Exhibit 2.1
MERGER AGREEMENT
Among
THE KINETICS GROUP, INC.
THE XXXXXX FAMILY 1991 TRUST, DATED FEBRUARY 1, 1991
XXXXX X. XXXXXXX,
BT CAPITAL PARTNERS, INC.,
UNITED STATES FILTER CORPORATION
and
U.S. FILTER/KG ACQUISITION CORP.
DECEMBER 31, 1997
PAGE
TABLE OF CONTENTS
I .........................................................................2
1.1 THE MERGER.......................................................2
1.2 EFFECTIVE TIME OF THE MERGER.....................................2
1.3 EFFECT OF THE MERGER.............................................2
1.4 CERTIFICATE OF INCORPORATION.....................................2
1.5 BYLAWS...........................................................3
1.6 DIRECTORS........................................................3
1.7 OFFICERS.........................................................3
1.8 ADDITIONAL ACTIONS...............................................3
1.9 CONVERSION OF SHARES.............................................4
1.10 EXCHANGE OF SHARES..............................................6
1.11 NATURE AND QUALIFICATION OF MERGER..............................6
1.12 ESCROW AGREEMENT; APPOINTMENT OF STOCKHOLDER REPRESENTATIVES....6
II ........................................................................7
2.1 INCORPORATION, STOCK, ETC........................................7
2.2 TITLE TO STOCK...................................................8
2.3 AUTHORITY; BINDING EFFECT........................................8
2.4 CERTIFICATE OF INCORPORATION, BY-LAWS AND AGREEMENTS.............9
2.5 INTERESTS IN OTHER ENTITIES......................................9
2.6 CORPORATE RECORDS................................................9
2.7 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES...............9
2.8 FINANCIAL STATEMENTS.............................................10
2.9 ABSENCE OF UNDISCLOSED LIABILITIES...............................10
2.10 TAX RETURNS.....................................................10
2.11 ABSENCE OF CERTAIN DEVELOPMENTS.................................11
2.12 CONTRACTS, COMMITMENTS AND PROPOSALS............................13
2.13 LITIGATION; COMPLIANCE..........................................14
2.14 LABOR RELATIONS.................................................15
2.15 NO VIOLATION OF LAWS OR AGREEMENTS; CONSENTS....................16
2.16 CONDITION OF ASSETS.............................................16
2.17 ENVIRONMENTAL MATTERS...........................................16
2.18 BROKERAGE.......................................................18
2.19 RESTRICTIVE DOCUMENTS...........................................18
2.20 BOOKS AND RECORDS...............................................19
2.21 INVENTORY.......................................................19
2.22 RECEIVABLES.....................................................19
2.23 BANK ACCOUNTS...................................................19
2.24 REAL PROPERTY...................................................20
2.25 EMPLOYEE BENEFITS...............................................20
2.26 INSURANCE.......................................................23
2.27 INSIDER INTERESTS...............................................23
2.28 PERMITS.........................................................23
2.29 INTELLECTUAL PROPERTY...........................................24
2.30 DISCLOSURE......................................................24
2.31 INVESTMENT REPRESENTATION.......................................24
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III .......................................................................25
3.1 INCORPORATION, STOCK, ETC........................................25
3.2 AUTHORITY; BINDING EFFECT; AND CONSENTS..........................26
3.3 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES...............26
3.4 BROKERAGE........................................................26
3.5 CONTINUATION OF COMPANY BUSINESS.................................26
3.6 PUBLIC FILINGS...................................................26
IV ........................................................................27
4.1 ACCESS TO THE COMPANY............................................27
4.2 COMPANY MATERIAL ADVERSE CHANGES.................................27
4.3 CONDUCT OF BUSINESS..............................................27
4.4 NOTIFICATION OF CERTAIN MATTERS..................................29
4.5 PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE...................30
V ........................................................................30
5.1 ACQUISITION PROPOSALS............................................30
5.2 REGISTRATION OF ACQUISITION SHARES...............................30
5.3 RESTRICTIONS ON RESALE OF ACQUISITION SHARES.....................35
5.4 POOLING-OF-INTERESTS.............................................35
5.5 XXXX-XXXXX-XXXXXX................................................35
5.6 NOTIFICATION OF MATERIAL ADVERSE CHANGE..........................35
5.7 NONCOMPETITION...................................................36
VI ........................................................................38
6.1 GENERAL CONDITIONS..............................................38
6.2 CONDITIONS TO OBLIGATIONS OF U.S. FILTER AND ACQUISITION
SUBSIDIARY......................................................38
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS...40
VII .......................................................................41
7.1 SURVIVAL OF REPRESENTATIONS......................................41
7.2 GENERAL INDEMNIFICATION BY COMPANY STOCKHOLDERS..................42
7.3 CLAIMS FOR INDEMNIFICATION.......................................43
7.4 DEFENSE BY INDEMNIFYING PARTY....................................43
7.5 NO CONTRIBUTION RIGHTS...........................................44
7.6 ARBITRATION......................................................44
VIII ......................................................................45
8.1 TERMINATION OF AGREEMENT.........................................45
8.2 EFFECT OF TERMINATION............................................46
IX ........................................................................46
9.1 VOTING...........................................................46
9.2 OWNERSHIP........................................................46
9.3 RESTRICTION ON TRANSFER..........................................47
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9.4 INVESTMENT INTENTION.............................................47
9.5 TERMINATION OF AGREEMENTS........................................47
9.6 TERMINATION......................................................48
9.7 EFFECTIVE DATE; SUCCESSION REMEDIES..............................48
9.8 NATURE OF HOLDINGS; SHARES.......................................48
X .........................................................................49
10.1 AMENDMENT AND MODIFICATIONS.....................................49
10.2 WAIVER OF COMPLIANCE............................................49
10.3 EXPENSES........................................................49
10.4 GOOD FAITH EFFORTS; FURTHER ASSURANCES..........................49
10.5 REMEDIES........................................................49
10.6 NOTICES.........................................................50
10.7 ASSIGNMENT......................................................52
10.8 PUBLICITY.......................................................52
10.9 GOVERNING LAW...................................................52
10.10 COUNTERPARTS...................................................52
10.11 HEADINGS.......................................................52
10.12 ENTIRE AGREEMENT...............................................52
10.13 THIRD PARTIES..................................................52
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EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Opinion of Counsel to the Company and the Stockholders
Exhibit D Form of Affiliate Letters
Exhibit E Opinion of Xxxxxx X. Xxxxxxxx, Esq., Vice President and
General Counsel of U.S. Filter
SCHEDULES
Schedule 1.9(g) Indebtedness
Schedule 2.1 Authorized Capital Stock of the Company
Schedule 2.8 Financial Statements
Schedule 2.9 Liabilities
Schedule 2.10 Tax Returns
Schedule 2.12 Contracts, Commitments and Proposals
Schedule 2.13 Litigation
Schedule 2.14 Labor Matters
Schedule 2.16 Encumbrances
Schedule 2.17(b) Environmental Reports
Schedule 2.17(c) Environmental Compliance
Schedule 2.17(d) Environmental Conditions
Schedule 2.17(e) Environmental Treatment, Storage & Disposal
Schedule 2.22 Receivables
Schedule 2.23 Bank Accounts
Schedule 2.24 Real Property
Schedule 2.25 Employee Benefit Plans
Schedule 2.26 Insurance Policies
Schedule 2.27 Insider Interests
Schedule 2.28 Permits
Schedule 2.29 Intellectual Property
Schedule 5.7 Geographic Areas of Business
Schedule 5.7(b) Current Investments
Schedule 9.2 Interests
Schedule 9.5 Stockholder Agreements
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INDEX TO DEFINED TERMS
Acquisition Shares....................................................
Acquisition Subsidiary................................................
Agreement.............................................................
Average Trading Price.................................................
Benefit Plan..........................................................
Business..............................................................
Certificate of Merger.................................................
Claims................................................................
Closing...............................................................
Closing Date..........................................................
Commission............................................................
Company...............................................................
Company Financial Statements..........................................
Company Group.........................................................
Company Plan..........................................................
Company Preferred Stock...............................................
Company Series A Common Stock.........................................
Company Series B Common Stock.........................................
Company Stock.........................................................
Defined Benefit Plan..................................................
Delaware Code.........................................................
Effective Time........................................................
Encumbrances..........................................................
Environmental Condition...............................................
Environmental Laws....................................................
ERISA.................................................................
Escrow Agreement......................................................
Escrow Shares.........................................................
Fully-Diluted Number..................................................
Hazardous Substance...................................................
HSR Act...............................................................
Indemnified Party.....................................................
Indemnifying Party....................................................
Indemnitees...........................................................
Intellectual Property ................................................
IRC...................................................................
IRS...................................................................
Law...................................................................
Litigation............................................................
Merger................................................................
Merger Shares.........................................................
Multiemployer Plan....................................................
Noncompetition Period.................................................
Other Agreements......................................................
Permits...............................................................
Person................................................................
Purchase Price........................................................
Purchase Price Adjustment.............................................
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Qualified Plan........................................................
Real Property.........................................................
Receivables...........................................................
Registration Statement................................................
Related Party.........................................................
Registration Expenses.................................................
Securities Act........................................................
Stockholders..........................................................
Subsidiaries..........................................................
Surviving Corporation.................................................
U.S. Filter...........................................................
U.S. Filter Common Stock..............................................
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MERGER AGREEMENT
This MERGER AGREEMENT (this "Agreement") is made and entered into as of
this 31st day of December, 1997, by and among United States Filter Corporation,
a Delaware corporation ("U.S. Filter"), U.S. Filter/KG Acquisition Corp., a
Delaware corporation ("Acquisition Subsidiary"), The Kinetics Group, Inc., a
Delaware corporation (the "Company"), and each of The Xxxxxx Family 1991 Trust,
dated February 1, 1991 ("The Xxxxxx Family Trust"), Xxxxx X. Xxxxxxx, and BT
Capital Partners, Inc. (each, a "Stockholder," and collectively, the
"Stockholders")(all stockholders of the Company, including both the Stockholders
and all other Company stockholders who are not parties to this Agreement, shall
be referred to herein collectively as the "Company Stockholders," and each
individually as a "Company Stockholder").
W I T N E S S E T H:
WHEREAS, the Company Stockholders own an aggregate of 3,892,500 shares of
Series A Common Stock, par value US$.01 per share, of the Company (the "Company
Series A Common Stock"), 3,675,000 shares of Series B Common Stock, par value
US$.01 per share, of the Company (the "Company Series B Common Stock"),
1,687,500 shares of Series A Preferred Stock, par value US$.01 per share, of the
Company (the "Company Series A Preferred Stock") and 386,233 shares of Series B
Preferred Stock, par value US$.01 per share, of the Company (the "Company Series
B Preferred Stock," and together with the Company Series A Common Stock, the
Company Series B Common Stock and the Company Series B Preferred Stock, the
"Company Stock"), and such shares constitute all of the issued and outstanding
shares of the capital stock of the Company; and
WHEREAS, concurrent with the Closing (as defined herein), U.S. Filter and
the Company shall cause Acquisition Subsidiary to merge with and into the
Company pursuant to Section 251 of the General Corporation Law of the State of
Delaware (the "Delaware Code"), thereby causing the Company to become a wholly
owned subsidiary of U.S. Filter; and
WHEREAS, for federal income tax purposes, the parties hereto intend that
the Merger shall qualify as a reorganization within the meaning of Sections
368(a)(1)(A) and (a)(2)(E) of the United States Internal Revenue Code of 1986,
as amended, and the applicable rulings and regulations thereunder (the "IRC");
WHEREAS, for accounting purposes, the parties hereto intend that the
Merger will be accounted for as a "pooling-of-interests"; and
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NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties agree as follows:
ARTICLE I
THE MERGER
1.1. THE MERGER. Upon the terms and conditions set forth in this
Agreement and in accordance with the Delaware Code, U.S. Filter and the Company
shall, on the Closing Date (as defined below), cause Acquisition Subsidiary to
merge with and into the Company, with the Company as the surviving corporation,
pursuant to Section 251 of the Delaware Code (the "Merger"). Following the
Merger, the separate corporate existence of Acquisition Subsidiary shall cease
and the Company will continue as the surviving corporation (the "Surviving
Corporation") and will succeed to and assume all of the rights and obligations
of Acquisition Subsidiary and the Company in accordance with the Delaware Code.
The closing of the transactions contemplated herein (the "Closing") shall occur
at 8:30 a.m., Pacific Time, on January 15, 1998 (the "Closing Date") at the
offices of O'Melveny & Xxxxx LLP, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx
Xxxxx, Xxxxxxxxxx, or by delivery of all documents and other items contemplated
by the Closing through the use of interstate mails and courier deliveries or use
of facsimile copies (to be followed by original mailed copies) on such earlier
or later date as all Conditions to Closing shall have been met, or at such other
time and date or in such other manner as the parties hereto shall agree to in
writing.
1.2. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties will
file a certificate of merger substantially in the form attached hereto as
Exhibit A (the "Certificate of Merger") or other appropriate documents executed
in accordance with the relevant provisions of the Delaware Code and will make
all other filings or recordings required under the Delaware Code.
Notwithstanding anything to the contrary, the parties hereby agree that they
will treat the Merger for legal and accounting purposes as having become
effective as of December 31, 1997 (the "Effective Time").
1.3. EFFECT OF THE MERGER. The Merger will have the effects set forth in
Section 259 of the Delaware Code.
1.4. CERTIFICATE OF INCORPORATION. Except as provided herein, the
Certificate of Incorporation of Acquisition
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Subsidiary, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended in accordance with applicable law. Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended in its entirety to
read as follows: "The name of this Corporation is: The Kinetics Group, Inc."
1.5. BYLAWS. The Bylaws of Acquisition Subsidiary, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.6. DIRECTORS. At the Effective Time, the directors of the Company
immediately prior to the Effective Time shall be deemed to have resigned at such
time and the following persons shall be deemed to be directors of the Surviving
Corporation until their successors are elected and qualified:
Xxxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
1.7. OFFICERS. The executive officers of the Surviving Corporation from
the Effective Time shall be the following persons, each of whom shall hold
office until his successor is elected or appointed and qualified:
Xxxxxxx X. Xxxxxxxx - Chairman of the Board
Xxxxx X. Xxxxxxx - Chief Executive Officer and
President
Xxxxx X. Xxxxxx - Vice President and Chief Financial
Officer
Xxxxxx X. Xxxxxxxx - Vice President and Secretary
1.8 ADDITIONAL ACTIONS. If, at any time after the Closing Date, the
Surviving Corporation determines or is advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Acquisition Subsidiary or the Company or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation will have the power and authority to execute and deliver, in the
name and on behalf of Acquisition Subsidiary or the Company, all such deeds,
bills of sale, assignments and assurances and to take and do, in the
3
name and on behalf of Acquisition Subsidiary or the Company, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
1.9 CONVERSION OF SHARES.
(a) As of the Effective Time, by virtue of the Merger and without
any action on the part of any holder of shares of Company Stock:
(i) Each share of Company Stock shall cease to be outstanding.
(ii) Each share of Company Series A Common Stock, including
Company Series B Common Stock deemed to have been converted into
Company Series A Common Stock, shall be converted into the right to
receive the number of shares of U.S. Filter Common Stock, par value
US$.01 per share (the "U.S. Filter Common Stock"), determined by
dividing (X) the quotient of the "Purchase Price," (as defined below
and as reduced by any Purchase Price Adjustment, as defined below)
divided by the "Fully-Diluted Number" (defined as the aggregate of
the number of issued and outstanding shares of Company Series A
Common Stock plus the number of shares of Company Series B Common
Stock on the Closing Date, plus the aggregate number of shares of
Company Series B Common Stock into which the Company Preferred Stock
is convertible) by (Y) the "Average Trading Price" (as defined
below); the number of shares of U.S. Filter Common Stock into which
Company stock is converted as of the Effective Time shall be
adjusted for any stock dividend, stock split or stock combination of
U.S. Filter Common Stock between the date hereof and the date of
Closing.
(iii) The "Purchase Price" means US $230,000,000 minus an
amount equal to all third party bank or institutional debt of the
Company as of December 31, 1997 (net of any cash balances of the
Company on hand as of such date).
(iv) Each share of Company Preferred Stock shall be converted
into the right to receive the number of shares of U.S. Filter Common
Stock that the holder of such share of Preferred Stock would have
been entitled to receive under the calculation in subsection (ii)
above had the holder converted such share into Company Series B
Common Stock immediately prior to the
4
Effective Time at the respective conversion prices then in effect
and after giving effect to all of the anti-dilution provisions of
the Company's Certificate of Incorporation.
(b) The Purchase Price shall be reduced, dollar for dollar, by the
following (the aggregate of which is the "Purchase Price Adjustment"):
(i) the aggregate amount of any payments owed to employees of
the Company or any Subsidiaries on the Closing Date and triggered by
the transactions contemplated by this Agreement (including, but not
limited to, any acceleration of the vesting schedules in any
employee option agreement triggered by this Agreement).
Any amounts deducted by reason of the Purchase Price Adjustment shall be
deemed paid by U.S. Filter by virtue of the reduction in consideration for
the Company Stock.
(c) "Average Trading Price" means $31.259.
(d) Any employee stock options to purchase Company Stock outstanding
and not exercised on the Closing Date shall be automatically converted
into options to purchase the number of shares of U.S. Filter Common Stock
that the holder of such options would have been entitled to receive under
the calculation in Section 1.9(a)(ii) above had the holder converted such
options into Company Series A Common Stock immediately prior to the
Effective Time (with the exercise price being adjusted accordingly), which
shares the Company has registered with the Securities and Exchange
Commission (the "Commission") on Form S-8.
(e) No certificates representing fractional shares of U.S. Filter
Common Stock will be issued upon the surrender for exchange of a
certificate or certificates representing Company Stock. In lieu of any
such fractional shares, each Company Stockholder who otherwise would be
entitled to receive a fractional share of U.S. Filter Common Stock will be
entitled to receive from U.S. Filter a cash payment equal to such fraction
multiplied by the Average Trading Price.
(f) U.S. Filter hereby agrees to assume all third party bank debt of
the Company and all other indebtedness of the Company incurred in the
ordinary course of business, except for such indebtedness as set forth in
Schedule 1.9(g), which the Company hereby agrees to pay off prior to
Closing.
5
1.10 EXCHANGE OF SHARES. Immediately following the Merger, upon surrender
by the Company Stockholders of the certificates representing the Company Stock,
U.S. Filter shall cause to be issued to the Company Stockholders certificates
representing the Acquisition Shares (as defined in Section 5.2 hereof), less any
Acquisition Shares placed in escrow pursuant to Section 1.12. By acceptance of
the Acquisition Shares, each Company Stockholder acknowledges and agrees that
each such certificate will be stamped or imprinted with a legend in
substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION STATEMENT
UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE ISSUER OR A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION INDICATING THAT SUCH DISTRIBUTION, SALE, TRANSFER,
ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
RESTRICTIONS ON RESALE CONTAINED IN THAT CERTAIN MERGER AGREEMENT, DATED
AS OF DECEMBER 31, 1997, A COPY OF WHICH IS AVAILABLE FROM THE SECRETARY
OF THE ISSUER."
1.11 NATURE AND QUALIFICATION OF MERGER. This Agreement contemplates that
the Merger will be a tax free merger in a reorganization pursuant to Sections
368(a)(1)(A) and (a)(2)(E) of the IRC, whereby the Company Stockholders will
receive capital stock in U.S. Filter in exchange for their capital stock in the
Company. The parties hereto expect that the Merger will further certain of their
business purposes objectives, including, without limitation, the expansion of
the Company's high-purity process piping business and the enhancement of
earnings created thereby. In doing so, following the Merger, the parties hereto
currently intend to carry on at least one significant historic business
enterprise of the Company, or to use at least a significant portion of the
Company's historic business assets in a business, in each case, within the
meaning of Treasury Reg. ss.1.368-1(d).
1.12 ESCROW AGREEMENT; APPOINTMENT OF STOCKHOLDER REPRESENTATIVES.
Approval of this Agreement by the Company Stockholders will constitute
appointment of The Xxxxxx Family Trust and BT Capital Partners, Inc. as
representatives and attorneys-in-fact (collectively, the "Stockholder
6
Representatives") to represent such Company Stockholders in connection with the
transactions contemplated by this Agreement and the Escrow Agreement, and to
take any and all other action on their behalf hereunder that may be taken by
Company Stockholders under the terms of this Agreement and the Escrow Agreement,
including powers to transfer such Company Stockholders' interests in the Escrow
Shares (as defined herein) in accordance with this Agreement and the Escrow
Agreement. Each Company Stockholder understands and agrees that the Stockholder
Representatives have been appointed as the Stockholder Representatives by each
of the other Company Stockholders. U.S. Filter and Acquisition Subsidiary shall
be entitled to rely on the advice, information and decisions of the Stockholder
Representative without any obligation independently to verify, authenticate or
seek the confirmation or approval of the Stockholder Representatives' advice,
information or decisions or any other facts from the Company Stockholders or any
other Person. The Stockholder Representatives named above shall continue to
serve as such until written notice of any change is received by U.S. Filter and
Acquisition Subsidiary. At the Closing, U.S. Filter shall deposit five percent
(5%) of all Company Stockholders' Acquisition Shares (the "Escrow Shares") in an
escrow account in accordance with the terms and conditions of an escrow
agreement substantially in the form attached hereto as Exhibit B (the "Escrow
Agreement"). The Escrow Shares shall be in the name and specifically for the
account of the Company Stockholders, as set forth in the Escrow Agreement, and
shall be held to satisfy any "Claims" (defined as any and all claims, losses,
demands, causes of action, suits, proceedings, administrative proceedings,
losses, judgments, decrees, debts, damages, liabilities, court costs, attorneys'
fees and any other expenses incurred, assessed or sustained) of the Indemnitees
(as defined below) for indemnification pursuant to Section 7.2 of this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
The Company, and, as to the representations regarding the Stockholders in
Sections 2.2, 2.3, 2.7, 2.15, 2.18 and 2.31, the Company and the Stockholders
jointly and severally, hereby represent and warrant to U.S.
Filter as follows:
2.1 INCORPORATION, STOCK, ETC. (a) The Company and each subsidiary of the
Company listed on Schedule 2.1, which list is an accurate and complete list of
the Company's subsidiaries (the "Subsidiaries") is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and is duly qualified and in good standing as a foreign corporation
and is duly authorized to transact business
7
in each jurisdiction wherein the character of the properties owned or leased by
it or the nature of the activities conducted by it makes such qualification and
good standing necessary, except where the failure to be so qualified does not
have a material adverse effect on the Company or any Subsidiary taken as whole,
(b) the Company and each Subsidiary has full corporate power and authority to
own or lease its properties and to carry on its business as it is now being
conducted, (c) the authorized capital stock of the Company and each Subsidiary,
and the issued and outstanding shares is set forth on Schedule 2.1, (d) the
shares of Company Stock and all shares of capital stock of the Subsidiaries have
been duly authorized and validly issued and are fully paid and nonassessable,
(e) except as set forth on Schedule 2.1, neither the Company nor any Subsidiary
is bound by any subscription, option, warrant, conversion privilege, or other
right, call, agreement or commitment to issue or sell, or any obligation,
agreement or commitment to purchase or otherwise acquire any of its authorized
capital stock or any securities convertible into or exchangeable for any of its
authorized capital stock, (f) none of the Company Stock or any shares of capital
stock of the Subsidiaries have been issued in violation of any preemptive or
contractual rights of any "Person" (defined to include a natural person, a
corporation, an association, a partnership, a limited liability company, a
trust, a joint venture, an unincorporated organization, a business, any other
legal entity and any governmental body) (and no such preemptive or contractual
rights will exist at the Closing Date), (g) all of the Company Stock and all
shares of capital stock of the Subsidiaries has been issued in compliance with
all applicable securities laws, and (h) there are no stockholders' voting trusts
or similar agreements with respect to the Company Stock or any shares of capital
stock of the Subsidiaries.
2.2 TITLE TO STOCK. Each Stockholder is the beneficial and record owner of
all of the shares of Company Stock in the amounts set forth on Schedule 2.1, and
each has good and marketable title thereto, free and clear of any liens,
"Encumbrances" (defined as any liability, debt, mortgage, deed of trust, pledge,
security interest, encumbrance, option, right of first refusal, agreement of
sale, adverse claim, easement, lien, assessment, restrictive covenant,
encroachment, burden or charge of any kind or nature whatsoever or any item
similar or related to the foregoing), security agreements, equities, charges,
conditions and restrictions. The Company, directly or indirectly, beneficially
owns and owns of record all of the capital stock of the Subsidiaries and has
marketable title to such stock, free and clear of any liens, Encumbrances,
security agreements, equities, charges, conditions and restrictions.
2.3 AUTHORITY; BINDING EFFECT. (a) The execution, delivery and performance
by the Company of this Agreement and
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each agreement or document contemplated hereby to be executed and delivered in
connection with the transactions contemplated by this Agreement on or before the
Closing (the "Other Agreements"), and the consummation of the transactions
contemplated hereby and thereby by the Company have been duly and validly
authorized by all necessary action on the part of the Company Stockholders and
the Company, (b) each Stockholder has the legal capacity to enter into this
Agreement and the Other Agreements and to consummate the transactions
contemplated hereby and thereby, (c) the Company has the corporate power and
authority to enter into this Agreement and the Other Agreements and to carry out
the transactions contemplated hereby and thereby and (d) this Agreement and each
Other Agreement is a valid and binding obligation of each Stockholder and the
Company, enforceable against each Stockholder and the Company in accordance with
its respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally or by equitable remedies.
2.4 CERTIFICATE OF INCORPORATION, BY-LAWS AND AGREEMENTS. Copies of (a)
the certificate of incorporation of the Company as certified by the Secretary of
State of Delaware, (b) the by-laws of the Company certified by the Secretary of
the Company, (c) the charter documents and by-laws for each Subsidiary and (d)
the minute books of the Company and each Subsidiary have heretofore been made
available to U.S. Filter and its representatives and such copies are each true
and complete copies of such instruments or records as amended to the date
hereof.
2.5 INTERESTS IN OTHER ENTITIES. The Company has no subsidiaries other
than the Subsidiaries and does not own, directly or indirectly, any capital
stock or other equity or ownership or proprietary interest in any other
corporation, partnership, limited liability company, association, trust, joint
venture or other entity.
2.6 CORPORATE RECORDS. All material proceedings or meetings of
stockholders and directors of the Company and each Subsidiary, and all material
consents to actions taken thereby, are accurately reflected in the minutes and
records contained in the corporate minute books of the Company and each
Subsidiary.
2.7 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent,
approval or authorization of, or declaration, filing or registration by any
Stockholder or the Company with any governmental or regulatory authority is
required by virtue of the status, business or activities of the Company or such
Stockholder (other than any necessary filing under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvement Acts of 1976, as amended (xxx
0
"XXX Xxx")) in connection with the execution and delivery by the Stockholders or
the Company of this Agreement and the Other Agreements and the consummation of
the transactions contemplated hereby and thereby.
2.8 FINANCIAL STATEMENTS. The consolidated financial statements of the
Company (the "Company Financial Statements") are the balance sheets, income
statements and statements of cash flows for the Company for each of the three
years ended September 30, 1997, September 30, 1996 and September 30, 1995. The
Company Financial Statements have been provided to U.S. Filter and have been
prepared in accordance with generally accepted accounting principles on a
consistent basis throughout the indicated periods, present fairly in all
material respects the financial condition, assets and liabilities and results of
operation of the Company and the Subsidiaries at the dates and for the relevant
periods indicated in accordance with generally accepted accounting principles
and except as set forth on Schedule 2.8, have been audited by Ernst & Young LLP.
2.9 ABSENCE OF UNDISCLOSED LIABILITIES. The Company and each Subsidiary
has no debt, obligation or liability, absolute, fixed, contingent or otherwise,
of any nature whatsoever, whether due or to become due, including any unasserted
Claim, whether incurred directly or by any predecessor thereto, and whether
arising out of any act, omission, transaction, circumstance, sale of goods or
services, state or facts or other condition, except (i) those reflected or
reserved against on the Company Financial Statements in the amounts shown
therein, (ii) those not required under generally accepted accounting principles
to be reflected and reserved against in the Company Financial Statements that
are expressly quantified and set forth in the contracts listed in Schedule 2.12;
(iii) those disclosed on Schedule 2.9; and (iv) those of the same nature as
those set forth on the Company Financial Statements that have arisen in the
ordinary course of business of the Company after September 30, 1997 through the
date hereof, all of which have been consistent in amount and character with past
practice and experience, and none of which, individually or in the aggregate,
has had or will have an adverse effect on the business, financial condition or
prospects of the Company and its Subsidiaries, taken as a whole, and none of
which is a liability for breach of contract or warranty or has arisen out of
tort, infringement of any intellectual property rights or violation of "Law"
(defined to include any applicable federal, state, municipal, local or foreign
statute, law, ordinance, rule, regulation or order of any kind or nature
whatsoever including any public policy, order of any governmental body or
principle of common law) or is claimed in any pending or threatened legal
proceeding.
2.10 TAX RETURNS. Except as disclosed in Schedule
10
2.10, (a) The Company and each Subsidiary has timely filed (taking into account
all extensions) all federal, state, and local tax returns for income taxes,
sales taxes, use taxes, withholding taxes, and employment taxes required by law
to have heretofore been filed, (b) the Company and each Subsidiary has paid or
caused to be paid all taxes, interest, deficiencies, assessments and penalties
which would be delinquent if not heretofore paid pursuant to said returns, (c)
no federal and state income tax returns of the Company or any Subsidiary for any
taxable years are currently being audited, nor has the Company or any Subsidiary
received a written notice of pending audit or inquiry with respect thereto from
any state or federal income tax authority, and no proceedings for unpaid tax
deficiencies are pending before the United States Internal Revenue Service (the
"IRS") or any state tax authority, (d) the Company has made available to U.S.
Filter true and correct copies of all of the Company's and each Subsidiary's
federal and state income tax returns that have been filed for the past five
years, and (e) neither the Company nor any Subsidiary has entered into any
extension agreement or any other agreement, consent or election, which would
have a material and adverse effect on its liability for any Federal or state
income taxes or which has extended the time for assessment, payment or
collection of any such taxes. The returns delivered to U.S. Filter, including
amendments to date, have been prepared in good faith without negligence or
willful misrepresentation and reflect completely and accurately all liability
for taxes of the Company and each Subsidiary for the periods covered thereby,
whether or not due and payable and whether or not disputed. All federal, state
and local income taxes, sales taxes, use taxes, withholding taxes and employment
taxes (including interest and penalties) payable by, or due from, the Company
and each Subsidiary have been fully paid or adequately disclosed and fully
provided for in the books and financial statements of the Company.
2.11 ABSENCE OF CERTAIN DEVELOPMENTS. During the period commencing
September 30, 1997 and ending on the Closing Date, neither the Company nor any
Subsidiary has:
(a) issued any notes, bonds or other debt securities, any equity
securities, any profits interests, or any securities exchangeable for or
convertible into any equity securities or profits interests;
(b) declared or made any payment or distribution of cash or other
property, or any equity securities or profits interests, to its
stockholders with respect to its capital stock or purchased or redeemed
any shares of its capital stock or made any interest, principal or other
payments to the Stockholders with respect to any amounts owing to them
except for scheduled payments of stock dividends on
11
outstanding Company Preferred Stock;
(c) (i) borrowed any amounts (except for ordinary course draws from
existing borrowings) or (ii) entered into any other liabilities in excess
of US$10,000 which are not in the ordinary course of business;
(d) sold, assigned or transferred any of its assets with a value of
more than US$100,000 except in the ordinary course of business;
(e) compromised any debt or Claim with a value of more than
US$10,000, except for debts or Claims compromised with customers in the
ordinary course of business;
(f) incurred any extraordinary losses or intentionally waived any
rights of a value in excess of US$100,000 in the aggregate, except for
rights waived with respect to customers in the ordinary course of
business;
(g) suffered any theft, destruction, damage or casualty loss in
excess of US$250,000 in the aggregate, not covered by insurance;
(h) engaged in any knowingly material and adverse transaction;
(i) authorized any general increase in the compensation of its
employees (including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment) or any general increase in the
compensation payable or to become payable to any employee other than in
the ordinary course of business (such as pursuant to a customary annual
salary and bonus reviews);
(j) intentionally waived, canceled or released any material right,
Claim or amount receivable except for rights waived in the ordinary course
of business or that not having any material adverse effect on the Company
and its Subsidiaries, taken as a whole;
(k) created, terminated or amended, or waived a right under, a
material agreement of the Company or any Subsidiary other than in the
ordinary course of business;
(l) suffered any material adverse change in its financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), net
worth, prospects, earning power, reserves, business or operations;
(m) suffered a labor strike or other labor trouble;
12
(n) made any payment to any Stockholder, officer or director (or a
relative or affiliate of any of such persons) or any employee or
consultant ("Related Party") required to be disclosed on Schedule 2.27,
other than as described therein;
(o) made any change in any method of accounting or accounting
practice which would have a material adverse effect on the assets or
operations of the Company or any Subsidiary; or
(p) agreed, whether in writing or otherwise, to take any action
described in this Section.
2.12 CONTRACTS, COMMITMENTS AND PROPOSALS.
(a) Except as listed in Schedule 2.12, neither the Company nor any
Subsidiary is bound by any of the following as a principal obligor (1.e.,
as direct contracting party and not as agent for another party):
(i) any contract or commitment which requires payment or
services in excess of US$100,000 or which has an unexpired term in
excess of one year;
(ii) any agreement, contract or instrument that grants a
power of attorney, agency or similar authority to another Person or
entity which was not entered into in the ordinary course of business
or is not terminable at will by the Company;
(iii) any agreement, contract or commitment to loan or
advance to, invest in, or guaranty any indebtedness or obligation
of, any individual, partnership, joint venture, corporation, trust,
unincorporated organization or other entity, where the principal
amount thereof is more than US$50,000 in the ordinary course of the
Company's business, or, if such agreement, contract, commitment or
guarantee is not in the ordinary course of business of the Company,
any amount whatsoever;
(iv) other than listed on Schedule 2.12(a)(i), any
agreement, contract or commitment relating to the employment of any
Person by the Company or any Subsidiary not terminable at will by
the employer, or any bonus, deferred compensation, pension,
severance, profit sharing, stock option, employee stock purchase,
retirement or other employee benefit plan;
13
(v) any consulting or similar type of contract which is
not, without a payment required thereunder (beyond those due for
work performed or materials delivered thereunder), terminable upon
ninety days' (or less) notice;
(vi) any confidentiality, non-disclosure or similar
agreement;
(vii) any agreement, contract or commitment which has an
adverse impact on the business or operations of the Company and its
Subsidiaries, taken as a whole, in excess of US$100,000;
(viii) any agreement, contract or commitment limiting
the freedom of the Company or such Subsidiary from engaging in its
present business;
(ix) any contract or agreement that contains a right of
first refusal with respect to any material asset of the Company or
such Subsidiary; and
(x) any unexpired written bid or proposal to enter into
any of the agreements identified above that is of a nature that it
could, as presented, be accepted by a third party and be thereby
binding upon the Company or such Subsidiary.
(b) Each contract, agreement and commitment listed in Schedule 2.12
is valid and in full force and effect and there exists no (i) default or
event of default or (ii) event, occurrence, condition or act which, with
the giving of notice or the lapse of time, would become a default or event
of default thereunder where such default or event of default would result
in a material adverse effect on the Company and the Subsidiaries, taken as
a whole. The Company or the applicable Subsidiary has fully performed all
of the terms or conditions of any contract or agreement set forth in
Schedule 2.12 (or required to be set forth in such Schedule) in all
respects which is required to be performed on or prior to the date hereof
and all of the covenants required to be performed by any other party
thereto on or prior to the date hereof have been performed in all
respects, except where failure to perform would not result in a material
adverse effect on the Company and its Subsidiaries, taken as a whole. A
copy of each contract, agreement or commitment listed in Schedule 2.12 has
heretofore been made available or delivered to, U.S. Filter and such copy
is true, correct and complete.
2.13 LITIGATION; COMPLIANCE. (a) Except as set forth
14
on Schedule 2.13, there is no action, suit or proceeding of any kind whatsoever,
whether civil, criminal or administrative, by or before any governmental
authority or arbitrator ("Litigation"), pending or, to the knowledge of the
Company, threatened, nor to the knowledge of the Company is there any basis for
any Litigation, and there is no written judgment, decree, injunction, award or
order outstanding, against or affecting the Company or any Subsidiary, the
business of the Company or any Subsidiary, any of the Company's or a
Subsidiary's assets, the Company Stock, the stock of any Subsidiary or any
transaction contemplated by this Agreement or any Other Agreements; and (b)
neither the Company nor any Subsidiary has received any notice claiming any
violation of any Law, and, to the knowledge of the Company, has not been during
the past five years nor to the knowledge of the Company is the Company or any
Subsidiary currently in violation of any Law which violation would have a
material adverse effect on the Company and the Subsidiaries, taken as a whole,
and to the knowledge of the Company no event has occurred or condition or state
of facts exists that would give rise to any such violation. Neither the Company
nor any Subsidiary has Litigation pending against any third party, except as
listed on Schedule 2.13.
2.14 LABOR RELATIONS. Schedule 2.14 sets forth by geographic region all
contracts between the Company and any labor organization. Except as disclosed on
Schedule 2.14, no employee of the Company or any Subsidiary is represented by
any union recognized by the Company or other labor organization recognized by
the Company. No representation election, arbitration proceeding, grievance,
labor strike, dispute, slowdown, stoppage or other labor trouble is pending or,
to the knowledge of the Company, threatened against, involving, affecting or
potentially materially adversely affecting the Company and its Subsidiaries,
taken as a whole. No complaint against the Company or any Subsidiary has been
commenced or, to the knowledge of the Company, threatened before the National
Labor Relations Board, the Equal Employment Opportunity Commission or any
similar state or local agency, by or on behalf of any employee of the Company or
any Subsidiary. Neither the Company nor any Subsidiary has any contingent
liability for sick leave, vacation time, severance pay or any similar item. To
the knowledge of the Company, neither the Company nor any Subsidiary has any
contingent liability of any occupational disease of any of its employees, former
employees or others. Except as set forth on Schedule 2.14, neither the execution
and delivery of this Agreement or the Other Agreements, the performance of the
provisions hereof or thereof, nor the consummation of the transactions
contemplated hereby or thereby will (either alone, or upon the occurrence of any
act or event, or with the lapse or time, or both) result in any severance
benefit or payment arising or becoming due from the Company or any Subsidiary to
any Person.
15
2.15 NO VIOLATION OF LAWS OR AGREEMENTS; CONSENTS. Neither the execution
and delivery of this Agreement or any Other Agreement to which the Stockholders,
the Company or any one of them, is or is to become a party, nor the consummation
by any of the Stockholders or the Company of the transactions contemplated
hereby or thereby nor the compliance with or fulfillment of the terms,
conditions or provisions hereof or thereof by the Stockholders or the Company,
or any of them, will (i) contravene any provisions of the certificate of
incorporation or by-laws of the Company or the charter documents of the
Subsidiaries; (ii) conflict with, result in a breach of, constitute a default or
an event of default (or an event that might, with the passage of time or the
giving of notice or any of them constitute a default or event of default) under
the terms of, result in the termination of or loss under, any material asset of
the Stockholders, the Company or any Subsidiary, including any Permit (as
defined below), Intellectual Property (as defined below), indenture, mortgage or
any other contract, agreement or instrument to which any Stockholder, the
Company or any Subsidiary is a party or by which any Stockholder, the Company or
any Subsidiary or any of their assets may be bound or affected, (iii) result in
the creation, maturation or acceleration of any liability or obligation of the
Stockholders, the Company or any Subsidiary (or give to any other Person the
right to cause such a creation, maturation or acceleration ), (iv) violate any
Law or violate any judgment or order of any governmental body to which the
Stockholders, the Company or any Subsidiary is subject or by which any of their
respective assets may be bound or affected, or (v) result in the creation or
imposition of any Encumbrance upon any of the Company Stock or any asset of the
Company or any Subsidiary or give to any other Person any interest or right
therein.
2.16 CONDITION OF ASSETS. The buildings, fixtures, improvements,
machinery, equipment, tools, furniture, improvements and tangible personal
property of the Company and each Subsidiary are in good operating condition
(normal wear and tear excepted) and repair. Except as set forth on Schedule
2.16, the Company and each Subsidiary has good and marketable title to all of
its assets, free and clear of all liens and other encumbrances.
2.17 ENVIRONMENTAL MATTERS.
(a) DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Hazardous Substance" shall mean substances that are
defined or listed in, or otherwise classified pursuant to, any
applicable laws as "hazardous substances," "hazardous materials,"
"hazardous wastes"
16
or "toxic substances," or any other formulation intended to define,
list or classify substances by reason of deleterious properties such
as ignitability, corrosivity, reactivity, radioactivity,
carcinogenicity, reproductive toxicity or "EP toxicity," and
petroleum and drilling fluids, produced waters and other wastes
associated with the exploration, development, or production of crude
oil, natural gas or geothermal energy.
(ii) "Environmental Laws" shall mean all Laws relating to the
protection of human health, safety or the environment including: (x)
all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges,
releases or threatened releases of Hazardous Substances, chemical
substances, pollutants, contaminants or toxic substances, materials
or wastes, whether solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature; and (y) all requirements
pertaining to the protection of the health and safety of employees
or the public.
(iii) "Environmental Condition" shall mean the presence in,
on, under or about the Real Property (as defined below) or the
assets of the Company or any Subsidiary of any Hazardous Substance
which, if the presence of such Hazardous Substance was known, would
be reportable under any Environmental Law, or which could reasonably
be anticipated to require investigation or remediation pursuant to
any Environmental Law.
(b) ENVIRONMENTAL REPORTS. Schedule 2.17(b) contains a list of
each report, study or filing, of which the Company is aware, and which
relates to the use of Hazardous Substances upon the Real Property in the
operation of the business of the Company or any Subsidiary, any
Environmental Condition existing upon the Real Property or the compliance
of the business of the Company or any Subsidiary, or any Real Property
with any Environmental Laws. A copy of each item listed in Schedule
2.17(b) has been provided to U.S. Filter.
(c) COMPLIANCE WITH ENVIRONMENTAL LAWS; PERMITS. Except as
disclosed in Schedule 2.17(c), the business of
17
the Company and each Subsidiary and all Real Property and personal
property used or operated in connection with the operation of the business
of the Company and each Subsidiary is, and at all times in the past has
been, used or operated in compliance with all Environmental Laws. The
Company and each Subsidiary has obtained and presently maintain all
Permits (as defined below) and other governmental authorizations required
to operate the business of the Company and such Subsidiaries in compliance
with all Environmental Laws, except where such failure would not cause a
material adverse effect on the Company in excess of US$100,000.
(d) ENVIRONMENTAL CONDITIONS; ACTION BY GOVERNMENTAL AGENCY.
Except as disclosed in Schedule 2.17(d), no Environmental Condition exists
upon the Real Property and no investigation, inquiry or other proceeding
is pending or, to the knowledge of the Company, threatened by any
governmental entity with respect to the Real Property or the business of
the Company or any Subsidiary and relating to any actual or alleged
Environmental Condition or failure to comply with any Environmental Law
where such failure would cause a material adverse effect on the Company in
excess of US$100,000.
(e) TREATMENT, STORAGE OR DISPOSAL SITES. Schedule 2.17(e),
contains a list of all Hazardous Substance or waste treatment, storage or
disposal sites used in the operation of the business of the Company or any
Subsidiary, which list identifies the type of Hazardous Substances or
wastes that are treated, stored or disposed of at each site and estimates
of the annual amount of Hazardous Substances or waste sent to each site.
None of the sites listed is the subject of federal, state, or local
enforcement action or other investigation that may lead to Claims against
the Company or any Subsidiary for cleanup costs remedial action, damages
to natural resources or for personal injury or property damage. Schedule
2.17(e) contains a list of all parties engaged to transport Hazardous
Substances or wastes to such treatment, storage or disposal sites.
2.18 BROKERAGE. No broker or finder has acted directly or indirectly for
the Stockholders, the Company or any Subsidiary in connection with this
Agreement or the Other Agreements or the transactions contemplated hereby or
thereby, and no broker or finder is entitled to any brokerage or finder's fee or
other commission in respect thereof based in any way on agreements, arrangements
or undertakings made by or on behalf of the Company, the Subsidiaries and the
Stockholders.
2.19 RESTRICTIVE DOCUMENTS. Neither the Company nor
18
any Subsidiary is subject to, or a party to, any charter, bylaw, mortgage,
lien, lease, license, Permit, instrument, order, judgment or decree, or to
the knowledge of the Company any other agreement, contract or restriction
of any kind or character not disclosed in the Schedules, which would
prevent consummation of the transactions contemplated by this Agreement or
the Other Agreements, compliance by the Company with the terms, conditions
and provisions hereof or the continued operation of the businesses of
Company and the Subsidiaries, taken as a whole, after the date hereof or
the Closing Date on substantially the same basis as heretofore operated or
which would restrict the ability of the Company or any Subsidiary to
acquire any property or conduct business of the nature currently conducted
by the Company or any Subsidiary.
2.20 BOOKS AND RECORDS. The Company has all of the material records,
systems, controls, data or information for the Company and the Subsidiaries
recorded, stored, maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not and including all means of access thereto
and therefrom) under the exclusive ownership and direct control of the Company.
2.21 INVENTORY. All of the finished goods inventory of the Company and
each Subsidiary is in good, merchantable and usable condition and is salable in
the ordinary course of business within a reasonable time. None of the Company's
or any Subsidiary's inventory has been consigned to others or is on consignment
from others.
2.22 RECEIVABLES. Schedule 2.22 discloses all trade and other accounts
receivable of the Company and each Subsidiary ("Receivables") outstanding as of
the date of this Agreement presented on an aged basis and separately identifies
the name of each account debtor and the total amount of each related Receivable.
All Receivables, whether reflected on the Company Financial Statements,
disclosed on Schedule 2.22 hereto or created after the date of the Company
Financial Statements, arose from bona fide sale transactions of the Company or a
Subsidiary, and to the knowledge of the Company no portion of any Receivable is
subject to counterclaim, defense or set-off or is otherwise in dispute, except
for normal cash and trade discounts. Except to the extent of the recorded
reserve for doubtful accounts, all of the Receivables are collectible in the
ordinary course of business using commercially reasonable efforts, except for
contract reserves and retainages.
2.23 BANK ACCOUNTS. Set forth in Schedule 2.23 is an accurate and complete
list showing the name and address of each bank in which the Company and each
Subsidiary has an account or
19
safe deposit box, the number of any such account or any such box and the names
of all Persons authorized to draw thereon or to have access thereto, except for
such xxxxx cash accounts which currently and typically have less than US$10,000
in available funds.
2.24 REAL PROPERTY. Schedule 2.24 discloses and summarizes all real
properties currently or formerly owned, used or leased by the Company or any
Subsidiary or in which the Company or any Subsidiary has an interest
(collectively, the "Real Property") and identifies the record title holder of
all of the Real Property. The Company or the applicable Subsidiary has good and
marketable fee simple title to (or a leasehold interest in, as the case may be)
all Real Property shown as owned by it on Schedule 2.24, free and clear of all
Encumbrances, other than (i) easements, covenants, rights-of-way and other
encumbrances or restrictions of record, (ii) zoning restrictions, and (iii)
liens for current taxes not yet due, provided that any such Encumbrance in
clauses (i), (ii) and (iii) does not either materially adversely affect the
value of the Real Estate or prohibit or interfere with the operations of the
business of the Company or any Subsidiary. The Company or the applicable
Subsidiary has the right to quiet enjoyment of all Real Property in which it
holds a leasehold interest for the full term, including all renewal rights, of
the lease or similar agreement relating thereto. Copies of all title insurance
policies written in favor of the Company or any Subsidiary and all surveys
relating to the Real Property owned or leased by the Company or any Subsidiary
have been delivered to U.S. Filter. All structures and other improvements on all
Real Property owned by the Company or any Subsidiary are within the lot lines
and do not encroach on the properties of any other Person, and the use and
operation of all Real Property conform to all applicable building, zoning,
safety and subdivision Laws, Environmental Laws and other Laws, and all
restrictive covenants and restrictions and conditions affecting title. Neither
the Company nor any Subsidiary has received any written or oral notice of
assessments for public improvements or condemnation against any Real Property.
2.25 EMPLOYEE BENEFITS.
(a) BENEFIT PLANS; COMPANY PLANS. Schedule 2.25 discloses all
written and unwritten "employee benefit plans" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder ("ERISA"), and any other
written and unwritten profit sharing, pension, savings, deferred
compensation, fringe, benefit, insurance, medical, medical reimbursement,
life, disability, accident, post-retirement health or welfare benefit,
stock option, stock purchase, sick pay, vacation, employment, severance,
20
termination or other plan, agreement, contract, policy, trust fund or
arrangement (each, a "Benefit Plan"), whether or not funded and whether or
not terminated, (i) maintained or sponsored by the Company or any
Subsidiary, or (ii) with respect to which the Company or any Subsidiary
(or the Stockholders with respect to the Company) has or may have
liability or is obligated to contribute, or (iii) that otherwise covers
any of the current or former employees of the Company or any Subsidiary or
their beneficiaries, or (iv) as to which any such current or former
employees or their beneficiaries participated or were entitled to
participate or accrue or have accrued any rights thereunder (each, a
"Company Plan").
(b) COMPANY GROUP MATTERS; FUNDING. Neither the Company nor any
corporation that may be aggregated with the Company under Sections 414(b),
(c), (m) or (o) of the IRC (the "Company Group") has any obligation to
contribute to or any direct or indirect liability under or with respect to
any Benefit Plan of the type described in Sections 4063 and 4064 of ERISA
or Section 413(c) of the IRC. Neither the Company nor any Subsidiary has
any liability, and after the Closing the Company and each Subsidiary will
not have any liability, with respect to any Benefit Plan of any other
member of the Company Group, whether as a result of delinquent
contributions, distress terminations, fraudulent transfers, failure to pay
premiums to the United States Pension Benefit Guaranty Corporation,
withdrawal liability or otherwise. No accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the IRC exists nor has
any funding waiver from the IRS been received or requested with respect to
any Company Plan or any Benefit Plan of any member of the Company Group
and no excise or other tax is due or owing because of any failure to
comply with the minimum funding standards of the IRC or ERISA with respect
to any of such plans.
(c) COMPLIANCE. Each of the Company Plans and all related trusts,
insurance contracts and funds have been created, maintained, funded and
administered in all respects in compliance with all applicable Laws and in
compliance with the plan document, trust agreement, insurance policy or
other writing creating the same or applicable thereto. No Company Plan is
or is proposed to be under audit or investigation, and no completed audit
of any Company Plan has resulted in the imposition of any tax, fine or
penalty.
(d) QUALIFIED PLANS. Schedule 2.25 discloses each Company Plan that
purports to be a qualified plan under Section 401(a) of the IRC and exempt
from United States federal income tax under Section 501(a) of the IRC (a
21
"Qualified Plan"). With respect to each Qualified Plan, a determination
letter (or opinion or notification letter, if applicable) has been
received from the IRS that such plan is qualified under Section 401(a) of
the IRC and exempt from federal income tax under Section 501(a) of the
IRC. No Qualified Plan has been amended since the date of the most recent
such letter. No member of the Company Group, nor any fiduciary of any
Qualified Plan, nor any agent of any of the foregoing, has done anything
that would adversely affect the qualified status of a Qualified Plan or
the qualified status of any related trust.
(e) NO DEFINED BENEFIT PLANS. No Company Plan is a defined benefit
plan within the meaning of Section 3(35) of ERISA (a "Defined Benefit
Plan"). No Defined Benefit Plan sponsored or maintained by any member of
the Company Group has been terminated or partially terminated after
September 1, 1974, except as set forth on Schedule 2.25. Each Defined
Benefit Plan identified as terminated on Schedule 2.25 has met the
requirement for standard termination of single-employer plans contained in
Section 4041(b) of ERISA. During the five year period ending on the
Closing Date, no member of the Company Group has transferred a Defined
Benefit Plan to a corporation that was not, at the time of transfer,
related to the transferor in any manner described in Sections 414(b), (c),
(m) or (o) of the IRC.
(f) MULTIEMPLOYER PLANS. No Company Plan is a multiemployer plan
within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a
"Multiemployer Plan"). No member of the Company Group has withdrawn from
any Multiemployer Plan or incurred any withdrawal liability to or under
any Multiemployer Plan. No Company Plan covers any employees of any member
of the Company Group in any foreign country or territory.
(g) PROHIBITED TRANSACTIONS; FIDUCIARY DUTIES; POST-RETIREMENT
BENEFITS. No prohibited transaction (within the meaning of Section 406 of
ERISA and Section 4975 of the IRC) with respect to any Company Plan exists
or has occurred that could subject the Company to any liability or tax
under Part 5 of Title I of ERISA or Section 4975 of the IRC. No member of
the Company Group, nor any administrator or fiduciary of any Company Plan,
nor any agent of any of the foregoing, has engaged in any transaction or
acted or failed to act in a manner that will subject the Company or any
Subsidiary to any liability for a breach of fiduciary or other duty under
ERISA or any other applicable Law. With the exception of the requirements
of Section 4980B of the IRC, no post-retirement benefits are provided
under any Company Plan that is a welfare benefit plan as described in
ERISA Section 3(1).
22
(h) VESTING OF EMPLOYEE OPTIONS. The consummation and Closing of
this Agreement will not trigger any acceleration of the vesting schedule
in any option agreement held by any employee of the Company.
2.26 INSURANCE. Set forth in Schedule 2.26 is a complete list of insurance
policies which the Company and each Subsidiary maintains with respect to the
business or the operations, properties or employees of the Company and each
Subsidiary. The Company and each Subsidiary has paid all premiums due under said
policies and such policies are in full force and effect.
2.27 INSIDER INTERESTS. Except as set forth on Schedule 2.27, no Related
Party has any material interest in any property, real or personal, tangible or
intangible of the Company or any Subsidiary, is indebted or otherwise obligated
to the Company or any Subsidiary (other than for employee reimbursement arising
in the ordinary course of business), has any contractual relationship with the
Company or any Subsidiary (other than as an employee of the Company or any
Subsidiary) or is an officer, director, employee or consultant of a competitor
of the Company or any Subsidiary. Except as set forth on Schedule 2.27, neither
the Company nor any Subsidiary is indebted or otherwise obligated to any such
Person, except for amounts due under normal arrangements applicable to all
employees generally as to salary or reimbursement of ordinary business expenses
not unusual in amount or significance. No Related Party will at any time after
the Closing for any reason, directly or indirectly, be or become entitled to
receive any payment or transfer of money or other property of any kind from the
Company or any Subsidiary, and the Company and each Subsidiary will not at any
time after Closing for any reason, directly or indirectly, be or become subject
to any obligation of any Related Party.
2.28 PERMITS. The Company and each Subsidiary holds all "Permits" (defined
to include any permit, certificate, license, franchise, privilege, approval,
registration or authorization required under any Law in connection with the
operation of its assets and business). All material Permits of the Company are
listed on Schedule 2.28. Each Permit is valid, subsisting and in full force and
effect. The Company and each Subsidiary is in compliance with and has fulfilled
and performed its obligations under each Permit, and, to the knowledge of the
Company, no event or condition or state of facts exists (or would exist upon the
giving of notice or lapse of time or any of them) that could constitute a breach
or default under any Permit. Neither the Company nor any Subsidiary has received
any notice of non-renewal of any Permit.
23
2.29 INTELLECTUAL PROPERTY. Schedule 2.29 discloses all of the trademark
and service xxxx rights, applications and registrations, trade names, fictitious
names, service marks, logos and brand names, copyrights, copyright applications,
letters patent, patent applications and licenses of any of the foregoing owned
or used by the Company or any Subsidiary in or applicable to its business. The
Company and each Subsidiary has the entire right, title and interest in and to,
or has the exclusive perpetual royalty-free right to use, the intellectual
proprietary rights disclosed on Schedule 2.29 and all other processes, know-how,
show-how, formulae, trade secrets, inventions, discoveries, improvements,
blueprints, specifications, drawings, designs and other proprietary rights
necessary or applicable to or advisable for use in the Company's and each
Subsidiary's business ("Intellectual Property"), free and clear of all
Encumbrances. Schedule 2.29 separately discloses all Intellectual Property under
license. The Intellectual Property is valid and not the subject of any
interference, opposition, reexamination or cancellation. To the knowledge of the
Company, no Person is infringing upon nor has any Person misappropriated any
Intellectual Property which infringement or violation would have a material
adverse impact upon the Company or any Subsidiary. To the knowledge of the
Company neither the Company nor any Subsidiary is infringing upon the
intellectual property rights of any other Person.
2.30 DISCLOSURE. No representation, warranty or written statement or
certificate made or furnished by the Company in this Agreement, any Other
Agreement, any Schedule or Exhibit or any material contract of the Company or
any Subsidiary or in any written statement or certificate furnished to U.S.
Filter pursuant to the express terms hereof, and including the Company's
Preliminary Prospectus dated February 18, 1997 (as of such date), contains or
will contain any misstatement of a material fact or omits or will omit to state
a material fact necessary in order of make the representations, warranties and
statements contained herein and therein not misleading in light of the
circumstances in which they are made.
2.31 INVESTMENT REPRESENTATION.
(a) Each Stockholder is an "accredited investor," as such term is defined
in Rule 501 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). The Stockholders are acquiring the Acquisition Shares
for their own account with the intention of holding the Acquisition Shares
for purposes of investment, and not as a nominee or agent for any other
party, or with a view to the resale or distribution of any of the
Acquisition
24
Shares, and the Stockholders have no intention of selling the Acquisition
Shares or any interest therein in violation of the federal securities Laws
or any applicable state securities Laws.
(b) The Company represents that is has forwarded to each Company
Stockholders all information provided to it by U.S. Filter regarding
investment in the Acquisition Shares and that the Company Stockholders
have had the opportunity to ask questions of and receive answers from
representatives of U.S. Filter concerning U.S. Filter and the Acquisition
Shares and to obtain certain additional information requested of U.S.
Filter. The Company represents that each Company Stockholder is acquiring
the Acquisition Shares for his or her own account with the intention of
holding the Acquisition Shares for purposes of investment, and not as a
nominee or agent for any other party, or with a view to the resale or
distribution of any of the Acquisition Shares, and the Company
Stockholders have no intention of selling the Acquisition Shares or any
interest therein in violation of the federal securities Laws or any
applicable state securities Laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF U.S. FILTER
U.S. Filter hereby represents and warrants as follows:
3.1 INCORPORATION, STOCK, ETC. (a) Each of U.S. Filter and Acquisition
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, (b) each of U.S. Filter and
Acquisition Subsidiary has full corporate power and authority to carry on its
business as it is now being conducted, (c) the authorized capital stock of U.S.
Filter consists of 75,000,000 shares of common stock, and the authorized capital
stock of Acquisition Subsidiary consists of 300,000,000 shares of common stock,
(d) the Acquisition Shares have been or, when issued to the Company Stockholders
will be, duly authorized and validly issued and are or, when issued to the
Company Stockholders will be, fully paid and nonassessable, (e) none of the
Acquisition Shares have been issued, or when issued to the Company Stockholders
will be done so, in violation of any preemptive or contractual or other rights
of any Person, (f) all of the Acquisition Shares have been issued, or when
issued to the Company Stockholders will be done so, in material compliance with
applicable securities Laws, and (g) there are no stockholders' voting trusts or
similar agreements which will be in effect with respect to the Acquisition
Shares at the Closing Date. As of December 31, 1997, there were 97,122,297
outstanding shares of U.S. Filter Common Stock.
25
3.2 AUTHORITY; BINDING EFFECT; AND CONSENTS. (a) The execution, delivery
and performance by U.S. Filter and Acquisition Subsidiary of this Agreement and
the Other Agreements and the consummation of the transactions contemplated
hereby and thereby by U.S. Filter and Acquisition Subsidiary have been duly and
validly authorized by all necessary corporate action, (b) U.S. Filter and
Acquisition Subsidiary have the corporate power and authority to enter into this
Agreement and the Other Agreements and to carry out the transactions
contemplated hereby and thereby and (c) each of this Agreement and the Other
Agreements is a valid and binding obligation of U.S. Filter and Acquisition
Subsidiary (to the extent U.S. Filter and Acquisition Subsidiary are parties
thereto), enforceable against U.S. Filter and Acquisition Subsidiary in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally or by equitable remedies.
3.3 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Other than any
filing required under the HSR Act, no consent, approval or authorization of, or
declaration, filing or registration by, U.S. Filter or Acquisition Subsidiary
with any governmental or regulatory authority is required in connection with the
execution and delivery by U.S. Filter or Acquisition Subsidiary of this
Agreement and the Other Agreements and the consummation of the transactions
contemplated hereby and thereby.
3.4 BROKERAGE. No broker or finder has acted directly or indirectly for
U.S. Filter in connection with this Agreement or the Other Agreements or the
transactions contemplated hereby or thereby, and no broker or finder is entitled
to any brokerage or finder's fee or other commission in respect thereof based in
any way on agreements, arrangements or undertakings made by or on behalf of U.S.
Filter.
3.5 CONTINUATION OF COMPANY BUSINESS. It is the present intention of U.S.
Filter to continue at least one significant historic business line of the
Company, or to use at least a significant portion of the Company's historic
business assets in a business, in each case, within the meaning of United States
Treasury Regulation ss.1.368-1(d).
3.6 PUBLIC FILINGS. U.S. Filter has timely made all necessary filings
required to be made with the Securities and Exchange Commission since
the date of its last quarterly filing on Form 10-Q.
26
ARTICLE IV
COVENANTS WITH RESPECT TO CONDUCT OF BUSINESS
OF THE COMPANY PRIOR TO CLOSING
4.1 ACCESS TO THE COMPANY. The Company will authorize and permit U.S.
Filter and its representatives (which term shall be deemed to include its
independent accountants and counsel), from the date hereof to the Closing Date,
to have access during normal business hours to all of the Company's and each
Subsidiary's properties, books, records, operating instructions and procedures,
tax returns and all other information with respect to the business of the
Company and each Subsidiary as U.S. Filter may from time to time request, and to
make copies of such books, records and other documents and to discuss the
business of the Company and each Subsidiary with such third persons, including,
without limitation, its directors, officers, employees, accountants, counsel,
suppliers, customers and creditors, as U.S. Filter considers necessary or
appropriate for the purposes of familiarizing itself with the business of the
Company and each Subsidiary, obtaining any necessary approvals of or Permits for
the transactions contemplated by this Agreement and the Other Agreements and
conducting an evaluation of the organization and business of the Company and
each Subsidiary.
4.2 COMPANY MATERIAL ADVERSE CHANGES
(a) From the date hereof to the Closing Date, the Company and each
of the Stockholders will promptly notify U.S. Filter of any event of which
the Company or any of the Stockholders obtains knowledge which has had or
has a material adverse effect on the business of the Company or any
Subsidiary or any other event of which the Company or Stockholders obtain
knowledge which if known as of the date hereof would have been required to
be disclosed to U.S. Filter pursuant to Article II of this Agreement.
(b) From the date hereof to the Closing Date, the Company will make
available to U.S. Filter (i) as soon as available, copies of all material
reports, renewals, filings, certificates, statements and other documents
filed with any governmental entity; (ii) monthly unaudited balance sheets,
statements of operations and cash flow and changes in stockholders' equity
for the Company; and (iii) such other reports theretofore prepared by the
Company as U.S. Filter may reasonably request relating to the Company or
any Subsidiary.
4.3 CONDUCT OF BUSINESS. From the date hereof to the Closing Date, the
Company shall not do and shall cause each Subsidiary not to do the following
without the prior written
27
consent of U.S. Filter, which consent may not be unreasonably withheld or
delayed:
(a) conduct its business except in the ordinary course consistent
with prudent industry practice;
(b) terminate or fail to renew any existing insurance coverage;
(c) terminate or fail to renew or preserve any material Permits held
in its name or the name of any of its officers;
(d) except in the ordinary course of business, incur or agree to
incur any obligation or liability (absolute or contingent) that requires
payment by the Company or the applicable Subsidiary of more than US$10,000
in any specific case or more than US$25,000 in the aggregate;
(e) make any loan, guaranty or other extension of credit, or enter
into any commitment to make any material loan, guaranty or other extension
of credit, to or for the benefit of any director, officer, employee,
Company Stockholder or any of their respective affiliates;
(f) grant any general increase in the compensation of any officer,
director or employee of the Company or the applicable Subsidiary
(including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) or any general increase in the
compensation payable or to become payable to any officer, director or
employee of the Company or the applicable Subsidiary other than in the
ordinary course of business (such as pursuant to the Company's or the
Subsidiary's customary annual salary and bonus reviews);
(g) enter into any employment or consulting contract or arrangement
that is not terminable at will and without penalty or continuing
obligation;
(h) sell, transfer, mortgage, encumber or otherwise dispose of any
assets or any liabilities, except (i) for dispositions of property with a
value of less than US$10,000, (ii) in the ordinary course of business or
(iii) as contemplated by this Agreement;
(i) issue, sell, redeem or acquire for value, or agree to do so, any
debt obligations or equity securities of the Company or any Subsidiary;
(j) declare, issue, make or pay any dividend or other
28
distribution of assets, whether consisting of money, or the personal
property, Real Property or other thing of value, to its stockholders, or
split, combine, dividend, distribute, repurchase or reclassify any shares
of its equity securities, except for scheduled payments of stock dividends
on outstanding Company Preferred Stock;
(k) change or amend its charter documents or bylaws;
(l) make any capital expenditures or commitments with respect
thereto aggregating more than US$100,000, except as required by any
existing agreements to which the Company or the Subsidiary is bound; or
(m) make special or extraordinary payments in a material amount
(1.e., payments not in the ordinary course of business) to any Person
except as contemplated by this Agreement;
(n) make any investment, by purchase, contributions to capital,
property transfers, or otherwise, in any other Person;
(o) dispose of or permit to lapse any rights to the use of any
intangible property or dispose of or disclose any intangible property not
a matter of public knowledge;
(p) make, change or revoke any tax election or make any agreement or
settlement with any taxing authority;
(q) compromise or otherwise settle any Claims, or adjust any
assertion or Claim of a deficiency in taxes (or interest thereon or
penalties in connection therewith) in any case, before furnishing a copy
to U.S. Filter and affording U.S. Filter an opportunity to consult with
respect thereto; or make any tax election or change any method or period
of accounting; or
(r) agree to or make any commitment to take any action prohibited by
this Section 4.3 or to take or omit to take any other action which is
reasonably likely to have a material and adverse impact on the
consolidated financial condition or operations of the Company and the
Subsidiaries taken as a whole.
4.4 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice
to U.S. Filter of the following: (i) the existence, occurrence, or failure to
occur, of any event that would or does have a likelihood of causing any
representation or warranty contained in this Agreement and made by the Company
or the Stockholders to be untrue or inaccurate in any material respect at any
time prior to the Closing Date and (ii) any failure of the Company or any
Stockholder, as the case may be, to comply with or satisfy, in any material
29
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement.
4.5 PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE. During the period
beginning on the date hereof and ending on the Closing Date, the Company will
use its good faith efforts to preserve the business of the Company and the
Subsidiaries and to preserve the goodwill of customers, suppliers and others
having business relations with the Company and the Subsidiaries.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 ACQUISITION PROPOSALS. Neither the Company nor any Stockholder shall
(nor shall the Company permit any Subsidiary or any of its affiliates to)
directly or indirectly, solicit, initiate or encourage any inquiries or the
making of any proposals from, engage or participate in any negotiations or
discussions with, provide any confidential information or data to, or enter into
(or authorize) any agreement or agreement in principle with any Person or
announce any intention to do any of the foregoing, with respect to any offer or
proposal to acquire all or any substantial part of the assets, properties, or
the business of the Company or any Subsidiary or the Company Stock or capital
stock of any Subsidiary, whether by merger, purchase of capital stock or assets
or otherwise.
5.2 REGISTRATION OF ACQUISITION SHARES.
(a) The Merger Shares shall be issued as a private placement of such
shares from U.S. Filter to the Company Stockholders. U.S. Filter shall use
its best efforts to register the Merger Shares for resale under the
Securities Act. The "Merger Shares" means all shares of U.S. Filter Common
Stock issued in the Merger to the Company Stockholders. With respect to
the Merger Shares (which term shall include all shares or other securities
received on account of or in exchange for such shares, including as a
result of any reorganization, merger, stock split, or similar event )
(collectively the "Acquisition Shares") to be registered, U.S. Filter
shall take the following actions:
(i) Prepare, file and use its best efforts to cause to
become effective by the earlier to occur of (i) June 1, 1998, or
(ii) the public announcement of the results of operations and
earnings of U.S. Filter, including the Company, for the fiscal year
ended
30
March 31, 1998, a Registration Statement on Form S-3 pursuant
to Rule 415 under the Securities Act (the "Registration Statement")
to register such Acquisition Shares. U.S. Filter shall file such
registration statement promptly upon filing by U.S. Filter of a
report on Form 8-K, which report shall contain all appropriate
financial information of the Company. U.S. Filter shall keep such
registration effective as to any Company Stockholder until the first
to occur of (1) the date on which the Acquisition Shares held by
such Company Stockholder are freely tradeable to the public pursuant
to Rule 144 promulgated under the Securities Act in any single three
month period, or (2) the second anniversary of the date of the
effectiveness of such Registration Statement;
(ii) Prepare and file with the Commission such
amendments and supplements to the Registration Statement as may be
necessary (1) to update and keep such Registration Statement
effective as provided in Section 5.2(a)(i) above, (2) to comply with
the provisions of the Securities Act with respect to the disposition
of all Acquisition Shares covered by the Registration Statement and
(3) to reflect a modification in the manner of distribution of such
Acquisition Shares. Notwithstanding anything else to the contrary
contained herein, U.S. Filter shall not be required to disclose in
any amendment or supplement to a registration statement or otherwise
(x) any confidential information concerning any matter which is the
subject of a notice given under Section 5.2(a)(v) as to which U.S.
Filter has a bona fide interest in withholding disclosure, or (y)
historical financial statements or pro forma financial information
required by Regulation S-X of the Commission in connection with a
business acquisition or disposition prior to the date when such
information would otherwise be required to be filed with the
Commission (including extensions pursuant to Item 7(a)(4) of Form
8-K);
(iii) Furnish to the NYSE and the Company Stockholders
such numbers of copies of any prospectus included in the
Registration Statement, including any preliminary prospectus, in
conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to
facilitate the disposition of such Acquisition Shares owned by them;
(iv) Use its best efforts to register and qualify the
Acquisition Shares covered by the
31
Registration Statement under such other securities or blue sky laws
of such jurisdictions as shall be reasonably requested by the
Company Stockholders, provided that U.S. Filter shall not be
required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions; and
(v) Notify each Company Stockholder at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which
the prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which the prospectus is used, and, except for a
period not to exceed 60 days in each instance where U.S. Filter has
a bona fide corporate interest in withholding disclosure or the time
period for filing with the Commission information referred to in
Section 5.2(a)(ii)(y) has not expired, promptly prepare and furnish
to such Company Stockholders a supplement or amendment to such
prospectus, or otherwise update such prospectus through the filing
of a Current Report on Form 8-K or otherwise, so that such
prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(b) Notwithstanding the foregoing, U.S. Filter shall not be
obligated to take any action pursuant to this Section 5.2:
(i) in any particular jurisdiction in which U.S. Filter
would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless
U.S. Filter is already subject to service in such jurisdiction and
except as may be required by the Securities Act; or
(ii) if, at such time, the Acquisition Shares held by
the Company Stockholders are freely tradeable without regard to any
volume restrictions under Rule 144 promulgated under the Securities
Act.
(c) All expenses incurred in connection with
32
registrations pursuant to this Section 5.2, including, without limitation,
all registration, printing, qualification and filing fees, fees and
disbursements of counsel for the U.S. Filter ("Registration Expenses"),
shall be borne by U.S. Filter. All costs and expenses applicable to the
registration, other than Registration Expenses, including without
limitation, underwriting discounts, selling commissions and stock transfer
taxes applicable to the Acquisition Shares registered by the Company
Stockholders, fees and disbursements of counsel for the Company
Stockholders shall be borne by the Company Stockholders.
(d) The obligations of U.S. Filter under this Section 5.2 shall not
be transferable by the Company Stockholders except in connection with a
transfer of the Acquisition Shares to a Company Stockholder's decedents or
spouse (or former spouse in connection with dissolution proceedings) on
death or otherwise, or to a trust for their benefit or to an affiliate of
such Company Stockholder in blocks of not less than 100,000 shares of U.S.
Filter Common Stock.
(e) U.S. Filter hereby agrees to indemnify and hold harmless each
Company Stockholder, and each such Company Stockholder's officers,
directors and employees, against any losses, claims, damages or
liabilities, joint or several, to which such Company Stockholder and/or
person or entity may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in any
registration statement filed pursuant to this Section 5.2, in any
preliminary prospectus or final prospectus contained therein or any
amendment or supplement thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading or (iii) any failure or
alleged failure of U.S. Filter to comply with any applicable statute, rule
or regulation in connection with the registration statement or the
offering, and will reimburse such Company Stockholder and/or such person
or entity for any legal or other expenses reasonably incurred by such
Company Stockholder and/or such person or entity as such expenses are
incurred in connection with investigating or defending any such loss,
claim, damage, liability or proceeding; PROVIDED, that U.S. Filter will
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, said
33
preliminary or final prospectus or said amendment or supplement in
reliance upon and in strict conformity with written information furnished
by such Company Stockholder specifically for use in the preparation
thereof.
(f) Each Company Stockholder, pursuant to the terms of Article VII
hereof, hereby agrees to indemnify and hold harmless U.S. Filter, and each
other person, if any, who controls U.S. Filter within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint
or several, to which U.S. Filter or such controlling person may become
subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or proceedings in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained, on the effective date thereof, in any
registration statement filed pursuant to this Section 5.2, in any
preliminary prospectus or final prospectus contained therein, or in any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and will reimburse U.S. Filter and each such controlling
person for any legal or other expenses reasonably incurred by U.S. Filter
or such controlling person as such expenses are incurred in connection
with investigating or defending any such loss, claim, damage, liability or
proceeding; PROVIDED that each Company Stockholder will be liable in any
such case only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, said preliminary or final prospectus or said amendment or
supplement in reliance upon and in strict conformity with written
information furnished by such Company Stockholder in his capacity as such
specifically for use in the preparation thereof.
34
5.3 RESTRICTIONS ON RESALE OF ACQUISITION SHARES. Each Company Stockholder
(and any assignee of the Acquisition Shares) shall not sell the Acquisition
Shares in the public market, unless it does so by or through Xxxxxxx Xxxxx
Xxxxxx, Inc., Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation, Deutsche
Xxxxxx Xxxxxxxx or BT Xxxx Xxxxx or such other nationally recognized investment
banking firm satisfactory to U.S. Filter in its reasonable discretion, and,
further the Company Stockholders shall sell the Acquisition Shares in the public
market in an orderly fashion as will not be materially disruptive to the market
for U.S. Filter Common Stock. The Company Stockholders shall not transfer the
Acquisition Shares (other than in the public market) to any Person without first
requiring that Person to be bound to U.S. Filter by the provisions of this
Section.
5.4 POOLING-OF-INTERESTS. The Company and each Company Stockholder shall
use its or his reasonable efforts to take, and the Stockholders shall use their
reasonable efforts to cause the Company to take, all actions reasonably
necessary to allow the Merger to be accounted for as a pooling-of-interests.
Each Company Stockholder agrees that he or she will use his or her reasonable
efforts to comply with the requirements of the Commission concerning risk
sharing in business combinations accounted for as pooling-of-interests, and
pursuant thereto will not sell or in any other way reduce his or her risk
relative to any shares of U.S. Filter Common Stock received in the Merger until
such time as financial results covering at least 30 days of post-closing
combined operations of U.S. Filter have been published.
5.5 XXXX-XXXXX-XXXXXX. The parties agree to use their reasonable efforts
to take, and the Stockholders shall use their reasonable efforts to cause the
Company to take, all actions necessary to comply with the HSR Act and to make
all necessary filings with applicable authorities thereunder.
5.6 NOTIFICATION OF MATERIAL ADVERSE CHANGE. From the date hereof to the
Closing Date, U.S. Filter will promptly notify the Stockholders of any event of
which U.S. Filter obtains knowledge which has had or has a material adverse
effect on the business of U.S. Filter or any other event of which U.S. Filter
obtains knowledge which if known as of the date hereof would have been required
to be disclosed to the Stockholders pursuant to Article III of this Agreement.
35
5.7 NONCOMPETITION.
(a) RESTRICTIONS ON COMPETITIVE ACTIVITIES. Each Stockholder (it
being expressly understood that the term Stockholder in this Section
5.7(a) does not include any affiliates of BT Capital Partners, Inc.)
agrees that after the Closing U.S. Filter and the Company shall be
entitled to the goodwill and going concern value of the business of the
Company and the Subsidiaries (the "Business") and to protect and preserve
the same to the maximum extent permitted by Law. Each Stockholder also
acknowledges that the Stockholders' management contributions to the
Business have been uniquely valuable and involve proprietary information
that would be competitively unfair to make available to any competitor of
the Company or any Subsidiary. For these and other reasons and as a
material inducement to U.S. Filter to enter into this Agreement, each
Stockholder hereby agrees that for a period (the "Noncompetition Period")
ending on the later of (i) three years after the date hereof and (ii) with
respect to Xxxxx X. Xxxxxxx, three years after he is no longer employed by
the Company or any Subsidiary, each Stockholder will not, directly or
indirectly, for such Stockholder's own benefit or as agent for another
carry on or participate in the ownership, management or control of, or the
financing of, or be employed by, or consult for or otherwise render
services to, or allow such Stockholder's name or reputation to be used in
or by any other present or future business enterprise that competes with
U.S. Filter, the Company or any Subsidiary in activities in which the
Company or any Subsidiary is engaged as of the Closing Date, including
without limitation, in those countries, states, counties and cities in
which the Company or any Subsidiary has conducted business prior to the
date hereof as set forth on Schedule 5.7 or conducts business prior to the
termination of Xxxxx Xxxxxxx'x employment with the Company or any
Subsidiary for so long as U.S. Filter or any person entitled to or
acquiring ownership of the goodwill of the Business or the Acquisition
Shares through U.S. Filter carries on a like business therein. In
addition, each Stockholder agrees that such Stockholder shall not,
directly or indirectly, solicit or have any other contact with any
customers of the Company, any Subsidiary or any affiliates or associates
of such customers until the end of the Noncompetition Period, other than
on behalf of the Company or a Subsidiary. U.S. Filter and each Stockholder
agree that the restrictions contained in this Section 5.7 are a material
inducement to U.S. Filter to enter this Agreement but that no other
separate compensation or consideration is being paid with respect to the
provisions contained in this Section 5.7.
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(b) EXCEPTIONS. Nothing contained in Section 5.7(a) relating to
noncompetition shall limit the right of any Stockholder as an investor to
continue to hold current investments (contingent upon full disclosure to
U.S. Filter in the attached Schedule 5.7(b)) and to make further
investments in securities of any corporation or limited partnership that
is registered on a national securities exchange or admitted to trading
privileges thereon or actively traded in a generally recognized
over-the-counter market, provided such Stockholder's equity interest
therein does not exceed 2% of the outstanding shares or interests in such
corporation or partnership.
(c) RESTRICTIONS ON SOLICITING EMPLOYEES. In addition, to protect
U.S. Filter against any efforts by any Stockholder to cause employees of
the Company or any Subsidiary to terminate their employment, each
Stockholder agrees that until the end of the Noncompetition Period, each
Stockholder will not directly or indirectly (i) induce any employee of the
Company or any Subsidiary to leave the Company or such Subsidiary or to
accept any other employment or position, or (ii) assist any other entity
in hiring any such employee.
(d) SPECIAL REMEDIES AND ENFORCEMENT. Each Stockholder recognizes
and agrees that a breach by such Stockholder of any of the covenants set
forth in this Section 5.7 could cause irreparable harm to U.S. Filter,
that U.S. Filter's remedies at law in the event of such breach would be
inadequate, and that, accordingly, in the event of such breach a
restraining order or injunction or both may be issued against such
Stockholder, in addition to any other rights and remedies which are
available to U.S. Filter. If this Section 5.7 is more restrictive than
permitted by the Laws of the jurisdiction in which U.S. Filter seeks
enforcement hereof, this Section 5.7 shall be limited to the extent
required to permit enforcement under such Laws. Without limiting the
generality of the foregoing, the parties intend that the covenants
contained in the preceding portions of this Section 5.7 shall be construed
as a series of separate covenants, one for each county and city or other
location specified. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms. If, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants
deemed included in this Section 5.7, then such unenforceable covenant
shall be deemed eliminated from these provisions for the purpose of those
proceedings to the extent necessary to permit the remaining separate
covenants to be enforced.
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ARTICLE VI
CONDITIONS OF PURCHASE
6.1 GENERAL CONDITIONS. The obligations of the parties to effect the
Merger shall be subject to the following conditions unless waived in writing by
all parties:
(a) NO ORDERS; LEGAL PROCEEDINGS. No law or order shall have been
enacted, entered, issued, promulgated or enforced by any governmental
entity, nor shall any action have been instituted and remain pending or
have been threatened and remain so by any governmental entity at what
would otherwise be the Closing Date, which prohibits or restricts or would
prohibit or restrict the transactions contemplated by this Agreement or
any Other Agreement or which would not permit the business of the Company
as presently conducted to continue unimpaired following the Closing Date.
(b) XXXX-XXXXX-XXXXXX. The waiting period under the HSR Act, shall
have expired or terminated.
(c) The parties shall have executed a mutually agreeable side letter
regarding U.S. Filter's cooperation in assisting the Stockholders in
selling their Acquisition Shares.
6.2 CONDITIONS TO OBLIGATIONS OF U.S. FILTER AND ACQUISITION SUBSIDIARY.
The obligations of U.S. Filter and Acquisition Subsidiary to effect the Merger
shall be subject to the following conditions except to the extent waived in
writing by U.S. Filter and Acquisition Subsidiary:
(a) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE COMPANY AND
THE STOCKHOLDERS. The representations and warranties of the Company and of
the Stockholders herein contained shall be true and correct at the Closing
Date with the same effect as though made at such time; the Company and
each of the Stockholders shall have performed all obligations and complied
with all covenants and conditions required by this Agreement to be
performed or complied with by them at or prior to the Closing Date; and
the Company shall have delivered to U.S. Filter and Acquisition Subsidiary
certificates in form and substance satisfactory to U.S. Filter and
Acquisition Subsidiary, dated the Closing Date, to such effect.
(b) NO ADVERSE CHANGE. There shall have been no significant adverse
change, regardless of insurance coverage
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therefor, in the condition (financial or otherwise), assets, liabilities
(absolute, accrued, contingent or otherwise), net worth, prospects,
earning power, commercial relationships, reserves, business or operations
of the Company or any Subsidiary; and the Company shall have delivered to
U.S. Filter and Acquisition Subsidiary certificates in form and substance
satisfactory to U.S. Filter and Acquisition Subsidiary, dated the Closing
Date, to such effect.
(c) OPINION OF COUNSEL. U.S. Filter and Acquisition Subsidiary shall
have received at the Closing from Xxxx Xxxx Xxxx & Freidenrich, counsel to
the Company and the Stockholders, an opinion dated the Closing Date, in
form and substance substantially as set forth in Exhibit C.
(d) CONSENTS. The Company and the Stockholders shall have obtained
all Permits, licenses, franchises, authorizations, approvals and third
party consents, in form and substance reasonably satisfactory to U.S.
Filter, necessary for the consummation of the Merger and to conduct the
business of the Company and each Subsidiary as presently conducted.
(e) ESCROW AGREEMENT. As of the Closing, each of the Company
Stockholders shall have entered into the Escrow Agreement, which agreement
shall become effective on the Closing Date.
(f) STOCK OPTIONS. All rights to acquire Company Stock (other than
employee stock options as set forth in Section 1.9 above) will have been
exercised or terminated as of the Closing Date.
(g) RELATED PERSONS. All existing debt of any kind owed by the
Company to any Related Person will have been paid prior to the Closing,
and all agreements or arrangements with Related Persons will have been
terminated.
(h) LISTING ON NYSE. The Acquisition Shares shall have been
authorized for listing on the NYSE, subject to official notice of
issuance.
(i) POOLING LETTER FROM KPMG PEAT MARWICK. U.S. Filter shall have
received from KPMG Peat Marwick, as independent auditors of U.S. Filter, a
letter, dated as of the Closing Date, in form and substance satisfactory
to U.S. Filter, to the effect that the business combination to be effected
by the Merger is required to be accounted for as a pooling-of-interests
for purposes of U.S. Filter's consolidated financial statements under
generally accepted
39
accounting principles and under applicable Commission rules and
regulations. No action shall have been taken by any governmental entity,
or any proposal made for any such action by any governmental entity, which
is reasonably likely to be put into effect, that would prevent U.S. Filter
from accounting for the business combination to be effected by the Merger
as a pooling-of-interests.
(j) POOLING LETTER FROM ERNST & YOUNG LLP. Company shall have
received from Ernst & Young LLP, as independent auditors of the Company, a
letter, dated as of the Closing Date, in form and substance satisfactory
to U.S. Filter, regarding that firm's concurrence with Company
management's conclusions as to the appropriateness of pooling of interests
accounting for the Merger under Accounting Principles Board Opinion No. 16
with respect to conditions related to the Company if the Merger is closed
and consummated under this Agreement. No action shall have been taken by
any governmental entity, or any proposal made for any such action by any
governmental entity, which is reasonably likely to be put into effect,
that would prevent U.S. Filter from accounting for the business
combination to be effected by the Merger as a pooling-of-interests.
(k) AFFILIATE LETTERS. U.S. Filter shall have received from each
Person who may be deemed to be an affiliate of the Company (under Rule 145
of the Securities Act or otherwise under applicable Commission accounting
releases with respect to pooling-of-interests accounting treatment) on or
prior to the Closing Date a signed agreement substantially in the form of
Exhibit D attached hereto.
(l) DISSENTER'S RIGHTS. Holders of not more than 3% of the Company
Stock shall have exercised dissenter's rights or rights of appraisal with
respect to the Merger.
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS. The
obligations of the Company and the Stockholders to effect the Closing and the
Merger shall be subject to the following conditions, except to the extent waived
in writing by the Company and the Stockholders:
(a) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF U.S. Filter. The
representations and warranties of U.S. Filter herein contained shall be
true at the Closing Date with the same effect as though made at such time;
U.S. Filter shall have performed all obligations and complied with all
covenants and conditions required by this Agreement to be performed or
complied with by it at or prior to the Closing Date, and U.S. Filter shall
have delivered to the
40
Company and the Stockholders a certificate of U.S. Filter in form and
substance satisfactory to the Company and the Stockholders, dated the
Closing Date and signed by a duly authorized corporate officer to such
effect.
(b) CONSENTS. U.S. Filter and the Company shall have received all
Permits, authorizations, regulatory approval and third party consents
necessary for the consummation of the Merger.
(c) OPINION. The Stockholders shall have received at the Closing
from Xxxxxx X. Xxxxxxxx, Esq., Senior Vice President, General Counsel and
Corporate Secretary of U.S. Filter, an opinion dated the Closing Date, in
form and substance substantially as set forth in Exhibit E.
(d) LISTING ON NYSE. The Acquisition Shares shall have been
authorized for listing on the NYSE, subject to official notice of
issuance.
(e) NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business or financial condition of U.S. Filter from
the date hereof to the Closing Date.
ARTICLE VII
INDEMNITY
7.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of the
parties contained in this Agreement or expressly incorporated herein and therein
by reference shall survive the Closing hereunder and any investigation made by
or on behalf of any party hereto until the first anniversary of the Closing. A
Claim for indemnification for breach of a representation, warranty or covenant
may be brought at any time provided that the representation or warranty on which
such Claim is based continues to survive at the time notice of such Claim is
given in accordance with this Article, and if such notice is given within such
period all rights to indemnification with respect to such Claim shall continue
in force and effect.
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7.2 GENERAL INDEMNIFICATION BY COMPANY STOCKHOLDERS.
(a) GENERAL INDEMNITY. Each Company Stockholder agrees, jointly and
severally, to indemnify, defend and hold U.S. Filter, Acquisition
Subsidiary, the Company, each Subsidiary and any director, officer,
employee, agent or representative of U.S. Filter, Acquisition Subsidiary,
each Subsidiary and the Company (excluding, however, the Stockholders)
(collectively the "Indemnitees" and individually, an "Indemnitee")
harmless against, and in respect of, any and all Claims suffered by or
asserted against any of the Indemnitees following the Closing Date
resulting from, relating to or arising out of (i) the breach by the
Company or any of the Stockholders of any of the representations,
warranties, covenants or agreements contained in or made pursuant to this
Agreement, (ii) the operations of the Company and the Subsidiaries prior
to the date hereof, including any and all agreements, whether written or
oral, to which the Company or any Subsidiary is or was a party, (iii) the
alleged or actual violation of any Law, rule or regulation, prior to the
Closing, by the Stockholders including, without limitation, any
Environmental Law, (iv) the generation, use, transportation, treatment,
storage, release or disposal, before the Closing, of Hazardous Substances
at the Real Property or (v) the presence of Hazardous Substances or the
existence of an Environmental Condition at the Real Property which was
present at such property or facility at any time on or prior to the
Closing. The Escrow Shares shall be held by the escrow agent pursuant to
the Escrow Agreement until the later of (i) the first anniversary of this
Agreement and (ii) the date that all Claims made by U.S. Filter prior to
such first anniversary have been finally resolved. Company Stockholders
will have no liability with respect to the matters described in clauses
(i)-(v) of this Section 7.2(a) unless the damages incurred by the
Indemnitees with respect to the matters in clause (i)-(v) shall exceed
US$250,000 (the "Threshold") on a cumulative basis, at which time Company
Stockholders shall be liable to Indemnitees for the total amount of such
damages without regard to the Threshold. In no event shall Company
Stockholders' aggregate liability to the Indemnitees for all matters
indemnified under this Section 7.2(a) exceed the amount of the Escrow
Shares and the sole recourse for any Company Stockholder liability shall
be to the Escrow Shares.
(b) PAYMENT. If any matter as to which an Indemnitee may be able to
assert a Claim hereunder has been finally determined in accordance with
this Agreement and the procedures set forth in the Escrow Agreement, the
Indemnitee
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has the right to be paid in an appropriate number of Escrow Shares
(rounded up to the next whole share, if necessary) taken from all Company
Shareholders on a pro rata basis. For purposes of determining the value of
each such share of U.S. Filter Common Stock under the Escrow Agreement,
such value shall equal the greater of the Average Trading Price or the
closing trading price of U.S. Filter Common Stock as reported by the NYSE
on the date the Claim has been finally determined.
(c) LOSSES NET OF INSURANCE BENEFIT. The amount of any Claim for
which indemnification is provided under this Article VII shall be net of
any amounts actually recovered by the Indemnitee in respect of the Claim
under insurance policies. Nothing in this Section shall be deemed to
obligate any person to maintain any insurance or to pursue any claim
against any insurer or third party (other than to pursue claims against an
insurer in a manner consistent with Indemnitee's customary practices).
(d) LOSSES NET OF TAX BENEFIT. The amount of any Claim for which
indemnification is provided under this Article VII shall be net of any tax
benefit to the Indemnitee. The Stockholders shall have the burden of
showing actual tax benefit to the Indemnitee as a direct result of such
Claim.
7.3 CLAIMS FOR INDEMNIFICATION. Whenever any Claim shall arise for
indemnification under this Agreement, the party entitled to indemnification (the
"Indemnified Party") shall promptly notify the other party (the "Indemnifying
Party") of the Claim in writing, which notice shall include the facts
constituting the basis for such Claim. A failure to notify or to give notice as
hereinabove set forth to the Indemnifying Party shall in no case prejudice the
rights of the Indemnified Party under this Agreement unless the Indemnifying
Party shall be prejudiced by such failure and then only to the extent the
Indemnifying Party shall be prejudiced by such failure. The Indemnified Party
shall not settle or compromise any Claim by a third party for which it is
entitled to indemnification hereunder without the prior written consent of the
Indemnifying Party (which shall not be unreasonably withheld) unless (a) a suit
shall have been instituted against it and (b) the Indemnifying Party shall not
have taken control of such suit after notification thereof.
7.4 DEFENSE BY INDEMNIFYING PARTY. In connection with any Claim giving
rise to indemnity under this Agreement resulting from or arising out of any
Claim or legal proceeding by a party who is not a party to this Agreement, the
Indemnifying Party at its sole cost and expense shall assume the defense of any
such
43
Claim or legal proceeding with legal counsel approved by the Indemnified Party
in its reasonable discretion provided that the Indemnified Party hereby agrees
that legal counsel appointed by any insurance company providing a defense with
respect to the matter in question shall be acceptable to Indemnified Party. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its own counsel and at its own expense. If
after notification thereof, the Indemnifying Party does not assume the defense
of any such Claim or litigation resulting from a Claim in a timely manner so as
not to prejudice the rights of the Indemnified Party, the Indemnified Party may
defend against such Claim or litigation, in such manner as it may deem
reasonably appropriate, including, but not limited to, settling such Claim or
litigation, after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate (within the exercise of
reasonable discretion). The liability of the Indemnifying Party shall be
conclusively established by such settlement by the Indemnified Party to the
extent entered into on the basis of its reasonable discretion, the amount of
such liability to include, but not be limited to, both the settlement
consideration and the reasonable costs and expenses, including attorneys' fees,
incurred by the Indemnified Party in effecting such settlement.
7.5 NO CONTRIBUTION RIGHTS. The Stockholders acknowledge that the
Stockholders shall have no right of contribution from the Company for indemnity
amounts paid by them for breaches of representations and warranties or covenants
of the Company hereunder.
7.6 ARBITRATION.
(a) GENERAL PROVISION; SELECTION OF ARBITRATOR. Except as otherwise
provided in this Agreement, any controversy or claim arising out of or
relating to this Agreement or the breach hereof shall be settled by
arbitration in Orange County, California. The arbitration shall be
administered by Judicial Arbitration and Mediation Services ("JAMS") in
its Orange County office. The arbitrator shall be a retired superior or
appellate court judge or Supreme Court Justice of the State of California
affiliated with JAMS. The Arbitrator shall be chosen by the mutual consent
of the parties or, if the parties cannot agree, the arbitrator shall be
chosen by JAMS in accordance with its rules then in effect. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitrator shall not have any power to alter,
amend, modify or change any of the terms of this Agreement nor to grant
any remedy which is either prohibited by the terms of this Agreement or
not available in a court of law.
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(b) PROVISIONAL REMEDIES; DISCOVERY.
Each of the parties reserves the right to file with a court of
competent jurisdiction an application for temporary or preliminary
injunctive relief, writ of attachment, writ of possession, temporary
protective order and/or appointment of a receiver on the grounds that the
arbitration award to which the applicant may be entitled may be rendered
ineffectual in the absence of such relief. The parties may obtain
discovery in aid of the arbitration to the fullest extent permitted under
law, including California Code of Civil Procedure Section 1283.05. All
discovery disputes shall be resolved by the arbitrator.
(c) APPLICABLE LAW; COSTS.
All questions in respect of procedure to be followed in conducting
the arbitration as well as the enforceability of this agreement to
arbitrate which may be resolved by state law shall be resolved according
to the law of the State of California. Any action brought to enforce the
provisions of this Section shall be brought in the Orange County Superior
Court. The costs of the arbitration, including any JAMS administration
fee, and arbitrator's fee, and costs of the use of facilities during the
hearings, shall be borne equally by the parties.
ARTICLE VIII
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 TERMINATION OF AGREEMENT. Anything herein to the contrary
notwithstanding, this Agreement and the transactions contemplated by this
Agreement shall terminate if the Closing does not occur on or before the close
of business on January 31, 1998 unless extended by mutual consent in writing of
U.S. Filter, Acquisition Subsidiary, the Company and the Stockholders and may
otherwise be terminated at any time before the Closing as follows and in no
other manner:
(a) MUTUAL CONSENT. By mutual consent in writing of U.S.
Filter and the Company.
45
(b) CONDITIONS TO U.S. FILTER'S AND ACQUISITION SUBSIDIARY'S
PERFORMANCE NOT MET. By U.S. Filter or Acquisition Subsidiary by written
notice to the Company and the Stockholders if any event occurs which would
render impossible the satisfaction of one or more conditions to the
obligations of U.S. Filter and Acquisition Subsidiary to consummate the
transactions contemplated by this Agreement as set forth in Section 6.2.
(c) CONDITIONS TO THE COMPANY'S AND THE STOCKHOLDERS' PERFORMANCE
NOT MET. By the Company by written notice to U.S. Filter and Acquisition
Subsidiary if any event which occurs would render impossible the
satisfaction of the conditions to the obligations of the Company or the
Stockholders to consummate the transactions contemplated by this Agreement
as set forth in Section 6.3.
8.2 EFFECT OF TERMINATION. In the event this Agreement shall be terminated
pursuant to Section 8.1, all further obligations of the parties under this
Agreement and the Other Agreements shall terminate without further liability of
any party to another; provided that the obligations of the parties contained in
Sections 10.3 and 10.8 and Article VII shall survive any such termination. A
termination under Section 8.1(b) or (c) shall not relieve any party of any
liability for a breach of, or for any misrepresentation under this Agreement, or
be deemed to constitute a waiver of any available remedy (including specific
performance if available) for any such breach or misrepresentation.
ARTICLE IX
STOCKHOLDERS AGREEMENT
In order to induce U.S Filter to enter into this Agreement, and as further
consideration for the promises and the mutual covenants herein, the Stockholders
further represent, warrant and covenant with U.S. Filter as follows:
9.1 VOTING. Stockholders will vote or cause to be voted all shares of
capital stock of the Company owned of record or beneficially owned or held in
any capacity by any of them or under any of their control in favor of the Merger
and other transactions provided for in or contemplated by this Agreement.
9.2 OWNERSHIP. As of the date hereof, Stockholders' only ownership of, or
interest in, equity securities or convertible debt securities of the Company
consists solely of the interests described in Schedule 9.2 hereto (collectively,
the "Company Shares").
46
9.3 RESTRICTION ON TRANSFER. Stockholders will not sell, transfer, pledge
or otherwise dispose of any of the Company Shares or any interest therein or
agree to sell, transfer, pledge or otherwise dispose of any of the Company or
any interest therein prior to Closing or the termination of this Agreement,
without U.S. Filter's express written consent.
9.4 INVESTMENT INTENTION. Each Stockholders has no present plan or
intention to sell, exchange, or otherwise dispose of a number of shares of U.S.
Filter Common Stock received in the Merger that would reduce such Stockholder's
ownership of U.S. Filter Common Stock to a number of shares having a value, as
of the Effective Time, of less than 50 percent of the value of all of the
formerly outstanding Company Stock held by such Stockholder as of the same date.
For purposes of this representation, dissenters' shares of Company Stock
exchanged for cash in lieu of fractional shares of U.S. Filter Common Stock will
be treated as outstanding Company Stock on the Effective Time. Moreover, Company
Stock and U.S. Filter Common Stock held by Stockholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the Merger will be considered in
making this representation.
The foregoing shall not prevent any the Stockholders whose shareholding in
U.S. Filter Common Stock will be less than 1% of the U.S. Filter Common Stock
issued and outstanding immediately after the Effective Time from selling,
exchanging or otherwise disposing of them; provided however, that any such sale,
exchange or other disposition (i) shall comply with all federal and state
securities laws, (ii) shall in no event be made at any time or in any manner
which may preclude or prevent (a) U.S. Filter from accounting for the Merger as
a pooling-of-interests, including before U.S. Filter publicly releases its first
report of financial statements including the combined financial results of U.S.
Filter and the Company for a period that includes at least 30 days of post
merger operations (which financial statements U.S. Filter will file in
accordance with federal securities laws) or (b) the Merger from constituting a
tax-free reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended.
9.5 TERMINATION OF AGREEMENTS. Stockholders and the Company, to the extent
they are parties, beneficiaries or have rights under any and all agreements
among stockholders, including those set forth on Schedule 9.5, hereby terminate
such agreements as of the Effective Time. Stockholders hereby agree that upon
termination all obligations under these agreements will be automatically
discharged and that Stockholders, their heirs, directors, officers, personal
representatives, assignees, and transferees fully and forever release and
forever discharge the Company and its associates, owners, stockholders,
predecessors,
47
successors, heirs, assigns, agents, directors, officers, partners, employees,
representatives, trustees, lawyers, insurers, sureties, and all persons acting
by, through, under, and in concert therewith, or any of them, of and from any
and all cause or causes of action, suits, claims, demands, obligations,
liabilities, damages, liens, contracts, agreements, promises, laws, costs or
expenses of any nature whatsoever, whether known or unknown, whether fixed or
contingent, whether at law or in equity, arising out of or in any way connected
or related to the above described agreements or the offer, sale, or issuance of
any Company securities or otherwise arising out of or in any way connected or
related to the offer, sale or issuance of any Company securities. Stockholders
acknowledge and intend the consequences of the foregoing release to apply even
as to claims for damages that may exist, and which, if known would materially
affect Stockholders' decision to execute this Agreement, regardless of whether
Stockholders' lack of knowledge is the result of oversight, error, negligence or
any other cause.
9.6 TERMINATION. Solely with respect to Sections 9.1, 9.2. and 9.3 of this
Agreement, Stockholders' obligations thereunder will terminate on January 31,
1998 unless extended in accordance with the terms of this Agreement, in which
event Stockholders' agreement and obligations will terminate on such extended
date. Notwithstanding the foregoing, if this Agreement were to be terminated
earlier in accordance with its terms (except in event of a termination by reason
of the Company's defaults, misrepresentation or breach), this Article IX and
Stockholders' obligations hereunder will also terminate concurrently with the
termination of this Agreement.
9.7 EFFECTIVE DATE; SUCCESSION REMEDIES. Upon U.S. Filter's acceptance and
execution of this Agreement, this Article IX shall mutually bind and benefit
U.S. Filter and the Stockholders, any of Stockholders' heirs, successors and
assigns and any of U.S Filter's successors. Stockholders agree that in light of
the inadequacy of damages as a remedy, specific performance shall be available
to U.S Filter, in addition to any other remedies U.S. Filter may have for the
violation of this Article IX.
9.8 NATURE OF HOLDINGS; SHARES. All references made in this Article IX to
Stockholders' holdings of the Company Shares shall be deemed to include Company
Shares held or controlled by any of the Stockholders, individually, jointly (as
community property or otherwise), or in any other capacity, and shall extend to
any securities issued to any Stockholders in respect of the Company Shares.
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ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 AMENDMENT AND MODIFICATIONS. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written agreement
between the parties hereto which states that it is intended to be a modification
of this Agreement.
10.2 WAIVER OF COMPLIANCE. Any failure of the Company and the
Stockholders, on the one hand, or U.S. Filter and Acquisition Subsidiary, on the
other, to comply with any obligation, covenant, agreement or condition herein
may be expressly waived in writing by the other party, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
10.3 EXPENSES. The parties agree that all fees and expenses incurred by
them in connection with this Agreement and the Other Agreements and the
transactions contemplated hereby and thereby shall be borne by the party
incurring such fees and expenses, except that, contingent upon the successful
Closing of the Merger, U.S. Filter hereby agrees to assume the reasonable legal
and accounting expenses incurred by the Company in the Merger.
10.4 GOOD FAITH EFFORTS; FURTHER ASSURANCES. Each party will use its good
faith efforts to cause all conditions to its and the other parties obligations
hereunder to be timely satisfied and to perform and fulfill all obligations on
its part to be performed and fulfilled under this Agreement and the Other
Agreements, to the end that the transactions contemplated by this Agreement and
the Other Agreements shall be effected substantially in accordance with the
terms of the Agreement or Other Agreement, as applicable and as reasonably
practicable. The parties shall cooperate with each other in such actions and in
securing requisite approvals. Each party shall execute and deliver both before
and after the Closing such further certificates, agreements and other documents
and take such other actions as the other party may reasonably request to
consummate or implement the transactions contemplated hereby or to evidence such
events or matters.
10.5 REMEDIES. To the maximum extent permitted by Law, all rights and
remedies existing under this Agreement are cumulative to and not exclusive of,
any rights or remedies otherwise available under applicable Law.
49
10.6 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, certified or registered mail
with postage prepaid, or by reputable overnight courier:
(a) if to the Company, to:
The Kinetics Group, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: President
with a copy to:
Xxxx Xxxx, Esq.
Xxxx Xxxx Xxxx & Freidenrich, LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
or to such other Person or address as the Company shall furnish to U.S.
Filter and Acquisition Subsidiary in writing;
50
(b) if to a Stockholder, to the address set forth on the signature
page hereto, or to such other Person or address as such Stockholder shall
furnish to U.S. Filter and Acquisition Subsidiary in writing, with a copy
to Xxxx Xxxx, Esq. at the address provided above;
(c) if to U.S. Filter or Acquisition Subsidiary, to:
United States Filter Corporation
00-000 Xxxx Xxxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Senior Vice President, General Counsel
and Corporate Secretary
with a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
or to such other Person or address as U.S. Filter or Acquisition
Subsidiary shall furnish to the Company and the Stockholders in writing.
51
10.7. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other party.
10.8 PUBLICITY. Neither the Company, any Subsidiary, any Stockholder, U.S.
Filter nor Acquisition Subsidiary shall make or issue, or cause to be made or
issued, any announcement or written statement concerning this Agreement or the
Other Agreements or the transactions contemplated hereby or thereby for
dissemination to the general public without the prior consent of the Company or
U.S. Filter. This provision shall not apply, however, to any announcement or
written statement required to be made by law or the regulations of any federal
or state governmental agency.
10.9 GOVERNING LAW. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of California, as applied to contracts entered into and to be wholly
performed within such State, except with regard to the internal affairs of
corporations not incorporated in California (which internal affairs shall be
governed by the law of the state or other jurisdiction of incorporation).
10.10. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.11. HEADINGS. The headings of the Sections and Articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
10.12. ENTIRE AGREEMENT. This Agreement, including the Exhibits and
Schedules hereto, the Other Agreements, and the other documents and certificates
delivered pursuant to the terms of this Agreement and the Other Agreements, set
forth the entire agreement and understanding of the parties hereto in respect of
the subject matter contained herein, and supersede all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto.
10.13. THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any
52
Person or corporation other than the parties hereto and their successors or
assigns, any rights or remedies under or by reason of this Agreement.
53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
"U.S. FILTER"
UNITED STATES FILTER CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxxx
---------------------------
Title: Senior Vice President
---------------------------
"ACQUISITION SUBSIDIARY"
U.S. FILTER/KG ACQUISITION CORP.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxxx
---------------------------
Title: Senior Vice President
---------------------------
"COMPANY"
THE KINETICS GROUP, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
---------------------------
Name: Xxxxxxx X. Xxxxxx, Xx.
---------------------------
Title: Chairman
---------------------------
"STOCKHOLDERS"
THE XXXXXX FAMILY 1991 TRUST, DATED
FEBRUARY 1, 1991
c/o The Kinetics Group, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
----------------------------------
Xxxxxxx X. Xxxxxx, Xx., Trustee
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxx, Trustee
54
/s/ Xxxxx X. Xxxxxxx
--------------------------------
Xxxxx X. Xxxxxxx
c/o The Kinetics Group, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
BT Capital Partners, Inc.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
By: /s/ Xxxx X. Xxx
---------------------------
Name: Xxxx X. Xxx
---------------------------
Title: Managing Director
---------------------------
