EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
among
RADNOR HOLDINGS CORPORATION
and
XXXXXXX XXXXXXXXXX
THE XXXXXXXXXX CHARITABLE TRUST
XXXXX RIVER PAPER COMPANY, INC.
GRUPO INDUSTRIAL HERMES, S.A. de X.X.
XXXXXXXXX GROUP
Dated October 30, 1996
EXECUTION COPY
TABLE OF CONTENTS
Page
1. DEFINITIONS............................................................ 1
2. SALE AND TRANSFER OF SHARES AND OTHER INTERESTS; CLOSING............... 9
2.1 Shares and Other Interests................................... 9
2.2 Purchase Price............................................... 9
2.3 Noncompetition Agreement..................................... 10
2.4 Closing...................................................... 10
2.5 Closing Obligations.......................................... 10
2.6 Adjustment Amount............................................ 12
2.7 Adjustment Procedure......................................... 12
2.8 Tax Matters.................................................. 13
2.9 Environmental Escrow......................................... 15
3. REPRESENTATIONS AND WARRANTIES OF XXXXXXXXXX........................... 16
3.1 Organization and Good Standing............................... 16
3.2 Authority; No Conflict....................................... 16
3.3 Capitalization............................................... 17
3.4 Financial Statements......................................... 18
3.5 Books and Records............................................ 18
3.6 Title to Properties; Encumbrances............................ 19
3.7 Condition and Sufficiency of Assets.......................... 20
3.8 Accounts Receivable.......................................... 20
3.9 Inventory.................................................... 20
3.10 No Undisclosed Liabilities................................... 21
3.11 Taxes........................................................ 21
3.12 No Material Adverse Change................................... 22
3.13 Employee Benefits............................................ 23
3.14 Compliance with Legal Requirements; Governmental
Authorizations............................................... 32
3.15 Legal Proceedings; Orders.................................... 33
3.16 Absence of Certain Changes and Events........................ 34
3.17 Contracts; No Defaults....................................... 35
3.18 Insurance.................................................... 37
3.19 Environmental Matters........................................ 37
3.20 Employees.................................................... 39
3.21 Labor Relations; Compliance.................................. 40
3.22 Intellectual Property........................................ 40
3.23 Certain Payments............................................. 41
3.24 Disclosure................................................... 42
3.25 Relationships with Related Persons........................... 42
(i)
3.26 Brokers or Finders........................................... 43
3A. REPRESENTATIONS AND WARRANTIES OF SELLERS............................... 43
4. REPRESENTATIONS AND WARRANTIES OF BUYER................................. 44
4.1 Organization and Good Standing............................... 44
4.2 Authority; No Conflict....................................... 44
4.3 Investment Intent............................................ 44
4.4 Certain Proceedings.......................................... 45
4.5 Brokers or Finders........................................... 45
4.6 Financing.................................................... 45
4.7 Independent Investigation.................................... 45
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE.............................. 46
5.1 Access and Investigation..................................... 46
5.2 Operation of the Businesses of the Acquired Companies........ 46
5.3 Negative Covenant............................................ 46
5.4 Required Approvals........................................... 47
5.5 Notification................................................. 47
5.6 Payment of Indebtedness by Related Persons................... 47
5.7 No Negotiation............................................... 47
5.8 Commercially Reasonable Efforts.............................. 48
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE................................ 48
6.1 Approvals of Governmental Bodies............................. 48
6.2 Commercially Reasonable Efforts.............................. 48
6.3 Notification................................................. 48
6A. COVENANTS OF PARTIES AFTER CLOSING DATE................................. 49
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE..................... 49
7.1 Accuracy of Representations.................................. 49
7.2 Sellers' Performance......................................... 50
7.3 Supply Contract.............................................. 50
7.4 Additional Documents......................................... 50
7.5 No Proceedings............................................... 51
7.6 No Claim Regarding Stock Ownership or Sale Proceeds.......... 51
7.7 Senior Notes Offering........................................ 51
7.8 Audited Financial Statements................................. 51
7.9 Environmental Reports........................................ 51
7.10 Resignations................................................. 51
7.11 Consent of the Bank of Montreal.............................. 52
(ii)
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.................... 52
8.1 Accuracy of Representations.................................. 52
8.2 Buyer's Performance.......................................... 52
8.3 Supply Contract.............................................. 52
8.4 Additional Documents......................................... 52
8.5 No Injunction................................................ 53
8.6 Release of Personal Guaranty................................. 53
9. TERMINATION ............................................................ 53
9.1 Termination Events........................................... 53
9.2 Effect of Termination........................................ 54
10. INDEMNIFICATION; REMEDIES............................................... 54
10.1 Survival; Right to Indemnification Not Affected by Knowledge. 54
10.2 Indemnification and Payment of Damages by each Seller........ 54
10.3 Indemnification and Payment of Damages by Xxxxxxxxxx......... 55
10.4 Indemnification and Payment of Damages by Buyer.............. 56
10.5 Time Limitations............................................. 56
10.6 Limitations on Amount--Xxxxxxxxxx............................ 57
10.7 Limitations on Amount--Buyer................................. 57
10.8 Procedure for Indemnification--Third Party Claims............ 57
10.9 Procedure for Indemnification--Other Claims.................. 58
10.10 Limitations of Liability..................................... 58
10.11 Sole and Exclusive Remedies.................................. 59
11. GENERAL PROVISIONS...................................................... 60
11.1 Expenses..................................................... 60
11.2 Public Announcements......................................... 60
11.3 Confidentiality.............................................. 61
11.4 Notices...................................................... 61
11.5 Jurisdiction; Service of Process............................. 62
11.6 Further Assurances........................................... 62
11.7 Waiver....................................................... 63
11.8 Entire Agreement and Modification............................ 63
11.9 Disclosure Letter............................................ 63
11.10 Assignments, Successors, and No Third-Party Rights........... 63
11.11 Severability................................................. 64
11.12 Section Headings, Construction............................... 64
11.13 Time of Essence.............................................. 64
11.14 Governing Law................................................ 64
11.15 Counterparts................................................. 64
(iii)
STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement ("Agreement") is made as of October 28, 1996,
by and among RADNOR HOLDINGS CORPORATION, a Delaware corporation ("Buyer") and
XXXXXXX XXXXXXXXXX ("Xxxxxxxxxx"), the Xxxxxxxxxx Charitable Trust, Xxxxxxx
Xxxxxxxxxx, trustee (the "Trust"), XXXXX RIVER PAPER COMPANY, INC., a Virginia
corporation ("JR"), GRUPO INDUSTRIAL HERMES, S.A. de C.V., a sociedad anonima
de capital variable, organized and existing under the laws of Mexico ("Grupo
Hermes"), and the persons and trusts listed in Schedule A hereto, (collectively,
the "Xxxxxxxxx Group," and collectively with Xxxxxxxxxx, the Trust, JR and Grupo
Hermes, the "Sellers").
RECITAL
-------
WHEREAS, Sellers desire to sell, and Buyer desires to purchase, all of the
issued and outstanding shares (the "Shares") of common and preferred capital
stock, and all options and warrants (collectively, the "Other Interests") to
purchase the common and preferred capital stock, of SP ACQUISITION CO., a
Delaware corporation (the "Company"), for the consideration and on the terms set
forth in this Agreement.
NOW, THEREFORE, in consideration of their respective covenants, agreements,
representations and warranties contained herein, and intending to be legally
bound, Buyer and Sellers hereby agree as follows:
AGREEMENT
---------
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Section 1:
"Acquired Companies"--the Company and its Subsidiaries, collectively.
"Adjustment Amount"--as defined in Section 2.6.
"Applicable Contract"--any Contract to which any Acquired Company is a party or
by which any Acquired Company or any of the assets owned or used by it is bound.
"Applicable Employee Benefit Laws"--as defined in Section 3.13(2).
"Assignments of Other Interests"--as defined in Section 2.4.
"Balance Sheets"--as defined in Section 3.4.
1
"Breach"--a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been any inaccuracy
in or breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision.
"Business Day"--any day other than a Saturday, Sunday or legal holiday under the
laws of the State of Delaware.
"Buyer"--as defined in the first paragraph of this Agreement.
"Buyer's Releases"--as defined in Section 2.4.
"Canadian GAAP"--generally accepted Canadian accounting principles from time to
time approved by the Canadian Institute of Chartered Accountants, applied on a
basis consistent with the basis on which the Balance Sheets and the other
financial statements of StyroChem International, Ltd. referred to in Section 3.4
were prepared.
"Canadian Plan"--as defined in Section 3.13(2).
"Canadian Revenue Authorities"--Revenue Canada and Revenue Quebec or any
successor agencies.
"Canadian Securities Legislation"--the securities legislation of each of the
provinces and territories of Canada or any successor legislation or regulations
and rules pursuant to such legislation or any successor legislation.
"Closing"--as defined in Section 2.4.
"Closing Date"--the date and time as of which the Closing actually takes place.
"Company"--as defined in the Recital of this Agreement.
"Competition Act"--the Competition Act (Canada) or any successor law and
---------------
regulations and rules issued pursuant to that act or any successor law.
"Confidentiality Agreement"--that certain letter agreement between the Company
and Benchmark Corporation of Delaware, dated June 27, 1996.
"Consent"--any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
2
"Contemplated Transactions"--all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares and the Other Interests by Sellers to Buyer;
(b) the execution, delivery, and performance of the Noncompetition
Agreement, the Sellers' Releases and the Buyer's Releases;
(c) the performance by Buyer and Sellers of their respective covenants and
obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and the Other
Interests.
"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Damages"--as defined in Section 10.2.
"Disclosure Letter"--the disclosure letter delivered by Sellers to Buyer
concurrently with the execution and delivery of this Agreement.
"Encumbrance"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, hypothec, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental Escrow Agreement"--as defined in Section 2.5.
"Environmental Liabilities"--any cost, damages, expense, liability, obligation,
or other responsibility arising from or under Environmental Law and consisting
of or relating to:
(a) any environmental matters or conditions (including on-site or off-site
contamination);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law;
3
(c) financial responsibility under Environmental Law for cleanup costs or
corrective action, including any investigation, cleanup, removal,
containment, or other remediation or response actions ("Cleanup")
required by applicable Environmental Law (whether or not such Cleanup
has been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., as amended
("CERCLA") or covered by any Environmental Law applicable in Canada.
"Environmental Law"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances,
violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) protecting resources, species, or ecological amenities;
(e) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(f) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-
appointed representatives of the public interest to recover for
injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Escrow Agent"--Duane, Morris & Heckscher.
4
"Escrow Agreement"--as defined in Section 2.5.
"Escrowed Funds"--as defined in Section 2.5.
"Facilities"--any real and immoveable property, leaseholds, or other interests
owned or operated by any Acquired Company and any buildings, plants, structures,
or equipment (including motor vehicles, tank cars, and rolling stock) owned or
operated by any Acquired Company.
"GAAP"--means U.S. GAAP in reference to the financial statements of StyroChem
International, Inc. and the Company, and Canadian GAAP in reference to the
financial statements of StyroChem International, Ltd.
"Governmental Authorization"--any approval, consent, license, permit, waiver, or
other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body"--any:
(a) nation, state, province, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, province, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, ministry, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"Hazardous Activity"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof.
"Hazardous Materials"--any waste or other substance that is listed, defined,
designated, or classified on the date hereof as hazardous, radioactive, or toxic
or a pollutant or a contaminant under or pursuant to any Environmental Law,
including any admixture or solution thereof, and specifically including
petroleum and all derivatives thereof or synthetic substitutes therefor and
asbestos or asbestos-containing materials.
5
"HSR Act"--the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Intellectual Property Assets"--as defined in Section 3.22.
"Interim Balance Sheets"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
"ITA"--the Income Tax Act (Canada) and the Taxation Act (Quebec) or any
-------------- ------------
successor law and regulations and rules issued pursuant to the Income Tax Act
--------------
(Canada) or the Taxation Act (Quebec) or any successor law.
------------
"Knowledge"--an individual will be deemed to have "Knowledge" of a particular
fact or other matter if such individual is actually aware of such fact or other
matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has Knowledge of such fact or other matter
when serving in such capacity.
"Legal Requirement"--any applicable federal, state, provincial, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, civil law, regulation,
statute, or treaty in effect as of the date hereof.
"Management"--Xxxxxxxxxx, Xxxx Xxxxxxx, Xxxx Xxxxx, Xxx Xxxxxxx and Xxxx Xxxx.
"Material Adverse Effect"--when such term is used to describe or refer to the
impact, magnitude, or significance of any Contract, obligation, liability,
consequence, effect, circumstance or condition, shall mean that the subject
matter of such description or reference has a material adverse effect on the
properties, assets, business, financial condition or prospects of the Acquired
Companies, taken as a whole.
"Noncompetition Agreement"--as defined in Section 2.4(a)(iii).
"Order"--any applicable award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
6
"Ordinary Course of Business"--an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if such action is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person.
"Organizational Documents"--(a) the articles or certificate of incorporation and
the bylaws of a corporation; (b) the partnership agreement and any statement of
partnership of a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) any charter
or similar document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the foregoing.
"Other Interests"--as defined in the Recital of this Agreement.
"Person"--any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"Plan"--as defined in Section 3.13.
"Proceeding"--any arbitration, hearing, litigation, or suit (whether civil,
criminal, administrative or investigative) commenced, brought, conducted, or
heard by or before any Governmental Body or arbitrator.
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer,
partner, executor, liquidator, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
7
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor,
liquidator, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 51% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 51% of the outstanding equity securities or
equity interests in a Person.
"Release"--any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
"Representative"--with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Seller"--as defined in the first paragraph of this Agreement.
"Sellers' Releases"--as defined in Section 2.4.
"Senior Notes Offering"--the sale by Buyer of up to $100,000,000 of its Senior
Notes.
"Shares"--as defined in the Recital of this Agreement.
"Subsidiary"--with respect to any Person (the "Owner"), any corporation or other
Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not
8
occurred) are held by the Owner or one or more of its Subsidiaries; when used
without reference to a particular Person, "Subsidiary" means a Subsidiary of the
Company.
"Tax"--any income tax or similar assessments or any sales, excise, occupation,
use, ad valorem, property, production, severance, transportation, employment,
payroll, franchise, withholding, estate, social service and corporation,
capital, value added, profits, gross receipts, custom duties, stamp, transfer,
water, business, goods and services, or other tax imposed by any United States
federal, state, or local (or any foreign or provincial) taxing authority,
including any interest, penalties, or additions attributable thereto.
"Tax Return"--any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or payment of any
Tax or in connection with the administration, implementation, or enforcement of
or compliance with any Legal Requirement relating to any Tax.
"Threat of Release"--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), that
would lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"U.S. GAAP"--generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Balance Sheets and the other
financial statements of the Company and StyroChem International, Inc. referred
to in Section 3.4 were prepared.
2. SALE AND TRANSFER OF SHARES AND OTHER INTERESTS; CLOSING
2.1 Shares and Other Interests
--------------------------
Subject to the terms and conditions of this Agreement, at the Closing, Sellers
will sell and transfer the Shares and the Other Interests to Buyer, and Buyer
will purchase the Shares and the Other Interests from Sellers.
2.2 Purchase Price
--------------
The purchase price (the "Purchase Price") for the Shares and the Other Interests
will be Twenty-Six Million Dollars ($26,000,000) less amounts shown on Exhibit
2.2 plus or minus the Adjustment Amount.
9
2.3 Noncompetition Agreement
------------------------
In addition to the Purchase Price, at the Closing Buyer will pay the sum of Four
Million Seven Hundred Sixty Thousand Dollars ($4,760,000) to Xxxxxxxxxx pursuant
to the Noncompetition Agreement.
2.4 Closing
-------
The purchase and sale (the "Closing") provided for in this Agreement will take
place at the offices of Buyer's counsel at Xxx Xxxxxxx Xxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000, at 9:00 a.m. (local time) on the date that is concurrent
with the closing of the Senior Notes Offering, or at such other time and place
as the parties may agree. Subject to the provisions of Section 9, failure to
consummate the purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section 2.3 will not result in
the termination of this Agreement and will not relieve any party of any
obligation under this Agreement.
2.5 Closing Obligations
-------------------
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers);
(ii) releases in the form of Exhibit 2.5(a)(ii) executed by Sellers
(collectively, the "Sellers' Releases");
(iii) a noncompetition agreement in the form of Exhibit 2.5(a)(iii),
executed by Xxxxxxxxxx (the "Noncompetition Agreement");
(iv) a consulting agreement in the form of Exhibit 2.5(a)(iv)
executed by Xxxxxxxxxx ("Consulting Agreement");
(v) such assignments of options and assignments of warrants
(collectively, the "Assignments of Other Interests") necessary
to effect the assignment to Buyer of all of the Other Interests,
each reasonably satisfactory in form and substance to Buyer and
duly executed by the appropriate Seller or Sellers; and
(vi) a certificate executed by each Seller representing and
warranting to Buyer that such Seller's representations and
warranties in this Agreement are accurate in all material
respects as of the Closing Date
10
as if made on the Closing Date (giving full effect to any
supplements to the Disclosure Letter that were delivered by
Sellers to Buyer prior to the Closing Date in accordance with
Section 5.5);
(vii) an escrow agreement (the "Escrow Agreement") by and among
Escrow Agent, Buyer and Xxxxxxxxxx, in the form of Exhibit
2.5(a)(vii), executed by Xxxxxxxxxx; and
(viii) an environmental escrow agreement (the "Environmental Escrow
Agreement") by and among Escrow Agent, Buyer and Xxxxxxxxxx,
in the form of Exhibit 2.5(a)(viii), executed by Xxxxxxxxxx.
(b) Buyer will make the following payments on account of the Purchase
Price:
(i) pay to Xxxxx Fargo Bank (the "Bank"), the amount which will
pay in full and satisfy the Company's outstanding indebtedness
to the Bank as of the Closing Date;
(ii) transfer to the Escrow Agent pursuant to the terms of the
Escrow Agreement the sum of One Million Dollars ($1,000,000)
(the "Escrowed Funds") pending final determination of the
Adjustment Amount in accordance with Sections 2.6 and 2.7
below and transfer to the Escrow Agent pursuant to the
Environmental Escrow Agreement the sum of One Million Three
Hundred Seventy-five Thousand Dollars ($1,375,000); and
(iii) pay the Sellers, in consideration for the Shares and the Other
Interests, an amount equal to $26,000,000 less the sum of the
payments referred to in Sections 2.5(b)(i) and 2.5(b)(ii) and
Exhibit 2.2, which will be allocated among the Sellers in
accordance with Schedule 2.5(b)(iii) and will be paid by wire
transfer to the Sellers (or to Xxxxxxxxxx on behalf of those
Sellers which have authorized Xxxxxxxxxx to receive payments
on their behalf) as specified on Schedule 2.5(b)(iii).
(c) Buyer will deliver to Sellers:
(i) a certificate executed by Buyer to the effect that, except as
otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was accurate
in all material respects as of the date of this Agreement and
is accurate in all respects as of the Closing Date as if made
on the Closing Date;
11
(ii) the Escrow Agreement, the Noncompetition Agreement, the
Consulting Agreement and the Environmental Escrow Agreement,
executed by Buyer; and
(iii) releases in the form of Exhibit 2.5(c)(iii) executed by Buyer
and the Acquired Companies (the "Buyer's Releases").
2.6 Adjustment Amount
-----------------
The Adjustment Amount (which may be a positive or negative number) will be equal
to the Company's net working capital as of the Closing Date calculated in
accordance with GAAP on a consolidated basis, minus the Company's net working
-----
capital as of August 3, 1996 as set forth on Schedule 2.6 to this Agreement,
------------
provided that for purposes of determining the Adjustment Amount the balance
sheet as of the Closing Date will be compared to Schedule 2.6 with respect to
the asset and liability accounts shown on Schedule 2.6.
2.7 Adjustment Procedure
--------------------
(a) Buyer will cause Xxxxxx Xxxxxxxx LLP, the Buyer's certified public
accountants, to determine the consolidated net working capital of the Company as
of the close of business on the Closing Date in accordance with GAAP and to
determine the Adjustment Amount based on the consolidated net working capital of
the Company as so determined as of the close of business on the Closing Date as
compared to the consolidated net working capital of the Company as shown on
Schedule 2.6, based on the asset and liability accounts specified on Schedule
2.6 and subject to the instructions provided in Schedule 2.6, but not subject to
any disclosures or statements made in the Disclosure Letter delivered to Sellers
pursuant to this Agreement. Buyer will deliver the statement prepared by Xxxxxx
Xxxxxxxx LLP showing the calculation of the Adjustment Amount ("Closing
Statement") to Xxxxxxxxxx within sixty (60) days after the Closing Date,
together with copies of Buyer's and Xxxxxx Xxxxxxxx LLP's work papers, and other
documents and information, used to prepare the Closing Statement. If, within
sixty (60) days following delivery of the Closing Statement and related
documents and information, Xxxxxxxxxx has not given Buyer notice of his
objection to the Closing Statement (such notice must contain a statement of the
basis of Xxxxxxxxxx'x objection), then the Company's net working capital
reflected in the Closing Statement will be used in computing the Adjustment
Amount. Buyer agrees upon reasonable notice to make available to Xxxxxxxxxx at
the offices of the Acquired Companies the books and records of the Acquired
Companies as required by Xxxxxxxxxx to verify the determination reflected in the
Closing Statement. If Xxxxxxxxxx gives such notice of objection, and the parties
are unable to resolve the subject of such objection within thirty (30) days
after such notice, then the issues in dispute will be submitted to Ernst &
Young, certified public accountants (the "Accountants"), for resolution with
instructions to the Accountants to resolve such dispute within forty-five (45)
days. If issues in dispute are submitted to the Accountants for resolution, (i)
each party will furnish to the Accountants such workpapers and other documents
and information relating to the disputed issues as the Accountants may request
and
12
are available to that party or its Subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the Accountants
any material relating to the determination and to discuss the determination with
the Accountants; (ii) the determination by the Accountants, as set forth in a
notice delivered to both parties by the Accountants, will be binding and
conclusive on the parties; and (iii) Buyer and Sellers will each bear 50% of the
fees of the Accountants for such determination.
(b) The final determination of the Adjustment Amount shall occur on the
earliest of (i) sixty (60) days after delivery of the Closing Statement to
Xxxxxxxxxx without objection, (ii) written agreement of Xxxxxxxxxx and Buyer to
the Closing Statement or any modification thereof, or (iii) written
determination by the Accountants. On the tenth (10th) Business Day following
the final determination of the Adjustment Amount, (i) if the Adjustment Amount
is a negative number and greater than negative $1,000,000, the Escrowed Funds
shall be paid to Buyer, and the Sellers shall pay to Buyer (in proportion to the
relative percentage of the Purchase Price payable to each Seller under Section
2.5(b)(iii) (such relative proportions, hereinafter, a "Pro Rata Basis")) an
amount equal to the amount by which the negative Adjustment Amount exceeds
negative $1,000,000, (ii) if the Adjustment Amount is a negative number and less
than or equal to negative $1,000,000, an amount equal to the negative Adjustment
Amount shall be paid to Buyer out of the Escrowed Funds, and the balance of the
Escrowed Funds, if any, shall be paid to the Sellers, and (iii) if the
Adjustment Amount is zero or a positive number, all of the Escrowed Funds shall
be paid to the Sellers, and Buyer shall pay to the Sellers an amount equal to
the positive Adjustment Amount, if any. All payments of the Escrowed Funds will
be made together with interest at the rate earned thereon. Payments must be
made in immediately available funds by wire transfer to such bank account as the
party entitled to receive such funds shall specify. Payments made to Sellers
under this Section and under Section 2.5(b)(iii) shall be paid on a Pro Rata
Basis in accordance with Schedule 2.5(b)(iii), and payments made to Xxxxxxxxxx
on behalf of Sellers other than JR shall be paid to Xxxxxxxxxx and then
distributed by Xxxxxxxxxx to such Sellers in accordance with Schedule
2.5(b)(iii). Any portion of the Adjustment Amount which is not disputed under
the procedures set forth above shall be paid to the party or parties entitled
thereto in accordance with the provisions of this Section 2.7, and the remaining
portion of the Adjustment Amount shall be paid when any dispute has been
resolved in accordance with the provisions of this Section 2.7. An example of
the calculation of the amount payable to Sellers at Closing and the calculation
and payment of the Adjustment Amount is set forth on Exhibit 2.7(b) attached
hereto (the assumptions set forth therein being arbitrary and used for
illustrative purposes only).
2.8 Tax Matters
-----------
The following provisions shall govern the allocation of responsibility as
between Buyer and Sellers for certain tax matters following the Closing Date:
13
(a) Tax Periods Ending on or Before the Closing Date. Buyer shall prepare
------------------------------------------------
or cause to be prepared and file or cause to be filed all Tax Returns for the
Acquired Companies for all periods ending on or prior to the Closing Date which
are filed after the Closing Date. Buyer shall permit Xxxxxxxxxx to review and
comment on each such Tax Return described in the preceding sentence prior to
filing and shall make such revisions to such Tax Returns as are reasonably
requested by Xxxxxxxxxx. Xxxxxxxxxx shall reimburse Buyer for Taxes of the
Acquired Companies with respect to such periods within fifteen (15) days after
payment by Buyer or the Acquired Companies of such Taxes to the extent such
Taxes are not reflected in the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the Closing Statement.
(b) Tax Periods Beginning Before and Ending After the Closing Date. Buyer
--------------------------------------------------------------
shall prepare or cause to be prepared and file or cause to be filed any Tax
Returns of the Acquired Companies for Tax periods which begin before the Closing
Date and end after the Closing Date in a manner reasonably consistent with past
tax returns. Buyer shall permit Xxxxxxxxxx to review and comment on each such
Tax Return described in the preceding sentence prior to filing and shall make
such revisions to such Tax Returns as are reasonably requested by Xxxxxxxxxx.
Xxxxxxxxxx shall pay to Buyer within fifteen (15) days after the date on which
Taxes are paid with respect to such periods an amount equal to the portion of
such Taxes which relates to the portion of such Taxable period ending on the
Closing Date to the extent such Taxes are not reflected in the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shown on the Closing Statement.
For purposes of this Section, in the case of any Taxes that are imposed on a
periodic basis and are payable for a Taxable period that includes (but does not
end on) the Closing Date, the portion of such Tax which relates to the portion
of such Taxable period ending on the Closing Date shall (x) in the case of any
Taxes other than Taxes based upon or related to income or receipts, be deemed to
be the amount of such Tax for the entire Taxable period multiplied by a fraction
the numerator of which is the number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
Taxable period, and (y) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Acquired Companies.
(c) Refunds and Tax Benefits. Any Tax refunds that are received by Buyer
------------------------
or the Acquired Companies, and any amounts credited against Tax to which Buyer
or the Acquired Companies become entitled, that relate to Tax periods or
portions thereof ending on or before the Closing Date shall be for the account
of Sellers, and Buyer shall pay over to Sellers on a Pro Rata Basis any such
refund or the amount of any such credit within fifteen (15) days after receipt
or entitlement thereto, unless Sellers have received credit therefor on the
Closing Statement. In addition, to the extent that a claim for refund or a
proceeding results in a payment or credit against Tax by a taxing authority to
the Buyer or the Acquired Companies
14
of any amount accrued on the Closing Statement, the Buyer shall pay such amount
to Sellers on a Pro Rata Basis within fifteen (15) days after receipt or
entitlement thereto.
(d) Cooperation on Tax Matters.
--------------------------
(i) Buyer and Sellers shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. Buyer and Sellers agree (A) that Buyer will cause the
Acquired Companies to retain all books and records with respect to Tax
matters pertinent to the Acquired Companies relating to any taxable period
beginning before or including the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Buyer or Sellers,
any extensions thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any taxing authority, and
(B) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if
the other party so requests, Buyer will cause the Acquired Companies to
allow the other party to take possession of such books and records.
(ii) Buyer and Sellers further agree, upon request, to use their best
efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to,
with respect to the transactions contemplated hereby).
(e) Any dispute between the parties regarding the matters set forth in
this Section 2.8 shall be submitted to the Accountants for resolution in
accordance with the procedures set forth in Section 2.7 above.
2.9 Environmental Escrow
--------------------
At the Closing, Buyer will pay $1,375,000 to the Escrow Agent to be held and
disbursed pursuant to the Environmental Escrow Agreement. Buyer shall have no
claim against Xxxxxxxxxx for breach of any representation or warranty related to
the matters specified on Exhibit A to the Environmental Escrow Agreement, other
than the right which Buyer has under the Escrow Agreement to apply the escrowed
funds to correct and address the matters specified on Exhibit A. Prior to
Closing, Buyer and Sellers will mutually agree on the independent consultant to
serve as contemplated by the Environmental Escrow Agreement.
15
3. REPRESENTATIONS AND WARRANTIES OF XXXXXXXXXX
Xxxxxxxxxx represents and warrants to Buyer as follows:
3.1 Organization and Good Standing
------------------------------
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate
list for each Acquired Company of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each stockholder, option holder or
warrant holder and the number of shares, options or warrants held by each). Each
Acquired Company is a corporation duly incorporated and organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under Applicable
Contracts. Except as set forth on Part 3.1 of the Disclosure Schedule, each
Acquired Company is duly qualified and registered to do and carry on business as
a foreign corporation and is in good standing under the laws of each state,
province or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification and registration.
(b) Xxxxxxxxxx has delivered to Buyer copies of the Organizational
Documents of each Acquired Company, as currently in effect.
3.2 Authority; No Conflict
----------------------
(a) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Acquired
Companies, or (B) any resolution adopted by the board of
directors or the stockholders of any Acquired Company;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any
of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to
which any Acquired Company, or any of the assets owned or used
by any Acquired Company, may be subject;
16
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate, or
modify, any Governmental Authorization that is held by any
Acquired Company or that otherwise relates to the business of,
or any of the assets owned or used by, any Acquired Company; or
(iv) except as set forth in Part 3.2 of the Disclosure Letter,
contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify,
any Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by any Acquired
Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Acquired Company is
or will be required to give any notice to or obtain any Consent from any Person
in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
3.3 Capitalization
--------------
The authorized equity securities of the Company consist of (i) 400,000 shares of
Common Stock, par value $.01 per share, of which certain shares are issued and
outstanding as set forth in Part 3.3 of the Disclosure Schedule (the "Common
Shares") and (ii) 100,000 shares of Class A Preferred Stock, par value $.01 per
share, of which certain shares are issued and outstanding as set forth in Part
3.3 of the Disclosure Schedule (the "Preferred Shares"). The Common Shares and
the Preferred Shares collectively constitute the Shares and are owned of record
as set forth in Part 3.3 of the Disclosure Schedule. The authorized equity
securities of StyroChem International, Inc., a Texas corporation, consist of 100
shares of common stock, par value $10.00, of which 100 shares are issued and
outstanding and are owned by the Company. The authorized equity securities of
StyroChem International, Ltd., a Quebec corporation, consist of 10 shares of
common stock, par value $10.00 per share, of which 10 shares are issued and
outstanding and owned by the Company. The authorized equity securities of
StyroChem FSC, Ltd., a Barbados corporation, consist of 1,000 shares of common
stock, no par value, all of which are owned by the Company. All of the
outstanding equity securities of each Acquired Company have been duly authorized
and validly issued and are fully paid and nonassessable. Except as described in
Part 3.3 of the Disclosure Letter, and with the exception of the Shares and the
Other Interests (which are owned by Sellers), all of the outstanding equity
securities and other securities of each Acquired Company are owned of record and
beneficially by one or more of the Acquired Companies, free and clear of all
Encumbrances. Except as described in Part 3.3 of the Disclosure Letter, there
are no outstanding Contracts obligating any Acquired Company to issue, sell or
transfer any equity
17
securities or other securities of any Acquired Company. None of the outstanding
equity securities or other securities of any Acquired Company was issued in
violation of the Securities Act, the Canadian Securities Legislation or any
other Legal Requirement. Except as set forth in Part 3.3 of the Disclosure
Letter, no Acquired Company owns, or has any Contract to acquire, any equity
securities or other securities of any Person (other than Acquired Companies) or
any direct or indirect equity or ownership interest in any other business. The
following debentures have been paid in full by the Company: (i) SP Acquisition
Co. 1994 Debenture No. 1, dated February 25, 1994, in the principal amount of
$400,000, in favor of Grupo Industrial Hermes, S.A. de C.V.; (ii) SP Acquisition
Co. 1994 Debenture No. 2, dated February 25, 1994, in the principal amount of
$800,000, in favor of Xxxxx River Paper Company, Inc.; (iii) SP Acquisition Co.
1994 Debenture No. 3, dated February 25, 1994, in the principal amount of
$800,000, in favor of X.X. Xxxxxxxxx; (iv) SP Acquisition Co. 1994 Debenture No.
4, dated December 22, 1994, in the principal amount of $666,000, in favor of
X.X. Xxxxxxxxx; and (v) SP Acquisition Co. 1994 Debenture No. 5, dated December
22, 1994, in the principal amount of $334,000, in favor of Grupo Industrial
Hermes, S.A. de C.V.
3.4 Financial Statements
--------------------
Xxxxxxxxxx has delivered to Buyer: (a) balance sheets of StyroChem
International, Inc. and Styrochem International, Ltd. for the period from
February 26, 1994 to April 1, 1995, and the related statements of income,
changes in stockholders' equity, and cash flow for the period ended April 1,
1995, together with the notes thereto and the report thereon of Coopers &
Xxxxxxx L.L.P., independent certified public accountants ("Audited Financial
Statements"), (b) consolidated balance sheets of the Company, StyroChem
International, Inc. and Styrochem International, Ltd. (the "Balance Sheets"),
and the related consolidated statements of income, changes in stockholders'
equity, and cash flow for the fiscal year ended March 30, 1996, and (c)
unaudited balance sheets of the Company, StyroChem International, Inc. and
Styrochem International, Ltd. as at September 28, 1996 (the "Interim Balance
Sheets") and the related unaudited statements of income, changes in
stockholders' equity, and cash flow for the 6 months then ended. Except as set
forth in Part 3.4 of the Disclosure Letter, such financial statements and notes
fairly present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Acquired Companies as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Audited Financial Statements); except as set forth in Part 3.4
of the Disclosure Letter, the financial statements referred to in this Section
3.4 reflect the consistent application of such accounting principles throughout
the periods involved. No financial statements of any Person other than the
Acquired Companies are required by GAAP to be included in the consolidated
financial statements of the Company.
3.5 Books and Records
-----------------
18
Except as set forth in Part 3.4 of the Disclosure Letter, the books of account,
minute books, stock record books, and other records of the Acquired Companies,
all of which have been made available to Buyer, are complete and correct in all
material respects. At the Closing, all of those books and records will be in
the possession of the Acquired Companies.
3.6 Title to Properties; Encumbrances
---------------------------------
Part 3.6 of the Disclosure Letter contains a complete and accurate list of all
real and immoveable property, real property leaseholds, or other interests
therein owned by any Acquired Company. The Acquired Companies own (with good
and indefeasible title in the case of real and immoveable property, subject only
to the matters permitted by the following sentence) all the properties and
assets (whether real and immoveable, personal and moveable, or mixed and whether
tangible or intangible) that they purport to own located in the facilities owned
or operated by the Acquired Companies or reflected as owned in the books and
records of the Acquired Companies, including all of the properties and assets
reflected in the Interim Balance Sheets and including all Intellectual Property
Assets (as hereinafter defined) (except for (i) assets held under capitalized
leases disclosed or not required to be disclosed in Part 3.6 of the Disclosure
Letter, (ii) personal and moveable property sold since the dates of the Interim
Balance Sheets, as the case may be, in the Ordinary Course of Business and (iii)
certain real and immoveable property and improvements thereon located in Keller,
Texas and identified in Part 3.6 of the Disclosure Letter as sold prior to
Closing, and all of the properties and assets purchased or otherwise acquired by
the Acquired Companies since the date of the Interim Balance Sheets (except for
personal and moveable property acquired and sold since the date of the Interim
Balance Sheets in the Ordinary Course of Business and consistent with past
practice), which subsequently purchased or acquired properties and assets (other
than inventory and short-term investments) are listed in Part 3.6 of the
Disclosure Letter. All material properties and assets reflected in the Interim
Balance Sheets and all Intellectual Property Assets are free and clear of all
Encumbrances except, with respect to all such properties and assets, (a)
mortgages, hypothecs or security interests shown on the Interim Balance Sheets
as securing specified liabilities or obligations, (b) mortgages, hypothecs or
security interests incurred in connection with the purchase of property or
assets after the date of the Interim Balance Sheets (such mortgages, hypothecs
and security interests being limited to the property or assets so acquired), (c)
liens for current taxes not yet due or the validity of which is being contested
in good faith by appropriate legal proceedings, (d) statutory liens (including
materialmen's, mechanic's, repairmen's, landlord's, and other similar liens)
arising in connection with the Ordinary Course of Business securing payments not
yet due and payable or, if due and payable, the validity of which is being
contested in good faith by appropriate legal proceedings, and (e) such
imperfections or irregularities of title, if any, as (A) are not substantial in
character, amount, or extent and do not materially detract from the value of the
property subject thereto, (B) do not materially interfere with either the
present or intended use of such property, and (C) do not, individually or in the
aggregate, materially interfere with the conduct of the Acquired Companies
normal operations or otherwise have a Material Adverse Effect.
19
3.7 Condition and Sufficiency of Assets
-----------------------------------
Except as disclosed in Part 3.7 of the Disclosure Schedule, to the knowledge of
Management, the buildings, plants, structures, and equipment of the Acquired
Companies are structurally sound, are in good operating condition and repair,
and are adequate for the uses to which they are being put, and none of such
buildings, plants, structures, or equipment is in need of maintenance or repairs
(except for ordinary, routine maintenance and repairs). The building, plants,
structures, and equipment of the Acquired Companies are sufficient for the
continued conduct of the Acquired Companies' businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
3.8 Accounts Receivable
-------------------
All accounts receivable of the Acquired Companies that are reflected on the
Interim Balance Sheets or on the Closing Statement and the accounting records of
the Acquired Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the reserves, if any, shown
on the Closing Statement (which reserves, if any, are adequate consistent with
past practice and will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging). Subject to such
reserves, if any, each of the Accounts Receivable either has been or will be
collected in full, without any set-off, within 180 days after the day on which
it first becomes due and payable. There is no contest, claim, or right of set-
off, other than returns in the Ordinary Course of Business, under any Contract
with any obligor of an Accounts Receivable relating to the amount or validity of
such Accounts Receivable. Part 3.8 of the Disclosure Letter contains a complete
and accurate list of all Accounts Receivable as of the date of the Interim
Balance Sheets, which list sets forth the aging of such Accounts Receivable.
3.9 Inventory
---------
Except as stated in Part 3.4 of the Disclosure Letter: All inventory of the
Acquired Companies, whether or not reflected in the Interim Balance Sheets,
consists of a quality and quantity useable and salable in the Ordinary Course of
Business. Inventories will be valued in accordance with GAAP applied on a
consistent basis, net of any reserves required in accordance with GAAP. Raw
materials, work in process and finished goods will be valued at the lower of
cost or market, with cost being calculated on an average cost basis, the lower
of cost or market test for raw materials and work in process will be determined
on a FIFO basis using the most current invoice and the next prior invoice(s)
unit all pounds of raw material and WIP have been valued. The amount of overhead
and labor added to work in process and finished goods is based on the direct
cost method where all material costs directly related to the production process
along with direct labor, depreciation, utilities, and repairs and maintenance
are capitalized into inventory and is
20
consistent with the prior periods. Non-prime inventory will be stated at the net
realizable value, using the average sales price of the last 90 days actual sales
of the specific product. The Acquired Companies will try to sell all non-prime
inventory prior to Closing.
3.10 No Undisclosed Liabilities
--------------------------
Except as set forth in Part 3.10 of the Disclosure Letter, the Acquired
Companies have no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Interim Balance
Sheets and current liabilities incurred in the Ordinary Course of Business since
the respective dates thereof which, if still outstanding on the Closing Date,
will be reflected in the Closing Statement; provided, however, the foregoing
representation does not apply to or cover any liabilities or obligations that
are generally the subject of any other representation or warranty made by
Xxxxxxxxxx in this Agreement, whether or not such liabilities or obligations
would be required to be disclosed under the express terms of such other
representation or warranty.
3.11 Taxes
-----
(a) Except as set forth in Part 3.11 of the Disclosure Letter, the Acquired
Companies have filed or caused to be filed on a timely basis since February 25,
1994 all Tax Returns that are or were required to be filed by or with respect to
any of them, either separately or as a member of a group of corporations,
pursuant to applicable Legal Requirements. The Acquired Companies have paid, or
made provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise (since February 25, 1994), or
pursuant to any assessment received by Sellers or any Acquired Company, except
such Taxes, if any, as are listed in Part 3.11 of the Disclosure Letter and are
being contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Interim Balance Sheets. Each of
the Acquired Companies has paid adequate and timely installments of taxes.
(b) Part 3.11 of the Disclosure Letter contains a complete and accurate
list of all audits of all Tax Returns filed since February 25, 1994. All
deficiencies proposed as a result of such audits have been paid, reserved
against, settled, or, as described in Part 3.11 of the Disclosure Letter, are
being contested in good faith by appropriate proceedings. Part 3.11 of the
Disclosure Letter describes all adjustments to the United States federal income
Tax Returns and Canadian (federal and provincial) income Tax Returns filed by
any Acquired Company or any group of corporations including any Acquired Company
for all taxable years since February 25, 1994, and the resulting deficiencies
proposed by the IRS or Canadian Revenue Authorities, as the case may be. Except
as described in Part 3.11 of the Disclosure Letter, neither Seller nor any
Acquired Company has given or been requested to give waivers or extensions (or
is or would be subject to a waiver or extension given by any other Person) of
any statute of limitations relating to the payment of Taxes of any Acquired
Company or
21
for which any Acquired Company may be liable for any Tax Return filed after
February 25, 1994.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of each Acquired Company are adequate (determined in accordance
with GAAP) and are at least equal to that Acquired Company's liability for Taxes
for any Tax Return filed after February 25, 1994. To Management's Knowledge,
there exists no proposed tax assessment against any Acquired Company except as
disclosed in the Interim Balance Sheets or in Part 3.11 of the Disclosure Letter
for any Return filed after February 25, 1994. No consent to the application of
Section 341(f)(2) of the IRC or any similar provision of the ITA has been filed
with respect to any property or assets held, acquired, or to be acquired by any
Acquired Company. All Taxes that any Acquired Company is or was required by
Legal Requirements to withhold or collect after February 25, 1994 have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(d) All Tax Returns filed since February 25, 1994 by (or that include on a
consolidated basis) any Acquired Company are true, correct, and complete in all
material respects. There is no tax sharing agreement that will require any
payment by any Acquired Company after the date of this Agreement. During the
consistency period (as defined in Section 338(h)(4) of the IRC or any equivalent
provision of the ITA with respect to the sale of the Shares to Buyer), no
Acquired Company or target affiliate (as defined in Section 338(h)(6) of the IRC
or any equivalent provision of the ITA with respect to the sale of the Shares to
Buyer) has sold or will sell any property or assets to Buyer or to any member of
the affiliated group (as defined in Section 338(h)(5) of the IRC or any
equivalent provision of the ITA) that includes Buyer. Part 3.11 of the
Disclosure Letter lists all such target affiliates.
(e) The paid-up capital for tax purposes of 10 shares of common stock, par
value $10.00 per share, of StyroChem International Ltd. is no less than its
stated capital for corporate purposes.
3.12 No Material Adverse Change
--------------------------
Except as set forth in Part 3.12 of the Disclosure Letter, since the date of the
Interim Balance Sheets, there has not been any material adverse change in the
business, operations, properties, prospects, assets, or condition of any
Acquired Company that would have a Material Adverse Effect, and, to the
Knowledge of Management, no event has occurred or circumstance exists that may
result in such a Material Adverse Effect.
22
3.13 Employee Benefits
-----------------
(1) U.S. Plans
----------
(a) As used in this Section 3.13, the following terms have the meanings
set forth below.
"Canadian Plan" has the meaning set forth in Section 3.13(2).
"Company Other Benefit Obligation" means an Other Benefit Obligation
owed, adopted, or followed by an Acquired Company or an ERISA Affiliate.
"Company Plan" means (a) a Plan of which an Acquired Company or an
ERISA Affiliate is a Plan Sponsor, or to which an Acquired Company or an
ERISA Affiliate contributes or in which an Acquired Company or an ERISA
Affiliate participates or (b) a Plan of which an Acquired Company or an
ERISA Affiliate was a Plan Sponsor, or to which an Acquired Company or an
ERISA Affiliate contributed or in which an Acquired Company or an ERISA
Affiliate participated at any time after 1990. All references to Plans are
to Company Plans unless the context requires otherwise.
"Company VEBA" means a VEBA whose members include employees of any
Acquired Company or any ERISA Affiliate.
"ERISA Affiliate" means, with respect to an Acquired Company, any
other person that, together with the Acquired Company, would be treated as
a single employer under IRC (S) 414.
"Multi employer Plan" has the meaning given in ERISA (S) 3(37)(A).
"Other Benefit Obligation" means an obligation, arrangement, contract
agreement, or customary practice, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered,
to one or more present or former directors, employees, or agents, other
than an obligation, arrangement, or practice that is a Plan or Canadian
Plan. An Other Benefit Obligation includes consulting agreements under
which the compensation paid does not depend upon the amount of service
rendered, sabbatical policies, severance payments, and fringe benefits
within the meaning of IRC (S) 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" has the meaning given in ERISA (S) 3(2)(A).
23
"Plan" has the meaning given in ERISA (S) 3(3), but does not include a
Canadian Plan.
"Plan Sponsor" has the meaning given in ERISA (S) 3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet the
requirements of IRC (S) 401(a).
"Title IV Plan" means a Pension Plan that is subject to Title IV of
ERISA, 29 U.S.C. (S) 1301 et seq., other than a Multi employer Plan.
"VEBA" means a voluntary employees' beneficiary association under IRC
(S) 501(c)(9).
(b) (i) Part 3.13(i) of the Disclosure Letter contains a complete and
accurate list of all Company Plans, Company Other Benefit Obligations, and
Company VEBAs, and identifies as such all Company Plans that are (A) defined
benefit Pension Plans, (B) Qualified Plans, (C) Title IV Plans, or (D) Multi
employer Plans.
(ii) Part 3.13(ii) of the Disclosure Letter contains a complete and
accurate list of (A) all ERISA Affiliates of each Acquired Company, and (B)
all Plans of which any such ERISA Affiliate is or was (since February 25,
1994) a Plan Sponsor, in which any such ERISA Affiliate participates or has
participated (since February 25, 1994) or to which any such ERISA Affiliate
contributes or has contributed (since February 25, 1994).
(iii) Part 3.13(iii) of the Disclosure Letter sets forth, for each
Multi employer Plan, as of its last valuation date, the amount of potential
withdrawal liability of the Acquired Companies and their ERISA Affiliates,
calculated according to information made available pursuant to ERISA (S)
4221(e).
(iv) Part 3.13(iv) of the Disclosure Letter sets forth a calculation
of the liability of the Acquired Companies for post-retirement benefits
other than pensions, made in accordance with Financial Accounting Statement
106 of the Financial Accounting Standards Board, regardless of whether any
Acquired Company is required by this Statement to disclose such
information.
(v) Part 3.13(v) of the Disclosure Letter sets forth the financial
cost of all obligations owed under any Company Plan or Company Other
Benefit Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
24
(c) Sellers have delivered to Buyer, or will deliver to Buyer within ten
(10) days of the date of this Agreement:
(i) all documents that set forth the terms of each Company Plan,
Foreign Plan, Company Other Benefit Obligation, or Company VEBA and of any
related trust, including (A) all plan descriptions and summary plan
descriptions of Company Plans and Foreign Plans for which Sellers or the
Acquired Companies are required to prepare, file, and distribute plan
descriptions and summary plan descriptions, and (B) all summaries and
descriptions furnished to participants and beneficiaries regarding Company
Plans, Foreign Plans, Company Other Benefit Obligations, and Company VEBAs
for which a plan description or summary plan description is not required;
(ii) all personnel, payroll, and employment manuals and policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including both
pension and welfare benefits) by the Acquired Companies and the ERISA
Affiliates, and all collective bargaining agreements pursuant to which
contributions are being made or obligations are owed by such entities;
(iv) a written description of any Company Plan, Foreign Plan or
Company Other Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any Company
Plan;
(vi) all insurance policies purchased by or to provide benefits
under any Company Plan;
(vii) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that
relate to any Company Plan, Company Other Benefit Obligation, or Company
VEBA;
(viii) all reports submitted within the four years preceding the date
of this Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with respect to any
Company Plan, Company Other Benefit Obligation, or Company VEBA;
(ix) the forms of notice to employees of their rights under ERISA
(S) 601 et seq. and IRC (S) 4980B given at any time since February 25,
1994;
(x) the Forms 5500 filed since February 25, 1994 with respect to
each Company Plan, including all schedules thereto and the opinions of
independent accountants;
25
(xi) all notices that were given by any Acquired Company or any
ERISA Affiliate or any Company Plan to the IRS, the PBGC, or any
participate or beneficiary, pursuant to statute, since February 25, 1994,
including notices that are expressly mentioned elsewhere in this Section
3.13;
(xii) all notices that were given by the IRS, the PBGC, or the
Department of Labor to any Acquired Company, any ERISA Affiliate or any
Company Plan since February 25, 1994;
(xiii) the Form PBGC 1 filed for each Title IV Plan since February 25,
1994; and
(xiv) the most recent determination letter for each Plan of the
Acquired Companies that is a Qualified Plan.
(d) Except as set forth in Part 3.13(vi) of the Disclosure Letter:
(i) The Acquired Companies have performed their obligations under
all Company Plans, Foreign Plans, Company Other Benefit Obligations, and
Company VEBAs;
(ii) No statement, either written or oral, has been made by any
Acquired Company to any Person with regard to any Plan, Foreign Plan or
Other Benefit Obligation that was not in accordance with the Plan, Foreign
Plan or Other Benefit Obligation and that could have an adverse economic
consequence to any Acquired Company or to Buyer;
(iii) The Acquired Companies, with respect to all Company Plans,
Company Other Benefits Obligations, and Company VEBAs, are, and each
Company Plan, Company Other Benefit Obligation, and Company VEBA is, in
compliance with ERISA, the IRC, and other applicable laws including the
provisions of such laws expressly mentioned in this Section 3.13, and with
any applicable collective bargaining agreement;
(A) No transaction prohibited by ERISA (S) 406 and no "prohibited
transaction" under IRC (S) 4975(c) have occurred with respect to any
Company Plan.
(B) No Seller or Acquired Company has any liability to the IRS
with respect to any Plan, including any liability imposed by Chapter
43 of the IRC.
(C) No Seller or Acquired Company has any liability to the PBGC
with respect to any Plan or has any liability under ERISA (S) 502 or
(S) 4071.
26
(D) All filings required by ERISA and the IRC as to each Plan
have been timely filed, and all notices and disclosures to
participants required by either ERISA or the IRC have been timely
provided.
(E) All contributions made to Company Plans and Company VEBAs
have been deductible for federal income tax purposes. To Management's
Knowledge, no trust under a Company Plan or Company VEBA receives
income that is subject to tax as unrelated business taxable income.
(iv) Each Company Plan can be terminated within sixty days, without
payment of any additional contribution or amount and without the vesting or
acceleration of any benefits promised by such Plan;
(v) Since February 25, 1994, there has been no establishment or
amendment of any Company Plan, Foreign Plan, Company VEBA, or Company Other
Benefit Obligation;
(vi) No event has occurred or circumstance exists that could result
in a material increase in premium costs of Company Plans, Foreign Plans and
Company Other Benefit Obligations that are insured, or a material increase
in benefit costs of such Plans and Obligations that are self-insured;
(vii) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any Company
Plan, Foreign Plan, Company Other Benefit Obligation, or Company VEBA is
pending or, to Sellers' Knowledge, is Threatened;
(viii) Each Qualified Plan of each Acquired Company is qualified in
form and operation under IRC (S) 401(a); each trust for each such Plan is
exempt from federal income tax under IRC (S) 501(a). Each Company VEBA is
exempt from federal income tax. No event has occurred or circumstance
exists that will or could give rise to disqualification or loss of tax-
exempt status of any such Plan or trust;
(ix) Each Acquired Company and each ERISA Affiliate has met the
applicable minimum funding standard for each Plan, and has made all
contributions required, under ERISA (S) 302 and IRC (S) 412;
(x) No Company Plan is subject to Title IV of ERISA;
(xi) The Acquired Companies have paid all amounts due to the PBGC
pursuant to ERISA (S) 4007;
27
(xii) No Acquired Company or any ERISA Affiliate has ceased
operations at any facility or has withdrawn from any Title IV Plan in a
manner that would subject an Acquired Company or Sellers to liability under
ERISA (S) 4062(e), (S) 4063, or (S) 4064;
(xiii) No Acquired Company or any ERISA Affiliate has filed a notice
of intent to terminate any Plan or has adopted any amendment to treat a
Plan as terminated. The PBGC has not instituted proceedings to treat any
Company Plan as terminated. No event has occurred or circumstance exists
that may constitute grounds under ERISA (S) 4042 for the termination of, or
the appointment of a trustee to administer, any Company Plan;
(xiv) No amendment has been made, or is reasonably expected to be
made, to any Plan that has required or could require the provision of
security under ERISA (S) 307 or IRC (S) 401(a)(29);
(xv) No accumulated funding deficiency, whether or not waived,
exists with respect to any Company Plan; no event has occurred or
circumstance exists that may result in an accumulated funding deficiency as
of the last day of the current plan year of any such Plan;
(xvi) The actuarial report for each Pension Plan of each Acquired
Company and each ERISA Affiliate fairly presents the financial condition
and the results of operations of each such Plan in accordance with GAAP;
(xvii) Since the last valuation date for each Pension Plan of each
Acquired Company and each ERISA Affiliate, no event has occurred or
circumstance exists that would increase the amount of benefits under any
such Plan or that would cause the excess of Plan assets over benefit
liabilities (as defined in ERISA (S) 4001) to decrease, or the amount by
which benefit liabilities exceed assets to increase;
(xviii) No reportable event (as defined in ERISA (S) 4043) has
occurred;
(xix) No Seller or Acquired Company has Knowledge of any facts or
circumstances that may give rise to any liability of any Seller, any
Acquired Company, or Buyer to the PBGC under Title IV of ERISA;
(xx) No Acquired Company or any ERISA Affiliate has ever
established, maintained, or contributed to or otherwise participated in, or
had an obligation to maintain, contribute to, or otherwise participate in,
any Multi employer Plan;
(xxi) No Acquired Company or any ERISA Affiliate of an Acquired
Company has withdrawn from any Multi employer Plan with respect to which
there is any outstanding liability as of the date of this Agreement. No
event has occurred or
28
circumstance exists that presents a risk of the occurrence of any
withdrawal from, or the participation, termination, reorganization, or
insolvency of, any Multi employer Plan that could result in any liability
of either any Acquired Company or Buyer to a Multi employer Plan;
(xxii) No Acquired Company or any ERISA Affiliate of an Acquired
Company has received notice from any Multi employer Plan that it is in
reorganization or is insolvent, that increased contributions may be
required to avoid a reduction in plan benefits or the imposition of any
excise tax, or that such Plan intends to terminate or has terminated;
(xxiii) No Multi employer Plan to which any Acquired Company or any
ERISA Affiliate contributes or has contributed is a party to any pending
merger or asset or liability transfer or is subject to any proceeding
brought by the PBGC;
(xxiv) Except to the extent required under ERISA (S) 601 et seq. and
IRC (S) 4980B, no Acquired Company provides health or welfare benefits for
any retired or former employee or is obligated to provide health or welfare
benefits to any active employee following such employee's retirement or
other termination of service;
(xxv) Each Acquired Company has the right to modify and terminate
benefits to retirees (other than pensions) with respect to both retired and
active employees;
(xxvi) Sellers and all Acquired Companies have complied in all
material with the provisions of ERISA (S) 601 et seq. and IRC (S) 4980B;
(xxvii) No payment that is owed or may become due to any director,
officer, employee, or agent of any Acquired Company will be nondeductible
to the Acquired Companies under IRC (S) 280G or subject to tax under IRC
(S) 4999; nor will any Acquired Company be required to "gross up" or
otherwise compensate any such person because of the imposition of any
excise tax on a payment to such person; and
(xxviii) The consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit under a
Company Plan, a Company Other Benefit Obligation or a Company VEBA.
(2) Canadian Plans
--------------
(a) Part 3.13.2 of the Disclosure Letter lists all the employee benefit,
health, welfare, supplemental unemployment benefit, bonus, severance, pension,
profit sharing, deferred compensation, stock compensation, stock purchase,
retirement, hospitalization insurance, medical, dental, legal, disability and
similar plans or arrangements or practices relating to the employees or former
employees of StyroChem International Ltd. which are
29
currently maintained or were maintained at any time since February 25, 1994 (the
"Canadian Plans").
(b) All of the Canadian Plans are and have been established, registered,
qualified, invested and administered, in all respects, in accordance with all
laws, regulations, orders or other legislative, administrative or judicial
promulgations applicable to the Canadian Plans ("Applicable Employee Benefit
Laws"). No fact or circumstance exists that could adversely affect the tax-
exempt status of any Canadian Plan.
(c) All obligations regarding the Canadian Plans have been satisfied,
there are no outstanding defaults or violations by any party to any Canadian
Plan and no taxes, penalties or fees are owing or exigible under any of the
Canadian Plans.
(d) StyroChem International Ltd. may unilaterally amend or terminate, in
whole or in part, each Canadian Plan and take contribution holidays under or
withdraw surplus from each Canadian Plan, subject only to approvals required by
Applicable Employee Benefit Laws and, with respect to amendment or termination,
the collective agreements disclosed in Part 3.13.2 of the Disclosure Letter.
(e) No Canadian Plan, nor any related trust or other funding medium
thereunder, is subject to any pending investigation, examination or other
proceeding, action or claim initiated by any governmental agency or
instrumentality, or by any other party (other than routine claims for benefits),
and there exists no state of facts which after notice or lapse of time or both
could reasonably be expected to give rise to any such investigation, examination
or other proceeding, action or claim or to affect the registration of any
Canadian Plan required to be registered.
(f) All contributions or premiums required to be made by StyroChem
International Ltd. under the terms of each Canadian Plan or by Applicable
Employee Benefit Laws have been made in a timely fashion in accordance with
Applicable Employee Benefit Laws and the terms of the Canadian Plans, and
StyroChem International Ltd. does not have, and as of the Closing Date will not
have, any liability (other than liabilities accruing after the Closing Date)
with respect to any of the Canadian Plans. Contributions or premiums will be
paid by StyroChem International Ltd. on an accrual basis for the period up to
the Closing Date even though not otherwise required to be made until a later
date.
(g) No amendments have been made to any Canadian Plan, no improvements to
any Canadian Plan have been promised and no amendments or improvements to any
Canadian Plan will be made or promised prior to the Closing Date.
(h) There have been no improper withdrawals, applications or transfers of
assets from any Canadian Plan or the trusts or other funding media relating
thereto, and neither StyroChem International Ltd., nor any of its agents or
delegates or any other person, has
30
been in breach of any fiduciary obligation with respect to the administration of
the Canadian Plans or the trusts of other funding media relating thereto.
(i) Subject to approvals under Applicable Employee Benefit Laws, StyroChem
International Ltd. may merge or consolidate any Canadian Plan or the assets
transferred from any Canadian Plan with any other arrangement, plan or fund.
(j) Sellers have furnished to Buyer true, correct and complete copies of
all the Canadian Plans as amended as of the date hereof together with all
related documentation including, without limitation, funding agreements,
actuarial reports, funding and financial information returns and statements, all
professional opinions (whether or not internally prepared) with respect to each
Canadian Plan, all material internal memoranda concerning the Canadian Plans,
copies of material correspondence with all regulatory authorities with respect
to each Canadian Plan and plan summaries, booklets and personnel manuals. No
material changes have occurred to the Canadian Plans or are expected to occur
which would affect the actuarial reports or financial statements required to be
provided to Buyer pursuant to this provision.
(k) Each Canadian Plan which is a funded plan is fully funded as of the
Closing Date on both a going concern and a solvency basis pursuant to the
actuarial assumptions and methodology utilized in the most recent actuarial
valuation therefor.
(l) None of the Canadian Plans enjoys any special tax status under
Applicable Employee Benefit Laws, nor have any advance tax rulings been sought
or received in respect of the Canadian Plans.
(m) All employee data necessary to administer each Canadian Plan have been
provided by Sellers to Buyer and are true and correct as of the date of this
Agreement and Sellers will notify Buyer of any changes thereto.
(n) No insurance policy or any other contract or agreement affecting any
Canadian Plan requires or permits a retroactive increase in contributions,
premiums or payments due thereunder. The level of insurance reserves under each
insured Canadian Plan is reasonable and sufficient to provide for all incurred
but unreported claims.
(o) Except as disclosed in Plan 3.13.2 of the Disclosure Letter, none of
the Canadian Plans which is not a pension plan provides benefits to retired
employees or to the beneficiaries or dependents of retired employees.
31
3.14 Compliance with Legal Requirements; Governmental Authorizations
---------------------------------------------------------------
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since February 25,
1994 has been, in full compliance with each Legal Requirement that is or
was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
violation by any Acquired Company of, or a failure on the part of any
Acquired Company to comply with, any Legal Requirement, or (B) may give
rise to any obligation on the part of any Acquired Company to undertake, or
to bear all or any portion of the cost of, any remedial action of any
nature; and
(iii) no Acquired Company has received, at any time since February
25, 1994, any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply with,
any Legal Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of any Acquired Company to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by any Acquired Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, any Acquired Company. Each Governmental Authorization listed or required to
be listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect. Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since February 25,
1994 has been, in material compliance with all of the terms and
requirements of each Governmental Authorization identified or required to
be identified in Part 3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental Authorization
listed or required to be listed in Part 3.14 of the Disclosure Letter; and
32
(iii) no Acquired Company has received, at any time since February
25, 1994, any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of or failure to comply with any
term or requirement of any Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental
Authorization.
The Governmental Authorizations listed in Part 3.14 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit the Acquired Companies to lawfully conduct and operate their
businesses in the manner in which they currently conduct and operate such
businesses and to permit the Acquired Companies to own and use their assets in
the manner in which they currently own and use such assets.
The representations, warranties and statements contained in this Section
3.14 do not apply to any matters covered by Section 3.19 below.
3.15 Legal Proceedings; Orders
-------------------------
(a) Except as set forth in Part 3.15 of the Disclosure Letter, there is
no pending Proceeding:
(i) that has been commenced by or against any Acquired Company or any
of the assets owned or used by, any Acquired Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Management, no such Proceeding has been Threatened and no
audit of the business or operations or Tax Returns of any of the Acquired
Companies by any Governmental Body is pending or Threatened. The Proceedings
listed in Part 3.15 of the Disclosure Letter will not have a Material Adverse
Effect.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired Companies, or any
of the assets owned or used by any Acquired Company, is subject; and
(ii) no officer, director, agent, or employee of any Acquired Company
is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of any Acquired Company.
33
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since February 25,
1994 has been, in full compliance with all of the terms and requirements of
each Order to which it, or any of the assets owned or used by it, is or has
been subject; and
(ii) no Acquired Company has received, at any time since February 25,
1994, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged,
possible, or potential violation of, or failure to comply with, any term or
requirement of any Order to which any Acquired Company, or any of the
assets owned or used by any Acquired Company, is or has been subject.
The representations, warranties and statements contained in this Section 3.15 do
not apply to any matters covered by Section 3.19 below.
3.16 Absence of Certain Changes and Events
-------------------------------------
Except as set forth in Part 3.16 of the Disclosure Letter, since the date of the
Interim Balance Sheets, the Acquired Companies have conducted their businesses
only in the Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of any
Acquired Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or other
acquisition by any Acquired Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired Company;
(c) increase by any Acquired Company in the amount of any bonuses,
salaries, or other compensation payable to any stockholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company, except as required under any such plan;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, which would have a
Material Adverse Effect;
34
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to any Acquired Company of at least $20,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business and the sale of non-prime inventory prior to the Closing), lease, or
other disposition of any asset or property of any Acquired Company or mortgage,
hypothec, pledge, or imposition of any lien or other encumbrance on any material
asset or property of any Acquired Company, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to any
Acquired Company in excess of $20,000;
(i) material change in the accounting methods used by any Acquired
Company (except as disclosed in Part 3.4 of the Disclosure Letter); or
(j) agreement, whether oral or written, by any Acquired Company to do any
of the foregoing.
3.17 Contracts; No Defaults
----------------------
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Xxxxxxxxxx has delivered to Buyer true and complete copies,
of:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by one or more Acquired Companies of an
amount or value in excess of $20,000;
(ii) each Applicable Contract that involves performance of services
or delivery of goods or materials to one or more Acquired Companies of an
amount or value in excess of $20,000;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of
one or more Acquired Companies in excess of $20,000;
(iv) each lease, rental or occupancy agreement, license, installment
and conditional sale agreement, and other Applicable Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or immoveable or personal or moveable property
(except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than
$20,000 and with terms of less than one year);
35
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including material agreements with current employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a
group of employees;
(vii) each Applicable Contract for capital expenditures in excess of
$50,000;
(viii) all other Applicable Contracts which individually or aggregated
together are material to the business, assets, results of operations,
condition (financial or otherwise), or prospects of the Acquired Companies
considered as a whole; and
(ix) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) no Seller, and no Related Person of any Seller, has or may
acquire any rights under, and no Seller has or may become subject to any
obligation or liability under, any Contract that relates to the business
of, or any of the assets owned or used by, any Acquired Company; and
(ii) no officer, director, agent, employee, consultant, or
contractor of any Acquired Company is bound by any Contract that purports
to limit the ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any conduct,
activity, or practice relating to the business of any Acquired Company, or
(B) assign to any Acquired Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter, each
Contract identified or required to be identified in Part 3.17(a) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) each Acquired Company is, in full compliance with all applicable
terms and requirements of each Contract identified or required to be
identified in Part 3.17(a) of the Disclosure Letter;
(ii) each other Person that has or had any obligation or liability
under any Contract identified or required to be identified in Part 3.17(a)
of the Disclosure Letter, in full compliance with all applicable terms and
requirements of such Contract; and
36
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result
in a violation or breach of, or give any Acquired Company or other Person
the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, or terminate, any
Applicable Contract identified or required to be identified in Part
3.17(a) of the Disclosure Letter; and
3.18 Insurance
---------
Set forth on Part 3.18 of the Disclosure Letter is a list of all material
policies of fire, liability, casualty, life, and other insurance owned or held
by the Acquired Companies. Such policies are in full force and effect, are
sufficient to satisfy all requirements of Legal Requirements and any material
Applicable Contracts to which any Acquired Company is a party. To the Knowledge
of Management, no event has occurred nor does any fact or condition exist which
would render any of such policies void or voidable or subject any such policies
to cancellation or termination, and the Acquired Companies have given timely
notice to the appropriate insurance carrier of all pending or threatened claims
against it that are insured.
3.19 Environmental Matters
---------------------
Except as set forth in Part 3.19 of the Disclosure Letter:
(a) Each Acquired Company is, and at all times since February 25, 1994 to
the Closing Date has been, in compliance with, and is not and has not been since
February 25, 1994 in violation of or liable under, any Environmental Law. To
the Knowledge of Management, each Acquired Company, and each other Person for
whose conduct they are or may be held responsible, was, at all times prior to
February 25, 1994, in compliance with, and was not in violation of or liable
under any Environmental Law. Management has no Knowledge of, or any reasonable
basis to expect, receipt by any Acquired Company, or any other Person for whose
conduct they are or may be held responsible, of any actual or Threatened
citation, directive, inquiry, summons, warning, order, notice, or other
communication from any Governmental Body or private citizen (including but not
limited to the current or prior owner or operator of any Facilities), of any
actual or potential violation of or failure to comply with any Environmental
Law, or of any actual or Threatened obligation to undertake or bear the cost of
any Environmental Liabilities with respect to any of the Facilities or any other
properties or assets (whether real and immoveable, personal and moveable, or
mixed) in which any Acquired Company has or had an interest, or with respect to
any property or Facility at or to which Hazardous Materials generated,
manufactured, refined, transferred, stored, imported, used, processed, owned or
possessed by any Acquired Company, or any other Person for whose conduct they
are or may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, received or otherwise come to be located.
37
(b) Since February 25, 1994 no claims, Encumbrances or other restrictions
of any nature, resulting from any Environmental Liabilities or arising under or
pursuant to any Environmental Law, have been asserted, imposed, or, to the
Knowledge of Management, threatened, with respect to or affecting any of the
Facilities or any other properties and assets (whether real and immoveable,
personal and moveable, or mixed) in which any Acquired Company, or any other
Person for whose conduct they are or may be held responsible, has or had an
interest. To the Knowledge of Management, at all times prior to February 25,
1994, no claims, Encumbrances or other restrictions of any nature, resulting
from any Environmental Liabilities or arising under or pursuant to any
Environmental Law, were asserted, imposed, or threatened with respect to or
affecting any of the Facilities or any other properties and assets (whether real
and immoveable, personal and moveable, or mixed) in which any Acquired Company,
or any other Person for whose conduct they are or may be held responsible, has
or had an interest.
(c) To the Knowledge of Management, no Acquired Company, or any other
Person for whose conduct they are or may be held responsible, has any
Environmental Liabilities with respect to the Facilities or any other properties
or assets (whether real and immoveable, personal and moveable, or mixed) in
which any Acquired Company, or any other Person for whose conduct they are or
may be held responsible, has or had an interest, or with respect to any property
or Facility at or to which Hazardous Materials generated, manufactured, refined,
stored, transferred, imported, used, processed, owned or possessed by any
Acquired Company, or any other Person for whose conduct they are or may be held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, received or otherwise come to be located.
(d) As of the date hereof, there are no Hazardous Materials present at the
Facilities, including any Hazardous Materials contained in barrels, above or
underground storage tanks, ponds, lagoons, impoundments, landfills, land
deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, or located in land, surface water, ground water,
sumps, or any other part of the Facilities, or incorporated into any structure
therein or thereon, except in compliance with all applicable Environmental Laws.
Since February 25, 1994, no Acquired Company, or any other Person for whose
conduct they are or may be held responsible, or to the Knowledge of Management,
any other Person, has permitted or conducted, or has been aware of, any
Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real and immoveable, personal and moveable, or
mixed) in which any Acquired Company has or had an interest, except in
compliance with all applicable Environmental Laws. To the Knowledge of
Management, at all times prior to February 25, 1994, no Acquired Company, or any
other Person for whose conduct they are or may be held responsible, permitted or
conducted, or was aware of, any Hazardous Activity conducted with respect to the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which any Acquired Company has or had an interest, except in compliance with
all applicable Environmental Laws.
38
(e) Since February 25, 1994, there has been no Release or, to the Knowledge
of Management, Threat of Release, of any Hazardous Materials at or from the
Facilities or any other locations where any Hazardous Materials were generated,
manufactured, refined, stored, transferred, produced, imported, used, processed,
owned or possessed by any Acquired Company, or any other Person for whose
conduct they are or may be held responsible, or from or by any other properties
and assets (whether real and immoveable, personal and moveable, or mixed) in
which any Acquired Company has or had an interest, or, to the Knowledge of
Management, any geologically or hydrologically adjoining property, whether by
any Acquired Company or any other Person. To the Knowledge of Management, at
all times prior to February 25, 1994, there was no Release or Threat of Release
of any Hazardous Materials at or from the Facilities or at any other locations
where any Hazardous Materials generated, manufactured, refined, stored,
transferred, produced, imported, used, possessed, owned, or possessed by any
Acquired Company, or any other Person for whose conduct they are or may be held
responsible, or at or from any other properties and assets (whether real and
immoveable, personal and moveable, or mixed) in which any Acquired Company has
or had an interest, or, to the Knowledge of Management, any geologically or
hydrologically adjoining property, whether by any Acquired Company or any other
Person.
(f) Xxxxxxxxxx has delivered to Buyer true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or initiated
by Sellers or, to the Knowledge of Management, by any Acquired Company,
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by any Acquired Company, or any other
Person for whose conduct they are or may be held responsible, with Environmental
Laws.
3.20 Employees
---------
(a) Part 3.20 of the Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of the Acquired
Companies, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation payable to managerial personnel since January 1, 1995; vacation
accrued; and service credited for purposes of vesting and eligibility to
participate under any Acquired Company's pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock option, cash bonus,
employee stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any other
employee benefit plan or any Director Plan; and
(b) Except as set forth in Part 3.20 of the Disclosure Letter, to
Management's Knowledge, no officer, or other key employee of any Acquired
Company intends to terminate his employment with such Acquired Company.
39
3.21 Labor Relations; Compliance
---------------------------
Since February 25, 1994, no Acquired Company has been or is a party to any
collective bargaining or other labor Contract. Since February 25, 1994, there
has not been, there is not presently pending or existing, and to Management's
Knowledge there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, or (b) any application for
certification of a collective bargaining agent. To Management's Knowledge, no
event has occurred or circumstance exists that could provide the basis for any
work stoppage or other labor dispute. There is no lockout of any employees by
any Acquired Company, and no such action is contemplated by any Acquired
Company. Each Acquired Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. No Acquired Company is liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 Intellectual Property
---------------------
(a) Intellectual Property Assets--The term "Intellectual Property Assets"
includes:
(i) the names "SP Acquisition Co.," "StyroChem International,
Inc.," "StyroChem International, Ltd." and "StyroChem," all fictional
business names, trading names, registered and unregistered trademarks,
service marks, and applications owned, used or Licensed by any Acquired
Company (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable owned, used or Licensed by any Acquired
Company (collectively, "Patents");
(iii) all copyrights in both published works and unpublished works
owned, used or Licensed by any Acquired Company (collectively,
"Copyrights");
(iv) all rights in mask works owned, used or Licensed by any
Acquired Company (collectively, "Rights in Mask Works"); and
(v) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets"); owned, used, or
licensed by any Acquired Company as licensee or licensor.
40
(b) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those necessary for the
operation of the Acquired Companies' businesses as they are currently
conducted. Except as set forth in Part 3.22(b) of the Disclosure Letter,
one or more of the Acquired Companies has the right to use without payment
to a third party all of the Intellectual Property Assets.
(ii) Except as set forth in Part 3.22(c) of the Disclosure Letter, no
employee of any Acquired Company has entered into any Contract that
restricts or limits in any way the scope or type of work in which the
employee may be engaged or requires the employee to transfer, assign, or
disclose information concerning his work to anyone other than one or more
of the Acquired Companies.
(c) Patents
(i) Part 3.22(d) of the Disclosure Letter contains a complete and
accurate list and summary description of all Patents.
(d) Trademarks
(i) Part 3.22(e) of Disclosure Letter contains a complete and
accurate list and summary description of all Marks.
(e) Copyrights
(i) Part 3.22(f) of the Disclosure Letter contains a complete and
accurate list and summary description of all Copyrights.
3.2 Certain Payments
----------------
Except as set forth in Part 3.23 of the Disclosure Schedule, and except for
normal business entertainment not exceeding a cost of $1,000 per person in any
instance, since February 25, 1994, no Acquired Company or director, officer,
agent, or employee of any Acquired Company, or any other Person associated with
or acting for or on behalf of any Acquired Company, has directly or indirectly
(a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of any Acquired Company, or (iv) in violation of any Legal
Requirement, (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Acquired Companies.
41
3.24 Disclosure
----------
(a) No representation or warranty of Xxxxxxxxxx in this Agreement and no
statement in the Disclosure Letter (giving effect to any supplements thereto)
omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
(c) Except as set forth in Part 3.24 of the Disclosure Letter, there is no
fact known to Xxxxxxxxxx that has specific application to Xxxxxxxxxx or any
Acquired Company (other than general economic or industry conditions) and that
materially adversely affects or, as far as Xxxxxxxxxx can reasonably foresee,
materially threatens, the assets, business, prospects, financial condition, or
results of operations of the Acquired Companies (on a consolidated basis) that
has not been set forth in this Agreement or the Disclosure Letter; provided,
however, the foregoing representation does not apply to or otherwise cover any
facts or matters that are generally the subject of any representation or
warranty made by Xxxxxxxxxx in this Agreement, whether or not any such facts or
matters would be required to be disclosed under the express terms of such other
representation or warranty.
3.25 Relationships with Related Persons
----------------------------------
Except as set forth in Part 3.25 of the Disclosure Letter, no Seller or any
Related Person of any Seller or of any Acquired Company has, or since February
25, 1994 has had, any material interest in any property (whether real and
immoveable, personal and moveable, or mixed and whether tangible or intangible),
used in or pertaining to the Acquired Companies' businesses. To the Knowledge of
Management, no Seller or any Related Person of any Seller or of any Acquired
Company is, or since January 1, 1994 has owned (of record or as a beneficial
owner) a material equity interest or any other financial or profit interest in,
a Person that has (i) had business dealings or a material financial interest in
any transaction with any Acquired Company, other than business dealings or
transactions conducted in the Ordinary Course of Business with the Acquired
Companies at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with any Acquired
Company with respect to any line of the products or services of such Acquired
Company (a "Competing Business") in any market presently served by such Acquired
Company, except for less than one percent (1%) of the outstanding capital stock
of any Competing Business that is publicly traded on any recognized exchange or
in the over-the-counter market. To the Knowledge of Management, except as set
forth in Part 3.25 of the Disclosure Letter, no Seller or any Related Person of
any Seller or of any Acquired Company is a party to any Contract with, or has
any claim or right against, any Acquired Company.
42
3.26 Brokers or Finders
------------------
Sellers and their agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
3A. REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller (i) severally and not jointly, and (ii) only as to such Seller
and not with respect to any other Seller, represents and warrants to Buyer as
follows:
(i) This Agreement constitutes the legal, valid, and binding obligation of
such Seller, enforceable against such Seller in accordance with its terms,
except that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (ii) equitable principles which may limit the availability
of certain equitable remedies (such as specific performance) in certain
instances. Upon the execution and delivery by such Seller of the Sellers'
Releases, and the Noncompetition Agreement to the extent such Seller is a party
thereto (collectively, the "Seller's Closing Documents"), such Seller's Closing
Documents will constitute the legal, valid, and binding obligations of such
Seller, enforceable against such Seller in accordance with their respective
terms, except that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights generally and (ii) equitable principles which may limit the
availability of certain equitable remedies (such as specific performance) in
certain instances. Such Seller has the full right, power, authority, and
capacity to execute and deliver this Agreement and such Seller's Closing
Documents and to perform such Seller's obligations under this Agreement and such
Seller's Closing Documents;
(ii) Except as set forth in Part 3.2 of the Disclosure Letter, such
Seller is not and will not be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions;
(iii) Except as set forth in Part 3.3 of the Disclosure Letter, such
Seller is and will be on the Closing Date the record and beneficial owners and
holders of the Shares shown on Part 3.3 of the Disclosure Schedule as owned by
such Seller, free and clear of all Encumbrances; and
(iv) Except as set forth in Part 3.15 of the Disclosure Letter, such
Seller is not subject to any Order that relates to the business of, or any of
the assets owned or used by, any Acquired Company.
43
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization and Good Standing
------------------------------
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
4.2 Authority; No Conflict
----------------------
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the Employment Agreements (collectively, the
"Buyer's Closing Documents"), the Buyer's Closing Documents will constitute the
legal, valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms. Buyer has the absolute and unrestricted
right, power, and authority to execute and deliver this Agreement and the
Buyer's Closing Documents and to perform its obligations under this Agreement
and the Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and
------------
delivery of this Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject;
or
(iv) any Contract to which Buyer is a party or by which Buyer may be
bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
------------
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
4.3 Investment Intent
-----------------
Buyer is acquiring the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act.
44
4.4 Certain Proceedings
-------------------
There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
4.5 Brokers or Finders
------------------
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Sellers harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.
4.6 Financing
---------
Buyer represents that prior to the closing that it will use its best efforts
(but not more than commercially reasonable) to obtain financing through the
Senior Notes Offering in an aggregate amount sufficient to consummate the
transactions contemplated hereby, and believes in good faith that such efforts
will be successful, although no commitments to purchase such notes have been
obtained and Buyer does not guarantee or otherwise assure Sellers that the
Senior Notes Offering will be completed.
4.7 Independent Investigation
-------------------------
Buyer represents that it has had an opportunity to ask questions of and receive
answers from the Acquired Companies regarding the Acquired Companies and their
business, assets, results of operations, and financial condition and the terms
and conditions of the sale of the Shares. In addition, Buyer hereby acknowledges
and affirms that it has completed its own independent investigation, analysis,
and evaluation of the Acquired Companies, that it has made all such reviews and
inspections of the business, assets, results of operations, condition (financial
or otherwise), and prospects of the Acquired Companies as it has deemed
necessary or appropriate, and that in making its decision to enter into this
Agreement and to consummate the transactions contemplated hereby it has relied
solely on (i) its own independent investigation, analysis, and evaluation of the
Acquired Companies and (ii) the representations and warranties of Sellers
contained herein.
45
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 Access and Investigation
------------------------
Between the date of this Agreement and the Closing Date, Xxxxxxxxxx will, and
will cause each Acquired Company and its Representatives to, (a) afford Buyer
and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") reasonable access to each Acquired Company's
personnel, properties (including subsurface testing), contracts, books and
records, and other documents and data, (b) furnish Buyer and Buyer's Advisors
with copies of all such contracts, books and records, and other existing
documents and data as Buyer may reasonably request, and (c) furnish Buyer and
Buyer's Advisors with such additional financial, operating, and other data and
information as Buyer may reasonably request, and (d) furnish Buyer and Buyer's
advisers with written consents and authorizations to obtain access to any
governmental files and records relating to StyroChem International Ltd.
5.2 Operation of the Businesses of the Acquired Companies
-----------------------------------------------------
Between the date of this Agreement and the Closing Date, Xxxxxxxxxx will, and
will cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the Ordinary
Course of Business;
(b) use its best efforts (but not more than commercially reasonable) to
preserve intact the current business organization of such Acquired Company, keep
available the services of the current officers, employees, and agents of such
Acquired Company, and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and others having business
relationships with such Acquired Company;
(c) confer with Buyer concerning operational matters of a material nature;
and
(d) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of such Acquired Company.
5.3 Negative Covenant
-----------------
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date, Xxxxxxxxxx will not, and will cause each
Acquired Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within its control, as
a result of which any of the changes or events listed in Section 3.16 is likely
to occur.
46
5.4 Required Approvals
------------------
As promptly as practicable after the date of this Agreement, Sellers will, and
will cause each Acquired Company to, make all filings required by Legal
Requirements to be made by it in order to consummate the Contemplated
Transactions (including all filings under the HSR Act and Competition Act).
---------------
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause each Acquired Company to, (a) cooperate with Buyer with respect to all
filings that Buyer elects to make or is required by Legal Requirements to make
in connection with the Contemplated Transactions and the Competition Act, and
---------------
(b) cooperate with Buyer in obtaining all consents identified in Schedule 4.2
------------
(including taking all actions requested by Buyer to cause early termination of
any applicable waiting period under the HSR Act).
5.5 Notification
------------
Between the date of this Agreement and the Closing Date, each Seller will
promptly notify Buyer in writing if such Seller or any Acquired Company becomes
aware of any fact or condition that causes or constitutes a Breach of any of
Sellers' representations and warranties as of the date of this Agreement, or if
such Seller or any Acquired Company becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Disclosure Letter if the Disclosure
Letter were dated the date of the occurrence or discovery of any such fact or
condition, Sellers will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, each Seller will
promptly notify Buyer of the occurrence of any Breach of any covenant of Sellers
in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 impossible or unlikely. No
supplement to the Disclosure Letter may be delivered by Sellers after the
Closing.
5.6 Payment of Indebtedness by Related Persons
------------------------------------------
Except as expressly provided in this Agreement or in Part 5.6 of the Disclosure
Letter, Sellers will cause all indebtedness owed to an Acquired Company by any
Seller or any Related Person of any Seller to be paid in full prior to Closing.
5.7 No Negotiation
--------------
Until such time, if any, as this Agreement is terminated pursuant to Section 9,
Sellers will not, and will cause each Acquired Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any non-
public information to, or consider the merits of any unsolicited inquiries or
proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of
47
any Acquired Company, or any of the capital stock of any Acquired Company, or
any merger, consolidation, business combination, or similar transaction
involving any Acquired Company.
5.8 Commercially Reasonable Efforts
-------------------------------
Between the date of this Agreement and the Closing Date, Sellers will use their
best efforts (but not more than commercially reasonable) to cause the conditions
in Sections 7 and 8 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 Approvals of Governmental Bodies
--------------------------------
As promptly as practicable after the date of this Agreement, Buyer will, and
will cause each of its Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions
(including all filings under the HSR Act and the Competition Act). Between the
date of this Agreement and the Closing Date, Buyer will, and will cause each
Related Person to, cooperate with Sellers with respect to all filings that
Sellers are required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with Sellers in obtaining all
consents identified in Part 3.2 of the Disclosure Letter; provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
6.2 Commercially Reasonable Efforts
-------------------------------
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Buyer will use its best efforts (but not more
than commercially reasonable) to cause the conditions in Sections 7 and 8 to be
satisfied.
6.3 Notification
------------
Between the date of this Agreement and the Closing Date, Buyer will promptly
notify Xxxxxxxxxx in writing if Buyer becomes aware of any fact or condition
that causes or constitutes a Breach of any of Buyer's representations and
warranties as of the date of this Agreement, or if Buyer becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. During the same period, Buyer will promptly notify Xxxxxxxxxx of the
occurrence of any Breach of any covenant of Buyer in this Section 6 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 8 impossible or unlikely. Within two weeks prior to the Closing, Buyer
will endeavor to notify Xxxxxxxxxx if, to the Knowledge of Buyer, any employees
of the Acquired Companies (other than Xxxxxxxxxx and Xxxx Xxxxx)
48
will not be employed by the Acquired Companies after the Closing Date, although
nothing in this Agreement shall obligate Buyer to continue the employment of any
employees of the Acquired Companies after the Closing Date.
6A. COVENANTS OF PARTIES AFTER CLOSING DATE
6A.1 Not more than three (3) business days after the Closing Date, Buyer
shall cause the Acquired Companies to pay an amount not exceeding $2,250,000 to
Chevron Chemical Company, such amount to be determined by Xxxxxxxxxx and set
forth in written instructions delivered by Xxxxxxxxxx to Buyer at Closing.
6A.2 For as long as Xxxxxxxxxx or Sellers have liability to Buyer for
indemnification under Section 10 of this Agreement, Buyer shall cause the
Acquired Companies to make available to Xxxxxxxxxx and Sellers, upon reasonable
advance notice and at a time reasonably convenient to the Acquired Companies,
copies of the books and records of the Acquired Companies reasonably required by
Xxxxxxxxxx and Seller to defend or resolve any claim for indemnification by
Buyer.
6A.3 Accounts receivable of the Acquired Companies which are reflected in
the Closing Statement as collectible and not reserved against, and which are in
fact not collected within 180 days after the Closing Date, will be assigned by
the Buyer to Xxxxxxxxxx, but only if (i) the Acquired Companies are no longer
doing business with the account debtors and (ii) Buyer has received payment from
Xxxxxxxxxx for such accounts receivable by way of indemnification with respect
to the breach of the representation and warranty made by Xxxxxxxxxx in Section
3.8 hereof. Xxxxxxxxxx will attempt to collect any accounts receivable assigned
to him and will remit any net proceeds collected, after costs and expenses of
collection, to the Sellers on a Pro Rata Basis. The Buyer will apply
collections received from customers for which there are accounts receivable
reflected in the Closing Statement, to the accounts receivable of such customers
in the order in which the invoices were submitted to such customers, unless
there is a bona fide dispute or billing error with respect to a particular
invoice.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and the Other Interests and to take
the other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations
---------------------------
(a) All of Sellers' and Xxxxxxxxxx'x representations and warranties in
this Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of
49
this Agreement, and must be accurate in all material respects as of the Closing
Date as if made on the Closing Date, without giving effect to any supplement to
the Disclosure Letter.
(b) Each of Xxxxxxxxxx'x representations and warranties in Sections 3.3,
3.12, and 3.24 must have been accurate in all respects as of the date of this
Agreement, and must be accurate in all respects as of the Closing Date as if
made on the Closing Date, without giving effect to any supplement to the
Disclosure Letter.
7.2 Sellers' Performance
--------------------
(a) All of the covenants and obligations that Sellers are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered pursuant to Section 2.4 must
have been delivered, and each of the other covenants and obligations in Sections
5.4 and 5.8 must have been performed and complied with in all respects.
7.3 Supply Contract
---------------
The Acquired Companies shall have entered into a contract with Chevron Chemical
Company ("Chevron") substantially in the form most recently submitted to Buyer
by Chevron for review prior to the date of this Agreement.
7.4 Additional Documents
--------------------
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Xxxxxxxx & Xxxxxx, P.C., dated the Closing Date, in form
and substance satisfactory to Buyer;
(b) release and termination of all options to acquire any of the Shares
held by Chevron Chemical Company; and
(c) such other documents as Buyer may reasonably request for the purpose
of (i) enabling its counsel to provide the opinion referred to in Section
8.4(a), (ii) evidencing the accuracy of any of Sellers' representations and
warranties, (iii) evidencing the performance by any Seller of, or the compliance
by any Seller with, any covenant or obligation required to be performed or
complied with by such Seller, (iv) evidencing the satisfaction of any condition
referred to in this Section 7, or (v) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
50
7.5 No Proceedings
--------------
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds
---------------------------------------------------
There must not have been made or Threatened by any Person (excluding Buyer) any
claim asserting that such Person (a) is the holder or the beneficial owner of,
or has the right to acquire or to obtain beneficial ownership of, any stock of,
or any other voting, equity, or ownership interest in, any of the Acquired
Companies, other than claims of the Sellers which are the subject of this
Agreement or (b) is entitled to all or any portion of the Purchase Price payable
for the Shares and the Other Interests other than payments to Sellers of the
Purchase Price.
7.7 Senior Notes Offering
---------------------
Buyer shall have completed the Senior Notes Offering, and shall have received
net proceeds of not less than $75,000,000 from such Senior Notes Offering.
7.8 Audited Financial Statements
----------------------------
The balance sheets, statements of income, changes in stockholders' equity and
cash flows of the Acquired Companies for the period ended April 1, 1996,
together with the unqualified audit report thereon of Deloitte & Touche, shall
have been delivered to Buyer, disclosing no material adverse change from the
unaudited financial statements for such period previously delivered to Buyer,
except for changes in deferred taxes and the effect of push-down accounting.
7.9 Environmental Reports
---------------------
Phase I and, if required by Buyer, Phase II environmental surveys of each parcel
of real estate owned or occupied by the Acquired Companies, satisfactory in form
and substance to Buyer, shall have been delivered to Buyer (copies of which
Buyer agrees to deliver to Xxxxxxxxxx prior to Closing).
7.10 Resignations
------------
Each of the directors of each of the Acquired Companies shall have resigned and
Xxxxxxxxxx shall have also resigned as an officer of each of the Acquired
Companies.
51
7.11 Consent of the Bank of Montreal
-------------------------------
The Bank of Montreal shall have consented to the Buyer's entering into this
Agreement and to the release of Xxxxxxxxxx from his personal guaranty of the
obligations of StyroChem International, Ltd, under the Agreement Respecting a
Term Loan and other Credit Facilities dated February 25, 1994, as amended, with
the Bank of Montreal.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and the Other Interests and to take the
other actions required to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Sellers, in whole or in part):
8.1 Accuracy of Representations
---------------------------
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
8.2 Buyer's Performance
-------------------
(a) All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4 and must have made the cash payments
required to be made by Buyer pursuant to Section 2.4(b).
8.3 Supply Contract
---------------
The Acquired Companies shall have entered into a contract with Chevron
substantially in the form most recently submitted to Buyer by Chevron prior to
the date of this Agreement.
8.4 Additional Documents
--------------------
Buyer must have caused the following documents to be delivered to Sellers:
(a) an opinion of Duane, Morris & Heckscher, dated the Closing Date, in
form and substance satisfactory to Sellers; and
(b) such other documents as Sellers may reasonably request for the purpose
of (i) enabling their counsel to provide the opinion referred to in Section
7.4(a), (ii) evidencing
52
the accuracy of any representation or warranty of Buyer, (iii) evidencing the
performance by Buyer of, or the compliance by Buyer with, any covenant or
obligation required to be performed or complied with by Buyer, (ii) evidencing
the satisfaction of any condition referred to in this Section 8, or (v)
otherwise facilitating the consummation of any of the Contemplated Transactions.
8.5 No Injunction
-------------
There must not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the sale of the Shares or the Other Interests by
Sellers to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
8.6 Release of Personal Guaranty
----------------------------
Xxxxxxxxxx shall have been released from all personal guarantees in connection
with indebtedness of the Acquired Companies to Bank of Montreal.
9. TERMINATION
9.1 Termination Events
------------------
This Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Xxxxxxxxxx if a material Breach of any provision of
this Agreement has been committed by the other party and such Breach has not
been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Xxxxxxxxxx, if any of the conditions in
Section 8 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Sellers
to comply with their obligations under this Agreement) and Xxxxxxxxxx has not
waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Xxxxxxxxxx if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before December
31, 1996, or such later date as the parties may agree upon.
9.2 Effect of Termination
---------------------
53
Each party's right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement and the exercise of a right of
termination will not be an election of remedies; provided, however, the
foregoing shall not apply in the event of the non-satisfaction of the conditions
in Sections 7.1 or 8.1 (unless the Breach of the representation or warranty
which caused such non-satisfaction was intentional or fraudulent), in which case
the parties agree that termination of this Agreement shall be the sole and
exclusive remedy of either party prior to the Closing due to the non-
satisfaction of the conditions set forth in Sections 7.1 or 8.1. If this
Agreement is terminated pursuant to Section 9.1, all further obligations of the
parties under this Agreement will terminate, except that the obligations in
Sections 11.1 and 11.3 will survive; provided, however, that if this Agreement
is terminated by a party because of the Breach of the Agreement by the other
party or because one or more of the conditions to the terminating party's
obligations under this Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under this Agreement, other than
as limited by the proviso in the preceding sentence, the terminating party's
right to pursue all remedies under this Agreement will survive such termination
unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification Not Affected by Knowledge
------------------------------------------------------------
All representations, warranties, covenants, and obligations in this Agreement,
the Disclosure Letter, the supplements to the Disclosure Letter, the certificate
delivered pursuant to Section 2.4(a)(v), and any other certificate or document
delivered pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
10.2 Indemnification and Payment of Damages by each Seller
-----------------------------------------------------
Each Seller, severally but not jointly, will indemnify and hold harmless Buyer,
the Acquired Companies, and their respective Representatives, stockholders,
controlling and persons (collectively, the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, any loss, liability, claim, damage
or expense (including costs of investigation and defense and reasonable
attorneys' fees) whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from:
(a) any Breach of any representation or warranty made by such Seller in
this Agreement, the Disclosure Letter (giving effect to any supplement to the
Disclosure Letter),
54
the supplements to the Disclosure Letter, or any other certificate or document
delivered by Sellers pursuant to this Agreement, as if such representation or
warranty were made on and as of the Closing Date;
(b) any Breach by such Seller of any covenant or obligation of such Seller
in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with such Seller or any Acquired Company (or any
Person acting on such Seller's behalf) in connection with any of the
Contemplated Transactions.
10.3 Indemnification and Payment of Damages by Xxxxxxxxxx
----------------------------------------------------
Xxxxxxxxxx will indemnify and hold harmless the Indemnified Persons for, and
will pay to the Indemnified Persons the amount of, any Damages arising from:
(a) any Breach of any representation or warranty made by Xxxxxxxxxx in
Section 3 of this Agreement, the Disclosure Letter (giving effect to any
supplement to the Disclosure Letter), the supplements to the Disclosure Letter,
or any other certificate or document delivered by Xxxxxxxxxx pursuant to this
Agreement;
(b) any Breach by Xxxxxxxxxx of any covenant or obligation of Xxxxxxxxxx
in this Agreement; and
(c) any claim by any person for brokerage or finders fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with Xxxxxxxxxx (or any Person acting on
Xxxxxxxxxx'x behalf) in connection with any of the Contemplated Transactions.
10.4 Indemnification and Payment of Damages by Buyer
-----------------------------------------------
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement, (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions, and (d) the
ownership, operation, and management by Buyer of the Acquired Companies, and the
operations and activities of the Acquired Companies, from and after the Closing
Date, except to the extent Buyer is indemnified by Sellers or Xxxxxxxxxx with
respect to such matters pursuant to Sections 10.2 or 10.3 above.
55
10.5 Time Limitations
----------------
If the Closing occurs, Sellers will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
within one (1) year following the Closing Date, Buyer notifies Sellers of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Buyer, except that (i) any claims with respect to Sections
3.8 and 3.9 shall be made in connection with the determination of the Adjustment
Amount and no such claim shall be allowed after the final determination of the
Adjustment Amount except to the extent that accounts receivable which are
treated as collectible and are not reserved against in determining the
Adjustment Amount are in fact not collected within 180 days; (ii) a claim with
respect to Section 3.11 must be made prior to the expiration of the applicable
statute of limitations on the assessment of additional Taxes which is the basis
of such claim, (iii) a claim with respect to Section 3.3 must be made prior to
three (3) years following the Closing Date; (iv) a claim with respect to Section
3.13 or 3.19 must be made prior to two years following the Closing Date; and (v)
a claim for indemnification or reimbursement not based upon any representation
or warranty or any covenant or obligation to be performed and complied with
prior to the Closing Date, may be made at any time. If the Closing occurs,
Buyer will have no liability (for indemnification or otherwise) with respect to
any representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless within one (1) year following
the Closing Date, Sellers notify Buyer of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Sellers, except
that a claim for indemnification or reimbursement not based upon any
representation or warranty or any covenant or obligation to be performed and
complied with prior to the Closing Date, may be made at any time.
10.6 Limitations on Amount--Xxxxxxxxxx
---------------------------------
(a) Xxxxxxxxxx will not have liability (for indemnification or otherwise)
with respect to the matters described in Section 10.3 until the total of all
Damages with respect to such matters exceeds $350,000 (the "Basket') and then
only for the amount by which such Damages exceed the Basket. Damages arising
from a single matter will not subject Xxxxxxxxxx to such liability for
indemnification, or be counted toward the Basket, unless they exceed $10,000,
but if they exceed $10,000 for a single matter, the entire amount of Damages for
such matter shall be counted toward the Basket and will subject Xxxxxxxxxx to
liability for indemnification to the extent the Basket is exceeded.
(b) This Section 10.6 will not apply to any Breach of any of Xxxxxxxxxx'x
representations and warranties of which Xxxxxxxxxx had Knowledge at any time
prior to the date on which such representation and warranty is made or any
intentional Breach by Xxxxxxxxxx of any covenant or obligation, and Xxxxxxxxxx
will be liable for all Damages with respect to such Breaches.
56
10.7 Limitations on Amount--Buyer
----------------------------
Buyer will have no liability (for indemnification or otherwise) with respect to
the matters described in clause (a) or (b) of Section 10.4 until the total of
all Damages with respect to such matters exceeds $350,000, and then only for the
amount by which such Damages exceed $350,000. However, this Section 10.7 will
not apply to any Breach of any of Buyer's representations and warranties of
which Buyer had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by Buyer of any
covenant or obligation, and Buyer will be liable for all Damages with respect to
such Breaches.
10.8 Procedure for Indemnification--Third Party Claims
-------------------------------------------------
(a) Promptly after receipt by an indemnified party under Section 10.2,
10.3, or 10.4 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
(b) If any Proceeding referred to in Section 10.8(a) is brought against an
indemnified party and it shall give written notice to the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it may wish, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party. If the
indemnifying party elects to assume the defense of such action, the indemnified
party shall have the right to employ separate counsel at its own expense and to
participate in the defense thereof. If the indemnifying party elects not to
assume (or fails to assume) the defense of such action, the indemnified party
shall be entitled to assume the defense of such action with counsel of its own
choice, at the expense of the indemnifying party. If the action is asserted
against both the indemnifying party and the indemnified party and there is a
conflict of interests which renders it inappropriate for the same counsel to
represent both the indemnifying party and the indemnified party, the
indemnifying party shall be responsible for paying for separate counsel for the
indemnified party. If the indemnifying party elects to assume the defense of
such action, (a) no compromise or settlement thereof may be effected by the
indemnifying party without the indemnified party's written consent (which shall
not be unreasonably withheld) unless the sole relief provided is monetary
damages that are paid in full by the indemnifying party and (b) the indemnifying
party shall have no liability with respect to any compromise or settlement
thereof effected without its written consent (which shall not be unreasonably
withheld). If notice is given to an indemnifying party of the commencement of
any Proceeding and the indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the indemnified party of its
election to assume the defense of
57
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Sellers hereby consent to the non-exclusive jurisdiction of any court
in which a Proceeding is brought against any Indemnified Person for purposes of
any claim that an Indemnified Person may have under this Agreement with respect
to such Proceeding or the matters alleged therein, and agree that process may be
served on Sellers with respect to such a claim anywhere in the world.
10.9 Procedure for Indemnification--Other Claims
-------------------------------------------
A claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.
10.10 Limitations of Liability
------------------------
The indemnification obligations of the parties hereto pursuant to this Section
10 shall be subject to the following limitations:
(a) The amount of Damages required to be paid by any party to indemnify
any other party pursuant to this Section 10 as a result of any claim for
indemnification shall be reduced to the extent of any amounts actually received
by such other party after the Closing Date pursuant to the terms of the
insurance policies (if any) covering such claim, and each party shall pursue
available claims against such insurance policies in good faith.
(b) The amount of Damages required to be paid by any party to indemnify
any other party pursuant to this Section 10 as a result of any claim shall be
reduced by the amount of any Tax benefit actually realized by such other party
as a result of such claim, provided that such reduced amount shall be increased
by the amount of any Taxes actually payable by such other party as a result of
the payment to such other party of Damages for such claim (the net reduction is
hereinafter referred to in this paragraph as the "Claim Reduction Amount"). The
Claim Reduction Amount shall be calculated by the indemnified party on a present
value basis using the appropriate applicable federal rate for the month that the
claim will be paid as specified under Section 1274(d) of the IRC. Any factual
assumptions, Tax rate assumptions, assumptions relating to the appropriate
applicable federal rate, or assumptions relating to the appropriate Tax
treatment of a particular item shall be made by the indemnified party. The
indemnified party shall supply to the indemnifying party such information as the
indemnifying party may reasonably request to support the indemnified party's
assumptions and calculations. If the indemnifying party believes that the
overall calculation is unreasonable, the parties shall submit the issue to an
independent public accounting firm of recognized national standing mutually
agreeable to the parties for determination as to whether such calculation is in
fact reasonable on an overall basis. If such firm determines that the
calculation is not reasonable, such firm shall modify whichever assumptions it
deems necessary to make the overall calculation reasonable. The
58
determinations of such firm shall be final and conclusive as to any dispute
regarding the Claim Reduction Amount. The costs and expenses of such firm in
connection with its determinations pursuant to this paragraph shall be borne
equally by the parties. Each party shall be solely responsible for all other
costs and expenses incurred by such party pursuant to this paragraph.
(c) No indemnification shall be required to be made by any indemnifying
party pursuant to this Section 10 with respect to any claims for indemnification
to the extent that the aggregate amount of Damages incurred by the indemnified
party with respect to all such claims (whether asserted, resulting, imposed, or
incurred before, on, or after the Closing Date) exceeds $4,000,000.
(d) The indemnification obligations of the parties pursuant to this
Section 10 (including the definition of the term "Damages" as provided herein)
shall be limited to actual and direct damages and shall not, except in the case
of a willful Breach of this Agreement or fraud, include consequential, punitive,
or exemplary damages or damages based on lost profits or lost opportunities.
10.11 Sole and Exclusive Remedies
---------------------------
The parties hereto agree that, in relation to any Breach of any representation,
warranty, covenant, or agreement made or entered into by a party hereto pursuant
to this Agreement or any certificate, instrument, or document delivered pursuant
hereto, the only sole and exclusive relief and remedies available to the other
party hereto in respect of such Breach (regardless of any other rights and
remedies provided by law or in equity) shall be:
(a) termination, but only if said termination is expressly permitted
under the provisions of Section 9.1;
(b) damages, but only to the extent properly claimable hereunder and as
provided and limited pursuant to this Section 10 and by Section 9.2;
(c) specific performance if a court of competent jurisdiction in its
discretion grants the same; and
(d) injunctive or declaratory relief if a court of competent jurisdiction
in its discretion grants the same.
The parties hereto hereby expressly (i) waive and forego any other rights and
remedies other than the foregoing, whether provided by law or in equity, and
(ii) agree that no action for termination or rescission, or claiming
repudiation, of this Agreement may be brought or maintained by either party
against the other following the Closing Date no matter how severe, grave, or
fundamental any such Breach may be by one party. Accordingly, the parties
hereby also expressly waive and forego any and all rights they may possess to
bring any such action.
59
11. GENERAL PROVISIONS
11.1 Expenses
--------
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants, except as otherwise provided in this Section. Buyer
will pay the fees of Deloitte & Touche incurred in connection with the
Contemplated Transactions, the costs of obtaining environmental reports for the
real properties owned by the Acquired Companies, and the HSR Act filing fee.
Sellers will cause the Acquired Companies not to incur any out-of-pocket
expenses in connection with this Agreement. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party.
11.2 Public Announcements
--------------------
Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Buyer and Xxxxxxxxxx mutually agree. Unless consented to by the
other party in advance or required by Legal Requirements, prior to the Closing
each party hereto shall, keep this Agreement strictly confidential and may not
make any disclosure of this Agreement to any Person, other than to their
financial advisors, legal counsel, accountants, bankers and others with a "need
to know" in order for the parties to carry out the Contemplated Transactions.
Sellers and Buyer will consult with each other concerning the means by which the
Acquired Companies' employees, customers, and suppliers and others having
dealings with the Acquired Companies will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
11.3 Confidentiality
---------------
The Buyer's obligations with respect to the confidentiality of all Evaluation
Material (as defined in the Confidentiality Agreement) shall be governed by the
Confidentiality Agreement. Between the date of this Agreement and the Closing
Date, Sellers will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Sellers and the Acquired Companies
to maintain in confidence, any written, oral or other information obtained in
confidence from Buyer or any subsidiary of Buyer in connection with this
Agreement on the Contemplated Transactions unless (a) such information is
already known to such party or to others not bound by a duty of confidentiality
or such information becomes publicly available through no fault of such party,
(b) the use of such information is necessary or appropriate in making any filing
or obtaining any consent or approval required for the consummation of the
Contemplated Transaction, or (c) the furnishing or use of such information is
required by legal proceedings. If the Contemplated Transactions are not
60
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
11.4 Notices
-------
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
Xxxxxxxxxx or Sellers:
Xxxxxxx Xxxxxxxxxx
000 Xxxxxxxxx Xxxx
Xxxx Xxxxx, Xxxxx 00000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxx, Esquire
Xxxxxxxx & Knight, P.C.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Buyer:
Radnor Holdings Corporation
Three Radnor Center, Xxxxx 000
000 Xxxxxxxxxx Xxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Chairman
61
with a copy to:
Xxxxxxx X. Xxxxxxx, Xx., Esquire
Duane, Morris & Heckscher
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
11.5 Jurisdiction; Service of Process
--------------------------------
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Delaware, County of New Castle, or, if it has or
can acquire jurisdiction, in the United States District Court for the District
of Delaware, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world.
11.6 Further Assurances
------------------
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 Waiver
------
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless
in writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8 Entire Agreement and Modification
---------------------------------
62
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter and constitutes (along with the documents referred to in
this Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
11.9 Disclosure Letter
-----------------
(a) Except as otherwise provided in the Disclosure Letter, the disclosures
in the Disclosure Letter, and those in any supplement thereto, must relate only
to the representations and warranties in the Section of the Agreement to which
they expressly relate and not to any other representation or warranty in this
Agreement.
(b) In the event of any inconsistency between the statements in the body of
this Agreement and those in the Disclosure Letter, and those in any supplement
thereto, (other than an exception expressly set forth as such in the Disclosure
Letter, and those in any supplement thereto, with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
11.10 Assignments, Successors, and No Third-Party Rights
--------------------------------------------------
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, which will not be unreasonably withheld,
except that Buyer may assign any of its rights under this Agreement to any
Subsidiary of Buyer, provided, however, that no such assignment shall be
effective to release or discharge Buyer from any of its obligations or
liabilities hereunder. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. Except as
otherwise expressly provided in Section 10, this Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
11.11 Severability
------------
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 Section Headings, Construction
------------------------------
63
The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
11.13 Time of Essence
---------------
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.14 Governing Law
-------------
This Agreement will be governed by the laws of the State of Delaware without
regard to conflicts of laws principles.
11.15 Counterparts
------------
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
64
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
-----
RADNOR HOLDINGS CORPORATION,
formerly known as
BENCHMARK CORPORATION OF DELAWARE
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx, Chairman
SELLERS:
-------
/s/ Xxxxxxx Xxxxxxxxxx
-------------------------------------------
Xxxxxxx Xxxxxxxxxx
XXXXX RIVER PAPER COMPANY, INC.
By: [SIGNATURE APPEARS HERE]
----------------------------------------
Name:
---------------------------------
Title:
--------------------------------
GRUPO INDUSTRIAL HERMES, S.A. de C.V.
By: [SIGNATURE APPEARS HERE]
----------------------------------------
Name:
---------------------------------
Title:
--------------------------------
X.X. Xxxxxxxxx
By: [SIGNATURE APPEARS HERE]
----------------------------------------
Name:
---------------------------------
Title: Attorney-in-Fact
--------------------------------
65
Xxxxxxx Xxxxxxxxx
By: [SIGNATURE APPEARS HERE]
--------------------------------------
Name:
---------------------------------
Title: Attorney-in-Fact
Xxxxx X. Xxxxxxxxx Trust
By: [SIGNATURE APPEARS HERE]
--------------------------------------
Name:
---------------------------------
Title: Attorney-in-Fact
Xxxxxxxx X. Xxxxxxxxx Trust
By: [SIGNATURE APPEARS HERE]
--------------------------------------
Name:
---------------------------------
Title: Attorney-in-Fact
Xxxxxxx X. Xxxxxxxxx Trust
By: [SIGNATURE APPEARS HERE]
--------------------------------------
Name:
---------------------------------
Title: Attorney-in-Fact
JMC Family Investment Limited Partnership,
Xxx X. Xxxxx, General Partner
By: [SIGNATURE APPEARS HERE]
--------------------------------------
Name:
---------------------------------
Title: Attorney-in-Fact
66
Xxxxxx X. Xxxxxxxx
By: [SIGNATURE APPEARS HERE]
----------------------------------------
Name:
---------------------------------
Title: Attorney-in-Fact
Xxxxxxx Xxxxxxxxxx Charitable Trust
By: [SIGNATURE APPEARS HERE]
----------------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Trustee
67
EXHIBIT 2.2
Amounts Reducing Purchase Price
-------------------------------
1. Amount payable by Acquired Companies to Chevron
after the Closing Date not exceeding $2,250,000, such
amount to be set forth in written instructions delivered
by Xxxxxxxxxx to Buyer at Closing
2. Indebtedness of Acquired Companies to Bank of Montreal
as of the Closing Date
3. Legal fees and costs of Xxxxxxxx & Knight in connection
with the Contemplated Transactions, such amount to be set
forth in written instructions delivered by Xxxxxxxxxx to
Buyer at Closing
SCHEDULE 2.6
Working Capital of the Company on a Consolidated Basis as of August 3, 1996
---------------------------------------------------------------------------
(Dollars in Thousands)
Cash and Cash Equivalents $ 119
Accounts Receivable, net 13,518
Inventory 7,184
Prepaid Expenses 299
-------
Total Current Assets 21,120
-------
Accounts Payable 14,779
Accrued Liabilities 1,972
Insurance Notes Payable 95
Taxes Payable 262
-------
Total Current Liabilities 17,108
-------
Net Working Capital $ 4,012
=======
1. Sellers have disclosed to Buyer a possible claim of Xxxxxxxx-Xxxxx
Corporation, as successor to Xxxxx Paper Company, against the Company in
the amount of $995,000 related to additional purchase price payable to
Xxxxx Paper Company in connection with the purchase of the Company's
business from Xxxxx Paper Company on February 25, 1994 with respect to the
aging of certain accounts receivable payable by WinCup. No adjustment to
the calculation of Net Working Capital and no adjustment to the Purchase
Price shall be made with respect to such claim in the event that
Xxxxxxxx-Xxxxx Corporation either releases such claim or refuses to release
such claim.
2. No adjustment to the Purchase Price shall be made to the extent that Net
Working Capital is reduced between the date of the Stock Purchase Agreement
and the Closing Date by reason of any reductions of purchases of products
from the Acquired Companies by Buyer which are not in the Ordinary Course
of Business of Buyer.
3. In the preparation of the Closing Statement, Sellers shall be entitled to
the benefit of any income tax deduction which can be utilized by the
Acquired Companies prior to the Closing Date with respect to the bonus paid
prior to the Closing Date to certain employees of the Acquired Companies
and with respect to the payment to Chevron Chemical Company referred to on
Exhibit 2.2.
4. In the preparation of the Closing Statement, accrued liabilities of the
Acquired Companies, whether or not reflected in the Interim Balance Sheets,
will include all uninvoiced liabilities for products and services rendered
prior to the Closing Date not included in accounts payable or uninvoiced
receipts. With respect to items accrued on a monthly basis that are
impacted by the 52-53 week accounting periods, accruals will be computed
consistent with prior periods. With respect to accrued employee benefit
plans,the accrued balance will include the amounts related to services or
obligations incurred prior to the closing date.
5. Accounts receivable deemed uncollectible will be written off prior to
Closing.
6. Inventory will be calculated as stated in Section 3.9, without regard to
Part 3.4 of the Disclosure Letter.
7. Accounts payable and accrued liabilities reflect amounts owing or accrued
in accordance with GAAP.
8. Accrued liabilities will be reduced by amounts accrued as incentive
compensation which will be paid to employees at Closing. In addition, up
to $1,000,000 will be drawn down on line and paid to employees at Closing.
9. Prepaid taxes are specifically excluded from this calculation.
10. Intercompany receivables and payables are excluded from this calculation.
11. Any refund due which will be received by any of the Acquired Companies for
over payment of taxes prior to Closing will be added to the total current
assets for this calculation.
12. Financial statements will be based on a 52/53 week year for pro rata
allocation purposes.
13. Accrued health insurance claims will be recorded as of the closing date
based on the procedure set forth on Exhibit 2.5.1 hereto.
SCHEDULE 4.2
Required Consents - Buyer
-------------------------
a. Buyer filed a premerger notification with the Federal Trade Commission
(the "FTC") seeking approval of the transactions contemplated by this
Agreement, pursuant to the HSR Act, and has received notice from the
FTC of the early termination of the HSR Act waiting period.
b. Buyer must receive the consent of the Bank of Montreal under the
Agreement Respecting a Term Loan and other Credit Facilities dated
February 25, 1994, as amended, between the Bank of Montreal and
StyroChem International, Ltd.
EXHIBIT 2.6.1
Calculation for Accrued Health Care Liability/Receivable
--------------------------------------------------------
PART 1
Claims incurred by Closing for
health insurance year beginning
February 25, 1996 A
Less amounts paid by StyroChem
against above claims through Closing B
-----
A - B
Less amounts in A which are
reimbursable under individual
stop loss of $30,000 at Closing C
------
(A-B) - C =
If positive this is added to liability.
If negative this is subtracted from liability.
PART 2
Claims incurred by Closing for
health insurance year beginning
February 25, 1996 A
Less amounts paid by StyroChem
against above claims through Closing B
------
A - B
Less annual aggregate stop loss
Pro Rata to date of Closing. Should
be equal to amounts accrued by
StyroChem. Maximum included in the
aggregate stop loss pool for any individual
will not exceed $30,000. C
--------
(A-B) - C =
Any amounts deemed receivable as a result of
the calculation in Part 2, will be paid to the
Acquired Company at which time all claims
incurred within the February 25, 1996 claim year
have been settled.
EXHIBIT 2.7(B)
Example of Purchase Price Calculation
-------------------------------------
Assumptions:
(a) Net Working Capital on Closing Date $ 3,000,000
(b) Chevron payment 1,000,000
(c) Xxxxx Fargo payment 3,000,000
(d) Bank of Montreal assumption 1,500,000
(e) Xxxxxxxx & Knight legal fees 100,000
Calculation at Closing:
Base Purchase Price $26,000,000
less Chevron 1,000,000
less Xxxxx Fargo 3,000,000
less escrow for working capital 1,000,000
less escrow for environmental 1,375,000
less Bank of Montreal 1,500,000
less Xxxxxxxx & Knight 100,000
---------------
Net payable to Sellers at the Closing $18,025,000
Post Closing Adjustment:
Adjustment Amount: negative $1,012,000 (this is based on the difference
between the August 3, 1996 net working capital of $4,012,000 and the
assumed net working capital as of the Closing Date of $3,000,000).
$1,000,000 working capital escrow (plus interest accrued thereon) is paid
to Buyer. Sellers on a Pro Rata Basis pay additional $12,000 to Buyer
EXHIBIT 21.1
Subsidiaries of the Registrant
State or Jurisdiction of Names under which
Name of Subsidiary Incorporation or Organization Subsidiary does Business
------------------------------- ----------------------------- ------------------------------
WinCup Holdings, Inc. Delaware WinCup Holdings, Inc.
WinCup Holdings of Texas, Inc.
Benchmark Holdings, Inc. Delaware Benchmark Holdings, Inc.
WinCup Holdings, L.P. Delaware WinCup Holdings, L.P.
SP Acquisition Co. Delaware SP Acquisition Co.
StyroChem International, Inc. Texas StyroChem International, Inc.
StyroChem International, Ltd. Quebec StyroChem International, Ltd.
StyroChem FSC, Ltd. Barbados StyroChem FSC, Ltd.
Radnor Management, Inc. Delaware Radnor Management, Inc.
