<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) October 2, 1995
---------------
United States Filter Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-10728 33-0266015
- ------------------------ --------------- -----------------------
(State of other (Commission (IRS Employer
jurisdiction 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 October 2, 1995 United States Filter Corporation (the "Company")
completed the acquisition of all of the outstanding capital stock of
Polymetrics, Inc. ("Polymetrics") from Anjou International Company ("Anjou")
pursuant to a stock purchase agreement dated August 30, 1995, as amended. The
acquisition was effective as of October 1, 1995.
The purchase price for Polymetrics was US$58.1 million, subject to a
post-closing purchase price adjustment (the "Purchase Price"). The Purchase
Price was paid by delivery of US$48.0 million in cash, retention by Anjou of a
US$2.0 million cash deposit made by the Company on June 27, 1995, and delivery
of 371,229 shares of the Company's common stock (the "Company Shares") valued at
US$8.1 million. The Company Shares were valued for this purpose at US$21.81944
per share. The Company agreed to establish a shelf registration for the Company
Shares after closing. This agreement to register the Company Shares and other
restrictions relating to the Company Shares are contained in a Transfer and
Registration Rights Agreement that was executed by the parties at the closing.
The Company also guaranteed the price at which Anjou could sell the Company
Shares for approximately six months after the closing. This guarantee and other
terms relating to the disposition of the Company Shares was set forth in a Share
Disposition Agreement that was executed by the parties at the closing.
The acquisition by the Company of Polymetrics has been accounted for by the
Company as a purchase.
Polymetrics is a leader in the design, manufacture, installation and
service of water treatment systems for the electronics, pharmaceutical,
laboratory, power generation and cogeneration industries. Polymetrics operates
more than 30 large mobile demineralizer trailers on the east and west coasts of
the United States and manages water treatment systems at various customer
locations. Polymetrics has 14 sales and service offices, which service
approximately 4,000 customers.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business acquired:
Report of Independent Auditors;
Consolidated Balance Sheets as of December 31, 1994 and June 30, 1995
(unaudited);
Consolidated Statements of Operations for the year ended December 31,
1994 and the six months ended June 30, 1995 (unaudited);
Consolidated Statement of Stockholder's Equity for the year ended
December 31, 1994;
Consolidated Statement of Cash Flows for the year ended December 31,
1994; and
Notes to Consolidated Financial Statements.
(b) Pro Forma Financial Information:
Pro Forma combined balance sheet, statements of operations and notes
thereto.
(c) Exhibits
1.0 Stock Purchase Agreement dated August 30, 1995, by and between
United States Filter Corporation, Anjou International Company, and
Polymetrics, Inc.
3
<PAGE>
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:
_____________________________________
Kevin L. Spence
Vice President
Date: October 6, 1995
4
<PAGE>
POLYMETRICS, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Polymetrics, Inc.:
We have audited the accompanying consolidated balance sheet of Polymetrics,
Inc. and subsidiaries (the Company) as of December 31, 1994, and the related
consolidated statements of operations, stockholder's equity, and cash flows
for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Polymetrics, Inc., and subsidiaries as of December 31, 1994, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
San Francisco, California
August 11, 1995
F-1
<PAGE>
POLYMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
DECEMBER JUNE 30,
31, 1994 1995
-------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................... $ 1,876 $ 538
Accounts receivable, less allowance for doubtful
accounts of $200 at December 31, 1994.................. 6,897 9,524
Costs in excess of billing.............................. 1,727 2,348
Inventories............................................. 3,860 4,187
Prepaid expenses and other current assets............... 371 1,536
Deferred income taxes................................... 1,147 1,250
------- -------
Total current assets.................................. 15,878 19,383
Property and equipment, net............................... 14,945 15,393
Other assets:
Goodwill, net of accumulated amortization of $5,790 at
December 31, 1994...................................... 3,101 2,876
Intangible assets, net of accumulated amortization of
$889 at December 31, 1994.............................. 412 310
Other assets............................................ 16 --
------- -------
$34,352 $37,962
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable........................................ $ 2,785 $ 5,264
Accrued liabilities..................................... 3,901 3,933
Deferred revenue........................................ 419 277
Income taxes payable.................................... 181 465
Due to parent........................................... 283 942
------- -------
Total current liabilities............................. 7,569 10,881
Advance from parent....................................... 14,695 14,695
Other liabilities......................................... 140 166
Deferred income taxes..................................... 1,101 1,221
------- -------
Total liabilities..................................... 23,505 26,963
------- -------
Stockholder's equity:
Common stock, $1 par value; 200,000 shares authorized,
issued, and outstanding at December 31, 1994........... 200 200
Additional paid-in capital................................ 14,774 14,774
Accumulated deficit....................................... (4,127) (3,975)
------- -------
Total stockholder's equity............................ 10,847 10,999
Commitments and contingencies.............................
Subsequent event..........................................
------- -------
$34,352 $37,962
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
POLYMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1994 1995
------------ -----------
(UNAUDITED)
<S> <C> <C>
Revenues:
Equipment sales and system installation projects.... $17,469 $14,676
Operating, maintenance, and rental.................. 23,265 12,681
------- -------
40,734 27,357
Cost of revenue:
Cost of equipment sales and system installation
projects........................................... 13,810 11,966
Cost of operating, maintenance, and rental.......... 11,895 6,950
------- -------
Gross profit...................................... 15,029 8,441
Selling, general, and administrative expenses......... 14,461 7,308
------- -------
Operating income.................................. 568 1,133
Interest expense, net................................. 1,068 658
------- -------
Income (loss) before income taxes................. (500) 475
Income tax benefit (expense).......................... 10 (323)
------- -------
Net (loss) income................................. $ (490) $ 152
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
POLYMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------- PAID-IN ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT EQUITY
------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances, December 31,
1993...................... 200,000 $200 14,774 (3,637) 11,337
Net loss................... -- -- -- (490) (490)
------- ---- ------ ------ ------
Balances, December 31,
1994...................... 200,000 $200 14,774 (4,127) 10,847
======= ==== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
POLYMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.............................................................. $ (490)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization....................................... 4,548
Changes in operating assets and liabilities:
Accounts receivables net........................................... (1,153)
Costs in excess of billings........................................ (1,727)
Inventories........................................................ 400
Prepaid expenses and other current assets.......................... (131)
Other assets....................................................... (16)
Accounts payable................................................... 788
Accrued liabilities................................................ 421
Deferred revenue................................................... 955
Due to parent...................................................... 283
Deferred income taxes.............................................. 300
Other liabilities.................................................. (30)
------
Net cash provided by operating activities......................... 4,148
Cash flows used in investing activities--purchases of property and
equipment............................................................. (2,410)
------
Net increase in cash................................................... 1,738
Cash at beginning of year.............................................. 138
------
Cash at end of year.................................................... $1,876
======
Supplemental disclosures of cash flow information:
Cash paid during the year:
Interest............................................................. $ 500
======
Income taxes......................................................... $ 31
======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
POLYMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Polymetrics, Inc. ("Polymetrics" or "the Company") was incorporated on
December 5, 1979. The Company develops, designs, and manufactures industrial
water treatment products for commercial applications and provides related
services under short-term contracts. The Company is a wholly owned subsidiary
of Anjou International Company (Anjou), a Delaware corporation, which is an
indirect wholly owned subsidiary of Compagnie Generale des Eaux.
Basis of Accounting
The Company's accounts reflect the pushdown basis of accounting resulting
from the purchase of Polymetrics by Anjou in 1981. The difference between the
purchase price paid and the historical basis of the assets and liabilities
acquired has been assigned primarily to intangible assets, including goodwill.
The acquisition of the assets and liabilities of Aqua Media in 1991 was also
accounted for as a purchase by the Company. The difference between the
historical basis in the assets and liabilities acquired and the purchase price
paid was assigned primarily to goodwill.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company as well as those of PolyOzone, Inc. and Polymetrics International
Corporation, Inc. All intercompany accounts and transactions have been
eliminated.
Revenue Recognition
The Company's revenues are derived primarily from custom and standard
equipment sales, system installations, and operating and maintenance
contracts. Revenues from short-term equipment and system installation
contracts are recognized upon shipment or later, upon installation, if
performed by the Company. Revenues from significant long-term custom equipment
and system installation contracts are recognized as costs are incurred under
the percentage of completion method. Revisions in cost and profit estimates
during the course of the work are reflected in the accounting period in which
the facts which require the revision become known. At the time a loss on a
contract becomes known, the entire amount of the estimated ultimate loss on
the contract is accrued.
Maintenance revenue is recognized ratably over the term of the contract.
Costs in Excess of Billings
Costs in excess of billings represent the difference between billings and
revenues recognized on contracts accounted for under the percentage of
completion accounting method.
Concentration of Credit
The Company sells products and services to customers in diversified
industries and geographic regions and, therefore, has no significant
concentrations of credit.
Inventories
Inventories, which consist principally of water filtration equipment
components and spare parts, are stated at the lower of cost (first-in, first-
out method) or market. Systems to be installed are considered work in process
F-6
<PAGE>
POLYMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(WIP) until the completion of installation at the customer site. WIP and
finished goods include material, labor, and assembly overhead. Year-end
inventories consisted of the following as of December 31, 1994 (in thousands):
<TABLE>
<S> <C>
Purchase materials.................................................... $2,086
Work in process....................................................... 1,320
Finished goods........................................................ 454
------
$3,860
======
</TABLE>
Property and Equipment
Property and equipment additions are recorded at cost. Depreciation and
amortization of property and equipment are provided using the straight-line
method over estimated useful lives ranging from 3 to 30 years.
Property and equipment includes systems leased or available for lease to
customers under operating leases typically for periods of short-term duration.
Certain leases contain penalties for early cancellation. The cost of the
leased systems is depreciated to a zero value on a straight-line basis over
useful lives ranging from 5 to 10 years. Accumulated depreciation on leased
(or available for lease) systems totaled $6,092,000 as of December 31, 1994.
Income Taxes
The operations of the Company are included in consolidated federal income
tax returns filed by Anjou's parent. The calculated tax provision approximates
the Company's income tax provision which would have been incurred on a stand-
alone basis in accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," subject to certain consolidated
return limitations. All federal income tax payables or refunds are made or
received by Anjou's parent.
Goodwill and Other Intangibles
The Company amortizes goodwill using the straight-line method over periods
ranging from 15 to 20 years. Trademarks, patents, customer lists, and other
intangible assets are being amortized using the straight-line method over
periods ranging from 3 to 6 years.
Advance from Parent
The Company has a long-term debt arrangement with Anjou allowing the Company
to borrow at the prime rate, as defined. The average prime rate during 1994
was 7.25%. Total interest incurred during 1994 was $1,068,000. Total long-term
amounts due Anjou as of December 31, 1994 were $14,695,000.
(2) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31, 1994
(in thousands):
<TABLE>
<S> <C>
Land and building................................................... $ 1,178
Leased systems...................................................... 14,901
Machinery and equipment............................................. 7,929
Furniture and fixtures.............................................. 533
Leasehold improvements.............................................. 863
Vehicles............................................................ 162
-------
25,566
Less accumulated depreciation and amortization...................... 10,621
-------
Property and equipment, net..................................... $14,945
=======
</TABLE>
F-7
<PAGE>
POLYMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3)ACCRUED LIABILITIES
Accrued liabilities consisted of the following as of December 31, 1994 (in
thousands):
<TABLE>
<S> <C>
Accrued compensation................................................. $1,378
Self-insurance....................................................... 1,103
Accrued installation costs........................................... 585
Accrued warranty..................................................... 292
Other................................................................ 543
------
$3,901
------
</TABLE>
(4)INCOME TAXES
The Company records income taxes in accordance with SFAS No. 109. This
statement provides for an asset and liability approach under which deferred
income taxes are provided based upon enacted tax laws and rates applicable to
the periods in which the taxes become payable.
Income tax expense (benefit) consisted of the following for the year ending
December 31, 1994 (in thousands):
<TABLE>
<S> <C>
Current:
Federal............................................................. $ 154
State............................................................... 29
-----
183
-----
Deferred:
Federal............................................................. (157)
State............................................................... (36)
-----
(193)
-----
$ (10)
=====
</TABLE>
A reconciliation of income tax benefit at the federal statutory rate to the
Company's income tax benefit follows (in thousands):
<TABLE>
<S> <C>
Income tax benefit at federal statutory rate......................... $(170)
Amortization of goodwill............................................. 153
Other................................................................ 7
-----
Income tax benefit............................................... $ (10)
=====
</TABLE>
Deferred income taxes reflect the net tax effects at temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Accounts receivable................................................ $ 78
Inventories........................................................ 359
Accrued compensation............................................... 674
Foreign tax credits................................................ 716
Other.............................................................. 36
Less valuation allowance for foreign tax credits................... (716)
------
1,147
Deferred tax liability:
Property and equipment............................................. 1,101
------
Net deferred tax asset........................................... $ 46
======
</TABLE>
F-8
<PAGE>
POLYMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5)EMPLOYEE BENEFIT PLAN
The Company has a defined contribution 401(k) plan for substantially all of
its employees. The terms of the plan call for the Company to contribute half
of the employee contribution up to 3% of the eligible employee's salary.
In 1994, the Company accrued $232,000 to be contributed to the 401(k)
defined contribution plan.
(6)COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office, warehouse, and manufacturing space under
noncancelable operating lease agreements that expire on various dates through
1999. The Company's corporate office lease provides for the first two months
to be free of rental payments and an option to renew the lease for an
additional five years. Rent expense is being recorded on a straight-line basis
over the initial lease term of 28 months, resulting in deferred rent for
amounts expensed in excess of amounts paid.
The Company receives sublease rental payments related to former corporate
offices, including office equipment, vacated in 1994. Both the sublease and
base lease expire in April 1999. Beginning in 1995 and continuing thereafter,
the sublease payments exceed the base lease payments. Sublease payments
totaled $59,000 during 1994.
The Company leases industrial water treatment products to customers under
short-term operating leases. Future minimum lease obligations and revenues
under noncancelable operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 OBLIGATIONS REVENUES
----------------------- ----------- --------
<S> <C> <C>
1995.................................................. $ 676 $1,004
1996.................................................. 327 740
1997.................................................. 193 709
1998.................................................. 68 567
1999.................................................. -- 246
Thereafter............................................ -- 987
------ ------
$1,264 $4,253
====== ======
</TABLE>
Rent expense was approximately $846,000 for the year ended December 31,
1994.
Self-Insurance and Postemployment Benefits
During 1993, the Company adopted SFAS No. 112, Employers' Accounting for
Postemployment Benefits Other Than Pensions. Prior to 1993, postemployment
benefit expenses were recognized on a pay-as-you-go basis. The Company elected
to immediately recognize the cumulative effect of the change in accounting for
postemployment benefits during 1993. The adoption of SFAS No. 112 and the
related liability are included in the self-insurance accrual discussed below.
The Company is self-insured up to $250,000 per incident for workers'
compensation, general liability and auto liability and maintains a self-
insurance accrual related to this exposure, the amount of which is determined
through consultation with an actuary. The self-insurance accrual totaled
$1,103,000 as of December 31, 1994.
F-9
<PAGE>
POLYMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7)SUBSEQUENT EVENT
On June 26, 1996 Anjou signed a letter of intent to sell all of the
Company's stock to United States Filter Corporation for approximately $60
million. Concurrently, the Company entered into an employment agreement with
certain officers at the Company which entitled them to payments, over and
above the Company's standard severance package, of approximately $1 million in
the event at their termination without cause.
(8)UNAUDITED FINANCIAL INFORMATION
The consolidated 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
consolidated 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.
F-10
<PAGE>
(b)
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
Polymetrics and the acquisition of Interlake as if they had been consummated on
that date. Also presented are the Proforma 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 Polymetrics and the Company's recent
acquisitions of AIW and Interlake which acquisitions were consummated on May 1,
1995 and August 10, 1995, respectively, as if they had been consummated as of
the beginning of the respective periods presented. The Company's fiscal year
ends on March 31 and Polymetrics', Interlake's and AIW's fiscal years end on
December 31. Pro forma data for the year ended March 31, 1995 combines the
results of the Company for the year ended March 31, 1995 with the results of
Polymetrics, Interlake and AIW for the year ended December 31, 1994, and the pro
forma data for the three months ended June 30, 1995 combines the results of each
of the Company, Polymetrics and Interlake for such three-month period and
includes the one-month period ended April 30, 1995 of AIW, which results are not
included in the Company's historical results for such period. The Company's
historical results for the three months ended June 30, 1995 include the results
of AIW from the date of its acquisition by the Company.
The pro forma data is based on the historical combined statements of the
Company. Polymetrics, Interlake, and AIW giving effect to the acquisitions 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
Statements are estimates and may differ from the actual adjustments when they
become known.
The following Unaudited Pro Forma Combined Financial Data also gives effect to
the sale by the Company of $140,000,000 6% Convertible Subordinated Notes due
2005, the repurchase by the Company of 139,518 shares of Series B Convertible
Preferred Stock for $4,709,000 and the delivery of $45,000,000 of Subordinated
Notes due 2001 in connection with the exercise of certain warrants to purchase
2,500,000 shares of Company common stock on September 18, 1995. The Pro Forma
Combined Balance Sheet at June 30, 1995 gives effect to the sale of the
convertible subordinated notes, the repurchase of Series B Preferred Stock and
the exercise of certain warrants to purchase Common Stock as if the transactions
had been consummated on that date. The Pro Forma Combined Statements of
Operations for the fiscal year ended March 31, 1995 and the three months ended
June 30, 1995 give effect to these transactions as of the beginning of the
respective periods presented.
The following Unaudited Pro Forma Combined Financial Statements do 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
acquisitions will enable it to continue to achieve economies of scale, such as
enhanced purchasing power and increased asset utilization. No assurances 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
acquisitions of Polymetrics, Interlake and AIW 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 Polymetrics and the notes thereto included
elsewhere herein, the audited financial statements of Interlake and AIW and the
notes thereto incorporated herein by reference and the audited consolidated
financial statements of the Company and the notes thereto also incorporated by
reference.
F-11
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
June 30, 1995
------------------------------------------------------------------------------------------
Pro Forma
-------------------------------------------------
Historical Adjustments
------------------------------------- Increase Adjustments
Company Interlake Polymetrics (Decrease) Reference Combined
--------- ---------- ------------ ----------- ---------------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents....... $ 5,712 $ 711 $ 538 $ 6,961
Short-term investments.......... 5,397 - - 30,502 a (i), (iii), (iv) 35,899
Accounts receivable, net........ 109,373 3,931 9,524 122,828
Cost and estimated earnings in
excess of billings on uncom-
pleted contracts............... 30,984 - 2,348 33,332
Inventories..................... 41,817 1,126 4,187 47,130
Prepaid expenses................ 9,464 71 1,536 11,071
Deferred taxes.................. 3,482 - 1,250 4,732
Other current assets............ 8,849 12 - 8,861
-------- ------- ------- --------
Total current assets ...... 215,078 5,851 19,383 270,814
-------- ------- ------- --------
Property, plant and equipment,
net.............................. 125,026 4,281 15,393 144,700
Investment in leasehold interest,
net.............................. 20,930 - - 20,930
Goodwill, net..................... 133,384 - 2,876 52,089 a (ii) 188,349
Other assets..................... 18,355 - 310 4,075 a (iii) 22,740
-------- ------- ------- --------
$512,773 $10,132 $37,962 $647,533
======== ======= ======= ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable............... $ 41,464 $ 412 $ 5,264 $ 47,140
Accrued liabilities............ 46,842 903 3,933 51,678
Current portion of long-term
debt.......................... 1,950 - - 1,950
Notes payable.................. 30,114 - - (30,114) a (iii) -
Billings in excess of costs and
estimated earnings on
uncompleted contracts......... 13,947 - - 13,947
Other current liabilities...... 10,231 - 1,684 11,915
-------- ------- ------- --------
Total current liabilities.. 144,548 1,315 10,881 126,630
-------- ------- ------- --------
Long-term debt, excluding
current portion................. 9,165 - - 9,165
Convertible subordinated debt.... 105,000 - - 95,000 a (iii) 200,000
Loan payable--Parent............. - 14,695 (14,695) c -
Deferred taxes................... 8,028 - 1,221 9,249
Other liabilities................ 4,414 - 166 4,580
-------- ------- ------- --------
Total liabilities......... 271,155 1,315 26,963 349,624
-------- ------- ------- --------
Shareholders' equity:
Convertible preferred stock.... 24,712 - - (2,641) a (iv) 22,071
Common stock................... 222 - 200 (168) a (i), (v), b 254
Additional paid-in capital..... 230,591 8,817 14,774 35,309 a (i), (iv), (v), b, c 289,491
Translation adjustment......... 947 - - 947
Accumulated deficit............ (14,854) - (3,975) 3,975 b (14,854)
-------- ------- ------- --------
Total shareholders'
equity.................. 241,618 8,817 10,999 297,909
-------- ------- ------- --------
$512,773 $10,132 $37,962 $647,533
======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial data.
F-12
<PAGE>
Pro Forma Combined Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, 1995
--------------------------------------------------------------------------------------------
Pro Forma
-------------------------------------------
Historical Adjustments
----------------------------------------------- Increase Adjustments
Company AIW Intertake Polymetrics (Decrease) Reference Combined
--------- -------- --------- ----------- ------------ ----------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $272,032 $43,929 $21,596 $40,734 $378,291
Cost of sales 193,432 30,789 12,137 25,705 2,365 d (i) 264,428
Depreciation and amortization - 8,650 - - (8,650) d (i) -
-------- ------- ------- ------- --------
Gross profit 78,600 4,490 9,459 15,029 113,863
Selling, general and
administrative expenses 64,015 6,070 6,766 14,461 8,443 d (i) 99,755
-------- ------- ------- ------- --------
Operating income (loss) 14,585 (1,580) 2,693 568 14,108
-------- ------- ------- ------- --------
Other income (expense):
Interest expense (5,384) (1,830) - (1,068) (3,118) d (ii) (11,400)
Other 1,787 (70) - 1,350 d (iii) 3,067
-------- ------- ------- ------- --------
(3,597) (1,830) (70) (1,068) (8,333)
-------- ------- ------- ------- --------
Income (loss) before
income taxes 10,988 (3,410) 2,623 (500) 5,775
Provision (benefit) for
income taxes 2,657 - - (10) (1,265) d (iv) 1,382
-------- ------- ------- ------- --------
Net income (loss) $ 8,331 $(3,410) $ 2,623 $ (490) $ 4,393
======== ======= ======= ======= ========
Net income per common share $ 0.51 $ 0.20
======= ========
Weighted average number of
shares outstanding 15,026 18,232
======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial data.
F-13
<PAGE>
Pro Forma Combined Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1995
--------------------------------------------------------------------------------------------
Pro Forma
-------------------------------------------
Historical Adjustments
----------------------------------------------- Increase Adjustments
Company AIW Interlake Polymetrics (Decrease) Reference Combined
------- ------ --------- ----------- ------------- ----------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $91,539 $3,601 $5,367 $15,229 $115,736
Cost of sales 63,665 2,497 3,218 11,549 472 d (i) 81,401
Depreciation and amortization - 481 - - (481) d (i) -
------- ------ ------ ------- --------
Gross profit 27,874 623 2,149 3,680 34,335
Selling, general and
administrative expenses 21,626 524 1,546 2,978 387 d (i) 27,061
------- ------ ------ ------- --------
Operating income 6,248 99 603 702 7,274
------- ------ ------ ------- --------
Other income (expense):
Interest expense (2,435) - - (286) (129) d (ii) (2,850)
Other 726 - - - 338 d (iii) 1,064
------- ------ ------ ------- --------
(1,709) - - (286) (1,786)
------- ------ ------ ------- --------
Income before income taxes 4,539 99 603 416 5,488
Provision for income taxes 1,180 - - 217 30 d (iv) 1,427
------- ------ ------ ------- --------
Net income $ 3,359 $ 99 $ 603 $ 199 $ 4,061
======= ====== ====== ======= ========
Net income per common share $ 0.16 $ 0.17
======= ========
Weighted average number of
shares outstanding 20,002 23,208
======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial data.
F-14
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
a. The pro forma combined balance sheet has been prepared to reflect the
pending acquisition by the Company of Polymetrics and the acquisition of
Interlake for aggregate estimated purchase prices comprised of the
following:
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
Polymetrics:
Cash $50,000
Common stock 9,000 59,000
-------
Interlake
Cash 20,000
Common stock 7,000 27,000
-------
Estimated transaction costs 600
------
86,600
======
</TABLE>
The estimated tangible net assets, as adjusted, of Polymetrics and
Interlake are assumed to be $25,694,000 and $8,817,000, respectively. The
difference between the estimated purchase prices and the estimated fair
values of the net assets of Polymetrics and Interlake is approximately
$52,089,000, which has been recorded as costs in excess of net assets of
businesses acquired attributable to the acquisitions in the accompanying
pro forma combined balance sheet.
On September 18, 1995, the Company (i) sold $140,000,000 6% Convertible
Subordinated Notes due 2005, (ii) repurchased 139,518 shares of Series B
Convertible Preferred Stock for $4,709,000, and (iii) issued 2,500,000
shares of Company common stock to effect the exercise of warrants to
purchase common stock in exchange for the delivery to the Company of
$45,000,000 of Subordinated Notes due 2001.
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 Polymetrics and 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 net proceeds from the sale of $140,000,000 of 6%
Convertible Subordinated Notes due 2005 and the application of
the net proceeds therefrom, which results in a reduction of
notes payable of $30,114,000 and an increase in other assets of
$4,075,000 representing deferred expenses of the sale of the
Notes.
(iv) To record the repurchase by the Company of 139,518 shares of
Series B Convertible Preferred Stock for $4,709,000.
(v) To record the effect of the delivery of $45,000,000 of
Subordinated Notes due 2001 in connection with the exercise of
certain warrants to purchase 2,500,000 shares of Company common
stock.
b. The pro forma combined balance sheet has been adjusted to eliminate the
equity of Polymetrics and Interlake.
c. The pro forma combined balance sheet has been adjusted to eliminate the net
loan payable of Polymetrics to its parent company.
F-15
<PAGE>
d. For the fiscal year ended March 31, 1995, the historical results of
operations of Polymetrics, Interlake and AIW reflect 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,
Polymetrics and Interlake for such three-month period and includes the one-
month period ended April 30, 1995 of AIW, which results are not included in
the Company's historical results for such period. The Company's historical
results for the three months ended June 30, 1995 include the results of AIW
from the date of its acquisition by the Company. 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) Selling, general and administrative expenses:
- To allocate AIW's depreciation and
amortization between cost of sales and selling,
general and administrative expenses $ 610 $ 9
- To allocate a portion of AIW's cost of sales
to selling, general and administrative expenses
for consistency with Company historical
presentation. 5,675 -
- To adjust goodwill amortization, which will be
amortized over 40 years 2,158 378
------- -----
$ 8,443 $ 387
======= =====
(ii) To adjust interest expense related to the sale of
$140,000,000 of 6% Convertible Subordinated Notes
and the delivery of $45,000,000 of Subordinated
Notes due 2001, net of interest expense recorded
by AIW and Polymetrics. $(3,118) $(129)
======= =====
(iii) To adjust other income for the effect of the interest
income related to the increase in short-term
investments resulting from the sale of the Notes. $ 1,350 $ 338
======= =====
(iv) To adjust the provision for income taxes to
reflect the combined results of operations. $(1,265) $ 30
======= =====
</TABLE>
F-16
<PAGE>
STOCK PURCHASE AGREEMENT
dated as of August 30, 1995
between
ANJOU INTERNATIONAL COMPANY
and
UNITED STATES FILTER CORPORATION
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms ................................. 1
SECTION 1.02. Other Defined Terms ................................... 6
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale ..................................... 7
SECTION 2.02. Purchase Price ........................................ 7
SECTION 2.03. Closing ............................................... 8
SECTION 2.04. Closing Financial Statements .......................... 8
SECTION 2.05. Adjustment of Purchase Price .......................... 9
SECTION 2.06. Cooperation; Access to Books and Records .............. 10
SECTION 2.07. Section 338(h)(10) Election: Certain Tax Returns ...... 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 3.01. Incorporation and Authority of the Seller ............. 12
SECTION 3.02. Incorporation and Qualification of Polymetrics and
the Subsidiaries ...................................... 12
SECTION 3.03. Capital Stock of Polymetrics .......................... 12
SECTION 3.04. Subsidiaries .......................................... 13
SECTION 3.05. No Conflict ........................................... 13
SECTION 3.06. Financial Statements .................................. 14
SECTION 3.07. Undisclosed Liabilities ............................... 14
SECTION 3.08. Labor Matters ......................................... 14
SECTION 3.09. Absence of Certain Changes or Events .................. 15
SECTION 3.10. Absence of Litigation ................................. 16
SECTION 3.11. Compliance with Laws .................................. 16
SECTION 3.12. Consents, Approvals, Licenses, Etc. ................... 17
SECTION 3.13. Personal Property; Business ........................... 17
SECTION 3.14. Real and Leased Property .............................. 17
SECTION 3.15. Employee Benefit Matters .............................. 18
SECTION 3.16. Taxes ................................................. 20
SECTION 3.17. Intellectual Property Rights .......................... 21
SECTION 3.18. Transactions With Related Parties ..................... 21
SECTION 3.19. Environmental Matters ................................. 22
SECTION 3.20. Insurance ............................................. 23
<PAGE>
Page
----
SECTION 3.21. Material Contracts ................................... 23
SECTION 3.22. Receivables .......................................... 24
SECTION 3.23. Customers ............................................ 25
SECTION 3.24. Brokers .............................................. 25
SECTION 3.25. Investment Purpose ................................... 25
SECTION 3.26. Disclosure ........................................... 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 4.01. Incorporation and Authority of the Purchaser .......... 25
SECTION 4.02. Capitalization ........................................ 26
SECTION 4.03. No Conflict ........................................... 26
SECTION 4.04. Consents and Approvals ................................ 27
SECTION 4.05. SEC Filings ........................................... 27
SECTION 4.06. Investment Purpose .................................... 27
SECTION 4.07. Brokers ............................................... 27
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing .............. 28
SECTION 5.02. Intercompany Accounts; Bonding ........................ 30
SECTION 5.03. Access to Information ................................. 31
SECTION 5.04. Confidentiality ....................................... 32
SECTION 5.05. Regulatory and Other Authorizations; Consents ......... 32
SECTION 5.06. Investigation ......................................... 32
SECTION 5.07. Further Action ........................................ 32
SECTION 5.08. Polymetrics Name; References; Non-Compete ............. 33
SECTION 5.09. Insurance Matters ..................................... 34
SECTION 5.10. Acquisition Proposals ................................. 35
SECTION 5.11. Notices in the Events of Suit or Breaches of
Representations and Warranties ........................ 36
SECTION 5.12. Interim Financial Statements .......................... 36
SECTION 5.13. Assets and Liabilities of PIC ......................... 36
SECTION 5.14. Matters Relating to Certain Employees ................. 36
ii
<PAGE>
Page
----
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Employees ............................................. 36
SECTION 6.02. Indemnity ............................................. 37
SECTION 6.03. Survival .............................................. 38
ARTICLE VII
TAX MATTERS
SECTION 7.01. Tax Indemnities ....................................... 38
SECTION 7.02. Refunds and Tax Benefits .............................. 39
SECTION 7.03. Preparation of Tax Returns ............................ 40
SECTION 7.04. Contests .............................................. 40
SECTION 7.05. Certain Audit Adjustments ............................. 42
SECTION 7.06. Cooperation and Exchange of Information ............... 42
SECTION 7.07. Conveyance Taxes ...................................... 43
SECTION 7.08. Miscellaneous ......................................... 43
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Seller ............... 43
SECTION 8.02. Conditions to Obligations of the Purchaser ............ 45
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival .............................................. 46
SECTION 9.02. Indemnification by the Purchaser ...................... 46
SECTION 9.03. Indemnification by the Seller ......................... 48
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. Termination ........................................... 51
SECTION 10.02. Effect of Termination ................................. 51
SECTION 10.03. Waiver ................................................ 51
iii
<PAGE>
Page
----
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses .............................................. 52
SECTION 11.02. Notices ............................................... 52
SECTION 11.03. Public Announcements .................................. 52
SECTION 11.04. Headings; Interpretation .............................. 53
SECTION 11.05. Severability .......................................... 53
SECTION 11.06. Entire Agreement ...................................... 53
SECTION 11.07. Assignment ............................................ 53
SECTION 11.08. Currency .............................................. 53
SECTION 11.09. No Third-Party Beneficiaries .......................... 53
SECTION 11.10. Waivers and Amendments ................................ 53
SECTION 11.11. Specific Performance .................................. 54
SECTION 11.12. Governing Law ......................................... 54
SECTION 11.13. Counterparts .......................................... 54
SCHEDULES
2.04 Items Which the Purchaser and the Seller Agree Should be Reflected in
Accordance with GAAP on the December 31, 1994 Financial Statements
2.05(a) Computation of Base Stockholder's Equity
2.05(b) Computation of Closing Stockholder's Equity -- Illustrative
Schedule Using Very Rough Estimates to Outline Methodology
5.02(a) Intercompany Accounts between Polymetrics, Inc. and Anjou
International Company -- Representative Balances As Of June 30, 1995
EXHIBITS
A Form of Share Disposition Agreement
B Form of Shelf Registration Agreement
iv
<PAGE>
STOCK PURCHASE AGREEMENT, dated as of August 30, 1995, between ANJOU
INTERNATIONAL COMPANY, a Delaware corporation (the "Seller"), and UNITED STATES
------
FILTER CORPORATION, a Delaware corporation (the "Purchaser").
---------
W I T N E S S E T H:
-------------------
WHEREAS, the Seller owns all the issued and outstanding shares of common
stock, par value $1.00 per share (the "Shares"), of Polymetrics, Inc., a
------
California corporation ("Polymetrics");
-----------
WHEREAS, the Seller and the Purchaser entered into a Letter Agreement,
dated June 26, 1995 (the "Letter Agreement"), with regard to the Purchaser's
----------------
proposal to purchase the Shares;
WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Seller, the Shares, upon the terms and subject to
the conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the Purchaser and the Seller
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the following meanings:
"Action" means any suit, claim or proceeding of any nature or kind
------
whatsoever, whether civil, criminal or administrative, by or before any
Governmental Authority.
"Affiliate" means, when used with respect to a specified Person, another
---------
Person that, either directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"Agreement" means this Stock Purchase Agreement, dated as of August 30,
---------
1995, between the Seller and the Purchaser, including the Exhibits hereto, the
Seller Disclosure Schedules and all amendments hereof made in accordance with
Section 11.10.
1
<PAGE>
"Books and Records" means all books of account and other financial records
-----------------
pertaining to Polymetrics and the Subsidiaries.
"Business" means the business of providing industrial purified process
--------
water equipment and services, as conducted as of the date of this Agreement by
Polymetrics and the Subsidiaries.
"Business Day" means any day that is not a Saturday, a Sunday or other day
------------
on which banks are required or authorized by law to be closed in the City of New
York.
"CERCLIS" means the Comprehensive Environmental Response Compensation
-------
Liability Information Systems List pursuant to Superfund.
"Companies" means Polymetrics and Polymetrics International Corporation, a
---------
California corporation ("PIC"), collectively.
"Confidentiality Agreement" means the letter agreement dated as of May 3,
-------------------------
1995 between the Seller and the Purchaser.
"Deposit" means the cash payment made by the Purchaser to the Seller on
-------
June 27, 1995 in the amount of $2,000,000 in connection with the execution and
delivery by the Purchaser and the Seller of the Letter Agreement.
"DGCL" means the General Corporation Law of the State of Delaware.
----
"Encumbrance" means any liability, debt, mortgage, deed of trust, pledge,
-----------
security interest, encumbrance, option, right of first refusal, agreement of
sale, easement, lien, assessment, restrictive covenant, encroachment, burden of
charge of any kind or nature whatsoever.
"Environmental Law" means any applicable Law relating to public health and
-----------------
safety or protection of the environment, including, without limitation, common
law nuisance, property damage and similar common law theories.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
-----
amended.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations thereunder, as in effect from time to time.
"GAAP" means U.S. generally accepted accounting principles in effect from
----
time to time applied consistently throughout the period or periods involved.
2
<PAGE>
"Governmental Authority" means any government, any governmental entity,
----------------------
department, commission, board, agency or instrumentality, and any court,
tribunal, or judicial or arbitral body, whether federal, state, local or
foreign.
"Governmental Order" means any order, judgment, injunction, decree,
------------------
stipulation, determination or award entered by or with any Governmental
Authority.
"Internal Revenue Code" means the U.S. Internal Revenue Code of 1986, as
---------------------
amended.
"IRS" means the U.S. Internal Revenue Service.
---
"knowledge" or "known" means, with respect to any matter in question, the
--------- -----
actual knowledge of the Specified Officers after due investigation. "Specified
Officers" means the executive and managing officers of the Person making the
knowledge statement. For purposes of this Agreement, use by the Seller herein
of the term "knowledge" of, or "known" with respect to, the Seller shall include
the knowledge of the Specified Officers of the Seller, Polymetrics and each
Subsidiary.
"Law" means any applicable federal, state, municipal, local or foreign
---
statute, law, ordinance, rule, regulation or order of any Governmental Authority
or principle of common law.
"Liabilities" means any and all debts, liabilities and obligations,
-----------
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable.
"Licenses" means all of the licenses, permits, certificates, franchises,
--------
approvals, registrations and authorizations and other governmental
authorizations required for the operation of the Business as conducted as of the
date of this Agreement.
"Losses" of a Person means any and all claims, 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) actually suffered or incurred by such Person.
"NJ-DEPE" means the New Jersey Department of Environmental Protection and
-------
Energy.
"NJ-ISRA" means the New Jersey Industrial Site Recovery Act (P.L. 1993,
-------
Ch. 39).
"Other Agreement" means each other agreement or document contemplated
---------------
hereby to be executed and delivered in connection with the transactions
contemplated by this
3
<PAGE>
Agreement on or before Closing, including, without limitation, the Share
Disposition Agreement and the Shelf Registration Agreement.
"Permitted Encumbrances" means (i) Encumbrances for inchoate mechanics'
----------------------
and materialmen's liens for construction in progress and workmen's, repairmen's,
warehousemen's and carriers' liens arising in the ordinary course of the
Business relating to invoices not yet due or invoices not in excess of $25,000
being contested in good faith, (ii) Encumbrances for Taxes not yet due and for
Taxes not in excess of $25,000 being contested in good faith, (iii) Encumbrances
and imperfections of title the existence of which would not in any material
respect affect the use of the property subject thereto; provided, however, that
------------------
the aforementioned definition of "Permitted Encumbrances" shall apply only for
----------------------
purposes of Articles III and VIII of this Agreement, and that for purposes of
Article V the definition of "Permitted Encumbrances" shall exclude each of the
----------------------
references to "not in excess of $25,000" in the preceding definition; and
provided further, however, that the foregoing modifications to the definition of
- -------- ------- -------
"Permitted Encumbrances" shall also apply for purposes of Article IX.
----------------------
"Person" means any natural person, individual, partnership, firm,
------
corporation, association, trust, limited liability company, unincorporated
organization, Governmental Authority or other entity.
"Polymetrics Material Adverse Effect" means any change or effect that is
-----------------------------------
materially adverse to the consolidated results of operations or the consolidated
financial condition of Polymetrics and the Subsidiaries, taken as a whole,
except for any such changes or effects resulting from (i) changes in general
economic conditions or changes that affect the industrial purified process water
equipment and services business in general, (ii) this Agreement or the
transaction contemplated hereby, (iii) the cancellation of the intercompany
arrangements referred to in Section 5.01(c) and (iv) the cancellation of the
contracts described in Section 5.01(e).
"Purchaser Common Stock" means the Purchaser's Common Stock, par value
----------------------
$.01 per share.
"Purchaser Material Adverse Effect" means any change or effect that is
---------------------------------
materially adverse to the consolidated results of operations or the consolidated
financial condition of the Purchaser and its Affiliates taken as a whole, except
for any such changes or effects resulting from (i) changes in general economic
conditions or changes the affect the water and wastewater treatment industry in
general, and (ii) this Agreement or the transactions contemplated hereby.
"Regulated Material" means any hazardous substances as defined by any
------------------
applicable Environmental Law and other material regulated by any applicable
Environmental Law, including, without limitation, asbestos, polychlorinated
biphenyls, petroleum, petroleum-related material, crude oil or any fraction
thereof.
4
<PAGE>
"Related Party" means (i) the Seller, (ii) any Affiliate of the Seller
-------------
(excluding PIC), and (iii) any officer or director of any Person identified in
clauses (i) or (ii) preceding.
"SEC" means the U.S. Securities and Exchange Commission.
---
"Securities Act" means the U.S. Securities Act of 1933, as amended, and
--------------
the rules and regulations thereunder, as in effect from time to time.
"Security Right" means, with respect to any security, any option, warrant,
--------------
subscription right, preemptive right, proxy, put, call, demand, commitment,
agreement, understanding or arrangement of any kind relating to such security,
whether issued or unissued, or any other security convertible into or
exchangeable for any such security. "Security Right" includes any right relating
--------------
to issuance, sale, assignment, transfer, purchase, redemption, conversion,
exchange, registration or voting and includes rights conferred by statute, by
the issuer's organic documents or by agreement.
"Seller Disclosure Schedule" means the disclosure schedule dated as of the
--------------------------
date of this Agreement delivered by the Seller to the Purchaser.
"Share Disposition Agreement" means the Share Disposition Agreement dated
---------------------------
as of the Closing Date between the Purchaser and the Seller.
"Shelf Registration Agreement" means the Registration and Transfer
----------------------------
Agreement dated as of the Closing Date between the Purchaser and the Seller.
"Subsidiaries" means PolyOzone, Inc., a Colorado corporation
------------
("PolyOzone"), and Polymetrics Inc. of Delaware, a Delaware corporation ("PID"),
--------- ---
each of which is a direct wholly owned subsidiary of Polymetrics (each of
PolyOzone and PID being individually referred to herein as a "Subsidiary").
----------
"Superfund" means the U.S. Comprehensive Environmental Response
---------
Compensation and Liability Act of 1980, 42 U.S.C. Sections 6901 et seq., as
-------
amended.
"Tax" or "Taxes" means all foreign or domestic income, gross receipts,
--- -----
stamp, sales, use, employment, franchise, profits, property or other taxes,
fees, duties, assessments or charges of any kind whatsoever (whether payable
directly or by withholding), together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto.
"Tax Return" means any tax return, statement, form, election or report
----------
required to be filed by or on behalf of any of the Seller, Polymetrics and the
Subsidiaries with any taxing authority relating to any Tax with respect to any
period.
5
<PAGE>
"Unaudited Balance Sheet" means the unaudited consolidated balance sheet of
-----------------------
the Companies and the Subsidiaries as of May 31, 1995 which has been adjusted
(in amounts appropriate as of May 31, 1995) for the items set forth on Schedule
2.04 hereto.
"Unaudited Financial Statements" means the Unaudited Balance Sheet and the
------------------------------
unaudited consolidated statement of operations of the Companies and the
Subsidiaries as of, and for the five month period ended, May 31, 1995.
SECTION 1.02. Other Defined Terms. The following terms have the meanings
-------------------
defined for such terms in the sections set forth below:
Term Section
- ---- -------
Adjustment 7.05
Accrual Amount 5.09(b)
Advance 5.02
Audited Financial Statements 3.06
Base Stockholder's Equity 2.05(a)
Benefit Plans 3.15(a)
C&L 2.04(c)
Closing 2.03(a)
Closing Date 2.03(a)
Closing Financial Statements 2.04(a)
Closing Stockholder's Equity 2.04(a)
Contest 7.04(b)
Debentures 4.02
ERISA Affiliate 3.15(f)
Final Stockholder's Equity 2.05(a)
Financial Statements 3.06
Intellectual Property 3.17
KPMG 2.04(a)
Letter Agreement Preamble
LSG 4.07
Material Contracts 3.21(a)
Multiemployer Plan 3.15(g)
Net Worth Decrease 2.05(c)
Net Worth Increase 2.05(b)
NYSE 2.02(b)
Options 4.02
PIC 1.01
Plan 6.01(a)
Polymetrics Preamble
Polymetrics Equipment and
Services 10.02(b)
Post-Closing Date Tax Benefit 7.01(e)
6
<PAGE>
PSSI 5.08(b)
Purchase Price 2.02(a)
Purchaser Preamble
Purchaser SEC Reports 4.05
Purchaser Stock Plans 4.02
Purchaser's Threshold Amount 9.02(b)
PW 3.25
Real Property 3.14
Receivables 3.22
Seller Preamble
Seller's Threshold Amount 9.03(b)
Selling Group 3.16(d)
Series A Preferred Stock 4.02
Series B Preferred Stock 4.02
Shares Preamble
Subsidiary Shares 3.04(b)
Tax Threshold Amount 7.01(e)
Trailigaz 5.01(e)
Transferred Employees 6.01(a)
USF Shares 2.02(b)
USFC Plan 6.01(a)
Warrants 4.02
Welfare Plan 3.15(h)
ARTICLE II
PURCHASE AND SALE
SECTION 2.01 Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, the Seller agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from the Seller, the Shares,
free and clear of all Encumbrances, at the Closing.
SECTION 2.02. Purchase Price. (a) Subject to the adjustments set forth in
Section 2.05, the aggregate purchase price (the "Purchase Price") for the Shares
shall be $58,100,000.
(b) The Purchase Price shall be payable by (i) delivery by the Purchaser to
the Seller of $48,000,000 in cash, (ii) retention by the Seller of the Deposit,
and (iii) delivery by the Purchaser to the Seller of that number of shares of
the Purchaser Common Stock (rounded in the aggregate to the nearest whole share;
collectively, the "USF Shares") that is equal to (x) $8,100,000 divided by (y)
the average of the closing price for the Purchaser Common Stock as reported by
the New York Stock Exchange (the "NYSE") for each of the 45 consecutive trading
days ending on the fifth to last trading day preceding the
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Closing Date. Such USF Shares shall be free and clear of all Encumbrances other
than the limitations on such USF Shares set forth in the Shelf Registration
Agreement.
SECTION 2.03. Closing. (a) Subject to the terms and conditions of this
-------
Agreement, the sale and purchase of the Shares and the other transactions
contemplated hereby shall take place at a closing (the "Closing") to be held at
-------
10:00 a.m., local time, on the later of (i) September 29, 1995, or (ii) the day
that is not more than four Business Days after the fulfillment (or waiver) of
all the conditions specified in Section 8.01 and 8.02 hereof, at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York, or at such other
time or on such other date or at such other place as the Seller and the
Purchaser may mutually agree upon in writing (the day on which the Closing takes
place being the "Closing Date").
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(b) At the Closing, the Seller shall deliver or cause to be delivered to
the Purchaser: (i) stock certificates evidencing the Shares duly endorsed in
blank or accompanied by stock powers duly executed in blank; and (ii) the
certificate required to be delivered pursuant to Section 8.02(a).
(c) At the Closing, the Purchaser shall deliver to the Seller: (i)
$48,000,000 by wire transfer in immediately available funds, to an account or
accounts designated at least four Business Days prior to the Closing Date by the
Seller in a written notice to the Purchaser, (ii) stock certificates evidencing
the USF Shares duly endorsed in the name of the Seller and registered at the
address of the Seller identified in Section 11.02 using the Seller's Federal tax
identification number 13-3594466, and (iii) the certificate required to be
delivered pursuant to Section 8.01(a).
SECTION 2.04. Closing Financial Statements. (a) No later than 60 calendar
----------------------------
days after the Closing Date, the Purchaser will cause to be prepared and
delivered to the Seller, at the Purchaser's expense, an audited consolidated
balance sheet of Polymetrics as of the Closing Date, as well as the audited
statement of operations and audited statement of cash flows of Polymetrics for
the period beginning on May 31, 1995 and ending on the Closing Date (and the
related worksheets, working papers, notes and schedules thereto) (the "Closing
-------
Financial Statements"), together with an unqualified report of KPMG Peat Marwick
- --------------------
("KPMG") thereon, and a certificate of the Purchaser based on such Closing
----
Financial Statements setting forth the Purchaser's calculation of Closing
Stockholder's Equity. The Purchaser shall cause KPMG to provide the Seller and
its accountants with access to KPMG's audit working papers relating to the
Closing Financial Statements. The Closing Financial Statements shall (v) fairly
present the consolidated financial position of Polymetrics and the Subsidiaries
as of the Closing Date, as well as the results of operations and changes in cash
flows of Polymetrics and the Subsidiaries for the period beginning on May 31,
1995 and ending at the close of business on the Closing Date in accordance with
GAAP applied on a basis consistent with the preparation of the Unaudited
Financial Statements, (w) include line items substantially consistent with those
in the Unaudited Financial Statements, (x) be prepared in accordance with
accounting policies and practices consistent with those used in the preparation
of the Unaudited Financial Statements, (y) not include any adjustments for
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items set forth on Section 3.06(b) of the Seller Disclosure Schedule and (z)
include adjustments (in amounts appropriate as of the Closing Date) for items
which the Purchaser and the Seller agree should be reflected in accordance with
GAAP on the December 31, 1994 financial statements, which items are set forth on
Schedule 2.04 hereto. With regard to the preparation of the Closing Financial
Statements, neither the Purchaser nor KPMG shall take into account any facts or
events that occurred subsequent to the Closing Date. "Closing Stockholder's
---------------------
Equity" means the consolidated stockholder's equity of Polymetrics and the
- ------
Subsidiaries as shown on the Closing Financial Statements computed in accordance
with the methodology set forth in Schedule 2.05(b); provided, however, that in
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calculating such stockholder's equity, all intercompany accountings addressed in
Section 5.02(a) shall be treated in the manner provided therein.
(b) If the Seller disagrees with the Closing Financial Statements and the
resulting calculation of Closing Stockholder's Equity delivered pursuant to
Section 2.04(a), the Seller may, within 30 calendar days after delivery of the
Closing Financial Statements (and the related worksheets, working papers, notes
and schedules referred to in Section 2.04), deliver a notice to the Purchaser of
the Seller's disagreements with such Closing Financial Statements and Closing
Stockholder's Equity, which notice shall (i) identify the items of
disagreements, (ii) the individual and aggregate amounts thereof and (iii) the
information which supports such contention.
(c) If a notice of disagreement shall be delivered pursuant to Section
2.04(b), the Purchaser and the Seller shall, during the 10 calendar days
following such deliver, use their best efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of Closing Stockholder's Equity, which amount shall not be less than the amount
thereof shown in the Purchaser's calculations delivered pursuant to Section
2.04(a) nor more than the amount thereof shown in the Seller's calculation
delivered pursuant to Section 2.04(b). If, during such period, the Purchaser
and the Seller are unable to reach such agreement, they shall promptly
thereafter use their best efforts to cause the San Francisco office of Coopers &
Lybrand ("C&L") promptly to review this Agreement and the disputed items or
---
amounts for the purpose of calculating Closing Stockholder's Equity. In making
such calculation, C&L shall consider only those items or amounts in the Closing
Financial Statements or the Purchaser's calculation of Closing Stockholder's
Equity as to which the Seller has disagreed, and in no event shall the Closing
Stockholder's Equity be less than the Purchaser's calculation or more than the
Seller's calculation. Such independent accountants shall deliver to the
Purchaser and the Seller, as promptly as practicable, and in no event later than
thirty (30) business days after the parties shall have submitted the disputed
items or amounts to C&L, a report setting forth such calculation. Such report
shall be final and binding upon the Purchaser and the Seller. The cost of such
review and report shall be borne equally by the parties.
SECTION 2.05. Adjustment of Purchase Price. (a) For purposes of this
----------------------------
Agreement, (i) "Base Stockholder's Equity" means $25,690,000, representing the
-------------------------
consolidated net worth of the Companies and the Subsidiaries as of May 31, 1995
reflected on the Unaudited Financial Statements, as computed in accordance with
the methodology set
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forth on Schedule 2.05(a), and (ii) "Final Stockholder's Equity" means the
--------------------------
Closing Stockholder's Equity (x) as shown in the Purchaser's calculation
delivered pursuant to Section 2.04(a), if no notice of disagreement with respect
thereto is duly delivered pursuant to Section 2.04(b); or (y) if such a notice
of disagreement is delivered, (A) as agreed by the Purchaser and the Seller
pursuant to Section 2.04(c) or (B) in the absence of such agreement, as shown in
C&L's calculation delivered pursuant to Section 2.04(c); provided that, in no
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event shall Final Stockholder's Equity be less than the Purchaser's calculation
of Closing Stockholder's Equity delivered pursuant to Section 2.04(a) or more
than the Seller's calculation of Closing Stockholder's Equity delivered pursuant
to Section 2.04(b).
(b) If Final Stockholder's Equity exceeds Base Stockholder's Equity (in
which case such excess shall be referred to as the "Net Worth Increase"), then
------------------
the Purchaser shall pay to the Seller, as an adjustment to the Purchase Price,
in the manner and with interest as provided in Section 2.05(d), the amount of
such Net Worth Increase.
(c) If Base Stockholder's Equity exceeds Final Stockholder's Equity (in
which case such excess of Base Stockholder's Equity over Final Stockholder's
Equity shall be referred to as the "Net Worth Decrease"), then the Seller shall
------------------
pay to the Purchaser, as an adjustment to the Purchase Price, in the manner and
with interest as provided in Section 2.05(d), the amount of such Net Worth
Decrease.
(d) Any payment pursuant to this Section 2.05 shall be made at a mutually
convenient time and place within 10 calendar days after the Final Stockholder's
Equity has been determined and, except as provided in the next sentence, shall
be made by delivery of a certified or official bank check payable in immediately
available funds or wire transfer of immediately available funds. If the Seller
is required to make a payment to the Purchaser pursuant to this Section 2.05,
the Seller shall be permitted to make all or part of such payment in the form of
the USF Shares valued at the greater of (i) the closing price for such shares as
reported by the NYSE for the day immediately preceding the date of such payment
and (ii) the Guaranteed Value (as defined in the Share Disposition Agreement).
The amount of any payment of cash or USF Shares to be made by either party
pursuant to this Section 2.05 shall bear interest from and including the Closing
Date to but excluding the date of payment at a rate of nine percent per annum
(using simple interest computation).
(e) Notwithstanding anything to the contrary in this Section 2.05, no
Purchase Price adjustment made pursuant to this Section 2.05 shall result in the
Purchase Price being less than $50,000,000.
SECTION 2.06. Cooperation; Access to Books and Records. During the period
----------------------------------------
of (i) the Purchaser's and KPMG's preparation and audit of the Closing Financial
Statements and their calculation of Closing Stockholder's Equity, (ii) any
dispute between the parties as to the Closing Financial Statements or the
calculation of Closing Stockholder's Equity, and (iii) any resolution of such
dispute by C&L, the parties (and their respective accountants) shall provide
each other (and their respective accountants) full access to their
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respective worksheets, working papers, notes, schedules, books, records and
personnel, and shall cooperate fully with each other.
SECTION 2.07. Section 338(h)(10) Election: Certain Tax Returns. The Seller
-------------------------------------------------
and the Purchaser shall timely file a joint election or elections pursuant to
Section 338(h)(10) of the Internal Revenue Code and any corresponding elections
under state and local law under which the sale of the Shares is treated as if it
were a sale of all of the assets of Polymetrics and each Subsidiary in a single
transaction on the Closing Date, with Polymetrics and each Subsidiary being
treated as a member of the Seller's consolidated group with respect to such
sale. Initial drafts of the materials required to make the joint election shall
be prepared by the Purchaser. The Seller and the Purchaser agree to cooperate
fully in order to make such election pursuant to Section 338(h)(10) valid,
including, but not limited to, the filing of Form 8023 and any accompanying
statements or schedules that may be required on a timely basis. The allocation
of the Purchaser's "adjusted grossed-up basis" (within the meaning of Treas.
Reg. 1.338(b)-1(c)) among the tangible and intangible assets of Polymetrics and
the Subsidiaries shall be agreed upon by the parties before the 30th day after
the completion of the Closing Financial Statements. If the parties are unable to
agree on such allocation during such time, then the Seller and the Purchaser
shall submit the issue to C&L for resolution in accordance with the procedures
and pursuant to the timetable described in Section 2.04(c). Such allocation
shall be used by the Seller, the Purchaser, Polymetrics and the Subsidiaries
for purposes of allocating the "deemed selling price" (as described in Treas.
Reg. 1.338(h)(10)-1(f)), and the Seller, the Purchaser, Polymetrics and the
Subsidiaries shall not file any tax return or schedule that is inconsistent with
such allocation. The Seller shall be responsible for and shall indemnify and
hold the Purchaser, Polymetrics and the Subsidiaries harmless for any Taxes that
arise from the deemed sale of the assets of Polymetrics and the Subsidiaries
pursuant to the Section 338(h)(10) election, including, without limitation, any
state or local income or franchise Taxes. Each party shall be entitled to
indemnification from the other for fifty percent (50%) of the amount of any
state and local Taxes attributable to any election in connection with the
transactions contemplated by this Agreement under state or local law similar to
the election available under section 338(g) of the Internal Revenue Code (or
which results from the making or deemed making of an election under Section
338(g) of the Internal Revenue Code) where the state or local jurisdiction (i)
does not provide for or recognize a Section 338(h)(10) election or (ii) does not
apply provisions corresponding to Section 338(h)(10) of the Internal Revenue
Code to Polymetrics and the Subsidiaries. This indemnity shall survive for the
period described in Section 7.08(b).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, the Seller represents and
warrants to the Purchaser as follows:
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SECTION 3.01. Incorporation and Authority of the Seller. The Seller is a
-----------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all necessary corporate power and
authority to enter into this Agreement and the Other Agreements to which it is
or is to become a party, to carry out its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by the Seller of this Agreement and the Other Agreements
to which Seller is or is to become a party, the performance by the Seller of its
obligations hereunder and thereunder and the consummation by the Seller of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of the Seller. This Agreement has been
duly executed and delivered by the Seller, and (assuming due authorization,
execution and delivery by the Purchaser) this Agreement constitutes, and, when
delivered, each Other Agreement to which the Seller shall become a party shall
constitute, a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 3.02. Incorporation and Qualification of Polymetrics and the
------------------------------------------------------
Subsidiaries. Polymetrics and each Subsidiary is a corporation duly
- ------------
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite power and authority to own,
operate or lease the properties and assets now owned, operated or leased by it
and to carry on its business in all material respects as currently conducted by
Polymetrics or such Subsidiary, and Polymetrics and each Subsidiary is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary. True
and complete copies of the certificate of incorporation and bylaws (or
equivalent organizational documents) of Polymetrics and each Subsidiary, each of
the foregoing as amended, have been made available for review by the Purchaser.
SECTION 3.03. Capital Stock of Polymetrics. The authorized capital stock of
----------------------------
Polymetrics consists solely of 5,000,000 shares of Common Stock, $1.00 par value
per share. There are 100,000 Shares issued and outstanding. The Shares
constitute all the issued and outstanding shares of capital stock of
Polymetrics. The Shares have been duly authorized and validly issued and are
fully paid and nonassessable and were not issued in violation of any pre-emptive
rights or securities laws. There are no Security Rights relating to the Shares
or other shares of capital stock of Polymetrics. The Shares are free and clear
of all Encumbrances, except as set forth on Section 3.03 of the Seller
Disclosure Schedule, which Encumbrances shall be released on or prior to
Closing, and except as a result of the Seller's obligation to transfer the
Shares to the Purchaser pursuant to this Agreement and any restriction on
transfer to others arising out of this Agreement. The Seller holds valid
equitable, legal and record title to the Shares.
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SECTION 3.04. Subsidiaries. (a) Other than the Subsidiaries, there are no
------------
other corporations, partnerships, joint ventures, associations or other entities
in which Polymetrics or any Subsidiary owns, of record or beneficially, any
direct or indirect equity or other interest or any right (contingent or
otherwise) to acquire the same. Neither Polymetrics nor any Subsidiary is a
member of (nor is any part of the Business conducted through) any partnership,
nor is Polymetrics nor any Subsidiary a participant in any joint venture or
similar arrangement.
(b) Section 3.04(b) of the Seller Disclosure Schedule sets forth the
jurisdiction of incorporation of each Subsidiary, its authorized capital stock
and the number and type of its issued and outstanding shares of capital stock
(collectively, the "Subsidiary Shares"). The Subsidiary Shares constitute all
-----------------
the issued and outstanding shares of capital stock of the respective
Subsidiaries. The Subsidiary Shares have been duly authorized and validly issued
and are fully paid and nonassessable and were not issued in violation of any
pre-emptive rights or securities laws. There are no Security Rights relating to
the Subsidiary Shares or any capital stock of any Subsidiary. The outstanding
Subsidiary Shares are free and clear of all Encumbrances, except as set forth on
Section 3.04(b) of the Seller Disclosure Schedule, which Encumbrances shall be
released on or prior to Closing, and except for any restrictions on transfer to
others arising out of this Agreement.
(c) Polymetrics holds valid equitable, legal and record title to the
Subsidiary Shares.
(d) Each Subsidiary is an inactive corporation.
SECTION 3.05. No Conflict. Assuming all consents, approvals, authorizations
-----------
and other actions described in Section 3.12 have been obtained and all filings
and notifications listed in Section 3.12 of the Seller Disclosure Schedule have
been made, and except as may result from any facts or circumstances relating
solely to the Purchaser or as described in Section 3.05 of the Seller Disclosure
Schedule or as a result of the Seller's obligation to transfer the Shares
pursuant to this Agreement, the execution, delivery and performance of this
Agreement and the Other Agreements by the Seller does not and will not (a)
violate or conflict with the certificate of incorporation or by-laws of the
Seller, Polymetrics or any Subsidiary, (b) conflict with or violate any Law or
Governmental Order applicable to the Seller, Polymetrics or any Subsidiary, (c)
result in the creation, maturation or acceleration of any liability or
obligation of the Seller, Polymetrics or any Subsidiary (or give to any other
Person the right to cause such a creation, maturation or acceleration), (d)
result in the creation or imposition of any Encumbrance upon any of the Shares,
any Subsidiary Shares, or any of the assets or properties of Polymetrics or any
Subsidiary, or give to any other Person any interest or right therein, or (e)
result in any breach of, or constitute a default (or event which with the giving
of notice or lapse of time, or both, would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any note, bond, mortgage, indenture, contract, agreement, lease, License,
permit, franchise or other instrument to which the Seller, Polymetrics or any
Subsidiary is a party or by which any of their assets or properties is bound or
affected.
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SECTION 3.06. Financial Statements. Attached as Section 3.06(a) of the
--------------------
Seller Disclosure Schedule are the consolidated balance sheet, income statements
and statements of cash flows for the Companies and the Subsidiaries for December
31, 1994 and the calendar year then ended, as audited by KPMG (the "Audited
-------
Financial Statements"), and the Unaudited Financial Statements. The Audited
- --------------------
Financial Statements and the Unaudited Financial Statements are referred to
herein collectively as the "Financial Statements". The Financial Statements have
--------------------
been prepared from the books of account and records of the Companies and the
Subsidiaries in accordance with GAAP and present fairly the consolidated
financial condition, assets and liabilities and results of operation of
Polymetrics and the Subsidiaries at the dates and for the relevant periods
indicated in accordance with GAAP, except for the absence of notes and subject
to changes resulting from normal year-end audit adjustments in the case of the
Unaudited Financial Statements, and except to the extent of the items set forth
on Section 3.06(b) of the Seller Disclosure Schedule, as to which the Seller
makes no representations and warranties. The Closing Financial Statements, when
delivered, shall have been prepared from the books of account and records of
Polymetrics and the Subsidiaries in accordance with GAAP and shall present
fairly the consolidated financial condition, assets and liabilities and results
of operation of Polymetrics and the Subsidiaries at the date and for the period
then ended in accordance with GAAP; provided, however, that the representation
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set forth in this sentence shall not apply to any item on the Closing Financial
Statements that the Seller disputes in accordance with the procedures set forth
in Section 2.04(b) nor to any item set forth on Section 3.06(b) of the Seller
Disclosure Schedule.
SECTION 3.07. Undisclosed Liabilities. The Seller has no knowledge of any
-----------------------
Liabilities of Polymetrics or any Subsidiary, other than Liabilities (a)
reflected or reserved against on the Unaudited Financial Statements, (b)
disclosed in Sections 3.06(a) or (b) or Section 3.07 of the Seller Disclosure
Schedule or otherwise disclosed in, or permitted as expressly contemplated by,
this Agreement, (c) with respect to matters addressed in Section 3.16 and
Article VII (which shall be governed solely by the terms of such Section 3.16
and Article VII) or (d) incurred in the ordinary course of business consistent
in nature and amounts in all material respects with past practice after the date
hereof and prior to the Closing.
SECTION 3.08. Labor Matters. Neither Polymetrics nor any Subsidiary is a
-------------
party to any labor agreement with respect to its employees with any labor
organization, group or association. Except as set forth in Section 3.08 of the
Seller Disclosure Schedule, Polymetrics and each Subsidiary is in compliance
with all applicable Laws respecting employment practices, terms and conditions
of employment and wages and hours. Except as set forth in Section 3.08 of the
Seller Disclosure Schedule, no representation election, arbitration proceeding,
grievance, labor strike, dispute, slowdown, stoppage or other labor trouble is
pending or, to the knowledge of the Seller, threatened against, involving or
affecting Polymetrics or the Subsidiaries. No complaint against Polymetrics or
the Subsidiaries is pending or, to the knowledge of the 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 Polymetrics or the Subsidiaries.
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SECTION 3.09. Absence of Certain Changes or Events. Since the date of the
------------------------------------
Unaudited Balance Sheet, and except as set forth in Section 3.09 of the Seller
Disclosure Schedule or as expressly contemplated by this Agreement, there has
not been:
(a) any Polymetrics Material Adverse Effect;
(b) any damage, destruction or loss to any of the assets or properties of
Polymetrics or any Subsidiary, which individually has a value in excess of
$10,000;
(c) any Encumbrance of any kind created on any properties or assets
(whether tangible or intangible) of Polymetrics or any Subsidiary, other than
(i) Permitted Encumbrances, (ii) Encumbrances that will be released at or prior
to the Closing or (iii) Encumbrances created in the ordinary course of business
having an individual value not exceeding $10,000 and having an aggregate value
not exceeding $200,000;
(d) except for purchases and sales of assets in the ordinary course of
business (i) any sale, assignment, transfer, lease or other disposition of any
asset of Polymetrics or any Subsidiary, or (ii) any acquisition of any asset by
Polymetrics or any Subsidiary, in the case of (i) and (ii) above, respectively,
having an individual value exceeding $75,000 and having an aggregate value
exceeding $250,000;
(e) the cancellation of any indebtedness owed to Polymetrics or any
Subsidiary (other than settlement of accounts receivable in the ordinary course
of business);
(f) any acquisition (by merger, consolidation, or acquisition of stock or
assets) by Polymetrics or any Subsidiary of any Person or any assets that
constitute an operating unit or division thereof;
(g) (i) any incurrence by Polymetrics or any Subsidiary of any indebtedness
for borrowed money, other than intercompany borrowings governed by Section
5.02(a), (ii) any issuance by Polymetrics or any Subsidiary of any debt
securities, or (iii) any assumption, grant, guarantee or endorsement, or other
accommodation arrangement making Polymetrics or any Subsidiary responsible for,
the Liabilities of any Person (other than solely among Polymetrics and the
Subsidiaries);
(h) any material change in any method of accounting or accounting practice
used by Polymetrics or any Subsidiary other than such changes required by GAAP;
(i) any issuance or sale of any shares of the capital stock of, or other
equity interests in, Polymetrics or any Subsidiary, or securities convertible
into or exchangeable for such shares or equity interests, or issuance or grant
of any Security Right with respect to any of the foregoing;
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(j) any declaration or payment of any dividend or other distribution on or
with respect to, or any redemption of, the Shares, except for the dividend
contemplated by Section 5.13;
(k) any amendment to Polymetrics' or the Subsidiaries' certificate of
incorporation or by-laws (or equivalent organizational documents);
(l) any increase in the base salary, wage or bonus of any employee of
Polymetrics or the Subsidiaries, other than (i) pursuant to existing agreements,
(ii) increases relating to those non-executive employees whose anniversary for
such an increase occurs during this period and (iii) any arrangements acceptable
to the Purchaser and the Seller which may be made with either or both of James
K. Webster and Kenneth J. Wall;
(m) any payment to or transaction with any Related Party, which payment or
transaction or arrangement relating to any payments or transactions is not
specifically disclosed on Section 3.18 of the Seller Disclosure Schedule;
(n) any payment, prepayment or discharge of any liability other than in the
ordinary course of business;
(o) any sale or assignment of any Intellectual Property of Polymetrics or
any Subsidiary; or
(p) any agreement to take any of the actions specified in this Section
3.09, except as expressly contemplated by this Agreement.
SECTION 3.10. Absence of Litigation. Except as set forth in Section 3.10 of
---------------------
the Seller Disclosure Schedule, (a) there are no Actions pending or, to the
knowledge of the Seller, Actions or investigations threatened against
Polymetrics or any Subsidiary or any of the assets or properties of Polymetrics
or any Subsidiary, (b) there are no Actions pending or, to the knowledge of the
Seller, Actions or investigations threatened against the Seller that,
individually or in the aggregate, would prevent the Seller from consummating the
transactions contemplated hereby, and (c) Polymetrics, the Subsidiaries and
their respective assets and properties are not subject to any Governmental
Order.
SECTION 3.11. Compliance with Laws. Polymetrics and the Subsidiaries and
--------------------
the conduct of the Business are in compliance in all meaningful respects with
all applicable Laws (excluding Environmental Laws, as to which the Seller's sole
representations or warranties are set forth in Section 3.19), except as set
forth on Section 3.11 of the Seller Disclosure Schedule. Neither of the Seller,
nor Polymetrics nor any Subsidiary has received any written notice to the effect
that Polymetrics or any Subsidiary is not in compliance in any meaningful
respect with any applicable Laws, except as set forth on Section 3.11 of the
Seller Disclosure Schedule.
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SECTION 3.12. Consents, Approvals, Licenses, Etc. No consent, approval,
----------------------------------
authorization, License, order or permit of, or declaration, filing or
registration with, or notification to, any Person is required to be made or
obtained by the Seller, Polymetrics or the Subsidiaries in connection with the
execution, delivery and performance of this Agreement and the Other Agreements
and the consummation of the transactions contemplated hereby and thereby
(including, without limitation, any such actions under any state or federal
Environmental Laws) except: (a) as set forth on Section 3.12 of the Seller
Disclosure Schedule; (b) the applicable requirements, if any, of the DGCL; and
(c) as may be necessary as a result of any facts or circumstances relating
solely to the Purchaser. All the Licenses of Polymetrics and each Subsidiary are
in full force and effect and Polymetrics and each Subsidiary is in compliance in
all significant respects with, and has fulfilled and performed in all
significant respects its obligations under, each such License. Neither
Polymetrics nor any Subsidiary has received any written notice of non-renewal or
cancellation of any License.
SECTION 3.13. Personal Property; Business. Except as described in Section
---------------------------
3.13 of the Seller Disclosure Schedule, Polymetrics and the Subsidiaries have
good and marketable title to all items of tangible personal property included
within the Unaudited Financial Statements, free and clear of all Encumbrances,
other than Permitted Encumbrances. To the knowledge of the Seller, Polymetrics
and the Subsidiaries, except as set forth in Section 3.13 of the Seller
Disclosure Schedule, all significant machinery, plants, vehicles and equipment
of Polymetrics and the Subsidiaries currently in use are in good repair and
condition, ordinary wear and tear excepted. The assets of Polymetrics include
all assets that are necessary for use in and operation of the Business as the
Business is currently conducted by the Seller. Except as described in Section
3.13 of the Seller Disclosure Schedule, Polymetrics is engaged in the Business
and no other business.
SECTION 3.14. Real and Leased Property. Sections 3.14(a) and (b) of the
------------------------
Seller Disclosure Schedule list all real properties currently owned, used or
leased by Polymetrics or the Subsidiaries or in which Polymetrics or the
Subsidiaries have an interest (collectively, the "Real Property"). Polymetrics
-------------
and the Subsidiaries have good and marketable fee simple title to all Real
Property shown as owned by them on Section 3.14(a) of the Seller Disclosure
Schedule, free and clear of all Encumbrances, other than Permitted Encumbrances
and those identified in Section 3.14(a) of the Seller Disclosure Schedule.
Except as set forth on Section 3.14 of the Seller Disclosure Schedule,
Polymetrics and the Subsidiaries have the right to quiet enjoyment of all Real
Property in which they hold a leasehold interest identified on Section 3.14(b)
of the Seller Disclosure Schedule for the full term of the lease or similar
agreement relating thereto. Copies of all title insurance policies written in
favor of Polymetrics and the Subsidiaries and all surveys relating to the Real
Property owned by Polymetrics or the Subsidiaries have been delivered to the
Purchaser. None of the structures and other improvements on Real Property owned
by Polymetrics and the Subsidiaries encroach on the properties of any other
Person. Further, the use and operation of all Real Property conform in all
meaningful respects to all applicable building, zoning, safety and subdivision
Laws, and all restrictive covenants and restrictions and conditions affecting
title. Neither Polymetrics nor any Subsidiary has received any written notice of
assessments for public improvements or condemnation against any Real Property.
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SECTION 3.15. Employee Benefit Matters. (a) With respect to each employee
------------------------
benefit plan, program, arrangement and contract (including, without limitation,
any "employee benefit plan" as defined in Section 3(3) of ERISA) maintained or
contributed to by Polymetrics or any Subsidiary (the "Benefit Plans"), the
-------------
Seller has made available to the Purchaser a copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Benefit Plan, (iii) if
applicable, each trust agreement relating to such Benefit Plan, (iv) the most
recent summary plan description for each Benefit Plan for which a summary plan
description is required, and (v) the most recent determination letter, if any,
issued by the IRS with respect to any Benefit Plan qualified under Section
401(a) of the Internal Revenue Code.
(b) With respect to the Benefit Plans, except as set forth in Section
3.15(b) of the Seller Disclosure Schedule, no event has occurred and, to the
knowledge of the Seller, there exists no condition or set of circumstances, in
connection with which Polymetrics or any Subsidiary could be subject to any
meaningful liability under the terms of such Benefit Plans, ERISA, the Internal
Revenue Code or any other applicable Law. No Benefit Plan is subject to Title IV
of ERISA.
(c) The Seller has made available to the Purchaser (i) copies of all
meaningful employment agreements with officers of Polymetrics and the
Subsidiaries, (ii) copies of all meaningful severance agreements, programs and
policies of Polymetrics and the Subsidiaries with or relating to their
employees, and (iii) copies of all meaningful plans, programs, agreements and
other arrangements of Polymetrics and the Subsidiaries with or relating to its
employees which contain change in control provisions.
(d) Except as provided in Section 3.15(d) of the Seller Disclosure
Schedule or as otherwise required by Law, no Benefit Plan of Polymetrics or any
Subsidiary provides retiree medical or retiree life insurance benefits to any
person.
(e) The Plan (as defined in Section 6.01) and related trust agreement are
qualified and tax exempt under Sections 401(a) and 501(a) of the Internal
Revenue Code. The Plan and related trust agreement have been maintained in all
meaningful respects in compliance with their terms and with the requirements
prescribed by ERISA and the Internal Revenue Code.
(f) During the past five (5) years, neither Polymetrics nor, to the
Seller's knowledge, any ERISA Affiliate has terminated a defined benefit pension
plan or been a sponsor of, or contributor to, a defined benefit pension plan
that has been terminated as a distress termination pursuant to Section 4041(c)
of ERISA or by the Pension Benefit Guaranty Corporation pursuant to Section 4042
of ERISA. For purposes of this Section 3.15, "ERISA Affiliate" means any
---------------
corporation, partnership or proprietorship with which Polymetrics or any
Subsidiary is, or at any time within the five (5) years prior to the date of
this Agreement was, a member of a (i) controlled group of corporations within
the meaning of Section 414(b) of the Internal Revenue Code, (ii) group of
commonly controlled trades or businesses within the meaning of Section 414(c) of
the Internal Revenue Code, or
18
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(iii) affiliated service group within the meaning of Section 414(m) of the
Internal Revenue Code and the Treasury Regulations thereunder.
(g) Polymetrics does not contribute to any Multiemployer Plan. Polymetrics
(i) has not incurred liability for complete or partial withdrawal, as defined in
Sections 4203 and 4205 of ERISA, by Polymetrics or the Subsidiaries or, to the
Seller's knowledge, any ERISA Affiliate from a Multiemployer Plan, (ii) will not
incur any such liability as a result of the acquisition of the Shares by the
Purchaser, and (iii) has not incurred any contingent liability under Section
4204 of ERISA with respect to any sale of assets by Polymetrics and Subsidiaries
or, to the Seller's knowledge, any ERISA Affiliate within the last five (5)
years. For purposes of this paragraph, "Multiemployer Plan" means any
------------------
multiemployer plan defined in Section 4001(a)(3) of ERISA (i) that Polymetrics
and the Subsidiaries maintain and contribute to or maintained and have
contributed to and (ii) that covers or has covered any employee of Polymetrics
or the Subsidiaries.
(h) (i) Each Welfare Plan has been maintained in all meaningful respects in
compliance with its terms and with the requirements prescribed by ERISA, the
Internal Revenue Code and other applicable law; and (ii)(A) each Welfare Plan
that is a "group health plan," as defined in Section 607(1) of ERISA, and (B)
each "group health plan" (as so defined) of any ERISA Affiliate has, to the
knowledge of the Seller, been operated in all meaningful respects in compliance
with the provisions of Part 6 of Title I of ERISA and Sections 162(k) (prior to
its amendment in 1988) and 4980B of the Internal Revenue Code at all times. For
purposes of this paragraph, "Welfare Plan" means any employee welfare benefit
------------
plan as defined in Section 3(1) of ERISA (i) that Polymetrics and the
Subsidiaries maintain or contribute to or have maintained or contributed to, and
(ii) that covers or has covered any employee of Polymetrics or the Subsidiaries.
(i) Neither Polymetrics, any Subsidiary nor any plan fiduciary of any
Welfare Plan or pension plan has engaged in any meaningful transaction
in violation of Sections 404 or 406 of ERISA or any "prohibited transaction," as
defined in Section 4975(c)(1) of the Internal Revenue Code, for which no
exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the
Internal Revenue Code for which Polymetrics or the Subsidiaries would be liable.
There is no pending or threatened assessment, complaint, proceeding, or
investigation of any kind in any court or government agency with respect to any
employee benefit plan of Polymetrics or any Subsidiary. All (i) insurance
premiums required to be paid with respect to, (ii) benefits, expenses, and other
amounts due and payable under, and (iii) contributions, transfers, or payments
required to be made to, any employee benefit plan of Polymetrics or the
Subsidiaries prior to the Closing will have been paid, made or accrued on or
before the Closing. With respect to any insurance policy intended to provide for
benefits under any employee benefit plan or funding therefor, (i) there is no
liability of Polymetrics or any Subsidiary, in the nature of a retroactive or
retrospective rate adjustment, loss sharing arrangement, or other actual or
contingent liability, nor would there be any such liability if such insurance
policy was terminated on the date hereof, and (ii) no insurance company issuing
any such policy is in receivership, conservatorship, liquidation or similar
proceeding and, to the knowledge of the Seller, no
19
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such proceedings with respect to any insurer are imminent. All payments
described in this subsection shall be accounted for and accrued in accordance
with current practices as in effect as of the date of this Agreement with
respect to Welfare Plans administered in conjunction with one or more ERISA
Affiliates. No employee benefit plan provides benefits to any individual who is
not a current or former employee of Polymetrics or the Subsidiaries, or the
dependents or the dependents of other beneficiaries of any such current or
former employee.
SECTION 3.16. Taxes. (a) Except as would not have a Polymetrics Material
-----
Adverse Effect, Polymetrics and each Subsidiary has filed or caused to be filed
on a timely basis, will file or cause to be filed on a timely basis, or has been
or will be included in, all Tax Returns that are required to be filed by it or
in which it is required to be included prior to or on the Closing Date, pursuant
to the Law of each governmental authority with taxing power over it. Except as
would not have a Polymetrics Material Adverse Effect, all such Tax Returns were
or will be, as the case may be, correct and complete. All Taxes that have become
due as shown on such Tax Returns or pursuant to any assessment received as an
adjustment to such Tax Returns have been paid or withheld, except (i) such
Taxes, if any, as are being contested in good faith and disclosed in Section
3.16 of the Seller Disclosure Schedule, (ii) such Taxes that are fully reserved
against on the Closing Financial Statements and (iii) Taxes accruing after the
Closing Date that are not yet due. Except as set forth in Section 3.16 of the
Seller Disclosure Schedule, to the best knowledge of the Seller no claim has
been made by a taxing authority of a jurisdiction where Polymetrics or the
Subsidiaries do not file Tax Returns that any of them are or may be subject to
taxation in that jurisdiction.
(b) Except as disclosed in Section 3.16(b) of the Seller Disclosure
Schedule, there is no pending, or, to the knowledge of Seller, threatened or
anticipated, assessment of any additional Tax against Polymetrics or either
Subsidiary for any taxable period during which Polymetrics, each Subsidiary or
any predecessor companies were members of the Selling Group (as defined below).
Polymetrics and the Subsidiaries have not waived any statute of limitations in
respect of any Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency for any taxable period during which Polymetrics and
each Subsidiary was a member of the Selling Group. No Tax audit or examination
is now pending or currently in progress with respect to Polymetrics or either
Subsidiary.
(c) Except as disclosed in Section 3.16 of the Seller Disclosure Schedule,
the Seller and its Affiliates, on the one hand, and Polymetrics and the
Subsidiaries, on the other hand, are not parties to any income Tax allocation or
sharing agreement. Polymetrics has not made any payment, nor is it obligated to
make any payment, nor is it a party to any agreement that under certain
circumstances could obligate it to make any payment, that will not be deductible
under Internal Revenue Code Section 280G or 162(m).
(d) Polymetrics and the Subsidiaries are member of an affiliated group of
corporations that includes the Seller (the "Selling Group") within the meaning
or Section 1504 of the Internal Revenue Code and currently join in the filing of
consolidated federal
20
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income tax returns. Except as would not have a Polymetrics Material Adverse
Effect, the Selling Group's consolidated federal income tax returns have
included all relevant items of every corporation required to be included
therein.
SECTION 3.17. Intellectual Property Rights. Section 3.17 of the Seller
----------------------------
Disclosure Schedule discloses all of the trademark and service mark rights,
applications and registrations, trade names, fictitious names, service marks,
logo and brand names, copyrights, copyright applications, letters patent, patent
applications and licenses of any of the foregoing owned or used by Polymetrics
or Subsidiary in the Business. Except as disclosed on Section 3.17 of the Seller
Disclosure Schedule, Polymetrics and the Subsidiaries have the entire right,
title and interest in and to, or have the exclusive perpetual royalty-free right
to use, the intellectual property rights disclosed on Section 3.17 of the Seller
Disclosure Schedule ("Intellectual Property"), free and clear of all
Encumbrances. To the knowledge of the Seller, all proprietary (i) product
processes, (ii) product know-how, (iii) product trade secrets, (iv) product
inventions, (v) product discoveries, and (vi) product improvements used in the
manufacture of products sold by Polymetrics and its Subsidiaries are owned free
and clear of any Encumbrances. To the knowledge of the Seller, Polymetrics is
not using any material proprietary product trade secrets that are patentable by
other parties; nevertheless, to the knowledge of the Seller, if any such
material proprietary product trade secrets were patented by other parties,
Polymetrics would be able to conduct the Business using alternate unpatented
processes. Section 3.17 of the Seller Disclosure Schedule separately discloses
all Intellectual Property under license. To the knowledge of Seller, (i) the
Intellectual property is not the subject of any interference, opposition,
reexamination or cancellation, (ii) no Person is infringing upon nor has any
Person misappropriated any Intellectual Property, and (iii) neither Polymetrics
nor any Subsidiary is infringing upon the intellectual property rights of any
other Person.
SECTION 3.18. Transactions With Related Parties. No Related Party is or
---------------------------------
has been since August 30, 1994 a party to any transaction, agreement or
understanding with 5.01(c) of the Seller Disclosure Schedule and except for
dividends properly reflected as such in the Audited and the Unaudited Financial
Statements. No Related Party uses any assets of Polymetrics or any Subsidiary
except directly in connection with the Business, and no Related Party owns any
asset used in the Business. Except as contemplated by the plans disclosed in
Section 3.15 or Section 3.18 of the Seller Disclosure Schedule, reflected in the
Financial Statements or for those intercompany matters within the contemplation
of Section 5.02(a), no Related Party has any claim of any nature against
Polymetrics or any Subsidiary, and neither Polymetrics nor any Subsidiary has
any claim of any nature against or Liability to any Related Party. All
intercompany accounts governed by Section 5.02 and their respective balances as
of June 30, 1995 are identified in Schedule 5.02(a). Identified in Section 3.18
of the Seller Disclosure Schedules are all assets of Polymetrics that have been
or will either be retained by the Seller or transferred to the Seller after
May 31, 1995, other than cash, intercompany accounts and books and records.
After the Closing Date, PIC will not have any claim of any nature against or
Liability to Polymetrics or any Subsidiary, and
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neither Polymetrics nor any Subsidiary will have any claim of any nature against
or Liability to PIC.
SECTION 3.19. Environmental Matters. Except as disclosed in Section 3.19(a)
---------------------
of the Seller Disclosure Schedule, and subject to the knowledge of the Seller
with respect to any matter occurring prior to the date that the Seller acquired
Polymetrics or the Subsidiaries, as the case may be, or, with respect to any
real property addressed below, the date that Polymetrics or the Subsidiaries
first acquired, leased or used such real property:
(a) Polymetrics and the Subsidiaries have operated the Business and each
parcel of real property owned, used, operated, managed, possessed or leased
by them in compliance in all meaningful respects with all applicable
Environmental Laws. Neither Polymetrics nor any Subsidiary is subject to any
meaningful liability, penalty or expense (including, without limitation, legal
fees) by virtue of any violation of any Environmental Law occurring prior to the
Closing with respect to any real property. All of the Licenses issued under or
pursuant to any Environmental Law of Polymetrics and each Subsidiary are in full
force and effect, and Polymetrics and each Subsidiary is in compliance in all
meaningful respects with, and has fulfilled and performed in all meaningful
respects its obligations under, each such License.
(b) Neither Polymetrics nor any Subsidiary has treated, stored, recycled
or disposed of any Regulated Material on, in under or about any real property,
and no other Person has treated, stored, recycled or disposed of any Regulated
Material on any part of the Real Property, in violation of any applicable
Environmental Law. There has been no release of any Regulated Material at, on,
in under or about any Real Property in violation of any applicable
Environmental Law or in any quantity or amount which would require any cleanup,
renewal, treatment or remediation. Neither Polymetrics nor any Subsidiary has
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
National Priorities List pursuant to Superfund, or on CERCLIS. None of the Real
Property is listed, nor has the Seller received any written notice that the Real
Property is proposed for listing on, the National Priorities List pursuant to
Superfund, CERCLIS or any state or local list of sites requiring investigation
or cleanup.
(c) Neither Polymetrics nor any Subsidiary has received any written 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. Polymetrics and the
Subsidiaries have not placed any notice or restriction relating to the presence
of any Regulated Material at any Real Property or in any deed to any Real
Property. Except for Regulated Material sent to Petroleum Waste, Inc. in Button
Willow, California, IT Corporation in Martinez, California, Casmalia Disposal
Site in Casmalia, California, and Kettleman City landfill in Kettleman City,
California, within the past ten years Polymetrics and the Subsidiaries have not
transported any Regulated Material for recycling, treatment, disposal, other
handling or otherwise. There is no pending or contemplated claim, by Polymetrics
or the Subsidiaries under any Environmental Law based
22
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on actions of others that may have impacted on the Real Property, and, except as
set forth on Section 3.19(c) of the Seller Disclosure Schedule, neither
Polymetrics nor the Subsidiaries have entered into any agreement with any Person
regarding any Environmental Law, remedial action or other environmental
liability or expense. No PCBs, friable asbestos or underground storage tanks are
present on or in any structure or equipment located on any Real Property. All
storage tanks formerly located on the Real Property, whether underground or
aboveground, were properly removed in compliance with applicable Environmental
Laws.
(d) Neither Polymetrics nor any Subsidiary is required to make any
filings, notices or submissions to NJ-DEPE pursuant to NJ-ISRA or to obtain any
approvals or documentation thereunder with respect to Polymetrics' Linden, New
Jersey facility as a result of the transactions contemplated by this Agreement.
SECTION 3.20. Insurance. Section 3.20 of the Seller Disclosure Schedule
---------
discloses all insurance policies with respect to which any of Polymetrics or the
Subsidiaries are the owner, insured or beneficiary. All material properties and
risks of Polymetrics and the Subsidiaries are covered by valid and currently
effective insurance policies or binders of insurance or programs of
self-insurance in such types and amounts as are consistent with customary
practices and standards of companies engaged in businesses and operations
similar to those of Polymetrics and the Subsidiaries. Section 3.20 of the Seller
Disclosure Schedule discloses the manner in which Polymetrics and the
Subsidiaries provide coverage for, or address the risks of, workers'
compensation claims and self-insured retentions and deductibles, including,
without limitation, self-insurance programs.
SECTION 3.21. Material Contracts. (a) Section 3.21(a) of the Seller
------------------
Disclosure Schedule lists the following contracts (collectively, with the leases
listed on Section 3.14(b) of the Seller Disclosure Schedule, the "Material
--------
Contracts") to which Polymetrics or any Subsidiary is a party or by which their
- ---------
assets may be bound:
(i) any commitment, contract, agreement, note, loan, evidence of
indebtedness, purchase order or letter of credit (other than intercompany
debt contemplated by Section 5.02(a) and purchase orders issued in the
ordinary course of business) that the Seller and Polymetrics reasonably
anticipate will, in accordance with its terms, involve aggregate payments
by or to Polymetrics or any Subsidiary of more than $90,000 within the 12
month period following the date hereof and that is not cancelable without
liability within 60 days;
(ii) any lease of personal property involving any annual expense
in excess of $25,000;
(iii) any contract or agreement containing covenants limiting in any
respect the freedom of Polymetrics or any Subsidiary to engage in any line
of business or compete with any Person;
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(iv) any contract or agreement not entered into in the ordinary
course of the Business; and
(v) any employment agreement involving payments of base compensation
annually by Polymetrics or any Subsidiary in excess of $75,000.
(b) Neither Polymetrics nor any Subsidiary is (and, to the knowledge of the
Seller, no other party is) in material breach or violation of, or default under,
any of the Material Contracts. Each Material Contract is a valid agreement,
arrangement or commitment of Polymetrics or Subsidiary which is a party thereto,
enforceable against Polymetrics or such Subsidiary in accordance with its terms
except where enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights generally and except where
enforceability is subject to the application of equitable principles or
remedies. The Unaudited Financial Statements reflect an accrual for the entire
amount of the estimated ultimate loss on each Material Contract as of the date
of the Unaudited Financial Statements.
(c) With respect to the contract between Polymetrics and Integrated Device
Technology, Inc. (purchase order C130880), the cost estimates for such contract
include all reasonably foreseeable costs of that contract in accordance with
GAAP as applied by Polymetrics, as described in the Unaudited Financial
Statements.
SECTION 3.22. Receivables. Section 3.22 of the Seller Disclosure Schedule
-----------
lists all trade and other accounts receivable, excluding unbilled receivables,
of Polymetrics ("Receivables") outstanding as of July 31, 1995. All Receivables,
-----------
whether reflected on the Unaudited Financial Statements, disclosed on Section
3.22 of the Seller Disclosure Schedule or created after July 31, 1995, arose
from bona fide sales and deliveries of goods, performance of services and other
business transactions of Polymetrics in the ordinary course of business. On the
Closing Date, no portion of any Receivable will be subject to any counterclaim,
defense or set-off, or otherwise be in dispute, in either case in an amount in
excess of Polymetrics' bad debt reserve on the Closing Financial Statements.
Except to the extent of the recorded reserve for doubtful accounts specified on
the Closing Balance Sheet, all of the Receivables shall be collectible in the
ordinary course of business and will be fully collected within 360 days after
having been created; provided, however, that (i) the Purchaser shall use its
-------- -------
best efforts to collect the Receivables, (ii) if a payment is received from an
account debtor who has not designated the invoice being paid thereby, such
payment shall be applied to the earliest invoice outstanding with respect to
indebtedness of such account debtor, and (iii) to the extent that, through no
fault of the Purchaser, the Purchaser has not collected the full amount of a
Receivable within 360 days after it was created, the Purchaser shall notify the
Seller of the uncollected portion of such Receivable in order to seek
indemnification from the Seller for such uncollected portion, and the Purchaser
shall assign to the Seller such amount of the Receivable as the Seller shall
have actually indemnified the Purchaser for.
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SECTION 3.23. Customers. Section 3.23 of the Seller Disclosure Schedule
---------
contains a complete and accurate list, as of the date hereof, of Polymetrics' 10
largest customers in terms of revenues during the twelve months ended on July
31, 1995 showing the approximate total sales by Polymetrics to each such
customer during such period. As of the date of this Agreement, the Seller has no
knowledge of any condition or state of facts or circumstances involving
Polymetrics' customers, suppliers, distributors or sales representatives that
Polymetrics or the Seller can reasonably foresee could adversely affect the
Business after the Closing Date. The Seller has not received written notice of
any condition or state of facts or circumstances involving Polymetrics'
customers, suppliers, distributors or sales representatives that Polymetrics or
the Seller can reasonably foresee could adversely affect the Business after the
Closing Date.
SECTION 3.24. Brokers. Except for Price Waterhouse LLP ("PW"), no broker,
------- --
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
and Other Agreements based upon arrangements made by or on behalf of the Seller.
The Seller is solely responsible for the fees and expenses of PW.
SECTION 3.25. Investment Purpose. The Seller is acquiring the USF Shares
------------------
for investment only and not with a view to or in connection with any
distribution of such USF Shares.
SECTION 3.26. Disclosure. To the knowledge of the Seller, none of the
----------
representations or warranties of the Seller contained herein and none of the
information contained in the Seller Disclosure Schedules 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, in light of the circumstances in which
they are made, not misleading in any material respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement and consummate
the transactions contemplated hereby, the Purchaser represents and warrants to
the Seller as follows:
SECTION 4.01. Incorporation and Authority of the Purchaser. The Purchaser
--------------------------------------------
is a corporation duly incorporated, validly existing and in good standing under
the laws of Delaware and has all necessary corporate power and authority to
enter into this Agreement and the Other Agreements to which it is or is to
become a party, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by the Purchaser of this Agreement and the Other Agreements to which
the Purchaser is or is to become a party, the performance by the Purchaser of
its obligations hereunder and thereunder and the consummation by the Purchaser
of the transactions contemplated hereby and thereunder have been duly
authorized
25
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by all requisite corporate action on the part of the Purchaser. This Agreement
has been duly executed and delivered by the Purchaser, and (assuming due
authorization, execution and delivery by the Seller) this Agreement constitutes,
and, when delivered, each Other Agreement to which the Purchaser shall become a
party shall constitute, a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in proceeding in equity or at law).
SECTION 4.02. Capitalization. The authorization capital stock of the
--------------
Purchaser consists of (a) 75,000,000 shares of the Purchaser Common Stock, (b)
3,000,000 shares of Series A Voting Cumulative Convertible Preferred Stock, par
value $.10 per share ("Series A Preferred Stock"), (c) 250,000 shares of Series
------------------------
B Voting Convertible Preferred Stock, $.10 par value ("Series B Preferred
------------------
Stock"), (d) $60,000,000 in principal amount Convertible Subordinated Debentures
- -----
(the "Debentures"), and (e) 2,500,000 Common Stock Purchase Warrants (the
----------
"Warrants"). As of July 21, 1995, (i) 22,228,776 shares of the Purchaser Common
--------
Stock were issued and outstanding, all of which were validly issued, fully paid
and nonassessable, (ii) 72,727 shares of the Purchaser Common Stock were held in
the treasury of the Purchaser and (iii) 8,895,169 shares of the Purchaser Common
Stock were reserved for future issuance pursuant to the Series A Preferred
Stock, the Series B Preferred Stock, the Options (as defined below), the
Debentures and the Warrants. As of the date of this Agreement, (i) 880,000
shares of Series A Preferred Stock are issued and outstanding, (ii) 139,518
shares of Series B Preferred Stock are issued and outstanding, (iii) $60,000,000
in principal amount Debentures are issued and outstanding and (iv) 2,500,000
Warrants are issued and outstanding. On the Closing Date, all issued and
outstanding shares of the Purchaser Common Stock will be duly authorized,
validly issued, fully paid and nonassessable. Except for the Series A Preferred
Stock, the Series B Preferred Stock, the Debentures, the Warrants and the
options (the "Options") granted under the Purchaser's 1991 Employee Stock Option
-------
Plan and the Purchaser's 1991 Director Stock Option Plan (collectively, the
"Purchaser Stock Plans") there are no Security Rights relating to the USF
---------------------
Common Shares, except as expressly contemplated by the Other Agreements. The USF
Shares to be issued to the Seller pursuant to this Agreement will be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Purchaser's Certificate of
Incorporation or By-Laws or any agreement to which the Purchaser is a party or
is bound.
SECTION 4.03. No Conflict. Assuming all consents, approvals,
-----------
authorizations and other actions described in Section 4.04 have been obtained
and except as may result from any facts or circumstances relating solely to the
Seller, the execution, delivery and performance of this Agreement and the Other
Agreements by the Purchaser does not and will not: (a) violate or conflict with
the certificate of incorporation or by-laws of the Purchaser, (b) conflict with
or violate any Law or Governmental Order applicable to the Purchaser, (c) result
in the creation, maturation or acceleration of any liability or obligation of
the Purchaser (or give to any other Person the right to cause such a creation,
maturation
26
<PAGE>
or acceleration), (d) result in the creation or imposition of any Encumbrance
upon any of the USF Common Shares or any of the assets or properties of the
Purchaser or give to any other Person any interest or right therein, or (e)
result in any breach of, or constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, contract, agreement,
lease, License, permit, franchise or other instrument to which the Purchaser is
a party or by which any of its assets or properties is bound or affected.
SECTION 4.04. Consents and Approvals. The execution and delivery of this
----------------------
Agreement and Other Agreements by the Purchaser does not, and the performance of
this Agreement by the Purchaser will not, require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority (including, without limitation, any such
actions required to be taken after Closing), except (a) compliance with the
applicable requirements, if any, of the DGCL, (b) the registration of the USF
Shares under the Securities Act, (c) listing of the USF Shares on the New York
Stock Exchange, and (d) as may be necessary as a result of any facts or
circumstances relating solely to the Seller. The Purchaser has obtained the
irrevocable written consent of its lenders, The First National Bank of Boston
and First Interstate Bank of California, to consummate the transactions
contemplated by this Agreement.
SECTION 4.05. SEC Filings. The Purchaser has filed all forms, reports and
-----------
documents required to be filed by it with the SEC since January 1, 1992 through
the date of this Agreement (collectively, the "Purchaser SEC Reports"). The
---------------------
Purchaser SEC Reports (a) were prepared in accordance with the requirements of
the Securities Act, or the Exchange Act, as the case may be, and (b) did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading.
SECTION 4.06. Investment Purpose. The Purchaser is acquiring the Shares
------------------
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
SECTION 4.07. Brokers. Except for LSG Advisors/Societe Generale ("LSG"),
------- ---
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Purchaser. The
Purchaser is solely responsible for the fees and expenses of LSG.
27
<PAGE>
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) Unless the
----------------------------------------
Purchaser otherwise agrees in writing and except as otherwise set forth herein
or in the Seller Disclosure Schedule (including, without limitation, Section
5.01 thereof), between the date of this Agreement and the Closing Date, the
Seller will cause Polymetrics and each Subsidiary to (i) conduct the Business
only in the ordinary course and (ii) use reasonable efforts to preserve the
current relationships of Polymetrics and the Subsidiaries with their respective
customers, suppliers, distributors, officers and other employees and other
Persons with which Polymetrics and the Subsidiaries have significant business
relationships. Nothing contained herein shall be deemed to prevent Polymetrics
and the Subsidiaries from (i) entering into such contracts as Polymetrics or the
Subsidiaries deem necessary or appropriate in order to conduct the Business as
presently conducted or contemplated to be conducted, and (ii) renewing (and
conducting such negotiations as are necessary to effect such renewal) any
contract, including, without limitation, leases for real and personal property,
to which Polymetrics or any of the Subsidiaries is currently a party and which
is either (x) scheduled to expire or (y) required to be renewed in accordance
with the terms of such contract or lease, on a date occurring between the date
of this Agreement and the Closing Date.
(b) Except as expressly provided in this Agreement or in the Seller
Disclosure Schedule (including, without limitation, Section 5.01 thereof),
between the date of this Agreement and the Closing Date, the Seller will cause
Polymetrics and the Subsidiaries not to do any of the following without the
prior written consent of the Purchaser (such consent not to be unreasonably
withheld):
(i) create any Encumbrance of any kind of any properties or assets
(whether tangible or intangible) of Polymetrics or any Subsidiary, other
than (i) Permitted Encumbrances, (ii) Encumbrances that will be released
at or prior to the Closing or (iii) Encumbrances created in the ordinary
course of business having an individual value not in excess of $10,000 and
having an aggregate value not in excess of $200,000;
(ii) except for purchase and sales of assets in the ordinary course
of business, (A) sell, assign, transfer, lease or otherwise dispose of any
assets of Polymetrics or any Subsidiary, or (B) acquire any fixed asset,
in the case of (A) and (B) above, respectively, having an individual value
exceeding $75,000 and an aggregate value exceeding $250,000;
(iii) cancel any indebtedness owed to Polymetrics or any Subsidiary
(other than settlement of accounts receivable in the ordinary course of
business);
(iv) acquire (by merger, consolidation, or acquisition of stock or
assets) any Person or any assets that constitute an operating unit or
division thereof;
28
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(v) (A) incur any indebtedness for borrowed money, other than
intercompany borrowings governed by Section 5.02(a), (B) issue any debt
securities or (C) assume, grant, guarantee or endorse, or enter into any
other accommodation arrangement making Polymetrics or any Subsidiary
responsible for, the Liabilities of any Person (other than Polymetrics or
any Subsidiary);
(vi) change any method of accounting or accounting practice used by
Polymetrics or any Subsidiary, other than such changes required by GAAP;
(vii) issue or sell any shares of the capital stock of, or other
equity interests in, Polymetrics or any Subsidiary, or securities
convertible into or exchangeable for such shares or equity interests, or
issue or grant any Security Right of any kind with respect to any of the
foregoing;
(viii) declare, set aside or pay any dividend or other distribution
on or with respect to, or redeem, the Shares, except for the dividend
contemplated by Section 5.13;
(ix) amend Polymetrics' or any Subsidiary's certificate of
incorporation or by-laws (or equivalent organizational documents);
(x) increase the base salary, wage or bonus of any employee of
Polymetrics or the Subsidiaries, other than (i) pursuant to existing
agreements (as such agreements may be renewed pursuant to Section
5.01(a)), (ii) those non-executive employees whose anniversary for such an
increase occurs during this period and (iii) those arrangements acceptable
to the Purchaser and the Seller made between Polymetrics and each of James
K. Webster and Kenneth J. Wall;
(xi) pay to or effect any transaction with any Related Party, which
payment or transaction is not specifically described on Section 3.18 of
the Seller Disclosure Schedule;
(xii) pay, prepay or discharge any liability other than in the
ordinary course of business;
(xiii) pay any management fee, except as permitted by Section
5.01(d);
(xiv) sell or assign any Intellectual Property of Polymetrics or any
Subsidiary; or
(xv) agree to take any of the actions prohibited pursuant to this
Section 5.01(b).
29
<PAGE>
(c) The Purchaser acknowledges that the Seller intends to cancel, prior to
or at the Closing, the intercompany arrangements identified in Section 5.01(c)
of the Seller Disclosure Schedule, copies of which have been delivered to the
Purchaser, and that such cancellations (including, without limitation, any
consequences of such cancellations) will not result in a breach of this
Agreement; provided, however, that all obligations of Polymetrics and the
-------- -------
Subsidiaries under such agreements shall terminate completely and neither
Polymetrics nor the Subsidiaries shall have any Liability to any Person with
respect thereto.
(d) Notwithstanding any of the limitations upon the conduct of the Business
imposed pursuant to this Section 5.01, Polymetrics shall be permitted to pay to
the Seller a management fee in an amount not to exceed (A) two hundred thousand
dollars ($200,000.00) multiplied by (B) a fraction, the numerator of which is
the number of days between January 1, 1995 and the Closing Date, and the
denominator of which is three hundred and sixty-five.
(e) The Purchaser acknowledges that the Seller will terminate prior to the
Closing Date (i) the Distribution Agreement, dated February 9, 1993, between
Polymetrics and Emery-Trailigaz Ozone Company ("Trailigaz"), and (ii) the
---------
License Agreement, dated December 6, 1994, between Polymetrics and Trailigaz, in
each case at the Purchaser's request. Neither party shall have any claim of any
nature against the other party, or any Liability to the other party, in
connection with the termination of the foregoing contracts, and the termination
of such contracts shall have no impact on the calculation of Base Stockholder's
Equity or Closing Stockholder's Equity.
SECTION 5.02. Intercompany Accounts; Bonding. (a) All intercompany accounts
------------------------------
between the Seller or its Affiliates, on the one hand, and Polymetrics and the
Subsidiaries, on the other hand, as of the Closing Date shall be settled in cash
at Closing and such settlement shall be reflected in the Closing Financial
Statements; provided, however, that (i) the advance from parent in the amount of
-------- -------
$14,695,000 as of May 31, 1995 (the "Advance") shall not be settled in cash but
-------
shall be capitalized on both the Closing Financial Statements and the Unaudited
Financial Statements and shall be counted towards both the Base Stockholder's
Equity and the Final Stockholder's Equity, and (ii) any remaining intercompany
accounts and any further advances from any affiliate of Polymetrics of the type
listed in Schedule 5.02(a) which cannot be settled for cash by Polymetrics on
the Closing Date shall be capitalized on the Closing Financial Statements and
will be counted towards the Final Stockholder's Equity.
(b) The Purchaser will cause the outstanding surety bonds described in
Section 5.02(b) of the Seller Disclosure Schedule issued solely for the benefit
of Polymetrics and the Subsidiaries under any of the Seller's (or any of the
Seller's Affiliates') surety agreements to be replaced by surety bonds issued
under the Purchaser's surety agreements upon expiration of each such surety bond
at the original contract expiration date, but not including, without limitation,
any extension to the original bond term. The Seller shall keep all such surety
bonds in place prior to their stated expiration; provided, however, that: (i)
-------- -------
the Purchaser shall indemnify and hold harmless the Seller from and against any
Losses
30
<PAGE>
incurred by the Seller after Closing in connection with any payment made by the
Seller to such sureties as a result of any draw under such surety bonds by the
beneficiaries thereof other than for events occurring prior to Closing, and (ii)
the Purchaser undertakes to provide the maintenance bond portion for such
existing surety bonds.
(c) As soon as practicable, but in no event more than five Business Days
after Closing, the Purchaser will cause the outstanding letter of credit issued
for the benefit of a Polymetrics customer, such letter of credit described in
Section 5.02(c) of the Seller Disclosure Schedule, to be replaced by a letter of
credit issued by the Purchaser.
SECTION 5.03. Access to Information. (a) From the date of this Agreement
---------------------
until the Closing, upon reasonable notice, the Seller shall, and shall cause the
officers, employees, auditors and agents of the Seller, Polymetrics and the
Subsidiaries to, (i) afford the officers, employees and authorized agents and
representatives of the Purchaser reasonable access, during normal business
hours, to the offices, properties, books and records of Polymetrics and the
Subsidiaries and (ii) furnish to the officers, employees and authorized agents
and representatives of the Purchaser such additional financial and operating
data and other information regarding the assets, properties, goodwill and
business of Polymetrics and the Subsidiaries as the Purchaser may from time to
time reasonably request in order to assist the Purchaser in fulfilling its
obligations under this Agreement and to facilitate the consummation of the
transfers contemplated hereby; provided, however, that the Purchaser shall not
-------- -------
unreasonably interfere in any material respect with any of the businesses or
operations of the Seller, Polymetrics, the Subsidiaries or any Affiliate of the
Seller.
(b) The Purchaser agrees that it shall preserve and keep all Books and
Records in the Purchaser's possession for a period of at least eight years after
the Closing Date. Within 90 days after such eight-year period, the Seller upon
written notice to the Purchaser shall be given an opportunity, at its cost and
expense, to copy all or any part of such Books and Records at the Seller's
expense. Notwithstanding anything else herein to the contrary, the obligations
of the Purchaser under this subsection (b) shall be assignable by the Purchaser
in connection with the sale by the Purchaser of all of the capital stock of
Polymetrics or substantially all of the assets of Polymetrics and any such
effective assignment shall be deemed a novation of the Purchaser's obligation
under this subsection (b).
(c) Subject to the provisions of Article VII herein, each party agrees that
it will cooperate with and make available to the other party, during normal
business hours, all Books and Records, information and employees (without
substantial disruption of employment) retained and remaining in existence after
the Closing Date which are necessary in connection with this Agreement and any
Tax inquiry, audit, investigation or dispute, any litigation or investigation or
any other matter requiring any such Books and Records, information or employees
for any reasonable business purpose. The party requesting any such Books and
Records, information or employees shall bear all of the out-of-pocket costs and
expenses (including, without limitation, attorneys' fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such Books and Records, information or employees. The
Seller may require certain financial information
31
<PAGE>
relating to the Business for periods prior to the Closing Date for the purpose
of filing federal, state, local and foreign Tax returns and other governmental
reports, and the Purchaser agrees to furnish such information to the Seller at
the Seller's request and expense.
SECTION 5.04. Confidentiality. The terms of the Confidentiality Agreement
---------------
are hereby incorporated herein by reference and shall continue in full force and
effect until the Closing, at which time such Confidentiality Agreement and the
obligations of the Purchaser under this Section 5.04 shall terminate. If this
Agreement is, for any reason, terminated prior to the Closing, the
Confidentiality Agreement shall continue in full force and effect.
SECTION 5.05. Regulatory and Other Authorizations: Consents. (a) Each party
---------------------------------------------
hereto shall use its best efforts to obtain all authorizations, consents, orders
and approvals of, and to give all notices to and make all filings with, all
Governmental Authorities and other third parties that may be or become necessary
for its execution and delivery of, and the performance of its obligations
pursuant to, this Agreement and will cooperate fully with the other party in
promptly seeking to obtain all such authorizations, consents, orders and
approvals, giving such notices, and making such filings. The parties hereto
acknowledge that time shall be of the essence in this Agreement and agree not to
take any action that will have the effect of unreasonably delaying, impairing or
impeding the receipt of any required authorizations, consents, orders or
approvals.
(b) The Purchaser will use its best efforts to assist the Seller in
obtaining any consents of landlords necessary or advisable in connection with
the transactions contemplated by this Agreement, including without limitation,
providing to such landlords (i) guarantees by the Purchaser of the obligations
of Polymetrics or any Subsidiary and (ii) such financial statements and other
financial information with respect to the Purchaser as such landlords may
reasonably request.
SECTION 5.06. Investigation. The Purchaser acknowledges and agrees that
-------------
subject to the terms and conditions herein provided, it (i) has made its own
inquiry and investigation into, and, based thereon, has formed an independent
judgment concerning, Polymetrics, the Subsidiaries and the Business; provided,
--------
however, that such inquiry and investigation shall not prevent the Purchaser
- -------
from relying on Article III of this Agreement; (ii) has been furnished with or
given adequate access to such information about Polymetrics, the Subsidiaries
and the Business as it has requested, and (iii) will not assert any claim
against the Seller or any of its directors, officers, employees, agents,
stockholders, Affiliates, consultants, counsel, accountants, investment bankers
or representatives, or hold the Seller or any such Persons liable, for any
inaccuracies, misstatements or omissions with respect to information (other than
the representations and warranties contained in this Agreement) furnished by the
Seller or any such Persons concerning the Seller, its Affiliates, Polymetrics,
the Subsidiaries and the Business.
SECTION 5.07. Further Action. Subject to the terms and conditions herein
--------------
provided, each of the parties hereto covenants and agrees to use its best
efforts to deliver or
32
<PAGE>
cause to be delivered such documents and other papers and to take or cause to be
taken such further actions as may be necessary, proper or advisable under
applicable Laws to consummate and make effective the transactions contemplated
hereby.
SECTION 5.08. Polymetrics Name; References; Non-Compete. (a) For a period
-----------------------------------------
of three years following the Closing Date, the Seller and its Affiliates shall
be permitted the exclusive right, without the right of assignment or sublicense,
to use the "Polymetrics" name exclusively in connection with the conduct of the
desalinization business; provided, however, that the Seller covenants that it
-------- -------
will not sue the Purchaser for the use by Polymetrics, the Purchaser or the
Purchaser's other Affiliates of the name "Polymetrics" in any business other
than the desalinization business.
(b) The Purchaser acknowledges that Polymetrics and Polymetrics Seawater
Systems, Inc. ("PSSI") have from time to time engaged in the desalinization
----
business. The Seller also acknowledges that the Purchaser is engaged in the
desalinization business. Prior to the Closing, the Seller shall have caused all
of the business and assets and liabilities associated directly and exclusively
with the desalinization business to be transferred and assigned to the Seller
and its Affiliates, and for the purposes of this Agreement all of such assets
and liabilities of such business are expressly retained by and for the benefit
of the Seller and its Affiliates and are expressly excluded from the definition
of the term Business. The Purchaser shall not acquire, and the Seller and its
Affiliates shall retain, Polymetrics' and PSSI's references for desalinization
projects and all books, records and other information relating exclusively to
Polymetrics' and PSSI's involvement in the desalinization business prior to the
date hereof. Following the Closing Date, only the Seller and its Affiliates will
be permitted to use such references, books, records and other information.
(c) The Purchaser agrees that, for a period commencing on the Closing Date
and ending on the third anniversary of the Closing Date, except with the
Seller's prior written consent, neither the Purchaser nor any Affiliates of the
Purchaser shall, directly or indirectly, own, manage, operate, join, control or
participate in the ownership, management, operation or control of, any profit or
non-profit business or organization, which competes with the operations of PSSI
in the Republic of Malta. Ownership of not more than 2% of the outstanding stock
of any publicly traded company shall not be in violation of this section. 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 the
Purchaser may allege against the Seller, whether based on this Agreement or
otherwise, shall not prevent the enforcement of this covenant. The Purchaser
agrees that the Seller's remedies at law for any breach or threat of breach by
the Purchaser of the provisions of this section will be inadequate, and that the
Seller 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 the Seller may be
entitled at law or 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 the Seller seeks to enforce this
covenant. Should any provisions of this section be adjudged to any
33
<PAGE>
extent invalid by any competent tribunal, such provision will be deemed modified
to the extent necessary to make it enforceable.
(d) For a period of three years from and after the Closing Date, neither
the Seller nor any company in which the Seller owns a majority of the voting
shares shall, directly or indirectly, own, manage, operate, join, control or
participate in the ownership, management, operation or control of, any business
that at any relevant time during such period directly competes with the
Purchaser or its Affiliates in the Business as currently conducted by
Polymetrics and the Subsidiaries anywhere in the United States. Ownership of not
more than 2% of the outstanding stock of any publicly traded company shall not
be a violation of this section. 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 the 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. The Seller agrees that the Purchaser's
remedies at law for any breach or threat of breach by the Seller of the
provisions of this section will be inadequate, and that the Purchaser 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 the Purchaser may be entitled at law or
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 the Purchaser 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.
SECTION 5.09. Insurance Matters.
-----------------
(a) As of Closing, Polymetrics and the Subsidiaries shall no longer be
provided insurance and self-insurance coverage under any insurance policies or
self-insurance programs of the Seller and its other Affiliates. Subject to
Section 5.09(c) below, all claims arising subsequent to the Closing Date,
whether or not covered by insurance, shall be for the account of Polymetrics;
provided, however, that nothing contained in this Section 5.09 shall be deemed
- -------- -------
to impair the Purchaser's right to be indemnified for breaches of the Seller's
representations and warranties pursuant to Article IX of this Agreement.
Following the Closing, the Seller shall, to the extent that coverage under its
insurance policies extends to include Polymetrics and the Subsidiaries in
respect of claims arising out of accidents or occurrences concerning Polymetrics
and the Subsidiaries prior to the Closing, (i) take no action to eliminate or
reduce such coverage and (ii) pay when due any premiums under such policies for
periods through the Closing Date. Following the Closing, each party will
cooperate with the insurance carrier in the defense and settlement of such
covered claims.
(b) Polymetrics shall retain and the Closing Financial Statements shall
include the self-insurance accrual reflected on Polymetrics' balance sheet as of
the Closing Date (the "Accrual Amount"), and Polymetrics shall retain
--------------
responsibility for its insurance risks. Accordingly, any amounts billed to the
Seller by its insurance carriers for claims
34
<PAGE>
arising from accidents or occurrences involving the Business on or prior to the
Closing Date will be billed by the Seller to Polymetrics and settled promptly,
but in no event later than fifteen (15) days after the date such bill is sent by
the Seller to Polymetrics.
(c) For a period of three (3) years following the Closing Date, the Seller
undertakes to reimburse the Purchaser for any amount falling within the self-
insured retention billed to the Seller by its insurance carriers for any claim
or claims arising from accidents or occurrences of the Business prior to the
Closing Date to the extent that the aggregate of such reimbursable amounts
exceeds the Accrual Amount. Accordingly, any amounts billed by the Seller to
Polymetrics for claims arising from accidents or occurrences of the Business
prior to the Closing Date will be billed by Polymetrics to the Seller and
settled promptly, but in no event later than fifteen (15) days after the date
such bill is sent by Polymetrics to the Seller.
(d) Any retrospective or retroactive premium adjustments applicable to
insurance covering the period prior to the Closing shall be charged against the
Accrual Amount.
(e) On the third anniversary of the Closing Date, if any portion of the
Accrual Amount remains after application of all claims made with respect thereto
prior to the third anniversary of the Closing Date, such remainder shall be paid
in its entirety by the Purchaser to the Seller. If any known claim existing as
of the Closing Date has not been resolved by such third anniversary, then the
parties shall attempt to agree on a reasonable estimate of the resolution of
such claim and, failing such agreement, shall ask the insurance carrier to
provide them with a reasonable estimate of the resolution of such claim, and, in
either event, the self-insured retention amount of such estimate shall be
deducted from the Accrual Amount in determining the amount to be paid by the
Purchaser to the Seller.
(f) The payments to be made, if any, by the Purchaser pursuant to
subsection (e) above and the Seller pursuant to subsection (c) above shall be
included in the aggregate dollar total of the Losses for which each party is
indemnified by the other and shall be subject to the $4,500,000 limitation with
respect to the Seller's indemnification obligations pursuant to Section 9.03(b)
and the $4,700,000 limitation with respect to the Purchaser's indemnification
obligations pursuant to Section 9.02(b); provided, however, that: (i) neither
-------- -------
the Seller's nor the Purchaser's payments, if any, pursuant to subsections (c)
and (e) above shall be included in the Seller's Threshold Amount or the
Purchaser's Threshold Amount, respectively; and (ii) the payments, if any,
pursuant to subsections (c) and (e) above shall be made, if by the Seller, in
accordance with Section 9.03(d) and, if by the Purchaser, in accordance with
Section 9.02(d).
SECTION 5.10. Acquisition Proposals. The Seller shall not, and the Seller
---------------------
shall not permit any of its Affiliates, officers, employees, agents or
representatives to, whether directly or indirectly, solicit or encourage
(including by way of furnishing information) any inquiries or proposals relating
to, or engage in any negotiations with respect to, the sale of the Shares (or of
Polymetrics' assets), or any part thereof, or any other
35
<PAGE>
business combination involving Polymetrics, except for inquiries or proposals
from, or discussions or negotiations with, the Purchaser and its authorized
representatives.
SECTION 5.11. Notices in the Events of Suit or Breaches of Representations
------------------------------------------------------------
and Warranties. Each of the Seller and the Purchaser shall promptly notify the
- --------------
other of any action, suit or proceeding that shall be instituted or threatened
against it or Polymetrics to restrain, prohibit or otherwise challenge the
legality of any transaction contemplated by this Agreement. Each of the Seller
and the Purchaser shall promptly notify the other of any facts or circumstances
made by it herein to be untrue in any material respect.
SECTION 5.12. Interim Financial Statements. The Seller shall promptly
----------------------------
deliver to the Purchaser copies of any monthly, quarterly or annual consolidated
balance sheets, income statements and statements of cash flows of Polymetrics
and the Subsidiaries for each such period after the date hereof through the
Closing Date.
SECTION 5.13. Assets and Liabilities of PIC. The Purchaser acknowledges
-----------------------------
that, prior to the Closing Date, the Seller shall have caused PIC to distribute
to the Seller the amount of $13,204,000, such distribution consisting of the sum
of (i) an assignment to the Seller of the $14,544,000 receivable owed to PIC by
Polymetrics and (ii) $878,000 representing the remaining assets of PIC, less a
liability owed by PIC to the Seller in the amount of $2,218,000. Also prior to
the Closing Date, but subsequent to or simultaneously with the transfer of
assets and liabilities of PIC described in the previous sentence, the Seller
shall contribute to the capital of Polymetrics the account receivable and assets
of PIC in the amount of $15,422,000 subject to a liability in the amount of
$2,218,000, of which $2,123,000 is part of the Advance from the Seller referred
to in Section 5.02 herein and, as such, shall be capitalized for purposes of
calculating Base Stockholders' Equity and Closing Stockholders' Equity in
accordance with Section 5.02(a)(i), and the remaining $95,000 shall be repayable
by Polymetrics to the Seller on demand.
SECTION 5.14. Matters Relating to Certain Employees. The parties agree that
-------------------------------------
(i) the loss of either or both of James K. Webster and Kenneth J. Wall as
employees of Polymetrics on or prior to the Closing Date shall not constitute a
Polymetrics Material Adverse Effect, and (ii) the continued employment of such
individuals by Polymetrics on the Closing Date is not a condition to the
obligations of the Purchaser pursuant to this Agreement.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Employees. (a) From and after the Closing, the Purchaser
---------
agrees to provide, or to cause Polymetrics and the Subsidiaries to provide,
those persons employed by Polymetrics or any Subsidiary immediately prior to the
Closing, including those
36
<PAGE>
employees on vacation, leave of absence, disability (work related or otherwise)
or sick leave or layoff (whether or not such employees return to active
employment with Polymetrics or any Subsidiary) (the "Transferred Employees"),
---------------------
with substantially the same level of employee benefits which are provided by the
Purchaser to its employees of comparable status and seniority. The Purchaser
will assume the sponsorship of the Polymetrics' 401(k) pension plan (the "Plan")
----
as of the Closing. The Purchaser hereby acknowledges and understands that prior
to the Closing, Polymetrics shall spin-off the account balances in the Plan of
those employees of Handy HRM Corp. who were participating in the Plan into
another plan unrelated to the Purchaser; provided, however, that if it is not
-------- -------
administratively feasible to complete such spin-off prior to the Closing, the
Purchaser shall cooperate with and use its best efforts to effectuate the
transfer of such assets, but in no event shall such transfer take place after
November 30, 1995 or, if later, the completion of any required 5310-A
notification under the Internal Revenue Code. Notwithstanding the foregoing, the
Purchaser shall have the right at any time subsequent to the Closing to merge
the Plan into the United States Filter Corporation 401(k) Plan ("USFC Plan") in
---------
conformity with the qualified plan merger provisions of the Internal Revenue
Code and the regulations thereunder. From and after the date of any such merger
of the Plan into the USFC Plan, all of the benefits accrued by the Transferred
Employees under the Plan as of the date of the Plan merger shall be preserved
under the USFC Plan with respect to the Transferred Employees' Plan account
balances as of the date of the Plan merger and all future benefit accruals shall
be based on the provisions of the Plan as it shall be amended from time to time.
(b) To the extent that service is relevant for purposes of eligibility,
vesting or benefit accrual under any employee benefit plan, program or
arrangement established or maintained by the Purchaser, Polymetrics or the
Subsidiaries for the benefit of the Transferred Employees, such plan, program or
arrangement shall credit such Transferred Employees with whatever service
credits exist for such employees under Polymetrics existing plans.
(c) The Purchaser agrees that for a period of at least one year after the
Closing Date, in the event that the employees listed in Section 6.01(c) of the
Seller Disclosure Schedule are either terminated without cause, or resign as a
result of the Purchaser's failure to maintain the current levels of the
employees' base salary and incentive bonus at a rate no less than their base
salary and incentive bonus on the day immediately preceding the Closing Date, it
will provide severance benefits equal to the following: a cash lump sum payment
equal to three months of the employee's base salary in effect on the day
immediately preceding the Closing Date, the employee's pro rata portion of his
or her annual bonus as calculated in the Polymetrics Incentive Bonus Plan as in
effect on the day immediately preceding the Closing Date, and full continued
health benefit coverage pursuant to the Consolidated Omnibus Reconciliation Act
of 1985 for six months at no cost to the employee. The Seller will immediately
reimburse the Purchaser for all amounts paid by the Purchaser pursuant to the
terms of this subsection (c).
SECTION 6.02. Indemnity. Anything in this Agreement to the contrary
---------
notwithstanding, the Purchaser hereby agrees to indemnify the Seller against and
hold the
37
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Seller harmless from any and all claims, losses, damages, expenses, obligations
and liabilities (including costs of collection, attorney's fees and other costs
of defense) arising out of or otherwise in respect of (i) any claim made by any
Transferred Employee against the Seller for any severance or termination
benefits pursuant to the provisions of any plan, program or arrangement or any
applicable federal or state law which the Purchaser agreed to provide under
Section 6.01 of the Agreement, (ii) any suit or claim of violation brought
against the Seller under the Worker Adjustment and Retraining Notification Act
of 1988 (or any comparable state Law) for any actions taken by the Purchaser,
Polymetrics or the Subsidiaries on or after the Closing Date with respect to any
facility, site or employment, operating unit or Transferred Employee, (iii) any
action taken on or after the Closing Date by the Purchaser, Polymetrics or the
Subsidiaries with respect to any Benefit Plan, except to the extent any such
liability, etc. is caused by an action, omission to act, event or circumstances
before the Closing Date, (iv) any claim for payments or benefits by Transferred
Employees or their respective beneficiaries under any Benefit Plan which are not
caused by any action, omission to act, event or circumstances before the Closing
Date, or (v) any failure of the Purchaser, Polymetrics or the Subsidiaries to
discharge their respective obligations under this Article VI which are not
caused by any act, omission to act, event or circumstances before the Closing
Date.
SECTION 6.03. Survival. The covenants and agreements of the parties hereto
--------
contained in this Article VI shall survive the Closing and shall remain in full
force and effect until the expiration of all statutes of limitations with
respect to the respective matters set forth herein.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Tax Indemnities. (a) The Seller shall indemnify the Purchaser
---------------
and Polymetrics against all Taxes (i) imposed on the Seller or any member of an
affiliated group with which the Seller files a federal consolidated or combined
income tax return (excluding Polymetrics and the Subsidiaries) with respect to
any taxable period that ends on or before the Closing Date or includes the
Closing Date and (ii) imposed on Polymetrics or any Subsidiary with respect to
any taxable period or portion thereof that ends on or before the Closing Date,
but, in each case, only to the extent that such Taxes are in excess of the
amount expressly reserved for Taxes on the Closing Financial Statements;
provided, however, that no indemnity shall be provided under this Agreement for
- -------- -------
any Taxes resulting from (i) an election under Section 338 of the Internal
Revenue Code with respect to the transactions contemplated by this Agreement
except as provided in Section 2.07 of this Agreement, or (ii) a reduction in any
net operating loss, capital loss or tax credit carryover allocable to
Polymetrics or any Subsidiary. Without limiting the foregoing, the Seller shall
also indemnify the Purchaser and Polymetrics against all Taxes arising out of a
breach of any representation and warranty contained in Section 3.16
38
<PAGE>
(b) The Purchaser and Polymetrics shall indemnify the Seller and its
affiliates against all Taxes imposed on or with respect to Polymetrics and its
Subsidiaries that are not subject to indemnification pursuant to paragraph (a)
of this Section 7.01 or Section 2.07, including, but not limited to, Taxes (i)
resulting from an election under Section 338 of the Internal Revenue Code with
respect to the transactions contemplated by this Agreement or (ii) with respect
to any taxable period which begins after the Closing Date.
(c) Any Taxes for a tax period beginning before the Closing Date and ending
after the Closing Date shall be apportioned between the Seller and the
Purchaser, in the case of real and personal property taxes and franchise taxes
not based on gross or net income, on a per diem basis and, in the case of other
Taxes (including, without limitation, sale and transfer Taxes), shall be
determined based on the actual operation of Polymetrics and the Subsidiaries
during the portion of such period ending on the Closing Date and the portion of
such period beginning on the day following the Closing Date. Each such portion
of such period shall be deemed to be a tax period subject to the provisions of
Section 7.01(a) and 7.01(b) above.
(d) Payment by the indemnitor of any amount due under this Section 7.01 or
Section 2.07 shall be made within ten days following written notice by the
indemnitee that payment of such amounts to the appropriate tax authority is due,
provided that the indemnitor shall not be required to make any payment earlier
than two days before it is due to the appropriate tax authority. If the Seller
receives an assessment or other notice of Taxes due with respect to Polymetrics
or any of its Subsidiaries for any period ending on or before the Closing Date
for which the Seller is not responsible, in whole or in part, pursuant to
paragraph (a) of this Section 7.01 because all or a part of such Tax does not
exceed the amount reserved for such Tax in the books and records of Polymetrics
or the Subsidiaries as of the Closing Date, and the Seller pays such Tax, then
the Purchaser or Polymetrics shall reimburse the Seller, within the time
provided in the first sentence of this Section 7.01(d), the amount of such Tax
for which Seller is not responsible. In the case of a Tax that is contested in
accordance with the provisions of Section 7.04, payment of the Tax to the
appropriate tax authority will not be considered to be due earlier than the date
a final determination to such effect is made by the appropriate taxing authority
or a court.
(e) With the exception of a reimbursement pursuant to Section 7.01(d), the
respective indemnification obligations of the Purchaser and the Seller pursuant
to this Section 7.01 shall not be effective until the aggregate dollar amount of
all Taxes which would otherwise be indemnifiable pursuant to this Section 7.01
by such party exceeds $25,000 (the "Tax Threshold Amount"), and then only to the
--------------------
extent such aggregate amount exceeds the Tax Threshold Amount. For the purposes
of this Section 7.01(e), in computing such aggregate amount of claims, the
amount of each claim shall be deemed to be an amount net of any Tax benefit to
the Purchaser, Polymetrics or any Subsidiary for a period or portion thereof
beginning after the Closing Date (a "Post-Closing Date Tax Benefit").
-----------------------------
SECTION 7.02. Refunds and Tax Benefits. (a) The Purchaser shall promptly
------------------------
pay to the Seller an amount equal to any refund, offset or credit (including,
without
39
<PAGE>
limitation, any interest paid or credited with respect thereto) received by the
Purchaser, Polymetrics or any Subsidiary or successor thereof of Taxes relating
to taxable periods or portions thereof ending on or before the Closing Date or
otherwise attributable to an amount paid by the Seller under Section 2.07 or
Section 7.01 hereof. The Purchaser shall, if the Seller so requests and at the
Seller's expense, cause the relevant entity to file a claim for and obtain any
refund, offset or credit in respect of which the Seller is entitled to payment
under this Section 7.02. The Purchaser shall permit the Seller to control (at
the Seller's expense) the prosecution of any such claim, and shall cause the
relevant entity to authorize by appropriate power of attorney such persons as
the Seller shall designate to represent such entity with respect to such refund
claim.
(b) To the extent the sale of Polymetrics and its Subsidiaries is not
considered a sale of assets for federal income tax purposes, the Purchaser,
Polymetrics and the Subsidiaries shall make an election under Section 172(b)(3)
of the Internal Revenue Code to relinquish the entire carryback period with
respect to any net operating loss or specified liability loss attributable by
Polymetrics or the Subsidiaries in any taxable period beginning after the
Closing Date that could be carried back to a taxable year of Polymetrics or any
Subsidiary ending on or before the Closing Date. Except as provided in Section
7.05, neither the Seller nor any affiliate thereof shall be required to pay to
the Purchaser or Polymetrics or any Subsidiary any refund or credit of Taxes
that results from the carryback to any taxable period ending on or before the
Closing Date of any net operating loss, capital loss or tax credit attributable
by Polymetrics or any Subsidiary in any taxable period beginning after the
Closing Date.
SECTION 7.03. Preparation of Tax Returns. Except for any state and local
--------------------------
tax returns made in connection with an election under any state or local law
similar to the election available under Section 338(g) of the Internal Revenue
Code (or which results from the making or deemed making of an election under
Section 338(g) of the Internal Revenue Code) where the state or local
jurisdiction (i) does not provide for or recognize a Section 338(h)(10) election
or (ii) does not apply provisions corresponding to Section 338(h)(10) of the
Internal Revenue Code to Polymetrics and the Subsidiaries, the Seller shall
prepare and file any tax returns and schedules relating to Polymetrics and the
Subsidiaries for the period ending on or before the Closing Date. The Purchaser
shall prepare or cause Polymetrics and each Subsidiary to prepare any tax return
relating to it for any period ending after the Closing Date. Such returns and
schedules shall be prepared on a basis consistent with those prepared for prior
tax years unless a different treatment of any item is required by an intervening
change in law. The Purchaser agrees to notify and to cause Polymetrics and each
Subsidiary to notify the Seller in writing prior to filing any return that
reports any item in a manner that is inconsistent with prior years as a result
of such change in law and to consider all comments made by the Seller with
respect thereto in good faith.
SECTION 7.04. Contests. (a) After the Closing Date, the Purchaser shall
--------
promptly notify the Seller in writing of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim on the Purchaser
or Polymetrics or any Subsidiary which, if determined adversely to the taxpayer
or after the lapse of time would be
40
<PAGE>
grounds for indemnification under Section 7.01 or Section 2.07. Such notice
shall contain factual information (to the extent known to the Purchaser,
Polymetrics or any Subsidiary) describing the asserted Tax liability in
reasonable detail and shall include copies of any notice or other document
received from any taxing authority in respect of any such asserted Tax
liability. If the Purchaser fails to give the Seller prompt notice of an
asserted Tax liability as required by this Section 7.04, then (a) if the Seller
is precluded by the failure to give prompt notice from contesting the asserted
Tax liability in both the administrative and judicial forums, then the Seller
shall not have any obligation to indemnify for any loss arising out of such
asserted Tax liability but such failure to give prompt notice results in a
detriment to the Seller, then any amount which the Seller is otherwise required
to pay the Purchaser pursuant to Section 7.01 or Section 2.07 with respect to
such liability shall be reduced by the amount of such detriment.
(b) The Seller may elect to direct, through counsel of its own choosing and
at its own expense, any audit, claim for refund and administrative or judicial
proceeding involving any asserted liability with respect to which indemnity may
be sought under Section 7.01 or Section 2.07 (any such audit, claim for refund
or proceeding relating to an asserted Tax liability is referred to herein as a
"Contest"). If the Seller elects to direct a Contest, the Purchaser shall
-------
cooperate and shall cause Polymetrics and/or any Subsidiary or its respective
successor or successors to cooperate, at the Seller's expense, in each phase of
such Contest. If the Seller elects not to direct the Contest, or contests its
obligation to indemnify under Section 7.01 or Section 2.07, the Purchaser,
Polymetrics or each Subsidiary shall take such reasonable steps as may be
prudent and within its capacity (with due allowance being given to the
circumstances) to preserve the right of the relevant entity to contest such
asserted Tax liability, shall further take such reasonable steps as the Seller
may timely request to preserve the right of the parties to contest such asserted
Tax liability, may pay, compromise or contest such asserted liability, and
shall be reimbursed by the Seller for reasonable costs of outside tax advisors
and related professionals and reasonable out-of-pocket costs incurred pursuant
to this sentence in connection with a Tax liability indemnifiable by the Seller
hereunder. However, neither the Purchaser, Polymetrics nor any Subsidiary may
settle or compromise any asserted liability without the consent of the Seller,
which consent shall not be unreasonably withheld. If the Purchaser or
Polymetrics nor any Subsidiary assumes control of a Contest with respect to
Taxes pursuant to the foregoing, the Seller shall retain the right, at any time
thereafter and immediately upon notice to the entity that shall have assumed
control of such Contest, itself to assume, at the Seller's expense, sole control
of such Contest. In this event, each of the Purchaser (or Polymetrics or any
Subsidiary) and the Seller may participate, at the Seller's expense, in the
Contest. If the Seller chooses to direct the Contest, the Purchaser shall
promptly empower and shall cause Polymetrics or their respective successors
promptly to empower (by power of attorney and such other documentation as may be
necessary and appropriate) such representatives of the Seller as it may
designate to represent the Purchaser or Polymetrics and/or the Subsidiaries or
their respective successors in the Contest insofar as the Contest involves an
asserted Tax liability for which the Seller would be liable under Section 7.01
or Section 2.07.
41
<PAGE>
SECTION 7.05. Certain Audit Adjustments. If an audit adjustment, claim
-------------------------
for refund or amended return ("Adjustment") after the date hereof shall both
----------
increase a Tax liability which is allocated to the Seller under Section 7.01 (or
reduce losses or credits otherwise available to the Seller) for a period ending
on or before the Closing Date and decrease a Tax liability of the Purchaser,
Polymetrics or and Subsidiary for a period ending after the Closing Date, then,
when and to the extent that the Purchaser (or Polymetrics or any Subsidiary)
derives a benefit from such decrease (through a reduction of Taxes, refund of
Taxes paid or credit against Taxes due), the Purchaser shall promptly pay to the
Seller an amount equal to the amount of such refund, reduction or credit (except
to the extent, in the case of a period that includes the Closing Date, the
Seller has previously been compensated for such benefit under Section 9.02).
Similarly, if an Adjustment shall both decrease a Tax liability which allocated
to the Seller under Section 7.01 for a period ending on or before the Closing
Date and increase the Tax liability of the Purchaser or Polymetrics or any
Subsidiary (or reduce losses or credits otherwise available to any such
corporation) for a period ending after the Closing Date, then, when and to the
extent that the Seller derives a benefit from such decrease (through a refund or
reduction of Taxes paid or credit against Taxes due), the Seller shall promptly
pay to the Purchaser an amount equal to the amount equal to the amount of such
refund, reduction or credit. The determination of whether a benefit is derived
for the Sellers or the Purchaser will be made on a with and without basis by
first computing tax without the item and then with the item and comparing the
taxes computed under each method.
SECTION 7.06. Cooperation and Exchange of Information. The Seller and the
---------------------------------------
Purchaser will provide each other with such cooperation and information as
either of them reasonably may request of the other in filing any Tax return,
amended return or claim for refund, determining a liability for Taxes or a right
to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax returns or portions thereof, together with
accompanying schedules and related work papers and documents relating to rulings
or other determinations by taxing authorities. Each party shall make its
employees available on a mutually convenient basis to provide explanations of
any documents or information provided hereunder. Each party will retain all
returns, schedules and work papers and all material records or other documents
relating to Tax matters of Polymetrics and the Subsidiaries for the taxable
period first ending after the Closing Date and for all prior taxable periods
until the later of (i) the expiration of the statute of limitations of the
taxable periods to which such returns and other documents relate, without regard
to extensions except to the extent notified by the other party in writing of
such extensions for the respective Tax periods, or (ii) eight years following
the due date (without extension) for such returns. Anything to the contrary in
this Agreement notwithstanding, the Seller shall retain for the periods noted
above all returns, schedules and work papers and all material records or other
documents relating to Tax matters for all taxable periods of Polymetrics and
the Subsidiaries ending on or prior to the Closing Date. Any information
obtained under this Section 7.06 shall be kept confidential, except as may be
otherwise necessary in connection with the filing of returns or claims for
refund or in conducting an audit or other proceeding. The Purchaser shall be
given an opportunity at its cost and expense to remove and retain all
42
<PAGE>
or any portion of such books and records as the Purchaser may select at the
expiration of such period.
SECTION 7.07. Conveyance Taxes. The Seller and the Purchaser agree that
----------------
responsibility for all sales, transfer, stamp, stock transfer, real property
transfer and similar Taxes incurred as a result of the sale of the Shares
contemplated hereby shall be borne equally by the Seller and the Purchaser.
Notwithstanding any limitation on indemnification for Taxes under this Article
VII, each party shall be entitled to indemnification from the other for fifty
percent (50%) of the amount of any Tax of the type contemplated by the foregoing
in this Section 7.07 assessed against it. The Seller and the Purchaser agree
that responsibility for all real property transfer gains taxes incurred as a
result of the sale of the Shares contemplated hereby shall be borne by the
Seller.
SECTION 7.08. Miscellaneous. (a) The parties agree to treat all payments
-------------
made under this Article VII, under any other indemnity provision contained in
this Agreement, and for any misrepresentations or breach of warranties or
covenants as adjustments to the Purchase Price or as capital contributions for
Tax purposes and that such agreed treatment shall govern for purposes hereof.
(b) The covenants and agreements of the parties hereto contained in
Section 2.07 and this Article VII shall survive the Closing and shall remain in
full force and effect until the expiration of all statutes of limitations as
extended by agreement or otherwise with respect to any Taxes that would be
indemnifiable by the Seller under Section 7.01(a) or Section 2.07 of this
Agreement or by the Purchaser under Section 7.01(b) of this Agreement.
(c) Any tax sharing arrangement between the Seller or its Affiliates, on
the one hand, and any of Polymetrics or the Subsidiaries, on the other hand,
shall be null and void immediately following the Closing except for purposes of
determining the tax impact of adjustments to the Closing Financial Statements
after Closing pursuant to Section 2.05.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Seller. The obligations of
---------------------------------------
the Seller to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment or waiver, at or prior to the Closing, of each of
the following conditions:
(a) Representations and Warranties; Covenants. (i) the representations
-----------------------------------------
and warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects as of the Closing, with the same force and
effect as if made on, as of and with reference to the Closing Date (or, in the
case of representations and warranties of the Purchaser which address matters
only as of a particular date, as of such date); (ii) the covenants and
agreements contained in this Agreement to be complied with by the Purchaser at
or prior to the Closing shall have been complied with in all material respects;
and (iii) the
43
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Seller shall have received a certificate of the Purchaser as to the matters set
forth in clauses (i) and (ii) above signed by a duly authorized officer of the
Purchaser;
(b) No Order. No Governmental Authority shall have enacted, issued,
--------
promulgated, enforced or entered any Governmental Order which is in effect and
has the effect of making the transactions contemplated by this Agreement illegal
or otherwise prohibiting consummation of such transactions; provided, however,
-------- -------
that the provisions of this Section 8.01(b) shall not apply if the Seller has
directly or indirectly solicited or encouraged any such action;
(c) No Purchaser Material Adverse Effect. There shall have been no
------------------------------------
Purchaser Material Adverse Effect after the date hereof and continuing on the
Closing Date;
(d) Listing on NYSE. The USF Shares shall have been authorized for listing
---------------
on the NYSE, subject to official notice of issuance;
(e) Opinion of Counsel. The Seller shall have received the executed legal
------------------
opinion of Damian C. Georgino, Esq. substantially as follows;
(i) The USF Shares have been duly authorized and validly issued and
are fully paid and nonassessable and were not issued in violation of any
preemptive rights and (ii) there are no options, warrants or rights of
conversion or other rights, agreements, arrangements or commitments
relating to the USF Shares obligating the Purchaser to issue or sell any of
the USF Shares;
(f) Good Standing Certificate. The Purchaser shall have delivered to the
-------------------------
Seller a certificate of the appropriate public official to the effect that the
Purchaser is a validly existing corporation in the State of Delaware as of a
date not more than 10 days prior to the Closing Date;
(g) Share Disposition Agreement. The Purchaser shall have executed and
---------------------------
delivered the Share Disposition Agreement substantially in the form annexed
hereto as Exhibit A;
(h) Shelf Registration Agreement. The Purchaser shall have executed and
----------------------------
delivered the Shelf Registration Agreement substantially in the form annexed
hereto as Exhibit B; and
(i) Security Interest. The Seller shall be satisfied, in its sole
-----------------
discretion, that the Purchaser shall have granted to the Seller a first
priority, perfected security interest governed by the applicable Uniform
Commercial Code in a certificate of deposit in the amount of $5,000,000 to
secure the Purchaser's obligations under the Share Disposition Agreement,
pursuant to a security agreement containing customary terms and conditions that
is reasonably acceptable to each party.
44
<PAGE>
SECTION 8.02. Conditions to Obligations of the Purchaser. The obligations
------------------------------------------
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or waiver, at or prior to the Closing, of
each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The representations and
-----------------------------------------
warranties of the Seller contained in this Agreement shall be true and correct
in all material respects as of the Closing, with the same force and effect as if
made on, as of and with reference to the Closing Date (or, in the case of
representations and warranties of the Seller which address matters only as of a
particular date, as of such date; (ii) the covenants and agreements contained in
this Agreement to be complied with by the Seller at or prior to the Closing
shall have been complied with in all material respects; and (iii) the Purchaser
shall have received a certificate of the Seller as to the matters set forth in
clauses (i) and (ii) above signed by a duly authorized officer of the Seller;
(b) No Order. No Governmental Authority shall have enacted, issued,
--------
promulgated, enforced or entered any statute, rule, regulation, injunction or
other Governmental Order which is in effect and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise prohibiting
consummation of such transactions; provided, however, that the provisions of
-------- -------
this Section 8.02(b) shall not apply if the Purchaser has directly or indirectly
solicited or encouraged any such action;
(c) Certain Closing Documents. The Seller shall have delivered to the
-------------------------
Purchaser:
(i) Certificates of the appropriate public officials to the effect
that each of the Seller, Polymetrics and each Subsidiary 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;
(ii) True and correct copies of (A) the certificate of incorporation
(or equivalent organizational document) of Polymetrics and each Subsidiary
as of a date not more than 10 days prior to the Closing Date, certified by
the Secretaries of State of their respective states of incorporation and
(B) the bylaws of Polymetrics and each Subsidiary as of the Closing Date,
certified by their respective Secretaries;
(iii) The minute books, stock ledgers and corporate seal of
Polymetrics and the Subsidiaries and certificates representing all
outstanding shares of capital stock of the Subsidiaries; and
(iv) Resignations of each member of the Boards of Directors of
Polymetrics and the Subsidiaries.
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(d) Share Disposition Agreement. The Seller shall have executed and
---------------------------
delivered the Share Disposition Agreement substantially in the form annexed
hereto as Exhibit A;
(e) Shelf Registration Agreement. The Seller shall have executed and
----------------------------
delivered the Shelf Registration Agreement substantially in the form annexed
hereto as Exhibit B;
(f) Listing on NYSE. The USF Shares shall have been authorized for
---------------
listing on the NYSE, subject to official notice of issuance;
(g) No Polymetrics Material Adverse Effect. There shall have been no
--------------------------------------
Polymetrics Material Adverse Effect after the date hereof and continuing on the
Closing Date; and
(h) Trailigaz. The Distribution Agreement, dated February 9, 1993,
---------
between Polymetrics and Trailigaz, and the License Agreement, dated December 6,
1994, between Polymetrics and Trailigaz, shall each have been terminated.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival. Subject to the limitations and other provisions
--------
of this Agreement, the representations, warranties, covenants and agreements of
the parties contained herein shall survive the Closing and shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Seller or the Purchaser, until June 30, 1996; provided, however, that the
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covenants and agreements set forth in Sections 2.04, 2.05, 2.06, 2.07, 5.02(b),
5.02(c), 5.03(b), 5.03(c), 5.04, 5.05, 5.06, 5.07, 5.08 and 5.09, and Articles
VI, VII, IX and XI shall remain in full force and effect for the applicable
periods specified in the respective Sections or Articles or, if no such period
is specified, indefinitely; provided further that the representation and
-------- -------
warranty set forth in 3.16 shall remain in full force and effect until the
expiration of all statutes of limitations as extended by agreement or otherwise
with respect to any Taxes discussed therein; provided further that the
-------- -------
representations and warranties: (i) in Section 4.05 shall survive only until the
Closing Date; (ii) in Section 3.19 shall survive for 912 days from the Closing
Date; (iii) in Section 3.07 shall survive until September 30, 1996; and (iv) in
Sections 3.03, 3.04(c) and 4.02 shall survive the Closing without limitation as
to time.
SECTION 9.02. Indemnification by the Purchaser. (a) The Purchaser agrees,
--------------------------------
subject to the other terms and conditions of this Agreement, to indemnify the
Seller and its officers, directors, employees, Affiliates and agents (all such
Persons included within the definition of the "Seller" as an indemnified party
under this Section 9.02) against and hold the Seller harmless from all Losses
to the Seller arising out of (i) the breach of any
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representation, warranty, covenant or agreement of the Purchaser herein (other
than Article VII, it being understood that the sole remedy for breach thereof
shall be pursuant to Article VII), (ii) the conduct of the Business by the
Purchaser following the Closing and (iii) the matter described in Section
8.02(h) of this Agreement (but not including any matter subject to
indemnification under Section 9.03 or elsewhere in this Agreement). Anything in
Section 9.01 to the contrary notwithstanding, no claim may be asserted nor may
any action be commenced against the Purchaser for breach of any representation,
warranty, covenant or agreement contained herein, unless written notice of such
claim or action is received by the Purchaser describing in reasonable detail the
facts and circumstances with respect to the subject matter of such claim or
action on or prior to the date on which the representation, warranty, covenant
or agreement on which such claim or action is based ceases to survive as set
forth in Section 9.01.
(b) Except with regard to the items specified in the proviso to Section
5.02(b) and in Section 9.02(a)(ii), the indemnification obligations of the
Purchaser pursuant to Section 9.02(a) in respect of breaches of representations
and warranties shall not be effective until the aggregate dollar amount of all
Losses which would otherwise be indemnifiable pursuant to Section 9.02(a)
exceeds $300,000 (the "Purchaser's Threshold Amount"), and then only to the
----------------------------
extent such aggregate amount exceeds the Purchaser's Threshold Amount. In
addition, except with regard to the items specified in the proviso to Section
5.02(b) and in Section 9.02(a)(ii), no claim may be made against the Purchaser
for indemnification pursuant to Section 9.02(a) in respect of breaches of
representations and warranties with respect to any individual item of Loss,
unless such item exceeds $1,000, nor shall any such item be applied to or
considered part of the Purchaser's Threshold Amount. Except with regard to the
items specified in the proviso to Section 5.02(b) and in Section 9.02(a)(ii),
the indemnification obligations of the Purchaser pursuant to Section 9.02(a) in
respect of Losses for breaches of representations and warranties shall not
exceed $4,700,000. For the purposes of this Section 9.02(b), in computing such
individual or aggregate amounts of claims, the amount of each claim shall be net
of any insurance proceeds and any indemnity, contribution or other similar
payment actually received by the Seller or any Affiliate of the Seller from any
third party with respect thereto.
(c) The Seller agrees to give the Purchaser written notice of any claim,
assertion, event or proceeding by or in respect of a third party as to which it
may request indemnification hereunder or as to which the Purchaser's Threshold
Amount may be applied as soon as is practicable and in any event within 30 days
of the time that the Seller learns of such claim, assertion, event or
proceeding; provided, however, that the failure to so notify the Purchaser shall
-------- -------
not affect rights to indemnification hereunder except to the extent that the
Purchaser is actually prejudiced by such failure. The Purchaser shall have the
right to direct, through counsel of its own choosing, the defense or settlement
of any such claim or proceeding at its own expense. If the Purchaser elects to
assume the defense of any such claim or proceeding, the Seller may participate
in such defense, but in such case the expenses of the Seller shall be paid by
the Seller. The Seller shall provide the Purchaser with access to its records
and personnel relating to any such claim, assertion, event or proceeding during
normal business hours and shall otherwise cooperate with the Purchaser in the
defense or
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settlement thereof, and the Purchaser shall reimburse the Seller for all its
reasonable out-of-pocket expenses in connection therewith. If the Purchaser
elects to direct the defense of any such claim or proceeding, the Seller shall
not pay, or permit to be paid, any part of any claim or demand arising from such
asserted liability, unless the Purchaser consents in writing to such payment or
unless the Purchaser, subject to the last sentence of this Section 9.02(c),
withdraws from the defense of such asserted liability, or unless a final
judgment from which no appeal may be taken by or on behalf of the Purchaser is
entered against the Seller for such liability. If the Purchaser undertakes the
conduct and control of any such claim or proceeding, the Purchaser shall not
thereby permit to exist any Encumbrance upon any asset of the Seller or any of
its affiliates, and the Purchaser 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 Seller. If the
Purchaser shall fail to defend, or, if after commencing or undertaking any such
defense, the Purchaser fails to prosecute or withdraws from such defense, the
Seller shall have the right to undertake the defense or settlement thereof, at
the Purchaser's expense.
(d) The Seller hereby acknowledges and agrees that, from and after the
Closing, its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article IX and in Articles VI and
VII. In furtherance of the foregoing, the Seller hereby waives, from and after
the Closing, to the fullest extent permitted under applicable law, any and all
other rights, claims and causes of action it may have against the Purchaser or
its officers, directors, employees, agents, representatives and Affiliates
relating to the subject matter of this Agreement, including without limitation
any and all claims for damages or for contribution arising under CERCLA or any
other Environmental Laws.
(e) Except as set forth in this Agreement, the Purchaser is not making any
representation, warranty, covenant or agreement with respect to the matters
contained herein. Anything herein to the contrary notwithstanding, no breach of
any representation, warranty, covenant or agreement contained herein shall give
rise to any right on the part of the Seller, after the consummation of the
purchase and sale of the Shares contemplated hereby, to rescind this Agreement
or any of the transactions contemplated hereby.
(f) Notwithstanding anything to the contrary contained in this Agreement,
the Purchaser shall have no liability under any provision of this Agreement for
and in no event shall the Purchaser's Threshold Amount be applied to any
consequential damages. The Seller shall take all reasonable steps to mitigate
its Losses upon and after becoming aware of any event which could reasonably be
expected to give rise to any Losses.
SECTION 9.03. Indemnification by the Seller. (a) The Seller agrees, subject
-----------------------------
to the other terms and conditions of this Agreement, to indemnify the Purchaser
and its officers, directors, employees, Affiliates and agents (all such Persons
included within the definition of "Purchaser" as an indemnified party under this
Section 9.03) against and hold it harmless from all Losses to the Purchaser
arising out of (i) the breach of any representation, warranty, covenant or
agreement of the Seller herein (other than Section 3.16 and Article
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VII, it being understood that the sole remedy for breach of such provisions
shall be pursuant to Article VII), (ii) all Liabilities arising out of the
desalinization business retained by the Seller as contemplated by Section 5.08
and (iii) any Losses arising from the transportation of Regulated Material to
the sites listed in Section 3.19 hereof. Anything in Section 9.01 to the
contrary notwithstanding, no claim may be asserted nor any action commenced
against the Seller for breach of any representation, warranty, covenant or
agreement contained herein, unless written notice of such claim or action is
received by the Seller describing in reasonable detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation, warranty, covenant or agreement
on which such claim or action is based ceases to survive as set forth in Section
9.01.
(b) The indemnification obligations of the Seller pursuant to this Section
9.03 in respect of (A) the item referred to in Section 9.03(a)(iii), (B)
breaches of representations and warranties and (C) breaches of Section 5.01(b)
(other than knowing or willful breaches of Section 5.01(b) by the Seller) shall
not be effective until the aggregate dollar amount of all Losses which would
otherwise be indemnifiable pursuant to this Section 9.03 exceeds $300,000 (the
"Seller's Threshold Amount"), and then only to the extent such aggregate amount
-------------------------
exceeds the Seller's Threshold Amount. In addition, no claim may be made against
the Seller for indemnification pursuant to this Section 9.03 in respect of (A)
the item referred to in Section 9.03(a)(iii), (B) breaches of representations
and warranties and (C) breaches of Section 5.01(b) (other than knowing or
willful breaches of Section 5.01(b) by the Seller) with respect to any
individual item of Loss, unless such item exceeds $1,000, nor shall any such
item be applied to or considered part of the Seller's Threshold Amount. The
indemnification obligations of the Seller in respect of (A) the item referred to
in Section 9.03(a)(iii), (B) breaches of representations and warranties and (C)
breaches of Section 5.01(b) (other than knowing or willful breaches of Section
5.01(b) by the Seller) pursuant to this Section 9.03 shall not exceed
$4,500,000. For the purposes of this Section 9.03(b), in computing such
individual or aggregate amounts of claims, the amount of each claim shall be net
of any insurance proceeds and any indemnity, contribution or other similar
payment actually received by the Purchaser or any Affiliate of the Purchaser
from any third party with respect thereto. Solely to avoid duplication of
payment to the Purchaser, no indemnification for Losses under this Section 9.03
shall be made for any item to the extent such item has been used as a basis in
calculating an adjustment to the Purchase Price pursuant to Section 2.06.
(c) The Purchaser agrees to give the Seller written notice of any claim,
assertion, event or proceeding by or in respect of a third party as to which it
may request indemnification hereunder or as to which the Seller's Threshold
Amount may be applied as soon as is practicable and in any event within 30 days
of the time that the Purchaser learns of such claim, assertion, event or
proceeding; provided, however, that the failure to so notify the Seller shall
-------- -------
not affect rights to indemnification hereunder except to the extent that the
Seller is actually prejudiced by such failure. The Seller shall have the right
to direct, through counsel of its own choosing, the defense or settlement of any
such claim or proceeding at its own expense. If the Seller elects to assume the
defense of any such claim
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or proceeding, the Purchaser may participate in such defense, but in such case
the expenses of the Purchaser shall be paid by the Purchaser. The Purchaser
shall provide the Seller with access to its records and personnel relating to
any such claim, assertion, event or proceeding during normal business hours and
shall otherwise cooperate with the Seller in the defense or settlement thereof,
and the Seller shall reimburse the Purchaser for all its reasonable
out-of-pocket expenses in connection therewith. If the Seller elects to direct
the defense of any such claim or proceeding, the Purchaser shall not pay, or
permit to be paid, any part of any claim or demand arising from such asserted
liability unless the Seller consents in writing to such payment or unless the
Seller, subject to the last sentence of this Section 9.03(c), withdraws from the
defense of such asserted liability or unless a final judgment from which no
appeal may be taken by or on behalf of the Seller is entered against the
Purchaser for such liability. If the Seller undertakes the conduct and control
of any such claim or proceeding, the Seller shall not thereby permit to exist
any Encumbrance upon any asset of the Purchaser or any of its affiliates, and
the Seller 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 Purchaser. If the Seller shall fail to
defend, or, if after commencing or undertaking any such defense, the Seller
shall fail to prosecute or withdraws from such defense, the Purchaser shall have
the right to undertake the defense or settlement thereof, at the Seller's
expense.
(d) The Purchaser hereby acknowledges and agrees that, from and after the
Closing, its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article IX, in Article VII and
Section 2.07. In furtherance of the foregoing, the Purchaser hereby waives, from
and after the Closing, to the fullest extent permitted under applicable law, any
and all other rights, claims and causes of action it (or, after the Closing,
Polymetrics or any Subsidiary) may have against the Seller or its officers,
directors, employees, agents, representatives and Affiliates relating to the
subject matter of this Agreement, including without limitation any and all
claims for damages or for contribution arising under CERCLA or any other
Environmental Laws.
(e) Except as set forth in this Agreement, the Seller is not making any
representation, warranty, covenant or agreement with respect to the matters
contained herein. Anything herein to the contrary notwithstanding, no breach of
any representation, warranty, covenant or agreement contained herein shall give
rise to any right on the part of the Purchaser, after the consummation of the
purchase and sale of the Shares contemplated hereby, to rescind this Agreement
or any of the transactions contemplated hereby.
(f) Notwithstanding anything to the contrary contained in this Agreement,
the Seller shall have no liability under any provision of this Agreement for and
in no event shall the Seller's Threshold Amount be applied to any consequential
damages. The Purchaser shall take and shall cause Polymetrics to take all
reasonable steps to mitigate their Losses upon and after becoming aware of any
event which could reasonably be expected to give rise to any Losses.
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ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. Termination. This Agreement may be terminated at any time
-----------
prior to the Closing (i) by the mutual written consent of the Seller and the
Purchaser and (ii) by either the Seller or the Purchaser, if the Closing shall
not have occurred prior to October 16, 1995; provided, however, that the right
-------- -------
to terminate this Agreement hereunder shall not be available to any party whose
deliberate failure to fulfill any obligation under this Agreement shall have
been the cause of, or shall have resulted in, the failure of the Closing to
occur prior to such date. Time shall be of the essence in this Agreement.
SECTION 10.02. Effect of Termination. (a) In the event of termination of
---------------------
this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except (a) as set forth in Section 5.04, Section 10.02(b) and Section 11.01, and
(b) that nothing herein shall relieve either party from liability for any
willful breach hereof.
(b) The Purchaser agrees that if the Closing shall not have occurred prior
to October 16, 1995, due to the failure of any one of the conditions set forth
in Section 8.01 (including the Purchaser's failure, notwithstanding the
satisfaction of all the conditions set forth in Section 8.02, to satisfy its
obligations under Section 2.03(c), but excluding the condition set forth in
Section 8.01(b)), or due to the deliberate failure by the Purchaser to fulfill
any of its obligations under this Agreement, (i) the Purchaser shall thereupon
be obligated to purchase $1,000,000 of Polymetrics Equipment and Services (as
defined below) from Polymetrics within the one year period subsequent to the
date of such termination, and (ii) the Deposit shall be credited toward
additional Polymetrics Equipment and Services purchased by the Purchaser within
the one year period subsequent to the date of such termination, after the
purchase of Polymetrics Equipment and Services provided for in clause (i) of
this Section 10.02(b). In all other cases, the Deposit shall be returned to the
Purchaser by the Seller, without interest. For purposes of this Agreement,
"Polymetrics Equipment and Services" means products and services normally
----------------------------------
available for sale to third parties by Polymetrics at that time, to be purchased
at standard prices and margins and on customary terms of sale. In no event shall
any sums paid by the Purchaser to the Seller hereunder be refunded to the
Purchaser should the Purchaser not purchase sufficient items of Polymetrics
Equipment and Services to exhaust all credits awarded to the Purchaser hereunder
within the one year period subsequent to the granting of such credits.
SECTION 10.03. Waiver. At any time prior to the Closing, either party
------
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby.
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ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses. Except as otherwise provided in Section 2.04(c),
--------
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
hereto incurring such costs and expenses, whether or not the Closing shall have
occurred, and no such costs or expenses shall be paid by Polymetrics or any
Subsidiary.
SECTION 11.02. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parities at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
11.02):
(a) if to the Seller:
Christian G.Farman
Vice-President
Chief Financial Officer
Anjou International Company
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, Delaware 19899
(b) if to the Purchaser:
United States Filter Corporation
73-710 Fred Waring Drive
Suite 222
Palm Desert, California 92260
Attention: Chief Executive Officer
and separately to the General Counsel
Telecopier: (619) 341-9368
SECTION 11.03. Public Announcements. Unless otherwise required by
--------------------
applicable Law, no party to this Agreement shall make any public announcements
in respect of this Agreement or the transactions contemplated hereby or
otherwise communicate with any news media without prior notification to the
other party, and the parties shall reasonably cooperate as to the timing and
contents of any such announcement.
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SECTION 11.04. Headings; Interpretation. The headings contained in this
------------------------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. 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.
SECTION 11.05. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other 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
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 Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
SECTION 11.06. Entire Agreement. This Agreement and each Other Agreement
----------------
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, between the Seller and the Purchaser with respect to the
subject matter hereof, except (i) the second sentence of Section 5 of the Letter
Agreement, (ii) the Confidentiality Agreement, (iii) the letter agreement, dated
as of the date hereof, between the Purchaser and the Seller, and (iv) as
otherwise expressly provided herein.
SECTION 11.07. Assignment. This Agreement shall not be assigned by
----------
operation of Law or otherwise.
SECTION 11.08. Currency. All currency references herein are to United
--------
States dollars.
SECTION 11.09. No Third-Party Beneficiaries. Except as specifically
----------------------------
provided in Articles VI, VII and IX, this Agreement is for the sole benefit of
the parties hereto and their permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
SECTION 11.10. Waivers and Amendments. This Agreement may be amended or
----------------------
modified, and the terms and conditions hereof may be waived, only by a written
instrument signed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right, power or privilege hereunder,
nor any single or partial exercise of any other right, power or privilege
hereunder, preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. The rights and remedies herein
provided
53
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are cumulative and are not exclusive of any rights or remedies which any party
may otherwise have at Law or in equity.
SECTION 11.11. Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any provision of this Agreement
required to be performed prior to the Closing was not performed in accordance
with the terms hereof and that, prior to the Closing, the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or in equity.
SECTION 11.12. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in a New York state or federal court sitting in the City of New York,
and the parties hereto hereby irrevocable submit to the exclusive jurisdiction
of such courts in any such action or proceeding and irrevocably waive the
defense of an inconvenient forum to the maintenance of any such action or
proceeding.
SECTION 11.13. Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
54
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IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
ANJOU INTERNATIONAL COMPANY
By /s/ Claudio Elia
-----------------------
Name: Claudio Elia
Title: President
UNITED STATES FILTER CORPORATION
By
-----------------------
Name:
Title:
55
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IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
ANJOU INTERNATIONAL COMPANY
By
-----------------------
Name:
Title:
UNITED STATES FILTER CORPORATION
By /s/ Richard J. Heckmann
------------------------
Name: Richard J. Heckmann
Title: Chairman, CEO & President
56
