68
8.6 Consent to Jurisdiction 68
8.7 Severability 69
8.8 No Third Party Beneficiaries 69
8.9 Entire Agreement 69
8.10 Amendment and Waiver 69
8.11 Counterparts 70
8.12 Headings 70
8.13 Definitions 70
8.14 No Implied Representation 70
8.15 Construction of Certain Provisions 70
8.16 Bulk Sales 71
List of Schedules
Schedule 1.1.1(a) Real Estate
Schedule 1.1.1(b) Common Plant Assets
Schedule 2.2 Excluded Assets
Schedule 2.6.4 Variations in Accounting Principles
Schedule 3.3 No Violation of Laws or Agreements
Schedule 3.4 Financial Statements
Schedule 3.5 No Changes
Schedule 3.6 Contracts
Schedule 3.7 Permits and Compliance with Laws Generally
Schedule 3.8 Environmental Matters - Generally
Schedule 3.8.10-I Compliance with Water Standards
Schedule 3.8.10-II Completion of Water Standards Remediation
Schedule 3.9 Seller and PEI Consents
Schedule 3.10 Title
Schedule 3.11 Real Estate Proceedings
Schedule 3.12 Taxes
Schedule 3.15 Labor Relations
Schedule 3.16.1 Employee Benefit Plans
Schedule 3.16.4 Employee Benefit Plans - Compliance
Schedule 3.16.9 Employee Benefit Plans - Extraordinary Benefits
Schedule 3.17 Absence of Undisclosed Liabilities
Schedule 3.18 No Pending Litigation or Proceedings
Schedule 3.19 Supply of Utilities
Schedule 3.20 Insurance
Schedule 3.22 WARN Act
Schedule 3.23 Condition of Assets
Schedule 3.25 All Assets
Schedule 4.3 No Violation of Laws or Agreements
Schedule 4.4 Buyer and Parent Consents
Schedule 5.1 Conduct of Business
Schedule 5.9.1 Employees
Schedule 5.10.2 Actuarial Assumptions and Methods
Schedule 5.12 Former Employees
Schedule 5.15 PEI Guarantee
Schedule 5.17 Schedule of Permits
Schedule 5.22 Non-Competition
Schedule 6.1.4 Required PPUC and Other Consents
Schedule 6.2.4 Required PPUC and Other Consents
TABLE OF EXHIBITS
Exhibit A - Assumption Agreement
Exhibit B - Assignment and Bill of Sale
Exhibit C - Deeds
Exhibit D - FIRPTA Affidavit of Seller
Exhibit E - Terms of Lease for Common Plant Assets
Exhibit F - Opinion of Moses & Gelso
Exhibit G - Operating Easement
Exhibit H - Opinion of Dechert Price & Rhoads
ASSET PURCHASE AGREEMENT
THIS IS AN ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of April
26, 1995, by and among Pennsylvania Enterprises, Inc., a Pennsylvania
corporation ("PEI"), Pennsylvania Gas and Water Company, a Pennsylvania
corporation ("Seller"), American Water Works Company, Inc., a Delaware
corporation ("Parent") and Pennsylvania-American Water Company, a Pennsylvania
corporation ("Buyer").
Background
A. PEI is a holding company which owns all the outstanding common stock,
no par value, stated value $10.00 per share, of Seller. Seller is a public
utility engaged, among other things, in the business of storing, supplying,
distributing and selling water to the public in certain areas in northeastern
Pennsylvania which business is regulated by the Pennsylvania Public Utility
Commission (the "Business"). Seller and PEI are sometimes hereinafter referred
to as the "Seller Parties."
B. Parent is a holding company which owns all of the outstanding common
stock, par value $5.50 per share, of Buyer. Buyer desires to purchase
substantially all of the assets, properties and rights of the Business, and
Seller desires to sell, and to cause the sale of, such assets, properties and
rights on the terms and subject to the conditions set forth in this Agreement.
Terms
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. As used in this
Agreement, the following terms shall have the respective meanings ascribed to
them in this Section:
1.1.1 "Acquired Assets" means, subject to Section 2.2, all of
Seller's right, title, and interest in, under and to all of the assets,
properties and rights exclusively used in the Business as a going concern of
every kind, nature and description existing on the Closing Date, wherever such
assets, properties and rights are located and whether such assets, properties
and rights are real, personal or mixed, tangible or intangible, and whether or
not any of such assets, properties and rights have any value for accounting
purposes or are carried or reflected on or specifically referred to in Seller's
books or financial statements, including all of the assets, properties and
rights exclusively relating to the Business enumerated below:
(a) all real property described in Schedule 1.1.1(a),
together with all fixtures, fittings, buildings, structures and other
improvements erected thereon, and easements, rights of way, water lines, rights
of use, licenses, hereditaments, tenements, privileges and other appurtenances
thereto or otherwise exclusively related to the Business (such as appurtenant
rights in and to public streets) (the "Real Estate");
(b) to the extent not included in clause (a) above, all
water tanks, reservoirs, water works, plant and systems, purification and
filtration systems, pumping stations, pumps, wells, mains, water pipes,
hydrants, equipment, machinery, vehicles, tools, dies, spare parts, materials,
water supplies, fixtures and improvements, construction in progress, jigs,
molds, patterns, gauges and production fixtures and other tangible personal
property, in transit or otherwise, used exclusively in the Business (the
"Equipment and Other Tangible Personal Property");
(c) notwithstanding the provisions of Section 2.2 but
subject to Section 2.4, all of Seller's water appropriation and flowage rights
referenced in the Order of Confirmation dated May 11, 1949 from the Pennsylvania
Water and Power Resources Board other than the water appropriation and flowage
rights relating to the reservoirs listed on Schedule 2.2; provided, however,
that Buyer shall have the right to the water in the Schedule 2.2 reservoirs in
the event of emergency or drought);
(d) all accounts receivable from customers, accrued utility
revenues, materials and supplies (at average cost net of reserve for
obsolescence) and prepayments attributable in each case exclusively to the
Business;
(e) all unamortized debt expense (related to the Assumed
Indebtedness), deferred treatment plant costs and carrying costs, deferred water
utility billings and other deferred charges (excluding deferred taxes
collectable) attributable exclusively to the Business of which recovery in
future rates is probable;
(f) Intellectual Property and goodwill, licenses and
sublicenses granted and obtained with respect thereto;
(g) subject to Section 2.4 hereof, (i) contracts,
commitments, agreements and instruments relating to the sale of any assets,
services, properties, materials or products, including all customer contracts,
operating contracts and distribution contracts relating exclusively to the
conduct of the Business; (ii) orders, contracts, supply agreements and other
agreements relating exclusively to the purchase of any assets, services,
properties, materials, or products for the Business; (iii) all leases of Real
Estate exclusively related to the Business; (iv) all other contracts, agreements
and instruments related exclusively to the Business; and (v) any such contracts,
agreements and other instruments referred to in clauses (i)-(iv) inclusive,
entered into between the date hereof and the Closing Date which are consistent
with the terms of this Agreement and are entered into in the ordinary course of
business consistent with past practice, and including in the case of clauses (i)
- - (iv) all such contracts, agreements and instruments more specifically listed
or described in Schedule 3.6, but specifically excluding the Collective
Bargaining Agreements (whether or not listed on Schedule 3.6) (the "Contracts");
(h) subject to Section 2.4 hereof, franchises, approvals,
permits, authorizations, licenses, orders, registrations, certificates,
variances, and other similar permits or rights obtained from any Authority
relating exclusively to the conduct of the Business and all pending applications
therefor (the "Permits");
(i) books, records, ledgers, files, documents (including
originally executed copies of written Contracts, to the extent available, and
copies to the extent not available), correspondence, Tax returns relating
exclusively to the Business, memoranda, forms, lists, plats, architectural
plans, drawings, and specifications, new product development materials, creative
materials, advertising and promotional materials, studies, reports, sales and
purchase correspondence, books of account and records relating to the
Transferred Employees (to the extent such transfer is not prohibited by law),
photographs, records of plant operations and materials used, quality control
records and procedures, equipment maintenance records, manuals and warranty
information, research and development files, data and laboratory books,
inspection processes, in each case, whether in hard copy or magnetic format, in
each instance, to the extent exclusively relating to the Business, the Acquired
Assets or the Transferred Employees;
(j) all rights or choses in action arising out of
occurrences before or after the Closing Date and exclusively related to any of
the Acquired Assets, including third party warranties and guarantees and all
related claims, credits, rights of recovery and set-off and other similar
contractual rights, as to third parties held by or in favor of Seller or PEI;
provided, however, that (notwithstanding the foregoing provisions of this
Section 1.1.1(j)), to the extent that Seller pays or discharges a liability
related to the Business or any of the Acquired Assets and related to such right
or chose in action (whether by reason of indemnification under this Agreement or
otherwise), Buyer will reassign or reconvey to Seller such right or chose in
action to the extent that such right or chose in action relates to a recovery of
amounts paid to Buyer;
(k) all rights to insurance and condemnation proceeds (i) to
the extent relating to the damage, destruction, taking or other impairment of
the Acquired Assets which damage, destruction, taking or other impairment occurs
on or prior to the Closing but only to the extent that the proceeds exceed the
amount of the write-down of the net book value of such Acquired Assets on the
books and records of Seller as a result of such damage, destruction, taking or
other impairment, and (ii) to the extent they relate to amounts paid by Buyer
for Damages to the extent Buyer does not receive payment pursuant to
Section 7.4.1(a); and
(l) the Benefit Plan assets transferred to a trust
established under an employee benefit plan maintained by Buyer in accordance
with Sections 5.10, 5.11 and 5.12.
Notwithstanding the foregoing, the Acquired Assets shall also include all of
Seller's right, title, and interest in and to the Common Plant Assets described
in Schedule 1.1.1(b).
1.1.2 "Adjusted Net Assets" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.3 "Affected Participant" has the meaning set forth as
Sections 5.10.1 and 5.11.1 hereof.
1.1.4 "Affiliate" of any Person means any Person, directly or
indirectly controlling, controlled by or under common control with such Person.
1.1.5 "Agreement" has the meaning set forth in the
introduction hereof.
1.1.6 "American Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.7 "American Savings Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.8 "Antitrust Division" has the meaning set forth in
Section 5.5 hereof.
1.1.9 "Assumed Benefit Plan" has the meaning set forth in
Section 3.16.6 hereof.
1.1.10 "Assumed Indebtedness" means the liabilities and
obligations from and after the Closing Date (except as set forth below) with
respect to (i) Luzerne County Exempt Facilities Revenue Refunding Bonds 1992
Series A including, without limitation, the Seller's obligations under the
Amended and Restated Project Facilities Agreement dated as of September 1, 1992
between Seller and the Luzerne County Industrial Development Authority (the
"IDA"), (ii) Luzerne County Exempt Facilities Revenue Bonds 1992 Series B
including, without limitation, the Seller's obligations under the Project
Facilities Agreement dated as of December 1, 1992 between Seller and the IDA,
(iii) Luzerne County Exempt Facilities Revenue Refunding Bonds 1993 Series A
including, without limitation, the Seller's obligations under the Second Amended
and Restated Project Facilities Agreement dated as of December 1, 1993 between
Seller and the IDA, (iv) Luzerne County Exempt Facilities Revenue Refunding
Bonds 1994 Series A including, without limitation, the Seller's obligations
under the Amended and Restated Project Facilities Agreement dated as of
November 1, 1994 between Seller and the IDA, (v) Loan Agreement dated
October 16, 1987 between Seller and the Pennsylvania Water Facilities Loan
Board, (vi) two Loan Agreements dated March 3, 1989 between Seller and the
Pennsylvania Infrastructure Investment Authority ("PENNVEST"), (vii) three Loan
Agreements dated December 3, 1992 between Seller and PENNVEST. For purposes of
clarity, except as set forth in the next sentence below, "Assumed Indebtedness"
shall not include any liability or obligation to the extent accrued prior to the
Closing Date or to the extent arising out of or relates to an event,
circumstance or occurrence prior to the Closing Date. "Assumed Indebtedness"
shall include the outstanding principal amount and the accrued but unpaid
interest owed by Seller on the debt obligations set forth in the first sentence
of this definition.
1.1.11 "Assumed Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.12 "Assumption Agreement" has the meaning set forth in
Section 2.3.2 hereof.
1.1.13 "Authority" means any federal, state, local or foreign
governmental or regulatory entity (or any department, agency, authority or
political subdivision thereof).
1.1.14 "Base Cash Purchase Price" has the meaning set forth in
Section 2.6.1 hereof.
1.1.15 "Beneficiary" means the Person(s) designated by an
Employee, by operation of law or otherwise, as entitled to compensation,
benefits, insurance coverage, payments or any other goods or services under a
Benefit Plan.
1.1.16 "Benefit Plans" has the meaning set forth in
Section 3.16.1 hereof.
1.1.17 "Business" has the meaning set forth in the Background
section hereof.
1.1.18 "Business Day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the Commonwealth of
Pennsylvania are authorized or obligated by law or executive order to close.
1.1.19 "Buyer" has the meaning set forth in the introduction
hereof.
1.1.20 "Buyer's Accountants" means Price Waterhouse LLP or any
firm of independent public accountants hereafter designated by Buyer for
purposes of this Agreement.
1.1.21 "Buyer's Adjusted Amount" has the meaning set forth in
Section 2.6.4(a) hereof.
1.1.22 "Ceiling" has the meaning set forth in Section 7.4.2(e)
hereof.
1.1.23 "CERCLA" has the meaning set forth in Section 3.8.2
hereof.
1.1.24 "CERCLIS" has the meaning set forth in Section 3.8.7
hereof.
1.1.25 "Closing" has the meaning set forth in Section 2.5
hereof.
1.1.26 "Closing Date" has the meaning set forth in Section 2.5
hereof.
1.1.27 "Closing Statement of Net Assets" has the meaning set
forth in Section 2.6.4(a) hereof.
1.1.28 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.29 "Collective Bargaining Agreements" means the agreements
identified as such on Schedule 3.6 hereto.
1.1.30 "Common Plant Assets" means the assets set forth on
Schedule 1.1.1(b).
1.1.31 "Competing Transaction" has the meaning set forth in
Section 5.2.
1.1.32 "Contracts" has the meaning set forth in
Section 1.1.1(g) hereof.
1.1.33 "Control" with respect to any Person means the
ownership, directly or indirectly, of at least a majority of the voting power of
each class of capital stock of such Person entitled to vote in the election of
directors of such Person generally.
1.1.34 "Damages" has the meaning set forth in Section 7.4.1(c)
hereof.
1.1.35 "DER" means the Pennsylvania Department of Environmental
Resources.
1.1.36 "Disclosure Schedules" means the Schedules referenced in
Articles 3, 4 and 5 of this Agreement, as amended or supplemented pursuant to
Section 5.3.
1.1.37 "Employees" has the meaning set forth in Section 5.9.1
hereof.
1.1.38 "Environmental Laws" has the meaning set forth in
Section 3.8 hereof.
1.1.39 "Equipment and Other Tangible Personal Property" has the
meaning set forth in Section 1.1.1(b) hereof.
1.1.40 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.1.41 "ERISA Affiliate" means (a) any corporation included
with any of the Seller Parties in a controlled group of corporations within the
meaning of Section 414(b) of the Code; (b) any trade or business (whether or not
incorporated) which is under common control with any of the Seller Parties
within the meaning of Section 414(c) of the Code; (c) any member of an
affiliated service group of which any of the Seller Parties is a member within
the meaning of Section 414(m) of the Code; or (d) any other person or entity
treated as an affiliate of any of the Seller Parties under Section 414(o) of the
Code.
1.1.42 "Excluded Assets" has the meaning set forth in
Section 2.2 hereof.
1.1.43 "Excluded Real Estate" means the real property of Seller
other than the real property described on Schedule 1.1.1(a).
1.1.44 "Financial Statements" has the meaning set forth in
Section 3.4 hereof.
1.1.45 "FIRPTA Affidavit" has the meaning set forth in
Section 2.7.1 hereof.
1.1.46 "Former Employees" means all salaried and hourly
employees once employed by Seller or any of its Affiliates, but who are no
longer so employed on the Closing Date.
1.1.47 "FTC" has the meaning set forth in Section 5.5 hereof.
1.1.48 "GAAP" has the meaning set forth in Section 3.4 hereof.
1.1.49 "Hazardous Substance" has the meaning set forth in
Section 3.8 hereof.
1.1.50 "HSR Act" has the meaning set forth in Section 3.9
hereof.
1.1.51 "IDA" shall mean the Luzerne County Industrial
Development Authority.
1.1.52 "IDA Financings" shall mean the indebtedness described
in clauses (i) through (iv) of the definition of Assumed Indebtedness
1.1.53 "Indemnified Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.54 "Indemnifying Party" has the meaning set forth in
Section 7.4.2(a) hereof.
1.1.55 "Intellectual Property" means the trademarks, patents,
trade names and copyrights and applications therefor, inventions, trade secrets,
and confidential business information (including know-how, formulas, water
filtration, purification and pumping processes and techniques, technical data,
designs, drawings, customer and supplier lists, and business and marketing plans
and proposals), all computer software (including data and related documentation
and object and source codes), whether in magnetic format or hard copy, and
tangible embodiments thereof (in whatever form or medium) of Seller, in each
case, utilized exclusively in the Business.
1.1.56 "Interim Statement of Net Assets" means the statement of
net assets for the Business at December 31, 1994.
1.1.57 "Interim Statement of Net Assets Date" means
December 31, 1994.
1.1.58 "IRS" has the meaning set forth in Section 3.16.2
hereof.
1.1.59 "Lien" means any lien, charge, claim, pledge, security
interest, conditional sale agreement or other title retention agreement, lease,
mortgage, security agreement, right of first refusal, option, restriction,
tenancy, license, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction).
1.1.60 "Material Adverse Effect" means a change or effect (or
series of related changes or effects) which has or is reasonably likely to have
a material adverse change in or effect upon the business, assets, condition
(financial or otherwise), or results of operations of the Business or the
Acquired Assets, taken as a whole.
1.1.61 "Mortgage Indenture" has the meaning set forth in
Section 6.1.4 hereof.
1.1.62 "On-site Conditions" has the meaning set forth in
Section 2.3.1(d).
1.1.63 "Operating Easement" has the meaning set forth in
Section 6.1.7(a) hereof.
1.1.64 "OSHA" has the meaning set forth in Section 3.7.1
hereof.
1.1.65 "PCBs" has the meaning set forth in Section 3.8.6
hereof.
1.1.66 "PEI" has the meaning set forth in the introduction
hereof.
1.1.67 "PEI Pension Plan" has the meaning set forth in
Section 5.10.1 hereof.
1.1.68 "PEI Savings Plan" has the meaning set forth in
Section 5.11.1 hereof.
1.1.69 "Permits" has the meaning set forth in Section 1.1.1(h)
hereof.
1.1.70 "Permitted Exceptions" has the meaning set forth in
Section 3.10 hereof; provided, however, that from and after the Closing
Permitted Exceptions shall not include any Lien arising under or resulting from
the Mortgage Indenture.
1.1.71 "Person" means an individual, a corporation, a
partnership, an association, an Authority, a trust or other entity or
organization.
1.1.72 "PPUC" has the meaning set forth in Section 5.5 hereof.
1.1.73 "Prime Rate" means the rate per annum announced from
time to time during the reference period by Citibank N.A. as its United States
prime, reference or base rate for commercial loans.
1.1.74 "Purchase Price" has the meaning set forth in
Section 2.6.1 hereof.
1.1.75 "Real Estate" has the meaning set forth in
Section 1.1.1(a) hereof.
1.1.76 "Recovery" has the meaning set forth in Section 7.4.2(l)
hereof.
1.1.77 "Release" or "Released" has the meaning set forth in
Section 3.8 hereof.
1.1.78 "Remedial Action" has the meaning set forth in
Section 3.8 hereof.
1.1.79 "Retained Liabilities" has the meaning set forth in
Section 2.3 hereof.
1.1.80 "Review Period" has the meaning set forth in
Section 2.6.4(b) hereof.
1.1.81 "SEC" has the meaning set forth in Section 5.8.3.
1.1.82 "Securities Filings" has the meaning set forth in
Section 5.8.2 hereof.
1.1.83 "Seller" has the meaning set forth in the introduction
hereof.
1.1.84 "Seller's Accountants" means Arthur Andersen LLP or any
other firm of independent public accountants hereafter designated by Seller for
purposes of this Agreement.
1.1.85 "Specified Liabilities" has the meaning set forth in
Section 7.4.2(f) hereof.
1.1.86 "Survey" has the meaning set forth in Section 5.14.1
hereof.
1.1.87 "Taxes" means any federal, state, local and foreign
income, payroll, withholding, excise, sales, use, personal property, use and
occupancy, business and occupation, mercantile, real estate, gross receipts,
license, employment, severance, stamp, premium, windfall profits, social
security (or similar unemployment), disability, transfer, registration, value
added, alternative, or add-on minimum, estimated, or capital stock and franchise
and other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
1.1.88 "Third Accounting Firm" has the meaning set forth in
Section 2.6.4(b) hereof.
1.1.89 "Threshold Amount" has the meaning set forth in
Section 7.4.2(e) hereof.
1.1.90 "Third Party Claim" has the meaning set forth in
Section 7.4(b)(i) hereof.
1.1.91 "Transferred Accounts" has the meaning set forth in
Section 5.11.2 hereof.
1.1.92 "Transaction Documents" has the meaning set forth in
Section 3.2 hereof.
1.1.93 "Transferred Employees" has the meaning set forth in
Section 5.9.2 hereof.
1.1.94 "Union Employees" has the meaning set forth in
Section 5.9.1 hereof.
1.1.95 "Utility Code" has the meaning set forth in Section 5.5
hereof.
1.1.96 "VEBAs" has the meaning set forth in Section 5.12
hereof.
1.1.97 "WARN Act" means the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. 2102 - 2109, as amended.
ARTICLE 2
THE TRANSACTION
2.1 Sale and Purchase of Assets. Subject to the terms and
conditions of this Agreement, at the Closing referred to in Section
2.5 below, PEI shall cause Seller to sell, assign, transfer,
deliver and convey to Buyer and Parent shall cause Buyer to purchase the
Acquired Assets for the Purchase Price specified in Section 2.6.
2.2 Excluded Assets. The following assets of
Seller shall be excluded from the Acquired Assets (the "Excluded Assets"):
2.2.1 assets of the Seller used in both the Business and in
Seller's gas business other than those described on Schedule 1.1.1(b);
2.2.2 cash and cash equivalents in transit, in hand or in bank
accounts;
2.2.3 except as otherwise set forth herein, assets
attributable or related to any Benefit Plan;
2.2.4 subject to Buyer's rights under clause (c) of the
definition of Acquired Assets, the Excluded Real Estate;
2.2.5 the stock record and minute books of Seller;
2.2.6 Acquired Assets disposed of by Seller after the date of
this Agreement to the extent such dispositions are not prohibited by this
Agreement;
2.2.7 except to the extent set forth in Sections 2.9 and 7.1,
rights to refunds of Taxes payable with respect to the business, assets,
properties or operations of any of the Seller Parties or any member of any
affiliated group of which any of them is a member, and which are treated as
Retained Liabilities under Section 2.3.3(b) below.
2.2.8 security and other deposits held in Seller's accounts;
2.2.9 accounts owing by and among Seller and its Affiliates;
2.2.10 notes receivable and other receivables (other than
accounts receivable from customers attributable exclusively to the Business);
2.2.11 all deferred tax assets or collectibles;
2.2.12 subject to Buyer's rights under clause (c) of the
definition of Acquired Assets, the reservoirs listed on Schedule 2.2 hereto; and
2.2.13 duplicate copies of all books and records transferred to
Buyer.
2.3 Assumption of Certain Liabilities.
2.3.1 Buyer shall not assume any liabilities of PEI or Seller
or any of their Affiliates, except that Buyer shall assume the following
specific liabilities and obligations:
(a) the obligations and liabilities set forth in Sections
5.9, 5.10, 5.11 and 5.12 hereof;
(b) all liabilities and obligations of Seller in respect of
the Contracts and Permits assigned or transferred to Buyer pursuant to this
Agreement in accordance with the respective terms thereof to the extent the
liability or obligation arises from and after the Closing Date;
(c) the Assumed Indebtedness;
(d) any liability, obligation or responsibility of Seller
for conditions at the Real Estate, whether based on statutory or common law, now
or hereafter in effect, known or unknown, contingent or actual, relating to or
arising from pollution, contamination or protection of the environment, human
health or safety or natural resources or relating to or arising from the
presence or Release or threat of Release of Hazardous Substances into the
environment at the Real Estate or into or from any building, structure, pipeline
or other facility at the Real Estate, including without limitation, any CERCLA
or similar liability under any federal or state law or regulation, except to the
extent Buyer has given written notice of a claim for indemnification pursuant to
Sections 7.3 and 7.4 hereof prior to the tenth anniversary of the Closing Date
(and if Buyer has given written notice prior to the tenth anniversary of the
Closing Date, to the extent that such claim is not entitled to indemnification
under Sections 7.3 and 7.4) (the foregoing, the "On-site Conditions");
(e) advances existing on the Closing Date for construction
of facilities relating to the Business; and
(f) liability for accrued but unused vacation pay for the
Transferred Employees to the extent provided in Section 5.9.2.
2.3.2 Any liabilities or obligations which are assumed by
Buyer pursuant to Section 2.3.1 above are hereinafter referred to as the
"Assumed Liabilities." At the Closing, Parent shall cause Buyer to execute and
deliver to Seller an assumption agreement, in substantially the form of the
Assumption Agreement attached hereto as Exhibit A (the "Assumption Agreement"),
pursuant to which Buyer shall assume the Assumed Liabilities. Each of Parent
and Buyer hereby irrevocably and unconditionally waives and releases the Seller
Parties from all Assumed Liabilities and all liabilities or obligations
exclusively relating to the Business to the extent arising from events or
occurrences after the Closing, including any liabilities created or which arise
by statute or common law, including CERCLA (it being understood that this shall
not constitute a waiver and release of any claims arising out of the contractual
relationships between Buyer and Seller).
2.3.3 Buyer shall not assume any liabilities, commitments or
obligations (contingent or absolute and whether or not determinable as of the
Closing) of any of the Seller Parties or any of their Affiliates except for the
Assumed Liabilities as specifically and expressly provided for above, whether
such liabilities or obligations relate to payment, performance or otherwise, and
all liabilities, commitments or obligations not expressly transferred to Buyer
hereunder as Assumed Liabilities are being retained by the Seller Parties, (the
"Retained Liabilities"). Each of the Seller Parties hereby irrevocably and
unconditionally waives and releases Buyer from all Retained Liabilities
including any liabilities created or which arise by statute or common law,
including CERCLA (it being understood that this shall not constitute a waiver
and release of any claims arising out of the contractual relationships between
Buyer and Seller).
Without limitation to the foregoing, all of the following shall be
considered Retained Liabilities and not Assumed Liabilities (except as specified
below) for the purposes of this Agreement:
(a) any product liability, toxic tort or similar claim for
injury to person or property, regardless of when made or asserted, to the extent
that it arises out of or is based upon any express or implied representation,
warranty, agreement or guarantee made by any of the Seller Parties or any of
their Affiliates prior to Closing, or alleged to have been made by any of such
Persons, or to the extent that it is imposed or asserted to be imposed by
operation of law, in connection with any service performed or product
distributed or sold by or on behalf of any of the Seller Parties or any of their
Affiliates prior to Closing, including any claim referred to above in this
Section 2.3.3(a) relating to water quality standards, any claim relating to any
product delivered in connection with the performance of services provided by
Seller and any claim seeking recovery for consequential damages, lost revenue or
income;
(b) except to the extent set forth in Sections 2.9 and 7.1
any federal, state, foreign or local income or other Tax payable with respect to
the business, assets, properties or operations of any of the Seller Parties or
any member of any affiliated group of which any of them is a member.
(c) any liability or obligation associated with or in
connection with the common plant assets (other than the liabilities and
obligations exclusively related to the Common Plant Assets set forth on Schedule
1.1.1(b));
(d) except as provided in Section 2.3.1 above, any liability
or obligation with respect to compensation or employee benefits of any nature
owed to any employees, agents or independent contractors of any of the Seller
Parties or any of their Affiliates, whether or not employed by Buyer after the
Closing, that arises out of or relates to events or conditions to the extent
occurring before the Closing Date;
(e) any liability or obligation of any of the Seller Parties
or any of their Affiliates existing as a result of any act, failure to act or
other state of facts or occurrence which constitutes a breach or violation of
any of Seller's or PEI's representations, warranties, covenants or agreements
contained in this Agreement, except to the extent set forth in Section 7.1.
(f) except to the extent set forth in Section 2.3.1(d), any
liability, obligation or responsibility of any of the Seller Parties, or any of
their Affiliates or predecessors, whether based on statutory or common law, now
or hereafter in effect, known or unknown, contingent or actual, relating to or
arising from pollution, contamination or protection of the environment, human
health or safety or natural resources or relating to or arising from the
presence or Release or threat of Release of Hazardous Substances into the
environment or into or from any building, structure, pipeline or other facility
or relating to or arising from the generation, use, storage, treatment,
disposal, transport or other handling of Hazardous Substances or sale of product
containing Hazardous Substances or from violation of any law relating to the
foregoing, including without limitation, any (A) CERCLA or similar liability
under any federal or state law or regulation or (B) any such liability
associated with businesses or assets of the Seller Parties other than the
Business;
(g) liabilities and obligations relating to the Business to
the extent arising prior to Closing (unless otherwise constituting Assumed
Liabilities) arising by operation of law under any common law or statutory
doctrine (including successor liability or de facto merger);
(h) any obligation or liability arising under any contract,
commitment, instrument or agreement (1) that is not transferred to Buyer as part
of the Acquired Assets, or (2) that relates to any breach or default (or to the
extent that it relates to an event which would, with the passing of time or the
giving of notice, or both, constitute a default) under any Contract, instrument
or agreement or to any services to be provided by Seller under any such
Contract, instrument or agreement to the extent that it arises out of or relates
to any period prior to the Closing Date;
(i) any liability or obligation in respect of the Excluded
Assets; or
(j) except for the Assumed Liabilities as specifically and
expressly set forth herein, any liability to the extent arising out of or
relating to the ownership or operation of the Acquired Assets or the Business
prior to the Closing Date (including any predecessor operations), any claims,
obligations or litigation to the extent arising out of or relating to events or
conditions occurring before the Closing Date, and any liability associated with
any business other than the Business.
2.4 Consent of Third Parties. On the Closing Date, PEI
shall cause Seller to assign to Buyer, and Parent shall cause
Buyer to assume, the Contracts and the Permits which are to be transferred to
Buyer as provided in this Agreement by means of the Assumption Agreement. To
the extent that the assignment of all or any portion of any Contract or Permit
shall require the consent (or result in a breach or violation thereof) of the
other party thereto or any other third party, and such consent shall not be
obtained prior to Closing, this Agreement shall not constitute an agreement to
assign any such Contract or Permit included in the Acquired Assets. In order,
however, to provide Buyer the full realization and value of every Contract of
the character described in the immediately preceding sentence, Seller agrees
that on and after the Closing, it will, at the request and under the direction
of Buyer, in the name of Seller or otherwise as Buyer shall specify, take all
reasonable actions (including without limitation the appointment of Buyer as
attorney-in-fact for Seller to proceed at Buyer's sole cost and expense) and do
or cause to be done all such things as shall in the reasonable opinion of Buyer
be necessary (a) to assure that the rights of Seller or its Affiliates under
such Contracts shall be preserved for the benefit of Buyer and (b) to facilitate
receipt of the consideration to be received by Seller or its Affiliates in and
under every such Contract. To the extent that Buyer does receive the benefits
of any such Contract pursuant to the preceding sentence, such Contract shall be
a Contract "assigned or transferred to Buyer pursuant to this Agreement" within
the meaning of Section 2.3.1(b) hereof. Nothing in this Section 2.4 shall in
any way diminish the obligations of Seller to obtain consents and approvals
under this Agreement.
2.5 Closing. Subject to the terms and conditions of this
Agreement, the closing of the sale and purchase of the Acquired Assets (the
"Closing") shall take place at 10 a.m., Philadelphia time, on a date mutually
satisfactory to Buyer and Seller which is no later than the fifth Business Day
after satisfaction (or waiver) of the conditions to Closing set forth in
Sections 6.1 and 6.2 hereof (other than those conditions which require the
delivery of any documents or the taking of other action, at the Closing) at the
offices of Dechert Price & Rhoads, 4000 Bell Atlantic Tower, 1717 Arch Street,
Philadelphia, PA 19103, or on such other date and at such other time or place
as may be mutually agreed upon by the parties hereto (the "Closing Date").
2.6 Purchase Price.
2.6.1 Purchase Price. Subject to the terms and conditions of
this Agreement, the aggregate purchase price based on and as of the date of the
Interim Statement of Net Assets would be Four Hundred Nine Million One Hundred
Forty-three Thousand Dollars ($409,143,000). Subject to the terms and
conditions of this Agreement, the aggregate purchase price to be paid by Buyer
for the purchase of the Acquired Assets (the "Purchase Price") shall be (I) Two
Hundred Fifty-Four Million Five Hundred Fifty-Five Thousand ($254,555,000) in
cash (the "Base Cash Purchase Price", the Base Cash Purchase Price as adjusted
in accordance with Section 2.6.3 is referred to as the "Initial Cash Payment"),
subject to adjustment pursuant to the provisions of this Agreement (including
Section 2.6.3, Section 2.6.4 and Section 2.9 of this Agreement) and (II) the
assumption by Buyer of the Assumed Liabilities.
2.6.2 Payment of Initial Cash Payment. Subject to the terms
and conditions of this Agreement, the Initial Cash Payment shall be paid by
Buyer on the Closing Date by federal or other wire transfer of immediately
available funds to the account designated by Seller in writing at least two (2)
Business Days prior to the Closing Date.
2.6.3 Estimated Closing Statement. At least five (5) business
days prior to the Closing Date, Seller shall deliver to Buyer a statement of net
assets (the "Estimated Statement of Net Assets") reflecting its good faith
calculation of the Adjusted Net Assets of the Business as of the last day of the
latest calendar month for which financial statements of Seller are available
(the "Estimated Adjusted Net Assets"). The Estimated Statement of Net Assets
shall be prepared in the same manner and utilizing the same accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets, except as set forth on Schedule 2.6.4. The Base Cash
Purchase Price shall be increased or decreased on a dollar for dollar basis by
the amount, if any, by which the Estimated Adjusted Net Assets is greater than
or less than Two Hundred Forty-Eight Million, Fifty-Five Thousand Dollars
($248,055,000) (such increase or decrease, as the case may be, is referred to
herein as the "Estimated Net Asset Adjustment").
2.6.4 Post-Closing Adjustment to Purchase Price.
(a) Within 90 days after the Closing, Buyer shall prepare
and deliver to the Seller Parties a Statement of Net Assets (the "Closing
Statement of Net Assets") which reflects the Adjusted Net Assets of the
Business, as of midnight immediately preceding the Closing Date, based on actual
financial performance and calculated in the same manner, utilizing the same
accounting principles, policies and methods utilized in preparing the Interim
Statement of Net Assets (except as set forth on Schedule 2.6.4), together with
(A) an audit report of Buyer's Accountants stating that the Closing Statement of
Net Assets has been prepared utilizing the same generally accepted accounting
principles, policies and methods used in the preparation of the Interim
Statement of Net Assets (except as set forth on Schedule 2.6.4) and (B) a
calculation of Buyer's determination of the amount of increase or decrease in
the amount of the Adjusted Net Assets of the Business from the Interim Statement
of Net Assets Date to the Closing Date which is derived from the Closing
Statement of Net Assets ("Buyer's Adjustment Amount"). For purposes of this
Agreement, "Adjusted Net Assets " with respect to the Business means (1) all
assets constituting Acquired Assets minus (2) all Assumed Liabilities (other
than liabilities assumed by Buyer pursuant to Sections 5.9, 5.10, 5.11 and 5.12,
but including accrued interest on the Assumed Indebtedness), minus (3) an amount
equal to the aggregate difference between: (i) the cost of each Transferred
Employee's vacation entitlement for the year in which the Closing occurs
multiplied by a fraction, the numerator of which is the number of days in such
year on or before Closing and the denominator of which is 365, and (ii) the cost
of the vacation days each Transferred Employee has taken on or before Closing,
minus (4) the excess of contributed property related to the Business over
$10,104,000. Buyer shall pay the fees and expenses of Buyer's Accountants
incurred in connection with this Section 2.6.4. The Seller Parties agree to
cooperate, and agree to cause Seller's Accountants to cooperate, with Buyer and
Buyer's Accountants in connection with the preparation of the Closing Statement
of Net Assets and related information, and shall provide to Buyer and Buyer's
Accountants such books, records and information as may be reasonably requested
from time to time, including the work papers of Seller's Accountants. Buyer
will give Seller and its representatives access during the normal business hours
of Buyer to the personnel, books and records of Buyer and the work papers of
Buyer's Accountants to assist Seller in the review of the Closing Statement of
Net Assets and related matters. Notwithstanding the foregoing, the Closing
Statement of Net Assets, Adjusted Net Assets and the Buyer's Adjustment Amount
shall also be adjusted to reflect the items specified in Section 2.9 to the
extent set forth therein. Buyer agrees that following the Closing through the
date on which the Closing Statement of Net Assets is delivered it will not take
any actions with respect to any accounting books, records, policies or
procedures on which the Closing Statement of Net Assets is to be based that
would make it impossible or impracticable to calculate the Adjusted Net Assets
in the manner and utilizing the methods required hereby. Without limiting the
generality of the foregoing, no changes shall be made in any reserve or other
account existing as of the date of the Interim Statement of Net Assets except in
the ordinary course or as a result of events occurring after the date of the
Interim Statement of Net Assets and, in such event, only in a manner consistent
with past practices of Seller.
(b) Seller may dispute any amounts reflected on the Closing
Statement of Net Assets or in the Buyer's Adjustment Amount, provided, however,
that Seller shall notify Buyer in writing of each disputed amount, and specify
the amount thereof in dispute and the basis of such dispute, within 30 days of
the Seller's receipt of the Closing Statement of Net Assets, and the Buyer's
Adjustment Amount (such 30 day period hereinafter referred to as the "Review
Period"). In the event of a dispute with respect to the Closing Statement of
Net Assets or the Buyer's Adjustment Amount, Buyer and Seller shall attempt to
reconcile their differences and any resolution by them as to any disputed
amounts shall be final, binding and conclusive on the parties. If Buyer and
Seller are unable to reach a resolution of such differences within 30 days of
receipt of Seller's written notice of dispute to Buyer, Buyer and Seller shall
submit the amounts remaining in dispute for resolution to an independent
accountant firm of national reputation mutually appointed by Seller and Buyer
(such independent accounting firm being herein referred to as the "Third
Accounting Firm"), which shall be requested to determine and report to the
parties, within 30 days after such submission, upon such remaining disputed
amounts, and such report shall be final, binding and conclusive on the parties
hereto with respect to the amounts disputed. The fees and disbursements of the
Third Accounting Firm shall be allocated between Buyer and the Seller Parties so
that the Seller Parties' share of such fees and disbursements shall be in the
same proportion that the aggregate amount of such remaining disputed amounts so
submitted by the Seller Parties to the Third Accounting Firm that is
unsuccessfully disputed by the Seller Parties (as finally determined by the
Third Accounting Firm) bears to the total amount of such remaining disputed
amounts so submitted by the Seller Parties to the Third Accounting Firm. The
Seller Parties shall pay the fees and expenses of Seller's Accountants incurred
in connection with this Section 2.6(d). Buyer's Adjustment Amount, if there are
no disputes with respect thereto, or Buyer's Adjustment Amount as adjusted after
the resolution of all disputes with respect thereto in accordance herewith,
shall be referred to as the "Final Net Asset Adjustment."
(c) If the Base Cash Purchase Price plus (or minus, if
negative) the Final Net Asset Adjustment exceeds the Initial Cash Payment, then
within five (5) business days after final determination thereof Buyer shall pay
Seller the amount of such excess together with interest thereon for the period
commencing on the Closing Date through the date of payment calculated at the
Prime Rate in cash by federal or other wire transfer of immediately available
funds, or certified or bank cashier's check. If the Initial Cash Payment
exceeds the sum of the Base Cash Purchase Price plus (or minus, if negative) the
Final Net Asset Adjustment, then within five (5) business days after final
determination thereof Seller shall pay Buyer the amount of such excess together
with interest thereon for the period commencing on the Closing Date through the
date of payment calculated at the Prime Rate in cash by federal or other wire
transfer of immediately available funds, or certified or bank cashier's check.
2. Deliveries and Proceedings at Closing. Subject to the
terms and conditions of this Agreement,
at the Closing:
2.7.1 Deliveries to Buyer. PEI shall cause Seller to deliver
to Buyer:
(a) bills of sale and instruments of assignment to the
Acquired Assets, duly executed by Seller, substantially in the form of Exhibit B
hereto and;
(b) the consents to transfer, of all transferable or
assignable Contracts, Intellectual Property, Permits (including Environmental
Permits), to the extent specifically required hereunder;
(c) title certificates to any motor vehicles included in
the Acquired Assets, duly executed by Seller (together with any other transfer
forms necessary to transfer title to such vehicles);
(d) one or more deeds of conveyance to the Real Estate to
Buyer, without covenant or warranty of title, duly executed and acknowledged by
Seller and in recordable form, each substantially in the form of Exhibit C
hereto;
(e) the Foreign Investment in Real Property Tax Act
Certification and Affidavit for each parcel of Real Estate, duly executed by the
Seller Parties, substantially in the form of Exhibit D hereto (the "FIRPTA
Affidavit");
(f) the certificates, opinions and other documents required
to be delivered by PEI and Seller pursuant to Section 6.1 hereof and certified
resolutions evidencing the authority of Seller as set forth in Section 3.2
hereof;
(g) all agreements and other documents required by this
Agreement;
(h) a receipt for the payment of the Initial Cash Payment
duly executed by Seller;
(i) all such other instruments of conveyance as shall, in
the reasonable opinion of Buyer and its counsel, be necessary to transfer to
Buyer the Acquired Assets in accordance with this Agreement and where necessary
or desirable, in recordable form;
(j) a lease of that portion of the Common Plant Assets which
Buyer and Seller shall determine is reasonably required for the operation of the
Business, substantially on terms set forth in Exhibit E; and
(k) the Operating Easement duly executed by Seller.
2.7.2 Deliveries By Buyer to the Seller Parties. Buyer will
deliver to the Seller Parties:
(a) wire transfer of immediately available funds in an
amount equal to the Initial Cash Payment;
(b) the Assumption Agreement, duly executed by Buyer;
(c) the Operating Easement duly executed by Buyer;
(d) the certificates, opinions and other documents required
to be delivered by Buyer pursuant to Section 6.2 hereof; and
(e) all such other instruments of assumption as shall, in
the reasonable opinion of Seller and its counsel, be necessary for Buyer to
assume the Assumed Liabilities in accordance with this Agreement.
2.8 Allocation of Consideration. Buyer and Seller shall
endeavor in good faith to agree upon an allocation of the
consideration paid by Buyer to Seller among the Acquired Assets within 90 days
after the Closing Date; Buyer and Seller shall endeavor in good faith to
determine the value of the Acquired Assets subject to real estate transfer taxes
within 90 days after the date hereof. If Buyer and Seller are unable to agree
on the allocation, then, if Buyer so requests, the allocation shall be
determined by an appraiser selected by Buyer and reasonably acceptable to
Seller; the Buyer shall pay the fees and expenses of such appraisal. Buyer and
the Seller Parties shall each report the federal, state and local income and
other tax consequences of the transactions contemplated by this Agreement (which
for purposes of this Agreement includes the Transaction Documents) in a manner
consistent with such allocation if determined in accordance with the preceding
two sentences including, but not limited to, the preparation and filing of
Form 8594 under Section 1060 of the Code (or any successor form or successor
provision of any future tax law, or any comparable provision of state, or local
tax law) with their respective federal, state and local income tax returns for
the taxable year that includes the Closing Date.
2.9 Prorations. The parties hereto agree that the
following expenses shall be calculated and pro rated as of the Closing Date,
with Seller responsible for such expenses for the period up to the Closing Date,
and Buyer to be responsible for the period on and after the Closing Date:
2.9.1 personal and real property taxes (on the basis on which
the same were assessed and paid) and sales, occupation and use taxes, in each
case, to the extent relating to the Business and except as otherwise provided in
Section 7.1;
2.9.2 electric, fuel, gas, telephone, sewer and utility
charges, in each case, to the extent relating to the Business;
2.9.3 rentals and other charges under Contracts to be assumed
by Buyer pursuant to Section 2.3 (except to the extent provided in
Section 2.3.3(h); and
2.9.4 charges under maintenance and service contracts and
other Contracts (except to the extent provided in Section 2.3.3(h), and fees
under Permits to be transferred to Buyer as part of the Acquired Assets.
To the extent that any taxing authority shall assess or otherwise
calculate real property taxes on a basis that includes both a portion of the
Real Estate and a portion of the Excluded Real Estate, the parties agree that
the following allocation principles shall apply. The parties shall each
endeavor to obtain from the taxing authority a statement specifying the
applicable taxes each party is obligated to pay. In the event that such a
statement is not obtained, (a) the party receiving a tax bill shall be
responsible for paying the tax, and the other party shall be required to
reimburse the first party promptly following determination of the allocation,
(b) the taxes based on the value of land shall be allocated based on the square
footage of the property owned by each of them, (c) the taxes based on the value
of improvements shall be allocated based on the assessed value, if known, of the
improvements located on the lands of each party, and (d) all other taxes shall
be allocated by mutual agreement in a manner generally consistent with the
foregoing. The parties each agree to negotiate in good faith regarding these
allocations.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF SELLER
Each of Seller and PEI jointly and severally represent and warrant to Buyer
as follows:
3.1 Qualification; No Interest in Other Entities.
3.1.1 PEI is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and has
all requisite corporate power and corporate authority to own and vote the common
stock, no par value, stated value $10.00 per share of Seller.
3.1.2 Seller is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and has
all requisite corporate power and corporate authority to own, lease and operate
the Acquired Assets and the Business as presently being conducted. Seller is
qualified to do business and is in good standing as a foreign corporation in all
jurisdictions wherein the nature of the business conducted by it or Seller's
ownership or use of assets and properties make such qualification necessary
except such failures to be qualified or to be in good standing, if any, which
when taken together with all such other failures of Seller do not have a
Material Adverse Effect.
3.1.3 No shares of any corporation or any ownership or other
investment interest, either of record, beneficially or equitably, in any Person
are included in the Acquired Assets.
3.2 Authorization and Enforceability. Each of Seller and
PEI has full corporate power and corporate authority to execute, deliver
and perform this Agreement and all other agreements and instruments to be
executed by them in connection herewith (such other agreements and
instruments being hereinafter referred to
collectively as the "Transaction Documents"). The execution, delivery and
performance by PEI and Seller of this Agreement and the Transaction Documents to
which PEI and/or Seller is a party have been duly authorized by all necessary
corporate action on the part of each of them, subject to the approval of each of
Seller's and PEI's respective common (and in the case of Seller, preferred)
stockholders. This Agreement has been duly executed and delivered by Seller and
PEI, and as of the Closing Date the other Transaction Documents will be duly
executed and delivered by Seller and PEI. This Agreement is a legal, valid and
binding obligation of Seller and PEI, enforceable against them in accordance
with its terms except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court. As of the
Closing Date, each of the other Transaction Documents to which PEI and Seller is
a party will be duly executed and delivered by PEI and Seller and will
constitute the legal, valid and binding obligations of Seller and PEI,
enforceable against them in accordance with its respective terms except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court.
3.3 No Violation of Laws or Agreements. The execution,
delivery, and performance of this Agreement and the Transaction Documents
by PEI and/or Seller do not, and the consummation of the transactions
contemplated by this Agreement and the Transaction Documents by PEI
and Seller, will not (a) contravene any provision of the Restated
Articles of Incorporation or Bylaws of PEI or Seller; or
(b) except as set forth on Schedule 3.3, violate, conflict with, result in a
breach of, or constitute a default (or an event which would, with the passage of
time or the giving of notice or both, constitute a default) under, or result in
or permit the termination, modification, acceleration, or cancellation of, or
result in the creation or imposition of any Lien of any nature whatsoever upon
any of the Acquired Assets or give to others any interests or rights therein
under (i) any indenture, mortgage, loan or credit agreement, license,
instrument, lease, contract, plan, permit or other agreement or commitment, oral
or written, to which PEI or Seller is a party, or by which the Business or any
of the Acquired Assets may be bound or affected, except for such violations,
conflicts, breaches, terminations, modifications, accelerations, cancellations,
Liens, interests or rights which, individually and in the aggregate, do not have
a Material Adverse Effect or will be cured, waived or terminated prior to the
Closing Date, or (ii) any judgment, injunction, writ, award, decree,
restriction, ruling, or order of any court, arbitrator or Authority or any
applicable constitution, law, ordinance, rule or regulation, to which Seller or
PEI is subject other than those violations or conflicts which individually and
in the aggregate would not have a Material Adverse Effect.
3.4 Financial Statements. Seller has previously delivered to
Buyer the financial statements of Seller contained in Schedule 3.4
(collectively, the "Financial Statements") and the Interim
Statement of Net Assets. The Financial Statements of Seller fairly present in
all material respects the financial position and the results of operations of
Seller in accordance with generally accepted accounting principles ("GAAP")
consistently applied. Except as set forth on Schedule 3.4, the Interim
Statement of Net Assets (a) has in all material respects been derived from the
books and records of Seller and reflects the separation of the operations
associated with the Business from other operations of Seller; and (b) fairly
presents in all material respects the Acquired Assets and Assumed Liabilities as
of the Interim Statement of Net Assets Date and has been prepared in accordance
with GAAP. The Financial Statements as of and for the period ending
December 31, 1994 have been prepared in the same manner and utilizing the same
accounting principles, policies and methods used in the Financial Statements as
of and for the period ending December 31, 1993 insofar as such Financial
Statements relate to Acquired Assets or Assumed Liabilities. The Interim
Statement of Net Assets has been prepared in the same manner and utilizing the
same accounting principles, policies and methods used in the Financial
Statements insofar as the Financial Statements relate to Acquired Assets or
Assumed Liabilities. The financial statements included in the Annual Report to
the PPUC for the year ended December 31, 1993 were prepared in all material
respects in accordance with the rules and regulations of the PPUC.
3.5 No Changes. Since the Interim Statement of Net
Assets Date to the date hereof, Seller has conducted the Business as presently
operated only in the ordinary course of business consistent with past practice.
Since the Interim Statement of Net Assets Date, except as disclosed in Schedule
3.5, there has not been:
3.5.1 any Material Adverse Effect;
3.5.2 prior to the date of this Agreement, any change in the
salaries or other compensation payable or to become payable to, or any advance
(excluding advances for ordinary business expenses) or loan to, any Transferred
Employee, or material change or material addition to, or material modification
of, other benefits (including any bonus, profit-sharing, pension or other plan
in which any of the Transferred Employees participate) to which any of the
Transferred Employees may be entitled, or any payments to any pension,
retirement, profit-sharing, bonus or similar plan other than in any such case
(i) in the ordinary course consistent with past practice, (ii) as required by
law, or (iii) as required by the Collective Bargaining Agreements;
3.5.3 any alteration in any material respect of the customary
practices with respect to the collection of accounts receivable of the Business
or the provision of discounts, rebates or allowances;
3.5.4 any disposition of or failure to keep in effect any
rights in, to or for the use of any Permit of the Business which individually or
in the aggregate would have a Material Adverse Effect;
3.5.5 any damage, destruction or loss affecting the Business
which individually or in the aggregate would have a Material Adverse Effect
whether or not covered by insurance;
3.5.6 prior to the date of this Agreement, any change by
Seller in its method of accounting or keeping its books of account or accounting
practices with respect to the Business except as required by GAAP and is set
forth on Schedule 3.5; or
3.5.7 prior to the date of this Agreement, any sale, transfer
or other disposition of any material assets, properties or rights of the
Business, except in the ordinary course of business consistent with past
practice.
3.6 Contracts. As of the date of this Agreement,
Schedule 3.6 contains a list of all Contracts (other than with respect to which
the Business' total annual liability or expense is less than (a) $100,000 per
such Contract and (b) $3,000,000 per all such Contracts). Seller has delivered
to Buyer a correct and complete copy of each written agreement listed in
Schedule 3.6. Except as disclosed on Schedule 3.6, with respect to each
Contract, neither Seller nor, to the Seller Parties' knowledge, any other party
thereto, is in breach or default, and to the Seller Parties' knowledge, no event
has occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
Contract, except in each case where such breaches, terminations, modifications,
accelerations or defaults, individually or in the aggregate, do not have a
Material Adverse Effect. Except as set forth in Schedule 3.6, there are no
disputes pending or to the best of the Seller Parties' knowledge, threatened,
under or in respect of any of the Contracts, other than those that individually
and in the aggregate do not have a Material Adverse Effect.
3.7 Permits and Compliance With Laws Generally.
3.7.1 Except as disclosed on Schedule 3.7, Seller possesses
and is in compliance with all Permits required to operate the Business as
presently operated and to own, lease or otherwise hold the Acquired Assets under
all applicable laws, rules, regulations, ordinances and codes, including
Environmental Laws (as defined below), except to the extent that any failure to
possess, or to comply with, any Permit, laws, rules, regulations or orders would
not, individually or in the aggregate, have a Material Adverse Effect. Except
as disclosed in Schedule 3.7, the Business is conducted by Seller in compliance
with all applicable laws (including the Occupational Safety and Health Act and
the rules and regulations thereunder ("OSHA"), zoning, building and similar laws
and Environmental Laws), rules, regulations, ordinances, codes, judgments and
orders, except for such failures to comply which do not individually or in the
aggregate have a Material Adverse Effect. All Permits of Seller relating to the
operation of the Business are in full force and effect, other than those the
failure of which to be in full force and effect would not individually or in the
aggregate have a Material Adverse Effect. There are no proceedings pending or,
to the Seller Parties' knowledge, threatened that seek the revocation,
cancellation, suspension or any adverse modification of any such Permits
presently possessed by Seller other than those revocations, cancellations,
suspensions or modifications which do not individually or in the aggregate have
a Material Adverse Effect.
3.7.2 Except as set forth on Schedule 3.7, no outstanding
notice, citation, summons or order has been issued, no outstanding complaint has
been filed, no outstanding penalty has been assessed and no investigation or
review is pending or, to the knowledge of the Seller Parties, threatened, by any
Authority or other Person with respect to any alleged (i) violation by Seller or
any Affiliate of Seller relating to the Business of any law, ordinance, rule,
regulation, code or order of any Authority; or (ii) failure by Seller or any
Affiliate to have any Permit required in connection with the conduct of the
Business or otherwise applicable to the Business (including the Acquired
Assets), except, in each case, where such violations or failures, individually
or in the aggregate, would not have a Material Adverse Effect.
3.8 Environmental Matters. Except as set forth on Schedule
3.8 hereto, and with such exceptions as are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect:
3.8.1 Seller has not disposed of or arranged for the disposal
of or Released any Hazardous Substances, other than in conformity with
applicable laws and regulations, at any Real Estate, or, in connection with the
Business or Acquired Assets, at any other facility, location, or other site.
3.8.2 Seller has not received any written notice or request
for information with respect to, and to the best of the Seller Parties'
knowledge, Seller has not been designated a potentially liable party for
remedial action or response costs, in connection with any Real Estate, or, as of
the date hereof, with respect to the Business or Acquired Assets, at any other
facility, location, or other site under the federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or comparable state
statutes.
3.8.3 To the best of the Seller Parties' knowledge, except for
such use or storage of Hazardous Substances as is incidental to the conduct of
the Business, which use and storage is or has been in compliance with applicable
laws and regulations, and which use and storage has not caused any condition
that requires Remedial Action, no Real Estate has been used for the storage,
treatment, generation, processing, production or disposal of any Hazardous
Substances or as a landfill or other waste disposal site in violation of any
law, rule or regulation.
3.8.4 To the best of the Seller Parties' knowledge underground
storage tanks are not, and have not in the past been, located on or under any
Real Estate.
3.8.5 There are no pending or unresolved claims against Seller
or the Business for investigatory costs, cleanup, removal, remedial or response
costs, or natural resource damages arising out of any Releases or threat of
Release of any Hazardous substances at any Real Estate or, as of the date
hereof, with respect to the Business or the Acquired Assets or at any other
facility, location, or other site.
3.8.6 To the best of the Seller Parties' knowledge, no
polychlorinated biphenyls ("PCBs") or asbestos-containing materials are located
at or in any Real Estate in violation of Environmental Laws or which require
Remedial Action.
3.8.7 To the best of the Seller Parties' knowledge, no
Hazardous Substance managed or generated by or on behalf of Seller at the Real
Estate or in connection with the Business or Acquired Assets has come to be
located at any site that is listed or formally proposed for listing under
CERCLA, the Comprehensive Environmental Response, Compensation and Liability
Information System ("CERCLIS"), or any similar state list or that is the subject
of federal, state, or local enforcement actions or investigations.
3.8.8 The Seller Parties know of no facts or circumstances
related to environmental matters (i) in connection with the operation of the
Business or (ii) concerning the Real Estate, that are reasonably likely to
result in any material reduction in the quality or quantity of water available
for supply to the Seller Parties' customers.
3.8.9 The Seller Parties will within thirty (30) days of the
date hereof provide Buyer with copies of all written environmental audits or
investigations of which they are aware (after due inquiry) prepared for the Real
Estate or operations of the Business.
3.8.10 Except as set forth in Schedule 3.8.10-I or the Seller
Parties' Annual Reports on Form 10-K for the year ended December 31, 1994:
(a) The Seller Parties (including for purposes of
Section 3.8.10(a) and (b), Affiliates and predecessors of the Seller Parties)
are and have been for the past three years in full compliance with all federal
and state primary drinking water standards;
(b) The Seller Parties are and have been for the past three
years in full compliance with all federal and state secondary drinking water
standards; and
(c) As to all outstanding violations of state or federal
drinking water standards, as of the date hereof, the Seller Parties have
completed or are in the process of completion in accordance with all applicable
deadlines, all actions required by Environmental Law or Authorities to correct
or otherwise respond to such violations. The estimated dates of completion of
such actions are listed on Schedule 3.8.10-II.
3.8.11 None of the Seller Parties will be required to place any
notice or restriction relating to the presence of Hazardous Substances in the
deed to any Real Estate, or in any written instrument accompanying this
Agreement, and no Real Estate has such a notice or restriction in its deed or
any other written instrument relating to the purchase, lease or rental of such
property.
For the purposes of these Sections 3.7 and 3.8: (A) "Remedial Action" means all
actions to (x) clean up, remove, treat or in any other way respond to any
presence, Release or threat of Release of Hazardous Substances; (y) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Substances so it does not endanger or threaten to endanger public or employee
health or welfare or the environment; or (z) perform studies, investigations or
monitoring necessary or required to investigate the foregoing; (B) "Environm
ental Laws" means any common law or federal, state or local law, statutes, rule,
regulation, ordinance, code, judgment or order relating to the protection of the
environment or human health and safety and includes, but is not limited to,
CERCLA (42 U.S.C. 9601, et seq.), the Clean Water Act (33 U.S.C. 1251 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.),
the Toxic Substances Control Act (15 U.S.C. 2601 et seq.), the Safe Drinking
Water Act (42 U.S.C. 300f et seq.) and the Oil Pollution Act of 1990 (33
U.S.C. 2701 et seq.), each as has been or may be amended and the regulations
promulgated pursuant thereto; (C) "Released" means released, spilled, leaked,
discharged, disposed of, pumped, poured, emitted, emptied, injected, leached,
dumped or allowed to escape; and (D) "Hazardous Substances" means hazardous or
toxic or polluting substance or waste or contaminant, including petroleum
products, PCBs and radioactive materials.
3.9 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by Seller or PEI of this
Agreement, the Transaction Documents, or the consummation of the transactions
contemplated hereby or thereby by the Seller Parties, including without
limitation in connection with the assignment of the Contracts and Permits
contemplated hereby, except (i) as required by the Hart-Scott Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), (ii) as specified on Schedule 3.9 and
(iii) for such other consents, approvals, authorizations, registrations or
filings the failure of which to obtain or make would not individually or in the
aggregate have a Material Adverse Effect.
3.10 Title. Seller has good and valid title to all of
the Acquired Assets constituting personal property, good and marketable title in
fee simple to all of the owned Acquired Assets constituting Real Estate and good
and valid leasehold title to all of the leased Acquired Assets constituting Real
Estate, in each case, free and clear of Liens subject only to the Permitted
Exceptions. "Permitted Exceptions" as used herein shall mean (a) the Liens set
forth in Schedule 3.10 hereto, (b) Liens securing Taxes, assessments,
governmental charges or levies, or the claims of materialmen, mechanics,
carriers and like persons, all of which are not yet due and payable or which are
being contested in good faith or (c) such other Liens which, individually or in
the aggregate, do not have a Material Adverse Effect (it being understood that
to the extent a Permitted Exception relates to or arises from a Retained
Liability, Seller shall still be liable for such Retained Liability to the
extent set forth herein).
3.11 Real Estate.
3.11.1 As of the date hereof, Seller has not received any
written or oral notice for assessments for public improvements against the Real
Estate which remains unpaid, and to the best knowledge of the Seller Parties, no
such assessment has been proposed. Except as set forth on Schedule 3.11, as of
the date hereof, there is no pending condemnation, expropriation, eminent domain
or similar proceeding affecting all or any portion of any of the Real Estate and
to the best knowledge of the Seller Parties no such proceeding is threatened.
3.11.2 Except as disclosed on Schedule 3.11, as of the date
hereof, Seller is not a lessee under any Contract relating to the use or
occupancy of the Real Estate involving annual payments in excess of $25,000.
3.12 Taxes. The Seller Parties have (a) timely filed all
material returns and reports for Taxes, including information returns, that are
required to have been filed in connection with, relating to, or arising out of,
the Business, (b) paid all Taxes that are shown to have come due pursuant to
such returns or reports and (c) paid all other material Taxes not required to be
reported on returns in connection with, relating to, or arising out of, or
imposed on the property of the Business for which a notice of assessment or
demand for payment has been received or which have otherwise become due. To the
best of the Seller Parties' knowledge, all such returns or reports have been
prepared in accordance with all applicable laws and requirements in all material
respects. Except to the extent disclosed on Schedule 3.12, none of the assets
of the Business or constituting any of the Acquired Assets (a) is property that
is required to be treated as owned by another Person pursuant to the "safe
harbor lease" provisions of former Section 168(f)(8) of the Code, (b) is "tax-
exempt use property" within the meaning of Section 168(h) of the Code or (c)
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
3.13 Patents and Intellectual Property Rights.
To the best of Seller's knowledge, the operations of Seller do not make
any unauthorized use of any Intellectual
Property except for any such unauthorized uses which do not have a Material
Adverse Effect. Assuming the consents listed as items 12 through 17 on Schedule
3.3 are obtained, Buyer will not lose any of Seller's rights to, or be required
to pay increased royalties for, any Intellectual Property included in the
Acquired Assets as a result of the Closing and the consummation of the
transactions contemplated by this Agreement, except for any such rights or such
increased royalties the loss or payment of which would, individually or in the
aggregate, not have a Material Adverse Effect.
3.14 Accounts Receivable. The accounts receivable of Seller
arising from the Business as set forth on the Interim Statement of Net
Assets or arising since the date thereof have arisen out of bona fide
sales and deliveries of goods, performance of services and other
business transactions in the ordinary course of business consistent with past
practice; the allowance for collection losses on the Interim Statement of Net
Assets has been determined in accordance with GAAP consistent with past
practice.
3.15 Labor Relations. As of the date hereof, except as set
forth in Schedule 3.15, to best of the knowledge of the Seller
Parties, there has been no union organizing efforts with respect to the Business
conducted within the last three (3) years and there are none now being conducted
with respect to the Business. Except as set forth in Schedule 3.15, Seller has
not at any time during the three (3) years prior to the date of this Agreement
had, nor, to the best of the Seller Parties' knowledge, is there now threatened,
a strike, work stoppage or work slowdown with respect to or affecting the
Business which had or could reasonably be expected to have a Material Adverse
Effect. As of the date hereof, except as set forth in Schedule 3.15, (i) no
Employee is represented by any union or other labor organization and (ii) there
is no unfair labor practice charge pending or, to the best knowledge of the
Seller Parties, threatened against Seller relating to any of the Employees as
related to the Business which could reasonably be expected to have a Material
Adverse Effect.
3.16 Employee Benefit Plans.
3.16.1 Schedule 3.16.1 contains a true and complete list of
each "employee benefit plan," as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA), bonus, incentive,
deferred compensation, excess benefit, employment contract, stock purchase,
stock ownership, stock option, supplemental unemployment, vacation, sabbatical,
sick-day, severance or other material employee benefit plan, program or
arrangement (other than those required to be maintained by law), whether written
or unwritten, qualified or nonqualified, funded or unfunded, foreign or
domestic, (i) maintained by, or contributed to by Seller or any of its
Affiliates, in respect of any Employee or Former Employee, or (ii) with respect
to which Seller or any of its Affiliates has any liability in respect of any
Employee or Former Employee (the "Benefit Plans"). Except as disclosed on
Schedule 3.16.1, neither Seller nor any of its Affiliates maintains any bonus,
pension or welfare benefit plan, program or arrangement, including any deferred
compensation arrangement, for directors, consultants or independent contractors
of the Business.
3.16.2 A true and complete copy of each Benefit Plan and
related trust agreements and (to the extent applicable) a copy of each Benefit
Plan's current summary plan description and in the case of an unwritten Benefit
Plan, a written description thereof, has been furnished to Buyer. In addition,
to the extent applicable, Buyer has been provided a copy of the most recent
Internal Revenue Service ("IRS") determination letter issued to each Benefit
Plan and a copy of the most recent IRS Form 5500 together with all schedules and
accountants' statement filed, and actuarial reports prepared, on behalf of each
Benefit Plan.
3.16.3 Each Benefit Plan which is intended to be qualified
under Section 401(a) of the Code (as designated on Schedule 3.16.1) is so
qualified and any trust forming a part of such a Benefit Plan is tax exempt
under Section 501(a) of the Code. Each such Benefit Plan has been amended, as
and when necessary, to comply with the Tax Reform Act of 1986 and upon timely
filing of an Application for Determination with the Internal Revenue Service,
will be eligible to make further such amendments under the "remedial amendment
period."
3.16.4 Except as disclosed in Schedule 3.16.4, each Benefit
Plan has been operated and administered in all material respects in accordance
with its terms and all applicable laws, including ERISA and the Code.
3.16.5 None of the Acquired Assets is subject to a Lien or Tax
under the Code or ERISA.
3.16.6 Neither Seller nor any ERISA Affiliate and, to the
knowledge of the Seller Parties, no other Person, has taken any action or failed
to take any action with respect to any Benefit Plan that may subject Buyer or
any Benefit Plan under which liabilities are assumed by Buyer under
Section 5.10, 5.11 or 5.12 ("Assumed Benefit Plan") to any material liability or
Tax under the Code or ERISA.
3.16.7 Neither Seller nor any ERISA Affiliate has incurred or
expects to incur any withdrawal liability with respect to any Benefit Plan which
is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA,
including any withdrawal liability arising from the actions of Seller or any
ERISA Affiliate contemplated by this Agreement. All contributions that Seller
or any ERISA Affiliate have been obliged to make to any Benefit Plan, including
any multiemployer plan, have been duly and timely made.
3.16.8 There are no pending or, to the knowledge of the Seller
Parties, threatened claims (other than routine claims for benefits),
assessments, complaints, proceedings or investigations of any kind in any court
or governmental agency with respect to any Benefit Plan which could reasonably
be expected to give rise to a material liability to Buyer.
3.16.9 Except as disclosed on Schedule 3.16.9, no Benefit Plan
provides benefits, including without limitation, death or medical benefits,
beyond termination of service or retirement other than (i) coverage mandated by
law, or (ii) death or retirement benefits under a Benefit Plan qualified under
Section 401(a) of the Code. Except as disclosed in Schedule 3.16.9, Seller has
communicated to retirees that future changes may have to be made to the health
care programs offered to retirees and/or that contributions may be required of
retirees. Except as disclosed in Schedule 3.16.9, neither the Vice President of
Human Resources and Customer Services, the Director of Human Resources, nor the
Vice President of Finance is aware of any representations made on behalf of the
Company which would limit Seller's ability to change post-retirement benefits.
3.16.10 With respect to each Benefit Plan that is a "group
health plan" within the meaning of Section 607 of ERISA and that is subject to
Section 4980B of the Code, Seller and each ERISA Affiliate have complied in all
material respects with the continuation coverage requirements of the Code and
ERISA.
3.16.11 As of January 1, 1995, the assets of the PEI Pension
Plan exceeded the actuarial present value of the accumulated benefit obligation
thereunder for all participants determined as described in Section 5.10.2
hereof.
3.17 Absence of Undisclosed Liabilities17 Absence of
Undisclosed Liabilities. Except as disclosed in Schedule 3.17, Seller has no
liabilities with respect to the Business which would constitute Assumed
Liabilities, either direct or indirect, matured or unmatured or absolute,
contingent or otherwise, except:
3.17.1 those liabilities set forth on the Interim Statement of
Net Assets or referred to in the notes to the Financial Statements and not
heretofore paid or discharged;
3.17.2 liabilities arising in the ordinary course of business
under any Contract; and
3.17.3 those liabilities incurred, consistent with past
business practice, in or as a result of the normal and ordinary course of
business since the Interim Statement of Net Assets Date and reflected in the
books and records related to the Business;
3.17.4 the obligations and liabilities set forth in Sections
5.9, 5.10, 5.11 and 5.12 hereof; and
3.17.5 those other liabilities, which individually and in the
aggregate, would not have a Material Adverse Effect.
3.18 No Pending Litigation or Proceedings. Except as
disclosed in Schedule 3.18, there are no actions, suits, investigations
or proceedings pending against or, to the best of the Seller Parties'
knowledge, threatened against or affecting, Seller, the Business or any
of the Acquired Assets before any court or arbitrator or
Authority which individually or in the aggregate, would have a Material Adverse
Effect. Except as disclosed in Schedule 3.18, there are currently no
outstanding judgments, decrees or orders of any court or Authority against
Seller or PEI, which relate to or arise out of the conduct of the Business or
the ownership, condition or operation of the Business or the Acquired Assets
which individually or in the aggregate would have a Material Adverse Effect.
3.19 Supply of Utilities. Except as set forth on Schedule 3.19,
the Real Estate has adequate arrangements for supplies of electricity, gas,
oil, coal and/or sewer for all operations at the 1994 or current operating
levels, whichever is greater. Except as set forth on Schedule 3.19, there
are no actions or proceedings pending or, to the best of the Seller
Parties' knowledge, threatened that would adversely affect the supply of
electricity, gas, coal or sewer to the Real Estate except for those which
individually and in the aggregate would not have a Material Adverse Effect.
3.20 Insurance. Schedule 3.20 lists the Seller Parties'
policies and contracts in effect as of the date hereof for insurance
covering the Acquired Assets or Assumed Liabilities and the operation of the
facilities constituting the Business owned or held by Seller or PEI, together
with the risks insured against, coverage limits and deductible amounts.
3.21 Relationship with Customers. As of the date hereof, Seller
does not have any current customer which accounted for more than 5% of the
net sales of the Business for the immediately preceding
12-month period.
3.22 WARN Act. Except as contemplated by Section 5.9
hereby or as set forth in Schedule 3.22 hereto, within six months prior to the
date hereof, (i) Seller has not effectuated (a) a "plant closing" (as defined in
the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Business; or
(b) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Business; (ii) Seller has not been affected by any
transaction or engaged in layoffs or employment terminations with respect to the
Business sufficient in number to trigger application of any similar state or
local law; and (iii) none of Seller's employees who are employed in connection
with the Business has suffered an "employment loss" (as defined in the WARN Act)
.
3.23 Condition of Assets. Except as set forth on Schedule 3.23,
the buildings, machinery, equipment, tools, furniture, improvements and
other fixed tangible assets of the Business included in the
Acquired Assets are in good operating condition and repair, reasonable wear and
tear excepted.
3.24 Brokerage. None of the Seller Parties or their
Affiliates have made any agreement or taken any other action which might
cause any Person to become entitled to a broker's or finder's fee or commission
as a result of the transactions contemplated hereunder which could result in
liability to Buyer or its Affiliates.
3.25 All Assets. Except as set forth on Schedule 3.25 and for
the Excluded Assets, the Acquired Assets include all assets, rights,
properties and contracts the use of which is necessary to the continued
conduct of the Business by Buyer substantially in the manner as it was conducted
prior to the Closing Date, including the service of all utility customers in
substantially the same manner and at substantially the same service levels as
provided by Seller on the date hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF BUYER
Parent and Buyer jointly and severally represent and warrant to Seller as
follows:
4.1 Organization and Good Standing
4.1.1 Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
4.1.2 Buyer is a corporation duly organized validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania and has all
requisite corporate power and authority to own, lease and operate the Acquired
Assets and the Business. Buyer is qualified to do business and is in good
standing in all jurisdictions wherein the nature of the business conducted by it
or Buyer's ownership or use of assets and properties make such qualification
necessary, except such failures to be qualified or to be in good standing, if
any, which when taken together with all such failures of Buyer do not have a
material adverse effect on its ability to perform its obligations under this
Agreement and the Transaction Documents.
4.2 Authorization and Enforceability. Each of Buyer and Parent
has full corporate power and corporate authority to, execute, deliver and
perform this Agreement and the other Transaction Documents to which
either of them is a party. The execution, delivery and performance
by Buyer and Parent of this Agreement and the Transaction Documents
to which Buyer and/or Parent is a party have been duly authorized by all
necessary corporate action on the part of each of them. This Agreement has
been duly executed and delivered by Buyer and Parent, and as of
the Closing Date the other Transaction Documents will be duly executed and
delivered by Buyer and Parent. This Agreement is a legal, valid and binding
obligation of Buyer and Parent, enforceable against them in accordance with its
terms, except as such enforceability may be limited by applicable laws relating
to bankruptcy, insolvency, fraudulent conveyance, reorganization or affecting
creditors' rights generally and except to the extent that injunctive or other
equitable relief is within the discretion of a court. As of the Closing Date,
each of the other Transaction Documents to which Buyer and Parent is a party
will be duly executed and delivered by Buyer and Parent and will constitute the
legal, valid and binding obligations of Buyer and Parent, enforceable against
them in accordance with its respective terms, except as such enforceability may
be limited by applicable laws relating to bankruptcy, insolvency, fraudulent
conveyance, reorganization or affecting creditors' rights generally and except
to the extent that injunctive or other equitable relief is within the discretion
of a court.
4.3 No Violation of Laws or Agreements. The execution, delivery
and performance of this Agreement and the Transaction Documents by Buyer
and/or Parent do not, and the consummation of the transactions contemplated
hereby and thereby will not, (a) contravene any provision of the
Articles of Incorporation or Bylaws of Buyer or the Certificate
of Incorporation or Bylaws of Parent; or (b) except as set forth on Schedule
4.3, violate, conflict with, result in a breach of, or constitute a default (or
an event which would with the passage of time or the giving of notice, or both,
constitute a default) under, or result in or permit the termination,
modification, acceleration, or cancellation of (i) any indenture, mortgage, loan
or credit agreement, license, instrument, lease, contract, plan, permit,
authorization, proof of dedication or other agreement or commitment, oral or
written, to which Parent or Buyer is a party, or by which any of their assets or
properties may be bound of affected, except for such violations, conflicts,
breaches, terminations, modifications, accelerations, cancellations, interests
or rights which, individually or in the aggregate do not have a material adverse
effect on their respective ability to perform their obligations under this
Agreement and the Transaction Documents, or (ii) any judgment, injunction, writ,
award, decree, restriction, ruling, or order of any court, arbitrator or
Authority or any applicable constitution, law, ordinance, rule or regulation to
which Buyer or Parent is subject other than those violations and conflicts which
individually or in the aggregate do not have a material adverse effect on their
respective ability to perform their obligations under this Agreement and the
Transaction Documents.
4.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by Buyer and Parent of
this Agreement, the other Transaction Documents, or the consummation of the
transactions contemplated hereby or thereby by Buyer or Parent except (i) as
required by the HSR Act, (ii) as specified on Schedule 4.4 and (iii) for such
consents, approvals, authorizations, registrations or filings, the failure to
obtain or make would not individually or in the aggregate have a material
adverse effect on their respective ability to perform their obligations under
this Agreement and the Transaction Documents.
4.5 Financing. Buyer and Parent have, and at the
Closing Date, will have sufficient resources to pay the Purchase Price.
4.6 Brokerage. None of Parents, Buyer or their
Affiliates have made any agreement or taken any other action which might cause
any Person to become entitled to a broker's or finder's fee or commission as a
result of the transactions contemplated hereunder which could result in
liability to the Seller Parties.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Conduct of Business. Except (i) as otherwise specifically
permitted by this Agreement, (ii) as set forth in Schedule 5.1
hereto or (iii) with the prior written consent of Buyer, from and after the date
of this Agreement and until the Closing Date, each of Seller and PEI agree that:
5.1.1 Seller shall conduct the Business as presently operated
and only in the ordinary course of business consistent with past practice.
5.1.2 They shall promptly inform Buyer in writing of any
specific event or circumstance of which they are aware, or of which they receive
notice, that has or is likely to have, individually or in the aggregate, taken
together with the other events or circumstances, a Material Adverse Effect on
the Acquired Assets or the Assumed Liabilities.
5.1.3 Seller shall not:
(a) change or modify in any material respect existing credit
and collection policies, procedures and practices with respect to accounts
receivable;
(b) enter into any contract or commitment, waive any right
or enter into any other transaction (except in the ordinary course of business)
which would have a Material Adverse Effect;
(c) commit to acquire subsequent to the Closing Date on
behalf of the Business any capital asset or group of capital assets costing in
excess of $1,000,000 which, if so acquired, would be included in the Acquired
Assets; or sell or lease or agree to sell or lease or otherwise dispose of any
assets included in the Acquired Assets except in the ordinary course of the
conduct of the Business, consistent with past practice;
(d) except in the ordinary course of business, consistent
with past practice or as required under any of Seller's debt instruments or
indentures, mortgage, pledge or subject to any Lien (other than Permitted Liens)
any of the Acquired Assets;
(e) change any compensation or benefits or grant any
material new compensation or benefits payable to or in respect of any
Transferred Employee except (i) as required by law, (ii) in the ordinary course,
consistent with past practice and (iii) as required by the Collective Bargaining
Agreements in existence on the date hereof; provided, however, no individual
Employee shall in any event receive a compensation increase in excess of seven
percent (7%) except as required by the Collective Bargaining Agreements in
existence on the date hereof;
(f) other than in the ordinary course of business consistent
with past practice, sell or otherwise transfer any assets necessary, or
otherwise material to the conduct of, the Business which would constitute
Acquired Assets;
(g) change the Seller's method of accounting or keeping its
books of account or accounting practices with respect to the Business, except as
required by GAAP; or
(h) intentionally and wilfully take or omit to take any
action which if taken or omitted prior to the date hereof would constitute or
result in a breach of any representations or warranties set forth in Sections
3.1, 3.2, 3.3, 3.4, 3.7, 3.8, 3.10, 3.14, 3.16 and 3.25 hereof (it being
understood that the failure to cure a breach shall not, by itself, be an
intentional and wilful omission to take action).
5.2 Negotiations. Neither PEI nor Seller nor any Person
controlled by PEI or Seller or under common control with PEI or Seller
(each such person being a "Section 5.2 Affiliate"), nor any officer, director,
employee, representative or agent of PEI or Seller or any of their Section 5.2
Affiliates, shall, directly or indirectly, solicit or initiate or (subject to
the fiduciary duties of the Board of Directors of PEI to its stockholders under
applicable law as advised by counsel) participate in any way in discussions or
negotiations with, or provide any information or assistance to, or enter into an
agreement with any Person or group of Persons (other than Parent, Buyer or any
Person controlled by Parent or Buyer or under common control with Parent, Buyer
or any Persons providing financing to the parties hereto in connection with
facilitating the consummation of the transactions contemplated by this
Agreement) concerning any acquisition, merger, consolidation, liquidation,
dissolution, disposition or other transaction (or series of such transactions)
that would result in the transfer to any such Person or group of Persons of ten
percent (10%) of the Acquired Assets (as measured by net book value of such
assets on the date of each such transaction) or the acquisition, merger,
consolidation, liquidation, dissolution, disposition or other transaction (or
series of such transactions) involving Seller or PEI, if such acquisition,
merger, consolidation, liquidation, dissolution, disposition or other
transaction (or series of such transactions) would be inconsistent, in any
respect, with the obligations of the Seller Parties hereunder (any of the
foregoing transactions, a "Competing Transaction"). PEI will promptly notify
Buyer of the substance of any inquiry or proposal concerning any such
transaction that may be received by any of the directors or executive officers
of PEI or Seller, their legal counsel or a Vice President or Managing Director
of their financial advisor who is assigned to the Seller Parties account.
5.3 Disclosure Schedules. As promptly as practicable, the
Seller Parties will provide Buyer with a supplement or amendment to
the Disclosure Schedules with respect to any matter, condition or
occurrence which is required to be set forth or described in the Disclosure
Schedules. For the avoidance of doubt, a matter, condition or occurrence shall
only be "required" to be set forth or described in the Disclosure Schedules if
the failure to be so disclosed would result in a breach of the applicable
representation or warranty (qualified by Material Adverse Effect where
applicable) on the date hereof or on the Closing Date. In addition, Seller
shall have the right at any time and from time to time prior to the Closing to
supplement or amend the Disclosure Schedules. Seller may provide Disclosure
Schedules with respect to any representation or warranty of this Agreement
whether or not a specific schedule is referred to therein. In the event that
any supplement or amendment of such Disclosure Schedules shall be provided later
than five (5) business days prior to the Closing Date the Buyer shall have the
right to delay the Closing for a period of five (5) business days in order for
Buyer to review such supplement or amendment. No such supplement or amendment
shall be deemed to cure any breach of or alter any representation or warranty
made in this Agreement so as to permit the Closing to occur unless Buyer
specifically agrees thereto in writing. The Seller Parties shall promptly
inform Buyer, and Buyer will promptly inform the Seller Parties of any fact or
event which comes to their attention, the existence of which constitutes or
likely will constitute a breach in any material respects of any representation
or warranty in this Agreement. In addition, Buyer will, within five (5) days of
receipt thereof, forward to Seller (i) any title report Buyer receives from a
title company with respect to the Real Estate and (ii) any written communication
regarding a specific Lien or title defect affecting a specifically identified
parcel of the Real Estate sent to the President, Treasurer, General Counsel and
Secretary of Parent, the Vice President and Treasurer of American Water Works
Service Co., Inc. or the President of Buyer, and sent by a party other than the
Seller Parties, their legal counsel, financial advisors or representatives.
5.4 Mutual Covenants. The parties mutually covenant from the
date of this Agreement to the Closing Date (and subject to the other terms
of this Agreement, including Section 5.8 hereof):
5.4.1 to cooperate with each other in determining whether
filings are required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents;
5.4.2 to use all reasonable efforts to obtain promptly the
satisfaction (but not waiver) of the conditions to the Closing of the
transactions contemplated herein (each party hereto shall furnish to the other
and to the other's counsel all such information as may be reasonably required in
order to effectuate the foregoing action); and
5.4.3 to advise the other parties promptly if such party
determines that any condition precedent to its obligations hereunder will not be
satisfied in a timely manner.
5.5 Filings and Authorizations. The parties hereto will as
promptly as practicable, make or cause to be made all such filings and
submissions under laws, rules and regulations applicable to it or its
Affiliates as may be required to consummate the terms of this Agreement,
including all notifications and information to be filed or supplied pursuant to
the HSR Act and with the Pennsylvania Public Utility Commission (the "PPUC")
pursuant to the Pennsylvania Public Utility Code (the "Utility Code"). Any such
filings and supplemental information will be in substantial compliance with the
requirements of the applicable law, rule or regulation. Each of Parent and
Buyer, on the one hand, and the Seller Parties, on the other, shall furnish to
the other such necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or submission to the
PPUC or which is necessary under the HSR Act. The Seller Parties, on the one
hand and Buyer and Parent, on the other, shall keep each other apprised of the
status of any communications with, and inquiries or requests for additional
information from, any Authority, including the PPUC, the United States Federal
Trade Commission ("FTC") and the Antitrust Division of the United States
Department of Justice (the "Antitrust Division"), and shall comply promptly with
any such inquiry or request. Each of PEI, Seller, Parent and Buyer will use its
reasonable efforts to obtain any clearance required under the HSR Act and from
the PPUC for the purchase and sale of the Acquired Assets in accordance with the
terms and conditions hereof. Notwithstanding the foregoing, nothing contained
in this Agreement will require or obligate any party or their respective
Affiliates (i) to initiate, pursue or defend any litigation (or threatened
litigation) to which any Authority (including the PPUC, the Antitrust Division
and the FTC) is a party; (ii) to agree or otherwise become subject to any
material limitations on (A) the right of Buyer or its Affiliates effectively to
control or operate the Business or the right of Seller or its Affiliates
effectively to control or operate Seller's gas business, (B) the right of Buyer
or its Affiliates to acquire or hold the Business or the right of Seller or its
Affiliates to hold the Excluded Assets or Seller's gas business, or (C) the
right of Buyer to exercise full rights of ownership of the Business or all or
any material portion of the Acquired Assets or the right of Seller to exercise
full rights of ownership of Seller's gas business or all or any material portion
of the Excluded Assets; or (iii) to agree or otherwise be required to sell or
otherwise dispose of, hold separate (through the establishment of a trust or
otherwise), or divest itself of all or any portion of the business, assets or
operations of PEI, Seller, Parent, Buyer, any Affiliate of Buyer or the
Business. The parties agree that no representation, warranty or covenant of
Buyer, Parent, PEI or Seller contained in this Agreement shall be breached or
deemed breached as a result of the failure by Parent and Buyer on the one hand
or the Seller Parties, on the other, to take any of the actions specified in the
preceding sentence.
5.6 Public Announcement. No party hereto shall make or issue, or
cause to be made or issued, any public announcement or written statement
concerning this Agreement or the transactions contemplated hereby
without the prior written consent of the other party (which will not be
unreasonably withheld or delayed), unless counsel to such party advises that
such announcement or statement is required by law (in which case the parties
shall make reasonable efforts to consult with each other prior to such required
announcement).
5.7 Further Assurances. Each of PEI, Parent, Buyer and Seller,
from time to time after the Closing, at Buyer's or Seller's request, will
execute, acknowledge and deliver to the applicable person such other
instruments of conveyance and transfer and will take such other actions
and execute such other documents, certifications, and further assurances as
Buyer or Seller, as the case may be, may reasonably require in order to
transfer, in accordance with the terms and conditions of this Agreement, more
effectively in Buyer or to put Buyer more fully in possession of any of the
Acquired Assets or better to enable Buyer to complete, perform and discharge any
of the Assumed Liabilities. Each party shall cooperate and deliver such
instruments and take such action as may be reasonably requested by the other
party in order to carry out the provisions and purposes of this Agreement and
the transactions contemplated hereby.
5.8 Cooperation.
5.8.1 Parent, Buyer, PEI and Seller shall cooperate and shall
cause their respective Affiliates, officers, employees, agents and
representatives to cooperate to ensure the orderly transition of the Business
from Seller to Buyer and to minimize the disruption to the Business resulting
from the transactions contemplated hereby.
5.8.2 Without limiting the foregoing, neither Parent and
Buyer, nor PEI and Seller (nor any of their respective Affiliates) shall make
any filings pursuant to federal or state securities laws ("Securities Filings")
or make any consent solicitations to holders of Assumed Indebtedness which
include any information about Seller, Buyer (or their respective Affiliates) or
the transactions contemplated hereby without the prior written approval of the
other party, which approval shall not be unreasonably withheld or delayed;
provided, however, that if such consent is withheld or delayed, any party may so
disclose such information in its reasonable judgment to the extent such party's
counsel advises it that such disclosure is required by applicable law. Each of
Parent, Buyer, PEI and Seller shall, and shall cause their respective Affiliates
to, comply with all applicable federal and state securities laws in connection
with this Agreement and the transactions contemplated hereby (including any
solicitation of consents of holders of Assumed Indebtedness), and all
information supplied by any party for inclusion in any Securities Filing or
consent solicitation, including, without limitation, any proxy or information
statement, or any registration statement on Form S-4 shall be true and correct
in all material respect and shall not contain any untrue statement of a material
fact or omit to state any material fact which is required to be stated therein
or which is necessary to make the statements contained therein not misleading in
light of the circumstances in which they were made.
5.8.3 If required under applicable law, each of PEI and Seller
shall prepare a proxy statement (collectively, the "Proxy Statements") for the
PEI common stock and Seller's preferred stock, file them with the Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, and
use all reasonable efforts to have them cleared by the SEC. Parent, Buyer, PEI
and Seller shall cooperate with each other in the preparation of the Proxy
Statements, and the Seller and PEI shall notify Parent and Buyer of the receipt
of any comments of the SEC with respect to the Proxy Statement and of any
requests by the SEC for any amendment or supplement thereto or for additional
information and shall provide to Parent and Buyer promptly copies of all
material correspondence between PEI and the Seller (or either of them) or any of
their representatives and the SEC. Each of PEI, Seller, Parent and Buyer agrees
to use its reasonable efforts, after consultation with the other parties hereto
to respond promptly to all such comments of and requests by the SEC. As
promptly as practicable after the Proxy Statements have been cleared by the SEC,
PEI and Seller shall mail the Proxy Statements to their respective stockholders.
5.8.4 Unless this Agreement has been terminated in accordance
with Section 6.3 hereof, each of PEI and the Seller, acting through their
respective Board of Directors, shall, in accordance with applicable law and its
respective Articles of Incorporation and By-Laws:
(a) after the Proxy Statements have been cleared by the SEC,
promptly and duly call, give notice of, convene and hold as soon as
practicable thereafter following the execution of this Agreement, a
meeting of its common (in the case of PEI) and preferred (in the case
of Seller) stockholders for the purpose of voting to approve and adopt
this Agreement and the consummation of the transactions contemplated
hereby by Seller and PEI;
(b) subject to the fiduciary duties of the directors of PEI
under Pennsylvania law as advised by counsel and subject to the
fiduciary duties of the directors of Seller to the holders of Seller's
preferred stock as advised by counsel, recommend approval of this
Agreement and the transactions contemplated hereby by its common
stockholders (and in the case of Seller, preferred) and include in the
Proxy Statement such recommendation, and use reasonable efforts to
solicit and secure such approval.
5.8.5 During the first 180 days after the Closing Date, Buyer
shall have the right to use all of the logos, trademarks and trade
identification of Seller as are located at the Real Estate or on the Acquired
Assets (collectively, the "Trademarks"). Buyer's use of the Trademarks shall be
in accordance with such reasonable quality control standards as may be
promulgated by Seller and provided to Buyer. If Seller shall notify Buyer in
writing of Buyer's material failure to comply with such reasonable quality
control standards and Buyer continues to not comply with such reasonable quality
control standards for more than 20 days after receipt of such notice, Seller
shall have the right to terminate Buyer's right under this Section 5.8.5 to use
the Trademarks.
5.8.6 Seller shall give Buyer and its representatives
(including Buyer's Accountants, consultants, counsel and employees), upon
reasonable notice and during normal business hours, full access to the
properties, contracts, employees, books, records and affairs of Seller to the
extent relating to the Business and the Acquired Assets, and shall cause its
officers, employees, agents and representatives to furnish to Buyer all
documents, records and information (and copies thereof), to the extent relating
to the Business and the Acquired Assets, as Buyer may reasonably request.
Except to the extent disclosed in the Disclosure Schedules in accordance with
Sections 5.3 and 8.4, no investigation or receipt of information by Buyer
pursuant to, or in connection with, this Agreement, shall diminish or obviate
any of the representations, warranties, covenants or agreements of Seller or PEI
under this Agreement or the conditions to the obligations of Parent or Buyer
under this Agreement. All information provided to Buyer under this Agreement
shall be held subject to the terms and conditions of the Confidentiality
Agreement dated March 23, 1995 between PEI and Parent.
5.9 Employees; Employee Benefits.
5.9.1 Schedule 5.9.1 lists divisions and the number of all
salaried and hourly employees actively employed (as of the date of this
Agreement) in each division by Seller or any of its Affiliates whose primary
responsibilities relate to the Business. Schedule 5.9.1 lists job
classifications and number of employees in each job classification of those
employees whose terms and conditions of employment are subject to a Collective
Bargaining Agreement ("Union Employees"). All individuals referred to on
Schedule 5.9.1 are herein referred to as the "Employees." As soon as practical
after the execution of this Agreement, Buyer and Seller shall determine at least
294 of the Employees to whom Buyer will offer employment and such additional
number of Employees, if any, whom Buyer also wishes to employ. Upon
determination of such Employees, Seller will supplement Schedule 5.9.1 with the
name, job title, unused vacation, current base salary or hourly wage, date of
hire and assigned location of each Transferred Employee (as that term is defined
below). At the Closing, Seller shall provide an updated Schedule 5.9.1 which
shall disclose all the information required under the preceding sentence as of
the most recent practicable date prior to Closing.
5.9.2 Effective as of the Closing, Buyer shall offer
employment to at least 294 of those employees included on Schedule 5.9.1. All
Employees to whom Buyer offers employment and who accept such employment are
herein referred to as the "Transferred Employees." In the event any Employees
do not accept Buyer's offer of employment, Buyer shall offer employment to such
additional employees (the identity of whom shall be determined by Buyer and
Seller) as are necessary to bring the total number of Transferred Employees to
at least 294. Subject to the provisions of this Section 5.9, Buyer shall
provide each Transferred Employee with compensation and employee benefits which
are substantially comparable to those provided by Buyer to its other similarly
situated employees. Buyer agrees (i) to waive any waiting period or limitations
regarding pre-existing conditions with respect to Transferred Employees and
their Beneficiaries under any group-health or long-term disability plan
maintained by Buyer (and/or any of its Affiliates) for the benefit of any
Transferred Employee, (ii) to credit any covered expenses incurred by a
Transferred Employee or Beneficiary of a Transferred Employee under Seller's
group health plan prior to the Closing towards any deductibles or limits under
any group health plan maintained by Buyer (and/or any of its Affiliates) for the
benefit of any Transferred Employee, (iii) to credit the service of each
Transferred Employee with Seller and its Affiliates before the Closing, for all
purposes under all employee benefit plans and arrangements maintained by Buyer
(and/or any of its Affiliates) for the benefit of any Transferred Employee,
other than for purposes of benefit accrual under any "defined benefit plan",
within the meaning of Section 3(35) of ERISA (iv) to provide accrued vacation to
Transferred Employees in the year in which the Closing occurs, equal to the
excess, if any, of the accrued vacation to which the Transferred Employee would
otherwise be entitled under Seller's vacation plan during that year over the
amount of accrued vacation the Transferred Employee had taken during that year,
and, thereafter, to provide vacation to Transferred Employees on the same basis
as provided to similarly situated employees of Buyer, with service credit as
provided in (iii), hereof, (v) to provide severance benefits to Transferred
Employees terminated by Buyer without cause within two years of Closing that are
substantially comparable to those benefits provided by Buyer to similarly
situated employees and (vi) to comply with all applicable legal requirements
with respect to Union Employees (including without limitation any applicable
duty to bargain with those employees' bargaining representative). Buyer shall
be responsible for providing to each Transferred Employee vacation in an amount
equal to the Transferred Employee's vacation entitlement for the year of Closing
reduced by the number of vacation days such Transferred Employee has taken on or
before Closing. Nothing in this Section 5.9 shall limit Buyer's authority to
terminate the employment of any Transferred Employee at any time and for
whatever reason. Until the second anniversary of the Closing Date, neither
Seller nor any of its Affiliates shall directly or indirectly solicit or offer
employment to any Transferred Employee then employed by Buyer or its Affiliates.
5.9.3 Except as specifically provided in Section 5.9.6 and
Section 5.12, Seller shall be solely responsible for any liability, claim or
expense (including reasonable attorneys' fees) related to compensation or
employee benefits incurred by Buyer as the result of any claims against Buyer or
its Affiliates that are made by any Employees or Former Employees (or the
Beneficiary of any Employee or Former Employee) who are not made offers to
become employees of Buyer or its Affiliates including, without limitation,
claims asserted against Buyer as a result of their termination by Seller or its
Affiliates.
5.9.4 Except as otherwise specifically provided in
Section 5.9, 5.10, 5.11 or 5.12, Seller shall be solely responsible for any
liability, claim or expense with respect to compensation or employee benefits of
any nature (including, but not limited to, workers compensation claims or the
benefits provided under the Benefit Plans, whether paid before or after the
Closing) owed to any Transferred Employee or the Beneficiary of any Transferred
Employee that arises out of or relates to (i) the employment relationship
between Seller or any of its Affiliates and such Transferred Employee or
Beneficiary, or (ii) any benefit claim or expense (including medical expenses)
incurred before Closing under any Benefit Plan. For purposes of this Agreement,
a medical expense shall be deemed to be incurred when the services giving rise
to a claim are rendered, regardless of when billed or paid. Without limiting
the foregoing, Seller shall be responsible for the payment of any employee
benefits that become due to any Transferred Employees as a result of their
termination by Seller.
5.9.5 Buyer shall be solely responsible for any liability,
claim or expense with respect to compensation or employee benefits of any nature
(including, but not limited to, workers compensation, claims or the benefits
provided under any employee benefit plan or arrangement of Buyer incurred after
Closing) owed to any Transferred Employee or Beneficiary of any Transferred
Employee that arises out of or relates to (i) the employment relationship
between Buyer or any of its Affiliates and any Transferred Employee or (ii) any
benefit claim or expense (including medical expense) incurred after Closing
under any employee benefit plan sponsored or contributed to by Buyer or an ERISA
Affiliate after Closing. Notwithstanding the foregoing, Buyer shall not be
responsible for the payment of any employee benefits that become due to any
Transferred Employees under any Benefit Plan (other than the Assumed Benefit
Plans).
5.9.6 Seller currently allocates 420 of the Employees to the
Business. Buyer agrees to reimburse Seller for 50% of the amount paid by Seller
as severance under Seller's severance plan as in effect on the date hereof to
any such Employees provided (i) Buyer does not offer to hire such Employees in
accordance with the provisions of Sections 5.9, 5.10, 5.11 and 5.12 and (ii)
Seller provides notice to those Employees on or shortly after the Closing Date
to the effect that their employment will be terminated on or shortly after the
Closing Date. Buyer will pay such reimbursement to Seller within 5 days after
receipt of a list of the Employees showing which are entitled to severance pay,
the amounts of that severance pay and certifying that those amounts have been
paid.
5.9.7 Until the second anniversary of the Closing Date, Buyer
shall not directly or indirectly solicit or offer employment to any active
employee of Seller or PEI, other than the Transferred Employees.
5.10 Employee Pension Plan.
5.10.1 Effective upon the date of the transfer described in
Section 5.10.2, subject to the terms and conditions of this Agreement, Buyer
shall cause the American Water System Pension Plan (the "American Pension Plan")
to assume the liability of the Employees' Retirement Plan of Pennsylvania
Enterprises, Inc. (the "PEI Pension Plan") for benefits accrued to the Closing
Date by those Transferred Employees participating in the PEI Pension Plan on the
Closing Date (the " Affected Participants"). From and after the Closing Date,
the Affected Participants will accrue additional benefits under the American
Pension Plan, as if they were newly hired on the Closing Date, provided that
they shall be given credit for service with Seller and its Affiliates for
eligibility and vesting, but not benefit accrual purposes, to the same extent
that credit for such service has been given by Seller and its Affiliates.
5.10.2 Buyer shall deliver to Seller as soon as practicable,
but in no event later than ninety (90) days after Closing (i) a certified copy
of the American Pension Plan and any amendment necessary to effectuate the
transfer of assets and the assumption of benefit liabilities in accordance with
this Section 5.10, (ii) a certified copy of the trust agreement for the American
Pension Plan; (iii) the most recent favorable determination letter from the IRS
with respect to the American Pension Plan; and (iv) an opinion from Buyer's
legal counsel acceptable to Seller that the American Pension Plan, as so
amended, complies or will comply on a timely basis with the applicable
provisions of the Code relating to the qualification of, and the transfer of
assets and assumption of benefit liabilities by, the American Pension Plan.
Seller shall deliver to Buyer as soon as practicable, but in no event later than
ninety (90) days after Closing, an opinion from Seller's legal counsel
acceptable to Buyer that the PEI Pension Plan complies or will comply on a
timely basis with the applicable provisions of the Code relating to the
qualification of the PEI Pension Plan, and the transfer of assets to and
assumption of benefit limitations by, the American Pension Plan. Promptly (but
in any event within 120 days after Closing), PEI shall cause the trustee of the
PEI Pension Plan to transfer in cash and such other property as may be
acceptable to Parent to the trustee of the American Pension Plan an amount equal
to the sum of (i) the actuarial present value of accumulated plan benefits of
the Affected Participants as of the Closing Date using the actuarial methods and
assumptions listed on Schedule 5.10.2, reduced by the amount of any
distributions to Affected Participants, and (ii) an additional amount equal to
interest at the Prime Rate on the amount described in the preceding clause (i)
for the period from the Closing Date to the date of such transfer. Both the
Seller Parties and Parent will file any IRS Form 5310A that is required with
respect to the transfer contemplated by this Section 5.10 at least thirty (30)
days prior to the transfer. Upon the asset transfer described in this
Section 5.10, Buyer and the American Pension Plan shall be responsible for all
benefits to which Transferred Employees were entitled under the PEI Pension Plan
as of the Closing Date, and Seller and the PEI Pension Plan shall cease to have
any liability, contingent or otherwise, for such benefits.
5.11 Employee Savings Plan.
5.11.1 Effective upon the date of the transfer described in
Section 5.11.2, subject to the terms and conditions of this Agreement, Buyer
shall cause the Savings Plan for Employees of American Water Works Company, Inc.
(the "American Savings Plan") to assume the liability of the Pennsylvania
Enterprises, Inc. Employees' Savings Plan (the "PEI Savings Plan") for that part
of account balances of those Transferred Employees participating in the PEI
Savings Plan on the Closing Date (the "Affected Participants") that is
transferred to the American Savings Plan. As of the Closing Date, Affected
Participants shall be 100% vested in their account balances under the PEI
Savings Plan. Transferred Employees shall be given credit under the American
Savings Plan for service with Seller and its Affiliates for eligibility and
vesting, to the same extent that credit for such service has been given by
Seller and its Affiliates.
5.11.2 Buyer shall deliver to Seller as soon as practicable,
but in no event later than ninety (90) days after Closing (i) a certified copy
of the American Savings Plan and any amendment necessary to effectuate the
transfer of assets and the assumption of account balances in accordance with
this Section 5.11, (ii) a certified copy of the trust agreement for the American
Savings Plan; (iii) the most recent favorable determination letter from the IRS
with respect to the American Savings Plan; and (iv) an opinion from Buyer's
legal counsel acceptable to Seller that the American Savings Plan, as so
amended, complies or will comply on a timely basis with the applicable
provisions of the Code relating to the qualification of, and the transfer of
assets and assumption of benefit liabilities by, the American Savings Plan.
Seller shall deliver to Buyer as soon as practicable, but in no event later than
ninety (90) days after Closing, an opinion from Seller's legal counsel
acceptable to Buyer that the PEI Savings Plan complies or will comply on a
timely basis with the applicable provisions of the Code relating to the
qualification of the PEI Savings Plan, and the transfer of assets to, and
assumptions of benefit limitations by, the American Savings Plan. PEI shall (i)
allow the Affected Participants to elect whether to have their entire accounts
under the PEI Savings Plan transferred to the American Savings Plan or to have
their accounts under the PEI Savings Plan other than their PEI stock accounts
transferred to the American Savings Plan and to retain their PEI stock accounts
in the PEI Savings Plan (the portion of the PEI Savings Plan accounts to be
transferred pursuant to the Affected Participant's elections is hereinafter the
"Transferred Accounts") and (ii) as soon as practicable, but in any event within
120 days after Closing, cause the trustee of the PEI Savings Plan to transfer in
cash, including, for those Affected Participants who elect to transfer their
entire accounts, the cash value of any PEI stock held in their accounts, and
promissory notes representing outstanding loans to Affected Participants to the
trustee of the American Savings Plan an amount equal to the sum of the account
balances of the Transferred Accounts calculated as of the most recent valuation
date under the PEI Savings Plan (which shall, in any event, be within thirty
(30) days of the transfer). Both the Seller Parties and Buyer will file any IRS
Form 5310A that is required with respect to the transfer contemplated by this
Section 5.11 date at least 30 days prior to the transfer. Upon the transfer
described in this Section 5.11, Buyer and the American Savings Plan shall be
responsible for all benefits attributable to the Transferred Accounts to which
Transferred Employees were entitled under the PEI Savings Plan as of such date,
and Seller and the PEI Savings Plan shall cease to have any liability,
contingent or otherwise, for such benefits. Sellers and the PEI Savings Plan
shall retain responsibility for all benefits attributable to the portion, if
any, of each Affected Participant's PEI Savings Plan accounts that is not
included in the Transferred Accounts and Buyer and the American Savings Plan
shall have no liability, contingent or otherwise, for such benefits.
5.12 Post-Retirement Health Care and Life Insurance. Within
sixty (60) days of the Closing, Seller agrees to transfer to trusts
established by Buyer under Section 501(c)(9) of the Code ("Buyer's VEBAs")
the amount held under any trust established by Seller under Section
501(c)(9) of the Code ("Seller's VEBAs") to fund post-retirement health care
and life insurance benefits attributable to the Former Employees identified
pursuant to the method set forth on Schedule 5.12 and any Transferred
Employees. Buyer agrees to provide post-retirement health care and life
insurance benefits to the Former Employees listed on Schedule 5.12
and, as applicable, Transferred Employees who become eligible for such benefits
after Closing and further agrees that Buyer's VEBAs will apply an amount at
least equal to the sum of the assets (and earnings thereon calculated at the
rate of return generated by Buyer's VEBAs) transferred from Seller's VEBAs to
provide post-retirement health care and life insurance benefits for such
employees. Upon Closing, Buyer shall be responsible for all obligations of the
Seller Parties to provide post-retirement health care and life insurance
benefits "incurred" (within the meaning of Section 5.9.4) after the Closing and
the Seller Parties shall cease to have any liability, contingent or otherwise,
for such benefits. Notwithstanding the foregoing, Buyer shall not pay and shall
not assume any obligation or responsibility of Seller to provide post-retirement
health care and life insurance benefits attributable to Former Employees to the
extent that the PPUC has not authorized recovery for the expense of such
benefits in Seller's water rates as of the Closing.
5.13 Taxes. The Seller Parties, on the one hand, and Parent and
Buyer, on the other, shall (a) each provide the other with such
assistance as may reasonably be requested by either of them in connection with
the preparation of any Tax return, any audit or other examination by any taxing
authority or any judicial or administrative proceeding with respect to Taxes;
(b) each retain and provide the other with any records or other information
which may be relevant to such return, audit, examination or proceeding, and (c)
each provide the other with any final determination of any such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Tax return of the other for any period (which shall be maintained
confidentially). Without limiting the generality of the foregoing, Parent and
Buyer, on the one hand, and the Seller Parties, on the other, shall retain,
until the applicable statutes of limitations (including all extensions) have
expired, copies of all Tax returns, supporting workpapers, and other books and
records or information which may be relevant to such returns for all Tax periods
or portions thereof ending before or including the Closing Date, and shall not
destroy or dispose of such records or information without first providing the
other party with a reasonable opportunity to review and copy the same.
5.14 Survey.
5.14.1 Within 180 days after the date hereof Seller shall
obtain at its sole cost and expense and deliver to Buyer a final survey (the
"Survey") of the Real Estate listed on Schedule 1.1.1(a), and a final mapping of
those portions of the Excluded Real Estate as may be required to be mapped in
connection with the Operating Easement. The Survey shall (A) be prepared and
sealed by a Professional Land Surveyor, registered in the Commonwealth of
Pennsylvania, who may be an employee of Seller, (B) be referenced to the
Pennsylvania Plane Coordinate System (North Zone), and where reasonably
feasible, to existing permanent structures such as dams, buildings, roadways and
abutments, and (C) contain a legal description of the Real Estate, including
metes and bounds, sufficient in detail for the preparation of recordable deeds.
The mapping of the Excluded Real Estate shall be sufficient in detail to permit
the recordation of the Operating Easement.
5.14.2 Buyer shall have 60 days after it receives the Survey
and make such adjustments in the Survey as it, in its reasonable, good faith
discretion, determines are necessary to operate the Business. Upon the
expiration of such 60 day-period Buyer will notify Seller in writing of such
adjustments. In the event that Seller disputes any such adjustments and Buyer
and Seller are unable to resolve such dispute within 30 days, Seller and Buyer
shall each have the right to terminate this Agreement.
5.14.3 The Seller Parties shall keep Buyer reasonably informed
at all times as to its progress with respect to the subdivision approval for
which Seller makes application (other than proceedings before the PPUC) and
shall provide Buyer with an opportunity to participate in such approval process
including the right to approve any changes in boundary lines or conditions or
restrictions imposed upon the Real Estate as a condition of any such subdivision
approval.
5.15 PEI Guarantees. Each of Parent and Buyer shall use its
reasonable efforts to assist PEI in obtaining full and complete releases
on the guarantees listed on Schedule 5.15 made by PEI of Seller's
obligations with respect to certain of the Assumed Indebtedness. For
purposes of this Section 5.15 and Section 5.16, reasonable efforts: (a) shall
include Buyer's assumption of the Assumed Indebtedness on the terms set forth in
this Agreement; (b) shall not be deemed to include any obligation on the part of
Parent to provide a guarantee of Buyer's obligations under each such debt
instrument assumed by Buyer at Closing; (c) shall include the obligation of
Buyer to provide a debt obligation to the IDA satisfactory to the IDA in
replacement of and in substitution for Seller's obligations to the IDA under
Seller's outstanding tax-exempt financings; and (d) shall not impose on Buyer or
Parent any obligation to issue any debt obligation under Section 5.16 other than
an obligation (i) on terms substantially similar to Buyer's outstanding general
first mortgage bond indebtedness (other than interest rate, fees and maturity)
and (ii) bearing interest at rates, and with fees and maturities, equal to the
Seller's indebtedness to the IDA.
5.16 Assumption of Seller Debt. Each of Buyer and Parent
shall use its reasonable efforts (as defined in Section 5.15) to assist
Seller in obtaining all consents and taking such other actions as may be
required to enable Buyer to assume at the Closing all of Seller's
liabilities and obligations under the Assumed Indebtedness to the
extent provided in Section 2.3.
5.17 Schedule of Permits. Within ninety (90) days following
the execution of this Agreement, PEI and Seller shall deliver to Buyer a
schedule, to be identified as Schedule 5.17, which sets forth all material
Permits required for the use of the Acquired Assets and the
operation of the Business by Buyer substantially in the manner as it was
conducted prior to the date hereof. For purposes of this Section 5.17 material
Permits shall include those required for the service of all utility customers at
substantially the same service levels as provided by Seller on the date of this
Agreement. All Permits listed on Schedule 5.17 that are required to be listed
on Schedule 3.3 or Schedule 3.9 shall be so designated. Seller has made or will
make prior to the Closing Date timely applications for renewals of all such
Permits listed on Schedule 5.17 which under applicable law must be filed prior
to the Closing Date to maintain the Permits listed on Schedule 5.17 in full
force and effect.
5.18 Title Information. Within sixty (60) days following the
execution of this Agreement, Seller shall use its reasonable efforts to
deliver to Buyer true, correct and complete copies of all existing title
policies, surveys, leases, deeds, instruments and agreements
relating to title to the Real Estate in Seller's possession.
5.19 Transaction with Related Parties. Effective as of the
Closing Date, Seller shall have terminated and cancelled all contracts,
commitments and agreements (including employment relationships) relating
to the Acquired Assets or the Business, between Seller, any Affiliate of
Seller (including PEI), any officer or director of Seller or PEI, or any
Affiliate of the foregoing. Seller shall be solely liable for any
contractual or other claims, express or implied arising out of the termination
and cancellation of any of the foregoing raised by any party thereto.
5.20 Approval by PEI. Upon approval of this Agreement and the
transactions contemplated hereby by the common stockholders of PEI as
contemplated by Section 5.8.4 hereof, PEI shall, as the sole owner of
common stock of Seller, vote all of such shares of common stock to approve this
Agreement and the transactions contemplated hereby.
5.21 Supplemental Information.
5.21.1 Seller shall provide Buyer, within five (5) days of the
execution or the date of receipt thereof, a copy of (a) each Contract (other
than with respect to which the Business' total annual liability or expense is
less than $50,000 per such Contract) entered into by Seller after the date
hereof and prior to the Closing Date; (b) a copy of any written notice for
assessments for public improvements against the Real Estate received after the
date hereof and prior to the Closing Date; (c) a copy of the filing of any
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any of the Real Estate received after the date hereof but
prior to the Closing Date; and (d) a copy of any Contract where Seller is a
lessee relating to the use or occupancy of the Real Estate and where such
Contract involves annual payments in excess of $25,000 entered into by Seller
after the date hereof and prior to the Closing Date.
5.21.2 Within five (5) days of the receipt of notice of
violation Seller shall notify Buyer of any violations of state or federal
drinking water standards which, if such violations existed on the date hereof,
would be required to be disclosed pursuant to Section 3.8.10 hereof, and shall
promptly notify Buyer of the actions proposed to be taken by Seller to correct
or otherwise respond to such violations.
5.22 Non-Competition. Except as set forth on Schedule 5.22, the
Seller Parties agree that for a period of fifteen (15) years after the
Closing Date neither Seller Party nor any Affiliate of a Seller Party
shall directly or indirectly own, manage, operate, control or participate in the
ownership, management, operation or control of or be otherwise connected in any
substantial manner with any entity engaged in the business of storing, supplying
and distributing water in Pennsylvania, whether or not such business is subject
to regulation by the Pennsylvania Public Utility Commission (it being understood
that the individual directors of Seller and PEI are not Affiliates of a Seller
Party).
5.23 Insurance. Seller or PEI shall arrange, to the reasonable
satisfaction of Buyer, for the first insurance policy listed on Schedule
3.19 (or any successor or replacement policy thereto) to provide
coverage for events or occurrences occuring prior to Closing but reported within
five years of the Closing Date.
ARTICLE 6
CONDITIONS PRECEDENT; TERMINATION
6.1 Conditions Precedent to Obligations of Buyer and Parent.
The obligations of Buyer and Parent to cause the purchase the Acquired
Assets and the assumption of the Assumed Liabilities and to consummate the
other transactions contemplated hereby are subject to the satisfaction, on
or prior to the Closing Date, of each of the following conditions
(any one or more of which may be waived in writing in whole or in part by
Buyer and Parent in their sole discretion):
6.1.1 Performance of Agreements; Representations and Warranties.
Seller and PEI shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them at or prior to the Closing; and the
representations and warranties set forth in this Agreement made by Seller and
PEI shall be true and correct on and as of the Closing Date with the same force
and effect as though such representations and warranties had been made on and as
of the Closing Date, except for representations and warranties that speak as of
a specific date or time other than the Closing Date (which need only be true and
correct as of such date or time), other than, in all such cases (except Section
3.25), such failures to be true and/or correct as would not in the aggregate
reasonably be expected to have a Material Adverse Effect, provided however, that
if any such representation or warranty is already qualified in any respect by
materiality or as to material adverse effect, for purposes of determining
whether this condition has been satisfied, such materiality or material adverse
effect qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso). Buyer shall have been
furnished with a certificate of the President or Vice President of Seller and
PEI dated the Closing Date, certifying to the foregoing.
6.1.2 Opinion of Counsel. Buyer shall have received from
Moses & Gelso, counsel to Seller and PEI, an opinion dated the Closing Date, in
form and substance satisfactory to Buyer, to the effect set forth in Exhibit F
hereto.
6.1.3 HSR Act. The applicable waiting period under the HSR
Act with respect to the transactions contemplated hereby shall have expired or
been terminated.
6.1.4 Required PPUC and Other Consents. The PPUC shall have
issued an order approving the transactions contemplated hereby and affirming
that the regulatory treatment with respect to the Business in existence as of
the date of this Agreement afforded to Seller (including without limitation as
to the recovery of deferred treatment plant costs and recovery of deferred
billings) shall be continued following the transactions contemplated hereby, and
such order shall not contain any restrictions or conditions (other than those in
effect on the date hereof) which would have a Material Adverse Effect on the
Acquired Assets or the Business, and such order shall be final and unappealable;
Seller shall have obtained the statutory and regulatory consents and approvals
listed on Schedule 6.1.4 hereto and all other statutory and regulatory consents
and approvals which are required under the laws or regulations of the United
States and other Authorities in order to consummate the transactions
contemplated hereby and to permit Buyer to conduct the Business in the manner
contemplated by Section 3.25 hereof other than those the failure of which to
obtain would not have a Material Adverse Effect (it being understood that the
failure to obtain subdivision approval from any Authority other than the PPUC
shall not be considered a required approval unless after the date hereof but
prior to the Closing Date, there is any court decision or any change in, or in
the interpretation by an appropriate Authority of, any law or regulation to the
effect that subdivision approval from an Authority other than the PPUC is
legally required for the subdivision of the Real Estate). Seller shall have
also obtained (i) all consents and legal opinions required to enable Buyer to
assume the IDA Financings (without any change in the tax-exempt status of the
IDA Financings) and all consents required pursuant to the Indenture of Mortgage
of Deed of Trust dated as of March 15, 1946 from Seller to First Trust of New
York, National Association, as successor to Morgan Guaranty Trust Company of New
York, as trustee, as supplemented (the "Mortgage Indenture") to enable Seller to
sell the Acquired Assets and to grant and transfer the rights under the
Operating Easement to Buyer at the Closing, free and clear of all Liens other
than Permitted Exceptions (and specifically free and clear of any Lien arising
under or pursuant to the Mortgage Indenture) and (ii) the consents listed on
Schedule 6.1.4 hereto.
6.1.5 Injunction; Litigation. (i) No statute, rule,
regulation or order of any court or Authority shall be in effect which restrains
or prohibits the transactions contemplated by this Agreement or which would
limit or materially adversely affect Buyer's ownership of all or any material
portion of the Acquired Assets, nor (ii) shall there be pending or threatened
any litigation, suit, action or proceeding by any party which would reasonably
be expected to materially limit or materially adversely affect Buyer's ownership
of the Acquired Assets.
6.1.6 Documents. Seller and PEI shall have delivered the
Survey and all of the certificates, instruments, contracts and other documents
specified to be delivered by it hereunder, including pursuant to Section 2.7
hereof and shall have made arrangements satisfactory to Buyer to deliver to
Buyer as promptly as practicable after the Closing, such records (including
customer and employee records) necessary to own and operate the Business.
6.1.7 Real Estate.
(a) Seller and Buyer shall have executed and delivered an
access and maintenance easement agreement substantially in the form of Exhibit G
hereto (the "Operating Easement").
(b) The IDA shall have transferred to Seller title to the
Project Facilities as set forth in Exhibit A to the Project Facilities Agreement
dated as of December 1, 1992 between Seller and the IDA.
(c) As of the Closing Date, the Real Estate, as surveyed
pursuant to Section 5.14 hereof, together with the rights granted under the
Operating Easement, as subject to the Permitted Exceptions, will be adequate to
operate the Business consistent with past practice, including the service of all
utility customers in substantially the same manner and at substantially the same
service levels as the Seller has heretofore provided, and Buyer shall have been
furnished with a certificate of the President or Vice President of Seller and
PEI dated the Closing Date, certifying to the foregoing, which certification
shall not survive the Closing.
6.1.8 Shareholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved by the holders of a
majority of the issued and outstanding shares entitled to vote thereon of (i)
common stock of PEI, (ii) common stock of Seller and (iii) preferred stock of
Seller.
6.2 Conditions Precedent to Obligations of Seller Parties. The
obligations of the Seller Parties to cause the sale of the Acquired
Assets and to consummate the other transactions contemplated hereby are
subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions (any one or more of which may be waived in writing in
whole or in part by the Seller Parties in their sole
discretion):
6.2.1 Performance of Agreements; Representations and
Warranties. Parent and Buyer shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them at or prior to the Closing; and the
representations and warranties set forth in this Agreement made by Buyer and
Parent shall be true and correct on and as of the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date, except for representations and warranties that speak
as of a specific date or time other than the Closing Date (which need only be
true and correct as of such date or time), other than, in all such cases (except
Section 4.2), such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a material adverse effect on the
respective ability of Buyer and Parent to perform their obligations under this
Agreement and the Transaction Documents, provided, however, that if any such
representation or warranty is already qualified in any respect by materiality or
as to material adverse effect, for purposes of determining whether this
condition has been satisfied, such materiality or material adverse effect
qualification will be in all respects ignored and such representation or
warranty shall be true and correct in all respects without regard to such
qualification (but subject to the overall exception as to material adverse
effect set forth immediately prior to this proviso). Seller shall have been
furnished with a certificate of the President or Vice President of Parent and
Buyer, dated the Closing Date, certifying to the foregoing.
6.2.2 Opinion of Counsel. Seller shall have received from
Dechert Price & Rhoads, counsel to Buyer, an opinion dated the Closing Date, in
form and substance satisfactory to Seller, to the effect set forth in Exhibit H
hereto.
6.2.3 HSR Act. The applicable waiting period under the HSR
Act with respect to the transactions contemplated hereby shall have expired or
been terminated.
6.2.4 Required PPUC and Other Consents. The PPUC shall have
issued an order approving the transactions contemplated hereby and such order
shall not contain any restrictions or conditions which would have a material
adverse effect on Seller or PEI, and such order shall be final and unappealable;
Seller shall have obtained the statutory and regulatory consents and approvals
listed on Schedule 6.2.4 hereto and all other statutory and regulatory consents
and approvals which are required under the laws or regulations of the United
States and other Authorities in order to consummate the transactions
contemplated hereby, other than those the failure of which to obtain would not
have a material adverse effect on the Seller or PEI after the Closing. Seller
shall have obtained (i) all consents and legal opinions required to enable Buyer
to assume the IDA Financings and Seller shall have obtained all consents
required pursuant to the Mortgage Indenture to enable Seller to sell the
Acquired Assets to Buyer at the Closing, free and clear of all Liens other than
Permitted Exceptions (and specifically free and clear of any Lien arising under
or pursuant to the Mortgage Indenture), and (ii) the consents listed as items 1-
4, 7, 9 and 17-19 of Schedule 3.3. Seller and Buyer shall each have obtained
all consents required to enable Buyer to grant and transfer the rights under the
Operating Easement to Seller free and clear of all Liens other than the "Buyer
Permitted Exceptions." "Buyer Permitted Exceptions" as used herein shall mean
(a) the Liens set forth in Schedule 3.10 hereto, (b) Liens securing Taxes,
assessments, governmental charges or levies, or the claims of materialmen,
mechanics, carriers and like persons, all of which are not yet due and payable
or which are being contested in good faith or (c) such other Liens which,
individually or in the aggregate, do not have a change or effect (or series of
related changes or effects) which has or is reasonably likely to have a material
adverse change in or effect upon the business, assets, condition (financial or
otherwise), or results of operations of the business of the Seller Parties taken
as a whole.
6.2.5 Injunction; Litigation. (i) No statute, rule,
regulation or order of any court or Authority shall be in effect which restrains
or prohibits the transactions contemplated by this Agreement or which would
limit or materially adversely affect PEI's or Seller's ownership of all or any
material portion of its properties, nor (ii) shall there be pending or
threatened any litigation, suit, action or proceeding by any party which could
reasonably be expected to materially limit or materially adversely affect PEI's
or Seller's ownership of any of its properties.
6.2.6 Operating Easement. Seller and Buyer shall have
executed and delivered the Operating Easement.
6.2.7 Documents. Parent and Buyer shall have delivered all
the certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 2.7 hereof.
6.2.8 Shareholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved by the holders of a
majority of the issued and outstanding shares entitled to vote thereon of (i)
common stock of PEI, (ii) common stock of Seller and (iii) preferred stock of
Seller.
6.3 Termination. This Agreement may be terminated at
any time prior to the Closing Date:
6.3.1 by mutual written consent of the Seller Parties, Buyer
and Parent;
6.3.2 by any of the Seller Parties on five (5) business days
notice if PEI or Seller receives a proposal to acquire from PEI or Seller all or
most of the assets of PEI or Seller or the Business or at least a majority of
the outstanding securities of PEI or Seller with general voting rights to elect
directors of PEI or Seller, as the case may be, or any right or option to
acquire any of the foregoing that PEI's Board of Directors determines in good
faith is more favorable to the common stockholders of PEI than the transactions
contemplated hereby;
6.3.3 by any of the Seller Parties, Parent or Buyer if (i) the
vote of the stockholders of PEI or the preferred stockholders of Seller to
approve this Agreement and the transactions contemplated hereby shall not be
obtained at any meeting, and/or any adjournments thereof, called therefor; (ii)
any governmental or regulatory body the consent of which is a condition to the
obligations of the Seller Parties, Parent and Buyer to consummate the
transactions contemplated hereby shall have determined not to grant its consent
and all appeals of such determination shall have been taken and have been
unsuccessful; (iii) any court of competent jurisdiction shall have issued an
order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have become final and
nonappealable; or (iv) the Closing shall not have occurred on or before
April 26, 1996;
6.3.4 by Buyer or Parent if (i) PEI or Seller fail to perform
its obligations under Sections 5.8.3 with respect to preparing, filing and
clearing the Proxy Statements with the SEC, or 5.8.4, and if, after ten (10)
days written notice by Parent or Buyer of any such failure, PEI or Seller fail
to cure (in the determination of Parent and Buyer) such failure, (ii) the
directors of PEI or Seller fail at the time of the mailing of the Proxy
Statements to their respective stockholders pursuant to Section 5.8.3 or at any
time thereafter to recommend approval of this Agreement or withdraw such
recommendation, or modify in a manner adverse to Parent and Buyer its
recommendations or approval or (iii) PEI or Seller enter into any letter of
intent or definitive agreement regarding a Competing Transaction; or
6.3.5 by Seller or Buyer pursuant to Section 5.14.2.
6.3.6 If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 6.3, this
Agreement shall become void and of no further force and effect, except for the
provisions of Section 5.6 relating to publicity, Section 6.4 relating to certain
payments, Section 3.24 and 4.6 relating to brokerage, and Section 8.6 relating
to jurisdiction. Nothing in this Section 6.3 shall be deemed to release either
party from any liability for any willful breach by such party of the terms and
provisions of this Agreement.
6.4 Termination Payments.
6.4.1 If (i) PEI or Seller terminates this Agreement in
accordance with Section 6.3.2; (ii) the Seller Parties, Parent or Buyer
terminates this Agreement in accordance with Section 6.3.3(i), and either PEI or
Seller enter into any letter of intent or definitive agreement with respect to
or consummate a Competing Transaction within three months of the date of such
termination; or (iii) Buyer or Parent terminates this Agreement pursuant to
Section 6.3.4 and either PEI or Seller has entered into or enters into any
letter of intent or definitive agreement with respect to or consummates a
Competing Transaction within six months of the date of such termination; then in
any such case within five (5) business days after the date of such termination
(or, if applicable, the date PEI or Seller enters into any letter of intent or
definitive agreement with respect to a Competing Transaction, or the date of
consummation of a Competing Transaction) Seller shall pay to Buyer the sum of
$9,000,000.
6.4.2 In addition, in any circumstances under which Buyer is
entitled to a payment pursuant to Section 6.4.1, Seller shall pay to Buyer all
reasonable out of pocket expenses incurred by Buyer and Parent in connection
with the transactions contemplated hereby up to a maximum expense reimbursement
of $1,500,000. Seller shall not be required to make any expense reimbursement
contemplated by this Section 6.4.2 unless and until it shall have a list from
Parent or Buyer stating the amount of its Expenses and copies of supporting
invoices.
ARTICLE 7
CERTAIN ADDITIONAL COVENANTS
7.1 Certain Taxes and Expenses. The Seller Parties, on the one
hand, and Buyer and Parent, on the other hand shall be equally responsible
for all state and local sales, use, transfer, real property transfer,
documentary stamp, recording and other similar taxes arising from and with
respect to the sale and purchase of the Acquired Assets. Except as
otherwise provided in this Agreement, each of the parties hereto shall each
bear its respective accounting, legal and other expenses incurred in connection
with the transactions contemplated by this Agreement.
7.2 Maintenance of Books and Records. The Seller Parties, on
the one hand, and Buyer and Parent, on the other hand, shall cooperate
fully with each other after the Closing so that (subject to any
limitations that are reasonably required to preserve any applicable
attorney-client privilege) each party has access to the business
records, contracts and other information existing at the Closing Date and
relating in any manner to the Acquired Assets or the Assumed Liabilities or the
conduct of the Business (whether in the possession of the Seller Parties or
Buyer or Parent). No files, books or records existing at the Closing Date and
relating in any manner to the Acquired Assets or the conduct of the Business
shall be destroyed by any party for a period of six years after the Closing Date
without giving the other party at least 30 days prior written notice, during
which time such other party shall have the right (subject to the provisions
hereof) to examine and to remove any such files, books and records prior to
their destruction. The access to files, books and records contemplated by this
Section 7.2 shall be during normal business hours and upon not less than two (2)
business days prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the party entitled to claim the same.
7.3 Survival.
7.3.1 Subject to this Section 7.3, Section 7.4.2(g) and
Section 7.4.2(j), all representations, warranties, covenants and agreements
contained in this Agreement or the Transaction Documents shall survive (and not
be affected in any respect by) the Closing, any investigation conducted by any
party hereto and any information which any party may receive. Notwithstanding
the foregoing,
(a) the covenants contained in Sections 5.1, 5.3, 5.4, 5.5,
5.8.2 through 5.8.6 and 5.21 and the related indemnity obligations contained in
Section 7.4 shall terminate on, and no action or claim with respect thereto may
be brought after, the third anniversary of the Closing Date;
(b) the covenants contained in Section 5.2 and the related
indemnity obligations contained in Section 7.4 shall terminate on, and no action
or claim with respect thereto may be brought after, the Closing Date;
(c) the representations and warranties contained in Sections
3.12 and 3.16 and the related indemnity obligations contained in Section 7.4
shall terminate on, and no action or claim with respect thereto may be brought
following the expiration of the applicable statute of limitations (or extensions
or waivers thereof);
(d) the representations and warranties contained in Section
3.2 and the related indemnity obligations contained in Section 7.4 shall survive
for an unlimited period of time;
(e) the representations and warranties contained in Section
3.10 and the related indemnity obligations contained in Section 7.4 shall
terminate on, and no action or claim with respect thereto may be brought after,
the tenth anniversary of the Closing Date;
(f) the representations and warranties contained in
Section 3.7 and 3.17 and the related indemnity obligations contained in
Section 7.4 shall terminate on, and no action or claim with respect thereto may
be brought after, the fifth anniversary of the Closing Date;
(g) the representations and warranties contained in Sections
3.3, 3.5, 3.6, 3.8, 3.9 and 3.25 and the related indemnity obligations contained
in Section 7.4 shall terminate on, and no action or claim with respect thereto
may be brought after, the third anniversary of the Closing Date;
(h) the representations and warranties contained in Section
3.11 and the certificate delivered pursuant to Section 6.1.7(c) and the related
indemnity obligations contained in Section 7.4 shall terminate on, and no action
or claim with respect thereto may be brought after, the Closing Date;
(i) the representations and warranties contained in Section
4.2 and the related indemnity obligations contained in Section 7.4 shall survive
for an unlimited period of time;
(j) the representations and warranties contained in Sections
4.3 and 4.4 and the related indemnity obligations contained in Section 7.4 shall
terminate on, and no action or claim with respect thereto may be brought after,
the third anniversary of the Closing Date;
(k) the representations and warranties contained in Section
4.5 and the related indemnity obligations contained in Section 7.4 shall
terminate on, and no action or claim with respect thereto may be brought after,
the Closing Date; and
(l) all other representations and warranties contained in
this Agreement and the related indemnity obligations contained in Section 7.4
shall terminate on and no further action or claim with respect thereto may be
brought after, the second anniversary of the Closing Date;
(m) such representations and warranties specified in the
foregoing clauses (c) through (k), and the covenants contained in Section 5.1,
5.2, 5.3, 5.4, 5.5, 5.8.2 through 5.8.6 and 5.21 and the liability of any party
with respect thereto, shall not terminate with respect to any claim, whether or
not fixed as to liability or liquidated as to amount, with respect to which such
party has been given written notice setting forth the facts upon which the claim
for indemnification is based and, if possible, a reasonable estimate of the
amount of the claims prior to the relevant anniversary of the Closing Date or
the 30th day after the expiration of the applicable statute of limitations (or
extensions or waivers thereof), as the case may be.
If any claim for indemnification is asserted or could be asserted with respect
to a breach or asserted breach of Section 3.17 (Undisclosed Liabilities) and the
Buyer or Parent is also entitled to indemnification in respect of that claim for
breach or asserted breach of any other representation or warranty in this
Agreement for which there is a shorter survival period, such shorter period will
apply to such claim except to the extent that such claim is a product liability,
toxic tort or similar claim (as described in Section 2.3.3(a)) brought by a
private party litigant.
7.3.2 No claim for indemnity under Section 7.4 shall be
brought or made by Buyer or Parent pursuant to Sections 7.4.1(a)(B) or
7.4.1(a)(C):
(a) after the tenth anniversary of the Closing Date, for any
action or claim with respect to the On-site Conditions;
(b) after the twentieth anniversary of the Closing Date,
with respect to the presence of Hazardous Substances at any locations other than
the Real Estate; and
(c) after the fifth anniversary of the Closing Date, for any
action or claim with respect to any other Retained Liability;
provided, however, that the foregoing time limitations shall not apply to any
such claims which have been the subject of a written notice from Parent and/or
Buyer to the Seller Parties prior to such period setting forth the facts upon
which the claim for indemnification is based and, if possible, a reasonable
estimate of the amount of the claims; and, provided, further, that the foregoing
time limitations shall also not apply to any such claims:
Paragraphs (u) through (z) are typed as text.
(u) with respect to Taxes;
(v) with respect to any liability of the types that appear
as "Current Liabilities" (other than "Other") on the Financial Statements of
Seller (other than the Assumed Indebtedness);
(w) not exclusively related to the Acquired Assets or not
exclusively related to the Business; and
(x) with respect to any of the matters discussed in
Section 3.16 hereof.
7.4 Indemnification. Seller, PEI, Parent and Buyer agree as
follows:
7.4.1 General Indemnification Obligations.
(a) Seller and PEI shall, indemnify Buyer and its directors,
officers and other Affiliates (including Parent) and hold Buyer and such other
parties harmless from and against any and all Damages arising out of or
resulting from (A) any breach of any representation, warranty, covenant or
agreement made by the Seller Parties in this Agreement or in any document or
certificate required to be furnished to Buyer by any of the Seller Parties
pursuant to this Agreement (including the Transaction Documents); (B) subject to
Section 7.3.2, any Excluded Assets or Retained Liabilities; (C) subject to
Section 7.3.2 the ownership, operation or use of any of the businesses or assets
of the Seller Parties or their Affiliates other than the Business whether
before, on or after the Closing Date; and (D) the failure of Seller to obtain
subdivision approvals for the transfer of the Real Estate from all applicable
Authorities.
(b) Buyer and Parent shall indemnify Seller, PEI and their
directors, officers and other Affiliates and hold Seller and such other parties
harmless from and against any and all Damages arising out of or resulting from
(A) any breach of any representation, warranty, covenant or agreement made by
Parent or Buyer in this Agreement or in any document or certificate required to
be furnished to Seller by Parent or Buyer pursuant to this Agreement (including
the Transaction Documents); (B) any Assumed Liabilities after the Closing Date;
(C) the ownership, operation or use of the Business after the Closing Date
(except to the extent resulting from Retained Liabilities or to the extent
resulting from breaches by the Seller Parties of representations, warranties,
covenants or agreements hereunder or in the other Transaction Documents); and
(D) any claim by a Transferred Employee or a Former Employee referred to on
Schedule 5.12 or the Beneficiary of any such employee or former employee for
post-retirement health care or life insurance benefits "incurred" (within the
meaning of Section 5.9.4) after the Closing.
(c) For purposes of this Agreement, "Damages" shall mean any
and all losses, liabilities, obligations, damages (including any governmental
penalty or punitive damages assessed or asserted against the party seeking
indemnification and including costs of investigation, clean-up and remediation),
deficiencies, interest, costs and expenses and any claims, actions, demands,
causes of action, judgments, costs and reasonable expenses (including reasonable
attorneys' fees and all other reasonable expenses incurred in investigating,
preparing or defending any litigation or proceeding, commenced or threatened,
incident to the successful enforcement of this Agreement). For purposes of
determining any breach of, and calculating the amount of Damages incurred by the
Indemnified Party arising out of or resulting from, any breach of a
representation, covenant or agreement by any party hereto, the references to a
"Material Adverse Effect" or materiality (or other correlative terms) shall be
disregarded. Notwithstanding the foregoing, Damages shall not include the loss
of profits of the party seeking indemnification, or punitive damages unless the
party seeking indemnification has had punitive damages assessed or asserted
against it.
7.4.2 General Indemnification Procedures.
(a) A party seeking indemnification pursuant to this
Section 7.4 (an "Indemnified Party") shall give prompt written notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of the
assertion of any claim, the incurrence of any Damages, or the commencement of
any action, suit or proceeding, of which it has knowledge and in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but failure to give such required notice shall relieve the Indemnifying
Party of any liability hereunder only to the extent that the Indemnifying Party
has suffered actual prejudice thereby. The Indemnifying Party shall have the
right, exercisable by written notice to the Indemnified Party after receipt of
notice from the Indemnified Party of the commencement of or assertion of any
claim or action, suit or proceeding by a third party in respect of which
indemnity may be sought hereunder (a "Third Party Claim"), to assume the defense
of such Third Party Claim which involves (and continues to involve) solely
monetary damages; provided, that (A) the Indemnifying Party expressly agrees in
such notice that, as between the Indemnifying Party and the Indemnified Party,
solely the Indemnifying Party shall be obligated to satisfy and discharge the
Third Party Claim, (B) such Third Party Claim does not include a request or
demand for injunctive or other equitable relief by an Authority and (C) the
Indemnifying Party makes reasonably adequate provision to assure the Indemnified
Party of the ability of the Indemnifying Party to satisfy the full amount of any
adverse monetary judgment that is reasonably likely to result. The Indemnifying
Party shall be deemed to have satisfied the condition set forth in clause (C) of
the proceeding sentence if it is a regulated utility.
(b) Neither the Indemnified Party nor the Indemnifying Party
shall settle any Third Party Claim without the prior written consent of the
other, which consent shall not be unreasonably withheld or delayed.
(c) The Indemnifying Party or the Indemnified Party, as the
case may be, shall have the right to participate in (but not control), at its
own expense, the defense of any Third Party Claim which the other party is
defending as provided in this Agreement.
(d) Amounts paid in respect of indemnification obligations
of the parties shall be treated as an adjustment to the Purchase Price.
(e) Subject to Section 7.4.2(f), neither Parent nor Buyer
(and the other Persons for which they can claim indemnity hereunder) shall be
entitled to indemnification for Damages incurred unless the aggregate amount of
Damages incurred by Parent or Buyer (or the other Persons for which they can
claim indemnification) exceeds $3,000,000 in the aggregate (the "Threshold
Amount"), in which case Seller and PEI shall then be liable for Damages in
excess of the Threshold Amount. Subject to Section 7.4.2(f), the cumulative
aggregate indemnity obligation of PEI and Seller under this Section 7.4 shall
not exceed $40,000,000 (the "Ceiling) and the cumulative aggregate indemnity
obligation of PEI and Seller under Section 7.4.1(a)(D) shall not exceed
$1,000,000.
(f) Notwithstanding the foregoing, the parties acknowledge
that Parent or Buyer (and the other Persons for which they can claim indemnity
hereunder) shall be entitled to indemnification for Damages in respect of
intentional and wilful breaches of covenants or agreements in this Agreement or
any of the Retained Liabilities other than the Specified Liabilities
irrespective of the Threshold Amount or the Ceiling, and that Parent or Buyer
(and the other Persons for which they can claim indemnity hereunder) shall be
entitled to indemnification for Damages pursuant to Section 7.4.1(a)(D)
irrespective of the Threshold Amount (it being understood that the failure to
cure a breach shall not, by itself, be an intentional and wilful breach). As
used herein, the "Specified Liabilities" shall mean the Retained Liabilities
arising from claims made after the Closing Date which (i) do not relate to
matters within the scope of clauses (u), (v), (w) and (x) of Section 7.3.2; (ii)
were unknown, after due inquiry, on or prior to Closing to any officer, any
accounting supervisor or any manager of a water system of Seller or PEI; (iii)
relate exclusively to the Acquired Assets or the Business prior to the Closing
Date; and (iv) are not within the scope of coverage or policy limits (without
giving effect to any deductible or retention) of the insurance policies of
Seller or PEI. Notwithstanding anything to the contrary in this Section 7.4,
Parent or Buyer (or the other Persons for which they can claim indemnification)
shall be entitled to indemnification for Damages in respect of a breach of
Section 3.2, 3.12 or 3.16 irrespective of the Threshold Amount or the Ceiling.
(g) Except to the extent provided in the Operating Easement,
the rights and remedies of PEI, Seller, Parent and Buyer under this Section 7.4
are exclusive and in lieu of any and all other rights and remedies which PEI,
Seller, Parent and Buyer may have under this Agreement or otherwise for monetary
relief with respect to (x) the inaccuracy of any representation, warranty,
certification or other statement made (or deemed made) by PEI, Seller, Parent or
Buyer in or pursuant to this Agreement or any of the Transaction Documents or
(y) any breach or failure to perform any covenant or agreements set forth in
this Agreement or any of the Transaction Documents.
(h) Except to the extent provided in Section 7.4.2(j) below,
no right to indemnification under this Section 7.4 shall be limited by reason of
any investigation or audit conducted before or after the Closing of any party
hereto including, without limitation, the Survey and the adjustment thereof
referred to in Section 5.14 hereof, or the knowledge of such party of any breach
of any representation, warranty, agreement or covenant by the other party at any
time, or the decision by such party to complete the Closing.
(i) No party shall have any liability to another party under
this Section 7.4 for Damages to the extent that:
(A) the Indemnified Party recovers insurance proceeds
covering the Damages; or
(B) the Indemnified Party's Tax liability is actually
reduced as a result of a tax benefit to which the Indemnified Party becomes
entitled in respect of the Damages;
(j) Seller and PEI shall have no liability or obligation
under this Section 7.4 for any Damages resulting from the inaccuracy or breach
of any representation or warranty if such inaccuracy or breach is disclosed by
Seller or PEI pursuant to and in accordance with Sections 5.3 and 8.4 hereof;
(k) Buyer agrees that (i) if it receives payment from Seller
or PEI for Damages arising under or pursuant to a breach of the representation
and warranty set forth in Section 3.10, and (ii) if Buyer has obtained title
insurance which may cover the claim or matter giving rise to such Damages, then
(iii) Buyer will make a claim under the title insurance if such claim can be
made in good faith. Buyer shall be under no obligation to obtain title
insurance or prosecute such claim (other than the initial filing of such claim).
(l) If at any time subsequent to the receipt by an
Indemnified Party of an indemnity payment hereunder, such Indemnified Party (or
any Affiliate thereof) receives any recovery, settlement or other similar
payment with respect to the Damages for which it received such indemnity payment
(including insurance proceeds pursuant to Section 7.4.2(i)(A) and a tax benefit
pursuant to Section 7.4.2(i)(B)) (the "Recovery"), such Indemnified Party shall
promptly pay to the Indemnifying Party an amount equal to the amount of such
Recovery, less any expense incurred by such Indemnified Party (or its
Affiliates) in connection with such Recovery, but in no event shall any such
payment exceed the amount of such indemnity payment;
(m) In the event of any indemnification claim under this
Section 7.4 involving the claim of any third party, the Indemnified Party shall
cooperate fully (and shall cause its Affiliates to cooperate fully) with the
Indemnifying Party in the defense of any such claim under this Section 7.4.
Without limiting the generality of the foregoing, the Indemnified Party shall
furnish the Indemnifying Party with such documentary or other evidence as is
then in its or any of its Affiliates' possession as may reasonably be requested
by the Indemnifying Party for the purpose of defending against any such claim.
Whether or not the Indemnifying Party chooses to defend or prosecute any claim
involving a third party, all the parties hereto shall cooperate in the defense
or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith.
7.5 UCC Matters. From and after the Closing Date,
Seller will promptly refer all inquiries with respect to ownership of the
Acquired Assets or the Business to Buyer. In addition, Seller will execute such
documents and financing statements as Buyer may reasonably request from time to
time to evidence transfer of the Acquired Assets to Buyer in accordance with
this Agreement, including any necessary assignment of financing statements.
7.6 Financial Statements. Seller, at Buyer's expense,
shall provide Buyer, within 90 days after Buyer's written request
therefor, with the following audited financial statements: (i) a
statement of net assets of the Business as of the end of the last fiscal year
prior to Closing and (ii) a statement of income of the Business and a statement
of cash flows or its equivalent of the Business for the last fiscal year prior
to Closing including opinions thereon of independent public accountants and the
following unaudited financial statements (i) a statement of net assets of the
Business as of the end of the last fiscal quarter prior to Closing and (ii) a
statement of income of the Business and a statement of cash flows or its
equivalent of the Business, for the period from the end of the last fiscal year
through the end of the last fiscal quarter prior to Closing in connection with
the preparation and filing of any registration statement or periodic report of
Buyer or its Affiliates pursuant to such laws.
7.7 Collection of Receivables. Seller agrees that it shall
promptly (and in any event no later than five (5) Business Days following
receipt) deliver all such payments with respect to accounts receivable
from customers of the Business received on and after the Closing Date
(including but not limited to negotiable instruments tendered in
payment of accounts receivable assigned to Buyer hereunder which shall be duly
endorsed by Seller to the order of Buyer) to Buyer. Seller shall cooperate with
Buyer in coordinating the transfer of collection agents and customers of the
Business who pay their bills through the Automated Clearinghouse (ACH) process
to Buyer.
ARTICLE 8
MISCELLANEOUS
8.1 Construction. Parent, Buyer and the Seller Parties
have participated jointly in the negotiation and drafting of this Agreement and
the Transaction Documents. In the event any ambiguity or question of intent or
interpretation arises, this Agreement and the Transaction Documents shall be
construed as if drafted jointly by Parent, Buyer and the Seller Parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" in this Agreement shall mean
including without limitation. Words in the singular shall be held to include
the plural and vice versa and words of one gender shall be held to include the
other genders as the context requires. The terms "hereof," "herein," and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of the Schedules
and Exhibits hereto) and not to any particular provision of this Agreement, and
Article, Section, paragraph, Exhibit and Schedule references are to the
Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement unless
otherwise specified. The word "or" shall not be exclusive. Provisions of this
Agreement shall apply, when appropriate, to successive events and transactions.
Section references refer to this Agreement unless otherwise specified.
8.2 Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted to be given to
any party hereunder shall be in writing and shall be deemed given only if
delivered to the party personally or sent to the party by telecopy, by
registered or certified mail (return receipt requested) with postage and
registration or certification fees thereon prepaid, or by any nationally
recognized overnight courier addressed to the party at its address set forth
below:
If to Buyer:
Pennsylvania-American Water Company
c/o American Water Works Company
1025 Laurel Oak Road
P.O. Box 1770
Voorhees, New Jersey 08043
Fax: (609) 346-8229
Attention: Counsel
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
Fax: (215) 994-2222
Attention: George W. Patrick, Esq.
If to Seller or PEI:
Pennsylvania Enterprises, Inc.
Wilkes-Barre Center
39 Public Square
Wilkes-Barre, PA 18711-0601
Attention: President
Fax:
with a copy to:
Hughes Hubbard & Reed
One Battery Park Plaza
New York, NY 10004
Attention: Garett J. Albert, Esq.
Fax: (212) 422-4726
8.3 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, however,
that no party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the other party hereto.
8.4 Exhibits and Schedules. All Exhibits and Disclosure
Schedules annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein. Disclosure of any fact or item in any Schedule referenced by a
particular paragraph or Section in this Agreement shall, should the existence of
the fact or item or its contents be clearly related to any other paragraph or
section, be deemed to be disclosed with respect to that other paragraph or
section.
8.5 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to the conflicts of laws principles thereof.
8.6 Consent to Jurisdiction. Each of the Seller Parties,
Parent and Buyer irrevocably submits to the exclusive
jurisdiction of (a) the Court of Common Pleas situated in any county in the
Commonwealth of Pennsylvania, and (b) any United States District Court situated
in the Commonwealth of Pennsylvania, for purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
(and agrees not to commence any action, suit or proceeding relating hereto
except in such courts). Each of the Seller Parties, Parent and Buyer further
agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth in Section 8.2
shall be effective service of process for any action, suit or proceeding with
respect to any matters to which it has submitted to jurisdiction as set forth in
the immediately preceding sentence. Each of the Seller Parties, Parent and
Buyer irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (a) the Court of Common Pleas situated in
any county in the Commonwealth of Pennsylvania, or (b) any United States
District Court situated in the Commonwealth of Pennsylvania, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
8.7 Severability. The parties agree that (a) the
provisions of this Agreement shall be severable in the event that any provision
hereof is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, (b) such invalid, void or otherwise unenforceable
provision shall be automatically replaced by another provision which is as
similar as possible in terms to such invalid, void or otherwise unenforceable
provision but which is valid and enforceable and (c) the remaining provisions
shall remain enforceable to the fullest extent permitted by law.
8.8 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or should be construed to confer upon or give to any
Person other than the parties hereto and their successors
and permitted assigns any rights or remedies under or by reason of this
Agreement.
8.9 Entire Agreement. This Agreement, together with the
Schedules and Exhibits hereto and the other Transaction Documents, the
Confidentiality Agreement dated March 23, 1995 between PEI and Parent, and the
Standstill Agreement dated the date hereof between PEI and Parent, constitute
the entire understanding of the parties with respect to the subject matter
hereof, supersede any prior agreements or understandings, written or oral, among
the parties with respect to the subject matter hereof and is not intended to
confer upon any Person other than the parties hereto any benefit, right or
remedy.
8.10 Amendment and Waiver. The parties may, by mutual
agreement, amend this Agreement in any respect, and any party, as
to such party, may (i) extend the time for the performance of any of the
obligations of the other party; (ii) waive any inaccuracies in representations
and warranties by the other party; (iii) waive compliance by the other party
with any of the covenants or agreements contained herein and performance of any
obligations by the other party; and (iv) waive the fulfillment of any condition
that is precedent to the performance by such party of any of its obligations
under this Agreement. To be effective, any such amendment or waiver must be in
writing and be signed by the party providing such waiver or extension, as the
case may be. The waiver by any party hereto of any breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach, whether or not similar.
8.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument.
8.12 Headings. The headings preceding the text of the
sections and subsections hereof are inserted solely for convenience of
reference, and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
8.13 Definitions. For purposes of this Agreement, "to the
best of the knowledge of the Seller Parties" shall mean the actual
knowledge possessed by any of the directors of the Seller Parties or the
following officers or employees of Seller: Chairman, President, Vice President-
Finance, Vice President-Human Resources and Customer Services, Vice President-
Water Resources, [Director of Field Operations], Vice President-Administration
and Secretary, Controller and water treatment plant managers.
8.14 No Implied Representation. NOTWITHSTANDING ANYTHING
CONTAINED IN THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY
HERETO THAT NEITHER OF THE SELLER PARTIES ARE MAKING ANY
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, BEYOND THOSE
EXPRESSLY GIVEN IN THIS AGREEMENT, ANY SCHEDULE HERETO, THE TRANSACTION
DOCUMENTS, OR ANY DOCUMENT, EXHIBIT, CERTIFICATE, INSTRUMENT OR STATEMENT TO BE
DELIVERED HEREUNDER OR THEREUNDER INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OR REPRESENTATION AS TO CONDITION, MERCHANTABILITY, SUITABILITY OR
FITNESS FOR A PARTICULAR PURPOSE AS TO ANY OF THE ACQUIRED ASSETS. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, IT IS UNDERSTOOD AND AGREED THAT ANY
COST ESTIMATES, PROJECTIONS OR OTHER PREDICTIONS CONTAINED OR REFERRED TO IN THE
SCHEDULES AND ANY COST ESTIMATES, PROJECTIONS OR PREDICTIONS OR ANY OTHER
INFORMATION CONTAINED OR REFERRED TO IN OTHER MATERIALS THAT HAVE BEEN OR SHALL
HEREINAFTER BE PROVIDED TO PARENT, BUYER OR ANY OF THEIR AFFILIATES, AGENTS OR
REPRESENTATIVES ARE NOT AND SHALL NOT BE DEEMED TO BE REPRESENTATIONS OR
WARRANTIES OF ANY OF THE SELLER PARTIES.
8.15 Construction of Certain Provisions. It is understood
and agreed that neither the specification of any dollar amount in the
representations and warranties contained in this Agreement nor the
inclusion of any specific item in the Schedules or Exhibits is
intended to imply that such amounts or higher or lower amounts, or the items so
included or other items, are or are not material, and none of the parties shall
use the fact of the setting of such amounts or the fact of any inclusion of any
such item in the Schedules or Exhibits in any dispute or controversy between the
parties as to whether any obligation, item or matter is or is not material for
purposes hereof.
8.16 Bulk Sales. Buyer agrees that it shall not make any
filings under the Pennsylvania tax bulk sales provisions with respect
to the transactions contemplated by this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
PENNSYLVANIA ENTERPRISES, INC.
By:_________________________________________________
Name: Dean T. Casaday
Title: President
PENNSYLVANIA GAS AND WATER COMPANY
By:________________________________________________
Name: Dean T. Casaday
Title: President
AMERICAN WATER WORKS COMPANY, INC.
By:_______________________________________________
Name: George W. Johnstone
Title: President and Chief Executive Officer
PENNSYLVANIA-AMERICAN WATER COMPANY
By:________________________________________________
Name: Robert M. Ross
Title: President