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): September 4, 1996
WATTS INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
Delaware 0-14787 04-2916536
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Route 114 and Chestnut Street, North Andover, Massachusetts 01845
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 688-1811
N/A
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets.
On June 19, 1996, Watts Industries, Inc. and its wholly-owned
subsidiary Watts Investment Company (collectively, the "Company")
entered into a Stock Purchase Agreement (the "Agreement") with
Tyco International Ltd. and its wholly-owned subsidiaries Mueller
Co. and Tyco Valves Limited (collectively, "Tyco"), providing
for the sale to Tyco of the Company's Waterworks Valve Group,
which includes its wholly-owned indirect subsidiaries Henry Pratt
Company ("Pratt"), James Jones Company ("Jones") and Edward
Barber & Co. Ltd. ("Barber"). On September 4, 1996, under the
terms of the Agreement, the Company completed the sale of the
Waterworks Valve Group to Tyco for a purchase price of $90.6
million in cash, subject to a post-closing adjustment. The
purchase price was determined by arms-length negotiations between
the Company and Tyco.
Jones is headquartered in El Monte, California and
manufactures fire hydrants, underground service valves and
fittings used for applications between water mains and meters.
Pratt is headquartered in Aurora, Illinois and manufactures AWWA
butterfly valves as well as ball, plug and check valves used in
the water distribution, water treatment and waste water markets.
Barber is headquartered in Tottenham, England and manufactures
valves, meter boxes and accessories for the European municipal
water market. The Waterworks Valve Group had sales in excess of
$85 million for the fiscal year ended June 30, 1996.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(b) Pro Forma Financial Information. Pro forma
financial information required by this item is not presented
herein because the equivalent information is included in the
Company's financial statements for the year ended June 30, 1996,
included in the Company's 1996 Annual Report on Form 10-K.
(c) Exhibits.
2.1 Stock Purchase Agreement dated as of June 19,
1996 by and among Mueller Co., Tyco Valves Limited, Watts
Investment Company, Tyco International Ltd. and Watts
Industries, Inc. (filed herewith).*
* The Registrant will supply to the Commission upon request
copies of any omitted schedule or exhibit to Exhibit 2.1. A list
of such omitted schedules is included herein.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
WATTS INDUSTRIES, INC.
By: /s/ William C. McCartney
William C. McCartney, Vice
President of Finance
Date: September 18, 1996
EXHIBIT INDEX
EXHIBIT DESCRIPTION
2.1 Stock Purchase Agreement dated as of June 19, 1996 by and
among Mueller Co., Tyco Valves Limited, Watts Investment Company,
Tyco International Ltd. and Watts Industries, Inc. (filed
herewith)
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
by and among
MUELLER CO. and TYCO VALVES LIMITED
as Buyers,
WATTS INVESTMENT COMPANY
as Seller,
and
WATTS INDUSTRIES, INC.
and
TYCO INTERNATIONAL LTD.
Dated as of June 19, 1996
STOCK PURCHASE AGREEMENT
INDEX
Page
SECTION 1. PURCHASE AND SALE OF SHARES 2
1.2 Purchase Price; Payment and Intercompany Adjustments 2
1.3 Determination of Inventory 2
1.4 Purchase Price Adjustment 3
1.5 Closing 4
1.6 GAAP Defined 4
1.7 Accounts Receivable and Notes 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND WATTS 5
2.1 Making of Representations and Warranties of Seller and
Watts 5
2.2 Organization 5
2.3 Organization and Qualification of the Companies 6
2.4 Capital Stock of the Companies 6
2.5 No Conflict 6
2.6 Financial Statements 7
2.7 Absence of Certain Changes 7
2.8 Contracts 9
2.9 Intellectual Property Rights 9
2.10 Real Properties 9
2.11 Litigation 10
2.12 Labor Matters 10
2.13 Employee Benefit Programs 11
2.14 Consents 13
2.15 Compliance with Laws 14
2.16 Environmental Matters 14
2.17 Tax Matters 15
2.18 Permits and Approvals 15
2.19 Government Contracts 16
2.20 Affiliate Contracts 16
2.21 Brokers 16
2.22 Insurance 16
2.23 Product Warranty 16
2.24 Powers of Attorney 16
2.25 Bank Accounts; Safe Deposit Boxes 17
2.26 Guaranties 17
2.27 Certain Business Relationships with the Companies 17
2.28 Restrictions on Business Activities 17
2.29 Non-Foreign Status 17
2.30 Tianjin Tanggu Watts Valve Company Ltd 17
2.31 Jones' Payments 18
SECTION 3. COVENANTS OF SELLER AND WATTS 18
3.1 Making of Covenants and Agreements 18
3.2 Conduct of Business Prior to the Closing 18
3.3 Consents and Approvals 20
3.4 Tianjin Tanggu Watts Valve Company Ltd 21
3.5 Availability of Records and Personnel 22
3.6 Non-Competition Agreement 22
3.7 Further Action 22
3.8 Waiver of Preemptive Rights 22
3.10 Certain Filings 23
3.11 Pratt Existence 23
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYERS AND TYCO. 23
4.1 Representations and Warranties of Buyers and Tyco 23
4.2 Organization and Authority 23
4.3 No Conflict 23
4.4 Consents 24
4.5 Litigation. There are no claims 24
4.6 Private Placement 24
4.7 Brokers 24
SECTION 5. COVENANTS OF BUYERS 25
5.1 Making of Covenants and Agreements 25
5.2 Consents and Approvals 25
5.3 Availability of Records and Personnel 25
5.4 Confidentiality 26
5.5 Use of Names 26
5.6 Further Action 26
5.7 Insurance 26
5.8 Pratt Matters 26
5.9 Certain Filings 27
5.10 Non-Solicitation 27
SECTION 6. CONDITIONS 27
6.1 Conditions to Obligations of Seller and Watts 27
6.2 Conditions to Obligations of Buyers and Tyco 28
SECTION 7. TERMINATION 29
7.1 Termination 29
7.2 Effect of Termination 30
SECTION 8. EMPLOYEES, PENSION AND OTHER BENEFIT PLANS 30
8.1 Bargaining Agreements 30
8.2 Employees 31
8.3 Benefit Plans Assumed by Buyers 31
8.4 Other Benefit Programs 32
8.5 401(k) Plan 32
8.6 Bonus Reserves 32
8.7 Payments to Mr. Jones 32
8.8 Stock Option Plan 32
SECTION 9. TAX MATTERS 33
9.1 Tax Indemnities 33
9.2 Refunds and Tax Benefits 34
9.3 Contests 35
9.4 Preparation of Tax Returns 35
9.5 Cooperation and Exchange of Information 35
9.6 Transfer Taxes 36
9.7 Miscellaneous 36
SECTION 10. SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS 36
SECTION 11. INDEMNIFICATION 37
11.1 Indemnification by Watts 37
11.2 Limitations on Indemnification by Watts 37
11.3 Indemnification by Tyco 39
11.4 Limitations on Indemnification by Tyco 39
11.5 Notice; Defense of Claims 40
11.6 Tax Benefits 42
SECTION 12. MISCELLANEOUS 42
12.1 Fees and Expenses 42
12.2 Governing Law 42
12.3 Notices 42
12.4 Guaranty of Obligations 44
12.5 Waiver of Environmental Claims 44
12.6 Public Announcements 44
12.7 Severability 44
12.8 No Third-Party Beneficiaries 44
12.9 Entire Agreement 45
12.10 Projections 45
12.11 Assignability; Binding Effect 45
12.12 Captions and Gender 45
12.13 Execution in Counterparts 45
12.14 Amendments 46
12.15 Consent to Jurisdiction 46
12.16 Currency Exchange Rates 46
12.17 Waiver of Jury Trial 46
12.18 Schedules 46
12.19 Federal Law 46
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of
June 19, 1996 by and among TYCO INTERNATIONAL LTD., a
Massachusetts corporation ("Tyco"), MUELLER CO., an Illinois
corporation ("Mueller"), TYCO VALVES LIMITED, an English company
("U.K. Co.") (Mueller and U.K. Co. are sometimes referred to
together herein as "Buyers" and individually as a "Buyer"), WATTS
INVESTMENT COMPANY, a Delaware corporation ("Seller"), and WATTS
INDUSTRIES, INC., a Delaware corporation ("Watts").
WHEREAS, Seller owns all of the issued and outstanding
shares of Common Stock, par value $.01 per share, of Henry Pratt
Company (the "Pratt Shares"), a Delaware corporation ("Pratt");
WHEREAS, Seller owns all of the issued and outstanding
shares of Common Stock, par value $100.00 per share, of James
Jones Company (the "Jones Shares"), a California corporation
("Jones");
WHEREAS, Seller owns all of the issued and outstanding
ordinary shares of British Pounds 1 each (provided that Watts holds one such
share as nominee for Seller) and preferred ordinary shares of British Pounds 1
each of Edward Barber (UK) Limited (collectively, the "Barber
Shares" and, together with the Pratt Shares and the Jones Shares,
the "Shares"), an English company ("Barber");
WHEREAS, Barber owns all of the issued and outstanding
ordinary shares of British Pounds 1 each (provided that Seller holds one such
share as nominee for Barber) and preferred ordinary shares of British Pounds 1
each of Edward Barber & Company, Ltd., (collectively, the "EBCO
Shares"), an English company ("EBCO") (Pratt, Jones, Barber and
EBCO are sometimes referred to collectively herein as the
"Companies" and individually as a "Company");
WHEREAS, Seller desires to sell to Buyers and Buyers desire
to purchase from Seller, the Shares, upon the terms and subject
to the conditions set forth herein;
WHEREAS, Tyco, as an inducement to Watts and Seller to enter
into the transactions contemplated hereby, has agreed to guaranty
the obligations of Buyers; and
WHEREAS, Watts, as an inducement to Buyers and Tyco to enter
into the transactions contemplated hereby, has agreed to guaranty
the obligations of Seller.
NOW, THEREFORE, in consideration of the promises and of the
mutual agreements and covenants contained herein, the parties
hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF SHARES.
1.1 Transfer of Shares. At the Closing (as defined in
Section 1.5 hereof), Seller shall deliver or cause to be
delivered (a) to Mueller certificates representing the Pratt
Shares and the Jones Shares and (b) to U.K. Co. certificates
representing the Barber Shares, in each case duly endorsed in
blank or accompanied by stock powers or stock transfers, as
applicable, duly executed in blank.
1.2 Purchase Price; Payment and Intercompany Adjustments.
The aggregate purchase price for the Pratt Shares, the Jones
Shares and the Barber Shares shall be an amount equal to U.S.
$88,000,000 (as adjusted pursuant to Section 1.4 hereof, the
"Purchase Price"). At the Closing, Buyers shall deliver to
Seller U.S. $88,000,000, plus or minus, as applicable, the
Closing Adjustment Amount (as defined in Section 1.4.1 hereof),
by wire transfer of immediately available funds, to an account or
accounts designated by Seller in writing. Each of the parties
hereto agrees that the Purchase Price shall be allocated among
the Pratt Shares, the Jones Shares and the Barber Shares as set
forth on Schedule 1.2 attached hereto. Prior to the Closing,
Watts and Seller shall (i) satisfy or cause to be satisfied the
British Pounds 1,000,000 loan from EBCO to Watts Industries Europe B.V. and
(ii) cancel, or cause to be canceled, the net amount of all
intercompany debt (other than the loan referenced in clause (i))
between Watts, Seller or any direct or indirect subsidiary of
Watts or Seller (other than the Companies), on the one hand, and
any Company on the other.
1.3 Determination of Inventory. The quantity and valuation
of the inventory of the Companies (the "Inventory") shall be
determined as follows:
(a) The value of the Inventory as of the Closing Date
shall be determined from the books and records of the Companies.
A physical inventory shall commence on the Closing Date and be
completed as promptly as practicable thereafter, the books and
records of the Companies shall be adjusted for Inventory
quantities as of the Closing Date, and such Inventory shall be
valued in accordance with paragraph (b) of this Section 1.3.
Such physical inventory shall be conducted by employees of the
Companies jointly with Seller's representatives at Seller's
expense and Buyers' representatives at Buyers' expense.
(b) The Inventory reflected on the Contract Net Worth
Statement (as defined in Section 1.4.1 hereof), the Estimated Net
Worth Statement (as defined in Section 1.4.1 hereof) and the
Actual Net Worth Statement (as defined in Section 1.4.4 hereof)
shall be valued at the lower of cost or market on a first-in,
first-out basis in accordance with GAAP (as defined in Section
1.6 hereof). Any disagreement regarding the quantity or value of
the Inventory, or both, shall be resolved in the manner and at
the time described in Section 1.4.4 hereof. Subject to the
inventory valuation reserves to be set forth in the Estimated Net
Worth Statement, (i) the Inventory of the Companies is
merchantable and fit for the purpose for which it was produced or
manufactured, (ii) none of such Inventory is slow moving or
obsolete, in each case, in accordance with the policies of the
Companies, the terms of which have been disclosed to Tyco, and
(iii) the Inventory of the Companies is usable or salable in the
ordinary course of business of the Companies as heretofore
conducted.
1.4 Purchase Price Adjustment.
1.4.1 Closing Purchase Price Adjustment. For
purposes of this Agreement, "Net Worth" means, with respect to
any Company, (i) the sum of all assets of such Company minus (ii)
the sum of all liabilities of such Company, calculated in
accordance with GAAP. For purposes of this Agreement, "Estimated
Net Worth" means the estimated Net Worth of the Companies at the
Closing Date based on the combined balance sheets of the
Companies as of the end of the month immediately preceding the
month in which the Closing occurs. The Purchase Price will be
adjusted dollar for dollar on the Closing Date to the extent that
the Estimated Net Worth, as jointly calculated, set forth in a
statement (the "Estimated Net Worth Statement") and agreed to by
Watts and Tyco at least two business days prior to the Closing
Date, differs from the Net Worth of the Companies at March 31,
1996 (the "Contract Net Worth") shown upon the statements set
forth in Schedule 1.4.1 attached hereto and made a part hereof
(the "Contract Net Worth Statement"). For purposes of this
Agreement, the term "Closing Adjustment Amount" means an amount,
whether a positive or negative number, equal to the difference
between the Estimated Net Worth minus the Contract Net Worth.
1.4.2 Post-Closing Purchase Price Adjustment. The
Purchase Price will be adjusted dollar for dollar following the
Closing Date as provided in this Section 1.4.2. For purposes of
this Agreement, the term "Post-Closing Adjustment Amount" means
an amount, whether a positive or negative number, equal to the
difference between the Actual Net Worth (as defined below) minus
the Estimated Net Worth. If the Estimated Net Worth is greater
than the actual Net Worth of the Companies at the Closing Date
(the "Actual Net Worth") as shown upon the Actual Net Worth
Statement as finally determined pursuant to Section 1.4.4 hereof,
then Seller shall pay to Tyco an amount equal to the Post-Closing
Adjustment Amount, and the Purchase Price shall be reduced
accordingly. If the Actual Net Worth is greater than the
Estimated Net Worth, then Tyco shall pay to Seller an amount
equal to the Post-Closing Adjustment Amount, and the Purchase
Price shall be increased accordingly. Payment shall be made in
immediately available funds by the party obligated to make such
payment not more than five business days following the
determination of the Actual Net Worth pursuant to Section 1.4.4
hereof and the amount of such payment shall bear interest from
the Closing Date through and including the date of payment at the
rate published in the Wall Street Journal from time to time as
the commercial bank prime rate (the "Prime Rate"), which rate
shall be adjusted as of the date of each change in the Prime
Rate.
1.4.3 Format for Net Worth Statements. Except for
cash and except for inventory reserves and certain pension assets
and liabilities (as addressed in the letter dated June 18, 1996
from Watts to Tyco), the Actual Net Worth Statement and the
Estimated Net Worth Statement shall be prepared on the same basis
as the Contract Net Worth Statement, in accordance with GAAP (as
defined in Section 1.6 hereof).
1.4.4 Delivery of Actual Net Worth Statement and
Dispute Resolution Procedures. Tyco will furnish to Watts not
later than 45 days after the Closing Date a statement showing the
Actual Net Worth (the "Actual Net Worth Statement"). Tyco will
give Watts and its accountants and attorneys reasonable access to
the premises of the Companies, to their respective books,
records, and work papers, and to the appropriate personnel of
Tyco, Buyers and the Companies for purposes of confirming the
Actual Net Worth Statement. Unless Watts notifies Tyco in
writing that it disagrees with the Actual Net Worth Statement
within 30 days after Watts' receipt thereof, the Actual Net Worth
Statement shall be conclusive and binding on all parties hereto
and not subject to dispute or review. If Watts notifies Tyco in
writing of its disagreement with the Actual Net Worth Statement
within such 30-day period, then Watts and Tyco shall attempt to
resolve their differences with respect thereto within 30 days
after Tyco's receipt of Watts' written notice of disagreement.
Any dispute regarding the Actual Net Worth Statement not resolved
by Watts and Tyco within such 30-day period will be resolved by
an accounting firm mutually acceptable to both parties or, in the
absence of agreement, by an accounting firm of national
reputation selected by lot after eliminating Tyco's principal
outside accountants and Watts' principal outside accountants and
one additional firm designated as objectionable by each of Tyco
and Watts. The parties will engage the accounting firm within
seven days after such 30-day period. The determination by the
accounting firm so selected of the Actual Net Worth Statement and
the Actual Net Worth (with such modifications therein, if any, as
reflect such determination) shall be conclusive and binding upon
all parties hereto and not subject to dispute or review. The
fees and expenses of such accounting firm in acting (in the event
of a dispute) under this Section 1.4.4 shall be shared equally by
Watts and Tyco.
1.5 Closing. Subject to the terms and conditions of this
Agreement, the purchase and sale of the Shares contemplated
hereby shall take place at a closing (the "Closing") to be held
at a location mutually agreed upon by the parties hereto,
beginning at 10:00 A.M. on the date (the "Closing Date") which is
three (3) business days following the later of (a) the expiration
or termination of the applicable waiting period under the HSR Act
(as defined in Section 3.3 hereof) and (b) the satisfaction or
waiver of all other conditions to the obligations of the parties
set forth in Section 6 hereof. Notwithstanding anything in
Section 7.1 hereof to the contrary, in the event all conditions
to Closing have been satisfied or waived on or prior to the
applicable termination date specified therein, then neither party
shall be entitled to exercise its right of termination as
contemplated therein by reason of the fact that this Section 1.5
contemplates that the Closing shall occur three (3) business days
after satisfaction or waiver of all such conditions, such
provision being included for the convenience of the parties and
their counsel in connection with the Closing.
1.6 GAAP Defined. For purposes of this Agreement, "GAAP"
means, with respect to Pratt and Jones, United States generally
accepted accounting principles in accordance with the relevant
Company's past practice and procedure, and with respect to EBCO
and Barber, accounting conventions, standards, principles and
practices generally accepted in the United Kingdom in accordance
with the relevant Company's past practice and procedure, in each
case with the exceptions set forth in Schedule 1.6 hereto,
consistently applied.
1.7 Accounts Receivable and Notes. All notes and accounts
receivable of each of the Companies are reflected properly on its
books and records, are valid and existing receivables which arose
in the ordinary course of business and are subject to no refunds
or other adjustments and to no defenses, rights of set off,
assignments, restrictions, encumbrances, conditions enforceable
by third parties, or counterclaims, are current and collectable,
and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve set forth in the
Contract Net Worth Statement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND WATTS
2.1 Making of Representations and Warranties of Seller and
Watts. Seller represents and warrants to Buyers as set forth in
this Section 2. Watts represents and warrants to Buyers as set
forth in Sections 2.2, 2.4, 2.5, 2.6, 2.7, 2.13, 2.14, 2.17,
2.20, 2.21, 2.22 and 2.27 solely with respect to itself. For
purposes of this Section 2, (a) "Material Adverse Effect" means
any change in, effect on, or circumstance that, individually or
when taken together with all other changes, effects or
circumstances that have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect is
materially adverse to the business, assets (including intangible
assets), results of operations or financial condition of the
Companies, taken as a whole and (b) "Seller's knowledge" or words
of similar import means the actual knowledge of the executive
officers of Watts, Pratt, Jones, Barber and EBCO which are listed
on Schedule 2 attached hereto.
2.2 Organization and Authority of Seller and Watts. Each
of Seller and Watts is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has all necessary corporate power and authority to
enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Seller and Watts, the
performance by Seller and Watts of their respective obligations
hereunder and the consummation by Seller and Watts of the
transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of Seller and Watts. This
Agreement has been duly executed and delivered by Seller and
Watts, and (assuming due authorization, execution and delivery by
each Buyer and Tyco) this Agreement constitutes a legal, valid
and binding obligation of Seller and Watts enforceable against
Seller and Watts in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally
and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
2.3 Organization and Qualification of the Companies. Each
of the Companies is a corporation duly organized, validly
existing and, with respect to Pratt and Jones, in good standing
under the laws of the jurisdiction of its incorporation and each
of the Companies has all necessary corporate power and authority
to own or lease its properties and assets and to conduct its
business as currently conducted. Each Company is duly qualified
as a foreign corporation to do business, and is in good standing,
in the jurisdictions set forth in Schedule 2.3 hereto with
respect to such Company, if any. Except for the jurisdictions
set forth in Schedule 2.3 hereto with respect to each Company, if
any, there is no jurisdiction where the character of the
properties owned, operated or leased or the nature of the
activities conducted by such Company requires such qualification,
except for such failures to qualify which would not have a
Material Adverse Effect. Each of the Companies has delivered to
Buyers complete and correct copies of its charter documents and
by-laws. None of the Companies is in default or in violation of
any provision of its charter or by-laws.
2.4 Capital Stock of the Companies. The Pratt Shares, the
Jones Shares, the Barber Shares and the EBCO Shares constitute
all of the issued and outstanding shares of capital stock or
share capital, as applicable, of Pratt, Jones, Barber and EBCO,
respectively. The Pratt Shares, the Jones Shares, the EBCO
Shares and the Barber Shares have been duly authorized, validly
issued and are fully paid and nonassessable and were not issued
in violation of any preemptive rights. Seller owns the Shares
free and clear of all pledges, security interests, encumbrances,
adverse claims and all other liens, provided that Watts holds one
ordinary share of Barber as nominee for Seller. Barber owns the
EBCO Shares free and clear of all pledges, security interests,
encumbrances, adverse claims and all other liens, provided that
Seller holds one ordinary share of EBCO as nominee for Barber.
There are no outstanding options, warrants, rights, commitments,
preemptive rights, (except with respect to the Barber Shares and
the EBCO Shares) purchase rights, subscription rights, exchange
rights or any other contract or agreement of any kind for the
issuance or sale of, or outstanding securities convertible into,
any additional (a) shares of capital stock of any class of Pratt
or Jones or (b) share capital of Barber or EBCO. There are no
voting trusts, voting agreements, proxies or other agreements,
obligations, instruments or undertakings with respect to the
voting or transfer of the Pratt Shares, the Jones Shares, the
Barber Shares or the EBCO Shares, provided that Watts holds one
ordinary share of Barber as nominee for Seller and Seller holds
one ordinary share of EBCO as nominee for Barber. Except for
EBCO, which is a wholly-owned subsidiary of Barber (provided that
Seller holds one ordinary share of EBCO as nominee for Barber),
no Company has any subsidiaries or ownership interests in other
entities.
2.5 No Conflict. Assuming all consents, approvals,
authorizations and other actions described in Section 2.14 hereof
and Schedule 2.14 hereto have been obtained or taken, the
execution, delivery and performance by Seller and Watts of this
Agreement and each agreement contemplated hereby to which Seller
and/or Watts is a party do not and will not (a) conflict with,
violate or constitute a default under any provision of the
charter documents, memorandum and articles of association or by-
laws, as amended, of Seller, Watts or any of the Companies,
(b) conflict with or violate any federal, state or local law,
rule, statute, regulation or ordinance applicable to Seller or
Watts or any order, writ, injunction or decree of any court or
governmental instrumentality applicable to Seller or Watts,
except as would not have a Material Adverse Effect or (c) result
in any material lien or encumbrance on the Shares or the EBCO
Shares or result in any breach of, or constitute a default under,
or result in any right of acceleration or termination of, any
note, bond, mortgage, indenture, contract, agreement or
instrument to which Seller, Watts, or any Company is a party or
by which any of the assets of the Companies is bound, except as
would not have a Material Adverse Effect or materially impair the
ability of Seller to consummate the transactions contemplated by
this Agreement.
2.6 Financial Statements. Attached hereto as
Schedule 1.4.1 is the Contract Net Worth Statement and the
unaudited income statement of each of Pratt, Jones and Barber (as
consolidated with EBCO) for the nine-month period ended March 31,
1996 (together with the Contract Net Worth Statement, the
"Financial Statements"). The Financial Statements were prepared
consistently using practices, procedures and policies which are
consistent with GAAP. The Financial Statements were prepared for
use in connection with the preparation of the consolidated
financial statements of Watts.
2.7 Absence of Certain Changes.
(a) Except as disclosed in Schedule 2.7 hereto, since
the date of the Contract Net Worth Statement, the business of
each Company has been conducted in the ordinary course and
consistent with past practice.
(b) Except as disclosed in Schedule 2.7 hereto, since
the date of the Contract Net Worth Statement, there has not been
with respect to any Company:
(i) any Material Adverse Effect;
(ii) except in the ordinary course of business,
any material mortgage, pledge, lien, security interest or other
encumbrance placed on any of the properties of such Company which
remains in existence on the date hereof;
(iii) except in the ordinary course of
business, any obligation or liability of any nature, whether
accrued, absolute, contingent or otherwise, including without
limitation any liability for nonperformance or termination of any
contract, incurred by such Company the aggregate value of which
exceeds $250,000;
(iv) except in the ordinary course of business,
any purchase, sale, lease, transfer, assignment, distribution or
other disposition of any of the fixed assets of such Company
having an aggregate value exceeding $250,000;
(v) any damage, destruction or loss affecting the
properties, assets or business of such Company which has had a
Material Adverse Effect;
(vi) except in the ordinary course of business
(A) any establishment of or increase in any bonus, insurance,
severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, any grant
of any stock options, stock appreciation rights, performance
awards or restricted stock awards), stock purchase or other
employee benefit plans, (B) any change in the compensation
payable or to become payable by such Company to any of its
officers or key employees, other than normal merit increases in
accordance with its usual practices, or (C) any bonus payment or
arrangement made to or with any of such officers or employees;
(vii) any material change in accounting
methods or practices, used by such Company, other than such
changes required to be implemented by United States generally
accepted accounting principles or accounting conventions,
standards, principles and practices generally accepted in the
United Kingdom;
(viii) any acquisition by such Company (by
merger, consolidation or acquisition of stock or assets) of any
corporation, partnership or other business organization or
division thereof;
(ix) except in the ordinary course of business or
in connection with the transactions contemplated hereby, any
disposal or lapse of any rights in, or for the use of any of the
Intellectual Property Rights (as defined in Section 2.9 hereof)
or any disclosure to any person not an employee, or other
disposition of, any customer lists by such Company; or
(x) any agreement or understanding, whether in
writing or otherwise, for such Company to take any of the actions
specified in subparagraphs (i) through (ix).
(c) Since the date of the Contract Net Worth
Statement, except as set forth in Schedule 2.7 hereto, neither
Seller nor Watts has with respect to any of the Companies:
(i) authorized for issuance, issued, delivered or
sold any equity securities of any Company, altered the terms of
any outstanding securities issued by any Company or increased the
indebtedness for borrowed money of any Company; or
(ii) declared, paid or set aside for payment any
dividend or other distribution (whether in cash, stock or
property or otherwise) in respect of any of the Shares or the
EBCO Shares, or redeemed, purchased or otherwise acquired any of
the Shares or the EBCO Shares, any securities convertible into or
exchangeable for any Shares or the EBCO Shares, or any options,
warrants or other rights to purchase or subscribe to any of the
foregoing (and no dividends are or will be owed to any holder of
the Shares or the EBCO Shares).
2.8 Contracts. Except as set forth in Schedule 2.8 hereto,
none of the Companies is a party to, or bound by, any contract
under which it is obligated to expend more than $200,000 in any
twelve-month period and which is not subject to cancellation by
it, on not more than 30 days' notice without material penalty.
There is no default by any Company or any state of facts which
with notice or lapse of time or both would constitute a default
by any Company in the performance of any obligation to be paid or
performed under any agreement, contract, lease, mortgage,
indenture, security agreement, loan agreement, note or employment
agreement to which such Company is a party, and none of the
Companies has received written notice of such a default, except
for such defaults which would not have a Material Adverse Effect.
To Seller's knowledge, no party other than any Company is in
material default under any agreement, contract, lease, mortgage,
indenture, security agreement, loan agreement, note or employment
agreement to which any Company is a party.
2.9 Intellectual Property Rights. Except as set forth in
Schedule 2.9 hereto, each Company has the rights to use, free and
clear, to Seller's knowledge, of any lien or other encumbrance,
all material patents, patent applications, trademarks, trademark
applications, service marks, service names, trade names, brand
names, logos, copyrights, licenses, computer software and rights
(collectively, the "Intellectual Property Rights") which are
necessary for the operation of its business. All of the patents,
patent applications, trademarks and trademark applications
included in the Intellectual Property Rights are listed on
Schedule 2.9 hereto. Except as set forth in Schedule 2.9 hereto,
to Seller's knowledge, the use of the Intellectual Property
Rights by the Companies does not conflict with the intellectual
property rights of any other person. Except as set forth in
Schedule 2.9 hereto, there is no claim or demand of any person
pertaining to, or any proceeding pending or, to Seller's
knowledge, threatened, which challenges the rights of any of the
Companies in respect of the Intellectual Property Rights. To
Seller's knowledge, none of the Intellectual Property Rights is
subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator or administrative
agency. To Seller's knowledge, no products currently
manufactured by any of the Companies, infringe any intellectual
property rights held, owned or used by any third party and, to
Seller's knowledge, none of the Intellectual Property Rights
held, owned or used by any of the Companies are being infringed
upon by others or used by others, whether or not such use
constitutes infringement, or has been the subject of dispute,
whether or not resulting in litigation, except for orders,
rulings, decrees, judgments, stipulations, alleged infringements
or disputes set forth in Schedule 2.9 hereto.
2.10 Real Properties. Schedule 2.10 hereto sets forth a
complete and correct list of all real property owned by each of
the Companies and lists any lease pursuant to which each of the
Companies lease real property as lessee or lessor. Each of the
Companies has or will have at the Closing (a) good and valid
title to all of the real property listed in Schedule 2.10 hereto
owned by it, and (b) valid leasehold interests in all real
properties listed in Schedule 2.10 hereto as leased by it, in
each case free and clear of all mortgages, liens, charges,
encumbrances, easements, security interests or title
imperfections other than (i) those listed in Schedule 2.10
hereto, (ii) liens for current taxes, assessments or governmental
charges not yet due and delinquent and (iii) those which do not,
individually or in the aggregate, materially interfere with the
use of the real properties or materially detract from their
value. Each of the Companies enjoys peaceful and undisturbed
possession under all real property leases listed in Schedule 2.10
hereto. The ownership or lease of real property by each of the
Companies or the use thereof, as presently used by each of the
Companies, does not violate any local zoning or similar land use
laws or governmental regulations, except where such violation
would not have Material Adverse Effect. None of the Companies is
in violation of or in noncompliance with any covenant, condition,
restriction, order or easement affecting the real property owned
or leased by each of the Companies, except where such violation
or noncompliance would not have a Material Adverse Effect. There
is no condemnation pending or, to Seller's knowledge, threatened,
affecting the real property owned or, to Seller's knowledge,
leased by any of the Companies.
2.11 Litigation. Except as set forth in Schedule 2.11
hereto, there are no claims, actions, proceedings or
investigations pending or, to Seller's knowledge, threatened,
against Seller or any Company or any of the assets or properties
of Seller or any Company, before any court, arbitrator or
administrative, governmental or regulatory authority or body
which are reasonably likely to have a Material Adverse Effect or
to materially impair the ability of Seller to consummate the
transactions contemplated by this Agreement, and there are no
orders, writs, injunctions or decrees currently in force against
the Companies or the directors, officers, or, to Seller's
knowledge, agents or employees of the Companies with respect to
the conduct of the Companies' respective businesses.
2.12 Labor Matters.
(a) As of the date hereof, there are no pending or, to
the actual knowledge of the executive officers of Watts listed on
Schedule 2.12 hereto, threatened resignations with respect to the
senior management of any Company, nor has any Company received
any notice concerning any prospective resignation with respect to
the senior management of such Company. Except as disclosed in
Schedule 2.12 or as would not have a Material Adverse Effect,
there are no currently pending or, to Seller's knowledge,
threatened, employment contract disputes, labor disturbances,
claims alleging wrongful termination of employment or violations
of local, state or federal employment practice laws (including
without limitation the Fair Labor Standards Act and state wage
and hour or applicable foreign legislation) involving any
employee of any Company.
(b) Except as set forth in Schedule 2.12 hereto, there
are no (i) labor strikes, slowdowns, representation campaigns or
work stoppages with respect to employees of any of the Companies
pending or, to Seller's knowledge, threatened, against or
affecting any of the Companies, (ii) pending formal written
grievances or arbitration proceedings arising out of collective
bargaining agreements to which any of the Companies is a party,
(iii) unfair labor practice complaints pending or, to Seller's
knowledge, threatened, against any of the Companies, or (iv)
collective bargaining agreements or other labor union contracts
applicable to persons currently employed by any of the Companies
and, to Seller's knowledge, there are no activities or
proceedings of any labor union to organize any such employees.
2.13 Employee Benefit Programs.
(a) Schedule 2.13 lists every U.S. Employee Program
(as defined below) and U.K. Employee Program (as defined below)
and every other Employee Program (as defined below) currently
maintained by Watts and in which any employee or former employee
of any Company (or any of their spouses, dependents or
beneficiaries) participates as of the Closing Date.
(b) Each U.S. Employee Program has been administered
in material compliance with its terms and with all filings,
reporting, disclosure, and other requirements of ERISA (as
defined below) and the Internal Revenue Code of 1986, as amended
(the "Code"). Each U.S. Employee Program (together with its
related funding instrument) that is an employee pension benefit
plan is qualified under Section 401 of the Code and the
regulations issued thereunder, and each such U.S. Employee
Program and its related funding instrument have been the subject
of a favorable determination letter issued by the Internal
Revenue Service holding that such U.S. Employee Program and
funding instrument are so qualified and no event has occurred
which would adversely affect the qualified status of such
Employee Program.
(c) Except as set forth on Schedule 2.13 hereto, there
has been no material failure of any Company to comply with any
laws applicable to any Employee Program since the date such
Company was acquired (the "Acquisition Date") by Watts or an
affiliate of Watts. No litigation, arbitration, or governmental
administrative proceeding (or investigation) or other proceeding
(other than routine claims for benefits) is pending or, to
Seller's knowledge, threatened, with respect to any such Employee
Program. Except as set forth on Schedule 2.13 hereto, to
Seller's knowledge, there was no material failure by any Company
to comply with any laws applicable to any Employee Program prior
to the Acquisition Date.
(d) Except as set forth on Schedule 2.13 hereto, no
Company has incurred any liability under Title IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
which has not been paid in full prior to the Closing. There is
no "accumulated funding deficiency" (whether or not waived) with
respect to any U.S. Employee Program which is subject to Section
412 of the Code or Section 302 of ERISA. With respect to any
U.S. Employee Program, except as set forth on Schedule 2.13
hereto, there has since the Acquisition Date been no (nor will
there be any as a result of the transaction contemplated by this
Agreement) (i) "reportable event," within the meaning of Section
4043 of ERISA or the regulations thereunder, for which the 30-day
notice requirement is not waived under 29 C.F.R. Part 2615 or
(ii) prohibited transaction (as defined in Section 4975(c)(i) of
the Code or Section 406 of ERISA) for which no exemption exists
under Sections 4975(d) or 4975(c)(2) of the Code or Section 408
of ERISA. To Seller's knowledge, except as set forth on
Schedule 2.13 hereto, no event of a type described in the
preceding sentence occurred with respect to any U.S. Employee
Program prior to the Acquisition Date. Since the Acquisition
Date, there has been no (nor will there be any as a result of the
transaction contemplated by this Agreement) event or condition
which presents a material risk of plan termination or any other
event that may cause any Company to have a lien imposed on its
assets or incur a liability under Title IV of ERISA, including
any liability which may result due to an "accumulated funding
deficiency" and would have a Material Adverse Effect. To
Seller's knowledge, except as set forth on Schedule 2.13 hereto,
no event of a type described in the preceding sentence occurred
prior to the Acquisition Date which would have a Material Adverse
Effect.
(e) Except as set forth on Schedule 2.13 hereto, no
Company since the Acquisition Date (i) has maintained any
Multiemployer Plan or (ii) except with respect to severed
employees who receive continuation of medical, dental and life
insurance coverage pursuant to severance agreements, has ever
provided health care or any other non-pension benefits to any
employees, their spouses, dependents or beneficiaries after their
employment is terminated (other than as required by Part 6 of
Subtitle B of Title I of ERISA) or has ever promised to provide
or is otherwise liable for such post-termination benefits. To
Seller's knowledge, prior to the Acquisition Date no Company
(i) maintained a Multiemployer Plan or (ii) provided health care
or any other non-pension benefits to any employees, their
spouses, dependents or beneficiaries after their employment is
terminated (other than as required by Part 6 of Subtitle B of
Title I of ERISA) or ever promised to provide such
post-termination benefits.
(f) In respect to each U.K. Employee Program, each
such Program that is an occupational pension scheme is approved
and in full compliance with the Pension Scheme Office and that
pension scheme accounts have been audited up to November 30,1994
and have not been qualified in any way.
(g) In respect to the EBCO Pension Scheme, there is no
right to receive an unreduced pension before age 65 for service
prior to the May 17, 1990 for male members in service on November
7, 1987 who terminated service prior to September 1, 1995.
(h) The Companies have no (i) employees located
outside of the U.S. and the U.K. and (ii) Employee Programs
covering employees outside of the U.S. and the U.K.
(i) Except as provided in Schedule 2.13 hereto, no
additional benefits or payments are due or payable at any time
under any Employee Program simply as a result of the transactions
contemplated by this Agreement.
(j) For purposes of this Section 2.13 and Section 8
hereof:
(i) "Employee Program" means (A) all employee
benefit plans within the meaning of Section 3(3) of ERISA,
including, but not limited to, multiple employer welfare
arrangements (within the meaning of Section 3(40)) of ERISA,
plans to which more than one unaffiliated employer contributes
and employee benefit plans (such as foreign or excess benefit
plans) which are not subject to ERISA; and (B) all stock option
plans, severance pay policies or agreements, employment
agreements, deferred compensation agreements, and all other
employee benefit plans, agreements, and arrangements not
described in (A) above. In the case of an Employee Program
funded through an organization described in Section 501(c)(9) of
the Code, each reference to such Employee Program shall include a
reference to such organization.
(ii) An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has
promised to provide) benefits under such Employee Program, or has
any obligation (by agreement or under applicable law) to
contribute to or provide benefits under such Employee Program, or
if such Employee Program provides benefits to or otherwise covers
employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii) An entity is an "Affiliate" of any
Company if, at the relevant time, it would have been considered a
single employer with such Company under Section 4001(b) of ERISA
or part of the same "controlled group" as such Company for
purposes of Section 302(d)(8)(C) of ERISA.
(iv) "Multiemployer Plan" means a (pension or non-
pension) employee benefit plan to which more than one employer
contributes and which is maintained pursuant to one or more
collective bargaining agreements.
(v) "U.S. Employee Program" means an Employee
Program sponsored by Pratt or Jones which covers U.S. employees.
(vi) "U.K. Employee Program" means an Employee
Program sponsored by EBCO or Barber which covers U.K. employees.
2.14 Consents. The execution and delivery by Seller and
Watts of this Agreement and each agreement contemplated hereby to
which Watts and/or Seller is a party do not, and the performance
of this Agreement and each such other agreement by Seller and
Watts will not, require any notice to, filing with, authorization
of, exemption by, or consent of, any person, entity or public or
governmental authority except, (a) as described in Schedule 2.14
hereto; (b) the notification requirements of the HSR Act and
(c) where failure to obtain such consent, exemption or
authorization or to make such notice or filing would not prevent
Seller from performing its obligations under this Agreement and
would not have a Material Adverse Effect.
2.15 Compliance with Laws. Except as set forth on Schedule
2.15 attached hereto, none of the Companies is in violation of
any law, statute, ordinance, order, rule or regulation applicable
to it or its properties, except for violations the existence of
which would not have a Material Adverse Effect. The
representation and warranty contained in this Section 2.15 does
not apply to any Environmental Law (as defined in Section 2.16
hereof).
2.16 Environmental Matters. Except (i) as set forth in
Schedule 2.16 attached hereto and made a part hereof and (ii) in
all cases as, in the aggregate have not and could not reasonably
be expected to have a Material Adverse Effect, to Seller's
knowledge: (a) each of the Companies is, and at all times has
been, in compliance with all federal, state, local and foreign
laws or any regulation, code, plan order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved
thereunder relating to the pollution or protection of the
environment, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants or
hazardous or toxic materials or wastes into ambient air, surface
water, ground water or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or
hazardous or toxic materials or waste (collectively,
"Environmental Laws"); (b) each of the Companies is in
compliance in all respects with all limitations, restrictions,
conditions, prohibitions, requirements, obligations, schedules
and timetables contained in any Environmental Law; (c) each of
the Companies has obtained all permits, licenses, certificates
and other authorizations and approvals which are required to
operate the Companies' businesses under any Environmental Laws
(collectively, the "Environmental Permits") and is in compliance
in all respects as required by the Environmental Permits, and all
of the Environmental Permits are, and on the Closing Date will
be, in full force and effect, and there does not exist as of the
date of this Agreement, and on the Closing Date there will not
exist, under any of the Environmental Permits or any compliance
schedule, any default, event of default, or event which, with
notice or lapse of time or both, would constitute an event of
default; (d) except to the extent any of the Companies is
required to notify governmental or regulatory authorities of the
transactions contemplated by this Agreement or as required by any
such governmental or regulatory authority to take any action,
each of the Companies is able to transfer all Environmental
Permits necessary for Buyers to continue, after the Closing, all
operations relating in any way to the conduct of each of the
Companies' businesses prior to the Closing; (e) each of the
Companies has disposed of or arranged for disposal of hazardous
waste or other material in a manner that would not reasonably be
expected to result in imposition of liability under any
Environmental Law; (f) no underground storage tanks exist or
have existed in or on the real property of any of the Companies;
(g) no liens under Environmental Laws currently in effect exist
with respect to the assets used in the business of any of the
Companies or necessary for the conduct thereof; (h) there is no
civil, criminal or administrative action, demand, claim, hearing,
notice or demand letter, notice of violation, investigation, or
proceeding pending or, threatened against any of the Companies
relating in any way to Environmental Laws currently in effect;
(i) as of the date of this Agreement, none of the Companies is
aware of nor has any Company received notice of any past or
present violations of Environmental Laws or any event, condition,
circumstance, activity, practice, incident, action or plan which
is reasonably likely to interfere with or prevent continued
compliance with or which would give rise to any common law or
statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, against any of the Companies based on
or resulting from the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment, of any
pollutant, contaminant or hazardous or toxic material or waste;
(j) no part of any of the Companies' real property, excluding
the structures erected thereon, but including the soil, subsoil,
and groundwater, contains any asbestos, urea formaldehyde foam
insulation or polychlorinated biphenyls ("PCBs"); and (k) no part
of the structures erected on the real property of any of the
Companies contain any asbestos or urea formaldehyde foam
insulation.
2.17 Tax Matters. For purposes of this Agreement, "Tax or
Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, stamp, customs
duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, real property, personal
property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any
kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not; and "Tax Return" means any
return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof. Except
as otherwise disclosed on Schedule 2.17 hereto, each Company has
filed or been included in or will file or be included in all Tax
Returns that it is required to file on or before the Closing
Date. All Taxes owed by each Company (whether or not shown on
any Tax Return) for periods, or portions of periods, ending on or
before the Closing Date have been paid, except where the failure
to pay would not have a Material Adverse Effect and except for
such Taxes as are accrued for or reserved against on the Contract
Net Worth Statement as adjusted through the Closing Date as
reflected on the Actual Net Worth Statement. None of the
Companies is the beneficiary of any extension of time within
which to file any Tax Return. Except as set forth on
Schedule 2.17 hereto, none of the Companies is a party to any
pending action or proceeding, nor, to Seller's knowledge, is any
such action or proceeding threatened by any governmental
authority, for the assessment or collection of any Taxes, and no
claim for the assessment or collection of any Taxes has been
asserted against any of the Companies, which has not been settled
with all amounts due having been paid or is being contested in
good faith. Each of the Companies has withheld, and will
withhold prior to the Closing, proper and accurate amounts from
employees of each of the Companies in compliance in all material
respects with all withholding and similar provisions of any and
all applicable federal, foreign, state, and local laws, statutes,
codes, ordinances, rules and regulations.
2.18 Permits and Approvals. Except as set forth in Schedule
2.18 hereto, each Company has all permits, registrations,
licenses, franchises, certifications, code approvals and other
approvals (collectively, "Approvals") necessary to conduct its
business, except for the absence of Approvals which would not
have a Material Adverse Effect.
2.19 Government Contracts. Except as set forth in
Schedule 2.19 hereto, no Company has been, nor as a result of the
consummation of the transactions contemplated by this Agreement
(without giving any consideration to the identity of Tyco or
Buyers) will it be, suspended or debarred from bidding on
contracts or subcontracts for any agency of the United States
Government including any subdivision thereof, or any state,
county or municipal entity nor, to Seller's knowledge, has such
suspension or debarment been threatened or action for suspension
or debarment been commenced. Notwithstanding the foregoing, no
representation or warranty is made in this Section 2.19 with
respect to any Company's failure to be included in or removed
from any of the aforementioned entities' specifications.
2.20 Affiliate Contracts. Except as set forth in
Schedule 2.20 hereto, there are no contracts between or among any
of the Companies on the one hand, and Watts, Seller or any of
their subsidiaries on the other.
2.21 Brokers. Except for Schroder Wertheim & Co.
Incorporated, the fees of which shall be paid by Watts, no
broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Watts, Seller or any of
their respective affiliates.
2.22 Insurance. Schedule 2.22 hereto sets forth a complete
and correct list and description of the policies of insurance in
effect in accordance with their terms on the date hereof covering
the assets and operations of each of the Companies. Except in
connection with changes in insurance carriers in the ordinary
course of business, none of the Companies has been denied
insurance or suffered the cancellation of any insurance in the
past five years.
2.23 Product Warranty. All products sold, leased or
delivered prior to the Closing Date by any of the Companies
("Company Products") have been in conformity with all applicable
contractual commitments and all express warranties, except where
the failure to conform would not have a Material Adverse Effect.
The Companies do not have any warranty or backcharge liability
for (and to Seller's knowledge, there is no basis for any present
or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any Company giving
rise to any such warranty or backcharge liability for)
replacement or repair of Company Products in excess of the
Companies' combined historical warranty and backcharge expense as
a percentage of the Companies' combined trailing twelve-month
sales. Schedule 2.23 hereto includes copies of the standard
terms and conditions of sale for each Company (containing
applicable guaranty, warranty and indemnity provisions), provided
that no representation or warranty is made that such standard
terms and conditions are used in every sales transaction of the
Companies.
2.24 Powers of Attorney. To Seller's knowledge, except as
set forth in Schedule 2.24 hereto, there are no powers of
attorney executed on behalf of any of the Companies.
2.25 Bank Accounts; Safe Deposit Boxes. Schedule 2.25
hereto sets forth a complete and correct list of each account
with any bank, trust company, securities broker or other
financial institution with which any of the Companies has any
account and all safe deposit boxes maintained by any of the
Companies, and the name of each person authorized to draw thereon
or to have access thereto.
2.26 Guaranties. To Seller's knowledge, except as set forth
in Schedule 2.26 hereto, none of the Companies is a guarantor for
any liability or obligation (including indebtedness) of any third
party.
2.27 Certain Business Relationships with the Companies.
Except as set forth in Schedule 2.27 hereto, none of the
directors or officers of Seller, Watts or any of the Companies,
is or has been involved in any business arrangement or
relationship with any of the Companies within the past 12 months.
2.28 Restrictions on Business Activities. Except for this
Agreement or as set forth in Schedule 2.28 hereto, to Seller's
knowledge, there is no agreement, judgment, injunction, order or
decree of any nature binding upon any of the Companies which has
or could reasonably be expected to have the effect of prohibiting
or impairing any business practice of any of the Companies,
acquisition of property by any of the Companies, or the conduct
of business by any of the Companies as currently conducted by any
of the Companies.
2.29 Non-Foreign Status. Seller is not a foreign person
within the meaning of Section 1445(f) of the Code.
2.30 Tianjin Tanggu Watts Valve Company Ltd.
(a) Seller is a holder of sixty percent (60%) of the
interest in an equity joint venture limited liability company in
the People's Republic of China ("PRC") established on June 27,
1994 known as the "Tianjin Tanggu Watts Valve Company Limited"
("TTWVC") and formed in accordance with the "Law of the People's
Republic of China on Joint Ventures Using Chinese and Foreign
Investment."
(b) Seller has entered into a Technology License
Contract dated June 27, 1994, with TTWVC providing for, among
other things, the grant of a non-exclusive license to TTWVC to
use Licensed Know-How (as hereinafter defined).
(c) Except as may be provided for by the laws,
regulations and dictates of the government of the PRC, Seller has
general management authority over TTWVC, which includes, but is
not limited to, the control over the use by TTWVC of Licensed
Know-How.
(d) Technical knowledge which pertains to the design,
manufacture, marketing and application of certain products
generally identified on Schedule 2.30 attached hereto was
licensed to TTWVC (the "Licensed Know-How") by Seller pursuant to
the Technology License Contract referenced in clause (b) above.
(e) TTWVC is currently only using that Pratt portion
of the Licensed Know-How relating to the "E-Lok" seat design (the
subject of expired U.S. Patent No. 3,958,314, issued May 25,
1976) and to AWWA flanged butterfly valves.
(f) Except with respect to the Licensed Know-How
relating to the (i) "E-Lok" seat design, (ii) AWWA flanged
butterfly valves, which will only be used by TTWVC to satisfy
orders from Pratt pursuant to the supply agreement contemplated
by Section 3.4(c) hereof and (iii) non-Pratt related products,
TTWVC neither currently uses nor currently has any plans or
intentions to use in the future any of the Pratt related Licensed
Know-How, subject to the PRC government's regulatory approval in
connection with the modification of the Technology License
Agreement as specified in Section 3.4(d) hereof.
(g) Seller has entered into a Trademark License
Contract dated June 27, 1994 with TTWVC providing for, among
other things, the grant of a non-exclusive license to TTWVC of
the "Pratt" and "Triton" marks, which are either registered in
the PRC in the name of Seller or for which applications have been
filed in the PRC in the name of Seller ("PRC Trademarks"). The
PRC Trademarks applications are pending in the PRC, and subject
to and following receipt of the PRC government's regulatory
approval in connection with the modification of the Trademark
License Contract as specified in Section 3.4(d) hereof, such
pending applications or then registered PRC Trademarks shall be
assigned to Pratt as specified in Section 3.4(d) hereof. The PRC
Trademarks are not currently part of the Intellectual Property
Rights subject to Section 2.9 hereof. TTWVC neither currently
uses nor currently has any plans or intentions to use in the
future any of the PRC Trademarks or the "Pratt" or "Triton"
marks, subject to the PRC government's regulatory approval in
connection with the modification of the Trademark License
Contract as specified in Section 3.4(d) hereof.
2.31 Jones' Payments. To Seller's knowledge, all payment
obligations of Jones to Houston Jones Locke and Joan Tiberg are
as set forth on Schedule 8.7 hereto.
SECTION 3. COVENANTS OF SELLER AND WATTS
3.1 Making of Covenants and Agreements. Seller and Watts
each hereby makes the covenants and agreements set forth in this
Section 3.
3.2 Conduct of Business Prior to the Closing.
(a) Unless Buyers otherwise agree in writing and
except as otherwise set forth herein or in the Schedules hereto,
between the date of this Agreement and the Closing Date, Seller
will (i) cause the Companies to conduct their respective
businesses only in the ordinary course, (ii) use commercially
reasonable efforts to preserve substantially intact the business
organization of the businesses of the Companies, (iii) use
commercially reasonable efforts to keep available to Buyers the
services of the present officers and key employees of the
Companies and (iv) use commercially reasonable efforts to
preserve the current relationships of the Companies with their
respective customers, suppliers and distributors.
(b) Unless Buyers otherwise agree in writing and
except as expressly provided in this Agreement or in the
Schedules hereto, between the date of this Agreement and the
Closing Date, Seller will cause each Company to:
(i) refrain from making any purchase, sale or
disposition of any asset or property other than in the ordinary
course of business and from mortgaging, pledging, subjecting to a
lien or otherwise encumbering any of its properties or assets
other than in the ordinary course of business;
(ii) refrain from incurring any contingent
liability as a guarantor or otherwise with respect to the
obligations of others except in the ordinary course of business,
and from incurring any other contingent or fixed obligations or
liabilities except in the ordinary course of business;
(iii) refrain from amending its charter and by-
laws or making any changes to its authorized or issued capital
stock;
(iv) refrain from declaring, setting aside or
paying any dividend, making any other distribution in respect of
its capital stock or making any direct or indirect redemption,
purchase or other acquisition of its stock;
(v) refrain from establishing or increasing any
bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation
rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plans, or otherwise increase
the compensation payable to or to become payable to the officers
or key employees of such Company, as applicable, except in any
case described above in the ordinary course of business or as may
be required by law;
(vi) except for a collective bargaining agreement
with respect to employees of Jones, the essential terms and
negotiation parameters of the impending contract renewal for
which are described in Schedule 3.2(b)(vi) hereto, refrain from
entering into any employment agreement with any of the employees
of such Company, as applicable;
(vii) refrain from severing or terminating any
management or executive employee of any of the Companies except
for cause in the ordinary course of business;
(viii) refrain from making any significant
change in the nature or organization of its business;
(ix) refrain from making any change in its
accounting methods or practices other than such changes required
to be implemented under United States generally accepted
accounting principles or, in the case of Barber and EBCO,
accounting conventions, standards, principles and practices
generally accepted in the United Kingdom;
(x) refrain from discontinuing or ceasing to
operate any part of its business; and
(xi) refrain from entering into an agreement or
understanding, whether in writing or otherwise, to do any of the
foregoing.
Notwithstanding anything herein to the contrary, Seller may,
in its sole discretion, prior to the Closing, take actions
necessary to cause the liabilities identified on Schedule 3.2A
attached hereto (the "Retained Liabilities") to be transferred
out of the Companies or otherwise paid, discharged or satisfied.
3.3 Consents and Approvals. Except as otherwise provided
in this Agreement, Seller shall use commercially reasonable
efforts to obtain all necessary authorizations, orders, consents
and approvals to the performance of its obligations under this
Agreement and the transactions contemplated hereby. As soon as
practicable after the date hereof, except as otherwise provided
in this Agreement, Seller shall make or file all filings,
document submissions, applications, statements and reports to all
foreign, federal or state government agencies or entities that
are required to be made prior to the Closing Date by or on behalf
of Seller pursuant to any applicable statute, rule or regulation
in connection with this Agreement and the transactions
contemplated hereby. Seller agrees to make an appropriate filing
of the Notification and Report Form pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations thereunder ("HSR Act") with respect
to the transactions contemplated hereby within five business days
after the date hereof and to supply promptly any additional
information and documentation that may be requested pursuant to
the HSR Act. Seller will request early termination of the
waiting period under the HSR Act. Seller shall promptly inform
Buyers of any inquiries or communications from or to such
governmental agencies and provide copies of any written
communications relating thereto. Notwithstanding anything herein
to the contrary, Seller shall in no event be required to make
expenditures or divestitures or incur obligations (other than
ordinary out-of-pocket expenditures) in order to secure consents
and approvals to the transactions contemplated hereby, including,
without limitation, under the HSR Act. Buyers' sole recourse in
the event of a failure to obtain any such consents and approvals
shall be either to waive the relevant condition to the extent
permitted hereunder or to terminate this Agreement pursuant to
the terms hereof. Seller shall not take any action which would
have the effect of delaying, impairing or impeding the receipt of
any required authorizations, consents, orders or approvals.
3.4 Tianjin Tanggu Watts Valve Company Ltd.
(a) Except as otherwise provided herein, Seller shall
cause TTWVC not to use in any manner whatsoever the Pratt related
Licensed Know-How.
(b) Prior to the Closing, Seller and Pratt will amend
their Technology License Contract dated June 27, 1994 on mutually
acceptable terms and conditions for the licensing by Pratt to
Seller of the (a) "E-Lok" seat design for use in TTWVC products
and (b) technology for AWWA flanged butterfly valves to be
produced by TTWVC for Pratt pursuant to the supply agreement
contemplated by clause (c) below.
(c) Prior to the Closing, Seller shall cause TTWVC to
enter into a supply agreement with Pratt on mutually acceptable
terms and conditions by which Pratt may purchase AWWA flanged
butterfly valve castings from TTWVC and will allow TTWVC to
retain for the sole and exclusive benefit of Pratt the patterns
and drawings used to manufacture such castings.
(d) Prior to the Closing, Seller shall use
commercially reasonable efforts to (i) modify its Technology
License Contract with TTWVC so as to remove any Intellectual
Property Rights or any other rights of any kind with respect to
Pratt (except for Intellectual Property Rights relating to the
"E-Lok" seat design and AWWA flanged butterfly valves as provided
for herein), (ii) modify its Trademark License Contract with
TTWVC to remove the license of the "Triton" and "Pratt" Chinese
trademark applications or if then applicable, the trademark
registrations, and (iii) obtain any necessary regulatory
approvals in connection with such modifications. Notwithstanding
the foregoing, Seller will not effect any of such modifications
or approvals prior to Closing. Seller shall cause TTWVC to
refrain from any use of the PRC Trademarks or the "Pratt" or
"Triton" marks, subject to the PRC government's regulatory
approval in connection with the modification of the Trademark
License Contract as specified in Section 3.4(d) hereof. Promptly
following receipt of appropriate PRC government approvals and
modification of the Trademark License Contract between Seller and
TTWVC, Seller shall assign to Pratt the pending "Triton" and
"Pratt" Chinese trademark applications, or registrations, if then
in existence.
(e) Seller shall continue to use commercially
reasonable efforts relating to the matters in subsection (d)
above after the Closing for a commercially reasonable period of
time.
3.5 Availability of Records and Personnel. After the
Closing, Watts and Seller shall make available, after prior
written notice at any time during normal business hours, to
Buyers and their affiliates as reasonably requested by any such
party or any taxing authority all information, records or
documents relating to the business of the Companies which may
have been retained by Watts and/or Seller in respect of all
periods prior to Closing and shall preserve all such information,
records and documents until the later of six years after the
Closing or the expiration of all statutes of limitations or
extensions thereof. Watts and Seller shall also make available
to Buyers and their affiliates, as reasonably requested by any
such party, personnel responsible for preparing or maintaining
such information, records and documents, both in connection with
tax and employee benefit matters as well as litigation. Prior to
destroying any records related to the businesses of the Companies
as conducted prior to the Closing, Watts and Seller shall notify
Buyers of their intent to destroy such records, and Seller and
Watts will permit Buyers to retain any such records if they wish
to do so.
3.6 Non-Competition Agreement. On or prior to the Closing
Date, Seller and Watts shall enter into a non-competition
agreement with Tyco and Buyers substantially in the form attached
hereto as Exhibit A.
3.7 Further Action. Seller shall execute and deliver such
documents and take such further actions as may be reasonably
required to carry out the provisions hereof and give effect to
the transactions contemplated hereby.
3.8 Waiver of Preemptive Rights. Each of Watts, Seller and
Barber, as the holders of the EBCO Shares and the Barber Shares,
shall execute prior to Closing such waivers of preemptive rights
as may be reasonably requested by Buyers with respect to the sale
of the EBCO Shares and the Barber Shares pursuant to this
Agreement.
3.9 Use of Pratt Name. Except as otherwise provided in
this Agreement and the agreements contemplated hereby, from and
after the Closing neither Watts nor Seller shall, and Watts and
Seller shall cause their respective affiliates not to, use the
"Pratt," "Jones" or "EBCO" names (collectively, the "Company
Names") in any manner in their respective businesses. Except as
otherwise provided in this Agreement and the agreements
contemplated hereby, Watts will and will cause each of its
affiliates to, immediately following the Closing Date, remove or
obliterate all the Company Names from their respective printed
materials, and not to put into use after the Closing Date any
such items and materials not in existence on the Closing Date
that bear any Company Name or any name, mark or logo similar
thereto. Notwithstanding the foregoing, Watts and its affiliates
may, for a period of 180 calendar days following the Closing
Date, use any printed materials existing on the Closing Date that
bear any Company Name or any name, mark or logo similar thereto,
where the removal of any Company Name or any such similar name,
mark or logo would be impractical; provided, however, that Watts
shall place, or cause to be placed, a stamp, mark or other
notation on any such item that identifies each Company as an
affiliate or business of Tyco (and not of Watts or Seller) as
soon as reasonably practicable after the Closing.
3.10 Certain Filings. Without the prior written consent of
Tyco, neither Watts, Seller nor any of their respective
affiliates or representatives shall notify, make any filing with
or otherwise communicate with the U.K. Office of Fair Trading
with respect to the transactions contemplated hereby.
3.11 Pratt Existence. Seller and Watts shall use
commercially reasonable efforts to cause the Former Pratt
Stockholders (as defined in Section 5.8 hereof) to waive the
requirement under Section 1.10 of the Agreement and Plan of
Merger dated as of August 22, 1991 by and among Watts, Pratt and
the other parties named therein that Pratt maintain its corporate
existence and be operated as a separate consolidated subsidiary.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYERS AND TYCO.
4.1 Representations and Warranties of Buyers and Tyco.
Each Buyer and Tyco represent and warrant to Seller and Watts as
set forth in this Section 4.
4.2 Organization and Authority. Mueller is a corporation
duly organized and validly existing in good standing under the
laws of the State of Illinois, U.K. Co. is a corporation duly
organized and validly existing under the laws of England and
Wales and Tyco is a corporation duly organized and validly
existing in good standing under the laws of the Commonwealth of
Massachusetts and each has all necessary corporate power and
authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by Mueller, U.K. Co. and Tyco, the performance by
Mueller, U.K. Co. and Tyco of their respective obligations
hereunder and the consummation by Mueller, U.K. Co. and Tyco of
the transactions contemplated hereby have been duly authorized by
all requisite corporate action on the part of Mueller, U.K. Co.
and Tyco. This Agreement has been duly executed and delivered by
Mueller, U.K. Co. and Tyco, and (assuming due authorization,
execution and delivery by Watts and Seller) this Agreement
constitutes a legal, valid and binding obligation of Mueller,
U.K. Co. and Tyco enforceable against Mueller, U.K. Co. and Tyco
in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject,
as to enforceability, to the effect of general principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
4.3 No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 4.4 hereof
and Schedule 4.4 hereto have been obtained or taken, the
execution, delivery and performance by Mueller, U.K. Co. and Tyco
of this Agreement and each agreement contemplated hereby to which
Mueller, U.K. Co. and/or Tyco is a party do not and will not
(a) conflict with or violate any provision of the charter
documents, memorandum and articles of association or by-laws, as
amended, of Mueller, U.K. Co. or Tyco, (b) conflict with or
violate any federal, state or local law, regulation or ordinance
applicable to Mueller, U.K. Co. or Tyco or any order, writ,
injunction or decree of any court or governmental instrumentality
applicable to Mueller, U.K. Co. or Tyco or (c) result in any
breach of, or constitute a default under, or result in any right
of acceleration or termination of, any note, bond, mortgage,
indenture, contract, agreement or instrument to which Mueller,
U.K. Co. or Tyco is a party or by which any of the assets of
Mueller, U.K. Co. or Tyco is bound, except as would not
materially impair the ability of Mueller, U.K. Co. or Tyco to
consummate the transactions contemplated by this Agreement.
4.4 Consents. The execution and delivery by Buyers and Tyco
of this Agreement and each agreement contemplated hereby to which
Tyco and/or either Buyer is a party do not, and the performance
of this Agreement and each such other agreement by Buyers and
Tyco will not, require any notice to, filing with, authorization
of, exemption by, or consent of, any person, entity or public or
governmental authority except (a) as described in Schedule 4.4
hereto; (b) the notification requirements of the HSR Act and (c)
where failure to obtain such consent, exemption or authorization
or to make such notice of filing would not prevent Mueller, U.K.
Co. or Tyco from performing their respective obligations under
this Agreement and would not materially impair the ability of
Mueller, U.K. Co. or Tyco to consummate the transactions
contemplated hereunder.
4.5 Litigation. There are no claims, actions, proceedings
or investigations pending or, to the knowledge of each of
Mueller, U.K. Co. and Tyco, threatened against any of Mueller,
U.K. Co. or Tyco or any of the assets or properties of Mueller,
U.K. Co. or Tyco before any court, arbitrator or administrative,
governmental or regulatory authority or body which, individually
or in the aggregate, are reasonably likely to have a material
adverse effect on Mueller, U.K. Co. or Tyco or to materially
impair the ability of Mueller, U.K. Co. or Tyco to consummate the
transactions contemplated by this Agreement.
4.6 Private Placement. Each of Mueller, U.K. Co. and Tyco
understands that (a) the offering and sale of the Shares
hereunder is intended to be exempt from the registration
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and (b) there is no existing pubic or other
market for the Shares and there can be no assurance that Buyers
will be able to sell or dispose of the Shares. The Shares are
being acquired by Buyers for their own account and without a view
to the public distribution of the Shares or any interest therein.
Mueller understands and agrees that it may not sell or dispose of
any of the Pratt Shares or the Jones Shares other than pursuant
to a registration statement or pursuant to an exemption from the
registration requirements of the Securities Act.
4.7 Brokers. Except for Donaldson, Lufkin & Jenrette, the
fees of which shall be paid by Tyco, no broker, finder or
investment broker is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or
on behalf of Tyco, Buyers or any of their affiliates.
SECTION 5. COVENANTS OF BUYERS AND TYCO.
5.1 Making of Covenants and Agreements. Each Buyer and
Tyco hereby makes the covenants and agreements set forth in this
Section 5.
5.2 Consents and Approvals. Buyers shall use commercially
reasonable efforts to obtain all necessary authorizations,
orders, consents and approvals to the performance of their
obligations under this Agreement and the transactions
contemplated hereby. As soon as practicable after the date
hereof, Buyers shall make or file all filings, document
submissions, applications, statements and reports to all foreign,
federal or state government agencies or entities which are
required to be made prior to the Closing Date by or on behalf of
either Buyer pursuant to any applicable statute, rule or
regulation in connection with this Agreement and the transactions
contemplated hereby. Buyers agree to make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act with
respect to the transactions contemplated hereby within five
business days after the date hereof and to supply promptly any
additional information and documentation that may be requested
pursuant to the HSR Act. Buyers will request early termination
of the waiting period under the HSR Act in connection with the
transactions contemplated hereby. Tyco will pay all of its and
Buyers' fees required under the HSR Act in connection with the
transactions contemplated hereby, including the filing fees
required under the HSR Act. Tyco shall promptly inform Seller of
any inquiries or communications from any such governmental
agencies and provide copies of any written communication relating
thereto. Notwithstanding anything herein to the contrary,
neither Tyco nor either Buyer shall in any event be required to
make expenditures or divestitures or incur obligations (other
than ordinary out-of-pocket expenditures) in order to secure
consents and approvals to the transactions contemplated hereby,
including, without limitation, under the HSR Act. Watts' and
Seller's sole recourse in the event of a failure to obtain any
such consents and approvals shall be either to waive the relevant
condition to the extent permitted hereunder or to terminate this
Agreement pursuant to the terms hereof. Neither Tyco nor Buyers
shall take any action which would have the effect of delaying,
impairing or impeding the receipt of any required authorizations,
consents, orders or approvals.
5.3 Availability of Records and Personnel. After the
Closing, Mueller, U.K. Co. and Tyco shall make available, after
prior written notice at any time during normal business hours, to
Watts, Seller and their respective affiliates as reasonably
requested by any such party or any taxing authority all
information, records or documents relating to the business of the
Companies and related personnel in respect of all periods prior
to the Closing and shall preserve all such information, records
and documents until the later of six years after the Closing or
the expiration of all statutes of limitations or extensions
thereof. Tyco, Mueller and U.K. Co. shall also make available to
Watts, Seller and their respective affiliates, as reasonably
requested by any such party, personnel responsible for preparing
or maintaining such information, records and documents, both in
connection with tax and employee benefit matters as well as
litigation. Prior to destroying any records related to the
businesses of the Companies as conducted prior to the Closing,
each of Tyco, Mueller and U.K. Co. shall notify Seller and Watts
of its intent to destroy such records, and Tyco, Mueller and U.K.
Co. will permit Seller and Watts to retain any such records if
they wish to do so.
5.4 Confidentiality. The terms of the letter agreement
dated as of April 29, 1996 (the "Confidentiality Agreement")
between Tyco and Schroder Wertheim & Co. Incorporated on behalf
of Watts are hereby incorporated herein by reference and shall
continue in full force and effect until the Closing, or for a
period of five (5) years from the date of this Agreement if the
Closing does not take place for any reason.
5.5 Use of Names. No interest in or right to use the name
"Watts Industries", "Watts" or "Watts Europe" or any derivation
thereof or any logo, trademark or trade name of Watts, Seller or
any of their respective subsidiaries or affiliates (other than
the Companies) (collectively, the "Retained Names and Marks") is
being transferred to Buyers pursuant to the transactions
contemplated hereby and any rights of the Companies to use such
Retained Names and Marks shall terminate as of the Closing Date.
Each Buyer will, immediately following the Closing Date, cause
each Company to remove or obliterate all the Retained Names and
Marks from their respective signs and printed materials, and not
to put into use after the Closing Date any such items and
materials not in existence on the Closing Date that bear any
Retained Name or Mark or any name, mark or logo similar thereto.
Notwithstanding the foregoing, the Companies may, for a period of
180 calendar days following the Closing Date, use (consistent in
all respects with the use thereof by the Companies prior to the
Closing Date) any printed materials existing on the Closing Date
that bear any Retained Name or Mark or any name, mark or logo
similar thereto, where the removal of any Retained Name or Mark
or any such similar name, mark or logo would be impractical;
provided, however, that each Buyer shall place, or cause to be
placed, a stamp, mark or other notation on any such item that
identifies each Company as an affiliate or business of such Buyer
(and not of Watts or Seller) as soon as reasonably practicable
after the Closing.
5.6 Further Action. Mueller, U.K. Co. and Tyco each shall
execute and deliver such documents and take such further actions
as may be reasonably required to carry out the provisions hereof
and give effect to the transactions contemplated hereby.
5.7 Insurance. Effective at 12:01 a.m. on the Closing
Date, the Companies shall cease to be insured by the insurance
policies of Watts, Seller and their respective affiliates. With
respect to insurance coverage written on an "occurrence basis,"
neither Watts, Seller nor any of their respective affiliates will
have any liability for occurrences which take place on or after
12:01 a.m. on the Closing Date.
5.8 Pratt Matters. Unless waived be the former
stockholders of Pratt entitled to waive such requirements (the
"Former Pratt Stockholders"), (a) until October 1, 1996, Buyers
and Tyco shall cause Pratt to maintain its corporate existence
and Pratt shall be operated as a separate consolidated subsidiary
of Mueller, (b) Buyers and Tyco shall assume the obligations of
Pratt and Watts to make the contingent payment with respect to
the period October 1, 1995 to September 30, 1996 and honor the
audit rights of the Former Pratt Stockholders under Section 1.10
of the Agreement and Plan of Merger dated as of August 22, 1991
by and among Watts, Pratt and the other parties named therein and
(c) Buyers and Tyco shall execute such documents as may be
reasonably requested by Watts to evidence the agreements
contained in the foregoing clauses (a) and (b) and as reasonably
required to obtain the necessary waiver and consent from the
Former Pratt Stockholders to consummate the sale of the Pratt
Shares contemplated hereby.
5.9 Certain Filings. Without the prior written consent of
Watts, neither Tyco, Buyers nor any of their respective
affiliates or representatives shall notify, make any filing with
or otherwise communicate with the U.K. Office of Fair Trading
with respect to the transactions contemplated hereby.
5.10 Non-Solicitation. For a period of two years after the
Closing Date, without the prior written consent of Watts, neither
Tyco, either Buyer nor any of their respective affiliates or
representatives shall solicit to employ any of the current
officers or employees of Watts with whom Tyco or Buyers or their
respective affiliates or representatives have had contact during
the course of the negotiation of this Agreement or the due
diligence review by Tyco and Buyers in connection with this
Agreement and the transaction contemplated hereby or who were
specifically identified to Tyco or Buyers during the period of
their investigation of the Companies, except that Tyco, Buyers
and their respective affiliates shall not be precluded from
hiring any such employee or officer who (a) initiates discussions
regarding such employment without any direct or indirect
solicitation by Tyco, Buyers or their respective affiliates or
representatives, (b) responds to any advertisement placed by
Tyco, Buyers or their respective affiliates or representatives or
(c) has been terminated by Watts prior to commencement of
employment discussions between Tyco, Buyers or their respective
affiliates or representatives and such employee or officer.
SECTION 6. CONDITIONS
6.1 Conditions to Obligations of Seller and Watts. The
obligations of Seller and Watts to consummate the transactions
contemplated by this Agreement shall be subject to fulfillment or
waiver, at or prior to the Closing, of each of the following
conditions:
(a) Representations and Warranties; Covenants. The
representations and warranties of Buyers and Tyco contained in
this Agreement shall be true and correct in all material respects
on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date; the covenants and agreements
to be performed and complied with by Buyers and Tyco hereunder on
or prior to the Closing Date shall have been duly performed and
complied with in all material respects and Watts shall have
received a certificate, in form and substance reasonably
satisfactory to Watts and its counsel, duly signed by the
President or a Vice President of Tyco and each Buyer to the
foregoing effect.
(b) HSR Act Waiting Period. The applicable waiting
period under the HSR Act shall have expired without action by the
Justice Department or the Federal Trade Commission to prevent
consummation of this Agreement or shall have been terminated
earlier.
(c) Opinion. Seller and Watts shall have received an
opinion, in substance reasonably satisfactory to Seller and
Watts, of counsel to Tyco and Mueller.
(d) Distributorship Agreement. Pratt and Watts
Industries (Canada), Inc. shall have entered into a
Distributorship Agreement substantially in the form attached
hereto as Schedule 6.1(d).
(e) No Action or Proceedings. No action or proceeding
by any court, administrative body or governmental agency shall
have been instituted or threatened which would enjoin, restrain
or prohibit, or might result in substantial damages in respect
of, this Agreement or the complete consummation of the
transactions as contemplated by this Agreement, and which would
in the reasonable judgment of Watts make it inadvisable to
consummate such transactions, and no law or regulation shall be
in effect and no court order shall have been entered in any
action or proceeding instituted by any party which enjoins,
restrains or prohibits this Agreement or the complete
consummation of the transactions as contemplated by this
Agreement.
(f) Proceedings Satisfactory to Watts. All
proceedings to be taken by Buyers and Tyco in connection with the
consummation of the Closing on the Closing Date and the other
transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the
transactions contemplated hereby reasonably requested by Watts
will be reasonably satisfactory in form and substance to Watts
and its counsel.
6.2 Conditions to Obligations of Buyers and Tyco. The
obligations of Buyers and Tyco to consummate the transactions
contemplated by this Agreement shall be subject to fulfillment or
waiver, at or prior to the Closing, of each of the following
conditions:
(a) Representations and Warranties; Covenants. The
representations and warranties of Seller and Watts contained in
this Agreement shall be true and correct in all material respects
on and as of the Closing Date with the same effect as though made
on and as of the Closing Date; the covenants and agreements to be
performed and complied with by Seller and Watts hereunder on or
prior to the Closing Date shall have been duly performed and
complied with in all material respects and Tyco shall have
received a certificate, in form and substance reasonably
satisfactory to Tyco and its counsel, duly signed by a President
or Vice President of each of Watts and Seller to the foregoing
effect.
(b) HSR Act Waiting Period. The applicable waiting
period under the HSR Act shall have expired without action by the
Justice Department or the Federal Trade Commission to prevent
consummation of this Agreement or shall have been terminated
earlier.
(c) No Actions or Proceedings. No action or
proceeding by any court, administrative body or governmental
agency shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial
damages in respect of, this Agreement or the complete
consummation of the transactions as contemplated by this
Agreement, and which would, in the reasonable judgment of Tyco,
make it inadvisable to consummate such transactions, and no law
or regulation shall be in effect and no court order shall have
been entered in any action or proceeding instituted by any party
which enjoins, restrains or prohibits this Agreement or the
complete consummation of the transactions as contemplated by this
Agreement.
(d) Resignations. Each director and officer of each
Company shall have delivered to Tyco a duly executed resignation
effective as of the Closing Date.
(e) Proceedings Satisfactory to Tyco. All proceedings
to be taken by Seller in connection with the consummation of the
Closing on the Closing Date and the other transactions
contemplated hereby and all certificates, opinions, instruments
and other documents required to effect the transactions
contemplated hereby reasonably requested by Tyco will be
reasonably satisfactory in form and substance to Tyco and its
counsel.
(f) License and Supply Agreements. Pratt and Seller
shall have entered into the license agreement contemplated by
Section 3.4(b) hereof and Pratt and TTWVC shall have entered into
the supply agreement contemplated by Section 3.4(c) hereof, in
each case on mutually acceptable terms.
(g) Opinion. Tyco and Buyers shall have received an
opinion, in substance reasonably satisfactory to Tyco and Buyers,
of counsel to Watts and Seller.
(h) Manufacturing Agreement. Pratt and Watts
Regulator Co. shall have entered into a Manufacturing Agreement
the material terms and conditions of which are described in
Schedule 6.2(h) attached hereto.
SECTION 7. TERMINATION
7.1 Termination. This Agreement may be terminated at any
time prior to the Closing as follows:
(a) With the mutual consent of Tyco and Watts;
(b) By either Watts or Tyco, if the Closing has not
occurred on or before July 31, 1996, provided that the
terminating party is not in material breach of this Agreement,
subject to the further provisions of this Section 7.1(b).
Notwithstanding any other provision of this Agreement to the
contrary, if on or prior to July 31, 1996, all conditions set
forth in Section 6 of this Agreement, other than those contained
in Sections 6.1(b) and 6.2(b) have been satisfied or waived, Tyco
and Watts shall each have the right, exercisable in their
respective sole discretion, to extend the date set forth in the
immediately preceding sentence to a date not later than October
1, 1996 (and the date after which either party may elect to
terminate this Agreement provided that such party is not in
material breach of this Agreement) on written notice to the other
on or prior to July 31, 1996;
(c) By Watts, provided that neither Watts nor Seller
is in material breach of this Agreement, if (i) any of Buyers or
Tyco is in material breach of this Agreement and such breach
shall remain uncured for a period of fifteen (15) business days
after Watts shall have given written notice of such breach to
Tyco, (ii) Buyers or Tyco shall have explicitly or by conduct
repudiated this Agreement and such repudiation shall have
remained uncured for a period of fifteen (15) business days after
Watts shall have given written notice thereof to Tyco, or (iii)
at the Closing Date the condition in Section 6.1(a) shall not
have been satisfied, complied with or performed in all material
respects (unless such failure of satisfaction, noncompliance or
nonperformance is the result directly or indirectly of any action
or failure to act on the part of Watts or Seller) and Seller
shall not have waived such failure of satisfaction, noncompliance
or nonperformance; and
(d) by Tyco or Buyers, provided that none of Tyco or
Buyers is in material breach of this Agreement, if (i) Seller or
Watts is in material breach of this Agreement and such breach
shall remain uncured for a period of fifteen (15) business days
after Tyco shall have given written notice of such breach to
Watts, (ii) Seller or Watts shall have explicitly or by conduct
repudiated this Agreement and such repudiation shall have
remained uncured for a period of fifteen (15) business days after
Tyco shall have given written notice thereof to Watts, or (iii)
at the Closing Date the condition in Section 6.2(a) shall not
have been satisfied, complied with or performed in all material
respects (unless such failure of satisfaction, noncompliance or
nonperformance is the result directly or indirectly of any action
or failure to act on the part of Tyco or Buyers) and Tyco shall
not have waived such failure of satisfaction, noncompliance or
nonperformance.
7.2 Effect of Termination. All obligations of the parties
hereunder shall, without liability to any party, cease upon any
termination pursuant to Section 7.1 except that (a) the
provisions of Section 5.4 and Section 12.1 hereof shall survive
any termination of this Agreement in any event and (b) nothing
herein shall relieve any party from liability for any breach of
this Agreement.
SECTION 8. EMPLOYEES, PENSION AND OTHER BENEFIT PLANS.
8.1 Bargaining Agreements. Subject to Section 3.2(b)(vi)
hereof, Buyers shall assume the collective bargaining agreements
covering employees of each of the Companies as of the Closing
Date.
8.2 Employees. All employees of the Companies who are
actively employed (including without limitation, employees who
are on short-term disability or on workers' compensation) on the
Closing Date and all individuals who are on an approved leave of
absence from any Company on the Closing Date are referred to as
"Subject Employees" for purposes of this Agreement. Buyers shall
cause the Companies to continue the employment of each of their
respective Subject Employees, as of the Closing Date, at a
position which is comparable to the last position held by such
Subject Employee immediately prior to the Closing Date (or, in
the case of a Subject Employee on an approved leave of absence,
continue such approved leave of absence as of the Closing Date),
provided that Buyers shall not be subject to any ongoing
employment obligation following the Closing Date except as may be
required by law.
8.3 Benefit Plans Assumed by Buyers. Each benefit program
sponsored by Pratt or Jones and each benefit program sponsored by
Barber or EBCO (together, the "Company Plans"), and that portion
of each benefit program sponsored by Watts which covers employees
(or former employees) of Pratt or Jones (or their dependents),
are listed in Schedule 8.3 hereto. Buyers shall, in respect of
Subject Employees, former employees of the Companies and their
spouses, dependents and beneficiaries, maintain or cause the
applicable Company to maintain, for a period of at least 60 days
after the Closing Date, each Company Plan in substantially the
form it existed immediately prior to the Closing Date (if
sponsored by a Company) or a comparable benefit program
providing, in the aggregate, substantially similar benefits on
substantially similar terms, but without any preexisting
condition or waiting period requirements other than those
applicable to a particular individual under a Company Plan as in
existence immediately prior to the Closing Date. On and after
the Closing Date, all benefits of the kind provided to Subject
Employees, former employees of the Companies and their spouses,
dependents or beneficiaries under Company Plans immediately prior
to the Closing Date shall be provided, if at all, under benefit
programs maintained by the Buyers and the Companies and not under
any benefit program maintained by Watts or any affiliate of
Watts. Neither Seller nor Watts shall have any responsibility to
provide any benefit to any Subject Employee, former employee of
any Company or any of their spouses, dependents or other
beneficiaries pursuant to any Company Plan on or after the
Closing Date (including any group health plan benefits required
under Part 6 of Subtitle B of Title I of ERISA or Section 4980B
of the Code for any Subject Employee, any spouse, dependent or
beneficiary of a Subject Employee or any individual who
previously elected continued health coverage under any Company
Plan prior to the Closing Date or who elects such coverage during
an election period commencing prior to the Closing Date), and
Buyers assume all such obligations and liabilities of Seller and
Watts in existence on the Closing Date or accruing thereafter.
The Companies shall hold appropriate reserves for incurred but
unreported claims attributable to periods prior to the Closing
Date under the self-funded medical, dental and vision programs
sponsored by Pratt and the self-funded vision program sponsored
by Jones, and shall have paid or reserved for all premiums due
under fully insured U.S. Employee Programs (as defined in
Section 2.13(j)(v) hereof) for such periods, in the Actual Net
Worth Statement as of the Closing Date. Seller shall comply with
the continuation coverage requirements with respect to group
health plans under Part 6 of Subtitle B of Title I of ERISA and
Section 4980B of the Code for any Subject Employee or any spouse,
dependent or beneficiary of a Subject Employee covered under
Watts' Medical Indemnity Plan immediately prior to the Closing
Date or any individual who elected continued health coverage
under such plan prior to the Closing Date or who elects such
coverage during an election period commencing prior to the
Closing Date.
8.4 Other Benefit Programs. Neither Seller nor Watts shall
have any responsibility with respect to any Subject Employee,
former employee of any Company or any of their spouses,
dependents or beneficiaries to provide any benefit (i) under any
Company Plan on or after the Closing Date or (ii) under any
benefit program that is not a Company Plan unless such person's
right to such benefit shall have accrued thereunder prior to the
Closing Date. Buyers assume no responsibility to continue any
such benefit program that is not a Company Plan. Seller shall
retain responsibility for any workers' compensation claim arising
out of an event occurring prior to the Closing Date and Buyer
shall be responsible for any workers' compensation claim arising
out of an event occurring on or after the Closing Date.
8.5 401(k) Plan. Watts shall fully vest all Subject
Employees of the Companies participating in the Watts Industries,
Inc. 401(k) Savings Plan (the "Watts 401(k) Plan") in their
respective account balances as of the Closing Date and shall
offer all Subject Employees the opportunity to elect immediate
lump sum distributions (subject to spousal consent where
appropriate). Buyers shall make all commercially reasonable
efforts to offer rollover treatment to all such lump sum
distributions (to the extent they constitute "eligible rollover
distributions") under a qualified defined contribution plan of
Buyers, in respect to Subject Employees who are employed by
Buyers (or a Company) as of the date such rollover is requested
by each such Subject Employee, including the receipt of
outstanding participant loan notes by direct transfer from the
trustees of the Watts 401(k) Plan.
8.6 Bonus Reserves. Each Company shall hold appropriate
reserves for payments of bonuses under the Watts' Executive
Incentive Bonus Plan, as amended, for the fiscal year ending June
30, 1996.
8.7 Payments to Mr. Jones. Watts shall continue to be
responsible for all of the obligations to Wallace Jones under the
consulting agreement among Seller, James Jones Company and Mr.
Jones attached to Schedule 8.7 hereto, including without
limitation, the payments required to be made under Section 3 of
such consulting agreement. Buyers shall be responsible for all
obligations of Jones to Houston Jones Locke and Joan Tiberg,
including the payment obligations set forth in Schedule 8.7
hereto.
8.8 Stock Option Plan. No employee of any of the Companies
currently has any rights under the Watts' 1986 Incentive Stock
Option Plan, as amended, or any other of Watts' stock-based
compensation plans.
8.9 Annual Reports. Seller shall reimburse Buyers for a
proportional share of the reasonable third party costs incurred
in connection with the preparation and filing of any IRS Form
5500, Annual Return/Report of Employee Benefit Plan, or PBGC
Form 1, and all schedules required to be attached to either of
the foregoing, for the plan year of any U.S. Employee Program (as
defined in Section 2.13 hereof) which ends coincident with or
first following the Closing Date. The share of costs to be paid
by Seller pursuant to the preceding sentence with respect to any
U.S. Employee Program shall be the product of (i) the reasonable
third party costs incurred by Buyers and the Companies after the
Closing Date and (ii) a fraction, the numerator of which is the
number of calendar months preceding the Closing Date in the
relevant plan year and the denominator of which is 12.
SECTION 9. TAX MATTERS
9.1 Tax Indemnities.
(a) Except to the extent Taxes are accrued for or
reserved against on the Actual Net Worth Statement and except for
any Taxes assessed upon audit by a governmental authority that
result from a timing difference that will reverse in a period
subsequent to the Closing Date, Watts shall indemnify and hold
harmless Tyco, Buyers and the Companies (i) for any and all Taxes
of the Companies with respect to all taxable periods of the
Companies ending on or prior to the Closing Date, (ii) all Taxes
allocated to Seller pursuant to Section 9.1(b) hereof, and (iii)
any losses, damages, assessments, settlements, judgments or
reasonable costs and expenses, with respect to all taxable
periods of the Companies ending on or prior to the Closing Date,
arising out of or incident to the imposition, assessments or
assertion of any such Taxes, including those incurred in
connection with the assertion or defense of any claim or
assessment for such Taxes (collectively, "Other Amounts").
(b) If, with respect to any Tax, the taxable period of
any Company does not terminate on the Closing Date, the Tax
(whether based on income, capital, ownership of property or
otherwise) attributable to the taxable period of such Company
that includes the Closing Date shall be allocated to (i) Seller
for the period up to and including the Closing Date (in excess of
amounts previously paid plus reserved therefor on the Actual Net
Worth Statement), and (ii) Buyers for the period subsequent to
the Closing Date (plus amounts reserved therefor on the Actual
Net Worth Statement). Tyco shall indemnify and hold harmless
Watts, Seller and their respective affiliates with respect to all
Taxes allocated to Buyers or Tyco pursuant to this Section 9.1(b)
and all Other Amounts with respect to such Taxes or related
thereto. For purposes of this Section 9.1(b), Taxes for the
period up to and including the Closing Date shall be determined
on the basis of a closing of the books as of the Closing Date,
except that any such tax imposed annually based on ownership of
assets on a particular date, or similar tax shall be prorated to
the period prior to and including the Closing Date and the period
thereafter.
(c) After the Closing Date, Tyco, Buyers and the
Companies shall indemnify and hold harmless Watts and its
affiliates against all Taxes imposed on or with respect to the
Companies with respect to any taxable period or portion thereof
that begins on or after the Closing Date and all Other Amounts
with respect to such Taxes or related thereto.
(d) Payment by the indemnitor of any amount due under
this Section 9.1 shall be made within fifteen days following
written notice by the indemnitee that payment of such amounts to
the appropriate tax authority or other person is due. In the
case of a Tax that is properly contested, payment of the Tax to
the appropriate tax authority will not be considered to be due
earlier than the date a final determination to such effect is
made by the appropriate taxing authority or a court unless
payment is required prior to a final determination.
(e) Indemnification by Watts pursuant to
Section 9.1(a) and indemnification by Tyco, Buyers and the
Companies pursuant to Sections 9.1(b) and 9.1(c) shall each be
limited to the amount of liability that remains after deducting
therefrom any Tax Benefit (as defined in Section 11.6 hereof) to
the indemnified party or any of its affiliates, but
indemnification by Watts pursuant to Section 9.1(a) shall not in
any event be subject to the Buyer Basket Amount (as defined in
Section 11.2(b) hereof).
9.2 Refunds and Tax Benefits.
(a) Tyco or Buyers shall pay to Watts any refund
(including any interest paid or credited with respect thereto)
received by Tyco or Buyers or their respective affiliates of
Taxes of the Companies (i) relating to taxable periods or
portions thereof ending on or before the Closing Date, except to
the extent included on the Actual Net Worth Statement or as the
result of net operating loss carrybacks from the post-closing
period or assessed upon audit by a governmental authority as a
result of a timing difference that will reverse itself in a
period subsequent to the Closing Date, or (ii) attributable to an
amount paid by Watts under Section 9.1(a) hereof. Tyco and
Buyers shall, if Watts so requests and at Watts' expense, and
provided Tyco, Buyers, their affiliates and the Companies will
not be adversely affected, cause the relevant entity to file for
and obtain a refund to which Watts is entitled under this Section
9.2(a).
(b) Watts shall pay to Tyco any refund (including any
interest paid or credited with respect thereto) received by Watts
or its affiliates of Taxes of the Companies (i) relating to
taxable periods or portions thereof beginning on or after the
Closing Date or (ii) attributable to an amount paid by Tyco or
Buyers under Sections 9.1(b) or 9.1(c) hereof. Watts shall, if
Tyco so requests and at Tyco's expense, and provided Watts,
Seller and their affiliates will not be adversely affected, cause
the relevant entity to file for and obtain a refund to which Tyco
or Buyers are entitled under this Section 9.2(b).
9.3 Contests.
(a) After the Closing, Tyco shall promptly notify
Watts in writing of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim
on Tyco, either Buyer or any of the Companies which, if
determined adversely would be grounds for indemnification under
Section 9.1. Such notice shall contain factual information (to
the extent known to Tyco, Buyers and the Companies) describing
the asserted Tax liability.
(b) Watts may elect to direct, through advisers of its
own choosing and at its own expense, any audit, claim for refund
and administrative or judicial proceeding involving any asserted
liability with respect to which indemnity may be sought under
Section 9.1(a) (any such audit, claim for refund or proceeding
relating to an asserted Tax liability is referred to herein as a
"Contest"). If Watts elects to direct a Contest, it shall within
30 calendar days of receipt of the notice of asserted Tax
liability provided for in Section 9.3(a) notify Tyco of its
intent to do so, and Tyco and Buyers shall cooperate and shall
cause the Companies to cooperate in each phase of such Contest.
9.4 Preparation of Tax Returns. Watts shall prepare and
file all Tax Returns relating to the Companies for any Tax period
ending on or prior to the Closing Date. Such Tax Returns shall
be prepared on a basis consistent with prior practice. With
respect to any Tax Returns for which Watts has filing
responsibility pursuant to the preceding sentence, the Companies
will be included in the consolidated, combined or unitary Tax
Returns of Watts or an affiliate of Watts on a basis consistent
with prior tax years unless a different treatment is required by
an intervening change in law. Tyco and Buyers shall prepare and
timely file or cause the Companies to prepare and timely file all
Tax Returns for which Watts is not responsible pursuant to this
Section 9.4.
9.5 Cooperation and Exchange of Information. Watts and
Tyco will provide each other with such cooperation and
information as any of them reasonably may request of another in
filing any Tax Return or claim for refund, determining a
liability for Taxes or a right to a refund of Taxes or
participating in or conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax Returns or portions thereof,
together with accompanying schedules and related work papers, and
other documents relating to rulings or other determinations by
taxing authorities. Each party shall reasonably make its
employees available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder.
Each party will retain all Tax Returns, schedules and work papers
and all material records or other documents relating to Tax
matters of each of the Companies for its respective taxable
period first ending after the Closing Date and for all prior
taxable periods until the later of (a) the expiration of the
statute of limitations of the taxable periods to which such Tax
Returns and other documents relate, or (b) six years following
the due date (without extension) for such Tax Returns. Any
information obtained under this Section 9.5 shall be kept
confidential, except as may be otherwise necessary in connection
with the filing of Tax Returns or claims for refund or in
conducting an audit or other proceeding.
9.6 Transfer Taxes. Tyco and Buyers hereby assume liability
for and shall pay all sales, transfer, stamp and similar taxes,
duties and fees incurred in connection with the transfer of the
Barber Shares as contemplated hereby. Tyco agrees to indemnify
Watts, Seller and their respective affiliates from and against
any and all liabilities, losses, damages, claims, expenses,
interest, awards, judgments and penalties (including without
limitation reasonable attorney's and consultant's fees and
expenses) incurred by Watts, Seller or any of their respective
affiliates as a result of the failure of Tyco or Buyers to make
timely or full payment of such taxes, duties and fees.
9.7 Miscellaneous.
(a) The parties agree to treat all payments made by
one party to the other party under this Section 9 and under
Section 11 hereof as adjustments to the Purchase Price for Tax
purposes.
(b) Except as expressly provided otherwise, this
Section 9 shall be the sole provision governing Tax matters and
indemnities therefor under this Agreement.
(c) For purposes of this Section 9, all references to
Tyco, Buyers, Watts, Seller and the Companies include successors
thereto.
(d) The representations, warranties, covenants and
agreements of the parties hereto contained in Section 2.17 hereof
and in this Section 9 shall survive the Closing and shall remain
in full force and effect until 60 days after the expiration of
all statutes of limitations with respect to any Taxes that would
be indemnifiable by Watts under Section 9.1(a) or by Buyers, Tyco
and the Companies under Sections 9.1(b) or 9.1(c).
(e) Each of the parties hereto agrees that it shall
not make any election under Section 338(h)(10) of the Code, or
under any analogous provisions of state or local law, with
respect to the purchase of the Pratt Shares, the Jones Shares or
the Barber Shares.
SECTION 10. SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS .
All representations, warranties, covenants and agreements
herein or in any schedule, exhibit, certificate or financial
statement delivered by any party to the other party pursuant to
this Agreement are material, shall be deemed to have been relied
upon by the other party and shall survive the Closing and shall
not merge in the performance of any obligation by either party
hereto, subject to the limitations set forth in Sections 9 and 11
hereof. Notwithstanding the immediately preceding sentence or
anything contained in this Agreement to the contrary, in the
event the Closing takes place, no party shall have any liability
to any other party with respect to the breach of any
representation, warranty, covenant or agreement of which such
breach such other party had actual knowledge prior to the Closing
(for purposes of this sentence, "actual knowledge" of each party
shall be deemed to include, without limitation, knowledge of all
matters disclosed in the Schedules to this Agreement).
SECTION 11. INDEMNIFICATION.
11.1 Indemnification by Watts. Subject to the terms and
conditions of this Agreement, Watts agrees from and after the
Closing to defend, indemnify and hold Tyco, Mueller, U.K. Co.,
each Company, their affiliates and their respective officers,
directors, employees and agents (individually a "Buyer
Indemnified Party" and collectively the "Buyer Indemnified
Parties") harmless from and against any and all demands, claims,
actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses (including, without limitation,
reasonable fees and expenses of counsel) (collectively,
"Claims"), whether or not arising out of third-party claims, and
including all amounts paid in investigation, defense or
settlement of the foregoing, based upon, arising out of, by
reason of or otherwise in respect of or in connection with (a)
any breach of any representation or warranty of Seller or Watts
contained in or made pursuant to this Agreement and (b) any
breach by Seller or Watts of any covenant or agreement of Seller
or Watts contained in or made pursuant to this Agreement;
provided that the sole remedy for any breach of Section 2.17
hereof shall be as set forth in Section 9 hereof and (c) the
Retained Liabilities. (Claims described in clauses (a), (b) and
(c) are collectively referred to as "Buyer Claims").
11.2 Limitations on Indemnification by Watts. The right of
Buyer Indemnified Parties to indemnification under Section 11.1
hereof shall be subject to the following provisions:
(a) No Buyer Claim may be asserted nor any action
commenced against Watts with respect thereto unless written
notice of such Buyer Claim or action describing in detail the
facts and circumstances of the subject matter of such Buyer Claim
or action is received by Watts on or prior to the second
anniversary of the Closing Date; provided, however, that a Buyer
Claim may be asserted and an action commenced against Watts to
the extent such Buyer Claim (i) involves fraud, intentional
misrepresentation or title to the Shares or arises under clause
(c) of Section 11.1 hereof, until the date immediately following
the termination of the applicable statute of limitations relating
thereto, if any or (ii) is based upon a breach of Section 2.16
hereof, until the fourth anniversary of the Closing Date.
(b) No indemnification shall be payable to Buyer
Indemnified Parties with respect to Buyer Claims unless the total
amount of all Buyer Claims shall exceed $500,000 in the aggregate
(the "Buyer Basket Amount"), whereupon only the amount of Buyer
Claims in excess of the Buyer Basket Amount shall be recoverable
in accordance with the terms hereof; provided, however, that the
Buyer Basket Amount shall not apply to (and the Buyer Indemnified
Parties shall be entitled to dollar for dollar recovery with
respect to) a Buyer Claim to the extent such Buyer Claim (i) is
based upon a breach of Sections 2.2, 2.3, 2.5, 2.14 or 2.21
hereof or (ii) arises under clause (c) of Section 11.1 hereof.
(c) Watts' aggregate liability under this Section 11
with respect to Buyer Claims shall not exceed fifty percent (50%)
of the Purchase Price; provided, however, that such limitation
shall not apply to a Buyer Claim to the extent such Buyer Claim
(i) is based upon a breach of Sections 2.2, 2.3, 2.5, 2.14 or
2.21 hereof or (ii) arises under clause (c) of Section 11.1
hereof.
(d) Notwithstanding anything herein to the contrary,
Watts shall not be obligated to provide any indemnification under
Section 11.1 hereof with respect to, and shall not otherwise be
liable for, any matter of which Tyco or either Buyer had actual
knowledge prior to the Closing (for purposes of this sentence,
"actual knowledge" of each party shall be deemed to include,
without limitation, knowledge of all matters disclosed in the
Schedules to this Agreement).
(e) Indemnification by Watts pursuant to Section 11.1
hereof shall be limited to the amount of any liability or damage
that remains after deducting therefrom (and the aggregate amount
of Buyer Claims for purposes of determining the Buyer Basket
Amount above shall be reduced by the amount of) (i) any Tax
Benefit (as defined in Section 11.6 hereof) to Buyers or Tyco or
any of their affiliates and (ii) any insurance proceeds and any
indemnity, contribution or other similar payment recoverable by
Buyers or Tyco or any of their affiliates from any third party
with respect thereto.
(f) Each Buyer and Tyco hereby acknowledges and agrees
that, from and after the Closing, its sole and exclusive remedy
with respect to any and all claims relating to the subject matter
of this Agreement shall be pursuant to the indemnification
provisions set forth in this Section 11 and in Section 9 hereof;
provided that each Buyer and Tyco shall have the right to pursue
any and all remedies which they may have, whether at law or in
equity, in the event of a breach of Sections 3.4, 3.5, 3.6, 3.7
or 3.9 hereof. In furtherance of the foregoing, each Buyer and
Tyco hereby waives, from and after the Closing, to the fullest
extent permitted under applicable law, any and all other rights,
claims and causes of action it (or, after the Closing, any of the
Companies) may have against Watts, Seller or their respective
officers, directors, employees, agents, representatives and
affiliates relating to the subject matter of this Agreement.
(g) Notwithstanding anything to the contrary contained
in this Agreement, Watts shall have no liability under any
provision of this Agreement for and in no event shall the Buyer
Basket Amount be applied to: (i) any liabilities or damages to
the extent that such liabilities or damages result from or arise
out of actions taken by either Buyer or Tyco, any of the
Companies or any of their respective affiliates after the Closing
Date or (ii) any consequential damages. Tyco and Buyers shall
take and shall cause the Companies to take all commercially
reasonable steps to mitigate all such liabilities and damages
upon and after becoming aware of any event which could reasonably
be expected to give rise to such liabilities and damages.
(h) Notwithstanding anything to the contrary contained
in this Agreement, to the extent that a Buyer Claim relates to a
breach of any representation or warranty contained in
Sections 1.3(b) or 1.7 hereof, such Buyer Claim may not be
asserted nor any action commenced against Watts with respect
thereto after the date on which the Actual Net Worth Statement is
finally determined as provided in Section 1.4.4 hereof, and on or
prior to such date the sole remedy for any such Buyer Claim shall
be an appropriate adjustment to the relevant amounts to be set
forth on the Actual Net Worth Statement.
11.3 Indemnification by Tyco. Subject to the terms and
conditions of this Agreement, Tyco agrees from and after the
Closing to defend, indemnify and hold Watts, Seller, each of
their respective affiliates and persons serving as officers,
directors, employees or agents of Watts, Seller or such
affiliates (individually a "Seller Indemnified Party" and
collectively the "Seller Indemnified Parties") harmless from and
against any and all Claims, whether or not arising out of
third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing, based
upon, arising out of, by reason of or otherwise in respect of or
in connection with (a) any breach of any representation or
warranty of Buyers or Tyco contained in or made pursuant to this
Agreement and (b) any breach by Buyers or Tyco of any covenant or
agreement of Buyers or Tyco contained in or made pursuant to this
Agreement. (Claims described in clauses (a) and (b) are
collectively referred to as "Seller Claims").
11.4 Limitations on Indemnification by Tyco. The right of
Seller Indemnified Parties to indemnification under Section 11.3
hereof shall be subject to the following provisions:
(a) No Seller Claim may be asserted nor any action
commenced against Tyco with respect thereto unless written notice
of such Seller Claim or action describing in detail the facts and
circumstances of the subject matter of such Seller Claim or
action is received by Tyco on or prior to the second anniversary
of the Closing Date; provided, however, that a Seller Claim may
be asserted and an action commenced against Tyco if such Seller
Claim (i) is based on a breach of Section 5.3, 5.4 or 5.5 hereof,
until the applicable provision expires, or, if no expiration is
specified in any such provision, until the date immediately
following the termination of the applicable statute of
limitations relating thereto, if any, or (ii) involves fraud or
intentional misrepresentation, until the date immediately
following the termination of the applicable statute of
limitations relating thereto, if any.
(b) Notwithstanding anything herein to the contrary,
Tyco shall not be obligated to provide any indemnification under
Section 11.3 hereof with respect to, and shall not otherwise be
liable for, any matter of which Watts or Seller had actual
knowledge prior to the Closing (for purposes of this sentence,
"actual knowledge" of each party shall be deemed to include,
without limitation, knowledge of all matters disclosed in the
Schedules to this Agreement).
(c) Indemnification by Tyco pursuant to Section 11.3
hereof shall be limited to the amount of any liability or damage
that remains after deducting therefrom (i) any Tax Benefit to
Watts or any of its affiliates and (ii) any insurance proceeds
and any indemnity, contribution or other similar payment
recoverable by Watts or any of its affiliates from any third
party with respect thereto.
(d) Watts and Seller hereby acknowledge and agree
that, from and after the Closing, their sole and exclusive remedy
with respect to any and all claims relating to the subject matter
of this Agreement shall be pursuant to the indemnification
provisions set forth in this Section 11 and in Section 9 hereof;
provided that Seller and Watts shall each have the right to
pursue any and all remedies which it may have, whether at law or
in equity, in the event of a breach of Sections 5.3, 5.4, 5.5,
5.6, 5.8 or 5.10 hereof. In furtherance of the foregoing, Watts
and Seller each hereby waives, from and after the Closing, to the
fullest extent permitted under applicable law, any and all other
rights, claims and causes of action it may have against Tyco,
Buyers, the Companies or their respective officers, directors,
employees, agents, representatives and affiliates relating to the
subject matter of this Agreement.
(e) Notwithstanding anything to the contrary contained
in this Agreement, Tyco shall have no liability under any
provision of this Agreement for: (i) any liabilities or damages
to the extent that such liabilities or damages result from or
arise out of actions taken by Watts, Seller or any of their
respective affiliates after the Closing Date or (ii) any
consequential damages. Watts and Seller shall take all
commercially reasonable steps to mitigate all such liabilities
and damages upon and after becoming aware of any event which
could reasonably be expected to give rise to such liabilities and
damages.
11.5 Notice; Defense of Claims.
(a) Notice of Claims. Promptly after receipt by an
indemnified party of notice of any claim, liability or expense to
which the indemnification obligations hereunder would apply, the
indemnified party shall give notice thereof in writing to the
indemnifying party (Tyco with respect to claims by Seller
Indemnified Parties and Watts with respect to claims by Buyer
Indemnified Parties), but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying
party from any liability except to the extent that the
indemnifying party shall have been prejudiced as a result of the
failure or delay in giving such notice. Such notice shall state
the information then available regarding the amount and nature of
such claim, liability or expense and shall specify the provision
or provisions of this Agreement under which the liability or
obligation is asserted.
(b) Third Party Claims. With respect to third party
claims, if within forty-five (45) days after receiving the notice
described in paragraph (a) above the indemnifying party gives
written notice to the indemnified party stating that it intends
to defend against such claim, liability or expense at its own
cost and expense, then counsel for the defense shall be selected
by the indemnifying party and the indemnifying party shall not be
required to make any payment with respect to such claim,
liability or expense as long as the indemnifying party is
conducting a good faith and diligent defense at its own expense;
provided, however, that the assumption of defense of any such
matters by the indemnifying party shall relate solely to the
claim, liability or expense that is subject or potentially
subject to indemnification. The indemnified party shall
cooperate in all reasonable respects, at the indemnifying party's
request, with the indemnifying party and its attorneys in the
investigation, trial and defense of such claim, liability or
expense and any resulting suit, proceeding or enforcement action
and any appeal therefrom. The indemnifying party shall have the
right, with the consent of the indemnified party, which consent
shall not be unreasonably withheld, to settle all indemnifiable
matters related to claims by third parties which are susceptible
to being settled. The indemnifying party shall keep the
indemnified party apprised of the status of the claim, liability
or expense and any resulting suit, proceeding or enforcement
action, shall furnish the indemnified party with all documents
and information that the indemnified party shall reasonably
request and shall consult with the indemnified party prior to
acting on major matters, including settlement discussions.
Notwithstanding anything herein stated, the indemnified party
shall at all times have the right to fully participate in such
defense at its own expense directly or through counsel; provided,
however, if the named parties to the action or proceeding include
both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct,
the expense of separate counsel for the indemnified party shall
be paid by the indemnifying party. If no such notice of intent
to dispute and defend is given by the indemnifying party, or if
such diligent good faith defense is not being or ceases to be
conducted, the indemnified party shall, at the expense of the
indemnifying party, undertake the defense of (with counsel
selected by the indemnified party), and shall have the right to
compromise or settle such claim, liability or expense. If such
claim, liability or expense is one that by its nature cannot be
defended solely by the indemnifying party, then the indemnified
party shall make available all information and assistance that
the indemnifying party may reasonably request and shall cooperate
with the indemnifying party in such defense.
(c) Non-Third Party Claims. With respect to non-third
party claims, if within forty-five (45) days after receiving the
notice described in paragraph (a) above the indemnifying party
does not give written notice to the indemnified party that it
contests such indemnity, the amount of indemnity payable for such
claim shall be as set forth in the indemnified party's notice.
If the indemnifying party provides written notice to the
indemnified party within such 45-day period that it contests such
indemnity, the parties shall attempt in good faith to reach an
agreement with regard thereto.
11.6 Tax Benefits. As used herein, the term "Tax Benefit"
shall mean the foreign, Federal, state and local income tax
savings that have resulted or would reasonably be likely to
result, if claimed, from any tax deduction or tax credit that
(i) the indemnified party is entitled to claim in accordance with
applicable law (without regard to the entitlement of such
indemnified party to any indemnification payment pursuant to the
terms of this Section 11) on a foreign, Federal, state or local
income tax return filed for the tax year of the relevant Company
in which the Claim is paid or incurred and (ii) is directly
attributable to such Claim. It shall be assumed that the
indemnified party is subject to the maximum marginal foreign,
Federal, state and local tax rates for a corporation doing
business in the principal jurisdiction where the Company to which
the Tax Benefit relates does business, unless the indemnified
party's independent certified public accountant certifies that
such indemnified party is subject to a different rate, in which
case such different rate shall apply.
SECTION 12. MISCELLANEOUS.
12.1 Fees and Expenses. Each of the parties will bear its
own expenses in connection with the negotiation and the
consummation of the transactions contemplated by this Agreement,
including without limitation the fees and expenses of any finder
or broker engaged by such party.
12.2 Governing Law. This Agreement shall be construed under
and governed by the internal laws of The Commonwealth of
Massachusetts without regard to its conflict of laws principles.
12.3 Notices. Any notice, request, demand or other
communication required or permitted hereunder shall be in writing
and shall be deemed to have been given if delivered or sent by
facsimile transmission, upon receipt, or if sent by registered or
certified mail, upon the sooner of the expiration of three (3)
days after deposit in United States post office facilities
properly addressed with postage prepaid or acknowledgment of
receipt. All notices and payments to a party will be sent to the
addresses set forth below or to such other address or person as
such party may designate by notice to each other party hereunder:
TO SELLER OR WATTS: WATTS INDUSTRIES, INC.
815 Chestnut Street
North Andover, MA 01845
Attention: David A. Bloss, Sr., Executive
Vice President
FAX: (508) 688-5841
With copies to: WATTS INDUSTRIES, INC.
815 Chestnut Street
North Andover, MA 01845
Attention: Suzanne M. Zabitchuck, Esq.,
Corporate Counsel
FAX: (508) 688-5841
and
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Robert P. Whalen, Jr., Esq.
FAX: (617) 523-1231
TO BUYERS OR TYCO: TYCO INTERNATIONAL LTD.
One Tyco Park
Exeter, NH 03833
Attention: General Counsel
FAX: (603) 778-7700
With copies to: MUELLER CO.
500 West Eldorado Street
P.O. Box 671
Decatur, IL 62525-1808
Attention: President
FAX: (217) 425-7382
TYCO VALVES LIMITED
Victoria Road
Leeds LS11 5UG
United Kingdom
Attn: Graham Latham
Fax: 44 113 2442055
Any notice given hereunder may be given on behalf of any party by
his counsel or other authorized representatives.
12.4 Guaranty of Obligations. In order to induce Tyco and
Buyers to enter into this Agreement and to consummate the
transactions contemplated hereby, Watts shall enter into a
guaranty substantially in the form attached hereto and made a
part hereof as Schedule 12.4A guaranteeing the due performance by
Seller of all of its obligations, undertakings, covenants and
agreements set forth herein. In order to induce Seller to enter
into this Agreement and to consummate the transactions
contemplated hereby, Tyco shall enter into a guaranty
substantially in the form attached hereto and made a part hereof
as Schedule 12.4B guaranteeing the due performance by Buyers of
all of their respective obligations, undertakings, covenants and
agreements set forth herein.
12.5 Waiver of Environmental Claims. Tyco and each Buyer
acknowledge that the representations and warranties contained in
Section 2.16 hereof are the only representations and warranties
being made with respect to compliance with or liability under
Environmental Laws or with respect to environmental permits. No
other representation contained in this Agreement shall apply to
any such matters and no other representation or warranty, express
or implied, is being made with respect thereto. From and after
the Closing, Tyco and each Buyer hereby waive on its behalf and
on behalf of its affiliates and their successors to the fullest
extent permitted under applicable law, any claim or remedy
otherwise available under any Environmental Law, including
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act and any similar federal or state
laws whether or not in existence on the date hereof, with respect
to the Companies or any release or threatened release of
hazardous materials associated with the Companies.
12.6 Public Announcements. No party to this Agreement shall
make any public announcements in respect hereof or the
transactions contemplated hereby (including any disclosures or
announcements required by law) or otherwise communicate with any
news media without prior notification to the other parties, and
the other parties shall cooperate as to the timing and contents
of any such announcement.
12.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon determination that
any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the greatest extent
possible.
12.8 No Third-Party Beneficiaries. This Agreement is for
the sole benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or
shall confer upon any other person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement.
12.9 Entire Agreement. This Agreement, including the
Schedules and Exhibits referred to herein and the other writings
specifically identified herein (including the Confidentiality
Agreement) or contemplated hereby or delivered in connection with
the transactions contemplated hereby, is complete, reflects the
entire agreement of the parties with respect to its subject
matter, and supersedes all previous written or oral negotiations,
commitments and writings. Except as set forth in this Agreement
and the Schedules and Exhibits attached hereto, Seller is not
making any representation, warranty, covenant or agreement with
respect to the matters contained herein. Specifically, Tyco and
each Buyer acknowledges having received from Watts, Seller and
their representatives an offering memorandum and other
information regarding the Companies in connection with the
transactions contemplated hereby and Tyco and each Buyer each
hereby represents and agrees that it is relying solely on the
representations, warranties and covenants contained in this
Agreement and the Schedules and Exhibits attached hereto in
making its decision to purchase the Shares and is not relying in
any respect upon such offering memorandum or other information.
12.10 Projections. Tyco and Buyers have received from
Watts and Seller and their representatives certain estimates,
projections, forecasts, plans and budgets for the Companies (the
"Projections"). Tyco and Buyers acknowledge that there are
uncertainties inherent in the Projections, that Tyco and Buyers
are familiar with such uncertainties, that Tyco and Buyers are
taking full responsibility for making their own evaluation of the
adequacy and accuracy of the Projections, and that neither Tyco
nor either Buyer will assert any claim against Watts, Seller or
any of their respective directors, officers, employees, agents,
stockholders, affiliates, consultants, counsel, accountants,
investment bankers or representatives, or hold any such persons
liable, with respect thereto.
12.11 Assignability; Binding Effect. This Agreement
shall only be assignable by either Buyer or Seller to a
corporation or partnership controlling, controlled by or under
common control with such Buyer or Seller upon written notice to
Seller or Buyers, as applicable, provided that neither such Buyer
nor Seller, as applicable, shall be relieved of any of its
obligations under this Agreement by virtue of any such
assignment. This Agreement shall be binding upon and enforceable
by, and shall inure to the benefit of, the parties hereto and
their respective successors, and permitted assigns.
12.12 Captions and Gender. The captions in this
Agreement are for convenience only and shall not affect the
construction or interpretation of any term or provision hereof.
The use in this Agreement of the masculine pronoun in reference
to a party hereto shall be deemed to include the feminine or
neuter pronoun, as the context may require.
12.13 Execution in Counterparts. For the convenience of
the parties and to facilitate execution, this Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the
same document.
12.14 Amendments. This Agreement may not be amended or
modified, nor may compliance with any condition or covenant set
forth herein be waived, except by a writing duly and validly
executed by Watts, Tyco, each Buyer and Seller, or in the case of
a waiver, the party waiving compliance.
12.15 Consent to Jurisdiction. All actions and
proceedings arising out of or relating to this Agreement shall be
heard and determined in a Massachusetts state court or federal
court sitting in Boston, Massachusetts and each of the parties
hereto hereby irrevocably submits to the exclusive jurisdictions
of such courts in any such action or proceeding and irrevocably
waives the defense of an inconvenient forum to the maintenance of
any such action or proceeding.
12.16 Currency Exchange Rates. For purposes of this
Agreement, including without limitation for purposes of
calculating Net Worth, Contract Net Worth, Estimated Net Worth
and Actual Net Worth pursuant to Section 1.4 hereof, amounts
denominated in a currency other than U.S. Dollars shall be
converted to U.S. Dollars at the currency exchange rate for such
foreign currency as published in the Wall Street Journal on the
applicable date.
12.17 Waiver of Jury Trial. EACH OF THE COMPANIES,
BUYERS, SELLER, TYCO AND WATTS HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
12.18 Schedules. The information included in each
Schedule hereto is hereby incorporated by reference into each
other Schedule hereto, so that each representation and warranty
contained herein shall be deemed to refer to and incorporate the
information contained in all Schedules.
12.19 Federal Law. References in this Agreement to
"federal" laws shall be deemed to include any national laws, to
the extent applicable.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed in Exeter, New Hampshire as of the date
set forth above by their duly authorized representatives.
TYCO:
TYCO INTERNATIONAL LTD.
By:
Name:
Title:
BUYERS:
MUELLER CO.
By:
Name:
Title:
TYCO VALVES LIMITED
By:
Name:
Title:
SELLER:
WATTS INVESTMENT COMPANY
By:
Name:
Title:
WATTS:
WATTS INDUSTRIES, INC.
By:
Name:
Title:
List of Schedules to Stock Purchase Agreement
by and among Mueller Co. and Tyco Valves Limited, as Buyers,
Watts Investment Company, as Seller,
and
Watts Industries, Inc. and Tyco International Ltd.
Except for Schedule 3.2A, Retained Liabilities, which is
filed herewith, the following described Schedules to the Stock
Purchase Agreement have been omitted from this Form 8-K, but a
copy of any and all of such omitted Schedules will be furnished
to the Commission upon request.
Schedule Description
1.2 Purchase Price Allocation
1.4.1 Contract Networth Statement
1.6 Exceptions to U.S. GAAP and U.K. Accounting
Conventions, etc.
2 List of Seller's executive officers with actual
knowledge
2.3 Organization and Qualification of the Companies
2.7 Absence of Certain Changes since March 31, 1996
2.8 Contracts
2.9 Intellectual Property Rights
2.10 Real Properties
2.11 Litigation
2.12 Labor Matters
2.13 Employee Benefit Programs
2.14 Consents
2.15 Compliance with Laws
2.16 Environmental Matters
2.17 Tax Matters
2.18 Permits and Approvals
2.19 Government Contracts
2.20 Affiliate Contracts
2.22 Insurance
2.23 Product Warranty
2.24 Powers of Attorney
2.25 Bank Accounts
2.26 Guaranties
2.27 Certain Business Relationships with the Companies
2.28 Restrictions on Business Activities
2.30 Licensed Know-How
3.2A Retained Liabilities (FILED HEREWITH)
3.2(b)(vi) Jones union contract negotiations
4.4 Consents, approval, authorizations, etc.
6.1(d) Distributorship Agreement
6.2(h) Manufacturing Agreement
8.3 Benefit Plans Assumed by Buyers
8.7 Wallace Jones Consulting Agreement
12.4(A) Form of Watts Guaranty
12.4(B) Form of Tyco Guaranty
Schedule 3.2A
RETAINED LIABILITIES
1. Polybutylene pipe litigation as described in Schedule 2.11,
Item 2 in so far as such claims and litigation, whenever
occurring, are related to Jones' products sold prior to the
Closing.
2. San Gabriel Valley Superfund site as described in Schedule
2.16, Item 5.
3. Other than claims related to Item 1 above, all products
liability claims and litigation with respect to products of the
Companies based on occurrences prior to Closing excluding any
claims and litigation relating solely to repair or replacement of
the products.
4. All workers' compensation claims by current or a former
employees of the Companies based on occurrences prior to Closing.
5. All claims or litigation relating to the Companies covered
by general liability insurance coverage based on occurrences
prior to Closing.
6. An agreement with Mr. Wallace Jones described in Schedule
8.7.
7. Contingent earn-out payment due to former shareholders of
Pratt for the period of October 1, 1995 to September 30, 1996
pursuant to Section 1.10 of the Agreement and Plan of Merger
dated as of 8/22/91 by and among Watts, Pratt and the other
parties named therein.
