EXHIBIT 2
ASSET PURCHASE AGREEMENT
by and between
FLORIDA WATER SERVICES CORPORATION
and
FLORIDA WATER SERVICES AUTHORITY
Dated as of September 19, 2002
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is dated as of September
19, 2002, by and between Florida Water Services Authority, a public entity of
the State of Florida ("Buyer"), and Florida Water Services Corporation, a
Florida corporation ("Seller").
RECITALS
WHEREAS, Seller owns potable water production, supply, treatment, and
distribution systems, alternative water systems, wastewater collection,
transmission, treatment and disposal systems, and reclaimed water facilities in
various incorporated and unincorporated areas in Florida (the "System," as
hereinafter defined); and
WHEREAS, Buyer, pursuant to Chapter 163, Florida Statutes, and the
Interlocal Agreement dated as of September 16, 2002, creating Buyer (the
"Interlocal Agreement") and other applicable laws, has the power and authority
to acquire and provide potable water, wastewater, and reclaimed water facilities
and to provide service outside of the boundaries of its participating members;
and
WHEREAS, various governmental entities have threatened to condemn
portions of System of the Seller, including portions of the water, wastewater
and reclaimed water utility Facilities of the Seller, and in lieu of
condemnation, Buyer desires to acquire all or substantially all of the assets
which are used by Seller in providing services through the water, wastewater and
reclaimed water Facilities throughout the State of Florida, and to avoid
condemnation, Seller has consented to sell those assets to Buyer; and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, the
Assets of Seller for the consideration and on the terms and subject to the
conditions set forth in this Agreement;
NOW THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Definitions and Usage
1.1 Definitions
For purposes of this Agreement, the following terms and variations
thereof have the meanings specified or referred to in this Section 1.1:
"Accounts Receivable"-- (a) all customer accounts receivable and other
rights to payment from customers of Seller and the full benefit of all security
for such accounts or rights to payment; (b) all other accounts or notes
receivable of Seller and the full benefit
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of all security for such accounts or notes; and (c) any claim, remedy or other
right related to any of the foregoing.
"Acquisition Bonds"-- means Bonds issued by the Buyer primarily for the
purpose of paying the Purchase Price or installments thereof and anticipated to
be in an aggregate amount sufficient to produce Acquisition Bond Net Proceeds in
an amount equal to the Purchase Price.
"Acquisition Bonds Net Proceeds' -- means the amount received from the
sale of the Acquisition Bonds less all the costs of issuing the Bonds,
establishing any required reserves, deducting $29 Million (for the purpose of
funding Remedial Capital Projects although it is not required that it be so
used), deducting $15,800,000 (for the purpose of funding future capital
improvements to the System although it is not required to be so used), deducting
an amount for the working capital needs of the Buyer and deducting the costs
incurred by the Buyer in connection with the transactions contemplated by this
Agreement. In the event that Bonds are issued at more than one time, the above
mentioned $44,800,000 will be deducted from the initial Bond issue in order to
determine the Acquisition Bond Net Proceeds.
"Appurtenances"-- all privileges, rights, easements, hereditaments and
appurtenances belonging to or for the benefit of the Land, including all
easements appurtenant to and for the benefit of any Land (a "Dominant Parcel")
for, and as the primary means of access between, the Dominant Parcel and a
public way, or for any other use upon which lawful use of the Dominant Parcel
for the purposes for which it is presently being used is dependent, and all
rights existing in and to any streets, alleys, passages and other rights-of-way
included thereon or adjacent thereto (before or after vacation thereof) and
vaults beneath any such streets.
"Assets" or "Assets to Be Sold"-- as defined in Section 2.1.
"Assignment and Assumption Agreement"-- as defined in Section
2.7(a)(ii).
"Assumed Liabilities"-- as defined in Section 2.4(a).
"Best Efforts" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously as possible, provided, however, that a Person required to use Best
Efforts under this Agreement will not be thereby required to take actions that
would result in a material adverse change in the benefits to such Person of this
Agreement and the Contemplated Transactions or to dispose of or make any change
to its business, expend any material funds or incur any other material burden.
"▇▇▇▇ of Sale"-- as defined in Section 2.7(a)(i).
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"Bonds" shall mean revenue bonds, the interest on which (i) accrues at
fixed rates and (ii) is excluded from gross income of the holder thereof for
federal income tax purposes, to be issued by the Buyer and payable solely from
and secured solely by the Net Revenues of the System and, if consented to by
Buyer, other assets of the Buyer.
"Bond Insurer"--any nationally recognized financial institution or
insurer of principal and interest on bonds of state and local governments whose
bond purchase agreement, letter or line of credit, surety bond, insurance policy
or guaranty would result in such bonds being rated in one of the highest two
categories by Standard & Poor's or Moody's.
"Breach"-- any breach of, or any inaccuracy in, any representation or
warranty or any breach of, or a failure to perform or comply with, any covenant
or obligation, in or of this Agreement.
"Business Day"-- any day other than: (a) Saturday or Sunday; or (b)
any other day on which banks in Florida are permitted or required to be closed.
"Buyer"-- as defined in the first paragraph of this Agreement.
"Buyer Indemnified Persons"-- as defined in Section 11.2.
"Capital Charges"- revenues, exclusive of Special Assessments, derived
by the Buyer from impact fees, guaranteed revenues, service availability fees,
or other such fees or charges, imposed upon landowners, builders or developers
in connection with the Buyer improvement of property within the services areas
of the System, to defray the costs of capital facilities.
"Capital Improvement Plan Requirement" -- an annual amount of
$25,000,000 for the purpose of providing extraordinary maintenance,
rehabilitation, upgrades to equipment or facilities, increased plant capacity,
and extensions and enlargements to the System, and excluding well and septic
tank conversions.
"Closing"-- as defined in Section 2.6.
"Closing Date"-- the date on which the Closing actually takes place.
"COBRA"-- as defined under Federal Employment Law.
"Code"-- the Internal Revenue Code of 1986.
"Confidential Information"-- as defined in Section 12.1.
"Contemplated Transactions"-- all of the transactions contemplated by
this Agreement.
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"Cost of Operation and Maintenance"-- all current expenses, paid or
accrued, for the operation, maintenance and repair of all Facilities of the
System, as calculated in accordance with generally accepted accounting
principles for units of local government and on a consistent basis with the
operation and maintenance and repair of the Facilities of the System under
Seller's ownership, and shall include, without limiting the generality of the
foregoing, insurance premiums, administrative expenses of the Buyer related
solely to the System, labor, cost of materials, consumables and supplies used
for current operation, but excluding any reserve for renewals or replacements,
any extraordinary or emergency repairs, any replacements, any capital
expenditures, any allowance for interest or depreciation or amortization, any
other non-cash item, any profit, any franchise fees, any payments in lieu of
taxes, and any voluntary payments to other governmental entities not required by
law.
"Customer Deposits"--any amounts deposited with or held by the Seller
as customer deposits.
"Damages"-- as defined in Section 11.2.
"Due Diligence Expenses"-- a sum up to $200,000 or such greater amount
as the Seller may approve in writing, to reimburse the costs incurred by the
Buyer for its due diligence expenses in making the decision to acquire the
System and issue the Acquisition Bonds for the Purchase Price.
"Effective Time"-- 12:01 am. on the Closing Date.
"Employee Plans"-- as defined in Section 3.13.
"Employment Agreement"-- as defined in Section 2.7(a)(vi).
"Encumbrance"-- any charge, claim, community or other marital property
interest, condition, equitable interest, lien, option, pledge, security
interest, mortgage, right of way, easement, encroachment, servitude, right of
first option, right of first refusal or similar restriction, including any
restriction on use, voting (in the case of any security or equity interest),
transfer, receipt of income or exercise of any other attribute of ownership.
"Environment"-- soil, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), ground waters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal
life and any other environmental medium or natural resource.
"Environmental, Health and Safety Liabilities"-- any cost, damages,
expense, liability, obligation or other responsibility arising from or under any
Environmental Law or Occupational Safety and Health Law, including those
consisting of or relating to:
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(a) any environmental, health or safety matter or condition
(including on-site or off-site contamination, occupational safety and
health and regulation of any chemical substance or product);
(b) any fine, penalty, judgment, award, settlement, legal or
administrative proceeding, damages, loss, claim, demand or response,
remedial or inspection cost or expense arising under any Environmental
Law or Occupational Safety and Health Law;
(c) financial responsibility under any Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any cleanup, removal, containment or other
remediation or response actions ("Cleanup") required by any
Environmental Law or Occupational Safety and Health Law (whether or not
such Cleanup has been required or requested by any Governmental Body or
any other Person) and for any natural resource damages; or
(d) any other compliance, corrective or remedial measure required
under any Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial" and "response action" include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA).
"Environmental Law"-- any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees or the public of
intended or actual Releases of pollutants or hazardous substances or
materials, violations of discharge limits or other prohibitions and the
commencement of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the Release
of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the Release or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged and
used so that they do not present unreasonable risks to human health or
the Environment when used or disposed of;
(e) protecting resources, species or ecological amenities;
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(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil or other
potentially harmful substances;
(g) cleaning up pollutants that have been Released, preventing
the Threat of Release or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
"ERISA"-- the Employee Retirement Income Security Act of 1974.
"Exchange Act"-- the Securities Exchange Act of 1934.
"Excluded Assets"-- as defined in Section 2.2.
"Facilities"-- the Land, leasehold, license, easement, right-of-way,
prescriptive claim or other interest in real property currently owned or
operated by Seller or used by the Seller in the operation of the System,
including the Tangible Personal Property used or operated by Seller at the
respective locations of the Land, and excluding the Excluded Assets.
"GAAP"-- generally accepted accounting principles applicable to the
Seller for financial reporting in the United States, applied on a basis
consistent with the basis on which the balance sheets and the other financial
statements referred to in Section 3.3 were prepared.
"Governing Documents"-- the articles or certificate of incorporation
and the bylaws of Sellers.
"Governmental Authorization"-- any consent, license, registration or
permit issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement.
"Governmental Body"-- any:
(a) federal, state, local, municipal, or other government;
(b) governmental authority of any nature (including any agency,
branch, department, board, commission, court, tribunal or other entity
exercising governmental powers ); or
(c) body exercising any administrative, executive, judicial,
legislative, police, regulatory or taxing authority or power.
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"Gross Revenues" or "Revenues" shall mean all moneys, received or
receivable by the Buyer, or accruing to it in the operation of the System, from
rates, fees, rentals, or other charges for the services or Facilities of the
System, excluding state and federal grants and grants in aid of construction,
unless otherwise provided herein, all calculated in accordance with generally
accepted accounting practice applicable to a local government. "Gross Revenues"
or "Revenues" shall also be deemed to include any amounts (exclusive of Capital
Charges retained by Seller) received by the Buyer as Capital Charges for any
facilities acquired from the Seller, but shall not include Special Assessments
or Capital Charges for any facilities not purchased from the Seller.
"Hazardous Activity"-- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Material in, on, under,
about or from any of the Facilities or any part thereof into the Environment and
any other act, business, operation or thing that increases the danger, or risk
of danger, or poses an unreasonable risk of harm, to persons or property on or
off the Facilities.
"Hazardous Material"-- any substance, material or waste which is or
will foreseeably be regulated by any Governmental Body, including any material,
substance or waste which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste," "restricted
hazardous waste," "contaminant," "toxic waste" or "toxic substance" under any
provision of Environmental Law, and including petroleum, petroleum products,
asbestos, presumed asbestos-containing material or asbestos-containing material,
urea formaldehyde and polychlorinated biphenyls.
"Improvements"-- all buildings, structures, fixtures and improvements
located on the Land or included in the Assets, including those under
construction.
"Indemnified Person"-- as defined in Section 11.9.
"Indemnifying Person"-- as defined in Section 11.9.
"Intellectual Property Assets"-- as defined in Section 3.14.
"Inventories"-- all inventories of Seller, wherever located, including
without limitation, all pumps, pipes, valves, plumbing fixtures, chemicals,
stored water, spare parts and all other materials and supplies to be used by
Seller in the operation of its business.
"IRS"-- the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
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"Land"-- all parcels and tracts of land in which Seller has a fee
ownership interest, except for the parcels and tracts of land set forth in
Exhibit 2.2.
"Lease"-- any Real Property Lease or any lease or rental agreement,
license, right to use or installment and conditional sale agreement to which
Seller is a party and any other Seller Contract pertaining to the leasing or use
of any Tangible Personal Property.
"Legal Requirement"-- any federal, state, local, municipal, or other
constitution, law, ordinance, principle of common law, code, regulation, or
statute.
"Liability"-- with respect to any Person, any liability or obligation
of such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued on the financial statements of
such Person.
"Material Consents"-- as defined in Section 7.3.
"Maximum Annual Retainage" -- means the sum $12 Million annually.
"Maximum Cumulative Retainage"-- the sum of $36 Million annually.
"Net Revenues" shall mean Gross Revenues less the Cost of Operation and
Maintenance.
"Occupational Safety and Health Law"-- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards under the Occupational Safety and Health Act.
"Order"-- any order, injunction, judgment, decree, ruling, assessment
or arbitration award of any Governmental Body or arbitrator.
"Ordinary Course of Business"-- an action taken by a Person will be
deemed to have been taken in the Ordinary Course of Business only if that action
is consistent in nature, scope and magnitude with the past practices of such
Person and is taken in the ordinary course of the normal, day-to-day operations
of such Person.
"Permitted Encumbrances"-- as defined in Section 3.7.
"Person"-- an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock company,
trust, unincorporated association, joint venture or other entity or a
Governmental Body.
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"Proceeding"-- any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, judicial or
investigative, whether formal or informal, whether public or private) commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"Purchase Price"-- as defined in Section 2.3.
"Real Property"-- the Land and Improvements.
"Real Property Lease"-- any ground lease or space lease.
"Record"-- information that is inscribed on a tangible medium or that
is stored in an electronic or other medium and is retrievable in perceivable
form.
"Related Person"-- (a) any Person that directly or indirectly controls,
is directly or indirectly controlled by or is directly or indirectly under
common control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest; and
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity).
For purposes of this definition, (a) "control" (including
"controlling," "controlled by," and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and shall be construed as such term is
used in the rules promulgated under the Securities Act; (b) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree and (iv) any other natural person who resides with such
individual; and (c) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities
or other voting interests representing at least ten percent (10%) of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least ten percent (10%) of the outstanding equity
securities or equity interests in a Person.
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"Release"-- any release, spill, emission, leaking, pumping, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching
or migration on or into the Environment or into or out of any property.
"Remedial Action"-- all actions, including any capital expenditures,
required: (a) to clean up, remove, treat or in any other way address any
Hazardous Material or other substance; (b) to prevent the Release or Threat of
Release or to minimize the further Release of any Hazardous Material or other
substance so it does not migrate or endanger or threaten to endanger public
health or welfare or the Environment; (c) to perform pre-remedial studies and
investigations or post-remedial monitoring and care; or (d) to bring all
Facilities and the operations conducted thereon into compliance with
Environmental Laws and environmental Governmental Authorizations.
"Remedial Capital Projects"-- capital projects needed to serve existing
customers as of the date of Closing that are necessary (i) to repair or replace
Facilities that are defective, inoperative, or failing, (ii) to improve or
repair the Facilities to the extent that the Facilities are not performing their
intended functions in a commercially reasonable and efficient manner, (iii) to
replace or improve the Facilities in order to cure any violations of any
Governmental Authorizations; and (iv) to perform extraordinary maintenance or
deferred maintenance that is necessary to enable the Facilities to perform their
intended functions. Remedial Capital Projects shall not include any expansion
related capital improvements, normal maintenance or renewal and replacement
items normally incurred in the Ordinary Course of Business. Buyer shall have
twelve (12) months from the date of Closing to investigate and determine the
extent of Remedial Capital Projects existing as of the date of Closing, if any,
which determination shall be consistent with prevailing utility industry
maintenance practices. On or before the first anniversary of execution of this
Agreement, Buyer shall notify Seller in writing of the specific projects and
estimated cost for each Remedial Capital Project. Disputes, if any shall be
resolved in accordance with Section 13.5.
"Remedial Capital Projects Amount"-- an amount sufficient to enable the
Buyer to fund all required Remedial Capital Projects for the System as it
existed as of the date of the Closing, which amount shall be in excess of the
aggregate amount of $29 Million funded for capital improvements as part of the
Acquisition Bonds plus the Capital Improvement Plan Requirement for five years
and the Renewal and Replacement Requirement for five years.
"Renewal and Replacement Requirement"--an annual amount equal to
$5,000,000 to be used for the purpose of paying the cost of renewals, upgrades,
enhancements, or the replacement of capital assets of the System and
extraordinary and emergency repairs thereto.
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"Representative" -- with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, accountant, financial
advisor, legal counsel or other representative of that Person.
"Retained Liabilities"-- as defined in Section 2.4(b).
"Seller"-- as defined in the first paragraph of this Agreement.
"Seller Contract"-- any contract, promise, or undertaking: (a) under
which Seller has or may acquire any rights or benefits; (b) under which Seller
has or may become subject to any obligation or liability; or (c) by which Seller
or any of the assets owned or used by Seller is or may become bound or are
encumbered.
"Special Assessments" shall mean revenues derived by the Buyer from
special assessments imposed upon benefited property in connection with
post-Closing acquisition or construction of additions, extensions or
improvements to the System.
"Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred), are held by the Owner or one or more of its
Subsidiaries.
"System" -- shall mean the complete combined and consolidated water,
sewer and reclaimed water utility systems of the Seller together with any and
all assets, improvements, extensions and additions thereto hereafter constructed
or acquired, but not including the Excluded Assets.
"Tangible Personal Property"-- all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials, vehicles
and other items of tangible personal property (other than Inventories) of every
kind owned or leased by Seller (wherever located and whether or not carried on
Seller's books), together with any express or implied warranty by the
manufacturers or sellers or lessors of any item or component part thereof and
all maintenance records and other documents relating thereto.
"Tax"-- any income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental, windfall
profit, customs, vehicle, airplane, boat, vessel or other title or registration,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum and
other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever
and any interest, penalty, addition or additional
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amount thereon imposed, assessed or collected by or under the authority of any
Governmental Body or payable under any tax-sharing agreement or any other
contract.
"Tax Return"-- any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"Third Party"-- a Person that is not a party to this Agreement.
"Third-Party Claim"-- any claim against any Indemnified Person by a
Third Party, whether or not involving a Proceeding.
"Threat of Release"-- a reasonable likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Unbilled Customer Revenue" - revenue for services provided to
customers that have not yet been billed as of the date of Closing, calculated on
a basis consistent with Seller's current billing practices.
1.2 Usage
(a) Interpretation. In this Agreement, unless a clear
contrary intention appears:
(i) the singular number includes the plural number
and vice versa;
(ii) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such
successors and assigns are not prohibited by this Agreement, and
reference to a Person in a particular capacity excludes such
Person in any other capacity or individually;
(iii) reference to any gender includes each other
gender;
(iv) reference to any agreement, document or
instrument means such agreement, document or instrument as
amended or modified and in effect from time to time in
accordance with the terms thereof;
(v) "hereunder," "hereof," "hereto," and words of
similar import shall be deemed references to this Agreement as a
whole and not to any particular Article, Section or other
provision hereof;
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(vi) "including" (and with correlative meaning
"include") means including without limiting the generality of
any description preceding such term;
(vii) with respect to the determination of any
period of time, "from" means "from and including" and "to" means
"to but excluding"; and
(viii) references to documents, instruments or
agreements shall be deemed to refer as well to all addenda,
exhibits, schedules or amendments thereto.
(b) Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted and all
accounting determinations hereunder shall be made in accordance with GAAP, as
the same applies to the Seller, and in accordance with generally accepted
accounting principles applicable to units of local government, as the same
applies to the Buyer.
(c) Legal Representation of the Parties. This Agreement was
negotiated by the parties with the benefit of legal representation, and any rule
of construction or interpretation otherwise requiring this Agreement to be
construed or interpreted against any party shall not apply to any construction
or interpretation hereof.
2. Sale and Transfer of Assets; Closing
2.1 Assets To Be Sold
Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, but effective as of the Effective Time, Seller shall
sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase
and acquire from Seller, free and clear of any Encumbrances (except as to
Appurtenances to the extent provided for elsewhere herein) other than Permitted
Encumbrances, all of Seller's right, title and interest in and to all of
Seller's property and assets, real, personal or mixed, tangible and intangible,
of every kind and description, wherever located, including the following (but
excluding the Excluded Assets):
(a) all Real Property and all Appurtenances;
(b) all Tangible Personal Property;
(c) all Inventories;
(d) all Accounts Receivable and Unbilled Customer Revenue;
(e) all Seller Contracts and all outstanding offers or
solicitations made by or to Seller to enter into any Contract;
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(f) all Governmental Authorizations and all pending
applications therefor or renewals thereof, in each case to the extent
transferable to Buyer;
(g) all data and Records related to the operations of
Seller, including client and customer lists and Records, all personnel records
(provided that Seller shall have reasonable access thereto) referral sources,
research and development reports and Records, production reports and Records,
service and warranty Records, equipment logs, operating guides and manuals,
financial and accounting Records, creative materials, advertising materials,
promotional materials, studies, reports, correspondence and other similar
documents and Records and, subject to Legal Requirements;
(h) all of the intangible rights and property of Seller,
including Intellectual Property assets, the trade name, "Florida Water
Services", going concern value, goodwill, telephone, telecopy and e-mail
addresses and listings;
(i) all claims of Seller against third parties relating to
the Assets, whether ▇▇▇▇▇▇ or inchoate, known or unknown, contingent or
non-contingent; and
(j) all rights of Seller relating to deposits and prepaid
expenses, claims for refunds and rights to offset in respect thereof and that
are not excluded under Section 2.2, and not including Seller letters of credit
for which the Seller is an applicant.
All of the property and assets to be transferred to Buyer hereunder are
herein referred to collectively as the "Assets" or "Assets to be Sold".
2.2 Excluded Assets
Notwithstanding anything to the contrary contained in Section 2.1 or
elsewhere in this Agreement, the following assets of Seller (collectively, the
"Excluded Assets") are not part of the sale and purchase contemplated hereunder,
are excluded from the Assets and shall remain the property of Seller after the
Closing:
(a) all cash, cash equivalents and short-term
investments; all payments (other than Customer Deposits) received by Seller
prior to Closing;
(b) Capital Charges received after the Closing by Buyer
which shall be remitted to Seller in each one-year period following the date of
the Closing, provided that (i) the total amount of Capital Charges retained by
and belonging to Seller for any one such year shall not exceed the Maximum
Annual Retainage (and at such time as the total amount of Capital Charges
remitted to Seller for any such one year period equals the Maximum Annual
Retainage, all further Capital Charges received by the System in such year shall
be retained by and belong to the Buyer), and (ii) the aggregate amount retained
by the Seller as Excluded Assets pursuant to this subsection 2.2(b) shall be the
Maximum Cumulative Retainage and at such time as the total cumulative amount of
Capital Charges remitted to Seller under this Section 2.2 equals the Maximum
Cumulative
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Retainage, no further Capital Charges shall be remitted to the Seller but all
such Capital Charges received by the System thereafter be retained by and shall
belong to the Buyer. The foregoing Capital Charges retained by Seller are to
compensate Seller for the excess capacity existing in the System as of the
Effective Date. The amount to be remitted to Seller hereunder by Buyer shall be
paid to Seller once a year, commencing 13 months after the Effective Date, for
all amount collected during the 12 month period then ended. Seller authorizes
Buyer to collect the Capital Charges on behalf of Seller.
(c) all minute books, stock Records and corporate seals;
(d) any shares of capital stock of Seller held in treasury;
(e) Seller's letters of credit outstanding at the date of
Closing.;
(f) all insurance policies and rights thereunder (except to
the extent specified in Section 2.1(i) and (j));
(g) all of the contracts listed in Exhibit 2.2;
(h) Records that Seller is required by law to retain in its
possession;
(i) all claims for refund of Taxes and other governmental
charges of whatever nature;
(j) all rights in connection with and assets of any Employee
Plans; and
(k) all rights of Seller under this Agreement, the ▇▇▇▇ of
Sale, the Assignment and Assumption Agreement; and
(l) the property and assets expressly designated in Exhibit
2.2.
2.3 Consideration
(A) INSTALLMENT PAYMENTS. The consideration for the Assets will
be four hundred seventy-one million ($471,000,000), as may be adjusted as
provided below in subsection 2.3(C) (the "Purchase Price"). The Purchase Price
will be payable in Installments delivered by wire transfer from Buyer to Seller
as follows:
DATE PAYABLE INSTALLMENT AMOUNT DUE
At the Closing Installment 1 $433,000,000
On the third anniversary date
of the closing Installment 2 $38,000,000
(B) ANNUAL NET REVENUE DEFERRAL. Seller and Buyer have prepared a
pro forma based upon the current Costs of Operation and Maintenance of the
System and the
15
current schedule of rates, fees and charges for the services of the System
(without any rate increases, but adjusted for indexing) a copy of which is
attached hereto as Exhibit Z.
Based on the pro forma, the parties anticipate that the Buyer will
realize Net Revenues in each of the first four 12 month periods following the
Closing ("Test Year(s)") sufficient to (i) fund the Renewal and Replacement
Requirement, (ii) fund (iii) the Capital Improvement Plan Requirement pay 30
year level debt service on the Acquisition Bonds, and (iv) provide Buyer with
net profits of $4.5 Million. The remaining bond proceeds for capital
improvements funded in the Acquisition Bonds, plus interest earnings on such
bond proceeds, may be allocated to fund short falls in the Capital Improvement
Requirement in each of the Test Years in such amounts as may be necessary to
meet such Test Year's Net Revenues test (the "Capital Funds Allocation").
Each year, Buyer and Seller will review the Net Revenues. In the event
Buyer determines that Net Revenues, together with any revenue guarantee payments
pursuant to subsection (E) below, are not sufficient to provide all of such
amounts in clauses (i) through (iv) of the preceding sentence, the Buyer shall
notify the Seller of such determination, and confer with the Buyer's underwriter
and Seller to set forth in full its reasoning therefore. At the end of 36 months
following the Closing, such portions of Installment 2 shall be deferred one year
or such time as necessary so that the Installment will be equal to Net Revenues
less the amounts set forth in (i) through (iv) in the preceding paragraph.
Notwithstanding the above, the balance of any unpaid Purchase Price as a result
of this subsection shall be paid to Seller within five (5) years of the date of
Closing.
(C) PURCHASE PRICE ADJUSTMENTS. Installment 2 of the Purchase
Price may be reduced under the following circumstances:
(i) the amount necessary to fund any indemnity amounts owed
by Seller under Article 11 hereunder, and
(ii) for all Remedial Capital Projects Amounts.
Within 20 days of the execution of this Agreement, Seller will provide
Buyer with its' current five year capital improvement program. Buyer shall
notify Seller in writing of the Remedial Capital Projects Amount, if any. Seller
shall identify the projects and estimated costs that comprise the Remedial
Capital Projects Amount which are not included on Seller's five year capital
improvement program. If Seller does not concur that a project is a Remedial
Capital Project or part of the Capital Improvement Plan Requirement during the
initial five year post Closing time period the matter shall be submitted to the
dispute resolution process set forth in 13.5.
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(D) DISPUTE RESOLUTION. Prior to implementing any reduction or
offset, the Buyer shall provide written notice to Seller of any proposed
reduction or offset. Seller shall have twenty (20) days to provide Buyer written
notice of objection to any such reductions or offset. Buyer and Seller shall
have sixty (60) days following written notice of objection from Buyer to
amicably resolve Buyer's objections. To the extent any objections cannot be
reconciled, either party may submit such objection to the Dispute Resolution
Process. Buyer may at any time deposit any Reduction Amount with an escrow agent
pending a final resolution under the Dispute Resolution Process, pursuant to an
Escrow Agreement reasonably satisfactory to the parties and to the extent Buyer
has done so Buyer shall not be deemed in default hereunder.
(E) Seller shall provide a guarantee ("Guarantee") in the form to be
agreed upon with 30 days after execution of this Agreement that Buyer will
receive Gross Revenues constituting monthly water and sewer charges ("Monthly
Fees") for the first twelve months after Closing of $95,318,000; for the second
twelve months of $97,701,000; and for the third twelve months of $100,143,000.
If the Buyer lowers any Monthly Fees during the forgoing time periods, the
amount guaranteed will be reduced by the amount the Monthly Fees would have been
if such reduction had not occurred.
(F) The Buyer agrees to use all reasonable commercial efforts to
issue the Acquisition Bonds. In the event the Buyer, after consultation with the
Buyer's financial advisor(s), underwriter(s), legal advisors, and with Seller,
in good faith, determines that some or all of such Acquisition Bonds cannot be
sold on a date that permits the Closing to occur on or prior to December 15,
2002, in that the Acquisition Bonds Net Proceeds would be less than
$433,000,000, then the Buyer shall immediately notify Seller in writing of such
determination, with such notice setting forth in reasonable detail the bases
upon which such determination was made, and the requirements, if reasonably
ascertainable to Seller, for ultimate issuance of all of the Bonds or such
portion thereof that would result in Acquisition Bond Net Proceeds received in
an amount equal to or greater than $433,000,000 on or prior to December 15,
2002. Upon receipt of such notice Seller shall have the option of (1) at any
time between the receipt of the notice and the issuance of the Bonds, closing
the transaction, and increasing the future installments set forth above by the
amount that the Acquisition Bonds Net Proceeds are less than $433,000,000 in an
equitable manner as agreed to by both Buyer and Seller; (2) postponing the
Closing until such time as Acquisition Bonds resulting in Acquisition Bonds Net
Proceeds of not less than $433,000,000 can reasonably be issued in accordance
with this Agreement; or (3) canceling this Agreement, and, if cancelled,
thereupon the Buyer and Seller shall have no liabilities and no further
obligations to each other under this Agreement, except that Seller shall pay to
Buyer the Due Diligence Expenses.
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For purposes of this Section 2.3(b), the Capital Charges remitted to
and retained by Seller shall not include the portion thereof representing AFPI,
to the extent of the following:
PERIOD PERCENTAGE OF AFPI
------ ------------------
for Capital Charges received until 0%
the first anniversary date of the Closing
for Capital Charges received until 20%
the second anniversary date of the Closing
for Capital Charges received until 40%
the third anniversary date of the Closing
for Capital Charges received until 60%
the fourth anniversary date of the Closing
for Capital Charges received until 80%
the fifth anniversary date of the Closing
and thereafter 100%
2.4 Liabilities
(a) Assumed Liabilities. On the Closing Date, but
effective as of the Effective Time, the Buyer shall assume and agree to
discharge only the following Liabilities of Seller (the "Assumed Liabilities"):
(i) any account payable (other than an account payable to
any Related Person of Seller) arising with respect to the System, that
remains unpaid at and is not delinquent as of the Effective Time but
only to extent it is included to determine the Final True Up as set
forth in Section 2.7(c);
(ii) any account payable arising with respect to the System,
(other than a account payable to any Related Person of Seller )
incurred by Seller in the Ordinary Course of Business between the date
of this Agreement and the Effective Time that remains unpaid at and is
not delinquent as of the Effective Time but only to extent it is
included to determine the Final True Up as set forth in Section 2.7(c);
(iii) any Liability to Seller's customers (other than an
account payable) incurred by Seller in the Ordinary Course of Business
outstanding as of the Effective Time, including, but not limited to
Customer Deposits, (other than any
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Liability arising out of or relating to a Breach that occurred prior to
the Effective Time);
(iv) any Liability arising after the Effective Time under the
Seller Contracts (other than any Liability arising under the contracts
described on Exhibit 2.2 or arising out of or relating to a Breach that
occurred prior to the Effective Time); any Liability of Seller arising
after the Effective Time under any Seller Contract included in the
Assets that is entered into by Seller after the date hereof in the
Ordinary Course of Business or in accordance with the provisions of
this Agreement (other than any Liability arising out of or relating to
a Breach that occurred prior to the Effective Time), and
(v) any Liability of Buyer under this Agreement or any other
document executed in connection with the Contemplated Transactions, and
(vi) any Liability of Buyer based upon Buyer's acts or
omissions occurring after the Effective Time, and
(vii) any Liability arising after Closing from operation of
the System.
(b) Retained Liabilities. The Retained Liabilities shall remain the
sole responsibility of and shall be retained, paid, performed and discharged
solely by Seller. "Retained Liabilities" shall mean all Liabilities other than
Assumed Liability.
2.5 Allocation
Seller shall prepare and deliver IRS Form 8594 to Buyer within
forty-five (45) days after the Closing Date to be filed with the IRS. In any
Proceeding related to the determination of any Tax, neither Buyer nor Seller
shall contend or represent that such allocation is not a correct allocation.
2.6 Closing
The purchase and sale provided for in this Agreement (the "Closing")
will take place at the offices of Buyer's counsel commencing at 10:00 a.m.
(local time) on or before December 15, 2002, unless Buyer and Seller otherwise
agree. Subject to the provisions of Section 9, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.6 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement. In such a situation, the Closing will occur as soon as practicable,
subject to Section 9.
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2.7 Closing Obligations
In addition to any other documents to be delivered under other
provisions of this Agreement, at the Closing:
(a) Seller shall deliver to Buyer, together with funds
sufficient to pay all Taxes necessary for the transfer, filing or recording
thereof:
(i) a ▇▇▇▇ of sale for all of the Assets that are Tangible
Personal Property in the form to be agreed upon by the parties prior to
Closing (the "▇▇▇▇ of Sale") executed by Seller and the guaranty;
(ii) an assignment of all of the Assets that are intangible
personal property in the form to be agreed upon by the parties prior to
Closing , which assignment shall also contain Buyer's undertaking and
assumption of the Assumed Liabilities (the "Assignment and Assumption
Agreement") executed by Seller;
(iii) for each interest in Real Property identified on Exhibit
3.7(a) and (b), a recordable special warranty deed; for all easement
interests, an assignment of easements without warranty; for each
leasehold interest, an assignment of lease, or such other appropriate
document or instrument of transfer, as the case may require, together
with a general assignment by the Seller of any and all rights or
interests Seller may otherwise have or hold (whether by license,
permit, prescriptive right, or otherwise) in respect of its operation
of the System, to occupy, use, traverse, spray, percolate through,
▇▇▇▇▇▇ under, each in form and substance satisfactory to Buyer and its
counsel and executed by Seller;
(iv) assignments of all Intellectual Property Assets executed
by Seller in form reasonably satisfactory to Buyer;
(v) such other deeds, bills of sale, assignments,
certificates of title, documents and other instruments of transfer and
conveyance as may reasonably be requested by Buyer, each in form and
substance agreed upon by the parties prior to Closing, executed by
Seller;
(vi) employment agreements in the form to be prepared by
Buyer in accordance with the provisions of this Agreement, executed by
such members of Seller's senior management team as identified by Buyer
in writing within ten business days after execution of this Agreement
(the "Employment Agreements");
(vii) assignments of all construction work in progress in form
reasonably acceptable to Buyer which have not yet been placed in
service as of the date of the Closing (such capital improvements which
have been placed in service being part of the Facilities which are
otherwise conveyed by Seller hereunder);
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(viii) a certificate executed by Seller as to the accuracy of
its representations and warranties as of the date of this Agreement and
as of the Closing in accordance with Section 7.1 and as to its
compliance with and performance of their covenants and obligations to
be performed or complied with at or before the Closing in accordance
with Section 7.2; and
(ix) a certificate of the Secretary of Seller certifying, as
complete and accurate as of the Closing, attached copies of the
Governing Documents of Seller, certifying and attaching all requisite
resolutions or actions of Seller's board of directors and shareholders
approving the execution and delivery of this Agreement and the
consummation of the Contemplated Transactions and certifying to the
incumbency and signatures of the officers of Seller executing this
Agreement and any other document relating to the Contemplated
Transactions.
(b) Buyer shall deliver to Seller:
(i) Installment 1 of Four Hundred Thirty-Three Million
dollars ($433,000,000) plus or minus such other funds as set forth on a
closing statement to be agreed upon between Buyer and Seller pursuant
to the terms of this Agreement by wire transfer to a domestic account
of a United States bank specified by the closing Seller in a writing
delivered to Buyer at least three (3) business days prior to the
Closing Date;
(ii) the Assignment and Assumption Agreement executed by
Buyer;
(iii) the executed Employment Agreements ;
(iv) a certificate executed by Buyer as to the accuracy of
its representations and warranties as of the date of this Agreement and
as of the Closing in accordance with Section 8.1 and as to its
compliance with and performance of its covenants and obligations to be
performed or complied with at or before the Closing in accordance with
Section 8.2; and
(v) a certificate of the Secretary of Buyer certifying, as
complete and accurate as of the Closing, attached copies of the
Governing Documents of Buyer and certifying and attaching all requisite
resolutions or actions of Buyer's governing board approving the
execution and delivery of this Agreement and the consummation of the
Contemplated Transactions and certifying to the incumbency and
signatures of the officers of Buyer executing this Agreement and any
other document relating to the Contemplated Transactions.
(c) As additional consideration for the transaction the
determination of the following (the "Final True Up") will take place between 120
and 140 days after the Closing and, in the event that the parties cannot agree
on the foregoing, then either party
21
may submit such dispute to the Dispute Resolution Process. To the extent that
Eligible Accounts (as hereinafter defined) and Eligible Unbilled Revenues (as
hereinafter defined) sold to the Seller hereunder as of the Effective Time minus
accounts payable assumed by the Buyer hereunder as of the Effective Time ("Final
Computed Amount") is in an amount greater than zero ($0) Dollars, then the Buyer
shall immediately pay to the Seller the difference and to the extent that the
Final Computed Amount is less than zero ($0) Dollars, then the Seller shall
immediately pay to the Buyer the difference. The payment in the foregoing
sentence shall be net of any payments made pursuant to the second sentence of
this Section. "Eligible Accounts" means Accounts Receivable outstanding as of
the Effective Time that are actually collected by the Buyer within 90 days after
the Effective Time and "Eligible Unbilled Accounts" means Unbilled Accounts
outstanding as of the Effective Time that are actually collected by the Buyer
within 120 days after the Effective Time.
(d) At the Closing, the Buyer shall have received (i) an opinion of
counsel acceptable to the Buyer stating that neither the City of Gulf Breeze nor
the City of ▇▇▇▇▇▇ will be held liable, as a matter of law, for the liabilities
of the Buyer and (ii) an opinion of counsel acceptable to the Buyer stating that
upon the acquisition of the System by the Buyer, the rates, fees and charges for
the services and facilities of the System are not subject to regulation by the
Florida Public Service Commission or any local regulatory authority.
2.8 Consents
(a) If there are any Material Consents that have not yet
been obtained (or otherwise are not in full force and effect) as of the Closing,
in the case of each Seller Contract as to which such Material Consents were not
obtained (or otherwise are not in full force and effect) (the "Restricted
Material Contracts"), Buyer may waive the closing conditions as to any such
Material Consent and either:
(i) elect to have Seller continue its efforts to obtain the
Material Consents; or
(ii) elect to have Seller retain that Restricted Material
Contract and all Liabilities arising therefrom or relating thereto; or
(iii) elect to have Seller require any other obligations under
such contract to perform their obligations under such contract and
remit to Seller the amounts due to such obligations, for payment by the
Seller to such obligations.
If Buyer elects to have Seller continue its efforts to obtain any
Material Consents and the Closing occurs, notwithstanding Sections 2.1 and 2.4,
neither this Agreement nor the Assignment and Assumption Agreement nor any other
document related to the consummation of the Contemplated Transactions shall
constitute a sale, assignment,
22
assumption, transfer, conveyance or delivery or an attempted sale, assignment,
assumption, transfer, conveyance or delivery of the Restricted Material
Contracts, and following the Closing, the parties shall use Best Efforts, and
cooperate with each other, to obtain the Material Consent relating to each
Restricted Material Contract as quickly as practicable. Pending the obtaining of
such Material Consents relating to any Restricted Material Contract, the parties
shall cooperate with each other in any reasonable and lawful arrangements
designed to provide to Buyer the benefits of use of the Restricted Material
Contract for its term (or any right or benefit arising thereunder, including the
enforcement for the benefit of Buyer of any and all rights of Seller against a
third party thereunder). Once a Material Consent for the sale, assignment,
assumption, transfer, conveyance and delivery of a Restricted Material Contract
is obtained, Seller shall promptly assign, transfer, convey and deliver such
Restricted Material Contract to Buyer, and Buyer shall assume the obligations
under such Restricted Material Contract assigned to Buyer from and after the
date of assignment to Buyer pursuant to a special-purpose assignment and
assumption agreement substantially similar in terms to those of the Assignment
and Assumption Agreement (which special-purpose agreement the parties shall
prepare, execute and deliver in good faith at the time of such transfer, all at
no additional cost to Buyer).
(b) If there are any Consents not listed on Exhibit 7.3
necessary for the assignment and transfer of any Seller Contracts to Buyer (the
"Nonmaterial Consents") which have not yet been obtained (or otherwise are not
in full force and effect) as of the Closing, Buyer shall elect at the Closing,
in the case of each of the Seller Contracts as to which such Nonmaterial
Consents were not obtained (or otherwise are not in full force and effect) (the
"Restricted Nonmaterial Contracts"), whether to:
(i) accept the assignment of such Restricted Nonmaterial
Contract, in which case, as between Buyer and Seller, such Restricted
Nonmaterial Contract shall, to the maximum extent practicable and
notwithstanding the failure to obtain the applicable Nonmaterial
Consent, be transferred at the Closing pursuant to the Assignment and
Assumption Agreement as elsewhere provided under this Agreement; or
(ii) reject the assignment of such Restricted Nonmaterial
Contract, in which case, notwithstanding Sections 2.1 and 2.4, (A)
neither this Agreement nor the Assignment and Assumption Agreement nor
any other document related to the consummation of the Contemplated
Transactions shall constitute a sale, assignment, assumption,
conveyance or delivery or an attempted sale, assignment, assumption,
transfer, conveyance or delivery of such Restricted Nonmaterial
Contract, and (B) Seller shall retain such Restricted Nonmaterial
Contract and all Liabilities arising therefrom or relating thereto.
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3. Representations and Warranties of Seller
Seller represents and warrants to Buyer as of the Exhibit Delivery Date
(as hereinafter defined) as follows:
3.1 Organization And Good Standing
(a) Seller is qualified to do business in the State of
Florida. Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under the Agreement. Complete and accurate copies of the Governing
Documents of Seller, as currently in effect, will be provided to Buyer prior to
Closing. .
(b) Seller has no Subsidiary and, except as disclosed to
Buyer in writing prior to Closing, does not own any shares of capital stock or
other securities of any other Person.
3.2 Enforceability; Authority; No Conflict
(a) This Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable against it in accordance with its terms and
each of Seller's Closing Documents will constitute the legal, valid, and binding
obligation of Seller, enforceable against Sellers. Seller has the absolute and
unrestricted right, power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement, and such action has been
duly authorized by all necessary action by Seller's shareholders and board of
directors.
(b) Neither the execution and delivery of this Agreement nor
the consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) Breach (A) any provision of any of the Governing
Documents of Seller or (B) any resolution adopted by the board of
directors or the shareholders of Seller;
(ii) except as disclosed in Exhibit 7.3, Breach any provision
of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or
payment under, or to cancel, terminate or modify, any Seller Contract;
or
(iii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the Assets.
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(c) Except as provided under Section 367.071, Florida
Statutes, and applicable equivalent County Regulatory provisions, Seller is not
required to give any notice to or obtain any material consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions except as set forth in
Exhibit 3.2(c).
3.3 Financial Statements
Seller has delivered or made available to Buyer: (a) an audited
balance sheet of Seller as at December 31, 2001, 2000 and 1999 (including the
notes thereto, the "Balance Sheet"), and the related audited statements of
income, changes in shareholders' equity and cash flows for the fiscal year then
ended, including in each case the notes thereto, together with the report
thereon of Price Waterhouse Coopers, independent certified public accountants;
and (b) an unaudited balance sheet of Seller as at July 31, 2002 (the "Interim
Balance Sheet") and the related unaudited statement of income. Such financial
statements fairly present the financial condition and the results of operations,
changes in shareholders' equity and cash flows of Seller as of the respective
dates of and for the periods referred to in such financial statements, all in
accordance with GAAP.
3.4 Sufficiency of Assets
The Assets (a) constitute all of the assets, tangible and
intangible, of any nature whatsoever, necessary to operate Seller's business in
the manner presently operated by Seller and (b) include all of the operating
assets of Seller.
3.5 Description of Land
Exhibit 3.5 contains a description of the Land.
3.6 Description of Leased Real Property
Exhibit 3.6 contains a description of the Leased Real Property.
3.7 Title to Assets; Encumbrances
(a) Seller owns good and marketable title to its
respective estates in the Land, free and clear of any Encumbrances, other than:
(i) liens for Taxes for the current tax year which
are not yet due and payable; and
(ii) those described in Exhibit 3.7 ("Real Estate
Encumbrances").
To the extent in Seller's possession, true and complete copies
of (A) all deeds, existing title insurance policies and surveys of or pertaining
to the Real Property and (B)
25
all instruments, agreements and other documents evidencing, creating or
constituting any Real Estate Encumbrances will be made available to Buyer
promptly. Seller warrants to Buyer that, at the time of Closing, the Land shall
be free and clear of all Real Estate Encumbrances other than those identified on
Exhibit 3.7 as reasonably acceptable to Buyer ("Permitted Real Estate
Encumbrances").
(b) Seller owns good and transferable title to all
of the other Assets free and clear of any Encumbrances other than those
described in Exhibit 3.7 ("Non-Real Estate Encumbrances"). Seller warrants to
Buyer that, at the time of Closing, all other Assets shall be free and clear of
all Non-Real Estate Encumbrances other than those identified on Exhibit 3.7 and
which are reasonably acceptable to Buyer ("Permitted Non-Real Estate
Encumbrances" and, together with the Permitted Real Estate Encumbrances
"Permitted Encumbrances").
Seller makes no representations regarding title to or the
sufficiency of Appurtenances to the Real Estate.
3.8 Taxes
(a) Tax Returns Filed and Taxes Paid. Seller has filed or
caused to be filed on a timely basis all Tax Returns and all reports with
respect to Taxes that are or were required to be filed pursuant to applicable
Legal Requirements. All Tax Returns and reports filed by Seller are true,
correct and complete. Seller has paid, or made provision for the payment of all
Taxes that have or may have become due for all periods covered by the Tax
Returns or otherwise, or pursuant to any assessment received by Seller, except
such Taxes, if any, as are listed in Part 3.14(a) and are being contested in
good faith. No claim has been made or is expected to be made by any Governmental
Body in a jurisdiction where Seller does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Encumbrances on any of
the Assets that arose in connection with any failure (or alleged failure) to pay
any Tax, and Seller has no knowledge of any basis for assertion of any claims
attributable to Taxes which, if adversely determined, would result in any such
Encumbrance.
(b) Buyer agrees to comply with the requirements of Section
196.295, Florida Statutes, Advalorem and Personal Property Taxes.
(c) Specific Potential Tax Liabilities and Tax Situations.
(i) Withholding. All Taxes that Seller is or was
required by Legal Requirements to withhold, deduct or collect have been
or will be duly withheld, deducted and collected and, to the extent
required, have been paid to the proper Governmental Body or other
Person.
26
3.9 Compliance With Legal Requirements; Governmental
Authorizations
(a) Except as set forth in Exhibit 3.11, without
representation that items on Exhibit 3.11 are Material:
(i) To Seller's knowledge, Seller is in compliance
with each Legal Requirement that is applicable to it or to the
conduct or operation of its business or the ownership or use of
any of its assets;
(ii) No event has occurred or circumstance exists
that (A) may constitute or result in a violation by Seller of,
or a failure on the part of Seller to comply with, any Legal
Requirement or (B) may give rise to any obligation on the part
of Seller to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature; and
(iii) Seller has not received any notice or other
communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged,
possible or potential violation of, or failure to comply with,
any Legal Requirement or (B) any actual, alleged, possible or
potential obligation on the part of Seller to undertake, or to
bear all or any portion of the cost of, any remedial action of
any nature.
(b) Exhibit 3.11(b) contains a complete and accurate list
of each Governmental Authorizations that are held by Seller or that otherwise
relates to Seller's business or the Assets. To Seller's knowledge, the
Governmental Authorizations listed are valid and in full force and effect.
(i) Seller is in material compliance with all of the
Material terms and requirements of the Governmental
Authorizations;
(ii) No event has occurred or circumstance exists
that may (A) constitute or result directly or indirectly in a
material violation of or a material failure to comply with any
material term or requirement of any Governmental Authorization
or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation or termination of, or any
modification to, any material Governmental Authorization;
(iii) Seller has not received any notice or other
communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged,
possible or potential violation of or failure to comply with any
term or requirement of any Governmental Authorization or (B) any
actual, proposed, possible or potential revocation, withdrawal,
suspension, cancellation, termination of or modification to any
Governmental Authorization, OTHER THAN such violations,
failures, revocations, withdrawals, suspensions, cancellations,
27
terminations or modifications as have either been resolved with
such Governmental Body or Person, or are not material to the
successful operation of the System or to the results of such
operations; and
(iv) To the best of Seller's knowledge, all
applications required to have been filed for the renewal of the
material Governmental Authorizations have been duly filed on a
timely basis with the appropriate Governmental Bodies, and all
other Material filings required to have been made with respect
to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations collectively constitute the
Governmental Authorizations necessary to permit Seller to lawfully conduct and
operate its business in the manner in which it currently conducts and operates
such business and to permit Seller to own and use its assets in the manner in
which it currently owns and uses such assets.
3.10 Legal Proceedings; Orders
(a) Except as set forth in Exhibit 3.12, there is no pending
or, to Seller's knowledge, threatened Proceeding:
(i) by or against Seller or that otherwise relates
to or may affect the business of, or any of the assets owned or
used by, Seller; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering
with, any of the Contemplated Transactions.
To the knowledge of Seller, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve as a
basis for the commencement of any such Proceeding. Seller will promptly deliver
or provided access to Buyer copies of all pleadings, correspondence and other
documents relating to each Proceeding listed in Exhibit 3.12. There are no
Proceedings listed or required to be listed in Exhibit 3.12 that could have a
Material adverse effect on the business, operations, assets, condition or
prospects of Seller or upon the Assets.
(b) Except as set forth in Exhibit 3.12; to the knowledge of
Seller, no officer, director, agent or employee of Seller is subject to any
Order that prohibits such officer, director, agent or employee from engaging in
or continuing any conduct, activity or practice relating to the business of
Seller.
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(c) Except as set forth in Exhibit 3.12:
(i) To Seller's knowledge, Seller is in Material
compliance with all of the terms and requirements of each Order
to which it or any of the Assets is or has been subject;
(ii) To Seller's knowledge, no event has occurred or
circumstance exists that is reasonably likely to constitute or
result in a violation of or failure to comply with any term or
requirement of any Order to which Seller or any of the Assets is
subject material to the operation of the System or a portion
thereof; and
(iii) Seller has not received any notice or other
communication (whether oral or written) from any Governmental
Body or any other Person regarding any actual, alleged, possible
or potential violation of, or failure to comply with, any term
or requirement of any Order to which Seller or any of the Assets
is or has been subject, that has not already been resolved.
3.10(A) Absence of Certain Changes and Events.
(a) Except as set forth in Exhibit 3.10(A), since July 1,
2002, Seller has conducted its business only in the Ordinary Course of Business,
there has not been any material adverse change in its business and in the
operation of the System, and there has not been:
(b) There has not been any damage to or destruction or loss
of any Asset, whether or not covered by insurance that has not been replaced or
which will not be replaced prior to the Effective Time;
(c) There has not been (to the extent the same might be
material to the results of operations of the System or a portion thereof) a sale
(other than sales of Inventories in the Ordinary Course of Business), lease or
other disposition of any Asset or property of Seller (including the Intellectual
Property Assets);
3.11 Contracts; No Defaults
(a) To the best of Seller's knowledge, Seller has delivered
or made available to Buyer accurate and complete copies, of:
(i) each Seller Contract that involves performance
of services or delivery of goods or materials by Seller of an
amount or value in excess of $10,000;
(ii) each Seller Contract that involves performance
of services or delivery of goods or materials to Seller of an
amount or value in excess of $10,000;
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(iii) each Seller Contract that was not entered into
in the Ordinary Course of Business and that involves
expenditures or receipts of Seller in excess of $10,000;
(iv) each Seller Contract affecting the ownership of,
leasing of, title to, use of or any leasehold or other interest
in any real or personal property (except personal property
leases and installment and conditional sales agreements having a
value per item or aggregate payments of less than $10,000 and
with a term of less than one year);
(v) each Seller Contract with any labor union or
other employee representative of a group of employees relating
to wages, hours and other conditions of employment; each Seller
Contract entered into other than in the Ordinary Course of
Business that contains or provides for an express undertaking by
Seller to be responsible for consequential damages;
(vi) each Seller Contract for capital expenditures in
excess of $10,000;
(vii) each Seller Contract not denominated in U.S.
dollars;
(viii) each Seller Contract containing covenants that
in any way purport to restrict Seller's business activity or
limit the freedom of Seller to engage in any line of business or
to compete with any Person;
(ix) each power of attorney of Seller that is
currently effective and outstanding;
(x) each written warranty, guaranty, and/or similar
undertaking withy respect to contractual performance extended by
Seller other than in the Ordinary Course of Business; and
(xi) each amendment, supplement and modification
(whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Exhibit 7.3:
(i) each Contract which is to be assigned to or
assumed by Buyer under this Agreement is in full force and
effect and is valid and enforceable in accordance with its
terms;
(ii) each Contract which is being assigned to or
assumed by Buyer is assignable by Seller to Buyer without the
consent of any other Person;
(c) Except as set forth in Exhibit 3.13 or 3.12:
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(i) Seller is in compliance with all applicable
terms and requirements of each Seller Contract which is being
assumed by Buyer;
(ii) To Seller's knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of
time) may contravene, conflict with or result in a Breach of, or
give Seller or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or payment under, or to cancel, terminate or
modify, any Seller Contract that is being assigned to or assumed
by Buyer;
(iii) To Seller's knowledge, no event has occurred or
circumstance exists under or by virtue of any Contract that
(with or without notice or lapse of time) would cause the
creation of any Encumbrance affecting any of the Assets; and
(iv) Seller has not given to or received from any
other Person any notice or other communication (whether oral or
written) regarding any actual, alleged, possible or potential
violation or Breach of, or default under, any Contract which is
being assigned to or assumed by Buyer.
(d) There are no renegotiations of, attempts to renegotiate
or outstanding rights to renegotiate any material amounts paid or payable to
Seller under current or completed Contracts with any Person having the
contractual or statutory right to demand or require such renegotiation and no
such Person has made written demand for such renegotiation.
3.12 Environmental Matters
Except as disclosed in Exhibit 3.13:
(e) Seller is in material compliance with and is not in
material violation of or liable under, any Environmental Law. Seller has no
basis to expect any actual or threatened order, notice or other communication
from (i) any Governmental Body or private citizen acting in the public interest
or (ii) the current or prior owner or operator of any Facilities, of any actual
or potential violation or failure to Materially comply with any Environmental
Law, or of any actual or threatened obligation to undertake or bear the cost of
any Environmental, Health and Safety Liabilities with respect to any Facility or
other property or asset (whether real, personal or mixed) in which Seller has or
had an interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used or processed by Seller.
(f) There are no pending or, to the knowledge of Seller,
threatened claims, Encumbrances, or other restrictions of any Material nature
resulting from any Environmental, Health and Safety Liabilities or arising under
or pursuant to any
31
Environmental Law with respect to or affecting any Facility or any other
property or asset (whether real, personal or mixed) in which Seller has or had
an interest.
(g) Seller has no knowledge of or any basis to expect nor has
received, any citation, directive, inquiry, notice, Order, summons, warning or
other communication that relates to Hazardous Activity, Hazardous Materials, or
any alleged, actual, or potential violation or failure to materially comply with
any Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health and Safety Liabilities
with respect to any Facility or property or asset (whether real, personal or
mixed) in which Seller has or had an interest, or with respect to any property
or facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used or processed by
(h) Seller has no Material Environmental, Health and Safety
Liabilities with respect to any Facility or, to the knowledge of Seller, with
respect to any other property or asset (whether real, personal or mixed) in
which Seller (or any predecessor) has or had an interest or at any property
geologically or hydrologically adjoining any Facility or any such other property
or asset.
(i) There are no Hazardous Materials present on or in the
Environment at any Facility or at any geologically or hydrologically adjoining
property, that are not in material compliance with Environmental Laws, including
any Hazardous Materials contained in barrels, aboveground or underground storage
tanks, landfills, land deposits, dumps, equipment (whether movable or fixed) or
other containers, either temporary or permanent, and deposited or located in
land, water, sumps, or any other part of the Facility or such adjoining
property, or incorporated into any structure therein or thereon. Seller has not
permitted or conducted, or is aware of, any Hazardous Activity conducted with
respect to any Facility or any other property or assets (whether real, personal
or mixed) in which Seller has or had an interest except in full compliance with
all applicable Environmental Laws.
(j) There has been no material Release or, to the knowledge
of Seller, Threat of Release, of any Hazardous Materials at or from any Facility
or at any other location where any Hazardous Materials were generated,
manufactured, refined, transferred, produced, imported, used, or processed from
or by any Facility, or from any other property or asset (whether real, personal
or mixed) in which Seller has or had an interest, or to the knowledge of Seller
any geologically or hydrologically adjoining property.
(k) Seller has delivered or made available to Buyer true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Seller pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance,
by Seller with Environmental Laws including, but not limited to the
environmental assessments listed in Exhibit 3.13
32
(l) Notwithstanding any provision contained herein to the
contrary:
(i) Seller shall not be responsible for any costs
associated with contamination which has come to be located on or
below the Property solely as the result of subsurface migration
in an aquifer from a source or sources outside the Property,
provided that (a) the Seller did not cause, contribute to, or
exacerbate the release or threat of release of the contaminants
through an act or omission; (b) the person that caused the
release is not an agent or employee of the Seller, and was not
in a direct or indirect contractual relationship with the
Seller; and (c) there is no alternative basis for the Seller's
liability for the contaminated aquifer, such as liability as a
generator or transporter of hazardous substances under Section
107(a) (3) and (4) of the Federal Comprehensive Environmental
Response Compensation and Liability Act (CERCLA) or liability as
an owner by reason of the existence of a source of contamination
on the Seller's property other than the contamination that
migrated in an aquifer from a source outside the Property.
(ii) Seller shall not be required to pay for the costs
of rehabilitation of environmental contamination resulting from
a discharge of petroleum products that is eligible for
restoration funding from the Inland Protection Trust Fund
pursuant to Chapter 376, Florida Statutes, in advance of
commitment of restoration funding in accordance with the sites
priority ranking pursuant to Section 376.3071(5)(a), Florida
Statutes. In the event that Buyer determines that rehabilitation
of petroleum contamination must occur earlier than the priority
ranking established by the Florida Department of Environmental
Protection, Buyer may request an assignment by Seller of all
rights to reimbursement from the Inland Protection Trust Fund
for such site and proceed with rehabilitation. Seller shall
provide an assignment of all rights to reimbursement within ten
(10) days of receipt of a request from a Buyer.
3.13 Employee Benefits
(a) Exhibit 3.16(a) contains and lists the following in connection
with the current employees of the System: (i) any collective bargaining
agreement not otherwise referenced in this Agreement or any employment agreement
not terminable on thirty (30) days notice, (ii) each defined benefit plan and
defined contribution plan, stock option or ownership plan, executive
compensation, bonus, incentive compensation or deferred compensation plan, (iii)
vacation pay, medical, dental, disability or death benefit plan, and (iv) any
other employee benefit plan, program, arrangement, agreement or policy,
including without limitation each "employee benefit plan" within the meaning of
Section 3(3) of ERISA, in each case which is maintained or contributed to or by
Seller, (collectively the "Employee Plans"). Seller will promptly deliver to
Buyer true, accurate and complete copies of the documents comprising each
Employee plan (or, with respect to any Employee Plan which is unwritten, a
detailed written description of eligibility, participation, benefits, funding
arrangements, assets and any other matters which relate to the obligations of
Seller.
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(b) Except as shown on Exhibit 3.13(b), neither Seller nor any
fiduciary of an Employee Plan has engaged in a transaction with respect to any
Employee Plan that, assuming the taxable period of such transaction expired as
of the date hereof, could subject Seller or Buyer to a Tax or penalty imposed by
either Section 4975 of the Code or Section 502(1) of ERISA or a violation of
Section 406 of ERISA.
(c) Except as shown on Exhibit 3.13(c), with respect to any Employee
Plan or any other such plan maintained by a corporation or trade or business
controlled by, controlling or under common control with Seller within the
meaning of Section 414 of the Code (collectively the "Controlled Group Plans"):
(i) Full payment has been made of all amounts that are
required under the terms of each Controlled Group Plan to be paid as
contributions with respect to all periods prior to and including the
last day of the most recent fiscal year of such Controlled group Plan
ended on or before the date of this Agreement and all periods
thereafter prior to the Closing Date, and no accumulated funding
deficiency or liquidity shortfall (as those terms are defined in
Section 412 of the Code) has been incurred with respect to any such
Employee Plan, whether or not waived.
(ii) No Controlled Group Plan, if subject to Title IV of
ERISA, has been completely or partially terminated, nor has any event
occurred nor does any circumstance exist that could result in the
partial termination of any such Controlled Group Plan.
(iii) The form of all Controlled Group Plans is in substantial
compliance with the applicable terms of ERISA, the Code, and any other
applicable laws, including the Americans with Disabilities Act of 1990,
the Family Medical Leave Act of 1993 and the Health Insurance
Portability and Accountability Act of 1996, and such plans have been
operated in compliance with such laws and the written Controlled Group
Plan documents.
(iv) Neither Seller nor any corporation or trade or business
controlled by, controlling or under common control with Seller within
the meaning of Section 414 of the Code contributes or is obligated to
contribute to any multiemployer plan (as defined in Section 3(3 7) of
ERISA) or has completely or partially withdrawn from (as defined in
ERISA Sections 4203 or 4205) any multiemployer plan under any
circumstances which would impose any Liability on Buyer.
(d) Except as shown on Exhibit 3.13(d), Seller has, at all times,
complied, and currently complies, in all material respects with the applicable
continuation requirements for its welfare plans, including (i) Section 4980B of
the Code (as well as its predecessor provision, Section 162(k) of the Code) and
Section 601 through 608, inclusive, of ERISA (collectively "COBRA") and (ii) any
applicable state statutes mandating health insurance continuation coverage for
employees.
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(e) Except for the continuation coverage requirements of COBRA, and
except as shown on Exhibit 3.13(e) Seller has no obligations or potential
liability for benefits to employees, former employees or their respective
dependents following termination of employment or retirement under any of the
Employee Plans that are welfare benefit plans as defined in Section 3(1) of
ERISA
3.14 Intellectual Property Assets
(a) The term "Intellectual Property Assets" means all intellectual
property owned or licensed (as licensor or licensee) by Seller in which Seller
has a proprietary interest, including:
(iii) Seller's name, all assumed fictional business names,
trade names, registered and unregistered trademarks, service marks and
applications (collectively, "Marks");
(iv) all patents, patent applications and inventions and
discoveries that may be patentable (collectively, "Patents");
(v) all registered and unregistered copyrights in both
published works and unpublished works (collectively, "Copyrights");
(vi) all rights in mask works;
(vii) all know-how, trade secrets, confidential or proprietary
information, customer lists, Software, technical information, data,
process technology, plans, drawings and blue prints (collectively,
"Trade Secrets"); and
(viii) all rights in internet web sites and internet domain
names presently used by Seller (collectively "Net Names").
(b) Exhibit 3.14 contains a complete and accurate list and summary
description and Seller has delivered to Buyer accurate and complete copies, of
all Intellectual Property Assets, except for any license implied by the sale of
a product and perpetual, paid-up licenses for commonly available Software
programs with a value of less than $500 under which Seller is the licensee
except as otherwise indicted on the foregoing exhibit. Except as set forth in
Exhibit 3.14, the Intellectual Property Assets are all those necessary for the
operation of Seller's business as it is currently conducted. Seller is the owner
or licensee of all right, title and interest in and to each of the Intellectual
Property Assets, free and clear of all Encumbrances, and has the right to use
and transfer without payment to a Third Party all of the Intellectual Property
Assets, other than in respect of licenses listed in Exhibit 3.14. To Seller's
knowledge, no Intellectual Property Asset is infringed, or to Seller's
knowledge, has been challenged or threatened in any way and does not infringe
the intellectual property rights of any Third Party.
35
3.15 Brokers Or Finders
Neither Seller nor any of its Representatives have incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payments in connection with the sale of
Seller's business or the Assets or the Contemplated Transactions.
3.16 Disclosure
(m) No Material representation or warranty made by Seller in
this Agreement contains any Material untrue statement or omits to state a
Material fact necessary to make any of them, in light of the circumstances in
which it was made, not misleading.
3.17 Employees
Exhibit 3.23(a) contains a complete and accurate list of the following
information for each employee and director of Seller, including each employee on
leave of absence or layoff status: name; job title; date of hiring or
engagement; date of commencement of employment or engagement; current
compensation paid or payable and any change in compensation since July 1, 2002;
sick and vacation leave that is accrued but unused; and service credited for
purposes of vesting and eligibility to participate under any Employee Plan, or
any other employee or director benefit plan, except as otherwise indicated on
said exhibit.
3.18 Labor Disputes; Compliance
(a) Except as shown on Exhibit 3.18, Seller has complied in all
material respects with all Legal Requirements relating to employment practices,
terms and conditions of employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining
and other requirements under state of federal law, the payment of social
security and similar Taxes and occupational safety and health. Seller is not
liable for the payment of any Taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
(b) Except as shown on Exhibit 3.18, (i) Seller has not been, and is
not now, a party to any collective bargaining agreement or other labor contract;
(ii) there has not been, there is not presently pending or existing, and to
Seller's knowledge there is not threatened, any strike, slowdown, picketing,
work stoppage or employee grievance process involving Seller; (iii) to Seller's
knowledge no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute; (iv) there is not pending
or, to Seller's knowledge, threatened against or affecting Seller any Proceeding
relating to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint
36
filed with the National Labor Relations Board or any comparable Governmental
Body, and there is no organizational activity or other labor dispute against or
affecting Seller or the Facilities; (v) no application or petition for an
election of or for certification of a collective bargaining agent is pending;
(vi) no grievance or arbitration Proceeding exists that might have an adverse
effect upon Seller or the conduct of its business; (vii) there is no lockout of
any employees by Seller, and no such action is contemplated by Seller; and
(viii) to Seller's knowledge there has been no pending charge of discrimination
filed against or threatened against Seller with the Equal Employment Opportunity
Commission or similar Governmental Body or any pending employment
discrimination, wrongful discharge, retaliation lawsuits or lawsuits alleging
whistleblowing.
3.19 Capital Program.
The Capital Improvement Plan Requirement, exclusive of the cost of any
Remedial Capital Projects and any Remedial Capital Project Amounts, includes
sufficient moneys to satisfy all obligations owned by the Seller under developer
agreements assumed by the Buyer.
4. Representations and Warranties of Buyer
Buyer represents and warrants to Seller as follows:
4.1 Organization and Good Standing
Buyer is a governmental entity duly organized, validly existing and in
good standing under the laws of the State of Florida, with full governmental
power and authority to conduct its business as it is now conducted and to
complete the transactions contemplated by this Agreement.
4.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the agreements to be executed or
delivered by Buyer at Closing (collectively, the "Buyer's Closing Documents"),
each of the Buyer's Closing Documents will constitute the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
respective terms. Buyer has the absolute and unrestricted right, power and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents, and such action has been duly authorized by all necessary
corporate action.
(b) Neither the execution and delivery of this Agreement by Buyer
nor the consummation or performance of any of the Contemplated Transactions by
Buyer will give any Person the right to prevent, delay or otherwise interfere
with any of the Contemplated Transactions pursuant to:
37
(i) any provision of Buyer's Governing Documents;
(ii) any resolution adopted by the board of directors or the
shareholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer
may be bound.
Buyer is not and will not be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 Certain Proceedings
There is no pending Proceeding that has been commenced against Buyer
and that challenges, or may have the effect of preventing, delaying, making
illegal or otherwise interfering with, any of the Contemplated Transactions. To
Buyer's knowledge, no such Proceeding has been threatened.
4.4 Brokers Or Finders
Neither Buyer nor any of its Representatives have incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with the
Contemplated Transactions.
5. Covenants of Seller Prior to Closing
5.1 Access and Investigation
Between the date of this Agreement and the Closing Date, and upon
reasonable advance notice received from Buyer and subject to any applicable
confidentiality obligations, Seller shall (a) afford Buyer and its
Representatives and prospective lenders, underwriters, and their Representatives
(collectively, "Buyer Group") full and free access, during regular business
hours, to Seller's personnel, properties (including subsurface testing),
Contracts, Governmental Authorizations, books and Records and other documents
and data, such rights of access to be exercised in a manner that does not
unreasonably interfere with the operations of Seller; (b) furnish Buyer Group
with copies of all such Contracts, Governmental Authorizations, books and
Records and other existing documents and data as Buyer may reasonably request;
(c) furnish Buyer Group with such additional financial, operating and other
relevant data and information as Buyer may reasonably request; and (d) otherwise
cooperate and assist, to the extent reasonably requested by Buyer, with Buyer's
investigation of the properties, assets and financial condition related to
Seller. In addition, Buyer shall have the right to have the Real
38
Property and Tangible Personal Property inspected by Buyer Group, at Buyer's
sole cost and expense, for purposes of determining the physical condition and
legal characteristics of the Real Property and Tangible Personal Property. In
the event subsurface or other destructive testing is recommended by any of Buyer
Group, Buyer shall be permitted to have the same performed with the prior
consent of Seller, which shall not be unreasonably withheld.
5.2 Operation of the Business of Seller
Between the date of this Agreement and the Closing, Seller shall:
(a) conduct its business in the Ordinary Course of Business;
(b) except as otherwise directed by Buyer in writing, and without
making any commitment on Buyer's behalf, use its Best Efforts to preserve intact
its current business organization, keep available the services of its officers,
employees and agents and maintain its relations and good will with suppliers,
customers, landlords, creditors, employees, agents and others having business
relationships with it;
(c) confer with Buyer prior to implementing operational decisions of
a Material nature;
(d) otherwise report periodically to Buyer concerning the status of
its business, operations and finances;
(e) make no Material changes in senior management personnel
identified by Buyer in Section 2.7, without prior consultation with Buyer;
(f) maintain the Assets in a state of repair and condition that
complies with Legal Requirements and is consistent with the requirements and
normal conduct of Seller's business;
(g) keep in full force and effect, without amendment, all rights
relating to Seller's business;
(h) comply with all Legal Requirements and contractual obligations
applicable to the operations of Seller's business;
(i) cooperate with Buyer and assist Buyer in identifying the
Governmental Authorizations required by Buyer to operate the business from and
after the Closing Date and either transferring existing Governmental
Authorizations of Seller to Buyer, where permissible, or obtaining new
Governmental Authorizations for Buyer;
(j) upon request from time to time, execute and deliver all
documents, make all truthful oaths, testify in any Proceedings and do all other
acts that may be reasonably
39
necessary to consummate the Contemplated Transactions, all without further
consideration; and
(k) maintain all books and Records of Seller relating to Seller's
business in the Ordinary Course of Business.
5.3 Negative Covenant
Except as otherwise expressly permitted herein, between the date of
this Agreement and the Closing Date, Seller shall not without the prior written
Consent of Buyer which shall not be unreasonably withheld and which shall be
promptly acted upon by Buyer, (a) make any modification to any material Contract
or Governmental Authorization; or (b) allow the levels of raw materials,
supplies or other materials included in the Inventories to vary Materially from
the levels customarily maintained.
5.4 Required Approvals
As promptly as practicable after the date of this Agreement, Seller
shall make all filings required by Legal Requirements to be made by it in order
to consummate the Contemplated Transactions. Seller also shall cooperate with
Buyer and its Representatives with respect to all filings that Buyer elects to
make or, pursuant to Legal Requirements, shall be required to make in connection
with the Contemplated Transactions. Seller also shall cooperate with Buyer and
its Representatives in obtaining all Material Consents.
5.5 Notification
Between the date of this Agreement and the Closing, Seller shall
promptly notify Buyer in writing if any of them becomes aware of (a) any fact or
condition that causes or constitutes a Breach of any of Seller's representations
and warranties made as of the date of this Agreement or (b) the occurrence after
the date of this Agreement of any fact or condition that would or be reasonably
likely to (except as expressly contemplated by this Agreement) cause or
constitute a Breach of any such representation or warranty had that
representation or warranty been made as of the time of the occurrence of, or
Seller's discovery of, such fact or condition. During the same period, Seller
also shall promptly notify Buyer of the occurrence of any Breach of any covenant
of Seller in this Article 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Article 7 impossible or unlikely.
5.6 No Negotiation
Until such time as this Agreement shall be terminated pursuant to
Section 9.1, Seller shall not directly or indirectly solicit, initiate,
encourage or entertain any inquiries or proposals from, discuss or negotiate
with, provide any nonpublic information to or consider the merits of any
inquiries or proposals from any Person (other than Buyer)
40
relating to any business combination transaction involving Seller or the System
(other than in the Ordinary Course of Business).
5.7 Best Efforts
Seller shall use their Best Efforts to cause the conditions in the Agreement to
be satisfied and on or before the Closing, Seller shall (a) amend its Governing
Documents and take all other actions necessary to change its name to one
sufficiently dissimilar to Seller's present name, in Buyer's judgment, to avoid
confusion and (b) take all actions requested by the Buyer to either assume such
name as an assumed name or to change its name to Seller's present name.
5.8 Payment Of Liabilities
Seller shall pay or otherwise satisfy in the Ordinary Course of
Business all of its Liabilities and obligations as they come due.
5.9 Current Evidence of Title
(a) As soon as is reasonably possible, and in no event later
than thirty (30) Business Days after the date of this Agreement, Seller shall
furnish to Buyer, at Seller's expense, for each parcel listed in Exhibit 3.5:
(i) from Commonwealth Land Title Insurance Company (the
"Title Policy") (the "Title Insurer"):
(1) a title commitment or title commitments issued
by the Title Insurer to insure title to each parcel listed in
Exhibit 3.5, , in the aggregate amount of that portion of the
Purchase Price allocated to the Land , as specified in Part 2.5,
covering such Land , naming Buyer as the proposed insured and
having an effective date after the date of this Agreement,
wherein the Title Insurer shall agree to issue an ALTA form
owner's title insurance policy 1992 (ID-17-92) with Florida
modifications (collectively the "Title Commitment"); and
(2) copies of all recorded documents listed as
Schedule B-1 matters to be terminated or satisfied in order to
issue the policy described in the Title Commitment or as special
Schedule B-2 exceptions thereunder (the "Recorded Documents").
(b) The Title Commitment shall include the Title Insurer's
requirements for issuing its title policy, which requirements shall be met by
Seller on or before the Closing Date (including those requirements that must be
met by releasing or satisfying monetary
41
Encumbrances, but excluding Encumbrances that will remain after Closing and
those requirements that are to be met solely by Buyer).
(c) If any of the following shall occur (collectively, a "Title
Objection"):
(i) The Title Commitment or other evidence of title or
search of the appropriate real estate records discloses that any party
other than Seller has title to the insured estate covered by the Title
Commitment;
(ii) any title exception is disclosed in Schedule B to any
Title Commitment that is not one of the Permitted Real Estate
Encumbrances or one that Seller specifies when delivering the Title
Commitment to Buyer as one that Seller will cause to be deleted from
the Title Commitment concurrently with the Closing, including (A) any
exceptions that pertain to Encumbrances securing any loans that do not
constitute an Assumed Liability and (B) any exceptions that Buyer
reasonably believes could materially and adversely affect Buyer's use
and enjoyment of the Land described therein; or
(iii) any Survey discloses any matter that Buyer reasonably
believes could materially and adversely affect Buyer's use and
enjoyment of the Land described therein;
then Buyer shall notify Seller in writing ("Buyer's Notice") of such matters
within [ten (10)] business days after receiving all of the Title Commitment,
Survey and copies of Recorded Documents for the Facility covered thereby.
(d) Seller shall use its Best Efforts to cure each Title Objection
and take all steps required by the Title Insurer to eliminate each Title
Objection as an exception to the Title Commitment. Any Title Objection that the
Title Company is willing to insure over on terms acceptable to Seller and Buyer
is herein referred to as an "Insured Exception." The Insured Exceptions,
together with any title exception or matters disclosed by the Survey not
objected to by Buyer in the manner aforesaid shall be deemed to be acceptable to
Buyer.
(e) Nothing herein waives Buyer's right to claim a breach of Section
3.9(a) or to claim a right to indemnification as provided in Section 11.2 if
Buyer suffers Material Damages as a result of a misrepresentation with respect
to the condition of title to the Land.
(f) Seller shall use its best efforts to comply with the
requirements of Schedule B Section 1 of the Title Commitment. At the Closing,
Seller shall identify any Schedule B Section 1 requirements that cannot be
satisfied as of the Closing. Seller and Buyer shall agree on a post-Closing
process to satisfy these requirements (the "Post-Closing Schedule B
Requirements"). Seller shall indemnify as to all Post-Closing Schedule B
requirements
42
that are not satisfied in accordance with the agreed upon post-Closing process
shall be identified by Seller in writing to Buyer.
6. Covenants of Buyer Prior to Closing
6.1 Required Approvals
As promptly as practicable after the date of this Agreement, Buyer
shall make, or cause to be made, all filings required by Legal Requirements to
be made by it to consummate the Contemplated Transactions. Buyer also shall
cooperate, and cause its Related Persons to cooperate, with Seller (a) with
respect to all filings Seller shall be required by Legal Requirements to make
and (b) in obtaining all Consents identified in Exhibit 7.3, provided, however,
that Buyer shall not be required to dispose of or make any change to its
business, expend any Material funds or incur any other Material burden in order
to comply with this Section 6.1.
6.2 Best Efforts
Buyer shall use its Best Efforts to cause the conditions in this
Agreement to be satisfied.
7. Conditions Precedent to Buyer's Obligation to Close
Buyer's obligation to purchase the Assets and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations
(a) All of Seller's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), shall have been accurate as of the Exhibit Delivery
Date, and shall be accurate in all material respects as of the time of the
Closing as if then made.
(b) Each of the representations and warranties in Sections 3.2(a)
and 3.4, and each of the representations and warranties in this Agreement that
contains an express materiality qualification, shall be accurate in all respects
as of the time of the Closing as if then made.
7.2 Seller's Performance
All of the covenants and obligations that Seller are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered
43
collectively), and each of these covenants and obligations (considered
individually), shall have been duly performed and complied with in all Material
respects.
7.3 Consents
Each of the Material Consents to be identified by Buyer and agreed to
by Seller in Exhibit 7.3 prior to Closing (the "Material Consents") shall have
been obtained and shall be in full force and effect which Exhibit shall be
attached hereto on or before the time the Due Diligence set forth in Section
13.15 is completed.
7.4 Additional Documents
Seller shall have caused the documents and instruments required by
Section 2.7(a) and the following documents to be delivered (or made available )
to Buyer:
(a) The articles of incorporation and all amendments thereto of
Seller, duly certified as of a recent date by the Secretary of State;
(b) A legal opinion reasonably satisfactory to Buyer; and
(c) Such other documents as Buyer may reasonably request for the
purpose of:
(i) evidencing the accuracy of any of Seller's
representations and warranties;
(ii) evidencing the performance by Seller of, or the
compliance by Seller with, any covenant or obligation required to be
performed or complied with by Seller;
(iii) evidencing the satisfaction of any condition referred to
in this Article 7;
(iv) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions; or
(v) evidence showing the release of all liens, security
interests, and other encumbrances other than Permitted Encumbrances
(but excluding any Permitted Encumbrances that encumber the Assets held
by any entity which has provided or may provide financing to the
Seller)
7.5 No Conflict
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly, Materially contravene or conflict
with or result in a Material violation of or cause Buyer or any Related Person
of Buyer to suffer any Material adverse consequence under (a) any applicable
Legal Requirement or Order or
44
(b) any valid Legal Requirement or Order that has been entered by any
Governmental Body.
8. Conditions Precedent to Seller's Obligation to Close
Seller's obligation to sell the Assets and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller in whole or in part):
8.1 Accuracy of Representations
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), shall have been accurate in all Material respects as
of the date of this Agreement and shall be accurate in all Material respects as
of the time of the Closing as if then made.
8.2 Buyer's Performance
All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), shall have been performed and complied with in all
Material respects.
8.3 Additional Documents
Buyer shall have caused a legal opinion satisfactory to Seller to be
supplied and the documents and instruments required by Section 2.7(b) and the
following documents to be delivered or made available to Seller:
(a) such other documents as Seller may reasonably request for the
purpose of:
(i) evidencing the accuracy of any representation or
warranty of Buyer,
(ii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer or
(iii) evidencing the satisfaction of any condition referred to
in this Article
8.4 No Injunction
There shall not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the consummation of the Contemplated Transactions
and (b) has
45
been adopted or issued, or has otherwise become effective, since the date of
this Agreement.
9. Termination
9.1 Termination Events
By notice given prior to or at the Closing, subject to Section 9.2,
this Agreement may be terminated as follows:
(a) by Buyer if a material Breach of any provision of this Agreement
has been committed by Seller and such Breach has not been waived by Buyer;
(b) by Seller if a material Breach of any provision of this
Agreement has been committed by Buyer and such Breach has not been waived by
Seller;
(c) by Buyer if any condition in Article 7 has not been satisfied as
of the date specified for Closing in the first sentence of Section 2.6 or if
satisfaction of such a condition by such date is or becomes impossible (other
than through the failure of Buyer to comply with its obligations under this
Agreement), and Buyer has not waived such condition on or before such date;
(d) by Seller if any condition in Article 8 has not been satisfied
as of the date specified for Closing in the first sentence of Section 2.6 or if
satisfaction of such a condition by such date is or becomes impossible (other
than through the failure of Seller to comply with its obligations under this
Agreement), and Seller has not waived such condition on or before such date;
(e) by mutual consent of Buyer and Seller;
(f) by Buyer if the Closing has not occurred on or before December
15, 2002 or such later date as the parties may agree upon, unless the Buyer is
in material Breach of this Agreement; or
(g) by Seller if the Closing has not occurred on or before December
15, 2002 or such later date as the parties may agree upon, unless the Seller is
in material Breach of this Agreement.
9.2 Effect Of Termination
Each party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of such right of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section 9.1, all obligations of the parties
under this Agreement will terminate, except that the obligations of the parties
in this Section 9.2 and Articles 12 and 13 (except for
46
those in Section 13.5) will survive, provided, however, that, if this Agreement
is terminated because of a Breach of this Agreement by the non-terminating party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the party's failure to
comply with its obligations under this Agreement, the terminating party's right
to pursue all legal remedies will survive such termination unimpaired.
Furthermore, notwithstanding any such termination, the Seller shall immediately
upon termination pay to the Buyer the Due Diligence Amount.
Neither Buyer nor Seller shall be liable to the other in the event that
after the execution of this Agreement there occurs (i) a change of law that
prevents the Closing, (ii) any action by a third party that prevents the Closing
or (iii) any order by a Governmental Agency or court that prevents the Closing.
Both parties agree to diligently defend against a third party attempt to prevent
a Closing.
10. Additional Covenants
10.1 Employees and Employee Benefits
(a) Information on Active Employees. For the purpose of this
Agreement, the term "Active Employees" shall mean all employees employed on the
Closing Date by Seller for its business who are employed exclusively in Seller's
business as currently conducted, including employees on temporary leave of
absence, including family medical leave, military leave, temporary disability or
sick leave, but excluding employees on long-term disability leave.
(b) Employment of Active Employees by Buyer.
(i) Buyer will make offers of employment to all employees
who meet the standards set forth on Exhibit 10.1(b) which Buyer will
supply to Seller which is accepted by Seller in the exercise of its
reasonable judgment and Buyer may interview all Active Employees. Buyer
will provide Seller with a list of Active Employees to whom Buyer has
made an offer of employment that has been accepted to be effective on
the Closing Date (the "Hired Active Employees"). Subject to Legal
Requirements, Buyer will have reasonable access to the Facilities and
personnel Records (including performance appraisals, disciplinary
actions, grievances and medical Records) of Seller for the purpose of
preparing for and conducting employment interviews with all Active
Employees and will conduct the interviews as expeditiously as possible
prior to the Closing Date. Access will be provided by Seller upon
reasonable prior notice during normal business hours. Effective
immediately before the Closing, Seller will terminate the employment of
all Hired Active Employees.
(ii) Neither Seller nor its Related Persons shall solicit the
continued employment of any Active Employee (unless and until Buyer has
informed Seller
47
in writing that the particular Active Employee will not receive any
employment offer from Buyer) or the employment of any Hired Active
Employee after the Closing. Buyer shall inform Seller promptly of the
identities of those Active Employees to whom it will not make
employment offers, and Seller shall assist Buyer in complying with the
WARN Act as to those Active Employees.
(iii) It is understood and agreed that (A) Buyer's expressed
intention to extend offers of employment as set forth in this section
shall not constitute any commitment, Contract or understanding
(expressed or implied) of any obligation on the part of Buyer to a
post-Closing employment relationship of any fixed term or duration or
upon any terms or conditions other than those that Buyer may establish
pursuant to individual offers of employment, and (B) employment offered
by Buyer is "at will" and may be terminated by Buyer or by an employee
at any time for any reason (subject to any written commitments to the
contrary made by Buyer or an employee and Legal Requirements). Nothing
in this Agreement shall be deemed to prevent or restrict in any way the
right of Buyer to terminate, reassign, promote or demote any of the
Hired Active Employees after the Closing or to change adversely or
favorably the title, powers, duties, responsibilities, functions,
locations, salaries, other compensation or terms or conditions of
employment of such employees.
(c) Salaries and Benefits.
(i) Seller shall be responsible for (A) the payment of all
wages and other remuneration due to Active Employees with respect to
their services as employees of Seller through the close of business on
the Closing Date, including pro rata bonus payments and all vacation
pay earned prior to the Closing Date; (B) the payment of any
termination or severance payments and the provision of health plan
continuation coverage in accordance with the requirements of COBRA and
Sections 601 through 608 of ERISA; and (C) any and all payments to
employees required under the WARN Act.
(ii) Seller shall be liable for any claims made or incurred
by Active Employees and their beneficiaries through the Closing Date
under the Employee Plans. For purposes of the immediately preceding
sentence, a claim will be deemed incurred, in the case of hospital,
medical or dental benefits, when the services that are the subject of
the charge are performed and, in the case of other benefits (such as
disability or life insurance), when an event has occurred or when a
condition has been diagnosed that entitles the employee to the benefit.
(d) No Transfer of Assets. Neither Seller nor its Related Persons
will any transfer of pension or other employee benefit plan assets to Buyer.
(e) Terms of Employment. Buyer will set its own initial terms and
conditions of employment for the Hired Active Employees and others it may hire,
including work
48
rules, benefits and salary and wage structure, all as permitted by law, provide
such terms and conditions shall be in the aggregate substantially similar in
value to the terms and conditions of such Hired Active Employees under the
Seller's employ as disclosed to Buyer herein. Buyer is not obligated to assume
any collective bargaining agreements under this Agreement. Seller shall be
solely liable for any severance payment required to be made to its employees due
to the Contemplated Transactions. Any bargaining obligations of Buyer with any
union with respect to bargaining unit employees subsequent to the Closing,
whether such obligations arise before or after the Closing, shall be the sole
responsibility of Buyer.
(f) General Employee Provisions.
(i) Seller and Buyer shall give any notices -required by
Legal Requirements and take whatever other actions with respect to the
plans, programs and policies described in this Section 10.1 as may be
necessary to carry out the arrangements described in this Section 10.1.
(ii) Seller and Buyer shall provide each other with such plan
documents and summary plan descriptions, employee data or other
information as may be reasonably required to carry out the arrangements
described in this Section 10.1.
(iii) If any of the arrangements described in this Section
10.1 are determined by the IRS or other Governmental Body to be
prohibited by law, Seller and Buyer shall modify such arrangements to
as closely as possible reflect their expressed intent and retain the
allocation of economic benefits and burdens to the parties contemplated
herein in a manner that is not prohibited by law.
(iv) Seller shall provide Buyer with completed 1-9 forms and
attachments with respect to all Hired Active Employees, except for such
employees as Seller certifies in writing to Buyer are exempt from such
requirement.
(v) Buyer shall not have any responsibility, liability or
obligation, whether to Active Employees, former employees, their
beneficiaries or to any other Person, with respect to any employee
benefit plans, practices, programs or arrangements (including the
establishment, operation or termination thereof and the notification
and provision of COBRA coverage extension) maintained by Seller.
(vi) Seller will require certain assistance from certain
Hired Active Employees to process post-Closing obligations of Seller,
including, but not limited to, filings with the Florida Public Service
Commission and other regulatory agencies and federal wage and tax
filings (collectively the "Post-Closing Obligations"), and Buyer agrees
to provide the services of such necessary employees to assist Seller
with its Post-Closing Obligations. Such assistance shall not
unreasonably interfere with the necessary employees' regular duties for
Buyer.
49
As consideration to Buyer for assistance with Seller's Post-Closing
Obligations, Seller shall pay Buyer the sum of Fifty Thousand Dollars
($50,000.00), which sum shall be credited to Buyer at the Closing.
10.2 Payment of all Taxes Resulting From Sale of Assets by Seller
Seller shall pay in a timely manner all Taxes resulting from or payable
in connection with the sale of the Assets pursuant to this Agreement, regardless
of the Person on whom such Taxes are imposed by Legal Requirements.
10.3 Payment of Other Retained Liabilities
In addition to payment of Taxes pursuant to Section 10.2, Seller shall
pay, or make adequate provision for the payment, in full all of the Retained
Liabilities and other Liabilities of Seller under this Agreement. If any such
Liabilities are not so paid or provided for, or if Buyer reasonably determines
that failure to make any payments will impair Buyer's use or enjoyment of the
Assets or conduct of the business previously conducted by Seller with the
Assets, Buyer may, upon ten (10) days notice, at any time after the Closing
Date, elect to make all such payments directly (but shall have no obligation to
do so) and set off and deduct the full amount of all such payments from the
first maturing installments of the unpaid principal balance of the Note pursuant
to Section 11.8. Buyer shall receive full credit under the Note and this
Agreement for all payments so made.
10.4 Removing Excluded Assets
Within sixty (60) days after the Closing Date, Seller shall remove all
Excluded Assets (other than the Capital Charges provided for in Section 2.2
hereof) from all Facilities and other Land to be occupied by Buyer. Such removal
shall be done in such manner as to avoid any damage to the Facilities and other
properties to be occupied by Buyer and any disruption of the business operations
to be conducted by Buyer after the Closing. Any damage to the Assets or to the
Facilities resulting from such removal shall be paid by Seller. Should Seller
fail to remove the Excluded Assets as required by this Section, Buyer shall have
the right, but not the obligation, (a) to remove the Excluded Assets at Seller's
sole cost and expense; (b) to store the Excluded Assets and to charge Seller all
storage costs associated therewith; (c) to treat the Excluded Assets as
unclaimed and to proceed to dispose of the same under the laws governing
unclaimed property; or (d) to exercise any other right or remedy conferred by
this Agreement or otherwise available at law or in equity. Seller shall promptly
reimburse Buyer for all costs and expenses incurred by Buyer in connection with
any Excluded Assets not removed by Seller on or before the Closing Date.
50
10.5 Reports and Returns
Seller shall promptly after the Closing prepare and file all reports
and returns required by Legal Requirements relating to the business of Seller as
conducted using the Assets, to and including the Effective Time.
10.6 Assistance in Proceedings
Seller will cooperate with Buyer and its counsel in the contest or
defense of, and make available its personnel and provide any testimony and
access to its books and Records in connection with, any Proceeding involving or
relating to (a) any Contemplated Transaction or (b) any action, activity,
circumstance, condition, conduct, event, fact, failure to act, incident,
occurrence, plan, practice, situation, status or transaction on or before the
Closing Date involving Seller or its business or either Shareholder.
10.7 Retention of and Access to Records
After the Closing Date, Buyer shall retain for a period consistent with
Buyer's record-retention policies and practices those Records of Seller
delivered to Buyer. Buyer also shall provide Seller and their Representatives
reasonable access thereto, during normal business hours to enable them to
prepare financial statements or tax returns or deal with tax audits. After the
Closing Date, Seller shall provide Buyer and its Representatives reasonable
access to Records that are Excluded Assets, during normal business hours for any
reasonable business purpose specified by Buyer in such notice.
10.8 Further Assurances
Subject to the proviso in Section 6.1, the parties shall cooperate
reasonably with each other and with their respective Representatives in
connection with any steps required to be taken as part of their respective
obligations under this Agreement, and shall (a) furnish upon request to each
other such further information; (b) execute and deliver to each other such other
documents; and (c) do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the Contemplated Transactions.
11. Indemnification; Remedies
11.1 Survival
All representations, warranties, covenants and obligations in this
Agreement, the certificates delivered pursuant to Section 2.7 and any other
certificate or document delivered pursuant to this Agreement shall survive the
Closing and the consummation of the Contemplated Transactions, subject to
Section 11.7. The right to indemnification, reimbursement or other remedy based
upon such representations,
51
warranties, covenants and obligations shall not be affected by any investigation
(including any environmental investigation or assessment) conducted with respect
to, or any Knowledge acquired at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with any such representation, warranty, covenant
or obligation. The waiver of any condition based upon the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification,
reimbursement or other remedy based upon such representations, warranties,
covenants and obligations. For purposes of this Article 11, whenever the phrases
"to Seller's knowledge", "to the best of Seller's knowledge", "to the knowledge
of Seller", or any similar phrase, or whenever the words "material",
"materially" are used in this Agreement (other than in this Article 11), such
words and phrases shall be disregarded for purposes of this Article 11 and
indemnification hereunder as if such words or phrases were stricken from this
Agreement.
11.2 Indemnification and Reimbursement by Seller
Seller will indemnify and hold harmless Buyer, and its Representatives,
shareholders, subsidiaries and Related Persons (collectively, the "Buyer
Indemnified Persons"), and will reimburse the Buyer Indemnified Persons for any
loss, liability, claim, damage, expense (including costs of investigation and
defense and reasonable attorneys' fees and expenses) or diminution of value,
whether or not involving a Third-Party Claim (collectively, "Damages") (but not
including any Damages covered by the offsets for the Remedial Capital Project
Amount), arising from or in connection with:
(a) any Breach of any representation or warranty made by
Seller in (i) this Agreement (without giving effect to any supplement thereto),
(ii) the certificates delivered pursuant to Section 2.7 (for this purpose, each
such certificate will be deemed to have stated that Seller's representations and
warranties in this Agreement fulfill the requirements of Section 7.1 as of the
Closing Date as if made on the Closing Date without giving effect to any
supplement thereto, unless the certificate expressly states that the matters
disclosed in a supplement have caused a condition specified in Section 7.1 not
to be satisfied), (v) any transfer instrument or (vi) any other certificate,
document, writing or instrument delivered by Seller pursuant to this Agreement;
(b) any Breach of any covenant or obligation of Seller in
this Agreement or in any other certificate, document, writing or instrument
delivered by Seller pursuant to this Agreement;
(c) any Liability arising out of the ownership or operation
of the Assets prior to the Effective Time other than the Assumed Liabilities;
(d) any brokerage or finder's fees or commissions or similar
payments
52
based upon any agreement or understanding made, or alleged to have been made, by
any Person with Seller (or any Person acting on its behalf) in connection with
any of the Contemplated Transactions;
(e) any liability under the WARN Act or any similar state
or local Legal Requirement that may result from an "Employment Loss", as defined
by 29 U.S.C. sect. 2101(a)(6), caused by any action of Seller prior to the
Closing or by Buyer's decision not to hire previous employees of Seller;
(f) any Employee Plan established or maintained by Seller;
or
(g) any Retained Liabilities.
Notwithstanding anything contained in this Agreement to the
contrary, the Buyer will not have the right to ▇▇▇ the Seller for Damages which
result form a defect in the title to the Real Property obtained by the Buyer
pursuant to this Agreement for which there is applicable title insurance
pursuant to Section 5.9 hereof and on which a claim may be made by the Buyer for
the relevant Damages unless (a) the Buyer has filed a claim under the relevant
title insurance policy and the claim has not been allowed within 90 days of the
date the claim was filed or (b) the Buyer has filed a claim under the relevant
title insurance policy, the claim was allowed within 90 days after the filing of
the claim but the processing or defending (or the taking of other relevant
action in accordance with the claim by the Title Insurer) is not proceeding in a
satisfactory manner as determined by the Buyer in the exercise of its reasonable
judgment.
11.3 Indemnification and Reimbursement by Seller--Environmental
Matters
In addition to the other indemnification provisions in this Article 11,
Seller will indemnify and hold harmless Buyer and the other Buyer indemnified
Persons, and will reimburse Buyer and the other Buyer Indemnified Persons, for
any Damages (including costs of cleanup, containment or other remediation)
arising from or in connection with:
(a) any Environmental, Health and Safety Liabilities arising
out of or relating to: (i) the ownership or operation by any Person at any time
on or prior to the Closing Date of any of the Facilities, assets or the business
of Seller, or (ii) any Hazardous Materials or other contaminants that were
present on the Facilities or Assets at any time on or prior to the Closing Date;
or
(b) any bodily injury (including illness, disability and
death, regardless of when any such bodily injury occurred, was incurred or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction and deprivation of the use of real property) or
other damage of or to any Person or any Assets in any way arising from or
allegedly arising from any Hazardous Activity conducted by any Person
53
with respect to the business of Seller or the Assets prior to the Closing Date
or from any Hazardous Material that was (i) present on or before the Closing
Date on or at the Facilities (or present on any other property, if such
Hazardous Material emanated or allegedly emanated from any Facility and was
present on any Facility, on or prior to the Closing Date) or (ii) Released or
allegedly Released by any Person on or at any Facilities or Assets at any time
on or prior to the Closing Date.
Buyer, with Seller's consent and approval which shall not be
unreasonably withheld will be entitled to control any Remedial Action, any
Proceeding relating to an Environmental Claim and, except as provided in the
following sentence, any other Proceeding with respect to which indemnity may be
sought under this Section 11.3. The procedure described in Section 11.9 will
apply to any claim solely for monetary damages relating to a matter covered by
this Section 11.3.
No claim for environmental indemnification or reimbursement may be
asserted unless the underlying environmental condition is (i) specifically
identified in Exhibit 3.13 or (ii) the party asserting the claim establishes
that the conditions, release, disposal or actions giving rise to the liability
or claim were present at or prior to Closing and that the party asserting the
claim did not materially cause or contribute to such conditions after Closing.
11.4 Indemnification and Reimbursement by Buyer
Buyer will indemnify and hold harmless Seller, and will reimburse
Seller, for any Damages arising from or in connection with:
(a) any Breach of any representation or warranty made by
Buyer in this Agreement or in any certificate, document, writing or instrument
delivered by Buyer pursuant to this Agreement;
(b) any Breach of any covenant or obligation of Buyer in
this Agreement or in any other certificate, document, writing or instrument
delivered by Buyer pursuant to this Agreement;
(c) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on
Buyer's behalf) in connection with any of the Contemplated Transactions; or
(d) any Assumed Liabilities.
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11.5 Limitations on Amount--Seller
Seller shall have no liability (for indemnification or otherwise) with
respect to claims under Section 11.2(a) until the total of all Damages with
respect to such matters exceeds $500,000 and then only for the amount by which
such Damages exceed $500,000. However, this Section 11.5 will not apply to
claims under (the following, each an "Exempted Breach") Section 11.2(b) through
(h) or to matters arising in respect of Sections 3.7, 3.13, or 3.15 to any
Breach of any of Seller's representations and warranties of which the Seller had
Knowledge at any time prior to the date on which such representation and
warranty is made or any Breach by Seller of any covenant or obligation.
Notwithstanding the foregoing, the Seller shall not be liable for Minor Claims
(as hereinafter defined) until such Minor Claims aggregate more than $500,000 in
which case, Seller shall be liable for all Minor Claims to the extent that in
the aggregate they exceed $500,000 provided that Damages in aggregate exceed
$500,000. "Minor Claim" means Damages resulting from a Breach hereof covered by
Section 11.2(a) (other than an Exempted Breach) that do not exceed $20,000.00.
11.6 Limitations on Amount--Buyer
Buyer will have no liability (for indemnification or otherwise) with
respect to claims under Section 11.4(a) until the total of all Damages with
respect to such matters exceeds $500,000 and then only for the amount by which
such Damages exceed $500,000. However, this Section 11.6 will not apply to
claims under Section 11.4(b) through (e) or matters arising in respect of
Section 4.4 or to any Breach of any of Buyer's representations and warranties of
which Buyer had Knowledge at any time prior to the date on which such
representation and warranty is made or any Breach by Buyer of any covenant or
obligation, and Buyer will be liable for all Damages with respect to such
Breaches.
11.7 Time Limitations
(a) If the Closing occurs, Seller will have liability (for
indemnification or otherwise) with respect to any Breach of (i) a covenant or
obligation to be performed or complied with prior to the Closing Date (other
than those in Sections 2.1 and 2.4(b) and Articles 10 and 12, as to which a
claim may be made at any time, or (ii) a representation or warranty (other than
one contained in Section 3.12 or 3.13 hereof) only if on or before three years
after the Closing Date, Buyer notifies Seller of a claim specifying the factual
basis of the claim in reasonable detail to the extent then known by Buyer. If
the Closing occurs, Seller will have liability (for indemnification or
otherwise) with respect to any Breach of the representations and warranties
contained in Section 3.12 or 3.13 hereof only if on or before five years after
the Closing Date, the Buyer notifies Seller of a claim specifying the factual
basis of the claim in reasonable detail to the extent then known by Buyer.
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(b) If the Closing occurs, Buyer will have liability (for
indemnification or otherwise) with respect to any Breach of (i) a covenant or
obligation to be performed or complied with prior to the Closing Date (other
than those in Article 12, as to which a claim may be made at any time) or (ii) a
representation or warranty (other than that set forth in Section 4.4, as to
which a claim may be made at any time), only if on or before three years after
the Closing Date, Seller notifies Buyer of a claim specifying the factual basis
of the claim in reasonable detail to the extent then known by Seller.
11.8 Right Of Setoff
Upon notice to Seller specifying in reasonable detail the basis
therefor, Buyer may set off any amount to which it may be entitled under this
Article 11 against amounts otherwise payable to Seller, subject to Seller's
right to object under the Dispute Resolution Process. The exercise of such right
of setoff by Buyer in good faith, whether or not ultimately determined to be
justified, will not constitute an event of default. Neither the exercise of nor
the failure to exercise such right of setoff or to give a notice of a claim
under the Escrow Agreement will constitute an election of remedies or limit
Buyer in any manner in the enforcement of any other remedies that may be
available to it.
11.9 Third-Party Claims
(a) Promptly after receipt by a Person entitled to indemnity
under Section 11.2, 11.3 (to the extent provided in the last sentence of Section
11.3) or 11.4 (an "Indemnified Person") of notice of the assertion of a
Third-Party Claim against it, such Indemnified Person shall give notice to the
Person obligated to indemnify under such Section (an "Indemnifying Person") of
the assertion of such Third-Party Claim, provided that the failure to notify the
Indemnifying Person will not relieve the Indemnifying Person of any liability
that it may have to any Indemnified Person, except to the extent that the
Indemnifying Person demonstrates that the defense of such Third-Party Claim is
prejudiced by the Indemnified Person's failure to give such notice.
(b) If an Indemnified Person gives notice to the
Indemnifying Person pursuant to Section 11.9(a) of the assertion of a
Third-Party Claim, the Indemnifying Person shall be entitled to participate in
the defense of such Third-Party Claim and, to the extent that it wishes (unless
(i) the Indemnifying Person is also a Person against whom the Third-Party Claim
is made and the Indemnified Person determines in good faith that joint
representation would be inappropriate or (ii) the Indemnifying Person fails to
provide reasonable assurance to the Indemnified Person of its financial capacity
to defend such Third-Party Claim and provide indemnification with respect to
such Third-Party Claim), to assume the defense of such Third-Party Claim with
counsel satisfactory to the Indemnified Person. After notice from the
Indemnifying Person to the Indemnified Person of its election to assume the
defense of such Third-Party Claim, the Indemnifying Person shall not, so long as
it diligently conducts such defense, be liable to the
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Indemnified Person under this Article 11 for any fees of other counsel or any
other expenses with respect to the defense of such Third-Party Claim, in each
case subsequently incurred by the Indemnified Person in connection with the
defense of such Third-Party Claim, other than reasonable costs of investigation.
If the Indemnifying Person assumes the defense of a Third-Party Claim, (i) such
assumption will conclusively establish for purposes of this Agreement that the
claims made in that Third-Party Claim are within the scope of and subject to
indemnification, and (ii) no compromise or settlement of such Third-Party Claims
may be effected by the Indemnifying Person without the Indemnified Person's
Consent unless (A) there is no finding or admission of any violation of Legal
Requirement or any violation of the rights of any Person; (B) the sole relief
provided is monetary damages that are paid in full by the Indemnifying Person;
and (C) the Indemnified Person shall have no liability with respect to any
compromise or settlement of such Third-Party Claims effected without its
Consent. If notice is given to an Indemnifying Person of the assertion of any
Third-Party Claim and the Indemnifying Person does not, within ten (10) days
after the Indemnified Person's notice is given, give notice to the Indemnified
Person of its election to assume the defense of such Third-Party Claim, the
Indemnifying Person will be bound by any determination made in such Third-Party
Claim or any compromise or settlement effected by the Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
Third-Party Claim may adversely affect it or its Related Persons other than as a
result of monetary damages for which it would be entitled to indemnification
under this Agreement, the Indemnified Person may, by notice to the Indemnifying
Person, assume the exclusive right to defend, compromise or settle such
Third-Party Claim, but the Indemnifying Person will not be bound by any
determination of any Third-Party Claim so defended for the purposes of this
Agreement or any compromise or settlement effected without its Consent (which
may not be unreasonably withheld).
(d) Notwithstanding the provisions of Section 13.4, Seller
and each Shareholder hereby consent to the nonexclusive jurisdiction of any
court in which a Proceeding in respect of a Third-Party Claim is brought against
any Buyer Indemnified Person for purposes of any claim that a Buyer Indemnified
Person may have under this Agreement with respect to such Proceeding or the
matters alleged therein and agree that process may be served on Seller and
Shareholders with respect to such a claim anywhere in the world.
(e) With respect to any Third-Party Claim subject to
indemnification under this Article 11: (i) both the Indemnified Person and the
Indemnifying Person, as the case may be, shall keep the other Person fully
informed of the status of such Third-Party Claim and any related Proceedings at
all stages thereof where such Person is not represented by its own counsel, and
(ii) the parties agree (each at its own expense) to render to each other such
assistance as they may reasonably require of each other and to
57
cooperate in good faith with each other in order to ensure the proper and
adequate defense of any Third-Party Claim.
(f) With respect to any Third-Party Claim subject to
indemnification under this Article 11, the parties agree to cooperate in such a
manner as to preserve in full (to the extent possible) the confidentiality of
all Confidential Information and the attorney-client and work-product
privileges. In connection therewith, each party agrees that: (i) it will use its
Best Efforts, in respect of any Third-Party Claim in which it has assumed or
participated in the defense, to avoid production of Confidential Information
(consistent with applicable law and rules of procedure), and (ii) all
communications between any party hereto and counsel responsible for or
participating in the defense of any Third-Party Claim shall, to the extent
possible, be made so as to preserve any applicable attorney-client or
work-product privilege.
11.10 Other Claims
A claim for indemnification for any matter not involving a Third-Party
Claim may be asserted by notice to the party from whom indemnification is sought
and shall be paid promptly after such notice, subject to filing an objection
under the Dispute Resolution Process.
11.11 Buyer Benefit
Upon any termination of this Agreement that would entitle the Buyer to
recover the benefit of its bargain with the Seller, the Buyer and Seller agree
that the value of the benefit of the bargain is speculative, is not readily
subject to determination objectively and agree that the value of the benefit of
the bargain to the Buyer is $5 Million, plus an amount equal to all transaction
costs which the Buyer would have paid if the Closing and issuance of the
Acquisition Bonds had taken place.
12. Confidentiality
12.1 Definition of Confidential Information
(a) As used in this Article 12, the term "Confidential
Information" includes any and all of the following information of Seller or
Buyer that has been or may hereafter be disclosed in any form, whether in
writing, orally, electronically or otherwise, or otherwise made available by
observation, inspection or otherwise by either party (Buyer on the one hand or
Seller, on the other hand) or its Representatives (collectively, a "Disclosing
Party") to the other party or its Representatives (collectively, a "Receiving
Party"):
(i) all information that is a trade secret under applicable
trade secret or other law;
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(ii) all information concerning product specifications, data,
know-how, formulae, compositions, processes, designs, sketches,
photographs, graphs, drawings, samples, inventions and ideas, past,
current and planned research and development, current and planned
manufacturing or distribution methods and processes, customer lists,
current and anticipated customer requirements, price lists, market
studies, business plans, computer hardware, Software and computer
software and database technologies, systems, structures and
architectures;
(iii) all information concerning the business and affairs of
the Disclosing Party (which includes historical and current financial
statements, financial projections and budgets, tax returns and
accountants' materials, historical, current and projected sales,
capital spending budgets and plans, business plans, strategic plans,
marketing and advertising plans, publications, client and customer
lists and files, contracts, the names and backgrounds of key personnel
and personnel training techniques and materials, however documented),
and all information obtained from review of the Disclosing Party's
documents or property or discussions with the Disclosing Party
regardless of the form of the communication; and
(iv) all notes, analyses, compilations, studies, summaries
and other material prepared by the Receiving Party to the extent
containing or based, in whole or in part, upon any information included
in the foregoing.
(b) Any trade secrets of a Disclosing Party shall also be entitled
to all of the protections and benefits under applicable trade secret law and any
other applicable law. If any information that a Disclosing Party deems to be a
trade secret is found by a court of competent jurisdiction not to be a trade
secret for purposes of this Article 12, such information shall still be
considered Confidential Information of that Disclosing Party for purposes of
this Article 12 to the extent included within the definition. In the case of
trade secrets, each of Buyer and Seller hereby waives any requirement that the
other party submit proof of the economic value of any trade secret or post a
bond or other security.
12.2 Restricted Use of Confidential Information
(a) Each Receiving Party acknowledges the confidential and
proprietary nature of the Confidential Information of the Disclosing Party and
agrees that such Confidential Information (i) shall be kept confidential by the
Receiving Party; (ii) shall not be used for any reason or purpose other than to
evaluate and consummate the Contemplated Transactions; and (iii) without
limiting the foregoing, shall not be disclosed by the Receiving Party to any
Person, except in each case as otherwise expressly permitted by the terms of
this Agreement or with the prior written consent of an authorized representative
of Seller with respect to Confidential Information of Seller (each, a "Seller
Contact") or an authorized representative of Buyer with respect to Confidential
Information of Buyer (each, a "Buyer Contact"). Each of Buyer and Seller
59
shall disclose the Confidential Information of the other party only to its
Representatives who require such material for the purpose of evaluating the
Contemplated Transactions and are informed by Buyer or Seller as the case may
be, of the obligations of this Article 12 with respect to such information. Each
of Buyer and Seller shall (iv) enforce the terms of this Article 12 as to its
respective Representatives; (v) take such action to the extent necessary to
cause its Representatives to comply with the terms and conditions of this
Article 12; and (vi) be responsible and liable for any breach of the provisions
of this Article 12 by it or its Representatives.
(b) Unless and until this Agreement is terminated, Seller
shall maintain as confidential any Confidential Information (including for this
purpose any information of Seller of the type referred to in Sections
12.1(a)(i), (ii) and (iii), whether or not disclosed to Buyer) of the Seller
relating to any of the Assets or the Assumed Liabilities. Notwithstanding the
preceding sentence, Seller may use any Confidential Information of Seller before
the Closing in the Ordinary Course of Business in connection with the
transactions permitted by Section 5.2.
(c) From and after the Closing, the provisions of Section
12.2(a) above shall not apply to or restrict in any manner Buyer's use of any
Confidential Information of the Seller relating to any of the Assets or the
Assumed Liabilities.
12.3 Exceptions
Sections 12.2(a) and (b) do not apply to that part of the Confidential
Information of a Disclosing Party that a Receiving Party demonstrates (a) was,
is or becomes generally available to the public other than as a result of a
breach of this Article 12 or the Confidentiality Agreement by the Receiving
Party or its Representatives; (b) was or is developed by the Receiving Party
independently of and without reference to any Confidential Information of the
Disclosing Party; or (c) was, is or becomes available to the Receiving Party on
a nonconfidential basis from a Third Party not bound by a confidentiality
agreement or any legal, fiduciary or other obligation restricting disclosure.
Seller shall not disclose any Confidential Information of Seller relating to any
of the Assets or the Assumed Liabilities in reliance on the exceptions in
clauses (b) or (c) above.
12.4 Legal Proceedings
If a Receiving Party becomes compelled in any Proceeding or is
requested by a Governmental Body having regulatory jurisdiction over the
Contemplated Transactions to make any disclosure that is prohibited or otherwise
constrained by this Article 12, that Receiving Party shall provide the
Disclosing Party with prompt notice of such compulsion or request so that it may
seek an appropriate protective order or other appropriate remedy or waive
compliance with the provisions of this Article 12. In the absence of a
protective order or other remedy, the Receiving Party may disclose that
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portion (and only that portion) of the Confidential Information of the
Disclosing Party that, based upon advice of the Receiving Party's counsel, the
Receiving Party is legally compelled to disclose or that has been requested by
such Governmental Body, provided, however, that the Receiving Party shall use
reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded by any Person to whom any Confidential Information is so disclosed.
The provisions of this Section 12.4 do not apply to any Proceedings between the
parties to this Agreement.
12.5 Return or Destruction of Confidential Information
If this Agreement is terminated, each Receiving Party shall (a) destroy
all Confidential Information of the Disclosing Party prepared or generated by
the Receiving Party without retaining a copy of any such material; (b) promptly
deliver to the Disclosing Party all other Confidential Information of the
Disclosing Party, together with all copies thereof, in the possession, custody
or control of the Receiving Party or, alternatively, with the written consent of
a Seller Contact or a Buyer Contact (whichever represents the Disclosing Party)
destroy all such Confidential Information; and (c) certify all such destruction
in writing to the Disclosing Party, provided, however, that the Receiving Party
may retain a list that contains general descriptions of the information it has
returned or destroyed to facilitate the resolution of any controversies after
the Disclosing Party's Confidential Information is returned.
12.6 Attorney-Client Privilege
The Disclosing Party is not waiving, and will not be deemed to have
waived or diminished, any of its attorney work product protections,
attorney-client privileges or similar protections and privileges as a result of
disclosing its Confidential Information (including Confidential Information
related to pending or threatened litigation) to the Receiving Party, regardless
of whether the Disclosing Party has asserted, or is or may be entitled to
assert, such privileges and protections. The parties (a) share a common legal
and commercial interest in all of the Disclosing Party's Confidential
Information that is subject to such privileges and protections; (b) are or may
become joint defendants in Proceedings to which the Disclosing Party's
Confidential Information covered by such protections and privileges relates; (c)
intend that such privileges and protections remain intact should either party
become subject to any actual or threatened Proceeding to which the Disclosing
Party's Confidential Information covered by such protections and privileges
relates; and (d) intend that after the Closing the Receiving Party shall have
the right to assert such protections and privileges. No Receiving Party shall
admit, claim or contend, in Proceedings involving either party or otherwise,
that any Disclosing Party waived any of its attorney work-product protections,
attorney-client privileges or similar protections and privileges with respect to
any information, documents or other material not disclosed to a Receiving Party
due to the Disclosing Party disclosing its Confidential Information (including
Confidential Information related to pending or threatened litigation) to the
Receiving Party.
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13. General Provisions
13.1 Expenses
Except as otherwise provided in this Agreement, each party to this
Agreement will bear its respective fees and expenses incurred in connection with
the preparation, negotiation, execution and performance of this Agreement and
the Contemplated Transactions, including all fees and expense of its
Representatives. Seller will pay all amounts payable to the Title Insurer in
respect of the Title Commitments, copies of exceptions and the Title Policy,
including premiums (including premiums for endorsements) and search fees. If
this Agreement is terminated, the obligation of each party to pay its own fees
and expenses will be subject to any rights of such party arising from a Breach
of this Agreement by another party.
13.2 Public Announcements
Any public announcement, press release or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as Seller determines. Except with the prior
consent of Seller or as permitted by this Agreement, Buyer nor any of its
Representatives shall disclose to any Person (a) the fact that any Confidential
Information of Seller has been disclosed to Buyer or its Representatives, that
Buyer or its Representatives have inspected any portion of the Confidential
Information of Seller, that any Confidential Information of Buyer has been
disclosed to Seller or their Representatives or that Seller or its
Representatives have inspected any portion of the Confidential Information of
Buyer or (b) any information about the Contemplated Transactions, including the
status of such discussions or negotiations, the execution of any documents
(including this Agreement) or any of the terms of the Contemplated Transactions
or the related documents (including this Agreement). Seller and Buyer will
consult with each other concerning the means by which Seller's employees,
customers, suppliers and others having dealings with Seller will be informed of
the Contemplated Transactions, and Buyer will have the right to be present for
any such communication.
13.3 Notices
All notices, Consents, waivers and other communications required or
permitted by this Agreement shall be in writing and shall be deemed given to a
party when (a) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid); (b) sent by facsimile or
e-mail with confirmation of transmission by the transmitting equipment; or (c)
received or rejected by the addressee, if sent by certified mail, return receipt
requested, in each case to the following addresses, facsimile numbers or e-mail
addresses and marked to the attention of the person (by name or title)
designated below (or to such other address, facsimile number, e-mail address or
person as a party may designate by notice to the other parties):
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Seller (before the Closing): ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a mandatory copy to: Florida Water Services Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇-▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A.
777 South Flagler Drive, Suite ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Gildan
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
Seller (after the Closing): ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
VP/General Counsel
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
Buyer:
--------------------------------
Attention:
Fax:
E-mail:
with a mandatory copy to:
--------------------------------
Attention:
Fax:
E-mail:
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13.4 Jurisdiction; Service of Process
Any Proceeding arising out of or relating to this Agreement or any
Contemplated Transaction may be brought in the courts of the State of Florida,
County of Escambia, or, if it has or can acquire jurisdiction, in the United
States District Court for the Northern District of Florida, and each of the
parties irrevocably submits to the exclusive jurisdiction of each such court in
any such Proceeding, waives any objection it may now or hereafter have to venue
or to convenience of forum, agrees that all claims in respect of the Proceeding
shall be heard and determined only in any such court and agrees not to bring any
Proceeding arising out of or relating to this Agreement or any Contemplated
Transaction in any other court. The parties agree that either or both of them
may file a copy of this paragraph with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in the first sentence of this section may be served on
any party anywhere in the world.
13.5 Enforcement of Agreement
(a) Notwithstanding any other provision in this Agreement,
any dispute among the parties which arises from the Agreement shall be resolved
by binding arbitration conducted in accordance with this Section 13.5. (the
"Dispute Resolution Process") Either party may initiate the Dispute Resolution
Process by providing written notice to the other party.
(b) After transmittal and receipt of a written notice
specifying the area or areas of disagreement or dispute, the parties agree to
meet at reasonable times and places, as mutually agreed upon, to discuss the
issues.
(c) If discussions between the parties fail to resolve the
dispute within fifteen (15) business days of the receipt by each party of the
notice described in subsection (a) of this Section 13.5, a binding arbitration
may then be initiated by either party by written notification to the other party
of the existence of a dispute. Any and all issues related to the matter
addressed by the written notice provided in subsection (a) of Section 13.5 or
any response by the other party shall be raised and resolved in a single
proceeding.
(d) The arbitrators shall be appointed and act as follows:
(1) Each party shall appoint a person as arbitrator within ten (10) business
days of the date one of the parties has notified the other of the existence of a
dispute; (2) Each appointment shall be signified in writing to the counter party
and the arbitrators so appointed, within ten (10) days of their acceptance of
appointment, shall appoint a third arbitrator, who shall chair the panel. If the
arbitrators appointed by the parties are unable to agree upon a third
arbitrator, the same shall be appointed by the American Arbitration Association
from its qualified panel of arbitrators. Each party shall have the right to veto
up to two
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appointments proposed by the American Arbitration Association. If either party
fails to appoint an arbitrator within ten (10) business days from the date one
of the parties has notified the other of the existence of a dispute, then an
arbitrator shall be appointed by the American Arbitration Association from its
qualified panel of arbitrators as the appointment of the party failing to timely
appoint and the two so appointed shall appoint a third arbitrator to chair the
panel. The party on whose behalf an arbitrator is appointed shall have the right
to veto up to two of the arbitrators appointed by the American Arbitration
Association; (3) Nothing in this Section 6.04 shall preclude the parties from
mutually agreeing to a single arbitrator to resolve the dispute; (4) No
arbitrator shall have a business or other pecuniary relationship with either
party, except for payment of arbitrator's fees and expenses without the written
consent of both parties.
(e) Arbitrators shall be sworn to perform their duties with
impartiality and fidelity. In rendering any decision, the arbitrator shall
proceed to consider the Agreement, the dispute identified in the notice and any
response and the actions taken and the documentation thereof, conduct, and
relative position, knowledge, and the ability of the parties in relation to the
dispute.
(f) The arbitration hearing shall convene not earlier than
sixty (60) days and not later than ninety (90) days of the acceptance of
appointment of all of the arbitrators chosen by the parties unless the parties
mutually agree to an earlier date. The arbitrators shall render a decision
within ten (10) business days of the date on which the arbitration hearing
concludes, and such decisions shall be in writing and in duplicate, one
counterpart thereof to be delivered simultaneously to each of the parties. The
decision shall contain findings of fact and conclusions of law and shall be
final and binding upon the parties.
(g) The parties shall be entitled to discovery pursuant to
the Florida Rules of Civil Procedure. All discovery requests by a party shall be
enforced by the arbitrators. The arbitration hearing shall not proceed until all
outstanding discovery requests have been fulfilled.
(h) The fees, charges and expenses of the arbitrators, any
experts engaged by the arbitrators, the respective counsel engaged by the
parties, and any witnesses called by the parties shall be paid as follows: the
arbitrators shall order each party to pay their own fees, charges and expenses
and assess the fees, charges and expenses of the arbitrators equally between the
parties.
(i) The provisions of the Florida Arbitration Code, Chapter
682, Florida Statutes, and the Florida Evidence Code, Chapter 90, Florida
Statutes, except to the extent inconsistent with the provisions of this
Agreement, shall specifically be deemed to apply to any arbitration proceeding
conducted hereunder. Unless the venue is mutually agreed upon otherwise by the
parties, the venue for any arbitration commenced pursuant to this Section shall
be in Pensacola, Florida.
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13.6 Waiver; Remedies Cumulative
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither any failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or any of the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of that party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
13.7 Entire Agreement and Modification
This Agreement supersedes all prior agreements, whether written or
oral, between the parties with respect to its subject matter (including any
letter of intent and any confidentiality agreement between Buyer and Seller) and
constitutes (along with the Disclosure Letter, Exhibits and other documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented, or otherwise modified except by
a written agreement executed by the party to be charged with the amendment.
13.8 Assignments, Successors and no Third-Party Rights
No party may assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of the other
parties, except that Buyer may collaterally assign its rights hereunder to any
financial institution providing financing in connection with the Contemplated
Transactions. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy or claim under or with respect to
this Agreement or any provision of this Agreement, except such rights as shall
inure to a successor or permitted assignee pursuant to this Section 13.8.
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13.9 Severability
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
13.10 Construction
The headings of Articles and Sections in this Agreement are provided
for convenience only and will not affect its construction or interpretation. All
references to "Articles," and "Sections" refer to the corresponding Articles and
Sections of this Agreement.
13.11 Time of Essence
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
13.12 Governing Law
This Agreement will be governed by and construed under the laws of the
State of Florida without regard to conflicts-of-laws principles that would
require the application of any other law.
13.13 Execution of Agreement
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
The exchange of copies of this Agreement and of signature pages by facsimile
transmission shall constitute effective execution and delivery of this Agreement
as to the parties and may be used in lieu of the original Agreement for all
purposes. Signatures of the parties transmitted by facsimile shall be deemed to
be their original signatures for all purposes.
13.14 Due Diligence.
This Agreement is being executed without all of its schedules and
Exhibits being attached. As to the foregoing which are documents, the parties
hereto agree to negotiate in good faith to finalize the form thereof on or
before the Due Diligence Date (as hereinafter defined). As to the Schedules and
other exhibits, all non-attached schedules and exhibits are to be prepared by
the Seller. During the course of preparing such schedules and exhibits, the
Seller will give to the Buyer drafts thereof as developed and supply to Buyer
such information, and permit the Buyer to conduct such due diligence, in
connection therewith as Buyer shall reasonably request. In addition, Seller
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acknowledges that Buyer has not conducted the due diligence that Buyer desires
to conduct prior to consummating the transactions contemplated hereby.
Consequently, at such time as Seller completes the schedules and exhibits it is
required to complete to be attached hereto, it shall deliver to Buyer a complete
set thereof with a written notice stating that the schedules and exhibits so
delivered are the final schedules and exhibits hereto that it is required to
complete and deliver. The date of the foregoing, the "Exhibit Delivery Date". If
the Exhibit Delivery Date has not occurred on or prior to thirty days after the
date hereof or, if they are so delivered prior thereto but the Buyer in the
exercise of its reasonable discretion is not satisfied with the substance
thereof, the Buyer shall have the right to terminate this Agreement except that
the Seller shall immediately pay to the Buyer the Due Diligence Expenses. The
Buyer agrees that it will in good faith seek to accomplish its due diligence on
or before six (6) weeks after the Exhibit Delivery Date. When it has completed
its due diligence, it shall notify the Seller. If the Buyer is not satisfied in
its reasonable discretion with the results of its due diligence, then the Buyer
may terminate this Agreement except that the Seller shall immediately pay to the
Buyer the Due Diligence Expenses. If the Buyer has not completed its due
diligence within the aforesaid time, then the Seller may terminate this
Agreement or if the expenses of the Buyer in conducting its due diligence are
reasonably projected by Buyer at any time to exceed $150,000 and the Seller
refuses to approve the reasonable projected amount over $150,000 as Due
Diligence Expenses as defined herein and subject to reimbursement by the Seller,
then the Buyer may terminate this Agreement, and, in each case, the Seller shall
pay to the Buyer the Due Diligence Expense.
13.15 RADON GAS.
(a) RADON IS NATURALLY OCCURRING RADIOACTIVE GAS THAT, WHEN
IT HAS ACCUMULATED IN A BUILDING IN SUFFICIENT QUANTITIES, MAY PRESENT HEALTH
RISKS TO PERSONS WHO ARE EXPOSED TO IT OVER TIME. LEVELS OF RADON THAT EXCEED
FEDERAL AND STATE GUIDELINES HAVE BEEN FOUND IN BUILDINGS IN FLORIDA. ADDITIONAL
INFORMATION REGARDING RADON TESTING MAY BE OBTAINED FROM THE COUNTY PUBLIC
HEALTH UNIT.
13.16 Limited Liability.
Neither the State of Florida nor any political subdivision or
municipality thereof, nor the Buyer, shall be obligated (1) to exercise its ad
valorem taxing power or any other taxing power in any form on any real or
personal property to pay any liability arising out of, or in any connection
whatsoever with, this Agreement, or to pay the principal of the Acquistion
Bonds, the interest thereon or other costs incident thereto or (2) to pay the
same from any other funds, except from the Net Revenues realized by the Buyer
from its ownership or operation of the System, junior and subordinate to the
payment of any Bonds or other indebtedness payable from such source. It is
further agreed between the
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Buyer and the Seller that this Agreement and any obligations arising in
connection therewith, whether for payment of the Purchase Price, or for any
claim of liability, remedy for breach, or otherwise, shall not constitute a lien
on the System or any other property of the Authority, or any municipality, but
shall constitute a lien only on the Pledged Revenues, in the manner provided in
this Agreement.
Notwithstanding anything to the contrary contained herein or in any
other instrument or document executed by or on behalf of the Buyer in connection
herewith, no stipulation, covenant, agreement or obligation contained herein or
therein shall be deemed or construed to be a stipulation, covenant, agreement,
or obligation of any present or future member, officer, employee or agent of the
Buyer, or of any incorporator, member, director, trustee, officer, employee or
agent of any successor to the Buyer, in any such person's individual capacity,
and no such person, in his individual capacity, shall be liable personally for
any breach or non-observance of or for any failure to perform, fulfill or comply
with any such stipulations, covenants, agreements or obligations, nor shall any
recourse be had for the payment of the principal of, premium, if any, or
interest on any of the Bonds or for any claim based thereon or on any such
stipulation, covenant, agreement, or obligation, against any such person, in his
individual capacity, either directly or through the Buyer or any successor to
the Buyer, under any rule of law or equity, statute or constitution or by the
enforcement of any assessment or penalty or otherwise, and all such liability of
any such person, in his individual capacity, is hereby expressly waived and
released. All references to the Buyer in this paragraph shall be deemed to
include the Buyer, the City of Gulf Breeze, the City of ▇▇▇▇▇▇, their respective
Mayors, Council Members, officers, employees, and agents.
The Buyer shall not be obligated to pay any liability, claim or
obligation arising from or in connection with this Agreement or the transactions
contemplated thereby, or any bonds or the interest thereon, from any funds of
the Buyer derived from any source other than the Pledged Revenues, junior and
subordinate the payment of the bonds secured by such Pledged Revenues. The
Seller hereby agrees to indemnify and defend the Buyer and hold the Buyer
harmless against any and all claims, losses liabilities or damages in any way
growing out of or resulting from challenges to this Agreement or objections to
the Authority to complete the contemplated transactions to the prior to closing,
including, without limitation, all costs and expenses of the Buyer, including
reasonable attorney's fees, incurred in the performance of any activities of the
Buyer in connection with the foregoing. All references to the Buyer in this
paragraph shall be deemed to include the Buyer, the City of Gulf Breeze, the
City of ▇▇▇▇▇▇, their respective Mayors, Council Members, officers, employees,
and agents.
Nothing herein shall be deemed to authorize, create or impose upon the
City of Gulf Breeze or the City of ▇▇▇▇▇▇ any obligation, duty, liability or
responsibility for the taking of or refraining from any action, or for the
payment of any sums for any reason whatsoever. The Seller hereby acknowledges
that the City of Gulf Breeze and the City of
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▇▇▇▇▇▇ shall have no liability whatsoever on account of this Agreement or the
transactions contemplated hereby, including, without limitation, any claims or
liabilities arising on account of any breach, misrepresentation or other action
or failure to act on the part of the Buyer. The Seller hereby covenants and
agrees that it will never seek remedy or recourse against, or seek to impose any
liability upon, the City of Gulf Breeze or City of ▇▇▇▇▇▇, for any liability or
claim arising in connection with or relating to this Agreement or the
transactions contemplated thereby, whether against the Buyer, the Cities of Gulf
Breeze or ▇▇▇▇▇▇ directly, or otherwise, under any rule of law or equity,
statute or constitution or by the enforcement of any provision of this
Agreement, or by way of assessment or penalty or otherwise; and all such
liability of any such entities is hereby expressly waived and released.
If, prior to closing, the Seller shall determine that, because of its
indemnity obligations of clause (ii) of the preceding paragraph is no longer
economically feasible to pursue to the Closing or the transaction contemplated
hereby, Seller may elect to give written notice to the Buyer that it no longer
wishes to complete the Closing transaction. Upon receipt of such notice, Buyer
may elect to proceed with the Closing without such indemnity under said clause
(ii) (in which case the Seller shall be excused from any further indemnity
obligation under said clause (ii)), or to terminate its obligations hereunder
(in which case the Seller shall be liable for Liquidated Damages).
The provisions of this Section shall survive the termination of this
Agreement.
13.17 Obligations Subordinate.
All obligations of the Buyer hereunder or arising in connection
therewith (the "Utility Acquisition Liabilities" or "UA Liabilities") shall be
limited and special obligations of the Buyer, payable solely from the Net
Revenues, junior and subordinate to the outstanding Bonds of the Authority. The
UA Liabilities shall not be or constitute a general indebtedness, liability,
general or moral obligation, or a pledge of the faith, credit or taxing power of
the Buyer, the State of Florida, or any political subdivision or municipal
corporation thereof, within the meaning of any constitutional or statutory
provision or limitation. Neither the State of Florida nor any political
subdivision or municipal corporation thereof, nor the Buyer shall be obligated
(1) to levy ad valorem taxes on any property to pay the UA Liabilities or other
costs incident thereto or (2) to pay the same from any other funds of the Buyer,
except from the Net Revenues, junior and subordinate to the outstanding Bonds of
the Authority. It is further agreed between the Buyer and the Seller that the UA
Liabilities shall not constitute a lien upon the System or facilities, or any
part thereof, or on any other property of the Buyer, but shall constitute a lien
only on the Net Revenues, junior and subordinate to the outstanding Bonds of the
Authority.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Buyer: Florida Water Services Authority
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By: /s/ J. ▇▇▇▇▇ ▇▇▇▇▇
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Its: Chairman
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Seller: Florida Water Services Corporation
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By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Its: President
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