<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 11, 1995
---------------
United States Filter Corporation
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-10728 33-0266015
--------------------- --------------------- ------------------
(State of other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification No.)
73-710 Fred Waring Drive, Suite 222, Palm Desert, California 92260
-----------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (619) 340-0098
--------------
<PAGE>
Item 2. Acquisition of Assets
On August 11, 1995, U.S. Filter/Ionpure, Inc. ("Buyer"), a wholly owned
subsidiary of United States Filter Corporation ("USF"), purchased substantially
all of the assets of Continental H2O Services, Inc., an Illinois corporation
d/b/a/ Interlake Water Systems ("Interlake"). The purchase was effected pursuant
to an Asset Purchase Agreement dated as of August 10, 1995 (the "Purchase
Agreement") among Interlake, Buyer and the Stockholders of Interlake, Florence
E. Stockdale, James Timothy Stockdale, William E. Stockdale III, John
Christopher Stockdale, Melody S. Williamson and Katherine S. Price (the
"Stockholders"). The transaction will be accounted for as a purchase, effective
July 31, 1995 (the "Closing Date").
The purchase price for the acquisition of the Interlake assets is
$27,000,000 (the "Purchase Price"), plus the assumption of those specified
liabilities of Interlake as set forth in the Purchase Agreement.
The Purchase Price comprises $20,000,000 in cash and 334,628 shares of USF
common stock, $.01 par value per share ("Common Stock"), of which a portion was
placed in escrow. The amount and form of the Purchase Price is subject to
certain post closing adjustments, including an adjustment, upward or downward,
based upon the "Net Tangible Book Value of the Purchased Assets" (as defined in
the Purchase Agreement) on the Closing Date. A portion of the Purchase Price
held in escrow comprises the consideration for certain real estate of Interlake
initially being leased to Buyer by Interlake and as to which Interlake has
undertaken to seek to obtain a zoning variance required to permit the present
industrial activities of Interlake at that site. The shares of Common Stock held
in escrow are held to satisfy a Purchase Price decrease, if any, and to satisfy
the Buyer's rights of indemnification under the Purchase Agreement.
USF has agreed, at the request of Stockholders holding at least 200,000
shares of Common Stock, to use its best efforts to register such Stockholders'
shares for resale under the Securities Act of 1933, as amended. The Stockholders
also have the right to have their shares included (subject to certain
limitations) in any registration of Common Stock otherwise effected by USF for
its own account or for the account of others, other than a registration relating
to any employee benefit plan or a merger, reclassification or other business
combination transaction.
2
<PAGE>
Interlake supplies a broad range of water treatment products, systems and
services to industrial customers throughout Ohio, Indiana, Michigan, Illinois
and Wisconsin. Interlake has 165 employees and 14 sales and service locations,
including two ion exchange resin regeneration plants, one near Chicago and a
second near Detroit. Interlake's revenues for the year ended December 31, 1994
were approximately $21 million.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business acquired:
Independent Auditors' Report;
Combined Balance Sheets as of December 31, 1994 and June 30, 1995
(unaudited);
Combined Statements of Operations for the year ended December 31,
1994 and six months ended June 30, 1995 (unaudited);
Combined Statement of Stockholders' Equity;
Combined Statement of Cash Flows;
Notes to Combined Financial Statements.
(b) Pro Forma Financial Information:
Pro Forma combined balance sheet, statements of operations and
notes thereto.
(c) Exhibit:
1.0 Asset Purchase Agreement dated August 10, 1995, by and among
Continental H2O Services, Inc., d/b/a/ Interlake Water Systems,
U.S. Filter/Ionpure, Inc. and Florence E. Stockdale, James
Timothy Stockdale, William E. Stockdale III, John Christopher
Stockdale, Melody S. Williamson and Katherine S. Price.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNITED STATES FILTER CORPORATION
By: /s/ KEVIN L. SPENCE
-------------------------------------
Kevin L. Spence
Vice President
Date: August 25, 1995
4
<PAGE>
CONTINENTAL H/2/O SERVICES, INC. AND
EVANSVILLE WATER CORPORATION
d/b/a INTERLAKE WATER SYSTEMS
Independent Auditors' Report
Board of Directors and Stockholders
Continental H/2/O Services, Inc. and
Evansville Water Corporation:
We have audited the accompanying combined balance sheet of Continental H/2/O
Services, Inc. and Evansville Water Corporation (d/b/a Interlake Water
Systems) as of December 31, 1994, and the related combined statements of
operations, stockholders' equity, and cash flows for the year then ended.
These combined financial statements are the responsibility of Interlake's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined financial statements were prepared as described in
note 1 and are not intended to be a complete presentation of Interlake Water
Systems' assets, liabilities, revenues, and expenses.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Continental H/2/O
Services, Inc. and Evansville Water Corporation (d/b/a Interlake Water
Systems) as of December 31, 1994 and the results of its operations and cash
flows for the year then ended in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
June 29, 1995
5
<PAGE>
CONTINENTAL H/2/O SERVICES, INC. AND
EVANSVILLE WATER CORPORATION
d/b/a INTERLAKE WATER SYSTEMS
Combined Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1994 1995
------------ -----------
(unaudited)
Assets
<S> <C> <C>
Current assets:
Cash................................................. $ -- 711,174
Accounts receivable--trade, less allowance for
doubtful accounts of $40,000 in 1994 and
1995 (unaudited).................................... 4,695,633 3,931,487
Inventories.......................................... 1,375,104 1,126,269
Prepaid expenses..................................... 168,758 70,703
Deposits............................................. 10,605 10,948
----------- ----------
Total current assets............................... 6,250,100 5,850,581
----------- ----------
Property, plant and equipment at cost:
Land................................................ 55,105 55,105
Buildings........................................... 639,515 639,515
Building improvements............................... 50,592 50,592
Machinery and equipment............................. 5,834,695 6,045,766
Furniture and fixtures.............................. 343,625 345,767
Leased systems...................................... 719,736 872,925
Leasehold improvements.............................. 281,776 285,594
Computer equipment.................................. 657,117 691,505
Vehicles............................................ 1,176,645 1,161,645
----------- ----------
9,758,806 10,148,414
Less accumulated depreciation and amortization...... 5,519,278 5,867,030
----------- ----------
Net property, plant, and equipment.................... 4,239,528 4,281,384
----------- ----------
$10,489,628 10,131,965
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable--trade............................... $ 539,901 411,878
Accrued expenses:
Salaries, wages, and vacation pay................... 616,207 378,953
Profit sharing plan contribution.................... 467,219 467,219
Taxes other than income taxes....................... 29,294 25,910
Other............................................... 73,205 30,721
----------- ----------
Total current liabilities......................... 1,725,826 1,314,681
----------- ----------
Stockholders' equity.................................. 8,763,802 8,817,284
----------- ----------
$10,489,628 10,131,965
=========== ==========
</TABLE>
See accompanying notes to combined financial statements.
6
<PAGE>
CONTINENTAL H/2/O SERVICES, INC. AND
EVANSVILLE WATER CORPORATION
d/b/a INTERLAKE WATER SYSTEMS
Combined Statements of Operations
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, June 30,
1994 1995
------------ ----------
(unaudited)
<S> <C> <C>
Net sales........................................ $21,596,392 $9,750,280
Cost of sales.................................... 12,136,731 5,418,270
----------- ----------
Gross profit..................................... 9,459,661 4,332,010
----------- ----------
Operating expenses:
Selling........................................ 1,988,796 978,711
General and administrative..................... 4,777,672 2,422,810
----------- ----------
Total operating expenses......................... 6,766,468 3,401,521
----------- ----------
Income from operations........................... 2,693,193 930,489
Other expenses--net.............................. (70,061) (6,041)
----------- ----------
Net income..................................... $ 2,623,132 $ 924,448
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
CONTINENTAL H/2/O SERVICES, INC. AND
EVANSVILLE WATER CORPORATION
d/b/a INTERLAKE WATER SYSTEMS
Combined Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Year Ended
December 31, 1994
-----------------
<S> <C>
Balance December 31, 1993..................................... $6,812,808
Stockholder distributions..................................... (672,138)
Net income.................................................... 2,623,132
----------
Balance December 31, 1994..................................... 8,763,802
==========
</TABLE>
See accompanying notes to combined financial statements.
8
<PAGE>
CONTINENTAL H/2/O SERVICES, INC. AND
EVANSVILLE WATER CORPORATION
d/b/a INTERLAKE WATER SYSTEMS
Combined Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended
December 31,
1994
------------
<S> <C>
Cash flows from operating activities:
Net income...................................................... $2,623,132
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.................................................. 889,358
Loss on sale of equipment..................................... 3,169
Changes in assets and liabilities:
Accounts receivable......................................... (1,070,447)
Inventories................................................. 171,975
Prepaid expenses and deposits............................... (59,717)
Accounts payable............................................ (1,023,992)
Accrued expenses............................................ 223,017
----------
Net cash provided by operating expenses........................... 1,756,495
----------
Cash flows from investing activities:
Expenditures for property, plant, and equipment................. (1,093,807)
Proceeds from sales of equipment................................ 9,450
----------
Net cash used in investing activities............................. (1,084,357)
----------
Cash flows used in financing activities--stockholder distribution. (672,138)
----------
Net increase in cash.............................................. --
Cash at beginning of the year..................................... --
----------
Cash at end of the year........................................... $ --
==========
</TABLE>
See accompanying notes to combined financial statements.
9
<PAGE>
CONTINENTAL H/2/O SERVICES, INC. AND
EVANSVILLE WATER CORPORATION
d/b/a INTERLAKE WATER SYSTEMS
Notes to Combined Financial Statements
December 31, 1994
(1) Operations and Basis of Presentation
Operations
Continental H2O Services, Inc. (an Illinois corporation) and Evansville
Water Corporation (an Indiana corporation) (together known as Interlake)
assemble, distribute, and service water purification systems. The companies
are related by reason of common ownership.
Basis of Presentation
The management of Interlake has signed a letter of intent to sell
substantially all of the assets of Interlake to a third party. Based on
preliminary negotiations, certain assets (principally real estate), certain
liabilities (principally a line of credit), and all of the assets and
liabilities of the environmental division of Continental H2O Services, Inc.
would be excluded from the sale. The accompanying combined financial
statements exclude these items. Consequently, these combined financial
statements are not intended to be a complete presentation of Interlake's
assets, liabilities, revenues and expenses.
(2) Summary of Significant Accounting Policies
Inventories
Inventories consist of various parts and service supplies which are valued
at the lower of cost or market. Cost is determined on a first-in, first-out
(FIFO) basis.
Property, Plant, and Equipment
Depreciation is provided on both accelerated and straight-line methods over
the estimated useful lives of the related assets. The lives generally used are
as follows:
<TABLE>
<S> <C>
Buildings................................................... 31.5-45 years
Building improvements....................................... 15-31 years
Machinery and equipment..................................... 5-10 years
Furniture and fixtures...................................... 5-10 years
Leasehold improvements...................................... 20 years
Computer equipment and vehicles............................. 3-5 years
</TABLE>
Expenditures for maintenance, repairs, renewals, and betterments, which do
not materially prolong the useful lives of the assets, are charged to
operations as incurred. Leasehold improvements are amortized on the straight-
line method over the lesser of their estimated useful lives or the related
lease term. The cost of property retired or sold and the related accumulated
depreciation are removed from the accounts and the resulting gain or loss is
reflected in operations currently.
10
<PAGE>
CONTINENTAL H/2/O SERVICES, INC. AND
EVANSVILLE WATER CORPORATION
d/b/a INTERLAKE WATER SYSTEMS
Notes to Combined Financial Statements--(Continued)
December 31, 1994
Accounts Payable
Accounts payable at December 31, 1994 consists primarily of checks issued
in excess of cash in bank.
Income Taxes
Continental H2O Services, Inc. and Evansville Water Corporation have elected
to be taxed as small business corporations and as such are not subject to
corporate Federal income tax, which is instead paid at the stockholder level.
Various state and local income taxes remain applicable and are included in
general and administrative expenses in the accompanying combined statement of
operations.
(3) Related-party Transactions
The following transactions have occurred between Interlake and certain
officers, stockholders, and other related parties:
(a) Interlake leases a facility under a rental agreement from an
officer/stockholder. Rental payments totaled $111,720 for 1994.
(b) Interlake sold certain inventory and related services to two related
companies (related by common ownership). Inventory and services sold
totaled $92,720 for 1994. Interlake also purchased inventory and
related services from the related companies. Total purchases for 1994
totaled $10,838.
(4) Commitments
Interlake leases eight (8) separate office and operating facilities in
various states under operating leases with terms expiring at various dates
through 1999. Certain of the leases are subject to rent escalations, real
estate tax adjustment, insurance, and maintenance costs. Interlake also leases
ten (10) separate vehicles under operating leases with terms expiring at
various dates through 1999. Future minimum annual rentals at December 31, 1994
on these noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Ended Officer/ Third
December 31, Stockholder Party Total
------------ ----------- -------- --------
<S> <C> <C> <C>
1995....................................... $111,720 $170,138 $281,858
1996....................................... 111,720 136,367 248,087
1997....................................... 111,720 110,401 222,121
1998....................................... 102,410 79,617 182,027
1999....................................... -- 28,707 28,707
-------- -------- --------
$437,570 $525,230 $962,800
======== ======== ========
</TABLE>
Total rent and lease expense was $414,596 in 1994.
(5) Employee Benefit Plan
Interlake participates in a trustee contributory profit sharing plan (Plan).
The Plan covers all eligible full-time employees. Contributions to the Plan
are at Interlake's discretion and were $467,219 in 1994.
11
<PAGE>
CONTINENTAL H/2/O SERVICES, INC. AND
EVANSVILLE WATER CORPORATION
d/b/a INTERLAKE WATER SYSTEMS
Notes to Combined Financial Statements--(Continued)
December 31, 1994
(6) Credit Concentration
Interlake provides credit to customers in the normal course of business. No
customer accounted for more than 5% of net sales during 1994.
(7) Combined Equity
Equity of $8,763,802 on the combined statement of stockholders' equity
consisted of the following at December 31, 1994:
<TABLE>
<S> <C>
Common stock................................................... $ 96,450
Retained earnings.............................................. 8,667,352
----------
$8,763,802
==========
</TABLE>
At December 31, 1994 there were 100,000 shares of common stock authorized at
$25 per share par value with 1,458 shares issued and outstanding for
Continental H2O Services, Inc. and there were 10,000 shares common stock
authorized at no par value with 500 shares issued and outstanding for
Evansville Water Corporation.
(8) Unaudited Financial Information
The combined financial statements for the six months ended June 30, 1995 are
unaudited. In the opinion of management, all adjustments, consisting only of
normal recurring items, considered necessary for a fair presentation have been
included. Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted from the interim combined
financial statements. The results of operations for the six months ended June
30, 1995 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1995.
12
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial data presents the Pro Forma
Combined Balance Sheet at June 30, 1995, giving effect to the acquisition of
Interlake as if it had been consummated on that date. Also presented are the Pro
Forma Combined Statements of Operations for the fiscal year ended March 31, 1995
and the three months ended June 30, 1995, after giving effect to the acquisition
of Interlake which acquisition was consummated on August 10, 1995, as if it had
been consummated as of the beginning of the respective periods presented. The
Company's fiscal year ends on March 31 and Interlake's fiscal year ends on
December 31. Pro Forma data for the year ended March 31, 1995 combines the
results of the Company with the results of Interlake for the year ended December
31, 1994, and the pro forma data for the three months ended June 30, 1995
combines the results of the Company and Interlake for such three-month period,
which results are not included in the Company's historical results for such
period.
The pro forma data is based on the historical combined statements of the Company
and Interlake giving effect to the acquisition under the purchase method of
accounting and the assumptions and adjustments outlined in the accompanying
Notes to Pro Forma Combined Financial Information. Under the purchase method of
accounting, assets acquired and liabilities assumed will be recorded at their
estimated fair value at the date of acquisition. The pro forma adjustments set
forth in the following unaudited pro forma combined financial data are estimates
and may differ from the actual adjustments when they become known.
The following unaudited pro forma combined financial data does not reflect
certain cost savings that management believes may be realized following the
acquisitions. These savings are expected to be realized primarily through
rationalization of operations and implementation of strict cost controls and
standardized operating procedures. Additionally, the Company believes the
acquisition will enable it to continue to achieve economies of scale, such as
enhanced purchasing power and increased asset utilization. No assurance can be
made as to the amount of cost savings, if any, that actually will be realized.
The pro forma data is provided for comparative purposes only. It does not
purport to be indicative of the results that actually would have occurred if the
acquisition of Interlake had been consummated on the dates indicated or that may
be obtained in the future. The pro forma combined financial data should be read
in conjunction with the notes thereto and the audited financial statements of
Interlake and the notes thereto included elsewhere herein, and the audited
consolidated financial statements of the Company and the notes thereto filed in
its report on Form 10-K for the year ended March 31, 1995.
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
June 30, 1995
--------------------------------------------------------------------------------
Pro Forma
---------------------------------------------
Historical Adjustments
----------------------------- Increase Adjustments
Company Interlake (Decrease) Reference Combined
------------ ------------ ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash $ 5,712 $ 711 $ (300) a(i) $ 6,123
Short-term investments 5,397 - $ 5,397
Accounts receivable, net 109,373 3,931 113,304
Cost and estimated earnings in excess
of billings on uncompleted contracts 30,984 - 30,984
Inventories 41,817 1,126 42,943
Prepaid expenses 9,464 71 9,535
Deferred taxes 3,482 - 3,482
Other current assets 8,849 12 8,861
-------- ------- --------
Total current assets 215,078 5,851 220,629
-------- ------- --------
Property, plant and equipment, net 125,026 4,281 129,307
Investment in leasehold interest, net 20,930 - 20,930
Cost in excess of net assets of
businesses acquired, net 133,384 - 18,483 a(ii) 151,867
Other assets 18,355 - 18,355
-------- ------- --------
$512,773 $10,132 $541,088
======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,464 $ 412 $ 41,876
Accrued liabilities 46,842 903 47,745
Current portion of long-term debt 1,950 - 1,950
Notes payable 30,114 - 30,114
Billings in excess of costs and estimated
earnings on uncompleted contracts 13,947 - 13,947
Other current liabilities 10,231 - 10,231
-------- ------- --------
Total current liabilities 144,548 1,315 145,863
-------- ------- --------
Long-term debt, excluding current portion 9,165 - 20,000 a(iii) 29,165
Convertible subordinated debentures 105,000 - 105,000
Deferred taxes 8,028 - 8,028
Other liabilities 4,414 - 4,414
-------- ------- --------
Total liabilities 271,155 1,315 292,470
-------- ------- --------
Shareholders' equity:
Convertible preferred stock 24,712 - 24,712
Common stock 222 - 3 a(i) 225
Additional paid-in capital 230,591 8,817 (1,820) a(i),b 237,588
Translation adjustment 947 - 947
Accumulated deficit (14,854) - (14,854)
-------- ------- --------
Total shareholders' equity 241,618 8,817 248,618
-------- ------- --------
$512,773 $10,132 $541.088
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial data.
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, 1995
--------------------------------------------------------------------------------
Pro Forma
---------------------------------------------
Historical Adjustments
----------------------------- Increase Adjustments
Company Interlake (Decrease) Reference Combined
------------ ------------ ----------- ------------ --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $272,032 $21,596 $293,628
Cost of sales 193,432 12,137 205,569
-------- ------- --------
Gross profit 78,600 9,459 88,059
Selling, general and administrative
expenses 64,015 6,766 450 c(i) 71,231
-------- ------- --------
Operating income 14,585 2,693 16,828
-------- ------- --------
Other income (expense):
Interest expense (5,384) - 1,800 c(ii) (7,184)
Other 1,787 (70) 1,717
-------- ------- --------
(3,597) (70) (5,467)
-------- ------- --------
Income before income taxes 10,988 2,623 11,361
Provision for income taxes 2,657 - 100 c(iii) 2,757
-------- ------- --------
Net income $ 8,331 $ 2,623 $ 8,604
======== ======= ========
Net income per common share $ 0.51 $ 0.51
======== ========
Weighted average number of shares
outstanding 15,026 15,361
======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial data.
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1995
--------------------------------------------------------------------------------
Pro Forma
---------------------------------------------
Historical Adjustments
----------------------------- Increase Adjustments
Company Interlake (Decrease) Reference Combined
------------ ------------ ----------- ------------ --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $ 91,539 $ 5,367 $ 96,906
Cost of sales 63,665 3,218 66,883
-------- ------- --------
Gross profit 27,874 2,149 30,023
Selling, general and administrative
expenses 21,626 1,546 114 c(i) 23,286
-------- ------- --------
Operating income 6,248 603 6,737
-------- ------- --------
Other income (expense):
Interest expense (2,435) - 450 c(ii) (2,885)
Other 726 - 726
-------- ------- --------
(1,709) - (2,159)
-------- ------- --------
Income before income taxes 4,539 603 4,578
Provision for income taxes 1,180 - 10 c(iii) 1,190
-------- ------- --------
Net income $ 3,359 $ 603 $ 3,388
======== ======= ========
Net income per common share $ 0.16 $ 0.16
======== ========
Weighted average number of shares
outstanding 20,002 20,337
======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial data.
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
a. The pro forma combined balance sheet has been prepared to reflect the
acquisition of Interlake for an aggregate estimated purchase price of
$27,300,000, comprised of the following:
Cash 20,000,000
Common stock 7,000,000
Estimated transaction costs 300,000
----------
27,300,000
==========
The estimated tangible net assets, as adjusted, of Interlake is assumed to
be $8,817,000. The difference between the estimated purchase price and the
estimated fair values of the net assets of Interlake is approximately
$18,483,000, which has been recorded as costs in excess of net assets of
businesses acquired attributable to the acquisition in the accompanying pro
forma combined balance sheet.
The pro forma combined balance sheet has been adjusted to reflect the above
as follows:
(i) To record the issuance of common stock and estimated transaction costs
related to the acquisitions of Interlake;
(ii) To adjust goodwill for the difference between the estimated purchase
prices and the estimated fair values of the net assets acquired;
(iii) To record the assumed incurrence of $20,000,000 of indebtedness with
an interest rate of 9% to consummate the acquisition.
b. The pro forma combined balance sheet has been adjusted to eliminate the
equity of Interlake.
<PAGE>
c. For the fiscal year ended March 31, 1995, the historical results of
operations of Interlake reflects their operation for the twelve months ended
December 31, 1994. The pro forma data for the three months ended June 30, 1995
combines the results of each of the Company and Interlake for such three-month
period. The pro forma combined statements of operations give effect to the
following pro forma adjustments as follows:
<TABLE>
<CAPTION>
Fiscal Year Three Months
Ended Ended
March 31, June 30,
1995 1995
----------- ------------
(In thousands)
<S> <C> <C>
(i) To adjust selling, general and
administrative expense for goodwill
amortization, which goodwill will be
amortized over 40 years. 450 114
====== ====
(ii) To adjust interest expense related to
the indebtedness that will be incurred
to finance the acquisition. Interest
on the indebtedness is assumed to be
at an effective rate of 9% per annum. $1,800 $450
====== ====
(iii) To adjust the provision for income
taxes to reflect the combined results
of operations. $ 100 $ 10
====== ====
</TABLE>
<PAGE>
Exhibit 1.0
ASSET PURCHASE AGREEMENT
Dated August 10, 1995
by and among
CONTINENTAL H2O SERVICE, INC.
d/b/a INTERLAKE WATER SYSTEMS,
U.S. FILTER/IONPURE, INC.
and
FLORENCE E. STOCKDALE,
JAMES TIMOTHY STOCKDALE,
WILLIAM E. STOCKDALE III,
JOHN CHRISTOPHER STOCKDALE,
MELODY S. WILLIAMSON and
KATHARINE S. PRICE
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
THE TRANSACTION
1.01. Sale and Purchase of Assets........................................... 1
1.02. Retained Assets....................................................... 3
1.03. Assumption of Liabilities............................................. 3
1.04. Retained Liabilities.................................................. 4
1.05. Purchase Price........................................................ 6
1.06. Closing............................................................... 6
1.07. Payment of Purchase Price............................................. 7
(a) At Closing..................................................... 7
(b) After Closing.................................................. 8
1.08. Escrow................................................................ 8
(a) Establishment.................................................. 8
(b) Post-Closing Purchase Price Adjustment......................... 8
(c) Distribution to Stockholders; Indemnification.................. 8
1.09. Post-Closing Purchase Price Adjustment................................ 9
(a) Determination.................................................. 9
(b) Minimum Adjustment............................................. 9
1.10. Financial Statements.................................................. 9
(a) Year-End Financial Statements.................................. 9
(b) Preliminary Closing Balance Sheet.............................. 9
(c) Delivery of Preliminary Closing Balance Sheet.................. 10
(d) Arbitration.................................................... 10
(e) Certain Definitions............................................ 10
1.11. Allocation of Purchase Price.......................................... 10
1.12. Passage of Title...................................................... 11
1.13. Certain Consents...................................................... 11
1.14. Detroit Real Estate................................................... 11
(a) Generally...................................................... 11
(b) Zoning Map Amendment........................................... 12
(c) Lease of the Detroit Real Estate............................... 12
(d) Termination of Detroit Real Estate Lease....................... 12
(e) Certain Covenants of Seller.................................... 13
(f) Certain Conditions............................................. 13
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<PAGE>
Page
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
2.01. Capacity............................................................. 14
2.02. Enforceability....................................................... 14
2.03. No Violation of Laws or Agreements; Consents......................... 14
2.04. Ownership of Seller.................................................. 15
2.05. Investment Representation............................................ 15
2.06. Accredited Investor Status........................................... 15
2.07. Finders' Fee......................................................... 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
3.01. Organization......................................................... 15
3.02. Authorization; Enforceability........................................ 15
3.03. Subsidiaries and Investments......................................... 16
3.04. No Violation of Laws or Agreements; Consents......................... 16
3.05. Financial Information................................................ 16
(a) Records...................................................... 16
(b) Financial Statements......................................... 16
3.06. No Changes........................................................... 17
3.07. Taxes................................................................ 17
3.08. Title................................................................ 18
3.09. Inventory............................................................ 18
3.10. Receivables.......................................................... 18
3.11. Business; Condition of Assets........................................ 18
3.12. No Pending Litigation or Proceedings................................. 19
3.13. Contracts; Compliance................................................ 19
3.14. Permits; Compliance With Law......................................... 19
3.15. Real Property........................................................ 20
3.16. Transactions With Related Parties.................................... 20
3.17. Labor Relations...................................................... 21
3.18. Products Liability; Warranties....................................... 21
3.19. Insurance............................................................ 21
3.20. Intellectual Property Rights......................................... 21
3.21. [Not Used]........................................................... 22
3.22. Environmental Matters................................................ 22
(a) Compliance; No Liability..................................... 22
(b) Treatment; CERCLIS........................................... 22
(c) Notices; Existing Claims; Certain Regulated Materials;
Storage Tanks............................................... 23
(d) No Notices................................................... 23
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<PAGE>
Page
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3.23. Customer Relations................................................... 23
3.24. Finders' Fees........................................................ 23
3.25. Disclosure........................................................... 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.01. Organization......................................................... 23
4.02. Authorization; Enforceability......................................... 24
4.03. No Violation of Laws; Consents....................................... 24
4.04. No Pending Litigation or Proceedings................................. 24
4.05. Capitalization....................................................... 24
4.06. SEC Filings.......................................................... 25
4.07. Authorization of USF Common Shares................................... 25
4.08. Finders' Fees........................................................ 25
4.09. Form S-3............................................................. 25
ARTICLE V
CERTAIN COVENANTS
5.01. Conduct of Business Pending Closing.................................. 25
(a) Ordinary Course; Compliance................................... 25
(b) Transactions.................................................. 25
(c) Access, Information and Documents............................. 26
5.02. Publicity............................................................ 26
5.03. Fulfillment of Agreements............................................ 26
5.04. Certain Transitional Matters......................................... 26
(a) Collection of Accounts Receivables............................ 26
(b) Endorsement of Checks......................................... 26
(c) Remit Funds................................................... 26
(d) Assumed Liabilities Controlled by Buyer....................... 26
(e) Use of Names.................................................. 27
(f) Insurance..................................................... 27
(g) Assistance.................................................... 27
5.05. No Solicitation of the Employees of the Business..................... 27
5.06. Seller's Employees................................................... 27
5.07. Severance and Termination Payments................................... 27
5.08. Certain Employee Benefit Matters..................................... 28
5.09. Profit Sharing Plan.................................................. 28
5.10. Workers' Compensation and Disability Claims.......................... 29
(a) Seller's Liability............................................ 29
(b) Buyer's Liability............................................. 29
5.11. Lease Arrangement.................................................... 29
5.12. Covenant Not to Compete.............................................. 29
(a) Restriction................................................... 29
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Page
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(b) Enforcement.................................................. 29
5.13. Acquisition Proposals................................................ 30
5.14. Confidentiality...................................................... 30
5.15. Occupancy of Enviropure.............................................. 30
5.16. Right of Inspection.................................................. 30
5.17. Merger of Evansville................................................. 30
5.18. Dividends............................................................ 30
ARTICLE VI
CONDITIONS TO CLOSING; TERMINATION
6.01. Conditions Precedent to Obligation of Buyer.......................... 31
(a) Bringdown of Representations and Warranties; Covenants....... 31
(b) Litigation................................................... 31
(c) No Material Adverse Change................................... 31
(d) Closing Certificate.......................................... 31
(e) Indemnity Escrow Agreement................................... 31
(f) Lease Agreements............................................. 31
(g) Evansville Merger............................................ 31
(h) Consents..................................................... 31
(i) Option Agreement...................................... 32
(j) Private Placement............................................ 32
(k) Listing of USF Common Shares................................. 32
(l) USF Common Share Value................................ 32
(m) [Not used................................................... 32
(n) Title Insurance.............................................. 32
(o) Surveys...................................................... 32
(p) Other Deliveries............................................. 32
(q) Closing Documents............................................ 33
6.02. Conditions Precedent to Obligation of Seller......................... 33
(a) Bringdown of Representations and Warranties; Covenants....... 33
(b) Litigation................................................... 33
(c) Closing Certificate.......................................... 33
(d) No Material Adverse Change................................... 33
(e) Listing of USF Common Shares................................. 34
(f) Indemnity Escrow Agreement................................... 34
(g) Lease Agreements............................................. 34
(h) Option Agreement............................................. 34
(i) USF Common Share Value................................ 34
(j) Closing Documents............................................ 34
(k) [Not Used................................................... 34
6.03. Deliveries and Proceedings at Closing................................ 34
(a) Deliveries by Seller and the Stockholders.................... 34
(b) Deliveries by Buyer......................................... 35
6.04. Termination.......................................................... 36
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<PAGE>
Page
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.01. Survival of Representations.......................................... 36
7.02. Indemnification by Seller............................................ 37
7.03. Indemnification by Stockholders...................................... 37
7.04. Indemnification by Buyer............................................. 37
7.05. Limitation of Liability.............................................. 38
(a) Basket....................................................... 38
(b) Time Period.................................................. 38
(c) Fraud; Intentional Misrepresentation......................... 38
(d) Limitation of Liability...................................... 38
(e) No Duplication............................................... 38
7.06. Indemnity Escrow..................................................... 39
7.07. Notice of Claims..................................................... 39
7.08. Third Party Claims................................................... 39
7.09. Set Off.............................................................. 40
7.10. Waiver............................................................... 40
7.11. Contract Indemnification Remedies as Exclusive Remedies After
the Closing......................................................... 40
ARTICLE VIII
MISCELLANEOUS
8.01. Construction......................................................... 41
8.02. Costs and Expenses................................................... 41
8.03. Pro Rata Basis; Allocated Basis...................................... 41
8.04. Stockholders' Committee.............................................. 42
(a) Creation..................................................... 42
(b) Continuance; Certain Rules................................... 42
(c) Buyer Reliance............................................... 42
8.05. Anti-Dilution Provisions............................................. 42
8.06. Further Assurances................................................... 42
8.07 Notices.............................................................. 43
8.08. Currency............................................................. 44
8.09. Residency............................................................ 44
8.10. Offset; Assignment; Governing Law.................................... 44
8.11. Amendment and Waiver; Cumulative Effect.............................. 44
8.12. Entire Agreement; No Third Party Beneficiaries....................... 44
8.13. Severability......................................................... 44
8.14. Counterparts......................................................... 45
- v -
<PAGE>
Asset Purchase Agreement ("Agreement") dated as of August
10, 1995, by and among Continental H20 Service, Inc., an
Illinois corporation d/b/a Interlake Water Systems
("Seller'); U.S. Filter/Ionpure, Inc., a Massachusetts
corporation ("Buyer"); and Florence E. Stockdale, James
Timothy Stockdale, William E. Stockdale III, John
Christopher Stockdale, Melody S. Williamson and Katherine
S. Price (collectively, the "Stockholders").
The Stockholders own all of the outstanding capital stock of Seller.
Seller desires to sell and transfer to Buyer, and Buyer desires to purchase from
Seller, certain of Seller's assets and assume certain of Seller's liabilities on
the terms and subject to the conditions set forth below. Certain of the
Stockholders own a majority of the outstanding capital stock of Evansville Water
Systems, Inc., an Indiana corporation ("Evansville"), and have rights to
purchase the remaining outstanding shares of capital stock of Evansville. Prior
to the closing hereunder, such Stockholders will merge Evansville into Seller
for the purpose of including the assets of Evansville in the sale contemplated
hereby. All representations, warranties and covenants relating to Seller and
other references to Seller herein are deemed to include Evansville.
In consideration of the representations, warranties, covenants and
agreements contained herein, Seller, Buyer and the Stockholders, each intending
to be legally bound hereby, agree as set forth below.
ARTICLE I
THE TRANSACTION
1.01. Sale and Purchase of Assets. At the Closing, Seller shall sell and
---------------------------
transfer to Buyer, and Buyer shall purchase from Seller, all of Seller's
properties and business as a going concern and assets of every kind, nature and
description existing as of the Closing Date, wherever such assets are located
and whether real, personal or mixed, tangible or intangible, and whether or not
any of such assets have any value for accounting purposes or are carried or
reflected on or specifically referred to in its books or financial statements,
except those assets specifically retained by Seller pursuant to Section 1.02,
------------
free of any debt, mortgage, deed of trust, pledge, security interest,
encumbrance, option, right of first refusal, agreement of sale, easement, lien,
assessment, restrictive covenant or encroachment of any kind or nature
whatsoever (collectively, "Encumbrances"), except those Encumbrances identified
on Schedule 3.08. Without limiting the foregoing, the properties, business,
-------------
goodwill and assets of Seller to be transferred hereunder are referred to herein
collectively as the "Purchased Assets" and include the following:
(a) All of Seller's rights as lessee to those real properties
described in Schedule 1.01(a);
----------------
(b) All of Seller's machinery, equipment, tooling, dies, jigs,
spare parts and supplies, including the items identified on Schedule 1.01(b);
----------------
<PAGE>
(c) All of Seller's inventories of raw materials,
work-in-process, parts, subassemblies and finished goods, wherever located and
whether or not obsolete or carried on Seller's books of account, including the
items identified on Schedule 1.01(c);
----------------
(d) All of Seller's other tangible assets, including office
furniture, office equipment and supplies, computer hardware and software,
leasehold improvements and vehicles, including the items identified on Schedule
--------
1.01(d);
-------
(e) All of Seller's service deionization assets at its
facilities and at its customers, facilities, including the items identified on
Schedule 1.01(e);
---------------
(f) All of Seller's cash, cash in banks, cash equivalents, bank
and mutual fund accounts, trade and other notes and accounts receivable,
deposits, investments, securities, advance payments, prepaid items and expenses,
deferred charges, rights of offset and credits and claims for refund;
(g) All of Seller's books, records, manuals, documents, books of
account, correspondence, sales and credit reports, customer lists, literature,
brochures, advertising material and the like;
(h) All of Seller's rights under personal property, and all of
Seller's rights under all other leases, contracts, agreements and purchase and
sale orders, including the Contracts identified on Schedule 3.13;
-------------
(i) All of Seller's claims, choses in action, causes of action
and judgments;
(j) All of Seller's rights under the Asset Purchase Agreement
dated October 2, 1991 between Seller and Peck Water Systems, an Ohio
corporation, and all other documents and agreements executed in connection
therewith, including, the Agreement Not to Compete dated September 30, 1991
between Philip E. Peckinpaugh and Seller, the Release dated April 6, 1995 of
Philip E. Peckinpaugh and the Release dated APril 6, 1995 of Peck Water Systems;
(k) All of Seller's rights in and to the name "Continental",
"Continental H\\2\\O Service, Inc.", "Interlake", "Interlake Water Systems",
"Peck", and "Evansville" and in any other tradename, trademark, fictitious name
or service mark, or any variant of any of them, and any applications therefor or
registrations thereof, and any other forms of intellectual property or
industrial property rights, including any patents, trade secrets or proprietary
manufacturing processes, including the items identified on Schedule 3.20;
-------------
(l) All of Seller's goodwill; and
(m) To the extent not described above, all of the assets to be
reflected on the Audited Year-End Balance Sheet (as defined in Section 1.10(e)),
---------------
the combined interim balance sheet of Seller and Evansville at June 30, 1995
attached as Exhibit A (the "Interim Balance Sheet"), the Closing Balance Sheet
---------
(as defined in Section 1.10(e)) and all assets acquired by Seller and Evansville
---------------
after June 30, 1995, but excluding assets that were
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<PAGE>
disposed of in the ordinary course of business not in violation of the
representations and warranties set forth in Section 3.06.
------------
The Detroit Real Estate shall be included in the Purchased Assets but shall be
conveyed in the manner, at such time and subject to the terms and conditions set
forth in Section 1.14.
------------
1.02. Retained Assets. Notwithstanding the foregoing, Seller shall retain
---------------
and the Purchased Assets shall not include the following assets (collectively,
the "Retained Assets"):
(a) the consideration to be delivered to Seller pursuant to this
Agreement;
(b) Seller's other rights hereunder;
(c) Seller's minute book, stock book and seal;
(d) except as provided in Sections 5.07, 5.08 and 5.09, all of
----------------------------
Seller's assets directly relating to all of Seller's Benefit Plans (as defined
in Section 5.08);
------------
(e) Seller's interest in the real estate and improvements
identified on Schedule 1.02(e);
----------------
(f) those agreements described in Schedule 1.02(f);
----------------
(g) any benefit, claim or receivable of Seller or the
Stockholders for any foreign, federal, state or local income, franchise, sales,
transfer, withholding or other tax of any kind or nature whatsoever;
(h) accounts receivable due from any Affiliate (as defined in
Section 3.16) of Seller;
------------
(i) all claims, choses in action, causes of action and
judgments in respect of any litigation matter identified on Schedule 3.12;
-------------
(j) those certain assets described in Schedule 1.02(i);
----------------
(k) Seller's right, title and interest in and to the life
insurance policies purchased on the lives of certain officers and other
employees; and
(l) any of Seller's records that relate exclusively to any of
the foregoing.
1.03. Assumption of Liabilities. Subject to Sections 5.07, 5.08, 5.09,
------------------------- -------------------------
5.10 and 8.02, at the Closing, Buyer shall pursuant to an assumption agreement
---- ----
assume and agree to perform, pay or discharge, when due, to the extent not
theretofore performed, paid or discharged the following obligations,
commitments and liabilities of Seller existing as of the Closing Date and only
such obligations, commitments and liabilities (collectively, the "Assumed
Liabilities"):
-3-
<PAGE>
(a) those liabilities on the Closing Balance Sheet to the extent
accrued thereon, other than the Adjusted Items (as defined in Section 1.10(e))
---------------
and other than any liability similar in nature to the Adjusted Items;
(b) those specified pursuant to the express terms of the
Contracts identified on Schedule 3.13;
-------------
(c) All foreign, federal, state or local income, franchise,
sales, transfer, withholding or other tax of any kind or nature whatsoever
applicable to the Business (as defined in Section 3.11) for all taxable periods
------------
commencing after the Closing Date;
(d) Any and all obligations and liabilities based on any claim,
suit or proceeding alleging a violation of any Law (as defined in Section 2.03)
------------
relating to the Business or the Purchased Assets for any act or omission that
shall have first occurred after the Closing Date;
(e) Any and all obligations and liabilities in connection with
any litigation or proceeding arising out of the conduct of the Business that
shall have first occurred after the Closing Date or any liabilities or
obligations for products of the Business that (i) shall have been both
manufactured and sold, or for services that shall have been performed, after
the Closing Date, or (ii) shall have been manufactured before but sold after
the Closing Date to the extent covered by Buyer's insurance policies or are
covered by applicable reserves on the Closing Balance Sheet;
(f) Any and all obligations or liabilities relating to warranty
claims for products of the Business that (i) shall have been both manufactured
and sold, or for services that shall have been performed, after the Closing
Date, or (ii) shall have been manufactured before but sold after the Closing
Date to the extent covered by Buyer's insurance policies or are covered by
applicable reserves on the Closing Balance Sheet;
(g) All losses incurred, sustained or threatened as a direct
or indirect result of the presence on or the release at or from the Real
Property (as defined in Section 3.22(a)) of any Regulated Material (as defined
---------------
in Section 3.22(b) and whether asserted under or arising under any Environmental
---------------
Law (as defined in Section 3.22(a)), which presence or release shall have first
---------------
occurred after the Closing Date; and all losses incurred, sustained or
threatened as a direct or indirect result of any acts taken by Buyer after the
Closing Date at or with respect to the Real Property relating to the handling or
release of any Regulated Material after the Closing Date or the presence on the
Real Property of any Regulated Material released after the Closing Date; and
(h) The amount that Seller was required to make as its 1994
contribution to Seller's Profit Sharing Plan (defined in Section 5.09) to the
------------
extent accrued on the Closing Balance Sheet, which amount shall be paid on or
before September 10, 1995.
1.04. Retained Liabilities. Notwithstanding anything else herein to the
--------------------
contrary, except for the Assumed Liabilities and subject to Sections 5.07, 5.08,
-------------------
5.09, 5.10 and 8.02, Buyer does not hereby and shall not assume or in any way
---------- ----
undertake to pay, perform, satisfy
-4-
<PAGE>
or discharge any other liabilities or obligations of Seller or the Stockholders,
whether due or to become due, whether accrued, absolute, contingent or
otherwise, existing as of the Closing Date or arising out of any transactions
entered into, or any state of facts existing, prior to the Closing Date (the
"Retained Liabilities"). Without limiting the generality of the foregoing,
Retained Liabilities shall include all liabilities or obligations:
(a) For or in connection with any dividends, distributions,
redemptions, or any option, warrant, subscription right, preemptive right, other
right, proxy, put, call, demand, plan, commitment, agreement, understanding or
arrangement of any kind relating to any security of Seller, whether issued or
unissued, or any other security convertible into or exchangeable for any such
security (including any right relating to issuance, sale, assignment, transfer,
purchase, redemption, conversion, exchange, registration or voting and includes
rights conferred by statute, by Seller's Governing Documents (as defined in
Section 3.04) or by agreement);
------------
(b) Arising out of any transaction affecting Seller or the
Stockholders after the Closing Date or obligations incurred by Seller or the
Stockholders after the Closing Date;
(c) For expenses, taxes or fees incident to or arising out of
the negotiation, preparation, approval or authorization of this Agreement and
the consummation of the transactions contemplated hereby, including all legal
and accounting fees and all brokers or finders' fees or commissions payable by
Seller;
(d) Against which Seller is insured or otherwise indemnified or
which would have been covered by insurance (or indemnification) but for a claim
by the issuer (or the indemnitor) that the insured (or the indemnities) had
breached its obligations under the policy of insurance (or the contract of
indemnity) or had committed fraud in the insurance application (or the contract
of indemnity);
(e) To any Related Party (as defined in Section 3.16), other
------------
than compensation and benefits described in Schedule 1.04(e);
----------------
(f) To indemnify Seller's officers, directors, employees or
agents, except as otherwise expressly provided in Section 7.04;
------------
(g) Unless included within the scope of Section 1.03(a) or (c),
----------------------
for any foreign, federal, state or local income, franchise, sales, transfer,
withholding or other tax of any kind or nature whatsoever, including any
interest or penalty thereon or addition thereto, whether or not imposed on
Seller by reason of, or in connection with, the transactions contemplated by
this Agreement;
(h) Arising out of or in connection with the business previously
operated by Seller and currently operated by Resource Chemistries, Corp., an
Illinois corporation, d/b/a Enviropure Solutions ("Enviropure"), and the
activity conducted by Seller under the name Interlake Environmental ("Interlake
Environmental"), including any liability under any Environmental Law or other
Law applicable thereto;
-5-
<PAGE>
(i) Arising out of or in connection with any Benefit Plans,
except as specifically provided in Section 1.03;
------------
(j) Under the contracts and agreements identified on
Schedule 1.02(f);
----------------
(k) The litigation matters identified on Schedule 3.12 and the
-------------
claims arising in connection therewith;
(l) Arising out of the real estate and improvements identified
on Schedule 1.02(e), including all mortgages, other Encumbrances and taxes
----------------
associated therewith;
(m) Relating to any Adjusted Item or Retained Asset;
(n) Relating to the sales tax lien for $6,600.65 and the Peck
Water Systems lien (filing No. AE0098567), each identified on Schedule 3.08;
-------------
the judgments in favor of or suits by Goldston Malinda Winn (filing No.
94L004827), Chicago Central PA (filing No. 93M42299), Lee Lacie and Lee Mettie
(filing No. 94L4215), Wynn et al. (filing No. 94L4827), each as identified on
Schedule 3.08; and the employment discrimination matter identified on
-------------
Schedule 3.17 as item No. 1 in excess of $10,000;
-------------
(o) The matters described under clause (b) "Treatment; CERCLIS"
of Schedule 3.22 relating to the transportation of Regulated Materials and
-------------
relating to the Real Properties listed or proposed for listing on the National
Priorities List pursuant to Superfund, CERCLIS, or any state or local lists of
sites requiring investigation or cleanup; and
(p) To American MidWest Bank.
Notwithstanding the foregoing or anything else herein to the contrary, Buyer
shall not have any claim against Seller or the Stockholders for any liability of
Buyer, if any, arising out of the alleged dispute between Buyer and
International Superabrasives, Inc. identified as item No. 1 on Schedule 3.12.
-------------
1.05. Purchase Price. The aggregate Purchase Price for the Purchased
--------------
Assets shall be $27,000,000, plus the assumption of the Assumed Liabilities
(collectively, the "Purchase Price"), subject to the Post-Closing Purchase Price
Adjustment as provided in Section 1.09.
------------
1.06. Closing. The consummation of the purchase and sale of the Purchased
-------
Assets, the assumption of the Assumed Liabilities and the other transactions
contemplated hereby (the "Closing") shall take place at such date and time as
the Buyer and Seller mutually agree at the offices of Holleb & Coff, 55 East
Monroe Street, Chicago, Illinois or at such other time, date or place as the
parties agree; provided, however, that Closing shall not occur after September
-------- --------
22, 1995. Notwithstanding the date that Closing actually occurs, for financial
accounting business, tax and all other purposes, the Closing shall be deemed to
be effective as of 11:59 p.m. on July 31, 1995, and all references herein to
"Closing Date" shall mean 11:59 p.m. on July 31, 1995; provided, however, that
-------- -------
if the Closing does not actually take place until after August 11, 1995, then
the Closing shall be deemed to be effective as of 11:59 p.m. on August 31, 1995,
and, in such event, all references herein to "Closing Date"
-6-
<PAGE>
shall mean 11:59 p.m. on August 31, 1995. Subject to the other terms of this
Agreement, all financial and other business transactions related to the
Purchased Assets and Assumed Liabilities occurring after the Closing Date for
matters applicable to any time after the Closing Date shall be for the account
of Buyer. Subject to the other terms of this Agreement, all financial and other
business transactions related to the Purchased Assets and Assumed Liabilities
occurring on or prior to the Closing Date as well as those occurring after the
Closing Date for matters applicable to any time on or prior to the Closing Date
shall be for the account of Seller. As soon as reasonable practicable after
Closing, Buyer and Seller shall, without duplicating any matter to be contained
in a Post-Closing Purchase Price Adjustment and consistent with the other terms
of this Agreement, pro-rate and settle in cash as of the Closing Date all
expenses and income items related to the Purchased Assets and Assumed
Liabilities that apply to time both (i) on or before the Closing Date and (ii)
after the Closing Date, such as a payroll paid after the Closing Date applicable
to payroll periods both before and after the Closing Date. All proceedings to be
taken and all Closing documents to be executed and delivered by the parties
hereto at Closing shall be deemed to have been taken and executed
simultaneously, and no proceedings shall be deemed taken nor any closing
documents executed or delivered until all Closing documents have been taken,
executed and delivered.
1.07. Payment of Purchase Price.
-------------------------
(a) At Closing. At Closing, the Purchase Price shall be paid as
----------
follows:
(i) delivery of $19,200,000 by Buyer to Seller by wire transfer
of federal funds;
(ii) delivery of $800,000 by Buyer to Escrow Agent by wire
transfer of federal funds;
(iii) delivery of that number of USF Common Shares having an
aggregate USF Common Share Value (rounded, in the aggregate, to the nearest
$100) equal to $4,000,000, by Buyer to the Stockholders on a Pro Rata BAsis (as
defined in Section 8.03);
------------
(iv) delivery of that number of USF Common Shares having an
aggregate USF Common Share Value (rounded, in the aggregate, to the nearest
$100) equal to $3,000,000 (collectively, the ""Escrow/Shares") by Buyer to
Escrow Agent (as defined in Section 1.08); and
------------
(v) by Buyer's assumption of the Assumed Liabilities pursuant to
an assumption agreement.
As used herein, "USF Common Shares" means the Common Stock, $.01 par value per
share, of United States Filter Corporation, a Delaware corporation ( "USF"), and
"USF Common Share Value" means the average of the closing prices of a USF Common
Share as reported by the New York Stock Exchange for each of the twenty trading
days ending on the fifth to last trading day preceding the Closing Date.
-7-
<PAGE>
(b) After Closing. Within five business days after the
-------------
determination of the Post-Closing Purchase Price Adjustment (as defined in
Section 1.09(a)), if any, the Post-Closing Purchase Price Adjustment shall be
---------------
paid. A Downward Adjustment (as defined in Section 1.09(a)) shall be paid
---------------
in accordance with Section 1.08(b). An Upward Adjustment shall be paid by USF
---------------
by the Seller in cash.
1.08. Escrow.
------
(a) Establishment. At the Closing, Buyer shall deliver the
-------------
Escrow Shares and $800,000 in immediately available funds (in accordance with
Section 1.07(a)(ii)) to Chicago Title and Trust Company ("Escrow Agent") to be
-------------------
held pursuant to the Indemnity Escrow Agreement substantially in the form of
Exhibit B ("Indemnity Escrow Agreement"). The Escrow Shares and the $800,000
---------
cash delivered by Buyer to Escrow Agent and all distributions with respect to
the Escrow Shares and earnings thereon and on the $800,000 cash are referred to
herein as the Escrow Fund. The Escrow Fund shall be subject to Buyer's claims of
indemnification under Article VII and Section 1.14 and shall be used to pay any
----------- ------------
Downward Adjustment. The registered address of the holders of the Escrow Shares
in the Escrow Fund shall be the address of the Escrow Agent. If the Escrow Agent
refuses for any reason to execute and deliver the Indemnity Escrow Agreement on
or prior to the Closing, the parties shall establish the escrow at PNC Bank,
National Association.
(b) Post-Closing Purchase Price Adjustment. Within five business
--------------------------------------
days after the determination of an Upward Adjustment, if any, is made, Buyer
shall pay to Seller in immediately available funds by wire transfer an amount
equal to the aggregate amount of the Upward Adjustment. Within five business
days after the determination of a Downward Adjustment, if any, is made, the
Escrow Agent shall deliver to Buyer from the Escrow Fund that number of Escrow
Shares having an aggregate USF Common Share Value equal to the aggregate amount
of the Downward Adjustment (rounded, in the aggregate, to the nearest $100). If
the aggregate amount of the Downward Adjustment exceeds the amount of the Escrow
Fund (the amount of such excess being an "Adjustment Deficiency"), then within
five business days after the determination of the Downward Adjustment is made,
the Stockholders and Seller, jointly and severally, shall deliver to Buyer (i)
USF Common Shares having an aggregate USF Common Share Value equal to the
Adjustment Deficiency, and (ii) if the aggregate USF Common Share Value of such
USF Common Shares is less than the Adjustment Deficiency, an amount of cash
equal to the unpaid Adjustment Deficiency by wire transfer of federal funds.
(c) Distribution to Stockholders; Indemnification. Within five
---------------------------------------------
business days after the determination of the Post-Closing Purchase Price
Adjustment, if any, is made, the Escrow Agent shall deliver to the Stockholders,
on a Pro Rata Basis and as provided in the Escrow Agreement, that number of
Escrow Shares, if any, that would lease as a balance in the Escrow Fund
immediately after such distribution cash and investments (valued at fair market
value) plus Escrow Shares (valued at the USF Common Share Value) that
collectively aggregate to $1,800,000 (the "Remaining Escrow Balance"), which
balance shall continue to be subject to Buyer's claims of indemnification under
Article VII and claims under Section 1.14; provided, however, that if Buyer
----------- ------------ -------- -------
shall have purchased the Detroit Real Estate from
-8-
<PAGE>
Seller prior to such date, the Remaining Escrow Balance shall be $1,000,000 and
not $1,800,000.
1.09. Post-Closing Purchase Price Adjustment.
--------------------------------------
(a) Determination. If the Net Tangible Book Value of the Purchased Assets
-------------
(as defined below) at the close of business on the Closing Date as determined by
reference to the Closing Balance Sheet is less than $9,025,479, then the
Purchase Price shall be reduced dollar-for-dollar by the amount of such
deficiency (a "Downward Adjustment"). If the Net Tangible Book Value of the
Purchased Assets at the close of business on the Closing Date as determined by
reference to the Closing Balance Sheet is greater than $9,025,479, then the
Purchase Price shall be increased dollar-for-dollar by the amount of such
increase (an "Upward Adjustment"); provided, however, that in no event shall
-------- -------
any portion of an Upward Adjustment increase the Purchase Price to the extent
that (but only to the extent that) such Upward Adjustment is attributable to (i)
any increase in Net Tangible Book Value of the Purchased Assets after December
31, 1994 that is not directly related to the net earnings or ordinary operations
of Seller and Evansville accrued in 1995 on or before the Closing Date, (ii) any
extraordinary gain, extraordinary income or other extraordinary item, or (iii)
any accounting adjustment resulting from the merger of Evansville into Seller or
other accounting adjustment not consistent with past practice of Seller or
Evansville. Any adjustment made pursuant to this Section 1.09(a) is referred to
---------------
herein as the "Post-Closing Purchase Price Adjustment."
(b) Minimum Adjustment. Notwithstanding the foregoing, no Post-Closing
------------------
Purchase Price Adjustment shall be made unless it shall exceed $50,000 (the
"Minimum Adjustment"). If the Post-Closing Price Adjustment exceeds the Minimum
Adjustment, the full amount of the Post-Closing Purchase Price Adjustment shall
be made. "Net Tangible Book Value of the Purchased Assets" means (i) the net
book value (i.e., book value net of accumulated depreciation, amortization,
---
depletion and like items) of the Purchased Assets, minus (ii) (A) the net book
value of the Purchased Assets, if any, that are or would be intangible assets
under United States generally accepted accounting principles ("GAAP"), and (B)
the amount of the Assumed Liabilities to the extent accrued on the applicable
balance sheet, in each case (i) and (ii) as of the Closing Date.
1.10. Financial Statements.
--------------------
(a) Year-End Financial Statements. Attached as Exhibit C is a combined
----------------------------- ---------
balance sheet and income statement of Seller and Evansville and related notes as
of December 31, 1994 and for the year then ended (the "Preliminary Year-End
Financial Statements"). Attached as Exhibit D is an audited combined balance
---------
sheet and income statement of Seller and Evansville and related notes as of
December 31, 1994 and for the year then ended audited by KPMG Peat Marwick (the
"Audited Year-End Financial Statements").
-9-
<PAGE>
defined below) on a basis consistent with the balance sheet included in the
Audited Year-End Financial Statements (the "Preliminary Closing Balance Sheet")
and an income statement of Seller and Evansville for the year commencing on
January 1, 1995 and ending on the Closing Date. No Retained Asset, Retained
Liability or Adjusted Item (collectively, the "Retained Items") shall be
included in the Preliminary Closing Balance Sheet or related income statement.
(c) Delivery of Preliminary Closing Balance Sheet. As soon as
---------------------------------------------
practicable, but no later than 40 days after the Closing Date, the Preliminary
Closing Balance Sheet and related income statement shall be delivered by Buyer
to Seller. The Preliminary Closing Balance Sheet and related income statement,
when delivered by Buyer to Seller, shall be deemed conclusive and binding on the
parties for purposes of determining the Post-Closing Purchase Price Adjustment,
unless Seller notifies Buyer in writing within 20 days after receipt of the
Preliminary Closing Balance Sheet and related income statement of its
disagreement therewith, which notice shall state with reasonable specificity the
reasons for any disagreement and identify the items and amounts in dispute.
(d) Arbitration. If any disagreement concerning the Preliminary
-----------
Closing Balance Sheet or related income statement or the Post-Closing Purchase
Price Adjustment is not resolved by Buyer and Seller within 60 days after the
Closing Date, the undisputed amount shall be paid in accordance with Section
-------
1.07(b), and Buyer and Seller shall promptly engage, on standard terms and
-------
conditions for a matter of such nature, the Chicago office of the accounting
firm of Deloitte and Touche LLP. The engagement agreement with the independent
accountants shall require the independent accountants to make their
determination with respect to the items in dispute within 80 days after the
Closing Date. Buyer and Seller shall each pay one-half of the cost of the fees
and expenses of such independent accountants at the time of payment of the
Post-Closing Purchase Price Adjustment. The resolution by the independent
accountants of any dispute concerning the Post-Closing Purchase Price Adjustment
shall be final, binding and conclusive upon the parties and shall be the
parties' sole and exclusive remedy regarding any dispute concerning the
Post-Closing Purchase Price Adjustment.
(e) Certain Definitions. As used herein, "Accounting
-------------------
Principles" mean GAAP applied on a basis consistent with the Audited Year-End
Financial Statements attached as Exhibit D, except that (i) only the Purchased
---------
Assets and the Assumed Liabilities as they exist on the date of the Preliminary
Closing Balance Sheet shall be included therein, (ii) the items, without
considering the numerical values attached thereto, of income and expense
realized or incurred by or assets and liabilities of Seller or Evansville that
were removed in arriving at the Preliminary Year-End Financial Statements and
the Audited Year-End Financial Statements, which items are identified on
Exhibit E-1 (the "Adjusted Items"), shall not be included in determining the
-----------
Preliminary Closing Balance Sheet, (iii) no item shall fail to be included in or
excluded from the Preliminary Closing Balance Sheet on the basis of materiality,
individually or collectively, and (iv) no physical inventory shall have been
taken. The final Closing Balance Sheet, as modified by the parties' agreement
and after any determination by the independent accountants as described in this
Section 1.10, is referred to herein as the "Closing Balance Sheet".
------------
1.11. Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
among the Purchased Assets in accordance with the allocation set forth in
Schedule 1.11. Buyer and
-------------
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<PAGE>
Seller shall report the federal, state and local income and other tax
consequences of the purchase and sale contemplated hereby in a manner consistent
with such allocation and shall not take any position inconsistent therewith upon
examination of any tax return, in any refund claim, in any litigation, or
otherwise. All Purchased Assets shall be valued at fair market value by
appraisals obtained by Seller, which appraisals shall be reasonably acceptable
to Buyer consistent with prior discussions between Buyer and Seller. The parties
shall complete IRS Form 8594 consistent with the foregoing.
1.12. Passage of Title. Title to all of the Purchased Assets shall pass
----------------
from Seller to Buyer as of the Closing Date, subject to the terms and conditions
of this Agreement. Notwithstanding the foregoing, Buyer assumes no risk of loss
to the Purchased Assets prior to the date that Closing actually occurs.
1.13. Certain Consents. Nothing in this Agreement shall be construed as an
----------------
attempt to assign any contract, agreement, permit, franchise, or claim included
in the Purchased Assets which is by its terms or in law nonassignable without
the consent of the other party or parties thereto, unless such consent shall
have been given, or as to which all the remedies for the enforcement thereof
enjoyed by Seller would not, as a matter of law, pass to Buyer as an incident of
the assignments provided for by this Agreement. In order, however, to provide
Buyer with the full realization and value of every contract, agreement, permit,
franchise and claim of the character described in the immediately preceding
sentence, Seller agrees that on and after the Closing, it will, at the request
and under the direction of Buyer, in the name of Seller or otherwise as Buyer
shall specify take all reasonable action (including the appointment of Buyer as
attorney-in-fact for Seller) and do or cause to be done all such things as shall
in the reasonable opinion of Buyer or its counsel be reasonably necessary (i) to
assure that the rights of Seller under such contracts, agreements, permits,
franchises, and claims shall be preserved for the benefit of Buyer and (ii) to
facilitate receipt of the consideration to be received by Seller in and under
every such contract, agreement, permit, franchise, and claim, which
consideration shall be held for the benefit of, and shall be delivered to,
Buyer. Nothing in this Section shall diminish the obligations of Seller
hereunder to obtain all consents and approvals and to take all such other
actions prior to or at Closing as are necessary to enable Seller to convey or
assign good and marketable title to all the Purchased Assets to Buyer.
1.14. Detroit Real Estate.
-------------------
(a) Generally. Seller is the owner in fee simple absolute of
---------
certain property known as Lot 1 and Lot 2 in the Hazel Park Industrial
Subdivision, as described in that certain Plat recorded in the Recorder's Office
of Oakland County, Michigan at Liber 146, pages 26, 27, 28 and 29 (the "Detroit
Real Estate"), which is currently being used by Seller and Enviropure for
manufacturing purposes. A portion of the Detroit Real Estate is zoned RA-2,
which does not permit industrial or manufacturing uses thereon. The Buyer and
Seller agree that Seller shall, at Seller's sole cost and expense, petition all
appropriate government entities and agencies thereof ("Official Bodies") to
amend the zoning map of Hazel Park to reflect that the entire property subsumed
within the Detroit Real Estate will be zoned M-1 Light Industrial, such that the
Buyer may continue to operate a manufacturing facility on the entire Detroit
Real Estate as a permitted use, as opposed to a legal
-11-
<PAGE>
nonconforming use or other land use designation (the ``Zoning Map Amendment'').
Buyer and Seller have allocated from the Purchase Price the sum of $750,000 as
the consideration for the Detroit Real Estate (the ``Detroit Real Estate
Purchase Price''). The Detroit Real Estate Purchase Price shall at the Closing
be delivered to the Escrow Agent to be held in accordance with the Escrow
Agreement and this Section 1.14.
(b) Zoning Map Amendment. Seller shall, as soon as possible after
--------------------
the Closing, petition all appropriate Official Bodies to effect the Zoning Map
Amendment. Without limiting the generality of the foregoing, Seller shall (i)
prepare and submit (after prior review and approval by Buyer) to all appropriate
Official Bodies all applications, correspondence, drawings, surveys and other
materials needed to effect the Zoning Map Amendment, (ii) attend such public
hearings and meetings of all Official Bodies in connection with the Zoning Map
Amendment as may be needed to appropriately effect the Zoning Map Amendment,
(iii) keep Buyer fully informed as to the progress of the Zoning Map Amendment,
including the dates of all hearings and meetings in connection therewith, (iv)
provide to Buyer copies of all applications, correspondence, drawings, surveys
and other materials provided to or received by Official Bodies in connection
with the Zoning Map Amendment and (v) take all actions reasonably necessary or
as reasonably requested by Buyer to effect fully the Zoning Map Amendment. Buyer
shall have the right, but not the obligation, to attend and participate in all
meetings and hearing related to the Zoning Map Amendment.
(c) Lease of the Detroit Real Estate. Until the Zoning Map
--------------------------------
Amendment is Fully Enacted (as defined in Subsection (d) below), Seller shall
permit Buyer to operate on the Detroit Real Estate in accordance with the lease
attached hereto as Exhibit E-2 (the ``Detroit Real Estate Lease''). Rent shall
-----------
be paid by Buyer to Seller in accordance with the Detroit Real Estate Lease
during the term thereof; provided, however that (i) 50% of the rent paid under
-----------------
the Detroit Real Estate Lease within 90 days after the Closing Date shall be
credited against the Detroit Real Estate Purchase Price and (ii) should the
Zoning Map Amendment not be Fully Enacted within such 90 day period, 100% of all
rent paid under the Detroit Real Estate Lease after such 90 day period has
elapsed shall be credited against the Detroit Real Estate Purchase Price.
(d) Termination of Detroit Real Estate Lease. At such time as
-----------------------------------------
the Zoning Map Amendment is Fully Enacted, Buyer shall cause the Escrow Agent to
deliver to Seller the Detroit Real Estate Purchase Price, as reduced for that
portion of rent paid under the Detroit Real Estate Lease as determined in
accordance with Section 1.14(c) above, and the Detroit Real Estate Lease shall
terminate. If there is insufficient cash in the Escrow Fund to make such
payment, then Buyer shall pay to seller an amount of cash equal to said
deficiency. The term ``Fully Enacted'' as used in this Section 1.14 shall mean
------------
the date when (i) Seller delivers to Buyer the written order(s) issued by the
appropriate Official Bodies legally and properly enacting the Zoning Map
Amendment to the reasonable satisfaction of Buyer and (ii) the period for
appeals in connection with the Zoning Map Amendment has expired such that the
order(s) enacting the Zoning Map Amendment are final and nonappealable:
provided, however, that should Seller not obtain the Zoning Map Amendment but
receive other final and nonappealable approvals from appropriate Official Bodies
(in form and substance reasonably satisfactory to Buyer) stating that Buyer, and
its successors and
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<PAGE>
assigns, may legally use the Detroit Real Estate as a manufacturing facility,
such other approvals shall be deemed for purposes of this Section 1.14 to
------------
constitute a Fully Enacted Zoning Map Amendment. Should the Zoning Map Amendment
not be Fully Enacted on or before the first anniversary of the Closing Date,
Buyer shall have the option, exercised by written notice to Seller forwarded at
any time after such date, to terminate the Detroit Real Estate Lease and the
obligations of Buyer to purchase the Detroit Real Estate in accordance with this
Agreement, in which event (x) Buyer shall vacate the Detroit Real Estate in
accordance with the Detroit Real Estate Lease, (y) the Escrow Agent shall
promptly return to Buyer an amount of cash equal to the Detroit Real Estate
Purchase Price, and (z) Seller and the Stockholders shall jointly and severally
indemnify and hold Buyer harmless from and against all Buyer Damages (as such
term is defined in Section 7.02) arising out of a relocation of the operations
------------
at the Detroit Real Estate; provided, however, Buyer Damages shall only be paid
-----------------
by Seller and Stockholders to the extent of reasonable, direct and necessary
local relocation expenses (exclusive of down time, loss of business, lost
profits and other expenses not directly related to such physical relocation),
and Buyer shall provide Seller with a detailed itemization of such expenses upon
demand, and provided, further, Seller's and Stockholder's indemnification
-----------------
regarding Buyer Damages relating to such direct relocation costs
in connection with the Detroit Real Estate shall in no event exceed $50,000. If
there is insufficient cash in the Escrow Fund to make the payment referred to in
clauses (y) and (z) immediately preceding, then Seller and the Stockholders,
jointly and severally, shall pay to Buyer an amount of cash equal to such
deficiency.
(e) Certain Covenants of Seller. At such time as the Zoning Map
---------------------------
Amendment is Fully Enacted and the Detroit Real Estate Purchase Price is
delivered to Seller, Seller shall convey to Buyer by deed of special warranty,
good, marketable and insurable title to the Detroit Real Estate, free and clear
of all liens, restrictions and encumbrances of any kind, except for matters as
shown on the commitment for title insurance issued by Chicago Title Insurance
Company, listed as commitment number 63-669891 and as revised through the
Closing Date, a copy of which title insurance commitment has been delivered to
Seller. Seller shall in no way during the term of the Detroit Real Estate Lease
(i) create, consent to or permit any lien or encumbrance against the Detroit
Real Estate, (ii) create, consent to or permit any easement, right of way,
restriction or other burden against the Detroit Real Estate (other than
easements required by Official Bodies that do not have a material adverse
affect on the use and enjoyment of the Detroit Real Estate or require forced
removal of any improvements on the Detroit Real Estate) or (iii) otherwise take
any action that would adversely affect title to the Detroit Real Estate.
(f) Certain Conditions. Notwithstanding anything else herein to
------------------
the contrary, all obligations of Seller to convey the Detroit Real Estate to
Buyer shall be subject to this Section 1.14, and all conditions to Buyer's
------------
obligations to Close hereunder related to the Detroit Real Estate are hereby
waived by Buyer subject to satisfaction of those conditions on or prior to the
date that Seller conveys title to the Detroit Real Estate in accordance with
Section 1.14(e).
---------------
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<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
-------------------
As an inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, each Stockholder severally represents and
warrants to Buyer as follows:
2.01. Capacity. Such Stockholder has the capacity and authority to enter
--------
into this Agreement and any other agreement or document contemplated hereby to
be executed and delivered on or before Closing (the "Other Agreements") to which
he or she is or is to become a party and perform his or her obligations
hereunder and thereunder.
2.02. Enforceability. This Agreement and each Other Agreement to which
--------------
such Stockholder is a party have been duly executed and delivered by and
constitute the legal, valid and binding obligations of such Stockholder,
enforceable against such Stockholder in accordance with their respective terms,
subject to applicable bankruptcy and moratorium laws and equitable principles
affecting the scope and enforcement of creditors' rights generally. Each Other
Agreement to which such Stockholder is to become a party pursuant to the
provisions hereof, when executed and delivered by such Stockholder, will
constitute the legal, valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with the terms of such
Other Agreement, subject to applicable bankruptcy and moratorium laws and
equitable principles affecting the scope and enforcement of creditors' rights
generally. All actions contemplated by this Agreement have been duly and validly
authorized by all necessary proceedings by such Stockholder. Without limiting
the effect of the foregoing, such Stockholder, qua stockholder of Seller, has
---
approved the sale by Seller of the Purchased Assets to Buyer.
2.03. No Violation of Laws or Agreements; Consents. Neither the execution
--------------------------------------------
and delivery of this Agreement or any Other Agreement to which such Stockholder
is or is to become a party, the consummation of the transactions contemplated
hereby or thereby nor the compliance with or fulfillment of the terms,
conditions or provisions hereof or thereof by such Stockholder will: (i)
conflict with, result in a breach of, constitute a default or an event of
default (or an event that might, with the passage of time or the giving of
notice or both, constitute a default or event of default) under any of the terms
of, any contract, agreement or instrument to which such Stockholder is a party,
(ii) to his or her knowledge, violate any applicable federal, state, municipal,
local or foreign statute, law, ordinance, rule, regulation or order of any kind
or nature whatsoever including any public policy, order of any governmental body
or principle of common law ("Law") or violate any judgment or order of any
court, government (federal, state, local or foreign), department, commission,
board, bureau, agency, official or other regulatory, administrative or
governmental authority or instrumentality (a "Governmental Body") to which such
Stockholder is a party. No consent, approval or authorization of, or
registration or filing with, any person is required in connection with the
execution and delivery by such Stockholder of this Agreement or any of the Other
Agreements to which he or she is or is to become a party pursuant to the
provisions hereof or the consummation by him or her of the transactions
contemplated hereby or thereby.
-14-
<PAGE>
2.04 Ownership of Seller. Such Stockholder owns that number of outstanding
-------------------
capital stock of Seller as identified for him or her on Schedule 2.04.
-------------
2.05. Investment Representation. Such Stockholder is acquiring the USF
-------------------------
Common Shares being delivered to him or her as a portion of the Purchase Price
for investment only and not with a view to or in connection with any resale or
distribution of such USF Common Shares, and hereby affirms that he or she has no
present intention of making any sale, assignment, pledge, gift, transfer or
other disposition of USF Common Shares or any interest therein.
2.06. Accredited Investor Status. Either (i) his or her current personal
--------------------------
net worth, including that of his or her spouse, exceeds $1,000,000, or (ii) (A)
his or her total individual income, in each calendar year 1993 and 1994 exceeded
$200,000 or total joint income with his or her spouse in each of those years
exceeded $300,000, and (B) he or she reasonably expects that his or her total
individual income for calendar year 1995 will exceed $200,000 or that his or her
total joint income with his or her spouse for calendar year 1995 will exceed
$300,000.
2.07. Finders' Fees. Such Stockholder has not employed any broker or
-------------
finder or incurred any liability for any brokerage fee, commission or finders'
fee in connection with any of the transactions contemplated hereby or by any
Other Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
---------
As an inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, Seller represents and warrants to Buyer all of
the matters set forth in this Article III. All references in this Article III,
----------- -----------
other than in Sections 3.01 through and including 3.06, to "Seller" shall be
------------- ----
deemed to include Evansville and any predecessors of Seller for the period of
time prior to the date that such predecessor became part of Seller, and
businesses that were once part of Seller, such as Enviropure, for the period of
time that such businesses were part of Seller.
3.01 Organization. Seller is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Illinois and has
the corporate power and authority to own and lease its properties, carry on its
business as now conducted, enter into this Agreement and the Other Agreements to
which it is or is to become a party and perform its obligations hereunder and
thereunder.
3.02. Authorization; Enforceability. This Agreement and each Other
-----------------------------
Agreement to which Seller is a party have been duly executed and delivered by
and constitute the legal, valid and binding obligations of Seller, enforceable
against it in accordance with their respective terms, subject to applicable
bankruptcy and moratorium laws and equitable principles affecting the scope and
enforcement of creditors' rights generally. Each Other Agreement to which Seller
is to become a party pursuant to the provisions hereof, when executed and
delivered by Seller, will constitute the legal, valid and binding obligation of
-15-
<PAGE>
Seller, enforceable against Seller in accordance with the terms of such Other
Agreement, subject to applicable bankruptcy and moratorium laws and equitable
principles affecting the scope and enforcement of creditors' rights generally.
All actions contemplated by this Section have been duly and validly authorized
by all necessary proceedings by Seller.
3.03. Subsidiaries and Investments. The Purchased Assets do not contain any
----------------------------
shares of capital stock of or other equity interest in any corporation,
partnership, joint venture or other entity.
3.04. No Violation of Laws or Agreements; Consents. Neither the execution
--------------------------------------------
and delivery of this Agreement or any Other Agreement to which Seller is or is
to become a party, the consummation of the transactions contemplated hereby or
thereby nor the compliance with or fulfillment of the terms, conditions or
provisions hereof or thereof by Seller will: (i) contravene any provision of the
certificate or articles of incorporation, bylaws, other charter or governing
documents (collectively "Governing Documents") of Seller, (ii) except as
provided in Schedule 3.04, conflict with, result in a breach of, constitute a
-------------
default or an event of default (or an event that might, with the passage of time
or the giving of notice or both, constitute a default or event of default) under
any of the terms of, result in the termination of, result in the loss of any
right under, or give to any other person the right to cause such a termination
or loss, any Purchased Asset, (iii) result in the creation, maturation or
acceleration of any Assumed Liability (or give to any other person the right to
cause such a creation, maturation or acceleration), (iv) violate any applicable
Law or violate any judgment or order of any Governmental Body to which Seller or
Evansville is subject or by which any of the Purchased Assets may be bound or
Assumed Liabilities or affected, or (v) result in the creation or imposition of
any Encumbrance upon any of the Purchased Assets or give to any other person any
interest or right therein. Except as disclosed in Schedule 3.04, no consent,
-------------
approval or authorization of, or registration or filing with, any person is
required in connection with the execution and delivery by Seller of this
Agreement or any of the Other Agreements to which it is or is to become a party
pursuant to the provisions hereof or the consummation by Seller of the
transactions contemplated hereby or thereby, other than approvals which have
been obtained.
3.05. Financial Information.
---------------------
(a) Records. The books of account and related records of Seller and
-------
Evansville reflect accurately the Purchased Assets and Assumed Liabilities.
(b) Financial Statements. Attached as Exhibit F are the balance
-------------------- ---------
sheet and related statements of operations and retained earnings and cash flows
for Seller and Evansville at December 31, 1993 and December 31, 1994 and for the
years then ended, as reviewed by Selden, Fox and Associates, Ltd., the balance
sheet and related statements of operations and retained earnings and cash flows
for Seller and Evansville at December 31, 1992, except that with respect to
Evansville, such information is limited to the tax returns filed for the fiscal
years ended on such dates, and an unaudited and unreviewed combined interim
balance sheet and income statement for Seller and Evansville at June 30, 1995
and for the six-month period then ended (collectively, the "Financial
Statements"). GAAP, subject to the exceptions in clauses (A) and (B) of the
immediately succeeding sentence, is
- 16 -
<PAGE>
referred to herein as the "Historical Accounting Principles". The Financial
Statements and the Audited Year End Financial Statements (i) are accurate,
correct and complete in accordance with the books of account and records of
Seller and Evansville, (ii) have been prepared in accordance with GAAP on a
consistent basis throughout the indicated periods, except that (A) the interim
financial statements contain no footnotes or year-end adjustments and (B) the
Financial Statements vary from GAAP as disclosed on Schedule 3.05, and (iii)
-------------
fairly present the financial condition, assets and liabilities and results of
operation of Seller and Evansville at the dates and for the relevant periods
indicated in accordance with the Historical Accounting Principles. The Audited
Year-End Financial Statements and the Closing Balance Sheet, when delivered, (A)
shall be accurate, correct and complete in accordance with the books of account
and records of Seller and Evansville, (B) shall have been prepared in accordance
with the Accounting Principles on a basis consistent with the Financial
Statements (but only to the extent that such consistency does not violate the
Accounting Principles), and (C) shall fairly present the Purchased Assets and
Assumed Liabilities at dates thereof and the earnings of Seller and Evansville
for the periods then ended in accordance with the Accounting Principles.
3.06. No Changes. Except as provided on Schedule 3.06, since December 31,
---------- -------------
1994, each of Seller and Evansville has conducted its business only in the
ordinary course. Without limiting the generality of the foregoing sentence,
except as provided in Schedule 3.06, since December 31, 1994, there has not been
-------------
any: (i) material adverse change in the financial condition, assets,
liabilities, net worth, earning power, business or prospects of Seller or
Evansville; (ii) material damage or destruction to any of the Purchased Assets,
whether or not covered by insurance; (iii) strike or other labor trouble at
Seller or Evansville; (iv) declaration or payment of any dividend or other
distribution on or with respect to or redemption or purchase by Seller or
Evansville of any shares of capital stock of Seller or Evansville, other than
cash dividends identified in Schedule 3.06; (v) increase in the salary, wage or
-------------
bonus of any employee of Seller or Evansville, other than increases in wages on
the anniversary dates for employees according to normal practice previously
disclosed to Buyer in writing; (vi) asset acquisition, including capital
expenditure, in excess of $25,000 in the aggregate, other than the purchase of
inventory in the ordinary course of business and other than the purchase of
water purification equipment for resale to customers in the ordinary course of
business; (vii) change in any method of accounting used by Seller or Evansville;
(viii) payment to or transaction with any Related Party, which payment or
transaction is not specifically disclosed on Schedule 3.16; (ix) disposition of
-------------
any asset (other than inventory in the ordinary course of business) for more
than $25,000 in the aggregate or for less than fair market value; (x) payment,
prepayment or discharge of any liability other than in the ordinary course of
business or any failure to pay any liability when due; (xi) write-offs or write-
downs of any assets of Seller or Evansville in excess of $15,000 in the
aggregate; (xii) creation, termination or amendment of, or waiver of any right
under, any material agreement of Seller or Evansville; or (xiii) agreement or
commitment to do any of the foregoing.
3.07. Taxes. Seller has filed or caused to be filed on a timely basis
-----
(including extensions), or will file or cause to be filed on a timely basis, all
returns for all federal, state, local or foreign income, franchise sales,
transfer or withholding taxes that are required to be filed by it prior to or on
the Closing Date, pursuant to the Law of each governmental
- 17 -
<PAGE>
authority with taxing power over it. All such tax returns were or will be, as
the case may be, correct and complete in accordance with applicable Law. Seller
has paid all taxes that have or will become due as shown on such tax returns or
pursuant to any assessment received as an adjustment to such Tax Returns, except
such taxes, if any, as are being contested in good faith and disclosed on
Schedule 3.07. Except as disclosed in Schedule 3.07, Seller is not currently the
------------- -------------
beneficiary of any extension of time within which to file any tax return for
taxes. No claim has been made by a taxing authority of a jurisdiction where
Seller does not file tax returns for taxes that it is or may be subject to
taxation in that jurisdiction. Except to the extent included in the Assumed
Liabilities, Seller has withheld and paid all taxes required to have been
withheld in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party. Seller has made a valid
election to be treated as an "S" corporation under the Internal Revenue Code of
1986, as amended (the "Code").
3.08. Title. Seller has good, valid and marketable legal and equitable
-----
title to all of the Purchased Assets. To the knowledge of Seller, the Purchased
Assets are not subject to any adverse claim. At the Closing, Buyer shall acquire
good, valid and marketable legal and equitable title to the Purchased Assets,
free and clear of any and all Encumbrances, other than the Encumbrances
identified on Schedule 3.08 and liens for current taxes not yet due.
-------------
3.09. Inventory. All of the inventory included in the Purchased Assets is
---------
valued on the books and records of Seller and in the Financial Statements at
lower of cost or market, the cost thereof being determined on a first-in,
first-out basis in accordance with GAAP. All of the finished goods inventory
included in the Purchased Assets is in good, merchantable and usable condition
and is saleable in the ordinary course of the business within a customary period
of time, and all of the raw materials and work-in-process inventory of Seller
can reasonably be expected to be consumed in the ordinary course of business
within a customary period of time. None of Seller's inventory is obsolete, has
been consigned to others or is on consignment from others.
3.10. Receivables. Schedule 3.10 discloses all trade and other accounts
----------- -------------
receivable included in the Purchased Assets ("Receivables") outstanding as of
May 31, 1995 presented on an aged basis and separately identifies the name of
each account debtor and the total amount of each related Receivable. All
Receivables, whether reflected on the Closing Balance Sheet or disclosed on
Schedule 3.10, arose or will arise from bona fide sale transactions of Seller,
-------------
and no portion of any Receivable is subject to counterclaim, defense or set-off
or is otherwise in dispute, except as provided in Schedule 3.10. Except to the
-------------
extent of the recorded reserve for doubtful accounts specified on the Closing
Balance Sheet, all of the Receivables are collectible in the ordinary course of
business and will be fully collected within 180 days after having been created
using commercially reasonable efforts, subject to the bankruptcy of an account
debtor prior to the date of this Agreement.
3.11. Business; Condition of Assets. Seller is engaged in the business of
-----------------------------
furnishing, installing, maintaining and servicing equipment and related supplies
used in systems to treat water (the "Business") and no other business. The
Purchased Assets are in good operating condition and repair and are suitable for
the purposes for which they are used in the Business. All of the Purchased
Assets are reflected on the Interim Balance Sheet or,
- 18 -
<PAGE>
under GAAP, are not required to be reflected thereon; and the Purchased Assets
include all assets that are used in the operation of the Business.
3.12. No Pending Litigation or Proceedings. Except as disclosed in
------------------------------------
Schedule 3.12 or 3.22, no action, suit, investigation, claim or proceeding of
------------- ----
any nature or kind whatsoever, whether civil, criminal or administrative, by or
before any Governmental Body or arbitrator ("Litigation") is pending or, to the
knowledge of Seller, overtly threatened against or affecting Seller, the
Business, any of the Purchased Assets, or any of the transactions contemplated
by this Agreement or any Other Agreement, and, to the knowledge of Seller, there
is no basis for any Litigation against Seller or the Purchased Assets. Except as
provided in Schedule 3.12, Seller has not been a party to any other material
-------------
Litigation since May 31, 1990. There is presently no outstanding judgment,
decree or order of any Governmental Body against or affecting Seller, the
Stockholders, the Business, any of the Purchased Assets, or any of the
transactions contemplated by this Agreement or any Other Agreement. Seller does
not have pending any Litigation against any third party.
3.13. Contracts; Compliance. Disclosed on Schedules 3.13, 3.15, 3.16 or
--------------------- --------------------------
3.20 is a brief description of each contract, lease, indenture, mortgage,
----
instrument, commitment or other agreement, arrangement or understanding, oral or
written, formal or informal, included in the Purchased Assets or Assumed
Liabilities that (i) is material to the Business, (ii) involves the purchase,
sale or lease of any asset, materials, supplies, inventory or services in excess
of $25,000 per year, (iii) has an unexpired term of more than six months from
the date hereof, taking into account the effect of any renewal options, (iv)
relates to the borrowing or lending of any money or guarantee of any obligation
in excess of $25,000, (v) limits the right of Seller (or, after the Closing
Date, Buyer or its Affiliates) to compete in any line of business or otherwise
restricts any right Seller (or, after the Closing Date, Buyer or its Affiliates)
may have, (vi) is an employment or consulting contract other than pursuant to
the form of "at will" employment agreement previously delivered to Buyer to
which all of Seller's employees are a party, or (vii) was not entered into in
the ordinary course of business (each, a "Contract" and collectively, the
"Contracts"). Each Contract is a legal, valid and binding obligation of Seller
and is in full force and effect, subject to applicable bankruptcy and moratorium
laws and equitable principles affecting the scope and enforcement of creditors'
rights generally. Seller and, to the knowledge of Seller, each other party to
each Contract has performed all obligations required to be performed by it
thereunder and is not in breach or default, and is not alleged to be in breach
or default, in any respect thereunder, and, to the knowledge of Seller, no event
has occurred and no condition or state of facts exists (or would exist upon the
giving of notice or the lapse of time or both) that would become or cause a
breach, default or event of default thereunder, would give to any person the
right to cause such a termination or would cause an acceleration of any
obligation thereunder. Except as provided on Schedule 3.13, Seller is not
-------------
currently renegotiating any Contract nor has Seller received any notice of
non-renewal or price increase or sales or production allocation with respect to
any Contract.
3.14. Permits; Compliance With Law. To the knowledge of Seller, Seller
----------------------------
holds all permits, certificates, licenses, franchises, privileges, approvals,
registrations and authorizations required under any applicable Law in connection
with the operation of the Purchased Assets and the Business (each, a "Permit"
and collectively, the "Permits"). Each
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<PAGE>
Permit is valid, subsisting and in full force and effect. Seller is in material
compliance with and has fulfilled and performed its obligations under each
Permit, and, to Seller's knowledge, no event or condition or state of facts
exists (or would exist upon the giving of notice or lapse of time or both) that
could constitute a material breach or default under any Permit. Except as
disclosed on Schedule 3.14, Seller has not been since May 31, 1990, nor is it
-------------
currently in violation of any Law and has received no notice of any violation of
Law, and, to the knowledge of Seller, no event has occurred or condition or
state of facts exists that could give rise to any such violation. Seller has
not received any notice of non-renewal of any Permit.
3.15. Real Property. The Purchased Assets include no fee interest in any
-------------
real property other than the Detroit Real Estate. Seller has fee simple title
to the Detroit Real Estate, free and clear of all Encumbrances, other than (i)
easements, covenants, rights of way and other encumbrances or restrictions of
record that do not either adversely affect the value of the Detroit Real Estate
or prohibit or interfere with the operations of the Business, (ii) zoning
restrictions, (iii) liens for current taxes not yet due, and (iv) as described
in Schedule 3.15. All structures and other improvements on the Detroit Real
-------------
Estate are within the lot lines and do not encroach on the properties of any
other person, and (subject to obtaining the Zoning Map Amendment pursuant to
Section 1.14 of this Agreement and to the Seller's knowledge) the use and
operation of the Detroit Real Estate conform in all material respects to all
applicable building, zoning, safety and subdivision Laws, and other Laws, and
all restrictive covenants and restrictions on conditions affecting title.
Schedule 3.15 discloses and summarizes all real properties currently used (but
-------------
not owned) or leased by Seller and included in the Purchased Assets
(collectively, the "Leased Real Property"). Subject to the express terms and
conditions of such leases, Seller has the right to quiet enjoyment of all
Leased Real Property for the full term, including all renewal rights, of the
lease or similar agreement relating thereto. Seller has not received any written
or oral notice of assessments for public improvements or condemnation
against the Detroit Real Estate or any Leased Real Property. To the knowledge
of Seller, the relationships between Seller and the lessors of the Leased Real
Property are such that there are no existing disputes with such lessors, and
no notices of defaults under any such leases have been received by Seller or
forwarded by Seller. The lease term under Seller's lease for its Peoria,
Illinois facility has lapsed, and Seller is a month-to-month tenant for said
facility.
3.16. Transactions With Related Parties. No Related Party is a party to
---------------------------------
any transaction, agreement or understanding with Seller except pursuant to
arrangements disclosed on Schedule 3.16 and except for dividends properly
-------------
reflected as such in the Financial Statements. No Related Party uses any of the
Purchased Assets except directly in connection with the Business, and, except as
disclosed on Schedule 3.16, no Related Party owns or has any other interest in
-------------
any Purchased Asset or other asset used in the Business. Except as disclosed on
Schedule 3.16, as otherwise expressly provided hereby or by any Other Agreement
-------------
or as otherwise may be mutually agreed after the Closing Date, (i) no Related
Party will at any time after the Closing Date for any reason, directly or
indirectly, become entitled to receive any payment or transfer of money or other
property of any kind from Buyer, and (ii) Buyer will not at any time after the
Closing Date for any reason, directly or indirectly, be or become subject to any
obligation to any Related Party. Schedule 3.16 also discloses all businesses
-------------
previously conducted by Seller during the last five years (whether or not such
businesses have been discontinued, sold or spun off, such as
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<PAGE>
Enviropure), all businesses currently operated by Seller that were not operated
by Seller continuously during the last five years (such as Evansville), and all
businesses currently treating waste streams containing materials requiring
special handling and recycling operated by any Related Party in close proximity
to the Leased Real Property. For purposes of this Agreement, "Related Party"
means (i) Seller and the Stockholders, (ii) any Affiliate of Seller or the
Stockholders, including Enviropure, (iii) any officer or director of any person
identified in clauses (i) or (ii) preceding, and (iv) any spouse, sibling,
ancestor or lineal descendant of any natural person identified in any one of the
preceding clauses. For purposes of this Agreement, "Affiliate" means, with
respect to any person, any other person that, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with such person.
3.17. Labor Relations. To the knowledge of Seller, the relations of Seller
---------------
with its employees are good. No employee of Seller is represented by any union
or other labor organization. No representation election, arbitration
proceeding, grievance, labor strike, dispute, slowdown, stoppage or other labor
trouble is pending or, to the knowledge of Seller, threatened against,
involving, affecting or potentially affecting Seller. Except as disclosed in
Schedule 3.17, no complaint against Seller is pending or, to the knowledge of
-------------
Seller, threatened before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any similar state or local agency, by or
on behalf of any employee of Seller. Except as provided on Schedule 3.17,
-------------
Seller has no contingent liability for sick leave, vacation time, severance
pay or any similar item not fully reserved on the Interim Balance Sheet.
Seller has no contingent liability for any occupational disease of any of its
employees, former employees or others. Neither the execution and delivery of
this Agreement, the performance of the provisions hereof nor the consummation
of the transactions contemplated hereby will trigger any severance pay
obligation under any contract or under any Law.
3.18. Products Liability; Warranties. Except as disclosed on Schedule
------------------------------ --------
3.18, no product manufactured, distributed or sold by Seller to others is or,
----
to the knowledge of Seller, has been alleged to have been defective or
improperly designed or manufactured. No product manufactured, distributed or
sold by Seller is in breach of any express or implied product warranty, other
than as shall be fully reserved in the warranty reserve on the Closing Balance
Sheet. Schedule 3.18 discloses and describes, or Seller has previously
-------------
delivered to Buyer, the terms of all express product warranties made by Seller
under which Buyer may have liability after the Closing Date.
3.19. Insurance. Schedule 3.19 discloses all liability insurance policies
--------- -------------
on an "occurrence" basis with respect to which Seller is the owner, insured or
beneficiary.
3.20. Intellectual Property Rights. Schedule 3.20 discloses all of the
---------------------------- -------------
trademark and service mark rights, applications and registrations, trade names,
fictitious names, service marks, logos and brand names, copyrights, copyright
applications, letters patent, patent applications and licenses of any of the
foregoing owned or used by Seller in or applicable to the Business. Seller has
the entire right, title and interest in and to, or has the perpetual
royalty-free right to use, the intellectual property rights disclosed on
Schedule 3.20 and all other processes, know-how, show-how, formulae, trade
-------------
secrets, inventions, discoveries, improvements, blueprints, specifications,
drawings, designs, and other proprietary rights
-21-
<PAGE>
necessary or applicable to or advisable for use in the Business ("Intellectual
Property"), free and clear of all Encumbrances, and all Intellectual Property is
included in the Purchased Assets. Schedule 3.20 separately discloses all
-------------
Intellectual Property under license. The Intellectual Property is valid and, to
the knowledge of Seller, not the subject of any interference, opposition,
reexamination or cancellation. To the knowledge of Seller, no person is
infringing upon nor has any person misappropriated any Intellectual Property nor
is Seller infringing upon the intellectual property rights of any other person.
3.21. [Not Used].
--------
3.22. Environmental Matters. Except as disclosed in Schedule 3.22:
--------------------- -------------
(a) Compliance; No Liability. Seller has operated the Business
------------------------
and each parcel of real property now or previously owned or leased by it ("Real
Property") in compliance with all applicable Laws in effect on the date hereof
and on the Closing Date relating to public health and safety or protection of
the environment, including common law nuisance, property damage and similar
common law theories ("Environmental Laws"). Seller is not subject to any
liability, penalty or expense (including legal fees) and Buyer will not
hereafter suffer or incur any loss, liability, penalty or expense (including
legal fees) by virtue of any violation by Seller of any Environmental Law
occurring on or prior to the Closing Date, any environmental activity conducted
on or with respect to any real property on or prior to the Closing Date or any
environmental condition existing on or with respect to any real property on or
prior to the Closing Date, in each case whether or not Seller permitted or
participated in such act or omission.
(b) Treatment; CERCLIS. Except directly in connection with
------------------
providing products and services to customers in the ordinary course of the
Business, Seller has not treated, stored or recycled of any hazardous substance,
as defined by any Environmental Law, or any other material regulated by any
applicable Environmental Law, including petroleum, petroleum-related material,
crude oil or any fraction thereof ("Regulated Material") on any real property,
and no other person has treated, stored, recycled or disposed of any Regulated
Material on any part of the Real Property. Seller has not disposed of any
Regulated Material on the Real Property except in accordance with applicable
Environmental Law. There has been no release of any Regulated Material at, on or
under any Real Property. Seller has not transported any Regulated Material or
arranged for the transportation of any Regulated Material to any location that
is listed or proposed for listing on the Comprehensive Environmental Response
Compensation Liability Information System List ("CERCLIS") or the National
Priorities List pursuant to the Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C. Sections 6901 et seq as
-- ---
amended ("Superfund") or any other location that is the subject of federal,
state or local enforcement action or other investigation that may lead to
claims against Buyer for cleanup costs, remedial action, damages to
natural resources, to other property or for personal injury including claims
under Superfund. None of the Real Property is listed or, to the knowledge of
Seller, proposed for listing on the National Priorities List pursuant to
Superfund, CERCLIS or any state or local list of sites requiring investigation
or cleanup.
-22-
<PAGE>
(c) Notices; Existing Claims; Certain Regulated Materials;
-----------------------------------------------------
Storage Tanks. Seller has not received any request for information, notice of
-------------
claim, demand or other notification that it is or may be potentially responsible
with respect to any investigation, abatement or cleanup of any threatened or
actual release of any Regulated Material. Seller is not required to place any
notice or restriction at any Real Property or in any deed to any Real Property
relating to the presence of any Regulated Material. Seller has provided to Buyer
a list of all sites to which Seller has transported any Regulated Material for
recycling, treatment, storage or disposal. There has been no past, and there is
no pending or contemplated, claim by Seller under any Environmental Law based on
actions of others that may have impacted on the Real Property, and Seller has
not entered into any agreement with any person regarding any Environmental Law,
remedial action or other environmental liability or expense. No polychlorinated
biphenyls or friable asbestos is present on or in any structure or equipment
located on any Real Property. All storage tanks located on the Leased Real
Property, whether underground or aboveground, are disclosed on Schedule 3.22,
-------------
and all such tanks and associated piping are in sound condition and are not
leaking and have not leaked.
(d) No Notices. The Illinois Responsible Property Transfer Tax
----------
Act (765 ILCS 90/1 through 7 (1994)) does not apply to the consummation of the
transactions contemplated hereby. No notices or filings shall be required or
other obligations will be imposed upon Seller or Buyer under any other
applicable state Environmental Laws upon consummation of the transactions
contemplated hereby.
3.23. Customer Relations. Except as provided on Schedule 3.23, there exists
------------------ -------------
no condition or state of facts or circumstances involving Seller's customers,
suppliers, distributors or sales representatives that Seller can reasonably
foresee that could adversely affect the Business after the Closing Date.
3.24. Finders' Fees. Seller has not employed any broker or finder or
-------------
incurred any liability for any brokerage fee, commission or finders' fee in
connection with any of the transactions contemplated hereby or by any Other
Agreement.
3.25. Disclosure. None of the representations or warranties of Seller
----------
contained herein and none of the information contained in the Schedules referred
to in Article III is false or misleading in any material respect or omits to
-----------
state a fact herein or therein necessary to make the statements herein or
therein not misleading in any material respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
As an inducement to Seller to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer represents and warrants to Seller as
follows:
4.01. Organization. Buyer is a corporation duly organized, validly existing
------------
and in good standing under the laws of the Commonwealth of Massachusetts, and
has the corporate power and authority to own or lease its properties, carry on
its business, enter into this
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<PAGE>
Agreement and the Other Agreements to which it is or is to become a party and
perform its obligations hereunder and thereunder.
4.02. Authorization; Enforceability. This Agreement and each Other
-----------------------------
Agreement to which Buyer is a party have been duly executed and delivered by and
constitute the legal, valid and binding obligations of Buyer, enforceable
against it in accordance with their respective terms, subject to applicable
bankruptcy and moratorium laws and equitable principles affecting the scope and
enforcement of creditors' rights generally. Each Other Agreement to which Buyer
is to become a party pursuant to the provisions hereof, when executed and
delivered by Buyer, will constitute the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with the terms of such Other
Agreement, subject to applicable bankruptcy and moratorium laws and equitable
principles affecting the scope and enforcement of creditors' rights generally.
All actions contemplated by this Section have been duly and validly authorized
by all necessary proceedings by Buyer.
4.03. No Violation of Laws; Consents. Neither the execution and delivery of
------------------------------
this Agreement or any other Agreement to which Buyer is or is to become a
party, the consummation of the transactions contemplated hereby or thereby nor
the compliance with or fulfillment of the terms, conditions or provisions hereof
or thereof by Buyer will: (i) contravene any provision of the Governing
Documents of Buyer, or (ii) violate any Law or any judgment or order of any
Governmental Body to which Buyer is subject or by which any of its assets may be
bound or affected. No consent, approval or authorization of, or registration or
filing with, any person is required in connection with the execution and
delivery by Buyer of this Agreement or any of the Other Agreements to which
Buyer is or is to become a party pursuant to the provisions hereof or the
consummation by Buyer of the transactions contemplated hereby or thereby, other
than (A) approvals which have been obtained, (B) the approval of FNB in
connection with Buyer's credit facility with FNB, which approval shall be
obtained prior to Closing, and (C) listing of the USF Common Shares included in
the Purchase Price on the New York Stock Exchange.
4.04. No Pending Litigation or Proceedings. No Litigation is pending or, to
------------------------------------
the knowledge of Buyer, threatened against or affecting Buyer in connection
with any of the transactions contemplated by this Agreement or any Other
Agreement to which Buyer is or is to become a party. There is presently no
outstanding judgment, decree or order of any Governmental Body against or
affecting Buyer in connection with the transactions contemplated by this
Agreement or any Other Agreement to which Buyer is or is to become a party.
4.05. Capitalization. Buyer's authorized capital consists of (i) 75,000,000
--------------
USF Common Shares, of which 22,226,676 shares were issued and outstanding as of
July 17, 1995, and 8,958,861 shares were reserved for issuance on exercise of
outstanding warrants or option or upon conversion of outstanding convertible
securities, or otherwise as of July 17, 1995; and (ii) 3,000,000 shares of
Preferred Stock, $.10 par value, of which (A) 880,000 shares were issued and
outstanding and subject to the Certificate of Designations of the Series A
Voting Cumulative Convertible Preferred Stock and (B) 139,518 shares were issued
and outstanding and subject to the Certificate of Designations of the Series B
Voting Convertible Preferred Stock.
- 24 -
<PAGE>
4.06. SEC Filings. Buyer has delivered or made available to the
-----------
Stockholders Buyer's Annual Report to stockholders and Form 10-K for the fiscal
year ending March 31, 1994, its Form 10-Q for the fiscal quarters ended June 30,
1994, September 30, 1994 and December 31, 1994, its proxy statement relating to
its annual meeting of stockholders held on September 14, 1994 and its special
meeting of stockholders held on February 17, 1995 and its annual meeting to be
held on September 11, 1995, its Forms 8-K and 8-K/A filed since March 31, 1994,
its prospectus dated April 26, 1995, and its Annual Report to stockholders and
Form 10-K for the fiscal year ended March 31, 1995. Such documents constitute
all of the filings required to be made by Buyer under the Securities Exchange
Act of 1934 since the end of its most recent fiscal year.
4.07. Authorization of USF Common Shares. The issuance of the USF Common
----------------------------------
Shares as part of the Purchase Price has been duly authorized by Buyer's Board
of Directors, and upon issuance and delivery under the terms hereof, all such
shares shall be duly authorized by all necessary corporate action, validly
issued, fully paid and nonassessable.
4.08. Finders' Fees. Buyer has not employed any broker or finder or
-------------
incurred any liability for any brokerage fee, commission or finders' fee in
connection with any of the transactions comtenplated hereby.
4.09. Form S-3. Buyer is currently eligible to file with the Securities
--------
and Exchange Commission a registration statement on Form S-3 to register the USF
Common Shares for resale in a secondary offering.
ARTICLE V
CERTAIN COVENANTS
-----------------
5.01. Conduct of Business Pending Closing. From and after the date hereof
-----------------------------------
and until the Closing Date, unless Buyer shall otherwise consent in writing,
Seller shall conduct its affairs as follows:
(a) Ordinary Course; Compliance. The Business shall be conducted
---------------------------
only in the ordinary course and consistent with past practice. Seller shall
maintain the Purchased Assets and Assumed Liabilities consistent with past
practice and shall comply in a timely fashion with the provisions of all
Contracts and Permits and its other agreements and commitments. Seller shall use
good faith reasonable efforts to keep its business organization intact, keep
available the services of its present employees and preserve the goodwill of its
suppliers, customers and others having business relations with it. Seller shall
maintain in full force and effect its policies of insurance, subject only to
variations required by the ordinary operations of the Business, or else shall
obtain, prior to the lapse of any such policy, substantially similar coverage
with insurers of recognized standing.
(b) Transactions. Seller shall not: (i) make any distribution
------------
with respect to its capital stock, other than as provided in Section 5.18; (ii)
------------
enter into any contract or commitment the performance of which may extend
beyond the Closing Date, except those made in the ordinary course of business,
the terms of which are consistent with past practice; (iii) enter into any
employment or consulting contract or arrangement that is not terminable
-25-
<PAGE>
at will and without penalty or continuing obligation; (iv) fail to pay any
liability or charge when due, other than liabilities contested in good faith by
appropriate proceedings; (v) take any action that is reasonably likely to result
in the occurrence of any event set forth in Section 3.06; or (vi) take any
------------
action or omit to take any action that will cause a breach or termination of any
Contract, other than termination by fulfillment of the terms thereunder.
(c) Access, Information and Documents. Seller shall give to Buyer
---------------------------------
and to Buyer's employees and representatives (including accountants, actuaries,
attorneys, environmental consultants and engineers) access during normal
business hours to all of the properties, books, tax returns, contracts,
commitments, records, officers, personnel and accountants (including independent
public accountants and their workpapers concerning Seller) of Seller and shall
furnish to Buyer all such documents and copies of documents and all information
with respect to the properties, liabilities and affairs of Seller as Buyer may
reasonably request.
5.02. Publicity. Neither Seller, Buyer nor any Stockholder shall issue any
---------
press release or otherwise make any announcements to the public or the employees
of Seller with respect to this Agreement without the prior written consent of
the other, except as required by Law. This Section shall expire on the 10th day
after the Closing Date.
5.03. Fulfillment of Agreements. Each party hereto shall use good faith
-------------------------
reasonable efforts to cause all of those conditions to the obligations of the
other under Article VI that are not beyond its reasonable control to be
----------
satisfied on or prior to the Closing and shall use its good faith reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement. Without limiting the foregoing,
Seller shall, prior to Closing, obtain the consents identified in Schedule 3.04.
-------------
5.04. Certain Transitional Matters.
----------------------------
(a) Collection of Accounts Receivables. Seller agrees that Buyer,
----------------------------------
after the Closing Date, shall have the right and authority to collect for
Buyer's own account all accounts receivable and other items included in the
Purchased Assets.
(b) Endorsement of Checks. After the Closing Date, Buyer shall
---------------------
have the right and authority to endorse without recourse the name of Seller on
any check or any other evidences of indebtedness received by Buyer on account of
any of the Business and Purchased Assets transferred to Buyer hereunder.
(c) Remit Funds. After the Closing Date, Seller and the
-----------
Stockholders shall promptly transfer and deliver to Buyer any cash or other
property, if any, that Seller or the Stockholders may receive related to the
Purchased Assets.
(d) Assumed Liabilities Controlled by Buyer. After the Closing
---------------------------------------
Date, Buyer shall have complete control over the payment, settlement or other
disposition of, or any dispute involving, any Assumed Liability, and Buyer shall
have the right to conduct and control all negotiations and proceedings with
respect thereto. Seller and the Stockholders
- 26 -
<PAGE>
shall notify Buyer immediately of any claim made with respect to any Assumed
Liability and shall not, except with the prior written consent of Buyer,
voluntarily make any payment of, or settle or offer to settle, or consent to any
compromise with respect to, any Assumed Liability. Seller and the Stockholders
shall cooperate with Buyer in connection with any negotiations or proceedings
involving any Assumed Liability.
(e) Use of Names. Promptly after Closing, Seller shall change its
------------
name to a name bearing no resemblance to its present name, and neither Seller
nor the Stockholder shall directly or indirectly use the names "Continental
H\\2\\O Services" or "Interlake" or "Evansville".
(f) Insurance. Following the Closing, Seller shall, to the extent
---------
that coverage under Seller's insurance policies extends to include the Business
or the Purchased Assets in respect of claims or occurrences concerning Seller on
or prior to the Closing Date, (i) take no action to eliminate or reduce such
coverage, other than normal elimination or reduction of coverage as they occur
by virtue of the filing of claims in the ordinary course under such insurance
policies, (ii) pay when due any premiums under such policies, including
retrospective or retroactive premium adjustments, and (iii) use their good faith
reasonable efforts to assist in filing and processing claims under, and
otherwise cooperate with Buyer and its successors to allow them, in their own
names, or on behalf of Seller, to obtain all coverage benefits applicable to the
Business under such insurance policies, including the execution of assignments
or powers of attorney for the benefit of Buyer. Any proceeds of insurance paid
by an insurer to Seller or the Stockholders for claims of Buyer made in
accordance with this Section shall be promptly paid to Buyer.
(g) Assistance. Seller and the Stockholders shall cooperate with
----------
and assist Buyer and its authorized representatives in order to provide, to the
extent reasonably requested by Buyer, an efficient transfer of control of the
Purchased Assets and Assumed Liabilities and to avoid any undue interruption in
the activities and operations of the Business following the Closing Date.
5.05. No Solicitation of the Employees of the Business. For a period of
------------------------------------------------
five years from and after the Closing Date, neither Seller nor the Stockholders
shall induce or seek to induce to leave the employ of Buyer or any of its
Affiliates, or, without the prior written consent of Buyer, employ or otherwise
use the services of, any employee employed in the Business, other than any such
employee whose employment is terminated by Buyer or any of its Affiliates prior
to such time.
5.06. Seller's Employees. Except as contemplated by written employment
------------------
agreements signed by Buyer on or before the date hereof, Buyer shall have the
right, but not the obligation to employ any or all of the employees of Seller;
provided, however, that Buyer shall hire at least that number of Seller's
-------- -------
employees that will not give rise to mandatory notice under the Worker
Adjustment Retraining Notification Act, 29 U.S.A. (SS) 2101-2109.
5.07. Severance and Termination Payments. Seller is retaining all liability
----------------------------------
for any severance or termination payments, if any, due to those of Seller's
employees that Buyer
- 27 -
<PAGE>
hires effective immediately after the Closing Date, which liability results from
such hiring. Buyer shall pay all liability for any severance or termination
payments, if any, due to those of Seller's employees that Buyer does not hire
immediately after the Closing Date; provided, however, that Buyer's liabilities
-------- -------
for such payments shall be limited to those amounts that would have been paid to
such employees had Buyer's current severance plan determined the amount of such
payments.
5.08. Certain Employee Benefit Matters. Seller shall retain all liability
--------------------------------
for and assets related to all of the Benefit Plans (as defined below) for all of
its employees and former employees of Seller, except that Buyer shall assume any
such assets and liabilities included in the Closing Balance Sheet in the amounts
shown thereon. All employees of Seller hired by Buyer after the Closing Date
will receive such salaries and be covered by the benefit plans that Buyer, in
its discretion, shall offer to such employees as part of their employment
arrangement with Buyer, and Buyer shall be solely liable for all such salaries
and benefits. All employees of Seller hired by Buyer immediately after the
Closing Date shall be credited for their length of service with Seller under
Buyer's Benefit Plans; provided, however, that if any such employee is entitled
-------- -------
to vacation benefits under Seller's current vacation plan in excess of three
weeks, such employees shall be entitled under Buyer's vacation plan to such
number of vacation days that such employee would have been entitled under
Seller's current vacation plan up to a maximum of four weeks. For purposes of
this Agreement, "Benefit Plan" includes all written and unwritten "employee
benefit plans" within the meaning of Section 3(3) of ERISA, and any other
written and unwritten profit sharing, pension, savings, deferred compensation,
fringe benefit, insurance, medical, medical reimbursement, life, disability,
accident, post-retirement health or welfare benefit, stock option, stock
purchase, sick pay, vacation, employment, severance, termination or other plan,
agreement, contract, policy, trust fund or arrangement, whether or not funded
and whether or not terminated, (i) maintained or sponsored by Seller, Evansville
or any corporation that may be aggregated with Seller under Sections 414(b),
(c), (m) or (o) of the Code, or (ii) with respect to which Seller has or may
have liability or is obligated to contribute, or (iii) that otherwise covers any
of the current or former employees of Seller or their beneficiaries, or (iv) as
to which any such current or former employees or their beneficiaries
participated or were entitled to participate or accrue or have accrued any
rights thereunder.
5.09. Profit Sharing Plan. Each employee of Seller who is hired by Buyer
-------------------
within thirty days after Closing (a "Seller Employee") who was a participant in
the Continental H\\2\\O Services, Inc. Employees Profit Sharing Plan and Trust
("Seller's Profit Sharing Plan") on the Closing Date shall become a participant
in the United States Filter Corporation 401(k) Plan, and service with Seller
shall be deemed to be service with Buyer. Subsequent to the Closing Date, Seller
shall cause the trustees of Seller's Profit Sharing Plan to make lump sum
distributions available to Seller Employees of their account balances under
Seller's Profit Sharing Plan as of the dates of the Seller Employees'
termination of employment with Seller; provided, however, that (i) Seller's
-------- -------
Profit Sharing Plan as of the dates of distribution of such benefits meets all
of the qualification requirements for a profit sharing plan under Section 401(a)
of the Code; and (ii) Seller's Profit Sharing Plan permits lump sum
distributions to its participants by reason of termination of employment, with
spousal consent if necessary. Buyer will permit Seller Employees who receive
such lump sum distributions to roll them
- 28 -
<PAGE>
over to Buyer's Profit Sharing Plan, either as direct rollovers from the trustee
of Seller's Profit Sharing Plan to the trustee of Buyer's 401(k) Plan as
directed by such Seller Employees or by the Seller Employees to the trustee
under Buyer's 401(k) Plan, within sixty days after receiving the lump sum
distributions from the trustee of Seller's Profit Sharing Plan.
5.10. Workers' Compensation and Disability Claims.
-------------------------------------------
(a) Seller's Liability. Seller shall remain liable for all
------------------
liability, whether due or to become due, whether accrued, absolute, contingent
or otherwise, for all workers' compensation, disability and occupational
diseases of or with respect to all of Seller's employees attributable to
injuries, claims, conditions, events and occurrences occurring on or before the
Closing Date.
(b) Buyer's Liability. Buyer shall be liable for all liability,
-----------------
whether due or to become due, whether accrued, absolute, contingent or
otherwise, for all workers' compensation, disability and occupational diseases
of or with respect to all of employees of Seller hired by Buyer attributable to
injuries, claims, conditions, events and occurrences first occurring after the
Closing Date.
5.11. Lease Arrangement. Florence E. Stockdale shall lease the real estate
-----------------
identified on Schedule 5.11 to Buyer pursuant to the terms of the lease
-------------
agreement attached as Exhibit H (the "Broadview Lease Agreement"), and the
---------
Seller shall lease the Detroit Real Estate to Buyer pursuant to the terms of the
Lease Agreement attached as Exhibit E-2 (the "Detroit Lease Agreement").
-----------
5.12. Covenant Not to Compete.
-----------------------
(a) Restriction. For a period of two years from and after the
-----------
Closing Date, neither Seller nor the Stockholders (other than Melody S.
Williamson and Florence E. Stockdale for the operations currently conducted by
Enviropure consistent with past practice) shall, unless acting as an officer or
employee of Buyer or its Affiliates, directly or indirectly, own, manage,
operate, join, control or participate in the ownership, management, operation or
control of, or be employed or otherwise connected as an officer, employer,
stockholder, partner or otherwise with, any business that at any relevant time
during such period directly or indirectly competes with Buyer or its Affiliates
in the Business in the States of Illinois, Indiana, Ohio, Michigan and
Wisconsin. Ownership of not more than 2% of the outstanding stock of any
publicly traded company shall not be a violation of this Section.
(b) Enforcement. The restrictive covenant contained in this
-----------
Section is a covenant independent of any other provision of this Agreement and
the existence of any claim that Seller may allege against any other party to
this Agreement, whether based on this Agreement or otherwise, shall not prevent
the enforcement of this covenant. Seller agrees that Buyer's remedies at law for
any breach or threat of breach by Seller of the provisions of this Section will
be inadequate, and that Buyer shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Section and to enforce
specifically the terms and provisions hereof, in addition to any other remedy to
which Buyer may be entitled at law or
- 29 -
<PAGE>
equity. The length of time for which this covenant not to compete shall be in
force shall not include any period of violation or any other period required for
litigation during which Buyer seeks to enforce this covenant. Should any
provision of this Section be adjudged to any extent invalid by any competent
tribunal, such provision will be deemed modified to the extent necessary to make
it enforceable.
5.13. Acquisition Proposals. Neither Seller nor the Stockholder shall nor
---------------------
shall they permit any of their Affiliates to, directly or indirectly, solicit,
initiate or encourage any inquiries or the making of any proposals from, engage
or participate in any negotiations or discussions with, provide any confidential
information or data to, or enter into or authorize any agreement or
understanding with, any person or announce any intention to do any of the
foregoing, with respect to any offer or proposal to acquire all or any
substantial part of the Purchased Assets or the Business or any of the capital
stock of Seller, whether by merger, purchase of capital stock or assets or
otherwise.
5.14. Confidentiality. The confidentiality letter agreement dated November
---------------
1, 1994, as supplemented by letters dated March 28, 1995 and April 1, 1995 (the
"Confidentiality Agreement") shall survive termination of this Agreement for any
reason if there shall be no Closing. otherwise, the Confidentiality Agreement
shall terminate on the Closing Date.
5.15. Occupancy of Enviropure. Within 180 days after the Closing Date, the
-----------------------
Stockholders shall cause Enviropure to completely vacate the Broadview, Illinois
property and within 120 days after the Closing Date, the Stockholders shall
cause Enviropure to completely vacate the Detroit Real Estate. So long as Buyer
or any Affiliate of Buyer is a party to the Lease Agreements, neither Seller nor
the Stockholders shall, nor shall they permit any Related Party to, occupy in
close proximity to any Leased Real Estate any property on which waste streams
containing materials requiring special handling and recycling are treated.
5.16. Right of Inspection. Seller shall have the right to inspect during
-------------------
normal business hours the books, records, manuals, documents and books of
account related to the Business for purposes of preparing Seller's income tax
returns and otherwise complying with applicable Law; provided, however, that
-------- -------
such right shall not interfere with the normal operations of the Business or
impose any costs or expenses on Buyer. Buyer shall retain all books, records,
manuals, documents and books of account of Seller relating to the Business for
seven years after the Closing Date.
5.17. Merger of Evansville. The Stockholders shall cause the merger of
--------------------
Evansville into Seller prior to Closing. The parties hereto agree that the
merger of Evansville into Seller shall, for purposes of this Agreement, be
deemed to be effective immediately prior to the Closing Date.
5.18. Dividends. Seller shall not prior to Closing make, pay or declare any
---------
dividend or other distribution with respect to its capital stock, except that
Seller may declare and pay such cash dividends in such amounts that will not in
the aggregate, in Seller's best reasonable estimation, cause the Net Tangible
Book Value of the Purchased Assets as of the Closing Date to be less than
$9,025,479.
- 30 -
<PAGE>
ARTICLE VI
CONDITIONS TO CLOSING: TERMINATION
----------------------------------
6.01. Conditions Precedent to Obligation of Buyer. The obligation of Buyer
-------------------------------------------
to proceed with the Closing under this Agreement is subject to the fulfillment
prior to or at Closing of the following conditions, any one or more of which
may be waived in whole or in part by Buyer at Buyer's sole option:
(a) Bringdown of Representations and Warranties; Covenants. Each
------------------------------------------------------
of the representations and warranties of Seller and the Stockholders contained
in this Agreement shall be true and correct in all material respects on and as
of the Closing Date, with the same force and effect as though such
representations and warranties had been made on, as of and with reference to the
Closing Date. Each of Seller and the Stockholders shall have performed in all
respects all of the covenants and complied with all of the provisions required
by this Agreement to be performed or complied with by it at or before the
Closing.
(b) Litigation. No statute, regulation or order of any
----------
Governmental Body shall be in effect that restrains or prohibits the
transactions contemplated hereby or that would limit or adversely affect Buyer's
ownership of the Purchased Assets, and there shall not have been overtly
threatened, nor shall there be pending, any action or proceeding by or before
any Governmental Body challenging the lawfulness of or seeking to prevent or
delay any of the transactions contemplated by this Agreement or any of the Other
Agreements or seeking monetary or other relief by reason of the consummation of
any of such transactions.
(c) No Material Adverse Change. Between the date hereof and the
--------------------------
Closing Date, there shall have been no material adverse change, regardless of
insurance coverage therefor, in the Purchased Assets, the Assumed Liabilities,
or the results of operations, prospects or condition, financial or otherwise, of
the Business.
(d) Closing Certificate. Seller and the Stockholders shall have
-------------------
delivered a certificate, dated the Closing Date, in such detail as Buyer shall
request, certifying to the fulfillment of the conditions set forth in
subparagraphs (a), (b) and (c) of this Section 6.01. Such certificate shall
------------
constitute a representation and warranty of Seller and the Stockholders with
regard to the matters therein for purposes of this Agreement.
(e) Indemnity Escrow Agreement. The Indemnity Escrow Agreement
--------------------------
shall have been executed and delivered by all parties thereto.
(f) Lease Agreements. The Broadview Lease Agreement shall have
----------------
been executed and delivered by Florence E. Stockdale, and the Detroit Lease
Agreement shall have been executed and delivered by Seller.
(g) Evansville Merger. Evansville shall have been duly merged
-----------------
into Seller under applicable state law under terms and conditions acceptable to
Buyer.
(h) Consents. Seller shall have received the consents, approvals
--------
and actions of the persons referred to in Schedule 3.04.
-------------
- 31 -
<PAGE>
(i) Option Agreement. Seller and the Stockholders shall have
----------------
executed and delivered the Option and Registration Rights Agreement in the form
of Exhibit I (the "Option Agreement").
---------
(j) Private Placement. Buyer shall be satisfied that there shall
-----------------
be a valid private placement of the USF Common Shares included in the Purchase
Price to be delivered pursuant to Article I, under Rule 506 under the Securities
---------
Act and under any applicable state securities laws, including representations or
questionnaires or both from each Stockholder to the effect that he or she is an
accredited investor under the Securities Act of 1933 and has such knowledge and
experience in financial and business matters that would permit him or her to be
capable of evaluating the merits and risks of an investment in such USF Common
Shares.
(k) Listing of USF Common Shares. The USF Common Shares to be
----------------------------
delivered pursuant to Article I shall have been listed on the New York Stock
---------
Exchange.
(l) USF Common Share Value. The USF Common Share Value shall be
----------------------
equal to or greater than $17 per share.
(m) [Not Used].
--------
(n) Title Insurance. Buyer shall have obtained for the Detroit
---------------
Real Estate held by Seller final marked commitments to issue to Buyer ALTA
(1990-Form B with appropriate state endorsements) owner's policies of title
insurance in coverage amounts equal to the fair market values of the Detroit
Real Estate, insuring good and marketable title fee simple title to the Detroit
Real Estate and good title to such leasehold interests with mechanic's liens
coverage and such endorsements as Buyer may have reasonably requested and with
exceptions only for (i) ALTA standard printed exceptions (other than mechanic's
and materialmen's liens and rights of possession), (ii) Permitted Encumbrances,
and (iii) other Encumbrances acceptable to Buyer.
(o) Surveys. With respect to the Detroit Real Estate, Buyer shall
-------
have received surveys of such property which conform to the standards set forth
in the ALTA/American Congress on Surveying and Mapping Minimum Standard Detail
Requirements for Land Title Surveys and which disclose no state of facts
inconsistent with the representations and warranties of Seller set forth in
Section 3.15 hereof.
------------
(p) Other Deliveries. Buyer shall have received:
----------------
(i) An affidavit of Seller stating, under penalty of
perjury, that it is not and has not been during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code, a United States real property holding
corporation as defined in Section 897(c)(2) of the Code.
(ii) With respect to the Detroit Real Estate, ALTA
extended coverage statements/affidavits in form and substance satisfactory to
Buyer's title insurer
- 32 -
<PAGE>
regarding title, mechanic's liens and such other customary matters as may be
reasonably requested by Buyer or Buyer's title insurer.
(iii) With respect to the Detroit Real Estate, a
certificate, duly executed and acknowledged by an officer of Seller under
penalties of perjury, in the form prescribed by Treasury Regulation (S)
1,1445-2(b)(2)(iii), stating (A) Seller's name, address and Federal tax
identification number, and (B) that it is not a "foreign person" within the
meaning of Section 1445 of the Code.
(iv) Evidence of release of all liens in favor of
American Midwest Bank & Trust.
(q) Closing Documents. Buyer shall have received the other
-----------------
documents referred to in Section 6.03(a). All agreements, certificates, opinions
---------------
and other documents delivered by Seller and the Stockholders to Buyer hereunder
shall be in form and substance satisfactory to counsel for Buyer, in the
exercise of such counsel's reasonable professional judgment.
6.02. Conditions Precedent to Obligation of Seller. The obligation of
--------------------------------------------
Seller and the Stockholders to proceed with the Closing under this Agreement is
subject to the fulfillment prior to or at Closing of the following conditions,
any one or more of which may be waived in whole or in part by Seller or the
Stockholders at their sole option:
(a) Bringdown of Representations and Warranties: Covenants. Each
------------------------------------------------------
of the representations and warranties of Buyer contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date, with
the same force and effect as though such representations and warranties had been
made on, as of and with reference to the Closing Date. Buyer shall have
performed all of the covenants and complied in all respects with all of the
provisions required by this Agreement to be performed or complied with by it at
or before the Closing.
(b) Litigation. No statute, regulation or order of any
----------
Governmental Body shall be in effect that restrains or prohibits the
transactions contemplated hereby, and there shall not have been overtly
threatened, nor shall there be pending, any action or proceeding by or before
any Governmental Body challenging the lawfulness of or seeking to prevent or
delay any of the transactions contemplated by this Agreement or the Other
Agreements or seeking monetary or other relief by reason of the consummation of
such transactions.
(c) Closing Certificate. Buyer shall have delivered a
-------------------
certificate, dated the Closing Date, in such detail as Seller and the
Stockholders shall request, certifying to the fulfillment of the conditions set
forth in subparagraphs (a) and (b) of this Section 6.02. Such certificate shall
------------
constitute a representation and warranty of Buyer with regard to the matters
therein for purposes of this Agreement.
(d) No Material Adverse Change. Between the date hereof and the
--------------------------
Closing Date, there shall have been no material adverse change, regardless of
insurance
- 33 -
<PAGE>
coverage therefor, in the assets, liabilities or the results of operations,
prospects or condition, financial or otherwise, of USF.
(e) Listing of USF Common Shares. The USF Common Shares to be
----------------------------
delivered pursuant to Article I shall have been listed on the New York Stock
Exchange. ---------
(f) Indemnity Escrow Agreement. The Indemnity Escrow Agreement
--------------------------
shall have been executed and delivered by all parties thereto.
(g) Lease Agreements. The Broadview Lease Agreement and the
----------------
Detroit Lease Agreement shall have been executed and delivered by Buyer.
(h) Option Agreement. Buyer shall have executed and delivered the
----------------
Option Agreement.
(i) USF Common Share Value. The USF Common Share Value shall be
----------------------
equal to or greater than $15 per share.
(j) Closing Documents. Seller shall also have received the other
-----------------
documents referred to in Section 6.03(b). All agreements, certificates, opinions
---------------
and other documents delivered by Buyer to Seller hereunder shall be in form and
substance satisfactory to counsel for Seller and the Stockholders, in the
exercise of such counsel's reasonable professional judgment.
(k) [Not Used].
--------
6.03. Deliveries and Proceedings at Closing.
-------------------------------------
(a) Deliveries by Seller and the Stockholders. Seller and the
-----------------------------------------
Stockholders shall deliver or cause to be delivered to Buyer at the Closing:
(i) A general warranty bill of sale and instrument of
assignment to the other Purchased Assets, duly executed by Seller, and a general
warranty deed or deeds to the Detroit Real Property, duly executed and
acknowledged by Seller and in recordable form.
(ii) An assignment of all transferable or assignable
licenses, permits and warranties relating to the Purchased Assets and of any
trademarks, trade names, patents and other Intellectual Property, duly executed
and in recordable form.
(iii) Title certificates to any motor vehicles owned by
Seller and included in the Purchased Assets duly executed by Seller (together
with any other transfer forms necessary to transfer title to such vehicles).
(iv) A cashier's or certified check drawn by Seller to
the order of Buyer or wire transfer in the aggregate amount of all of Seller's
cash on hand and in banks at the close of business on the date prior to the
Closing Date less an amount equal to all uncleared checks that have been drawn
by Seller prior to the Closing Date in payment of any
- 34 -
<PAGE>
Assumed Liabilities (and Seller shall retain in such banks amounts equal to the
amounts of such uncleared checks).
(v) Certificates of the appropriate public officials to
the effect that Seller was a validly existing corporation in good standing in
its state of incorporation as of a date not more than 10 days prior to the
Closing Date.
(vi) Incumbency and specimen signature certificates dated
the Closing Date, signed by the officers of Seller and certified by its
Secretary.
(vii) True and correct copies of (A) the Governing
Documents (other than the bylaws) of Seller as of a date not more than 10 days
prior to the Closing Date, certified by the Secretary of State of its state of
incorporation and (B) the bylaws of Seller as of the Closing Date, certified by
its Secretary.
(viii) Certificates of the Secretary of Seller (A)
setting forth all resolutions of the Board of Directors of Seller and the
Stockholders authorizing the execution and delivery of this Agreement and the
performance by Seller of the transactions contemplated hereby, and (B) to the
effect that the Governing Documents of Seller delivered pursuant to Section
-------
6.03(a)(vii) were in effect at the date of adoption of such resolutions, the
-----------
date of execution of this Agreement and the Closing Date.
(ix) The opinion of Holleb & Coff, legal counsel to
Seller and the Stockholders, substantially the form of Exhibit J.
---------
(x) Certificates of the Secretary of State of Indiana and
the Secretary of State of Illinois to the effect that Evansville shall have been
merged into Seller under Indiana and Illinois state law, respectively.
(xi) Such other agreements and documents as Buyer may
reasonably request.
(b) Deliveries by Buyer. Buyer shall deliver or cause to be
-------------------
delivered to Seller (or Escrow Agent, as hereinbefore provided) at the Closing:
(i) Wire transfer of federal funds in accordance with
Section 1.07(a)(i) pursuant to complete wire transfer instructions delivered by
------------------
Seller to Buyer in writing at least five days prior to Closing.
(ii) Wire transfer of federal funds in accordance with
Section 1.07(a)(ii) pursuant to complete wire transfer instructions delivered by
-------------------
Seller to Buyer in writing at least five days prior to Closing.
(iii) Share certificates evidencing that number of USF
Shares determined by reference to Section 1.07(a)(iii).
--------------------
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<PAGE>
(iv) Share certificates evidencing that number of Escrow
Shares determined by reference to Section 1.07(a)(iv).
-------------------
(v) An assumption agreement in form and substance
reasonably acceptable to Buyer and Seller.
(vi) A certificate of the appropriate public official
to the effect that Buyer is a validly existing corporation in the Commonwealth
of Massachusetts as of a date not more than 10 days prior to the Closing Date.
(vii) Incumbency and specimen signature certificates
signed by the officers of Buyer and certified by the Secretary of Buyer.
(viii) True and correct copies of (A) the Governing
Documents (other than the bylaws) of Buyer as of a date not more than 10 days
prior to the Closing Date, certified by the Secretary of State of the
Commonwealth of Massachusetts and (B) the bylaws of Buyer as of the Closing
Date, certified by the Secretary of Buyer.
(ix) A certificate of the Secretary of Buyer (A) setting
forth all resolutions of the Board of Directors of Buyer authorizing the
execution and delivery of this Agreement and the performance by Buyer of the
transactions contemplated hereby, certified by the Secretary of Buyer and (B) to
the effect that the Governing Documents of Buyer delivered pursuant to Section
-------
6.03(b)(vii) were in effect at the date of adoption of such resolutions, the
------------
date of execution of this Agreement and the Closing Date.
(x) The opinion of Donald L. Bergmann, Buyer's in-house
legal counsel, in substantially the form of Exhibit K.
---------
(xi) Such other agreements and documents as Seller may
reasonably request.
6.04. Termination. This Agreement may be terminated at any time prior to
-----------
Closing by: (i) mutual consent of Buyer and Seller; (ii) Buyer, if any of the
conditions specified in Section 6.01 hereof shall not have been fulfilled by
------------
September 22, 1995 and shall not have been waived by Buyer; (iii) Seller, if any
of the conditions specified in Section 6.02 hereof shall not have been fulfilled
------------
by September 22, 1995 and shall not have been waived by Seller. In the event of
termination of this Agreement by either Buyer or Seller pursuant to clause (ii)
or (iii) of the immediately preceding sentence, the remedy of the party
terminating this Agreement shall be limited solely to recovery of all of such
party's costs and expenses incurred in connection herewith.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
--------------------------------------------
7.01. Survival of Representations. All representations, warranties and
---------------------------
agreements made by any party in this Agreement or pursuant hereto shall survive
the Closing, but all claims for damages made by virtue of such representations,
warranties and agreements shall
- 36 -
<PAGE>
be made under, and subject to the limitations set forth in, this Article VII.
-----------
The representations and warranties set forth in Articles II, III and IV are
---------------- --
considered to be cumulative, and any limitation or qualification set forth in
any one representation and warranty therein shall not limit or qualify any other
representation and warranty therein.
7.02. Indemnification by Seller. Seller shall indemnify, defend, save and
-------------------------
hold Buyer and its officers, directors, employees, agents and Affiliates
(collectively, "Buyer Indemnitees") harmless from and against all demands,
claims, allegations, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing; collectively, "Buyer Damages") asserted
against, imposed upon, resulting to, required to be paid by, or incurred by any
Buyer Indemnitees, directly or indirectly, in connection with, arising out of,
which could result in, or which would not have occurred but for (i) a breach of
any representation or warranty made by Seller in this Agreement, in any
certificate or document furnished pursuant hereto by Seller or in any Other
Agreement to which Seller is or is to become a party, (ii) a breach or
nonfulfillment of any covenant or agreement made by Seller in or pursuant to
this Agreement and in any Other Agreement to which Seller is or is to become a
party, (iii) any Retained Item, (iv) any activities of Enviropure on or prior to
the Closing Date with respect to Enviropure's Broadview, Illinois property and
the Detroit Real Estate, (v) any violation of any Environmental Law by
Enviropure at the Broadview, Illinois property or the Detroit Real Estate, after
the Closing Date through the date that Enviropure vacates each such site, (vi)
the liens identified in Section 1.04(n), and (vii) the matters identified on
---------------
Schedules 3.14 and 3.22 (other than those matters referred to in Section 1.04(o)
-------------- ---- ---------------
which are governed by clause (iii) immediately preceding).
7.03. Indemnification by Stockholders. Each Stockholder, on an Allocated
-------------------------------
Basis severally and not jointly (as defined in Section 8.03), shall indemnify,
------------
defend, save and hold the Buyer Indemnitees harmless from and against all Buyer
Damages asserted against, imposed upon, resulting to, required to be paid by, or
incurred by any Buyer Indemnitees, directly or indirectly, in connection with,
arising out of, which could result in, or which would not have occurred but for
(i) a breach of any representation or warranty made by Seller or such
Stockholder in this Agreement, in any certificate or document furnished pursuant
hereto by Seller or such Stockholder or in any Other Agreement to which Seller
or such Stockholder is or is to become a party, (ii) a breach or nonfulfillment
of any covenant or agreement made by Seller or such Stockholder in or pursuant
to this Agreement and in any Other Agreement to which Seller or such Stockholder
is or is to become a party, (iii) any Retained Item, (iv) any activities of
Enviropure on or prior to the Closing Date with respect to Enviropure's
Broadview, Illinois property and the Detroit Real Estate, (v) any violation of
any Environmental Law by Enviropure at the Broadview, Illinois property or the
Detroit Real Estate after the Closing Date through the date that Enviropure
vacates each such site, (vi) the liens identified in Section 1.04(n), and (vii)
---------------
the matters identified on Schedules 3.14 and 3.22 (other than those matters
-------------- ----
referred to in Section 1.04(o) which are governed by clause (iii) immediately
preceding). ---------------
7.04. Indemnification by Buyer. Buyer shall indemnify, defend, save and
------------------------
hold Seller and its officers, directors, employees, Affiliates and agents and
the Stockholders
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<PAGE>
(collectively, "Seller Indemnitees") harmless from and against any and all
demands, claims, allegations, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, cost and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing; collectively,
"Seller Damages") asserted against, imposed upon, resulting to, required to be
paid by, or incurred by any Seller Indemnitees, directly or indirectly, in
connection with, arising out of, which could result in, or which would not have
occurred but for (i) a breach of any representation or warranty made by Buyer in
this Agreement or in any certificate or document furnished pursuant hereto by
Buyer or any Other Agreement to which Buyer is a party, (ii) a breach or
nonfulfillment of any covenant or agreement made by Buyer in or pursuant to this
Agreement and in any Other Agreement to which Buyer is a party, and (iii) any
Assumed Liability.
7.05. Limitation of Liability. Notwithstanding the foregoing, the
-----------------------
obligations of Seller and the Stockholder to indemnify Buyer Indemnitees against
any Buyer Damages shall be subject to all of the following limitations:
(a) Basket. No indemnification shall be made under clause (i) of
------
Section 7.02 or clause (i) of Section 7.03 until the aggregate amount of Buyer
------------ ------------
Damages thereunder exceeds $100,000 (the "Basket") and indemnification shall be
made by Seller thereunder only to the extent Buyer Damages in the aggregate
exceed the amount of the Basket.
(b) Time Period. Seller and the Stockholders shall be obligated
-----------
to indemnity Buyer Indemnitees by virtue of clause (i) of Section 7.02 or clause
------------
(i) of Section 7.03 only for those Buyer Damages as to which Buyer has given
------------
Seller written notice thereof within 12 months after the Closing Date; provided,
--------
however, that with respect to any claim for Buyer Damages by reason of a breach
-------
of any representation or warranty relating to those matters governed by Section
-------
3.22 or any claim for Buyer's Damages related to those matters referred to in
----
clause (vii) of Section 7.02 or clause (vii) of Section 7.03, Seller's and the
------------ ------------
Stockholders' indemnification shall be limited to those matters as to which such
written notice shall have been given within three years after the Closing Date.
(c) Fraud: Intentional Misrepresentation. Notwithstanding the
------------------------------------
foregoing, any limitations set forth in Sections 7.05(a) or (b) shall not apply
-----------------------
to Buyer Damages arising out of (i) fraud, (ii) the breach of any representation
or warranty contained herein or pursuant hereto if such representation or
warranty was made with actual knowledge that it contained an untrue statement of
a fact or omitted to state a fact necessary to make the statements of facts
contained therein not misleading, or (iii) the breach by Seller or the
Stockholders of the representations and warranties set out in Sections 3.08 or
----------------
3.16.
----
(d) Limitation of Liability. The liability of Seller and the
-----------------------
Stockholders for any Buyer Damages shall not exceed $27,000,000 in the
aggregate.
(e) No Duplication. Notwithstanding anything else herein to the
--------------
contrary, solely to avoid duplication, no indemnification shall be made under
clause (i) of Section 7.02 or clause (i) of Section 7.03 to the extent that a
------------
claim thereunder shall have been used as a basis for a Downward Adjustment.
<PAGE>
7.06. Indemnity Escrow. As provided in Section 1.08, Buyer shall deliver
---------------- ------------
the Escrow Fund to Escrow Agent to be held in trust pursuant to the Indemnity
Escrow Agreement which shall have a term of 12 months; provided, however, that
-------- -------
if any claim or claims are made against the Escrow Fund prior to the expiration
of such 12-month period, the Indemnity Escrow Agreement shall continue until
such claim or claims are resolved. In addition to any other right and remedies
available to the Buyer's Indemnitees, the Buyer's Indemnitees may use the Escrow
Fund for any indemnification of Buyer's Damages under Sections 7.02 and 7.03 and
------------- ----
Buyer may use such fund for the matters addressed in Section 1.14. Any Buyer
------------
Damages paid by using USF Common Shares shall be valued at the USF Common Share
Value. To the extent that Buyer Damages under Sections 7.02 and 7.03 and amounts
------------- ----
claimed under Section 1.14 are in the aggregate less than the balance of the
------------
Escrow Fund upon termination of the Indemnity Escrow Agreement, such remaining
Escrow Fund shall be distributed to Seller as provided in the Escrow Agreement.
To the extent that Buyer Damages under Sections 7.02 and 7.03 and amounts
------------- ----
claimed under Section 1.14 are in the aggregate greater than the balance of the
------------
Escrow Fund, the Stockholders and Seller shall deliver to Buyer either cash or,
at their option, USF Common Stock to pay in full all such amounts not covered by
the Escrow Fund. If either USF or the Stockholders exercise their respective
rights, in whole or in part, to transfer the USF Common Shares included in the
Purchase Price to USF pursuant to the terms of the Option and Registration
Rights Agreement, then that amount of cash payable upon such exercise that must
be delivered to the Escrow Agent pursuant to the terms of the Option and
Registration Rights Agreement shall be delivered to the Escrow Agent, shall
become part of the Escrow Fund, and shall be subject to the terms of the
Indemnity Escrow Agreement. In the event of the acceptance of a Call Offer (as
such term is defined in the Option and Registration Rights Agreement), any
proceeds payable to the Stockholders as a result thereof as provided in the
Option and Registration Rights Agreement shall be paid to the Stockholders.
7.07 Notice of Claims. If any Buyer Indemnitee or Seller Indemnitee (an
----------------
"Indemnified Party") believes that it has suffered or incurred or will suffer or
incur any Buyer Damages or Seller Damages, as the case may be ("Damages") for
which it is entitled to indemnification under this Article VII, such Indemnified
-----------
Party shall so notify the party or parties from whom indemnification is being
claimed (the "Indemnifying Party") with reasonable promptness and reasonable
particularity in light of the circumstances then existing. If any action at law
or suit in equity is instituted by or against a third party with respect to
which any Indemnified Party intends to claim any Damages, such Indemnified Party
shall promptly notify the Indemnifying Party of such action or suit. The failure
of an Indemnified Party to give any notice required by this Section 7.07 shall
------------
not affect any of such party's rights under this Article VII or otherwise except
-----------
and to the extent that such failure is actually prejudicial to the rights or
obligations of the Indemnified Party.
7.08. Third Party Claims. The Indemnifying Party shall have the right to
------------------
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnifying Party may compromise or settle
the same, provided that the Indemnifying Party shall give the Indemnified Party
advance notice of any proposed compromise or settlement. The Indemnifying Party
shall permit the Indemnified Party to participate in the defense of any such
action or suit through counsel chosen by the Indemnified Party, provided that
the fees and expenses of such counsel shall be borne by the
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<PAGE>
Indemnified Party. Notwithstanding the foregoing, if a third party claim
involves one of Buyer's customers or is otherwise integrally related to the
Business, then the Indemnified Party shall have the right to conduct and
control, through counsel of its choosing, the defense of any third party claim,
action or suit, and the Indemnified Party may compromise or settle the same,
provided that the Indemnified Party shall give the Indemnifying Party advance
notice of any proposed compromise or settlement. The Indemnified Party shall
permit the Indemnifying Party to participate in the defense of any such action
or suit through counsel chosen by the Indemnifying Party, provided that the fees
and expenses of such counsel shall be borne by the Indemnifying Party. If
Indemnified Party permits the Indemnifying Party to undertake, conduct or
control the conduct and settlement of such action or suit, (i) the Indemnifying
Party shall not thereby permit to exist any Encumbrance upon any asset of the
Indemnified Party; (ii) the Indemnifying Party shall not consent to any
settlement that does not include as an unconditional term thereof the giving of
a complete release from liability with respect to such action or suit to the
Indemnified Party; (iii) the Indemnifying Party shall permit the Indemnified
Party to participate in such conduct or settlement through counsel chosen by the
Indemnified Party; and (iv) the Indemnifying Party shall agree promptly to
reimburse the Indemnified Party for the full amount of any Damages including
fees and expenses of counsel for the Indemnified Party incurred after giving the
foregoing notice to the Indemnifying Party and prior to the assumption of the
conduct and control of such action or suit by the Indemnifying Party.
7.09. Set Off. If any amounts shall be due and owing to an Indemnified
-------
Party as the result of a claim for indemnification made pursuant to this Article
-------
VII, such amounts may be offset against any amounts due and owing to the
---
Indemnifying party.
7.10. Waiver. Except as provided in Sections 7.02 and 7.03, Buyer hereby
------ ------------- ----
waives any and all claims it may have against Seller, whether based on statute,
common law, or other theory, arising out of the condition or use of the Real
Property or the Business of Seller, including but not limited to all claims
under the Comprehensive Environmental Response, Compensation, and Liability Act
and equivalent state provisions.
7.11. Contract Indemnification Remedies as Exclusive Remedies After the
-----------------------------------------------------------------
Closing. This Agreement provides contractual remedies for breaches of the
-------
representations, warranties, covenants and other agreements set forth herein and
for the occurrence of certain other claims, losses, damages, penalties and
expenses which may be sustained, suffered or incurred by a party hereto by means
of indemnification or injunction, as applicable, after the Closing. Therefore,
effective after the Closing, each of the parties hereto hereby irrevocably
waives and relinquishes any right any of them may have to any breach of contract
claims or similar types of claims giving rise to remedies at law, in equity, at
common law or pursuant to statute, including those arising under any
Environmental Law, except for those remedies expressly contained in this
Agreement as regards any claims, losses, damages, penalties and expenses which
may be sustained, suffered or incurred in connection with, arising from or
related to this Agreement or the transactions contemplated hereby.
- 40 -
<PAGE>
ARTICLE VIII
MISCELLANEOUS
-------------
8.01. Construction. As used in this Agreement, unless the context otherwise
------------
requires: (i) references to "Article" or "Section" are to an article or section
hereof; (ii) all "Exhibits" and "Schedules" referred to herein are to Exhibits
and Schedules attached hereto and are incorporated herein by reference and made
a part hereof; (iii) "include", "includes" and "including" are deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import; (iv) "knowledge" means, with respect to any
person, the actual knowledge of such person and such matters that a prudent
person in a similar position should have known; (v) "knowledge" of the Seller
includes the knowledge of James Timothy Stockdale, William E. Stockdale III and
John Christopher Stockdale, each in his capacity as an employee of Seller; (vi)
"knowledge" of the Seller in Section 3.22 also includes the knowledge of Melody
------------
S. Williamson in her capacity as an employee of Seller; and (vii) the headings
of the various articles, sections and other subdivisions hereof are for
convenience of reference only and shall not modify, define or limit any of the
terms or provisions hereof.
8.02. Costs and Expenses. Buyer, Seller and the Stockholders shall each pay
------------------
its respective expenses, brokers' fees and commissions, and Seller shall pay all
of its expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including all accounting, legal and appraisal fees and
settlement charges, except as provided in Section 1.10. The expenses of the
------------
Auditors shall be paid by Buyer. All transfer taxes in connection with the
Purchased Assets and all fees of the Escrow Agent shall be paid one-half by
Buyer and one-half by Seller.
8.03. Pro Rata Basis; Allocated Basis. For purposes of this Agreement,
-------------------------------
"Pro Rata Basis" means 35.90% to Florence E. Stockdale, 15.35% to James Timothy
Stockdale, 15.35% to William Stockdale III, 15.35% to John Christopher
Stockdale, 15.35% to Melody Williamson and 2.70% to Katharine Price. For
purposes of this Agreement, "Allocated Basis" means, on a several basis and not
a joint and several basis, 90% to Florence E. Stockdale, 2.395% to James Timothy
Stockdale, 2.395% to William Stockdale III, 2.395% to John Christopher
Stockdale, 2.395% to Melody Williamson and .42% to Katharine Price; provided,
--------
however, that in any circumstances where (i) any one or more of the Stockholders
-------
is deceased at the time that any payment on an Allocated Basis is due, then the
other Stockholders shall be jointly and severly liable for the deceased
Stockholder's or Stockholders' share of such payment, and (ii) in the event that
Florence E. Stockdale does not make any applicable payment within thirty days
after such payment is due on an Allocated Basis (other than by reason of her
death which circumstances shall be governed by clause (i) preceding) then the
other Stockholders shall be jointly and severally liable for 35.90% of the
amount not so paid and severally liable for the remainder as follows: 23.95% to
James Timothy Stockdale, 23.95% to William Stockdale III, 23.95% to John
Christopher Stockdale, 23.95% to Melody Williamson and 4.2% to Katharine Price.
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<PAGE>
8.04. Stockholders' Committee.
-----------------------
(a) Creation. The Stockholders do hereby, for themselves and
--------
their personal representatives and other successors, constitute and appoint a
committee of three persons initially to consist of Florence E. Stockdale, James
Timothy Stockdale and John Christopher Stockdale as their agents and
attorneys-in-fact (the "Stockholders' Committee") to take all action required or
permitted under this Agreement and the Other Agreements, including the execution
and delivery of the Escrow Agreement on behalf of the Stockholders, the giving
and receiving of all notices and consents and the execution and delivery of all
documents, including any amendments of any non-material term or provision, of
this Agreement or of the Escrow Agreement, the execution and delivery of any
agreements and releases in connection with the settlement of any dispute or
claim under Article VII hereof or the Escrow Agreement or to satisfy any expense
-----------
obligations of the Stockholders under this Agreement or the Escrow Agreement.
The vote of a majority of the Stockholders' Committee shall be required to take
any action on behalf of the Stockholders pursuant to the authority granted to
them under this Section.
(b) Continuance; Certain Rules. In the event of the death,
--------------------------
physical or mental incapacity or resignation of any of the members of any of the
Stockholders' Committee or a vacancy thereon for any other reason, the remaining
members of the Stockholders' Committee shall promptly appoint a substitute or
substitutes and shall advise Buyer thereof. As between the Stockholders'
Committee and the Stockholders, the members of the Stockholders' Committee shall
not be liable for, and shall be indemnified by the Stockholders or provided with
insurance against, any good faith error of judgment on their part or any other
act done or omitted by them in good faith in connection with their duties as
members of such Committee, except for gross negligence or willful misconduct.
The Stockholders' Committee may consult with professional advisors of its
choice. All expenses incurred by the members of the Stockholders' Committee in
performing their duties (including fees and expenses of professional advisors)
and any indemnification to be provided to the Stockholders' Committee shall be
jointly and severally borne by the Stockholders.
(c) Buyer Reliance. Buyer shall be entitled to rely exclusively
--------------
upon any communications given by the Stockholders' Committee on behalf of all
Stockholders, and shall not be liable for any action taken or not taken in
reliance upon the Stockholders' Committee. Buyer shall be entitled to disregard
any notices or communications given or made by the Stockholders unless given or
made through the Stockholders' Committee.
8.05. Anti-Dilution Provisions. If after the date hereof the issued and
------------------------
outstanding USF Common Shares included in the Purchase Price shall have been
changed into a different number of shares as a result of a stock split, reverse
stock split, stock dividend, recapitalization, merger, reclassification or other
similar transaction, the USF Common Share Value shall be adjusted
proportionately.
8.06. Further Assurances. Seller and the Stockholders shall, at any time
------------------
and from time to time on and after the Closing Date, upon request by Buyer and
without further consideration, take or cause to be taken such actions and
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such instruments, documents,
- 42 -
<PAGE>
transfers, conveyances and assurances as may be reasonably required to convey,
transfer, assign and deliver the Purchased Assets to Buyer.
8.07. Notices. All notices and other communications given or made pursuant
-------
to this Agreement shall be in writing and shall be deemed to have been duly
given or made (i) the second business day after the date of mailing, if
delivered by registered or certified mail, postage prepaid, (ii) upon delivery,
if sent by hand delivery, (iii) upon delivery, if sent by prepaid courier, with
a record of receipt, or (iv) the next day after the date of dispatch, if sent by
cable, telegram or facsimile (with a copy simultaneously sent by registered or
certified mail, postage prepaid, return receipt requested), to the parties at
the following addresses:
(i) if to Buyer, to:
U.S. Filter/Ionpure, Inc.
73-710 Fred Waring Drive
Suite 222
Palm Desert, CA 92260
Attn: Chief Executive Officer
Facsimile No.: 619-341-9368
with a copy to:
Donald L. Bergmann, Esq.
110 Washington Avenue
North Haven, CT 06473
Facsimile No.: 203-234-0171
(ii) if to Seller, the Stockholders or the Stockholders'
Committee, to:
Mr. James Timothy Stockdale
2660 South 17th Avenue
Broadview, IL 60153
Facsimile No.: 708-345-8006
with a copy to:
Howard N. Gilbert, Esq.
Holleb & Coff
55 East Monroe Street
Chicago, IL 60603-5896
Facsimile No.: 312-807-3900
Any party hereto may change the address to which notice to it, or copies
thereof, shall be addressed, by giving notice thereof to the other parties
hereto in conformity with the foregoing.
- 43 -
<PAGE>
8.08. Currency. All currency references herein are to United States
--------
dollars.
8.09. Residency. Each Stockholder other than Katharine S. Price represents
---------
and warrants to the Buyer that he or she is a resident of the State of Illinois.
Katharine S. Price represents and warrants to the Buyer that she is a resident
of the State of Indiana.
8.10. Offset; Assignment; Governing Law. Buyer shall be entitled to offset
---------------------------------
or recoup from any amounts due to Seller or the Stockholders from Buyer
hereunder or under any Other Agreement against any obligation of Seller or the
Stockholders to Buyer hereunder or under any Other Agreement. This Agreement and
all the rights and powers granted hereby shall bind and inure to the benefit of
the parties hereto and their respective permitted successors and assigns. This
Agreement and the rights, interests and obligations hereunder may not be
assigned by any party hereto without the prior written consent of the other
parties hereto, except that Buyer may make such assignments to any Affiliate of
Buyer provided that Buyer remains liable hereunder. This Agreement shall be
governed by and construed in accordance with the laws of Delaware without regard
to its conflict of law doctrines.
8.11. Amendment and Waiver; Cumulative Effect. To be effective, any
---------------------------------------
amendment or waiver under this Agreement must be in writing and be signed by the
party against whom enforcement of the same is sought. Neither the failure of any
party hereto to exercise any right, power or remedy provided under this
Agreement or to insist upon compliance by any other party with its obligations
hereunder, nor any custom or practice of the parties at variance with the terms
hereof shall constitute a waiver by such party of its right to exercise any such
right, power or remedy or to demand such compliance. The rights and remedies of
the parties hereto are cumulative and not exclusive of the rights and remedies
that they otherwise might have now or hereafter, at law, in equity, by statute
or otherwise.
8.12. Entire Agreement; No Third Party Beneficiaries. This Agreement and
----------------------------------------------
the Schedules and Exhibits set forth all of the promises, covenants, agreements,
conditions and undertakings between the parties hereto with respect to the
subject matter hereof, and supersede all prior or contemporaneous agreements and
understandings, negotiations, inducements or conditions, express or implied,
oral or written. This Agreement is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder, except the provisions
of Sections 7.02, 7.03 and 7.04 relating to Buyer Indemnitees and Seller
----------------------------
Indemnitees. Without limiting the foregoing, no employee of Seller may rely on
any provision of this Agreement.
8.13. Severability. If any term or other provision of this Agreement is
------------
held by a court of competent jurisdiction to be invalid, illegal or incapable of
being enforced under any rule of Law in any particular respect or under any
particular circumstances, such term or provision shall nevertheless remain in
full force and effect in all other respects and under all other circumstances,
and all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this
- 44 -
<PAGE>
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the fullest extent possible.
8.14. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall be deemed to be one and the same instrument.
- 45 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
U.S. FILTER/IONPURE, INC.
By: /s/ [Signature Appears Here]
------------------------------------
Title: Vice President
------------------------------
STOCKHOLDERS:
/s/ Florence E. Stockdale
---------------------------------------
Florence E. Stockdale
/s/ James Timothy Stockdale
---------------------------------------
James Timothy Stockdale
/s/ William E. Stockdale III
---------------------------------------
William E. Stockdale III
/s/ John Christopher Stockdale
---------------------------------------
John Christopher Stockdale
/s/ Melody S. Williamson
---------------------------------------
Melody S. Williamson
/s/ Katharine S. Price
---------------------------------------
Katharine S. Price
CONTINENTAL H\\2\\O SERVICE, INC.
D/B/A INTERLAKE WATER SYSTEMS
By: /s/ [Signature Appears Here]
-----------------------------------
Title: President
--------------------------------
- 46 -
<PAGE>
JOINDER
-------
United States Filter Corporation, a Delaware corporation, hereby
joins and agrees to be bound by the foregoing Asset Purchase Agreement for the
sole and limited purpose of committing to deliver the USF Shares and the Escrow
Shares (as such terms are defined therein) in accordance with the terms set
forth therein.
UNITED STATES FILTER CORPORATION
By: /s/Signature Appears Here
-------------------------
Title: Senior Vice President
---------------------
- 47 -
