<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 29, 1998
MET-PRO CORPORATION
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 001-07763 23-1683282
- --------------------------------------------------------------------------------
STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
160 CASSELL ROAD, HARLEYSVILLE, PA 19438
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 215-723-6751
------------------------------
================================================================================
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
ON OCTOBER 29, 1998, MET-PRO CORPORATION, TOGETHER WITH A WHOLLY-OWNED
SUBSIDIARY INCORPORATED AS AN ONTARIO (CANADA) CORPORATION (COLLECTIVELY
"REGISTRANT"), COMPLETED THE ACQUISITION OF ALL OF THE OPERATING ASSETS OF
FLEX-KLEEN CORPORATION, A DELAWARE CORPORATION, AND FLEX-KLEEN CANADA, LTD., AN
ONTARIO (CANADA) CORPORATION (COLLECTIVELY "FLEX-KLEEN") PURSUANT TO AN ASSET
ACQUISITION AGREEMENT TO WHICH FLEX-KLEEN'S AFFILIATES, AQUA ALLIANCE, INC.
(FORMERLY KNOWN AS AIR & WATER TECHNOLOGIES, INC.) AND AWT AIR COMPANY, INC.
(FORMERLY KNOWN AS RESEARCH COTTRELL, INC.) ARE ALSO PARTY.
FLEX-KLEEN IS A LEADING SUPPLIER OF DRY PARTICULATE COLLECTORS THAT ARE USED
PRIMARILY IN THE PROCESS OF MANUFACTURING FOOD PRODUCTS AND PHARMACEUTICALS.
REGISTRANT DOES NOT EXPECT TO MAKE ANY IMMEDIATE SIGNIFICANT OPERATIONAL CHANGES
IN FLEX-KLEEN'S OPERATIONS.
THE CONSIDERATION PAID BY REGISTRANT WAS $15,000,000, PLUS THE ASSUMPTION OF
ORDINARY BUSINESS LIABILITIES. THE SOURCE OF SUCH CONSIDERATION WAS A
$12,000,000 LOAN FROM MELLON BANK, N. A., WITH THE BALANCE BEING FUNDED BY
REGISTRANT'S CASH ON HAND.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
---------
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
FINANCIAL STATEMENTS OF FLEX-KLEEN FOR THE YEAR ENDED OCTOBER 31, 1997 AND THE
NINE MONTHS ENDED JULY 31, 1998 ARE INCLUDED HEREWITH.
(B) PRO FORMA FINANCIAL INFORMATION.
--------------------------------
REGISTRANT SHALL FILE BY AMENDMENT THE PRO FORMA FINANCIAL INFORMATION REQUIRED
BY THIS ITEM 7(B) OF FORM 8-K NOT LATER THAN 60 DAYS AFTER THE DATE THAT THE
INITIAL REPORT ON FORM 8-K MUST BE FILED.
(C) EXHIBITS.
---------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2 ASSET PURCHASE AGREEMENT DATED AS OF OCTOBER 29, 1998 AMONG
FLEX-KLEEN CORPORATION, FLEX-KLEEN CANADA, LIMITED, AQUA
ALLIANCE, INC., AWT AIR COMPANY, INC., 1321249 ONTARIO LIMITED
AND MET-PRO CORPORATION
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
DATE: NOVEMBER 13, 1998
MET-PRO CORPORATION
BY:/s/ William L. Kacin
---------------------------
WILLIAM L. KACIN, PRESIDENT
<PAGE>
ITEM 7. (A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
FLEX-KLEEN CORPORATION
FINANCIAL REPORT
JULY 31, 1998 AND OCTOBER 31, 1997
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT 1
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
Combined balance sheets 2
Combined statements of operations 3
Combined statements of stockholder's equity 4
Combined statements of cash flows 5
Notes to combined financial statements 6-10
- --------------------------------------------------------------------------------
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholder and Board of Directors
Flex-Kleen Corporation
Itasca, Illinois
We have audited the accompanying combined balance sheets of Flex-Kleen
Corporation and Flex-Kleen Canada, Ltd. (both wholly-owned subsidiaries of Air &
Water Technologies Corporation and collectively referred to hereinafter as Flex-
Kleen Corporation) as of July 31, 1998 and October 31, 1997, and the related
combined statements of operations, stockholder's equity and cash flows for the
nine months ended July 31, 1998 and the year ended October 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Flex-Kleen Corporation as of
July 31, 1998 and October 31, 1997 and the results of its operations and its
cash flows for the nine months and year then ended, in conformity with generally
accepted accounting principles.
/s/ McGladrey & Pullen, LLP
- ---------------------------
New York, New York
September 18, 1998
1
<PAGE>
FLEX-KLEEN CORPORATION
COMBINED BALANCE SHEETS
July 31, 1998 and October 31, 1997
<TABLE>
<CAPTION>
July 31, October 31,
1998 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Note 7)
Current Assets
Cash $ - $ 16,000
Accounts receivable (less allowance for doubtful
accounts 1998 - $61,000; 1997 - $80,000) 2,359,000 4,055,000
Inventories 1,745,000 1,503,000
Prepaid expenses and other 30,000 46,000
-------------- ------------
Total current assets 4,134,000 5,620,000
Machinery and Equipment, net 240,000 273,000
Related Party Receivables 1,305,000 2,312,000
-------------- ------------
$ 5,679,000 $ 8,205,000
============== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 2,142,000 $ 3,149,000
Employee compensation related payables 404,000 548,000
Other accrued expenses 153,000 322,000
Income taxes payable 36,000 74,000
-------------- ------------
Total current liabilities 2,735,000 4,093,000
-------------- ------------
Related Party Payables 1,108,000 1,024,000
-------------- ------------
Stockholder's Equity
Common stock - $100 par value; 2,000 200,000 200,000
shares authorized, issued and outstanding
Additional paid-in-capital 1,715,000 2,930,000
Retained earnings - -
Cumulative currency translation adjustment (79,000) (42,000)
-------------- -------------
Total stockholder's equity 1,836,000 3,088,000
-------------- -------------
$5,679,000 $8,205,000
============== =============
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
FLEX-KLEEN CORPORATION
COMBINED STATEMENTS OF OPERATIONS
For the Nine Months Ended July 31, 1998 and the Year Ended October 31, 1997
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales, net $13,331,000 $19,396,000
Cost of Sales 8,460,000 12,895,000
------------ ------------
Gross profit 4,871,000 6,501,000
Selling, General and Administrative Expenses 3,025,000 3,999,000
Depreciation and Amortization 59,000 74,000
------------ ------------
Operating income 1,787,000 2,428,000
Other Expense 91,000 134,000
------------ ------------
Income before income tax provision 1,696,000 2,294,000
Federal and state income taxes 650,000 793,000
------------ ------------
Net income $ 1,046,000 $ 1,501,000
============ ============
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
FLEX-KLEEN CORPORATION
COMBINED STATEMENTS OF STOCKHOLDER's EQUITY
For the Nine Months Ended July 31, 1998 and the Year Ended October 31, 1997
<TABLE>
<CAPTION>
Cumulative
Additional Currency
Common Stock Paid-In Retained Translation
Shares Amount Capital Earnings Adjustment Total
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October
31, 1996 2,000 $ 200,000 $ 3,889,000 $ 66,000 $ (17,000) $ 4,138,000
Net Income - - 1,501,000 - 1,501,000
Net transfers to parent - - (959,000) (1,567,000) - (2,526,000)
Currency translation
adjustment - - - - (25,000) (25,000)
--------------------------------------------------------------------------------------------------------
Balance, October
31, 1997 2,000 200,000 2,930,000 - (42,000) 3,088,000
Net income - - - 1,046,000 - 1,046,000
Net transfers to parent - - (1,215,000) (1,046,000) - (2,261,000)
Currency translation - - - - (37,000) (37,000)
adjustment
--------------------------------------------------------------------------------------------------------
Balance July 31,
1998 2,000 $ 200,000 $ 1,715,000 $ - $ (79,000) $ 1,836,000
========================================================================================================
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
FLEX-KLEEN CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
For the Nine Months Ended July 31, 1998 and the Year Ended October 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997
--------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 1,046,000 $ 1,501,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 59,000 74,000
(Increase) decrease in assets:
Accounts receivable 1,696,000 360,000
Inventories (242,000) (49,000)
Prepaid expenses and other 16,000 35,000
Related party receivables/payables 1,091,000 492,000
Increase (decrease) in liabilities:
Accounts payable (1,007,000) 535,000
Employee compensation related payables (144,000) (14,000)
Other accrued expenses (169,000) (231,000)
Income taxes (38,000) (83,000)
------------ ------------
Net cash provided by
operating activities 2,308,000 2,620,000
------------ ------------
Cash Flows From Investing Activities
Purchase of machinery and equipment (26,000) (53,000)
------------ ------------
Net cash (used in) investing activities (26,000) (53,000)
------------ ------------
Cash Flows From Financing Activities
Net transfers to parent (2,261,000) (2,526,000)
Other (37,000) (25,000)
------------ ------------
Net cash (used in)
financing activities (2,298,000) (2,551,000)
------------ ------------
Net (decrease) increase in cash (16,000) 16,000
Cash
Beginning of period 16,000 -
------------- ------------
End of period $ - $ 16,000
============= ============
Supplemental Disclosures of Cash Flow Information
Cash paid for income taxes $ 44,000 $ 8,000
============= ============
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
FLEX-KLEEN CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying combined financial statements include the accounts of
Flex-Kleen Corporation, a Delaware corporation and a wholly-owned
subsidiary of AWT Air Company ("AWT Air"), a New Jersey corporation, and
Flex-Kleen Canada, Ltd., a Canadian corporation and a wholly-owned
subsidiary of AWT Air. Hereafter, Flex-Kleen Corporation and Flex- Kleen
Canada, Ltd. are referred to collectively as "Flex-Kleen" or "the Company".
AWT Air is wholly-owned by Air & Water Technologies Corporation (AWT).
All significant inter-company transactions and balances have been
eliminated in the preparation of these combined financial statements.
Note 2. Nature of Business and Summary of Significant Accounting Policies
Nature of Business:
Flex-Kleen services customers throughout the United States and Canada,
providing industrial air pollution and filtration devices and related
parts to its customers.
The following is a summary of the Company's significant accounting
policies:
Revenue recognition
The Company recognizes revenue when goods are shipped and when repair
and maintenance services are performed.
Inventories:
Inventories are stated principally at the lower of cost (first in,
first out method) or market and consist primarily of components and
parts.
Machinery and equipment:
Machinery and equipment is stated at cost. Depreciation and
amortization of machinery and equipment is primarily computed on the
straight-line method over the estimated useful lives of the assets.
The estimated useful lives are generally 5 to 10 years. Repair and
maintenance costs are expensed as incurred; major renewals and
betterments are capitalized. Machinery and equipment at July 31, 1998
and October 31, 1997 consists of the following:
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Machinery and equipment $ 144,000 $ 130,000
Computer equipment 459,000 463,000
------------ -----------
603,000 593,000
Less: accumulated depreciation and amortization (363,000) (320,000)
------------ -----------
$ 240,000 $ 273,000
============ ===========
</TABLE>
6
<PAGE>
FLEX-KLEEN CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 2. Nature Of Business and Summary of Significant Accounting Policies
(continued)
Income taxes:
The Company files a federal consolidated tax return with its parent
corporation AWT and subsidiaries. Accordingly, income taxes payable to
(refundable from) the tax authorities are recognized on the financial
statements of AWT as the taxpayer for income tax purposes. The members
of the consolidated group allocate tax payments to all members of the
group for the income tax reduction resulting from a member's inclusion
in the consolidated return, or, the member makes payments to AWT for
its allocated share of the consolidated income tax liability. This
allocation represents the liability or benefit that would be reported
if the Company was separately filing its tax return(s). The result of
these allocations increases or reduces the amounts due to or from AWT.
The Company in accordance with FASB 109 recognizes deferred tax assets
on deductible temporary differences and deferred tax liabilities on
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and
their tax bases. As those differences reverse, they will enter into
the determination of future taxable income included in the
consolidated tax returns. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of
enactment. For these financial statements, the deferred tax effect is
recorded as a component of amounts due to or from AWT.
Use of accounting estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Note 3. Related Party Transactions
Net cash transfers to AWT:
As noted earlier, the Company is a wholly-owned subsidiary of AWT. As
part of the cash needs management system of AWT, all available cash is
swept from the Company's accounts on a regular updated basis. The
Company processes payments through bank accounts which are funded by
AWT as checks are presented. The net cash transfers to AWT during the
year ended October 31, 1997 and the nine months ended July 31, 1998
were approximately $2,526,000 and $2,261,000, respectively. These
amounts have been reflected as a reduction in available retained
earnings and additional paid-in-capital in the accompanying combined
financial statements.
7
<PAGE>
FLEX-KLEEN CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 3. Related Party Transactions (continued)
Allocation of Shared Expenses:
AWT regularly incurs and pays certain expenses on the Company's
behalf. All costs applicable to the Company have been included in the
accompanying statements of operations. Certain common expenses and
expenses incremental and proportional to the Company's operations,
such as marketing, human resources, information system support,
clerical and other administrative support as well as certain
managerial and other costs, have been allocated to the Company and
included in the accompanying statements of operations. The allocations
to the Company are based on various factors, including percentage of
revenue and expenses and number of employees which, in the judgment of
management who control both AWT and the Company, are reasonable.
General and administrative costs allocated to the Company for the nine
months ended July 31, 1998 and the year ended October 31, 1997 were
$266,000 and $508,000, respectively.
Management believes the costs that would have been incurred had the
Company existed on a stand alone basis would not have been materially
different than the costs reflected in the accompanying combined
statements of operations.
Other
Related party receivables and payables represent amounts due from or
to other AWT subsidiaries and affiliates for goods and services and
facility use exchanged by the Company and the related companies. There
currently exists no scheduled repayment terms for these amounts and,
accordingly, they have been classified as long-term in the
accompanying financial statements.
Note 4. Benefit Plans
AWT maintains savings and retirement plans in which the Company matches a
fixed percentage of each employee's contribution up to a maximum of 4% of
such employee's compensation. One plan also provides for annual
discretionary Company contributions which are fixed by the Board of
Directors based on the performance of the applicable employee group for
certain eligible employees. The expense charged to operations applicable to
these plans was approximately $99,000 and $78,000 for the nine months ended
July 31, 1998 and the year ended October 31, 1997, respectively.
Note 5. Income Taxes
The federal and state income tax provision (benefit) for the nine months
ended July 31, 1998 and the year ended October 31, 1997 consist of the
following:
<TABLE>
<CAPTION>
Current 1998 1997
------------- -------------
<S> <C> <C>
Federal $ 605,000 $ 741,000
State 8,000 (75,000)
Deferred
Federal 37,000 127,000
State - -
------------- -------------
$ 650,000 $ 793,000
============= =============
</TABLE>
8
<PAGE>
FLEX-KLEEN CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 5. Income Taxes (continued)
The difference between the income tax provision computed by applying the
statutory federal income tax rate to the pretax income and the actual tax
provision is as follows:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Statutory provision $ 577,000 $ 780,000
State income taxes 17,000 13,000
Impact of foreign operations 11,000 11,000
Non-deductible expenses 31,000 45,000
Other 14,000 (56,000)
------------- -------------
$ 650,000 $ 793,000
============= =============
</TABLE>
Note 6. Subsequent Event
On August 12, 1998, AWT signed a letter of intent which provides for the
sale of substantially all of the assets and assumption of substantially all
of the liabilities of the Company for total consideration of approximately
$15 million.
Note 7. Commitment and Contingencies
The Company is party to various lease agreements for facilities and
warehouses. Rent expense for the nine months ended July 31, 1998 and the
year ended October 31, 1997 was $365,000 and $650,000, respectively. Future
minimum obligations under noncancellable leases with original terms in
excess of one year are as follows:
<TABLE>
<CAPTION>
Years Ended
October Amount
----------- ------------
<S> <C> <C>
1999 $ 215,000
2000 222,000
2001 209,000
2002 200,000
2003 33,000
Thereafter ------------
$ 879,000
============
</TABLE>
In connection with certain financing transactions of AWT,
substantially all of the assets of the Company are pledged.
Note 8. Recently Issued Accounting Pronouncements
Under Statement of Financial Accounting Standards No. 130 issued by the
Financial Accounting Standards Board in June 1997, the Company will be
required to display components of both net income and comprehensive income
on the face of the financial statements along with the corresponding
earnings per share amount.
9
<PAGE>
FLEX-KLEEN CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 8. Recently Issued Accounting Pronouncements (continued)
Comprehensive income is the change in equity during a period resulting
from non-owner sources. It consists of two major items: net income and
other comprehensive income. The most common components of other
comprehensive income include foreign currency translation adjustments,
minimum pension liability adjustments and unrealized gains and losses
on available-for-sale securities.
The effective date of the statement for the Company is fiscal 1999
(i.e. periods beginning after December 15, 1997).
Note 9. Year 2000 Issue
The Year 2000 Issue relates to whether computer systems will properly
recognize and process date-sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could
generate erroneous data or possibly fail. The Company is heavily
dependent on computer processing in the conduct of substantially all
of its business activities. The Company has conducted a comprehensive
review of its computer systems to identify the systems that could be
affected by the Year 2000 issue and believes its critical systems are
Year 2000 compliant.
The cost of making the systems Year 2000 compliant has not been
significant to date. Due to the uncertainty regarding the direction
and actions the buyer of the Company's assets may take regarding Year
2000 issues, a reasonable estimate of the costs that may be incurred
to become Year 2000 compliant cannot be made.
10
<PAGE>
Item 7. (C-2) Asset Purchase Agreement dated as of October 29, 1998 among
Flex-Kleen Corporation, Flex-Kleen Canada Limited, Aqua Alliance, Inc., AWT
Air Company, Inc., 1321249 Ontario Limited and Met-Pro Corporation
ASSET PURCHASE AGREEMENT
dated as of
October 29, 1998
among
FLEX-KLEEN CORPORATION
FLEX-KLEEN CANADA LIMITED
AQUA ALLIANCE, INC.
AWT AIR COMPANY, INC.
1321249 ONTARIO LIMITED
and
MET-PRO CORPORATION
<PAGE>
TABLE OF CONTENTS
----------------------
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 1
PURCHASE AND SALE
<S> <C> <C>
1.1 Purchase and Sale.............................................................................................. 2
1.1.1 Included Assets....................................................................................... 2
1.1.2 Excluded Assets....................................................................................... 4
1.2 Purchase As Between Met-Pro and Met-Pro Canada................................................................. 5
1.3 The Purchase Price............................................................................................. 5
1.3.1 Purchase Price........................................................................................ 5
1.3.2 Adjustment at Closing to Purchase Price............................................................... 6
1.3.3 Payment of Purchase Price............................................................................. 6
1.3.4 Allocation of Purchase Price.......................................................................... 7
1.3.5 Reimbursement for Cash Outlays between the Effective Date and the
Closing Date.......................................................................................... 8
1.4 Assumption of Certain Liabilities; Excluded Liabilities........................................................ 11
1.4.1 Assumed Liabilities................................................................................... 11
1.4.2 Excluded Liabilities.................................................................................. 12
ARTICLE 2
CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS, CHANGES IN NAME, FURTHER
ASSURANCES AND EFFECTIVE DATE
2.1 Closing........................................................................................................ 14
2.2 Items to be Delivered at Closing............................................................................... 14
2.3 Third Party Consents........................................................................................... 16
2.4 Changes in Name................................................................................................ 16
2.5 Further Assurances............................................................................................. 17
2.6 Effective Date................................................................................................. 17
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Sellers.................................................................. 17
3.1.1 Corporate Existence................................................................................... 17
3.1.2 Corporate Power; Authorization; Enforceable Obligations............................................... 18
3.1.3 No Interest in Other Entities......................................................................... 18
3.1.4 Validity of Contemplated Transactions, etc............................................................ 18
3.1.5 No Third Party Options................................................................................ 19
3.1.6 Financial Statements.................................................................................. 19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
3.1.7 Absence of Undisclosed Liabilities.................................................................... 20
3.1.8 Property of Others; Location of Assets................................................................ 20
3.1.9 Transactions With Affiliates.......................................................................... 20
3.1.10 Existing Condition.................................................................................... 21
3.1.11 Title to Properties................................................................................... 22
3.1.12 Compliance with Law; Authorizations................................................................... 22
3.1.13 Litigation............................................................................................ 23
3.1.14 Insurance............................................................................................. 23
3.1.15 Contracts and Commitments............................................................................. 24
3.1.16 Additional Information................................................................................ 25
3.1.17 Labor Matters......................................................................................... 26
3.1.18 Employee Benefit Plans and Arrangements............................................................... 26
3.1.19 Intellectual Property Matters......................................................................... 26
3.1.20 Environmental Matters................................................................................. 27
3.1.21 Real Property......................................................................................... 28
3.1.22 Availability of Documents............................................................................. 29
3.1.23 Assets................................................................................................ 29
3.1.24 Conditions Affecting Sellers.......................................................................... 29
3.1.25 Warranty Costs........................................................................................ 30
3.1.26 Flex-Kleen Canada..................................................................................... 30
3.2 Representations and Warranties of Purchasers................................................................... 30
3.2.1 Corporate Existence................................................................................... 30
3.2.2 Corporate Power and Authorization..................................................................... 31
3.2.3 Validity of Contemplated Transactions, etc............................................................ 31
3.2.4 Met-Pro Canada........................................................................................ 31
3.2.5 No Other Representations.............................................................................. 31
3.3 Survival of Representations and Warranties..................................................................... 32
ARTICLE 4
INDEMNIFICATION
4.1 Indemnification by Sellers and Shareholders.................................................................... 33
4.1.1 Indemnification by Sellers and Shareholders........................................................... 33
4.1.2 Limitation on Sellers' and Shareholders' Liability for Breaches of
Representations and Warranties........................................................................ 33
4.1.3 Liability for Breach of Covenant and Excluded Liabilities............................................. 33
4.2 Indemnification by Purchasers.................................................................................. 34
4.3 Method of Asserting Claims, etc................................................................................ 34
4.4 Payment........................................................................................................ 38
4.5 Arbitration.................................................................................................... 39
4.6 Compliance with Bulk Sales Laws................................................................................ 40
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.7 Calculation of Damages......................................................................................... 40
4.8 Exclusive Remedy............................................................................................... 41
4.9 Goods and Services Gross-up On Indemnification................................................................. 41
ARTICLE 5
EMPLOYEE BENEFIT MATTERS
5.1 Employees and Offers of Employment............................................................................. 41
5.2 Non-Solicitation............................................................................................... 42
5.3 Vacation Credit................................................................................................ 43
5.4 COBRA.......................................................................................................... 43
5.5 Health Care and Prescription Benefits; Other Employee Benefits................................................. 43
5.6 Allocation of Liability........................................................................................ 44
5.7 Service Credit and Pre-existing Conditions..................................................................... 44
5.8 Savings Plans.................................................................................................. 45
5.9 Employee Benefit Plans......................................................................................... 45
ARTICLE 6
CERTAIN POST CLOSING MATTERS
6.1 Discharge of Business Obligations.............................................................................. 46
6.2 Maintenance of Books and Records; Cooperation.................................................................. 46
6.3 Payments Received.............................................................................................. 47
6.4 Use of Name.................................................................................................... 47
6.5 UCC Matters.................................................................................................... 48
6.6 Covenant Not to Compete........................................................................................ 48
6.7 Contracting of Non-Assignable Customer Contracts............................................................... 49
6.8 Auditor's Consent.............................................................................................. 49
6.9 Right to Use Network in Connection with EMS Accounting System.................................................. 49
6.10 Transfer of Permits............................................................................................ 49
6.11 Insurance...................................................................................................... 49
6.12 Straddle Taxes................................................................................................. 50
6.13 Income Tax; Financial Reporting................................................................................ 50
ARTICLE 7
MISCELLANEOUS
7.1 Brokers' and Finders' Fees..................................................................................... 51
7.2 Sales, Transfer and Documentary Taxes, etc..................................................................... 52
7.3 Expenses....................................................................................................... 52
7.4 Contents of Agreement; Parties in Interest; etc................................................................ 52
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
7.5 Assignment..................................................................................................... 53
7.6 Amendments and Waiver.......................................................................................... 53
7.7 Notices........................................................................................................ 53
7.8 Delaware Law to Govern......................................................................................... 54
7.9 No Benefit to Others........................................................................................... 54
7.10 Headings, Gender, "Person" and Certain Definitions............................................................. 54
7.11 Schedules and Exhibits......................................................................................... 55
7.12 Severability................................................................................................... 55
7.13 Counterparts................................................................................................... 55
7.14 Waiver of Jury Trial........................................................................................... 55
7.15 Guarantee...................................................................................................... 55
</TABLE>
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ASSET PURCHASE AGREEMENT, dated as of October 29, 1998, by and among
FLEX-KLEEN CORPORATION, a Delaware corporation ("Flex-Kleen"), AWT AIR
COMPANY, INC., a New Jersey corporation and the sole shareholder of
Flex-Kleen ("AWT Air"), FLEX-KLEEN CANADA, LIMITED, an Ontario, Canada
corporation that is an indirect, wholly-owned subsidiary of AWT Air
("Flex-Kleen Canada") (Flex-Kleen and Flex-Kleen Canada referred to
collectively as the "Sellers" and individually as a "Seller"), AQUA
ALLIANCE, INC., a Delaware corporation and the sole shareholder of AWT Air
("Aqua Alliance") (AWT Air and Aqua Alliance referred to collectively as
the "Shareholders" and individually as a "Shareholder"), and MET-PRO
CORPORATION, a Delaware corporation ("Met-Pro"), and 1321249 ONTARIO
LIMITED, an Ontario corporation whose sole shareholder is Met-Pro ("Met-Pro
Canada") (Met-Pro and Met-Pro Canada referred to collectively as the
"Purchasers" and individually as a "Purchaser").
-----------------------------------------------------
Sellers are engaged in the business of designing, manufacturing on an
out-sourced contract basis, and distributing and selling worldwide,
equipment and products used in the collection of dry dust particulate from
various gas streams, including fabric filter dust collectors and other bag
houses, cartridge dust collectors, compleat dust collectors, and
aftermarket filter bags, cages, valves and fabrications (such business as
of July 31, 1998 hereafter referred to as the "Business").
Shareholders are the direct or indirect holders of all of Sellers'
issued and outstanding capital stock.
Purchasers, between them as set forth herein, desire to purchase all
of the Business of Sellers.
Subject only to the limitations and exclusions contained in this
Agreement and on the terms and conditions hereinafter set forth, Sellers
desire to sell and Purchasers desire to purchase the Business, its
operations, and the assets of Sellers used therein.
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
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ARTICLE 1
Purchase and Sale
1.1 Purchase and Sale. At the Closing hereunder (as defined in Section
2.1 hereof) and except for the Excluded Assets (as defined by and set forth
in Section 1.1.2 hereof), Purchasers, upon and subject to the terms and
conditions of this Agreement and in reliance upon the representations,
warranties, covenants and agreements of Sellers and Shareholders herein
contained, agree to purchase from Sellers, and Sellers, upon and subject to
the terms and conditions of this Agreement and in reliance upon the
representations, warranties, covenants and agreements of Purchasers, agree
to sell, grant, convey, assign, transfer and deliver to Purchasers, as
between them as set forth in Section 1.2 hereof, all right, title and
interest of Sellers in and to (a) the Business as a going concern, (b) the
names "FLEX-KLEEN CORPORATION" and "FLEX-KLEEN CANADA LIMITED" and all
variations thereof and all goodwill associated therewith, and (c) all of
the assets, properties and rights of Sellers constituting the Business or
used therein, of every kind and description, real, personal and mixed,
tangible and intangible, wherever situated (which Business, name, goodwill,
assets, properties and rights are herein sometimes called the "Assets"),
free and clear of all mortgages, liens, pledges, security interests,
charges, claims, restrictions and encumbrances of any nature whatsoever
(collectively "Liens"), except Permitted Liens (as defined in Section
3.1.11 hereof). In addition, AWT Air at Closing shall assign and transfer
to Purchasers all of its right, title and interest in any Confidentiality
Agreement (as defined in Section 1.1(e) below) executed by AWT Air and any
employee, consultant, customer or vendor of Sellers; provided, however,
that the foregoing shall not be deemed to preclude Sellers or Shareholders
from enforcing the provisions of such Confidentiality Agreements with
respect to information matters or events arising on or prior to the Closing
Date.
1.1.1 Included Assets. The Assets shall exclude only those assets
expressly set forth in Section 1.1.2 hereof, and shall include without
limitation all of the tangible and intangible assets, properties and rights
of Sellers used directly or indirectly in the conduct of, or generated by
or constituting, the Business, both in the United States, Canada, and in
any other locations, as of the Effective Date (as hereafter defined in
Section 2.6), including, without limitation, the following:
(a) all machinery, equipment, office equipment and systems,
tools, vehicles, furniture, furnishings, partitions, plant equipment,
fixtures, leasehold improvements, molds, dies, goods, and other
tangible personal property;
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(b) all cash or cash equivalents of Sellers, in transit, in hand
or in bank accounts, regardless of whether maintained in the name of
Sellers or Shareholders, including all cash generated by the Business
after the Effective Date;
(c) all prepaid items, unbilled costs and fees, and accounts,
notes and other receivables;
(d) all supplies, inventories, finished goods, spare parts,
replacement parts, materials, raw materials, work in process, goods,
and office and other supplies including packaging material and
cartons;
(e) to the extent permitted by applicable law, all rights under
any agreement, non-disclosure or confidentiality agreement (each a
"Confidentiality Agreement"), Contract (as defined in Section 3.1.15
hereof), contract, agreement with vendors and suppliers, lease, plan,
instrument, registration, license, certificate of occupancy, other
permit or approval of any nature, or other document, commitment,
arrangement, undertaking, practice or authorization;
(f) all rights under any patent, trademark, service mark, trade
name, business name, trade dress, logo or copyright, whether
registered or unregistered, and any applications therefor;
(g) all technologies, methods, formulations, data bases, trade
secrets, know-how, inventions and other intellectual property used in
the Business or under development;
(h) all computer software including but not limited to the EMS
Accounting System (including documentation and related object and
source codes, if presently available to Sellers);
(i) all information, files, records, documents, sales and product
literature, advertising mechanicals and photographs, advertising text
and copy, advertising, marketing and promotional materials,
demonstration samples, product models, and any other usual sales
materials, engineering drawings, technical data, operational manuals,
books and records, data, plans, contracts and recorded knowledge,
including customer, vendor, representative, distributor and supplier
lists, related to the foregoing;
(j) all business telephone numbers and mailing addresses,
including all post office box numbers, for and owned by the Business;
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(k) all rights or choses in action arising out of occurrences
before or after the Closing, including without limitation all rights
under express or implied warranties relating to the Assets;
(l) to the extent not covered above, all claims and rights under
contracts, agreements, contract rights, leases, license agreements,
franchise rights, policies, purchase and sale orders, quotations,
executory commitments, instruments, arrangements and understandings of
Sellers to which either Seller is a party, including but not limited to
any security deposits; and
(m) to the extent not covered above, all assets and properties
reflected on the Effective Date Pro Forma Balance Sheet (as defined in
Section 3.1.6 hereof).
1.1.2 Excluded Assets. Notwithstanding the foregoing, the Assets shall
not include any of the following (collectively the "Excluded Assets" and
each an "Excluded Asset"):
(a) the corporate seals, certificates of incorporation, minute
books, stock books, tax returns, books of account or other records
having to do with corporate organization of Sellers;
(b) the rights which accrue or will accrue to Sellers under this
Agreement;
(c) the rights to any of Sellers' claims for any federal,
Canadian, Provincial, state, local, or other foreign tax refunds or
credits relating to periods prior to the Effective Date, plus the
rights to any of Sellers' claims for any federal, Canadian,
Provincial, state, local or other foreign income tax refunds or
credits relating to periods prior to the Closing Date;
(d) any receivable or inter-company indebtedness due from either
of the Shareholders or other affiliate of Sellers as of the Effective
Date;
(e) assets disposed of in the ordinary course of business between
the Effective Date and the Closing Date in accordance with the
provisions of this Agreement;
(f) Sellers' "CARAT" accounting software;
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<PAGE>
(g) any insurance policy of Seller, and any right of Sellers
under any policy of insurance, including any proceeds payable or paid
thereunder, for claims arising prior to the Effective Date;
(h) any trademark or service mark not used in the Business, or
other tangible or intangible asset or right set forth on Exhibit 1.1.2
hereof;
(i) assets associated with employees or employee benefit plans
prior to the Closing Date;
(j) the leases of Sellers for the facilities in Sharpsburg, North
Carolina and Richmond Hill, Ontario;
(k) the capital stock of Sellers;
(l) assets of Flex-Kleen Canada which do not primarily relate to
the Business, including but not limited to Flex-Kleen Canada's right
to payment from Stone Container (Canada), Inc; and
(m) any asset or item set forth on Schedule 1.1.2 hereof.
1.2 Purchase As Between Met-Pro and Met-Pro Canada. At Closing, the
Assets shall be acquired by, and transferred and conveyed to, as between
the Purchasers as follows:
(a) all of the Assets that are used by Flex-Kleen Canada in the
Business shall be acquired by, and transferred and conveyed to,
Met-Pro Canada; and
(b) all other Assets shall be acquired by, and shall be
transferred and conveyed to, Met-Pro, except that at or prior to
Closing, Met-Pro may assign its right hereunder to any wholly-owned
subsidiary of Met-Pro; provided, however, that Met-Pro shall be solely
liable for any performance required of it hereunder, notwithstanding
any such assignment.
1.3 The Purchase Price.
1.3.1 Purchase Price. The purchase price (the "Purchase Price") to be
paid hereunder by Purchasers shall be in the amount of $15,000,000 (fifteen
million dollars) cash, which amount shall be subject to adjustment as
provided for by Section 1.3.2 hereof.
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<PAGE>
1.3.2 Adjustment at Closing to Purchase Price. The Purchase Price
shall be adjusted at Closing as follows:
(a) The Purchase Price shall be reduced by the amount, if any, by
which the Pro Forma Net Equity (as hereafter defined) on the Effective
Date Pro Forma Balance Sheet is less than $2,200,000. No adjustment to
the amount of the Purchase Price shall be made to the extent to which
such Pro Forma Net Equity on the Effective Date Pro Forma Balance
Sheet shall exceed $2,200,000. For purposes of this Agreement, "Pro
Forma Net Equity" shall mean the book value of the Assets recorded on
the Effective Date Pro Forma Balance Sheet, net of and minus the
liabilities recorded on the Effective Date Pro Forma Balance Sheet;
and
(b) The Purchase Price shall be reduced by the product, if any,
determined by multiplying (x) the amount by which the EBITDA (as
hereafter defined) for the nine months ending July 31, 1998 as
determined from the July 31, 1998 Financial Statements (hereafter
defined in Section 3.1.6 hereof) is less than $1,650,000, (y) by five
(5). The maximum amount of reduction in the Purchase Price pursuant to
this adjustment shall be $500,000. No adjustment to the amount of the
Purchase Price shall be made to the extent to which such EBITDA for
the nine months ending July 31, 1998 on the July 31, 1998 Financial
Statements shall exceed $1,650,000. For purposes of this Agreement,
"EBITDA" shall mean earnings on the July 31, 1998 Financial Statements
before interest, taxes, depreciation, and amortization, determined in
accordance with U.S. generally accepted accounting principles
("GAAP"), consistently applied.
(c) The sum of the reductions, if any, to the Purchase Price
provided by this Section 1.3.2 shall be referred to in this Agreement
as the "Purchase Price Closing Adjustment."
1.3.3 Payment of Purchase Price. On the Closing Date, Purchasers shall
pay (i) to Sellers, on account of the Purchase Price, $14,500,000 (fourteen
million five hundred thousand dollars), less the amount of the Purchase
Price Closing Adjustment (such net amount, the "Sellers Closing Payment"),
payable by wire transfer of immediately available funds to such account as
Sellers shall designate, and (ii) to the Escrow Agent (the costs and
charges of which shall be shared equally between Sellers and Purchasers)
under an Escrow Agreement substantially in the form attached hereto as
Exhibit 1.3.3 (the "Escrow Agreement"), on account of the Purchase Price,
the sum of $500,000 (five hundred thousand dollars) (the "Escrow Closing
Payment"; and together with the Sellers Closing Payment, the "Closing
Payment").
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<PAGE>
1.3.4 Allocation of Purchase Price.
(a) As soon as practicable after the Closing Date, Sellers shall
deliver to Purchasers a statement (the "Allocation Statement") setting
forth the allocation of the Purchase Price, plus or minus, as the case
may be, and to the extent properly taken into account under Section
1060 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Assumed Liabilities, any Purchase Price Closing Adjustment
pursuant to Section 1.3.2 hereof, and any Closing Cash Flow
Reimbursement Payment and any Post-Closing Cash Flow Reimbursement
Payment pursuant to Sections 1.3.5(a) and 1.3.5(b) hereof,
respectively, amongst the Assets and the covenant not to compete
contained in Section 6.6 hereof. The Allocation Statement shall
reflect the allocation set forth on Schedule 1.3.4 hereto, plus or
minus any adjustments to the Purchase Price for the Post-Closing Cash
Flow Reimbursement Payment (to the extent properly taken into account
under Section 1060 of the Code).
(b) Purchasers shall have a period of fifteen (15) calendar days
after the delivery of the Allocation Statement to present in writing
to Seller any objections that Purchasers may have to the calculation
and allocation set forth in the Allocation Statement. Unless
Purchasers timely object, the Allocation Statement shall be binding
upon the parties without further adjustment.
(c) If Purchasers shall raise any objections within such fifteen
(15) calendar day period, Purchasers and Sellers shall negotiate in
good faith and use their best efforts to resolve such dispute. If the
parties fail to agree within five (5) calendar days after Purchasers'
delivery of their objections, then each party may calculate and
allocate the Purchase Price (for purposes of Section 1060 of the Code)
as it shall determine; provided, however, that the $50,000 allocated
in Schedule 1.3.4 to the covenant not to compete provided for in
Section 6.6 hereof and the absence in Schedule 1.3.4 of any allocation
to goodwill as a component of the Assets and Business of Flex-Kleen
Canada shall not vary from that provided for in Schedule 1.3.4.
(d) If the Allocation Statement is finally agreed upon as
provided for hereby, Sellers and Purchasers agree to (i) calculate and
report, and to cause their affiliates to calculate and report, an
allocation of such Purchase Price (with adjustments as described
above) amongst the Assets and the covenant not to compete in a manner
entirely consistent with the agreed-to Allocation Statement, (ii) act
in accordance with the Allocation Statement in the preparation and
filing of all Tax returns and elections (including, without limitation
filing Form 8594 with their Federal income Tax returns for the taxable
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<PAGE>
year that includes the Effective Date) and in the course of any Tax
audit, Tax review or Tax litigation relating thereto and (iii) take no
position and cause their affiliates to take no position inconsistent
with the Allocation Statement for U.S. federal and state and Canadian
and Provincial income Tax purposes.
(e) Not later than 30 days prior to the filing of their
respective Forms 8594 relating to this transaction, each party shall
deliver to the other party a copy of its Form 8594.
(f) The parties acknowledge and agree that any adjustment to the
Allocation Statement for the Closing Cash Flow Reimbursement Payment
and the Post-Closing Cash Flow Reimbursement Payment contemplated by
Section 1.3.4(a) hereof is for tax reporting purposes only, and shall
not be considered an adjustment for financial reporting purposes, and
that nothing contained in this Section 1.3.4 or in Sellers' or
Purchasers' Form 8594 shall be deemed to in any way alter the intent
or intended effect of Section 2.6 or Section 6.13(b) hereof.
1.3.5 Reimbursement for Cash Outlays between the Effective Date and
the Closing Date.
(a) At Closing, there shall be a reimbursement for the Cash Flow
(as hereafter defined) of the Business during the period beginning
with the Effective Date and ending on September 25, 1998, in the
amount set forth on Schedule 1.3.5 hereto, payable by wire transfer of
immediately available funds to such account as Purchasers, if the Cash
Flow shall be a positive number, or Sellers, if the Cash Flow shall be
a negative number, shall designate (the "Closing Cash Flow
Reimbursement Payment").
For purposes of this Section 1.3.5, "Cash Flow" of the Business
shall mean the difference obtained by subtracting (i) net cash
transfers, payments, contributions or infusions made by Shareholders or
any of their affiliates to Sellers which are in the nature of loans,
capital contributions or similar advances to Sellers, from (ii) net
cash transfers, payments, distributions or disbursements made by
Sellers to Shareholders or any of their affiliates which are in the
nature of loans, dividends, distributions or similar advances to
Shareholders or their affiliates or withdrawals from Sellers.
(b) After Closing, there shall be a reimbursement for the Cash
Flow of the Business during the period between September 26, 1998 and
ending on the Closing Date (the "Post-Closing Cash Flow Reimbursement
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Payment"), as follows:
(i) Within twenty (20) calendar days following the
Closing Date, Sellers shall deliver to Purchasers a pro forma
unaudited Cash Flow statement of the Business for the period
beginning with September 26, 1998 and ending on the Closing
Date (the "Closing Pro Forma Cash Flow Statement"). In
preparing the Closing Pro Forma Cash Flow Statement, Sellers
shall utilize the same procedures and methodology utilized in
the determining the amount of the Closing Cash Flow
Reimbursement Payment reflected in Schedule 1.3.5 hereof.
(ii) If Purchasers disagree with Sellers' Closing Pro
Forma Cash Flow Statement delivered pursuant to Section
1.3.5(b)(i) hereof, Purchasers may, within twenty five (25)
calendar days after delivery of the Closing Pro Forma Cash
Flow Statement, deliver a notice to Sellers disagreeing with
such calculation and setting forth Purchasers' calculation of
such amount. Any such notice of disagreement shall specify
those items or amounts as to which Purchasers disagree, and
Purchasers shall be deemed to have agreed with all other items
and amounts contained in the Closing Pro Forma Cash Flow
Statement.
(iii) The "Final Closing Pro Forma Cash Flow Statement"
shall be (A) the Closing Pro Forma Cash Flow Statement if
Purchasers do not notify Sellers of any disagreement therewith
within such twenty-five (25) calendar-day period and (B) if
Purchasers notify Sellers in writing of any disagreement with
such Closing Pro Forma Cash Flow Statement, such Closing Pro
Forma Cash Flow Statement as adjusted or corrected in
accordance with the resolution of such disagreement, either by
agreement of Sellers or Purchasers or by an internationally
recognized firm of independent public accountants as to which
Sellers and Purchasers shall mutually agree (the "CPA Firm"),
as the case may be.
(iv) Purchasers and Sellers shall negotiate in good faith
to resolve any disagreements raised by Purchasers'
disagreement notice, but if Purchasers and Sellers are unable
to resolve all of their disagreements with respect to the
determination of any of the disputed items within ten (10)
calendar days following receipt of Purchasers' disagreement
notice, they shall proceed to refer their remaining
disagreements to the CPA Firm, which shall, acting as experts
and not as arbitrators, determine, only with respect to
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<PAGE>
the remaining differences so submitted, whether and to what
extent, if any, the Closing Pro Forma Cash Flow Statement
requires correction or adjustment. The parties shall
instruct the CPA Firm to deliver its written determination
to Purchasers and Sellers no later than the twentieth
calendar day after the remaining differences underlying
Purchasers' notice are referred to the CPA Firm. The cost of
such review and report shall be borne (A) by Sellers if the
difference between the Final Closing Pro Forma Cash Flow
Statement and Closing Pro Forma Cash Flow Statement as set
forth in Sellers' calculation of the Closing Pro Forma Cash
Flow Statement delivered pursuant to Section 1.3.5(b)(i)
hereof is greater than the difference between the Final
Closing Pro Forma Cash Flow Statement and the Closing Pro
Forma Cash Flow Statement as set forth in Purchasers'
calculation of the Closing Pro Forma Cash Flow Statement
delivered pursuant to Section 1.3.5(b)(i) hereof, (B) by
Purchasers if the first such difference is less than the
second such difference, and (C) otherwise equally by
Purchasers and Sellers.
(v) If the Final Closing Pro Forma Cash Flow Statement
reflects a negative cash amount (i.e., that during the
period between October 1, 1998 and the Closing Date, the
amount of cash infused into the Business by Sellers or
Shareholders exceeded the amount withdrawn by Sellers or
Shareholders), then Purchasers shall pay Sellers such
negative amount; and if the Final Closing Pro Forma Cash
Flow Statement reflects a positive cash amount (i.e., that
during the period between October 1, 1998 and the Closing
Date, the amount of cash withdrawn by Sellers or
Shareholders from the Business exceeded the amount infused
by Sellers or Shareholders into the Business), then Sellers
shall pay Purchasers such positive amount, in each case, by
wire transfer of immediately available funds to such account
as the recipient shall designate, within five (5) calendar
days of finalizing the Final Closing Pro Forma Cash Flow
Statement pursuant to this Section 1.3.5, provided, however,
that if upon Purchasers completing their review of the
Closing Pro Forma Cash Flow Statement, there is any amount
owning hereunder by either party to the other party that is
not in dispute by the parties, Purchasers or Sellers, as
applicable, shall pay such undisputed amount to the other
party promptly (within five (5) calendar days of Purchasers'
completion of such review).
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(c) To the extent to which this Agreement elsewhere specifically
provides for reimbursement of Sellers for certain expenses of the
Business beginning with the Effective Date, including, without
limitation, as set forth in Sections 5.5(a) and 5.5(c) hereof, such
amounts shall not be included as an expense of the Business for
purposes of this Section 1.3.5. In addition, in determining the Cash
Flow of the Business for the period beginning with the Effective Date,
the parties shall give effect to the provisions of this Agreement,
including without limitation Section 6. 13(a) and Section 7.3 hereof.
1.4 Assumption of Certain Liabilities; Excluded Liabilities.
1.4.1 Assumed Liabilities. Upon the terms and subject to the
conditions of this Agreement including but not limited to Purchasers' right
to indemnity under Section 4.1 hereof, Purchasers agree, effective at the
time of the Closing, to assume all debts, obligations, contracts and
liabilities of Sellers of any kind, character or description relating to or
arising out of the conduct of the Business (collectively the "Assumed
Liabilities"), except for the Excluded Liabilities (as defined by and set
forth in Section 1.4.2 hereof), including without limitation the following:
(a) all liabilities set forth on the Effective Date Pro Forma
Balance Sheet and all liabilities incurred after the Effective Date to
the extent not satisfied prior to the Closing Date;
(b) all liabilities and obligations of Sellers arising under the
Contracts (as defined in Section 3.1.15 hereof);
(c) by way of an assignment of such leases, all liabilities and
obligations of Sellers arising after the Effective Date under the real
property lease for the offices occupied by Flex-Kleen in Itasca,
Illinois (the "Itasca Lease");
(d) all warranty liabilities and obligations relating to any
products manufactured or sold by the Business on or prior to the
Closing Date (exclusive of any product liability claims);
(e) except as set forth in Section 1.4.2 hereof, all liabilities
or obligations relating to employee benefits or compensation
arrangements existing on or prior to the Effective Date, to the extent
such obligations are reserved for on the Effective Date Pro Forma
Balance Sheet, with respect to any employee of the Business who is
employed by Purchasers as of the Closing Date; and
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(f) the obligations of Sellers and Aqua Alliance under that
certain Transitional Services Agreement dated as of July 23, 1998
between Aqua Alliance and Hamon & Cie (International) S.A. ("Hamon"),
only with respect to the provision to Hamon and/or its subsidiaries of
office space at Itasca, Illinois, warehouse space and services at
Sharpsburg, North Carolina and the EMS Inventory Accounting System
described in items 2, 6 and 7 of Schedule A thereof.
1.4.2 Excluded Liabilities. Notwithstanding any provision in this
Agreement including but not limited to Section 1.4.1 hereof or any other
writing to the contrary, Purchasers at Closing shall assume only the
Assumed Liabilities and shall not assume any other liability or obligation
of Sellers of whatever nature, whether presently in existence or arising
hereafter. All such other liabilities and obligations shall be retained by
and remain obligations and liabilities of Sellers (all such liabilities and
obligations not being assumed being herein referred to as the "Excluded
Liabilities" and each an "Excluded Liability"), and, notwithstanding
anything to the contrary in this Section 1.4, none of the following shall
be Assumed Liabilities for the purposes of this Agreement:
(a) any liability or obligation for any Tax (as hereafter
defined) incurred prior to the Effective Date together with any
liability or obligation under Section 6.13(a) hereof; provided,
however, that Transfer Taxes (as defined by Section 7.2 hereof)
incurred in connection with the transactions contemplated by this
Agreement shall be paid in the manner set forth in Section 7.2 hereof.
For purposes of this Agreement, "Tax" means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits,
license, registration, recording, documentary, conveyancing, gains,
withholding on amounts paid to or by any Seller, payroll, employment,
excise, severance, stamp, occupation, premium, property,
environmental, windfall profit, goods and services, capital, Canada
Pension Plan, custom duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any
governmental authority responsible for the imposition of any such tax
(domestic or foreign), or (ii) liability for the payment of any
amounts of the type described in (i) as a result of being party to any
agreement or any express or implied obligation to indemnify any other
person;
(b) any obligations of Sellers in respect of Flex-Kleen's or
Flex-Kleen Canada's real property sub-leases for facilities in
Richmond Hill, Ontario, Canada, respectively, and Flex-Kleen's sale
and leasing back of facilities in Sharpsburg, North Carolina (the
"Sharpsburg Facilities"), whenever arising, relating to activity
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or events prior to the Effective Date, it being understood that as of
Closing, Purchaser shall enter into a new lease for the Sharpsburg
Facilities;
(c) all liabilities for overdrafts relating to checks written but
not cashed prior to the Effective Date;
(d) any inter-company liability with respect to the Business
owing by Sellers to Shareholders or any of their affiliates;
(e) all liabilities for personal injury claims (including claims
relating to silicosis or any personal injury relating to exposure to
Hazardous Substances (as defined in (f) below)) and for product
liability claims, in each case relating to an action or event
occurring, or product sold by Sellers, prior to the Effective Date;
(f) all liabilities arising under any Environmental Law (as
defined in Section 3.1.20 hereof), whenever asserted, to the extent
arising out of: (i) the alleged or actual violation, on or prior to
the Effective Date, of any Environmental Law by any Seller in
connection with its operation or ownership of the Business or the
Assets, (ii) the existence, on or prior to the Effective Date, of any
hazardous, carcinogenic or toxic material, pollutant, contaminant,
chemical or waste, regulated by or designated as such by any
Environmental Law (any of the foregoing, a "Hazardous Substance") at,
on or under any real property that was owned or leased or operated by
any Seller, to the extent to which such existence represented as of
the Effective Date a violation of any Environmental Law or as to which
any Environmental Law would require remediation, (iii) the disposal,
discharge or release, on or prior to the Effective Date, of any
Hazardous Substance by any Seller in connection with its operation of
the Business or by any present or former affiliate of Sellers at the
Sharpsburg Facility, (iv) the ownership or operation on or prior to
the Effective Date by Flex-Kleen or AWT Air of the real property
constituting the Sharpsburg Facility, (v) the ownership or operation
by any Seller of any business or real property other than the Assets
or the Business, (vi) the removal of the items set forth on Schedule
2.2(a) hereof (notwithstanding that this shall have occurred after the
Effective Date), (vii) any matter referred to in Schedule 3.1.20
hereof, and (viii) any claims made by any third party including any
governmental agency with respect to any of the foregoing (collectively
"Environmental Liabilities" and any of the foregoing an "Environmental
Liability");
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(g) any liability or obligation relating to the following
employee benefits or compensation arrangements existing on or prior to
the Effective Date with respect to any employee or former employee of
the Business: (A) any retirement or post-retirement benefit or benefit
plan including but not limited to any retirement or post-retirement
health care, insurance or pension benefit (collectively the
"Post-Retirement Benefits"); (B) any carried-over vacation benefit
carried over from any period prior to January 1, 1998 including but
not limited to any "equitable adjustment" made or granted to any
Flex-Kleen employee during 1998 which was not used as of the Effective
Date; (C) any defined benefit plan or obligation relating thereto; (D)
any employee retention agreement (collectively the "Employee Retention
Agreements"); and (E) any employment termination obligation including
without limitation any obligation under the AWT Air Severance Pay Plan
adopted April 1, 1997 (the "AWT Air Severance Pay Plan"), except as
relates to Maurice and Joan Hamilton under the terms of Section 5.1
hereof (collectively the "Employment Termination Agreements"); and
(h) any liability or obligation arising out of an action or event
occurring on or prior to the Effective Date relating to an Excluded
Asset; provided, however, that Flex-Kleen's indemnity obligation under
Section 11.2 of its lease for the Sharpsburg Facility is an Excluded
Liability.
ARTICLE 2
CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS, CHANGES IN NAME, FURTHER
ASSURANCES AND EFFECTIVE DATE
2.1 Closing. The closing (the "Closing") of the transactions
contemplated hereby shall take place at 11:00 A.M., local time, on October
29, 1998 at the offices of Davis, Polk and Wardwell, 450 Lexington Avenue,
New York, NY 10017. The date of the Closing is sometimes herein referred to
as the "Closing Date."
2.2 Items to be Delivered at Closing. At the Closing and subject to
the terms and conditions herein contained:
(a) Sellers shall deliver to Purchasers the following:
(i) such bills of sale, assignments, patent assignments,
endorsements, and other good and sufficient instruments and
documents of conveyance and transfer, in form reasonably
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satisfactory to Purchasers and their counsel, as shall be
necessary and effective to transfer and assign to, and vest in,
Purchasers all of Sellers' right, title and interest in and to
the Assets, and simultaneously with such delivery, Sellers shall
take all such steps as may be reasonably required to put
Purchasers in actual possession and operating control of the
Assets;
(ii) the Closing Cash Flow Reimbursement Payment, if
required, pursuant to Section 1.3.5(a) hereof;
(iii) to the extent not addressed by Section 2.2(a)(i)
hereof, an assignment and assumption agreement pertaining to
Flex-Kleen's lease for facilities at 955 Hawthorn Drive, Itasca,
Illinois (the "Itasca Lease") (and shall deliver to Purchasers
original copies of all consents obtained for such assignment) and
with respect to the Itasca Lease, Purchasers shall at Closing
provide a letter of credit security deposit to the landlord as
required by the Itasca Lease to replace the letter of credit
security deposit to be returned by the landlord to the Sellers;
(iv) a certificate from Sellers and Shareholders dated the
Closing Date as to the removal of the items set forth on Schedule
2.2(a) hereof;
(v) such documents as Purchasers shall request relating to
the existence of Sellers and Shareholders, the authority of
Sellers and Shareholders for these transactions, and as
Purchasers shall otherwise reasonably request; and
(vi) any other documents or items called for by this Article
2 and elsewhere by this Agreement.
(b) Purchasers shall deliver to Sellers the following:
(i) the Sellers Closing Payment in accordance with Section
1.3 hereof;
(ii) the Closing Cash Flow Reimbursement Payment, if
required, pursuant to Section 1.3.5(a) hereof;
(iii) the Closing Health Care and Prescription Plan Premium
Reimbursement Payment and the Closing Benefits Cost Reimbursement
Payment, in accordance with Sections 5.5 (a) and 5.5(c) hereof,
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respectively, unless such payments shall be included in the
Closing Cash Flow Reimbursement Payment;
(iv) an undertaking whereby Purchasers will assume and agree
to pay, discharge or perform, as appropriate, Sellers'
liabilities and obligations to the extent and as provided in
Section 1.4.1 hereof in form reasonably satisfactory to Sellers
and their counsel;
(v) such documents as Sellers shall request relating to the
existence of Purchasers, the authority of Purchasers for these
transactions, and as Sellers shall otherwise reasonably request;
and
(vi) any other documents or items called for by this Article
2 and elsewhere by this Agreement.
(c) Sellers, Purchasers and Escrow Agent shall execute and
deliver the Escrow Agreement, and Purchasers shall deliver the Escrow
Closing Payment to the Escrow Agent.
2.3 Third Party Consents. To the extent that Sellers' rights under any
agreement, contract, commitment, lease or other Asset to be assigned to
Purchasers hereunder may not be assigned without the consent of another
person which as of Closing has not been obtained, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof or be unlawful. Prior to Closing, Sellers, at
their expense, shall use reasonable commercial efforts to obtain any such
required consents. If any such consent shall not be obtained or would in
Sellers' reasonable opinion require unreasonable commercial efforts or if
any attempted assignment would be ineffective or would impair Purchasers'
rights under the Asset in question so that Purchasers would not in effect
acquire the benefit of all such rights, Sellers, to the maximum extent
permitted by law and the Asset, shall act after the Closing as Purchasers'
agents, without mark-up charges or expense to Purchasers, in order to
obtain for it the benefits thereunder and shall cooperate, to the maximum
extent permitted by law and the Asset, with Purchasers in any other
reasonable arrangement designed to provide such benefits to Purchasers.
2.4 Changes in Name. On the Closing Date, Sellers and Shareholders
shall deliver to Purchasers all such executed documents as may be required
on that date to change Sellers' names in Sellers' state and province of
incorporation, respectively. Not later than twenty (20) calendar days after
the Closing Date, Sellers and Shareholders shall deliver to Purchasers all
such executed documents as may be required to change Sellers' names in each
state and province where either of the Sellers is qualified to do business.
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2.5 Further Assurances. Sellers and Shareholders from time to time
after the Closing, at Purchasers' request, will execute, acknowledge and
deliver to Purchasers such other instruments of conveyance and transfer and
will take such other actions and execute and deliver such other documents,
certifications and further assurances as Purchasers may reasonably require
in order to vest more effectively in Purchasers, or to put Purchasers more
fully in possession of, any of the Assets, or to better enable Purchasers
to complete, perform or discharge any of the liabilities or obligations
assumed by Purchasers at the Closing pursuant to Section 1.4.1 hereof. Each
of the parties hereto will cooperate with the other and execute and deliver
to the other parties hereto such other instruments and documents and take
such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence and confirm the
intended purposes of this Agreement.
2.6 Effective Date. Notwithstanding the actual date of the Closing,
the Closing shall be deemed to be effective as of 5:01 P.M. on July 31,
1998 (the "Effective Date"). For the period from the Effective Date until
the actual date of the Closing, Sellers shall be deemed to have operated
the Business for the benefit of Purchasers, as if the Closing had taken
place on the Effective Date. All economic activity of Sellers, including
all sales, cash and earnings, during the period between the Effective Date
and the Closing, shall inure to Purchasers. Notwithstanding the foregoing,
tax reporting and liability and financial reporting pertaining to such
activity shall be treated as set forth in Section 6.13(a) and Section
6.13(b) hereof, respectively.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Sellers. Sellers hereby
represent and warrant to Purchasers as of the Closing Date that, except as
set forth on a disclosure schedule attached hereto (the "Disclosure
Schedule"), each of which exceptions shall specifically identify the
relevant subsection hereof to which it relates and shall be deemed to be
representations and warranties as if made hereunder:
3.1.1 Corporate Existence. Each Shareholder and Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its respective incorporation. Each Seller is
duly qualified to do business and in good standing as a foreign corporation
in each jurisdiction where the conduct of the Business by it requires it to
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be so qualified, all of which jurisdictions are listed on Section 3.1.1 of
the Disclosure Schedule, except for such qualification the absence of which
would not have a Material Adverse Effect (as hereafter defined). Any
penalty or fine for the failure by any Seller to have qualified in any
jurisdiction shall constitute Damages under Section 4.1 hereof. As used
herein, "Material Adverse Effect" means a material adverse effect on the
business, assets or results of operations of the Business, except any such
effect resulting from or arising in connection with (i) this Agreement or
the transactions contemplated hereby, (ii) changes or conditions affecting
the air pollution analysis, monitoring, control or management industries
generally or (iii) changes in economic, regulatory or political conditions
generally.
3.1.2 Corporate Power; Authorization; Enforceable Obligations. Each
Shareholder and Seller has the corporate power and authority to execute,
deliver and perform this Agreement. The execution, delivery and performance
of this Agreement by each Shareholder and Seller have been duly authorized
by all necessary corporate and shareholder action. This Agreement has been,
and the other agreements, documents and instruments required to be
delivered by Sellers or Shareholders in accordance with the provisions
hereof (the "Sellers' Documents") will be, duly executed and delivered on
behalf of Shareholders and Sellers by duly authorized officers of
Shareholders and Sellers, and this Agreement constitutes, and the Sellers'
Documents when executed and delivered will constitute, the valid and
binding obligations of each Shareholder and Seller as is a party thereto,
enforceable against such party in accordance with their respective terms.
3.1.3 No Interest in Other Entities. Except for interests in the
entities described in Section 3.1.3 of the Disclosure Schedule, no shares
of any corporation or any ownership or other investment interest, either of
record, beneficially or equitably, in any association, partnership, joint
venture or other legal entity are included in the Assets.
3.1.4 Validity of Contemplated Transactions, etc. Except as set forth
in Section 3.1.4 to the Disclosure Schedule, the execution, delivery and
performance of this Agreement by each Shareholder and Seller does not and
will not violate, conflict with or result in the breach of any term,
condition or provision of, or require the consent of any other person
under, (a) any existing law, ordinance, or governmental rule or regulation
to which such Seller or Shareholder is subject, (b) any judgment, order,
writ, injunction, decree or award of any court, arbitrator or governmental
or regulatory official, body or authority which is applicable to such
Seller or Shareholder, (c) the charter documents of such Seller or
Shareholder or any securities issued by such Seller or Shareholder, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization (hereinafter defined in Section 3.1.12), or other written
instrument, to which such Seller or Shareholder is a party, by which such
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Seller or Shareholder may have rights or by which any of the Assets may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of such Seller or Shareholder thereunder. Except as aforesaid,
no authorization, approval or consent of, and no registration or filing
with, any governmental or regulatory official, body or authority is
required in connection with the execution, delivery or performance of this
Agreement by Sellers or Shareholders.
3.1.5 No Third Party Options. There are no existing agreements,
options, commitments or rights with, of or to any person to acquire any
Sellers' assets, properties or rights included in the Assets or any
interest therein, except for those contracts entered into in the normal
course of business consistent with past practice for the sale of inventory
of such Seller.
3.1.6 Financial Statements. Sellers have provided Purchasers with (i)
an audited balance sheet of Sellers as of and at October 31, 1997, and the
related audited statements of income, shareholders equity, cash flows and
notes to financial statements for the fiscal year ended October 31, 1997
(the "October 31, 1997 Financial Statements"); (ii) an audited balance
sheet of Sellers as of and at July 31, 1998, and the related audited
statements of income, shareholders equity, cash flows and notes to
financial statements for the interim period ended July 31, 1998 ( the "July
31, 1998 Financial Statements"); and (iii) an unaudited balance sheet as of
and at July 31, 1998 which on a pro forma basis records the Assets and
Assumed Liabilities, and excludes the Excluded Assets and Excluded
Liabilities, as if the Closing had taken place on such date (the "Effective
Date Pro Forma Balance Sheet"), together with such pro forma adjustments.
The statements of income, shareholders equity, cash flow and notes to
financial statements included in the July 31, 1998 Financial Statements
fairly present the income, cash flow and changes in shareholders equity of
Sellers for the nine month period ended July 31, 1998, have been prepared
in accordance with GAAP, consistently applied, and contain all adjustments
necessary to present fairly the income, shareholders equity and cash flow
of Sellers for the nine month period then ended.
The Effective Date Pro Forma Balance Sheet fairly presents the
financial position of the Assets and Assumed Liabilities as of July 31,
1998 on a pro forma basis, as if the Closing had taken place on such date,
has been prepared in accordance with GAAP, consistently applied, and
contains all adjustments necessary to fairly present the financial position
of the Assets and Assumed Liabilities as of July 31, 1998 including
adjustments to exclude the Excluded Assets and Excluded Liabilities.
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3.1.7 Absence of Undisclosed Liabilities. Sellers have no liabilities
or obligations with respect to the Business, either direct or indirect,
matured or unmatured or absolute, contingent or otherwise, except:
(a) as set forth on Section 3.1.7 to the Disclosure Schedule;
(b) those liabilities or obligations set forth on the Effective
Date Pro Forma Balance Sheet and not heretofore paid or discharged;
(c) liabilities arising in the ordinary course of business under
any agreement, contract, commitment, lease or plan specifically
disclosed on Schedule 3.1.7 to the Disclosure Schedule or not required
to be disclosed because of the term or amount involved; and
(d) those liabilities or obligations incurred, consistent with
past business practice, in the ordinary course of business since the
Effective Date.
For purposes of this Agreement, the term "liabilities" shall include,
without limitation, any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, known or unknown, asserted or unasserted,
choate or inchoate, liquidated or unliquidated, secured or unsecured.
3.1.8 Property of Others; Location of Assets. Except as set forth in
Section 3.1.8 of the Disclosure Schedule, no person other than Sellers owns
any equipment or other tangible assets or properties situated on the
premises of Sellers or necessary to the operation of the business of
Sellers, except for leased items disclosed in Section 3.1.8 of the
Disclosure Schedule and for items of immaterial value. Section 3.1.8 of the
Disclosure Schedule identifies the location of all of the tangible Assets
being acquired by Purchasers hereunder that are not located on the premises
of Sellers, such as but not limited to molds, casting patterns, special
machinery, and office equipment such as laptop computers.
3.1.9 Transactions With Affiliates. Except as set forth in Section
3.1.9 to the Disclosure Schedule, no shareholder, director or officer of
Sellers, or any of such person's affiliates, owns or has a 5% or more
ownership interest in any corporation or other entity that is or was during
the last three years a party to, or in any property which is or was during
the last three years the subject of, any material contract, agreement or
understanding, business arrangement or relationship with Sellers.
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3.1.10 Existing Condition. Since the Effective Date, except as set
forth on Section 3.1.10 of the Disclosure Schedule, Sellers with respect to
the Business have not:
(a) incurred any liabilities, other than liabilities incurred in
the ordinary course of business consistent with past practice, or
discharged or satisfied any lien or encumbrance, or paid any
liabilities, other than in the ordinary course of business consistent
with past practice, or failed to pay or discharge when due any
liabilities of which the failure to pay or discharge has caused or
will cause any material damage or risk of material loss to it or any
of its assets or properties;
(b) sold, encumbered, assigned or transferred any assets or
properties which would have been included in the Assets if the Closing
had been held on the Effective Date or on any date since then, except
in the ordinary course of business consistent with past practice;
(c) created, incurred, assumed or guaranteed any indebtedness for
money borrowed, or mortgaged, pledged or subjected any of its Assets
to any Lien, except for Permitted Liens (hereinafter defined in
Section 3.1.11 hereof);
(d) made or suffered any amendment or termination of any material
agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, except for amendments or terminations that do
not have economic effect, or canceled, modified or waived any
substantial debts or claims held by it or waived any rights of
substantial value, whether or not in the ordinary course of business,
except for cancellations, modifications or waivers that do not have
economic effect;
(e) declared, set aside or paid any dividend or made or agreed to
make any other distribution or payment in respect of its capital
shares or redeemed, purchased or otherwise acquired or agreed to
redeem, purchase or acquire any of its capital shares;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its
business, operations, assets, properties or prospects or (ii) of any
item or items carried on its books of account individually or in the
aggregate at more than $5,000 or suffered any repeated, recurring or
prolonged shortage, cessation or interruption of supplies or utility
or other services required to conduct its business and operations;
(g) suffered any Material Adverse Effect;
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(h) received written notice or had knowledge of any actual or
threatened litigation, workers' compensation claim, human rights
claim, personal injury claim, product liability claim or other claim
or demand, labor trouble, strike or other occurrence, event or
condition of any similar character which has had or might have an
adverse effect on its business, operations, assets, properties or
prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $5,000
except such as may be involved in ordinary repair, maintenance or
replacement of its assets;
(j) increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary business
expenses) or loan to, any of its employees or made any increase in, or
any addition to, other benefits to which any of its employees may be
entitled, other than in the ordinary course of business;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) taken any action which under Sellers' prevailing operating
policies or procedures requires the written approval or authorization
of George Mammola;
(m) entered into any transaction other than in the ordinary
course of business consistent with past practice; or
(n) suffered, caused or permitted an Environmental Liability
which if unremediated would require an expenditure in excess of
$5,000.
3.1.11 Title to Properties. Each Seller has good and valid title to
all of its properties and assets, real, personal and mixed, included in the
Assets which such Seller purports to own, including without limitation all
properties and assets reflected in the Effective Date Pro Forma Balance
Sheet (except for inventory sold since the date thereof in the ordinary
course of business consistent with past practice) free and clear of all
Liens, except for (i) Liens for current Taxes not yet due and payable or
which are being contested in good faith, (ii) Liens disclosed in Section
3.1.11 of the Disclosure Schedule, (iii) worker's, carrier's and
materialman's Liens, and (iv) Liens that are immaterial in character,
amount, and extent, and which do not detract from the value or interfere
with the present use of the properties they affect ("Permitted Liens").
3.1.12 Compliance with Law; Authorizations. Except as disclosed in
Section 3.1.12 of the Disclosure Schedule, since January 1, 1995, each
Seller has complied with, and has not been in violation of any, law,
ordinance, or governmental or regulatory rule or regulation, whether
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federal, Canadian, Provincial, state, local or foreign, applicable to the
Business, including, without limitation, laws, rules or regulations
primarily related to employee health and safety (the "Regulations").
Sellers own, hold and possess all material franchises, licenses, permits,
rights, applications, filings, registrations and other authorizations
("Authorizations") which are required to conduct the Business as presently
conducted; all such Authorizations are in full force and effect; and
Sellers have no knowledge of any threatened suspension or cancellation of
them. All such Authorizations are listed and described in Section 3.1.12 of
the Disclosure Schedule. Sellers are not in default, nor has any Seller
received any written notice of any claim of default, with respect to any
such Authorization, and the use of the Authorizations by Sellers has been
in compliance with the Regulations.
3.1.13 Litigation. Except as set forth in Section 3.1.13 of the
Disclosure Schedule, no litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to
the knowledge of any of Alain Brunais, George Mammola, William Hughes or
Wayne Fritz, threatened against Sellers or which relates to the Assets, the
Business or the transactions contemplated by this Agreement, nor do to the
knowledge of such persons, is there any reasonably likely basis for any
such litigation, arbitration, investigation or proceeding. No Seller is a
party to or subject to the provisions of any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority which could materially adversely
affect Sellers, the Assets, the Business or the transactions contemplated
hereby. All litigation, losses and proceedings against or involving Sellers
during the previous five (5) years, both resolved and pending, are set
forth on Section 3.1.13 of the Disclosure Schedule.
3.1.14 Insurance. Section 3.1.14 of the Disclosure Schedule sets forth
a list of all insurance policies and bid and performance bonds relating to
the Assets and the business and operations of the Business. There are no
claims by Sellers pending under any such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds or in respect of which such underwriters have
reserved their rights. The insurance maintained by Sellers with regard to
the Business is adequate for the business conducted by Sellers. To the
knowledge of Alain Brunais, Augustine Bolella, William Komianos, Jeremy
Long and George Mammola, all insurance claims (other than medical claims)
involving Sellers during the previous five (5) years, both resolved and
pending, are set forth on Section 3.1.14 of the Disclosure Schedule.
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3.1.15 Contracts and Commitments. Except as set forth in Section
3.1.15 of the Disclosure Schedule, no Seller is a party to any written:
(a) agreement, contract or commitment with any present or former
employee or consultant or for the employment of any person, including
any consultant, who is engaged in the conduct of the Business;
(b) agreement, contract or commitment for the future purchase of,
or payment for, supplies or products, or for the performance of
services by a third party which supplies, products or services are
used in the conduct of the Business involving in any one case $20,000
or more, except as to contracts for the fabrication of equipment for
which the limitation should be $75,000 or more;
(c) agreement, contract or commitment to sell or supply products
("Goods Contracts") or to perform services ("Services Contracts") in
connection with the business involving in any one case $100,000 or
more;
(d) agreement, contract or commitment relating to the Business
not otherwise listed on the Disclosure Schedule and continuing over a
period of more than six months from the date hereof or exceeding
$20,000 in value;
(e) distribution, dealer, representative or sales agency
agreement, contract or commitment relating to the Business;
(f) lease under which any Seller is either lessor or lessee
relating to the Assets or any property at which the Assets are
located;
(g) note, debenture, bond, equipment trust agreement, letter of
credit agreement, loan agreement or other contract or commitment for
the borrowing or lending of money relating to the Business or
agreement or arrangement or a line of credit or guarantee, pledge or
undertaking of the indebtedness of any other person relating to the
Business;
(h) agreement, contract or commitment for any or political
contribution relating to the Business;
(i) commitment or agreement for any capital expenditure or
leasehold improvement in excess of $5,000 relating to the Business;
(j) agreement, contract or commitment limiting or restraining
Sellers, the Business or any successor thereto from engaging or
competing in any manner or in any business, nor, to Sellers'
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knowledge, is any employee of Sellers engaged in the conduct of the
Business subject to any such agreement, contract or commitment;
(k) license, franchise, distributorship or other agreement which
relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance
or other know-how of or used by Sellers in the conduct of the
Business; or
(l) material agreement, contract or commitment relating to the
Business not made in the ordinary course of business.
With respect to each such agreement, contract, commitment, lease,
plan and other instrument, document or undertaking listed in Section
3.1.15 of the Disclosure Schedule, or not required to be listed
therein because of the amount thereof (the "Contracts" and each a
"Contract"): (i) each Contract is in full force and effect and is
valid and enforceable in accordance with its terms; (ii) no Seller is,
and to knowledge of any such Seller, no other party thereto is, in
default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained in any Contract; and (iii)
no event has occurred which with or without the giving of written
notice or lapse of time, or both, would constitute a default
thereunder by any Seller or, to the knowledge of any such Seller, of
any other party thereto.
3.1.16 Additional Information. Section 3.1.16 to the Disclosure
Schedule contains accurate schedules, lists or summary descriptions, as the
case may be, of the following:
(a) [Intentionally omitted]
(b) the name and address of every bank and other financial
institution in which either Seller maintains an account (whether
checking, savings or otherwise), lock box or safe deposit box for the
Business, and the account numbers and names of persons having signing
authority or other access thereto;
(c) the names and titles of and current annual base salary or
hourly rates for all employees of Sellers engaged in the conduct of
the Business, together with a statement of the full amount and nature
of any other remuneration, whether in cash or kind, paid to each such
person during the current or immediately previous calendar year and
the bonuses accrued for, the incentive, bonus plan or agreement,
commission structure or entitlement, and as of October 23, 1998, the
vacation and severance benefits to which each such person is entitled;
and
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(d) all names under which each of the Sellers has conducted any
business or which such Seller has otherwise used during the last five
years.
3.1.17 Labor Matters. Except as set forth in Section 3.1.17 of the
Disclosure Schedule, since January 1, 1995, no Seller has suffered any
strike, slowdown, picketing or work stoppage by any union or other group of
employees affecting the Business; no Seller is a party to any collective
bargaining agreement with respect to employees of the Business, no such
agreement determines the terms and conditions of employment of any employee
of the Business of such Seller, no collective bargaining agent has been
certified as a representative of any of the employees of the Business of
such Seller, and no representation campaign or election is now in progress
with respect to any of the employees of the Business of either Seller.
3.1.18 Employee Benefit Plans and Arrangements.
(a) Section 3.1.18 of the Disclosure Schedule contains a complete
list of all employee benefit plans, whether formal or informal,
whether or not set forth in writing, and whether covering one person
or more than one person, sponsored or maintained by Sellers or any
affiliate of Sellers for the benefit of any employee of the Business.
For the purposes hereof, the term "employee benefit plan" includes all
plans, retirement and post-retirement benefits, funds, programs,
policies, arrangements, practices, customs and understandings
providing benefits of economic value to any employee, beneficiary,
dependent or assignee of any such employee other than regular salary,
wages or commissions paid substantially concurrently with the
performance of the services for which paid. Without limitation, the
term "employee benefit plan" includes all employee welfare benefit
plans within the meaning of section 3(l) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), all employee
pension benefit plans within the meaning of section 3(2) of ERISA or
any other similar United States, Canadian, State and Provincial law,
statute, regulation or rule.
(b) No "employee benefit plan" covering employees of the Business
is a "multiemployer plan" within the meaning of Section 3(37) of
ERISA.
3.1.19 Intellectual Property Matters. Section 3.1.19 of the Disclosure
Schedule sets forth a list of all patents, trademarks, trade names, logos,
owned, licensed or used by Sellers or held for use primarily in the
Business (the "Intellectual Property"), all of which are owned by Sellers
free and clear of any Liens, other than Permitted Liens, except as set
forth in Section 3.1.19 of the Disclosure Schedule. Except as set forth in
Section 3.1.19 of the Disclosure Schedule, no claim or litigation has been
asserted and Sellers has not received written notice of any threatened
claim of infringement or any other claim or litigation by any person
contesting the right of Sellers to use, or the validity or enforceability
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of, the Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement pertaining thereto or asserting
the misuse thereof. The use by Sellers of the Intellectual Property prior
to the Closing has not infringed upon the rights of any person or violated
any license or other agreement applicable thereto. No present or former
employee of Sellers and no other person owns or has any proprietary,
financial or other interest, direct or indirect, in whole or in part, in
the Intellectual Property. Section 3.1.19 of the Disclosure Schedule also
lists all confidentiality or nondisclosure agreements to which Sellers or
any of Sellers' employees is a party which relates to the Business.
3.1.20 Environmental Matters.
(a) Except as set forth in Section 3.1.20 of the Disclosure
Schedule, each Seller has obtained all permits, licenses, certificates
and other authorizations which are required in connection with the
conduct of the Business by any and all federal, Canadian, Provincial,
state or local law, rule or regulation, as in effect on or prior to
the date hereof, relating to pollution or protection of the
environment, including Regulations relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants,
chemicals, or toxic or other Hazardous Substances or wastes into the
environment (including without limitation ambient air, surface water,
groundwater, or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or
toxic or other Hazardous Substances or wastes, but excluding such
laws, rules, or regulations primarily related to employee health and
safety (collectively the "Environmental Laws" and any of such an
"Environmental Law").
(b) Except as set forth in Section 3.1.20 of the Disclosure
Schedule, each Seller is in compliance in the conduct of the Business
with all terms and conditions of the required permits, licenses,
certificates and authorizations, and is also in compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder and which has been issued to or is applicable to
any Seller in connection with its operation of the Business
(collectively "Order").
(c) Except as set forth in Section 3.1.20 of the Disclosure
Schedule, no Seller is aware of, nor has such Seller received written
notice of, any past or present event, condition, circumstance,
activity, practice, incident, action or plan which has resulted in or
is reasonably likely to result in a violation of any Environmental Law
or any Order thereunder or which has resulted in or is reasonably
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likely to result in an obligation under any Environmental Law or any Order
thereunder to perform any remedial, removal or clean-up activity, or which
is reasonably likely to give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, study or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened release into
the environment, of any pollutant, contaminant, chemical, or toxic or
hazardous substance or waste.
(d) Except as set forth in Section 3.1.20 of the Disclosure
Schedule, there is no civil, criminal or administrative action, suit,
demand, claim, hearing, written notice or demand letter, written
notice of violation, investigation, or proceeding pending or, to the
knowledge of Sellers, threatened against either of Sellers in
connection with the conduct of the Business relating in any way to any
Environmental Law.
3.1.21 Real Property.
(a) Real Property Defined. All real property (including, without
limitation, all interests in and rights to real property) and
improvements located thereon which are owned or leased by Sellers and
used in connection with the Business or included in the Assets are
listed on Section 3.1.21 of the Disclosure Schedule (the "Real
Property").
(b) Owned Real Property. Sellers own no Real Property in fee
simple.
(c) Leased Real Property. With respect to the Real Property that
is leased by Sellers, all of which is identified on Section 3.1.21 of
the Disclosure Statement:
(i) Sellers have delivered to Purchasers a true and complete
copy of the Itasca Lease, which is the only lease for Real
Property that is being assumed by or assigned to Purchasers;
(ii) The Itasca Lease is in full force and effect and has
not been assigned, modified, supplemented or amended except as
set forth on Section 3.1.21 of the Disclosure Schedule, and no
Seller is in default thereunder, and, to the knowledge of
Sellers, no other party to such lease is in default thereunder,
and no circumstances or state of facts presently exists which,
with the giving of written notice or passage of time, or both,
would permit the landlord under such lease to terminate such
lease; and
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(iii) Section 3.1.21 of the Disclosure Schedule sets forth a
description of all executory contracts made by or on behalf of
Sellers, or by which Sellers are bound, with respect to the
Itasca property including, without limitation, operation,
management, maintenance, utility, and construction contracts (the
"Leaseholds Executory Contracts"). At Closing, Sellers shall
deliver to the Purchasers a true and complete copy (the original
execution copy, if available) of each of the Leaseholds Executory
Contracts.
3.1.22 Availability of Documents.
(a) [Intentionally omitted]
(b) Sellers have made available to Purchasers (i) accounts
receivable aging reports with run dates of October 26, 1998 as of July
31,1998 and September 25, 1998 for each of Flex-Kleen and Flex-Kleen
Canada (collectively, the "A/R Aging Reports"), (B) accounts
receivable check receipt registers with run dates of October 27, 1998
for the fiscal months of July and September 1998 for each of
Flex-Kleen and Flex-Kleen Canada (collectively, the "Check Receipt
Registers"), (C) Physical Inventory at Sharpsburg with a run date of
October 27, 1998 (the "Inventory Report") and (D) the Listing of
Equipment and Machinery as of July 31, 1998 (the "Equipment Listing").
Copies of each of the A/R Aging Reports, the Check Receipt Registers,
the Inventory Report and the General Ledger (collectively the "Ledger
Reports") is attached to Section 3.1.22(b) to the Disclosure Schedule.
The information contained in the Ledger Reports has been prepared in
the ordinary course of business with Sellers' customary care and, to
the knowledge of William Hughes and Wayne Fritz, is true and correct.
The foregoing representation shall not be construed as a
representation as to the collectability or quality of the receivables
listed on A/R Aging Reports or as to the quality of the inventory
listed on the Inventory Report or the assets identified in the
Equipment Listing.
3.1.23 Assets. The Assets include all rights and property necessary to
the present conduct of the Business by Purchasers, and used by or in the
Business in the manner it is presently conducted by Sellers.
3.1.24 Conditions Affecting Sellers. Each Seller has used its
commercially reasonable efforts to keep available for Purchasers the
services of the employees, agents, customers and suppliers of such Seller
active in the conduct of the Business. Except as set forth in Section
3.1.24 of the Disclosure Schedule, Sellers have not been notified in
writing that any employee, agent, customer or supplier or other
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advantageous arrangement will be lost or become unavailable to Purchasers
on account of the consummation of the transactions contemplated hereby.
3.1.25 Warranty Costs. The Effective Date Pro Forma Balance Sheet
contains an adequate reserve for pre-Effective Date warranty costs and
expenses on the basis of the actual warranty costs and expenses incurred by
the Business for the one-year period immediately prior to the Effective
Date.
3.1.26 Flex-Kleen Canada. Except as set forth in Section 3.1.26 of the
Disclosure Schedule:
(a) Flex-Kleen Canada is not a non-resident of Canada with the
meaning of Section 116 of the Income Tax Act of Canada. Neither
Flex-Kleen nor the Shareholders are disposing of any "Taxable Canadian
Property" in this transaction for purposes of the Income Tax Act
(Canada);
(b) Flex-Kleen Canada is registered for purposes of the GST, and
Flex-Kleen Canada's registration number is 120881336RT002;
(c) Flex-Kleen Canada does not have assets with an aggregate
value in excess of CDN $35,000,000 (thirty-five million Canadian
dollars), and Flex-Kleen Canada does not generate gross revenues from
sales in or from Canada in excess of an aggregate of CDN $35,000,000
(thirty-five million Canadian dollars) per year;
(d) Purchasers will not assume any liabilities with respect to
any underfunding which may exist under any defined benefit plan
covering Canadian employees of the Business as of the Closing Date;
and
(e) There are no registrations, executions, levies, or the like
with respect to the Business or affecting the Assets against
Flex-Kleen Canada or any of its predecessor entities under the
Personal Property Security Act of Ontario, the Bank Act of Canada, the
Bankruptcy and Insolvency Act of Canada, and/or the Bulk Sales Act of
Ontario.
3.2 Representations and Warranties of Purchasers. Purchasers represent
and warrant to Sellers as follows:
3.2.1 Corporate Existence. Each Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
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3.2.2 Corporate Power and Authorization. Each Purchaser has the power
and authority to execute, deliver and perform this Agreement. The
execution, delivery and performance of this Agreement by each Purchaser
have been duly authorized by all necessary corporate action. This Agreement
has been duly executed and delivered by each Purchaser and constitutes the
legal, valid and binding obligation of such Purchaser enforceable against
such Purchaser in accordance with its terms.
3.2.3 Validity of Contemplated Transactions, etc. The execution,
delivery and performance of this Agreement by each Purchaser does not and
will not violate, conflict with or result in the breach of any term,
condition or provision of, or require the consent of any other party to,
(a) any existing law, ordinance, or governmental rule or regulation to
which such Purchaser is subject, (b) any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory
official, body or authority which is applicable to such Purchaser, (c) the
charter documents or bylaws of, or any securities issued by, such
Purchaser, or (d) any mortgage, indenture, agreement, contract, commitment,
lease, plan or other written instrument to which such Purchaser is a party
or by which Purchaser is otherwise bound. Except as aforesaid, no
authorization, approval or consent of, and no registration or filing with,
any governmental or regulatory official, body or authority is required in
connection with the execution, delivery and performance of this Agreement
by Purchasers.
3.2.4 Met-Pro Canada. Met-Pro Canada is registered for purposes of the
GST, and Met-Pro Canada's registration number is 882943624RT0001.
3.2.5 No Other Representations. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES OF SELLERS SET FORTH IN SECTION 3.1 HEREOF, PURCHASERS AGREE AND
ACKNOWLEDGE THAT THE PURCHASED ASSETS ARE BEING SOLD "AS IS," AND
PURCHASERS AGREE TO ACCEPT THE PURCHASED ASSETS AND THE BUSINESS IN THE
CONDITION THAT THEY ARE IN ON THE CLOSING DATE WITHOUT RELIANCE UPON ANY
OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, MADE BY OR ON
BEHALF OF OR IMPUTED TO SELLERS OR THEIR AFFILIATES. Without limiting the
generality of the foregoing, Purchasers acknowledge that Sellers and their
affiliates make no representation or warranty with respect to (a) any
projections, estimates or budgets delivered to or made available to
Purchasers of future revenues, future results of operations (or any
components thereof), future cash flows or future financial condition (or
any component thereof) of the Business or the future business and
operations of the Business or, (b) except for the representations and
warranties of Sellers set forth in Section 3.1 hereof, any other
information or documents made available to Purchasers or their counsel,
accountants or advisors with respect to the Business.
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3.3 Survival of Representations and Warranties.
(a) All representations and warranties made by the parties in
this Agreement or in any certificate, schedule, statement, document or
instrument furnished hereunder or in connection with negotiation,
execution and performance of this Agreement shall survive the Closing
for a period of one year, except for the representations and
warranties set forth in (i) Section 3.1.19 hereof, which shall survive
the Closing until the period of any applicable statute of limitations
or extension thereof for the assertion of any third party claims shall
expire, and (ii) Section 3.1.18 and Section 3.1.20 hereof, which shall
survive the Closing indefinitely with respect to a claim or matter
resulting solely from any claim made by any third party; provided that
Section 3.1.18 and 3.1.20 shall survive the Closing only for the
period of any applicable statute of limitations or extensions thereof
with respect to claims not resulting from such third party claims.
(b) For purposes of Section 3.3(a), a "third party" shall be
deemed not to include Purchasers' affiliates.
(c) Notwithstanding any investigation or audit conducted before
or after the Closing Date or the decision of any party to complete the
Closing, each party shall be entitled to rely upon the representations
and warranties set forth herein; provided, however, that if on the
Closing Date any of William L. Kacin, Gary J. Morgan, Robert Cane or
Jeffrey H. Nicholas has actual knowledge that any representation or
warranty made by Sellers is inaccurate as of the date made, Purchasers
and their affiliates shall have no right or remedy after the Closing
to the extent of such inaccuracy, and shall be deemed to have waived
their rights to indemnification to the extent thereof.
(d) Neither the identification of Jeffrey H. Nicholas in Section
3.3(c) nor his participation in the transactions contemplated hereby
shall create any basis for disqualifying him or Fox, Rothschild,
O'Brien & Frankel, LLP from representing Purchasers in any controversy
or dispute arising out of the transactions contemplated hereby.
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ARTICLE 4
INDEMNIFICATION
4.1 Indemnification by Sellers and Shareholders.
4.1.1 Indemnification by Sellers and Shareholders. Subject to the
limitation set forth in Section 4.1.2 hereof, Sellers and Shareholders
jointly and severally indemnify Purchasers, their affiliates, successors
and assigns (each an "Indemnified Purchaser Party") against and agree to
hold each of them harmless from any and all damage, loss, liability and
expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' and accountants' fees and expenses)
(collectively "Damages") in connection with any claim, demand, assessment,
fine, penalty, judgment, deficiency, liability, cost, expense, action,
suit, proceeding or judgment incurred or suffered by any Indemnified
Purchaser Party arising out of any of:
(a) any misrepresentation or breach of representation or warranty
made by any Seller or Shareholder pursuant to this Agreement;
(b) any breach of covenant or agreement made or to be performed
by any Seller or Shareholder in this Agreement; and
(c) any Excluded Liability as defined by Section 1.4.2 hereof.
4.1.2 Limitation on Sellers' and Shareholders' Liability for Breaches
of Representations and Warranties. Sellers and Shareholders shall not be
liable under Section 4.1.1(a) unless the aggregate amount of Damages with
respect to all matters referred to in Section 4.1.1(a) exceeds $25,000 and
then only to the extent of such excess and Sellers' and Shareholders'
maximum liability under Section 4.1.1(a) shall not exceed $1,500,000;
provided further, that Sellers and Shareholders shall not be liable under
Section 4.1.1(a) for any Damages with respect to liabilities in excess of
the amounts reserved therefor on the Effective Date Pro Forma Balance Sheet
unless such liabilities exceed the aggregate of amount of all reserves on
the Effective Date Pro Forma Balance Sheet, and then only to the extent of
such excess.
4.1.3 Liability for Breach of Covenant and Excluded Liabilities. (a)
The limitation on liability imposed by Section 4.1.2 hereof for Damages
under Section 4.1.1(a) hereof shall not apply to Damages under Section
4.1.1(b) hereof or Section 4.1.1(c) hereof, each of which shall not be
subject to such $25,000 threshold amount nor such $1,500,000 maximum
amount, and shall be without limitation.
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(b) The expiration provided for by Section 3.3 hereof of the
representations and warranties set forth in Article 3 hereof does not
apply to the indemnification obligations provided for by Section
4.1.1(b) hereof and Section 4.1.1(c) hereof. The expiration of a
representation and warranty that may also be of similar subject matter
to an Excluded Liability does not affect Purchasers' indemnity rights
for the Excluded Liability. The parties further acknowledge that as
pertains to a given subject matter, there may be differences in the
scope of a representation and warranty, on the one hand, and an
Excluded Liability, on the other hand, and that the accuracy of a
representation and warranty shall not be deemed to limit a party's
right to indemnity for an Excluded Liability, nor shall the absence of
an indemnity claim for an Excluded Liability be deemed to limit a
party's right to indemnification for breach of representation and
warranty.
4.2 Indemnification by Purchasers. Purchasers jointly and severally
indemnify Sellers and Shareholders, their affiliates, successors and
assigns (each an "Indemnified Seller Party") against and agree to hold each
of them harmless from any and all Damages in connection with any claim,
demand, assessment, fine, penalty, judgment, deficiency, liability, cost,
expense, action, suit, proceeding or judgment incurred or suffered by any
Indemnified Seller Party arising out of:
(a) any misrepresentation or breach of representation or
warranty, covenant or agreement made or to be performed by any
Purchaser pursuant to this Agreement; and
(b) any Assumed Liability as defined by Section 1.4.1 hereof.
4.3 Method of Asserting Claims, etc. In the event that any claim or
demand for which Sellers or Shareholders would be liable to an Indemnified
Purchaser Party hereunder is asserted against or sought to be collected
from an Indemnified Purchaser Party by a third party, the Indemnified
Purchaser Party shall notify Sellers and Shareholders in writing of such
claim or demand, specifying the nature of such claim or demand and the
amount or the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim and
demand) (the "Claim Notice"). The Claim Notice shall be given within
fifteen (15) calendar days after an Indemnified Purchaser Party becomes
aware of any fact, condition or event which may give rise to a claim for
which indemnification may be sought hereunder. Notwithstanding the
foregoing, the failure by an Indemnified Purchaser Party to give timely
notice shall not affect its rights to indemnification hereunder, except to
the extent to which Sellers or Shareholders shall demonstrate damage caused
by such failure. Sellers and Shareholders shall have fifteen (15) calendar
days from receipt of the Claim Notice (the "Notice Period") to notify the
Indemnified Purchaser Party, (x) whether or not they dispute their
liability to the Indemnified Purchasers Party hereunder with respect to
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such claim or demand and (y) notwithstanding any such dispute, whether or
not they desire, at their sole cost and expense, to defend the Indemnified
Purchaser Party against such claim or demand.
(a) If Sellers or Shareholders dispute their liability with
respect to such claim or demand or the amount thereof (whether or not
Sellers or Shareholders desire to defend the Indemnified Purchaser
Party against such claim or demand as provided in paragraphs (b) and
(c) below), such dispute shall be resolved in accordance with Section
4.5 hereof. Pending the resolution of any dispute by Sellers or
Shareholders of their liability with respect to any claim or demand,
such claim or demand shall not be settled by the Indemnified Purchaser
Party without the prior written consent of Sellers or Shareholders.
(b) In the event that Sellers or Shareholders notify the
Indemnified Purchaser Party within the Notice Period that they desire
to defend the Indemnified Purchaser Party against such claim or demand
then, except as hereinafter provided, Sellers or Shareholders,
respectively, shall have the right to defend the Indemnified Purchaser
Party by appropriate proceedings, which proceedings shall be promptly
settled or prosecuted by them to a final conclusion in such a manner
as to avoid any risk of the Indemnified Purchaser Party becoming
subject to liability for any other matter; provided, however, Sellers
and Shareholders shall not, without the prior written consent of the
Indemnified Purchaser Party, consent to the entry of any judgment
against the Indemnified Purchaser Party or enter into any settlement
or compromise which does not include, as an unconditional term
thereof, the giving by the claimant or plaintiff to the Indemnified
Purchaser Party of a release, in form and substance satisfactory to
the Indemnified Purchaser Party, as the case may be, from all
liability in respect of such claim or litigation. If any Indemnified
Purchaser Party desires to participate in, but not control, any such
defense or settlement, it may do so at its sole cost and expense. If,
in the reasonable opinion of the Indemnified Purchaser Party, any such
claim or demand or the litigation or resolution of any such claim or
demand involves an issue or matter which could have a materially
adverse effect on the business, operations, assets, properties or
prospects of the Indemnified Purchaser Party, including without
limitation the administration of the tax returns and responsibilities
under the tax laws of any Indemnified Purchaser Party, then the
Indemnified Purchaser Party shall have the right to control the
defense or settlement of any such claim or demand and its reasonable
costs and expenses shall be included as part of the indemnification
obligation of Sellers and Shareholders hereunder; provided, however,
that the Indemnified Purchaser Party shall not settle any such claim
or demand without the prior written consent of Sellers or
Shareholders, which consent shall not be unreasonably withheld. If the
Indemnified Purchaser Party should elect to exercise such right,
Sellers or Shareholders shall have the right to participate in, but
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not control, the defense or settlement of such claim or demand at
their sole cost and expense.
(c) (i) If Sellers or Shareholders elect not to defend the
Indemnified Purchaser Party against such claim or demand, whether by
not giving the Indemnified Purchaser Party timely notice as provided
above or otherwise, then the amount of any such claim or demand, or if
the same be defended by Sellers or Shareholders or by the Indemnified
Purchaser Party (but none of the Indemnified Purchaser Party shall
have any obligation to defend any such claim or demand), then that
portion thereof as to which such defense is unsuccessful, in each case
shall be conclusively deemed to be a liability of Sellers and
Shareholders hereunder, unless Sellers and Shareholders shall have
disputed their liability to the Indemnified Purchaser Party hereunder,
as provided in (a) above, in which event such dispute shall be
resolved as provided in Section 4.5 hereof.
(ii) In the event an Indemnified Purchaser Party should have
a claim against Sellers or Shareholders hereunder that does not
involve a claim or demand being asserted against or sought to be
collected from it by a third party, the Indemnified Purchaser
Party shall promptly send a Claim Notice with respect to such
claim to Sellers and Shareholders. If Sellers or Shareholders
dispute their liability with respect to such claim or demand,
such dispute shall be resolved in accordance with Section 4.5
hereof; if Sellers or Shareholders do not notify the Indemnified
Purchaser Party within the Notice Period that they dispute such
claim, the amount of such claim shall be conclusively deemed a
liability of Sellers or Shareholders, respectively, hereunder.
(d) All claims for indemnification by an Indemnified Seller Party
under this Agreement shall be asserted and resolved under the
procedures set forth above substituting in the appropriate place
"Indemnified Seller Party" for "Indemnified Purchaser Party" and
variations thereof and "Purchasers" for "Sellers" and "Shareholders."
(e) Each party shall cooperate, and cause their respective
affiliates to cooperate, in the defense or prosecution of any claim or
demand made by a third party and shall furnish or cause to be
furnished such records, information and testimony, attend such
conferences, discovery proceedings, hearings, trials or appeals, and
make such filings with governmental authorities, as may be reasonably
requested in connection therewith. Sellers shall reimburse an
Indemnified Purchaser Party for its out-of-pocket expenses, including
reasonable attorneys fees and expenses, incurred in connection with
this provision in respect of any matter or claim for which such
Indemnified Purchaser Party has a right of indemnity under this
Agreement, and Purchasers shall indemnify an Indemnified Seller Party
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for its out-of-pocket expenses, including reasonable attorneys fees
and expenses, incurred in connection with this provision in respect of
any matter or claim for which such Indemnified Seller Party has a
right of indemnity under this Agreement.
(f) Notwithstanding any of the foregoing provisions in Section
4.3 of this Agreement:
(i) In the event that any claim or demand relating to
Environmental Liabilities for which Sellers or Shareholders may
be liable hereunder is asserted, Shareholders shall have the
option to assume exclusive control of the resolution of any such
claim or demand. Except as set forth below, Shareholders shall
have satisfied their obligations under this Agreement with
respect to any Environmental Liabilities as regards any affected
real property if the result of any remediation meets or exceeds
the least stringent standards, based on the use of such property
at the Closing Date, required to comply with Environmental Laws
as in effect on the Closing Date (or, at the Shareholders'
option, as in effect on the date any remediation is concluded);
provided, however, that Shareholders agree to use reasonable
efforts to obtain any available approval from the applicable
governmental authority of such remediation. Notwithstanding
anything herein to the contrary, Shareholders' obligations under
this Agreement shall not be considered satisfied to the extent to
which such "least stringent standards" criteria shall result in
the creation of any obligation, liability or duty on the part of
an Indemnified Purchaser Party as regards such affected real
property.
(ii) Each Indemnified Purchaser Party agrees to take no
action (such as, but not limited to, any drilling or testing of
the soil or ground water) and that each will not affirmatively
initiate any action by any Indemnified Purchaser Party or third
party, including any governmental agency or authority, which
could reasonably be expected to lead to a claim with respect to
any such matter, except in each case to the extent believed by
such Indemnified Purchaser Parties, in good faith, to be required
by any Environmental Law.
(iii) Each Indemnified Purchaser Party agrees to maintain,
to instruct its executive officers and directors to maintain, and
to require each New Hire (as hereafter defined) to execute a
confidentiality agreement substantially similar to the
Confidentiality Agreement (as hereafter defined) executed by
Sellers' existing employees. For purposes of this provision, a
"New Hire" is any new employee of Met-Pro's Flex-Kleen division,
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other than a New Employee as defined in Article 5 hereof. The
parties acknowledge that Sellers' existing employees have
executed confidentiality agreements (each a "Confidentiality
Agreement") with Sellers, which at Closing shall be assigned to
Purchasers.
(iv) Notwithstanding any breach by any New Hire or New
Employee of his confidentiality obligation, the indemnification
rights of an Indemnified Purchaser Party as pertains to
environmental matters shall not be deemed waived or limited
unless Sellers or Shareholders shall demonstrate that the
Indemnified Purchaser Party conspired or acted in concert with
such breaching New Hire or New Employee in regards to such
breach. In addition, notwithstanding any breach by an Indemnified
Purchaser Party of its obligations under Section 4.3(f)(iii), an
Indemnified Purchaser Party's indemnification rights hereunder
shall not be deemed waived or limited except to the extent to
which Sellers or Shareholders shall establish that such breach
was the proximate cause of the governmental or other third party
action. Under no event shall an Indemnified Purchaser Party's
indemnification rights be deemed waived or limited for any action
taken by Helser Industries, its successors and assigns, except to
the extent to which an Indemnified Purchaser Party shall act with
regard to Helser Industries, its successors and assigns in breach
of Section 4.3(f)(ii) hereof.
(v) No obligation of an Indemnified Purchaser Party under
Section 4.3 (f)(iii) shall be deemed breached by (A) the filing
by Met-Pro of a copy of this Agreement, exclusive of the
Disclosure Schedules and Exhibits, with any governmental agency
pursuant to a good faith belief that such filing is required by
law or (B) any disclosure made to any governmental agency or
other third party to the extent believed by the disclosing
Indemnified Purchaser Party, in good faith, to be required by any
Environmental Law.
(vi) Sellers or Shareholders agree to use reasonable efforts
to ensure that any actions taken by Sellers or Shareholders or
their representatives in connection herewith on property then
occupied by Purchasers or their successors are performed in a
manner which is not disruptive to the normal operation of such
property. Sellers or Shareholders shall promptly furnish
Purchasers and its successors with a copy of any written
engineering, environmental or other similar report pertaining to
the property.
4.4 Payment. Upon the determination of the liability under Section 4.3
or 4.5 hereof, the appropriate party shall pay to the other, as the case
may be, within ten (10) calendar days after such determination, the amount
of any claim for indemnification made hereunder. The first $500,000 (five
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hundred thousand dollars) of Sellers' payment obligations for claims under
Section 4.1.1(a) hereof shall initially be satisfied with withdrawals from
the Escrow Closing Payment held under the Escrow Agreement. Sellers shall
directly pay Purchasers for claims under Section 4.1.1(b) and Section 4.1.1
(c) hereof. In the event that the indemnified party is not paid in full for
any such claim promptly after the other party's obligation to indemnify has
been determined in accordance herewith, it shall have the right,
notwithstanding any other rights that it may have against any other person,
firm or corporation, to set off the unpaid amount of any such claim against
any amounts owed by it under any agreements entered into pursuant to this
Agreement. Upon the payment in full of any claim, either by set off or
otherwise, the entity making payment shall be subrogated to the rights of
the indemnified party against any person, firm or corporation with respect
to the subject matter of such claim.
4.5 Arbitration.
(a) All disputes under this Article 4 shall be settled by
arbitration in Philadelphia, Pennsylvania, before a single arbitrator
(the "Arbitrator") pursuant to the rules of the American Arbitration
Association. Arbitration may be commenced at any time by any party
hereto giving written notice to each other party to a dispute that
such dispute has been referred to arbitration under this Section 4.5.
The Arbitrator shall be selected by the joint agreement of Sellers and
Purchasers, but if they do not so agree within twenty (20) days after
the date of the notice referred to above, the selection shall be made
pursuant to the rules from the panels of arbitrators maintained by
such Association. Any award rendered by the Arbitrator shall be
conclusive and binding upon the parties hereto; provided, however,
that any such award shall be accompanied by a written opinion of the
Arbitrator giving the reasons for the award. This provision for
arbitration shall be specifically enforceable by the parties and the
decision of the Arbitrator in accordance herewith shall be final and
binding and there shall be no right of appeal therefrom. Each party
shall pay its own expenses of arbitration and the expenses of the
Arbitrator shall be equally shared; provided, however, that if in the
opinion of the Arbitrator any claim for indemnification or any defense
or objection thereto was unreasonable, the Arbitrator may assess, as
part of his award, all or any part of the arbitration expenses of the
other party (including reasonable attorneys' fees) and of the
Arbitrator against the party raising such unreasonable claim, defense
or objection.
(b) To the extent that arbitration may not be legally permitted
hereunder and the parties to any dispute hereunder may not at the time
of such dispute mutually agree to submit such dispute to arbitration,
any party may commence a civil action in a court of appropriate
jurisdiction to resolve disputes hereunder. Nothing contained in this
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Section 4.5 shall prevent the parties from settling any dispute by
mutual agreement at any time.
(c) Sellers or Shareholders may apply to the Arbitrator for a
written determination that Purchasers filed a Notice of Claim (as
defined in Section 4 of the Escrow Agreement) in bad faith and
principally for the purpose of delaying the release to Sellers or
Shareholders of any portion of the Escrow Fund (as defined in Section
1 of the Escrow Agreement). Upon such a determination, the Arbitrator
may assess against Purchasers all or any part of the arbitration
expenses of Sellers or Shareholders (including reasonable attorneys'
fees) and of the Arbitrator.
4.6 Compliance with Bulk Sales Laws. The parties hereby waive
compliance by Purchasers and Sellers with the bulk sales law and any other
similar laws in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement. Purchasers, jointly and severally,
indemnify Sellers and Shareholders from, and hold them harmless against,
any liabilities, damages, costs and expenses resulting from or arising out
of (i) the parties' failure to comply with any of such laws in respect of
the transactions contemplated by this Agreement, or (ii) any action brought
or levy made as a result thereof, other than those liabilities which have
been expressly assumed, on such terms as expressly assumed, by Purchasers
pursuant to this Agreement. It is agreed that the Purchasers shall not
require Flex-Kleen Canada to comply, or to assist the Purchasers to comply,
with the requirements of section 6 of the Retail Sales Tax Act (Ontario),
or such other comparable legislation in other provinces as may be
applicable to the transfer of the Assets used by Flex-Kleen Canada in the
Business under this Agreement. Notwithstanding the foregoing, Sellers agree
to indemnify and hold harmless the Purchasers from and against any claims
which may be made or brought against the Purchasers or which the Purchasers
may suffer or incur as a result of, in respect of, or arising out of such
non-compliance.
4.7 Calculation of Damages. (a) The Sellers and Shareholders shall not
be liable under Section 4.1 hereof for (i) any Damages to the extent that
the Indemnified Purchaser Party has been compensated for such claim or
matter pursuant to Section 6.11 hereof or pursuant to any other insurance
proceeds realized by the Indemnified Purchaser Party or its affiliates for
such claim or matter, (ii) consequential Damages, (iii) Damages for lost
profits incurred by the Indemnified Purchaser Party, or (iv) punitive
Damages.
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(b) Notwithstanding Section 4.7(a)(iii), Sellers and Shareholders
shall be liable for Damages for lost profits for any claim or matter
arising under Section 6.6(a) hereof.
(c) Warranty costs and claims arising after the Closing Date for
product sold by Sellers prior to the Effective Date shall be
calculated for purposes of determining Damages in a manner consistent
with Sellers' past practices during the twelve months ended July 31,
1998.
4.8 Exclusive Remedy. The indemnification rights of the parties under
this Article 4 shall be the sole and exclusive rights and remedies of the
parties hereto for misrepresentations and breaches of representations and
warranties set forth in Article 3 hereof. The foregoing shall not be
deemed, however, to limit the parties' rights and remedies as may exist in
law, equity or otherwise for breach of any agreement or covenant hereunder.
4.9 Goods and Services Gross-up On Indemnification. Where an amount is
payable by an Indemnified Purchaser Party or Indemnified Seller Party as
indemnification pursuant to the terms of this Agreement and the Excise Tax
Act (Canada) provides that GST is deemed to have been collected by the
payee thereof, the amount so payable as determined without reference to
this Section 4.9 (the "Indemnification Amount") shall be increased by an
amount equal to the rate of GST applied to the Indemnification Amount in
accordance with the Excise Tax Act (Canada).
ARTICLE 5
EMPLOYEE BENEFIT MATTERS
5.1 Employees and Offers of Employment.
(a) Purchasers shall make offers of employment as of the Closing
Date to all of the employees who work for the Business immediately
prior to the Closing Date for positions similar to those performed
immediately prior to the Closing Date (i) at their current salaries
and (ii) on such other terms and conditions which, for a period of no
less than one year following the Closing Date, will be no less
favorable in the aggregate to those generally provided to similarly
situated employees of Purchasers. All employees who accept such offers
of employment shall be referred to herein as "New Employees." Subject
to the provisions hereof, all New Employees will become employees of
Purchasers on the Closing Date, except that any employee of the
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Business who is inactive (including without limitation employees who
are disabled) as of the Closing Date will become a New Employee after
such employee returns to work on the earlier of (i) the date such
employee becomes eligible to participate in life, short-term
disability and health plans of Purchasers or their affiliates and (ii)
the tenth business day following such employee returns to work.
Purchasers shall promptly reimburse Sellers for the costs associated
with such employee including salary and cost of benefits between the
date such employee returns to work and the date such employee becomes
a New Employee. The date an employee becomes an employee of Purchasers
is a "Hire Date." Nothing in this Article 5 or elsewhere in this
Agreement is intended to confer upon any employee of Sellers any right
to continued employment by Purchasers and it is understood that
Purchasers shall employ any such person on an "at will" basis.
(b) Notwithstanding anything in Section 5.1 (a) herein to the
contrary, Met-Pro Canada at Closing shall offer employment on terms
and conditions which shall not trigger any severance obligations under
Canadian, statutory or common law or otherwise (excepting, however,
any obligation under the AWT Air Severance Pay Plan) to Maurice and
Joan Hamilton, and Purchasers shall be jointly and severally liable to
pay any severance payment under Canadian statutory or common law or
otherwise (excepting, however, any payment due under the AWT Air
Severance Pay Plan) to Maurice and Joan Hamilton for years of service
accrued as an employee of Flex-Kleen Canada as of the date of the
Closing. Purchasers shall solely assume the defense of any claim for
severance brought by such persons following Closing, whether under
statutory or common law or otherwise (excepting, however, the AWT Air
Severance Pay Plan), and shall be solely liable for the costs and
expenses including legal fees in connection with any such claim. Prior
to Closing, except for the transactions contemplated by this
Agreement, Sellers shall take no act which would trigger any severance
obligation under Canadian, statutory or common law or otherwise to
Maurice and Joan Hamilton.
(c) Prior to Closing, Sellers agree to give written notice to its
employees not eligible as of Closing for post-retirement benefits of
the termination and unavailability of post-retirement benefits, and of
the elimination of any benefits under the AWT Air Severance Pay Plan,
and to provide evidence of same at Closing to Purchasers.
5.2 Non-Solicitation.
(a) Until the third anniversary of the Closing Date, Sellers and
Shareholders will not, directly or indirectly, solicit or offer
employment to any person who, after the Closing Date, is then an
employee of Purchasers, or who has terminated employment with
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Purchasers without the consent of Purchasers within 180 days of such
solicitation or offer.
(b) Until the third anniversary of the Closing Date, Purchasers
will not, and will cause their affiliates not to, directly or
indirectly, solicit or offer employment to any person who, after the
Closing Date, is then an employee of Sellers or an affiliate of
Sellers or who has terminated employment with Sellers or any affiliate
of Sellers without the consent of Sellers or such affiliate of Sellers
within 180 days of such solicitation or offer.
5.3 Vacation Credit. From and after the Closing Date, New Employees
shall be entitled to use their unused vacation benefits earned as employees
of Sellers after January 1, 1998 under Sellers' vacation arrangements that
were in effect as of January 1, 1998. All vacation benefits of Sellers'
employees earned as of December 31, 1997, including but not limited to any
equitable adjustments made or granted during 1998 for prior service to
Sellers, not used or paid in the ordinary course of business prior to the
Effective Date shall be paid by Sellers to such employees within sixty (60)
days of the Closing Date in accordance with Exhibit 5.3.
5.4 COBRA. Subsequent to the Closing Date, Purchasers shall be liable
for continuation of health care coverage required by Code Section 4980B and
ERISA Section 601 through 608 ("COBRA") with respect to New Employees, and
Sellers shall be liable for health care continuation required by COBRA for
any of their employees who are not New Employees. Purchasers shall ensure
that any COBRA requirements are met with respect to any "qualifying event"
with respect to a New Employee (and covered family members of a New
Employee) occurring on or after the Closing Date. Sellers shall ensure that
any COBRA requirements are met with respect to any "qualifying event" with
respect to Sellers' employees (and covered family members of such
employees) who do not become New Employees occurring on or after the
Closing Date. Prior to or on the Closing, Sellers shall give appropriate
written notices to their respective employees of the Business as to the
occurrence of the transactions contemplated by this Agreement.
5.5 Health Care and Prescription Benefits; Other Employee Benefits.
(a) All health care and prescription claims incurred by Sellers'
employees between the Effective Date and the Closing Date and between
the Closing Date and October 31, 1998 shall be paid pursuant to
Sellers' insurance policies or Sellers' self-insurance plans subject
to no deductible. At Closing, Purchasers shall reimburse Sellers for
the portion of the health care and prescription plan "deemed premium"
for Sellers' employees for the period between the Effective Date and
September 30, 1998, in an amount consistent with and based upon the
per month premium charges to Flex-Kleen during the period between
November 1, 1997 and the Effective Date, pursuant to Schedule 5.5(a)
(the "Closing Health Care and Prescription Plan Premium Reimbursement
Payment"). After Closing, Purchasers shall similarly reimburse Sellers
on the same basis, for the period October 1, 1998 through October 31,
1998, within fifteen (15) days after being provided with written
documentation adequately supporting such charge. For purposes of this
Section 5.5(a), "deemed premium" shall be the amount allocated by
Sellers to the health care and prescription plan covering employees of
the Business for purpose of funding claims under such plan, consistent
with Sellers' past practices for same during the nine months ended
July 31, 1998.
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(b) In addition to the reimbursement provided for by Section
5.5(a) hereof, Purchasers shall reimburse Sellers for actual
out-of-pocket costs for other employee benefits or other
employment-benefit related costs during the period between the
Effective Date and the Closing Date and from the Closing Date to
October 31, or with respect to employees who were inactive on the
Effective Date, the date of such employees return to work, consistent
with the cost of such charges during the one year period ended with
the Effective Date. At Closing, Purchasers shall reimburse Sellers for
these charges for the period between the Effective Date and September
30,1998, pursuant to Schedule 5.5(c) (the "Closing Benefits Cost
Reimbursement Payment"). After Closing, Purchasers shall similarly
reimburse Sellers on the same basis, for the period October 1, 1998
through October 31, 1998, within fifteen (15) days after being
provided with written documentation adequately supporting such charge.
5.6 Allocation of Liability.
(a) Except as set forth in this Article 5, in Section 1.4.2
hereof or as elsewhere herein set forth, as of the Closing Date, (i)
Purchasers shall assume all liabilities in respect of employees that
are recorded on the Effective Date Pro Forma Balance Sheet to the
extent not satisfied prior to the Closing Date and all liabilities
incurred after the Effective Date, (ii) all liabilities incurred in
the normal course of the Business with respect to employees of the
Business between the Effective Date and the Closing Date and (iii)
Purchasers shall have sole liability and responsibility for and in
respect of all obligations to New Employees arising on and after the
Closing Date, and Purchasers shall indemnify and hold harmless Sellers
in respect of each of the foregoing.
(b) Except as set forth herein, Sellers shall retain all
obligations and liabilities and have sole liability for obligations,
including obligations arising under any employee benefit plan and any
lawsuits or claims, relating to or arising with respect to any
employee of the Business, including any person who has retired from or
terminated employment with Sellers, arising or attributable to any
time prior to the Effective Date and with respect to any employee of
Sellers after the Closing Date other than a New Employee.
5.7 Service Credit and Pre-existing Conditions.
(a) Purchasers or one of their affiliates will recognize all
prior service with Sellers or any of their affiliates of New Employees
solely for eligibility and vesting purposes in regard to those
employee benefit plans in which New Employees are enrolled by
Purchasers or one of their affiliates immediately after the Closing
Date.
(b) Purchasers, to the extent allowable under its agreements,
agree to waive any restrictions under the health and welfare plans of
either Purchaser or any affiliate thereof with respect to those New
Employees who are no longer subject to Sellers' pre-existing
limitation provisions on the Closing Date. With respect to those New
Employees who are subject to Sellers' pre-existing limitation
provisions on the Closing Date, Purchasers' pre-existing limitation
provisions shall lapse on the date such limitations would have lapsed
under Sellers' applicable plans had the New Employee remained in the
employ of either Seller or an affiliate thereof, to the extent
allowable under Purchasers' agreements.
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5.8 Savings Plans.
(a) Effective as of the Closing Date, Sellers shall amend the
Aqua Alliance Savings and Retirement Plan (the "Seller Savings Plan")
to cause the account balances of each New Employee thereunder to vest
as of each employee's respective Hire Date and to cause their active
participation in the Seller Savings Plan to cease as of their
respective Hire Dates.
(b) On or immediately prior to the Closing Date, Met-Pro shall
(i) establish or designate one or more qualified defined contribution
plans (the "Buyer DC Plans") for the benefit of New Employees
excepting Maurice and Joan Hamilton ("New American Employees"), and
furnish Sellers with the most recent favorable determination letter
from the Internal Revenue Service relating to the Buyer DC Plans as
promptly as practicable, (ii) take any necessary action to qualify the
Buyer DC Plans under the applicable provisions of the Code and (iii)
make all filings and submissions to appropriate governmental agencies
required of it in connection with a transfer of assets as described
below. All New American Employees who are eligible to participate in
the Seller Savings Plan shall become eligible to participate in the
Buyer DC Plans as of their respective Hire Dates, and shall be
credited with eligibility service and vesting service for all period
of service with Sellers, their affiliates or any other entity, if so
credited with such service under the Seller Savings Plan.
(c) As soon as practical following receipt by Purchasers and
Sellers of favorable determination letters or Purchasers'
certification to Sellers, and Sellers' certification to Purchasers, in
a manner reasonably acceptable to both Purchasers and Sellers, that
the Seller Savings Plan and the Buyer DC Plans are qualified under the
applicable provisions of the Code, Sellers shall cause the trustee of
the Seller Savings Plan to transfer assets representing the full
account balances of the New American Employees, together with the
appropriate net investment return (including unrealized appreciation
or depreciation) thereon, reduced by any necessary benefit or
withdrawal payments made in respect of New American Employees prior to
the actual date of transfer, to the trustee of the Buyer DC Plans.
5.9 Employee Benefit Plans. Purchasers shall not assume any liability
for any employee benefit plan sponsored or maintained by Sellers, nor shall
Purchasers assume or be liable for any liability or obligation to any
employee of Sellers or New Employee relating to any such employee benefit
plan, except for the reimbursement obligation under Section 5.5(c) hereof
with respect to contributions by Sellers under such plans during the period
between the Effective Date and the Closing Date. No portion of the assets
of any employee benefit plan heretofore sponsored or maintained by Sellers
(and no amount attributable to any such plan) shall be transferred to
Purchasers, and Purchasers shall not be required to continue any such plan
after the Closing Date. The amounts payable on account of all benefit
arrangements shall be determined with reference to the date of the event by
reason of which such amounts become payable, without regard to conditions
subsequent, and Purchasers shall not be liable for any claim for insurance,
reimbursement or other benefits payable by reason of any event which occurs
prior to the Closing Date. All amounts payable directly to employees, or to
any fund, program, arrangement or plan maintained by Sellers therefor,
shall be paid by Sellers within a reasonable period of time after the
Closing Date to the extent that such payment is not inconsistent with the
terms of such fund, program, arrangement or plan.
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ARTICLE 6
CERTAIN POST CLOSING MATTERS
6.1 Discharge of Business Obligations. From and after the Closing
Date, Sellers shall pay and discharge, in accordance with past practice but
not less than on a timely basis, all obligations and liabilities incurred
prior to the Effective Date in respect of the Business, its operations or
the assets and properties used therein (except for those expressly assumed
by Purchasers hereunder pursuant to Section 1.4.1), including without
limitation any liabilities or obligations to employees, trade creditors,
vendors, representatives, customers and clients of the Business inclusive
of PostRetirement Benefits, Employee Retention Agreements and Employment
Termination Agreements.
6.2 Maintenance of Books and Records; Cooperation. Each of Sellers and
Purchasers shall preserve until the tenth anniversary of the Closing Date
all records possessed or to be possessed by such party relating to any of
the assets, liabilities or business of the Business prior to the Closing
Date (including, without limitation, all records relating to the filing of
all Tax returns, the making of any election relating to Taxes, the
preparation for any audit by any taxing authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax). After the
Closing Date, where there is a legitimate purpose, such party shall provide
the other parties with access, upon prior reasonable written request
specifying the need therefor, during regular business hours, to (i) the
officers and employees of such party and (ii) the books of account and
records of such party, but, in each case, only to the extent relating to
the assets, liabilities or business of the Business prior to the Closing
Date, and the other parties and their representatives shall have the right
to make copies of such books and records; provided, however, that the
foregoing right of access shall not be exercised in such a manner as to
interfere unreasonably with the normal operations and business of such
party; and further, provided, that, the requesting party, its officers,
directors and representatives shall not disclose such information as
constitutes trade secrets or confidential business information of such
party, except (i) as required by law, (ii) with the prior written consent
of such party, which consent shall not be unreasonably withheld, or (iii)
where such information becomes available to the public generally, or
becomes generally known to competitors of such party, through sources other
than the requesting party, its affiliates or its officers, directors or
representatives. Sellers and Purchasers shall cooperate with each other in
the conduct of any audit or other proceeding relating to Taxes involving
the Assets or the Business, including without limitation, providing any tax
returns, supporting schedules and other related documents that may be
reasonably requested.
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6.3 Payments Received. Sellers and Purchasers each agree that after
the Closing they will hold and will promptly transfer and deliver to the
other, from time to time as and when received by them, any cash, checks
with appropriate endorsements (using their commercially reasonable efforts
not to convert such checks into cash), or other property that they may
receive on or after the Closing which properly belongs to the other party,
including without limitation any insurance proceeds and any tax refunds or
credits (and interest thereon, if any) referred to in Section 1.1.2(c)
hereof, and will account to the other for all such receipts. Purchasers
shall send written notice to Sellers within fifteen (15) calendar days of
the receipt by Purchasers of any tax refund or credit (and interest
thereon, if any) referred to in Section 1.1.2(c). Such notice shall set
forth the amount received, the date of receipt, and the matter to which the
refund or credit relates. From and after the Closing, Purchasers shall have
the right and authority to endorse without recourse the name of Sellers on
any check or any other evidences of indebtedness received by Purchasers on
account of the Business and the Assets transferred to Purchasers hereunder.
6.4 Use of Name.
(a) From and after the Closing Date, Sellers and Shareholders
will sign such consents and take such other action as Purchasers shall
reasonably request in order to permit Purchasers to use the names
"Flex-Kleen Corporation," "Flex-Kleen Canada Limited" and variants
thereof. From and after the Closing Date, except as set forth in this
Section 6.4, Sellers and Shareholders will not use or do business, or
assist any third party in using or doing business, under the names or
marks "Flex-Kleen Corporation," "Flex-Kleen Canada Limited" or any
names or marks similar thereto or being a variant thereof.
(b) After the Closing, affiliates of Sellers shall have the right
to use existing materials owned by such affiliates that contain the
name of Sellers until the earlier of (i) one year after the Closing
Date and (ii) the date existing stocks are exhausted. After the
Closing, Purchasers shall have the right to use existing packaging,
labeling, containers, supplies, advertising materials, technical data
sheets, and all such other materials that contain the name "Air &
Water Technologies Corporation" ("AWT") until the earlier of (i) one
year after the Closing Date and (ii) the date existing stocks are
exhausted.
(c) Affiliates of Sellers shall have the right to use Sellers'
names and marks in advertising that cannot be changed by such
affiliates using reasonable efforts for a period not to exceed one
year after the Closing Date. Purchasers shall have the right to use
the names and marks of AWT in advertising that cannot be changed by
Purchasers using reasonable efforts for a period not to exceed one
year after the Closing Date.
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(d) Notwithstanding anything in Section 6.4 (b) to the contrary,
affiliates of Sellers shall not be obligated to change the names and
marks of Sellers on goods (i) used solely on an internal basis or (ii)
in the hands of customers at the time of the expiration of a time
period set forth in subsection (b) above. Purchasers shall not be
obligated to change the names and marks of AWT on goods (i) used
solely on an internal basis or (ii) in the hands of customers at the
time of the expiration of a time period set forth in subsection (b)
above. The obliteration of the names and marks shall be deemed
compliance with the covenant not to use the names and marks pursuant
to this Section 6.4.
(e) Purchasers acknowledge and agree that they are not obtaining
any rights hereunder to use the mark "Research-Cottrell" and variants
thereof the globe logo associated with such mark or any other marks or
rights conveyed by Aqua Alliance and/or its affiliates to Hamon
pursuant to the Asset and Stock Purchase Agreement between AWT (n/k/a
Aqua Alliance) and Hamon dated as of June 6, 1998 and that any use by
Purchasers of such marks or logos only shall be pursuant to the letter
agreement dated the date hereof between Met-Pro and Hamon, a copy of
which is attached as Exhibit 6.4(e).
(f) Shareholders agree to use reasonable efforts to cease using
the marks of Sellers on buildings, cars, trucks and other fixed assets
as soon as possible, and in any event by no later than January 31,
1999.
6.5 UCC Matters. From and after the Closing Date, Sellers will
promptly refer all inquiries with respect to ownership of the Assets or the
Business to Purchasers. In addition, Sellers will execute such documents
and financing statements as Purchasers may request from time to time to
evidence transfer of the Assets to Purchasers, including any necessary
assignments of financing statements.
6.6 Covenant Not to Compete.
(a) From and after the Closing, for a period of five years from
the date thereof, Sellers and Shareholders shall not, directly or
indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, any business whether
in corporate, proprietorship or partnership form or otherwise as more
than a five percent owner in such business, where such business
competes with the Business. The parties hereto specifically
acknowledge and agree that the remedy at law for any breach of the
foregoing will be inadequate and that the Purchasers, in addition to
any other relief available to them, shall be entitled to temporary and
permanent injunctive relief without the necessity of proving actual
damage. In the event that the provisions of this Section 6.6(a) should
ever be deemed to exceed the limitation provided by applicable law,
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then the parties hereto agree that such provisions shall be reformed
to set forth the maximum limitations permitted.
(b) Notwithstanding anything in Section 6.6(a) to the contrary,
(i) Metcalf & Eddy, Inc. and its successors may continue to market and
sell fugitive emissions monitoring equipment and services to oil
refineries and other clients (including, without limitation, fugitive
emissions monitoring, inventory and tagging field services, database
products and programming services, fugitive emissions related
hardware, including air monitoring equipment, identification tags, and
data collection equipment), (ii) Shareholders and their subsidiaries
may continue to carry on their businesses (other than the Business)
consistent with prior practice and (iii) Shareholders and their
subsidiaries may perform any of their respective obligations in
respect of any Excluded Asset or Excluded Liability, in each case as
provided or contemplated by this Agreement.
6.7 Contracting of Non-Assignable Customer Contracts. In the event
that any of the contracts that Sellers have with any of their customers
shall not be assignable to Purchasers, Sellers agree following Closing to
contract with Purchasers, at no additional cost or mark-up, for the
performance of Sellers' respective obligations under such contracts, in
accordance with the terms thereof.
6.8 Auditor's Consent. Sellers agree to use reasonable commercial
efforts to cause McGladrey and Pullen, Sellers' auditors, from time to time
to provide their written consent to the inclusion of the October 31, 1997
Financial Statements and the July 31, 1998 Financial Statements in Section
3.1.6 hereof in any filings made by Purchasers with the Securities and
Exchange Commission (the "SEC") after the Closing, where in Purchasers'
reasonable judgment the SEC's rules or regulations require such inclusion.
6.9 Right to Use Network in Connection with EMS Accounting System.
Until January 31, 1999, Purchasers shall have the right to utilize Sellers'
worldwide access network, at no charge, for communication between
Flex-Kleen's Sharpsburg, NC, Markham, Ontario and Itasca, IL locations in
connection with the EMS Accounting System.
6.10 Transfer of Permits. Sellers each agree to use commercially
reasonable efforts to cooperate with Purchasers in connection with
Purchasers' application for the transfer, renewal or issuance of any
permits, licenses, approvals or other authorizations involving the
Business.
6.11 Insurance. Except for health care and prescription claims which
shall be resolved as set forth in Section 5.5 hereof, if, after the
Closing, Purchasers shall suffer any loss, arising between the Effective
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Date and the Closing Date, out of a third-party claim or otherwise, that
Purchasers in good faith notify Sellers would be covered by any insurance
policy (including, but not limited to, any general liability insurance
policy) maintained by or for the benefit of Sellers, Sellers shall present
and pursue with commercially reasonable efforts a claim for payment under
such policy in respect of such loss, and pay to Purchasers the proceeds, if
any, of such claim, net of applicable deductibles, under any such policy as
reimbursement in respect of such loss, subject to the provisions of this
Section 6.11.
6.12 Straddle Taxes. All real property taxes, personal property taxes
and similar ad valorem obligations levied with respect to the Assets for a
taxable period which includes (but does not end on) the Closing Date
(collectively, the "Apportioned Obligations") shall be apportioned between
Sellers and Purchasers based on the number of days of such taxable period
included in the Pre-Effective Date Straddle Tax Period (as defined below)
and the number of days of such taxable period after the Effective Date
(with respect to any such taxable period, the "Post-Effective Date Straddle
Tax Period"). "Pre-Effective Date Straddle Tax Period" means (i) any tax
period ending on or before the Effective Date and (ii) with respect to a
tax period that commences before but ends after the Effective Date, the
portion of such period up to and including the Effective Date. Sellers
shall be liable for the proportionate amount of such taxes that is
attributable to the Pre-Effective Date Straddle Tax Period, and Purchasers
shall be liable for the proportionate amount of such taxes that is
attributable to the Post-Effective Date Straddle Tax Period. Upon receipt
of any bill for real or personal property taxes relating to the Assets,
each of Sellers and Purchasers shall present a statement to the other
setting forth the amount of reimbursement to which each is entitled under
this Section 6.12 together with such supporting evidence as is reasonably
necessary to calculate the proration amount. The proration amount shall be
paid by the party owing it to the other within ten (10) calendar days after
delivery of such statement. In the event that either Sellers or Purchasers
shall make any payment for which it is entitled to reimbursement under this
Section 6.12, the other party shall make such reimbursement promptly but in
no event later than ten (10) calendar days after the presentation of a
statement setting forth the amount of reimbursement to which the presenting
party is entitled along with such supporting evidence as is reasonably
necessary to calculate the amount of reimbursements.
6.13 Income Tax; Financial Reporting.
(a) The parties agree that all items of income and expense
relevant to the calculation of taxable income and the income tax
liability with respect to or attributable to the Business, the Assets
and the operation thereof for the period between the Effective Date
and the Closing Date will, for all tax purposes, be reported
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exclusively by Sellers, and that Sellers shall be exclusively
responsible for the payment of any and all federal, Canadian,
Provincial, state, local or other foreign income taxes attributable
thereto, whether based on net or gross income. Such tax liability and
expense shall not be considered an expense of the Business for
purposes of the Closing and Final Closing Cash Flow Reimbursement
Statements referred to in Section 1.3.5 hereof.
(b) The parties agree that for purposes of Aqua Alliance's and
Met-Pro's respective financial reporting requirements to the SEC, Aqua
Alliance shall exclusively report the sales and earnings attributable
to the operation of the Business for the period from the Effective
Date through September 25, 1998 (the closing date of Sellers and
Shareholders for the fiscal month of September 1998), and Met-Pro
shall exclusively report the sales and earnings attributable to the
operation of the Business for the period beginning September 26, 1998.
(c) Nothing contained in Section 6.13(a) and Section 6.13(b)
shall be construed to in any way alter the intent or intended effect
of Section 2.6 hereof (relating to the Effective Date of the
transactions contemplated by this Agreement).
6.14 Markham Facilities. Purchasers understand that there is no
existing lease for Sellers' occupancy of the Markham Facilities and Sellers
in no way represent that they shall assist Purchasers in its occupancy of
the Markham Facilities. Purchaser shall be responsible for all agreements
with the landlord and tenant at the Markham Facilities.
ARTICLE 7
MISCELLANEOUS
7.1 Brokers' and Finders' Fees.
(a) Except for any fees due to Lazard Freres & Co., LLC, which
Sellers agree to be solely responsible for, Sellers represent and
warrant to Purchasers that all negotiations relative to this Agreement
have been carried on by them directly without the intervention of any
person who may be entitled to any fee, brokerage or finder's fee or
other commission in respect of this Agreement or the consummation of
the transactions contemplated hereby, and Sellers agree to indemnify
and hold harmless Purchasers against any and all claims, losses,
liabilities and expenses which may be asserted against or incurred by
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them as a result of Sellers' dealings, arrangements or agreements with
any such person.
(b) Except for any fees due to Howard, Lawson & Co., which
Purchasers agree to be solely responsible for, Purchasers represent
and warrant that all negotiations relative to this Agreement have been
carried on by them directly without the intervention of any person who
may be entitled to any fee, brokerage or finder's fee or other
commission in respect of this Agreement or the consummation of the
transactions contemplated hereby, and Purchasers agree to indemnify
and hold harmless Sellers against any and all claims, losses,
liabilities and expenses which may be asserted against or incurred by
them as a result of Purchasers' dealings, arrangements or agreements
with any such person.
7.2 Sales, Transfer and Documentary Taxes, etc. Sellers and Purchasers
shall share equally all federal, Canadian, Provincial, state and local
sales, documentary and other transfer taxes, if any, due as a result of the
purchase, sale or transfer of the Assets or the assumption of the Assumed
Liabilities in accordance herewith, without regard to upon which party such
taxes may be imposed by law. To the extent permitted by applicable law or
regulation, Purchasers will, at their own expense, file all necessary
returns and other documentation with respect to all such taxes and fees,
and to the extent to which any such return or documentation must under
applicable law or regulation be filed by Sellers, Sellers agree to do so at
their own expense. At Closing, Flex-Kleen Canada and Met-Pro Canada shall
jointly execute and file an election (a) under subsection 167(1) of the
Excise Tax Act (Canada) and any similar provincial legislation, in the
prescribed manner and form, that no GST, QST or HST be payable in respect
of the Assets of Flex-Kleen Canada transferred under this Agreement and (b)
under Section 22 of the Income Tax Act (Canada) and any similar provincial
legislation with respect to any accounts receivable of Flex-Kleen Canada
transferred to Met-Pro Canada under this Agreement. Met-Pro Canada and
Flex-Kleen Canada shall file all necessary elections or filings under this
Section 7.2 in compliance with all relevant tax legislation.
7.3 Expenses. Except as otherwise provided in this Agreement, each
party hereto shall pay its own expenses incidental to the preparation of
this Agreement, the carrying out of the provisions of this Agreement and
the consummation of the transactions contemplated hereby. No such expense
of any Seller or Shareholder shall be deemed to be an expense of the
Business for purposes of the Closing Cash Flow Reimbursement Payment or the
Pro Forma or Final Closing Cash Flow Statements.
7.4 Contents of Agreement; Parties in Interest; etc. This Agreement
sets forth the entire understanding of the parties hereto with respect to
the transactions contemplated hereby. It shall not be amended or modified
except by written instrument duly executed by each of the parties hereto.
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Any and all previous agreements and understandings between or among the
parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement.
7.5 Assignment. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of Shareholders, Sellers and Purchasers.
7.6 Amendments and Waiver. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver
is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative
and not exclusive of any rights or remedies provided by law.
7.7 Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in
writing and shall be deemed given only if delivered personally or sent by
telecopy or by registered or certified mail, postage prepaid, as follows:
If to Purchasers, to:
William L. Kacin, President
Met-Pro Corporation
160 Cassell Road
Harleysville, PA 19438
Telecopy: (215) 723-6226
With a required copy (which shall not constitute notice) to:
Jeffrey H. Nicholas, Esq.
Fox, Rothschild, O'Brien & Frankel, LLP
997 Lenox Drive
Lawrenceville, NJ 08648
Telecopy: (609) 896-1469
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If to Sellers or Shareholders, to:
Aqua Alliance, Inc.
800 Third Avenue, 38th Floor
New York, New York 10022
Attention: General Counsel
Telecopy: (212) 702-2709/2710
With a required copy (which shall not constitute notice) to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: John A. Bick, Esq.
Telecopy: (212) 450-4800
or to such other address as the addressee may have specified in a notice
duly given to the sender as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have
been given as of the date so delivered, telecopied or mailed.
7.8 Delaware Law to Govern. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of
Delaware, without regard to the conflicts of laws rules of such state.
7.9 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and, in the case of Article 4 hereof, the other Indemnified
Parties, and their heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any
rights on any other persons.
7.10 Headings, Gender, "Person" and Certain Definitions. All section
headings contained in this Agreement are for convenience of reference only,
do not form a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement. Words used herein, regardless
of the number and gender specifically used, shall be deemed and construed
to include any other number, singular or plural, and any other gender,
masculine, feminine, or neuter, as the context requires. Any reference to a
"person" herein shall include an individual, firm, corporation,
partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity. Any reference to an
"affiliate" herein means, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under common control
with such other person. Unless specifically provided for to the contrary,
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"Knowledge of Sellers," "Sellers' knowledge" or any other similar knowledge
qualification in this Agreement means to the actual knowledge, after
reasonable investigation, of any of the following persons: George Mammola,
President of AWT Air Company, Inc.; William Hughes, General Manager of
Flex-Kleen; Alain Brunais; Wayne Fritz; Augstine Bolella; Donald Schneider;
Al Foote; James Hojnacki; Mike Maxwell; Carrie Tepper; John Mondak; and
Maurice Hamilton. All monetary amounts set forth herein are in United
States dollars unless expressly otherwise set forth.
7.11 Schedules and Exhibits. All Exhibits and Schedules referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.
7.12 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of
such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7.13 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all
of which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more
counterparts taken together shall have been executed and delivered by the
parties. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
7.14 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
7.15 Guarantee. Shareholders hereby unconditionally guarantee to
Purchasers and their affiliates the full and timely performance of all of
the obligations and agreements of Sellers. The foregoing guarantee shall
include the guarantee of the payment of all damages, costs and expenses
which might become recoverable as a result of the nonperformance of any of
the obligations or agreements so guaranteed or as a result of the
nonperformance of this guarantee. Any guaranteed person may, at its option,
proceed against Shareholders, jointly and severally, for the performance of
any such obligation or agreement, or for damages for default in the
performance thereof, without first proceeding against any other party or
against any of its properties. Shareholders further agree that their
guarantee shall be an irrevocable guarantee and shall continue in effect
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notwithstanding any extension or modification of any guaranteed obligation,
any assumption of any such guaranteed obligation by any other party, or any
other act or thing which might otherwise operate as a legal or equitable
discharge of a guarantor, and Shareholders hereby waive all special
suretyship defenses and notice requirements.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.
FLEX-KLEEN CORPORATION
By: /s/ George C. Mammola
-------------------------
Name: George C. Mammola
Title: President
AWT AIR COMPANY, INC.
By: /s/ George C. Mammola
-------------------------
Name: George C. Mammola
Title: President
FLEX-KLEEN CANADA LIMITED
By: /s/ George C. Mammola
-------------------------
Name: George C. Mammola
Title: President
AQUA ALLIANCE, INC.
By: /s/ Alain Brunais
-------------------------
Name: Alain Brunais
Title: Chief Financial Officer
MET-PRO CORPORATION
By: /s/ William L. Kacin
-------------------------
Name: William L. Kacin
Title: President
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1321249 ONTARIO LIMITED
By: /s/ William L. Kacin
-------------------------
Name: William L. Kacin
Title: President
WITNESSES:
/s/
- --------------------------
/s/
- --------------------------
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