SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 1, 1996
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AMERICAN WATER WORKS COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-3437-2 51-0063696
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1025 Laurel Oak Road, P.O. Box 1770, Voorhees, New Jersey 08043
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 346-8200
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<PAGE> FORM 8-K
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
On February 16, 1996, a subsidiary of American Water Works
Company, Inc. (the "Company") completed the acquisition of the regulated
water operations and certain related assets of Pennsylvania Gas and Water
Company ("PG&W"). The acquisition occurred pursuant to an Asset Purchase
Agreement dated as of April 26, 1995 among the Company, the Company's
subsidiary, Pennsylvania-American Water Company ("PAWC"), PG&W and PG&W's
parent, Pennsylvania Enterprises, Inc. ("PEI") (the "Asset Purchase
Agreement"). The acquired assets were used by PG&W in the operation of its
regulated water business in Lackawanna, Luzerne, Wayne and Susquehanna
counties, Pennsylvania, and will continue to be so used by PAWC.
The consideration for the acquisition, which consisted of a cash
payment and PAWC's assumption of certain indebtedness of PG&W, aggregated
approximately $409 million based primarily on the December 31, 1995 net
book value of the assets acquired, and is subject to adjustment based on
the net book value of those assets on the date of the acquisition. The
funds for the cash payment was provided by short term borrowings from a
syndicate of 10 banks which included Mellon Bank, N.A., First Union
National Bank, as co-agents under a Credit Agreement with PAWC dated
February 16, 1996.
The Company is not aware of any material relationship between the
Company and PGW or any of its affiliates, any director or officers of the
Company, or any associate of any such director or officer.
A copy of the press release of PAWC announcing completion of the
acquisition is filed as an exhibit hereto.
Item 7. Financial Statements, Pro Forma Financial Information and
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Exhibits.
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(a) Financial Statements --
Pursuant to Item 7(a)(4) of Form 8-K, the Company has
requested an extension of time for filing the financial information of the
Company and consolidated subsidiaries due to the impracticability of filing
such information at the time this Report on Form 8-K is filed. The Company
anticipates that it will file such financial information within 60 days of
the date on which this Report on Form 8-K is filed.
(a) Pro Forma Financial Information --
Pursuant to Item 7(b)(2) of Form 8-K, the Company has
requested an extension of time for filing the pro forma financial
information of the Company and consolidated subsidiaries due to the
impracticability of filing such information at the time this Report on Form
8-K is filed. The Company anticipates that it will file such financial
information within 60 days of the date on which this Report on Form 8-K is
filed.
<PAGE> FORM 8-K
Item 7. Financial Statements, Pro Forma Financial Information and
----------------------------------------------------------
Exhibits.
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(c) Exhibits
Exhibit No. Description
- ----------- ------------
2.1 Asset Purchase Agreement,
dated as of April 26, 1995, among
American Water Works Company
Inc., Pennsylvania-American Water
Company, Pennsylvania Gas
and Water Company and
Pennsylvania Enterprises, Inc.
99.1 Press release issued by Pennsylvania-
American Water Company on
February 16, 1996.
- ---------------------------------
*. Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to
such agreement are omitted. Exhibit 2.1 contians a list
identifying the contents of all such schedules, and the
Company agrees to furnish supplementally copies of such
schedules to the Commission upon request.
<PAGE> FORM 8-K
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
AMERICAN WATER WORKS COMPANY, INC.
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(Registrant)
By:
----------------------------------
Name: George W. Johnstone
Title: President
Date: March 1, 1996
<PAGE> EXHIBIT INDEX FORM 8-K
Exhibit No.
As provided
in Item 601
Exhibit Number Description
- -------------- ------------
2.1 Asset Purchase Agreement,
dated as of April 26, 1995, among
American Water Works Company
Inc., Pennsylvania-American Water
Company, Pennsylvania Gas
and Water Company and
Pennsylvania Enterprises, Inc.
99.1 Press release issued by Pennsylvania-
American Water Company on
February 16, 1996.
<PAGE>
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<PAGE>
<PAGE> 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
<PAGE>
<PAGE> 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
<PAGE>
<PAGE> 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
<PAGE>
<PAGE> 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
<PAGE>
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:
<PAGE>
(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;
<PAGE>
(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;
<PAGE>
(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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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 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.
<PAGE>
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 of the Code; 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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. section 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"):
<PAGE>
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
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
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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;
<PAGE>
(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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
2.7 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;
<PAGE>
(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
<PAGE>
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, 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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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) "Environmental 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. section 9601, et seq.), the Clean
Water Act (33 U.S.C. section 1251 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et seq.), the
Toxic Substances Control Act (15 U.S.C. section 2601 et seq.), the
Safe Drinking Water Act (42 U.S.C. section 300f et seq.) and the
Oil Pollution Act of 1990 (33 U.S.C. section 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
<PAGE>
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
<PAGE>
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
<PAGE>
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,
<PAGE>
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,
<PAGE>
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 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,
<PAGE>
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) .
<PAGE>
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
<PAGE>
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,
<PAGE>
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:
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 canceled 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.
<PAGE>
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 occurring
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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;
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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):
<PAGE>
(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:
(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
<PAGE>
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.
<PAGE>
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.
<PAGE>
(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.
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
<PAGE>
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: Kenneth L. Pollock
Title: Chairman of the Board
PENNSYLVANIA GAS AND WATER COMPANY
By:________________________________________________
Name: Kenneth L. Pollock
Title: Chairman of the Board
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
<PAGE> NEWS RELEASE Exhibit 99.1
from
[Pennsylvania-American Water Company - Logo]
800 West Hershey Park Drive, P.O. Box 888, Hershey, PA 17033-0888
(717) 533-5000
Contact: Bob Manbeck
FOR IMMEDIATE RELEASE Dir.-Communications
- ---------------------
Phone: (717) 531-3304 office
(717) 697-6373 home
Date: February 16, 1996
Pennsylvania-American Acquires PG&W Water System
--------------------------------------------------
Hershey, PA - The largest asset acquisition in the history of the
United States water utility business was completed today when Hershey-based
Pennsylvania-American Water Company (PAWC) purchased the regulated water
assets of Pennsylvania Gas and Water Company (PG&W) for about $409 million.
PAWC is the largest regulated water company in the United States and a
subsidiary of American Water Works Company, Inc. (NYSE:AWK) (AWWC) of
Voorhees, N.J. PG&W is a subsidiary of Pennsylvania Enterprises, Inc.
(NYSE:PNT) (PEI) based in Wilkes-Barre. Regulatory approval for the
transaction was granted by the Pennsylvania Public Utility commission. The
purchase was financed by a combination of cash and assumption of bonds.
As a result of the purchase, PAWC will serve an additional 400,000
people living in 65 communities located in portions of Lackawana, Luzerne,
Susquehanna and Wayne Counties including the cities of Scranton and Wilkes-
Barre. The assets include 10 water treatment plants, 36 reservoirs and
8,000 acres of watershed land.
<PAGE> Exhibit 99.1
Pennsylvania-American Water Company
February 16, 1996
Page Two
"This historic acquisition represents a true milestone in the growth
of Pennsylvania-American Water Company," said PAWC President Robert M.
Ross. "The new service areas in northeastern Pennsylvania border several
systems we operate in the Poconos region. We are looking forward to
providing safe, reliable and environmentally responsible water service to
people living within these four counties. Pennsylvania-American prides
itself in providing quality water and superior service to its customers,"
Ross said.
The company's additional service area spans over 200 square miles. Of
the 298 employees who will operate the company's new service area, 294
formerly worked for PG&W.
With the PG&W acquisition, PAWC will serve a population of nearly 2
million people in 31 Pennsylvania counties encompassing 287 municipalities.
