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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 29, 1996
WATSON GENERAL CORPORATION
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(Exact name of registrant as specified in its charter)
California
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(State or other jurisdiction of incorporation)
0-16011 95-2873758
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(Commission File No.) (IRS Employer Identification No.)
32-B Mauchly
Irvine, California 92718
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714)-727-4020
N.A.
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
On January 18, 1996, Watson General Corporation (the "Company") and the
shareholders of EnviroQuest Technologies, Ltd. ("ETL") entered into a Stock
Purchase Agreement and consummated the transaction contemplated thereby on
January 30, 1996.
As reported in a previous Current Report on Form 8-K, in early April of 1996
the Company entered into a Settlement Agreement and Release with one of the
principal selling shareholders of ETL pursuant to which the aggregate purchase
price paid by the Company for ETL was reduced.
On July 29, 1996, the Company obtained an adjustment to the purchase price from
the other principal selling shareholder of ETL, John Marencik, pursuant to
which 138,650 shares of the Company's common stock were returned to the
Company, reducing the aggregate number of shares issued in connection with the
transaction to 184,000. In addition, a promissory note issued by the Company
for $36,740 was returned to the Company. The cash portion of the purchase
price for ETL, which was $800,000, was not affected. The reduction in the
purchase price was negotiated in settlement of a dispute by the Company
regarding the accuracy of certain representations, warranties and covenants
made to it in connection with the acquisition. The alleged inaccuracies
involved the prior conduct of certain persons employed by ETL and did not
involve the efficacy of the SIRAS technology, or the correctness in any
material aspect of the financial statements of ETL. Mr. Marencik also resigned
as a Director of the Company and released the Company from its obligation to
seek his election to the Board.
(c) Exhibits.
Exhibit 1 Settlement Agreement and Release
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has dully caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date 8/8/96 Watson General Corporation
By: /s/ Joseph L. Christoffel
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Joseph L. Christoffel,
Chief Financial Officer
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EXHIBIT 1
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (the "Agreement") is made and
entered into as of the 29th day of July, 1996 by and among John M. Marencik,
an individual ("Marencik"), Watson General Corporation, a California
corporation ("Watson"), and EnviroQuest Technologies, Ltd., a Missouri
corporation ("ETL").
WHEREAS, Marencik and certain other individuals sold stock of ETL to
Watson pursuant to that certain Stock Purchase Agreement dated on or about
January 18, 1996 (the "Stock Purchase Agreement"); and
WHEREAS, Watson believes that certain representations, warranties and
covenants made to it in the Stock Purchase Agreement have been breached and
that Watson was fraudulently induced to enter into the Stock Purchase
Agreement; and
WHEREAS, ETL believes that Marencik breached his fiduciary duty to ETL
and committed willful and/or negligent acts against ETL; and
WHEREAS, Marencik, on the one hand, and Watson and ETL, on the other
hand, desire to resolve all differences between them without admitting any
wrongdoing on the part of either party;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Return of Watson Stock. Marencik hereby returns, transfers and
assigns to Watson all right, title and interest in and to 138,650 shares (the
"Watson Shares") of the 158,650 shares of Watson common stock issued to
Marencik by Watson pursuant to the Stock Purchase Agreement. Marencik hereby
confirms that he has not transferred or assigned any right or interest in or to
the Watson Shares to any other person, and that the remaining 20,000 shares of
Watson common stock have been pledged to a third party. The certificate(s)
representing the Watson Shares shall be delivered to Watson or ETL concurrently
with the execution of this Agreement.
2. Return of Promissory Note. Marencik hereby returns, transfers and
assigns to Watson all right, title and interest in and to the promissory note
issued to Marencik by Watson pursuant to the Stock Purchase Agreement in the
amount of $36,740 (the "Note"). Marencik hereby confirms that he has not
transferred or assigned any right or interest in or to the Note to any other
person. The Note shall be delivered to Watson or ETL concurrently with the
execution of this Agreement.
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3. Amendment of Employment Agreement. Concurrently with the
execution of this Agreement by Marencik and ETL, such parties shall execute an
amendment to the existing Employment Agreement of Marencik by ETL, which
amendment shall among other things recharacterize the agreement as a consulting
agreement and which is attached hereto as Exhibit A.
4. Resignation of Marencik as Director of Watson. Marencik hereby
resigns as a director of Watson, and permanently waives his right to be elected
as a director of Watson pursuant to section 2.4 of the Stock Purchase
Agreement.
5. Termination of Warwick Lease. Concurrently with the execution of
this Agreement by Marencik and ETL, Marencik, ETL and Frances Marencik shall
terminate the lease between the ETL and Marencik and Frances Marencik relating
to 4325 Warwick, Kansas City, Missouri, which termination agreement is attached
hereto as Exhibit B.
6. Resolution of Chesapeake. Concurrently with the execution of this
Agreement, the parties hereto and Frances Marencik shall enter into an
agreement regarding the termination of Chesapeake Bay Financial Corp. and the
assumption by ETL of certain indebtedness of Chesapeake, as set forth in the
agreement attached hereto as Exhibit C.
7. Acceptance of Frances Marencik Settlement. Marencik hereby agrees
to and accepts the terms, conditions and undertakings of Frances Marencik as
set forth in that certain Settlement Agreement and Release made and entered
into as of the 5th day of April, 1996 by and among Frances E. Marencik, ETL and
Watson.
8. Certain Undertakings By Marencik. Marencik hereby reconfirms the
accuracy of the representations and warranties made by Marencik in Schedule
11.2 of the Stock Purchase Agreement, and shall cooperate fully with ETL in
connection with the litigation set forth in such schedule, including without
limitation making himself reasonably available without cost as a witness for
ETL.
9. Actions Necessary or Advisable To Implement the Foregoing.
Marencik, Watson and ETL each hereby agree to take such other action, including
but not limited to the execution of one or more documents, which may be
necessary or advisable to implement the foregoing agreements and undertakings
of each such party pursuant to sections 1 through 8 inclusive of this
Agreement. Without limiting the foregoing, Marencik shall deliver a written
request to James Ewan, as escrow holder under that certain Escrow Agreement
dated January 30, 1996, to release the shares of ETL common stock previously
owned by him from such escrow and to deliver such shares to Watson.
10. Representation By Marencik. Marencik hereby represents, warrants
and covenants to Watson and ETL that, except for the matters set forth in that
certain letter dated April 4, 1996 from Edward T Swanson, Esq. to Mark Meers,
Esq. (the "April 1996 letter"), Marencik has no actual knowledge as of the
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date hereof that any representation, warranty or covenant in the Stock Purchase
Agreement by the Sellers (as that term is defined in the Stock Purchase
Agreement) was not correct in all material respects.
11. Release of Marencik. Watson and ETL shall and hereby do relieve,
release and discharge Marencik, and each of his heirs, successors and assigns,
of and from any and all claims, debts, liabilities, demands, obligations,
promises, acts, agreements, costs, expenses, damages, actions and causes of
action, of whatsoever kind or nature, whether now known or unknown, suspected
or unsuspected, based on, arising out of, or in connection with (a) the
representations, warranties and/or covenants of Marencik pursuant to the Stock
Purchase Agreement to the extent that such representations, warranties and/or
covenants relate to the matters set forth in the April 1996 letter, or (b) any
actions or omissions by Marencik in his capacity as an officer, director and/or
employee of ETL prior to the date of the Stock Purchase Agreement which relate
to the matters set forth in the April 1996 letter; provided, however, that
nothing herein shall release, waive, or prejudice any rights that Watson or ETL
may have against Marencik for any breach by Marencik or any representation,
warranty, covenant or undertaking of Marencik in the Stock Purchase Agreement
which does not relate to the matters set forth in the April 1996 letter or any
representation, warranty, covenant or undertaking pursuant to this Agreement.
12. Release of ETL and Watson. Marencik shall and hereby does
relieve, release and discharge ETL and Watson, and each of their officers,
directors, agents, successors and assigns, of and from any and all claims,
debts, liabilities, demands, obligations, promises, acts, agreements, costs,
expenses, damages, actions and causes of action, of whatsoever kind or nature,
whether now known or unknown, suspected or unsuspected, based on, arising out
of, or in connection with any matter prior to the date of this Agreement,
provided however, that nothing herein shall release, waive, or prejudice any
representation, warranty, covenant or undertaking pursuant to this Agreement.
13. Representations and Warranties. The parties hereto, and each of
them, represent and warrant to each other and agree with each other as follows:
(a) Each of the parties hereto has had the opportunity to
obtain independent legal advice from an attorney of his or its own choice with
respect to the advisability of executing this Agreement.
(b) There have been no other agreements or understandings
between the parties relating to the settled and released matters, except as
stated in this Agreement.
(c) Each party hereto, together with his or its attorney, has
made such investigation of the facts and of the law pertaining to this
settlement and this Agreement, and of all the matters pertaining thereto, as he
or it deems necessary.
(d) Each party hereto is the sole and rightful owner of all
right, title and interest in and to every claim, action and other matter which
he or it releases herein and has not heretofore assigned or
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otherwise transferred, and shall not assign or otherwise transfer, any interest
in any claim, action or other matter which he or it may have against the other
party hereto.
14. Binding Effect. This Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their respective representatives,
successors, heirs and assigns. However, except as otherwise expressly provided
herein, this Agreement is not for the benefit of any person not a party hereto
or specifically identified as a beneficiary herein, and is not intended to
constitute a third party beneficiary contract.
15. Captions. The headings of the sections of this Agreement are
intended solely for convenience of reference and are not intended and shall not
be deemed for any purpose whatever to modify or explain or place any
construction upon any of the provisions of this Agreement.
16. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which will be an original, but all of which,
when taken together, will constitute one and the same instrument.
17. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings of
the parties, and there are no representations, warranties or other agreements
between the parties in connection with the subject matter hereof except as
specifically set forth herein.
18. Amendment or Waiver. No supplement, modification, amendment, or
waiver of this Agreement shall be binding unless executed in writing by the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any provision hereof (whether or not
similar), nor shall waiver constitute a continuing waiver.
19. Governing Law. The parties hereto hereby agree that this
Agreement shall be governed by the laws of the State of Missouri.
20. Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, to achieve the intent of the parties to the extent possible. In any
event, all other provisions of this Agreement shall be deemed valid and
enforceable to the extent possible.
21. Survival of Warranties and Representations. The warranties and
representations of this Agreement are deemed to survive the date of execution
hereof.
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IN WITNESS WHEREOF, the parties hereto have each approved and executed
this Agreement as of the date set forth above.
/s/ JOHN M. MARENCIK
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John M. Marencik
WATSON GENERAL CORPORATION
By: /s/ RONALD G. CRANE
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Ronald G. Crane
ENVIROQUEST TECHNOLOGIES, LTD.
By /s/ ROGER H. SHERWOOD
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Roger H. Sherwood
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