EXHIBIT 99.2
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
AMONG
PENTAIR, INC.
WICOR, INC.
AND
WISCONSIN ENERGY CORPORATION
February 3, 2004
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TABLE OF CONTENTS
Page
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1. PURCHASE AND SALE OF SHARES.................................................1
1.1. Purchase and Sale....................................................1
1.2. Designated Purchasers................................................1
2. PURCHASE PRICE; PAYMENT.....................................................1
2.1. Purchase Price.......................................................1
2.2. Payment..............................................................2
2.3. Determination of Net Asset Value.....................................2
3. REPRESENTATIONS AND WARRANTIES OF SELLER....................................5
3.1. Corporate............................................................5
3.2. Seller...............................................................7
3.3. Authority............................................................7
3.4. No Violation.........................................................7
3.5. Financial Statements.................................................8
3.6. Tax Matters..........................................................8
3.7. Absence of Certain Changes...........................................9
3.8. Absence of Undisclosed Liabilities..................................11
3.9. No Litigation.......................................................11
3.10. Compliance with Laws and Orders.....................................11
3.11. Title to and Condition of Properties................................12
3.12. Insurance...........................................................13
3.13. Contracts and Commitments...........................................13
3.14. No Default..........................................................15
3.15. Labor Matters.......................................................15
3.16. Employee Benefit Plans..............................................15
3.17. Trade Rights........................................................18
3.18. Product Warranty and Product Liability..............................18
3.19. Certain Relationships to Company....................................19
3.20. Customers and Suppliers.............................................19
3.21. No Brokers or Finders...............................................19
3.22. Limit of Representations............................................20
4. REPRESENTATIONS AND WARRANTIES OF BUYER....................................20
4.1. Corporate...........................................................20
4.2. Authority...........................................................20
4.3. No Violation........................................................20
4.4. Sufficient Funds....................................................20
4.5. No Brokers or Finders...............................................21
4.6. Investment Intent Representation....................................21
5. COVENANTS PRIOR TO THE CLOSING.............................................21
5.1. Pre-Closing Access to Information and Real Property.................21
5.2. Conduct of Business Pending the Closing.............................23
5.3. Further Assurances..................................................24
5.4. Certain Filings.....................................................24
5.5. Title Insurance.....................................................25
5.6. Surveys.............................................................25
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5.7. Notification........................................................25
5.8. Financing...........................................................25
5.9. Non-Water Subsidiaries..............................................26
5.10. Intercompany Indebtedness...........................................26
5.11. Employee Benefit Plan Matters.......................................26
5.12. Limitation on Covenants.............................................27
6. ADDITIONAL COVENANTS.......................................................27
6.1. Post-Closing Access to Information; Cooperation.....................27
6.2. Tax Matters.........................................................28
6.3. Employee Benefit Plan Matters.......................................31
6.4. Pump Business Headquarters..........................................32
6.5. Certain Product Safety Matters......................................32
6.6. Investigation.......................................................32
6.7. Confidentiality.....................................................32
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS................................33
7.1. Representations and Warranties True on the Closing Date.............33
7.2. Compliance With Agreement...........................................33
7.3. No Orders...........................................................33
7.4. HSR Act and Other Approvals.........................................33
7.5. Financing...........................................................33
8. CONDITIONS PRECEDENT TO COMPANY'S AND SELLER'S OBLIGATIONS.................33
8.1. Representations and Warranties True on the Closing Date.............33
8.2. Compliance With Agreement...........................................34
8.3. No Orders...........................................................34
8.4. HSR Act and Other Approvals.........................................34
8.5. PSCW Approval.......................................................34
9. INDEMNIFICATION............................................................34
9.1. By Seller...........................................................34
9.2. By Buyer............................................................35
9.3. Indemnification Claims..............................................35
9.4. Limitations on Indemnification......................................37
9.5. Adjustments for Insurance and Taxes and Calculation of Losses.......38
10. CLOSING...................................................................39
10.1. Closing Date; Location..............................................39
10.2. Documents to be Delivered by Company and Seller.....................40
10.3. Documents to be Delivered by Buyer..................................40
11. TERMINATION...............................................................40
11.1. Termination.........................................................40
11.2. Effect of Termination...............................................41
12. MISCELLANEOUS.............................................................41
12.1. Disclosure Schedule.................................................41
12.2. Publicity...........................................................41
12.3. Assignment..........................................................42
12.4. Parties in Interest.................................................42
12.5. Law Governing Agreement; Waiver of Jury Trial.......................42
12.6. Severability........................................................42
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12.7. Amendment and Modification..........................................42
12.8. Waiver..............................................................42
12.9. Notice..............................................................43
12.10. Expenses............................................................44
12.11. Equitable Relief....................................................45
12.12. Interpretive Provisions.............................................46
12.13. Entire Agreement....................................................46
12.14. Counterparts........................................................46
12.15. Section Headings; Table of Contents.................................46
12.16. No Strict Construction..............................................46
12.17. Definitions.........................................................46
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SCHEDULES
Schedule 3.1(c) - Qualification
Schedule 3.1(d) - Subsidiaries
Schedule 3.1(e) - Corporate Documents
Schedule 3.1(f) - Capitalization
Schedule 3.4 - No Violation
Schedule 3.5 - Financial Statements
Schedule 3.6(d) - Tax Audits
Schedule 3.6(f) - Other Tax Matters
Schedule 3.7 - Absence of Certain Changes
Schedule 3.8 - Absence of Undisclosed Liabilities
Schedule 3.9 - No Litigation
Schedule 3.10(a) - Compliance with Laws and Orders
Schedule 3.10(b) - Licenses and Permits
Schedule 3.10(c) - Environmental Matters
Schedule 3.11(b) - Real Property
Schedule 3.12 - Company Insurance Policies
Schedule 3.13 - Contracts and Commitments
Schedule 3.14 - No Default
Schedule 3.15 - Labor Matters
Schedule 3.16(a)-1 - Employee Benefit Plans
Schedule 3.16(a)-2 - Multiemployer Plans
Schedule 3.16(c)(vii) - Accumulated Benefit Obligations
Schedule 3.16(d) - Prohibited Transactions
Schedule 3.16(f) - Payments and Compliance
Schedule 3.16(g) - Post Retirement Benefits
Schedule 3.16(h) - Triggering of Obligations
Schedule 3.17 - Trade Rights
Schedule 3.18 - Product Warranty and Product Liability
Schedule 3.19 - Certain Relationships to Company
Schedule 3.20(a) - Customers
Schedule 3.20(b) - Suppliers
EXHIBITS
Exhibit 4.3 - No Violation
Exhibit 4.4 - Financing Commitments
Exhibit 5.1(a) - Buyer's Consultant Information Sharing Protocol
Exhibit 5.2 - Conduct of Business Pending the Closing
Exhibit 5.11(b) - Form of Company Retention and Severance Plan
Exhibit 12.10(b) - Severance Obligations
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and effective
as of February 3, 2004 among Pentair, Inc., a Minnesota corporation ("Buyer"),
WICOR, Inc., a Wisconsin corporation ("Company"), and Wisconsin Energy
Corporation, a Wisconsin corporation ("Seller").
WHEREAS, Company is engaged, through the Water Subsidiaries, including
WICOR Industries, LLC, a Wisconsin limited liability company ("Industries"), in
the research and development, design, manufacture, production, marketing,
distribution and sale of water equipment and systems (the "Water Business"); and
WHEREAS, Company is engaged, through the Non-Water Subsidiaries, in
businesses other than the Water Business (the "Other Businesses"); and
WHEREAS, Seller owns all of the issued and outstanding shares of capital
stock of Company (collectively, the "Shares"); and
WHEREAS, Buyer desires to purchase the Shares from Seller, and Seller
desires to sell the Shares to Buyer, upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, capitalized terms used but not defined in the context of the
Section in which such terms first appear shall have the respective meanings set
forth in Section 12.17.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants, agreements and conditions set forth in
this Agreement, and intending to be legally bound, the Parties agree as follows:
1. PURCHASE AND SALE OF SHARES
1.1. Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and
acquire from Seller, all of the Shares.
1.2. Designated Purchasers. Buyer may, upon prior written
notice to Seller, assign its rights and obligations, in whole or in part, under
this Agreement to one or more of its wholly-owned Subsidiaries (each such
Entity, a "Designated Purchaser") for the purpose of carrying out the
transactions contemplated hereby; provided, however, that Buyer shall fully and
unconditionally guarantee the performance of all obligations of Buyer and any
such Designated Purchaser under this Agreement and the other documents and
instruments to be executed and delivered by Buyer or any such Designated
Purchaser pursuant hereto.
2. PURCHASE PRICE; PAYMENT
2.1. Purchase Price. The purchase price (the "Purchase
Price") for the Shares shall be an amount equal to Eight Hundred Fifty Million
Dollars ($850,000,000), as adjusted pursuant to Section 2.2(a) and Section
2.2(b), if at all.
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2.2. Payment. The Purchase Price shall be paid as follows:
(a) Cash to Seller. At the Closing, Buyer shall
deliver to Seller an amount equal to Eight Hundred Fifty Million Dollars
($850,000,000), minus the amount, if any, by which the Net Asset Value
as reflected on the Estimated Closing Balance Sheet is less than Six
Hundred Fifty-Nine Million Nine Hundred Eight Thousand Five Hundred
Thirty-Six Dollars ($659,908,536) or plus the amount, if any, by which
the Net Asset Value as reflected on the Estimated Closing Balance Sheet
exceeds Six Hundred Fifty-Nine Million Nine Hundred Eight Thousand Five
Hundred Thirty-Six Dollars ($659,908,536).
(b) Adjustment Amount. On or before the tenth (10th)
business day following the final determination of the Final Closing
Balance Sheet pursuant to Section 2.3, either (i) Seller shall pay to
Buyer the amount, if any, by which the Net Asset Value as reflected on
the Final Closing Balance Sheet is less than the Net Asset Value as
reflected on the Estimated Closing Balance Sheet, together with interest
on the amount being paid from the Closing Date to the date of the
payment at a rate per annum equal to the 90-day London Inter-Bank
Offered Rate plus 200 basis points, or (ii) Buyer shall pay to Seller
the amount, if any, by which the Net Asset Value as reflected on the
Final Closing Balance Sheet exceeds the Net Asset Value as reflected on
the Estimated Closing Balance Sheet, together with interest on the
amount being paid from the Closing Date to the date of the payment at a
rate per annum equal to the 90-day London Inter-Bank Offered Rate plus
200 basis points.
(c) Method of Payment. All payments under this
Section 2.2 shall be made by wire transfer of immediately available
funds to an account that the recipient, at least forty-eight (48) hours
prior to the time for payment specified hereunder, has designated in
writing.
2.3. Determination of Net Asset Value.
(a) Balance Sheet. As used in this Agreement, "Balance
Sheet" shall mean a schedule in the form of a balance sheet of Company
showing the net book values, as of a specified time, of the respective
categories of Balance Sheet Assets and Balance Sheet Liabilities set
forth in the Recent Balance Sheet. All references in this Agreement to
"Balance Sheet" or "Net Asset Value" of Company shall be deemed to refer
to Company after giving effect to the Distribution. The Estimated
Closing Balance Sheet, the Preliminary Closing Balance Sheet, the
Audited Closing Balance Sheet and the Final Closing Balance Sheet shall
be prepared in accordance with generally accepted accounting principles
in the United States taking into account the Distribution ("GAAP")
applied on a basis consistent with that used in the preparation of the
Recent Balance Sheet, including the application of consistent accounting
policies, principles, methodologies and practices. Notwithstanding any
other provision in this Agreement to the contrary, to the extent that,
during the period from December 31, 2003 to the Closing Date, there are
any changes in reserves of Company relating to (i) asbestos, product
liability, current Tax or environmental Liabilities of Company or Water
Subsidiaries or (ii) Liabilities of the Non-Water Subsidiaries, such
changes shall not be reflected on the Estimated Closing Balance Sheet,
the Preliminary Closing Balance Sheet, the Audited Closing Balance Sheet
or the Final Closing Balance Sheet (except and only to the extent
required by Deloitte in its presentation of the Audited Closing Balance
Sheet) and, in any case, shall in no event be taken into account for
purposes of determining the amount of
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the adjustment to the Purchase Price, if any, to be made pursuant to
Section 2.2(a) or Section 2.2(b).
(b) Estimated Closing Balance Sheet. For purposes of
determining the Purchase Price payable by Buyer at the Closing, not less
than five (5) business days prior to the Closing Date, Seller shall, in
consultation with Buyer, prepare, or cause to be prepared, and deliver
to Buyer a Balance Sheet as of the close of business on the business day
immediately prior to the Closing Date (the "Effective Time"), which
shall represent Seller's reasonable estimate of the Final Closing
Balance Sheet and be accompanied by Seller's determination of (i) the
amount of the Net Asset Value as of the Effective Time as reflected on
such Balance Sheet and (ii) the amount of any adjustment to the Purchase
Price pursuant to Section 2.2(a). If Buyer shall reasonably object to
any of the information set forth on such Balance Sheet, then, during the
remainder of such five (5) business day period prior to the Closing,
Buyer and Seller shall negotiate in good faith to agree upon appropriate
adjustments such that such Balance Sheet and accompanying schedules
reflect a mutually acceptable estimate of the Final Closing Balance
Sheet and the Net Asset Value as of the Effective Time to be reflected
on the Final Closing Balance Sheet, but in the absence of such
agreement, the most recent month-end Balance Sheet of Company with
respect to the Water Business shall control (the estimated Balance Sheet
as agreed to by the Parties pursuant to this Section 2.3(b), or in the
absence of such agreement, the most recent month-end Balance Sheet of
Company with respect to the Water Business, is referred to as the
"Estimated Closing Balance Sheet"). Company and Seller shall provide to
Buyer such information relating to the preparation of the Estimated
Closing Balance Sheet as Buyer reasonably requests in connection with
its review of the Estimated Closing Balance Sheet.
(c) Preliminary Closing Balance Sheet. Within sixty (60)
calendar days after the Closing, Buyer and Company shall prepare, or
cause to be prepared, in consultation with Seller, and deliver to the
Milwaukee office of Deloitte & Touche LLP ("Deloitte") a Balance Sheet
as of the Effective Time (the "Preliminary Closing Balance Sheet"). The
Preliminary Closing Balance Sheet shall be prepared in accordance with
GAAP on a basis consistent with the Estimated Closing Balance Sheet.
(d) Audited Closing Balance Sheet. Upon its receipt of the
Preliminary Closing Balance Sheet, Deloitte shall conduct an audit of
the Preliminary Closing Balance Sheet in accordance with generally
accepted accounting standards and in accordance with the standards set
forth in Section 2.3(a) and Section 2.3(c). In connection with the
engagement of Deloitte, each Party shall execute reasonable engagement
letters and supply such other documents and information as Deloitte
reasonably requires. Deloitte shall be instructed to use every
reasonable effort to conduct such audit and deliver to Buyer and Seller
its audit report with respect to the Preliminary Closing Balance Sheet
(the "Audited Closing Balance Sheet") within thirty (30) calendar days
after its receipt of the Preliminary Closing Balance Sheet and, in any
case, as soon as practicable after such receipt. In connection with
Deloitte's audit, Deloitte may reflect such adjustments to the
Preliminary Closing Balance Sheet on the Audited Closing Balance Sheet
as shall be required by Deloitte as a condition to providing its clean
opinion in its audit report. Promptly upon completion of its audit,
Deloitte shall deliver to Buyer and Seller the Audited Closing Balance
Sheet accompanied by Deloitte's determination of (i) the amount of the
Net Asset Value as of the Effective Time as reflected on the Audited
Closing Balance Sheet and (ii) the amount of any adjustment to the
Purchase Price to be paid and by whom pursuant to Section 2.2(b).
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(e) Objection to Audited Closing Balance Sheet. After the
Audited Closing Balance Sheet is delivered to Buyer and Seller pursuant
to Section 2.3(d), Buyer and Seller shall each have thirty (30) calendar
days to review and respond to it in accordance with this Section 2.3(e).
Buyer and Company shall preserve, and shall instruct Deloitte to
preserve, all documents or records used in or relevant to the
preparation of the Audited Closing Balance Sheet and the calculation of
Net Asset Value including, without limitation, accountants' workpapers
used in the preparation or audit thereof. During the period of any
review or dispute within the contemplation of this Section 2.3, Buyer
and Company shall afford Seller and its authorized Representatives
reasonable access to the same, as well as to employees of Buyer, Company
and Water Subsidiaries and their respective accountants, including,
without limitation, Deloitte, upon Seller's request. If Buyer or Seller
objects to any item on the Audited Closing Balance Sheet, then such
objecting Party shall inform the other Party on or before the last day
of such thirty (30) calendar day period by delivering written notice to
the other Party (each a "Balance Sheet Objection") (i) setting forth in
detail a description of the basis of the Balance Sheet Objection and the
adjustments to the Audited Closing Balance Sheet that such objecting
Party believes should be made and (ii) setting forth the amount of the
Net Asset Value as of the Effective Time based on the Audited Closing
Balance Sheet, adjusted in accordance with such Party's Balance Sheet
Objection. If no Balance Sheet Objection is delivered within such thirty
(30) calendar day period, then Buyer and Seller shall be deemed to have
accepted the Audited Closing Balance Sheet, which shall be deemed final,
binding, conclusive and nonappealable.
(f) Dispute Resolution Following Objection.
(i) Negotiation. If either Buyer or Seller shall
deliver a Balance Sheet Objection pursuant to Section 2.3(e),
then Buyer and Seller shall promptly meet and attempt in good
faith to resolve any dispute or disagreement relating to the
Audited Closing Balance Sheet (the "Balance Sheet Dispute"). Any
resolution between Buyer and Seller as to any disputed amount
shall be final, binding, conclusive and nonappealable.
(ii) Resolution by CPA Firm. If Buyer and Seller are
unable to resolve the Balance Sheet Dispute within thirty (30)
calendar days following the delivery of a Balance Sheet
Objection, then at any time thereafter Buyer or Seller may elect
to have the Balance Sheet Dispute resolved by a nationally
recognized firm of independent public accountants as to which
Buyer and Seller mutually agree (the "CPA Firm"). The CPA Firm
shall not be rendering, and during the preceding two-year period
shall not have rendered, audit services to Buyer, Seller or
Company. The CPA Firm shall, acting as experts and not as
arbitrators, determine on the basis of the standards set forth
in Section 2.3(a) and Section 2.3(c), and only with respect to
the remaining accounting-related differences so submitted to the
CPA Firm (and not by independent review), whether and to what
extent, if any, any item on the Audited Closing Balance Sheet or
the Net Asset Value as of the Effective Time as reflected on the
Audited Closing Balance Sheet requires adjustment. In connection
with the engagement of the CPA Firm, each Party shall execute
reasonable engagement letters and supply such other documents
and information as the CPA Firm reasonably requires. Without
limiting the Parties' obligations under this Section 2.3(f),
each Party may submit such data and information to the CPA Firm
as such Party deems appropriate. The CPA Firm shall be
instructed to use every reasonable effort to
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perform its services within fifteen (15) calendar days after
submission of the Balance Sheet Dispute to it and, in any case,
as soon as practicable after such submission. In resolving the
Balance Sheet Dispute, the CPA Firm shall not assign a value to
any item greater than the greatest value for such item claimed
by any Party, or less than the smallest value for such item
claimed by any Party, as presented to the CPA Firm pursuant
hereto. The CPA Firm's determination hereunder shall be set
forth in a written statement delivered to Seller and Buyer and
shall be final, binding, conclusive and nonappealable.
(iii) Payment of Fees of CPA Firm. Buyer and Seller
shall each pay 50% of the fees and expenses of the CPA Firm in
connection with the services provided pursuant Section
2.3(f)(ii).
(g) Final Closing Balance Sheet. As used in this Agreement,
the "Final Closing Balance Sheet" shall be: (i) the Audited Closing
Balance Sheet if (A) no Balance Sheet Objection is delivered during the
thirty (30) calendar day period specified in Section 2.3(e) or (B) Buyer
and Seller so agree in writing; or (ii) the Audited Closing Balance
Sheet, as adjusted by (A) the written agreement of Buyer and Seller
and/or (B) the CPA Firm in accordance with Section 2.3(f)(ii).
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to
Buyer, other than as disclosed in the Disclosure Schedule delivered to Buyer at
the time of the execution of this Agreement.
3.1. Corporate.
(a) Organization. Company is a corporation duly
organized, validly existing and in good standing under the Laws of the
State of Wisconsin.
(b) Corporate Power. Company has all requisite
corporate power and authority to own and operate its assets, to carry on
its business as currently being conducted, to execute and deliver this
Agreement and to perform its obligations hereunder.
(c) Qualification. Company is qualified to do
business as a foreign corporation, and is in good standing, in each
jurisdiction in which the ownership or operation of the assets owned or
operated by it, or the conduct of its business, makes such qualification
necessary, except where the failure to be so qualified or in good
standing would not have a Company Material Adverse Effect. Schedule
3.1(c) sets forth a list of all the jurisdictions in which Company is
qualified to do business as a foreign corporation.
(d) Subsidiaries. Schedule 3.1(d) contains a list of
the name, jurisdiction of incorporation or organization and ownership of
each corporation, limited liability company, partnership or other Entity
of which capital stock or other equity or ownership interests are
directly or indirectly owned by Company (collectively, the "Company
Subsidiaries"), setting forth whether each such Company Subsidiary is
engaged in the Water Business (each, a "Water Subsidiary") or in the
Other Businesses (each, a "Non-Water Subsidiary"). Except as set forth
in Schedule 3.1(d), Company does not directly or indirectly
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own any capital stock or other equity or ownership interest of any
corporation, limited liability company, partnership or other Entity.
Except as set forth in Schedule 3.1(d), no Person other than Company
directly or indirectly owns any capital stock or other equity or
ownership interest of any Water Subsidiary. All outstanding capital
stock and other equity or ownership interests of each Water Subsidiary
are free and clear of any Liens and are validly issued, fully paid and
nonassessable, except (i) as set forth on Schedule 3.1(d); (ii) for
restrictions imposed by federal or state securities Laws; and (iii) in
the case of Wisconsin corporations, to the extent provided by Section
180.0622(2)(b) of the Wisconsin Business Corporation Law. Except as set
forth on Schedule 3.1(d), there are no (A) securities convertible into
or exchangeable for the capital stock or other equity or ownership
interests of any Water Subsidiary; (B) options, warrants or other rights
to purchase or subscribe to capital stock or other equity or ownership
interests of any Water Subsidiary or securities that are convertible
into or exchangeable for capital stock or other equity or ownership
interests of any Water Subsidiary; or (C) contracts, commitments or
agreements relating to the issuance, sale or transfer of any capital
stock or other equity or ownership interests of any Water Subsidiary,
any such convertible or exchangeable securities or any such options,
warrants or other rights. Each Water Subsidiary (1) is a corporation,
limited liability company, partnership or other Entity duly organized,
validly existing and in good standing under the Laws of its jurisdiction
of incorporation or organization, (2) has all requisite corporate or
other similar power and authority to carry on its business as it is now
being conducted and to own and operate the properties and assets it now
owns and operates and (3) is in good standing and is qualified to do
business as a foreign corporation or other Entity in each jurisdiction
wherein the ownership or operation of the properties owned by it, or the
conduct of its business, makes such qualification necessary, except
where the failure to be so qualified or in good standing would not have
a Company Material Adverse Effect.
(e) Corporate Documents. Company has made available
to Buyer copies of its and each Water Subsidiary's charter, bylaws or
similar organizational documents, as in effect on the date hereof. The
corporate minute book and stock records of Company and each Water
Subsidiary made available for Buyer's inspection are materially complete
copies of such instruments. Set forth in Schedule 3.1(e) is a list of
the directors and senior executive officers of Company, Industries,
Sta-Rite Industries, LLC, Hypro, LLC and SHURflo, LLC, as of the date
hereof.
(f) Capitalization. The authorized capital stock of
Company consists entirely of 121,500,000 shares of common stock, par
value $1.00 per share. No shares of such capital stock are issued or
outstanding except for 100 shares of common stock of Company, which are
owned of record and beneficially by Seller. All Shares are validly
issued, fully paid and nonassessable, except to the extent provided by
Section 180.0622(2)(b) of the Wisconsin Business Corporation Law. Except
as set forth on Schedule 3.1(f), there are no (i) securities convertible
into or exchangeable for any capital stock or other securities of
Company, (ii) options, warrants or other rights to purchase or subscribe
to capital stock or other securities of Company or securities that are
convertible into or exchangeable for capital stock or other securities
of Company or (iii) contracts, commitments, agreements, understandings
or arrangements of any kind relating to the issuance, sale or transfer
of any capital stock or other securities of Company, any such
convertible or exchangeable securities or any such options, warrants or
other rights.
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3.2. Seller.
(a) Organization. Seller is a corporation duly
organized, validly existing and in good standing under the Laws of the
State of Wisconsin.
(b) Corporate Power. Seller has all requisite
corporate power and authority to own and operate its assets, to carry on
its business as currently being conducted, to execute and deliver this
Agreement and to perform its obligations hereunder.
(c) Title. Seller has, and upon consummation of the
transactions contemplated hereby Buyer will receive, title to the
Shares, free and clear of all Liens, other than restrictions imposed by
federal or state securities Laws.
3.3. Authority. The execution and delivery of this Agreement
by Company or Seller and the consummation by Seller or Company of the
transactions contemplated hereby have been duly authorized by the respective
boards of directors of each of Company and Seller and the shareholder of Company
and no other or further act or proceeding on the part of Company or Seller or
their respective shareholders is necessary to authorize this Agreement or the
consummation by Seller or Company of the transactions contemplated hereby.
Assuming due and valid authorization, execution and delivery hereof by Buyer,
this Agreement constitutes a valid and binding agreement of Company and Seller,
enforceable in accordance with its terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other Laws affecting creditors' rights
generally, and by general equitable principles.
3.4. No Violation. Except as set forth on Schedule 3.4 and
except as may result from facts or circumstances relating solely to Buyer or its
Affiliates, neither the execution and delivery of this Agreement nor the
consummation by Company or Seller of the transactions contemplated hereby (a)
will violate any applicable statute, law, ordinance or regulation (collectively,
"Laws") or any order, writ, injunction, judgment or decree (collectively,
"Orders") of any court, arbitrator, commission, regulatory board, bureau,
agency, or authority or other governmental body, whether federal, state,
municipal, county, local or foreign (collectively, "Governmental Entities")
applicable to Seller, Company or Water Subsidiaries, (b) except for applicable
requirements (i) of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and any other Competition Laws; (ii) under the Exchange
Act; and (iii) of any national securities exchange upon which shares of common
stock of Seller are listed, will require on the part of Seller or Company any
authorization, consent, approval, exemption or other action by or notice to,
declaration, filing or registration with, any Governmental Entity or (c) will
violate or conflict with, or constitute a default (or an event that, with notice
or lapse of time, or both, would constitute a default) under, or will result in
the termination of, or accelerate the performance required by Seller, Company or
any Water Subsidiary, or result in the creation of any Lien upon any of the
assets of Company or any Water Subsidiary under, any term or provision of the
charter, bylaws or similar organizational documents of Company, Seller or any
Water Subsidiary or of any Contract to which Company, Seller or any Water
Subsidiary is a party or by which Company, Seller or any Water Subsidiary or any
of their respective assets or properties may be bound, except in the case of
each of clauses (a), (b) and (c) as would not have a Company Material Adverse
Effect or would not materially adversely affect the ability of Seller or Company
to consummate the transactions contemplated hereby.
3.5. Financial Statements. Included as Schedule 3.5 are
consolidated financial statements of Industries or Company, as applicable,
(collectively, the "Financial Statements")
7
consisting of (a) the financial statements (including balance sheets and
statements of earnings, shareholders' equity and cash flows) of Industries as of
and for each of the fiscal years ended December 31, 2002, 2001 and 2000
(including the notes contained therein or annexed thereto), which financial
statements have been reported on, and are accompanied by, the signed,
unqualified opinion of Deloitte & Touche LLP for 2002 and Xxxxxx Xxxxxxxx LLP
for 2001 and 2000, (b) the unaudited consolidated financial statements
(including balance sheet and statements of earnings, shareholders' equity and
cash flows) of Industries as of and for the year ended December 31, 2003, and
(c) an unaudited consolidated balance sheet of Company as of December 31, 2003
giving effect to the Distribution as if it had occurred on December 31, 2003
(the "Recent Balance Sheet"). Except as set forth on Schedule 3.5 and except as
set forth therein, the Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved and fairly
present in all material respects the financial position and results of
operations of Industries or Company, as applicable, as of the dates and for the
periods indicated, except in the case of unaudited statements, for the absence
of notes thereto.
3.6. Tax Matters.
(a) Provision For Taxes. All material Taxes of
Company and Water Subsidiaries attributable to periods preceding or
ending with the date of the Recent Balance Sheet have been paid or have
been included in a liability accrual for the specific Taxes on the
Recent Balance Sheet. The provision made for Taxes on the Recent Balance
Sheet is sufficient for the payment of all material Taxes of Company and
Water Subsidiaries at the date of the Recent Balance Sheet and for all
years and periods prior thereto. Since the date of the Recent Balance
Sheet, neither Company nor any Water Subsidiary has incurred any
material Taxes other than Taxes incurred in the ordinary course of
business consistent in type and amount with its respective past
practices, other than as the result of the transaction described in
Section 5.9 of this Agreement.
(b) Tax Returns Filed. All federal income Tax and
other material Tax Returns required to be filed by or on behalf of
Company and each Water Subsidiary have been timely filed and, when
filed, were true, correct and complete in all material respects. All
material Taxes owed and/or due, and the Taxes shown as due on such Tax
Returns, were paid or adequately accrued. Copies of all federal income
Tax and other material Tax Returns filed by Company and each Water
Subsidiary for each such Entity's three most recent fiscal years have
been made available to Buyer.
(c) Withholding. Company and each Water Subsidiary
has duly withheld and paid all material Taxes that it is required to
withhold and pay in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other third
party.
(d) Tax Audits. No claim has ever been made in
writing by any authority in a jurisdiction in which Company or any Water
Subsidiary does not file Tax Returns that Company or such Water
Subsidiary, as the case may be, is or may be subject to taxation by that
jurisdiction or authority. The material Tax Returns of Company and each
Water Subsidiary that are under audit or have been audited by the
Internal Revenue Service ("IRS") or other applicable Tax authorities
within the past three (3) years, together with a list of all powers of
attorney granted by Company or any Water Subsidiary with respect to any
material Tax matter, are set forth in Schedule 3.6(d). Neither Company
nor any Water Subsidiary has
8
received from the IRS or any other applicable Tax authorities any
written notice of material underpayment or assessment of Taxes that has
not been paid or any written objection to any material Tax Return filed
by Company or any Water Subsidiary. Except as set forth on Schedule
3.6(d), there are no outstanding Contracts or waivers extending the
statutory period of limitations applicable to any material Tax Return.
(e) No Tax Liens. Neither Company nor any Water
Subsidiary has any material Liens for Taxes other than Permitted Liens.
(f) Other. Except as set forth on Schedule 3.6(f),
neither Company nor any Water Subsidiary has (i) filed any consent or
agreement under Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) to Seller's knowledge, applied for any Tax
ruling, (iii) to Seller's knowledge, entered into a closing agreement as
described in Section 7121 of the Code or otherwise (or any corresponding
or similar provision of state, municipal, county, local, foreign or
other Tax Law) or any other Contract with any Tax authority, (iv) made
any payments, or been a party to a Contract (including this Agreement)
that under any circumstances could obligate it to make payments (either
before or after the Closing Date) that will not be deductible because of
Section 162(m) or Section 280G of the Code, or (v) been a party to any
material Tax allocation, Tax sharing or Tax indemnification Contract.
Neither Company nor any Water Subsidiary is a "United States real
property holding company" within the meaning of Section 897 of the Code.
Neither Company nor any Water Subsidiary has been the "distributing
corporation" or a "controlled corporation" (within the meaning of
Section 355 of the Code) with respect to a transaction described in
Section 355 of the Code that occurred during a Tax period for which the
applicable statute of limitations for assessment has not yet expired,
taking into account all mitigation provisions under the Code and other
applicable Law.
3.7. Absence of Certain Changes. Except as set forth in
Schedule 3.7, as disclosed in the Financial Statements or as contemplated by or
in connection with the transactions contemplated by this Agreement, since the
date of the Recent Balance Sheet, there has not been:
(a) No Adverse Change. Any change constituting a
Company Material Adverse Effect.
(b) No Increase in Compensation. Any material
increase in the compensation, salaries, commissions or wages payable or
to become payable to any employees of Company or any Water Subsidiary,
including any bonus or other employee benefit granted, made or accrued
in respect of such employees (including any such increase or change
pursuant to any Employee Plan/Agreement or other commitment), except to
the extent increased, granted, made or accrued in the ordinary course of
business consistent with past practice or as required by Law or
applicable Employee Plan/Agreement.
(c) No Labor Disputes. Except as may result from
facts, circumstances or actions relating to Buyer or its Affiliates or
the transactions contemplated by this Agreement, any labor dispute or
disturbance relating to Company or any Water Subsidiary, other than
routine individual grievances or other disputes that would not have a
Company Material Adverse Effect.
9
(d) No Distributions. Any declaration, setting aside
or payment of any dividend or other distribution in respect of the
capital stock of Company or any Water Subsidiary, other than the
Distribution and any distributions of cash to Seller; any redemption,
purchase or other acquisition by Company or any Water Subsidiary of any
capital stock of such Entity, or any security relating to such capital
stock; or any other payment of any kind to Seller as a shareholder of
Company or to any shareholder of a Water Subsidiary as such a
shareholder.
(e) No Disposition of Property. Any sale, lease or
other disposition of any material assets of Company or any Water
Subsidiary, except for sales, leases or other dispositions in the
ordinary course of business.
(f) No Amendment of Contracts, Rights. Any entering
into, material amendment or early termination of any material Contract
relating to employment to which Company or any Water Subsidiary is a
party, or any entering into, material amendment or early termination of
any other material Contract to which Company or any Water Subsidiary is
a party, or any release or waiver of any material claims or rights under
any material Contract to which Company or any Water Subsidiary is a
party, other than in the ordinary course of business.
(g) Loans and Advances. Any loan or advance made by
Company or any Water Subsidiary to any Person, other than in the
ordinary course of business.
(h) Credit. Any grant of credit by Company or any
Water Subsidiary to any customer (including any distributor) of Company
or such Water Subsidiary on terms or in amounts that are materially more
favorable than those that have been extended to such customer in the
past or any other material change in the terms of any credit heretofore
extended by Company or any Water Subsidiary, except for changes made in
the ordinary course of business.
(i) Discharge of Obligations. Any discharge,
satisfaction or written agreement to satisfy or discharge any material
Liability of Company or any Water Subsidiary, other than the discharge
or satisfaction of Liabilities in the ordinary course of business.
(j) Accounting Principles. Any material change or
application for any material change in Company's or any Water
Subsidiary's financial or Tax accounting principles or methods, except
as required by GAAP or applicable Law.
3.8. Absence of Undisclosed Liabilities. Except as disclosed,
reflected or reserved for in the Recent Balance Sheet, the Final Closing Balance
Sheet or in Schedule 3.8, since December 31, 2003, neither Company nor any Water
Subsidiary has incurred any Liabilities that would be required to be reflected
or reserved against in a consolidated balance sheet of Company and Water
Subsidiaries prepared in accordance with GAAP as applied in preparing the
Financial Statements other than: (a) Liabilities incurred since the date of the
Recent Balance Sheet in the ordinary course of business consistent with past
practice, none of which has had or would have a Company Material Adverse Effect;
(b) Liabilities disclosed in the Disclosure Schedule or that are of the type or
kind that would be disclosed in the Disclosure Schedule if they did not fall
below the minimum threshold amount, term or materiality of the disclosures
called for by the terms of this Agreement to be set
10
forth in the Disclosure Schedule; and (c) Liabilities incurred in connection
with the transactions contemplated hereby or otherwise contemplated or permitted
by this Agreement.
3.9. No Litigation. Except as set forth in Schedule 3.9 and
except as may result from facts, circumstances or actions relating to Buyer or
its Affiliates or the transactions contemplated by this Agreement, there is no
Litigation pending or, to Seller's knowledge, threatened against Company or any
Water Subsidiary that would have a Company Material Adverse Effect.
3.10. Compliance with Laws and Orders.
(a) Laws and Orders. Except as set forth in Schedule
3.10(a) or as would not have a Company Material Adverse Effect, Company
and each Water Subsidiary (including its business and assets) are in
compliance with all applicable Laws and Orders. Except as set forth in
Schedule 3.10(a), neither Company nor any Water Subsidiary has received
written notice of any violation or alleged violation of any Laws or
Orders within the last two (2) years, except for such violations or
alleged violations as would not have a Company Material Adverse Effect.
(b) Licenses and Permits. Company and each Water
Subsidiary have all licenses, permits, approvals, certifications and
consents of all Governmental Entities and all governmental certification
organizations ("Permits") required, and all exemptions from requirements
to obtain or apply for any of the foregoing, for the conduct of its
business (as currently conducted) and the operation of its facilities
(as currently operated), except where the failure to hold such Permits
or exemptions would not have a Company Material Adverse Effect. Except
as would not result in a Company Material Adverse Effect or as set forth
on Schedule 3.10(b), all such Permits are in full force and effect and
will not be made subject to any loss, limitation or obligation to
reapply as a result of the transactions contemplated hereby.
(c) Environmental Matters. Except for past
violations for which Company or any Water Subsidiary is neither subject
to any current Liability nor is reasonably likely to become subject to
any future Liability and except as set forth in Schedule 3.10(c),
Company and each Water Subsidiary (including its respective business and
assets) are in compliance with applicable requirements of Environmental
Laws including, without limitation, the requirements to hold and comply
with the conditions of all Permits required by such Environmental Laws,
except for such failure to comply as would not have a Company Material
Adverse Effect. Except as set forth in Schedule 3.10(c), there is no
Litigation nor any claim, hearing, notice of violation or demand letter
pending or, to Seller's knowledge, threatened against Company or any
Water Subsidiary relating in any way to the Environmental Laws except
for any such matter that would not have a Company Material Adverse
Effect. To Seller's knowledge, there is no Litigation pending or
threatened against any Person whose Liability therefor may have been
retained or assumed by or could be imputed or attributed to Company or
any Water Subsidiary relating in any way to the Environmental Laws.
Except as set forth in Schedule 3.10(c), to Seller's knowledge, (i)
there are no events, conditions, circumstances, activities, practices,
incidents, actions, omissions or plans that are reasonably likely to
result in any Liability to Company or any Water Subsidiary under
Environmental Laws, including any Liabilities related to offsite
disposal locations, or interfere with or prevent continued material
compliance by Company or any Water Subsidiary with applicable
Environmental Laws; and (ii) no Waste has been released or is
11
present on the Real Properties as a result of the operation of the Water
Business in quantities or under circumstances that require remediation
reasonably likely to result in material costs pursuant to applicable
Environmental Laws. Copies of all material environmental studies in the
possession of Company, any Water Subsidiary or Seller, relating to any
Real Property or property with respect to which any Liability has been
asserted against any Water Subsidiary have been made available to Buyer.
Notwithstanding anything to the contrary contained in this Agreement,
the representations and warranties in this Section 3.10(c) are Company's
and Seller's exclusive representations and warranties regarding
compliance with and Liabilities under Environmental Laws.
3.11. Title to and Condition of Properties.
(a) Marketable Title. Company and each Water
Subsidiary has good and marketable title, valid license rights or a
valid leasehold interest in all of the properties and assets used by
such Entity in the operation of the Water Business, free and clear of
all Liens, except for (i) zoning Laws and other land use restrictions
that do not materially adversely impair the present use or occupancy of
the property subject thereto; (ii) any Liens for Taxes, assessments and
other governmental charges not yet due and payable or due but not
delinquent or due and being contested in good faith; (iii) any
mechanics', workmen's, repairmen's, warehousemen's, carriers' or other
similar Liens arising in the ordinary course of business, or being
contested in good faith; (iv) any Liens which have not had and are not
reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect and (v) any defects, easements, rights of way,
restrictions, covenants, claims or other similar charges or any other
matters of record, which do not, individually or in the aggregate, have
a material adverse effect on the use or possession of such properties or
assets (collectively, the "Permitted Liens").
(b) Real Property. Schedule 3.11(b) sets forth all
real property owned, used or occupied by Company and each Water
Subsidiary primarily in the operation of the Water Business as of the
date hereof (the "Real Property"). Each Real Property has adequate
rights of access to public ways.
(c) Condition. Except as would not result in a
Company Material Adverse Effect, all material tangible assets owned or
utilized by Company or any Water Subsidiary in the operation of the
Water Business as currently conducted and located on the Real Property
are in adequate condition for the purposes for which they are currently
used. Except as would not result in a Company Material Adverse Effect,
all buildings, plants and other physical structures owned or utilized by
Company or any Water Subsidiary in the operation of the Water Business
as currently conducted and located on the Real Property are in adequate
condition for the purposes for which they are currently used.
(d) No Condemnation, Expropriation or Similar
Action. To Seller's knowledge, no condemnation, expropriation or taking
is pending nor has Company or Seller received written notice that any
such condemnation, expropriation or taking has been planned, scheduled
or proposed.
3.12. Insurance. Schedule 3.12 sets forth a list of all
policies of fire, liability, product liability, workers compensation, health,
product, recall and other forms of insurance currently in effect with respect
to, or that provides coverage for, the business or assets of Company
12
and each Water Subsidiary (collectively, the "Company Insurance Policies").
Schedule 3.12 includes the carrier, the description of coverage, the limits of
coverage, retention or deductible amounts, amount of annual premiums, date of
expiration and date through which premiums have been paid with respect to each
Company Insurance Policy and the name of the Entity that is the owner of such
policy. Company has made available copies of each Company Insurance Policy to
Buyer. All Company Insurance Policies are valid and enforceable policies and
provide insurance coverage with respect to the business and assets of Company
and each Water Subsidiary of the kinds, in the amounts and against the risks
which, in Seller's judgment, are customary for organizations of similar size and
business, except for such failures to be valid or enforceable as would not have
a Company Material Adverse Effect. Except as set forth in Schedule 3.12, neither
Company nor any Water Subsidiary has received any written notice of cancellation
or termination with respect to any Company Insurance Policy. To Seller's
knowledge, Company and each Water Subsidiary has timely made all claims that it
has been entitled to make under each Company Insurance Policy, except for such
failure to make such claims as would not have a Company Material Adverse Effect.
Except as set forth in Schedule 3.12, neither Company nor any Water Subsidiary
has received any written notice from or on behalf of any insurance carrier
issuing any Company Insurance Policy that insurance rates therefor will
hereafter be substantially increased (except to the extent insurance rates may
be increased for all similarly situated risks) or that there will hereafter be
an increase in a deductible (or an increase in premiums to maintain an existing
deductible) or nonrenewal of any Company Insurance Policy. Except as set forth
in Schedule 3.12, there is no claim by Company or any Water Subsidiary pending
under any Company Insurance Policy as to which coverage has been denied or
disputed by the underwriters of such policies.
3.13. Contracts and Commitments. Except as set forth in
Schedule 3.13 (the items listed in Schedule 3.13, the "Listed Contracts"):
(a) Real Property Leases. Neither Company nor any
Water Subsidiary (whether as lessor or lessee) is a party to any
material Contracts for the lease or occupancy of Real Property, other
than those entered into in the ordinary course of business.
(b) Personal Property Leases. Neither Company nor
any Water Subsidiary (whether as lessor or lessee) is a party to any
Contracts for the lease or use of any material personal property
involving any remaining consideration, termination charge or other
expenditure in excess of $1,000,000 (or its foreign currency equivalent
as of the date hereof) or involving performance over a period of more
than twelve (12) months.
(c) Contracts for Services. Neither Company nor any
Water Subsidiary has any material Contract with any officer, employee,
consultant, sales representative, dealer, distributor, franchisee or
other third party performing similar functions that is not cancelable by
Company or any Water Subsidiary on notice of not longer than thirty (30)
calendar days without material Liability, penalty or premium.
(d) Powers of Attorney. Neither Company nor any
Water Subsidiary has given a power of attorney or proxy that is
currently in effect to any Person for any purpose whatsoever.
(e) Collective Bargaining Agreements. Neither
Company nor any Water Subsidiary has any collective bargaining Contract
with any union, guild, shop committee or other collective bargaining
group.
13
(f) Loan Agreements. Neither Company nor any Water
Subsidiary has any material loan Contract, promissory note, letter of
credit or other evidence of indebtedness, as a signatory, guarantor or
otherwise.
(g) Guarantees. Neither Company nor any Water
Subsidiary has guaranteed the payment or performance of any Person,
agreed to indemnify any Person (except under Contracts entered into by
Company or a Water Subsidiary in the ordinary course of business) or to
act as a surety, or otherwise agreed to be contingently or secondarily
liable for the obligations of any Person for amounts that are material
to Company and Water Subsidiaries taken as a whole.
(h) Governmental Contracts. Neither Company nor any
Water Subsidiary has any material Contract with any Governmental Entity,
other than those entered into in the ordinary course of business.
(i) Agreements Relating to Company Trade Rights.
Neither Company nor any Water Subsidiary has any material consulting,
development, joint development or similar material Contract relating to
any of the Company Trade Rights, other than those entered into in the
ordinary course of business.
(j) Restrictive Agreements. Neither Company nor any
Water Subsidiary has any Contract (i) prohibiting or restricting Company
or any Water Subsidiary from competing in any business or geographical
area, or soliciting customers or employees, or otherwise restricting it
from carrying on any business anywhere in the world or (ii) relating to
the location of employees or a minimum number of employees to be
employed by Company or any Water Subsidiary.
(k) Other Material Contracts. Neither Company nor
any Water Subsidiary has any Contract involving consideration or other
expenditure in excess of $1,000,000 (or its foreign currency equivalent
as of the date hereof), or involving performance over a period of more
than twelve (12) months, or that is otherwise individually material to
the operations of Company and Water Subsidiaries, taken as a whole and
not entered into in the ordinary course of business.
3.14. No Default. Except as set forth on Schedule 3.14,
neither Company nor any Water Subsidiary is in default under any Listed Contract
to which it is a party, and to Seller's knowledge, no event or omission has
occurred that, through the passage of time or the giving of notice, or both,
would constitute a default by Company or any Water Subsidiary thereunder or
cause the acceleration of any of Company's or any Water Subsidiary's obligations
thereunder or result in the creation of any Lien, other than Permitted Liens, on
any of Company's or any Water Subsidiary's assets, other than, in any such case,
as would not have a Company Material Adverse Effect. To Seller's knowledge, no
third party is in default in any material respect under any Listed Contract to
which Company or any Water Subsidiary is a party, other than as would not have a
Company Material Adverse Effect.
3.15. Labor Matters. Except as may result from facts,
circumstances or actions relating to Buyer or its Affiliates or the transactions
contemplated by this Agreement or as set forth on Schedule 3.15: (a) within the
last three (3) years, neither Company nor any Water Subsidiary has experienced
any material labor disputes, work stoppages due to labor disagreements or, to
Seller's
14
knowledge, any union organization attempts; (b) there is no unfair labor
practice charge pending before the National Labor Relations Board or, to
Seller's knowledge, threatened against Company or any Water Subsidiary; (c)
there is no material labor strike, dispute, slowdown or stoppage actually
pending or, to Seller's knowledge, threatened against or affecting Company or
any Water Subsidiary; and (d) no question concerning representation has been
raised or, to Seller's knowledge, is threatened relating to the employees of
Company or any Water Subsidiary.
3.16. Employee Benefit Plans.
(a) Disclosure. Schedule 3.16(a)-1 sets forth a list of all
plans, programs, Contracts, policies and practices, including any
pension, thrift, savings, profit sharing, retirement, bonus, incentive,
health, dental, death, accident, disability, stock purchase, stock
option, stock appreciation, stock bonus, executive or deferred
compensation, hospitalization, "parachute," severance, vacation, sick
leave, fringe or welfare benefits, any employment Contracts, "golden
parachutes," "employee benefit plans" (as defined in Section 3(3) of
ERISA), and written or binding oral statements of policies, practices or
understandings relating to employment that are sponsored or maintained
by Company or any ERISA Affiliate, or to which Company or any ERISA
Affiliate contributes or is required to contribute, for the benefit of
any person who currently is or formerly was employed in respect of the
Water Business or who currently serves or previously served as a
director in respect of the Water Business (collectively, the "Employee
Plans/Agreements"). Schedule 3.16(a)-1 separately identifies each
Employee Plan/Agreement covering employees or former employees who
primarily perform or performed, as the case may be, services outside of
the United States. No Employee Plan/Agreement is a "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA), and neither Company nor any
Water Subsidiary and, except as set forth on Schedule 3.16(a)-2, no
ERISA Affiliate of Company or any Water Subsidiary has ever contributed
nor been obligated to contribute to any such multiemployer plan.
(b) Delivery of Documents. Company and Seller have
made available to Buyer copies of the following information with respect
to each Employee Plan/Agreement:
(i) the Employee Plan/Agreement, including
all amendments, or if there is not a written plan
document, a written summary of the terms and conditions
of the Employee Plan/Agreement;
(ii) the most recent annual report, if
required under ERISA;
(iii) the summary plan description, together
with each summary of material modifications, if required
under ERISA;
(iv) if the Employee Plan/Agreement is funded
through insurance or a trust, insurance or any third
party funding vehicle, the insurance policy or contract
of the trust or other funding agreement and the most
recent financial statements thereof; and
(v) the most recent determination letter
received from the IRS with respect to any Employee
Plan/Agreement that is intended to be qualified under
Section 401 of the Code.
15
(c) Terminations, Proceedings, Penalties, Etc. With
respect to each Employee Plan/Agreement that is subject to Title IV of
ERISA, and, solely for purposes of clauses (i), (ii), (iii) and (iv)
immediately following, with respect to any other plan subject to Title
IV of ERISA and maintained or contributed to by an ERISA Affiliate of
Company or any Water Subsidiary:
(i) no such plan has been terminated so as
to subject, directly or indirectly, Company or any Water
Subsidiary to any Liability or any of Company's or any
Water Subsidiary's assets to the imposition of any Lien
under Title IV of ERISA;
(ii) no proceeding has been initiated or
threatened by any Person (including the Pension Benefit
Guaranty Corporation) to terminate any such plan;
(iii) no condition or event currently exists
or is reasonably expected to occur that could subject,
directly or indirectly, Company or any Water Subsidiary
to any Liability (other than for the payment of
termination insurance premiums) or any of Company's or
any Water Subsidiary's assets to the imposition of any
Lien under Title IV of ERISA;
(iv) other than the execution of this
Agreement or the consummation of any transaction
contemplated by this Agreement, no "reportable event"
(as defined in Section 4043 of ERISA) has occurred with
respect to any such plan, except for any such reportable
event for which the 30-day notice requirement has been
waived or that could not reasonably be expected to
subject Company or any Water Subsidiary to any
Liability;
(v) no such plan that is subject to Section
302 of ERISA or Section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined in Section
302 of ERISA and Section 412 of the Code, respectively),
whether or not waived;
(vi) no such plan is a plan described in
Section 4064 of ERISA; and
(vii) except as disclosed on Schedule
3.16(c)(vii), the present value of the accumulated
benefit obligations under such plan, as determined by
such plan's actuary based upon the actuarial assumptions
used for funding purposes in the most recent actuarial
report prepared with respect to such plan, did not, as
of such plan's most recent valuation date, exceed the
then current value of the assets of such plan allocable
to such accumulated benefit obligations.
(d) Prohibited Transactions. Except as set forth on
Schedule 3.16(d), there have been no "prohibited transactions" (within
the meaning of Section 406 or 407 of ERISA or Section 4975 of the Code)
for which a statutory or administrative exemption does not exist with
respect to any Employee Plan/Agreement, other than any such prohibited
transaction that could not subject Company or any Water Subsidiary to
any Liability. No
16
Person who is a "fiduciary" (as defined in Section 3(21) of ERISA) with
respect an Employee Plan/Agreement has any Liability for breach of
fiduciary duty in connection with the administration or investment of
the assets of an Employee Plan/Agreement.
(e) No person engaged by Company or any Water
Subsidiary as an independent contractor, third party contract laborer,
temporary employee, or "leased employee" (within the meaning of Section
414(n) of the Code) has ever been improperly excluded from participation
in an Employee Plan/Agreement, nor has Company or any Water Subsidiary
used the services of such individuals to an extent that would reasonably
be expected to result in the disqualification of any Employee
Plan/Agreement or the imposition of penalties or excise Taxes with
respect to the Employee Plan/Agreements by the IRS, the United States
Department of Labor or other Governmental Entity.
(f) Payments and Compliance. Except as set forth on
Schedule 3.16(f), with respect to each Employee Plan/Agreement, (i) all
payments due from the Employee Plan/Agreement (or from Company or any
Water Subsidiary with respect to the Employee Plan/Agreement) have been
made, and all amounts properly accrued to date as Liabilities that have
not been paid have been properly recorded on the books of Company or a
Water Subsidiary; (ii) such Employee Plan/Agreement has been operated
and administered in all material respects in accordance with its terms
and all Laws, including ERISA and the Code; (iii) all reports and
information relating to the Employee Plan/Agreement required to be filed
with any Governmental Entity or provided to participants or their
beneficiaries have been timely filed or disclosed and, when filed or
disclosed, were true, correct and complete; (iv) if the Employee
Plan/Agreement is intended to qualify under Section 401 of the Code, it
has received a favorable determination letter from the IRS with respect
to such qualification and nothing has occurred since the date of such
letter that is reasonably likely to result in the revocation of such
determination; (v) there is no Litigation pending (other than routine
Litigation for benefits) or, to Seller's knowledge, threatened with
respect to the Employee Plan/Agreement or against the assets of the
Employee Plan/Agreement, except for such Litigation as would not have a
Company Material Adverse Effect; and (vi) all employer and employee
contributions that are due have been made within the time periods
prescribed by ERISA and the Code, and all contributions for any period
ending on or before the Closing Date that are not yet due have been made
or accrued in accordance with past custom or practice of the Company or
Water Subsidiary.
(g) Post Retirement Benefits. Except as disclosed on
Schedule 3.16(g), no Employee Plan/Agreement provides benefits,
including death or medical benefits (whether or not insured), with
respect to current or former employees or directors of Company or any
Water Subsidiary beyond their retirement or other termination of
service, other than (i) coverage mandated solely by applicable Law, (ii)
death benefits or retirement benefits under any "employee pension
benefit plan," as defined in Section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as Liabilities on the books of Company or
a Water Subsidiary or (iv) benefits the entire costs of which are borne
by such individual or his or her beneficiary.
(h) No Triggering of Obligations. Except as set
forth on Schedule 3.16(h), the consummation of the transactions
contemplated hereby will not (i) entitle any current or former employee
or director of Company or any Water Subsidiary to severance pay,
unemployment compensation or any other payment, except as expressly
17
provided in this Agreement or (ii) accelerate the time of payment or
vesting or increase the amount of compensation due to any current or
former employee or director of Company or any Water Subsidiary.
(i) Future Commitments. Neither Company nor any
Water Subsidiary has announced any plan or legally binding commitment to
create any additional Employee Plans/Agreements or to amend or modify
any existing Employee Plans/Agreements.
3.17. Trade Rights. Schedule 3.17 contains a list of all
Company Trade Rights registrations and applications owned by Company or a Water
Subsidiary. All Company Trade Rights shown as registered in Schedule 3.17 have
been properly registered in the jurisdictions set forth in Schedule 3.17. All
pending registrations and applications listed on Schedule 3.17 have been
properly made and filed, and all annuity, maintenance, renewal and other fees
relating to such registrations or applications are current. To Seller's
knowledge, to conduct its respective business as it is currently conducted,
neither Company nor any Water Subsidiary requires any Trade Rights that it does
not already have a right to use. Neither Company nor any Water Subsidiary is
infringing or in the past two (2) years has infringed any Trade Rights of
another. To Seller's knowledge, no Person is infringing or in the past two (2)
years has infringed any of the Company Trade Rights. Except as set forth in
Schedule 3.17, neither Company nor any Water Subsidiary pays any material
royalties or other material monetary consideration for the right to use any
Trade Rights of others, other than payments in the ordinary course of business.
3.18. Product Warranty and Product Liability. Neither Company
nor any Water Subsidiary has provided a warranty for sales of Products other
than in the ordinary course of business. Schedule 3.18 also contains a
description of all material pending product warranty claims. Except as set forth
on Schedule 3.18, none of the Products has been the subject of any replacement,
field fix, retrofit, modification or recall campaign that would result in a
Company Material Adverse Effect, and to Seller's knowledge, no facts or
conditions exist that could reasonably be expected to result in such a recall
campaign.
3.19. Certain Relationships to Company. All material Contracts
and material obligations between Company or any Water Subsidiary and any
Affiliate of Company or any Water Subsidiary (other than Company and Water
Subsidiaries) are described in Schedule 3.19. Schedule 3.19 contains a list of
all material services provided to Company or any Water Subsidiary by employees
of any Affiliates of Company or any Water Subsidiary (other than Company and
Water Subsidiaries). Any assets owned, leased or licensed by the Non-Water
Subsidiaries that are necessary to the operation of the business of Company and
Water Subsidiaries as currently conducted will be owned, leased or licensed by
Company or Water Subsidiaries as of the Closing.
3.20. Customers and Suppliers.
(a) Major Customers. Schedule 3.20(a) contains a
list of the five (5) largest customers, including distributors, of each
of Sta-Rite Industries, LLC, Hypro, LLC and SHURflo, LLC for the most
recent fiscal year (determined on the basis of the total dollar amount
of net sales) showing the total dollar amount of net sales to each such
customer for such fiscal year without disclosure of such customers'
names or other identifying characteristics. Except as would not result
in a Company Material Adverse Effect, neither Company nor any Water
Subsidiary has received any notice as of the date hereof that any of the
customers described in Schedule 3.20(a) will not continue to be
customers of Company
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and Water Subsidiaries after the Closing at substantially the same level
of purchases set forth on Schedule 3.20(a).
(b) Major Suppliers. Schedule 3.20(b) contains a
list of the five (5) largest suppliers to each of Sta-Rite Industries,
LLC, Hypro, LLC and SHURflo, LLC for the most recent fiscal year
(determined on the basis of the total dollar amount of purchases)
showing the total dollar amount of purchases from each such supplier for
such fiscal year without disclosure of such suppliers' names or other
identifying characteristics. Except as would not result in a Company
Material Adverse Effect, neither Company nor any Water Subsidiary has
received any notice as of the date hereof that any of the suppliers
described in Schedule 3.20(b) will not continue to be suppliers to
Company and Water Subsidiaries after the Closing and will not continue
to supply Company and Water Subsidiaries with substantially the same
quantity of goods and services at competitive prices.
3.21. No Brokers or Finders. Except for such fees that will be
paid by Seller, none of Company, Seller nor any Water Subsidiary nor any of
their respective directors, officers or employees has retained, employed or used
any investment banking firm, broker or finder in connection with the
transactions provided for herein or the negotiation thereof, nor are any of them
responsible for the payment of any investment banking, broker's or finder's
fees.
3.22. Limit of Representations.
Notwithstanding anything to the contrary contained in this Agreement, (a) all
representations and warranties contained in this Article 3 shall assume the
consummation of the Distribution; and (b) except to the extent the
representations and warranties contained in Section 3.19 and the first two
sentences of Section 3.1(d) relate to Non-Water Subsidiaries, no representation
or warranty contained in this Article 3 shall in any way apply to any Non-Water
Subsidiary or the business or operations of any Non-Water Subsidiary or any
Other Businesses.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to
Company and Seller.
4.1. Corporate.
(a) Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of the
State of Minnesota.
(b) Corporate Power. Buyer has all requisite
corporate power and authority to execute and deliver this Agreement and
to perform its obligations hereunder.
4.2. Authority. The execution and delivery of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated hereby
have been duly authorized by the board of directors of Buyer and no other or
further corporate act or proceeding on the part of Buyer or its shareholders is
necessary to authorize this Agreement or the consummation by Buyer of the
transactions contemplated hereby. This Agreement constitutes a valid and binding
agreement of Buyer, enforceable in accordance with its terms, except as such may
be limited by bankruptcy, insolvency, reorganization or other Laws affecting
creditors' rights generally, and by general equitable principles.
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4.3. No Violation. Neither the execution and delivery of this
Agreement nor the consummation by Buyer of the transactions contemplated hereby
(a) will violate any Laws or Orders of any Governmental Entity applicable to
Buyer, (b) except for applicable requirements (i) of the HSR Act and any other
Competition Laws; (ii) under the Exchange Act; and (iii) of any national
securities exchange upon which shares of common stock of Buyer are listed, will
require on the part of Buyer any authorization, consent, approval, exemption or
other action by or notice to, declaration, filing or registration with, any
Governmental Entity or (c) except as set forth on Exhibit 4.3 will violate or
conflict with, or constitute a default (or an event that, with notice or lapse
of time, or both, would constitute a default) under, or will result in the
termination of, or accelerate the performance required by Buyer, any term or
provision of the charter, bylaws or similar organizational documents of Buyer or
of any Contract to which Buyer is a party or by which Buyer or any of its assets
or properties may be bound.
4.4. Sufficient Funds. Buyer has obtained legally binding
financing commitments from responsible financial institutions, copies of which
are attached as Exhibit 4.4 (the "Financing Commitments"), to provide cash to
Buyer in an amount sufficient to enable Buyer to consummate the transactions
contemplated by this Agreement.
4.5. No Brokers or Finders. Except for such fees that will be
paid by Buyer, neither Buyer nor any of its directors, officers, employees or
agents have retained, employed or used any investment banking firm, broker or
finder in connection with the transactions provided for herein or in connection
with the negotiation thereof, nor are any of them responsible for the payment of
any investment banking, broker's or finder's fees.
4.6. Investment Intent Representation. Buyer is acquiring the
Shares for its own account and not with a view toward any resale or distribution
of any of the Shares or any beneficial interest in the Shares. Buyer agrees that
the Shares may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of without registration under the Securities Act of 1933,
as amended, or an applicable exemption therefrom and without compliance with
foreign securities laws, in each case, to the extent applicable.
5. COVENANTS PRIOR TO THE CLOSING
5.1. Pre-Closing Access to Information and Real Property.
(a) General. From the date hereof until the earlier
of the Closing and date of termination of this Agreement and except as
prohibited by applicable Law, Company and Seller shall, and shall use
their commercially reasonable efforts to cause Water Subsidiaries and
Company's and Water Subsidiaries' officers, employees, agents,
independent accountants and advisors ("Representatives") to, furnish to
Buyer and its Representatives, at reasonable times and places, (i)
subject to Section 5.1(b), such access to the facilities of the Water
Business as Buyer may from time to time reasonably request; (ii) such
access to the assets, books and records of Company and Water
Subsidiaries as Buyer may from time to time reasonably request; and
(iii) such access to financial and operating data and other information
relating to Company and Water Subsidiaries as Buyer may from time to
time reasonably request, including access to the work papers of
Company's independent auditors (with the consent of such auditors);
provided, however, that nothing herein shall require Company or Water
Subsidiaries to disclose any information to Buyer if such disclosure (A)
would cause significant competitive harm to Company, Water Subsidiaries
or their Affiliates
20
if the transactions contemplated by this Agreement are not consummated
or (B) would be in violation of applicable Laws of any Governmental
Entity or the provisions of any agreement to which Seller or Company or
any Water Subsidiary is a party; provided further, that notwithstanding
clause (A), and subject to clause (B), of the foregoing proviso, Seller
and Company shall, and shall use their commercially reasonable efforts
to cause Water Subsidiaries and their Representatives to, provide
information to Buyer's Consultant subject to the terms of Exhibit
5.1(a). Buyer will hold any such information which is nonpublic in
confidence in accordance with the provisions of the Confidentiality
Agreement, the terms of which are hereby incorporated herein by
reference and which shall survive termination of this Agreement and
which shall govern the treatment of all information provided to or
obtained by Buyer in connection with the transactions contemplated by
the Agreement.
(b) Access to Real Property. Buyer understands and
agrees that any on-site inspections of the Real Property, including by
the Environmental Consultant, shall be conducted upon not less than
forty-eight (48) hours' prior notice to Company and/or the Water
Subsidiary operating at such Real Property and in the presence of a
representative of Company or the applicable Water Subsidiary. Without
limiting Section 5.1(a)(i), from the date hereof until the earlier of
the Closing and date of termination of this Agreement, Seller and
Company agree to furnish to Buyer and its Representatives, at reasonable
times and places such access to the facilities of the Water Business as
Buyer may from time to time reasonably request for the Environmental
Consultant to conduct environmental inspections, investigations and
testing (including Phase I environmental site assessments and audits) of
the operations and Real Property of Company and the Water Subsidiaries.
Notwithstanding the foregoing, the Parties agree that the Environmental
Consultant may only conduct Phase II environmental site assessments and
audits on a Real Property if Buyer, Buyer's environmental counsel, the
Environmental Consultant and Seller and Seller's environmental counsel
collectively shall reasonably determine, based on the results of the
Phase I environmental site assessments and audits or any other
information or evidence available to them, that Waste is present or
likely present on, at, above or below any Real Property and (A) such
Phase I environmental site assessments and audits or other information
or evidence indicate that a release of such Waste into structures on the
Real Property or into the ground, groundwater or surface water of the
Real Property has occurred, (B) such Waste presents a material risk to
human health or the environment or (C) such Waste is reasonably likely
to result in material Liability to the Company or any Water Subsidiary
under Environmental Laws. Buyer shall (i) use commercially reasonable
efforts to conduct its investigations at the Real Property, including by
the Environmental Consultant, in a manner that minimizes any disruption
of the operations of Company and/or any Water Subsidiary at the Real
Property and (ii) indemnify, protect, defend and hold harmless Company
and each Water Subsidiary from any and all claims (including, without
limitation, any claim for a mechanic's lien or materialman's lien),
causes of action, costs, losses, damages and reasonable attorneys' fees
incurred by Company or any Water Subsidiary in connection with or
arising out of any inspections carried on by or on behalf of Buyer
pursuant to this Section 5.1 (except to the extent of conditions
disclosed in any such inspection that existed prior to such inspection
and that constitute a breach of a representation or warranty contained
in Section 3.10(c)). The provisions of the preceding sentence of this
Section 5.1(b) shall survive the termination of this Agreement.
(c) Financial Statements. Seller, at its expense,
shall engage Deloitte to conduct an audit of the consolidated balance
sheet of Industries as of December 31, 2003 and
21
shall deliver such audited consolidated balance sheet of Industries on
or prior to March 15, 2004. Upon the Closing or earlier with the consent
of Seller (which consent shall not be unreasonably withheld or delayed),
Buyer may arrange, at Buyer's sole cost and expense, and Company and
Seller shall use commercially reasonable efforts to cooperate with
Buyer, to have such financial statements of Company after giving effect
to the Distribution audited to the extent Buyer is required to file with
the Securities and Exchange Commission in a Current Report on Form 8-K
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended.
(d) Xxxxxxxx-Xxxxx Implementation. From the date
hereof until the earlier of the Closing and date of termination of this
Agreement and except as prohibited by applicable Law, Seller will use
commercially reasonably efforts to cause Company and Water Subsidiaries
to (i) implement a process to document their significant internal
controls over financial reporting and an internal testing and
remediation program with respect to such controls and (ii) furnish to
Buyer and its Representatives, at reasonable times and places, and in
accordance with the limitations described in Section 5.1(a), access to
the Representatives of Seller, Company and Water Subsidiaries primarily
responsible for the implementation described in clause (i) above. Buyer
shall be solely responsible for the payment of all costs and expenses
relating to the activities of Buyer and its Representatives pursuant to
the foregoing clause (ii) and any incremental costs or expenses that may
be imposed on Seller, Company or Water Subsidiaries as a result of such
activities of Buyer and its Representatives.
5.2. Conduct of Business Pending the Closing. From the date
hereof until the earlier of the Closing and date of termination of the
Agreement, except as required or contemplated by or in connection with the
transactions contemplated by this Agreement, including as disclosed on the
Disclosure Schedule, and except for any actions taken by Seller, Company or
Water Subsidiaries of the type set forth in Exhibit 5.2 or otherwise consented
to by Buyer in writing (which consent shall not be unreasonably withheld or
delayed):
(a) No Material Changes. Seller will cause Company
and each Water Subsidiary to conduct its business in the ordinary and
usual course of business and will not make or institute any material
changes in its methods of operation.
(b) Maintain Organization. Seller will cause Company
and each Water Subsidiary to use commercially reasonable efforts to
preserve its business intact and to preserve for Buyer its current
relationships with its suppliers, customers and others with which it has
business dealings.
(c) No Corporate Changes. Seller will cause Company
and each Water Subsidiary not to amend its charter, bylaws or similar
organizational documents or make any changes in its authorized or issued
capital stock. Seller will cause Company and each Water Subsidiary not
to issue any additional capital stock or enter into any Contract to
issue any additional capital stock.
(d) No Capital Expenditures. Seller will cause
Company and each Water Subsidiary not to make any unbudgeted capital
expenditure, nor commit to make any unbudgeted capital expenditure, in
excess of Five Hundred Thousand Dollars ($500,000) (or its foreign
currency equivalent as of the date hereof), except pursuant to a Listed
Contract.
22
(e) Maintenance of Insurance. Seller will cause
Company and Water Subsidiaries to use commercially reasonable efforts to
maintain insurance policies comparable to the policies in effect as of
the date of this Agreement.
(f) Interim Financials. Seller will cause Company to
make available to Buyer such interim monthly financial statements of
Company and Water Subsidiaries as Company and Water Subsidiaries have
prepared and Company has used in the ordinary course of managing the
Water Business and measuring and reporting the operating results of
Company and Water Subsidiaries, as soon as practicable after they are
available.
(g) No Negotiations. Until the Closing or until this
Agreement has been terminated in accordance with its terms, Seller will
not, and will cause Company and Seller's and Company's respective
officers, director and agents not to, solicit or furnish any information
to, commence or conduct presently ongoing negotiations with, or enter
into any Contract with, any Person other than Buyer relating to the sale
or other disposition of a material portion of the assets of the Water
Business or of all or any portion of the capital stock of Company or any
Water Subsidiary, in each case whether directly or indirectly, or by
merger, sale of stock, reorganization, recapitalization or otherwise (an
"Acquisition Proposal"). Company and Seller will promptly provide Buyer
written notice of any such Acquisition Proposal and the terms thereof.
(h) No Transfer of Shares. Seller will not transfer
any of the Shares except to Buyer pursuant hereto.
5.3. Further Assurances. Each of the Parties hereto agrees to
use its respective commercially reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Laws and regulations to consummate and make
effective the transactions contemplated by this Agreement.
5.4. Certain Filings. Each Party shall make or cause to be
made, in cooperation with the other Parties and to the extent applicable and as
promptly as practicable, (a) an appropriate filing of a Notification and Report
Form pursuant to the HSR Act with respect to the transactions contemplated
hereby (which filing shall be made in any event within ten (10) business days
following the date hereof) and (b) all other necessary filings, forms,
declarations, notifications, registrations and notices with other Governmental
Entities under Competition Laws relating to the transactions contemplated
hereby. Each Party shall use commercially reasonable efforts to respond at the
earliest practicable date with any requests for additional information made by
the Federal Trade Commission (the "FTC"), the United States Department of
Justice (the "DOJ") or any other Governmental Entities, and act in good faith
and reasonably cooperate with the other party in connection with any
investigation of any Governmental Entity. Each party shall use all commercially
reasonable efforts to furnish to each other all information required for any
filing, form, declaration, notification, registration and notice. Each party
shall give the other party reasonable prior notice of any communication with,
and any proposed understanding or agreement with, any Governmental Entity
regarding any filings, forms, declarations, notifications, registrations or
notices, and permit the other to review and discuss in advance, and consider in
good faith the views of the other in connection with any proposed communication,
understanding or agreement with any Governmental Entity with respect to the
transactions contemplated by the Agreement. None of the parties shall
independently participate in any meeting, or engage in any substantive
conversation, with any governmental authority in respect of any filings or
inquiry without giving the other party
23
prior notice of the meeting and, unless prohibited by such Governmental Entity,
the opportunity to attend and/or participate. The parties will consult and
cooperate with one another in connection with any information or proposals
submitted in connection with proceedings under or relating to any Competition
Law. Without limiting the foregoing, Buyer and Seller shall each use all
commercially reasonable efforts: (i) to avoid the entry of any judgment that
would restrain, prevent or delay the Closing, on or before the Termination Date;
and (ii) to eliminate every impediment under any Competition Law that may be
asserted by any Governmental Entity so as to enable the Closing to occur as soon
as reasonably possible (and in any event no later than the Termination Date).
5.5. Title Insurance. Not less than thirty (30) calendar days
prior to the Closing, Company and Seller shall provide to Buyer copies of any
title insurance commitments and/or policies for the Real Property that are
currently in their possession. Company and Seller shall use commercially
reasonable efforts to cooperate with Buyer (which shall not include the
expenditure of any amounts by Seller and/or Company) to assist Buyer in
obtaining title insurance commitments pursuant to which the title company shall
commit to issue to Buyer standard form owner's policies of title insurance with
respect to all Real Property owned by the Water Subsidiaries. Such cooperation
by Company and Seller shall include providing the title insurance company with
such affidavits, certificates or similar instruments as the title insurance
company may reasonably and customarily require. Buyer shall be solely
responsible for all costs associated with such title insurance commitments and
any premiums for any title policies for the Real Property.
5.6. Surveys. Not less than thirty (30) calendar days prior
to the Closing, Company and Seller shall provide to Buyer copies of any surveys
of the Real Property that are currently in their possession. Subject to the
provisions of Section 5.1(b), Company and Seller shall use commercially
reasonable efforts to cooperate with Buyer (which shall not include the
expenditure of any amounts by Seller and/or Company) to assist Buyer in
obtaining surveys of all Real Property owned by the Water Subsidiaries. Buyer
shall be solely responsible for all costs associated with the preparation of
such surveys.
5.7. Notification. Prior to the Closing, Seller shall
promptly notify Buyer (after Seller has notice thereof), and Buyer shall
promptly notify Seller (after Buyer has notice thereof), and keep such other
Parties advised, as to any Litigation pending and known to such Party or, to its
actual knowledge, threatened against such Party that challenges the transactions
contemplated hereby. In addition, prior to the Closing, Seller shall promptly
notify Buyer (after Seller has notice thereof), as to any Company Material
Adverse Effect and Buyer shall promptly notify Seller (after Buyer has notice
thereof) of any Buyer Material Adverse Effect.
5.8. Financing. Buyer will use its best efforts to consummate
the funding contemplated by the Financing Commitments prior to Closing. If any
portion of the funding contemplated by the Financing Commitments becomes
unavailable, regardless of fault, then Buyer will use its best efforts to obtain
from other sources the financing necessary for the consummation of the
transactions contemplated hereby (the "Other Financing"). Consistent with the
foregoing, Buyer will not take any action or omit to take any action that may
impair its ability, or its prospective lenders' willingness, to consummate the
Financing Commitments in accordance with the terms of the Financing Commitments.
Buyer will keep Seller reasonably informed as to the status of the Financing
Commitments and will notify Seller promptly of any material developments with
respect to the Financing Commitments.
24
5.9. Non-Water Subsidiaries. Prior to the Closing, Seller
shall cause Company to distribute to Seller (a) its direct or indirect equity or
other ownership interest in Non-Water Subsidiaries (the "Distribution"), (b) all
of Company's cash such that the sole asset of Company at the Closing is the
equity interests of Industries and (c) all of Industries' cash. Seller will use
its commercially reasonable efforts to obtain any requisite approvals from the
Public Service Commission of the State of Wisconsin (the "PSCW") to permit the
consummation of the Distribution and to confirm that Company and the Water
Subsidiaries will not be subject to regulation by the PSCW as of the
Distribution. Buyer shall use its commercially reasonable efforts to cooperate
with Seller, as and to the extent reasonably requested by Seller, in connection
with obtaining such approvals. Seller and Company will (i) consult with Buyer
with respect to, permit Buyer and its counsel to review in advance and make
reasonable comments on, any proposed material written communications, including
any application for an order for such approvals, to the PSCW, (ii) furnish to
Buyer copies of all material correspondence, filings and written communications
between Seller or Company and the PSCW with respect to such approvals and (iii)
notify Buyer promptly of any material developments with respect to obtaining
such approvals.
5.10. Intercompany Indebtedness. Immediately prior to the
Closing, Seller shall, and shall cause its Affiliates (other than Company and
Water Subsidiaries) to, settle any outstanding obligations or indebtedness of
Company and Water Subsidiaries owed to Seller or its Affiliates (other than
Company and Water Subsidiaries) ("Intercompany Indebtedness") by way of capital
contribution in kind.
5.11. Employee Benefit Plan Matters.
(a) Effective not later than immediately before the
Closing, Seller shall cause the assets of any Employee Plan/Agreement
that are attributable to Company Employees or former employees of the
Water Business and that are held under a trust or other arrangement that
is intended to be exempt from taxation under Section 501(a) of the Code
to be held under such a trust or other arrangement of which Company or a
Water Subsidiary is the sole settlor (but in any event only to the
extent that the liabilities attributable to such assets will be
liabilities of a Buyer Plan immediately after the Closing). Subject to
ERISA and other applicable Law, the assets so held under each trust so
settled by Company or a Water Subsidiary (net of any trading,
transaction or trust establishment expenses), shall consist of cash,
marketable and other liquid securities, or other property which can be
liquidated to cash within a commercially reasonable period of time or
which provides for the payment of benefits as and when the become due
(e.g., an annuity contract).
(b) Not later than two weeks after the date hereof,
Buyer shall identify for Seller not fewer than twenty (20) Company
Employees who shall be identified on Exhibit B of the form of Company
Retention and Severance Plan attached hereto as Exhibit 5.11(b), and
effective not later than the Closing, Company shall adopt such plan
(with Exhibit B thereto incorporating solely the names of the Company
Employees so identified by Buyer) in the form of the document attached
hereto as Exhibit 5.11(b).
(c) The Parties shall use their commercially
reasonable efforts to cooperate and share such information as is
reasonably necessary for the transition in the administration and
provision of benefits under the Employee Plans/Agreements.
25
5.12. Limitation on Covenants.
Notwithstanding anything to the contrary contained in this Agreement, no
obligations or covenants of Company and Water Subsidiaries contained in Article
5 (other than as specifically set forth in Section 5.9) shall in any way apply
to or restrict the operations of any Non-Water Subsidiary or any Other
Businesses.
6. ADDITIONAL COVENANTS
6.1. Post-Closing Access to Information; Cooperation.
(a) Access to Information. After the Closing, for a
period of seven (7) years after the Closing Date, each Party shall
preserve and retain, or, cause its Subsidiaries to preserve and retain,
all corporate, accounting, Tax, legal, auditing or other books and
records of such Party and its Subsidiaries (including any documents
relating to any governmental or non-governmental actions, suits,
proceedings or investigations) relating to the conduct of the business
and operations of Company and Water Subsidiaries prior to the Closing
Date. Notwithstanding the foregoing, during such seven-year period, each
Party and its Subsidiaries may dispose of any such books and records
which are offered to, but not accepted by, the other Party. Each Party
shall not, and shall not permit its Subsidiaries to, dispose of any such
books and records at any time after such seven-year period without first
offering such books and records to the other Party. After the Closing
Date, each Party shall, and shall cause its Subsidiaries to, permit the
other Party and its authorized Representatives to have reasonable access
to, and to inspect and copy, all materials referred to in this Section
6.1(a) and to meet with officers and employees of such Party and its
Subsidiaries on a mutually convenient basis in order to obtain
explanations with respect to such materials and to obtain additional
information and to call such officers as witnesses. Without limiting the
foregoing, after the Closing, each Party shall make available to any
other Party, as reasonably requested, and to any Tax authority that is
legally permitted to receive the following pursuant to its subpoena
power or its equivalent, all books, records and other data relating to
Tax Liabilities or potential Tax Liabilities as is reasonably necessary
for the filing of all Tax Returns, the preparation for any audit by any
Governmental Entity and the prosecution or defense of any claim, suit or
proceeding relating to any Tax Return and shall preserve all such books,
records and other data until the expiration of any applicable statute of
limitations for assessment or refund of Taxes or extensions thereof.
(b) Cooperation. Each Party shall use their
respective commercially reasonable efforts to cooperate with each other,
as and to the extent reasonably requested by any other Party, in
connection with (i) the filing of Tax Returns pursuant to Section 6.2
and (ii) any Litigation (including insurance claims) brought by or
against any third party in connection with (A) any transaction
contemplated by this Agreement or (B) any fact or condition relating to
Company's business or assets. Such cooperation shall include making
available to the requesting Party, at such times and under such
circumstances so as not to unreasonably disrupt business, the relevant
information, documents, records and employees of the cooperating Party,
allowing the relevant personnel of the cooperating Party to assist the
requesting Party in participating in any such matter (including
providing testimony in Litigation), executing and delivering documents
or instruments and taking all such action as the requesting Party
reasonably requests in connection with such matter; provided, however,
that the requesting Party shall promptly reimburse the cooperating Party
for all out-of-pocket costs, for a pro-rata portion of the salary
(including fringe benefits with such pro-rata portion determined based
upon the time spent in connection with cooperation) and for travel and
26
subsistence expenses directly relating to such cooperation of any of the
cooperating Party's employees who assist the requesting Party, unless
the requesting Party is entitled to indemnification therefor under
Article 9 or such costs, salary and expenses are incurred by the
cooperating Party in assisting the requesting Party to prepare a Tax
Return described in Section 6.2(a) or Section 6.2(b).
(c) Adversarial Proceedings Involving Parties.
Notwithstanding the provisions of this Section 6.1, although the
existence of a Dispute or other adversarial proceeding between or among
any of the Parties shall not abrogate or suspend the provisions of this
Section 6.1, as to such records or other information directly pertinent
to such Dispute or other adversarial proceeding, the Parties may not
utilize this Section 6.1 but rather, absent agreement, must utilize the
rules of discovery.
6.2. Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and Seller for certain Tax
matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing
Date. Between the date of this Agreement and the Closing Date, Seller
shall file, or cause Company and Water Subsidiaries to file, on a timely
basis all Tax Returns that are required to be filed by Company and Water
Subsidiaries prior to the Closing Date (taking into account any
extensions of time to file). Buyer shall prepare or cause to be
prepared, in a manner consistent with the past practice of Company and
Water Subsidiaries, except as otherwise required by applicable Law, and
file or cause to be filed all Tax Returns for Company and Water
Subsidiaries for all periods ending on or prior to the Closing Date that
are required to be filed after the Closing Date (other than income (or
franchise) Tax Returns with respect to periods for which a consolidated,
unitary or combined income (or franchise) Tax Return of Seller or any
Affiliate of Seller (other than Company or a Water Subsidiary) will
include the operations of Company or any Water Subsidiary). In the case
of each such Tax Return prepared or filed by Buyer, Buyer shall submit a
pro forma Tax Return (with copies of any relevant schedules, work papers
and other documentation) to Seller for approval within a reasonable time
prior to the date on which such Tax Return is due to be filed (taking
into account any applicable extensions), which approval shall not be
unreasonably withheld, and shall incorporate on such Tax Return any
reasonable comments timely provided in writing by Seller in respect of
such Tax Return. Seller shall pay or cause Company and Water
Subsidiaries to pay all Taxes due and payable on the Tax Returns filed
under the first sentence of this Section 6.2(a) and shall reimburse
Buyer for all Taxes of Company and Water Subsidiaries due and payable on
the Tax Returns filed under the second sentence of this Section 6.2(a)
within ten (10) business days after payment by Buyer, Company or any
Water Subsidiary of such Taxes to the extent such Taxes are not
reflected in the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book
and Tax income) shown on the face of the Final Closing Balance Sheet.
(b) Tax Periods Beginning Before and Ending After
the Closing Date. Buyer shall prepare or cause to be prepared, in a
manner consistent with the past practice of Company and Water
Subsidiaries, except as otherwise required by applicable Law, and file
or cause to be filed any Tax Returns of Company and Water Subsidiaries
for Tax periods that begin before the Closing Date and end after the
Closing Date. In the case of each such Tax
27
Return prepared or filed by Buyer, Buyer shall submit a pro forma Tax
Return (with copies of any relevant schedules, work papers and other
documentation) to Seller for approval within a reasonable time prior to
the date on which such Tax Return is due to be filed (taking into
account any applicable extensions), which approval shall not be
unreasonably withheld, and shall incorporate on such Tax Return any
reasonable comments timely provided in writing by Seller in respect of
such Tax Return. Seller shall pay to Buyer within ten (10) business days
after the date on which Taxes are paid with respect to such periods an
amount equal to the portion of such Taxes that relates to the portion of
such Tax period ending on the Closing Date to the extent such Taxes are
not reflected in the reserve for Tax Liability (rather than any reserve
for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Final Closing Balance
Sheet. For purposes of this Agreement, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such
Taxes that relates to the portion of such Tax period ending on the
Closing Date shall (i) in the case of any Taxes other than Taxes based
upon or related to income or receipts or net worth (e.g., franchise
taxes), be deemed to be the amount of such Taxes for the entire Tax
period multiplied by a fraction, the numerator of which is the number of
days in the Tax period ending on and including the Closing Date, and the
denominator of which is the number of days in the entire Tax period, and
(ii) in the case of any Taxes based upon or related to income or
receipts or net worth (e.g., franchise taxes), be deemed equal to the
amount that would be payable if the relevant Tax period ended on the
Closing Date, using the "closing of the books" method of accounting, and
in a manner consistent with the Final Closing Balance Sheet. Any credits
relating to a Tax period that begins before and ends after the Closing
Date shall be taken into account as though the relevant Tax period ended
on the Closing Date.
(c) Consolidated Returns for Periods Through the
Closing Date. Seller shall include the income of Company and Water
Subsidiaries (including any deferred income triggered into income by
Treasury Regulation Section 1.1502-13 and Treasury Regulation Section
1.1502-14 and any excess loss accounts taken into income under Treasury
Regulation Section 1.1502-19) on the consolidated, combined or unitary
federal (and state) income (or franchise) Tax Returns of Seller for all
periods through and including the Closing Date and pay any Taxes
attributable to such income. Company and Water Subsidiaries shall
furnish Tax information to Seller for inclusion in Seller's federal (and
state) consolidated (or combined) income Tax Return for the period that
includes the Closing Date in accordance with the past custom and
practice of Company and Water Subsidiaries. Seller shall allow Buyer an
opportunity to review and comment upon such Tax Returns (including any
amended returns) to the extent that they relate to Company or any Water
Subsidiary. Seller shall take no position on such Tax Returns that
relate to Company or any Water Subsidiary that would materially
adversely affect Company or any Water Subsidiary after the Closing Date,
unless such position would be reasonable in the case of a Person that
owned Company or any Water Subsidiary both before and after the Closing
Date. For the purposes of such Tax Returns, the income of Company and
Water Subsidiaries shall be apportioned to the period up to and
including the Closing Date and the period after the Closing Date by
closing the books of Company and Water Subsidiaries as of the end of the
Closing Date and in a manner consistent with the Final Closing Balance
Sheet. Seller shall not settle any audit of a federal or state income
(or franchise) Tax Return with respect to periods for which a
consolidated, unitary or combined income (or franchise) Tax Return of
Seller or of any Affiliate of Seller (other than Company or any Water
Subsidiary) will include the operations of Company or any Water
Subsidiary in a manner that would materially adversely affect
28
Company or any Water Subsidiary after the Closing Date, unless such
settlement would be reasonable in the case of a Person that owned
Company or any Water Subsidiary both before and after the Closing Date,
and Seller shall disclose to Buyer information relating to any such
settled audit to the extent such settled audit has a material effect on
the Tax Liabilities of Company or any Water Subsidiary in any Tax
period, or portion thereof, that begins after the Closing Date.
(d) Refunds or Credits. At the reasonable request of
Seller, Buyer shall cooperate, or cause Company or Water Subsidiaries to
cooperate, with Seller in obtaining any refunds or credits (including
interest thereon) relating to Taxes for which Seller or any of its
Affiliates (other than Company or a Water Subsidiary) may be liable
under this Agreement; provided, however, that Buyer shall not be
required to file such claims for refund to the extent such claims for
refund would have a material adverse effect in future periods or to the
extent the claims for refund relate to a carryback of an item. Buyer,
Company or Water Subsidiary, as applicable, shall be entitled to all
other refunds and credits of Taxes; provided, however, that Buyer shall
not allow the amendment of any Tax Return relating to any Taxes of
Company or any Water Subsidiary for a period ending on or prior to the
Closing Date or the carryback of an item to a period ending on or prior
to the Closing Date without Seller's consent. For purposes of this
paragraph, the terms "refund" and "credit" shall include a reduction in
Taxes and the use of an overpayment of Taxes as an audit or other Tax
offset. Receipt of a refund shall occur upon the filing of a return or
an adjustment thereto using such reduction, overpayment or offset, or
upon the receipt of cash.
(e) Resolution of Disagreements Between Seller and
Buyer. If either Seller or Buyer disagrees as to the amount of Taxes for
which it is liable under this Agreement, Seller and Buyer shall promptly
consult each other to resolve such dispute following the receipt of
written notice from either Party to begin such consultation. If any such
point of disagreement cannot be resolved within twenty (20) business
days of the date of such written notice, Seller and Buyer shall within
ten (10) business days after such period jointly select a nationally
recognized independent public accounting or law firm with no material
relationship to Seller or Buyer to act as an arbitrator to resolve,
within forty-five (45) days after its selection, all points of
disagreement concerning Tax matters with respect to this Agreement and
presented to such accounting or law firm at the time of its selection.
If Seller, on the one hand, and Buyer, on the other hand, cannot agree
on the selection of an accounting or law firm within such ten-day
period, they shall cause their respective accounting or law firms to
select such firm within five (5) business days of the end of such
ten-day period. Any such resolution shall be conclusive and binding on
Buyer and Seller. The fees of such independent public accounting or law
firm shall be divided equally between Seller, on the one hand, and
Buyer, on the other hand. Seller and Buyer shall (and shall cause
Company and each Water Subsidiary to) provide to such firm full
cooperation.
(f) Payments.
(i) The Parties hereto agree to treat all
indemnification payments made pursuant to this Agreement
as adjustments to the Purchase Price for all income Tax
purposes and to take no position contrary thereto in any
Tax Return or proceeding before any taxing authority,
except as otherwise required by applicable Law or any
applicable Order.
29
(ii) The Parties hereto agree to allocate the
Purchase Price to the Shares for all income Tax purposes
and to take no position contrary thereto in any Tax
Return or proceeding before any taxing authority, except
as otherwise required by applicable Law or any
applicable Order.
(g) Tax Sharing Agreement. All Tax sharing Contracts
or similar Contracts with respect to or involving Company or any Water
Subsidiary shall be terminated as of the Closing Date, and after the
Closing Date, neither Company nor any Water Subsidiary shall be bound
thereby or have any Liability thereunder, and such Contracts shall have
no further effect for any Tax year (whether the current year, a future
year or a past year).
6.3. Employee Benefit Plan Matters.
(a) With respect to any employee benefits that are
provided to an individual who is an employee of Company or any Water
Subsidiary (including any individual on layoff, disability or leave of
absence, paid or unpaid) immediately before the Closing ("Company
Employees") under any employee benefit plan, program, arrangement or
agreement maintained after the Closing by Buyer or its Affiliates
("Buyer Plans"), Buyer shall cause service accrued by Company Employees
during employment with Company or Water Subsidiaries prior to the
Closing Date to be recognized for all purposes to the same extent
recognized by Company or Water Subsidiaries immediately prior to the
Closing Date, except to the extent necessary to prevent duplication of
benefits. Notwithstanding the foregoing, with respect to any Buyer Plan
which did not benefit Company Employees prior to Closing, service
accrued by Company Employees for employment with Company or a Water
Subsidiary prior to Closing need not be recognized for purposes of
benefit accrual, except as required by applicable Law. With respect to
any medical, dental or other welfare benefits that are provided at any
time to Company Employees under Buyer Plans, any applicable pre-existing
condition exclusions and waiting periods (except to the extent such
limitations or waiting periods are already in effect with respect to
such employees and have not been satisfied under the comparable Employee
Plan/Agreement immediately prior to the Closing Date) shall be waived,
and each Company Employee shall be provided with credit for any
copayments and deductibles paid prior to the Closing Date in satisfying
any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after
the Closing Date.
(b) Buyer shall cause to be provided and be solely
responsible for any continuation coverage required under Section 4980B
of the Code, Sections 601-608 of ERISA or applicable state Law ("COBRA")
with respect to any current or former employee of Company or any Water
Subsidiary whose "qualifying event" (as that term is defined in COBRA)
occurs or occurred at or before the Closing or in connection with the
transactions contemplated by this Agreement.
(c) Buyer shall cause Company and Water Subsidiaries
to honor in accordance with its terms the Company Retention and
Severance Plan referenced in Section 5.11(b).
6.4. Pump Business Headquarters. After the Closing, Buyer
will establish the headquarters for its water pump business in Southeastern
Wisconsin.
30
6.5. Certain Product Safety Matters.
Buyer acknowledges and agrees that Seller, Company and Water Subsidiaries have
been actively involved in efforts to prevent and minimize Liabilities associated
with certain consumer product safety matters commonly referred to as "entrapment
injuries" including, without limitation, through cooperation with The Industry
Consortium for the Prevention of Entrapment Injuries. Buyer agrees that,
following the Closing, Buyer, Company and its Subsidiaries shall continue in
good faith to address, prevent and minimize any Liability associated with,
relating to or arising from any such matters.
6.6. Investigation.
Each of Buyer, on the one hand, and Seller and Company on the other hand,
acknowledges and agrees that (i) none of the other Party nor the other Party's
directors, officers, employees, stockholders, Affiliates, or Representatives
makes any representation or warranty, either express or implied, as to the
accuracy or completeness of any of the information provided or made available by
it to the other Party or its Representatives (other than the representations and
warranties contained in this Agreement) and (ii) each Party will not assert any
claim (whether in contract or tort, under federal or state securities Laws or
otherwise) against the other Party or the other Party's directors, officers,
employees, stockholders, Affiliates or Representatives, or hold any such Persons
liable for, any inaccuracies, misstatements or omissions with respect to
information (other than the representations and warranties contained in this
Agreement and rights to indemnification in connection therewith) furnished by
the other Parties or any such Persons concerning such other Parties; provided
the foregoing shall not preclude any Party from seeking any remedy for fraud or
fraudulent misrepresentation.
6.7. Confidentiality. Except as may be required (i) by Law;
(ii) in connection with fulfilling its obligations under the terms of this
Agreement; (iii) in connection with the defense of or other involvement in any
claim or adversarial proceeding relating to Company or the Water Business or the
transactions contemplated by this Agreement, whether among the Parties or
involving any third party; or (iv) as otherwise consented to in writing by
Buyer, Seller agrees that, for a period of three (3) years following the Closing
Date, (A) Seller will not directly or indirectly disclose any Confidential
Information that is in its possession; and (B) if Seller receives a request to
disclose all or any part of the Confidential Information in connection with a
legal proceeding, Seller will (1) promptly notify Buyer of the existence, terms
and circumstances surrounding such request so that Buyer may seek a protective
order or other appropriate remedy, and (2) in the event no such protective order
or other remedy is obtained and disclosure of such information is required, at
Buyer's cost and expense, exercise all commercially reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded such portion of
the disclosed information that Buyer so designates.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of Buyer to consummate the transactions
contemplated by this Agreement is subject to the satisfaction (or written waiver
by Buyer), prior to or at the Closing, of each of the following conditions:
7.1. Representations and Warranties True on the Closing Date.
The representations and warranties of Company and Seller herein shall be true
and accurate as of the
31
Closing Date as if made at and as of such time (other than those representations
and warranties that address matters only as of a particular date or only with
respect to a specific period of time which need only be true and accurate as of
such date or with respect to such period), except where the failure of such
representations and warranties, individually or in the aggregate, to be so true
and accurate (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein) would not have a Company Material
Adverse Effect.
7.2. Compliance With Agreement. Company and Seller shall have
in all material respects performed and complied with all of their respective
agreements and obligations under this Agreement that are to be performed or
complied with by Company or Seller prior to or on the Closing Date.
7.3. No Orders. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Order that is in effect and enjoins or otherwise prohibits consummation of the
transactions contemplated by this Agreement and no United States federal or
state or German Governmental Entity shall have instituted any proceeding seeking
any such Order.
7.4. HSR Act and Other Approvals. All applicable waiting
periods under the HSR Act and any other Competition Law applicable to the
transactions contemplated by this Agreement shall have expired or terminated.
7.5. Financing. The funding conditions set forth in the
Financing Commitments or in the Other Financing shall have been satisfied or
waived.
8. CONDITIONS PRECEDENT TO COMPANY'S AND SELLER'S OBLIGATIONS
The obligation of Company and Seller to consummate the
transactions contemplated by this Agreement is subject to the satisfaction (or
written waiver by Seller), prior to or at the Closing, of each of the following
conditions:
8.1. Representations and Warranties True on the Closing Date.
The representations and warranties of Buyer herein shall be true and accurate as
of the Closing Date as if made at and as of such time (other than those
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time which need only be true and
accurate as of such date or with respect to such period), except where the
failure of such representations and warranties, individually or in the
aggregate, to be so true and accurate (without giving effect to any limitation
as to "materiality" or "material adverse effect" set forth therein) would not
have a Buyer Material Adverse Effect.
8.2. Compliance With Agreement. Buyer shall have in all
material respects performed and complied with all of its agreements and
obligations under this Agreement that are to be performed or complied with by
Buyer prior to or on the Closing Date.
8.3. No Orders. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Order that is in effect and enjoins or otherwise prohibits consummation of the
transactions contemplated by this Agreement and no United States
32
federal or state or German Governmental Entity shall have instituted any
proceeding seeking any such Order.
8.4. HSR Act and Other Approvals. All applicable waiting
periods under the HSR Act and any other Competition Law applicable to the
transactions contemplated by this Agreement shall have expired or terminated.
8.5. PSCW Approval. Seller and Company shall have obtained
any requisite approvals from the PSCW to permit the consummation of the
Distribution.
9. INDEMNIFICATION
9.1. By Seller. Upon the terms and subject to the conditions
set forth in this Article 9, from and after the Closing, Seller shall indemnify,
defend and hold harmless Buyer and its Affiliates (including Company), and their
respective directors, officers and employees (collectively, the "Buyer
Indemnified Parties"), from and against all losses, damages, costs, other
Liabilities and reasonable expenses (including reasonable expenses of
investigation and defense fees and disbursements of counsel and other
professionals) ("Losses") incurred by such Buyer Indemnified Parties arising out
of or resulting from: (a) any inaccuracy or breach of any representation or
warranty of Seller contained in this Agreement (ignoring, for purposes of
determining the existence of any such inaccuracy or breach or the amount of any
Losses with respect thereto, any "materiality," "material adverse effect" or
similar qualifier set forth in such representation or warranty); (b) any breach
of any covenant of Seller or Company (in the case of Company only with respect
to those covenants required to be performed or complied with by Company prior to
the Closing) contained in this Agreement; (c) any Liability of Company or Water
Subsidiaries for (i) Taxes of Company or Water Subsidiaries with respect to any
taxable period or portion thereof that ends on or before the Closing Date, or
which are otherwise allocated to Seller under this Agreement, to the extent not
reflected in the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the Final Closing Balance Sheet, or (ii) Taxes with respect to any
taxable period or portion thereof that ends on or before the Closing Date, or
which are otherwise allocated to Seller under this Agreement, to the extent not
reflected in the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the Final Closing Balance Sheet, of any Person other than Company or
Water Subsidiaries (A) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Law), (B) as a transferee or
successor, (C) by Contract or (D) otherwise; (d) all Liabilities of Company to
the extent they relate to or arise from the ownership of the capital stock of or
other ownership interests in Non-Water Subsidiaries and all Taxes or other
Liabilities assessed on or incurred by Company or any Water Subsidiary as a
result of the Distribution; (e) any Liability of Company or Water Subsidiaries
relating to Products manufactured or sold by Company or Water Subsidiaries prior
to the Closing Date that contain or are alleged to contain asbestos; or (f) any
Liability of Company or Water Subsidiaries arising from product liabilities,
losses, injuries or damages that occur prior to the Closing arising from, caused
by or arising out of the design, manufacture, assembly, installation or sale of
any Product by Company or Water Subsidiaries prior to the Closing.
Notwithstanding any other provision to the contrary contained in this Agreement,
the indemnification obligations of Seller contained in each of clauses (e) and
(f), respectively, of this Section 9.1 shall in each case be Buyer's sole and
exclusive remedy with respect to the matters referred to therein, except for
actions grounded in fraud with respect to which such limitations shall not
apply. For the avoidance of doubt, no Buyer Indemnified Party shall
33
be entitled to recover Losses under any of clauses (a), (b), (c) or (d) of this
Section 9.1 to the extent Seller has an indemnification obligation under either
clause (e) or (f) of this Section 9.1.
9.2. By Buyer. Upon the terms and subject to the conditions
set forth in this Article 9, from and after the Closing, Buyer shall indemnify,
defend and hold harmless Seller and its Affiliates, and their respective
directors, officers, employees and other representatives (collectively, the
"Seller Indemnified Parties"), from and against all Losses incurred by such
Seller Indemnified Parties arising out of or resulting from (a) any inaccuracy
or breach of any representation or warranty of Buyer contained in this Agreement
(ignoring, for purposes of determining the existence of any such inaccuracy or
breach or the amount of any Losses with respect thereto, any "materiality,"
"material adverse effect" or similar qualifier set forth in such representation
or warranty), (b) any breach of any covenant of Buyer contained in this
Agreement or (c) any Liability of Company or Water Subsidiaries for Taxes of
Company or Water Subsidiaries for which Seller is not required to indemnify
Buyer pursuant to Section 9.1(c) and (d) hereof.
9.3. Indemnification Claims. All claims for indemnification
by a Party to be indemnified hereunder (an "Indemnified Party") from a Party
required to provide indemnification hereunder (an "Indemnifying Party") shall be
asserted and resolved as set forth in this Section 9.3.
(a) The Indemnified Party shall promptly notify the
Indemnifying Party in writing of any claim or demand which the
Indemnified Party has determined has given rise to a right of
indemnification under this Agreement. Subject to the Indemnifying
Party's right to defend third party claims as hereinafter provided, the
Indemnifying Party shall satisfy its obligations under this Article 9 as
soon as practicable after the receipt of written notice thereof from the
Indemnified Party.
(b) In the event that any written claim or demand
for which an Indemnifying Party may be liable to any Indemnified Party
hereunder is asserted against or sought to be collected from any
Indemnified Party by a third party, such Indemnified Party shall
promptly, but in no event later than fifteen (15) days following such
Indemnified Party's receipt of such claim or demand (including a copy of
any related written third party demand, claim or complaint) (a "Claim"),
notify in writing the Indemnifying Party of such Claim (the "Claim
Notice"). The Indemnifying Party shall be relieved of its obligations to
indemnify the Indemnified Party with respect to such Claim if the
Indemnified Party fails to timely deliver the Claim Notice and the
Indemnifying Party is actually prejudiced thereby. If a Claim is made
against an Indemnified Party, the Indemnifying Party shall be entitled
to participate therein and, to the extent that they shall wish, to
assume the defense thereof, and, after written notice from the
Indemnifying Party to the Indemnified Party of such election to so
assume the defense thereof, the Indemnifying Party shall not be liable
to the Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof. The Indemnified Party shall
cooperate fully with the Indemnifying Party and its counsel in the
defense against any such Claim. The Indemnified Party shall have the
right to participate at its own expense in the defense of such Claim.
Except as provided in Section 6.2(c) with respect to Claims arising out
of audits of Tax Returns described in Section 6.2(c), neither the
Indemnifying Party, on the one hand, nor the Indemnified Party, on the
other hand, shall admit liability to, or settle, compromise or discharge
any such Claim without the prior consent of the other party, which
consent shall not be unreasonably withheld or delayed; provided,
however, that the Indemnified Party may refuse its consent to a bona
fide offer of settlement that the
34
Indemnifying Party wishes to accept if such proposed settlement might
reasonably be expected to affect adversely the ability of the
Indemnified Party to conduct its business. In such event, the
Indemnified Party shall assume the defense of such matter at the sole
expense of the Indemnified Party and the obligation of the Indemnifying
Party to the Indemnified Party shall be equal to the lesser of (i) the
amount of the bona fide offer of settlement that the Indemnified Party
refused to accept plus the costs and expenses of the Indemnified Party
prior to the date the Indemnifying Party notified the Indemnified Party
of the offer of settlement and (ii) the actual out-of-pocket amount the
Indemnified Party is obligated to pay as a result of the Indemnified
Party's continuing to pursue such matter. In the event the Indemnifying
Party elects not to or fails to defend such Claim, the Indemnified Party
shall defend against such Claim in good faith and in a commercially
reasonable manner at the cost and expense of the Indemnifying Party, and
the Indemnifying Party shall have the right to participate in such
defense at its own expense. Without limiting the generality of the
foregoing, to the extent that, following the Closing, pursuant to this
Section 9.3(b), any of Buyer, Company or their respective Subsidiaries
are engaged in the management or defense of any matter relating to the
Liabilities described in clauses (e) or (f) of Section 9.1 (an "Asbestos
or Product Liability Claim"), Buyer will, and will cause Company and
their respective Subsidiaries and Affiliates to, manage and defend
against any such Asbestos or Product Liability Claim in good faith and
in a commercially reasonable manner, subject to Seller's right to make
inquiries to and receive information from Buyer regarding the management
and defense of any such Asbestos or Product Liability Claim. If Seller
objects to Buyer's management and defense of any such Asbestos or
Product Liability Claim, then Seller may elect to manage and defend
against any such Asbestos or Product Liability Claim in good faith and
in a commercially reasonable manner, subject to Buyer's right to make
inquiries to and receive information from Seller regarding the
management and defense of any such Asbestos or Product Liability Claim.
9.4. Limitations on Indemnification. Except for fraud or any
willful misrepresentation, as to which claims may be brought without limitation
as to time or amount:
(a) Time Limitation. The representations and
warranties shall survive the Closing for a period lasting until, and no
claim or action shall be brought under this Article 9 for breach of a
representation or warranty after the lapse of, twelve (12) months after
the Closing. Regardless of the foregoing, however, or any other
provision of this Agreement:
(i) There shall be no time limitation on any
claim or action brought for breach of any representation
or warranty made in or pursuant to Sections 3.2(c) and
3.3, such representations and warranties shall survive
the Closing indefinitely, and Seller hereby waives all
applicable statutory limitation periods with respect
thereto.
(ii) Any claim or action brought for breach
of any representation or warranty made in or pursuant to
Section 3.6 may be brought at any time until the date
that is thirty (30) calendar days after the underlying
obligation is barred by the applicable period of
limitation under federal, state or any other applicable
Laws relating thereto (as such period may be extended by
tolling or waiver) and such representations and
warranties shall survive the Closing for a period
lasting until such date.
35
(iii) The representations and warranties in
Section 3.10(c) shall survive the Closing for a period
lasting until, and no claim or action shall be brought
under this Article 9 for breach of a representation or
warranty under Section 3.10(c) after the lapse of, five
years after the Closing.
(iv) The representations and warranties in
Section 3.16 shall survive the Closing for a period
lasting until, and no claim or action shall be brought
under this Article 9 for breach of a representation or
warranty under Section 3.16 after the lapse of, three
years after the Closing.
(v) Any claim made by a Party hereunder by
filing a suit or action in a court of competent
jurisdiction or a court reasonably believed to be of
competent jurisdiction for breach of a representation or
warranty prior to the termination of the survival period
for such claim shall be preserved despite the subsequent
termination of such survival period.
(vi) If any act, omission, disclosure or
failure to disclose shall form the basis for a claim or
action for breach of more than one representation or
warranty, and such claims have different periods of
survival hereunder, then the termination of the survival
period of one claim or action shall not affect a Party's
right to make a claim or action based on the breach of
representation or warranty still surviving.
(b) Minimum Claim; Basket; Cap. Except with respect
to claims for breaches of representations or warranties contained in
Sections 3.2(c) and 3.3 (as to which the following limitations shall not
apply), a Buyer Indemnified Party shall be entitled to indemnification
under clauses (a), (e) or (f) of Section 9.1 only in the event that the
aggregate amount of Losses (without duplication) suffered or incurred by
all Buyer Indemnified Parties with respect to all such matters, in the
aggregate, exceeds Ten Million Dollars ($10,000,000) (the "Basket") and
then only to the extent of such excess; and provided, further, that
Seller shall be required to indemnify, defend and hold harmless the
Buyer Indemnified Parties with respect to a breach of a representation
or warranty only if and to the extent the Losses arising therefrom
exceed Fifty Thousand Dollars ($50,000) (the "Minimum Claim Amount") and
such Losses shall be applied against the Basket only to the extent such
Losses exceed the Minimum Claim Amount; and provided, further, that the
Buyer Indemnified Parties shall not be entitled to recover from Seller
under clause (a) of Section 9.1 more than Eighty-Five Million Dollars
($85,000,000), in the aggregate.
(c) Indemnification as Sole Remedy. Following the
Closing, notwithstanding any other provision of this Agreement or the
provisions of any Environmental Law including the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
Sections 9601 et seq., the indemnities provided in this Article 9 shall
be the sole and exclusive remedy of the Parties hereto, their
Affiliates, successors and assigns with respect to any and all claims
for Losses under this Agreement or arising out of Liabilities of Company
or its Subsidiaries with respect to the Real Property under
Environmental Laws, except for actions grounded in fraud, with respect
to which the limitations set forth in this Agreement shall not apply.
36
9.5. Adjustments for Insurance and Taxes and Calculation of
Losses.
(a) In the event that an Indemnified Party has been
indemnified for any Loss pursuant to this Article 9 and the payment or
accrual of such Loss by such Indemnified Party results in a deduction
which in turn results in an actual reduction in the Tax Liability of the
Indemnified Party or any Affiliate thereof for any Tax period, then
(without duplication for any such reduction otherwise taken into
account) the Indemnified Party will pay to the Indemnifying Party the
amount of such reduction in Tax Liability at the time such Indemnified
Party actually realizes such reduction in Tax Liability through receipt
of a refund of Tax or a credit against Tax Liability then due and
payable. For purposes of this paragraph, a payment or accrual of a Tax
Liability results in an actual reduction in a party's Tax Liability with
respect to a Tax period, only to the extent that the amount of such
party's Tax Liability with respect to such period, taking into account
such accrual or payment, is less than the amount of such Liability
determined without regard to such payment or accrual.
(b) If any Losses sustained by an Indemnified Party
are covered by an insurance policy or an indemnification, contribution
or similar obligation of another Person (other than an Affiliate of such
Indemnified Party), the Indemnified Party shall use commercially
reasonable efforts to collect such insurance proceeds or indemnity,
contribution or similar payments; provided, however, that if any such
insurance policy is owned by an Indemnifying Party, then the Indemnified
Party shall have no obligation to collect such insurance proceeds but
shall use its commercially reasonable efforts to cooperate with the
Indemnifying Party (including providing notice to the Indemnifying Party
so that the Indemnify Party may timely submit a claim under the terms of
such insurance policy) to permit the Indemnifying Party to cause, at the
Indemnifying Party's sole expense, such insurance proceeds to be
collected. If the Indemnified Party receives such insurance proceeds or
indemnity, contribution or similar payments prior to being indemnified,
held harmless and reimbursed under Section 9.1 or Section 9.2, as
applicable, with respect to such Losses, the payment by an Indemnifying
Party under this Article 9 with respect to such Losses shall be reduced
by the net amount of such insurance proceeds or indemnity, contribution
or similar payments to the extent related to such Losses, less
reasonable attorney's fees and other expenses incurred in connection
with such recovery. If the Indemnified Party receives such insurance
proceeds or indemnity, contribution or similar payments after being
indemnified and held harmless by an Indemnifying Party with respect to
such Losses, the Indemnified Party shall pay to the Indemnifying Party
the net amount of such insurance proceeds or indemnity, contribution or
similar payment to the extent related to such Losses, less reasonable
attorney's fees and other expenses incurred in connection with such
recovery. If any Indemnified Party receives payment under this Article 9
on account of a claim that an Indemnifying Party believes in good faith
is covered by an insurance policy or an indemnification, contribution or
similar obligation of another Person (other than an Affiliate of such
Indemnified Party), that Indemnified Party shall (i) on written request
of the Indemnifying Party assign, to the extent assignable, its rights
under such insurance policy or indemnification, contribution or similar
obligation with respect to such claim to the Indemnifying Party and (ii)
be relieved of any further obligation to pursue collection of such
insurance or indemnification, contribution or similar obligation (except
that, if requested to do so by the Indemnifying Party, the Indemnified
Party shall reasonably cooperate with the Indemnifying Party at the
Indemnifying Party's sole expense, to collect any such insurance or
indemnification, contribution or similar obligation).
37
(c) If during the period from December 31, 2003 to
the Closing Date, there is a change in the amount of any reserve of
Company and such change in reserve is reflected on the Final Closing
Balance Sheet and is taken into account for purposes of determining the
amount of an adjustment, if any, to the Purchase Price pursuant to
Section 2.2(a) or Section 2.2(b) and the Liability to which any such
reserve relates is a matter for which a Buyer Indemnified Party would
otherwise be entitled to indemnification under Section 9.1, then the
calculation of a Buyer Indemnified Party's Losses shall be reduced by
the amount of the increase in such reserve during the period from
December 31, 2003 to the Closing Date.
(d) Notwithstanding any other provision in this
Agreement, as to any claims by an Indemnified Party, Losses shall not
include, and no Indemnified Party shall be entitled to be indemnified or
to make any claim for, lost profits or any indirect, consequential,
incidental, special or punitive damages other than any such damages
actually paid by an Indemnified Party to a Person other than an
Indemnified Party.
10. CLOSING
10.1. Closing Date; Location. Subject to the terms and
conditions of this Agreement, the consummation of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Xxxxx & Xxxxxxx, 000
Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx, at 10:00 a.m., local time, on the
fifth (5th) business day after the satisfaction or waiver of the conditions to
the Closing set forth in Article 7 and Article 8 or such other place, date or
time as the Parties shall mutually agree in writing. The actual time and date of
the Closing is referred to as the "Closing Date."
10.2. Documents to be Delivered by Company and Seller. At the
Closing, Company and Seller shall deliver to Buyer (a) the stock certificate or
certificates representing the Shares, duly endorsed for transfer or with duly
executed stock powers attached; (b) a certificate signed by officers of Company
and Seller reasonably acceptable to Buyer, in form and substance reasonably
satisfactory to Buyer and Seller, certifying that the conditions set forth in
Sections 7.1 and 7.2 have been satisfied (except to the extent waived in writing
by Buyer); (c) the resignations of directors and/or officers, as the case may
be, of Company and Water Subsidiaries who are employees or officers of Seller,
effective as of the Closing Date, in form and substance reasonably satisfactory
to Buyer and Seller, duly executed by such persons; and (d) all other previously
undelivered documents, instruments or writings required to be delivered by
Seller or Company to Buyer at or prior to the Closing in connection with the
transactions contemplated hereby.
10.3. Documents to be Delivered by Buyer. At the Closing,
Buyer shall deliver to Seller (a) the cash payment required by Section 2.2(a),
in accordance with Section 2.2(c); (b) a certificate signed by an officer of
Buyer reasonably acceptable to Seller, in form and substance reasonably
satisfactory to Buyer and Seller, certifying that the conditions set forth in
Sections 8.1 and 8.2 have been satisfied (except to the extent waived in writing
by Seller); and (c) all other previously undelivered documents, instruments or
writings required to be delivered by Buyer to Seller at or prior to the Closing
in connection with the transactions contemplated hereby.
38
11. TERMINATION
11.1. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual written agreement of Buyer and Seller;
(b) by either Buyer or Seller, by giving written
notice of such termination to the other Party, if such other Party or
one of its Affiliates shall have breached any of its material
obligations or agreements under this Agreement and such breach shall be
incapable of cure or has not been cured within thirty (30) days
following the giving of written notice by the non-breaching Party to the
other Party of such breach;
(c) by either Buyer or Seller, by giving written
notice of such termination to the other Party, if any Order permanently
enjoining or otherwise prohibiting consummation of the transactions
contemplated hereby shall become final and nonappealable;
(d) by either Buyer or Seller, by giving written
notice of such termination to the other, if the Closing shall not have
occurred on or prior to September 1, 2004, provided that such date shall
be extended for a period not to exceed sixty (60) calendar days to the
extent necessary for (i) the Parties to substantially comply with any
request for additional information made by the FTC or DOJ or (ii) any
applicable waiting period under the HSR Act to expire or terminate up to
a thirty (30) day maximum following substantial compliance with a
request for additional information made by the FTC or DOJ (such date, as
it may be extended pursuant to the foregoing proviso, the "Termination
Date"); provided further, that the terminating Party and its Affiliates
shall not be in material breach of their obligations under this
Agreement;
(e) by Seller, by giving written notice of such
termination to Buyer, if there has been a breach of the representations
and warranties of Buyer contained in this Agreement which (i) would
result in the failure of the condition set forth in Section 8.1; and
(ii) cannot be or is not cured prior to the Termination Date; or
(f) by Buyer, by giving written notice of such
termination to Seller, if there has been a breach of the representations
and warranties of Company and Seller contained in this Agreement which
(i) would result in the failure of the condition set forth in Section
7.1; and (ii) cannot be or is not cured prior to the Termination Date.
11.2. Effect of Termination. In the event of the termination
of this Agreement in accordance with Section 11.1, this Agreement shall
thereafter become void and have no effect, and no Party hereto or its respective
Affiliates or their directors, officers, employees, agents or advisors shall
have any Liability to the other Party hereto or their respective Affiliates,
directors, officers or employees, except for the obligations of the Parties
hereto in the Confidentiality Agreement or contained in this Section 11.2, the
penultimate sentence of Section 5.1(b) and Sections 12.2, 12.5, 12.9 and 12.10
hereof, and except that nothing herein will relieve any Party from Liability for
any willful breach of this Agreement by it or one of its Affiliates prior to
such termination.
39
12. MISCELLANEOUS
12.1. Disclosure Schedule. Company and Seller have prepared
the schedules attached to this Agreement (the "Disclosure Schedule") and
delivered them to Buyer on the date hereof. No representation or warranty shall
be qualified or otherwise affected by any fact or item disclosed on any Schedule
unless such representation or warranty is expressly qualified by reference to a
Schedule, and any fact or item disclosed on any Schedule shall be deemed
disclosed on all other Schedules to which such fact or item may reasonably apply
so long as such disclosure is in sufficient detail to enable a reasonable person
to identify the other article or Section of this Agreement to which such
information is responsive. The Disclosure Schedule shall be construed with and
as an integral part of this Agreement to the same extent as if the same had been
set forth verbatim herein. Any matter disclosed pursuant to the Disclosure
Schedule shall not be deemed to be an admission or representation as to the
materiality of the item so disclosed. No supplement or update to the Disclosure
Schedule after the date hereof shall be deemed to cure any inaccuracy or breach
of a representation or warranty for the purposes of Section 7.1 or Section 9.1.
12.2. Publicity. Each Party agrees that, from the date hereof
through the Closing Date, no public release or announcement relating to the
transactions contemplated hereby shall be issued or made by any Party without
the prior consent of the other Parties (which consent shall not be unreasonably
withheld), except as such release or announcement may, in the judgment of the
releasing Party, be required by Law or Order or the rules or regulations of any
United States securities exchange, in which case the Party required to make the
release or announcement shall allow the other Parties reasonable time to comment
on such release or announcement in advance of such issuance. Without limiting
the generality of the foregoing, (a) the Parties shall cooperate to prepare a
joint press release to be issued following the execution of this Agreement and
on the Closing Date, and (b) except as prohibited by applicable Law, Company and
Seller shall provide Buyer access to, and facilitate meetings with, employees of
Company for the purpose of making announcements relating to, and preparing for
the consummation of, the transactions contemplated hereby.
12.3. Assignment. Except as expressly set forth in Section
1.2, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the Parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other Parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the Parties and their respective permitted
successors and assigns.
12.4. Parties in Interest. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Parties and their
respective heirs, personal representatives, permitted successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to confer
any rights upon any other Person, except as expressly provided in Article 9.
12.5. Law Governing Agreement; Waiver of Jury Trial. This
Agreement shall be construed and interpreted according to the Laws of the State
of Wisconsin, excluding any choice of law rules that may direct the application
of the Laws of another jurisdiction. Each Party waives any right to trial by
jury with respect to any Litigation arising out of or relating to this
Agreement.
12.6. Severability. If any court of competent jurisdiction
determines that the provisions of this Agreement are illegal or excessively
broad as to duration, geographical scope or activity, then such provisions shall
be construed so that the remaining provisions of this Agreement
40
shall not be affected, but shall remain in full force and effect, and any such
illegal or overly broad provisions shall be deemed, without further action on
the part of any Person, to be modified, amended and/or limited, but only to the
extent necessary to render the same valid and enforceable in the applicable
jurisdiction.
12.7. Amendment and Modification. Buyer and Seller may amend,
modify and supplement this Agreement in such manner as may be agreed upon by
them in writing.
12.8. Waiver. No waiver by any Party of any of the provisions
hereof shall be effective unless expressly set forth in writing and executed by
the Party so waiving. The waiver by any Party of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach.
12.9. Notice. All notices, requests, demands and other
communications under this Agreement shall be given in writing and shall be
personally delivered; sent by telecopier or facsimile transmission; or sent to
the applicable Parties at their respective addresses indicated in this Section
12.9 by private overnight courier service, as follows:
(i) If to Seller, to:
Wisconsin Energy Corporation
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
(with a copy, which shall not constitute notice
to Seller, to)
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Facsimile: (000) 000-0000
(ii) If to Company prior to the Closing, to:
WICOR, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
41
(with a copy, which shall not constitute notice
to Company, to)
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Facsimile: (000) 000-0000
(iii) If to Company after the Closing, to:
WICOR, Inc.
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx Xxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
(with a copy, which shall not constitute notice
to Company, to)
Xxxxx & Xxxxxxx
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, III, Esq.
Facsimile: (000) 000-0000
(iv) If to Buyer, to:
Pentair, Inc.
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx Xxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
(with a copy, which shall not constitute notice
to Buyer, to)
Xxxxx & Lardner
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, III, Esq.
Facsimile: (000) 000-0000
or to such other Person or address as any Party shall have specified by notice
in writing to the other Parties. In addition, any notice given to Company prior
to the Closing shall be given in the same manner to Seller; any notice given to
Company after the Closing shall be given in the same manner to Buyer. If
personally delivered, such communication shall be deemed delivered upon actual
receipt; if sent by telecopier or facsimile transmission, such communication
shall be deemed delivered the day of the transmission, or if the transmission is
not made on a business day, the first business day after transmission (and
sender shall bear the burden of proof of delivery); and if sent by overnight
courier, such communication shall be deemed delivered upon receipt.
42
12.10. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
(a) Expenses to be Paid by Buyer. Buyer shall be
solely responsible for the payment and discharge of all claims for
brokerage commissions or finder's fees arising as a result of the
retention, employment or other use of any broker or finder by Buyer and
any of its directors, officers, employees or agents in connection with
the transactions provided for herein or the negotiation thereof (which
shall not constitute a Liability payable by Company, Water Subsidiaries
or Seller).
(b) Expenses to be Paid by Seller. Seller shall pay
each of the following (none of which shall constitute a Liability
payable by Company, Water Subsidiaries or Buyer):
(i) Brokerage. Seller shall be solely
responsible for the payment and discharge of all claims
for brokerage commissions or finder's fees arising as a
result of the retention, employment or other use of any
broker or finder by Company or Seller and any of their
respective directors, officers, employees or agents in
connection with the transactions provided for herein or
the negotiation thereof.
(ii) Professional Fees. Except as otherwise
contemplated by this Agreement in Article 2 and Section
5.1(c) with respect to accounting fees, all fees and
expenses of Company's and Water Subsidiaries' legal,
accounting, investment banking and other professional
counsel in connection with the transactions contemplated
hereby.
(iii) Severance Obligations. All severance,
change of control and other payments related to
employment of, or under any agreements maintained by
Seller with respect to, the individuals set forth on
Exhibit 12.10(b), and any Liability arising under or in
respect of any benefit plan or arrangement set forth on
Exhibit 12.10(b).
(iv) Transfer Taxes. All Taxes or fees
(including any penalties and interest) applicable to,
imposed upon or arising out of the sale or transfer of
the Shares to Buyer and the other transactions
contemplated hereby, including the transaction described
in Section 5.9.
(c) Environmental Consultant. Buyer and Seller shall
each pay 50% of the fees and expenses of the Environmental Consultant in
connection with the activities contemplated by Section 5.1(b).
(d) Deloitte. Buyer and Seller shall each pay 50% of
the fees and expenses of Deloitte in connection with the audit
contemplated by Section 2.3(d) with respect to the Audited Closing
Balance Sheet.
(e) Other. Except to the extent otherwise expressly
set forth in this Agreement, each Party shall bear its own expenses and
the expenses of its counsel and other agents in connection with the
transactions contemplated hereby.
43
12.11. Equitable Relief. The Parties hereto agree that (a) any
breach of the provisions of this Agreement will result in irreparable injury to
the non-breaching Party for which a remedy at law would be inadequate, and (b)
in addition to any relief at law that may be available to Buyer for such breach
and regardless of any other provision contained in this Agreement, the Parties
hereto shall be entitled to injunctive and other equitable relief as a court may
grant.
12.12. Interpretive Provisions. The term "knowledge" when used
in the phrases "to Seller's knowledge" or "Seller has no knowledge" or words of
similar import shall mean, and shall be limited to, the actual knowledge,
without independent investigation of any of the following individuals: Xxx
Xxxxxxxx, Xxxx Xxxxxxxx, Xxx Xxxxxxxxx, Xxx Xxxxxxx or Xxx Xxxxx. The terms
"including" and "include" shall mean "including without limitation" and "include
without limitation," respectively. The term "commercially reasonable efforts" as
used in Section 5.4 has the meaning as mutually understood by the parties.
12.13. Entire Agreement. This Agreement (including the exhibits
and schedules attached hereto) and the Confidentiality Agreement supersede all
prior agreements among the Parties with respect to its subject matter and
constitutes (together with the other documents and instruments to be executed
and delivered pursuant hereto) a complete and exclusive statement of the terms
of the agreement among the Parties with respect to its subject matter.
12.14. Counterparts. This Agreement may be executed by
facsimile signature pages and in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
12.15. Section Headings; Table of Contents. The Section and
Sub-Section headings contained in this Agreement and the Table of Contents to
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
12.16. No Strict Construction. Notwithstanding the fact that
this Agreement has been drafted or prepared by one of the Parties, each of the
Parties confirms that both it and its counsel have reviewed, negotiated and
adopted this Agreement as the joint agreement and understanding of the Parties.
The language used in this Agreement shall be deemed to be the language chosen by
the Parties to express their mutual intent, and no rule of strict construction
shall be applied against any Party.
12.17. Definitions. For purposes of this Agreement, the term:
(a) "Acquisition Proposal" has the meaning set forth
in Section 5.2(g).
(b) "Affiliate" has the meaning ascribed to such
term in Rule 12b-2 promulgated under the Exchange Act by the Securities
and Exchange Commission, as in effect on the date hereof.
(c) "Agreement" has the meaning set forth in the
preamble of this Agreement.
(d) "Asbestos or Product Liability Claim" has the
meaning set forth in Section 9.3(b).
44
(e) "Audited Closing Balance Sheet" has the meaning
set forth in Section 2.3(d).
(f) "Balance Sheet" has the meaning set forth in
Section 2.3(a).
(g) "Balance Sheet Assets" means the consolidated
assets of Company.
(h) "Balance Sheet Dispute" has the meaning set
forth in Section 2.3(f)(i).
(i) "Balance Sheet Liabilities" means the
consolidated Liabilities of Company.
(j) "Balance Sheet Objection" has the meaning set
forth in Section 2.3(e).
(k) "Basket" has the meaning set forth in Section
9.4(b).
(l) "Buyer" has the meaning set forth in the
preamble of this Agreement.
(m) "Buyer Indemnified Parties" has the meaning set
forth in Section 9.1.
(n) "Buyer Material Adverse Effect" means any
material adverse change in, or material adverse effect on, (i) the
business, financial condition or results of operations of Buyer and its
Subsidiaries, taken as a whole or (ii) Buyer's ability to consummate the
transactions contemplated by this Agreement; provided, however, that the
changes or effects that are generally applicable to (A) the industries
or markets in which Buyer and its Subsidiaries operate; (B) the United
States or global economy or (C) the United States securities markets
shall be excluded from the determination of Buyer Material Adverse
Effect.
(o) "Buyer Plans" has the meaning set forth in
Section 6.3(a).
(p) "Buyer's Consultant" means McKinsey & Company.
(q) "Claim" has the meaning set forth in Section
9.3(b).
(r) "Claim Notice" has the meaning set forth in
Section 9.3(b).
(s) "Closing" has the meaning set forth in Section
10.1.
(t) "Closing Date" has the meaning set forth in
Section 10.1.
(u) "COBRA" has the meaning set forth in Section
6.3(b).
(v) "Code" has the meaning set forth in Section
3.6(f).
(w) "Company" has the meaning set forth in the
preamble of this Agreement.
45
(x) "Company Employees" has the meaning set forth in
Section 6.3(a).
(y) "Company Insurance Policies" has the meaning set
forth in Section 3.12.
(z) "Company Material Adverse Effect" means any
material adverse change in, or material adverse effect on, the business,
financial condition or results of operations of Company and the Water
Subsidiaries, taken as a whole; provided, however, that the changes or
effects that are generally applicable to (i) the industries and markets
in which Company and the Water Subsidiaries operate; (ii) the United
States or global economy; or (iii) the United States securities markets
shall be excluded from the determination of Company Material Adverse
Effect; and provided, further, that any adverse change or effect on
Company or the Water Subsidiaries resulting from (i) the execution of
this Agreement and the announcement of this Agreement and the
transactions contemplated hereby or (ii) the failure of Buyer to consent
to any of the actions proscribed by Section 5.2, shall also be excluded
from the determination of Company Material Adverse Effect.
(aa) "Company Subsidiaries" has the meaning set forth
in Section 3.1(d).
(bb) "Company Trade Rights" means all of Company's
and Water Subsidiaries' worldwide rights in, to and under Trade Rights.
(cc) "Competition Law" means the HSR Act and all
other federal, state and foreign Laws and Orders that are designed or
intended to prohibit, restrict or regulate (i) actions having the
purpose or effect of monopolization or restraint of trade or lessening
of competition or (ii) foreign investment.
(dd) "Confidential Information" means any and all
information relating to the management, operations, finances, products,
trade secrets or services of the Water Business, including financial
data, employee information, computer programs and systems, computer
based information, plans, projections, formulae, processes, methods,
products, manuals, drawings and marketing information, whether written,
oral or computer generated which relates exclusively to the Water
Business , other than such information as may at any time be or become
lawfully available to the general public through no fault of Seller.
(ee) "Confidentiality Agreement" means that certain
Confidentiality Agreement, dated October 15, 2003, between Seller and
Buyer.
(ff) "Contracts" means all oral and written
contracts, purchase orders, sales orders, licenses, leases and other
agreements, commitments, arrangements and understandings.
(gg) "Control" (including the correlative meanings of
the terms "Controlled by" and "under Common Control with"), as used with
respect to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of management policies of
such Person, whether through the ownership of voting securities, by
contract or otherwise.
(hh) "CPA Firm" has the meaning set forth in Section
2.3(f)(ii).
46
(ii) "Deloitte" has the meaning set forth in Section
2.3(c).
(jj) "Designated Purchaser" has the meaning set forth
in Section 1.2.
(kk) "Disclosure Schedule" has the meaning set forth
in Section 12.1.
(ll) "Distribution" has the meaning set forth in
Section 5.9.
(mm) "DOJ" has the meaning set forth in Section 5.4.
(nn) "Effective Time" has the meaning set forth in
Section 2.3(b).
(oo) "Employee Plans/Agreements" has the meaning set
forth in Section 3.16(a).
(pp) "Entity" shall mean any corporation, firm,
unincorporated organization, association, partnership, limited liability
company, business trust, joint stock company, joint venture
organization, entity or business.
(qq) "Environmental Consultant" means ENSR
International.
(rr) "Environmental Laws" means all Laws currently in
effect (including common law) relating to pollution, protection of the
environment or human health, occupational safety and health or
sanitation, including Laws relating to emissions, spills, discharges,
generation, storage, leaks, injection, leaching, seepage, releases or
threatened releases of Waste into the environment (including ambient
air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Waste, together
with any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved
thereunder.
(ss) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
(tt) "ERISA Affiliate" means any Entity that is a
member of a controlled group of corporations (as defined in Section
414(b) of the Code) of which Company or any Water Subsidiary is a
member, an unincorporated trade or business under common control with
Company or any Water Subsidiary (as determined under Section 414(c) of
the Code), or a member of an "affiliated service group" (within the
meaning of Section 414(m) of the Code) of which Company or any Water
Subsidiary is a member.
(uu) "Estimated Closing Balance Sheet" has the
meaning set forth in Section 2.3(b)
(vv) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(ww) "Final Closing Balance Sheet" has the meaning
set forth in Section 2.3(g).
47
(xx) "Financial Statements" has the meaning set forth
in Section 3.5.
(yy) "Financing Commitments" has the meaning set
forth in Section 4.4.
(zz) "FTC" has the meaning set forth in Section 5.4.
(aaa) "GAAP" has the meaning set forth in Section
2.3(a).
(bbb) "Governmental Entities" has the meaning set
forth in Section 3.4.
(ccc) "HSR Act" has the meaning set forth in Section
3.4.
(ddd) "Indemnified Party" has the meaning set forth in
Section 9.3.
(eee) "Indemnifying Party" has the meaning set forth
in Section 9.3.
(fff) "Industries" has the meaning set forth in the
recitals of this Agreement.
(ggg) "Intercompany Indebtedness" has the meaning set
forth in Section 5.10.
(hhh) "IRS" has the meaning set forth in Section
3.6(d).
(iii) "Laws" has the meaning set forth in Section 3.4.
(jjj) "Liability" means any direct or indirect
indebtedness, loss, damage, cost, expense or obligation, fixed or
unfixed, known or unknown, asserted or unasserted, liquidated or
unliquidated, secured or unsecured.
(kkk) "Liens" means any mortgages, liens (statutory or
otherwise), security interests, claims, pledges, levies, easements,
encroachments, hypothecations, restrictions, rights-of-way, charges,
possibilities of reversion, rights of refusal or other encumbrances.
(lll) "Listed Contracts" has the meaning set forth in
Section 3.13.
(mmm) "Litigation" means any action, suit, proceeding,
arbitration or other alternate dispute resolution procedure,
investigation or inquiry, whether civil, criminal or administrative,
before any Governmental Entity.
(nnn) "Losses" has the meaning set forth in Section
9.1.
(ooo) "Minimum Claim Amount" has the meaning set forth
in Section 9.4(b).
(ppp) "Net Asset Value" means the amount in United
States Dollars of the consolidated shareholders' equity of Company, plus
net Intercompany Indebtedness, and minus all cash on hand in Company and
Industries.
(qqq) "Non-Water Subsidiary" has the meaning set forth
in Section 3.1(d).
48
(rrr) "Orders" has the meaning set forth in Section
3.4.
(sss) "Other Business" has the meaning set forth in
the recitals of this Agreement.
(ttt) "Other Financing" has the meaning set forth in
Section 5.8.
(uuu) "Party" or "Parties" means Buyer, Company and/or
Seller, as the case may be.
(vvv) "Permits" has the meaning set forth in Section
3.10(b).
(www) "Permitted Liens" has the meaning set forth in
Section 3.11(a).
(xxx) "Person" means any natural person or Entity.
(yyy) "Preliminary Closing Balance Sheet" has the
meaning set forth in Section 2.3(c).
(zzz) "Products" means all products sold at any time
prior to the Closing by Company, any Water Subsidiary or that have borne
a trademark of Company, as part of, in or through the operations of
Company prior to the Closing.
(aaaa) "PSCW" has the meaning set forth in Section 5.9.
(bbbb) "Purchase Price" has the meaning set forth in
Section 2.1.
(cccc) "Real Property" has the meaning set forth in
Section 3.11(b).
(dddd) "Recent Balance Sheet" has the meaning set forth
in Section 3.5.
(eeee) "Representatives" has the meaning set forth in
Section 5.1(a).
(ffff) "Seller" has the meaning set forth in the
preamble of this Agreement.
(gggg) "Seller Indemnified Party" has the meaning set
forth in Section 9.2.
(hhhh) "Shares" has the meaning set forth in the
recitals of this Agreement.
(iiii) "Subsidiaries" means, as to any Person, any
Person (i) of which such Person directly or indirectly owns securities
or other equity interests representing fifty percent (50%) or more of
the aggregate voting power; (ii) of which such Person possesses fifty
percent (50%) or more of the right to elect directors or Persons holding
similar positions; or (iii) which such Person Controls directly or
indirectly through one or more intermediaries, at any time during the
period for which the determination of Subsidiary is being made.
(jjjj) "Tax Return" means any return, declaration,
report, estimate, claim for refund, election or information return or
statement relating to, or required to be filed in connection with, any
Taxes, including any schedule, form, attachment or amendment.
49
(kkkk) "Taxes" means any federal, state, county, local,
territorial, provincial, or foreign income, net income, gross receipts,
single business, unincorporated business, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs
duties, capital stock, franchise, profits, gains, withholding, social
security (or similar), payroll, unemployment, disability, workers
compensation, real property, personal property, ad valorem, replacement,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition, whether or not disputed and whether
imposed by Law, Order, Contract or otherwise.
(llll) "Termination Date" has the meaning set forth in
Section 11.1(d).
(mmmm) "Trade Rights" means rights in the following:
(i) all trademark rights, business identifiers, trade dress, service
marks, trade names and brand names; (ii) all copyrights and all other
rights associated therewith and the underlying works of authorship;
(iii) all patents and all proprietary rights associated therewith; (iv)
all inventions, mask works and mask work registrations, know how,
discoveries, improvements, designs, computer source codes, programs and
other software (including all machine readable code, printed listings of
code, documentation and related property and information), trade
secrets, websites, domain names, shop and royalty rights, and all other
types of intellectual property; and (v) all registrations of any of the
foregoing, all applications therefor, all goodwill associated with any
of the foregoing and all claims for infringement thereof.
(nnnn) "Waste" means (i) any petroleum, hazardous or
toxic petroleum-derived substance or petroleum product, flammable or
explosive material, radioactive materials, asbestos in any form that is
or could become friable, urea formaldehyde foam insulation, foundry sand
or polychlorinated biphenyls (PCBs); (ii) any chemical or other material
or substance that is now regulated, classified or defined as or included
in the definition of "hazardous substance," "hazardous waste,"
"hazardous material," "extremely hazardous substance," "restricted
hazardous waste," "toxic substance," "toxic pollutant," "pollutant" or
"contaminant" under any Environmental Law, or any similar denomination
intended to classify substance by reason of toxicity, carcinogenicity,
ignitability, corrosivity or reactivity under any Environmental Law; or
(iii) any other chemical or other material, waste or substance, exposure
to which is now prohibited, limited or regulated by or under any
Environmental Law.
(oooo) "Water Business" has the meaning set forth in
the recitals of this Agreement.
(pppp) "Water Subsidiary" has the meaning set forth in
Section 3.1(d).
Unless the context otherwise requires, the foregoing definitions in the singular
include the plural and vice versa.
[The next page is the signature page.]
50
IN WITNESS WHEREOF, the undersigned have caused their duly
authorized officers to execute and deliver this Stock Purchase Agreement as of
the day and year first written above.
PENTAIR, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
-----------------------------
Title: Chairman and CEO
-----------------------------
WICOR, INC.
By: /s/ Xxxxx Xxxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxxx
-----------------------------
Title: Senior VP and General Counsel
-----------------------------
WISCONSIN ENERGY CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
-----------------------------
Title: Chairman and CEO
-----------------------------
