SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period
ended March 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period
from to
Commission File No. 1-4663
Crompton & Knowles Corporation
(exact name of registrant as specified in its charter)
Massachusetts 04-1218720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Station Place, Metro Center
Stamford, Connecticut 06902
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203)353-5400
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at April 17, 1995
Common Stock, $.10 par value 48,026,751 shares
CROMPTON & KNOWLES CORPORATION
FORM 10-Q
FOR QUARTER ENDED MARCH 30, 1996
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements and
Accompanying Notes
. Consolidated Statements of Earnings
(unaudited) - Quarters ended March 30, 1996
and April 1, 1995
. Consolidated Balance Sheets - March 30, 1996
(unaudited) and December 30, 1995
. Consolidated Statements of Cash Flows
(unaudited) - Quarters ended March 30, 1996
and April 1, 1995
. Notes to the Consolidated Financial
Statements - Quarter ended March 30, 1996
(unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 11 Statement Re Computation of Per Share Earnings
-1-
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Quarters ended March 30, 1996 and April 1, 1995
(In thousands, except per share data)
March 30, April 1,
1996 1995
Net sales $ 164,840 $ 168,193
Cost of products sold 116,948 116,559
Selling, general and administrative 27,094 25,422
Depreciation and amortization 4,009 3,725
Interest 2,037 1,568
Other income (252) (228)
Total costs and expenses 149,836 147,046
Earnings before income taxes 15,004 21,147
Income taxes 5,536 7,951
Net earnings $ 9,468 $ 13,196
Net earnings per common share $ .20 $ .27
Dividends per common share $ .135 $ .12
Average shares outstanding 48,318 48,921
See accompanying notes to consolidated financial statements.
- - 2 -
March 30, 1996 UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 30, 1996 and December 30, 1995
(In thousands of dollars)
March 30, December 30,
1996 1995
ASSETS
CURRENT ASSETS
Cash $ 2,599 $ 918
Accounts receivable 123,779 112,693
Inventories 163,210 154,846
Other current assets 25,589 23,038
Total current assets 315,177 291,495
NON-CURRENT ASSETS
Property, plant and equipment 135,051 129,991
Cost in excess of acquired net assets 60,525 51,922
Other assets 10,765 10,730
$ 521,518 $ 484,138
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 57,886 $ 60,439
Accounts payable 60,991 49,415
Accrued expenses 41,916 35,136
Income taxes payable 8,141 3,747
Other current liabilities 21,894 16,578
Total current liabilities 190,828 165,315
NON-CURRENT LIABILITIES
Long-term debt 74,000 64,000
Accrued postretirement liability 7,635 7,559
Deferred income taxes 7,197 7,217
STOCKHOLDERS' EQUITY
Common stock 5,336 5,336
Additional paid-in capital 59,557 59,440
Retained earnings 237,098 234,113
Accumulated translation adjustment 4,797 6,320
Treasury stock at cost (62,890) (62,972)
Deferred compensation (2,040) (2,190)
Total stockholders' equity 241,858 240,047
$ 521,518 $ 484,138
See accompanying notes to consolidated financial statements.
- 3 -
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Quarters ended March 30, 1996 and April 1, 1995
(In thousands of dollars)
March 30, April 1,
Increase (decrease) to cash 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 9,468 $ 13,196
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 4,009 3,726
Deferred compensation 150 473
Changes in assets and liabilities, net 663 (12,979)
Net cash provided by operations 14,290 4,416
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (10,025) (8,633)
Capital expenditures (2,967) (5,733)
Other investing activities (635) 457
Net cash used by investing activities (13,627) (13,909)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 10,000 -
Change in notes payable (2,510) 19,851
Net treasury stock activity 35 (3,607)
Dividends paid (6,483) (5,814)
Net cash provided by financing activities 1,042 10,430
CASH
Effect of exchange rates on cash (24) 34
Change in cash 1,681 971
Cash at beginning of period 918 1,832
Cash at end of period $ 2,599 $ 2,803
See accompanying notes to consolidated financial statements.
-4-
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Quarter ended March 30, 1996 (Unaudited)
(In thousands)
PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The information included in the foregoing consolidated financial
statements is unaudited but reflects all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair statement of the results for
the interim periods presented.
Included in accounts receivable are allowances for doubtful
accounts of $3,640 in 1996 and $3,269 at December 30, 1995.
Accumulated depreciation amounted to $102,385 in 1996 and $99,292
at December 30, 1995.
Accumulated amortization of cost in excess of acquired net assets
amounted to $8,665 in 1996 and $8,281 at December 30, 1995.
Other current liabilities primarily include customer deposits.
It is suggested that the interim consolidated financial
statements be read in conjunction with the consolidated financial
statements and notes included in the Company's 1995 Annual Report
on Form 10-K.
CAPITAL STOCK
There are 53,361,072 common shares issued at $.10 par value, of
which 5,334,321 shares and 5,351,962 shares were held in the
treasury at March 30, 1996 and December 30, 1995, respectively.
INVENTORIES
Components of inventories are as follows:
March 30, Dec. 30,
1996 1995
Finished goods $ 95,816 $ 89,177
Work in process 31,030 30,316
Raw materials and supplies 36,364 35,353
$163,210 $154,846
EARNINGS PER COMMON SHARE
The computation of earnings per common share is based on the
weighted average number of common and common equivalent shares
outstanding. A dual presentation of earnings per common share
has not been made since there is no significant difference in
earnings per share calculated on a primary or fully diluted
basis.
ACQUISITIONS
In January 1996, the Company acquired ER-WE-PA, GMBH at a cost of
$10,025 subject to audit adjustment. The acquisition has been
accounted for using the purchase method and, accordingly, the
acquired assets and liabilities have been recorded at their fair
values at the dates of acquisition. The excess cost of purchase
price over fair value of net assets acquired in the amount of
$8,392 is being amortized over forty years. The operating
results are included in the consolidated statements of earnings
since the date of acquisition.
BUSINESS SEGMENT DATA
Quarter Ended
March 30, April 1,
1996 1995
SALES
Specialty chemicals $ 96,083 $102,542
Specialty process equipment
and controls 68,757 65,651
$164,840 $168,193
OPERATING PROFIT
Specialty chemicals $ 12,791 $ 15,591
Specialty process equipment
and controls 7,106 10,057
General corporate expense ( 3,108) ( 3,161)
16,789 22,487
Interest expense ( 2,037) ( 1,568)
Other income 252 228
Earnings before income taxes $ 15,004 $ 21,147
Subsequent Event
On April 30, 1996 the Company entered into an agreement and plan
of merger with Uniroyal Chemical Corporation ("Uniroyal"), a $1.1
billion manufacturer of chemicals and polymers including rubber
chemicals, crop protection chemicals and chemicals and additives
for the plastics and lubricants industries. Under the terms of
the agreement and subject to the conditions contained therein,
among other things, each share of Uniroyal common stock will be
exchanged for common stock of the Company valued at $15 based on
the average price of the Company's stock over a period of twenty
trading days ending with the third trading day preceding the date
of the mailing of proxy materials. However, the Company will
issue no more than 1.1111 shares, nor less than .9091 shares, for
each share of Uniroyal common stock. Each share of Uniroyal's
Series A Cumulative Redeemable Preferred Stock and Series B
Preferred Stock issued and outstanding immediately prior to the
consummation of the merger will be converted into and represent a
number of shares of the Company's common stock equal to the
exchange ratio multiplied by 6.667.
The merger agreement provides that Uniroyal would be required to
pay the Company a termination fee of $50 million if the merger
agreement is terminated (i) under certain circumstances following
receipt of a proposal for a competing transaction and a competing
transaction is consummated within one year following such
termination or (ii) after Uniroyal's determination to terminate
the merger agreement to pursue a competing transaction that would
be more favorable to Uniroyal stockholders than the proposed
merger with the Company.
The merger is subject to the satisfaction or waiver of various
conditions, including approval by the stockholders of both
Uniroyal and the Company, Hart-Scott-Rodino and other regulatory
approvals and availability of tax-free status and pooling of
interests accounting treatment. The anticipated closing date of
the merger is during the Company's third calendar quarter.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER RESULTS
Overview
Consolidated net sales of $164.8 million for the first quarter
of 1996 declined 2% from the comparable 1995 period. Net
earnings of $9.5 million declined 28% versus the first quarter
of 1995. Net earnings per common share of $.20 were 26% lower
than the $.27 reported last year.
Gross margin as a percentage of net sales decreased to 29.1%
from 30.7% in the first quarter of 1995 as a result of lower
margins in both of the Company's segments. Consolidated
operating profit of $16.8 million declined 25% from the first
quarter of 1995 as the specialty chemicals segment decreased 18%
and the specialty process equipment and controls segment
decreased 29%.
Specialty Chemicals
The Company's specialty chemicals segment reported sales of
$96.1 million which represents a decline of 6% from the first
quarter of 1995. The decrease was attributable to the impact of
lower unit volume (4%) and lower selling prices (2%).
Domestic dyes sales of $46.5 million declined 11% from the
comparable 1995 quarter primarily due to lower unit volume (8%)
and lower selling prices (3%). International dyes sales of
$23.5 million declined 4% versus the first quarter of 1995
primarily as a result of lower selling prices. Specialty
ingredients sales of $26.1 million rose 1% primarily as a result
of increased unit volume. The percentage of sales outside the
United States was 26%, versus 25% in the comparable 1995 period.
Operating profit of $12.8 million for the first quarter of 1996
decreased 18% from 1995. The decrease was attributable
primarily to the impact of lower unit volume and pricing. The
percentage of operating profit outside the United States
declined to 11% from 17% in 1995.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls segment
reported sales of $68.7 million, which represents an increase of
5% from the first quarter of 1995. Approximately 21% was
attributable to the incremental impact of acquisitions offset
partially by lower unit volume in the domestic business. Export
sales shipped from the U.S. accounted for 28% of total segment
sales versus 18% in the comparable period in 1995 as shipments
to the Far East increased significantly. International sales
increased substantially as a result of acquisitions and
accounted for 16% of total segment sales versus 1% in the first
quarter 1995.
Operating profit for the first quarter of 1996 declined 29% to
$7.1 million primarily attributable to lower unit volume in the
domestic business. International operating profit was not
significant in either the first quarter of 1996 or the first
quarter of 1995. The order backlog for extruders and related
equipment at the end of the first quarter of 1996 amounted to
$92 million (including ER-WE-PA backlog of $24 million) compared
to $72 million at December 30, 1995.
Other
Selling, general and administrative expenses of $27.1 million
increased 7% versus the comparable period in 1995 primarily due
to the impact of acquisitions. Depreciation and amortization of
$4.0 million increased 8% versus 1995 primarily as a result of a
higher fixed asset base including acquisitions. Interest
expense increased $469 thousand primarily as a result of
increased borrowings. Other income of $252 thousand
approximated the level for the first quarter of 1995. The
effective tax rate of 36.9% decreased slightly versus the
comparable 1995 period.
LIQUIDITY AND CAPITAL RESOURCES
The March 30, 1996 working capital balance of $124.4 million
decreased $1.8 million from $126.2 million at year-end 1995.
The current ratio declined slightly to 1.7 from 1.8 at the end
of 1995. Days sales in receivables averaged 62 days in the first
quarter of 1996, an increase from 55 days for all of 1995.
Inventory turnover averaged 2.9 for the first quarter of 1996
compared with 2.8 for all of 1995.
Cash flows from operating activities of $14.3 million increased
$9.9 million from the first quarter of 1995 primarily
attributable to decreases in working capital requirements
partially offset by lower earnings. Cash provided by operating
activities and increased borrowings were used to finance the
acquisition of ER-WE-PA, fund capital expenditures and pay cash
dividends. The Company's debt to total capital ratio increased
to 35% from 34% at year-end 1995. Capital expenditures are
expected to approximate $16 million in 1996 primarily for
expansion and improvement of operating facilities in the United
States and Europe. The Company's long-term liquidity needs
including such items as capital expenditures and dividends are
expected to be financed from operations.
INTERNATIONAL OPERATIONS
The stronger U.S. dollar exchange rate versus the Belgian Franc
and French Franc accounted primarily for the reduction of $1.5
million in the accumulated translation adjustment account since
year-end 1995. Changes in the balance of this account are
primarily a function of fluctuations in exchange rates and do
not necessarily reflect either enhancement or impairment of the
net asset values or the earnings potential of the Company's
foreign operations.
The Company operates manufacturing facilities in Europe which
serve primarily the European market. Exchange rate disruptions
between the United States and European currencies, and among
European currencies, are not expected to have a material effect
on year-to-year comparisons of the Company's earnings.
RESEARCH AND DEVELOPMENT
The Company employs about 285 engineers, draftsmen, chemists,
and technicians responsible for developing new and improved
chemical products and process equipment systems for the
industries served by the Company. Often, new products are
developed in response to specific customer needs. The Company's
process of developing and commercializing new products and
product improvements is ongoing and involves many products, no
one of which is large enough to significantly impact the
Company's results of operations from year-to-year. Research and
development expenditures totaled $3.5 million for the first
quarter of 1996 compared to $3.4 million in the comparable 1995
period.
ENVIRONMENTAL MATTERS
The Company's manufacturing facilities are subject to various
federal, state and local requirements with respect to the
discharge of materials into the environment or otherwise
relating to the protection of the environment. The Company has
been designated, along with others, as a potentially responsible
party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, or comparable state
statutes, at two waste disposal sites; and an inactive
subsidiary has been designated, along with others, as a
potentially responsible party at two other sites. While the
cost of compliance with existing environmental requirements is
expected to increase, based on the facts currently known to the
Company, management expects that those costs, including the cost
to the Company of remedial actions at the waste disposal sites
where it has been named a potentially responsible party, will
not be material to the results of the Company's operations in
any given year.
PART II. OTHER INFORMATION:
Item 4. Submission of Matter to a Vote of Security Holders
(a) The Annual Meeting of the Stockholders was held
on April 9, 1996
(b) Proxies for the Annual Meeting were solicited
pursuant to Regulation 14A under the Securities
Exchange Act of 1934, there was no solicitation
in opposition to the nominees for the Board of
Directors as listed in the Proxy Statement, and
all of such nominees were elected.
(c) A brief description of each matter voted upon at
the Annual Meeting, and the results of voting,
are as follows:
1. Election of three (3) Directors to serve for a term
expiring in 1999:
FOR AGAINST
Vincent A. Calarco 41,345,447 shares 343,729 shares
Charles J. Marsden 41,362,039 shares 327,137 shares
C. A.(Lance) Piccolo 41,327,025 shares 362,151 shares
2. Approval of the selection by the Board of Directors of
an auditor for 1996
FOR AGAINST ABSTAINED
41,506,547 shares 101,147 shares 81,482 shares
-12-
PART II. OTHER INFORMATION:
Item 5. Other Information
On April 30, 1996 the Company entered into an agreement and
plan of merger with Uniroyal Chemical Corporation
("Uniroyal"), a $1.1 billion manufacturer of chemicals and
polymers including rubber chemicals, crop protection
chemicals and chemicals and additives for the plastics and
lubricants industries. Under the terms of the agreement and
subject to the conditions contained therein, among other
things, each share of Uniroyal common stock will be
exchanged for common stock of the Company valued at $15
based on the average price of the Company's stock over a
period of twenty trading days ending with the third trading
day preceding the date of the mailing of proxy materials.
However, the Company will issue no more than 1.1111 shares,
nor less than .9091 shares, for each share of Uniroyal
common stock. Each share of Uniroyal's Series A Cumulative
Redeemable Preferred Stock and Series B Preferred Stock
issued and outstanding immediately prior to the consummation
of the merger will be converted into and represent a number
of shares of the Company's common stock equal to the
exchange ratio multiplied by 6.667.
The merger agreement provides that Uniroyal would be
required to pay the Company a termination fee of $50 million
if the merger agreement is terminated (i) under certain
circumstances following receipt of a proposal for a
competing transaction and a competing transaction is
consummated within one year following such termination or
(ii) after Uniroyal's determination to terminate the merger
agreement to pursue a competing transaction that would be
more favorable to Uniroyal stockholders than the proposed
merger with the Company.
The merger is subject to the satisfaction or waiver of
various conditions, including approval by the stockholders
of both Uniroyal and the Company, Hart-Scott-Rodino and
other regulatory approvals and availability of tax-free
status and pooling of interests accounting treatment. The
anticipated closing date of the merger is during the
Company's third calendar quarter.
-13- <PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
(2)* Agreement and Plan of Merger
(The Registrant agrees to
supplementally furnish the
commission upon request a copy
of any omitted exhibit or
schedule.)
(11) Statement Re Computation of Per Share
Earnings
(27)* Financial Data Schedule
(b) No reports on Form 8-K were filed during the
quarter for which this report is filed.
* Copies of these Exhibits are annexed to this report on
Form 10-Q provided to the Securities and Exchange Commission
and the New York Stock Exchange.
-14-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CROMPTON & KNOWLES CORPORATION
(Registrant)
May 13, 1996 By:/s/ Charles J. Marsden
Charles J. Marsden
Vice President-Finance
and Chief Financial Officer
May 13, 1996 By:/s/ John T. Ferguson, II
John T. Ferguson, II
General Counsel and Secretary
-15-
AGREEMENT AND PLAN OF MERGER
AMONG
CROMPTON & KNOWLES CORPORATION
("Crompton"),
TIGER MERGER CORP.
a wholly owned direct subsidiary of Crompton
("Subcorp"),
and
UNIROYAL CHEMICAL CORPORATION
("Uniroyal")
April 30, 1996<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF MERGER............................. 1
PRELIMINARY STATEMENTS................................... 1
AGREEMENT................................................ 1
ARTICLE I: THE MERGER................................... 1
1.1 The Merger................................... 1
1.2 Effective Time............................... 2
1.3 Effects of the Merger........................ 2
1.4 Certificate of Incorporation and Bylaws...... 2
1.5 Directors and Officers....................... 2
1.6 Additional Actions........................... 2
ARTICLE II: CONVERSION OF SECURITIES..................... 3
2.1 Conversion of Capital Stock.................. 3
2.2 Exchange Ratio; Fractional Shares............ 3
2.3 Exchange of Certificates..................... 4
(a) Exchange Agent........................... 4
(b) Exchange Procedures...................... 4
(c) Distributions with Respect to
Unexchanged Shares...................... 5
(d) No Further Ownership Rights in Uniroyal Common
Stock and Uniroyal Preferred Stock...... 5
(e) Termination of Exchange Fund............. 5
(f) No Liability............................. 6
(g) Investment of Exchange Fund.............. 6
2.4 Treatment of Stock Options and Warrants...... 6
2.5 Dissenter's Rights........................... 7
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF
CROMPTON AND SUBCORP...................... 8
3.1 Organization and Standing.................... 8
3.2 Subsidiaries................................. 8
3.3 Corporate Power and Authority................ 9
3.4 Capitalization of Crompton................... 9
3.5 Conflicts, Consents and Approval............. 9
3.6 Brokerage and Finder's Fees.................. 10
3.7 Opinion of Financial Advisor................. 10
3.8 Accounting Matters........................... 11
3.9 Employee Benefit Plans....................... 11
3.10 Crompton SEC Documents....................... 13
3.11 Taxes........................................ 13
3.12 Registration Statement....................... 14
3.13 Compliance with Law.......................... 14
3.14 Litigation................................... 14
3.15 No Material Adverse Change................... 15
3.16 Board Meeting................................ 15
3.17 Undisclosed Liabilities...................... 15
3.18 Labor Relations.............................. 15
3.19 Operation of Crompton's Business............. 15
3.20 Permits; Compliance.......................... 16
3.21 Environmental Matters........................ 16
3.22 Uniroyal Stock Ownership..................... 16
3.23 Contracts.................................... 16
3.24 State Takeover Laws.......................... 17
3.25 Crompton Rights Agreement.................... 17
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF
UNIROYAL................................... 17
4.1 Organization and Standing.................... 17
4.2 Subsidiaries................................. 17
4.3 Corporate Power and Authority................ 18
4.4 Capitalization of Uniroyal................... 18
4.5 Conflicts; Consents and Approvals............ 19
4.6 No Material Adverse Change................... 19
4.7 Uniroyal SEC Documents....................... 19
4.8 Taxes........................................ 20
4.9 Compliance with Law.......................... 21
4.10 Registration Statement....................... 21
4.11 Litigation................................... 21
4.12 Brokerage and Finder's Fees; Expenses........ 21
4.13 Opinion of Financial Advisor................. 21
4.14 Accounting Matters........................... 21
4.15 Employee Benefit Plans....................... 22
4.16 Contracts.................................... 24
4.17 Labor Relations.............................. 24
4.18 Undisclosed Liabilities...................... 24
4.19 Operation of Uniroyal's Business............. 24
4.20 Permits; Compliance.......................... 24
4.21 Environmental Matters........................ 24
4.22 Crompton Stock Ownership..................... 25
4.23 Board Meeting................................ 25
4.24 DGCL Section 203 and State Takeover Laws..... 25
4.25 Uniroyal Rights Agreement.................... 25
ARTICLE V: COVENANTS OF THE PARTIES..................... 26
5.1 Mutual Covenants............................. 26
(a) General................................. 26
(b) HSR Act................................. 26
(c) Other Governmental Matters.............. 26
(d) Pooling-of-Interests.................... 26
(e) Tax-Free Treatment...................... 26
(f) Public Announcements.................... 26
(g) Access.................................. 26
5.2 Covenants of Crompton........................ 27
(a) Crompton Stockholders Meeting........... 27
(b) Preparation of Joint Proxy Statement.... 27
(c) Conduct of Crompton's Operations........ 27
(d) Indemnification......................... 27
(e) Directors' and Officers' Insurance...... 28
(f) Employee Benefits....................... 28
(g) Notification of Certain Matters......... 29
(h) No Solicitation......................... 29
(i) [Intentionally Omitted]................. 30
(j) Listing Application..................... 30
(k) Directors of Crompton................... 30
(l) Affiliates of Crompton.................. 30
(m) Change in Control....................... 31
5.3 Covenants of Uniroyal........................ 31
(a) Uniroyal Stockholders Meeting........... 31
(b) Information for the Registration Statement and
Preparation of Joint Proxy Statement.... 31
(c) Conduct of Uniroyal's Operations........ 31
(d) No Solicitation......................... 33
(e) Affiliates of Uniroyal.................. 34
(f) Notification of Certain Matters......... 34
ARTICLE VI: CONDITIONS................................... 34
6.1 Mutual Conditions............................ 34
6.2 Conditions to Obligations of Uniroyal........ 36
6.3 Conditions to Obligations of Crompton and
Subcorp.................................... 36
ARTICLE VII: TERMINATION AND AMENDMENT................. 37
7.1 Termination.................................. 37
7.2 Effect of Termination........................ 38
7.3 Amendment.................................... 39
7.4 Extension; Waiver............................ 39
ARTICLE VIII: MISCELLANEOUS............................. 40
8.1 Survival of Representations and
Warranties................................. 40
8.2 Notices...................................... 40
8.3 Interpretation............................... 40
8.4 Counterparts................................. 41
8.5 Entire Agreement............................. 41
8.6 Third Party Beneficiaries.................... 41
8.7 Governing Law................................ 41
8.8 Specific Performance......................... 41
8.9 Assignment................................... 41
8.10 Expenses..................................... 41
8.11 Incorporation of Disclosure Schedules........ 42
8.12 Severability................................. 42
8.13 Subsidiaries................................. 42
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement")
is made and entered into as of the 30th day of April, 1996, by
and among Crompton & Knowles Corporation, a Massachusetts cor-
poration ("Crompton"), Tiger Merger Corp., a Delaware corpo-
ration and a wholly owned subsidiary of Crompton ("Subcorp"),
and Uniroyal Chemical Corporation, a Delaware corporation
("Uniroyal").
PRELIMINARY STATEMENTS
A. Crompton desires to acquire the specialty
chemical business and other businesses operated by Uniroyal
through the merger (the "Merger") of Subcorp with and into
Uniroyal, with Uniroyal as the surviving corporation, pursuant
to which each share of Uniroyal Common Stock (as defined in
Section 4.4) and each share of Uniroyal Preferred Stock (as
defined in Section 2.1(c)) outstanding at the Effective Time
(as defined in Section 1.2) will be converted into the right to
receive shares of Crompton Common Stock (as defined in Section
3.4) as more fully provided herein.
B. Uniroyal desires to combine its specialty
chemical and other businesses with the specialty chemical and
related businesses operated by Crompton and for the holders of
shares of Uniroyal Common Stock ("Uniroyal Stockholders") to
have a continuing equity interest in the combined Crompton/
Uniroyal businesses.
C. The parties intend that the Merger constitute a
tax-free "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
D. The parties intend that the Merger be accounted
for as a pooling-of-interests for financial reporting purposes.
E. The respective Boards of Directors of Crompton,
Subcorp and Uniroyal have determined the Merger in the manner
contemplated herein to be desirable and in the best interests
of their respective stockholders and, by resolutions duly
adopted, have approved and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises
and the mutual and dependent promises hereinafter set forth,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the provisions of the
Delaware General Corporation Law (the "DGCL"), Subcorp shall be
merged with and into Uniroyal as soon as practicable following
the satisfaction or waiver of the conditions set forth in
Article VI. Following the Merger, the separate corporate
existence of Subcorp shall cease and Uniroyal shall continue
its existence under the laws of the State of Delaware.
Uniroyal, in its capacity as the corporation surviving the
Merger, is hereinafter sometimes referred to as the "Surviving
Corporation."
1.2 Effective Time. The Merger shall be consummated
by filing with the Secretary of State of the State of Delaware
(the "Delaware Secretary of State") a certificate of merger
(the "Certificate of Merger") in such form as is required by
and executed in accordance with Section 251(c) of the DGCL.
The Merger shall become effective (the "Effective Time") when
the Certificate of Merger has been filed with the Delaware Sec-
retary of State or at such later time as shall be specified in
the Certificate of Merger. Prior to the filing referred to in
this Section 1.2, a closing (the "Closing") shall be held at
the offices of Crompton, One Station Place, Metro Center,
Stamford, Connecticut, or such other place as the parties may
agree on the date (the "Closing Date") specified by the
parties, which date shall be as soon as practicable, but in any
event within ten business days, following the date upon which
all conditions set forth in Article VI hereof have been
satisfied or waived or such other time as the parties may
mutually agree.
1.3 Effects of the Merger. The Merger shall have
the effects set forth in Section 259 of the DGCL.
1.4 Certificate of Incorporation and Bylaws. The
Certificate of Merger shall provide that at the Effective Time
(i) the Certificate of Incorporation of the Surviving Corpora-
tion as in effect immediately prior to the Effective Time shall
be amended as of the Effective Time so as to contain the provi-
sions, and only the provisions, contained immediately prior
thereto in the Certificate of Incorporation of Subcorp, except
for Article I thereof which shall continue to read "The name of
the corporation is 'Uniroyal'", and (ii) the By-laws of
Uniroyal in effect immediately prior to the Effective Time
shall be the By-laws of the Surviving Corporation, amended as
of the Effective Time so as to contain the provisions, and only
the provisions, contained in the Bylaws of Subcorp immediately
prior thereto; in each case until amended in accordance with
applicable law.
1.5 Directors and Officers. From and after the Ef-
fective Time, the officers of Uniroyal shall be the officers of
the Surviving Corporation and the directors of Subcorp shall be
the directors of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified.
Prior to the Effective Time, Uniroyal shall deliver to Crompton
evidence satisfactory to Crompton of the resignations of the
directors of Uniroyal, such resignations to be effective as of
the Effective Time.
1.6 Additional Actions. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be
advised that any further deeds, assignments or assurances in
law or any other acts are necessary or desirable to carry out
the provisions of this Agreement, the proper officers and di-
rectors of Crompton and Uniroyal shall take all such necessary
action.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the
part of Crompton, Subcorp or Uniroyal:
(a) Each share of common stock, $0.01 par value, of
Subcorp issued and outstanding immediately prior to the
Effective Time shall beconverted into one share of common
stock, $0.01 par value, of the Surviving Corporation.
Such newly issued shares shall thereafter constitute all
of the issued and outstanding capital stock of the Surviv-
ing Corporation.
(b) Each share of Uniroyal Common Stock (other than
shares to be cancelled in accordance with Section 2.1(d))
issued and outstanding immediately prior to the Effective
Time shall be converted into and represent a number of
shares of Crompton Common Stock equal to the Exchange
Ratio (as defined below).
(c) Each share of the Series A Cumulative Redeemable
Preferred Stock, $0.01 par value per share, of Uniroyal
(the "Uniroyal Series A Preferred Stock") issued and
outstanding immediately prior to the Effective Time (other
than shares to be cancelled in accordance with Section
2.1(d) and other than Dissenting Shares covered by Section
2.5) shall be converted into and represent a number of
shares of Crompton Common Stock equal to the Exchange
Ratio multiplied by 6.667. Each share of the Series B
Preferred Stock, $0.01 par value per share, of Uniroyal
(the "Uniroyal Series B Preferred Stock," and, together
with the Uniroyal Series A Preferred Stock, the "Uniroyal
Preferred Stock") issued and outstanding immediately prior
to the Effective Time (other than shares to be cancelled
in accordance with Section 2.1(d) and other than
Dissenting Shares covered by Section 2.5) shall be
converted into and represent a number of shares of
Crompton Common Stock equal to the Exchange Ratio
multiplied by 6.667.
(d) Each share of capital stock of Uniroyal held in
the treasury of Uniroyal or held by Crompton or any of its
subsidiaries shall be cancelled and retired and no payment
shall be made in respect thereof.
2.2 Exchange Ratio; Fractional Shares. The "Ex-
change Ratio" shall equal $15.00 divided by the "Acquiror
Transaction Value" (as defined below), rounded to four decimal
places; provided, however, that notwithstanding the foregoing,
the Exchange Ratio shall not be less than 0.9091 nor more than
1.1111. The term "Acquiror Transaction Value" shall mean the
average closing price on the New York Stock Exchange ("NYSE")
Composite Tape of Crompton Common Stock for the twenty (20) New
York Stock Exchange trading days ending with the third New York
Stock Exchange trading day immediately preceding the date of
mailing of the Joint Proxy Statement (as defined in Section
3.12). No certificates for fractional shares of Crompton
Common Stock shall be issued as a result of the conversions
provided for in Section 2.1(b) and in Section 2.1(c). To the
extent that an outstanding share of Uniroyal Common Stock or
Uniroyal Preferred Stock would otherwise have become a
fractional share of Crompton Common Stock, the holder thereof,
upon presentation of such fractional interest represented by an
appropriate certificate for Uniroyal Common Stock or Uniroyal
Preferred Stock to the Exchange Agent pursuant to Section 2.3,
shall be entitled to receive a cash payment therefor in an
amount equal to the value (determined with reference to the
closing price of Crompton Common Stock on the NYSE Composite
Tape on the last full trading day immediately prior to the
Effective Time) of such fractional interest. Such payment with
respect to fractional shares is merely intended to provide a
mechanical rounding off of, and is not a separately bargained
for, consideration. If more than one certificate representing
shares of Uniroyal Common Stock or Uniroyal Preferred Stock
shall be surrendered for the account of the same holder, the
number of shares of Crompton Common Stock for which cer-
tificates have been surrendered shall be computed on the basis
of the aggregate number of shares represented by the
certificates so surrendered. In the event that prior to the
Effective Time Crompton shall declare a stock dividend or other
distribution payable in shares of Crompton Common Stock or
securities convertible into shares of Crompton Common Stock, or
effect a stock split, reclassification, combination or other
change with respect to Crompton Common Stock, the Exchange
Ratio set forth in this Section 2.2 shall be adjusted to
reflect such dividend, distribution, stock split, reclas-
sification, combination or other change.
2.3 Exchange of Certificates.
(a) Exchange Agent. At or prior to the Effective
Time, Crompton shall deposit with an exchange agent designated
by Crompton and reasonably acceptable to Uniroyal (the "Ex-
change Agent"), for the benefit of Uniroyal Stockholders and
holders of Uniroyal Preferred Stock, for exchange in accordance
with this Section 2.3, certificates representing shares of
Crompton Common Stock issuable pursuant to Section 2.1 in
exchange for outstanding shares of Uniroyal Common Stock and
Uniroyal Preferred Stock and shall from time-to-time deposit
cash in an amount reasonably expected to be paid pursuant to
Section 2.2 (such shares of Crompton Common Stock and cash, to-
gether with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. Promptly and, in any
event, within three (3) business days after the Effective Time,
Crompton shall cause the Exchange Agent to mail to each holder
of record of a certificate or certificates (the "Certificates")
which immediately prior to the Effective Time represented out-
standing shares of Uniroyal Common Stock or Uniroyal Preferred
Stock whose shares were converted into the right to receive
shares of Crompton Common Stock pursuant to Section 2.1(b) or
Section 2.1(c) (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form
and have such other provisions as Crompton may reasonably
specify) and (ii) instructions for effecting the surrender of
the Certificates in exchange for certificates representing
shares of Crompton Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together
with a duly executed letter of transmittal, the holder of such
Certificate shall be entitled to receive in exchange therefor
(x) a certificate representing that number of shares of
Crompton Common Stock which such holder has the right to
receive pursuant to Section 2.1 and (y) a check representing
the amount of cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, which such holder
has the right to receive pursuant to the provisions of this
Article II, after giving effect to any required withholding
tax, and the shares represented by the Certificate so
surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, payable to
holders of shares of Uniroyal Common Stock or Uniroyal
Preferred Stock. In the event of a transfer of ownership of
shares of Uniroyal Common Stock or Uniroyal Preferred Stock
which is not registered on the transfer records of Uniroyal, a
certificate representing the proper number of shares of
Crompton Common Stock, together with a check for the cash to be
paid in lieu of fractional shares, if any, and unpaid dividends
and distributions, if any, may be issued to such transferee if
the Certificate representing such shares of Uniroyal Common
Stock or Uniroyal Preferred Stock held by such transferee is
presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.3, each Certifi-
cate shall be deemed at any time after the Effective Time to
represent only the right to receive upon surrender a certifi-
cate representing shares of Crompton Common Stock and cash in
lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, as provided in this Article II.
(c) Distributions with Respect to Unexchanged
Shares. Notwithstanding any other provisions of this Agree-
ment, no dividends or other distributions declared or made af-
ter the Effective Time with respect to shares of Crompton
Common Stock having a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate,
and no cash payment in lieu of fractional shares shall be paid
to any such holder, until the holder shall surrender such
Certificate as provided in this Section 2.3. Subject to the
effect of Applicable Laws (as defined in Section 3.13),
following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole
shares of Crompton Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after
the Effective Time theretofore payable with respect to such
whole shares of Crompton Common Stock and not paid, less the
amount of any withholding taxes which may be required thereon,
and (ii) at the appropriate payment date subsequent to
surrender, the amount of dividends or other distributions with
a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect
to such whole shares of Crompton Common Stock, less the amount
of any withholding taxes which may be required thereon.
(d) No Further Ownership Rights in Uniroyal Common
Stock and Uniroyal Preferred Stock. All shares of Crompton
Common Stock issued upon surrender of Certificates in
accordance with the terms hereof (including any cash paid
pursuant to this Article II) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such
shares of Uniroyal Common Stock or Uniroyal Preferred Stock
represented thereby, and from and after the Effective Time
there shall be no further registration of transfers on the
stock transfer books of Uniroyal of shares of Uniroyal Common
Stock or Uniroyal Preferred Stock. If, after the Effective
Time, Certificates are presented to the Surviving Corporation
for any reason, they shall be cancelled and exchanged as pro-
vided in this Section 2.3.
(e) Termination of Exchange Fund. Any portion of
the Exchange Fund which remains undistributed to Uniroyal
Stockholders and holders of Uniroyal Preferred Stock for one
(1) year after the Effective Time shall be delivered to
Crompton or the Surviving Corporation, upon demand thereby, and
holders of shares of Uniroyal Common Stock or Uniroyal Pre-
ferred Stock who have not theretofore complied with this Sec-
tion 2.3 shall thereafter look only to Crompton for payment of
any claim to shares of Crompton Common Stock, cash in lieu of
fractional shares thereof, or dividends or distributions, if
any, in respect thereof.
(f) No Liability. None of Crompton, the Surviving
Corporation or the Exchange Agent shall be liable to any person
in respect of any shares of Uniroyal Common Stock or Uniroyal
Preferred Stock (or, in each case, dividends or distributions
with respect thereto) or cash from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall
not have been surrendered prior to seven years after the Ef-
fective Time of the Merger (or immediately prior to such ear-
lier date on which any cash, any cash in lieu of fractional
shares or any dividends or distributions with respect to whole
shares of Uniroyal Common Stock or Uniroyal Preferred Stock in
respect of such Certificate would otherwise escheat to or be-
come the property of any Governmental Authority (as defined in
Section 3.5)), any such cash, dividends or distributions in
respect of such Certificate shall, to the extent permitted by
Applicable Law, become the property of Crompton, free and clear
of all claims or interest of any person previously entitled
thereto.
(g) Investment of Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund, as di-
rected by Crompton, on a daily basis. Any interest and other
income resulting from such investments shall be paid to
Crompton upon termination of the Exchange Fund pursuant to
Section 2.3(e).
2.4 Treatment of Stock Options and Warrants.
(a) Prior to the Effective Time, Crompton and
Uniroyal shall take all such actions as may be necessary to
cause each unexpired and unexercised option or right to
purchase shares of Uniroyal Common Stock under stock option
plans and stock purchase plans of Uniroyal in effect on the
date hereof which has been granted to current or former
directors, officers, employees, consultants or independent
contractors of Uniroyal or its subsidiaries by Uniroyal (each,
a "Uniroyal Option") to be automatically converted at the
Effective Time into an option (a "Crompton Exchange Option") to
purchase that number of shares of Crompton Common Stock equal
to the number of shares of Uniroyal Common Stock issuable
immediately prior to the Effective Time upon exercise of the
Uniroyal Option (without regard to actual restrictions on
exercisability) multiplied by the Exchange Ratio, with an exer-
cise price equal to the exercise price which existed under the
corresponding Uniroyal Option divided by the Exchange Ratio,
and with other terms and conditions that are the same as the
terms and conditions of such Uniroyal Option immediately before
the Effective Time (including, without limitation, the
acceleration of the exercisability of each such option upon the
consummation of the Merger and the length of the period of
continuing exercisability of each such option after any termi-
nation of the employment of the respective optionee); provided
that with respect to any Uniroyal Option that is an "incentive
stock option" within the meaning of Section 422 of the Code,
the foregoing conversion shall be carried out in a manner sat-
isfying the requirements of Section 424(a) of the Code. In
connection with the issuance of Crompton Exchange Options,
Crompton shall (i) reserve for issuance the number of shares of
Crompton Common Stock that will become subject to Crompton
Exchange Options pursuant to this Section 2.4 and (ii) from and
after the Effective Time, upon exercise of Crompton Exchange
Options, make available for issuance all shares of Crompton
Common Stock covered thereby, subject to the terms and
conditions applicable thereto. A list of certain optionees
whose termination will be treated as "for Good Reason" or
"without Cause" (as defined in the Uniroyal Options) in deter-
mining the length of the post-termination period of continuing
exercisability has been agreed upon by Crompton and Uniroyal
and provided to Crompton by Uniroyal on the date hereof.
Crompton shall cause the committee administering its stock
incentive plan to grant Crompton Exchange Options in accordance
with this Section 2.4.
(b) The Surviving Corporation shall take all such
actions as may be necessary to cause each unexpired and
unexercised warrant to purchase shares of Uniroyal Common Stock
under the Warrant Agreement, dated as of October 30, 1989,
between Uniroyal and Avery, Inc. (each, a "Uniroyal Warrant")
to be converted into a warrant (a "Crompton Exchange Warrant")
to purchase that number of shares of Crompton Common Stock
equal to the number of shares of Uniroyal Common Stock issuable
immediately prior to the Effective Time upon exercise of the
Uniroyal Warrant (without regard to actual restrictions on
exercisability) multiplied by the Exchange Ratio, with an exer-
cise price equal to the exercise price which existed under the
corresponding Uniroyal Warrant divided by the Exchange Ratio,
and with other terms and conditions that are the same as the
terms and conditions of such Uniroyal Warrant immediately
before the Effective Time. In connection with the issuance of
Crompton Exchange Warrants, Crompton shall (i) reserve for
issuance the number of shares of Crompton Common Stock that
will become subject to Crompton Exchange Warrants pursuant to
this Section 2.4 and (ii) from and after the Effective Time,
upon exercise of Crompton Exchange Warrants, make available for
issuance all shares of Crompton Common Stock covered thereby,
subject to the terms and conditions applicable thereto.
(c) Uniroyal agrees to issue treasury shares of
Uniroyal, to the extent available, upon the exercise of
Uniroyal Options or Uniroyal Warrants prior to the Effective
Time.
(d) Crompton agrees to file with the Securities and
Exchange Commission (the "Commission") as soon as reasonably
practicable after the Closing Date a registration statement on
Form S-8 or other appropriate form under the Securities Act to
register shares of Crompton Common Stock issuable upon exercise
of the Crompton Exchange Options and use its reasonable best
efforts to cause such registration statement to remain
effective until the exercise or expiration of such options.
2.5 Dissenter's Rights. Notwithstanding anything in
this Agreement to the contrary, Uniroyal Preferred Stock
outstanding immediately prior to the Effective Time and held by
a holder who has delivered a written demand for appraisal of
such shares in accordance with Section 262 of the DGCL, if such
Section 262 provides for appraisal rights for such Uniroyal
Preferred Stock in the Merger ("Dissenting Shares"), shall not
be converted as provided in Section 2.1 hereof, unless and
until such holder fails to perfect or effectively withdraws or
otherwise loses his right to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses his right to
appraisal, such Dissenting Shares shall thereupon be treated as
if they had been converted as of the Effective Time into the
right to receive the Crompton Common Stock, as provided in
Section 2.1 hereof, and to which such holder is entitled,
without interest or dividends thereon. Uniroyal shall give
Crompton prompt notice of any demands received by Uniroyal for
appraisal of Uniroyal Preferred Stock, and, prior to the
Effective Time, Crompton shall have the right to participate in
all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, Uniroyal shall not, except with
the prior written consent of Crompton, make any payment with
respect to, or offer to settle, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CROMPTON AND SUBCORP
In order to induce Uniroyal to enter into this Agree-
ment, Crompton and Subcorp hereby represent and warrant to
Uniroyal that the statements contained in this Article III are
true, correct and complete.
3.1 Organization and Standing. Each of Crompton and
its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation with full power and authority (corporate and
other) to own, lease, use and operate its properties and to
conduct its business as and where now owned, leased, used,
operated and conducted. Each of Crompton and its subsidiaries
is duly qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates makes such
qualification necessary, except where the failure to be so
qualified or in good standing in such jurisdiction would not
have a material adverse effect on Crompton. Neither Crompton
nor any of its subsidiaries is in default in the performance,
observance or fulfillment of any provision of, in the case of
Crompton, its Articles of Organization, as amended and restated
(the "Crompton Articles"), or By-Laws, or, in the case of any
subsidiary of Crompton, its Certificate of Incorporation, By-
laws or other organizational documents.
3.2 Subsidiaries. As of the date hereof, other than
immaterial interests, Crompton does not own, directly or indi-
rectly, any equity or other ownership interest in any corpora-
tion, partnership, joint venture or other entity or enterprise,
except as set forth in Section 3.2 to the disclosure schedule
(the "Crompton Disclosure Schedule") delivered by Crompton to
Uniroyal and dated the date hereof. Section 3.2 to the
Crompton Disclosure Schedule sets forth as to each subsidiary
of Crompton: (i) its name and jurisdiction of incorporation or
organization, (ii) its authorized capital stock or share
capital, and (iii) the number of issued and outstanding shares
of its capital stock or share capital. Except as set forth in
Section 3.2 to the Crompton Disclosure Schedule, Crompton owns,
directly or indirectly, each of the outstanding shares of
capital stock (or other ownership interests having by their
terms ordinary voting power to elect a majority of directors or
others performing similar functions with respect to such
subsidiary) of each of Crompton's subsidiaries. Except as set
forth in Section 3.2 to the Crompton Disclosure Schedule, each
of the outstanding shares of capital stock of each of
Crompton's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and is owned, directly or indi-
rectly, by Crompton free and clear of all liens, pledges,
security interests, claims or other encumbrances, other than
liens imposed by law which could not reasonably be expected to
have, in the aggregate, a material adverse effect on Crompton.
Other than as set forth in Section 3.2 to the Crompton
Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any
subsidiary of Crompton, nor are there outstanding any securi-
ties which are convertible into or exchangeable for any shares
of capital stock of any subsidiary of Crompton; and no sub-
sidiary of Crompton has any obligation of any kind to issue any
additional securities or to pay for securities of any
subsidiary of Crompton or any predecessor thereof.
3.3 Corporate Power and Authority. Each of Crompton
and Subcorp has all requisite corporate power and authority to
enter into this Agreement and, subject to authorization of the
Merger and the transactions contemplated hereby by the holders
of Crompton Common Stock ("Crompton Stockholders"), to
consummate the transactions contemplated by this Agreement.
The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part
of each of Crompton and Subcorp, subject to authorization of
the Merger and the transactions contemplated hereby by Crompton
Stockholders. This Agreement has been duly executed and
delivered by each of Crompton and Subcorp, and constitutes the
legal, valid and binding obligation of each of Subcorp and
Crompton enforceable against each of them in accordance with
its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights
and general principles of equity.
3.4 Capitalization of Crompton. As of the date
hereof, Crompton's authorized capital stock consisted solely of
(a) 250,000,000 shares of common stock, $0.10 par value per
share ("Crompton Common Stock"), of which (i) 48,026,751 shares
were issued and outstanding, (ii) 5,334,321 shares were issued
and held in treasury (which does not include the shares re-
served for issuance as set forth in clause (a)(iii) below) and
(iii) 2,601,077 shares were reserved for issuance upon the
exercise or conversion of options, warrants or convertible
securities granted or issuable by Crompton, and (b) 250,000
shares of preferred stock, without par value, none of which was
issued and outstanding or reserved for issuance and 67,000
shares of which are designated as "Series A Junior Participat-
ing Preferred Stock." Each outstanding share of Crompton
capital stock is, and all shares of Crompton Common Stock to be
issued in connection with the Merger will be, duly authorized
and validly issued, fully paid and nonassessable, and each out-
standing share of Crompton capital stock has not been, and all
shares of Crompton Common Stock to be issued in connection with
the Merger will not be, issued in violation of any preemptive
or similar rights. As of the date hereof, other than as set
forth in the first sentence hereof, in the Crompton SEC
Documents (as defined in Section 3.10) or in Section 3.4 to the
Crompton Disclosure Schedule, there are no outstanding
subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any
type relating to the issuance, sale or transfer by Crompton of
any securities of Crompton, nor are there outstanding any
securities which are convertible into or exchangeable for any
shares of capital stock of Crompton; and Crompton has no obli-
gation of any kind to issue any additional securities or to pay
for securities of Crompton or any predecessor. Crompton has no
outstanding bonds, debentures, notes or other similar
obligations the holders of which have the right to vote
generally with holders of Crompton Common Stock.
3.5 Conflicts, Consents and Approval. Neither the
execution and delivery of this Agreement by Crompton or Subcorp
nor the consummation of the transactions contemplated hereby
will:
(a) conflict with, or result in a breach of any pro-
vision of the Crompton Articles or By-Laws of Crompton or
the Certificate of Incorporation or Bylaws of Subcorp;
(b) except as disclosed to Uniroyal on the date
hereof, violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event
which, with the giving of notice, the passage of time or
otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time
or otherwise) to terminate, accelerate, modify or call a
default under, or result in the termination, acceleration
or cancellation of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the
properties or assets of Crompton or any of its subsidiar-
ies under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, li-
cense, contract, undertaking, agreement, lease or other
instrument or obligation to which Crompton or any of its
subsidiaries is a party;
(c) violate any order, writ, injunction, decree,
statute, rule or regulation, applicable to Crompton or any
of its subsidiaries or their respective properties or as-
sets; or
(d) require any action or consent or approval of, or
review by, or registration or filing by Crompton or any of
its affiliates with any third party or any court, arbitral
tribunal, administrative agency or commission or other
governmental or regulatory body, agency, instrumentality
or authority (a "Governmental Authority"), other than (i)
authorization of the Merger and the transactions contem-
plated hereby by Crompton Stockholders, (ii)
authorization for inclusion of the shares of Crompton
Common Stock to be issued in the Merger and the
transactions contemplated hereby on the NYSE, subject to
official notice of issuance, (iii) actions required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated there-
under (the "HSR Act"), and (iv) registrations or other ac-
tions required under federal and state securities laws as
are contemplated by this Agreement;
except for any of the foregoing that are set forth in Section
3.5 to the Crompton Disclosure Schedule and, in the case of
(b), (c) and (d), for any of the foregoing that would not,
individually or in the aggregate, have a material adverse
effect on Crompton.
3.6 Brokerage and Finder's Fees. Except for
Crompton's obligation to Salomon Brothers Inc ("Salomon") (a
copy of the written agreement relating to such obligation hav-
ing previously been provided to Uniroyal), Crompton has not in-
curred and will not incur, directly or indirectly, any
brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement. Other than the
foregoing obligation to Salomon, Crompton is not aware of any
claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the
negotiation of this Agreement or in connection with the
transactions contemplated hereby. A bona fide written estimate
of the aggregate amount of all fees and expenses expected to be
paid by Crompton to all accountants and investment bankers in
connection with the Merger has been provided to Uniroyal on the
date hereof.
3.7 Opinion of Financial Advisor. Crompton has
received the opinion of Salomon to the effect that, as of the
date hereof, the Exchange Ratio is fair to Crompton from a
financial point of view.
3.8 Accounting Matters. To the best knowledge of
Crompton and except as set forth in Section 3.8 to the Crompton
Disclosure Schedule, neither Crompton nor any of its affiliates
has taken or agreed to take any action that (without giving
effect to any actions taken or agreed to be taken by Uniroyal
or any of its affiliates) would prevent Crompton from ac-
counting for the business combination to be effected by the
Merger as a pooling-of-interests for financial reporting pur-
poses in accordance with Accounting Principles Board Opinion
No. 16, the interpretative releases issued pursuant thereto,
and the pronouncements of the Commission thereon.
3.9 Employee Benefit Plans.
(a) For purposes of this Section 3.9, the following
terms have the definitions given below:
"Controlled Group Liability" means any and all
liabilities under (i) Title IV of ERISA, (ii) section
302 of ERISA, (iii) sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of
section 601 et seq. of ERISA and section 4980B of the
Code, and (v) corresponding or similar provisions of
foreign laws or regulations, in each case other than
pursuant to the Crompton Plans.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and the regulations
thereunder.
"ERISA Affiliate" means, with respect to any
entity, trade or business, any other entity, trade or
business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or Sec-
tion 4001(b)(1) of ERISA that includes the first en-
tity, trade or business, or that is a member of the
same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
"Crompton Plans" means all employee benefit
plans, programs, policies, practices, and other
arrangements providing benefits to any employee or
former employee or beneficiary or dependent thereof,
whether or not written, and whether covering one
person or more than one person, sponsored or
maintained by Crompton or any of its subsidiaries or
to which Crompton or any of its subsidiaries
contributes or is obligated to contribute. Without
limiting the generality of the foregoing, the term
"Crompton Plans" includes all employee welfare ben-
efit plans within the meaning of Section 3(1) of
ERISA and all employee pension benefit plans within
the meaning of Section 3(2) of ERISA.
(b) Section 3.9 to the Crompton Disclosure Schedule
lists all Crompton Plans. With respect to each Crompton Plan,
Crompton has made available to Uniroyal a true, correct and
complete copy of: (i) each writing constituting a part of such
Crompton Plan, including without limitation all plan documents,
benefit schedules, trust agreements, and insurance contracts
and other funding vehicles; (ii) the most recent Annual Report
(Form 5500 Series) and accompanying schedule, if any; (iii) the
current summary plan description, if any; (iv) the most recent
annual financial report, if any; and (v) the most recent
determination letter from the IRS, if any.
(c) The Internal Revenue Service has issued a favor-
able determination letter with respect to each Crompton Plan
that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code (a "Qualified Crompton Plan") and
there are no existing circumstances nor any events that have
occurred that could adversely affect the qualified status of
any Qualified Crompton Plan or the related trust.
(d) All contributions required to be made to any
Crompton Plan by Applicable Laws or by any plan document or
other contractual undertaking, and all premiums due or payable
with respect to insurance policies funding any Crompton Plan,
for any period through the date hereof have been timely made or
paid in full and through the Closing Date will be timely made
or paid in full or, to the extent not required to be made or
paid on or before the date hereof or the Closing Date, as
applicable, have been or will be fully reflected in the
Crompton SEC Documents filed or to be filed with the
Commission.
(e) Crompton and its subsidiaries have complied, and
are now in compliance, in all material respects, with all pro-
visions of ERISA, the Code and all laws and regulations ap-
plicable to the Crompton Plans. There is not now, and there
are no existing, circumstances that could give rise to, any
requirement for the posting of security with respect to a
Crompton Plan or the imposition of any lien on the assets of
Crompton or any of its subsidiaries under ERISA or the Code.
(f) Except as set forth in Section 3.9(f) to the
Crompton Disclosure Schedule, no Crompton Plan is subject to
Title IV or Section 302 of ERISA or Section 412 or 4971 of the
Code. No Crompton Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan")
or a plan that has two or more contributing sponsors at least
two of whom are not under common control, within the meaning of
Section 4063 of ERISA (a "Multiple Employer Plan"), nor has
Crompton or any of its subsidiaries or any of their respective
ERISA Affiliates, at any time within five years before the date
hereof, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(g) There does not now exist, and there are no ex-
isting, circumstances that could result in, any Controlled
Group Liability that would be a liability of Crompton or any of
its subsidiaries following the Closing. Without limiting the
generality of the foregoing, neither Crompton nor any of its
subsidiaries nor any of their respective ERISA Affiliates has
engaged in any transaction described in Section 4069 or Section
4204 of ERISA.
(h) Except as disclosed in the Crompton SEC
Documents filed with the Commission as of the date hereof or as
disclosed to Uniroyal on the date hereof and except for health
continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA, neither Crompton nor any of its
subsidiaries has any liability for life, health, medical or
other welfare benefits to former employees or beneficiaries or
dependents thereof.
(i) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will result in, cause the accelerated vesting or deliv-
ery of, or increase the amount or value of, any payment or ben-
efit to any employee of Crompton or any of its subsidiaries.
Without limiting the generality of the foregoing and except as
set forth in Section 3.9(i) to the Crompton Disclosure
Schedule, no amount paid or payable by Crompton or any of its
subsidiaries in connection with the transactions contemplated
hereby either solely as a result thereof or as a result of such
transactions in conjunction with any other events will be an
"excess parachute payment" within the meaning of Section 280G
of the Code.
(j) There are no pending or threatened claims (other
than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the
Crompton Plans, any fiduciaries thereof with respect to their
duties to the Crompton Plans or the assets of any of the trusts
under any of the Crompton Plans which could reasonably be ex-
pected to result in any material liability of Crompton or any
of its subsidiaries to the Pension Benefit Guaranty
Corporation, the Department of Treasury, the Department of
Labor or any Multiemployer Plan.
3.10 Crompton SEC Documents. Each of Crompton and
its subsidiaries has timely filed with the Commission all
forms, reports, schedules, statements, exhibits and other
documents required to be filed by it since December 31, 1992
under the Securities Exchange Act of 1934, as amended (together
with the rules and regulations thereunder, the "Exchange Act")
or the Securities Act (such documents, as supplemented and
amended since the time of filing, collectively, the "Crompton
SEC Documents"). The Crompton SEC Documents, including, with-
out limitation, any financial statements or schedules included
therein, at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness
and the dates of mailing, respectively) (a) did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances un-
der which they were made, not misleading, and (b) complied in
all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be. The
financial statements of Crompton included in the Crompton SEC
Documents at the time filed (and, in the case of registration
statements and proxy statements, on the date of effectiveness
and the date of mailing, respectively) complied as to form in
all material respects with applicable accounting requirements
and with the published rules and regulations of the Commission
with respect thereto, were prepared in accordance with gener-
ally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited statements,
as permitted by Form 10-Q of the Commission), and fairly
present (subject in the case of unaudited statements to normal,
recurring and year-end audit adjustments) in all material
respects the consolidated financial position of Crompton as at
the dates thereof and the consolidated results of its op-
erations and cash flows for the periods then ended.
3.11 Taxes. Except as set forth in Section 3.11 to
the Crompton Disclosure Schedule, (i) Crompton has duly filed
all federal, and material state, local and foreign income,
franchise, excise, real and personal property and other tax
returns and reports (including, but not limited to, those filed
on a consolidated, combined or unitary basis) required to have
been filed by Crompton prior to the date hereof, (ii) all of
the foregoing returns and reports are true and correct in all
material respects, and Crompton has paid or, prior to the
Effective Time, will pay all taxes required to be paid in
respect of the periods covered by such returns or reports to
any federal, state, foreign, local or other taxing authority,
(iii) Crompton has paid or made adequate provision (in
accordance with generally accepted accounting principles) in
the financial statements of Crompton included in the Crompton
SEC Documents for all taxes payable in respect of all periods
ending on or prior to December 31, 1995, (iv) neither Crompton
nor any of its subsidiaries will have any material liability
for any taxes in excess of the amounts so paid or reserves so
established and neither Crompton nor any of its subsidiaries is
delinquent in the payment of any material tax, assessment or
governmental charge and none of them has requested any exten-
sion of time within which to file any returns in respect of any
fiscal year which have not since been filed, (v) no
deficiencies for any tax, assessment or governmental charge
have been proposed in writing, asserted or assessed (tenta-
tively or definitely), in each case, by any taxing authority,
against Crompton or any of its subsidiaries for which there are
not adequate reserves (in accordance with generally accepted
accounting principles), (vi) as of the date of this Agreement,
there are no pending requests for waivers of the time to assess
any such tax, other than those made in the ordinary course and
for which payment has been made or there are adequate reserves
(in accordance with generally accepted accounting principles),
(vii) the federal income tax returns of Crompton and its
subsidiaries have been audited by the Internal Revenue Service
through the fiscal year ending December 31, 1991, and (viii)
Crompton has not filed an election under Section 341(f) of the
Code to be treated as a consenting corporation. For purposes
of this Agreement, the term "tax" shall include all federal,
state, local and foreign taxes including interest and penalties
thereon.
3.12 Registration Statement. None of the informa-
tion provided by Crompton or any of its subsidiaries for
inclusion in the registration statement on Form S-4 to be filed
with the Commission by Crompton under the Securities Act,
including the prospectus (as amended, supplemented or modified,
the "Prospectus") relating to shares of Crompton Common Stock
to be issued in the Merger and the joint proxy statement and
form of proxies relating to the vote of Uniroyal Stockholders
with respect to the Merger and the vote of Crompton
Stockholders with respect to the Merger (collectively and as
amended, supplemented or modified, the "Joint Proxy Statement")
contained therein (such registration statement as amended, sup-
plemented or modified, the "Registration Statement"), at the
time the Registration Statement becomes effective or, in the
case of the Joint Proxy Statement, at the date of mailing, will
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or neces-
sary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Each
of the Registration Statement and Joint Proxy Statement, except
for such portions thereof that relate only to Uniroyal and its
subsidiaries, will comply as to form in all material respects
with the provisions of the Securities Act and Exchange Act.
3.13 Compliance with Law. Each of Crompton and its
subsidiaries is in compliance with, and at all times since
December 31, 1992 has been in compliance with, all applicable
laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders
entered by any Governmental Authority (collectively,
"Applicable Laws") relating to it or its business or prop-
erties, except for any such failures to be in compliance
therewith which, individually or in the aggregate, would not
have a material adverse effect on Crompton.
3.14 Litigation. Except as set forth in Section
3.14 to the Crompton Disclosure Schedule or in the Crompton SEC
Documents, there is no suit, claim, action, proceeding or
investigation (an "Action") pending or, to the knowledge of
Crompton, threatened against Crompton or any of its
subsidiaries which, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on
Crompton or a material adverse effect on the ability of
Crompton to consummate the transactions contemplated hereby.
Neither Crompton nor any of its subsidiaries is subject to any
outstanding order, writ, injunction or decree which, individu-
ally or in the aggregate, insofar as can be reasonably fore-
seen, could have a material adverse effect on Crompton or a
material adverse effect on the ability of Crompton to consum-
mate the transactions contemplated hereby.
3.15 No Material Adverse Change. Except as set
forth in the Crompton SEC Documents filed with the Commission
as of the date hereof or in Section 3.15 to the Crompton
Disclosure Schedule, since December 31, 1995, each of Crompton
and its subsidiaries has conducted its business in the ordinary
course, consistent with past practice, and there has been no
(i) material adverse change in the assets, liabilities, results
of operations, business or financial condition of Crompton and
its subsidiaries taken as a whole, (ii) material adverse effect
on the ability of Crompton to consummate the transactions
contemplated hereby, (iii) declaration, setting aside or pay-
ment of any dividend or other distribution with respect to its
capital stock, or (iv) material change in its accounting prin-
ciples, practices or methods.
3.16 Board Meeting. The Board of Directors of
Crompton, at a meeting duly called and held, has by the
required vote of the directors then in office determined that
this Agreement and the transactions contemplated hereby,
including the Merger, taken together, are fair to and in the
best interests of Crompton and the Crompton Stockholders.
3.17 Undisclosed Liabilities. Except (i) as and to
the extent disclosed or reserved against on the consolidated
balance sheet of Crompton as of December 31, 1995 or the notes
thereto included in the Crompton SEC Documents or otherwise
disclosed in the Crompton SEC Documents filed with the
Commission as of the date hereof, (ii) as incurred after the
date thereof in the ordinary course of business consistent with
prior practice and not prohibited by this Agreement or (iii) as
set forth in Section 3.17 to the Crompton Disclosure Schedule,
neither Crompton nor any of its subsidiaries have any li-
abilities or obligations of any nature, whether known or un-
known, absolute, accrued, contingent or otherwise and whether
due or to become due, that, individually or in the aggregate,
have or would reasonably be expected to have a material adverse
effect on Crompton.
3.18 Labor Relations. There is no unfair labor
practice complaint against Crompton or any of its subsidiaries
pending before the NLRB and there is no labor strike, dispute,
slowdown or stoppage, or any union organizing campaign, actu-
ally pending or, to the knowledge of Crompton, threatened
against or involving Crompton or any of its subsidiaries,
except for any such proceedings which would not have a material
adverse effect on Crompton. Except as disclosed in the
Crompton SEC Documents, neither Crompton nor any of its
subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or under-
standing with a labor union or labor organization. To the
knowledge of Crompton, there are no organizational efforts with
respect to the formation of a collective bargaining unit pres-
ently being made or threatened involving employees of Crompton
or any of its subsidiaries.
3.19 Operation of Crompton's Business. (a) Since
December 31, 1995 through the date of this Agreement, none of
Crompton or any of its subsidiaries has engaged in any
transaction which, if done after execution of this Agreement,
would violate Section 5.2(c) hereof except as described or
reflected in the Crompton SEC Documents or as set forth in
Section 3.19 to the Crompton Disclosure Schedule.
3.20 Permits; Compliance. Each of Crompton and its
subsidiaries is in possession of all franchises, grants, au-
thorizations, licenses, permits, easements, variances, exemp-
tions, consents, certificates, approvals and orders (collec-
tively, "Permits") necessary to own, lease and operate its
properties and to carry on its business as it is now being con-
ducted, except for any such Permits the failure of which to
possess, individually or in the aggregate, would not reasonably
be expected to have a material adverse effect on Crompton.
3.21 Environmental Matters.
(a) As used herein, the term "Environmental Laws"
means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (in-
cluding, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, con-
taminants, or industrial, toxic or hazardous substances or
wastes (collectively, "Hazardous Materials") into the environ-
ment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judg-
ments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
(b) Except as set forth in the Crompton SEC
Documents filed with the Commission as of the date hereof,
there are, with respect to Crompton, its subsidiaries or any
predecessor of the foregoing, no past or present violations of
Environmental Laws, releases of any material into the envi-
ronment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give
rise to any common law environmental liability or any liability
under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 or similar federal, state, local or
foreign laws, other than those which, individually or in the
aggregate, would not reasonably be expected to have a material
adverse effect on Crompton, and none of Crompton and its
subsidiaries has received any notice with respect to any of the
foregoing, nor is any Action pending or threatened in connec-
tion with any of the foregoing.
(c) Except as set forth in the Crompton SEC
Documents filed with the Commission as of the date hereof, no
Hazardous Materials are contained on or about any real property
currently owned, leased or used by Crompton or any of its sub-
sidiaries and no Hazardous Materials were released on or about
any real property previously owned, leased or used by Crompton
or any of its subsidiaries during the period the property was
so owned, leased or used, except in the normal course of
Crompton's business.
3.22 Uniroyal Stock Ownership. Neither Crompton nor
any of its subsidiaries owns any shares of Uniroyal Common
Stock or other securities convertible into Uniroyal Common
Stock.
3.23 Contracts. Except as set forth in Section 3.23
to the Crompton Disclosure Schedule, none of Crompton, any of
its subsidiaries, or, to the knowledge of Crompton, any other
party thereto is in violation of or in default in respect of,
nor has there occurred an event or condition which with the
passage of time or giving of notice (or both) would constitute
a default by Crompton under, any contract, agreement,
guarantee, lease or executory commitment (each a "Contract") to
which it is a party, except such violations or defaults under
such Contracts which, individually or in the aggregate, would
not have a material adverse effect on Crompton.
3.24 State Takeover Laws. Prior to the date hereof,
the Board of Directors of Crompton has taken all action
necessary to exempt under or make not subject to any state
takeover law or state law that purports to limit or restrict
business combinations or the ability to acquire or vote shares:
(i) the execution of this Agreement, (ii) the Merger and (iii)
the transactions contemplated hereby.
3.25 Crompton Rights Agreement. Crompton has taken
or will take all action necessary, if any, in respect of the
Rights Agreement dated as of July 20, 1988, as amended, between
Crompton and The Chase Manhattan Bank, N.A. (the "Crompton
Rights Agreement"), so as to provide that none of Uniroyal and
its affiliates will become an "Acquiring Person" and that no
"Stock Acquisition Date" or "Distribution Date" (as such terms
are defined in the Crompton Rights Agreement) will occur as a
result of the execution of this Agreement or the consummation
of the Merger pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF UNIROYAL
In order to induce Subcorp and Crompton to enter into
this Agreement, Uniroyal hereby represents and warrants to
Crompton and Subcorp that the statements contained in this
Article IV are true, correct and complete.
4.1 Organization and Standing. Each of Uniroyal and
its subsidiaries is a corporation duly organized, validly ex-
isting and in good standing under the laws of its state of in-
corporation with full power and authority (corporate and other)
to own, lease, use and operate its properties and to conduct
its business as and where now owned, leased, used, operated and
conducted. Each of Uniroyal and its subsidiaries is duly
qualified to do business and in good standing in each jurisdic-
tion in which the nature of the business conducted by it or the
property it owns, leases or operates makes such qualification
necessary, except where the failure to be so qualified or in
good standing in such jurisdiction would not have a material
adverse effect on Uniroyal. Neither Uniroyal nor any of its
subsidiaries is in default in the performance, observance or
fulfillment of any provision of, in the case of Uniroyal, its
Certificate of Incorporation, as amended, or Bylaws, as amended
and restated, or, in the case of any subsidiary of Uniroyal,
its Certificate of Incorporation, Bylaws or other organiza-
tional documents.
4.2 Subsidiaries. As of the date hereof, other than
immaterial interests, Uniroyal does not own, directly or indi-
rectly, any equity or other ownership interest in any corpora-
tion, partnership, joint venture or other entity or enterprise,
except as set forth in Section 4.2 to the disclosure schedule
(the "Uniroyal Disclosure Schedule") delivered by Uniroyal to
Crompton and dated the date hereof. Section 4.2 to the
Uniroyal Disclosure Schedule sets forth as to each subsidiary
of Uniroyal: (i) its name and jurisdiction of incorporation or
organization, (ii) the number of issued and outstanding shares
of its capital stock or share capital and (iii) the percentage
of securities owned by its immediate parent. Except as set
forth in Section 4.2 to the Uniroyal Disclosure Schedule,
Uniroyal owns, directly or indirectly, each of the outstanding
shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of
directors or others performing similar functions with respect
to such subsidiary) of each of Uniroyal's subsidiaries. Each
of the outstanding shares of capital stock of each of
Uniroyal's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and is owned, directly or indi-
rectly, by Uniroyal free and clear of all liens, pledges,
security interests, claims or other encumbrances, other than
liens imposed by law which could not reasonably be expected to
have, in the aggregate, a material adverse effect on Uniroyal.
Other than as set forth in Section 4.2 to the Uniroyal
Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any sub-
sidiary of Uniroyal, nor are there outstanding any securities
which are convertible into or exchangeable for any shares of
capital stock of any subsidiary of Uniroyal; and no subsidiary
of Uniroyal has any obligation of any kind to issue any
additional securities or to pay for securities of any
subsidiary of Uniroyal or any predecessor thereof.
4.3 Corporate Power and Authority. Uniroyal has all
requisite corporate power and authority to enter into this
Agreement and, subject to authorization of the Merger and the
transactions contemplated hereby by Uniroyal Stockholders, to
consummate the transactions contemplated by this Agreement.
The execution and delivery of this Agreement and the consumma-
tion of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of
Uniroyal, subject to authorization of the Merger and the trans-
actions contemplated hereby by Uniroyal Stockholders. This
Agreement has been duly executed and delivered by Uniroyal and
constitutes the legal, valid and binding obligation of Uniroyal
enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of
equity.
4.4 Capitalization of Uniroyal. As of the date
hereof, Uniroyal's authorized capital stock consisted solely of
(a) 205,000,000 shares of common stock, $0.01 par value per
share ("Uniroyal Common Stock"), of which (i) 24,286,043 shares
were issued and outstanding, (ii) 1,136,588 shares were issued
and held in treasury (which does not include the shares
reserved for issuance set forth in clause (a)(iii) below) and
(iii) 1,959,108 shares were reserved for issuance upon the
exercise or conversion of outstanding options, warrants or
convertible securities other than purchase rights granted or
issued by Uniroyal, and (b) 50,000,000 shares of preferred
stock, $0.01 par value per share, of which (i) 29,721 shares
are designated as "Series A Cumulative Redeemable Preferred
Stock," all of which were issued and outstanding, (ii) 12,000
shares are designated as "Series B Preferred Stock," all of
which were issued and outstanding, and (iii) 2,050,000 shares
are designated as "Series C Junior Participating Preferred
Stock," none of which was issued and outstanding. Each
outstanding share of Uniroyal capital stock is duly authorized
and validly issued, fully paid and nonassessable, and has not
been issued in violation of any preemptive or similar rights.
As of the date hereof, other than as set forth in the first
sentence hereof, in the Uniroyal SEC Documents (as defined in
Section 4.7) or in Section 4.4 to the Uniroyal Disclosure
Schedule, there are no outstanding subscriptions, options, war-
rants, puts, calls, agreements, understandings, claims or other
commitments or rights of any type relating to the issuance,
sale or transfer by Uniroyal of any securities of Uniroyal, nor
are there outstanding any securities which are convertible into
or exchangeable for any shares of capital stock of Uniroyal;
and Uniroyal has no obligation of any kind to issue any
additional securities or to pay for securities of Uniroyal or
any predecessor. Uniroyal has no outstanding bonds,
debentures, notes or other similar obligations the holders of
which have the right to vote generally with holders of Uniroyal
Common Stock.
4.5 Conflicts; Consents and Approvals. Neither the
execution and delivery of this Agreement by Uniroyal, nor the
consummation of the transactions contemplated hereby will:
(a) conflict with, or result in a breach of any pro-
vision of the Certificate of Incorporation, as amended, or
Bylaws, as amended and restated, of Uniroyal;
(b) except as disclosed to Crompton on the date
hereof, violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event
which, with the giving of notice, the passage of time or
otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time
or otherwise) to terminate, accelerate, modify or call a
default under, or result in the termination, acceleration
or cancellation of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the
properties or assets of Uniroyal or any of its
subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of
trust, license, contract, undertaking, agreement, lease or
other instrument or obligation to which Uniroyal or any of
its subsidiaries is a party;
(c) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Uniroyal or any
of its subsidiaries or any of their respective properties
or assets; or
(d) require any action or consent or approval of, or
review by, or registration or filing by Uniroyal or any of
its affiliates with any third party or any Governmental
Authority, other than (i) authorization of the Merger and
the transactions contemplated hereby by Uniroyal
Stockholders, (ii) actions required by the HSR Act and
(iii) registrations or other actions required under
federal and state securities laws as are contemplated by
this Agreement;
except, in the case of (b), (c) and (d), for any of the
foregoing that would not, individually or in the aggregate,
have a material adverse effect on Uniroyal.
4.6 No Material Adverse Change. Except as set forth
in the Uniroyal SEC Documents filed with the Commission as of
the date hereof or in Section 4.6 to the Uniroyal Disclosure
Schedule, since October 1, 1995, each of Uniroyal and its
subsidiaries has conducted its business in the ordinary course,
consistent with past practice, and there has been no (i)
material adverse change in the assets, liabilities, results of
operations, business or financial condition of Uniroyal and its
subsidiaries taken as a whole, (ii) material adverse effect on
the ability of Uniroyal to consummate the transactions contem-
plated hereby, (iii) declaration, setting aside or payment of
any dividend or other distribution with respect to its capital
stock, or (iv) material change in its accounting principles,
practices or methods.
4.7 Uniroyal SEC Documents. Each of Uniroyal and
its subsidiaries has timely filed with the Commission all
forms, reports, schedules, statements, exhibits and other
documents required to be filed by it since December 31, 1992
under the Exchange Act or the Securities Act (such documents,
as supplemented and amended since the time of filing, collec-
tively, the "Uniroyal SEC Documents"). The Uniroyal SEC
Documents, including, without limitation, any financial state-
ments or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on
the dates of effectiveness and the dates of mailing, respec-
tively) (a) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities
Act, as the case may be. The financial statements of Uniroyal
included in the Uniroyal SEC Documents at the time filed (and,
in the case of registration statements and proxy statements, on
the date of effectiveness and the date of mailing, respec-
tively) complied as to form in all material respects with ap-
plicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were
prepared in accordance with generally accepted accounting prin-
ciples applied on a consistent basis during the periods in-
volved (except as may be indicated in the notes thereto or, in
the case of unaudited statements, as permitted by Form 10-Q of
the Commission), and fairly present (subject in the case of
unaudited statements to normal, recurring and year-end audit
adjustments) in all material respects the consolidated finan-
cial position of Uniroyal as at the dates thereof and the
consolidated results of its operations and cash flows for the
periods then ended.
4.8 Taxes. Except as set forth in the Uniroyal SEC
Documents or in Section 4.8 to the Uniroyal Disclosure
Schedule, (i) Uniroyal has duly filed all federal, and material
state, local and foreign income, franchise, excise, real and
personal property and other tax returns and reports (including,
but not limited to, those filed on a consolidated, combined or
unitary basis) required to have been filed by Uniroyal prior to
the date hereof, (ii) all of the foregoing returns and reports
are true and correct in all material respects, and Uniroyal has
paid or, prior to the Effective Time, will pay all taxes
required to be paid in respect of the periods covered by such
returns or reports to any federal, state, foreign, local or
other taxing authority, (iii) Uniroyal has paid or made
adequate provision (in accordance with generally accepted
accounting principles) in the financial statements of Uniroyal
included in the Uniroyal SEC Documents for all taxes payable in
respect of all periods ending on or prior to December 31, 1995,
(iv) neither Uniroyal nor any of its subsidiaries will have any
material liability for any taxes in excess of the amounts so
paid or reserves so established and neither Uniroyal nor any of
its subsidiaries is delinquent in the payment of any material
tax, assessment or governmental charge and none of them has
requested any extension of time within which to file any re-
turns in respect of any fiscal year which have not since been
filed, (v) no deficiencies for any tax, assessment or gov-
ernmental charge have been proposed in writing, asserted or
assessed (tentatively or definitely), in each case, by any tax-
ing authority, against Uniroyal or any of its subsidiaries for
which there are not adequate reserves (in accordance with gen-
erally accepted accounting principles), (vi) as of the date of
this Agreement, there are no pending requests for waivers of
the time to assess any such tax, other than those made in the
ordinary course and for which payment has been made or there
are adequate reserves (in accordance with generally accepted
accounting principles), (vii) the federal income tax returns of
Uniroyal and its subsidiaries have been audited by the Internal
Revenue Service through the fiscal year ending October 1, 1989,
and (viii) Uniroyal has not filed an election under Section
341(f) of the Code to be treated as a consenting corporation.
4.9 Compliance with Law. Each of Uniroyal and its
subsidiaries is in compliance with, and at all times since
December 31, 1992 has been in compliance with, all Applicable
Laws relating to it or its business or properties, except for
any such failures to be in compliance therewith which,
individually or in the aggregate, would not have a material
adverse effect on Uniroyal.
4.10 Registration Statement. None of the informa-
tion provided by Uniroyal or any of its subsidiaries for
inclusion in the Registration Statement at the time it becomes
effective or, in the case of the Joint Proxy Statement, at the
date of mailing, will contain any untrue statement of a mate-
rial fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The Registration Statement and Joint
Proxy Statement, except for such portions thereof that relate
only to Crompton and its subsidiaries, will each comply as to
form in all material respects with the provisions of the
Securities Act and the Exchange Act.
4.11 Litigation. Except as set forth in Section
4.11 to the Uniroyal Disclosure Schedule or in the Uniroyal SEC
Documents, there is no Action pending or, to the knowledge of
Uniroyal, threatened against Uniroyal or any of its
subsidiaries which, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on
Uniroyal or a material adverse effect on the ability of
Uniroyal to consummate the transactions contemplated hereby.
Neither Uniroyal nor any of its subsidiaries is subject to any
outstanding order, writ, injunction or decree which,
individually or in the aggregate, insofar as can be reasonably
foreseen, could have a material adverse effect on Uniroyal or a
material adverse effect on the ability of Uniroyal to consum-
mate the transactions contemplated hereby.
4.12 Brokerage and Finder's Fees; Expenses. Except
for Uniroyal's obligation to Morgan Stanley & Co. Incorporated
("Morgan") (a copy of the written agreement relating to such
obligation having previously been provided to Crompton),
Uniroyal has not incurred and will not incur, directly or
indirectly, any brokerage, finder's or similar fee in con-
nection with the transactions contemplated by this Agreement.
Other than the foregoing obligation to Morgan, Uniroyal is not
aware of any claim for payment of any finder's fees, brokerage
or agent's commissions or other like payments in connection
with the negotiation of this Agreement or in connection with
the transactions contemplated hereby. A bona fide written
estimate of the aggregate amount of all fees and expenses ex-
pected to be paid by Uniroyal to all attorneys, accountants and
investment bankers in connection with the Merger has been
provided to Crompton on the date hereof.
4.13 Opinion of Financial Advisor. Uniroyal has re-
ceived the opinion of Morgan to the effect that, as of the date
hereof, the consideration to be received by the Uniroyal
Stockholders is fair to the Uniroyal Stockholders from a
financial point of view.
4.14 Accounting Matters. To the best knowledge of
Uniroyal, neither Uniroyal nor any of its affiliates has taken
or agreed to take any action that (without giving effect to any
actions taken or agreed to be taken by Crompton or any of its
affiliates) would prevent Crompton from accounting for the
business combination to be effected by the Merger as a pooling-
of-interests for financial reporting purposes in accordance
with Accounting Principles Board Opinion No. 16, the
interpretative releases issued pursuant thereto, and the
pronouncements of the Commission thereon.
4.15 Employee Benefit Plans.
(a) For purposes of this Section 4.15, the following
terms have the definitions given below:
"Controlled Group Liability" means any and all
liabilities under (i) Title IV of ERISA, (ii) section
302 of ERISA, (iii) sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of
section 601 et seq. of ERISA and section 4980B of the
Code, and (v) corresponding or similar provisions of
foreign laws or regulations, in each case other than
pursuant to the Uniroyal Plans.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and the regulations
thereunder.
"ERISA Affiliate" means, with respect to any
entity, trade or business, any other entity, trade or
business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or Sec-
tion 4001(b)(1) of ERISA that includes the first en-
tity, trade or business, or that is a member of the
same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
"Uniroyal Plans" means all employee benefit
plans, programs, policies, practices, and other
arrangements providing benefits to any employee or
former employee or beneficiary or dependent thereof,
whether or not written, and whether covering one
person or more than one person, sponsored or
maintained by Uniroyal or any of its subsidiaries or
to which Uniroyal or any of its subsidiaries
contributes or is obligated to contribute. Without
limiting the generality of the foregoing, the term
"Uniroyal Plans" includes all employee welfare
benefit plans within the meaning of Section 3(1) of
ERISA and all employee pension benefit plans within
the meaning of Section 3(2) of ERISA.
(b) All material Uniroyal Plans for the benefit of
the executive officers of Uniroyal have been disclosed in the
Uniroyal SEC Documents. With respect to each Uniroyal Plan,
Uniroyal has made available to Crompton a true, correct and
complete copy of: (i) each writing constituting a part of such
Uniroyal Plan, including without limitation all plan documents,
benefit schedules, trust agreements, and insurance contracts
and other funding vehicles; (ii) the most recent Annual Report
(Form 5500 Series) and accompanying schedule, if any; (iii) the
current summary plan description, if any; (iv) the most recent
annual financial report, if any; and (v) the most recent
determination letter from the IRS, if any.
(c) The Internal Revenue Service has issued a favor-
able determination letter with respect to each Uniroyal Plan
that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code (a "Qualified Uniroyal Plan") and
there are no existing circumstances nor any events that have
occurred that could adversely affect the qualified status of
any Qualified Uniroyal Plan or the related trust, except as set
forth in Section 4.15(c) to the Uniroyal Disclosure Schedule.
(d) All contributions required to be made to any
Uniroyal Plan by Applicable Laws or by any plan document or
other contractual undertaking, and all premiums due or payable
with respect to insurance policies funding any Uniroyal Plan,
for any period through the date hereof have been timely made or
paid in full and through the Closing Date will be timely made
or paid in full or, to the extent not required to be made or
paid on or before the date hereof or the Closing Date, as
applicable, have been or will be fully reflected in Uniroyal's
financial statements contained in the Uniroyal SEC Documents.
(e) Except as set forth in Section 4.15(c) to the
Uniroyal Disclosure Schedule, Uniroyal and its subsidiaries
have complied, and are now in compliance, in all material
respects, with all provisions of ERISA, the Code and all laws
and regulations applicable to the Uniroyal Plans. There is not
now, and there are no existing, circumstances that standing
alone could give rise to, any requirement for the posting of
security with respect to a Uniroyal Plan or the imposition of
any lien on the assets of Uniroyal or any of its subsidiaries
under ERISA or the Code.
(f) Except as set forth in Section 4.15(f) to the
Uniroyal Disclosure Schedule, no Uniroyal Plan is subject to
Title IV or Section 302 of ERISA or Section 412 or 4971 of the
Code. No Uniroyal Plan is a Multiemployer Plan (as defined in
Section 3.9) or a Multiple Employer Plan (as defined in Section
3.9), nor has Uniroyal or any of its subsidiaries or any of
their respective ERISA Affiliates, at any time within five
years before the date hereof, contributed to or been obligated
to contribute to any Multiemployer Plan or Multiple Employer
Plan.
(g) There does not now exist, and there are no ex-
isting, circumstances that could result in, any Controlled
Group Liability that would be a liability of Uniroyal or any of
its subsidiaries following the Closing, other than normal
funding responsibilities. Without limiting the generality of
the foregoing, neither Uniroyal nor any of its subsidiaries nor
any of their respective ERISA Affiliates has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.
(h) Except as disclosed in the Uniroyal SEC
Documents filed with the Commission as of the date hereof or as
disclosed to Crompton on the date hereof and except for health
continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA, neither Uniroyal nor any of its
subsidiaries has any liability for life, health, medical or
other welfare benefits to former employees or beneficiaries or
dependents thereof.
(i) A statement by Uniroyal, to the best of
Uniroyal's knowledge, as to the "excess parachute payments"
within the meaning of Section 280G of the Code which may become
payable by Uniroyal or any of its subsidiaries in connection
with the transactions contemplated hereby either solely as a
result thereof or as a result of such transactions in
conjunction with any other events has been provided to Crompton
by Uniroyal on the date hereof.
(j) There are no pending or threatened claims (other
than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the
Uniroyal Plans, any fiduciaries thereof with respect to their
duties to the Uniroyal Plans or the assets of any of the trusts
under any of the Uniroyal Plans which could reasonably be ex-
pected to result in any material liability of Uniroyal or any
of its subsidiaries to the Pension Benefit Guaranty
Corporation, the Department of Treasury, the Department of
Labor or any Multiemployer Plan.
4.16 Contracts. None of Uniroyal, any of its
subsidiaries, or, to the knowledge of Uniroyal, any other party
thereto is in violation of or in default in respect of, nor has
there occurred an event or condition which with the passage of
time or giving of notice (or both) would constitute a default
by Uniroyal under, any Contract to which it is a party, except
such violations or defaults under such Contracts which,
individually or in the aggregate, would not have a material
adverse effect on Uniroyal.
4.17 Labor Relations. There is no unfair labor
practice complaint against Uniroyal or any of its subsidiaries
pending before the NLRB and there is no labor strike, dispute,
slowdown or stoppage, or any union organizing campaign, actu-
ally pending or, to the knowledge of Uniroyal, threatened
against or involving Uniroyal or any of its subsidiaries,
except for any such proceedings which would not have a material
adverse effect on Uniroyal. Except as disclosed in the
Uniroyal SEC Documents, neither Uniroyal nor any of its
subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or under-
standing with a labor union or labor organization. To the
knowledge of Uniroyal, there are no organizational efforts with
respect to the formation of a collective bargaining unit pres-
ently being made or threatened involving employees of Uniroyal
or any of its subsidiaries.
4.18 Undisclosed Liabilities. Except (i) as and to
the extent disclosed or reserved against on the balance sheet
of Uniroyal as of December 31, 1995 or the notes thereto
included in the Uniroyal SEC Documents or otherwise disclosed
in the Uniroyal SEC Documents filed with the Commission as of
the date hereof, or (ii) as incurred after the date thereof in
the ordinary course of business consistent with prior practice
and not prohibited by this Agreement, neither Uniroyal nor any
of its subsidiaries have any liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent
or otherwise and whether due or to become due, that, individu-
ally or in the aggregate, have or would reasonably be expected
to have a material adverse effect on Uniroyal.
4.19 Operation of Uniroyal's Business. (a) Since
October 1, 1995 through the date of this Agreement, none of
Uniroyal or any of its subsidiaries has engaged in any
transaction which, if done after execution of this Agreement,
would violate Section 5.3(c) hereof except as described or
reflected in the Uniroyal SEC Documents or as set forth in
Section 4.19 to the Uniroyal Disclosure Schedule.
4.20 Permits; Compliance. Each of Uniroyal and its
subsidiaries is in possession of all Permits necessary to own,
lease and operate its properties and to carry on its business
as it is now being conducted, except for any such Permits the
failure of which to possess, individually or in the aggregate,
would not reasonably be expected to have a material adverse ef-
fect on Uniroyal.
4.21 Environmental Matters.
(a) Except as set forth in Section 4.21 to the
Uniroyal Disclosure Schedule or set forth in the Uniroyal SEC
Documents filed with the Commission as of the date hereof or in
a report previously provided by Uniroyal to Crompton, there
are, with respect to Uniroyal, its subsidiaries or any
predecessor of the foregoing, no past or present violations of
Environmental Laws, releases of any material into the
environment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give
rise to any common law environmental liability or any liability
under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 or similar federal, state, local or
foreign laws, other than those which, individually or in the
aggregate, would not reasonably be expected to have a material
adverse effect on Uniroyal, and none of Uniroyal and its
subsidiaries has received any notice with respect to any of the
foregoing, nor is any Action pending or threatened in connec-
tion with any of the foregoing.
(b) Except as set forth in Section 4.21 to the
Uniroyal Disclosure Schedule or set forth in the Uniroyal SEC
Documents filed with the Commission as of the date hereof or in
a report previously provided by Uniroyal to Crompton, no
Hazardous Materials are contained on or about any real property
currently owned, leased or used by Uniroyal or any of its
subsidiaries and no Hazardous Materials were released on or
about any real property previously owned, leased or used by
Uniroyal or any of its subsidiaries during the period the
property was so owned, leased or used, except in the normal
course of Uniroyal's business.
4.22 Crompton Stock Ownership. Neither Uniroyal nor
any of its subsidiaries owns any shares of Crompton Common
Stock or other securities convertible into Crompton Common
Stock.
4.23 Board Meeting. The Board of Directors of
Uniroyal, at a meeting duly called and held, has by the
required vote of the directors then in office determined that
this Agreement and the transactions contemplated hereby,
including the Merger, taken together, are fair to and in the
best interests of Uniroyal and the stockholders of Uniroyal.
4.24 DGCL Section 203 and State Takeover Laws.
Prior to the date hereof, the Board of Directors of Uniroyal
has taken all action necessary to exempt under or make not
subject to (x) Section 203 of the DGCL and (y) any other state
takeover law or state law that purports to limit or restrict
business combinations or the ability to acquire or vote shares:
(i) the execution of this Agreement, (ii) the Merger and (iii)
the transactions contemplated hereby.
4.25 Uniroyal Rights Agreement. Uniroyal has taken
or will take all action necessary, if any, in respect of the
Rights Agreement dated as of April 29, 1993, between Uniroyal
and Chemical Bank, as amended (the "Uniroyal Rights
Agreement"), so as to provide that none of Crompton and its
affiliates will become an "Acquiring Person" and that no "Stock
Acquisition Date," "Distribution Date" or "Triggering Event"
(as such terms are defined in the Uniroyal Rights Agreement)
will occur as a result of the execution of this Agreement or
the consummation of the Merger pursuant to this Agreement or
the acquisition or transfer of shares of Uniroyal Common Stock
by Crompton.
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to
the period from and after the execution of this Agreement.
5.1 Mutual Covenants.
(a) General. Each of the parties shall use its rea-
sonable efforts to take all action and to do all things neces-
sary, proper or advisable to consummate the Merger and the
transactions contemplated by this Agreement (including, without
limitation, using its reasonable efforts to cause the condi-
tions set forth in Article VI for which they are responsible to
be satisfied as soon as reasonably practicable and to prepare,
execute and deliver such further instruments and take or cause
to be taken such other and further action as any other party
hereto shall reasonably request).
(b) HSR Act. As soon as practicable, and in any
event no later than ten (10) business days after the date here-
of, each of the parties hereto will file any Notification and
Report Forms and related material required to be filed by it
with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the HSR Act with
respect to the Merger, will use its reasonable efforts to ob-
tain an early termination of the applicable waiting period, and
shall promptly make any further filings pursuant thereto that
may be necessary, proper or advisable; provided, however, that
neither Crompton nor any of its subsidiaries shall be required
hereunder to divest or hold separate any portion of their busi-
ness or assets.
(c) Other Governmental Matters. Each of the parties
shall use its reasonable efforts to take any additional action
that may be necessary, proper or advisable in connection with
any other notices to, filings with, and authorizations, con-
sents and approvals of any Governmental Authority that it may
be required to give, make or obtain.
(d) Pooling-of-Interests. Each of the parties shall
use its best efforts to cause the Merger to qualify for
pooling-of-interests accounting treatment for financial report-
ing purposes.
(e) Tax-Free Treatment. Each of the parties shall
use its best efforts to cause the Merger to constitute a tax-
free "reorganization" under Section 368(a) of the Code and to
permit Wachtell, Lipton, Rosen & Katz and Skadden, Arps, Slate,
Meagher & Flom to issue their respective opinions provided for
in Section 6.1(g).
(f) Public Announcements. Unless otherwise required
by Applicable Laws or requirements of the National Association
of Securities Dealers or the NYSE (and in that event only if
time does not permit), at all times prior to the earlier of the
Effective Time or termination of this Agreement pursuant to
Section 7.1, Crompton and Uniroyal shall consult with each
other before issuing any press release with respect to the
Merger and shall not issue any such press release prior to such
consultation.
(g) Access. From and after the date of this Agree-
ment until the Effective Time (or the termination of this
Agreement), Crompton and Uniroyal shall permit representatives
of the other to have appropriate access at all reasonable times
to the other's premises, properties, books, records, contracts,
tax records, documents, customers and suppliers. Information
obtained by Crompton and Uniroyal pursuant to this Section
5.1(g) shall be subject to the provisions of the confidential-
ity agreement between them dated March 18, 1996 (the "Confiden-
tiality Agreement"), which agreement remains in full force and
effect.
5.2 Covenants of Crompton.
(a) Crompton Stockholders Meeting. Crompton shall
take all action in accordance with Applicable Laws and the
Crompton Articles and By-Laws necessary to convene a meeting of
Crompton Stockholders as promptly as practicable to consider
and vote upon the approval of the Merger, this Agreement and
the transactions contemplated hereby.
(b) Preparation of Joint Proxy Statement. Crompton
shall cooperate with Uniroyal to, and shall, as soon as is
reasonably practicable, prepare and file the Joint Proxy State-
ment with the Commission on a confidential basis. Crompton
shall cooperate with Uniroyal to, and shall, prepare and file
the Registration Statement with the Commission as soon as is
reasonably practicable following clearance of the Joint Proxy
Statement by the Commission and shall cooperate with Uniroyal
to, and shall, use all reasonable efforts to have the Registra-
tion Statement declared effective by the Commission as promptly
as practicable and to maintain the effectiveness of the Regis-
tration Statement through the Effective Time. Crompton shall
use all reasonable efforts to mail at the earliest practicable
date to Crompton Stockholders the Joint Proxy Statement, which
shall include all information required under Applicable Laws to
be furnished to Crompton Stockholders in connection with the
Merger and the transactions contemplated thereby. Crompton
shall advise Uniroyal promptly after it receives notice of (i)
the Registration Statement being declared effective or any
supplement or amendment thereto being filed with the
Commission, (ii) the issuance of any stop order in respect of
the Registration Statement, and (iii) the receipt of any
correspondence, comments or requests from the Commission in
respect of the Registration Statement. Crompton also shall
cooperate with Uniroyal to, and shall, take such other rea-
sonable actions (other than qualifying to do business in any
jurisdiction in which it is not so qualified) required to be
taken under any applicable state securities laws in connection
with the issuance of shares of Crompton Common Stock in the
Merger.
(c) Conduct of Crompton's Operations. During the
period from the date of this Agreement to the Effective Time,
and except as set forth in Section 5.2(c) to the Crompton
Disclosure Schedule, Crompton shall conduct its operations in
the ordinary course except as expressly contemplated by this
Agreement and the transactions contemplated hereby and shall
use its reasonable efforts to maintain and preserve its
business organization and its material rights and franchises
and to retain the services of its officers and key employees
and maintain relationships with customers, suppliers and other
third parties to the end that their goodwill and ongoing
business shall not be impaired in any material respect.
(d) Indemnification. From and after the Effective
Time, Crompton shall cause the Surviving Corporation to indem-
nify and hold harmless to the fullest extent permitted under
Applicable Law each person who is now, or has been at any time
prior to the date hereof, an officer, director, employee,
trustee or agent of Uniroyal (or any subsidiary or division
thereof), including, without limitation, each person control-
ling any of the foregoing persons (individually, an "Indemni-
fied Party" and collectively, the "Indemnified Parties"),
against all losses, claims, damages, liabilities, costs or ex-
penses (including attorneys' fees), judgments, fines, penalties
and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation arising out of or
pertaining to acts or omissions, or alleged acts or omissions,
by them in their capacities as such, whether commenced, as-
serted or claimed before or after the Effective Time and in-
cluding, without limitation, liabilities arising under the Se-
curities Act, the Exchange Act and state corporation laws in
connection with the Merger. Crompton shall cause the Surviving
Corporation to keep in effect Uniroyal's current provisions in
its Certificate of Incorporation and Bylaws providing for
exculpation of director and officer liability and
indemnification of the Indemnified Parties to the fullest
extent permitted under the DGCL, which provisions shall not be
amended except as required by Applicable Law or except to make
changes permitted by law that would enlarge the Indemnified
Parties' right of indemnification. In the event of any actual
or threatened claim, action, suit, proceeding or investigation
in respect of such acts or omissions, (i) Crompton shall cause
the Surviving Corporation to pay the reasonable fees and
expenses of counsel selected by the indemnified party, which
counsel shall be reasonably acceptable to Crompton, in advance
of the final disposition of any such action to the full extent
permitted by Applicable Law, upon receipt of any undertaking
required by Applicable Law, and (ii) Crompton shall cause the
Surviving Corporation to cooperate in the defense of any such
matter; provided, however, that the Surviving Corporation shall
not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld).
(e) Directors' and Officers' Insurance. Crompton
agrees to use its reasonable best efforts to cause the
Surviving Corporation to maintain in effect for not less than
six years after the Effective Time the current policies of
directors' and officers' liability insurance maintained by
Uniroyal with respect to matters occurring prior to the
Effective Time; provided, however, that (i) the Surviving
Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions which are no less
advantageous to the covered officers and directors and (ii) the
Surviving Corporation shall not be required to pay an annual
premium for such insurance coverage in excess of four times the
current annual premium paid by Uniroyal for its existing
coverage, but in such case shall purchase as much coverage as
possible for such amount.
(f) Employee Benefits. Crompton covenants and
agrees that, for a period of two years from and after the Ef-
fective Time, it will cause the Surviving Corporation or its
subsidiaries to provide for the benefit of employees of the
Surviving Corporation or its subsidiaries benefits that are no
less favorable, in the aggregate, as those provided to
employees of Uniroyal or its subsidiaries immediately prior to
the date of this Agreement. If any Employee (as defined below)
becomes a participant in any employee benefit or compensation
plan of Crompton, a Crompton subsidiary (other than the
Surviving Corporation) or a Crompton affiliate, such Employee
shall be given credit under such plan for all service with
Uniroyal and its subsidiaries, affiliates and predecessors
which is recognized by Uniroyal and is rendered prior to the
time the Employee becomes such a participant, solely for
purposes of determining eligibility and vesting (but not for
benefit accrual or any other purposes); provided, however, such
service need not be credited to the extent it would result in a
duplication of benefits, including, without limitation, benefit
accrual service under defined benefit plans. To the extent
employee benefit plans of Crompton or its subsidiaries or
affiliates provide medical or dental welfare benefits to
Employees or Former Employees (as defined below) after the
Effective Time, such plans shall waive any preexisting condi-
tions and actively-at-work exclusions and shall provide that
any expenses incurred on or before the Effective Time shall be
taken into account under such plans for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket
provisions. For purposes of the foregoing, (i) "Employees"
shall mean the employees of Uniroyal or a Uniroyal subsidiary
whose terms of employment are not subject to a collective
bargaining agreement immediately prior to the Effective Time,
including, without limitation, any employee who is absent at
the Effective Time on short-term disability, long-term dis-
ability, Workers' Compensation or an authorized leave (such as
maternity, military, family and medical leaves or other leaves
where return to work is subject to statutory requirements), and
(ii) "Former Employees" shall mean any former employees of
Uniroyal or a Uniroyal subsidiary whose employment terminated
prior to the Effective Time (whether by retirement or other-
wise).
Crompton shall cause the Surviving Corporation and
its subsidiaries to honor all Uniroyal's existing agreements
with any Employee or Former Employee and shall pay by wire
transfer at the Closing the amounts referred to in that certain
letter agreement dated the date hereof between Crompton and
Uniroyal. The parties hereto agree that, prior to the Closing,
Uniroyal will, with the participation of Crompton, use its best
efforts to enter into amendments (reasonably satisfactory to
Crompton) to the existing employment agreements with all
individuals listed in Section 5.2(f) to the Crompton Disclosure
Schedule to reflect the amendments described on the term sheets
dated April 30, 1996, signed by such individuals.
A description of the amounts to be paid at Closing to
various individuals who have existing employment agreements
with Uniroyal, if any such individual notifies Crompton in
writing prior to the Closing that he will terminate his
employment with Uniroyal as of the Closing, has been agreed
upon by Crompton and Uniroyal and provided to Crompton by
Uniroyal on the date hereof.
(g) Notification of Certain Matters. Crompton shall
give prompt notice to Uniroyal of (i) the occurrence or non-
occurrence of any event the occurrence or non-occurrence of
which would cause any Crompton or Subcorp representation or
warranty contained in this Agreement to be untrue or inaccurate
at or prior to the Effective Time and (ii) any material failure
of Crompton to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to
this Section 5.2(g) shall not limit or otherwise affect the
remedies available hereunder to Uniroyal.
(h) No Solicitation. Crompton agrees that, during
the term of this Agreement, it shall not, and shall not
authorize or permit any of its subsidiaries or any of its or
its subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to (i) solicit,
initiate, encourage or facilitate, or furnish or disclose non-
public information in furtherance of, any inquiries or the
making of any proposal with respect to any recapitalization,
merger, consolidation or other business combination involving
Crompton, or acquisition of any capital stock or any material
portion of the assets (except as set forth in Section 5.2(h) to
the Crompton Disclosure Schedule and except for acquisition of
assets in the ordinary course of business consistent with past
practice) of Crompton, or any combination of the foregoing (a
"Crompton Competing Transaction"), (ii) negotiate, explore or
otherwise engage in discussions with any person (other than
Uniroyal or its directors, officers, employees, agents and
representatives) with respect to any Crompton Competing
Transaction or (iii) enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by
this Agreement; provided that Crompton may (i) furnish infor-
mation to, and negotiate or otherwise engage in discussions
with, any party who delivers a written proposal for a Crompton
Competing Transaction if and so long as the Board of Directors
of Crompton determines in good faith by a majority vote, based
upon advice of its outside legal counsel, that failing to take
such action would reasonably be expected to constitute a breach
of the fiduciary duties of the Board and determines in good
faith by a majority vote that such a proposal is more favorable
to Crompton Stockholders in the aggregate and from a financial
point of view than the transactions contemplated by this
Agreement (including any adjustment to the terms and conditions
of such transactions proposed by Uniroyal in response to such
Crompton Competing Transaction) and (ii) take a position with
respect to the Merger or a Crompton Competing Transaction, or
amend or withdraw such position, in compliance with Rule 14d-9
or Rule 14e-2 promulgated under the Exchange Act with regard to
a Crompton Competing Transaction. Crompton will immediately
cease all existing activities, discussions and negotiations
with any parties conducted heretofore with respect to any of
the foregoing. From and after the execution of this Agreement,
Crompton shall immediately advise Uniroyal in writing of the
receipt, directly or indirectly, of any inquiries, discussions,
negotiations, or proposals relating to a Crompton Competing
Transaction (including the specific terms thereof) and promptly
furnish to Uniroyal a copy of any such proposal or inquiry in
addition to any information provided to or by any third party
relating thereto.
(i) [Intentionally Omitted]
(j) Listing Application. Crompton shall, as soon as
practicable following the date hereof, prepare and submit to
the NYSE a listing application covering the shares of Crompton
Common Stock (and associated rights) issuable in the Merger,
and shall use its reasonable best efforts to obtain, prior to
the Effective Time, approval for the listing of such shares of
Crompton Common Stock (and associated rights), subject to
official notice of issuance.
(k) Directors of Crompton. Immediately after the
Effective Time, Crompton will take such action as may be
necessary to cause (x) Robert J. Mazaika, Uniroyal's Chairman,
President and Chief Executive Officer, to be elected to the
Board of Directors of Crompton as Crompton's "Vice Chairman,"
(y) Thomas M. Begel, a director of Uniroyal, to be elected to
the Board of Directors of Crompton and (z) Harry Corless, a
director of Uniroyal, to be elected to the Board of Directors
of Crompton, each of the foregoing to be elected to a different
class of the Crompton Board.
(l) Affiliates of Crompton. Crompton shall use its
reasonable best efforts to cause each such person who may be at
the Effective Time or was on the date hereof an "affiliate" of
Crompton within the meaning of Rule 145 under the Securities
Act, to execute and deliver to Uniroyal no less than 35 days
prior to the date of the meeting of Crompton Stockholders to
approve the Merger written undertakings in the form reasonably
acceptable to Uniroyal.
(m) Change in Control. Crompton agrees that the
consummation of the Merger shall constitute a "Change in
Control" of Uniroyal for all purposes within the meaning of all
compensation or benefit plans or agreements of Uniroyal and its
subsidiaries, including without limitation, the Uniroyal 1993
Stock Option Plan, the supplemental executive retirement
agreements, the share purchase agreements, the Management
Subscription Agreement and the employment agreements. In
amplification of the foregoing, Crompton specifically agrees
that, if the holder of a Uniroyal employment agreement shall
terminate his employment within one year after the consummation
of the Merger, such termination shall be deemed to be upon a
termination of employment described in clause (C) of the first
sentence of Section 7(d) of Uniroyal's employment agreements
with Messrs. Mazaika, Johnson, Ingulli, Krakower, Melore,
Eisenberg, Stephenson and Hagen or clause (B) of the first
sentence of Section 3(d) of Uniroyal's employment agreement
with Mr. Castaldi, except as otherwise agreed to by such
individual after the date hereof.
5.3 Covenants of Uniroyal.
(a) Uniroyal Stockholders Meeting. Uniroyal shall
take all action in accordance with Applicable Laws and its
Certificate of Incorporation, as amended, and Bylaws, as
amended and restated, necessary to convene a meeting of
Uniroyal Stockholders as promptly as practicable to consider
and vote upon the approval of the Merger, this Agreement and
the transactions contemplated hereby.
(b) Information for the Registration Statement and
Preparation of Joint Proxy Statement. Uniroyal shall promptly
furnish Crompton with all information concerning it as may be
required for inclusion in the Registration Statement. Uniroyal
shall cooperate with Crompton in the preparation of the Regis-
tration Statement in a timely fashion and shall use all reason-
able efforts to have the Registration Statement declared effec-
tive by the Commission as promptly as practicable. If at any
time prior to the Effective Time, any information pertaining to
Uniroyal contained in or omitted from the Registration
Statement makes such statements contained in the Registration
Statement false or misleading, Uniroyal shall promptly so in-
form Crompton and provide Crompton with the information neces-
sary to make statements contained therein not false and mis-
leading. Uniroyal shall use all reasonable efforts to
cooperate with Crompton in the preparation and filing of the
Joint Proxy Statement with the Commission on a confidential
basis. Uniroyal shall use all reasonable efforts to mail at
the earliest practicable date to Uniroyal Stockholders the
Joint Proxy Statement, which shall include all information
required under Applicable Laws to be furnished to Uniroyal
Stockholders in connection with the Merger and the transactions
contemplated thereby.
(c) Conduct of Uniroyal's Operations. During the
period from the date of this Agreement to the Effective Time,
Uniroyal shall conduct its operations in the ordinary course
except as expressly contemplated by this Agreement and the
transactions contemplated hereby and shall use its reasonable
efforts to maintain and preserve its business organization and
its material rights and franchises and to retain the services
of its officers and key employees and maintain relationships
with customers, suppliers and other third parties to the end
that their goodwill and ongoing business shall not be impaired
in any material respect. Without limiting the generality of
the foregoing, during the period from the date of this Agree-
ment to the Effective Time or the earlier termination of this
Agreement pursuant to Section 7.1, Uniroyal shall not, except
as otherwise expressly contemplated by this Agreement and the
transactions contemplated hereby or as set forth in Section
5.3(c) to the Uniroyal Disclosure Schedule, without the prior
written consent of Crompton:
(i) do or effect any of the following actions with
respect to its securities: (A) adjust, split, combine or
reclassify its capital stock, (B) make, declare or pay any
dividend or distribution on, or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible
into or exchangeable for any shares of its capital stock
(except in connection with the use of shares of capital
stock of Uniroyal to pay the exercise price or tax with-
holding in connection with stock-based employee benefit
plans of Uniroyal or any of its subsidiaries), (C) grant
any person any right or option to acquire any shares of
its capital stock, (D) issue, deliver or sell or agree to
issue, deliver or sell any additional shares of its capi-
tal stock or any securities or obligations convertible
into or exchangeable or exercisable for any shares of its
capital stock or such securities (except pursuant to the
exercise of outstanding warrants, options or rights to
purchase Uniroyal Common Stock), or (E) enter into any
agreement, understanding or arrangement with respect to
the sale or voting of its capital stock;
(ii) sell, transfer, lease, pledge, mortgage, encum-
ber or otherwise dispose of any of its property or assets
which are material, individually or in the aggregate,
other than in the ordinary course of business consistent
with past practice;
(iii) make or propose any changes in its Certificate
of Incorporation, as amended, or Bylaws, as amended and
restated or other organizational documents;
(iv) merge or consolidate with any other person or
acquire a material amount of assets or capital stock of
any other person or enter into any confidentiality agree-
ment with any person, other than in connection with this
Agreement and the transactions contemplated hereby;
(v) incur, create, assume or otherwise become liable
for indebtedness for borrowed money, other than in the
ordinary course of business consistent with past practice,
or assume, guarantee, endorse or otherwise as an accom-
modation become responsible or liable for obligations of
any other individual, corporation or other entity, other
than in the ordinary course of business consistent with
past practice;
(vi) enter into or modify any employment, severance,
termination or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termina-
tion pay to, any officer, director, consultant or employee
other than salary increases and bonuses granted in the
ordinary course of business consistent with past practice,
or otherwise increase the compensation or benefits pro-
vided to any officer, director, consultant or employee
except as may be required by Applicable Law, this Agree-
ment, any applicable collective bargaining agreement or a
binding written contract in effect on the date of this
Agreement;
(vii) change its method of doing business or change
any method or principle of accounting in a manner that is
inconsistent with past practice;
(viii) settle any Actions, whether now pending or here-
after made or brought involving an amount in excess of
$250,000;
(ix) modify, amend or terminate, or waive, release or
assign any material rights or claims with respect to, any
material Contract to which Uniroyal is a party or any
confidentiality agreement to which Uniroyal is a party;
(x) incur or commit to any capital expenditures,
obligations or liabilities in respect thereof, other than
in the ordinary course of business consistent with past
practice;
(xi) take any action to exempt under or make not sub-
ject to (x) Section 203 of the DGCL or (y) any other state
takeover law or state law that purports to limit or re-
strict business combinations or the ability to acquire or
vote shares, any person or entity (other than Crompton or
its subsidiaries) or any action taken thereby, which per-
son, entity or action would have otherwise been subject to
the restrictive provisions thereof and not exempt there-
from;
(xii) take any action that would reasonably be ex-
pected to result in the representations and warranties set
forth in Section 4.25 becoming false or inaccurate, or to
otherwise terminate, amend, modify or make inapplicable as
to any person or entity, the Uniroyal Rights Agreement or
redeem the rights issued thereunder;
(xiii) permit or cause any subsidiary to do any of the
foregoing or agree or commit to do any of the foregoing;
or
(xiv) agree in writing or otherwise to take any of the
foregoing actions.
(d) No Solicitation. Uniroyal agrees that, during
the term of this Agreement, it shall not, and shall not
authorize or permit any of its subsidiaries or any of its or
its subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to (i) solicit,
initiate, encourage or facilitate, or furnish or disclose non-
public information in furtherance of, any inquiries or the
making of any proposal with respect to any recapitalization,
merger, consolidation or other business combination involving
Uniroyal, or acquisition of any capital stock or any material
portion of the assets (except as set forth in Section 5.3(d) to
the Uniroyal Disclosure Schedule and except for acquisition of
assets in the ordinary course of business consistent with past
practice) of Uniroyal, or any combination of the foregoing (a
"Uniroyal Competing Transaction"), (ii) negotiate, explore or
otherwise engage in discussions with any person (other than
Crompton, Subcorp or their respective directors, officers, em-
ployees, agents and representatives) with respect to any
Uniroyal Competing Transaction or (iii) enter into any agree-
ment, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other trans-
actions contemplated by this Agreement; provided that Uniroyal
may (i) furnish information to, and negotiate or otherwise
engage in discussions with, any party who delivers a written
proposal for a Uniroyal Competing Transaction if and so long as
the Board of Directors of Uniroyal determines in good faith by
a majority vote, based upon advice of its outside legal
counsel, that failing to take such action would reasonably be
expected to constitute a breach of the fiduciary duties of the
Board and determines in good faith by a majority vote that such
a proposal is more favorable to Uniroyal Stockholders in the
aggregate and from a financial point of view than the transac-
tions contemplated by this Agreement (including any adjustment
to the terms and conditions of such transactions proposed by
Crompton in response to such Uniroyal Competing Transaction)
and (ii) take a position with respect to the Merger or a
Uniroyal Competing Transaction, or amend or withdraw such
position, in compliance with Rule 14d-9 or Rule 14e-2
promulgated under the Exchange Act with regard to a Uniroyal
Competing Transaction. Uniroyal will immediately cease all
existing activities, discussions and negotiations with any
parties conducted heretofore with respect to any of the
foregoing. From and after the execution of this Agreement,
Uniroyal shall immediately advise Crompton in writing of the
receipt, directly or indirectly, of any inquiries, discussions,
negotiations, or proposals relating to a Uniroyal Competing
Transaction (including the status, but not the specific terms
thereof) and promptly furnish to Crompton a copy of any such
proposal or inquiry in addition to any information provided to
or by any third party relating thereto.
(e) Affiliates of Uniroyal. Uniroyal shall use its
reasonable best efforts to cause each such person who may be at
the Effective Time or was on the date hereof an "affiliate" of
Uniroyal within the meaning of Rule 145 under the Securities
Act, to execute and deliver to Crompton no less than 35 days
prior to the date of the meeting of Uniroyal Stockholders to
approve the Merger written undertakings in the form reasonably
acceptable to Crompton.
(f) Notification of Certain Matters. Uniroyal shall
give prompt notice to Crompton of (i) the occurrence or non-
occurrence of any event the occurrence or non-occurrence of
which would cause any Uniroyal representation or warranty con-
tained in this Agreement to be untrue or inaccurate at or prior
to the Effective Time and (ii) any material failure of Uniroyal
to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this
Section 5.3(f) shall not limit or otherwise affect the remedies
available hereunder to Crompton.
ARTICLE VI
CONDITIONS
6.1 Mutual Conditions. The obligations of the par-
ties hereto to consummate the Merger shall be subject to ful-
fillment of the following conditions:
(a) No temporary restraining order, preliminary or
permanent injunction or other order or decree which pre-
vents the consummation of the Merger shall have been is-
sued and remain in effect, and no statute, rule or regu-
lation shall have been enacted by any Governmental Author-
ity which prevents the consummation of the Merger.
(b) All waiting periods applicable to the consumma-
tion of the Merger under the HSR Act shall have expired or
been terminated and all other material consents, approv-
als, permits or authorizations required to be obtained
prior to the Effective Time from any Governmental
Authority in connection with the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby shall have been obtained.
(c) The Merger and the transactions contemplated
hereby shall have been approved by the Uniroyal Stock-
holders in the manner required by any Applicable Law.
(d) The Merger and the transactions contemplated
hereby shall have been approved by the Crompton
Stockholders in the manner required by any Applicable Law.
(e) The Commission shall have declared the Crompton
Registration Statement effective. On the Closing Date and
at the Effective Time, no stop order or similar restrain-
ing order shall have been threatened by the Commission or
entered by the Commission or any state securities admin-
istrator prohibiting the Merger.
(f) No Action shall be instituted by any Governmen-
tal Authority which seeks to prevent consummation of the
Merger or which seeks material damages in connection with
the transactions contemplated hereby which continues to be
outstanding.
(g) Crompton shall have received an opinion of
Wachtell, Lipton, Rosen & Katz and Uniroyal shall have
received an opinion of Skadden, Arps, Slate, Meagher &
Flom substantially to the effect that, on the basis of the
facts, representations and assumptions set forth in such
opinion which are consistent with the state of the facts
then existing, under Applicable Law, for Federal income
tax purposes, the Merger will constitute a reorganization
under Section 368(a) of the Code. In rendering such
opinions, Wachtell, Lipton, Rosen & Katz and Skadden,
Arps, Slate, Meagher & Flom may require and rely on
representations contained in certificates of Crompton,
Uniroyal, Subcorp and others, as they deem reasonably
appropriate.
(h) Crompton shall have received a letter, in form
and substance reasonably satisfactory to Crompton, from
KPMG Peat Marwick LLP, dated the date of the Joint Proxy
Statement and confirmed in writing at the Effective Time,
stating that the Merger will qualify as a pooling of in-
terests transaction under Opinion 16 of the Accounting
Principles Board.
(i) Uniroyal shall have received a letter, in form
and substance reasonably satisfactory to Uniroyal, from
Deloitte & Touche LLP, dated the date of the Joint Proxy
Statement and confirmed in writing at the Effective Time,
stating that the Merger will qualify as a pooling of in-
terests transaction under Opinion 16 of the Accounting
Principles Board.
(j) The shares of Crompton Common Stock to be issued
in the Merger shall have been authorized for inclusion on
the NYSE, subject to official notice of issuance.
(k) Agreements with the officers of Uniroyal jointly
identified by Crompton and Uniroyal on the date hereof and
set forth in Section 5.2(f) to the Crompton Disclosure
Schedule shall have been executed substantially on the
terms set forth in the term sheets dated April 30, 1996,
signed by such officers.
6.2 Conditions to Obligations of Uniroyal. The
obligations of Uniroyal to consummate the Merger and the trans-
actions contemplated hereby shall be subject to the fulfillment
of the following conditions unless waived by Uniroyal:
(a) The representations and warranties of each of
Crompton and Subcorp set forth in Article III shall be
true and correct on the date hereof and on and as of the
Closing Date as though made on and as of the Closing Date
(except for representations and warranties made as of a
specified date, which need be true and correct only as of
the specified date), except for such inaccuracies which
have not had and would not reasonably be expected to have
in the reasonably foreseeable future a material adverse
effect on Crompton.
(b) Each of Crompton and Subcorp shall have per-
formed in all material respects each obligation and agree-
ment and shall have complied in all material respects with
each covenant to be performed and complied with by it
hereunder at or prior to the Effective Time.
(c) Each of Crompton and Subcorp shall have fur-
nished Uniroyal with a certificate dated the Closing Date
signed on behalf of it by the Chairman, President or any
Vice President to the effect that the conditions set forth
in Sections 6.2(a) and (b) have been satisfied.
(d) Each person who may be at the Effective Time or
was on the date of this Agreement an "affiliate" of
Crompton within the meaning of Rule 145 under the Securi-
ties Act, shall have executed and delivered to Uniroyal at
least 35 days prior to the date of the meeting of Crompton
Stockholders to approve the Merger written undertakings in
the form reasonably acceptable to Uniroyal.
(e) Crompton shall have entered into satisfactory
arrangements with respect to the consolidated indebtedness
of the combined company.
6.3 Conditions to Obligations of Crompton and Sub-
corp. The obligations of Crompton to consummate the Merger and
the other transactions contemplated hereby shall be subject to
the fulfillment of the following conditions unless waived by
each of Crompton and Subcorp:
(a) The representations and warranties of Uniroyal
set forth in Article IV shall be true and correct on the
date hereof and on and as of the Closing Date as though
made on and as of the Closing Date (except for representa-
tions and warranties made as of a specified date, which
need be true and correct only as of the specified date),
except for such inaccuracies which have not had and would
not reasonably be expected to have in the reasonably
foreseeable future a material adverse effect on Uniroyal.
(b) Uniroyal shall have performed in all material
respects each obligation and agreement and shall have com-
plied in all material respects with each covenant to be
performed and complied with by it hereunder at or prior to
the Effective Time.
(c) Uniroyal shall have furnished Crompton with a
certificate dated the Closing Date signed on its behalf by
its Chairman, President or any Vice President to the ef-
fect that the conditions set forth in Sections 6.3(a) and
(b) have been satisfied.
(d) Each person who may be at the Effective Time or
was on the date of this Agreement an "affiliate" of
Uniroyal within the meaning of Rule 145 under the Securi-
ties Act, shall have executed and delivered to Crompton at
least 35 days prior to the date of the meeting of Uniroyal
Stockholders to approve the Merger written undertakings in
the form reasonably acceptable to Crompton.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated
at any time prior to the Effective Time, whether before or af-
ter approval and adoption of this Agreement by Uniroyal Stock-
holders and Crompton Stockholders:
(a) by mutual consent of Crompton and Uniroyal;
(b) by either Crompton or Uniroyal if any permanent
injunction or other order or decree of a court or other
competent Governmental Authority preventing the con-
summation of the Merger shall have become final and non-
appealable, provided that the party seeking to terminate
this Agreement under Section 7.1(b) shall have used its
reasonable efforts to remove such injunction, order or
decree;
(c) by either Crompton or Uniroyal if the Merger
shall not have been consummated before December 31, 1996,
unless extended by the Boards of Directors of both
Crompton and Uniroyal (provided that the right to termi-
nate this Agreement under this Section 7.1(c) shall not be
available to any party whose failure or whose affiliate's
failure to perform any material covenant or obligation
under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such
date);
(d) by Crompton or Uniroyal if at the meeting of
Uniroyal Stockholders held for such purpose (including any
adjournment or postponement thereof) the requisite vote of
the Uniroyal Stockholders to approve the Merger and the
transactions contemplated hereby shall not have been
obtained;
(e) by Crompton or Uniroyal if the meeting of
Crompton Stockholders held for such purpose (including any
adjournment or postponement thereof) the requisite vote of
the Crompton Stockholders to approve the Merger and the
transactions contemplated hereby shall not have been
obtained;
(f) by Crompton or Uniroyal (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement con-
tained herein) if there shall have been a material breach
of any of the covenants or agreements or any of the
representations or warranties set forth in this Agreement
on the part of the other party, which breach is not cured
within thirty (30) days following written notice given by
the terminating party to the party committing such breach,
or which breach, by its nature, cannot be cured prior to
the Closing; or
(g) by either Crompton or Uniroyal if the Board of
Directors of Uniroyal shall reasonably determine that a
Uniroyal Competing Transaction is more favorable to
Uniroyal Stockholders in the aggregate and from a
financial point of view than the transactions contemplated
by this Agreement and Uniroyal shall have delivered to
Crompton a written notice of the determination by the
Uniroyal Board of Directors to terminate this Agreement
pursuant to this Section 7.1(g); provided, however, that
Uniroyal may not terminate this Agreement pursuant to this
clause (g) unless (i) five business days shall have
elapsed after delivery to Crompton of the notice referred
to above, (ii) at the end of such five business-day period
the Uniroyal Board of Directors shall continue to believe
that such Uniroyal Competing Transaction is more favorable
to Uniroyal Stockholders in the aggregate and from a
financial point of view than the transactions contemplated
by this Agreement, (iii) at the time of such termination,
Uniroyal shall have paid to Crompton the Termination Fee
and (iv) promptly thereafter Uniroyal shall enter into a
definitive acquisition, merger or similar agreement to
effect such Uniroyal Competing Transaction.
7.2 Effect of Termination.
(a) In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement, except for
the provisions of the last sentence of Section 5.1(g) and the
provisions of Sections 7.2 and 8.10, shall become void and have
no effect, without any liability on the part of any party or
its directors, officers or stockholders. Notwithstanding the
foregoing, nothing in this Section 7.2 shall relieve any party
to this Agreement of liability for a material breach of any
provision of this Agreement. If this Agreement is terminated
(i) by Crompton or Uniroyal pursuant to Section 7.1(g), (ii) by
Crompton pursuant to Section 7.1(c) if (A) Uniroyal's or
Uniroyal's affiliate's failure to perform any material covenant
or obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to have occurred on or
before December 31, 1996 and (B) a Prior Event (as defined
below) shall have occurred prior to such termination and (C) a
Uniroyal Competing Transaction is consummated within one year
following such termination, (iii) by Crompton pursuant to
Section 7.1(f) if (A) Uniroyal's or Uniroyal's affiliate's
failure to perform any material covenant or obligation under
this Agreement is the basis for such termination and (B) a
Prior Event shall have occurred prior to such termination and
(C) a Uniroyal Competing Transaction is consummated within one
year following such termination or (iv) by Crompton or Uniroyal
pursuant to Section 7.1(d) if (A) a Prior Event shall have
occurred prior to such termination and (B) a Uniroyal Competing
Transaction is consummated within one year following such
termination; then in any such case Uniroyal will, in the case
of a termination by Crompton, within three business days
following, in the case of clause (i) of this paragraph, any
such termination or, in the case of clauses (ii), (iii) or (iv)
of this paragraph, the consummation of the Uniroyal Competing
Transaction, or, in the case of a termination by Uniroyal,
prior to, in the case of clause (i) of this paragraph, such
termination or, in the case of clause (iv) of this paragraph,
the consummation of the Uniroyal Competing Transaction, pay to
Crompton in cash by wire transfer in immediately available
funds to an account designated by Crompton a termination fee in
an amount equal to $50 million (the "Termination Fee").
(b) As used herein, a "Prior Event" shall mean any
of the following events:
(i) any person (other than Crompton or any of its
subsidiaries) shall have commenced (as such term is
defined in Rule 14d-2 under the Exchange Act), or shall
have filed a registration statement under the Securities
Act, with respect to, a tender offer or exchange offer to
purchase any shares of Uniroyal Common Stock such that,
upon consummation of such offer, such person would
Beneficially Own (as defined below) or control 10% or more
of the then outstanding Uniroyal Common Stock;
(ii) Uniroyal or any of its subsidiaries shall have
entered into, authorized, recommended, proposed or pub-
licly announced an intention to enter into, authorize,
recommend, or propose, an agreement, arrangement or un-
derstanding with any person (other than Crompton or any of
its subsidiaries) to, or any person (other than Crompton
or any of its subsidiaries) shall have publicly announced
a bona fide intention to, (A) effect any Competing
Transaction, (B) purchase, lease or otherwise acquire 10%
or more of the assets of Uniroyal or any of its
subsidiaries or (C) purchase or otherwise acquire (in-
cluding by way of merger, consolidation, tender or ex-
change offer or similar transaction) Beneficial Ownership
of securities representing 10% or more of the voting power
of Uniroyal or any of its subsidiaries; or
(iii) any person (other than Crompton or any subsid-
iary of Crompton) shall have acquired Beneficial Ownership
or the right to acquire Beneficial Ownership of a number
of shares of Uniroyal Common Stock in addition to the
number of shares of Uniroyal Common Stock Beneficially
Owned by such person on the date hereof equal to 10% or
more of the voting power of Uniroyal.
(c) As used herein, the terms "Beneficial Ownership"
and "Beneficially Own" shall have the meanings ascribed to them
in Rule 13d-3 under the Exchange Act. As used herein, "person"
shall have the meaning specified in Sections 3(a)(9) and
13(d)(3) of the Exchange Act.
7.3 Amendment. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respec-
tive Boards of Directors, at any time before or after adoption
of this Agreement by Uniroyal Stockholders or authorization of
issuance of shares of Crompton Common Stock in the Merger by
Crompton Stockholders, but after each such approval or
authorization, no amendment shall be made which by law requires
further approval or authorization by the Uniroyal Stockholders
or Crompton Stockholders, as the case may be, without such
further approval or authorization. Notwithstanding the
foregoing, this Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
7.4 Extension; Waiver. At any time prior to the
Effective Time, Crompton (with respect to Uniroyal) and
Uniroyal (with respect to Crompton and Subcorp) by action taken
or authorized by their respective Boards of Directors, may, to
the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of such
party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed
on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations and Warranties. The
representations and warranties made herein by the parties here-
to shall not survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties here-
to, which by its terms contemplates performance after the Ef-
fective Time or the termination of this Agreement.
8.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if de-
livered personally, telecopied (which is confirmed) or dis-
patched by a nationally recognized overnight courier service to
the parties at the following addresses (or at such other ad-
dress for a party as shall be specified by like notice):
(a) if to Crompton or Subcorp:
Crompton & Knowles Corporation
One Station Place, Metro Center
Stamford, CT 06902
Attention: John T. Ferguson, II
Telecopy No.: (203) 353-5470
with a copy to
Edward D. Herlihy
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
(b) if to Uniroyal:
Uniroyal Chemical Corporation
Benson Road
Middlebury, CT 06749
Attention: Ira J. Krakower
Telecopy No.: (203) 573-4301
with a copy to
Joseph A. Coco
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopy No.: (212) 735-2000
8.3 Interpretation. When a reference is made in
this Agreement to an Article or Section, such reference shall
be to an Article or Section of this Agreement unless otherwise
indicated. The headings and the table of contents contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agree-
ment. When a reference is made in this Agreement to common
stock of Uniroyal or Crompton, as the case may be, or shares
thereof, such reference shall be deemed to include the
preferred share purchase rights issued pursuant to the Uniroyal
Rights Agreement or Crompton Rights Agreement, as the case may
be that trade together with such common stock. For the
purposes of any provision of this Agreement, a "material
adverse effect" with respect to any party shall be deemed to
occur if the aggregate consequences of all breaches and
inaccuracies of covenants and representations of such party and
its subsidiaries, taken as a whole, under this Agreement, when
read without any exception or qualification for a material ad-
verse effect, are reasonably likely to have a material adverse
effect on the assets, liabilities, results of operations,
business or financial condition of such party and its
subsidiaries, taken as a whole.
8.4 Counterparts. This Agreement may be executed in
counterparts, which together shall constitute one and the same
Agreement. The parties may execute more than one copy of the
Agreement, each of which shall constitute an original.
8.5 Entire Agreement. This Agreement (including the
documents and the instruments referred to herein) and the Con-
fidentiality Agreement constitute the entire agreement among
the parties and supersede all prior agreements and understand-
ings, agreements or representations by or among the parties,
written and oral, with respect to the subject matter hereof and
thereof.
8.6 Third Party Beneficiaries. Nothing in this
Agreement, express or implied, is intended or shall be con-
strued to create any third party beneficiaries, except for the
provisions of Sections 5.2(d), 5.2(e), 5.2(k) and 5.2(m) which
may be enforced by the beneficiaries thereof (the expenses,
including reasonable attorneys' fees, that may be incurred
thereby in enforcing such provisions to be paid by Crompton).
8.7 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Dela-
ware without regard to principles of conflicts of law.
8.8 Specific Performance. The transactions contem-
plated by this Agreement are unique. Accordingly, each of the
parties acknowledges and agrees that, in addition to all other
remedies to which it may be entitled, each of the parties here-
to is entitled to a decree of specific performance, provided
that such party is not in material default hereunder.
8.9 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be as-
signed by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the
other parties. Subject to the preceding sentence, this Agree-
ment shall be binding upon, inure to the benefit of and be en-
forceable by the parties and their respective successors and
assigns.
8.10 Expenses. Subject to the provisions of Section
7.2, Crompton and Uniroyal shall pay their own costs and
expenses associated with the transactions contemplated by this
Agreement, except that Uniroyal and Crompton shall share
equally (i) the filing fees in connection with the filing of
the Joint Proxy Statement and Registration Statement with the
Commission and (ii) the expenses incurred in connection with
printing and mailing the Joint Proxy Statement to the Crompton
Stockholders and Uniroyal Stockholders.
8.11 Incorporation of Disclosure Schedules. The
Uniroyal Disclosure Schedule and the Crompton Disclosure
Schedule are hereby incorporated herein and made a part hereof
for all purposes as if fully set forth herein.
8.12 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other juris-
diction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
8.13 Subsidiaries. As used in this Agreement, the
word "subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or un-
incorporated, (i) of which such party directly or indirectly
owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect
a majority of the board of directors or others performing simi-
lar functions with respect to such corporation or other organi-
zation, or any organization of which such party is a general
partner and (ii) for purposes of Articles III and IV hereof,
that would constitute a "significant subsidiary" of such party
within the meaning of Rule 1-02 of Regulation S-X promulgated
by the Commission.
IN WITNESS WHEREOF, Crompton, Subcorp and Uniroyal
have signed this Agreement as of the date first written above.
CROMPTON & KNOWLES CORPORATION
By: /s/ V. A. Calarco
V. A. Calarco
TIGER MERGER CORP.
By: /s/ V. A. Calarco
V. A. Calarco
UNIROYAL CHEMICAL CORPORATION
By: /s/ Robert J. Mazaika
Robert J. Mazaika
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
PRIMARY FULLY DILUTED
Quarter Ended Quarter Ended
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
Earnings
Net earnings $ 9,468 $ 13,196 $ 9,468 $ 13,196
Shares
Weighted average shares
outstanding 48,019 48,471 48,019 48,471
Common stock equivalents 194 435 299 450
Average shares outstanding 48,213 48,906 48,318 48,921
Per share
Net earnings $ 0.20 $ 0.27 $ 0.20 $ 0.27
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 2,599
<SECURITIES> 0
<RECEIVABLES> 123,779
<ALLOWANCES> 3,640
<INVENTORY> 163,210
<CURRENT-ASSETS> 315,177
<PP&E> 135,051
<DEPRECIATION> 102,385
<TOTAL-ASSETS> 521,518
<CURRENT-LIABILITIES> 190,828
<BONDS> 0
0
0
<COMMON> 5,336
<OTHER-SE> 236,522
<TOTAL-LIABILITY-AND-EQUITY> 521,518
<SALES> 164,840
<TOTAL-REVENUES> 164,840
<CGS> 116,948
<TOTAL-COSTS> 148,051
<OTHER-EXPENSES> (252)
<LOSS-PROVISION> (77)
<INTEREST-EXPENSE> 2,037
<INCOME-PRETAX> 15,004
<INCOME-TAX> 5,536
<INCOME-CONTINUING> 9,468
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,468
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
