SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended September 30, 1999 Commission File No. 0-29812
BERKSHIRE ENERGY RESOURCES
Massachusetts 04-3408946
115 Cheshire Road, Pittsfield, Massachusetts 01201-1803
Registrant's telephone number, including Area Code 413:442-1511
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
At September 30, 1999, the Registrant had issued and outstanding 2,519,170
shares of Common Stock, no par value.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS Unaudited
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
09/30/99 09/30/98
-------- --------
<S> <C> <C>
Operating Revenues $ 4,775 $ 4,837
Cost of Gas Sold 1,883 1,821
------- -------
Operating Margin 2,892 3,016
------- -------
Other Operating Expenses 3,205 3,350
Depreciation 546 415
Other Taxes 285 215
------- -------
Total 4,036 3,980
------- -------
Operating Loss (1,144) (964)
Other Income - Net 599 608
------- -------
Operating Loss and Other Income (545) (356)
Interest Expense 1,066 1,078
------- -------
Pre-Tax Loss (1,611) (1,434)
Income Tax Benefit (638) (558)
------- -------
NET LOSS (973) (876)
Retained Earnings at Beginning of Period 9,300 8,911
------- -------
Total 8,327 8,035
------- -------
Dividends Declared:
Preferred Stock 4 4
Common Stock 743 682
------- -------
Total Dividends 747 686
------- -------
Retained Earnings at End of Period $ 7,580 $ 7,349
======= =======
Loss Attributable to Common Shares $ (977) $ (880)
======= =======
Average Common Shares Outstanding 2,519.2 2,337.9
------- -------
Basic and Diluted Loss
Per Common Share $ (0.39) $ (0.38)
======= =======
</TABLE>
See Independent Accountants' Review Report and Notes to Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS Unaudited
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Twelve Months Ended
--------------------
09/30/99 09/30/98
-------- --------
<S> <C> <C>
Operating Revenues $50,671 $54,386
Cost of Gas Sold 22,547 26,591
------- -------
Operating Margin 28,124 27,795
------- -------
Other Operating Expenses 14,156 14,390
Depreciation 4,568 4,384
Other Taxes 2,117 1,881
------- -------
Total 20,841 20,655
------- -------
Operating Income 7,283 7,140
Other Income - Net 2,102 1,618
------- -------
Operating and Other Income 9,385 8,758
Interest Expense 4,370 4,369
------- -------
Pre-Tax Income 5,015 4,389
Income Taxes 1,880 1,636
------- -------
NET INCOME 3,135 2,753
Retained Earnings at Beginning of Period 7,349 7,261
------- -------
Total 10,484 10,014
------- -------
Dividends Declared:
Preferred Stock 14 15
Common Stock 2,890 2,650
------- -------
Total Dividends 2,904 2,665
------- -------
Retained Earnings at End of Period $ 7,580 $ 7,349
======= =======
Earnings Available for Common Shares $ 3,121 $ 2,738
======= =======
Average Common Shares Outstanding 2,449.8 2,290.1
------- -------
Basic and Diluted Earnings
Per Common Share $ 1.27 $ 1.20
======= =======
</TABLE>
See Independent Accountants' Review Report and Notes to Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
------------- --------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS:
Property, Plant and Equipment - at original cost:
Gas-related activities $111,768 $110,405
Unregulated activities 14,084 14,007
-------- --------
125,852 124,412
Less: Accumulated Depreciation and amortization:
Gas-related activities 34,311 34,075
Unregulated activities 7,029 6,973
-------- --------
41,340 41,048
Property, Plant and Equipment - Net:
Gas-related activities 77,457 76,330
Unregulated activities 7,055 7,034
-------- --------
84,512 83,364
Current Assets:
Cash 44 117
Accounts Receivable:
Gas-related activities (less allowance for
doubtful accounts Sept.1999-$1,043;June 1999-$1,000) 4,154 6,498
Unregulated activities (less allowance for
doubtful accounts Sept. 1999-$15;June 1999-$19) 341 654
Inventories:
Gas-related activities (at cost) 5,424 4,137
Unregulated activities (at the lower
of average cost or market) 294 164
Recoverable Gas Costs 1,844 188
Prepayments and Other 839 1,238
Prepaid Taxes 1,671 397
-------- --------
Total Current Assets 14,611 13,393
-------- --------
Deferred Debits:
Unamortized Debt Expense - Net 2,124 2,150
Capital Stock Expense - Net 220 232
Environmental Cleanup Costs 827 718
Other 4,951 2,293
-------- --------
Total Deferred Debits 8,122 5,393
-------- --------
Recoverable Environmental Cleanup
Costs 3,335 3,335
-------- --------
TOTAL ASSETS $110,580 $105,485
======== ========
</TABLE>
See Independent Accountants' Review Report and Notes to Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
------------- --------
(Unaudited) (Audited)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Common Shareholders' Equity:
Common Shares $ 28,725 $ 28,596
Retained Earnings 7,580 9,300
-------- --------
Total Common Shareholders' Equity 36,305 37,896
-------- --------
Redeemable Cumulative Preferred Stock 310 312
-------- --------
Long-Term Debt 40,000 40,000
-------- --------
Current Liabilities:
Notes Payable to Banks 13,736 7,100
Accounts Payable 2,484 2,636
Other Current Liabilities 2,307 2,628
-------- --------
Total Current Liabilities 18,527 12,364
-------- --------
Other Liabilities 1,711 1,538
-------- --------
Unamortized Investment Tax Credit 1,053 1,070
-------- --------
Deferred Income Taxes 9,339 8,970
-------- --------
Reserve for Recoverable Environmental
Cleanup Costs 3,335 3,335
-------- --------
TOTAL CAPITALIZATION AND LIABILITIES $110,580 $105,485
======== ========
</TABLE>
See Independent Accountants' Review Report and Notes to Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
09/30/99 09/30/98
-------- --------
<S> <C> <C>
Cash flows from Operating Activities:
Net Loss $ (973) $ (876)
Adjustments to Reconcile Net Loss to
Net Cash Used in Operating Activities:
Depreciation and Amortization 730 577
Provision for Losses on Accounts Receivable 99 99
Recoverable Gas Costs (1,656) (1,741)
Deferred Income Taxes 369 763
Changes in Assets and Liabilities
Which Provided (Used) Cash:
Accounts Receivable 2,558 2,467
Inventories (1,417) (959)
Accounts Payable (152) (300)
Taxes Accrued (1,274) (1,569)
Other (2,517) (537)
------- -------
Net Cash Used in Operating Activities (4,233) (2,076)
------- -------
Cash Flows Used in Investing Activities
Construction Expenditures (1,858) (1,814)
------- -------
Cash Flows Provided by (Used in)
Financing Activities:
Dividends Paid (747) (686)
Proceeds from Notes Payable 6,636 3,750
Proceeds from Other Stock Transactions - Net 129 782
------- -------
Net Cash Provided by Financing Activities 6,018 3,846
------- -------
Net Decrease in Cash (73) (44)
Cash at Beginning of Period 117 160
------- -------
Cash at End of Period $ 44 $ 116
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest(net of amount capitalized) $ 1,423 $ 1,422
======= =======
Income Taxes(net of refund) $ 173 $ 181
======= =======
</TABLE>
See Independent Accountants' Review Report and Notes to Financial Statements.
Berkshire Energy Resources
Notes to Consolidated Financial Statements
September 30,1999
- ----------------------------------------------------------------------------
(Dollars in Thousands Except Share Amounts)
NOTES:
OTHER FINANCIAL INFORMATION:
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete consolidated financial statements. The
Company has reclassified certain amounts for prior years to conform with
the fiscal year 2000 presentation. All adjustments, which in the opinion of
management are necessary for a fair presentation of the operations for the
interim periods presented, have been made. These adjustments are of a
normal recurring nature. The results of operations for such interim periods
are not necessarily indicative of results of operations for a full year.
These consolidated financial statements should be read in conjunction with
the summary of accounting policies and notes to financial statements
included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1999.
RISK MANAGEMENT POLICY
The Company is investigating the possibility of purchasing a vehicle
to insulate itself from warmer than normal weather during the fiscal year
2000 winter period.
CONTINGENCIES:
ENVIRONMENTAL:
Like other companies in the natural gas industry, the Company is a
party to governmental actions associated with former gas manufacturing
sites. Management estimates that expenditures to remediate and monitor
known environmental sites will range from $3,355 to $12,673. In accordance
with SFAS No. 5, the Company has recorded the most likely cost of $3,355.
The Company's unamortized cost at September 30, 1999 was $827 and should be
recovered over a seven-year period through the Local Distribution
Adjustment Clause (LDAC).
SEGMENT INFORMATION
The Company operates two segments: regulated activities and
unregulated diversified businesses. Gas-related activities (regulated)
consist primarily of natural gas distribution to residential, commercial and
industrial customers, as well as the sale and leasing of gas-burning
equipment. Diversified businesses (unregulated) consist primarily of the
distribution of liquefied petroleum gas, the commodity sale of energy to
commercial and industrial customers and providing on-premise HVAC (Heating
Ventilation and Air Conditioning) and plumbing services in commercial,
industrial and residential markets.
Information about the Company's operations, by business segments is
presented below. Because of the acquisition dates, unregulated activities
do not include any revenues from the most recent subsidiary acquisitions.
(See Results of Operations Twelve Months Ended September 30, 1999 -
Organizational Changes)
<TABLE>
<CAPTION>
For the Three Months Ended 9/30/99
-----------------------------------
Regulated Unregulated
Activities Activities Total
---------- ----------- -----
<S> <C> <C> <C>
Net Sales 4,139 636 4,775
Operating Margin 2,556 336 2,892
Operating Loss (986) (158) (1,144)
Net Loss (882) (91) (973)
<CAPTION>
For the Three Months Ended 9/30/98
-----------------------------------
Regulated Unregulated
Activities Activities Total
---------- ----------- -----
<S> <C> <C> <C>
Net Sales 4,247 590 4,837
Operating Margin 2,688 328 3,016
Operating Loss (788) (176) (964)
Net Loss (793) (83) (876)
<CAPTION>
For the Twelve Months Ended 9/30/99
-----------------------------------
Regulated Unregulated
Activities Activities Total
---------- ----------- -----
<S> <C> <C> <C>
Net Sales 45,663 5,008 50,671
Operating Margin 25,395 2,729 28,124
Operating Income 6,867 416 7,283
Net Income 2,893 242 3,135
<CAPTION>
For the Twelve Months Ended 9/30/98
-----------------------------------
Regulated Unregulated
Activities Activities Total
---------- ----------- -----
<S> <C> <C> <C>
Net Sales 49,626 4,760 54,386
Operating Margin 25,486 2,309 27,795
Operating Income 6,831 309 7,140
Net Income 2,481 272 2,753
</TABLE>
Subsequent Event:
On November 9, 1999, the Company signed a definitive merger agreement
with Energy East Corporation under which the Company will become a wholly-
owned subsidiary of Energy East. Energy East will acquire all of the
common shares of Berkshire Energy Resources for $38.00 per share in cash.
The transaction has an equity market value of approximately $96 million,
based on approximately 2,513,905 million Berkshire common shares
outstanding. Energy East will also assume approximately $40,000,000 of
Berkshire preferred stock and long-term debt. The transaction will be
accounted for using the purchase method of accounting.
The merger is subject to, among other things, the approvals of
Berkshire shareholders, and the Securities and Exchange Commission (SEC).
The Company expects the transaction to close by the end of the second
quarter of 2000.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ----------------------------------------------------------------------------
Results of Operations - First Quarter Ended September 30, 1999 versus First
Quarter Ended September 30, 1998
- ----------------------------------------------------------------------------
Consolidated net loss was $973,000 for the three months ended
September 30, 1999 compared to a loss of $876,000 for the same period a
year earlier. Operating Margin for both natural gas and propane decreased
$124,000 or 4.1 % as compared to 1998.
Operating Margin on sales of natural gas decreased $132,000 or 4.9%
as compared to 1998. The decrease was due to the migration of customers
from firm sales to transportation and interruptible rates. Operating
Margin (Operating Margin or Gross Profit = Operating Revenues net of Cost
of Gas Sold) is primarily affected by the level of firm gas sold and
transported. Interruptible gas sold and transported has minimal or no
effect on Operating Margin since those margins are primarily flowed back to
the firm customers through the Cost of Gas Adjustment Clause (CGAC) and
LDAC. The Company's sales are affected by weather as the majority of its
firm customers use natural gas for heating. Changes in the cost of natural
gas do not affect Operating Margin as these changes are recovered or
returned to customers through the CGAC.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
3 Month Firm MCF Sold & Transported 664,000 703,000
3 Month Consolidated Operating Margin $2,892,000 $3,016,000
</TABLE>
Other Operating Expenses decreased $145,000 or 4.3% as compared with
1998, primarily due to lower pension and employee benefit costs.
Depreciation Expense increased $131,000 due to an increase in the
amount of depreciable assets.
Other Income - Net decreased $9,000 or 1.5% due to a charge off for
the retirement of used rental equipment, partially offset by increased
jobbing income.
Other Taxes increased $70,000, primarily due to increased personal
property taxes reflecting growth in plant assets and higher tax rates.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ----------------------------------------------------------------------------
Results of Operations - Twelve Months Ended September 30, 1999 versus
Twelve Months Ended September 30, 1998
- ----------------------------------------------------------------------------
Earnings available for Common Stock were $3,121,000 for the twelve
months ended September 30, 1999 as compared to $2,738,000 for 1998.
Operating Margin increased $329,000 or 1.1% from 1998. The increase
is primarily due to growth in the propane customer base in conjunction with
the acquisition of a local propane dealer.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
12 Month Firm MCF Sold & Transported 6,153,000 6,105,000
12 Month Consolidated Operating Margin $28,124,000 $27,795,000
</TABLE>
Other Operating Expenses decreased by $234,000 as a result of lower
bad debts due to a change in the recovery mechanism for the portion of bad
debt expense related to gas costs, and a reduction of pension costs as a
result of very positive performance of various investment vehicles in which
fund assets are invested.
Depreciation increased $184,000 or 4.2% due to additions to plant
assets.
Other Taxes increased $236,000 or 12.5% due to increases in plant
property and municipal tax rates and payroll taxes related to increased
payroll.
Other Income - Net increased $484,000 or 2.9% primarily representing
proceeds recognized from weather insurance. The Company purchased
insurance to protect against warmer than normal weather for the winter
period.
Income Taxes increased $244,000 due to an increase in earnings.
Common Share Dividends increased by $240,000 or 9.1% due to
additional shares outstanding through the Company's Dividend Reinvestment
and Optional Cash Purchase Plan (DRIP) over the twelve-month period, and to
a lesser extent, an increase in the quarterly dividend to $.295 per share
from $.29 per share effective the fourth quarter of fiscal year 1999.
LIQUIDITY AND CAPITAL RESOURCES - SEPTEMBER 30, 1999
Cash flows used in operating activities have increased by $2,157,000
from the three months ended September 30, 1998, due to an increase in
accounts receivable and less cash from recoverable gas costs. Capital
requirements have been primarily funded by internal sources. The issuance
of long-term financing is dependent on management's evaluation of needs,
financial market conditions and other factors. Short-term financing is
used to meet seasonal cash requirements.
The Company initially finances construction expenditures and other
funding needs primarily with internal sources, short-term bank borrowings
and the reinvestment of dividends. The Company continually evaluates its
short-term borrowing position, and based on prevailing interest rates,
market conditions, and other considerations, makes determinations regarding
conversion of short-term borrowings to long-term debt or equity.
The Company added $1,858,000 to Property, Plant and Equipment during
the three months ended September 30, 1999. These construction expenditures
primarily represent investments in new and replacement mains and services.
Organizational Changes:
On September 10, 1999, Berkshire Energy Marketing, Inc. a wholly-
owned subsidiary of Berkshire Energy Resources changed its name to
Berkshire Service Solutions, Inc.
Berkshire Service Solutions is engaged in the commodity sale of
energy to commercial and industrial customers and provides on-premise HVAC
and plumbing services in commercial, industrial and residential markets.
This unregulated subsidiary on September 30, 1999, purchased the assets of
Yankee Plumbing & Heating, Inc. of Pittsfield, Massachusetts, a plumbing
and heating contractor. The firm is engaged in the sale and installation
of heating systems and service and maintenance work. Also, on October 14,
1999, the Company purchased the assets of Shedd Inc., also based in
Pittsfield. Services provided by Shedd include the sale, installation and
maintenance of boilers, furnaces, heat pumps and air conditioning equipment
and duct work. They also provide kitchen, bath and other installations,
equipment and appliances as well as sprinkler systems for industrial and
commercial businesses.
The acquisition of these companies demonstrates the Company's
commitment to expand opportunities in the competitive marketplace.
The capital structure of the Company at September 30, 1999 was 47.4%
Common Equity, .4% Preferred Stock and 52.2% Long-Term Debt.
Funds for environmental clean-up costs are initially financed through
short-term borrowings and all such costs will be recovered over a seven-
year period under a ruling issued by the Massachusetts Department of
Telecommunications and Energy (DTE).
Year 2000 Compliance
The Company has evaluated the impact of the Year 2000 on all mission
critical applications and significant third party suppliers. Necessary
remediation and system replacements have been substantially completed and
critical applications are considered Year 2000 ready.
During fiscal 1999, the Company completed the replacement of its core
business information systems including billing, customer service,
accounting, payroll and inventory. This system was vendor-certified Year
2000 compliant.
Other areas of the business not related to its core business
information systems have been tested and remediated. These areas include
meter reading, dispatch, desktop PC's, administrative, and telephone
systems and are now Year 2000 ready.
Due to the complexity of the Year 2000 problem and the reliance on
certain critical vendors and suppliers, there can be no guarantees that the
Company will achieve Year 2000 compliance or that critical vendors and
suppliers will achieve Year 2000 compliance. A vendor management program
has been completed as part of the Company's effort to obtain reasonable
assurances from key vendors that there will not be any interruptions in the
supply of goods and services as a result of the Year 2000 issues. The
Company is preparing strategies to address potential failures of
significant vendors in its contingency plans.
The Company has drafted a business contingency plan addressing Year
2000 risks associated with its internal systems, supplier or communications
failure. The plan includes continuation strategies for critical business
processes. The Company will continue to review and develop the contingency
plan through the second quarter of fiscal 2000.
The total cost to the Company of Year 2000 Compliance activities has
not been and is not anticipated to be material to its financial position or
results of operations in any given year. Management has budgeted fifty-
thousand dollars for fiscal year 2000 to address Year 2000 related
expenditures. These costs and the date on which the Company plans to
complete Year 2000 modification and testing processes are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of
certain resources, third party modification plans and other factors.
However, there can be no guarantee that these estimates will be achieved
and actual results could differ from those plans.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
This Quarterly Report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Actual
results could differ materially from those contemplated by such statements.
Such statements reflect management's current views, are based on many
assumptions and are subject to risks and uncertainties.
Certain important factors which could cause such results to differ
include risks associated with the Company's maintaining contracts with
specific customers, government regulation, the increasingly competitive
nature of the markets in which the Company is engaged, and dependence on
key personnel. These factors are not intended to represent a complete list
of the general or specific risks that may affect the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
No developments during the quarter.
Item 2. Changes in Securities
---------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On November 4, 1999, the Annual Meeting of the shareholders of
Berkshire Energy Resources was held at the Crowne Plaza Hotel,
Pittsfield, Massachusetts at 10:00 a.m.
Proxies for said annual meeting were solicited pursuant to
Regulation 14A of the Securities Exchange Act of 1934. There was
no solicitation in opposition to Management's nominees, as listed
in the Proxy statement, for the election of Trustees. All
nominees were duly elected.
Item 5. Other Information
-----------------
Not Applicable
Item 6. Exhibits and Reports on Form 8 - K
----------------------------------
(a) List of Exhibits
Exhibit 27 - Financial Data Schedule
Exhibit 10(u) Asset Purchase Agreement between Berkshire Service
Solutions, Inc., and Yankee Plumbing & Heating Co., Inc., dated
September 30, 1999. Filed as part of Exhibit 10(u) to Berkshire
Energy Resources form 10-Q for the fiscal quarter ended September
30, 1999, File No. 0-1857-3, and filed herewith.
Exhibit 10(v) Asset Purchase Agreement between Berkshire Service
Solutions, Inc., and Shedd, Inc., dated October 14, 1999. Filed
as part of Exhibit 10(v) to Berkshire Energy Resources form 10-Q
for the fiscal quarter ended September 30, 1999, File No. 0-1857-3,
and filed herewith.
(b) Reports on Form 8-K:
A report on Form 8-K was filed on November 10, 1999, to
report the occurrence of an event covered by Item 5 by the
Company regarding a definitive merger agreement with Energy
East Corporation on November 9, 1999.
The consolidated balance sheet as of September 30, 1999, the related
consolidated statements of operations and retained earnings for the three
month and twelve month periods ended September 30, 1999 and 1998, and the
consolidated statements of cash flows for the three month periods ended
September 30, 1999 and 1998 have been reviewed, prior to filing, by the
Registrant's independent public accountants, Deloitte & Touche LLP, whose
report covering their review of the consolidated financial statements is
presented below.
Deloitte &
Touche LLP
-------------------------------------------------------
City Place Telephone:(860) 280-3000
185 Asylum Street Facsimile:(860) 280-3051
Hartford, Connecticut 06103-3402
INDEPENDENT ACCOUNTANTS' REPORT
Berkshire Energy Resources:
We have reviewed the accompanying balance sheet of Berkshire Energy
Resources (formerly The Berkshire Gas Company)(the "Company") as of
September 30, 1999, the related consolidated statements of operations and
retained earnings for the three month and twelve month periods ended
September 30, 1999 and 1998, and the consolidated statements of cash flows
for the three month periods ended September 30, 1999 and 1998. These
consolidated financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Berkshire Energy Resources as
of June 30, 1999, and the related consolidated statements of income,
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated August 12, 1999, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated balance
sheet as of June 30, 1999 is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.
/s/ Deloitte & Touche LLP
November 4, 1999
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 thereunto duly authorized.
Berkshire Energy Resources
Registrant
/s/ Michael J. Marrone
------------------------------------
Michael J. Marrone
Vice President, Treasurer &
Chief Financial Officer
Dated: November 15, 1999
Exhibit 10 (u)
ASSET PURCHASE AGREEMENT
------------------------
AGREEMENT dated September 30, 1999 among BERKSHIRE SERVICE SOLUTIONS,
INC., a Massachusetts corporation principal place of business in
Pittsfield, Massachusetts ("BSS"), YANKEE PLUMBING & HEATING CO., INC., a
Massachusetts corporation with a principal place of business in Pittsfield,
Massachusetts ("Yankee"), and KEVIN O. HARRINGTON of Pittsfield,
Massachusetts ("Harrington" or "Stockholder").
PRELIMINARY STATEMENT
---------------------
BSS is a wholly owned subsidiary of Berkshire Energy Resources, a
Massachusetts Business Trust, with a principal place of business in
Pittsfield, Massachusetts ("BER").
Yankee is engaged in the plumbing, heating and mechanical contracting
business in Berkshire County, Massachusetts with a place of business at 381
Tyler Street, Pittsfield, Massachusetts (the "Yankee Business").
Yankee and Harrington desire to sell to BSS, and BSS desires to
purchase from Yankee and Harrington, substantially all of the assets of the
Yankee Business and Harrington's goodwill, on the terms and subject to the
conditions set forth herein.
AGREEMENT
---------
IT IS THEREFORE AGREED AS FOLLOWS:
1. SALE OF ASSETS. At the Closing (as defined in Section 6),
Yankee shall sell to BSS, and BSS shall purchase from Yankee, for the
Purchase Price (defined in Section 4) the following assets of Yankee (the
"Purchased Assets"):
(a) all machinery and equipment ("Equipment"), including, without
limitation, the Equipment listed on Schedule 1 (a) attached hereto;
(b) all accounts receivable ("Accounts Receivable") listed on
Schedule 1 (b) attached hereto;
(c) all inventory ("Inventory") listed on Schedule 1 (c) attached
hereto;
(d) all customer lists of any type or description;
(e) all rights to the telephone numbers assigned to Yankee;
(f) the business name "Yankee";
(g) all of Yankee's contract rights under all contracts entered
into in connection with the Yankee Business (the "Yankee
Contracts") to the extent such rights are transferable;
(h) all customer work-in-process ("Work-in-Process") listed on
Schedule 1 (h) attached hereto;
(i) all vehicles utilized in the operation of the Yankee Business
listed on Schedule 1 (i) attached hereto;
(j) Corporate Goodwill; and,
(k) all other assets utilized in the operation of the Yankee
Business, excluding the Excluded Assets (defined in
Section 2).
2. EXCLUDED ASSETS. The Purchased Assets shall not include (a)
cash and cash equivalents such as prepaid insurance and (b)
those assets listed on Schedule 2, which includes one (1) 1999 Ford
Explorer, attached hereto (the "Excluded Assets").
3. INDEMNIFICATION OF LIABILITIES.
3.1 Yankee Indemnification. BSS shall not assume, and shall
have no obligation to pay, any liabilities or obligations of Yankee
or the Stockholder. Yankee and Stockholder shall execute the
Indemnification and Hold Harmless Agreement (the "Yankee
Indemnification") set forth on Exhibit 3.1, attached hereto.
3.2 Yankee Accounts Payable; Vehicle Loans. At the Closing,
Yankee shall cause to be paid in full the trade payables and vehicle
loans listed at Schedule 3.2 attached hereto and shall deliver to BSS
the motor vehicle titles assigned over to BSS immediately upon their
receipt from the secured lender. Yankee agrees to allow BSS to
utilize the vehicles subsequent to the Closing Date at no cost and
shall continue all insurance coverage at present levels. BSS shall
pay the cost of insurance premiums attributable to the post-closing
period. Provided Yankee has otherwise performed pursuant to this
Paragraph 3.2, BSS shall indemnify and hold Yankee harmless against
any uninsured claims arising out of BSS's use of the vehicles
subsequent to the Closing Date.
3.3 Yankee's Contracts. At the Closing, Yankee shall
execute the assignment of its outstanding contracts (the "Contract
Assignment") set forth at Exhibit 3.3 attached hereto.
4. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE.
4.1 Purchase Price. The purchase price for the Purchased
Assets (the "Purchase Price") shall be $228,700.00 (subject to
adjustment as set forth in Section 4.3) and
shall be paid at the Closing in cash, by certified or official bank
check payable to the order of Yankee or by wire transfer to Yankee of
immediately available funds to accounts designated by Yankee. The
Purchase Price is calculated as follows:
4.1.1 $200,000.00 less the reduction in inventory
($56,900.00 - $39,100.00) plus the 1998 accounts payable
balance ($46,500.00).
4.2 Purchase Price Allocation. The allocation of the Purchase
Price (the "Purchase Price Allocation") shall be as follows, subject
to adjustment as set forth in Section 4.3:
4.3.1.1 Adjustments:
--------------------
Motor Vehicles $ 85,000.00
---------
Equipment $ 36,400.00
---------
Accounts Receivable $ 48,200.00+$6,800.00=$55,000.00
------------------------------
Inventory $ 39,100.00
---------
Goodwill $ 20,000.00
---------
Purchase Price $228,700.00+$6,800.00=$235,500.00
--------------------------------
To the extent permitted by law, the parties shall not take any position on
any income tax returns or before any governmental agency charged with the
collection of any tax, or in any judicial proceeding relating thereto, that
shall be inconsistent with the allocation of the Purchase Price set forth
in this Section 4.2.
4.3 Adjustment of the Purchase Price and Purchase Price
Allocation.
4.3.1 The Purchase Price is predicated in part on the
value of Accounts Receivable, Equipment, Inventory and Work-in-
Process. At Closing, the following adjustment shall be made to
the Purchase Price:
4.3.1.1 As of the Closing Date (as defined in
Section 6), if the good and collectible Accounts
Receivable shall exceed $48,200.00, the amount of such
excess of $6,800 shall be added to the Purchase Price.
If the Accounts Receivable shall be less than $48,200.00,
the amount of such deficit shall be deducted from the
Purchase Price. For purposes of this Section 4.3.1.1,
"good and collectible" Accounts Receivable shall mean
accounts which shall be paid by the third party obligor
within six (6) months of the Closing Date.
4.3.1.2 Based upon the adjustment to the Purchase
Price made pursuant to this Section 4.3.1.1, the Purchase
Price Allocation shall be appropriately adjusted.
5. STOCKHOLDER GOODWILL. In addition to all other amounts payable
by BSS to Yankee, BSS shall pay Harrington, as consideration for his
personal goodwill the sum of $700,000.00 at the closing in cash, by
certified or official bank check payable to the order of Harrington or by
wire transfer to Harrington of immediately available funds to accounts
designated by Harrington.
6. CLOSING. The closing (the "Closing") of BSS's purchase of the
Purchased Assets and of Harrington's Goodwill shall take place on September
30, 1999 (the "Closing Date"), at 2:00 p.m. at the offices of Martin &
Oliveira, LLP, 100 North Street, Suite 301, Pittsfield, Massachusetts, or
at such other time and place as shall be mutually agreed upon by the
parties.
7. REPRESENTATIONS AND WARRANTIES BY YANKEE AND THE STOCKHOLDER.
Yankee and the Stockholder jointly and severally represent and warrant to
BSS as follows:
7.1. Organization. Yankee is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and is qualified to conduct its
business as it is presently conducted. Yankee has the corporate
power and is duly authorized to carry on its business where and as
now conducted and to own, lease, use and operate its properties as it
now does.
7.1.1 Stockholder represents that he conducts business
activities only through Yankee and that there are no other
affiliates or subsidiaries of Yankee.
7.1.2 The authorized equity securities of Yankee consist
of 5,000 shares no par common stock, of which 100 are issued
and outstanding (the "Shares"). Harrington is and will be on
the Closing Date the record and beneficial owner and holder of
the Shares, free and clear of all encumbrances.
7.2 Capacity. Yankee and the Stockholder have full authority
and capacity to enter into and to perform this Agreement in
accordance with its terms, and is not bound by or subject to any
contractual or other obligation that would be violated by the
execution or performance of this Agreement, and this Agreement is
valid and binding upon Yankee and the Stockholder in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditor's rights in general.
7.3 Financial Statements. Yankee has delivered to BSS
financial statements of Yankee for the fiscal years ended August 31,
1998 and August 31, 1999, prepared on a "compilation" basis by
Yankee's independent certified public accountants, including balance
sheet of Yankee as at such dates and statements of income and
retained earnings for the periods then ended, together with related
schedules (the "Yankee Financial Statements"). The Yankee Financial
Statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior
periods and fairly present the financial condition of Yankee as of
the respective dates thereof and the results of operations of Yankee
for the period then ended.
7.4 Absence of Certain Changes. Except as noted on the Yankee
Financial Statements or as set forth on Schedule 7.4 attached hereto,
from the date of the Yankee Financial Statements through the date
hereof, the business of Yankee has been operated in the ordinary
course and there has not been:
7.4.1 Any change in the assets, liabilities, business,
prospects, or condition (financial or otherwise) of Yankee
except changes in the ordinary course of business, none of
which shall have been materially adverse.
7.4.2 Any damage, destruction or loss (whether covered
by insurance or not) materially or adversely affecting the
business or properties of Yankee.
7.4.3 Any general salary increase made for the benefit
of the employees of Yankee or any specific increase in the
salary of any employee of Yankee.
7.4.4 Any unusual commitment or liability incurred, or
any unusual acquisitions or purchases made, by Yankee.
7.4.5 Any significant event or condition of any
character materially or adversely affecting the business or
prospects of Yankee.
7.5 Taxes. Yankee has filed all federal, state and local
income, employment and other tax returns required to be filed by it
on or before the dates on which such returns were due to be filed or
extensions to file such returns have been timely filed or granted and
have not expired. Except as set forth on Schedule 7.5 attached
hereto, Yankee has paid all taxes of any nature for which Yankee is
responsible, except for taxes which are not yet due and payable as of
the date hereof. The amounts established as provisions for taxes on
the Yankee Financial Statements are sufficient for the payment of all
accrued and unpaid federal, state and local income, employment and
other taxes of Yankee for all periods ending prior to August 31,
1999.Except as set forth on Schedule 7.5, (a) there are no claims
pending or threatened against Yankee for unpaid taxes, (b) there are
no outstanding waivers or agreements by Yankee for the extension of
the time for the assessment of any tax, (c) neither the Internal
Revenue Service nor any state agency, other than the Massachusetts
Department of Employment and Training, has conducted a tax audit or
examination of Yankee for the past three years, and (d) no
deficiencies in taxes or any other governmental charges have been
claimed, proposed or assessed against Yankee, and no facts exist or
have existed which would constitute a basis for assessment of
liability for any tax or other governmental charge which is not
reflected on the Yankee Financial Statements.
7.6 Title. Except as set forth on Schedule 7.6 attached
hereto, Yankee has, and as of the Closing shall be conveying to BSS,
good and marketable title to the Purchased Assets, free and clear of
all claims, liens or other encumbrances.
7.7 Personnel. Attached hereto as Schedule 7.7 is a true and
complete (a) list of all employees of Yankee which sets forth (i) the
full name, address and social security number of each employee, (ii)
each employee's date of hire, (iii) the method of payment (i.e.
hourly or salaried) and current rate of earnings for each employee
and (iv) any written agreement relating to such employee's employment
and (b) description of all employee benefit plans, programs or
arrangements, written or unwritten, to which Yankee is a party,
including, without limitation, any pension, profit sharing or other
retirement plans, any health and welfare benefit plans, and plans,
programs or arrangements for bonuses, vacation and other leaves,
severance and deferred compensation. Yankee has no collective
bargaining agreement with any of its employees.
7.8 Litigation; Etc. Except as set forth on Schedule 7.8
attached hereto, (a) there is no litigation, proceeding or
governmental investigation pending or, to the knowledge of Yankee or
the Stockholder, threatened, and there is no order, injunction or
decree outstanding against or relating to Yankee or the Stockholder,
the property, assets or business of Yankee or the Stockholder.
Neither Yankee nor the Stockholder is in violation of any applicable
law, regulation, ordinance, order, injunction or decree, or any other
requirement of any governmental body or court, relating to the
property or business of Yankee.
7.9 Leases, Contracts, Etc. Attached hereto as Schedule 7.9
are complete and accurate lists, descriptions and/or schedules of the
following:
7.9.1 With respect to the real property or personal
property leased by Yankee:
7.9.1.1 The location of such property;
7.9.1.2 The name of the landlord or lessor of each
such property which is leased, together with (a) the name
of the tenant or lessee, (b) the rental payable,
(c) the expiration date of existing leases and a
specification of all rights of renewal or purchase or
other rights existent upon expiration, and (d) a copy of
each existing lease.
7.9.2 All mortgages, pledges, deeds of trust, loan and
credit instruments, and agreements and similar instruments to
which Yankee is a party.
7.9.3To the extent not included in the foregoing, all
leases, purchase and sales orders, licenses, contracts,
agreements, commitments and understandings of any nature,
written or oral to which Yankee is a party in any capacity or
by which it is bound, and which cannot be terminated by Yankee
on less than 30 days' notice without liability or which involve
expenditure by Yankee of more than $10,000.00 (a "Contract").
With respect to each Contract :
7.9.3.1 Yankee is, and at all times since the
first day of the last completed fiscal year has been, in
full compliance with all applicable terms and
requirements of each Contract under which Yankee has or
had any obligation or liability or by which Yankee or any
of the assets owned or used by Yankee is or was bound.
7.9.3.2 No event has occurred or circumstances
exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or
breach of, or give Yankee the right to declare a default
or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or
modify, any Contract.
7.9.3.3 Yankee has not given to or received from
any other party, at any time since the first day of the
last completed fiscal year of Yankee, any notice or other
communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or
breach of, or default under, any Contract.
7.10 Accuracy of Representations. All statements
contained in any exhibit, certificate or other document
delivered by or on behalf of Yankee or Stockholder pursuant to
this Agreement or in connection with the transactions
contemplated hereby shall be deemed representations and
warranties hereunder by Yankee and Stockholder. No
representation or warranty by Yankee or Stockholder in this
Agreement or in any exhibit, certificate or other document
delivered or to be delivered by Yankee or Stockholder pursuant
to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue
statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained
therein not misleading.
7.11 Condition and Sufficiency of Assets. The Motor Vehicles
and Equipment of Yankee listed on Schedule 1 (a) and Schedule 1 (i)
are in good operating condition and repair, and is adequate for the
uses to which they are being put, and none of such Motor Vehicles and
Equipment are in need of maintenance or repairs except for ordinary,
routine maintenance and repairs that are not material in nature or
cost. Motor Vehicles and Equipment of Yankee are sufficient for the
continued conduct of Yankee's business after the Closing in
substantially the same manner as conducted prior to the Closing.
7.12 Accounts Receivable. All accounts receivable of Yankee
that are listed on Schedule 1 (b) and all unbilled Work-In-Progress
that is listed on Schedule 1 (h) as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent
valid obligations arising from services actually performed in the
ordinary course of business. Unless paid prior to the Closing Date,
the Accounts Receivable are or will be as of the Closing Date current
and collectible. Each of the Accounts Receivable either has been or
will be collected in full, without any set-off, within six (6) months
after the day on which it first becomes due and payable. There is no
contest, claim, or right of set-off, other than returns in the
ordinary course of business, under any contract with any obligor of
an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Stockholder agrees to reimburse BSS for any
accounts receivable not collected by BSS within six (6) months of the
Closing Date provided BSS assigns to Stockholder its contractual
right to collect said accounts.
7.13 Inventory. BSS acknowledges that it has inspected
Yankee's inventory and that Yankee makes no representations as to the
quantity or quality of its present inventory on hand.
7.14 No Undisclosed Liabilities. Yankee has no liabilities or
obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities
or obligations reflected or reserved against in the Yankee Financial
Statements. Yankee and Stockholder represent and warrant that they
shall promptly pay, as of the Closing, all liabilities of Yankee.
8. REPRESENTATIONS AND WARRANTIES BY BSS. BSS represents and
warrants to Yankee and Stockholder as follows:
8.1 Organization. BSS is a wholly owned subsidiary of BER,
which is a Massachusetts Business Trust, and is a Massachusetts
corporation duly organized, validly existing and in good standing
under the laws of Massachusetts and is qualified to conduct its
business as it is presently conducted. BSS has the requisite power
and is duly authorized to carry on its business where and as now
conducted and to own, lease, use and operate its properties as it now
does.
8.2 Capacity. BSS has full authority and capacity to enter
into and to perform this Agreement in accordance with its terms, and
is not bound by or subject to any contractual or other obligation
that would be violated by the execution or performance of this
Agreement, and this Agreement is valid and binding upon BSS in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditor's rights in
general.
8.3 Litigation; Etc. Except as set forth on Schedule 8.3
attached hereto, (a) there is no litigation, proceeding or
governmental investigation pending or to the knowledge of BSS,
threatened, and there is no order, injunction or decree outstanding
against or relating to BSS or the property, assets or business of
BSS.
8.4 Accuracy of Representations. All statements contained in
any exhibit, schedule, certificate or other document delivered by or
on behalf of BSS pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed representations and
warranties hereunder by BSS. No representation or warranty by BSS in
this Agreement or in any exhibit, schedule, certificate or other
document delivered or to be delivered by BSS pursuant to this
Agreement or in connection with the transactions contemplated hereby
contains and will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the
statements contained therein not misleading.
9. EMPLOYMENT AGREEMENT. As of the Closing Date, the Stockholder
shall enter into an employment agreement with BSS, in the form of Exhibit
9-1 attached hereto (the "Employment Agreement").
10. LEASE AGREEMENT. As of the Closing Date, BSS shall enter into
the following agreement (the "Lease Agreement"):
10.1.1 Lease for premises located at 360 and 381 Tyler Street,
Pittsfield, Massachusetts, in the form of Exhibit 10-1 attached
hereto.
11. COVENANT NOT TO COMPETE. As of the Closing Date, the
Stockholder shall enter into an Employment Agreement which, in part,
contains a covenant not to compete with BSS, in the form of Exhibit 9-1
attached hereto.
12. CONDITIONS TO CLOSING; TERMINATION.
12.1 Conditions Precedent to Obligations of BSS. The Closing
and all obligations of BSS pursuant to this Agreement shall be
conditioned upon the following:
12.1.1 Representations and Warranties. All
representations and warranties of Yankee and Stockholder
contained in Section 7 shall be true in all material respects
as of the Closing Date and BSS shall
have received a confirmation from an executive officer of
Yankee, in form acceptable to BSS and its counsel, to that
effect.
12.1.2 No Material Changes. From the date hereof
through the Closing Date, the Yankee Business shall have been
operated in the ordinary course and there shall not have been:
12.1.2.1 Any change in the assets, liabilities,
business, prospects or condition (financial or otherwise)
of Yankee except changes in the ordinary course of
business, none of which shall have been materially
adverse.
12.1.2.2 Any damage, destruction or loss (whether
covered by insurance or not) materially or adversely
affecting the business or properties of Yankee.
12.1.2.3 Any general salary increase made for the
benefit of the employees of Yankee or any specific
increase in the salary of any employee of Yankee.
12.1.2.4 Any unusual commitment or liability
incurred, or any unusual acquisitions or purchases made,
by Yankee.
12.1.2.5 Any significant event or condition of any
character materially or adversely affecting the business
or prospects of Yankee.
12.1.3 Performance of Obligations. Yankee and
Stockholder shall have performed all of their obligations under
this Agreement required to be performed as of the Closing Date.
12.1.4 Consents and Approvals. All consents, waivers,
authorizations and approvals of any governmental authority,
domestic or foreign, or of any other person, entity or
organization shall have been obtained, and the transactions
contemplated hereby shall not conflict with or result in any
breach or violation of the terms and conditions of, or
constitute (or with notice or lapse of time, or both,
constitute) a default under applicable federal, state, local or
foreign statute, regulation, order, judgment or decree.
12.1.5 Due Diligence. BSS shall have been satisfied
with its "due diligence" examinations of Yankee pursuant to
Section 16.1.
12.1.6 Delivery of Documents. BSS shall deliver all
documents, certificates and any other instruments set forth in
Section 13.1.
12.2 Conditions Precedent to Obligations of Yankee and
Stockholder. The Closing and all obligations of Yankee and
Stockholder pursuant to this Agreement shall be conditioned upon the
following:
12.2.1 Representations and Warranties. All
representations and warranties of BSS contained in Section 8
shall be true in all material respects as of the Closing Date
and Yankee and Stockholder shall have received confirmation
from the Trustees of BER, in form acceptable to Yankee, the
Stockholder and their counsel, to that effect.
12.2.2 Performance and Obligations. BSS shall have
performed all of its obligations under this Agreement required
to be performed as of the Closing Date.
12.2.3 Consents and Approvals. All consents, waivers,
authorizations and approvals of any governmental authority,
domestic or foreign, or of any other person, entity or
organization shall have been obtained and the transactions
contemplated hereby shall not conflict with or result in any
breach or violation of the terms and conditions of, or
constitute (or with notice or lapse of time, or both,
constitute) a default under applicable
federal, state, local or foreign statute, regulation, order,
judgment or decree.
12.2.4 Delivery of Documents. Yankee and Stockholder
shall deliver all documents, certificates and any other
instruments set forth in Section 13.2.
12.3 Termination.
12.3.1 Termination by the Parties. This Agreement may
be terminated and the transactions contemplated hereby may be
abandoned prior to the Closing as follows:
12.3.1.1 At any time by the mutual written consent
of BSS, Yankee and Stockholder.
12.3.1.2 By notice from BSS to Yankee and
Stockholder if all of the conditions set forth in Section
12.1 shall not have been either (i) satisfied or (ii)
waived, on or prior to the Closing Date.
12.3.1.3 By notice from Yankee and Stockholder to
BSS if all of the conditions set forth in Section 12.2
shall not have been either (i) satisfied or (ii) waived,
on or prior to the Closing Date.
12.3.1.4 By notice from BSS, Yankee or Stockholder
to the others if for any reason the Closing shall not
have taken place on or before September 30, 1999;
provided, however, that any party may extend the closing
date up to and including October 15, 1999 after which
time this Agreement shall terminate.
12.3.2 Effect of Termination. If this Agreement shall
be terminated pursuant to Section 12.3.1, it shall become null
and void and of no further force or effect and no party to this
Agreement shall have any liability or further obligation to any
other party to this Agreement with respect to this Agreement or
the transactions contemplated hereby except as provided in
Section 12.3.3 and Section 18.11; provided, however, that no
termination of this Agreement pursuant to the provisions of
Section 12.3.1 shall relieve any party of liability for a
breach of any provision of this Agreement occurring prior to
such termination.
12.3.3 Return of Documents Upon Termination. In the
event of termination of this Agreement pursuant to Section
12.3.1, BSS, Yankee and Stockholder shall each return to the
other party any documents or copies thereof in possession of
such party furnished by the other party in connection with the
transactions contemplated by this Agreement.
13. DELIVERIES TO BE MADE AT CLOSING. At the Closing, BSS, Yankee
and Stockholder shall deliver to each other the documents, certificates and
other instruments set forth in this Section 13.
13.1 BSS's Deliveries. At or prior to the Closing, BSS shall
deliver to Yankee the following:
13.1.1 Trustee's Certificate. A copy of the resolutions
of the trustees of BER, certified as having been duly and
validly adopted and as being in full force and effect on the
Closing Date, authorizing the execution and delivery by BSS of
this Agreement, the other agreements and instruments to be
executed and delivered by BSS as provided herein, and the
performance by BSS of the transactions contemplated hereby.
13.1.2 BSS Clerk's Certificate. A copy of the
resolutions of the directors of BSS, certified by its corporate
clerk or assistant clerk as having been duly and validly
adopted and as being in full force and effect on the Closing
Date, authorizing the execution and delivery by BSS of the
Employment Agreement, the Lease Agreement and any other
agreements and instruments to be executed and delivered by BSS
as provided herein.
13.1.3 Incumbency Certificates. A certified incumbency
and signature certificate for the trustees of BER, and a
certified incumbency and signature certification for the
officers of BSS.
13.1.3 Certificates of Good Standing. Certificates of
Good Standing issued by the Massachusetts Secretary of State as
to the good standing of BER and BSS.
13.1.4 Opinion of BSS's Counsel. The written opinion of
counsel for BER and BSS satisfactory in form and substance to
Yankee, the Stockholder and counsel for Yankee and Stockholder
and substantially in the form of Exhibit 13.1.4 attached
hereto, dealing with the matters set forth in Exhibit 13.1.4
and such other matters as Yankee, the Stockholder and counsel
for Yankee and Stockholder may reasonably request.
13.1.5 Certificate of Directors. Certificate of the
Directors of BSS containing the confirmation described in
Section 12.2.1 that all representations and warranties of BSS
contained in Section 8 shall be true in all material respects
as of the Closing Date.
13.1.6 Employment Agreement. The Employment Agreement
executed by BSS.
13.1.7 Lease Agreement. The Lease Agreement executed
by BSS.
13.1.8 Other Documents. All such other documents,
certificates and instruments as Yankee, the Stockholder and
their counsel may reasonably request in connection with the
consummation of the transactions contemplated by this
Agreement.
13.2 Yankee's Deliveries. At or prior to the Closing,
Yankee shall deliver to BSS the following documents:
13.2.1 Corporate Resolutions. A copy of the resolutions
of the stockholder and directors of Yankee, certified by its
corporate clerk or assistant clerk as having been duly and
validly adopted and as being in full force and effect on the
Closing Date, authorizing the execution and delivery by Yankee
of this Agreement, the other agreements and instruments to be
executed and delivered by Yankee as provided herein, and the
performance by Yankee of the transactions contemplated hereby.
13.2.2 Incumbency Certificate. An incumbency and
signature certificate for the officers of Yankee certified by
the clerk or assistant clerk of Yankee.
13.2.3 Bill of Sale. A Bill of Sale, conveying all of
Yankee's right, title and interest in the Purchased Assets to
BSS.
13.2.4 Certificate of Corporate Good Standing. A
Certificate of Good Standing issued by the Massachusetts
Secretary of State as to the corporate good standing of Yankee.
13.2.5 Certificate of Executive Officer. The
Certificate of an Executive Officer of Yankee containing the
confirmation described in Section 12.1.1 that all
representations and warranties of Yankee and Stockholder
contained in Section 7 shall be true in all material respects
as of the Closing Date.
13.2.7 Opinion of Yankee's Counsel. The written opinion
of counsel for Yankee and Stockholder satisfactory in form and
substance to BSS and BSS's counsel and substantially in the
form of Exhibit 13.2.7 attached hereto, dealing with the
matters set forth in Exhibit 13.2.7 and such other matters as
BSS and BSS's counsel may reasonably request.
13.2.8 Employment Agreement. The Employment Agreement
executed by each of the Stockholder.
13.2.9 Lease Agreement. The Lease Agreement executed by
Harrington.
13.2.10 Assignment Agreement. The Assignment Agreement
executed by Yankee.
13.2.11 Indemnification Agreement. The Indemnification
Agreement executed by Yankee and the Stockholder.
13.2.12 Other Documents. All such other documents,
certificates and instruments as BSS and its counsel may
reasonably request in connection with the consummation of the
transactions contemplated by this Agreement.
14. EMPLOYEES. On the Closing Date, Yankee shall terminate all of
its employees currently employed in connection with the Yankee Business
(the "Employees") and BER and BSS shall cause hire the Employees for
substantially the same wages and under terms of employment, including
fringe benefits, similar to their present terms of employment as Employees-
At-Will.
15. INDEMNIFICATION.
15.1 Indemnification by Yankee. Yankee and Stockholder shall,
jointly and severally, indemnify, defend and hold BSS and its
officers, directors, stockholders, agents, employees,
representatives, successors and assigns (collectively, the "BSS
Indemnified Parties"), harmless from and against any and all damage,
loss, cost, obligation, claims, demands, assessments, judgments or
liability (whether based on contract, tort, product liability, strict
liability or otherwise), including taxes, and all expenses,
including, without limitation, interest, penalties and reasonable
attorneys' and accountants' fees and disbursements (collectively,
"Damages"), incurred by any of the BSS Indemnified Parties, resulting
from or in connection with any one or more of the following:
15.1.1 Any breach of any representation or warranty made
by Yankee or Stockholder in this Agreement.
15.1.2 Any failure to perform any covenant or agreement
made or undertaken by Yankee or Stockholder in this Agreement
or in any other agreement delivered to BSS pursuant to this
Agreement.
15.1.3 Any services provided by Yankee prior to the
Closing Date.
15.1.4 Any third party claim for brokerage of finder's
fees or commissions based on any agreement that may have been
made in connection with this transaction.
15.1.5 Any failure of Yankee to pay or discharge the
liabilities of Yankee.
Notwithstanding the foregoing, the BSS Indemnified
Parties shall not seek to recover Damages from Yankee or
Stockholder pursuant to Sections 15.1.1, 15.1.2 or 15.1.3 in an
aggregate amount of less than $5,000.00, provided that, if the
aggregate amount of Damages shall exceed $5,000.00, then this
indemnity shall apply only to the amount in excess of
$5,000.00. The obligations of Yankee and Stockholder under
Sections 15.1.1, 15.1.2 and 15.1.3 shall survive until December
31, 2001 and the obligations of Yankee and Stockholder under
Sections 15.1.4 and 15.1.5 shall survive indefinitely.
15.2 Indemnification by BSS. BSS shall indemnify, defend and
hold the Stockholder and Yankee and its officers, directors, agents,
employees, representatives, successors and assigns (collectively, the
"Yankee Indemnified Parties"), harmless from and against any and all
Damages incurred by any of the Yankee Indemnified Parties, resulting
from or in connection with any one or more of the following:
15.2.1 Any breach of any representation or warranty made
by BSS in this Agreement.
15.2.2 Any failure to perform any covenant or agreement
made or undertaken by BSS in this Agreement or in any other
agreement delivered to Yankee or Stockholder pursuant to this
Agreement.
Notwithstanding the foregoing, the Yankee Indemnified Parties
shall not seek to recover Damages from BSS pursuant to Sections
15.2.1 and 15.2.2 in an aggregate amount of less than $5,000.00,
provided that, if the aggregate amount of Damages shall exceed
$5,000.00, then this indemnity shall apply only to the amount in
excess of $5,000.00. The obligations of BSS under Sections 15.2.1
and 15.2.2 shall survive until December 31, 2001.
15.3 Effects of Insurance. If any party or parties who shall
have suffered Damages for which the other party or parties shall be
liable for indemnification pursuant to this Section 15 shall obtain
monetary recovery for such Damages under an insurance policy or from
any other third party, the amount of such monetary recovery shall be
deducted from the amount due from the indemnifying party or parties.
If an indemnified party's monetary recovery from a third party shall
be made after payment shall have been made by the indemnifying party
or parties, then the amount of such recovery shall be refunded to the
indemnifying party or parties, but only after and to the extent of
the amount of the recovery from such third party. An indemnified
party who shall have received a recovery for Damages arising from a
breach of a representation, warranty or covenant under this Agreement
which is subject to indemnification shall have no right to recover
twice for the same Damages under the indemnification provided in this
Agreement.
15.4 Effects of Taxes. The amount of any Damages for which
Indemnification shall be provided pursuant to this Section 15 shall
be reduced to take account of any tax benefit actually realized by
the indemnified party as a result of the deductibility of such
Damages. For purposes of this Agreement, an indemnified party shall
be deemed to have "actually realized" a net tax benefit to the extent
that the amount of taxes payable by such indemnified party shall be
reduced below the amount of taxes that such indemnified party would
have been required to pay but for the deductibility of such Damages.
15.5 Right of Set-Off. Upon notice to Yankee and Stockholder
specifying in reasonable detail the basis for such set-off, BSS may
set off any amount to which it may be entitled under Section 15.1 and
Section 7.12 against payments otherwise payable under the Employment
Agreement and against amounts otherwise payable under the Lease
Agreement. The exercise of such right of set-off by BSS in good
faith, whether or not ultimately determined to be justified, will not
constitute an event of default under the Employment Agreement or
under the Lease Agreement or a breach of this Agreement. Neither the
exercise of nor the failure to exercise such right of set-off will
constitute an election of remedies or limit BSS in any manner in the
enforcement of any other remedies that may be available to it.
16. DUE DILIGENCE.
16.1 BSS's Due Diligence Examination. During the period of
time ending September 30, 1999 (the "Due Diligence Period"), to the
extent not already delivered by Yankee, Yankee shall provide such
information concerning Yankee as BSS may request, including, without
limitation, the Articles of Organization of Yankee and any amendments
thereto, the By-Laws of Yankee, and all books, records, surveys,
accounting reports and other documents relating to Yankee and the
management and operation of the Yankee Business. Upon prior notice
to Yankee, BSS and its agents, attorneys, accountants, advisors,
appraisers, engineers, independent contractors and proposed credit
providers (collectively, "BSS's Agents") shall have the right during
the Due Diligence Period to (a) view, inspect and test the Purchased
Assets, the real estate on which the various offices of the Yankee
Business are located and their physical condition during regular
business hours and (b) interview the management and employees of
Yankee and Yankee's customers; provided, however, that BSS shall
request Yankee's prior approval (which shall not be unreasonably
withheld) of the persons to be interviewed and the estimated length
of interviews. All examinations, inquiries and investigations
conducted by BSS and BSS's Agents shall be conducted in such a manner
as to minimize the disruption of the Yankee Business to the extent
reasonably practicable.
16.2 Yankee's Due Diligence Examination. During the Due
Diligence Period, to the extent not already delivered by BSS, BSS
shall provide to Yankee a disclosure package consisting of copies of
BSS's employee benefit plans and policies.
17. PROFESSIONAL FEES. Each of BSS and Yankee shall bear the cost
of all fees, expenses and disbursements due its own attorneys, accountants
and appraisers.
18. MISCELLANEOUS PROVISIONS.
18.1 Severability. If any provision of this Agreement shall
be deemed by any court having jurisdiction thereon to be invalid or
unenforceable, the balance of this Agreement shall remain in effect;
if any provision of this Agreement shall be deemed by any such court
to be unenforceable because such provision shall be too broad in
scope, such provision shall be construed to be limited in scope to
the extent such court shall deem necessary to make it enforceable;
and if any provision shall be deemed inapplicable by any such court
to any person or circumstances, it shall nevertheless be construed to
apply to all other persons and circumstances.
18.2 Assignment. This Agreement and any rights granted
hereunder may not be assigned or otherwise transferred by any party
without the prior consent of the other parties.
18.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, legal representatives, successors
and assigns but shall not be assignable except as set forth in
Section 18.2.
18.4 Entire Agreement. This Agreement contains a complete
statement of the undertakings between the parties with respect to its
subject matter, cannot be changed or terminated orally, and
supersedes all prior agreements and undertakings. There is no
representation not set forth in this Agreement (including the
Schedules and Exhibits hereto) which have been relied upon by the
parties. Notice. Any notice, approval, consent or other
communication under this Agreement shall be in writing and shall be
considered given when (1) delivered personally, or (2) mailed by
registered or certified mail, return receipt requested or (3)
transmitted by telecopy with a confirming copy sent by overnight mail
or courier service, return receipt requested, to the parties at the
addresses indicated below (or at such other address as a party may
specify by notice to the others pursuant hereto). Notice given by a
party's counsel shall be considered notice given by that party.
(a) If to BSS, to it at:
172 Hubbard Avenue
Pittsfield, MA 01201
Attention: Robert M. Allessio, President & COO
Telecopy No.: (413) 443-0546
(b) If to Yankee or the Stockholder, to them at:
381 Tyler Street
Pittsfield, MA 01201
Telecopy No.: (413) 499-7930
(c) In each case, with a copy to:
John J. Martin, Jr., Esquire
MARTIN & OLIVEIRA
100 North Street, Suite 301
Pittsfield, MA 01201
Telecopy No.: (413) 445-5883
David W. Murphy, Jr., Esquire
KATZ, MURPHY & GREENWALD
29 Wendell Avenue
Pittsfield, MA 01201
Telecopy No.: (413) 445-5888
18.6 Modifications. This Agreement may not be modified except
by a writing signed by all of the parties hereto.
18.7 Further Assurances. From time to time after the
Closing, each party shall, at the request of the other party, execute
and deliver such documents and take such actions as may be necessary
to implement the transactions contemplated by this Agreement.
18.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all
of which taken together shall constitute one and the same agreement.
18.9 Governing Law; Effect. This Agreement shall be governed
by and construed in accordance with the substantive law of the
Commonwealth of Massachusetts, without giving effect to the conflicts
or choice of law provisions of Massachusetts or any other
jurisdiction, and shall have the effect of a sealed instrument.
18.10 No Waiver. Each party hereto may, by written notice to
the other parties hereto: (a) extend the time for the performance of
any of the obligations or other actions of such other party under
this Agreement; (b) waive any inaccuracies in the representations,
warranties, conditions or covenants of such other party contained in
this Agreement; or (c) waive or modify performance of any of the
obligations of such other party under this Agreement. Except as
provided in the foregoing sentence, no waiver of the performance or
breach of, or default under, any condition or obligation hereof shall
be deemed to be a waiver of any other performance, or breach of, or
default under the same or any other condition or obligation of this
Agreement.
18.11 Confidentiality.
18.11.1 Confidential Information. In connection with
the transaction contemplated by this Agreement, BSS, Yankee and
Stockholder shall be exchanging certain confidential
information regarding their respective businesses, including
financial statements, reports, summaries of operations,
projections, customer lists and information, employee lists,
policy statements and other information relating to such
businesses (collectively, "Confidential Information").
Confidential Information shall include written and oral
statements, documents and materials relating to BSS, Yankee and
Stockholder that shall be divulged by BSS, Yankee and
Stockholder and their agents, attorneys, accountants and
advisors or that shall otherwise come into the possession of
BSS, Yankee and Stockholder, as the case may be. BSS, Yankee
and Stockholder shall maintain the Confidential Information of
the other party in strict confidence. Without the prior
written authorization of BSS, Yankee and Stockholder, as the
case may be, none of the Confidential Information shall be (a)
copied or (b) disclosed to any other party. The obligations of
the parties set forth in this Section 18.10.1 shall survive the
termination of this Agreement.
18.11.2 Confidentiality of Terms and Conditions. Each
party shall maintain confidential the terms and conditions of
this Agreement and not disclose any of such terms and
conditions to any third party without the prior written consent
of the other parties hereto.
18.12 Non-Solicitation. During the period commencing on the
date of this Agreement and ending on the Closing Date, Yankee shall
not permit or take any action to encourage, solicit, engage in
discussions or negotiations with, or provide any information to, any
person, firm, or other entity or group (other than BSS or its
representatives) concerning any merger, consolidation, sale of
substantial assets, purchase or sale of shares of capital stock or
other similar transaction involving Yankee.
18.13 Survival. This Agreement shall survive the Closing.
Signed and sealed on the date first written above.
BERKSHIRE SERVICE SOLUTIONS, INC.
By /s/ Robert M. Allessio
----------------------
Robert M. Allessio,
President and COO
YANKEE PLUMBING & HEATING CO., INC.
By /s/ Kevin O. Harrington
-----------------------
Kevin O. Harrington,
President
/s/ Kevin O. Harrington
-----------------------
Kevin O. Harrington,
Individually
SCHEDULE 1 (a)
- --------------
EQUIPMENT
---------
All furniture, fixtures and equipment at the premises presently
occupied by Yankee Plumbing & Heating Co., Inc. at 381 Tyler Street,
Pittsfield, Massachusetts, except the Excluded Assets, listed on Section 2.
SCHEDULE 1 (b)
- --------------
ACCOUNTS RECEIVABLE
-------------------
See attachment marked as 1 (b) and made a part hereof.
SCHEDULE 1 (c)
- --------------
INVENTORY
---------
See attachment marked as 1 (c) and made a part hereof.
SCHEDULE 1 (h)
- --------------
WORK-IN-PROCESS
---------------
See attachment marked as 1 (h) and made a part hereof.
SCHEDULE 1 (i)
- --------------
MOTOR VEHICLES
--------------
See attachment marked as 1 (i) and made a part hereof.
SCHEDULE 2
- ----------
EXCLUDED ASSETS
---------------
1. One (1) Sony lap top computer;
2. One (1) desk top computer;
3. One (1) oak desk with chair;
4. Two (2) oak file cabinets (one [1] 3 drawer cabinet and one [1] 2
drawer horizontal cabinet);
5. One (1) oak coat rack;
6. Two (2) wall clocks;
7. One (1) sign "Here you get your moneys worth";
8. Miscellaneous pictures in the office;
9. One (1) AM/FM receiver with speakers and tape deck; and,
10. 1999 Ford Explorer.
SCHEDULE 3.2
- ------------
ACCOUNTS PAYABLE
----------------
TO BE PAID AT CLOSING
---------------------
Vehicle loans to be paid at Closing--see Schedule 1 (i).
EXHIBIT 3.1
- -----------
FORM OF YANKEE INDEMNIFICAITON AGREEMENT
----------------------------------------
See attachment marked as 3.1 and made a part hereof.
EXHIBIT 3.3
- -----------
FORM OF ASSIGNMENT AGREEMENT
----------------------------
See attachment marked as 3.3 and made a part hereof.
SCHEDULE 7.4
- ------------
CHANGES IN THE ASSETS, LIABILITIES, BUSINESS,
---------------------------------------------
PROSPECTS OR CONDITION OF YANKEE NOT IN
---------------------------------------
THE ORDINARY COURSE OF BUSINESS
-------------------------------
None.
SCHEDULE 7.5
- ------------
YANKEE TAXES
------------
None.
SCHEDULE 7.6
- ------------
CLAIMS, LIENS OR OTHER ENCUMBRANCES
-----------------------------------
ON PURCHASED ASSETS
-------------------
None.
SCHEDULE 7.7
- ------------
YANKEE EMPLOYEES
----------------
See attachment marked as 7.7 and made a part hereof.
SCHEDULE 7.8
- ------------
YANKEE LITIGATION, ETC.
-----------------------
None.
SCHEDULE 7.9
- ------------
YANKEE LEASES, CONTRACTS, ETC.
------------------------------
Yankee leases Kevin O. Harrington's 1999 Ford Expedition from Ford,
and Yankee presently rents the Tyler Street premises on a month-to-month
basis, having no written lease.
SCHEDULE 8.3
- ------------
BSS LITIGATION, ETC.
--------------------
None.
EXHIBIT 9-1
- -----------
FORM OF EMPLOYMENT AGREEMENT WITH HARRINGTON
--------------------------------------------
EXHIBIT 10-1
- ------------
FORM OF 360 AND 381 TYLER STREET,
----------------------------------
PITTSFIELD, MASSACHUSETTS LEASE
-------------------------------
EXHIBIT 13.1.4
- --------------
OPINION OF COUNSEL FOR BER AND BSS
----------------------------------
See attachment marked 13.1.4 and made a part hereof.
EXHIBIT 13.2.3
- --------------
FORM OF BILL OF SALE
--------------------
EXHIBIT 13.2.7
- --------------
OPINION OF YANKEE'S COUNSEL
---------------------------
See attachment marked as 13.2.7 and made a part hereof.
Exhibit 10 (v)
ASSET PURCHASE AGREEMENT
------------------------
AGREEMENT dated October 14, 1999 among BERKSHIRE SERVICE SOLUTIONS,
INC., a Massachusetts corporation with a principal place of business in
Pittsfield, Massachusetts ("BSS"), SHEDD, INC., a Massachusetts corporation
with a principal place of business in Pittsfield, Massachusetts ("Shedd"),
DARRELL SHEDD of Worthington, Massachusetts ("Darrell"), and WARREN M. BEAN
of Dalton, Massachusetts ("Warren"; Darrell and Warren are collectively
referred to herein as the "Stockholders").
PRELIMINARY STATEMENT
---------------------
BSS is a wholly-owned subsidiary of Berkshire Energy Resources, a
Massachusetts business trust with a principal place of business in
Pittsfield, Massachusetts ("BER"). BSS was organized by BER to: (a) engage
in the business of mechanical contracting, including the design,
installation and servicing of plumbing, heating, ventilating and air
conditioning systems and equipment (including sheet metal fabrication) and
the sale and servicing of related products (the "MC Business"), (b) acquire,
pursuant to this Agreement, all of the MC Business assets of Shedd, and (c)
acquire the business assets of other entities engaged in the MC Business.
Shedd is engaged in the MC Business in Berkshire County, Massachusetts
with places of business at 724 and 730 Tyler Street, Pittsfield,
Massachusetts and at 134 East Housatonic Street, Dalton, Massachusetts (the
"Shedd Business").
Shedd desires to sell to BSS, and BSS desires to purchase from Shedd,
substantially all of the assets of the Shedd Business, on the terms and
subject to the conditions set forth herein.
AGREEMENT
IT IS THEREFORE AGREED AS FOLLOWS:
1. SALE OF ASSETS. At the Closing (as defined in Section 6), Shedd
shall sell to BSS, and BSS shall purchase from Shedd, for the Purchase Price
(defined in Section 4) the following assets of Shedd (the "Purchased
Assets"):
(a) all furniture and fixtures including leasehold improvements by
Shedd at its 724 and 730 Tyler Street, Pittsfield and 134 East
Housatonic Street, Dalton, locations, machinery, vehicles and
equipment (collectively, "FF&E"), including, without
limitation, the FF&E listed on Schedule 1 (a) attached hereto;
(b) all accounts receivable ("Accounts Receivable") listed on
Schedule 1 (b) attached hereto;
(c) all inventory ("Inventory") listed on Schedule 1 (c) attached
hereto;
(d) all customer lists of any type or description;
(e) all rights to the telephone numbers assigned to Shedd;
(f) the business names "Shedd" and "Dalton Sheet Metal" for use in
connection with the MC Business and related goodwill;
(g) all of Shedd's contract rights under all contracts entered into
in connection with the Shedd Business (the "Shedd Contracts"),
including the Re-Bath Agreement (defined in Section 18), to the
extent such rights are transferable;
(h) all customer work-in-process ("Work-in-Process") listed on
Schedule 1 (h) attached hereto; and
(i) all other assets utilized in the operation of the Shedd
Business,
excluding the Excluded Assets (defined in Section 2).
2. EXCLUDED ASSETS. The Purchased Assets shall not include (a)
cash and cash equivalents such as prepaid insurance and (b) those assets
listed on Schedule 2 attached hereto (the "Excluded Assets").
3. ASSUMPTION OF LIABILITIES; ASSIGNMENT OF SHEDD CONTRACTS. BSS
shall not assume, and shall have no obligation to pay, any liabilities or
obligations of Shedd or the Stockholders except for liabilities and
obligations set forth on Schedule 3 attached hereto (the "Assumed
Liabilities"). At the Closing, Shedd and BSS shall enter into an assignment
and assumption agreement with respect to the Assumed Liabilities and the
Shedd Contracts in the form attached hereto as Exhibit 3 (the "Assignment
and Assumption Agreement").
4. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE.
---------------------------------------------
4.1 Purchase Price. The purchase price (the "Purchase Price")
for the Purchased Assets, which shall be subject to adjustment as set
forth in Section 4.4, shall be the sum of $1,136,462, which includes
$278,000 designated to be used by Shedd to satisfy third-party trade
creditor obligations as of the Closing.
4.2 Payment of the Purchase Price; Escrow. Except for that
portion of the Purchase Price that shall be held in escrow as set
forth in Section 4.2.2, the Purchase Price shall be paid at the
Closing by wire transfer to Shedd of immediately available funds to
accounts designated by Shedd.
4.3 Escrow. Simultaneously with the receipt of the Purchase
Price, Shedd shall remit to Cain, Hibbard, Myers & Cook, P.C. (the
"Escrow Agents") $150,000 of the Purchase Price to be held in escrow
pursuant to the terms and conditions of an Escrow Agreement among BSS,
Shedd and the Escrow Agents in the form of Exhibit 4.3.2 attached
hereto (the "Escrow Agreement").
4.4 Purchase Price Allocation. The allocation of the Purchase
Price (the "Purchase Price Allocation") shall be as follows, subject
to adjustment as set forth in Section 4.5:
FF&E $212,636
Accounts Receivable $445,754
Inventory $176,500
Goodwill $301,572
To the extent permitted by law, the parties shall not take any position on
any income tax returns or before any governmental agency charged with the
collection of any tax, or in any judicial proceeding relating thereto, that
shall be inconsistent with the allocation of the Purchase Price set forth in
this Section 4.4.
4.5 Adjustment of the Purchase Price and Purchase Price
Allocation as at the Closing.
4.5.1 The Purchase Price is predicated in part on the
value of Accounts Receivable, and Work-in-Process, and the
Purchase Price shall be appropriately increased or reduced, as
confirmed by an Addendum to this Agreement (the "Purchase Price
Adjustments"), by the amount by which the value of Accounts
Receivable and Work-in-Process, as of the end of the business
day immediately preceding the Closing, shall be above or below
the following amounts:
Closing A/R $445,754
Work-in-Process $ 42,380
As used herein, "Closing A/R" shall mean the total Accounts Receivable shown
on the books of Shedd.
4.5.2 The Purchase Price and Purchase Price Allocation
shall be adjusted to reflect the Purchase Price Adjustments.
4.6 Adjustment of Purchase Price After the Closing. After
the Closing, the Purchase Price shall be adjusted to reflect the
actual amount of Closing A/R collected by BSS during the six-month
period following the Closing, with the amount of any deficit disbursed
to BSS as provided in the Escrow Agreement.
5. LOAN BY BSS TO THE STOCKHOLDERS. At the Closing, BSS shall loan
(a) Darrell the sum of $210,000 and (b) Warren the sum of $90,000 on the
terms set forth in the promissory notes attached hereto as Exhibit 5 (the
"Notes"). Darrell and Warren acknowledge that during the term of the Notes,
each shall receive notification from BSS on an annual basis, pursuant to
Internal Revenue Code Section 7872, of the amount of foregone interest
deemed to have been paid as additional compensation.
6. CLOSING. The closing (the "Closing") of BSS's purchase of the
Purchased Assets shall take place on October 14, 1999 (the "Closing Date"),
at 10:00 a.m. at the offices of Cain, Hibbard, Myers & Cook, P.C., 66 West
Street, Pittsfield, Massachusetts, or at such other time and place as shall
be mutually agreed upon by the parties.
7. REPRESENTATIONS AND WARRANTIES BY SHEDD AND THE STOCKHOLDERS.
-------------------------------------------------------------
Shedd and the Stockholders jointly and severally represent and warrant to
BSS as follows:
7.1 Organization. Shedd is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and is qualified to conduct its business
as it is presently conducted. Shedd has the corporate power and is
duly authorized to carry on its business where and as now conducted
and to own, lease, use and operate its properties as it now does.
7.1.1 Shedd is the surviving corporation in a merger
between Shedd and Dalton Sheet Metal Co., Inc. pursuant to
Articles of Merger filed with the Massachusetts Secretary of
State on April 1, 1998. Since the effective date of the merger,
all business activities of the former Dalton Sheet Metal Co.,
Inc. have been conducted through Shedd as the surviving
corporation. There are no affiliates or subsidiaries of Shedd.
7.1.2 The authorized capital stock of Shedd consists of
12,500 shares of common stock, no par value, of which 1,000
shares are issued and outstanding (the "Shares"). The
Stockholders are and will be on the Closing Date the record and
beneficial owners and holders of the Shares, free and clear of
all encumbrances. Darrell owns 700 of the Shares, and Warren
owns 300 of the Shares.
7.2 Capacity. Shedd and each of the Shedd Stockholders has
full authority and capacity to enter into and to perform this
Agreement in accordance with its terms, and is not bound by or subject
to any contractual or other obligation that would be violated by the
execution or performance of this Agreement, and this Agreement is
valid and binding upon Shedd and the Stockholders in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditor's rights in general.
7.3 Financial Statements. Shedd has delivered to BER financial
statements of Shedd for the fiscal years ended March 31, 1998 and
March 31, 1999, prepared on a "review" basis by Shedd's independent
certified public accountants, including balance sheets of Shedd as at
such dates and statements of income, retained earnings and cash flows
for the periods then ended, together with related notes and schedules
and internally prepared financial statements for the five months ended
August 31, 1999, which include a balance sheet of Shedd at such date
and a statement of income for such period (collectively, the "Shedd
Financial Statements"). Except to the extent that certain 2000 year-
end adjustments may not be reflected on the financial statements for
the five months ended August 31, 1999, the Shedd Financial Statements
have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods and fairly
present the financial condition of Shedd as of the respective dates
thereof and the results of operations of Shedd for the periods then
ended.
7.4 Absence of Certain Changes. Except as noted on the Shedd
Financial Statements or as set forth on Schedule 7.4 attached hereto,
from the date of the Shedd Financial Statements through the date
hereof, the business of Shedd has been operated in the ordinary course
and there has not been:
7.4.1 Any change in the assets, liabilities, business,
prospects, or condition (financial or otherwise) of Shedd except
changes in the ordinary course of business, none of which shall
have been materially adverse.
7.4.2 Any damage, destruction or loss (whether covered by
insurance or not) materially or adversely affecting the business
or properties of Shedd.
7.4.3 Any general salary increase made for the benefit of
the employees of Shedd or any specific increase in the salary of
any employee of Shedd.
7.4.4 Any unusual commitment or liability incurred, or
any unusual acquisitions or purchases made, by Shedd.
7.4.5 Any significant event or condition of any character
materially or adversely affecting the business or prospects of
Shedd.
7.5 Taxes. Shedd has filed all federal, state and local
income, employment and other tax returns required to be filed by it on
or before the dates on which such returns were due to be filed or
extensions to file such returns have been timely filed or granted and
have not expired. Except as set forth on Schedule 7.5 attached
hereto, Shedd has paid all taxes of any nature for which Shedd is
responsible, except for taxes which are not yet due and payable as of
the date hereof. The amounts established as provisions for taxes on
the Shedd Financial Statements are sufficient for the payment of all
accrued and unpaid federal, state and local income, employment and
other taxes of Shedd for all periods ending prior to August 31, 1999.
Except as set forth on Schedule 7.5, (a) there are no claims pending
or threatened against Shedd for unpaid taxes, (b) there are no
outstanding waivers or agreements by Shedd for the extension of the
time for the assessment of any tax, (c) neither the Internal Revenue
Service nor any state agency has conducted a tax audit or examination
of Shedd for the past three years, and (d) no deficiencies in taxes or
any other governmental charges have been claimed, proposed or assessed
against Shedd, and no facts exist or have existed which would
constitute a basis for assessment of liability for any tax or other
governmental charge which is not reflected on the Shedd Financial
Statements.
7.6 Title. Except as set forth on Schedule 7.6 attached
hereto, Shedd has, and as of the Closing shall be conveying to BSS,
good and marketable title to the Purchased Assets, free and clear of
all claims, liens or other encumbrances.
7.7 Personnel. Attached hereto as Schedule 7.7 is a true and
complete (a) list of all employees of Shedd which sets forth (i) the
full name, address and social security number of each employee, (ii)
each employee's date of hire, (iii) the method of payment (i.e. hourly
or salaried) and current rate of earnings for each employee and (iv)
any written agreement relating to such employee's employment and (b)
description of all employee benefit plans, programs or arrangements,
written or unwritten, to which Shedd is a party, including, without
limitation, any pension, profit sharing or other retirement plans, any
health and welfare benefit plans, and plans, programs or arrangements
for bonuses, vacation and other leaves, severance and deferred
compensation. Shedd has no collective bargaining agreement with any
of its employees. The term of the employment agreement for John
Eckert, a copy of which is attached to Schedule 7.7, has expired and
has not been extended or renewed.
7.8 Litigation; Etc. Except as set forth on Schedule 7.8
attached hereto, (a) there is no litigation, proceeding or
governmental investigation pending or, to the knowledge of Shedd or
the Stockholders, threatened, and there is no order, injunction or
decree outstanding against or relating to Shedd or any Stockholder,
the property, assets or business of Shedd or any Stockholder. Neither
Shedd nor any of the Stockholders is in violation of any applicable
law, regulation, ordinance, order, injunction or decree, or any other
requirement of any governmental body or court, relating to the
property or business of Shedd.
7.9 Leases, Contracts, Etc. Attached hereto as Schedule 7.9
are complete and accurate lists, descriptions and/or schedules of the
following:
7.9.1 With respect to the real property or personal
property leased by Shedd:
7.9.1.1 The location of such property;
7.9.1.2 The name of the landlord or lessor of each
such property which is leased, together with (a) the name
of the tenant or lessee, (b) the rental payable, (c) the
expiration date of existing leases and a specification of
all rights of renewal or purchase or other rights existent
upon expiration, and (d) a copy of each existing lease.
7.9.2 All mortgages, pledges, deeds of trust, loan and
credit instruments, and agreements and similar instruments to
which Shedd is a party.
7.9.3 To the extent not included in the foregoing, all
leases, purchase and sales orders, licenses, contracts,
agreements, commitments and understandings of any nature,
written or oral to which Shedd is a party in any capacity or by
which it is bound, and which cannot be terminated by Shedd on
less than 30 days' notice without liability or which involve
expenditure by Shedd of more than $10,000 (a "Contract").
Except as set forth on Schedule 7.8 and 7.9, with respect to
each Contract:
7.9.3.1 Shedd is, and at all times since the first
day of the last completed fiscal year has been, in
compliance with all applicable material terms and
requirements of each Contract under which Shedd has or had
any obligation or liability or by which Shedd, or any of
the assets owned or used by Shedd, is or was bound.
7.9.3.2 No event has occurred or circumstances
exist that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or
breach of, or give Shedd the right to declare a default or
exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate or modify, any
Contract.
7.9.3.3 Shedd has not given to or received from any
other party, at any time since the first day of the last
completed fiscal year of Shedd, any notice or other
communication (whether oral or written) regarding any
actual, alleged, possible or potential violation or breach
of, or default under, any Contract.
7.10 Accuracy of Representations. All statements contained in
any exhibit, certificate or other document delivered by or on behalf
of Shedd or the Stockholders pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties hereunder by Shedd and the
Stockholders. No representation or warranty by Shedd or any
Stockholder in this Agreement or in any exhibit, certificate or other
document delivered or to be delivered by Shedd or the Stockholders
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
7.11 Condition and Sufficiency of Assets. The FF&E listed on
Schedule 1 (a) is in good operating condition and repair and is
adequate for the uses to which they are being put, and none of such
FF&E is in need of maintenance or repairs except for (a) ordinary,
routine maintenance and repairs and (b) other repair in an amount not
to exceed $5,000. The FF&E of Shedd is sufficient for the continued
conduct of the Shedd Business after the Closing in substantially the
same manner as conducted prior to the Closing.
7.12 Accounts Receivable. All accounts receivable of Shedd
listed on Schedule 1 (b) and all unbilled Work-in-Process listed on
Schedule 1 (h) (each an "Account" and collectively, the "Accounts") as
of the Closing Date represent or will represent valid obligations
arising from services actually performed in the ordinary course of
business. Unless paid prior to the Closing Date, the Accounts are or
will be as of the Closing Date current and collectible. Except as set
forth on Schedule 7.8, there is no contest, claim or right of set-off,
other than returns in the ordinary course of business, under any
contract with any obligor of an Account relating to the amount or
validity of such Account.
7.13 Inventory. The Inventory of Shedd listed on Schedule 1
(c) consists of a quality and quantity usable and salable in the
ordinary course of business, except for obsolete items and items of
below-standard quality, all of which have been written off or written
down to the net realizable value and have been valued as such as of
the Closing Date. The quantities of each item of inventory (whether
raw materials, work-in-process or finished goods) are not excessive,
but are reasonable in the present circumstances of Shedd.
8. REPRESENTATIONS AND WARRANTIES BY BSS. BSS represents and
warrants to Shedd and the Stockholders as follows:
8.1 Organization. BSS is a Massachusetts corporation duly
organized, validly existing and in good standing under the laws of
Massachusetts and is qualified to conduct its business as it is presently
conducted. BSS has the requisite power and is duly authorized to carry on
its business where and as now conducted and to own, lease, use and operate
its properties as it now does.
8.2 Capacity. BSS has full authority and capacity to enter
into and to perform this Agreement in accordance with its terms, and
is not bound by or subject to any contractual or other obligation that
would be violated by the execution or performance of this Agreement,
and this Agreement is valid and binding upon BSS in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditor's rights in general.
8.3 Employee Benefit Plans. Attached hereto as Schedule 8.3 is
a true and complete description of all employee benefit plans,
programs or arrangements, written or unwritten, which BSS shall
provide to its employees, including, without limitation, any pension,
profit sharing or other retirement plans, any health and welfare
benefit plans, and plans, programs or arrangements for bonuses,
vacation and other leaves, severance and deferred compensation.
8.4 Litigation; Etc. Except as set forth on Schedule 8.4
attached hereto, there is no litigation, proceeding or governmental
investigation pending or to the knowledge of BSS, threatened, and
there is no order, injunction or decree outstanding against or
relating to BSS or the property, assets or business of BSS.
8.5 Accuracy of Representations. All statements contained in
any exhibit, schedule, certificate or other document delivered by or
on behalf of BSS pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed representations and
warranties hereunder by BSS. No representation or warranty by BSS in
this Agreement or in any exhibit, schedule, certificate or other
document delivered or to be delivered by BSS pursuant to this
Agreement or in connection with the transactions contemplated hereby
contains and will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the
statements contained therein not misleading.
9. CONDITIONS TO CLOSING; TERMINATION.
9.1 Conditions Precedent to Obligations of BSS. The Closing
and all obligations of BSS pursuant to this Agreement shall be
conditioned upon the following:
9.1.1 Representations and Warranties. All
representations and warranties of Shedd and the Stockholders
contained in Section 7 shall be true in all material respects as
of the Closing Date and BSS shall have received a confirmation
from an executive officer of Shedd, in form acceptable to BSS
and its counsel, to that effect.
9.1.2 No Material Changes. From the date hereof through
the Closing Date, the Shedd Business shall have been operated in
the ordinary course and there shall not have been:
9.1.2.1 Any change in the assets, liabilities,
business, prospects or condition (financial or otherwise)
of Shedd except changes in the ordinary course of
business, none of which shall have been materially
adverse.
9.1.2.2 Any damage, destruction or loss (whether
covered by insurance or not) materially or adversely
affecting the business or properties of Shedd.
9.1.2.3 Any general salary increase made for the
benefit of the employees of Shedd or any specific increase
in the salary of any employee of Shedd.
9.1.2.4 Any unusual commitment or liability
incurred, or any unusual acquisitions or purchases made,
by Shedd.
9.1.2.5 Any significant event or condition of any
character materially or adversely affecting the business
or prospects of Shedd.
9.1.3 Performance of Obligations. Shedd and the
Stockholders shall have performed all of their obligations under
this Agreement required to be performed as of the Closing Date,
including any obligations under Sections 11, 16, 17 and 18 to be
performed prior to the Closing.
9.1.4 Consents and Approvals. All consents, waivers,
authorizations and approvals of any governmental authority,
domestic or foreign, or of any other person, entity or
organization shall have been obtained, and the transactions
contemplated hereby shall not conflict with or result in any
breach or violation of the terms and conditions of, or
constitute (or with notice or lapse of time, or both,
constitute) a default under applicable federal, state, local or
foreign statute, regulation, order, judgment or decree.
9.1.5 Due Diligence. BSS shall have been satisfied with
its "due diligence" examinations of Shedd pursuant to Section /1
13.1.
9.1.6 Approval of BER Trustees and BSS Directors. The
BER Board of Trustees and the BSS Board of Directors shall have
approved and authorized (a) the execution and delivery of this
Agreement (b) the performance by BER and BSS of this Agreement
and all of the transactions contemplated hereby and (c) the
execution and performance of the other agreements and
instruments to be executed and delivered by BER and BSS as
provided herein.
9.1.7 Delivery of Documents. Shedd shall have delivered
all documents, certificates and any other instruments required
to be delivered by it pursuant to Section 10.2.
9.2 Conditions Precedent to Obligations of Shedd and the
Stockholders. The Closing and all obligations of Shedd and the
Stockholders pursuant to this Agreement shall be conditioned upon the
following:
9.2.1 Representations and Warranties. All
representations and warranties of BSS contained in Section 8
shall be true in all material respects as of the Closing Date
and Shedd and the Stockholders shall have received confirmation
from the President of BSS, in form acceptable to Shedd, the
Stockholders and their counsel, to that effect.
9.2.2 Performance and Obligations. BSS shall have
performed all of its obligations under this Agreement required
to be performed as of the Closing Date.
9.2.3 Consents and Approvals. All consents, waivers,
authorizations and approvals of any governmental authority,
domestic or foreign, or of any other person, entity or
organization shall have been obtained and the transactions
contemplated hereby shall not conflict with or result in any
breach or violation of the terms and conditions of, or
constitute (or with notice or lapse of time, or both,
constitute) a default under applicable federal, state, local or
foreign statute, regulation, order, judgment or decree.
9.2.4 Delivery of Documents. BSS shall have delivered
all documents, certificates and any other instruments required
to be delivered by it pursuant to Section 10.1.
9.3 Termination.
9.3.1 Termination by the Parties. This Agreement may be
terminated and the transactions contemplated hereby may be
abandoned prior to the Closing as follows:
9.3.1.1 At any time by the mutual written consent
of BSS, Shedd and the Stockholders.
9.3.1.2 By notice from BSS to Shedd and the
Stockholders if all of the conditions set forth in Section
9.1 shall not have been either (i) satisfied or (ii)
waived, on or prior to the Closing Date.
9.3.1.3 By notice from Shedd and the Stockholders
to BSS if all of the conditions set forth in Section 9.2
shall not have been either (i) satisfied or (ii) waived,
on or prior to the Closing Date.
9.3.1.4 By notice from BSS, Shedd or the
Stockholders to the others if for any reason the Closing
shall not have taken place on or before October 15, 1999;
provided, however, that any party may extend the closing
date up to and including October 22, 1999 after which time
this Agreement shall terminate.
9.3.2 Effect of Termination. If this Agreement shall be
terminated pursuant to Section 9.3.1, it shall become null and
void and of no further force or effect and no party to this
Agreement shall have any liability or further obligation to any
other party to this Agreement with respect to this Agreement or
the transactions contemplated hereby except as provided in
Section 9.3.3 and Section 15.11; provided, however, that no
termination of this Agreement pursuant to the provisions of
Section 9.3.1 shall relieve any party of liability for a breach
of any provision of this Agreement occurring prior to such
termination.
9.3.3 Return of Documents Upon Termination. In the event
of termination of this Agreement pursuant to Section 9.3.1, BSS,
Shedd and the Stockholders shall each return to the other party
any documents or copies thereof in possession of such party
furnished by the other party in connection with the transactions
contemplated by this Agreement.
10. TRANSACTIONS AT CLOSING. At the Closing, BSS, Shedd and the
Stockholders shall deliver to each other the documents, certificates and
other instruments set forth in this Section 10.
10.1 BSS's Deliveries. At or prior to the Closing, BSS shall
deliver to Shedd the following:
10.1.1 Trustee's Certificate. A copy of the resolutions
of the trustees of BER, certified as having been duly and
validly adopted and as being in full force and effect on the
Closing Date, authorizing the execution and delivery by BSS of
this Agreement, the other agreements and instruments to be
executed and delivered by BER and BSS as provided herein, and
the performance by BER and BSS of the transactions contemplated
hereby.
10.1.2 BSS Clerk's Certificate. A copy of the
resolutions of the directors of BSS, certified by its corporate
clerk or assistant clerk as having been duly and validly adopted
and as being in full force and effect on the Closing Date,
authorizing the execution and delivery by BSS of this Agreement,
the other agreements and instruments to be executed and
delivered by BSS as provided herein and the performance by BSS
of the transactions contemplated hereby.
10.1.3 Incumbency Certificates. A certified incumbency
and signature certificate for (a) the officers of BER and (b)
the officers of BSS.
10.1.4 Certificates of Good Standing. Certificates of
Good Standing issued by the Massachusetts Secretary of State as
to the good standing of BER and BSS.
10.1.5 Opinion of BER's and BSS's Counsel. The written
opinion of counsel for BER and BSS satisfactory in form and
substance to Shedd, the Stockholders and counsel for Shedd and
the Stockholders and substantially in the form of Exhibit 10.1.5
attached hereto, dealing with the matters set forth in Exhibit
10.1.5 and such other matters as Shedd, the Stockholders and
counsel for Shedd and the Stockholders may reasonably request.
10.1.6 Certificate of President. Certificate of the
President of BSS containing the confirmation described in
Section 9.2.1 that all representations and warranties of BSS
contained in Section 8 shall be true in all material respects as
of the Closing Date.
10.1.7 Employment Agreements. The employment agreements
between (a) BSS and Darrell and (b) BSS and Warren
(collectively, the "Employment Agreements"), in the forms of
Exhibits 10.1.7(a) and 10.1.7(b) attached hereto, executed by
BSS.
10.1.8 Management Operations Agreement. The Management
Operations Agreement among BER, BSS, Darrell and Warren in the
form attached as Exhibit A to the Employment Agreements (the
"MOA"), executed by BER and BSS.
10.1.9 Lease Agreements. The following lease agreements
(collectively, the "Lease Agreements"), executed by BSS:
10.1.9.1 Lease between BSS and Donald G. Shedd for
the premises located at 730 Tyler Street, Pittsfield,
Massachusetts, in the form of Exhibit 10.1.9.1 attached
hereto.
10.1.9.2 Lease between BSS and Darrell Shedd for
the premises located at 724 Tyler Street, Pittsfield,
Massachusetts, in the form of Exhibit 10.1.9.2 attached
hereto.
10.1.9.3 Assignment and Assumption of Lease dated
January 20, 1999 between Berkshire Bridge & Iron Co., Inc.
and Shedd for the premises located at 134 East Housatonic
Street, Dalton, Massachusetts, in the form of Exhibit
10.1.9.3 attached hereto.
10.1.10 Assignment and Assumption Agreement. The
Assignment and Assumption Agreement executed by BSS.
10.1.11 Other Documents. All such other documents,
certificates and instruments as Shedd, the Stockholders and
their counsel may reasonably request in connection with the
consummation of the transactions contemplated by this Agreement.
10.2 Shedd's Deliveries. At or prior to the Closing, Shedd
shall deliver to BSS the following documents:
10.2.1 Corporate Resolutions. A copy of the resolutions
of the stockholders and directors of Shedd, certified by its
corporate clerk or assistant clerk as having been duly and
validly adopted and as being in full force and effect on the
Closing Date, authorizing the execution and delivery by Shedd of
this Agreement, the other agreements and instruments to be
executed and delivered by Shedd as provided herein, and the
performance by Shedd of the transactions contemplated hereby.
10.2.2 Incumbency Certificate. A certified incumbency
and signature certificate for the officers of Shedd.
10.2.3 Bill of Sale. A Bill of Sale, conveying all of
Shedd's right, title and interest in the Purchased Assets to
BSS.
10.2.4 Certificate of Corporate Good Standing. A
Certificate of Good Standing issued by the Massachusetts
Secretary of State as to the corporate good standing of Shedd.
10.2.5 Certificate of Executive Officer. The Certificate
of an Executive Officer of Shedd containing the confirmation
described in Section 9.1.1 that all representations and
warranties of Shedd and the Stockholders contained in Section 7
shall be true in all material respects as of the Closing Date.
10.2.7 Opinion of Shedd's Counsel. The written opinion
of counsel for Shedd and the Stockholders satisfactory in form
and substance to BSS and BSS's counsel and substantially in the
form of Exhibit 10.2.7 attached hereto, dealing with the matters
set forth in Exhibit 10.2.7 and such other matters as BSS and
BSS's counsel may reasonably request.
10.2.8 Employment Agreements. The Employment Agreements
executed by each of the Stockholders.
10.2.9 MOA. The MOA executed by each of the
Stockholders.
10.2.10 Lease Agreements. The Lease Agreements executed
by Donald G. Shedd, Darrell and Shedd, as the case may be.
10.2.11 Assignment and Assumption Agreement. The
Assignment and Assumption Agreement executed by Shedd.
10.2.12 Notes. The Notes executed by each of the
Stockholders.
10.2.13 Motor Vehicle Titles. Motor vehicle titles, free
of all encumbrances, for each of the motor vehicles listed on
Schedule 1 (a), executed by Shedd conveying all of Shedd's
right, title and interest in the motor vehicles to BSS.
10.2.14 Brodrick Release. An executed release, in form
satisfactory to BSS's counsel, of Robert Brodrick releasing any
claim that he may have with respect to the Re-Bath Agreement.
10.2.15 Other Documents. All such other documents,
certificates and instruments as BSS and its counsel may
reasonably request in connection with the consummation of the
transactions contemplated by this Agreement.
11. EMPLOYEES. On the Closing Date, Shedd shall terminate all of
its employees currently employed in connection with the Shedd Business (the
"Employees") and BSS shall hire the Employees as Employees-at-Will, except
for Darrell, Warren and Eric Booth (whose employment contract expires on May
11, 2000) for substantially the same wages and under terms of employment,
including fringe benefits, similar to their present terms of employment.
Shedd shall pay the Employees any accrued vacation pay owed on or before the
Closing Date.
12. INDEMNIFICATION.
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12.1 Indemnification by Shedd. Shedd and each Stockholder
shall, jointly and severally, indemnify, defend and hold BSS and its
officers, directors, stockholders, agents, employees, representatives,
successors and assigns (collectively, the "BSS Indemnified Parties"),
harmless from and against any and all damage, loss, cost, obligation,
claims, demands, assessments, judgments or liability (whether based on
contract, tort, product liability, strict liability or otherwise),
including taxes, and all expenses, including, without limitation,
interest, penalties and reasonable attorneys' and accountants' fees
and disbursements (collectively, "Damages"), incurred by any of the
BSS Indemnified Parties, resulting from or in connection with any one
or more of the following:
12.1.1 Any breach of any representation or warranty made
by Shedd or any Stockholder in Section 7 of this Agreement,
excluding the representations and warranties with respect to
Inventory and Accounts Receivable.
12.1.2 Any failure to perform any covenant or agreement
made or undertaken by Shedd or any Stockholder in Sections 11,
16, 17 or 18 of this Agreement.
12.1.3 Any failure to perform any other covenant or
agreement made or undertaken by Shedd or any Stockholder in this
Agreement or in any other agreement delivered to BSS pursuant to
this Agreement.
12.1.4 Any services provided by Shedd prior to the
Closing Date.
12.1.5 Any third party claim for brokerage or finders'
fees or commissions based on any agreement between Shedd and
such third party that may have been made in connection with this
transaction.
12.1.6 Any failure of Shedd to pay or discharge the
liabilities of Shedd.
12.2 Survival. The obligations of Shedd and the Stockholders
under Sections 12.1.1 and 12.1.3 shall survive until December 31, 2001
and the obligations of Shedd and the Stockholders under Sections
12.1.2, 12.1.4, 12.1.5 and 12.1.6 shall survive indefinitely.
12.3 Indemnification by BSS. BSS shall indemnify, defend and
hold the Stockholders and Shedd and its officers, directors, agents,
employees, representatives, successors and assigns (collectively, the
"Shedd indemnified Parties"), harmless from and against any and all
Damages incurred by any of the Shedd Indemnified Parties, resulting
from or in connection with any one or more of the following:
12.3.1 Any breach of any representation or warranty made
by BSS in Section 8 of this Agreement.
12.3.2 Any failure to perform any covenant or agreement
made or undertaken by BSS in this Agreement or in any other
agreement delivered to Shedd or the Stockholders pursuant to
this Agreement.
12.3.3 Any failure of BSS to pay or discharge the Assumed
Liabilities.
12.3.4 Any third party claim for brokerage or finders'
fees or commissions based on any agreement between BER or BSS
and such third party that may have been made in connection with
this transaction.
12.3.5 Any services provided by BSS after the Closing
Date.
12.4 Survival. The obligations of BSS under Sections 12.3.1
and 12.3.2 shall survive until December 31, 2001 and the obligations
of BSS under Sections 12.3.3, 12.3.4 and 12.3.5 shall survive
indefinitely.
12.5 Effects of Insurance. If any party or parties who shall
have suffered Damages for which the other party or parties shall be
liable for indemnification pursuant to this Section 12 shall obtain
monetary recovery for such Damages under an insurance policy or from
any other third party, the amount of such monetary recovery shall be
deducted from the amount due from the indemnifying party or parties.
If an indemnified party's monetary recovery from a third party shall
be made after payment shall have been made by the indemnifying party
or parties, then the amount of such recovery shall be refunded to the
indemnifying party or parties, but only after and to the extent of the
amount of the recovery from such third party. An indemnified party
who shall have received a recovery for Damages arising from a breach
of a representation, warranty or covenant under this Agreement which
is subject to indemnification shall have no right to recover twice for
the same Damages under the indemnification provided in this Agreement.
12.6 Effects of Taxes. The amount of any Damages for which
Indemnification shall be provided pursuant to this Section 12 shall be
reduced to take account of any tax benefit actually realized by the
indemnified party as a result of the deductibility of such Damages.
For purposes of this Agreement, an indemnified party shall be deemed
to have "actually realized" a net tax benefit to the extent that the
amount of taxes payable by such indemnified party shall be reduced
below the amount of taxes that such indemnified party would have been
required to pay but for the deductibility of such Damages.
12.7 Right of Set-Off.
-----------------
12.7.1 Notice of Set-Off. Upon notice to the
Stockholders specifying in reasonable detail the basis for such
set-off (the "Set-Off Notice"), BSS may set off the amount of
any Damages to which it may be entitled pursuant to Section 12.1
of this Agreement or as a result of a breach of the MOA,
Employment Agreements, Lease Agreements or Notes (the "Set-Off
Amount") against payments otherwise payable to the Stockholders
under the Employment Agreements, excluding the Salary and fringe
benefits payable under Sections 6.1 and 6.3 of the Employment
Agreements, the MOA and the Lease Agreements, unless, within 20
days after the giving of the Set-Off Notice, the Stockholders
shall give BSS a notice stating that the Stockholders dispute
the claim underlying the proposed set-off (the "Dispute
Notice").
12.7.2 Escrow of Set-Off Amount. If a Dispute Notice
shall be given, BSS shall deposit the Set-Off Amount in escrow
with the Escrow Agents, to be held by the Escrow Agents in an
interest-bearing account until such time as (a) the Escrow
Agents shall receive a joint written notice from BSS and the
Stockholders instructing the Escrow Agent to release the Set-Off
Amount and accrued interest as specified in such notice or (b)
the dispute shall be adjudicated pursuant to a final
unappealable order of a court of competent jurisdiction, in
which event the Escrow Agents shall release the Set-Off Amount
and accrued interest in accordance with such order.
12.7.3 Indemnification of Escrow Agents. The Escrow
Agents shall not be liable for any action which they may in good
faith take or refrain from taking in connection herewith,
believed by them to be authorized or within the rights and powers
conferred upon them by this Section 12.7. The parties shall
jointly and severally indemnify and hold harmless the Escrow
Agents from and against any claims against them for any action
taken in good faith.
12.7.4 Authority of Escrow Agents. The Escrow Agents
shall be authorized to act upon any document, request or notice
which is believed by them in good faith to be genuine and signed
or presented by the proper party or parties, and shall be
protected in so acting.
12.7.5 Remedies. Neither the exercise of, nor the
failure to exercise, BSS's right of set-off pursuant to this
Section 12.7 shall constitute an election of remedies or limit
BSS in any manner in the enforcement of any other remedies that
may be available to it.
12.7.6 Exercise of Set-Off. The exercise of the right
of set-off set forth in this Section 12.7 by BSS in good faith,
whether or not ultimately determined to be justified, shall not
constitute a breach of this Agreement.
13. DUE DILIGENCE.
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13.1 BSS's Due Diligence Examination. During the period of
time ending on October 13, 1999 (the "Due Diligence Period"), to the
extent not already delivered by Shedd, Shedd shall provide such
information concerning Shedd as BSS may request, including, without
limitation, the Articles of Organization of Shedd and any amendments
thereto, the By-Laws of Shedd, and all books, records, surveys,
accounting reports and other documents relating to Shedd and the
management and operation of the Shedd Business. Upon prior notice to
Shedd, BSS and its agents, attorneys, accountants, advisors,
appraisers, engineers, independent contractors and proposed credit
providers (collectively, "BSS's Agents") shall have the right during
the Due Diligence Period to (a) view, inspect and test the Purchased
Assets, the real estate on which the various offices of the Shedd
Business are located and their physical condition during regular
business hours and (b) interview the management and employees of Shedd
and Shedd's customers; provided, however, that BSS shall request
Shedd's prior approval (which shall not be unreasonably withheld) of
the persons to be interviewed and the estimated length of interviews.
All examinations, inquiries and investigations conducted by BSS and
BSS's Agents shall be conducted in such a manner as to minimize the
disruption of the Shedd Business to the extent reasonably practicable.
13.2 Shedd's Due Diligence Examination. During the Due
Diligence Period, to the extent not already delivered by BSS, BSS
shall provide to Shedd a disclosure package consisting of copies of
the following: (a) BSS's employee benefit plans and policies and
(b)BSS's Articles of Organization and By-Laws.
14. PROFESSIONAL FEES. Each of BER and Shedd shall bear the cost
of all fees, expenses and disbursements due its own attorneys, accountants
and appraisers.
15. MISCELLANEOUS PROVISIONS.
15.1 Severability. If any provision of this Agreement shall be
deemed by any court having jurisdiction thereon to be invalid or
unenforceable, the balance of this Agreement shall remain in effect;
if any provision of this Agreement shall be deemed by any such court
to be unenforceable because such provision shall be too broad in
scope, such provision shall be construed to be limited in scope to
the extent such court shall deem necessary to make it enforceable; and
if any provision shall be deemed inapplicable by any such court to any
person or circumstances, it shall nevertheless be construed to apply
to all other persons and circumstances.
15.2 Assignment. This Agreement and any rights granted
hereunder may not be assigned or otherwise transferred by any party
without the prior consent of the other parties.
15.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors and
assigns but shall not be assignable except as set forth in Section
15.2.
15.4 Entire Agreement. This Agreement contains a complete
statement of the undertakings between the parties with respect to its
subject matter, cannot be changed or terminated orally, and supersedes
all prior agreements and undertakings. There is no representation not
set forth in this Agreement (including the Schedules and Exhibits
hereto) which have been relied upon by the parties.
15.5 Notice. Any notice, approval, consent or other
communication under this Agreement shall be in writing and shall be
considered given when (1) delivered personally, or (2) mailed by
registered or certified mail, return receipt requested or (3)
transmitted by telecopy with a confirming copy sent by overnight mail
or courier service, return receipt requested, to the parties at the
addresses indicated below (or at such other address as a party may
specify by notice to the others pursuant hereto). Notice given by a
party's counsel shall be considered notice given by that party.
(a) If to BER, to it at:
172 Hubbard Avenue
Dalton, MA 01226
Attention: Robert M. Allessio, President
Telecopy No. 413-443-0546
(b) If to Shedd, to it at:
730 Tyler Street
Pittsfield, MA 01201
Telecopy No. 413-448-6255
(c) If to Darrell, to him at:
299 River Road
Worthington, MA 01098
(d) If to Warren, to him at:
7 Orchard Road
Dalton, MA 01226
(e) In each case, with a copy to:
John J. Martin, Jr., Esquire
MARTIN & OLIVEIRA, LLP
100 North Street, Suite 301
Pittsfield, MA 01201
Telecopy No. 413-445-5883
and
C. Jeffrey Cook, Esquire
CAIN, HIBBARD, MYERS & COOK, P.C.
66 West Street
Pittsfield, MA 01201
Telecopy No. 413-443-7694
15.6 Modifications. This Agreement may not be modified except
by a writing signed by all of the parties hereto.
15.7 Further Assurances.
-------------------
15.7.1 From time to time after the Closing, each party
shall, at the request of the other party, execute and deliver
such documents and take such actions as may be necessary to
implement the transactions contemplated by this Agreement.
15.7.2 Except for the Assumed Liabilities, Shedd shall
promptly pay, within 30 days of the Closing, all disclosed or
undisclosed liabilities of Shedd in existence as of the Closing
Date.
15.8 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original
and all of which taken together shall constitute one and the
same agreement.
15.9 Governing Law; Effect. This Agreement shall be
governed by and construed in accordance with the substantive law of
the Commonwealth of Massachusetts, without giving effect to the
conflicts or choice of law provisions of Massachusetts or any other
jurisdiction, and shall have the effect of a sealed instrument.
15.10 No Waiver. Each party hereto may, by written notice to
the other parties hereto: (a) extend the time for the performance of
any of the obligations or other actions of such other party under this
Agreement; (b) waive any inaccuracies in the representations,
warranties, conditions or covenants of such other party contained in
this Agreement; or (c) waive or modify performance of any of the
obligations of such other party under this Agreement. Except as
provided in the foregoing sentence, no waiver of the performance or
breach of, or default under, any condition or obligation hereof shall
be deemed to be a waiver of any other performance, or breach of, or
default under the same or any other condition or obligation of this
Agreement.
15.11 Confidentiality.
----------------
15.11.1 Confidential Information. In connection with the
transaction contemplated by this Agreement, BSS, Shedd and the
Stockholders shall be exchanging certain confidential
information regarding their respective businesses, including
financial statements, reports, summaries of operations,
projections, customer lists and information, employee lists,
policy statements and other information relating to such
businesses (collectively, "Confidential Information").
Confidential Information shall include written and oral
statements, documents and materials relating to BSS, Shedd and
the Stockholders that shall be divulged by BSS, Shedd and the
Stockholders and their agents, attorneys, accountants and
advisors or that shall otherwise come into the possession of
BSS, Shedd and the Stockholders, as the case may be. BSS, Shedd
and the Stockholders shall maintain the Confidential Information
of the other party in strict confidence. Without the prior
written authorization of BSS, Shedd and the Stockholders, as the
case may be, none of the Confidential Information shall be (a)
copied or (b) disclosed to any other party. The obligations of
the parties set forth in this Section 15.11.1 shall survive the
termination of this Agreement.
15.11.2 Confidentiality of Terms and Conditions. Each
party shall maintain confidential the terms and conditions of
this Agreement and not disclose any of such terms and conditions
to any third party without the prior written consent of the
other parties hereto.
15.12 Non-Solicitation. During the period commencing on the
date of this Agreement and ending on the Closing Date, Shedd shall not
permit or take any action to encourage, solicit, engage in discussions
or negotiations with, or provide any information to, any person, firm,
or other entity or group (other than BSS or its representatives)
concerning any merger, consolidation, sale of substantial assets,
purchase or sale of shares of capital stock or other similar
transaction involving Shedd.
15.13 Survival. This Agreement shall survive the Closing.
16. CORPORATE PLUMBER'S LICENSE. From and after the Closing
until the expiration or earlier termination of his Employment Agreement
("Darrell's Term"), Darrell shall be obligated, at no additional
compensation from BSS, to make available to BSS his master plumber's license
to support the issuance of the corporate plumber's license required for the
operation of the MC Business. If for any reason Darrell's license shall not
be available at any time during Darrell's Term, Darrell shall immediately
engage, at no additional expense to BSS, another license holder to support
BSS's corporate license so that at no time during Darrell's Term shall BSS
have to suspend operations because of lack of the required license. Darrell
shall be responsible for any legal fees, fines or penalties incurred by or
imposed against him or Shedd in connection with the action currently pending
before the Board of the State Examiners of Plumbers and Gasfitters. Darrell
acknowledges that the indemnification set forth in Section 12.1 covers this
Section 16.
17. INDEMNIFICATION FOR SHEDD LITIGATION. From and after the
Closing, at no cost to BSS, Shedd and the Stockholders shall endeavor to
resolve and dispose of each of the litigation matters described on Schedule
7.8. In all cases, Shedd and the Stockholders shall be responsible for any
settlement, fines, interest, penalties or legal fees incurred in connection
with the resolution of said matters.
18. RE-BATH AGREEMENT. From and after the Closing, Shedd and the
Stockholders shall take all action necessary to enable BSS to sell and
install Re-Bath products in the same manner as done by Shedd prior to the
Closing, including the assignment of Shedd's interest in the Dealership
Agreement dated November 1, 1993 between Re-Bath Corporation and Shedd (the
"Re-Bath Agreement") to BSS.
Signed and sealed on the date first written above.
BERKSHIRE SERVICE SOLUTIONS, INC.
By /s/ Robert M. Allessio
--------------------------------
Its President
SHEDD, INC.
By /s/ Darrell Shedd
--------------------------------
Its President
/s/ Darrell Shedd
--------------------------------
DARRELL SHEDD
/s/ Warren M. Bean
-------------------------------------
WARREN M. BEAN
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<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1999
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