THIS
LIMITED LIABILITY INTEREST PURCHASE AGREEMENT (this “
Agreement ”)
is entered into as of this 5th day of May, 2008 by and among
Artesian Water Maryland, Inc., a Delaware corporation (the
“ Buyer ”),
Mountain Hill Water Company, LLC, a Maryland limited liability
company (the “ Company ”),
and Sunrise Holdings L.P., a Pennsylvania limited partnership
and the Company’s sole member (the “ Member ” and
together with the Company, collectively the “
Sellers
”). Artesian Resources Corporation, a
Delaware corporation and the sole stockholder of the Buyer
(“ Artesian ”),
joins in this Agreement for the limited purposes herein set
forth.
WHEREAS,
the Company is a private water utility company that provides
potable water and fire suppression service (the “
Business ”)
in the areas known as Principio Business Park (current
service) and Charlestown Crossing (future service) each in
Cecil County, Maryland as more fully described in the map (the
area in orange) attached to Schedule
1.1 (the “ Existing Service
Territory ”), and has the ability, upon approval
of the applicable governmental authorities and the purchase
and installation of the necessary infrastructure, to provide
water service to areas located outside of the Existing Service
Territory and in Cecil County, Maryland as more fully
described in the map (the area in red) attached to Schedule
1.1 (the “ Potential Expansion
Service Territory ”), which together with the
Existing Service Territory comprises a service territory
located in Cecil County, Maryland of approximately 8,000 acres
(the Existing Service Territory and the Potential Expansion
Service Territory collectively comprise the “
Service
Territory ”); and
WHEREAS,
the Company contracted with the Buyer to install the Water
Plant (as defined on Exhibit
A hereto); and
WHEREAS,
from the time that the Company first commenced operation of
the Business on October 1, 2007 , the Company has
contracted with Buyer to perform both the day-to-day field
operations of the Business (namely operation of the Water
Plant, transmission lines and systems), as well as to handle
certain administrative functions of the Business (namely
billing of customers collections of accounts receivable,
reporting to the PSC, and reporting to the applicable
governmental sewer authorities); and
WHEREAS,
the Buyer desires to purchase from the Member, and the Member
desires to sell, assign, transfer and convey to the Buyer, all
of the Company’s issued and outstanding LLC Interests
(as hereinafter defined) (the “Acquired
Interests”), free and clear of all Liens (as hereinafter
defined), but excluding the Member Lien (as hereinafter
defined), on the terms and conditions herein set
forth.
NOW,
THEREFORE, in consideration of the representations,
warranties, covenants and agreements of the parties
hereinafter set forth, as well as for other good and valuable
consideration, the receipt and adequacy is hereby
acknowledged, the Buyer, the Sellers and Artesian, intending
to be legally bound hereby, do hereby agree as
follows:
ARTICLE
I
DEFINITIONS
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Section 1.1
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Definitions .
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Except
as otherwise expressly provided in this Agreement, the
capitalized terms used in this Agreement shall have the
meanings specified in Exhibit
A hereto and
shall be equally applicable to both the singular and plural
forms.
ARTICLE
II
SALE AND DELIVERY OF ACQUIRED INTERESTS
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Section 2.1
|
Sale and
Delivery of Acquired Interests .
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Subject
to the terms and conditions of this Agreement, at the Closing,
the Member shall sell, assign, transfer, convey and deliver to
the Buyer, free and clear of all Liens (excluding the Member
Lien, as hereinafter defined), all of its right, title and
interest in and to the Acquired Interests as of the Effective
Date (as hereinafter defined).
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Section 2.2
|
Purchase Price; Payment Thereof; Adjustment Thereto
.
|
In consideration of the sale, assignment, transfer, conveyance and
delivery of the Acquired Interests by the Member to the Buyer and
in reliance on the representations, warranties, covenants and
agreements made by the Member and the Company in this Agreement, at
the Closing, the Buyer shall pay to the Member a sum equal to the following (the
“ Purchase
Price ”): (i) Five Million Nine
Hundred Fifty-Three Thousand Five Hundred Thirty-Six and 67/100
Dollars ($5,953,536.67), representing the Total Asset Value as of
12/31/07, less
(ii) an amount sufficient to pay the amounts set forth on
Schedule
2.2 , which shall include, without limitation all debt of
the Company and/or Transaction Expenses that have not been paid by
or on behalf of the Company at or prior to the Closing
(collectively “ Closing Debt ”),
plus
(or minus, as applicable) (iii) an amount equal to the sum
of the net change in the Total Asset Value from the Effective Date
through the Closing Date (including but not limited to accrued
interest on the aggregate Total Asset Value for the time period
commencing on the Effective Date and ending on the Closing Date,
and an administrative fee on any increase in the value of the
Property, Plant and Equipment for the time period commencing on the
Effective Date and ending on the Closing Date) . At the Closing, the
Purchase Price shall be paid by the Buyer to the Company as
follows:
(a)
an
amount equal to twenty percent (20%) of the Purchase Price (the
“ Down
Payment ”); and
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(b)
|
the
balance of the Purchase Price, if any, by a promissory note to be
paid in four (4) equal annual installments of principal, plus
interest accruing at a rate equal to the London Interbank Offering
Rate (“ LIBOR ”)
(determined as set forth in the Note, as such term is defined
below) plus 150 basis points, compounded annually using the average
outstanding and unpaid balance for the previous twelve (12) month
period, on the terms and conditions of the promissory note in
substantially the form attached hereto as Exhibit
B (the “ Note
”). Subject to the terms of this Agreement, the
parties hereto agree that the obligations of the Buyer under the
Note shall be secured by a first priority lien and security
interest perfected by executing the Security Agreement (as
hereinafter defined) and filing a Financing Statement on Form UCC-1
against the all of the assets of the Company (as defined on
Exhibit
A ) in favor of the Member (“Member
Lien”). In addition, Artesian shall guarantee the
obligations of the Buyer under the Note on the terms and conditions
set forth in the guaranty substantially in the form attached hereto
as Exhibit
C (the “ Guaranty
”).
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(c)
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The
Closing Debt amount shall be paid by the Buyer, at Buyer’s
sole expense, at the Closing directly to the creditors set forth on
Schedule
2.2 in accordance with the instructions set forth in the
applicable payoff or release letters in respect of such amounts, by
certified or cashier’s check or wire transfer of immediately
available funds to an account or accounts designated in writing by
the applicable creditor at Closing. Buyer agrees and
acknowledges that the full and complete satisfaction of the Closing
Debt by the Buyer is a prerequisite to the Member being in a
position to convey the Acquired Interests to the Buyer free and
clear of all Liens (excluding the Member Lien).
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ARTICLE
III
CLOSING
The closing of the transactions contemplated by this Agreement (the
“ Closing
”) shall take
place at the offices of DLA Piper US LLP, 6225 Smith Avenue,
Baltimore, Maryland 21209, commencing at 10:00 a.m. local time on a
date that is three (3) Business Days following the satisfaction or
waiver of the conditions to Closing set forth in
Articles VIII and IX
of this Agreement, or
such other date as the Buyer and the Company shall mutually agree
upon in writing, but in no event later than August 1,
2008. The date of the Closing is herein referred to as
the “ Closing
Date .” Notwithstanding the
Closing Date, the parties hereto agree that the transfer of the
Acquired Interests from the Member to the Buyer shall have an
effective transfer date as of 11:59 p.m. on December 31, 2007
(“Effective Date”)
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Section 3.2
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Closing
Deliveries .
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(a)
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At
the Closing, the Sellers shall deliver, or cause to be delivered,
to the Buyer each of the following:
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(i)
|
an
instrument of assignment, duly endorsed by the Member, transferring
the Acquired Interests to the Buyer as of the Effective
Date;
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(ii)
|
an
easement agreement in substantially the form of Exhibit
D attached hereto (the “ Easement Agreement
”), duly executed by the Sellers and their Affiliates party
thereto;
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(iii)
|
all
Required Consents (as defined below in Section 8.4 )
listed on Schedule
4.4 ;
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(iv)
|
the
certificates required by Sections 9.1
and 9.2
;
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(v)
|
a
certificate of an authorized officer or the managing member of the
Company certifying the truth and correctness of attached
copies of the articles of organization, operating agreement and
resolutions of the managing member (both as managing member and in
its capacity as the sole member of the Company) approving the
execution and delivery of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated
hereby, in substantially the form of Exhibit
E attached hereto;
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(vi)
|
a
certificate of an authorized officer of the general partner of the
Member
certifying the truth and correctness of attached copies of the
articles or certificate of formation or organization, operating
agreement and resolutions of the general partner of the Member
approving the execution and delivery of this Agreement and the
Transaction Documents and the consummation of the transactions
contemplated hereby, in substantially the form of Exhibit
F attached hereto;
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(vii)
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a
certificate, dated as of a date no earlier than three days prior to
the Closing Date, duly issued by the applicable Governmental
Authority in the State of Maryland, showing that the Company is in
good standing and authorized to do business in such
jurisdiction;
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(viii)
|
a
certificate, dated as of a date no earlier than three days prior to
the Closing Date, duly issued by the applicable Governmental
Authority in the Commonwealth of Pennsylvania, showing that the
Member is in good standing and authorized to do business in such
jurisdiction;
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(ix)
|
duly executed payoff letters or release letters from
the creditors set
forth
Schedule 2.2 and from any other lenders
of the Company, all in form and substance reasonably acceptable to
the Buyer (the “ Payoff Letters
”);
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(x)
|
duly executed UCC-3 termination statements, lien releases or such
other release and termination instruments (or copies thereof), as
the Buyer shall reasonably request, including but not limited to,
with respect to the Liens set forth on
Schedule 2.2 ,
in order to vest all right, title and interest in and to the
Acquired Interests free and clear of all Liens;
and
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(xi)
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such other documents
and instruments as may be reasonably necessary to effect the intent
of this Agreement and consummate the transactions contemplated
hereby.
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(b)
|
At
the Closing, the Buyer shall deliver, or cause to be delivered,
each of the following:
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(ii)
|
the
Note duly executed by the Buyer;
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(iii)
|
the
full payment of the Closing Debt;
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(iv)
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the
Easement Agreement duly executed by the Buyer;
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(v)
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the
certificates required by Sections 8.1
and 8.2
;
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(vi)
|
a
certificate signed by the Secretary or Assistant Secretary of the
Buyer certifying the truth and correctness of attached copies of
the certificate of incorporation and bylaws, and that the board of
directors of the Buyer has approved the execution, delivery of this
Agreement, the Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby;
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(vii)
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a
certificate, dated as of a date no earlier than three days prior to
the Closing Date, duly issued by the applicable Governmental
Authority in the State of Delaware, showing that the Buyer is in
good standing and authorized to do business in such
jurisdiction;
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(viii)
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the
“ Security
Agreement ” duly executed by Buyer in substantially in
a form attached hereto as Exhibit
G and UCC-1 financing statement duly executed by
the Buyer representing a first lien security interest in all of the
Company’s assets in favor of the Member.
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(c)
|
At
the Closing, Artesian shall deliver, or cause to be delivered, to
the Company each of the following:
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(i)
|
the
Guaranty, duly executed by Artesian; and
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(ii)
|
a
certificate signed by the Secretary or Assistant Secretary of
Artesian certifying the truth and correctness of attached copies of
the certificate of incorporation and bylaws, and that the board of
directors of Artesian has approved the execution, delivery of this
Agreement, the Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby
jointly and severally represent and warrant to the Buyer that the
following representations and warranties are, as of the date
hereof, and will be, as of the Closing Date, true and
correct:
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Section 4.1
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Organization and Good Standing .
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(a)
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The
Company is a limited liability company duly organized, validly
existing and in good standing under the Laws of the State of
Maryland, and is duly authorized and qualified to do business under
all applicable Laws, regulations, ordinances and orders of public
authorities with full corporate power and authority to carry on its
business in the places and in the manner as now conducted, to own
or hold under lease the properties and assets it now owns or holds
under lease, and to perform all of its obligations under the
Material Contracts. The Company is not qualified to do
business in any jurisdiction other than its state of
organization. The Company has not conducted business
under any name other than “Mountain Hill Water Company,
LLC” and “Principio Water Company, LLC” since its
date of formation.
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(b)
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The
Member is a limited partnership duly organized, validly existing
and in good standing under the Laws of the Commonwealth of
Pennsylvania.
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Section 4.2
|
Capitalization; Title to Limited Liability Company Interests
.
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(a)
|
Schedule 4.2 sets forth the authorized Limited Liability
Company Interests of the Company (the “ LLC Interests ”),
the name of each Person holding any such LLC Interests (including
any options, warrants or other rights to purchase any equity
securities of the Company or LLC Interests) and any securities
convertible into or exchangeable for LLC Interests and the amount
and type of such securities held by such Person as of the date of
this Agreement. Immediately after the Closing, all of
the issued and outstanding LLC Interests shall be held beneficially
and of record by the Buyer, free and clear of all Liens (excluding
the Member Lien and subject to the Buyer’s full and complete
payment and satisfaction of the Closing Debt). Except as
set forth on Schedule 4.2 , the
Company has no issued and outstanding LLC Interests or securities
convertible into or exchangeable for LLC Interests or any other
ownership interest or containing any profit participation features,
nor does the Company have outstanding any rights or options to
subscribe or to purchase its LLC Interests or other ownership
interest or any equity appreciation rights or phantom equity
plans. The Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or
retire any of its LLC Interests or other ownership interest or any
warrants, options or other rights to acquire its LLC
Interests. All of the outstanding LLC Interests have
been duly authorized and are validly issued, fully paid and
nonassessable and were not issued in violation of any statutory or
contractual or preemptive rights or similar
restrictions.
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(b)
|
The
Company does not own as of the date hereof and will not own as of
the Closing Date, of record or beneficially, or control, directly
or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation,
limited association or other business entity. The
Company is not directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity (including any
limited liability company).
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(c)
|
There
are no statutory or contractual or preemptive rights, rights of
first refusal or similar rights or restrictions with respect to the
sale of any LLC Interests hereunder. The Company has not
violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its LLC
Interests, and the offer and sale of the Acquired Interests
hereunder does not require any registration under any applicable
federal or state securities laws. There are no
agreements with respect to the voting or transfer of the LLC
Interests.
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(d)
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The
Company has no Indebtedness having the right to vote (or
convertible into or exchangeable for, securities having the right
to vote) on matters on which the holder(s) of the LLC Interests may
vote.
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(e)
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The
Member has good and marketable title to the Acquired Interests and,
at the Closing, will transfer good and marketable title to the
Acquired Interests, free and clear of all Liens (excluding the
Member Lien and subject to the Buyer’s full and complete
payment and satisfaction of the Closing Debt), to the
Buyer.
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Section 4.3
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Authority
and Validity .
|
The
execution and delivery by each Seller, the performance by each
Seller under, and the consummation by each Seller of the
transactions contemplated by, this Agreement and each of the
agreements, instruments and documents contemplated hereby (the
“ Transaction
Documents ”) to which such Seller is a party, has
been duly and validly authorized by all required action by or
on behalf of each Seller. This Agreement and each
of the Transaction Documents has been duly and validly
executed and delivered by each Seller party thereto, and
constitutes the valid and binding obligation of each Seller
party thereto, enforceable against such Seller in accordance
with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or similar Laws now or hereafter in effect relating to the
enforcement of creditors’ rights generally or by
principles governing the availability of equitable
remedies.
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Section 4.4
|
No Conflict; Required Consents .
|
Except
for, and subject to receipt of, the Required Consents (as
defined in Section
8.4 ), all of which are listed on Schedule 4.4
, neither the execution and delivery of this Agreement or any
of the Transaction Documents, nor the carrying out of any of
the transactions contemplated hereby, will (a) result in any
violation, termination or modification of, or be in conflict
with, the Company's articles of organization or operating
agreement, each as amended to date, (b) result in any breach
of or constitute a default (or with notice or lapse of time or
both would become a default) under, or give to others any
rights of termination, amendment, acceleration or
cancellation, or result in the creation of any lien upon any
of its properties or assets pursuant to any Permit or any
Contract to which the Company is a party or by
which it or any of the Acquired Interests are bound or
affected, or (c) result in any violation of, or be in conflict
with, any Law or Permit applicable to the Company or by which
the Acquired Interests are bound or affected.
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Section 4.5
|
Total Asset Value .
|
Attached
to Schedule
4.5 is a true, complete and correct list of the
aggregate value of all of the Company’s assets as of
December 31, 2007, (collectively, “ Total Asset Value
” ) .
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Section 4.6
|
Title to and Condition of Assets .
|
Schedule 4.5 , Schedule
4. 7 , and
Schedule
4.8 , sets forth all of the assets, properties and rights
(in each case whether real or personal or tangible or intangible)
of the Company as of the date of this Agreement and as of the
Closing Date. The assets, properties and rights set
forth on Schedule
4.5 , Schedule
4. 7 , and
Schedule
4.8
constitute all assets, properties and rights (in each case whether
real or personal or tangible or intangible) necessary for the
Company to conduct the Business after the Closing as it is
presently being conducted. Except as set forth on
Schedule
4.5 , no Affiliate of the Company owns or leases from or to
the Company any of the assets, properties and rights set forth on
Schedule
4.5 , Schedule
4.7 , and Schedule
4.8 . The Company has good and marketable title
to, or a valid leasehold interest in, or a valid license to use,
all of the assets, properties and rights (in each case whether real
or personal or tangible or intangible) set forth on Schedule
4.5 , Schedule
4. 7 , and
Schedule
4.8 used by the Company in the Business or located on any
property owned, leased or used by the Company, free and clear of
all Liens and defects of title. To the best of the
Sellers’ Knowledge, all of the tangible assets of the Company
(collectively , “Property, Plant and
Equipment ”) are in good condition and repair,
ordinary wear and tear excepted, and has been maintained and
repaired in a good and workmanlike manner in accordance with
industry standards.
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Section 4.7
|
Real Property .
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The
Company does not hold, and has never held, any real property
in fee simple. The Company does not lease any real
property (“ Leased Property
”) or have a right to access or use any other real
property (including by easement) (each, an “ Easement ”)
except as described on Schedule
4.7 . The Company has valid and enforceable
leasehold interest or easement in each Leased Property and
Easement, respectively, listed on Schedule
4.7 , free and clear of all Liens. None of
the Easements will terminate as a result of the execution and
delivery of this Agreement or any of the Transaction Documents
nor the carrying out of the transactions contemplated
hereby.
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(a)
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The
Company is not a party to any instruments, documents, contracts,
agreements, arrangements, commitments, bids, leases, licenses or
any other contract rights (whether written or oral) (collectively,
“ Contracts ”)
other than the Contracts set forth on Schedule
4.8 (the “ Material Contracts
”). True and complete copies, or, in the case of
oral Contracts, written summaries of all Material Contracts have
been delivered to the Buyer. All Material Contracts are
in full force and effect and constitute the valid, legal, binding
and enforceable obligation of the Company, and, to the
Sellers’ Knowledge, the counterparties thereto in accordance
with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws
now or hereafter in effect relating to the enforcement of
creditors’ rights generally or by principles governing the
availability of equitable remedies. No act
or omission has occurred which, through the passage of time or
the giving of notice, or both, would with respect to any
Material Contract set forth on Schedule
4.8: (a) constitute a material breach or default under any
such Material Contract or cause the acceleration of any obligations
of the Company thereunder, (b) result in the creation of any Lien
on any of the Acquired Interests, or (c) give rise to or
automatic termination thereof. Except as set forth on
Schedule
4.8) , the Company has not been notified that any party to
any Material Contract that it intends to cancel, terminate, not
renew or exercise an option under any Material Contract, whether in
connection with the transactions contemplated hereby or otherwise
and no such action has been threatened or
contemplated.
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There
are no outstanding Orders of any Governmental Authority
involving the Business or the Acquired
Interests. There is no Litigation and there are no
other actions, suits, or legal, administrative or arbitral
proceedings or investigations (collectively, “
Claims
”) (whether or not the defense thereof or Liabilities in
respect thereof are covered by insurance), pending or, to the
Sellers’s Knowledge, threatened against or involving the
Business or the Acquired Interests, and no material Claims
have been instituted or, to the Sellers’ Knowledge,
threatened against or involving the Business or the Acquired
Interests.
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Section 4.10
|
Environmental .
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(a)
|
To
the best of Sellers’ Knowledge, no real property currently or
formerly owned or leased or used by the Company or any of its
Affiliates (collectively, “ Real Property ”)
is or has been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation, Liability
Information System (“ CERCLIS ”) or any
similar state list, or is or has been the subject of any
“Superfund” evaluation or investigation, or any other
investigation or proceeding of any Governmental Authority or
unaffiliated third party (each, a “ Third Party ”) or
of the Sellers evaluating whether any remedial action is necessary
to respond to any release of any Hazardous Substance, pollutant or
contaminant on or in connection with such Real
Property.
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(b)
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To
the best of Sellers’ Knowledge, the Business of the Company
and its Affiliates are and at all times have been operated in
compliance with all applicable Laws concerning the protection of
the public health, public safety or the environment (“
Environmental
Laws ”). To the best of Sellers’
Knowledge, none of the Company’s assets or properties are
required to be upgraded or modified in order to comply with
applicable Environmental Laws. Neither the Company nor
any of its Affiliates has ever received any claims or notices, oral
or written, (i) (A) alleging that the Company or any of its
Affiliates is liable under any Environmental Law, or (B) ordering
the Company or any of its Affiliates to remedy or recommending that
the Company or any of its Affiliates remediate, any environmental
damage to any Real Property or modify or upgrade its assets to
comply with Environmental Laws, and (ii) to the Sellers’
Knowledge, no such claims or notices are threatened or pending and
there are no facts or circumstances that would reasonably be
expected to give rise to any such claim or notice.
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(c)
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Except
in compliance with applicable Environmental Laws, to the
Sellers’ Knowledge there has been no release or threatened
release of any Hazardous Substance, pollutant or contaminant to any
soil, groundwater, surface water, building component, wastewater,
air or other media: (i) on or from any Real Property during the
ownership, occupation or use of such Real Property by the Company
or any of its Affiliates, or at or from any other location where
the Company or any of its Affiliates arranged for the storage,
treatment, disposal or handling of any Hazardous Substance,
pollutant or contaminant, or (ii) by the Company or any of its
Affiliates on any other real property.
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(d)
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Except
as set forth on Schedule
4.10(d) , there are no and have not been any underground
storage tanks, above-ground storage tanks, underground piping
(except for water or sewer), asbestos-containing materials,
polychlorinated biphenyls or Hazardous Substances used, stored,
treated or disposed of at any Real Property.
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(e)
|
Schedule 4.10(f) lists all environmental audits, assessments
or reports and any other written information concerning the
Company’s actual or potential liability under any
Environmental Law (collectively, “ Environmental Reports
”) in the possession or control of the Sellers or any of
their Affiliates, including, without limitation, all Phase I, II
and III environmental assessment reports with respect to the Real
Property in the possession or control of the Sellers or any of
their Affiliates. A true and complete copy of each
Environmental Report listed on Schedule
4.10(f) has previously been delivered by the Company to the
Buyer.
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(a)
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The
Sellers have no unpaid liability for any Taxes in respect of any
taxable period ending on or before the Effective
Date. As used in this Agreement, the term “
Pre-Closing Tax
Period ” shall mean any taxable period ending on or
before the Effective Date.
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(b)
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Each
of the Sellers has filed or will cause to be timely filed all Tax
Returns required to have been filed by it prior to or with respect
to the Effective Date (subject to any timely extensions permitted
by Law) with the appropriate taxing authority with respect to Taxes
for any period ending on or before the Effective
Date. The Sellers have 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 the Sellers. Schedule
4.11 sets forth all of the jurisdictions in which Tax
Returns are filed by or on behalf of the Company and a description
of such Tax Returns filed in each such jurisdiction is listed
opposite the name of each jurisdiction listed on Schedule
4.11 .
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(c)
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(i)
No deficiency for any amount of Tax has been asserted or assessed
by a taxing authority against the Sellers that remains unpaid, (ii)
no notice of audit or possible assessment has been received from
any taxing authority by the Sellers, and (iii) the Sellers have not
agreed to any waiver or extension of the statute of limitations
applicable to the assessment or collection of any Tax imposed in
respect of a Pre-Closing Tax Period.
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(d)
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The Sellers have
withheld or otherwise collected all Taxes or other amounts it was
required to withhold or collect under any applicable federal, state
or local Law, including, without limitation, any amounts required
to be withheld or collected with respect to employee, state and
federal income tax withholding, social security, unemployment
compensation, sales or use taxes (excluding any sales or use taxes
applicable to the transfer of the Acquired Interests as
contemplated by this Agreement), workmen’s compensation or
other similar Taxes, and all such amounts have been timely remitted
to the proper authorities.
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(e)
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The Company has not
been a member of an affiliated group that files or filed
consolidated federal income Tax Returns. The Company is not a party
to any tax allocation, tax sharing or other Contract pursuant to
which it is obligated to pay the Taxes of another
Person.
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Section 4.12
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Compliance with Laws;
Permits .
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(a)
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The
ownership and operation of the Company and its assets, properties
and rights and the operation of the Business as it is currently
conducted and operated do not violate or infringe any Law in any
material respect. The Sellers have not received written
notice (or, to the Sellers’ Knowledge, oral notice) of any
violation by the Company of any Law applicable to the operation of
the Business as currently conducted or ownership and operation of
the company and its assets, properties and rights as currently
operated. The Company has timely paid all applicable
fees or other Taxes, including registration fees and maintenance
fees, required by any Governmental Authority to maintain the
Permits in good standing.
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(b)
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Schedule 4.12 lists all approvals, consents, licenses,
permits, waiver or other authorizations issued, granted, given or
otherwise made available by or under the authority of any
Governmental Authority (collectively, “ Permits ”) that
are used by the Company and its Affiliates in the ownership,
maintenance or operation of the assets, properties or rights of the
Company or the conduct of the Business, as presently
conducted. A true and complete copy of each Permit
listed on Schedule
4.12 has previously been delivered by the Company or the
Member to the Buyer. All such Permits are in full force
and effect, and the Company is not in default under any such
Permit. The Company and its Affiliates have taken all
necessary actions to maintain the effectiveness of the
Permits. No written notice (or, to the Sellers’
Knowledge, any oral notice) of default, suspension, revocation, or
cancellation of any Permit from any Governmental Authority has been
received by the Company or any of its Affiliates and, to the
Sellers’ Knowledge, there is no proposed or threatened
issuance of any such notice or basis for any such
action. The Permits listed in Schedule
4.12 are all of the material Permits necessary for the
Company to conduct the Business as currently
conducted.
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Section 4.13
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Employees and Employee Benefits .
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There
are no, and have never been, any employees of the Company.
There are no, and have never been any, employee benefit plans
(as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended) or other plans, Contracts or
policies established or maintained for the benefit of or
affecting any employees, consultants, independent contractors,
agents or other service providers for the Company
(collectively, “ Benefit Plans
”) sponsored, maintained or contributed to by the
Company or any ERISA Affiliate or to which the Company or any
ERISA Affiliate is or was at any time obligated to make
payments or contributions, or with respect to which the
Company or any ERISA Affiliate has or may have any
liability.
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Section 4.14
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Undisclosed Liabilities .
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The
Company has no liabilities or obligations of any type (whether
accrued, contingent, unliquidated or otherwise and regardless
of when asserted) arising out of or which could reasonably be
expected to arise out of any acts or omissions relating to the
Company, its predecessors or the conduct of the Business at or
prior to the date hereof, or at or prior to the Closing Date,
other than liabilities set forth in the Financial Statements
or, as of the Closing Date, as will be set forth on
Schedule
4.14 . The Company has no Indebtedness as of
the date of this Agreement other than the Indebtedness
described on Schedule
4.14 and will have no Indebtedness as of the Closing
Date other than as set forth on Schedule
2.2 .
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Section 4.15
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Service
Territory
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All
of the Company’s approvals from Cecil County, Maryland
and the PSC to operate a private water company are attached as
Schedule
4.15. To the best of the Sellers’ Knowledge, the
Company has: (a) valid and enforceable rights to use and
access the Existing Service Territory and to use, access,
operate and otherwise conduct its Business and own and operate
its assets, properties and other rights in the Existing
Service Territory, including the right to access and maintain
and the assets, properties and rights of the Company located
within the Existing Service Territory, and (b) to the best of
Sellers’ Knowledge, the Company’s Business and the
assets, properties and rights of the Company within the
Existing Service Territory conform: (i) to all applicable
Laws, including material zoning requirements, without reliance
upon a variance issued by a Governmental Authority or a
classification of the parcel in question as a nonconforming
use, and (ii) to all restrictive covenants, if any, or other
liens affecting all or part of the Existing Service
Territory. To the best of Sellers’ Knowledge,
upon receipt of the applicable approvals and authorizations
from Governmental Authorities, the Buyer will have valid and
enforceable rights to use and access the Potential Expansion
Service Territory and to use, access, operate and otherwise
conduct the Business and own and operate the Company and the
assets, properties and rights of the Company within the
Potential Expansion Service Territory. There is no
pending or, to the Sellers’ Knowledge, threatened,
Litigation by any Governmental Authority involving the
Company’s ability to provide services or otherwise
conduct its operations within the Service Territory, including
any Claims by any Governmental Authority to annex all or any
portion of the Company’s Business, assets or properties
within the Existing Service Territory.
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Section 4.16
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Absence of Material Adverse Change .
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Since
January 1, 2008 there has been no Material Adverse Change or,
to the Sellers’ Knowledge, any event or circumstance, or
liability or obligation of any nature (whether accrued,
contingent, absolute, determined, determinable or otherwise),
that, individually or in the aggregate, would reasonably be
expected to result in a Material Adverse Change.
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Section 4.17
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Transactions with Related Parties .
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Except
as set forth on Schedule
4.17 , there is no Contract between the Company and (a)
any current or former officer, member, general or limited
partner, employee, independent contractor, agent of the
Sellers (b) any parent, spouse, child, brother, sister or
other family relation (by blood or marriage) of any such
officer, member, general or limited partner, employee,
independent contractor, agent of the Sellers; (c) any
corporation, partnership or other entity of which any such
officer, member, general or limited partner, employee,
independent contractor, agent of the Sellers or any such
family relation is an officer, director, manager, partner,
trustee or greater than 10% equity owner or beneficiary; or
(d) any Affiliate of the Sellers. Each of the
transactions set forth on Schedule
4.17 is on terms no less favorable to the Company than
could reasonably be obtained by the Company from an unrelated
third party in an arm’s length negotiation.
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Section 4.18
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Certain Payments .
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The
Company has not, nor has and officer, manager, member, general
or limited partner, employee or agent of the Sellers, directly
or indirectly on behalf of the Company, (a) made any
payment in violation of any federal, state, local, municipal,
foreign or other Law to any person or entity, private or
public, regardless of form, whether in money, property, or
services, or (b) established or maintained any fund or
asset that has not been recorded in the Records.
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Section 4.19
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Customer and Supplier Relationships .
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Schedule 4.19 lists all the customers of the Company as of
the date hereof (the “ Customers ”) and
all of the suppliers of the Company as of the date hereof (the
“ Suppliers
”). Except as set forth on Schedule
4.19 , the Company has not received any written notice from
any Customer regarding its intent to, or its attempt or threat to,
cancel its Contract or its other relationship with the Company or
to substantially reduce its purchases from the Company, whether as
a result of the transactions contemplated by this Agreement or
otherwise. To the Sellers’ Knowledge, the Company
is not engaged in any disputes with any Customer the outcome of
which could result in a Material Adverse Change.
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Section 4.20
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Officers
and Directors; Bank Accounts .
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Schedule 4.20 lists all of the officers and managers of the
Company and all bank accounts of the Company (designating each
authorized signatory and the level of each signatory’s
authorization).
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Section 4.21
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No
Brokers .
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No
Seller nor any Person acting on behalf of any Seller or any
Representative of the Sellers has agreed to pay a commission,
finder’s or investment banking fee, or similar payment
in connection with this Agreement or any matter related hereto
to any Person, nor has any such Person taken any action on
which a claim for any such payment could be based, other than
payments for which the Buyer will have no liability or
obligation.
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Section 4.22
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Disclosure
.
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All agreements,
schedules, exhibits, certificates or reports furnished or to be
furnished to the Buyer by or on behalf of the Sellers in connection
with this Agreement or the transactions contemplated hereby are
true, complete and accurate in all material
respects. None of the representations and warranties set
forth in this Agreement (as modified by the disclosure schedules
thereto), the schedules and certificates furnished by the Sellers
to the Buyer pursuant hereto, taken as a whole, contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements contained herein or therein not
misleading.
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Section 4.23
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No Other
Representations and Warranties .
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Except
for the representations and warranties contained in this
Article
IV , the Sellers make no other representations or
warranty with respect to the Company, the Business or the
Acquired Interests.
ARTICLE
V
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
ARTESIAN
The Buyer and
Artesian, jointly and severally, hereby represent and warrant to
the Sellers that the following representations and warranties are,
as of the date hereof, and will be, as of the Closing Date, true
and correct:
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Section 5.1
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Organization and Good Standing .
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The Buyer and
Artesian are each a corporation duly organized, validly existing
and in good standing under the Laws of the State of
Delaware. The Buyer and Artesian each has full corporate
power and authority to own its properties and carry on its business
as it is now being conducted.
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Section 5.2
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Authority and Validity .
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The
execution and delivery by the Buyer and Artesian, the
performance by the Buyer and Artesian under, and the
consummation by the Buyer and Artesian of the transactions
contemplated by, this Agreement and the Transaction Documents
to which the Buyer and/or Artesian is a party, have been duly
and validly authorized by all required corporate action by or
on behalf of the Buyer and/or Artesian. This
Agreement and the Transaction Documents to which the Buyer
and/or Artesian are a party have been, duly and validly
executed and delivered by the Buyer and/or Artesian and
constitute valid and binding obligations of the Buyer and/or
Artesian, enforceable against the Buyer and/or Artesian in
accordance with their respective terms, except as the same may
be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws now or hereafter in
effect relating to the enforcement of creditors’ rights
generally or by principles governing the availability of
equitable remedies.
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Section 5.3
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No Violation .
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There
is no legal action, proceeding or investigation pending or, to
the knowledge of the Buyer and/or Artesian, threatened against
the Buyer and/or Artesian, nor is there any Judgment
outstanding against the Buyer and/or Artesian or to or by
which the Buyer and/or Artesian is subject or bound that
materially adversely affects the ability of the Buyer to
consummate any of the transactions contemplated
hereby.
Except as set forth on
Schedule 5.4 ,
no consent, approval, permit, authorization of, declaration to or
filing with any Governmental Authority or any other Person on the
part of the Buyer and/or Artesian is required in connection with
the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
Neither the Buyer and/or Artesian nor any Person acting on behalf
of the Buyer and/or Artesian has agreed to pay a commission,
finder’s fee, investment banking fee or similar payment in
connection with this Agreement or any matter related hereto nor has
the Buyer and/or Artesian taken any action on which a claim
for any such payment could be based.
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Section 5.6
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Environmental .
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(a)
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To
the best of Buyer’s Knowledge, the Plant, Property and
Equipment are being, and at all times during the Buyer’s
operation have been, operated in compliance with all applicable
Environmental Laws. To the best of Buyer’s
Knowledge, none of the Plant, Property and Equipment is required to
be upgraded or modified in order to comply with existing applicable
Environmental Laws. Neither the Buyer nor Artesian has
ever received any claims or notices, oral or written, (i) (A)
alleging that the Buyer or any of its Affiliates is liable under
any Environmental Law with respect to the operation of the
Business, or (B) ordering the Buyer or any of its Affiliates to
remedy or recommending that the Buyer or any of its Affiliates
remediate, any environmental damage to any of the Plant, Property
and Equipment or modify or upgrade the Plant, Property and
Equipment to comply with Environmental Laws, and (ii) to the
Buyer’s Knowledge, no such claims or notices are threatened
or pending and there are no facts or circumstances that
would
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