SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (date of earliest event reported): April 10, 1995
EASTERN ENTERPRISES
(Exact name of registrant as specified in its charter)
Massachusetts 1-2297 04-1270730
(State of organization) (Commission File (IRS Employer
Number) Identification No.)
9 Riverside Road, Weston, Massachusetts 02193
(Address of principal executive offices)(zip code)
Registrant's telephone number, including area code: (617)647-2300
Item 2. Acquisition or Disposition of Assets
On April 10, 1995, Water Products Group Incorporated ("WPGI"), a wholly-owned
subsidiary of Eastern Enterprises ("Eastern"), sold all of the issued and
outstanding capital stock of WaterPro Supplies Corporation ("WaterPro") to WP
Acquisition Corp., a wholly-owned subsidiary of Edmundson International, Inc.
("Edmundson") and an indirect wholly-owned subsidiary of Consolidated Electrical
Distributors, Inc. ("CED"), for a cash purchase price of $52,130,000. WaterPro
is engaged in the business of distributing components for the repair,
improvement and expansion of municipal water supply and wastewater collection
systems. Such sale was pursuant to a Stock Purchase Agreement dated March 2,
1995 (the "Agreement") among Eastern, WPGI, CED and Edmundson. The Agreement
provides that the purchase price is subject to post-closing adjustments,
including an adjustment based on changes in the tangible net worth of WaterPro
occurring between December 31, 1994 and April 7, 1995.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit 2.1 Stock Purchase Agreement dated March 2, 1995,
among Eastern, WPGI, CED and Edmundson.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EASTERN ENTERPRISES
Date:April 20, 1995 By:/S/L. William Law, Jr.
-------------- ----------------------
L. William Law, Jr., Senior
Vice President, General
Counsel and Secretary
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Exhibit 2.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT made as of March 2, 1995 (the "Agreement") by and
between Eastern Enterprises, a Massachusetts business trust ("Eastern") and
Water Products Group Incorporated, a Massachusetts corporation ("WPGI") (each a
"Seller" and collectively the "Sellers"); and Edmundson International, Inc., a
California corporation ("Edmundson") and Consolidated Electrical Distributors,
Inc., a Delaware corporation ("CED")(each a "Buyer" and collectively the
"Buyers").
WITNESSETH:
WHEREAS, the Sellers own all of the outstanding shares of capital stock of
WaterPro Supplies Corporation, a Massachusetts corporation ("WaterPro"); and
WHEREAS, the Sellers desire to sell to the Buyers and the Buyers desire to
purchase all of the outstanding capital stock of WaterPro, upon the terms and
subject to the conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises, provisions and
respective covenants, representations and warranties herein contained, the
parties hereby agree as follows:
1. Purchase and Sale of Stock.
1.1 Agreement to Purchase and Sell. Upon the terms and subject to the
conditions contained in this Agreement, the Sellers agree to sell, assign,
transfer and deliver to the Buyers, and the Buyers agree to purchase from the
Sellers, at the Closing (as defined in Section 2), 100 shares of Common Stock,
par value $.01 per share, of WaterPro, being all of the issued and outstanding
shares of capital stock of WaterPro (the "Purchased Shares").
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1.2 Transfer and Delivery of Shares. Upon the terms and subject to the
conditions contained in this Agreement, the Sellers will at the Closing deliver
to the Buyers certificates representing the Purchased Shares together with duly
executed stock transfer powers, in form sufficient to effect the transfer
thereof to the Buyers, to either of them, or to any wholly-owned subsidiary of
either of them, as they shall direct.
1.3 Purchase Price. Upon the terms and subject to the conditions
contained herein, the Buyers shall pay to the Sellers at the Closing a purchase
price for the Purchased Shares (the "Purchase Price") of Fifty-Two Million, One
Hundred and Thirty Thousand Dollars ($52,130,000), which shall be subject to
adjustment following the Closing pursuant to the provisions set forth in Section
1.4 hereof. Of the Purchase Price, $47,130,000 shall be paid by the Buyers to
the Sellers at the Closing in good and immediately available funds and the
balance of $5,000,000 shall be paid by the Buyers on the Closing Date in good
and immediately available funds to Shawmut Bank, N. A., as Escrow Agent for the
Sellers and the Buyers pursuant to the Escrow Agreement in the form attached
hereto as Exhibit A (the "Escrow Agreement").
1.4 Adjustment to Purchase Price. The Purchase Price shall be
adjusted pursuant to the provisions of this Section 1.4.
(a) No later than thirty (30) days following the Closing Date,
the Sellers together with Sellers' accountants, Arthur Andersen LLP ("AA"), will
prepare a balance sheet of WaterPro as of the close of business on April 6, 1995
(the "Closing Balance Sheet"). The Closing Balance Sheet shall be prepared in
accordance with the provisions of this Agreement and generally accepted
accounting principles ("GAAP") applied on a basis consistent with the December
31, 1994 balance sheet of WaterPro included in the Financial Statements referred
to in Section 3.6 (the "December 1994 Balance Sheet"), except to the extent
otherwise expressly provided in paragraph (b) of this Section 1.4. In connection
with the preparation of the Closing Balance Sheet, the Sellers shall cause
WaterPro to conduct a physical inventory of WaterPro's inventory as of the close
of business on April 6, 1995. AA, the Buyers' accountants, Ernst & Young, and
representatives of the Sellers and the Buyers shall be permitted to observe all
aspects of such physical inventory. All books and records of WaterPro shall be
available for review at all reasonable times to the Sellers and their
accountants in connection with their preparation of the Closing Balance Sheet
and to the Buyers and their accountants in connection with their review of the
Closing Balance Sheet. The Buyers shall be provided access to review the
workpapers of the Sellers' accountants in connection with the Buyers' review of
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the Closing Balance Sheet, and, in the event of any dispute concerning the
Closing Balance Sheet, the Sellers shall be provided access to review the
workpapers of the Buyers' accountants. Each of the parties shall pay all fees
and expenses of its own accountants in connection with preparation and review of
the Closing Balance Sheet.
(b) For purposes of preparing the Closing Balance Sheet:
(i) Inventory shall be valued at the lower of average cost
(determined using the same methods used in preparing the December 1994 Balance
Sheet) or market, on an item by item basis, in accordance with the provisions of
this paragraph. Items shall be valued at zero which are (x) broken, damaged,
defective or incomplete or (y) specially manufactured per WaterPro's order and
which are not listed in a manufacturer's catalog or price sheets and not
committed for sale to a customer, provided that such items shall not be written
down below the amount of credit or refund receivable upon return thereof to the
manufacturer or supplier. All existing reserves for "dead stock", "emerging dead
stock", slow-moving, surplus or obsolete inventory on WaterPro's books and
records shall be reversed and shall not be applied. In place thereof, a total
reserve of $650,000 shall be established therefor.
(ii) WaterPro's accounts receivable shall be valued at the
full amount thereof without applying any reserve for uncollectible accounts or
bad debts.
(iii) No reserves, accruals or tax assets shall be
included on account of any taxes, including, without limitation, federal, state
or local income, sales, use or other taxes.
(c) Within five (5) days following completion of the Closing
Balance Sheet, Sellers shall calculate the Purchase Price adjustment resulting
therefrom, which shall be equal to the difference between WaterPro's Tangible
Net Worth (as hereinafter defined) as reflected on the Closing Balance Sheet and
$39,277,000. For purposes hereof, "Tangible Net Worth" shall mean WaterPro's
total shareholder's equity minus the amount for goodwill (net of amortization),
as reflected on the Closing Balance Sheet. Sellers shall promptly provide a copy
of such calculation to the Buyers, together with a copy of the Closing Balance
Sheet.
(d) The Buyers shall have the right to review the Closing
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Balance Sheet and the Sellers' calculation of the Purchase Price adjustment, if
any. If the Buyers dispute the Sellers' Closing Balance Sheet or calculation of
the Purchase Price adjustment, the Buyers shall give written notice of such
dispute to the Sellers not later than thirty (30) days after receiving the
Sellers' calculation pursuant to paragraph (c) above, setting forth in
reasonable detail the reasons for the dispute, the Buyers' proposed changes to
the Closing Balance Sheet and the Buyers' proposed calculation of the Purchase
Price adjustment. If the Buyers give no such notice within such thirty-day
period, the Sellers' calculation of the Purchase Price adjustment shall become
final and binding upon the parties with no need for further action on the part
of any party. If the Buyers do give written notice of dispute to the Sellers
within such thirty-day period in accordance with the foregoing, the Sellers and
the Buyers shall endeavor in good faith to reach agreement on the Purchase Price
adjustment within ten (10) days after the Sellers' receipt of the Buyers' notice
of dispute (the "Review Period"). If the parties are unable to reach agreement
on the Purchase Price adjustment within the Review Period, the matter will be
submitted by the parties to Deloitte & Touche (the "Neutral Accountants"), which
firm will determine any adjustments necessary to the calculation of the Purchase
Price in accordance with the provisions of this Agreement. Such determination by
the Neutral Accountants shall be final and binding upon the Buyers and the
Sellers. The expense of retaining the Neutral Accountants shall be borne 50% by
the Buyers and 50% by the Sellers.
(e) If the Tangible Net Worth reflected on the Closing Balance
Sheet is less than $39,277,000, the Sellers shall pay such difference to the
Buyers, and if such Tangible Net Worth is greater than such amount, the Buyers
shall pay such difference to the Sellers. Any such payment by the Buyers to the
Sellers shall be made in good and immediately available funds not later than
five (5) days following final determination of the Closing Balance Sheet in
accordance with paragraph (d) above. Any such payment by the Sellers to the
Buyers shall be made first from the escrow account held pursuant to the Escrow
Agreement, and, in the event of such a payment, the parties shall execute and
deliver a joint instruction to the Escrow Agent not later than five (5) days
following final determination of the Closing Balance Sheet in accordance with
paragraph (d) above, instructing it to make such payment to the Buyers.
1.5 Releases to Sellers from Escrow.
(a) In the event that the balance held in the escrow account,
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after making any payment to the Buyers required by Section 1.4(e), would exceed
$3,000,000, the parties shall execute and deliver to the Escrow Agent,
simultaneously with delivery of the joint instruction referred to in Section
1.4(e)(or, if no joint instruction is given under Section 1.4(e), within five
(5) days following final determination of the Closing Balance Sheet in
accordance with Section 1.4(d) above), a joint instruction to pay such excess
amount to the Sellers, so that no more than $3,000,000 will remain in the escrow
account immediately following such payment.
(b) In the event that the balance held in the escrow account
on October 10, 1995, after making any payment to the Buyers required by Section
1.4(e) and after making any payment to the Sellers required by Section 1.5(a),
exceeds an amount equal to X plus $1,000,000, where "X" equals the amount of
Accounts Receivable reflected on the Closing Balance Sheet which remain
uncollected as of October 10, 1995, the parties shall execute and deliver to the
Escrow Agent, on or before October 15, 1995, a joint instruction to pay such
excess to the Sellers, so that the balance held in the escrow account following
such payment will not exceed X plus $1,000,000.
1.6 Payment of Intercompany Account. At the Closing, a payment will be
made in good and immediately available funds, from the Buyers to the Sellers, or
from the Sellers to the Buyers, as necessary, to settle and reduce to zero the
intercompany account between WaterPro and the Sellers. Such payment shall not
affect or be reflected in the Closing Balance Sheet.
2. Closing. The Closing of the transactions contemplated by this Agreement (the
"Closing") shall be held at the offices of Eastern Enterprises in Weston,
Massachusetts, at 10:00 a.m. Eastern Standard time, on April 10, 1995 or on such
other date and/or at such other time and/or place as the parties may hereafter
agree. Notwithstanding the foregoing, in the event that the conditions specified
in Sections 5.3 and 6.3 hereof have not been satisfied by such date, the date on
which the Closing is to occur shall be automatically extended to the third
business day following the date on which satisfaction of such conditions occurs,
provided that no such extension shall exceed sixty (60) days. In the event of
such an extension, the April 6, 1995 date for the Closing Balance Sheet,
including physical inventory, shall be appropriately adjusted. The date on which
the Closing shall occur is hereinafter referred to as the "Closing Date".
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3. Representations and Warranties by the Sellers. The Sellers jointly and
severally represent and warrant to the Buyers as follows:
3.1 Organization of Sellers. Eastern has been duly organized and is
validly existing as a Massachusetts business trust in good standing under the
laws of The Commonwealth of Massachusetts. WPGI has been duly organized and is
validly existing as a corporation in good standing under the laws of The
Commonwealth of Massachusetts. The Sellers have heretofore delivered to the
Buyer a complete and correct copy of Eastern's Declaration of Trust and By-Laws
and WPGI's Articles of Organization and By-Laws, in each case as in effect on
the date hereof.
3.2 Incorporation and Good Standing of WaterPro. WaterPro has been duly
organized and is validly existing as a corporation in good standing under the
laws of The Commonwealth of Massachusetts, with corporate power and authority to
own or operate the properties which it now owns or operates and to conduct the
business in which it is now engaged. There is no jurisdiction in which the
properties owned or leased by WaterPro, or the nature of the business conducted
by WaterPro, requires it to be qualified as a foreign corporation and where
failure to so qualify could have a material adverse effect on its business. The
Sellers have heretofore delivered to the Buyers a complete and correct copy of
WaterPro's Articles of Organization and By-Laws, as in effect on the date
hereof.
3.3 Capitalization. WaterPro's authorized capital stock consists of
200,000 shares of common stock, par value .01 per share, of which 100 shares
have been validly issued and are outstanding. All of such outstanding shares of
common stock are owned beneficially and of record by WPGI. The Sellers have and
will transfer to the Buyers on the Closing Date good and valid title to the
Purchased Shares, free and clear of all liens, claims, restrictions, security
agreements, rights of third parties, options or encumbrances of any kind
whatsoever. All of the Purchased Shares are fully-paid and non-assessable. There
are and will be on the Closing Date no outstanding (i) securities convertible
into or exchangeable for capital stock of any class of WaterPro, (ii) options,
warrants or other rights to subscribe for or purchase from WaterPro or the
Sellers any shares of capital stock of any class of WaterPro, or (iii)
agreements of any kind relating to the issuance of any such capital stock,
convertible or exchangeable securities, options, warrants or rights.
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3.4 Subsidiaries. WaterPro does not own any capital stock of or
other equity interest in any corporation or other entity.
3.5 Authority for Agreement. Each Seller has all necessary power and
authority, and has taken all necessary action, corporate or otherwise, to
authorize, execute and deliver this Agreement and all other agreements and
instruments contemplated hereby (the "Other Agreements") to which it is a party
and to carry out its obligations hereunder and thereunder. This Agreement
constitutes and such Other Agreements, when duly executed, will constitute the
valid and legally binding obligations of the Sellers, enforceable in accordance
with their respective terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application, heretofore or
hereafter enacted or in effect, affecting the rights and remedies of creditors
generally, and (ii) the exercise of judicial or administrative discretion in
accordance with general equitable principles, particularly as to the
availability of the remedy of specific performance or other injunctive relief
(the "Remedies Exception"). Assuming that clearances under the H-S-R Act and
ISRA (both as defined below) are obtained, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not conflict with or result in any violation of or default under any
provision of the charter documents or by-laws of either Seller or any material
default with respect to any mortgage, indenture, lease, agreement or other
instrument, permit, concession, grant, franchise, license, judgement, order,
decree, statute, law, ordinance, rule or regulation to which either of the
Sellers or WaterPro is a party or to which it or they or any of their property
is subject. Such execution, delivery and consummation will not accelerate the
maturity of or otherwise modify the terms of any indebtedness or other
obligations of WaterPro or result in the creation of any lien, charge,
encumbrance or security interest upon any of its assets. No consent, approval,
waiver, order or authorization of, or registration, declaration or filing with,
any third party or governmental authority is required in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby by Sellers, except for (i) the expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"H-S-R Act"); and (ii) any one or a combination of letters, declarations,
approvals or other documents from the New Jersey Department of Environmental
Protection and Energy in compliance with the provisions of the New Jersey
Industrial Site Recovery Act ("ISRA") as it relates to WaterPro's Forked River,
New Jersey facility.
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3.6 Financial Statements. Attached hereto as Exhibit 3.6 are copies of
each of the following: balance sheets and statements of income, shareholder's
equity and cash flow of WaterPro, together with the notes thereto at and for the
years ended December 31, 1993 and December 31, 1994 (collectively, the
"Financial Statements"). The Financial Statements present fairly and (except as
otherwise may be disclosed in the notes thereto) in conformity with generally
accepted accounting principles ("GAAP") consistently applied the financial
condition on the dates indicated and the results of operations and cash flow of
WaterPro for the periods indicated. WaterPro has no material liabilities,
obligations or commitments, whether accrued, absolute, contingent or otherwise,
of a nature required by GAAP to be reflected or reserved against in a balance
sheet or disclosed in the notes thereto, except (a) liabilities and obligations
reflected or reserved against in the December 31, 1994 balance sheet included in
the Financial Statements, or disclosed in the notes thereto, (b) liabilities and
obligations incurred in the ordinary course of business since the date of said
balance sheet and (c) liabilities and obligations disclosed in the Schedules to
this Agreement.
3.7 Absence of Changes. Since December 31, 1994, except as disclosed in
the Schedules to this Agreement or as contemplated hereby or arising out of the
transactions provided for herein, WaterPro has not:
(a) entered into any material transaction or any material
contract or agreement, other than in the ordinary course of business;
(b) suffered any strike or other material labor trouble or
been the subject of any effort to organize its work force, or any material part
thereof, into a new or different bargaining unit or with a new collective
bargaining agent or become aware that any of the foregoing is threatened;
(c) suffered any material uninsured loss, or interruption in
use, of any of its assets, properties, goodwill, business or operations on
account of fire, flood, riot, strike or Act of God;
(d) declared, paid or set aside for payment any dividend
or distribution with respect to capital stock;
(e) subjected to any material mortgage, pledge, lien or
security interest any assets or properties, or created or incurred any material
liability with respect to borrowed money, other than in the ordinary course of
business;
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(f) sold or disposed of any capital asset having a value in
excess of $25,000 other than in the ordinary course of business;
(g) adopted or amended any material bonus, profit sharing,
stock option, pension, retirement or other plan for the benefit of employees, or
increased the compensation of any employee other than in accordance with present
compensation review policies and in the ordinary course of business; or
(h) issued, sold, redeemed or repurchased any shares of
capital stock, or granted any option, warrant or right to purchase shares of
capital stock.
3.8 Taxes. The Sellers and WaterPro have filed on a consolidated basis
all federal income tax returns, and have filed all state, local and foreign
income, excise and franchise tax returns, real estate and personal property tax
returns, sales and use tax returns and other tax returns and customs and duties
filings that are required to have been filed by them in respect of the business,
assets and properties of WaterPro, and they have duly paid all taxes that have
become due pursuant thereto, and have duly paid all other taxes, assessments and
other governmental charges imposed by law upon them or any of their properties,
assets, income, receipts, payrolls, transactions, capital, net worth or
franchises relating to WaterPro which have become due. Except as disclosed in
Schedule 3.8 hereto, no notice has been received by the Sellers or WaterPro of
any deficiency or assessment of additional taxes relating to WaterPro and none
of them is party to or the subject of any action, audit, examination or other
proceeding by any governmental authority for assessment or collection of any
such taxes. Except as disclosed in Schedule 3.8, none of the Sellers or WaterPro
has given any waiver or extension of any period of limitations governing the
time of assessment or collection of any such tax.
3.9 Contracts. Schedule 3.9 contains a list as of the date hereof of
all material agreements, contracts and commitments of the following types,
written or oral, to which either of the Sellers or WaterPro is a party and which
relate to the business, assets or properties of WaterPro: (a) notes, credit
agreements, mortgages, guarantees, surety or indemnification agreements,
indentures, security agreements and other agreements and instruments relating to
the borrowing of money (other than from the Sellers) or the extension of credit
in excess of $25,000; (b) sales agency, representative, broker, finders, dealers
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and distributorship agreements; (c) licenses of patents, copyrights, trademarks
and other intellectual property or property rights; (d) agreements not to
compete; (e) joint venture and research and development agreements; (f) leases
and subleases of real property; (g) powers of attorney; (h) employment
agreements; (i) agreements with consultants; (j) any other executory agreement
entered into in the ordinary course of business involving payments, receipts or
liabilities of more than $100,000 in the aggregate, other than agreements with
customers and suppliers; and (k) any other executory agreement which was not
entered into in the ordinary course of business involving payments, receipts or
liabilities of more than $25,000 in the aggregate.
The Seller has delivered or made available to the Buyers complete and
correct copies of all such agreements, contracts and commitments, together with
all amendments thereto. Except as disclosed in Schedule 3.9, such agreements,
contracts and commitments are in full force and effect and WaterPro has in all
material respects performed all obligations required thereunder to be performed
by it to date and is not in material default.
3.10 ERISA Matters.
(a) Schedule 3.10 contains a true and complete list, as of the
date of this Agreement, of all "employee benefit plans" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA")
(collectively, the "Plans") maintained or contributed to by Sellers or WaterPro
(or to which any of them is a party or by which it is bound) and in which any
one or more of the employees of WaterPro participates, receives a benefit, is
eligible to participate, or is eligible to receive a benefit, whether or not
reduced to writing. True, current and complete copies of such Plans, and all
amendments (and to the extent any such Plan is not in writing, a written
description of the material provisions of such Plan) have been furnished to the
Buyers with respect to each Plan.
(b) Except as required to comply in operation with legislation
affecting Plans intended to be qualified under Section 401(a) of the Internal
Revenue Code of 1986 (the "Code") prior to any unexpired deadline for amendment,
each Plan and each trust or funding vehicle related to such Plan is in
compliance in all material respects with, and has been administered and operated
in all material respects in accordance with, its terms. There has been no
violation of any term of any Plan which would have a material adverse effect
upon WaterPro.
(c) Each Plan and each trust or funding vehicle related to
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such Plan is in compliance in all material respects with, and has been
administered and operated in all material respects in compliance with, all
applicable statutes, orders, rules and regulations. Each Plan which is intended
to be a "qualified plan" as described in Code Section 401(a) has been determined
by the IRS to so qualify (or a timely application for such determination has
been submitted to the IRS) and each such Plan has at all times been operated so
as to preserve its qualified status under Code Section 401(a). Each trust
related to a Plan intended to be qualified under Code Section 401(a) is exempt
from tax under Code Section 501(a).
(d) No Plan is, or is intended to be, funded by, associated
with or related to a "voluntary employees' beneficiary association" within the
meaning of Code Section 501(c)(9).
(e) WaterPro has never contributed to a multi-employer
plan as defined in Section 4001(a)(3) of ERISA.
(f) With respect to all Plans and related trusts, no
"prohibited transaction," as that term is defined in Section 406 of ERISA, has
occurred which is likely to subject any Plan, related trust or party dealing
with any such Plan or related trust to any material tax or penalty on prohibited
transactions imposed by Section 502(i) of ERISA or Section 4975 of the Code, and
the consummation of the transactions contemplated by this Agreement will not
constitute a prohibited transaction.
(g) There are no material actions, suits, arbitrations or
claims (other than routine claims for benefits by employees, beneficiaries or
dependents arising in the normal course of operations of such Plan) pending, or
to the best knowledge of the Sellers, threatened, with respect to any such Plan
or any fiduciary or sponsor of such Plan with respect to their duties under such
Plan or the assets of any trust under any such Plan.
3.11 Patents, Trademarks and Copyrights. Schedule 3.11 sets forth a
complete and accurate list of all material United States and foreign patents,
trademarks, copyrights, and registrations, licenses and applications therefor,
owned by, registered to, or applied for by WaterPro. Except as disclosed in
Schedule 3.11, (i) each such patent, trademark, and copyright shown on Schedule
3.11 as being owned by WaterPro is owned free and clear of all liens, security
interests and other encumbrances; (ii) to the knowledge of Sellers, there has
been no infringement of any patent, trademark or copyright listed on Schedule
3.11 by any third party and there are no claims of any third party that WaterPro
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is infringing upon any intellectual property rights of such third party; (iii)
no royalty or other fee is due to any party for use of any such patent,
trademark or copyright by WaterPro; and (iv) no license or right has been
granted by Sellers or WaterPro to any third party to use any such patent,
trademark or copyright.
3.12 Real Property; Leases. Schedule 3.12 identifies all real property
owned by WaterPro. WaterPro has good and marketable title in fee simple to all
of such real property shown on Schedule 3.12 as being owned by it, free and
clear of all mortgages, security interests, pledges, liens and encumbrances,
other than (i) liens for state and local property taxes not yet due and payable;
(ii) matters disclosed in Schedule 3.12; and (iii) such other imperfections of
title, charges or encumbrances which do not detract materially from the
aggregate value of such properties or interfere with the present use thereof by
WaterPro. On or before the Closing Date, WaterPro shall obtain preliminary
reports on title from a recognized title insurance company showing title to such
parcels to be vested in WaterPro, free and clear of encumbrances other than
those referred to in clauses (i), (ii) and (iii) above, and shall deliver copies
thereof to the Buyers.
All leases and leasehold interests of WaterPro in any real property are
listed in Schedule 3.12 hereto. Except as disclosed in Schedule 3.12, such
leases represent valid and binding rights and obligations, are in full force and
effect and are enforceable by WaterPro in accordance with their respective
terms, subject to the Remedies Exception, and WaterPro enjoys peaceful and
undisturbed possession thereunder. No material default on the part of WaterPro
under any such lease has occurred, and, to the knowledge of the Sellers, no
event has occurred or is continuing which with proper notice and/or the passage
of time would constitute a material default thereunder.
3.13 Condition of Fixed Assets. The fixed assets of WaterPro reflected
on the Closing Balance Sheet are in all material respects adequate and usable
for the purposes for which they are intended in the business of WaterPro,
subject to ordinary wear and tear.
3.14 Litigation. Except as disclosed in Schedule 3.14, there are no
material judicial or administrative actions, suits, claims, proceedings or
investigations pending against WaterPro or involving its assets, properties or
business, nor, to the knowledge of the Sellers, is any such action, suit,
proceeding or investigation threatened, and there are presently no outstanding
material judgments, decrees or orders of any governmental body to which WaterPro
or its assets, properties or business is subject.
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3.15 Compliance with Laws and Governmental Authorizations. WaterPro is
not in violation or default under any statute, law, ordinance, rule, regulation,
judgment, order, decree, permit, concession, grant, franchise, license or other
governmental authorization or approval applicable to it or its assets,
properties or business, where such violation or default would have a material
adverse effect on its business or financial condition. All material permits,
concessions, grants, franchises, licenses and other governmental authorizations
and approvals necessary for the conduct of such business as currently conducted
have been duly obtained and are in full force and effect, and there are no
proceedings pending or, to the knowledge of Sellers, threatened that may result
in the revocation, cancellation or suspension of any of the foregoing.
3.16 Brokers, Finders, etc.. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on without
the intervention of any person acting on behalf of the Sellers in such manner as
to give rise to any valid claim against the Sellers, WaterPro or the Buyers for
any brokerage or finder's commission, fee or similar compensation, except for
amounts that may be due to Banbury Capital Corporation, for which the Sellers
are solely responsible.
3.17 Environmental Matters. WaterPro is not in violation or default
under any federal, state, local or foreign law, statute, regulation, license,
authorization or permit relating to environmental protection (including without
limitation federal, state, local and foreign laws, statutes, rules and
regulations relating to treatment, storage, disposal, generation and
transportation of industrial, toxic or hazardous substances or solid or
hazardous waste, or air or water pollution (collectively, "Environmental
Laws")), where such violation or default would have a material adverse effect on
its business or financial condition. To the knowledge of Sellers, and except as
disclosed in Schedule 3.17, no facts, events or conditions (including without
limitation the generation, treatment, transport, storage, emission, disposal,
release or other placement, deposit or location of any substance) currently give
rise to any material liability on the part of WaterPro under any Environmental
Laws as presently in effect.
3.18 Employee Matters. There are no collective bargaining agreements
with employees of WaterPro and there is no union representing any such
employees; there is not pending or, to the Sellers' knowledge, threatened, any
15
strike, labor dispute, grievance or unfair labor practice claim or proceeding,
slowdown, walkout or work stoppage involving any such employees; and, to the
Sellers' knowledge, no union representation question exists and no union
organizing activities are taking place with respect to such employees. Sellers
have delivered to the Buyers a list of all salaried employees of WaterPro,
indicating the present salary level and years of service of each.
3.19 Insurance. Sellers have maintained and now maintain (i) insurance
on the business and the assets of WaterPro covering property damage and loss of
income by fire and other casualty to the limits and with the deductibles shown
on Schedule 3.19 and (ii) insurance protection against such liabilities, claims,
and risks, and in such amounts, as is shown on said Schedule. All such policies
shall be maintained in force by Sellers until the Closing Date. Copies of all
such policies have been made available to the Buyers for its inspection.
3.20 Inventory. The inventory reflected on the Closing Balance Sheet is
valued at the lower of average cost (determined using the same methods used in
preparing the December 1994 Balance Sheet) or market, in accordance with the
provisions of Section 1.4(b) hereof, and does not include any items which were,
as of the Closing Date, broken, damaged, defective or incomplete (except to the
extent of any credit or refund receivable upon return thereof).
3.21 Out-of Warranty Meters. Following the Closing, WaterPro will incur
no Net Costs (as hereinafter defined) for repair or replacement of any
Out-of-Warranty Meters (as hereinafter defined) which contain Defects (as
hereinafter defined) on the Closing Date, provided that WaterPro uses best
efforts, consistent with past practices, to have the manufacturer of each such
item incur, or reimburse WaterPro for, such costs. As used herein, the term
"Out-of-Warranty Meter" means a water meter in WaterPro's inventory on the
Closing Date and reflected in the Closing Balance Sheet, which has not
previously been used, and with respect to which the warranty extended by the
manufacturer thereof has expired by its terms; the term "Defect" means a defect
in materials or workmanship of a type which was covered by the manufacturer's
warranty prior to expiration thereof; and "Net Costs" means costs incurred by
WaterPro for repair or replacement, net of all credits, reimbursements,
contributions, indemnities and other amounts payable by the manufacturer or any
other party with respect thereto.
4.0 Representations and Warranties by Buyers. The Buyers
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jointly and severally represent and warrant to the Sellers as follows:
4.1 Organization; Authority. Each Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and each has all necessary power and authority, and has taken all
necessary action, corporate or otherwise, to authorize, execute and deliver this
Agreement and the Other Agreements to which it is a party, and to carry out its
obligations hereunder and thereunder. This Agreement constitutes and such Other
Agreements, when duly executed, will constitute the valid and legally binding
obligations of the Buyers, enforceable in accordance with their respective
terms, subject to the Remedies Exception. Assuming that clearance under the
H-S-R Act and ISRA are obtained, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Buyers and do not and will not conflict with or result in any
violation of or default under any provision of the charter documents or by-laws
of either Buyer or material default with respect to any mortgage, indenture,
lease, agreement or other instrument, permit, concession, grant, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to either Buyer. No consent, approval, waiver, order or authorization
of, or registration, declaration or filing with, any third party or governmental
authority is required in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby by the
Buyers, except for (i) the expiration of the waiting period under the H-S-R Act
and (ii) any one or a combination of letters, declarations, approvals or other
documents from the New Jersey Department of Environmental Protection and Energy
in compliance with the provisions of ISRA as it relates to WaterPro's Forked
River, New Jersey facility.
4.2 Brokers, Finders, etc. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without the
intervention of any person acting on behalf of the Buyers in such manner as to
give rise to any valid claim against the Buyers, the Sellers or WaterPro for any
brokerage or finder's commission, fee or similar compensation.
4.3 Litigation. There are no judicial or administrative actions, suits,
proceedings or investigations pending or, to the knowledge of the Buyers,
threatened, which question or raise any issue with respect to this Agreement or
of any action taken or to be taken pursuant to or in connection with the
provisions of this Agreement, nor do the Buyers know of any basis for any such
action, suit, proceeding or investigation.
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5.Conditions to Obligations of Buyers. The obligations of the Buyers under this
Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions, unless otherwise waived by the Buyers.
5.1 Warranties and Agreements of Sellers; Officer's Certificate. All
representations and warranties of the Sellers contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date with
the same effect as though such representations and warranties were made at and
as of the Closing Date, except to the extent that such representations and
warranties expressly relate to any earlier date, to the extent that the
information contained in Schedules expressly relates to any earlier date and to
the extent of changes contemplated by or which arise out of the transactions to
which this Agreement relates, and the Sellers shall have performed and complied
in all material respects with all the covenants and agreements and satisfied all
the conditions required by this Agreement to be performed, complied with or
satisfied by them at or prior to the Closing Date; and the Buyers shall have
received a certificate dated the Closing Date and signed by the President or a
Vice President of each Seller to the foregoing effect.
5.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Sellers to authorize and carry out this
Agreement shall have been taken.
5.3 Consents of Third Parties. All consents and approvals of third
parties set forth in Section 3.5 hereof shall have been received and delivered
to the Buyers. The waiting period under the H-S-R Act shall have expired or been
terminated without any indication by the Federal Trade Commission or the U.S.
Justice Department that either intends to take any further actions with respect
to the transactions contemplated hereby.
5.4 Opinion of Counsel for Sellers. The Buyers shall have received
from L. William Law, Jr., General Counsel of Eastern, an opinion dated the
Closing Date, in the form set forth as Exhibit B hereto.
5.5 Legal Action. No action or proceeding shall have been commenced as
to which there are reasonable grounds for believing that such action or
proceeding may result in an order or judgment invalidating or rescinding the
transactions contemplated hereby.
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5.6 Escrow Agreement. The Sellers shall have executed and delivered
on or before the Closing Date the Escrow Agreement in the form attached hereto
as Exhibit A.
6. Conditions to the Sellers' Obligations. The obligations of the Sellers under
this Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions, unless otherwise waived by the Sellers.
6.1 Warranties and Agreement of the Buyers; Officer's Certificate. All
representations and warranties of the Buyers contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date with
the same effect as though such representations and warranties were made at and
as of the Closing Date, except to the extent that such representations and
warranties expressly relate to an earlier date and to the extent of changes
contemplated by or which arise out of the transactions to which this Agreement
relates, and the Buyers shall have performed and complied in all material
respects with all of the covenants and agreements and satisfied all the
conditions required by this Agreement to be performed and complied with or
satisfied by them at or prior to the Closing Date; and the Sellers shall have
received a certificate dated the Closing Date and signed by the President or a
Vice President of each Buyer to the foregoing effect.
6.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Buyers to authorize and carry out this
Agreement shall have been taken.
6.3 Consents of Third Parties. All consents and approvals of third
parties set forth in Section 3.5 hereof, shall have been received and delivered
to the Sellers. The waiting period under the H-S-R Act shall have expired or
been terminated without any indication by the Federal Trade Commission or the
U.S. Justice Department that either intends to take any further actions with
respect to the transactions contemplated hereby.
6.4 Opinion of Counsel for the Buyers. The Sellers shall have received
from Bernard E. Lyons, Esq., General Counsel for the Buyers, an opinion dated
the Closing Date, in the form set forth as Exhibit C hereto.
6.5 Legal Action. No action or proceeding shall have been commenced as
to which there are reasonable grounds for believing that such action or
proceeding may result in an order or judgment invalidating or rescinding the
transactions contemplated hereby.
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6.6 Release of Guaranties. The Sellers shall have received releases
under the guaranties and other obligations of the Sellers relating to WaterPro's
business listed on Schedule 6.6 hereto, or the Buyers shall have executed and
delivered to the Sellers an agreement to indemnify and hold harmless Sellers
from and against all claims, losses, liabilities and expenses relating thereto,
in form reasonably acceptable to the Sellers.
6.7 Escrow Agreement. The Buyers shall have executed and delivered on
or before the Closing Date the Escrow Agreement in the form attached hereto as
Exhibit A.
7. Expenses. Each of the parties hereto shall assume and bear all expenses,
costs and fees incurred or assumed by it in the preparation and execution of
this Agreement, whether or not the transactions herein provided for shall be
consummated. Buyers, on the one hand, and the Sellers, on the other, shall
indemnify and hold each other harmless from and against any and all liabilities
and claims in respect of any such expenses, costs or fees.
8. Indemnities.
8.1 Indemnities of the Sellers. The Sellers hereby jointly and
severally agree to indemnify and hold harmless the Buyers and their respective
directors, officers and affiliates from and against all actions, claims,
liabilities, damages, losses or deficiencies, and any reasonable costs and
expenses incident thereto (including reasonable attorney's fees), net of all tax
benefits and insurance and other recoveries realizable therefrom, that result
from (i) the inaccuracy of any representation or warranty made by the Sellers
herein; (ii) the action entitled Wisconsin Gas Company v. Mueller Co., et al.,
presently pending in the U. S. District Court for the Eastern District of
Wisconsin (the "Wisconsin Gas Suit"), provided that the Sellers indemnification
obligation with respect to such suit shall extend only to amounts in excess of
any and all indemnification, contribution and other rights of recovery WaterPro
may have against insurers and all other third parties (including Mueller Co.)
with respect thereto; (iii) any claims that may be asserted by the former
shareholders of Water Products Company or E&H Utility Sales, Inc., by O&R
Utilities, Inc. or K. Raymond Augst, Jr. or Otis R. Pool, or by Water
Specialties, Inc. or its current or former shareholders (including Nelson
Shugart) with respect to any violation by the Sellers, or any violation by
WaterPro occurring prior to the Closing Date, of any provision of any of the
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asset or stock purchase agreements pursuant to which the Sellers or their
affiliates acquired the businesses that comprise WaterPro; or (iv) any claims
that may be asserted against WaterPro as a "related person" to Eastern under the
federal Coal Industry Retiree Health Benefit Act of 1992 for premiums due from
Eastern to the Combined Fund under such Act (collectively, "Buyers' Losses").
Notwithstanding the foregoing, the Sellers' aggregate liability under this
Section 8 shall not exceed the Purchase Price, and the Sellers shall be liable
under this Section 8 for Buyers' Losses (other than those arising from the
representations and warranties contained in Sections 3.1 through 3.5, Section
3.8 or Section 3.16) only if and to the extent that the aggregate amount of such
Buyers' Losses exceeds $250,000 (it being understood, however, that any payment
to the Buyer pursuant to Section 1.4(e) or Section 9.8 shall not be subject to
such $250,000 deductible). Sellers shall be obligated in accordance with this
Section 8 for the full amount of Buyers' Losses arising from the representations
and warranties contained in Sections 3.1 through 3.5, Section 3.8 and Section
3.16. Whenever any Buyers' Loss has occurred or will or may occur, the Buyers
shall so notify the Sellers promptly in writing, and each such notice shall
specify in such detail as is then known to the Buyers the circumstances of such
asserted Buyers' Loss. Any failure to promptly give such notice will relieve the
Sellers of liability hereunder to the extent that such failure adversely affects
the ability of the Sellers to defend their interests with respect thereto, or to
the extent that notice is not timely in accordance with Section 8.3.
8.2 Buyers' Indemnity. The Buyers hereby agrees to indemnify and hold
harmless the Sellers and their respective directors, trustees, officers and
affiliates from and against all actions, claims, liabilities, damages, losses or
deficiencies, and any reasonable costs and expenses incidentthereto (including
reasonable attorney's fees), net of all tax benefits and insurance and other
recoveries realizable therefrom, (i) that result from the inaccuracy of any
representation or warranty made by the Buyers herein; or (ii) that arise from
the termination, change in employment status or terms of employment or change in
compensation or benefits of any employee of WaterPro occurring after the Closing
(collectively, "Sellers' Losses"). Notwithstanding the foregoing, the Buyers
shall be liable under this Section 8 for Sellers' Losses (other than those
arising from the representations and warranties contained in Sections 4.1 and
4.2) only if and to the extent that the aggregate amount of such Sellers' Losses
exceeds $250,000. Whenever any Sellers' Loss has occurred or will or may occur,
the Sellers shall so notify the Buyers in writing, and each such notice shall
specify in such detail as is then known to the Sellers the circumstances of such
asserted Sellers' Loss. Any failure to promptly give such notice will relieve
21
the Buyers of liability hereunder to the extent that such failure adversely
affects the ability of the Buyers to defend their interests with respect
thereto.
8.3 Termination of Rights Hereunder. Notwithstanding any other
provision hereof, no claim may be made or lawsuit instituted with respect to any
breach or inaccuracy of any representation or warranty of Sellers contained
herein under the provisions of Section 8.1 (except for Reserved Claims) after
the second anniversary of the Closing Date. As used herein, the term "Reserved
Claims" shall mean (i) any claims with respect to Buyers' Losses as to which the
Buyers have given the Sellers written notice, specifying in detail the
circumstances of the asserted loss, prior to such second anniversary date and
(ii) claims based upon the representations and warranties contained in Sections
3.1 through 3.5, Section 3.8, Section 3.10 or Section 3.16, with respect to
which no claim may be made or lawsuit instituted after the sixth anniversary of
the Closing Date.
8.4 Exclusive Remedy. The indemnification provided for in this Section
8 shall be the exclusive post-Closing remedy available to any party hereto with
respect to any breach or inaccuracy of any representation or warranty contained
herein.
8.5 Third Party Actions. In the event any claim is made, suit is
brought or tax audit or other proceeding is instituted against the Buyers or
WaterPro or any of their respective directors, officers, or affiliates which
involves or appears reasonably likely to involve a Buyers' Loss for which the
Buyers may seek indemnification under this Section8, the Buyers will, promptly
after receipt of notice of any such claim, suit or proceeding for which
indemnification may be sought, notify the Sellers of the commencement thereof.
Any failure to promptly give such notice will relieve the Sellers of liability
hereunder to the extent that such failure adversely affects the ability of the
Sellers to defend their interests with respect thereto, or to the extent that
notice is not timely in accordance with Section 8.3. The Sellers (at their
expense) shall have the right and shall be given the opportunity to assume the
defense or settlement of such claim, suit or proceeding, with counsel reasonably
satisfactory to the Buyers. In the event that the Sellers shall so assume such
defense, they shall have no further obligation to pay any expenses of Buyers,
including attorney's fees, related thereto. The Sellers shall not, except at
their own cost, make any settlement with respect to any such claim, suit or
proceeding without the prior consent of the Buyers, which consent shall not be
unreasonably withheld or delayed; provided, however, that if the settlement
22
involves only cash payments by Sellers, no such consent shall be required.
8.6 Minimizing Losses. Each party agrees to use all reasonable efforts
to minimize all liabilities, damages, losses, deficiencies, costs and expenses
for which it may seek indemnification from the other party pursuant to this
Section 8, and to minimize the amount of such indemnification obligation by
diligently pursuing the maximum possible insurance recovery or recovery from
other available sources with respect to such liabilities, damages, losses,
deficiencies, costs and expenses.
9. Covenants.
9.1 Preparation for Closing. The Buyers shall use all reasonable
efforts to bring about the fulfillment of the conditions to Closing set forth in
Section 6 hereof, and the Sellers shall use all reasonable efforts to bring
about the fulfillment of the conditions to Closing set forth in Section 5
hereof.
9.2 Conduct of Business. From the date hereof to the Closing, except as
contemplated by this Agreement or otherwise consented to by the Buyers, the
Sellers will and will cause WaterPro to:
(a) carry on the business presently conducted by WaterPro (the
"Business") in the ordinary course and in substantially the same manner as
heretofore in all material respects and, to the extent consistent with prudent
management of the Business, use reasonable efforts to preserve relationships
with customers, suppliers and others having dealings with the Business;
(b) maintain all of the material structures, equipment and
other tangible property used in the Business in the same repair, order and
condition as represented in Section 3.13 except for ordinary wear and tear;
(c) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried in respect of the
Business;
(d) perform in all material respects all obligations of
WaterPro under agreements, contracts and instruments relating to or affecting
the Business;
(e) not amend the provisions of, change the benefit structure
23
of, increase particular benefits (or a person's nonforfeitable right to any
benefit) under, or expand the coverage of or eligibility with respect to any
Plan from what such provisions, benefit structure, benefits, rights, coverage
and eligibility were under such Plan as in effect on the date of this Agreement,
nor make any such amendment, change, increase or expansion with respect to any
such Plan or adopt any new plan nor increase the compensation of any employee of
WaterPro other than in accordance with present compensation review policies and
in the ordinary course of business;
(f) maintain the books of account and records of the Business
in the usual and regular manner;
(g) comply in all material respects with all statutes, laws,
ordinances, rules and regulations as they apply to the Business;
(h) file on a timely basis all tax returns and pay any and all
taxes which shall become due or shall have accrued on account of the operation
of the Business on or prior to the Closing Date;
(i) not merge or consolidate or agree to merge or consolidate
WaterPro with, or cause WaterPro to purchase or agree to purchase substantially
all of the assets of or otherwise acquire, any business or any corporation,
partnership, association or other business organization or division thereof;
(j) not amend the Articles of Organization or By-Laws of
WaterPro;
(k) not declare, pay or set aside for payment any
dividend or distribution with respect to capital stock of WaterPro;
(l) not issue, sell, redeem or repurchase any shares of
capital stock of WaterPro, or grant any option, warrant or right to purchase
such stock;
(m) not create any material mortgage, pledge, lien or security
interest in any assets or properties of WaterPro, nor create or incur any
material liability with respect to borrowed money (provided that this clause
shall not prohibit intercompany advances made to WaterPro by the Sellers in
accordance with past practices);
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(n) not sell or otherwise dispose of any capital asset
having a value in excess of $25,000, other than in the ordinary course of
business; and
(o) not enter into any contract involving payments, receipts
or liabilities of more than $25,000 in the aggregate, except in the ordinary
course of business.
9.3 Access and Information; Confidentiality. The Sellers shall afford
to the Buyers and to their employees, accountants, counsel and other authorized
representatives reasonable access throughout the period prior to the Closing to
the facilities, properties, books and records of WaterPro. The Buyers shall
cause all information obtained by them or their representatives pursuant to this
Agreement or in connection with the negotiation hereof to be treated as
confidential and shall not use, nor permit others to use, any such information
for any purpose other than the consummation of the transactions contemplated
hereby or, if the Closing is consummated, the conduct of the Business following
the Closing; and, in any event, shall not use or permit others to use any such
information in a manner detrimental to the Sellers or WaterPro. In the event the
Closing is not consummated, the Buyers shall immediately return to the Sellers
all such information and documents and materials containing any such
information, including all documents and materials supplied by the Sellers or
WaterPro and all copies thereof, in whatsoever form. The foregoing provisions
shall not be deemed to supersede or limit any prior agreement of the Buyers
concerning confidentiality and non-use of information.
9.4 Non-Competition by Sellers. The parties hereto recognize that the
Buyers have the exclusive interest in protecting and preserving the good will of
the Business following the Closing Date. Accordingly, the Sellers agree that for
the period beginning on the Closing Date and ending on the fifth anniversary of
the Closing Date, neither the Sellers nor any person, firm or corporation
controlled by either of the Sellers will directly or indirectly, in any capacity
(whether as a stockholder, partner, owner, principal or otherwise), have any
interest in, be associated with, or otherwise be engaged in, any business that
is in direct or indirect competition with the Business or any portion thereof;
provided that the foregoing provisions shall not prohibit the ownership of (i)
five percent (5%) or less of any class of securities of any corporation or
entity that is in competition with the Business, or (ii) any interest in any
entity with respect to which less than ten percent (10%) of its business is in
competition with the Business.
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9.5 Tax Provisions. For purposes of this section (i) "Tax" or "Taxes"
shall mean all Federal, state, local and foreign taxes and assessments,
including all interest, penalties and additions imposed with respect to such
amounts, (ii) "Tax Returns" shall mean all Tax returns, reports and forms
required to be filed by, or which include, WaterPro, (iii)"Seller Tax Returns"
shall mean all Tax Returns for periods ending on, or before, the Closing Date
with the exception of any returns to be filed by WaterPro or the Buyers as a
result of an election under Section 338(g) of the Code or comparable provisions
of state or local tax law with respect to WaterPro (the "Section 338 Election"),
and (iv) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(a) Upon the Buyers' written request, the Sellers shall use
all reasonable efforts to timely provide complete and accurate information and
records as Buyers may reasonably request to enable the Buyers to (i) make a
Section 338 Election and (ii) prepare and file all related returns, reports and
forms. Sellers shall not be required to make an election under Section
338(h)(10) of the Code (or any comparable election under state or local law).
The Sellers will afford the Buyers full access to its records to permit the
Buyers to satisfy itself as to the accuracy of such information. The Form 8594
and accompanying worksheet heretofore delivered to the Buyers is represented and
warranted by the Sellers to accurately reflect the calculation of tax goodwill
created by the acquisition of assets from A&P Water and Sewer Supplies, Inc. in
1991. The only adjustment to such tax goodwill since that time has been the
addition of $200,000 of basis through an examination adjustment by the Internal
Revenue Service.
(b) Sellers shall timely prepare and file with the appropriate
authorities all Seller Tax Returns or amendments thereof (including, without
limitation Federal change reports filed with states) for Federal and state
income or franchise Taxes and WaterPro shall prepare and file all other Seller
Tax Returns (including without limitation employment Tax, property Tax and sales
Tax returns). Sellers shall promptly pay all Taxes due with respect to Sellers
Tax Returns. Buyers or WaterPro shall timely prepare and file with the
appropriate authorities all other Tax Returns or amendments thereof, and will
pay all Taxes due with respect to such Tax Returns; provided that Sellers will
promptly reimburse WaterPro for all Taxes paid by WaterPro or Buyers with
respect to Tax Returns for a period which begins before and ends after the
Closing Date to the extent such Taxes relate to the period prior to the Closing.
In no event shall such reimbursement include any tax occasioned by a Section 338
Election. For any taxable period of WaterPro that includes (but does not end on)
26
the Closing Date, Buyers and Sellers agree to file all Tax Returns on the basis
that the relevant taxable period ended as of the close of business on the
Closing Date, unless the relevant taxing authority will not accept a Tax Return
filed on that basis.
(c) Buyers and Sellers recognize that each of them may need
access from time to time, after said Closing Date to certain Tax records and
information held by Sellers and WaterPro to the extent such records and
information pertain to events occurring prior to the Closing Date; therefore,
Buyers and Sellers agree to use their best efforts to properly retain and
maintain such records for a reasonable period of time and, upon written request,
to provide records to the other party that such other party deems necessary or
appropriate.
(d) Sellers hereby indemnify Buyers against all liability for
Taxes due on Seller Tax Returns including, without limitation, any Taxes due as
a result of examination adjustments made by the Internal Revenue Service or by
the applicable state or local taxing authorities for such taxable years as
finally determined. WaterPro and Buyers hereby indemnify Sellers against all
liabilities for Taxes due on other Tax Returns, including, without limitation,
all Taxes due as a result of examination adjustments; provided, however, that
Sellers will promptly reimburse WaterPro for all Taxes so due with respect to
any Tax Return for a period which begins before and ends after the Closing Date
to the extent that such Taxes relate to the period prior to the Closing. In no
event shall reimbursement include any Tax occasioned by a Section 338 Election.
(e) The Sellers shall have full responsibility for and control
over (including the power to settle or litigate) any audit or other proceeding
relating to a Seller Tax Return. If Buyers or WaterPro receives notice of the
commencement of any such audit or proceeding it shall promptly inform Sellers
thereof in writing. Any failure to promptly give such notice will relieve the
Sellers of liability hereunder to the extent that such failure adversely affects
the ability of the Sellers to defend their interests with respect thereto. The
Buyers and WaterPro shall have full responsibility for, and control over
(including the power to settle or litigate), any audit or other proceeding
relating to any other Tax Return, except a Tax Return for a period beginning
before and ending after the Closing Date. Buyers shall control the audit or
other proceeding relating to a Tax Return for a period beginning before and
ending after the Closing Date, but (i) shall keep Seller fully informed as to
the progress of such audit or proceeding and (ii) shall settle such an audit or
27
proceeding only with the written consent of the Sellers (which consent shall not
be unreasonably withheld or delayed). If Sellers receive notice of the
commencement of an audit or proceeding involving a Tax Return other than a
Seller Tax Return, they shall promptly inform Buyers and WaterPro thereof in
writing.
(f) Any refunds of Taxes of WaterPro for any taxable period
ending on or before the Closing Date (or filed on that basis pursuant to
Paragraph 9.5(b)), other than a refund attributable solely to a loss carry-back
from a taxable period beginning on or after the Closing Date, shall be for the
account of Sellers.
9.6 Publicity. Prior to the Closing, none of Sellers, Buyers or any of
their respective affiliates, representatives or agents shall make or issue, or
cause to be made or issued, any announcement or written statement concerning
this Agreement or the transactions contemplated hereby for dissemination to the
public without the prior consent of the other party, which consent shall not be
unreasonably withheld or delayed. This provision shall not apply, however, to
any announcement or written statement required to be made by law or the
regulations of any stock exchange to which a party is subject, except that the
party required to make such announcement shall, whenever practicable, consult
with the other party concerning the timing and content of such announcement
before such announcement is made. The parties hereto shall consult with one
another and cooperate on the substance of any press releases concerning either
the execution of this Agreement or the consummation of the transactions
contemplated hereby to be disseminated to the public by the Sellers, Buyers or
any of their affiliates, representatives or agents on or about the date of the
execution of this Agreement or on the Closing Date, as the case may be.
9.7 Guaranties. In the event that the Sellers do not receive the
releases referred to in Section 6.6 hereof prior to Closing, the Buyers shall
execute and deliver to the Sellers prior to Closing the indemnity agreement
referred to in such Section.
9.8 Accounts Receivable. The Buyers shall cause WaterPro to use its
best efforts consistent with past practices to effect collection in the ordinary
course of all Accounts Receivable reflected on the Closing Balance Sheet
(including but not limited to the maintenance and assertion of all lien and bond
rights). In the event that despite such best efforts, WaterPro has not fully
collected such Accounts Receivable by the first anniversary of the Closing Date,
28
the Buyers may demand that the Sellers pay to WaterPro the uncollected amount of
such Accounts Receivable by giving the Sellers a written demand for such
payment, accompanied by full details and supporting documents for such claim,
not later than fifteen (15) days following such first anniversary date. For the
purpose of determining such uncollected Accounts Receivable under this Section,
payments received by WaterPro from a customer after the Closing Date shall be
applied to the oldest outstanding account first, unless the customer (otherwise
than as a result of any action, suggestion or inducement by WaterPro or the
Buyers) specifies the application of such payment to a different account. The
Sellers shall have the right to review such demand and supporting documents. If
the Sellers dispute the Buyers' demand, the Sellers shall give written notice of
such dispute to the Buyers not later than fifteen (15) days after receiving such
demand, setting forth in reasonable detail the reasons for the dispute. If the
Sellers give no such notice within such fifteen-day period, the Buyers' demand
shall be deemed correct and binding upon the parties with no need for further
action on the part of any party. If the Sellers do give written notice of
dispute to the Buyers within such fifteen-day period in accordance with the
foregoing, the Sellers and the Buyers shall endeavor in good faith to reach
agreement as to Buyers' demand within ten (10) days after the Buyers' receipt of
the Sellers' notice of dispute. If the parties are unable to reach agreement
within such ten-day period, the matter will be submitted by the parties to the
Neutral Accountants, which firm will determine the amount of the payment, if
any, to be made by the Sellers to the Buyers with respect to uncollected
Accounts Receivable in accordance with the provisions of this Agreement. Such
determination by the Neutral Accountants shall be final and binding upon the
Buyers and the Sellers. The expense of retaining the Neutral Accountants for
such purpose shall be borne 50% by the Buyers and 50% by the Sellers. Any such
payment by the Sellers to the Buyers shall be made from the escrow account held
pursuant to the Escrow Agreement, and, in the event of such a payment, the
parties shall execute and deliver a joint instruction to the Escrow Agent not
later than five (5) days following final determination of the payment to be made
by the Sellers in accordance with this section, instructing the Escrow Agent to
make such payment to the Buyers. In the event of such a payment, at the request
of the Sellers, any uncollected Accounts Receivable which have given rise to
such payment, together with any proceeds from any subsequent complete or partial
collection thereof, shall be assigned and transferred to the Sellers. In
addition, any amount collected or otherwise received after the Closing with
respect to any account receivable of WaterPro which was written off prior to the
Closing (and, accordingly, was not reflected on the Closing Balance Sheet) shall
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be for the account of the Sellers and such amounts shall be promptly paid to the
Sellers.
9.9 Listing of Customer Orders. Not later than ten (10) days after the
date of this Agreement, the Sellers shall cause WaterPro to deliver to the
Buyers a list of all open customer and vendor orders involving future payments
of more than $100,000.
9.10 Environmental Audit. Upon reasonable prior notice, the Sellers
shall grant access to the Buyers prior to the Closing Date to real property
owned by WaterPro for the purpose of conducting a Phase I environmental
assessment, which assessment shall be done at the Buyers' election and at their
sole cost.
10. Pre-Acquisition Notification. The parties hereto recognize that the
transaction contemplated hereby is subject to the pre-merger notification
requirements of the H-S-R Act, and each party agrees to file a properly prepared
notification form with respect to this transaction under such Act, requesting
early termination of the waiting period thereunder, as soon as possible, and, in
connection therewith, the Sellers and the Buyers each hereby covenant and agree
to use best efforts to obtain and preserve the termination of the waiting period
under said Act. The Sellers agree to reimburse the Buyers for one-half ($22,500)
of the H-S-R Act filing fee paid by the Buyers.
11. Entire Agreement; Assignability. This Agreement, together with the schedules
and exhibits hereto, constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein. This Agreement
may not be assigned by either of the parties hereto without the prior written
consent of the other party hereto.
12. Injunctive Relief. The parties agree that their respective remedies at law
for any breach or threatened breach of the provisions of this Agreement will be
inadequate, and that each party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, including without
30
limitation the sale by the Sellers and purchase by the Buyers of the Purchased
Stock.
13. Amendment. This Agreement may be amended by the parties hereto at any
time, but only by an instrument in writing duly executed and delivered on
behalf of each of the parties hereto.
14. Interpretations; Headings. Where reference is made herein to the knowledge
of the Sellers or to Sellers' knowledge, or words of similar import, such
reference shall mean the actual knowledge of the present officers of the
Sellers. Where reference is made herein to the term "material" with respect to
WaterPro or the Buyers, such term shall mean material in relation to the
financial condition or business of WaterPro or the Buyer (as the case may be)
taken as a whole. Section headings are not to be considered part of this
Agreement, are included solely for convenience and are not intended to be full
or accurate descriptions of the contents thereof. References to Sections are to
portions of this Agreement unless the context requires otherwise.
15. Exhibits. The Exhibits and Schedules attached to and referred to in
this Agreement are an integral part of this Agreement.
16. Successors and Assigns. All of the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective transferees, successors and assigns. The parties acknowledge
and agree that there are no third party beneficiaries of this Agreement or of
any other agreement between the parties contemplated hereby.
17. Notices, etc. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered (by hand or courier service) or mailed, first-class postage prepaid,
addressed as follows:
if to the Sellers:
Eastern Enterprises
9 Riverside Road
Weston, MA 02193
Attn: Chief Executive Officer
with a copy to: General Counsel
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if to the Buyers:
Edmundson International, Inc.
Consolidated Electrical Distributors, Inc.
31356 Via Colinas
Westlake Village, CA 91362-3915
Attn: Chairman
with a copy to: Bernard E. Lyons, Esq.
Attorney at Law
1516 Pontius Avenue
Los Angeles, CA 90025
or to such other address of a party of which such party has given notice to the
other parties pursuant to this Section 17.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws (other than those with respect to choice of law) of The
Commonwealth of Massachusetts. Subject to Section 22, each party hereto agrees
that all claims in any action or proceeding arising out of or related to this
Agreement may be heard and determined in any Massachusetts state court or
federal court sitting in The Commonwealth of Massachusetts.
19. Severability. The provisions of this Agreement are severable, and in
the event that any one or more provisions are deemed illegal or unenforceable,
the remaining provisions shall remain in full force and effect.
20. Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
21. Obligations Joint and Several. All obligations and liabilities of the
Sellers hereunder and under the Other Agreements are joint and several; and
all obligations and liabilities of the Buyers hereunder and under the Other
Agreements are joint and several.
22. Arbitration. Except as set forth in Section 1.4(d) and Section 9.8 with
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respect to matters to be resolved by the Neutral Accountants, if a dispute
arises relating to this Agreement, it will be decided finally by three
arbitrators in an arbitration proceeding conforming to the Commercial
Arbitration Rules of the American Arbitration Association. Said arbitrators
shall be appointed as follows: one by the Sellers, one by the Buyers and the
third by said two arbitrators, or, if they cannot agree, then the third
arbitrator shall be appointed by the American Arbitration Association. Said
arbitration shall take place in Minneapolis, Minnesota, and the decision of a
majority of said arbitrators shall be binding and final upon the parties, and
their decision shall be enforceable as a judgment in a court of competent
jurisdiction. If agreed to by the parties, the American Arbitration Association
shall mediate the dispute between the parties prior to or at any time during
arbitration. The cost of such arbitration or mediation, or arbitration and
mediation, shall be borne 50% by the Buyers and 50% by the Sellers, except that
each party shall pay the fees and disbursements of its attorneys and witnesses.
23. Reference is hereby made to the declaration of trust establishing Eastern
Enterprises dated July 18, 1929, as amended, a copy of which is on file in the
office of the Secretary of The Commonwealth of Massachusetts. The name "Eastern
Enterprises" refers to the trustees under said declaration as trustees and not
personally; and no trustee, shareholder, officer or agent of Eastern Enterprises
shall be held to any personal liability in connection with the affairs of said
Eastern Enterprises, but the trust estate only is liable.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EASTERN ENTERPRISES
By: /S/ J. Atwood Ives
------------------------------------
Chairman and Chief Executive Officer
WATER PRODUCTS GROUP INCORPORATED
By: /S/ Walter J. Flaherty
-----------------------------------
Vice President
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EDMUNDSON INTERNATIONAL, INC.
By: /S/ Keith W. Colburn
----------------------------------
Chairman of the Board
CONSOLIDATED ELECTRICAL DISTRIBUTORS, INC.
By: /S/ Keith W. Colburn
----------------------------------
Chairman of the Board
34
List of omitted Schedules and other attachments:
- -----------------------------------------------
Exhibit A--Form of Escrow Agreement Exhibit B--Form of Opinion of L.
William Law, Jr. Exhibit C--Form of Opinion of Bernard E. Lyons
Schedule 3.6--Financial Statements of WaterPro Schedule 3.8--List of
certain tax matters Schedule 3.9--List of certain material contracts
Schedule 3.10--List of employee benefit plans Schedule 3.11--List of
certain intellectual property matters Schedule 3.12--List of owned and
leased real property Schedule 3.14--List of certain litigation matters
Schedule 3.17--List of certain environmental matters Schedule
3.19--List of insurance coverages Schedule 6.6--List of certain
guaranties
Eastern Enterprises hereby agrees to furnish supplementally to the Commission a
copy of any such omitted schedule or other attachment upon request.
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