<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT ON FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 2, 1996
REUNION RESOURCES COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 1-7226 76-0404108
(State or other jurisdiction (Registration No.) (IRS Employer
of incorporation) (Commission File Number) Identification No.)
</TABLE>
2801 POST OAK BOULEVARD, SUITE 400, HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
(713) 627-9277
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 2, 1996 (the "Closing Date"), Rostone Corporation ("Rostone"), a
Delaware corporation, was merged (the "Merger") with and into Oneida Molded
Plastics Corp. ("Oneida"), a New York corporation and a wholly-owned subsidiary
of Reunion Resources Company (the "Company" or "Registrant") pursuant to a
Merger Agreement, dated as of December 22, 1995 (the "Merger Agreement").
Pursuant to the Merger Agreement, Oneida, as the surviving corporation, changed
its name to Oneida Rostone Corp. ("ORC"). The purchase price payable by ORC
under the Merger Agreement to the stockholders of Rostone is an amount up to
$4,000,503 as follows: (i) $503 in 1996, (ii) up to $2,000,000 in 1997 if
Rostone achieves specified levels of earnings before interest and taxes (as
provided in the Merger Agreement) for the calendar year 1996 and (iii) up to
$2,000,000 in 1998 if Rostone achieves specified levels of earnings before
interest and taxes (as provided in the Merger Agreement) for the calendar year
1997. Under the terms of ORC's Loan Facility (described below), all such
payments may only be made from equity contributions the Company may provide to
ORC. The financial terms of the transaction were determined based on Rostone's
financial position and results of operations for the fiscal year ended December
31, 1994 and for the eleven months ended November 30, 1995.
In connection with the acquisition of Rostone by ORC, the Company hired
Prudential Securities Incorporated ("Prudential") to act as its financial
advisor. In a letter dated January 15, 1996, Prudential rendered its opinion to
the Board of Directors of the Company that, as of the date thereof, the merger
consideration to be paid pursuant to the Merger Agreement was fair, from a
financial point of view, to the Company. In arriving at its opinion, Prudential,
among other things: (i) reviewed Rostone's historical financial data and other
information regarding Rostone prepared by the management of Rostone and the
Company ("Management"); (ii) reviewed financial projections prepared by
Management, relating to the sales, earnings and prospects for Rostone's
business; (iii) reviewed the financial terms of a draft of the Merger Agreement
dated January 3, 1996; (iv) reviewed the financial terms of certain other
transactions deemed relevant by Prudential; (v) reviewed publicly available
information concerning certain other companies that Prudential deemed to be
comparable to Rostone, and the trading history of the common stock of each such
company; and (vi) conducted discussions with senior officers of Rostone and the
Company concerning the financial condition and prospects of Rostone.
Rostone, located in Lafayette, Indiana, compounds and molds thermoset
polyester resins. Rostone's products consist of proprietary bulk and sheet
molding compounds, both for internal use and for sale to other manufacturers,
and custom molded parts for the electrical, appliance, business machine and
other markets. For the nine months ended September 30, 1995 (unaudited), Rostone
had net sales of approximately $21.1 million, operating profit of approximately
$1.4 million and net income of approximately $0.3 million. For the year ended
December 31, 1994, Rostone had net sales of approximately
<PAGE>
$25.6 million, operating profit of approximately $1.4 million and a net loss of
approximately $0.2 million.
Contemporaneous with the Rostone acquisition, ORC and its wholly-owned
subsidiary, Oneida Molded Plastics, Corp. of North Carolina ("OMPC-NC"), amended
and restated the terms of their secured credit facility (the "Loan Facility")
with Congress Financial Corporation ("Congress") to provide for term loans in an
aggregate principal amount of $6,600,000 and revolving loans initially in an
aggregate principal amount of up to $9,400,000. The loan proceeds borrowed on
the Closing Date were primarily used to refinance Rostone's bank and
institutional debt.
In the Merger ORC acquired 100% of the preferred stock and 94% of the common
stock of Rostone from CGI Investment Corp. ("CGII") a company owned 51% by
Stanwich Partners Inc. ("SPI") and 49% by Chatwins Group Inc. ("Chatwins"). Mr.
Charles E. Bradley, Mr. John G. Poole and Mr. Richard Evans are officers,
directors and/or shareholders of SPI. Mr. Bradley is the Company's Chairman,
President and Chief Executive Officer and Mr. Evans is Executive Vice President
of the Company. Mr. Bradley is also a controlling shareholder and the Chairman
of the Board of Chatwins which owns 38% of the Company's outstanding common
stock. Mr. Thomas L. Cassidy, a director of the Company, and Mr. Poole, an
officer of Oneida and a nominee for a directorship of the Company, are also
directors of Chatwins. Prior to the Merger certain officers and directors of
Oneida, including Messrs. Bradley and Poole, were also serving as officers and
directors of Rostone and CGII.
Prior to the Merger, Rostone was indebted to CGII pursuant to a $250,000
promissory note dated May 21, 1993. The note, which had an outstanding balance
of $367,742 (principal and accrued interest) on the Closing Date and continues
as an obligation of ORC, is subordinated to the prior payment of indebtedness
owing by ORC to Congress, except that if certain conditions are met, regularly
scheduled monthly interest payments may be paid when due.
Prior to the Merger, Oneida was indebted to Chatwins in the amount of
$4,932,940 pursuant to a 10% promissory note due on the earlier of September 14,
1997 and the date on which the Company sells any of its material assets (the
"Oneida/Chatwins Debt"). Interest on this note is payable monthly. The note,
which had an outstanding balance of $3,553,952 (principal and accrued interest)
on the Closing Date and continues as an obligation of ORC, is subordinated to
the prior payment of indebtedness owing by ORC to Congress, except that if
certain conditions are met, regularly scheduled monthly interest payments may be
paid when due and principal may be paid out of equity or subordinated loans that
may be advanced by the Company to ORC.
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Prior to the Merger, Rostone was the leasee of certain equipment beneficially
owned by Chatwins and Mr. Bradley. Chatwins and Mr. Bradley share the risks and
benefits under the lease pro rata in proportion to the purchase price of the
equipment paid to the equipment manufacturer by each (57% for Chatwins and 43%
for Mr. Bradley). At any time during the lease term Rostone (ORC) may purchase
the equipment upon the payment of the amount which, when combined with its prior
lease payments, will return to Chatwins and Mr. Bradley the amounts paid by each
of them to the manufacturer plus interest thereon at 13.5% per annum, compounded
monthly from the date of each co-venturer's payment to the equipment
manufacturer. Chatwins and Mr. Bradley's rights to payment under the lease are
subordinated to the prior payment of indebtedness owing by ORC to Congress,
except that if certain conditions are met, regularly scheduled monthly lease
payments may be made when due and the amount due on exercise of ORC's purchase
option may be paid out of the proceeds of purchase money financing provided by a
non-affiliate of ORC and permitted under the terms of the Loan Facility.
On November 1, 1995 and November 2, 1995, respectively, Mr. Bradley made loans
of $850,000 and $500,000 to the Company, which the Company then used as part of
a $1,550,000 loan it advanced to Oneida evidenced by a 10% promissory note of
Oneida payable November 2, 1997. Oneida used these funds to repay a portion of
the Oneida/Chatwins Debt. The Company issued two notes to Mr. Bradley for the
$1,350,000 he advanced, each bearing interest at a rate of 10% per annum and
each due and payable on September 14, 1997. According to the terms of these
notes, should the Company sell any of its material assets, it will prepay these
notes in an amount equal to the proceeds of such sale which remain (if any)
after the Company loans to ORC a portion of the net proceeds of such sale in an
amount sufficient to permit ORC to repay the Oneida/Chatwins Debt.
To facilitate the closing of the Merger and the Loan Facility, Mr. Bradley
entered into several financial arrangements with Congress and an existing
creditor of Rostone. To induce Congress to consummate the Loan Facility, Mr.
Bradley guaranteed the obligations of ORC and OMPC-NC under the Loan Facility
subject to a cap of $4 million, which cap declines over time to $2 million. Mr.
Bradley will receive a credit support fee from ORC and OMPC-NC in an aggregate
amount equal to one percent (1%) per annum of the amount guaranteed, payable
monthly. Mr. Bradley's rights to payment of the monthly installments of the
credit support fee are subordinated to the prior payment of indebtedness owing
by ORC to Congress, except that if certain conditions are met, the monthly
installments may be paid when due. As a further inducement to Congress Mr.
Bradley entered into an environmental indemnity agreement pursuant to which Mr.
Bradley agrees to indemnify Congress against liabilities that may arise from
environmental problems that may be associated with ORC's existing properties and
to reimburse Congress for certain
3
<PAGE>
investigatory and cleanup costs that Congress may incur should Congress request
that those activities be performed by ORC and should ORC fail to perform them.
To induce the existing creditor of Rostone to permit the Merger and Loan
Facility to be consummated, Mr. Bradley agreed to purchase from this creditor
50% of the $2,034,225 owing to him by Rostone on the Closing Date if this
indebtedness was restated to provide for quarterly amortization over a two year
period with interest at 10% per annum payable quarterly subject, however, to a
subordination agreement with Congress. As a result of this transaction, Mr.
Bradley and the creditor each holds a note from ORC in the amount of
$1,017,112.50 bearing interest at 10% per annum which is subordinated to the
prior payment of indebtedness owing by ORC to Congress, except that if certain
conditions are met, regularly scheduled payments of interest may be paid when
due.
Management of the Company believes that the acquisition of Rostone will
further the Company's objective of increasing ORC's customer base and expanding
its product offerings and service capabilities in the plastics industry. The
Company intends to continue to use the assets of Rostone in substantially the
same manner as they were used prior to the Merger.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) and (b). The financial statements and pro forma information required by
this item will be furnished by an amendment to this report on Form 8-K within 60
days of this filing.
(c). Exhibits
The following exhibits are filed herewith in accordance with Item 601 of
Regulation S-K:
EXHIBIT NO. EXHIBIT DESCRIPTION
2.1 Merger Agreement, dated as of December 22, 1995 (executed
February 2, 1996) between Oneida Molded Plastics Corp. and
Rostone Corporation.
99.1 Opinion of Prudential Securities Incorporated
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned hereunto duly authorized.
REUNION RESOURCES COMPANY
Dated: February 14, 1996 By: /s/ Richard L. Evans
------------------------------------
Name: Richard L. Evans
Title: Executive Vice President
5
<PAGE>
EXHIBIT INDEX*
EXHIBIT NO. EXHIBIT DESCRIPTION
2.1 Merger Agreement, dated as of December 22, 1995 (executed
February 2, 1996) between Oneida Molded Plastics Corp.
and Rostone Corporation.
99.1 Opinion of Prudential Securities Incorporated
- ------------
* Page numbers inserted on manually signed copy only.
6
<PAGE>
EXHIBIT 2.1
================================================================================
MERGER AGREEMENT
between
ONEIDA MOLDED PLASTICS CORP.
and
ROSTONE CORPORATION
Dated As Of: December 22, 1995
(Executed February 2, 1996)
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
PLAN OF MERGER; CLOSING; EFFECTIVE TIME
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1.1 The Merger 1
1.2 Surviving Corporation 1
1.3 Certificate of Incorporation and By-Laws. 2
1.4 Directors 2
1.5 Officers 2
1.6 The Closing 2
1.7 Venue for Closing and Related Deliveries 3
1.8 Effective Time 3
1.9 Definitions 3
1.10 Outstanding Shares 5
</TABLE>
ARTICLE II
STATUS AND CANCELLATION OF SECURITIES
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<CAPTION>
<C> <S> <C>
2.1 Cancellation of Shares 5
2.2 Exchange of Share Certificates. 7
2.3 Consideration for Shares 7
2.4 Taking of Necessary Action; Further Action 8
2.5 Taxes 9
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
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<C> <S> <C>
3.1 Representations and Warranties of Rostone 9
(a) Corporate Organization 9
(b) Authority; Execution and Validity of Agreement 10
(c) No Conflict 10
(d) Capitalization 11
(e) Broker's or Finder's Fees 11
(f) Financial Statements 11
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
(g) Absence of Certain Changes or Events 12
(h) Leases of Personal Property; Material Contracts; No Default 13
(i) Patents, Trademarks and Trade Names 14
(j) Litigation 14
(k) Compliance with Laws 14
(l) Taxes 15
(m) Title to Property 15
(n) Insurance 15
(o) Licenses 15
(p) Employee Benefit Plans 16
(q) Environmental Matters 16
(r) Labor Matters 17
(s) Personal Property 17
(t) Real Property 18
(u) Obligations to Society Capital 18
(v) Books and Records 19
(w) Accounts Receivable 19
(x) Inventory 19
(y) Disclosure 19
3.2 Representations and Warranties of the Purchaser 20
(a) Corporate Organization 20
(b) Authority; Execution and Validity of Agreement 20
(c) No Conflict 21
(d) Broker's or Finder's Fees 21
(e) Litigation 21
(f) Compliance with Laws 21
(g) Taxes 21
</TABLE>
ARTICLE IV
AMENDMENT
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4.1 Amendment 22
</TABLE>
(ii)
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PAGE
ARTICLE V
DELIVERIES AT CLOSING
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5.1 Deliveries of Rostone 22
5.2 Deliveries of the Purchaser 23
</TABLE>
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
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<C> <S> <C>
6.1 Survival of Representations and Warranties 23
6.2 Indemnification by Rostone 24
6.3 Indemnification by the Purchaser 24
6.4 Notice and Payment of Claims 25
6.5 Matters Involving Third Parties 26
6.6 Mitigation of Damages 27
6.7 Other Remedies 27
</TABLE>
ARTICLE VII
GENERAL PROVISIONS
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7.1 Expenses 27
7.2 Execution in Counterparts 27
7.3 Notices 27
7.4 Governing Law 28
7.5 Titles and Headings 29
7.6 Successors and Assigns 29
7.7 Entire Agreement; No Oral Waiver 29
7.8 Severability 29
7.9 No Third-Party Rights 29
7.10 Remedies 30
</TABLE>
(iii)
<PAGE>
MERGER AGREEMENT
----------------
MERGER AGREEMENT, dated as of December 22, 1995 (the "Agreement"),
between Rostone Corporation, a Delaware corporation incorporated on March 21,
1990 as Rostone Acquisition Corporation ("ROSTONE"), and Oneida Molded Plastics
Corp., a New York corporation incorporated on August 14, 1964 ("ONEIDA" or the
"PURCHASER").
W I T N E S S E T H :
-------------------
WHEREAS, the respective Boards of Directors of Oneida and Rostone have
each determined that, subject to the satisfaction of certain conditions, the
merger of Rostone into Oneida (the "MERGER") in accordance with the Delaware
General Corporation Law (the "DGCL") and the New York Business Corporation Law
("NYBCL") and the terms and conditions of this Agreement is desirable and in the
best interests of the stockholders of the respective companies;
WHEREAS, the Board of Directors of Oneida, by resolutions duly
adopted, has directed that the Merger be submitted to a vote of the shareholder
of Oneida; and
WHEREAS, the Board of Directors of Rostone, by resolutions duly
adopted, has directed that the Merger be submitted to a vote of the stockholders
of Rostone.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
PLAN OF MERGER; CLOSING; EFFECTIVE TIME
1.1 The Merger. At the Effective Time (as defined in Section 1.8
-----------
hereof), and subject to the terms and conditions of this Agreement and the DGCL
and NYBCL, Rostone shall be merged with and into Oneida in the Merger, the
separate corporate existence of Rostone shall thereupon cease, and Oneida shall
be the surviving corporation in the Merger. Oneida after the Merger is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2 Surviving Corporation. At the Effective Time, the Surviving
----------------------
Corporation shall continue its corporate existence under the laws of the State
of New York. The Merger shall have the effects set forth in the DGCL and NYBCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises of
a public as well as of a private nature of Rostone and Oneida shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Rostone and
Oneida shall become the debts, liabilities and duties of the Surviving
Corporation. The name of the Surviving Corporation shall be "ONEIDA ROSTONE
CORP.".
<PAGE>
1.3 Certificate of Incorporation and By-Laws. (a) The Certificate of
-----------------------------------------
Incorporation attached hereto as Exhibit A shall be the Certificate of
Incorporation of the Surviving Corporation, until thereafter duly amended in
accordance with the terms thereof and applicable law.
(b) The By-Laws, attached as Exhibit B hereto, shall be the By-Laws
of the Surviving Corporation, until thereafter duly amended in accordance with
the terms thereof, the Certificate of Incorporation of the Surviving Corporation
and applicable law.
1.4 Directors . At the Effective Time, Charles E. Bradley, Sr. shall
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be the sole director of the Surviving Corporation, replacing all existing
directors of Oneida and Rostone, to hold office in accordance with the
Certificate of Incorporation and By-Laws of the Surviving Corporation and until
his successor is duly elected and qualified.
1.5 Officers. At the Effective Time, the following individuals
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shall be the officers of the Surviving Corporation, replacing all existing
officers of Oneida and Rostone, each to hold the office set forth opposite his
or her name in accordance with the Certificate of Incorporation and By-Laws of
the Surviving Corporation and until his or her successor is duly appointed and
qualified:
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<S> <C>
PRESIDENT: David Harrington
VICE PRESIDENT-FINANCE,
TREASURER AND SECRETARY: Robert Wiehl
ASSISTANT TREASURER: Richard Evans
CONTROLLER AND ASSISTANT SECRETARY: John Buckla
ASSISTANT SECRETARY: Scott A. Junkin
ASSISTANT SECRETARY: John Poole
</TABLE>
1.6 The Closing. The closing for the Merger (the "CLOSING") shall
------------
take place at 10:00 a.m., New York time, on the date on which each of the
deliveries specified in Section 5 hereof have been satisfied (or waived by the
applicable party) or on such other date as the parties mutually agree. The time
and date of the Closing are herein referred to as the "CLOSING DATE". The
parties hereto agree to use their best efforts to cause the Closing Date to
occur as soon as practicable consistent with the provisions of this Agreement.
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1.7 Venue for Closing and Related Deliveries. The Closing and the
-----------------------------------------
delivery of the documents on the Closing Date shall occur at the offices of
Richards & O'Neil, LLP, 885 Third Avenue, New York, New York.
1.8 Effective Time. Concurrently with the Closing, the parties
---------------
hereto will deliver certificates of merger (collectively, the "CERTIFICATE OF
MERGER") to the Secretary of State of the State of Delaware and the Department
of State of the State of New York, which certificates shall provide that the
Merger shall become effective under the DGCL and NYBCL on the later of the date
of such filings or such time as is specified in the Certificate of Merger (the
"EFFECTIVE TIME"), and the parties shall make all other filings or recordings
required by the DGCL and NYBCL in connection with the Merger.
1.9 Definitions. For the purpose of this Agreement the following
------------
terms shall have the stated meanings:
(a) "AFFILIATE" when used with respect to a Person shall mean any
Person directly or indirectly controlling, controlled by or under common control
with such Person and any stockholder, employee, director or relative of any such
Person.
(b) "BUSINESS DAY" shall mean a day other than a Saturday, Sunday or
other day on which commercial banks are authorized or required by law to close
under the laws applicable to such banks in New York, New York.
(c) "DEFERRED CONSIDERATION A" shall mean one cent ($.01) per Share
times the number of Shares.
(d) "DEFERRED CONSIDERATION B" shall mean the amount equal to eight
(8) times Rostone EBIT for 1996 in excess of $2,200,000 up to a maximum amount
of $2,000,000. For example, if Rostone EBIT for 1996 is $2,450,000 (or more),
Deferred Consideration B shall equal $2,000,000.
(e) "DEFERRED CONSIDERATION C" shall mean the amount equal to eight
(8) times Rostone EBIT for 1997 in excess of $2,450,000 up to a maximum amount
of $2,000,000. For example if Rostone EBIT for 1997 is $2,700,000 (or more),
Deferred Consideration C shall equal $2,000,000.
(f) "LIEN" shall mean any lien, mortgage, pledge, attachment,
security interest, charge, encumbrance, claim, community property interest,
option, 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 or any arrangement having the effect of the
foregoing.
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(g) "MERGER CONSIDERATION" shall mean the portions of the Deferred
Consideration A, Deferred Consideration B and Deferred Consideration C payable
under Sections 2.3(b)-(d) hereof to Stockholders who formerly held Rostone
Common Stock.
(h) "MERGER CONSIDERATION PER SHARE" shall mean the quotient obtained
by dividing (i) the Merger Consideration by (ii) the aggregate number of shares
of Rostone Common Stock issued and outstanding immediately prior to the
Effective Time, rounded down to the nearest cent per share.
(i) "PERSON" shall mean any individual, corporation, limited
liability company, partnership, trust, joint venture, unincorporated association
or other entity of whatever nature, public or private.
(j) "PURCHASER MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on the ability of the Surviving Corporation to pay the Merger
Consideration and the Preferred Consideration as and when due.
(k) "PREFERRED CONSIDERATION" shall mean portions of the Deferred
Consideration A, Deferred Consideration B and Deferred Consideration C payable
under Sections 2.3(b)-(d) hereof to Stockholders who formerly held Rostone
Preferred Stock.
(l) "PREFERRED CONSIDERATION PER SHARE" shall mean the quotient
obtained by dividing (i) the Preferred Consideration by (ii) the aggregate
number of shares of Rostone Preferred Stock issued and outstanding immediately
prior to the Effective Time rounded down to the nearest cent per share.
(m) "ROSTONE EBIT" shall mean the sum of net income, interest expense
and tax expense for the period in question, determined in accordance with
generally accepted accounting principles (except as set forth on Schedule 1.9(m)
hereto) on a pro forma basis for the business of Rostone acquired by the
Surviving Corporation determined as if such business were a separate
corporation.
(n) "ROSTONE COMMON STOCK" shall mean all of the issued and
outstanding Class A and Class B Common Stock of Rostone, par value $.40 per
share.
(o) "ROSTONE DEBT" shall mean the aggregate principal amount of all
Indebtedness (as defined in Section 3.1(z)) of Rostone outstanding on the
Closing Date including, without limitation, as set forth on Schedule 3.1(z) plus
all accrued and unpaid interest thereon and charges and penalties owing in
respect thereof as of the Closing Date.
(p) "ROSTONE PREFERRED STOCK" shall mean all of the issued and
outstanding Preferred Stock of Rostone, par value $.01 per share.
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<PAGE>
(q) "SELLER MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on the business, operations (including, without limitation, results of
operations), properties (including, without limitation, intangible properties),
condition (financial or otherwise) or prospects of Rostone.
(r) "SHARES" shall mean collectively the Rostone Common Stock and
Rostone Preferred Stock.
(s) "STOCKHOLDERS" shall mean all holders of Rostone Common Stock and
Rostone Preferred Stock immediately prior to the Effective Time.
1.10 Outstanding Shares. (a) The designation and number of
-------------------
outstanding shares of each class and series of Oneida are as follows: (i)
25,000 shares of preferred stock, all of which shares are entitled to vote as a
class on the Merger and (ii) 601 shares of common stock all of which shares are
entitled to vote as a class on the Merger.
(b) The designation and number of outstanding shares of each class
and series of Rostone are as follows: (i) 29,050 shares of preferred stock,
none of which shares are entitled to vote on the Merger and (ii) 21,250 shares
of Class A common stock, all of which shares are entitled to vote as a class on
the Merger.
ARTICLE II
STATUS AND CANCELLATION OF SECURITIES
2.1 Cancellation of Shares.
-----------------------
(a) As of the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, each share of Rostone Common Stock
that is issued and outstanding immediately prior to the Effective Time shall
cease to be outstanding, be cancelled and cease to exist, and, subject to
Section 2.1(e) hereof, each holder of a certificate representing any such
Rostone Common Stock shall thereafter cease to have any rights with respect to
such Rostone Common Stock and, in consideration of such cancellation, each share
of Rostone Common Stock shall be converted into, and the holder of each such
share shall have, without any action on the part of such holder, the right to
receive the Merger Consideration Per Share. The cash deliverable to each holder
of shares of Rostone Common Stock pursuant to this Section 2.1(a) shall be
delivered at such times as provided herein following surrender of the
certificate formerly representing such shares duly endorsed as herein provided.
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(b) As of the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, each share of Rostone Common Stock
which is held in the treasury of Rostone or Oneida shall be cancelled, without
any conversion thereof.
(c) As of the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, each share of Rostone Preferred Stock
that is issued and outstanding immediately prior to the Effective Time shall
cease to be outstanding, be cancelled and cease to exist, and, subject to
Section 2.1(e) hereof, each holder of a certificate representing any such
Rostone Preferred Stock shall thereafter cease to have any rights with respect
to such Rostone Preferred Stock and, in consideration of such cancellation, each
share of Rostone Preferred Stock shall be converted into, and the holder of each
such share shall have, without any action on the part of such holder, the right
to receive the Preferred Consideration Per Share. The cash deliverable to each
holder of shares of Rostone Preferred Stock pursuant to this Section 2.1(c)
shall be delivered at such times as provided herein following surrender of the
certificate formerly representing such Shares duly endorsed as herein provided.
(d) As of the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, each share of common stock, par value
$100.00 per share, of Oneida issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $100.00 per share, of the
Surviving Corporation. As of the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, each share of preferred
stock, par value $100.00 per share, of Oneida issued and outstanding immediately
prior to the Effective Time shall be converted into and become one validly
issued, fully paid and nonassessable share of preferred stock, par value $100.00
per share of the Surviving Corporation.
(e) Notwithstanding anything in this Agreement to the contrary, each
Share of Rostone Common Stock and Rostone Preferred Stock outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger and who properly demands appraisal for such share of
Rostone Common Stock and/or Rostone Preferred Stock in accordance with the DGCL,
if the DGCL provides for appraisal rights for such Shares in the Merger
("DISSENTING SHARES"), shall not be converted into a right to receive any Merger
Consideration Per Share or Preferred Consideration Per Share, but shall no
longer have any rights in Rostone other than rights granted to holders of
Dissenting Shares pursuant to the DGCL, unless such holder fails to perfect or
withdraws or otherwise loses such holder's right to appraisal or if such rights
are otherwise not available by operation of Section 262 of the DGCL or
otherwise. If such holder fails to perfect or withdraws or loses such holder's
right to appraisal or if such rights are otherwise not available by operation of
Section 262 of the DGCL or otherwise, each such Dissenting Share shall be
treated as if it had been converted as of the Effective Time into a right to
receive, as of the Effective Time, the Merger Consideration Per Share or
Preferred Consideration Per Share as provided in Section 2.1(a) or 2.1(c)
hereof.
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(f) Rostone shall give the Purchaser prompt notice of any demands
received by Rostone for appraisal of any Shares and, prior to the Effective
Time, the Purchaser shall have the right to participate in all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, Rostone
shall not, except with the prior written consent of the Purchaser or as
otherwise required by law, make any payment with respect to, or settle or offer
to settle, any such demands.
2.2 Exchange of Share Certificates.
------------------------------
(a) From and after the Effective Time, the Surviving Corporation
shall act as exchange agent in effecting the exchange of certificates which,
prior to the Effective Time, represented Shares, for the consideration
receivable in respect thereof pursuant to Section 2.3 hereof. Upon the
surrender of each certificate representing validly issued Shares, duly endorsed
if requested by the Surviving Corporation and accompanied by such other
instruments of transfer, certifications and other documents as shall be
requested by the Surviving Corporation, the Surviving Corporation shall pay to
each record holder of Shares the amounts provided in Section 2.3 hereof, at the
time therein provided, and such certificate shall forthwith be cancelled and
extinguished. From and after the Effective Time and until so surrendered and
exchanged, each such certificate (other than certificates representing
Dissenting Shares) shall represent solely the right to receive the Merger
Consideration Per Share or Preferred Consideration Per Share payable in respect
of such Shares.
(b) Promptly after the Closing and upon receipt of evidence
satisfactory to the Surviving Corporation that the stock transfer books of
Rostone have been closed and pursuant to such other reasonable procedures and
conditions as the Surviving Corporation shall reasonably prescribe, the
Surviving Corporation shall mail or deliver the letters of transmittal to each
record holder of certificates representing Shares not surrendered at the Closing
pursuant to Section 2.3 hereof and which shall have been converted into the
right to receive the Merger Consideration Per Share or Preferred Consideration
Per Share applicable to such Shares determined in accordance with this
Agreement.
(c) After the Closing, there shall be no transfers of any Shares on
the stock transfer books of Rostone. If, after the Effective Time, certificates
previously representing Shares are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the applicable portions of the Merger
Consideration or Preferred Consideration applicable to such Shares subject to
applicable law including in the case of the Dissenting Shares.
2.3 Consideration for Shares.
-------------------------
(a) Subject to compliance with the provisions of Sections 2.2 and 2.3
hereof, the following amounts shall be owing to Stockholders upon the Effective
Time: to each Stockholder holding Rostone Common Stock an amount equal to the
Merger Consideration Per
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Share multiplied by the number of shares of Rostone Common Stock which such
Stockholder held of record immediately prior to the Effective Time; and to each
Stockholder holding Rostone Preferred Stock an amount equal to the Preferred
Consideration Per Share multiplied by the number of shares of Rostone Preferred
Stock which such Stockholder held of record immediately prior to the Effective
Time. THE RIGHTS OF EACH STOCKHOLDER UNDER THIS AGREEMENT ARE SUBORDINATED IN
RIGHT OF PAYMENT TO CONGRESS FINANCIAL CORPORATION PURSUANT TO THE TERMS AND
CONDITIONS OF SEPARATE SUBORDINATION AGREEMENTS, EACH DATED THE DATE OF
EXECUTION HEREOF, BETWEEN CONGRESS FINANCIAL CORPORATION AND SUCH STOCKHOLDER.
(b) On the date on which Reunion Resources Company, a Delaware
corporation ("REUNION"), consummates the sale of its oil and gas assets and
receives good funds from the sale thereof, the Surviving Corporation shall pay
the Deferred Consideration A to Stockholders who held Shares immediately prior
to the Effective Time.
(c) On the later to occur of (i) March 31, 1997 and (ii) the earlier
to occur of (A) the date on which Purchaser shall have paid in full all amounts
owing under the promissory note of the Purchaser to Mr. Allan Bir dated the date
of execution hereof in the principal amount of $1,016,325 plus $262.50 for each
day after January 30, 1996 until the date of execution hereof (the "BIR NOTE")
and (B) the date on which Mr. Bir shall have sold, assigned and transferred the
Bir Note to CGI Investment Corp. ("CGII") or its designee, the Surviving
Corporation shall pay the Deferred Consideration B, if any, to Stockholders who
held Shares immediately prior to the Effective Time as follows: first to
Stockholders who previously held Rostone Preferred Stock until the aggregate
cumulative amount paid to such Stockholders under Section 2.3(b) and this
Section 2.3(c) equals $2,905,000.00; and then the balance, if any, to
Stockholders who previously held Rostone Common Stock.
(d) On the later to occur of (i) March 31, 1998 and (ii) the earlier
to occur of (A) the date on which Purchaser shall have paid in full all amounts
owing under the Bir Note and (B) the date on which Mr. Bir shall have sold,
assigned and transferred the Bir Note to CGII or its designee, the Surviving
Corporation shall pay the Deferred Consideration C, if any, to Stockholders who
previously held Shares as follows: first to Stockholders who previously held
Rostone Preferred Stock until the aggregate cumulative amount paid to such
Stockholders under Sections 2.3(b) and 2.3(c) and this Section 2.3(d) equals
$2,905,000.00; and then the balance, if any, to Stockholders who previously held
Rostone Common Stock.
2.4 Taking of Necessary Action; Further Action. At the request of
-------------------------------------------
the Purchaser, Rostone shall use its best efforts to take all such action as may
be necessary or appropriate to effectuate the Closing and due filing of the
Certificate of Merger and any other documents required to be filed under the
DGCL and NYBCL in respect of the Merger as promptly as possible, including,
without limitation, the adoption and filing under the DGCL and
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NYBCL of the Certificate of Merger consistent with the terms of this Agreement.
If at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers, and franchises of either Oneida or Rostone, the
officers of such corporations are fully authorized in the name of their
corporation or otherwise to take, and shall take, all such lawful and necessary
action. In addition, Rostone shall cooperate to take all necessary actions to
ensure the transfer and/or continued validity of all permits, licenses and
authorizations necessary to the lawful operations of Rostone's facilities.
2.5 Taxes.
------
(a) If any portion of the consideration payable hereunder upon the
Merger is to be paid to a Person other than the holder in whose name the
certificate formerly representing Shares surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the Person requesting such exchange shall pay to Rostone any transfer
or other taxes required by reason of the payment of the consideration payable
hereunder upon the Merger to a person other than the registered holder of the
certificate surrendered, or shall establish to the satisfaction of the Surviving
Corporation that such taxes have been paid or are not applicable.
Notwithstanding the foregoing, neither the Surviving Corporation nor any other
party hereto shall be liable to a holder of Shares for any Consideration payable
hereunder upon the Merger delivered pursuant hereto to a public official
pursuant to applicable abandoned property or escheat laws.
(b) Stockholders shall furnish the Surviving Corporation with Form W-
9 or W-8, as required. The Surviving Corporation shall withhold from each
payment made hereunder in accordance with the "back-up withholding" rules in
cases in which required certificates are not provided or where such withholding
is otherwise required.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Rostone. Rostone hereby
------------------------------------------
represents and warrants to the Purchaser as follows and agrees that such
representations and warranties constitute an inducement to Purchaser to enter
into the transactions contemplated hereby and that Purchaser is relying on the
accuracy thereof:
(a) Corporate Organization. Rostone is a corporation duly organized
-----------------------
and incorporated and validly existing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to own, use and
operate its properties and to carry on its business as the same is now being
conducted and is duly qualified or licensed to do business
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as a foreign corporation in the jurisdictions listed on Schedule 3.1(a) hereto,
such jurisdictions being every jurisdiction in which the nature of its business
or properties makes such qualification necessary, except such jurisdictions in
which the failure to so qualify or be licensed, individually or in the
aggregate, would not have a Seller Material Adverse Effect.
(b) Authority; Execution and Validity of Agreement. Rostone has all
-----------------------------------------------
requisite power and authority to execute and deliver this agreement and all
other agreements or documents executed in connection with the transactions
contemplated hereby (collectively, the "CLOSING DOCUMENTS") to which it is or
will be a party and to perform its obligations hereunder and thereunder and to
consummate the transaction contemplated hereby and thereby. The execution and
delivery of this Agreement and the other Closing Documents to which it is or
will be a party, the performance of its obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by the vote of the Board of Directors of Rostone and, except for
the approval of the Stockholders under the DGCL, no further corporate action on
the part of Rostone is legally required to authorize the sale of the Shares, the
execution and delivery of this Agreement or such other Closing Documents to
which it is a party, the performance of its obligations hereunder and thereunder
or the consummation of the transactions contemplated hereby and thereby. This
Agreement and the other Closing Documents executed by Rostone through the date
hereof have been duly and validly executed and delivered by or on behalf of
Rostone and, assuming due authorization, execution and delivery hereof and
thereof by the Purchaser, constitute legal, valid and binding obligations of
Rostone enforceable against it in accordance with their respective terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or limiting creditors' rights generally or
by equitable principles relating to enforceability.
(c) No Conflict. Neither the execution and delivery of this
------------
Agreement or the other Closing Documents to which Rostone is or will be a party,
nor the performance by Rostone of its obligations hereunder or thereunder nor
the consummation of the transactions contemplated hereby and thereby will (i)
violate or conflict with any of the provisions of the Certificate of
Incorporation or By-Laws of Rostone; (ii) with or without the giving of notice
or the lapse of time or both, violate or constitute a default under, or result
in the acceleration or entitle any party to accelerate (whether after the giving
of notice or lapse of time or both) any obligation under any mortgage,
indenture, deed of trust, lease, contract, agreement, license or other
instrument or violate any provision of any law, order, judgment, decree,
restriction or ruling of any governmental authority to which Rostone is a party
or by which any of its property is bound, which would, individually or in the
aggregate, have a Seller Material Adverse Effect or prevent the consummation of
the transactions contemplated hereby; or (iii) result in the creation of any
Lien upon the Shares or any of the assets of Rostone or the loss of any license
permit, grant of authority or other contractual right with respect thereto,
which would, individually or in the aggregate, have a Seller Material Adverse
Effect.
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(d) Capitalization. The authorized capital stock of Rostone
---------------
consists of 81,622 shares of capital stock, of which 29,050 shares are Preferred
Stock, 26,286 shares are Class A Common Stock and 26,286 shares are Class B
Common Stock. With respect to the Preferred Stock, all 29,050 authorized shares
are issued and outstanding on the date hereof. With respect to the Class A
Common Stock, 21,250 shares are issued and outstanding on the date hereof. With
respect to the Class B Common Stock, there are no shares issued and outstanding
on the date hereof. The Shares have been duly authorized and validly issued,
are fully paid and nonassessable and constitute 100% of the issued and
outstanding shares of the capital stock of Rostone. Except as set forth in the
Stockholders Agreement among Rostone (f/k/a "Rostone Acquisition Corporation")
and its stockholders dated April 16, 1990 (i) there are no outstanding
preemptive rights, rights of first refusal, conversion or other rights, options,
warrants, calls, rights or commitments issued or entered into by or binding upon
Rostone or any other agreement of any character, or any Liens, relating to the
transfer, issuance or voting of any shares of the capital stock of Rostone
(including the Shares), whether issued or unissued, or any securities or rights
issued by Rostone which are convertible into or exchangeable for or evidencing
the right to subscribe for, any shares of capital stock or securities of
Rostone, including without limitation under the documents referenced in Section
3.1(u) hereof and (ii) Rostone is not subject to any obligation (contingent or
otherwise) to repurchase, redeem or otherwise acquire any shares of its capital
stock.
(e) Broker's or Finder's Fees. Neither Rostone, or any agent of
--------------------------
Rostone has authorized any person to act as a broker, finder, banker,
consultant, intermediary or in any similar capacity which would be entitled to
any investment banking, brokerage, finder's or similar fee in connection with
the transactions contemplated by this Agreement.
(f) Financial Statements. Rostone has previously furnished to the
---------------------
Purchaser true and complete copies of the following audited financial statements
of Rostone (the "FINANCIAL STATEMENTS"): (i) consolidated balance sheets at
December 31, 1994 (ii) consolidated statements of operations and retained
deficit for the year ended December 31, 1994; and (iii) consolidated statements
of cash flows for the year ended December 31, 1994. In addition, Rostone has
previously furnished to the Purchaser true and complete copies of the following
unaudited financial statements of Rostone (the "UNAUDITED FINANCIAL
STATEMENTS"): (i) balance sheet at November 30, 1995; (ii) statement of income
for the eleven months ended November 30, 1995; and (iii) statement of cash flow
for the eleven months ended November 30, 1995. The Financial Statements and the
Unaudited Financial Statements present fairly the financial condition and
results of operations and changes in cash flow of Rostone for the periods
indicated. The Financial Statements and Unaudited Financial Statements were
prepared in accordance with generally accepted accounting principles ("GAAP"),
consistently applied except as set forth on Schedule 3.1(f) hereto. Except as
disclosed on Schedule 3.1(f) hereto, Rostone has no liabilities or obligations,
fixed or contingent, that are not reflected on the Unaudited November 30, 1995
balance sheet except for (i) liabilities incurred in the ordinary course of
business since November 30, 1995, (ii) liabilities or obligations which
individually or in the aggregate will not have a
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Seller Material Adverse Effect and (iii) any liability or obligation which (if
known) would not be required to be presented in financial statements or the
notes thereto prepared in accordance with GAAP.
(g) Absence of Certain Changes or Events. Except as set forth on
-------------------------------------
Schedule 3.1(g) hereto or as otherwise contemplated by this Agreement, since
November 30, 1995:
(i) there has not occurred any change or event or changes or
events having, individually or in the aggregate for all such changes
or events, a Seller Material Adverse Effect; and
(ii) Rostone has not (A) purchased, redeemed, issued, sold or
otherwise acquired or disposed of, directly or indirectly, any shares
of its capital stock or any of its other securities, or granted any
options, warrants or other rights to purchase or convert any
obligation into any shares of its capital stock or into any of its
other securities, (B) mortgaged, pledged or subjected to or permitted
the imposition of any Lien (other than statutory Liens for taxes not
yet due and payable) upon any of its assets or properties, except in
the ordinary course of business in an amount and manner consistent
with past practice, (C) made any declaration, payment or setting aside
for payment of any dividend (whether in cash, securities or other
property) in respect of its capital stock, except intercompany
receivables, (D) entered into any material commitment or transaction
(including, without limitation, any borrowing or capital expenditure)
not in the ordinary course of business in a manner consistent with
past practice or not otherwise contemplated by this Agreement, (E)
disposed of or permitted to lapse any rights to the use of any
registered patent, registered trademark or registered copyright, other
than such dispositions or lapses which would not, individually or in
the aggregate, have a Seller Material Adverse Effect, (F) granted any
increase in the compensation of any of its employees, including any
such increase pursuant to any bonus, pension, profit-sharing or other
plan or commitment, or any increase in the compensation payable or to
become payable to any such employee, except, in each case, for
increases granted in the ordinary course of business in a manner
consistent with past practice or in accordance with the terms of any
of the Contracts disclosed on Schedule 3.1(h)(ii) hereto, or (G)
entered into or agreed (whether in writing or otherwise) to enter into
any agreement or other arrangement to take any action referred to in
this Section 3.1(g).
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(h) Leases of Personal Property; Material Contracts; No Default.
------------------------------------------------------------
(i) Schedule 3.1(h)(i) hereto sets forth a true and complete list
of each lease of personal property to which Rostone is a party or by
which it or any of its respective assets are bound which provides for
payments in excess of $20,000 over the committed term of such lease or
series of related leases (collectively, the "PERSONAL PROPERTY
LEASES"). Rostone has delivered to the Purchaser a true and complete
copy of each of the Personal Property Leases.
(ii) Schedule 3.1(h)(ii) hereto sets forth a true and complete
list of all agreements of the following types to which Rostone is a
party or by which it or any of its respective properties or assets are
bound (collectively, the "CONTRACTS"): (A) employment agreements
providing for annual compensation in excess of $50,000 with respect to
any employee or which contain severance provisions in excess of
$25,000 per employee, (B) non-competition and secrecy agreements, (C)
collective bargaining agreements, (D) loan agreements, notes,
mortgages, indentures, security agreements and other agreements and
instruments relating to the borrowing of money, in each case pursuant
to which the outstanding indebtedness is in excess of $100,000 for any
such obligation, (E) material franchise, broker or license agreements
with any third party, (F) powers of attorney (other than agency
agreements entered into in the ordinary course of business), (G)
partnership or joint venture agreements and (H) other agreements
(other than Personal Property Leases and Real Property leases, as
defined hereinafter) requiring payments in excess of $50,000 each
during the remainder of their term (including for these purposes any
series of agreements with any Person or Affiliated group of Persons
which in the aggregate require payments in excess of $50,000). Except
as set forth on Schedule 3.1(h)(ii) hereto, Rostone is not a party to
or bound by any Contract which limits or restricts it from competing
in any line of business or carrying on or expanding the nature or
geographical scope of its business anywhere in the world. Rostone has
delivered or made available to the Purchaser a true and complete copy
of each of the Contracts.
(iii) Except as set forth on Schedule 3.1(h)(iii) hereto, Rostone
has performed in all material respects, or is now performing in all
material respects, its obligations under, and is not in default (and
would not by the lapse of time or the giving of notice or both be in
default) under, or in breach or violation of, nor has it received
notice of any asserted claim of a default by Rostone under, or a
breach or violation by Rostone of, any of the Personal Property Leases
or Contracts, which failure of performance, default, breach or
violation would, individually or in the aggregate, have a Seller
Material Adverse Effect.
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(iv) Except as set forth in the Schedule 3.1(h) or as reflected
on the Unaudited November 30, 1995 balance sheet of Rostone, Rostone
has no liabilities or obligations to any present or former Affiliate
of Rostone.
(i) Patents, Trademarks and Trade Names. Rostone owns, or has
------------------------------------
licensed or otherwise has the right to use, all patents, registered trademarks,
trade names and registered copyrights (including those set forth on Schedule
3.1(i) hereto) necessary to the conduct of its business as currently conducted,
subject to such exceptions which would not, individually or in the aggregate,
have a Seller Material Adverse Effect. Except as set forth on Schedule 3.1(i)
hereto, Rostone does not own or have any licenses with respect to any patents,
registered trademarks, tradenames and registered copyrights. Subject to such
claims and other matters as would not, individually or in the aggregate, have a
Seller Material Adverse Effect, except as set forth on Schedule 3.1(i), no
claims are currently being asserted by any Person to the use of any such patent,
trademark, trade name or copyright or challenging or questioning the validity or
effectiveness of any such license or agreement; and the use of such patents,
trademarks, trade names and copyrights by Rostone and the Subsidiary does not
infringe on the rights of any Person.
(j) Litigation. Except as set forth on Schedule 3.1(j), there is no
-----------
action, suit, investigation, claim or proceeding at law or in equity by or
before any arbitrator, court, governmental instrumentality or other agency
pending or, to the knowledge of Rostone, threatened, against Rostone, or any of
its assets, and to Rostone's knowledge, no event has occurred or circumstances
exist that could give rise to or serve as a basis for the commencement of any
such proceeding. Without limiting the generality of the foregoing, there are no
liabilities of Rostone of any nature relating to the Linda S. Hart matters.
(k) Compliance with Laws. Rostone is in compliance in all respects
---------------------
with all laws, statutes, rules, regulations, ordinances, decrees and orders of
any federal, state, local or foreign governmental authority, any court or any
arbitrator ("LAWS") applicable to it or to the conduct of its business, except
where the failure to so comply would not, individually or in the aggregate, have
a Seller Material Adverse Effect. Rostone is not charged with or, to the
knowledge of Rostone, has been threatened with any charge concerning or is under
any investigation with respect to, any violation of any provision of any Law,
except for such violations which would not, individually or in the aggregate,
have a Seller Material Adverse Effect. Rostone is not in violation of or in
default under, and to the knowledge of Rostone, since December 31, 1990 no event
has occurred which, with the lapse of time or the giving of notice or both,
would result in the violation of or default under, the terms of any judgment,
decree, order, injunction or writ of any court or other governmental authority,
except for such violations or defaults which would not, individually or in the
aggregate, have a Seller Material Adverse Effect.
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(l) Taxes. Rostone has filed when due all tax returns that it was
------
required to file, and has paid all taxes shown thereon as owing, except where
the failure to file such tax returns or to pay such taxes would not,
individually or in the aggregate, have a Seller Material Adverse Effect. Except
as set forth on Schedule 3.1(l), none of the tax returns filed by, on behalf of
or with respect to Rostone is currently the subject of audit. Tax returns have
been closed through March 1992. Rostone has not waived any statute of
limitations in respect of taxes or agreed to any extension of time with respect
to a tax assessment or deficiency with respect to any tax return. Rostone is
not party to any tax allocation or tax sharing agreement, and since December 31,
1990, Rostone has not been a member of an affiliated group (an "AFFILIATED
GROUPS") within the meaning of Section 1504 of the Internal Revenue Code of
1986, as amended (the "CODE"), filing consolidated federal income tax returns
other than CGII ("CGII").
(m) Title to Property. Rostone has good and marketable title to all
------------------
of its properties and assets (including those set forth on Schedule 3.1(m)),
real, personal, mixed, tangible and intangible which are material to the conduct
of its business as it is currently conducted, free and clear of all Liens except
(a) Liens referred to in the notes to the Financial Statements, (b) Liens for
current taxes not yet due and payable, (c) such Liens and imperfections of
title, if any, as are not substantial in character, amount or extent and do not
materially impair the use or occupancy of such property or assets or the
business operations of Rostone, (d) Liens arising by operation of law without
the knowledge of Rostone (e) those properties and assets in which Rostone has
only a leasehold interest as indicated by an asterisk on Schedule 3.1(m) (each
of which leases is valid and subsisting) and (f) where the failure to have such
title or interest would not, individually or in the aggregate, have a Seller
Material Adverse Effect.
(n) Insurance. Schedule 3.1(n) hereto sets forth a true and
----------
complete list of all material insurance policies or binders currently insuring
the property, assets or business liabilities of Rostone. Rostone has delivered
or made available to the Purchaser summaries of such current policies and
binders. All such current policies or binders are in full force and effect and
no premiums due and payable thereon are delinquent. There are no pending
material claims against such insurance by Rostone.
(o) Licenses. Rostone currently has, and Schedule 3.1(o) sets
---------
forth, all material licenses, permits, approvals, consents, registrations,
franchises and other authorizations of any federal, state, local or foreign
governmental authority ("LICENSES") required for the operation of its business
and the use and ownership or leasing of its properties and assets, as currently
operated, used, owned or leased, except where the loss, expiration, invalidity
or failure to have such Licenses would not, individually or in the aggregate,
have a Seller Material Adverse Effect. All of such Licenses are valid, in full
force and effect and in good standing, except where the failure to be so would
not, individually or in the aggregate, have a Seller Material Adverse Effect.
There is no proceeding pending or, to the knowledge of Rostone, threatened, that
disputes the validity of any such License or that is likely to result in the
15
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revocation, cancellation or suspension, or any adverse modification of, any such
License. Rostone is, and at all times since December 31, 1990, has been, in
full compliance with all terms and requirements of each License, except where
the failure to do so would not, individually or in the aggregate, have a Seller
Material Adverse Effect. No such License is limited, voided or otherwise
impaired by the transactions hereby contemplated and no action is necessary in
relation to maintaining the full force and effect of any License in connection
with the transactions hereby contemplated.
(p) Employee Benefit Plans.
-----------------------
(i) Schedule 3.1(p) hereto sets forth a true and complete list
of, and Rostone has delivered or made available to the Purchaser a
true and complete copy of, each written pension, profit-sharing,
thrift or other retirement plan, stock option plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance or
hospitalization program and any other fringe benefit arrangements,
including, without limitation, any "employee benefit plan" (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) under which employees of Rostone are
eligible to participate or derive a benefit (collectively, the
"PLANS").
(ii) Except as set forth on Schedule 3.1(p) hereto, each Plan, to
the extent applicable, is and has been since December 31, 1990 in
compliance in all material respects with the relevant provisions of
ERISA and the Code. Except as set forth on Schedule 3.1(p) hereto,
each Plan which is intended to meet the qualification requirements of
Section 401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified and Rostone knows of no facts or
circumstances which are likely to adversely affect the qualified
status of any Plan.
(iii) Except as set forth on Schedule 3.1(p) hereto, Rostone does
not contribute to or have any obligation to contribute to a
"multiemployer plan" (within the meaning of Section 3(37) of ERISA)
and Rostone has not incurred any withdrawal liability, or suffered a
"complete withdrawal" or a "partial withdrawal" with respect to a
"multiemployer plan."
(q) Environmental Matters. Except as disclosed in Schedule 3.1(q)
----------------------
or as would not, individually or in the aggregate, have a Seller Material
Adverse Effect, (i) all handling, manufacturing, processing, distribution, use,
treatment, storage, transport and disposal of hazardous substances and non-
hazardous waste has been conducted in accordance with applicable Environmental
Laws; (ii) all emissions, discharges or releases into the Environment of
Hazardous Substances have either been made in accordance with applicable
Environmental Laws, including without limitation all permits, exemptions and
other authorizations thereunder, or have been reported to the appropriate
governmental authority in accordance with applicable
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Environmental Law; (iii) all permits, exemptions and other authorizations
required under applicable Environmental Laws for use of the property and the
operation of the business thereon have been obtained, are being complied with,
and all fees and assessments in association therewith have been timely paid and,
to the knowledge of Rostone, no additional permits or licenses are or will be
required in order to continue operation of the business; and (iv) with respect
to the disposal of any Hazardous Substance generated on or removed from any
property, Rostone has received no notice of an administrative proceeding,
violation, citation, administrative or consent order, lawsuit, action, claim,
demand or decree which alleges any violation of any applicable Environmental
Law, and has no knowledge that such disposal or removal has been conducted
without compliance with any applicable Environmental Law.
"ENVIRONMENTAL LAW" means any federal, state or local law, regulation
or code, or any order, decree, judgment or injunction issued, promulgated,
approved or entered thereunder, relating to the condition of the air, ground,
surface water or soil or pollution of the environment or the protection of
public health, including, without limitation, the release, threatened release,
manufacture, processing, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
"HAZARDOUS SUBSTANCE" means any "Hazardous Substance," "Oil" or
"Pollutant or Contaminant," as such terms are defined in 40 C.F.R. (S) 300.5,
including any substance the presence of which requires investigation, removal,
remediation or other response under any Environmental Law, and any other
substance that is defined or regulated as a hazardous substance, hazardous or
toxic waste, toxic substance or waste, special waste, industrial waste or
radioactive material under any applicable Environmental Law.
"ENVIRONMENT" means 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.
(r) Labor Matters . There are no controversies pending or, to the
--------------
knowledge of Rostone, threatened, between Rostone and any of its respective
employees, which controversies would, individually or in the aggregate, have a
Seller Material Adverse Effect. Except as disclosed in Schedule 3.1(h), Rostone
is a not party to any collective bargaining agreement or other labor union
contract applicable to persons employed by it, nor, to the knowledge of Rostone,
are there any activities or proceedings of any labor union to organize any such
employees. There is no strike or lockout or material slowdown or work stoppage
pending or, to the knowledge of Rostone, threatened, by or with respect to the
employees of Rostone or the Subsidiary. Labor relations are satisfactory.
(s) Personal Property. The equipment and fixtures owned by Rostone
-------------------
are structurally sound, in substantially good condition and repair, ordinary
wear and tear excepted,
17
<PAGE>
and are adequate for the uses to which they are being put in the ordinary course
of Rostone's business. All the personal property owned by Rostone constitute, in
the reasonable business judgment of Rostone, all of the tangible personal
property necessary for the operation of the business of Rostone as it is
currently operated (other than such personal property as may be leased by
Rostone and other than those items, if any, the failure of which to own or lease
would not, individually or in the aggregate, have a Seller Material Adverse
Effect).
(t) Real Property.
--------------
(i) Schedule 3.1(t) hereto sets forth a true list of all real
property owned by Rostone ("OWNED REAL PROPERTY") and of all real
property leased by Rostone, clearly indicating which is which ("LEASED
REAL PROPERTY" and, together with the Owned Real Property, "REAL
PROPERTY").
(ii) Except as set forth on Schedule 3.1(t) hereto, (A) Rostone
has not received any written notice that any of the Real Property is
not currently zoned to permit the conduct of the business of Rostone
thereon as it is currently being conducted and (B) to the knowledge of
Rostone, there are no notes or notices of any material violation of
any material applicable Law noted in or issued by any governmental
authority against or affecting any of the Real Property.
(iii) Schedule 3.1(t) hereto sets forth a true and complete list
of all of the leases relating to the Leased Real Property
(collectively, the "REAL PROPERTY LEASES"). Rostone has delivered or
made available to the Purchaser true and complete copies of the Real
Property Leases. Each of the Real Property Leases is in full force and
effect. Since December 31, 1994, Rostone has not received any written
notice from any lessor under any of the Real Property Leases asserting
that Rostone is in default thereunder and Rostone has no knowledge
that it is in default thereunder. Rostone enjoys in all material
respects peaceful and undisturbed possession under each of the Real
Property Leases.
(u) Obligations to Society Capital. The Note and Warrant Purchase
-------------------------------
Agreement, dated as of April 16, 1990, between Rostone and Society Capital
Corporation (as successor in interest to Ameritrust Corporation), the note
issued thereunder and the related Stock Purchase Warrant currently held by Key
Capital Corporation (as successor to Society Capital Corporation) with respect
to 2119.25 shares which was originally issued to Ameritrust Corporation on April
16, 1990 and reissued to Society Capital Corporation on May 21, 1993 and all
other agreements between Rostone and Society Capital Corporation have been
terminated and Rostone has no further obligations thereunder or under any
agreement or understanding with Society Capital Corporation (or any predecessor
or successor) including without limitation the agreements listed on Schedule
3.1(u) hereto.
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<PAGE>
(v) Books and Records. The books of account, minute books, stock
-----------------
record books and other records of Rostone, all of which have been made available
to Purchaser, are complete and correct and have been maintained in accordance
with sound business practices, including the maintenance of adequate system of
internal controls. The minute books of Rostone contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, Board of Directors, and committees of the Boards of Directors of
Rostone, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books.
(w) Accounts Receivable. All accounts receivable of Rostone that
-------------------
are reflected on the November 30, 1995 balance sheet or on the accounting
records of Rostone 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 Rostone's
business.
(x) Inventory. All inventory of Rostone, whether or not reflected
---------
in the November 30, 1995 balance sheet, consists of a quality and quantity
usable and salable in the ordinary course of business, except for obsolete items
and items of below-standard quality, all of which have been written off or
written down to net realizable value in the November 30, 1995 balance sheet or
on the accounting records of Rostone as of the Closing Date, as the case may be.
All inventories not written off have been priced at the lower of cost or market
on the last in, first out basis. The quantities of each item of inventory
(whether raw materials, work-in-process, or finished goods) are not excessive,
but are reasonable in the present circumstances of Rostone.
(y) Disclosure.
-----------
(i) No representation or warranty of Rostone in this Agreement
and no statement in any Schedule hereto 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.
(ii) There is no fact known to Rostone that has specific
application to Rostone (other than general economic or industry
conditions) and that materially adversely affects or, as far as
Rostone can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of
Rostone that has not been set forth in this Agreement or in the
Schedules thereto.
(iii) When considered cumulatively, the following items and
liabilities do not and would not reasonably be expected to, have a
Seller Material Adverse Effect: all items and liabilities that would
be disclosed under any particular
19
<PAGE>
provision of this Section 3.1 but for the fact that Rostone deemed
them to be "immaterial," or determined that they would not have a
Seller Material Adverse Effect, or otherwise were not required to be
disclosed because of their relative immateriality under any particular
provision of this Section 3.1.
(z) Schedule 3.1(z) sets forth a true and complete list of all
obligations and liabilities, whether contingent or otherwise, of Rostone, (i)
for borrowed money (whether or not the recourse of the lender is to the whole of
Rostone's assets or only a portion thereof), (ii) evidenced by bonds, notes,
debentures or similar instruments or letters of credit, (iii) for the payment of
money for obligations under a lease that is required to be capitalized for
financial reporting purposes under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board as in
effect on the date of this Agreement), (iv) all liabilities of the nature set
forth in (i)-(iii) above that Rostone has guaranteed or that is otherwise its
legal liability, and (v) any and all deferrals, renewals, refinancings,
refundings, amendments, modifications or supplements to, any liability of the
kind described in any of the preceding clauses (i) through (iv), whether or not
between or among the same parties (collectively, "INDEBTEDNESS"). Except as set
forth on Schedule 3.1(z), Rostone has no Indebtedness.
3.2 Representations and Warranties of the Purchaser. The Purchaser
------------------------------------------------
hereby represents and warrants to Rostone as follows:
(a) Corporate Organization. The Purchaser is a corporation duly
-----------------------
organized, validly existing and in good standing under the laws of the its
jurisdiction of incorporation, has all requisite corporate power and authority
to own, use and operate its properties and to carry on its business as the same
is now being conducted.
(b) Authority; Execution and Validity of Agreement. The Purchaser
-----------------------------------------------
has all requisite power and authority to execute and deliver this Agreement and
the Closing Documents to which it is or will be a party and to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the other Closing Documents to which the Purchaser is or will be a party,
the performance of its obligations hereunder and thereunder and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
the vote of the Board of Directors of the Purchaser, and, except for the
approval of the sole shareholder of the Purchaser, no further corporate action
on the part of the Purchaser is necessary to authorize the purchase of the
Shares, the execution and delivery of this Agreement and the other Closing
Documents to which it is a party, the performance of its obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby and
thereby. This agreement and the other Closing Documents executed by the
Purchaser through the date hereof have been duly and validly executed and
delivered by the Purchaser and, assuming due authorization, execution and
delivery thereof by Rostone, constitute legal, valid and binding obligations of
the
20
<PAGE>
Purchaser enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
(c) No Conflict. Neither the execution and delivery of this
------------
Agreement and the other Closing Documents, nor the performance by the Purchaser
of its obligations hereunder or thereunder nor the consummation of the
transactions contemplated hereby and thereby will (i) violate or conflict with
any of the provisions of the Certificate of Incorporation or By-laws of the
Purchaser, or (ii) with or without the giving of notice or the lapse of time or
both, violate or constitute a default under or result in the acceleration of or
entitle any party to accelerate (whether after the giving of notice or lapse of
time or both) any material obligation under any mortgage, indenture, deed of
trust, lease, contract, agreement, license or other instrument or any provision
of any law, order, judgment, decree, restriction or ruling of any governmental
authority to which the Purchaser is a party or by which any of its property is
bound, which violation, conflict, default or acceleration will have a "Purchaser
Material Adverse Effect".
(d) Broker's or Finder's Fees. Neither the Purchaser, any of its
--------------------------
Affiliates nor any agent of any of them has authorized any person to act as
broker, finder, banker, consultant, intermediary or in any other similar
capacity (other than for the purpose of rendering a fairness opinion) which
would entitle such person to any investment banking, brokerage, finder's or
similar fee in connection with the transactions contemplated by this Agreement.
(e) Litigation. There is no action, suit, investigation, claim or
-----------
proceeding at law or in equity by or before any arbitrator, court, governmental
instrumentality or other agency pending or, to the knowledge of the Purchaser,
threatened, against the Purchaser or any of its assets, properties or rights
which questions or challenges the validity of this Agreement or any action taken
or proposed to be taken by the Purchaser pursuant hereto or in connection with
the transactions contemplated hereby or which would, if adversely determined,
have a Purchaser Material Adverse Effect.
(f) Compliance with Laws. The Purchaser is in compliance in all
---------------------
material respects with all material Laws applicable to it or to the conduct of
its business, except where the failure to so comply would not, individually or
in the aggregate, have a Purchaser Material Adverse Effect.
(g) Taxes. The Purchaser has filed when due all tax returns that it
------
was required to file, and has paid all taxes shown thereon as owing, except
where the failure to file such tax returns or to pay such taxes would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect.
21
<PAGE>
ARTICLE IV
AMENDMENT
4.1 Amendment. This Agreement may be amended by action taken by
----------
Oneida and Rostone at any time before or after adoption of the Merger by the
shareholders of Oneida and Rostone but, after such approval, any amendment shall
be subject to the limitations of the DGCL and NYBCL. This Agreement may not be
amended except by an instrument in writing signed on behalf of the parties.
ARTICLE V
DELIVERIES AT CLOSING
5.1 Deliveries of Rostone. Rostone shall have delivered, or caused
----------------------
to be delivered, to the Purchaser, or otherwise placed under the Purchaser's
control, on or prior to the Closing, the following:
(a) the minute books, stock transfer books and similar corporate
records of Rostone;
(b) all of Rostone's books and records, including financial
records;
(c) Certificate of Incorporation of Rostone, as amended,
certified by the Secretary of State of the State of its incorporation;
(d) the by-laws, as amended, of Rostone, certified as of the
Closing Date by the Secretary or an Assistant Secretary of Rostone;
(e) certificates, dated not earlier than forty-five (45) days
prior to the Closing Date, of the Secretary of State of the jurisdiction of
incorporation of Rostone and of the Secretary of State of the jurisdiction in
which Rostone is duly qualified or licensed to do business as a foreign
corporation, as to the good standing of Rostone in such jurisdiction and the
existence of Rostone under the laws of the State of Delaware;
(f) a copy of resolutions, certified as of the Closing Date by
the Secretary or an Assistant Secretary of Rostone, adopted by the Board of
Directors of Rostone authorizing the execution and delivery of this Agreement by
Rostone and the consummation of the transactions contemplated hereby;
(g) favorable written opinions of Richards & O'Neil, LLP and
Scott A. Junkin, Esq. in form and substance reasonably satisfactory to the
Purchaser; and
22
<PAGE>
(h) proof of termination or satisfaction all liability of Rostone
to Stanwich Partners Inc. and Apex Capital Partners, L.P. under the consulting
agreements between Rostone and such parties dated April 16, 1990.
5.2 Deliveries of the Purchaser. The Purchaser shall have
----------------------------
satisfied, performed or delivered, or caused to be delivered, to Rostone, on or
prior to the Closing, the following:
(a) the Certificate of Incorporation of the Purchaser, as
amended, certified by the Secretary of the State of the State of its
incorporation;
(b) the by-laws of the Purchaser, certified as of the Closing
Date by the Secretary or an Assistant Secretary of the Purchaser;
(c) a certificate, dated not earlier than forty-five (45) days
prior to the Closing Date, of the Secretary of State of the State of its
incorporation, as to the good standing of the Purchaser in such State;
(d) a copy of resolutions, certified as of the Closing Date by
the Secretary or an Assistant Secretary of the Purchaser, adopted by the Board
of Directors of the Purchaser authorizing the execution and delivery of this
Agreement by the Purchaser and the consummation of the transactions contemplated
hereby; and
(e) a favorable written opinion of Porter & Hedges, LLP in form
and substance reasonably satisfactory to Rostone.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
6.1 Survival of Representations and Warranties. Except as provided
-------------------------------------------
below, notwithstanding (a) the making of this Agreement, (b) any examination
made by or on behalf of the parties hereto and (c) the Closing hereunder, the
representations and warranties of Rostone and the Purchaser contained in this
Agreement, the Closing Documents or in any certificate or other document
delivered pursuant to or in connection with this Agreement, shall survive the
Closing until March 31, 1998. No action for indemnification pursuant to Section
6.2 or 6.3 hereof may be brought with respect thereto after expiration of the
survival period of the representation and warranty as set forth in this Section
6.1; provided, however, that if prior to such date one party hereto has notified
-------- -------
the other party hereto in writing of a claim for indemnity under this Article VI
(whether or not formal legal action shall have been commenced based upon such
claim), such claim shall continue to be subject to indemnification in accordance
with this Article VI notwithstanding such expiration date.
23
<PAGE>
6.2 Indemnification by Rostone.
---------------------------
(a) Subject to Sections 6.1, 6.4(c) and 6.6 hereof, from and
after the Closing, Rostone shall indemnify and hold harmless the Purchaser, its
Affiliates, successors and assigns, and the officers, directors and shareholders
of each of them, from and against all damages, claims, losses, deficiencies,
liabilities and expenses (including reasonable accountants' and attorneys' fees)
of any kind or nature (collectively "DAMAGES") incurred thereby or caused
thereto, based on, arising out of, resulting from or relating to:
(i) any breach of any of the representations or warranties made
by Rostone in this Agreement or any other Closing Document other than those, if
any, of which the Purchaser had actual knowledge at the time of Closing;
(ii) any breach or violation of or failure to fully perform any
covenant, agreement or obligation of Rostone in this Agreement or any of the
other Closing Documents other than those, if any, of which the Purchaser had
actual knowledge at the time of the Closing; and
(iii) any action, suit or claim by any third party for any
brokerage, finder's, agent's or similar fees or commissions in connection with
the transactions contemplated hereby insofar as such actions are alleged to be
based on arrangements or contacts made by or with Rostone or any of its
Affiliates (except the Purchaser).
(b) Subject to Section 6.4(c)(ii) hereof, from and after the Closing,
Rostone shall indemnify and hold the Purchaser harmless against, and will pay to
the Purchaser, or its successors and assigns, the full amount of, (i) any
Rostone Debt in excess of $11,700,000 and (ii) any costs the Surviving
Corporation shall be required by any Environmental Law to pay in connection with
the remediation of environmental contamination that the Phase II Environmental
Site Assessment, dated December 22, 1995, prepared by ATEC for Reunion Resources
Company relating to the property at 2450 Sagamore Parkway South, Lafayette,
Indiana, suggests may exist in the ground water at such property. For purposes
of clause (ii) above, remediation shall not include the further Phase II
investigation costs necessary to further delineate the nature and extent of any
such contamination, but shall include the costs to develop a remediation plan
(if remediation is required by any Environmental Law), to obtain the necessary
governmental consents to the implementation of such remediation plan, and to
implement such plan.
6.3 Indemnification by the Purchaser. Subject to Sections 6.1 and
---------------------------------
6.6 hereof, from and after the Closing, the Purchaser shall indemnify and hold
harmless, Rostone, its Affiliates, successors and assigns, and the officers,
directors and shareholders of each of them, from and against any and all Damages
incurred thereby or caused thereto, based on, arising out of, resulting from or
relating to:
24
<PAGE>
(a) any breach of any of the representations or warranties made
by the Purchaser in this Agreement or any of the other Closing Documents other
than those, if any, of which Rostone had actual knowledge at the time of the
Closing;
(b) any breach or violation of or failure to fully perform any
covenant, of the Purchaser in this Agreement or any of the other Closing
Documents other than those, if any, of which Rostone had actual knowledge at the
time of the Closing;
(c) any liability of or claim against Rostone based on occurrences
after the Closing; or
(d) any action, suit or claim by any third party for any
brokerage, finder's, agent's or similar fees or commissions in connection with
the transactions contemplated hereby insofar as such actions are alleged to be
based on arrangements or contacts made by, to or with the Purchaser or any of
its Affiliates (except Rostone).
6.4 Notice and Payment of Claims.
-----------------------------
(a) Whenever any claim shall arise for indemnification
hereunder, the party entitled to indemnification under this Article VI (the
"INDEMNIFIED PARTY") shall notify the party liable for such indemnification
including, in the case of Rostone after the Effective Time, the Stockholders
(the "INDEMNIFYING PARTY") within a reasonable period of time after becoming
aware of, and shall provide to the Indemnifying Party as soon as practicable
thereafter all information and documentation necessary to support and verify,
any Damages that the Indemnified Party shall have determined have given or could
reasonably be expected to give rise to a claim for indemnification hereunder,
and the Indemnifying Party shall be given access to all books and records in the
possession or under the control of the Indemnified Party which the Indemnifying
Party reasonably determines to be related to such claim; provided, that, the
--------- -----
failure or delay in so notifying the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations to indemnify pursuant to the terms of this
Agreement.
(b) Subject to Section 6.4(c) hereof, all claims for indemnity
under this Article VI shall be paid by the Indemnifying Party on demand in
immediately available funds in U.S. dollars after such claim and the liability
for Damages thereunder shall be deemed to be finally determined. A claim for
indemnification and the liability for Damages thereunder shall be deemed
"finally determined" for purposes of this Article VI when the parties have so
determined by mutual agreement or, if disputed, when a final non-appealable
order of a court of competent jurisdiction has been entered.
(c) Notwithstanding any other term or provision of this
Agreement to the contrary, (i) Rostone shall not be liable for Damages arising
in connection with its
25
<PAGE>
indemnification obligations under Section 6.2(a) hereof until such Damages shall
exceed $100,000 in the aggregate (and then only to the extent of such excess),
and (ii) Rostone's maximum cumulative liability for indemnification hereunder
shall not exceed the amount equal to the sum of the Merger Consideration and the
Preferred Consideration payable hereunder and the Purchaser's sole recourse
against Rostone (but not against CGII as set forth in the attached "Guaranty and
Subordination") for indemnification under this Agreement shall be by offset
against any Merger Consideration and Preferred Consideration that has not yet
been paid to the Stockholders pursuant to the terms of this Agreement. Rostone,
on behalf of itself and the Stockholders, hereby authorizes the Purchaser to
make any such offsets to which it is entitled hereunder.
6.5 Matters Involving Third Parties.
--------------------------------
(a) If any third party shall commence an action, suit or claim
against any Indemnified Party with respect to any matter (a "THIRD PARTY CLAIM")
which may give rise to a claim for indemnification against any Indemnifying
Party under this Article VI, the Indemnified Party shall notify the Indemnifying
Party thereof in writing as soon as practicable.
(b) The Indemnifying Party shall have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice that
is reasonably acceptable to Indemnified Party, so long as (i) the Indemnifying
Party shall notify the Indemnified Party in writing (within 10 days after its
receipt of notice of the Third Party Claim) that it will indemnify the
Indemnified Party from and against any Damages the Indemnified Party may suffer
arising out of the Third Party Claim and (ii) the Indemnifying Party diligently
conducts the defense of the Third Party Claim.
(c) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 6.5(b) hereof, (i) the
Indemnified Party may retain separate co-counsel, at its sole cost and expense,
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior consent of
the Indemnifying Party, (iii) the Indemnified Party shall cooperate within
reason with such defense and (iv) the Indemnifying Party shall not consent to
the entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld or delayed. Should the Indemnified
Party withhold consent under clause (iv) above in respect of a judgment or
settlement involving only the payment of money by the Indemnifying Party, the
Indemnifying Party shall have the right, upon notice to the Indemnified Party
within seven days of receipt of the Indemnified Party's denial of consent, to
pay to the Indemnified Party the full amount of such judgment or settlement,
including all interest, costs or other charges relating thereto, and shall pay
all attorneys' fees incurred to such date for which the Indemnifying Party is
obligated
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<PAGE>
under this Agreement, at which time the Indemnifying Party's rights and
obligations with respect to the Third Party Claim shall cease.
6.6 Mitigation of Damages. If any event shall occur which would
----------------------
otherwise entitle either party to assert a claim for indemnification hereunder,
no Damages shall be deemed to have been sustained by such party to the extent of
(a) any tax savings actually realized by such party with respect thereto or (b)
any net proceeds received by such party from any insurance policy with respect
thereto.
6.7 Other Remedies. The foregoing indemnification provisions of
---------------
this Article VI are in addition to, and not in derogation of, any statutory,
equitable or common law remedy either party hereto may have for any breach of
any representation, warranty, covenant or agreement contained in this Agreement.
ARTICLE VII
GENERAL PROVISIONS
7.1 Expenses. All fees, commissions and other expenses incurred by
---------
any party hereto in connection with the negotiation of this Agreement and the
other Closing Documents and in preparing for the purchase and sale of the Shares
and the other transactions contemplated hereby, including any fees and expenses
of their respective counsel and financial advisors, shall be borne by the party
incurring such fee or expense. In any action, suit or other proceeding under or
to enforce any provision of this Agreement or any other Closing Document, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
other out-of-pocket expenses from the losing party.
7.2 Execution in Counterparts. This Agreement may be executed in
--------------------------
one or more counterparts, all of which, when taken together, shall be considered
one and the same agreement, and shall become a binding agreement when one or
more counterparts have been signed by each party and delivered to the other
party.
7.3 Notices. (a) All notices, requests, demands or other
--------
communications provided herein shall be made in writing and shall be deemed to
have been duly given if delivered personally, by confirmed facsimile or by
courier or sent by registered or certified mail, postage prepaid, as follows:
27
<PAGE>
(i) if to Rostone, to: Rostone Corporation
P.O. Box 7497
2450 Sagamore Parkway South
Lafayette, Indiana 47903
Attn: President
(ii) if to the Purchaser,
to: Oneida Molded Plastics Corp.
104 South Warner Street
Oneida, New York 13421
Attn: President
or to such other address as either party shall have specified by notice in
writing to the other party.
(b) All notices and other communications required or permitted
under this Agreement which are addressed as provided in this Section 8.3 (i) if
delivered personally against proper receipt or by confirmed facsimile, shall be
effective upon delivery and (ii) if delivered (A) by certified or registered
mail with postage prepaid, or (B) by Federal Express or similar courier service
with courier fees paid by the sender, shall be effective two business days
following the date when mailed or couriered, as the case may be.
7.4 Governing Law.
--------------
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
application of principles of conflicts of laws, except to the extent the laws of
the State of Delaware shall apply with regard to the effectiveness of the Merger
under the DGCL.
(b) Any lawsuits arising out of or in connection with this
Agreement may be brought in a federal district court located in the City of New
York (or, if such court lacks jurisdiction to hear such lawsuit, a New York
State court located in the City of New York). The parties hereto consent to the
non-exclusive jurisdiction and venue of any United States federal court located
in the City of New York (unless such court is unavailable, in which case the
parties hereto consent to the jurisdiction and venue of any New York State court
located in the City of New York) for the resolution of claims by the parties
hereto arising under or relating to this Agreement. The parties hereto further
acknowledge that proper service of process on a party may be made on an agent
designated by such party located in the City of New York or by certified mail.
28
<PAGE>
7.5 Titles and Headings. Titles and headings to Articles and
--------------------
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
7.6 Successors and Assigns. This Agreement shall not be assignable
-----------------------
by Rostone without the prior written consent of the Purchaser, or by the
Purchaser without the prior written consent of Rostone, provided, however, that
-------- -------
the Purchaser may assign all or any part of its interest in this agreement to
any of its affiliates without the consent of Rostone if such Affiliate
undertakes to perform the Purchaser's obligations hereunder; and provided
--------
further, that no such assignment shall relieve the Purchaser of its obligations
- -------
hereunder. Any assignment in violation of the foregoing shall be null and void.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors in interest and permitted
assigns.
7.7 Entire Agreement; No Oral Waiver. This Agreement and the
---------------------------------
Schedules and certificates and other documents contemplated hereby constitute
the entire agreement between the parties pertaining to the subject matter hereof
and supersede all prior and contemporaneous agreements, understandings and
representations, whether oral or written, of the parties in connection therewith
except to the extent incorporated or specifically referred to herein. No
covenant or condition or representation not expressed in this Agreement shall
affect or be effective to interpret, change or restrict this Agreement. No
prior drafts of this Agreement and no words or phrases from any such prior
drafts shall be admissible into evidence in any action, suit or other proceeding
involving this Agreement or the transactions contemplated hereby. This
Agreement may not be changed or terminated orally, nor shall any change,
termination or attempted waiver of any of the provisions of this Agreement be
binding on any party unless in writing signed by the parties hereto. No waiver
of any provision of or default under this Agreement shall affect the right of
Rostone or the Purchaser thereafter to enforce any other provision or to
exercise any right or remedy in the event of any other default, whether or not
similar.
7.8 Severability. If any provision of this Agreement shall be
-------------
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
7.9 No Third-Party Rights. Nothing in this Agreement, expressed or
----------------------
implied, shall or is intended to confer upon any Person other than the parties
hereto or their respective successors or assigns, any rights or remedies of any
nature or kind whatsoever under or by reason of this Agreement, including
without limitation any rights of employment or continued employment.
29
<PAGE>
7.10 Remedies. In the event of any failure or refusal by any party
---------
to comply with any covenant or agreement contained in this Agreement, the other
party shall have the right to pursue the remedy of specific performance.
30
<PAGE>
IN WITNESS WHEREOF, the parties have executed, delivered and entered
into this Agreement on February 2, 1996.
ROSTONE CORPORATION
/s/ Robert Wiehl
By:____________________________
Name: Robert Wiehl
Title: Vice President
ONEIDA MOLDED PLASTICS CORP.
/s/ Robert Wiehl
By:____________________________
Name: Robert Wiehl
Title: Vice President
31
<PAGE>
Guarantee and Subordination
---------------------------
By its signature below, CGII does hereby agree that if the Purchaser
shall have a claim to indemnity under Section 6.2(b) above which is not paid by
offset against the Merger Consideration and Preferred Consideration payable
hereunder, then on April 1, 1998 CGII shall pay to the Purchaser the full amount
of such claim. In furtherance and not in limitation of the foregoing CGII agrees
that (i) until the earlier to occur of (x) the date on which the Surviving
Corporation and CGII shall agree that the Purchaser will have no unsatisfied
claim for indemnification under Section 6.2(b) and (y) April 1, 1998 the
Surviving Corporation shall be relieved of its obligation to pay to CGII the
principal amount of, or any interest on, any such obligations as may be owing by
the Surviving Corporation to CGII on or after the Closing Date and (ii) the
Purchaser may offset the amount of such claim under Section 6.2(b) against any
and all obligations owing by the Surviving Corporation to CGII on April 1, 1998.
CGII understands and agrees that this guaranty is a material inducement to
Purchaser to enter into the Merger Agreement, and acknowledges that it received
a benefit from the Merger in that it was able to sell its subsidiary, Rostone,
on terms acceptable to it, and that it received a benefit commensurate with the
guaranty granted hereby.
CGII INVESTMENT CORP.
/s/ John Poole
By:_______________________
Name: John Poole
Title: Vice President
32
<PAGE>
EXHIBIT 99.1
[LETTERHEAD OF PRUDENTIAL SECURITIES APPEARS HERE]
January 15, 1996
The Board of Directors
Reunion Resources Company
2801 Post Oak Boulevard
Houston, TX 77056
Dear Sirs:
Oneida Molded Plastics Corporation, a New York corporation ("Oneida"), a
wholly-owned subsidiary of Reunion Resources Company, a Delaware corporation
("Reunion"), and Rostone Corporation, a Delaware corporation ("Rostone"),
propose to enter into a Merger Agreement (the "Agreement") providing for the
merger of Rostone with and into Oneida. Pursuant to the Agreement, and as more
fully described therein, at the "Effective Time" (as defined in the Agreement):
(i) each share of common stock of Rostone, par value $0.40 per share (the
"Rostone Common Stock"), and each share of preferred stock of Rostone, par value
$0.01 per share (the "Rostone Preferred Stock"), shall be converted into the
right to receive $0.01 per share ("Deferred Consideration A") on the date on
which Reunion consummates the sale of certain oil and gas assets; (ii) each
share of Rostone Preferred Stock shall be converted into the right to receive a
cash payment on March 31, 1997 equal to eight times the amount, if any, by which
"Rostone EBIT" (as defined in the Agreement) for the calendar year 1996 exceeds
$2,200,000, up to a maximum payment of $2,000,000 ("Deferred Consideration B"),
divided by the aggregate number of shares of Rostone Preferred Stock, provided
that the aggregate cumulative amount of Deferred Consideration A and Deferred
Consideration B paid in connection with the Rostone Preferred Stock shall not
exceed $2,905,000, and each share of Rostone Common Stock shall be converted
into the right to receive the balance, if any, of Deferred Consideration B not
paid in connection with the Rostone Preferred Stock divided by the aggregate
number of shares of Rostone Common Stock; (iii) each share of Rostone Preferred
Stock shall be converted into the right to receive a cash payment on March 31,
1998 equal to eight times the amount, if any, by which Rostone EBIT for the
calendar year 1997 exceeds $2,450,000, up to a maximum payment of $2,000,000
("Deferred Consideration C"), divided by the aggregate number of shares of
Rostone Preferred Stock, provided that the aggregate cumulative amount of
Deferred Consideration A, Deferred Consideration B and Deferred Consideration C
paid in connection with the Rostone Preferred Stock shall not exceed $2,905,000,
and each share of Rostone Common Stock shall be converted into the right to
receive the balance, if any, of Deferred Consideration C not paid in connection
with the Rostone Preferred Stock divided by the aggregate number of shares of
Rostone Common Stock; and (iv) Oneida, as the surviving corporation, shall
assume the aggregate principal amount of debt and capital leases of Rostone,
together with all accrued and unpaid interest thereon outstanding on the Closing
Date (as defined in the Agreement) (the "Debt").
<PAGE>
[LETTERHEAD OF PRUDENTIAL SECURITIES APPEARS HERE]
The Board of Directors
Reunion Resources Company
January 15, 1996
Page 2
In addition, we understand that the Debt to be assumed by Oneida, as the
surviving corporation, pursuant to the Agreement, amounts to approximately
$11,686,187. The amounts referred to in clauses (i) through (iii) of the first
paragraph hereof, and in the first sentence of this paragraph, are hereafter
collectively referred to as the "Merger Consideration".
Furthermore, we understand that: (i) approximately 94% of the Rostone Common
Stock is owned by C.G.I. Investment Corporation ("C.G.I.I.") and approximately
6% of the Rostone Common Stock is owned by two private individuals; (ii) 51% of
the common stock of C.G.I.I. is owned by Stanwich Partners, Inc. ("Stanwich")
and 49% of the common stock of C.G.I.I. is owned by Chatwins Group, Inc.
("Chatwins"), 100% of the common stock of which in turn is owned by Stanwich;
and (iii) Chatwins controls approximately 45% of the common stock of Reunion.
You have asked us to render an opinion, with respect to the fairness, from a
financial point of view, to Reunion of the Merger Consideration to be paid
pursuant to the Agreement.
In conducting our analysis and arriving at the opinion stated herein, we have,
among other things: (i) reviewed Rostone's historical financial data and other
information regarding Rostone prepared by the management of Rostone and Reunion
("Management"); (ii) reviewed certain information, including financial
projections prepared by Management, relating to the sales, earnings and
prospects for Rostone's business; (iii) reviewed the financial terms of a draft
of the Agreement dated January 3, 1996; (iv) reviewed the financial terms
of certain other transactions we deemed relevant; (v) reviewed publicly
available information concerning certain other companies that we deemed to be
comparable to Rostone, and the trading history of the common stock of each such
company; (vi) conducted discussions with senior officers of Rostone and Reunion
concerning the financial condition and prospects of Rostone; and (vii) reviewed
such other financial studies and analyses; and performed such other
investigations and taken into account such other matters, as we deemed relevant
to our opinion.
Prudential Securities Incorporated ("Prudential Securities") was retained by
Reunion pursuant to a letter agreement dated November 29, 1995 to render an
opinion with regard to the proposed transaction. We received a retainer fee from
Reunion, and we will receive an additional fee in connection with this opinion,
as set forth in the letter agreement referred to above. Prudential Securities
has previously provided financial services to Reunion for which we have received
fees. In addition, in the ordinary course of business, we may trade the common
stock of Reunion for our own account and for the accounts of customers, and
accordingly at any time may hold a long or short position in such common stock,
and certain accounts of our customers hold common stock of Reunion.
<PAGE>
[LETTERHEAD OF PRUDENTIAL SECURITIES APPEARS HERE]
The Board of Directors
Reunion Resources Company
January 15, 1996
Page 3
In preparing our opinion, we have, without independent verification, relied upon
the accuracy and completeness of the financial data and other information
reviewed by us that was provided to us by Management, or is publicly available.
With respect to the financial projections prepared by Management, we have
assumed that they represent the best currently available estimates and judgments
of Management as to the future financial performance of Rostone, and we have not
undertaken any independent analysis to verify the reasonableness of the
assumptions underlying such financial forecasts. We have neither made nor
obtained any independent appraisals of the properties, facilities or other
assets of Rostone. We note that for each of the three years ending December 31,
1992, 1993 and 1994, Rostone has received qualified audit opinions from Price
Waterhouse L.L.P. We have assumed that Rostone EBIT for the calendar years 1996
and 1997 will be calculated pursuant to the Agreement on a stand alone basis. In
addition, we have assumed that all the transactions contemplated by the
Agreement will be consummated on the basis of the terms and provisions of the
January 3, 1996 draft of the Agreement. Our opinion is necessarily based on
economic, financial and market conditions as they exist and can be evaluated on
the date hereof.
It is understood that this letter is for the information of the Board of
Directors of Reunion only, and must not be used for any other purpose without
our prior written consent.
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Merger Consolidation to be paid pursuant to the Agreement is
fair, from a financial point of view, to Reunion.
Very truly yours,
/s/ PRUDENTIAL SECURITIES INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
