Asset Purchase Agreement, dated October 7, 2008 by and among Artesian Water Maryland, Inc., a Delaware corporation, and Cecil County, Maryland, a body corporate and politic under the laws of the State of Maryland, as represented by the Board of County Commissioners of Cecil County

(a)  

Plant and Equipment.  All of the plant and equipment and other tangible personal property, whether owned, leased or otherwise possessed by the County and located at any Facility or otherwise used in the operation of any Facility (the “Plant and Equipment”), including, without limitation, the plant, equipment and other tangible personal property specified on Schedule 2.1(a) and all commercial wells, water treatment facilities, pumping stations, storage tanks, transmission mains (or spine lines) and distribution mains.

(b)  

Real Property.  All of the County’s right, title and interest in and to the real property related to the use and operation of each of the Facilities, including without limitation those real properties more fully described on Schedule 2.1(b) (the “Owned Real Property”).

(c)  

Leased Property and Easements.  All of the County’s rights to access or use any real property or fixtures (including by lease, license or easement) directly or indirectly used in the operation of any Facility or its Water Transmission and Distribution System (as defined in Section 2.1(e)), including, without limitation, those leases and easements identified on Schedule 2.1(c) (collectively, the “Easements”).

(d)  

Assumed Contracts and Certain Other Rights of the County.  All right, title and interest of the County following the Closing in, to and under all instruments, documents, contracts, agreements, arrangements, commitments, bids, leases, licenses and any other contract rights (whether written or oral) (collectively, “Contracts”) of the County existing on the Closing Date and used in connection with the operation of any Facility or its Water Transmission and Distribution System and specified on Schedule 2.1(d) (the “Assumed Contracts”).

(e)  

Water Transmission and Distribution Systems.  As to each Facility, all of the County’s right, title and interest in and to the water transmission and distribution system owned, leased or otherwise possessed by the County or used in the operation of such Facility, as more fully described on Schedule 2.1(e) (each, a “Water Transmission and Distribution System” and collectively, the “Water Transmission and Distribution Systems”).

(f)  

Permits.  All approvals, consents, licenses, permits, waivers or other authorizations issued, granted, given, applied for at the time of Closing or otherwise made available by or under the authority of any Governmental Authority (other than the County) (collectively, “Permits”) for the ownership or operation of any Facility and its Water Transmission and Distribution System, including, without limitation, those Permits specified on Schedule 2.1(f) to the extent such Permits are assignable.

(g)  

Customers and Suppliers.  All rights of the County to serve the customers now or hereafter serviced by the County within the Service Area (collectively, the “Customers”); and all rights of the County to be served by or otherwise interact with vendors and suppliers of the County with respect to the conduct of the operations of one or more of the Facilities or its Water Transmission and Distribution System (collectively, the “Suppliers”), which Suppliers as of the date of this Agreement are identified on the attached Schedule 2.1(g).

(a)  

Assumed Liabilities.  At the Closing, the Buyer will assume Liability for and agree to pay, perform and discharge, in a timely manner and in accordance with the terms thereof, all of the following (collectively, the “Assumed Liabilities”):

(i)  

all obligations and responsibilities to provide water transmission and distribution services to the Service Area arising from and after the Closing;

(ii)  

all accounts payable and trade payables first accruing from and after the Closing;

(iii)  

the Assumed Contracts with respect to all periods from and after Closing (but shall not assume any Liability arising from the County’s performance or non-performance under any Assumed Contract at any time prior to the Closing, whether asserted before or after such date);

(iv)  

all Liabilities with respect to any Taxes first accruing immediately after the Closing and which were incurred in connection with the Buyer’s ownership or operation of the Purchased Assets;

(v)  

all Liabilities arising out of the ownership and/or operation of the Purchased Assets subsequent to the Closing Date;

(vi)  

all sales and use, transfer-related taxes, stamp, real property recordation fees or taxes and all other fees and/or costs associated with the transfer of title of the Purchased Assets from the County to the Buyer; and

(vii)  

all Liabilities or demands (contingent or otherwise) arising out of any Environmental Laws (as defined in Section 4.8(b) hereof) relating to contamination events as a result of the ownership and/or operation of the Purchased Assets occurring from and after the Closing Date.

(b)  

Excluded Liabilities.  Except for the Assumed Liabilities, the Buyer shall not assume, and shall not be deemed to have assumed by anything contained in this Agreement or otherwise, any Liability of the County whatsoever (the “Excluded Liabilities”).  Without limiting the generality of the foregoing, the Buyer shall not assume, and shall not be deemed by anything contained in this Agreement or otherwise to have assumed any of the following Excluded Liabilities:

(i)  

all Liabilities and obligations of the County under this Agreement;

(ii)  

all Liabilities arising out of the operation and ownership of the Purchased Assets prior to the Closing;

(iii)  

all Liabilities or demands for any Taxes in respect of the Purchased Assets that are due and payable for periods at or prior to the Closing;

(iv)  

all Liabilities or demands arising out of any Liability or demand (whether or not asserted) or threatened or pending Litigation relating to the Purchased Assets for any period ending at or prior to the Closing;

(v)  

all Liabilities or demands arising out of any work or Contract that were to be performed by the County at or prior to the Closing, including, without limitation, any warranty claims relating thereto;

(vi)  

all Liabilities or demands for fees, costs or expenses incurred by the County in connection with the preparation and negotiation of this Agreement and the consummation of the transactions contemplated hereby (collectively, “Transaction Expenses”), including without limitation, attorneys’, accountants’ and consultants’ fees, finder’s fees, costs and expenses, regardless of when incurred;

(vii)  

all Liabilities or demands (contingent or otherwise) arising out of any Environmental Laws relating to contamination events with respect to the Purchased Assets occurring at any time before the Closing Date; and

(viii)  

all other Liens, Liabilities or demands of the County arising out of or relating to the ownership, use or operation of any Facility or its Water Transmission and Distribution System that are not Assumed Liabilities.

(c)  

Prorations.  The parties will make customary prorations in respect of any personal or real property Taxes, rent and power and other utility charges as of the Closing Date.

(d)  

Allocation of Purchase Price.  The Buyer and the County agree to allocate the Purchase Price (and all other capitalizable costs) among the Purchased Assets for all purposes (including financial, accounting and Tax purposes) in accordance with an allocation schedule to be agreed upon by the Buyer and the County prior to Closing.  The Buyer and the County shall file all Tax Returns, reports and other documents, including an asset acquisition statement on Form 8594, required by any competent taxing authority in a timely manner consistent with the allocation set forth on such agreed schedule.

Closing.

Closing Deliveries.

(a)  

At the Closing, the County shall deliver, or cause to be delivered, to the Buyer each of the following:

(i)  

the Purchased Assets;

(ii)  

a General Assignment and Bill of Sale in substantially the form of Exhibit B attached hereto (the “Bill of Sale”), duly executed by the County;

(iii)  

a Deed for the Owned Real Property in substantially the form of Exhibit C attached hereto (the “Deed”)

(iv)  

an Assignment and Assumption Agreement in substantially the form of Exhibit D attached hereto (the “Assignment and Assumption Agreement”), duly executed by the County;

(v)  

a confirmatory amendment to the Franchise Agreement acknowledging the Closing and the transfer of the Purchased Assets, and the resultant extension of the Franchise and the Franchise Area to include the Service Area, all as contemplated in the Franchise Agreement and the Letter of Intent;

(vi)  

all original certificates of title, manufacturer’s statements of origin, bills of sale or other similar title documents for the Plant and Equipment that are in the possession of the County, duly endorsed for transfer, providedthat if the County shall be unable to deliver to the Buyer any original certificate of title, manufacturer’s statement of origin, bill of sale or other similar title document in respect of any Plant and Equipment included in the Purchased Assets, the County will deliver a bill of sale or similar title document to the Buyer, in form and substance satisfactory to the Buyer in its sole discretion, with respect to each such item of Plant and Equipment or cooperate with the Buyer’s reasonable requests to obtain any replacement certificate of title or similar title document;

(vii)  

all Permits listed on Schedule 2.1(f), to the extent transferable;

(viii)  

all Required Consents (as defined below in Section 8.4), to be obtained or made by the County;

(ix)  

a correct and complete list of the Customers of the County as of the Closing Date;

(x)  

the certificates required by Sections 9.1 and 9.2;

(xi)  

a certificate evidencing the approval by the Commissioners of the County of the execution and delivery of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby;

(xii)  

such other documents and instruments as may be reasonably necessary to effect the intent of this Agreement and consummate the transactions contemplated hereby.

(b)  

At the Closing, the Buyer shall deliver, or cause to be delivered, each of the following:

(i)  

the Bill of Sale duly executed by the Buyer;

(ii)  

if the Buyer is to pay any amounts pursuant to Section 2.4(b) of this Agreement, the NAV Note, duly executed by the Buyer;

(iii)  

the Assignment and Assumption Agreement duly executed by the Buyer;

(iv)  

the certificates required by Sections 8.1 and 8.2;

(v)  

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; and

(vi)  

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.

Authority and Validity.

No Conflict; Required Consents.

Net Asset Value.

Title to and Condition of Purchased Assets.

(a)  

To the County's Knowledge the Purchased Assets constitute all assets, properties and rights (in each case whether real or personal or tangible or intangible) necessary for the County to conduct the operations of the Facilities or the Water Transmission and Distribution Systems after the Closing as they are each presently being conducted.

(b)  

To the County's Knowledge, the County has good, marketable, valid and legal title to, or a valid leasehold interest in, or a valid license to use, all of the Purchased Assets (in each case whether real or personal or tangible or intangible) used by the County in the operations of the Facilities or the Water Transmission and Distribution Systems or located on any property owned, leased or used by the County, free and clear of all Liens and defects of title.

(c)  

All of the Plant and Equipment are in good condition and repair, ordinary wear and tear excepted, and, to the best of the County’s Knowledge, have been maintained and repaired in a good and workmanlike manner in accordance with industry standards.

Section 4.5  

Real Property.

To the County's Knowledge, (i)  the County does not own or otherwise hold in fee simple any real property used and useful in the conduct of the operations of any Facility or its Water Transmission and Distribution System other than the Owned Real Property; and (ii) Except as described on Schedule 4.5(a), the County owns in its sole capacity good, marketable, valid and legal fee simple title to the Owned Real Property, subject to no Liens other than (A) real property taxes that are not due and payable as of the Closing Date, or (B) use and occupancy restrictions of public record that are generally applicable to properties in the immediate neighborhood or the subdivision in which such Owned Real Property is located.

To the County's Knowledge, (i) the County does not lease any real property  or have a right to access or use any other real property (including by license or easement) used and useful in the conduct of the operations of any Facility or its Water Transmission and Distribution System, except as described on Schedule 2.1(c) (“Leased Property”); (ii) the County has a valid and enforceable leasehold interest or easement in each Leased Property and Easement, respectively, listed on Schedule 2.1(c), free and clear of all Liens; and (iii) none of the lease agreements for the Leased Property or Easements will terminate as a result of the execution and delivery of this Agreement or any of the Transaction Documents nor the consummation of the transactions contemplated hereby.

To the County's Knowledge, the Owned Real Property, the Leased Property and Easements comprise all of the real property interests necessary for the Buyer to operate the Facilities and the Water Transmission and Distribution Systems after the Closing as they are each presently being conducted by the County and they will each be conducted by the County on the Closing Date.

Contracts.

Environmental.

(a)  

The County has no Knowledge that any of the Owned Real Property or real property subject to any of the Easements (all, collectively, the “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 County 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.

(b)  

To the Knowledge of the County, the County has received no notice, written or otherwise, which remains outstanding or unresolved, to the effect that the Facilities and the Water Transmission and Distribution Systems are not being operated in compliance in all material respects with all Applicable Laws concerning the protection of the public health, public safety or the environment (“Environmental Laws”).  To the Knowledge of the County, the County has received no notice, written or otherwise, which remains outstanding or unresolved, (i) (A) alleging that the County or any of its agents is liable under any Environmental Law, or (B) ordering the County or any of its agents to remedy or recommending that the County or any of its agents remediate, any environmental damage to any Real Property or modify or upgrade its assets to comply with Environmental Laws, and (ii) to the County's Knowledge, no such claims or notices are threatened or pending.

(c)  

The County has no Knowledge of any violation of Environmental Laws, which remains unremedied or unresolved, respecting the release or threatened release of any Hazardous Substance, pollutant or contaminant to any soil, groundwater, surface water, building component, wastewater, air or other media on or from any Real Property during the ownership, occupation or use of such Real Property by the County or any of its agents.

(d)  

Except as set forth on Schedule 4.8(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.

(e)  

Schedule 4.8(e) lists all environmental audits, assessments or reports and any other written information concerning the County’s actual or potential liability under any Environmental Law (collectively, “Environmental Reports”) in the possession or control of the County or any of its agents, 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 County or any of its agents.  A true and complete copy of each Environmental Report listed on Schedule 4.8(e) has previously been delivered by the County to the Buyer.

(a)  

The County has no unpaid liability for any Taxes required to have been paid with respect to any taxable periods ending on or prior to the Closing Date.

(b)  

The County has no liability for any rebates or penalties in lieu of rebates pursuant to Section 148 of the Code.

Compliance with Applicable Laws; Permits.

(a)  

To the County's Knowledge, the County has received no notice, written or otherwise, which remains unremedied or unresolved, respecting any violation by the County or its agents of any Applicable Law applicable to the operations of one or more of the Facilities or the Water Transmission and Distribution Systems as they are currently conducted or the other Purchased Assets as currently operated. The County has timely paid all applicable fees, including registration fees and maintenance fees, if any, required by any Governmental Authority to maintain the Permits in good standing.

(b)  

Schedule 2.1(f) lists all Permits that are used by the County in the ownership, maintenance or operation of the Purchased Assets, as presently owned, maintained or operated.  A true and complete copy of each Permit listed on Schedule 2.1(e) has previously been delivered by the County to the Buyer.  To the County's Knowledge, all such Permits are in full force and effect, and the County has received no notice, written or otherwise, of default, suspension, revocation, or cancellation of any Permit from any Governmental Authority. To the County's Knowledge, the Permits listed in Schedule 2.1(f) are all of the Permits necessary for the County to conduct the operations of the Facilities, the Water Transmission and Distribution Systems and the other Purchased Assets as currently conducted.

Employees and Employee Benefits.

(a)  

The County has heretofore delivered to the Buyer (and will re-deliver, as of the Closing Date) a true and complete list of all the employees of the County whose primary responsibilities are in respect of the operations of one or more of the Facilities, the Water Transmission and Distribution Systems or the other Purchased Assets, their current respective positions or job classifications and their current respective wage scales or salaries, as the case may be, and vacation benefits (including all accrued vacation time). To the County's Knowledge, the County is, in respect of the operations of the Facilities, the Water Transmission and Distribution Systems or the other Purchased Assets, in compliance in all material respects with all Applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and is not engaged in any unfair labor practice.

(b)  

To the County’s Knowledge, the consummation of the transactions contemplated by this Agreement will not entitle any employee to severance pay, unemployment compensation or any similar payment, or accelerate the time of payment or vesting, or increase the amount of any compensation due to, or in respect of, any employee.

(c)  

As of the Closing Date and for a period of at least three (3) years prior thereto, the County has not been a party to any labor and collective bargaining agreements with any employees whose responsibilities are in respect to the operations of the Facilities, the Water Transmission and Distribution Systems or the other Purchased Assets.

Section 4.12  

Undisclosed Liabilities.

Service Area and Customers.

(a)  

The County has valid and enforceable rights to use and access the Service Area and to use, access, operate and otherwise conduct the operation of the Purchased Assets located within the Service Area, including the right to access and maintain the Purchased Assets located within the Service Areas. To the County's Knowledge, there is no pending Litigation by any Person involving the County’s ability to provide services or otherwise conduct the operations of the Facilities and the Water Transmission and Distribution Systems or to access its properties or assets within, on or under the Service Area, including, without limitation, any Litigation by the County to annex or condemn all or any portion of the assets or properties of another Person within the Service Area.

(b)  

As of the Closing Date, the Franchise Area will be extended to include the Service Area and the Buyer's Franchise and rights and obligations under the Franchise Agreement will extend to include its right to operate the Facilities and the Water Transmission and Distribution System for their intended purposes, all subject to the terms, covenants and conditions set forth in the Franchise Agreement.

Absence of Material Adverse Change.

Customer and Supplier Relationships.

No Brokers.

Disclosure.

No Other Representations and Warranties.

Organization and Good Standing.

Authority and Validity.

No Violation.

No Brokers.

Disclosure.

No Other Representations and Warranties.

Conduct of Business Pending Closing.

(a)  

enter into any Contract other than with Customers or Suppliers in the ordinary course of business substantially as conducted heretofore;

(b)  

cause any Material Adverse Change or perform or not perform any action the performance or non-performance of which would reasonably be expected to result in a Material Adverse Change;

(c)  

make any loan or advance to any Customer, Supplier or employee whose responsibilities involve the operation of the Purchased Assets, other than for services provided to Customers on credit or advances to employees under a Benefit Plan, in each case, in the ordinary course of business consistent with past practice;

(d)  

(i) incur any Indebtedness in respect of the Purchased Assets, except expenses and current liabilities incurred in connection with or for services rendered or goods supplied in the ordinary course of business or obligations or liabilities incurred by virtue of the execution of this Agreement, or (ii) create any Lien on any Purchased Assets;

(e)  

cancel, waive or release any debt, right or claim in respect of the Purchased Assets or the ownership or operation thereof, except, in each case, in the ordinary course of business consistent with past practice;

(f)  

change the accounting principles, methods or practices (including, without limitation, any change in depreciation or amortization policies or rates) utilized by the County involving or affecting the Purchased Assets or the ownership or operation thereof;

(g)  

make any capital expenditure or commitment therefore for which the Buyer will be liable at or following the Closing or that will increase the Net Asset Value of any of the Purchased Assets;

(h)  

make, revoke or change any Tax election, or settle any matter relating to Taxes involving or affecting the Purchased Assets or the ownership or operation thereof;

(i)  

increase the wages or salaries, as the case may be, or vacation benefits provided to any employee whose primary responsibilities are in respect of the operations of one or more of the Facilities or the Water Transmission and Distribution Systems, other than such increases in the ordinary course of business substantially as conducted heretofore; or

(j)  

take any action that if taken after the date of this Agreement would constitute a variance from or breach of the representations and warranties set forth in Article IV of this Agreement.

Access and Cooperation; Results of Due Diligence Investigation.

(a)  

The County shall provide the Buyer and its Representatives with all information that the Buyer may reasonably request in connection with this Agreement and the transactions contemplated hereby in auditable form.  Upon reasonable prior notice, the County shall provide the Buyer and its Representatives with access during regular business hours to the Purchased Assets, Books and Records (as defined in the Franchise Agreement) relating to the Purchased Assets and Customers and Suppliers of the County.  The County and its Representatives will also cooperate with the Buyer and its Representatives, including the Buyer’s auditors and counsel, in the Buyer’s due diligence investigation of the Purchased Assets (including, without limitation, a title review or in obtaining title opinions satisfactory to the Buyer as to the County’s rights, title or interest in and to the Owned Real Property, the Easements, the Leased Property and the Plant and Equipment) and any Liabilities in respect thereof or Indebtedness of the County involving or affecting the Purchased Assets.  In addition, the County and its Representatives will cooperate with the Buyer and its Representatives in the preparation of any documents or other materials required in connection with the transactions contemplated by this Agreement.  In addition, the County and the Buyer shall use their respective reasonable efforts to satisfy all conditions to Closing and all other matters relating to the consummation of the transactions contemplated by this Agreement and the Transaction Documents.  The County and the Buyer shall cooperate with each other in connection with any filings with any other Governmental Authority, including, without limitation, all filings with the PSC, and shall use their reasonable efforts to furnish to each other all information required for any such filing to be made with any Governmental Authority in connection with the transactions contemplated by this Agreement.

(b)  

If in the course of the Buyer’s due diligence investigation, the Buyer discovers or identifies any Purchased Assets that are not in good condition or repair (ordinary wear and tear excepted), or defects of title, defects or impediments in the right to use or Liens or Liabilities other than the Liens or Liabilities disclosed by the County in the Disclosure Schedules attached hereto or Indebtedness with respect to any of the Purchased Assets, then, prior to the Closing and promptly following discovery or identification thereof, the Buyer shall notify the County of such deficiencies in condition, defects of title, defects or impediments to use, or Liens or Liabilities or Indebtedness discovered or otherwise identified by the Buyer in the course of its due diligence investigation with respect to the Purchased Assets.  Promptly following receipt of such notice from the Buyer and prior to the Closing, the County shall notify the Buyer as to whether it intends to elect to use its commercially reasonable efforts to repair, or remove or otherwise correct all defects of title or defects or impediments in the right to use, any of the Purchased Assets so discovered or identified by the Buyer or to satisfy and discharge or obtain and, if applicable, file with the appropriate Governmental Authority duly executed release agreements, termination statements, lien releases or such other release and termination instruments with respect to any and all such Liens or Liabilities or Indebtedness so discovered or identified by the Buyer. The County shall be under no obligation to make any such election, provided that, (i) the County shall be obligated to take action to satisfy and discharge any Indebtedness and to remove or release any Lien or Liability with respect to any of the proposed Purchased Assets to the extent that any such Indebtedness may be satisfied and discharged or such Lien or Liability may be removed or released solely by the payment of money (in which case the County shall be obliged to take action to make such payment and to satisfy and discharge such Indebtedness or to remove or release such Lien or Liability, as the case may be, not later than the Closing Date); and (ii) under no circumstances shall the County be obliged to commence, prosecute, join in or to defend against any judicial action with respect to any such defects of title, defects or impediments in the right to use or Liens or Liabilities as identified by the Buyer. If, at or prior to Closing, the Buyer shall not be satisfied in its sole discretion that the County shall convey to the Buyer (i) the Purchased Assets in good condition and repair (subject to ordinary wear and tear), (ii) good, marketable, valid and legal title to or a valid right to use any Purchased Asset, free and clear of all Liens, or (ii) that the Indebtedness to be satisfied and discharged or the Liens or Liabilities requested by the Buyer to be released pursuant to this Section 6.3 have not been respectively satisfied and discharged or released, in each case, as determined by the Buyer in its sole discretion, then the Buyer shall have the right and option, exercisable by written notice at any time at or prior to Closing, either (w) to exclude one or more of such assets from the Purchased Assets (which assets the Buyer shall identify in writing to the County) and to reduce the Cash Purchase Price to be paid to the County by the amount of the Net Asset Value ascribed to each such asset, (x) solely with respect to such Purchased Assets for which the Buyer shall determine that the County shall not convey to the Buyer good, marketable, valid and legal title, and subject to the agreement of the County, to accept indemnification from the County in respect of all Liabilities of the Buyer arising out of or relating to such defects of title, notwithstanding any provisions to the contrary in Section 10.1 of this Agreement, but otherwise subject to the terms, conditions and limitations set forth in Article X of this Agreement, or (y) to terminate this Agreement.  If the Buyer elects to exclude any asset from the Purchased Assets pursuant to clause (x) of the foregoing sentence, the Buyer hereby waives any right to indemnification or other remedies available to the Buyer under this Agreement with respect to any inaccuracies in or breaches of the representations and warranties contained in this Agreement with respect to each such asset that is excluded from the Purchased Assets.

Application for PSC Approval.

Exclusive Dealing Prior to Closing.  

Compliance with Bulk Transfer Act.

Cooperation Obtaining Approvals from Governmental Authorities.

Access to Books and Records.

(a)  

At or immediately after the Closing, the Buyer or one of its Affiliates shall offer employment to commence at the Closing Date to up to nine (9) employees of the County identified on schedules previously delivered to the Buyer by the County, on the same terms and conditions with respect to salary or wages and vacation (as such salary or wages and vacation are respectively described on such provided schedules) at which each such employee was employed by the County immediately prior to the Closing Date; provided, however, that this Section 7.3(a) shall obligate the Buyer to offer employment only to those employees of the County set forth on such provided schedules who are actively employed by the County as of the close of business on the day immediately prior to the Closing Date.

(b)  

All employees hired by the Buyer or its Affiliates pursuant to offers of employment under Section 7.3(a) (the “Hired Employees”) will be permitted to elect to participate in the health and welfare employee benefit plans of the Buyer or its Affiliates in which the Buyer’s employees with similar positions and responsibilities may elect to participate, subject to the employment policies and procedures of the Buyer or its Affiliates and the applicable terms and conditions of the employee benefit plans of the Buyer or its Affiliates.  The Buyer shall not be required to accept, and shall not accept, any rollovers or other transfers of any amounts into its or any of its Affiliate’s employee benefit plans.

(c)  

All Hired Employees shall be “at-will” employees of the Buyer or its Affiliates and nothing expressed or implied in this Agreement will obligate the Buyer or its Affiliates or their respective successors or assigns to provide continued employment to any such Hired Employee for any specified period of time following the Closing Date.  After the Closing Date, the Buyer and its Affiliates will be the sole judge of the number, identity and qualifications of the employees necessary for the conduct of the operations of the Facilities, the Water Transmission and Distribution Systems and the other Purchased Assets and reserves the right to take any personnel action it deems necessary or appropriate with respect to the Hired Employees.

Rate Structure.

(a)  

From the Closing Date until December 31, 2010 (the “Rate Stabilization Period”) and subject to the approval of the PSC, the Buyer shall be permitted to increase the rates for customers in existence on and after the Closing Date in the Service Area only on an annual basis by the change in the Revised Consumer Price Index for all Urban Consumers, all items, U.S. City Average, as reported by the Bureau of Labor Statistics, Department of Labor (the “CPI”).  The change in the CPI shall be determined by multiplying the existing customer rates by a fraction (a) the numerator of which is the difference between (i) the CPI for the last full calendar year, and (ii) the CPI for the last full calendar year for the preceding year (the “Prior Year’s CPI”), and (b) the denominator of which is the Prior Year's CPI.  Each change in CPI pursuant to this Section 7.4(a) shall be calculated as of January 1 of each calendar year within the Rate Stabilization Period and shall be determined by the Buyer within forty-five (45) days after the date on which the CPI for the last full calendar year is publicly released by the Bureau of Labor Statistics, Department of Labor, which adjustment in rates shall be applied retroactively to January 1 of each such calendar year within the Rate Stabilization Period.

(b)  

During the Rate Stabilization Period, upon request by the Buyer, the County shall support in writing and otherwise reasonably cooperate with the Buyer to assist the Buyer in the obtaining of any authorizations or other Permits from the PSC sought by the Buyer in connection with the adjustment of the customer rates for the Service Area pursuant to Section 7.4(a).

(c)  

Nothing set forth in this Agreement shall prohibit the Buyer’s imposition of PSC-approved connection fees or charges on new customers in the Service Area who are served by any Facility beginning after the Closing Date.

Consents and Approvals.

Representations and Warranties.

Performance of Obligations.

No Litigation.

PSC Approval.

Consents and Approvals.

Absence of Certain Changes.

Due Diligence.

Financing.

Obligations of the County.

Obligations of the Buyer.

Procedure.

(a)  

Each Buyer Indemnified Person and County Indemnified Person shall be referred to collectively herein as an “Indemnified Person.”  Any Indemnified Person seeking indemnification with respect to any actual or alleged Liability shall give notice to the Person from whom indemnification is sought (each, an “Indemnifying Person”) on or before the date specified in Section 10.4, but within thirty (30) day of receipt of notice of a Liability for which an Indemnifying Person is obligated to indemnify an Indemnified Person.  The Indemnified Person shall take action necessary to avoid entry of a default judgment if such action is needed before the Indemnified Person provides the Indemnifying Person notice; provided, however, that no such action shall in any way prejudice or harm the Indemnifying Persons.  In the event that the Indemnified Person does not timely notify the Indemnifying Person under this Section 10.3 of any Liability for which the Indemnifying Person is obligated to indemnify the Indemnified Person and such failure in any way prejudices or harms the Indemnifying Person (including, without limitation, any defense, right or remedy of the Indemnifying Person), then the Indemnifying Person shall be under no obligation to indemnify the Indemnified Person to the extent of any such prejudice or harm to the Indemnifying Person.

(b)  

With respect to an Indemnifying Person’s indemnity obligations set forth in Section 10.1 or 10.2, as the case may be, the Indemnifying Person shall provide the defense of any Liability brought against the Indemnified Person by selecting counsel of the Indemnifying Person’s choice to defend the Liability, subject to the consent of the Indemnified Person, which shall not be unreasonably withheld, conditioned or delayed. Nothing in this Agreement shall be deemed to prevent the Indemnified Person from cooperating with the Indemnifying Person and participating in the defense of any Liability by its own counsel at its own cost and expense, provided however, that after consultation with the Indemnified Person, the Indemnifying Person shall have the right to defend, settle or compromise any claim, suit, cause of action, or proceeding arising hereunder, so long as the settlement includes a full release of the Indemnified Person, and the Indemnifying Person shall have the authority to decide the appropriateness and the amount of any such settlement. If the Indemnified Person does not consent to the terms of any such settlement or compromise, then the Indemnifying Person shall not settle the Liability but its obligation to indemnify the Indemnified Person shall in no event exceed the amount of such settlement.  Notwithstanding the foregoing, the Indemnifying Person shall be entitled to settle or compromise any Liability for which the Indemnifying Person is obligated to indemnify the Indemnified Person without the consent of the Indemnified Person, if such settlement or compromise requires only the payment of money damages and/or a full release of the Liability against the Indemnified Person.  If the Indemnifying Person fails, after notice pursuant to Section 10.3(b), to undertake the Indemnified Person’s defense of any Liabilities encompassed within this Article X, then the Indemnifying Person’s indemnification shall include, but is not limited to, the Indemnified Person's reasonable attorneys' fees, including fees for outside counsel hired to defend the Indemnified Person, incurred in defending against any such claim, suit, cause of action, or proceeding, any interest charges arising from any claim, suit, cause of action, or proceeding arising under this Agreement or Applicable Laws, the Indemnified Person’s out-of-pocket expenses, and the reasonable value of any services rendered by the County Attorney, or the County staff or its employees, if the County is the Indemnified Person, or, if the Buyer is the Indemnified Person, the reasonable value of any in-house attorney, staff or employees of the Buyer.

(c)  

Neither the provisions of this Article X nor any damages recovered by the Indemnified Person shall be construed to limit the liability of the Indemnifying Person or its contractors or subcontractors for damages under the Agreement or Applicable Laws or to excuse the faithful performance of obligations required by the Agreement, except to the extent that any monetary damages suffered by the Indemnified Person have been satisfied by a financial recovery under this section or other provisions of the Agreement or Applicable Laws.  The Indemnified Person shall not be entitled to recover any amount under this Agreement with respect to any Liability for which the Indemnifying Person is obligated to indemnify the Indemnified Person, if and to the extent that the Indemnified Person shall have actually recovered any amount with respect to such Liability.  The Indemnified Person shall use its reasonable efforts to claim and recover any damages suffered by it under any insurance policy or third party indemnity it may have, which amounts shall be deducted from any amount for which the Indemnifying Person is obligated to indemnify the Indemnified Person under this Agreement.

(d)  

Nothing in this Agreement shall be construed to waive the County’s governmental immunity.

(e)  

In the event of any action or proceeding brought against an Indemnified Person for which the Indemnified Person is entitled to indemnification under this Agreement, the Indemnifying Party shall not admit any liability in any such  matter on behalf of the Indemnified Party, and the Indemnified Party shall not admit any liability for any such Liability for which the Indemnified Party is indemnified under this Agreement without the prior written consent of the Indemnifying Party.

(f)  

Anything to the contrary in this Agreement notwithstanding, neither party shall be liable to the other party or to any insurance company (by way of subrogation or otherwise) insuring the other party for any loss or damage to any building, structure or other tangible property, when such loss is caused by any of the perils which are or could be insured against under a standard policy of full replacement costs insurance for fire, theft and all risk coverage, or losses under workers’ compensation laws and benefits, event though such loss or damage might have been occasioned by the negligence of such party, its agents or employees (this clause shall not apply, however, to any damage caused by intentionally wrongful actions or omissions).

Survival of Certain Provisions.

(a)  

The representations and warranties of the County and the Buyer set forth in Article IV and Article V shall survive the Closing and shall continue in full force and effect without limitation after the Closing until the expiration of the statute of limitations applicable thereto has expired.

(b)  

Except as otherwise set forth in Section 10.4(a), each of the covenants, agreements and obligations of the parties contained in this Agreement, including, without limitation, the indemnification obligations of the County and the Buyer set forth in Sections 10.1 and 10.2 will survive the Closing and will continue in full force and effect in accordance with its terms, or, if not specific as to duration, until the expiration of the applicable statutes of limitations relating thereto.

(c)  

Each period of survival of the representations and warranties, covenants and agreements prescribed by Section 10.4(a) and (b) above is referred to as a “Survival Period.”  The liabilities of each party under its respective representations and warranties, covenants and agreements will expire as of the expiration of the applicable Survival Period; provided, however, that such expiration will not include, extend or apply to any representation or warranty or covenant the breach of which has been asserted by a party in a written notice to the other party before such expiration.

(d)  

All indemnities provided for in the Agreement shall apply even in the event of joint and/or concurrent negligence, strict liability, or other fault of the party whose liability is indemnified.

Remedies.

(a)  

Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver.  All rights and remedies of any party described in this Agreement are cumulative of each other and of every right or remedy such party may otherwise have.

Termination.

(a)  

at any time, by mutual written consent of the Buyer and the County;

(b)  

by either the Buyer or the County at any time (if such party itself is not then in material breach of any of its representations and warranties, covenants, agreements or other obligations contained in this Agreement), if the other party is in material breach or default of any of its representations and warranties, covenants, agreements or other obligations herein, which breach or default remains uncured for a period of thirty (30) days after such other party’s receipt of written notice of such breach or default;

(c)  

by the Buyer at any time pursuant to Section 6.2 or Section 6.3(b) of this Agreement;

(d)  

by the Buyer at any time, if the Buyer determines in its sole discretion that the condition to Closing set forth in Section 9.7of the Agreement shall not be satisfied; or

(e)  

by either the Buyer, on the one hand, or the County, on the other, (if such party itself is not then in material breach of any of its representations and warranties, covenants, agreements or other obligations contained in this Agreement) upon written notice to the other, if the transactions contemplated by this Agreement shall not have closed by December 31, 2009.

Consequences of Termination.

Actions of Parties.

Preemption.

Expenses.

Amendments and Waivers.

Binding Acceptance; Assignment.

Third Party Beneficiaries.

Waiver of Jury Trial.

Attorneys’ Fees.

Severability.

Recitals.

Construction.

(a)  

The parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any provision of this Agreement.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

(b)  

The attached exhibits are incorporated in this Agreement by reference and expressly made a part of this Agreement.

(c)  

The captions and headings of articles and sections throughout this Agreement are intended solely to facilitate reading and reference to the sections and provisions of this Agreement. Such captions shall not affect the meaning or interpretation of this Agreement.

Section 12.15  

Counterparts.

Section 12.16  

Time is of the Essence.