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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
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[ ] Preliminary Proxy Statement
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14a-6(e)(2))
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Wyant Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
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0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
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LOGO
LOGO
May 19, 1999
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend the
1999 Annual Meeting of Shareholders (the "Annual Meeting") of Wyant Corporation
("Wyant") to be held on Tuesday, June 22, 1999, at 10:00 a.m. local time at the
Newark Airport Marriott Hotel, Newark, New Jersey 07114. The formal Notice of
Annual Meeting and Proxy Statement, fully describing the matters to be acted
upon at the Annual Meeting, appear on the following pages.
The matters to be considered at the Annual Meeting are the approval of
the sale of the health care business to Paper-Pak Products, Inc., the election
of directors and the ratification of the appointment of Ernst & Young LLP as
Wyant's independent certified public accountants.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS RECOMMENDS THE
APPROVAL OF ALL THE PROPOSALS BEING PRESENTED AT THE ANNUAL MEETING.
I urge you to thoroughly review the accompanying Proxy Statement and give
these proposals your careful attention before completing the enclosed proxy
card.
You are being asked to decide on an important change in Wyant's
direction. This decision requires the approval of a majority of all shares of
Wyant common stock entitled to vote at the Annual Meeting to become effective.
Accordingly, your vote is very important regardless of the number of shares you
own. Please sign each proxy card that you receive and return it as soon as
possible in the postage-paid return envelope that is provided for your
convenience. The return of your proxy card will not prevent you from voting in
person but will assure that your vote is counted if you are unable to attend the
Annual Meeting.
Kindly forward your proxy card at your earliest convenience.
Sincerely yours,
LOGO
Donald C. MacMartin
Chairman, President and Chief
Executive Officer
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WYANT CORPORATION
100 READINGTON ROAD
SOMERVILLE, NEW JERSEY 08876
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 22, 1999
------------------------
May 19, 1999
TO THE SHAREHOLDERS OF WYANT CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Wyant
Corporation, a New York corporation ("Wyant"), will be held on Tuesday, June 22,
1999, at 10:00 a.m. local time at the Newark Airport Marriott Hotel, Newark, New
Jersey 07114, to consider and vote upon:
1. A proposal to approve the sale of the health care business
to Paper-Pak Products, Inc., as described in the accompanying Proxy
Statement.
2. A proposal to elect seven (7) directors to serve one-year
terms on the Board of Directors.
3. A proposal to ratify the appointment of Ernst & Young LLP as
Wyant's independent certified public accountants for the fiscal year
ending December 31, 1999.
4. Any other business as may properly come before the Annual
Meeting or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice. Only shareholders of record at the close of
business on May 7, 1999 are entitled to notice of and to vote at the Annual
Meeting and at any adjournments thereof.
Shareholders who do not vote in favor of the proposed transaction with
Paper-Pak Products, Inc. (Proposal No. 1 above) may be entitled to exercise
dissenters' rights by following the procedures set forth in Section 623 of the
New York Business Corporation Law, a copy of which is attached as Annex C to the
accompanying Proxy Statement.
By Order of the Board of
Directors,
LOGO
James A. Wyant
Corporate Secretary
Whether or not you plan to attend this meeting, you are urged to
complete, sign and return the enclosed proxy card, no postage to be affixed if
mailed in the United States in the envelope provided.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION................................................ 1
General............................................. 1
Record Date......................................... 1
Vote Required....................................... 1
Quorum; Effect of Abstentions and Broker
Non-Votes.......................................... 2
Voting and Revocation of Proxies.................... 2
Dissenters' Rights.................................. 3
Proxy Solicitation.................................. 3
Recommendation of the Board of Directors............ 3
SUMMARY OF PROXY STATEMENT.................................. 4
WYANT CORPORATION........................................... 9
THE PAPER-PAK TRANSACTION (Item 1 on the Proxy Card)........ 10
General............................................. 10
Background of the Paper-Pak Transaction............. 10
Reasons for the Paper-Pak Transaction............... 13
Opinion of Houlihan Lokey........................... 15
The Asset Purchase Agreement........................ 18
Other Agreements with Paper-Pak..................... 25
Application of Sale Proceeds; Operations after the
Paper-Pak Transaction.............................. 26
Certain Regulatory Matters.......................... 27
Income Tax Consequences............................. 27
Rights of Dissenting Shareholders................... 28
Vote Required....................................... 30
Recommendation of the Board of Directors............ 30
CERTAIN PROJECTIONS OF FUTURE OPERATING RESULTS............. 31
CERTAIN INFORMATION WITH RESPECT TO THE COMMON STOCK........ 32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND WYANT
MANAGEMENT................................................ 33
ELECTION OF DIRECTORS (Item 2 on the Proxy Card)............ 35
Nominees............................................ 35
Executive Officers.................................. 36
Executive Compensation.............................. 37
Certain Relationships and Related Transactions...... 41
Compliance with Section 16(a) of the Securities
Exchange Act of 1934............................... 42
APPOINTMENT OF INDEPENDENT AUDITORS (Item 3 on the Proxy
Card)..................................................... 42
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING............... 43
FORWARD-LOOKING STATEMENTS.................................. 43
DOCUMENTS INCORPORATED BY REFERENCE......................... 44
Annex A -- Asset Purchase Agreement dated as of February 23,
1999 between Wyant Corporation and Paper-Pak
Products, Inc.
Annex B -- Voting Agreement dated as of March 11, 1999
between James A. Wyant and Paper-Pak Products,
Inc.
Annex C -- Section 623 of the New York Business Corporation
Law
Annex D -- Opinion of Houlihan, Lokey, Howard & Zukin
Financial Advisors, Inc.
Annex E -- Annual Report on Form 10-K/A (Amendment No. 2) of
Wyant Corporation for the fiscal year ended
December 31, 1998
Annex F -- Quarterly Report on Form 10-Q of Wyant
Corporation for the quarterly period ended March
31, 1999
</TABLE>
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WYANT CORPORATION
100 READINGTON ROAD
SOMERVILLE, NEW JERSEY 08876
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 22, 1999
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PROXY STATEMENT
------------------------
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to the shareholders of Wyant
Corporation, a New York corporation ("Wyant"), in connection with the
solicitation by the Board of Directors of Wyant (the "Board of Directors") of
proxies in the accompanying form for use at its Annual Meeting of Shareholders
(the "Annual Meeting") to be held on Tuesday, June 22, 1999, at 10:00 a.m. local
time at the Newark Airport Marriott Hotel, Newark, New Jersey 07114, and at any
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting. This Proxy Statement and the accompanying Notice of Annual
Meeting, form of proxy and Annual Report of Wyant for its fiscal year ended
December 31, 1998 (the "Annual Report") are first being mailed to Wyant
shareholders on or about May 19, 1999.
RECORD DATE
Only shareholders of record at the close of business on May 7, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting or
any adjournments thereof. On the Record Date, there were approximately 700
holders of record and there were 2,273,817 shares of common stock of Wyant, par
value $.01 per share (the "Common Stock"), issued and outstanding. Each holder
of Common Stock is entitled to one vote per share upon all matters to be acted
upon at the Annual Meeting.
VOTE REQUIRED
Pursuant to Wyant's Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and Section 909 of the New York Business
Corporation Law (the "NYBCL"), assuming a quorum is present at the Annual
Meeting, the affirmative vote by the holders of a majority of all outstanding
shares of Common Stock entitled to vote at the Annual Meeting will be required
to approve the Asset Purchase Agreement dated as of February 23, 1999 (the
"Asset Purchase Agreement") between Wyant and Paper-Pak Products, Inc., a
Delaware corporation ("Paper-Pak"), pursuant to which Wyant has agreed to sell
to Paper-Pak its health care business and substantially all of the assets
relating to such business, and the other transactions contemplated thereby
(collectively, the "Paper-Pak Transaction"). A copy of the Asset Purchase
Agreement is attached as Annex A to this Proxy Statement and is incorporated by
reference herein. This Proxy Statement describes the material portions of the
Asset Purchase Agreement. The description of the Asset Purchase Agreement set
forth herein is subject to, and is qualified in its entirety by reference to,
the text of the Asset Purchase Agreement.
Assuming a quorum is present at the Annual Meeting,
(1) the affirmative vote by the holders of a plurality of the
shares of Common Stock entitled to vote at the Annual Meeting cast, in
person or by properly executed proxy, will be required to act on the
election of directors, and
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(2) the affirmative vote by the holders of a majority of the
shares of Common Stock entitled to vote at the Annual Meeting cast, in
person or by properly executed proxy, will be required to ratify the
appointment of Ernst & Young LLP as Wyant's independent certified public
accountants for the fiscal year ending December 31, 1999.
James A. Wyant, Vice Chairman of the Board of Directors and Wyant's
Corporate Secretary ("Mr. Wyant"), has the power to vote approximately 55% of
the outstanding shares of Common Stock (the "Wyant Shares"). See "Security
Ownership of Certain Beneficial Owners and Wyant Management." Pursuant to a
Voting Agreement dated as of March 11, 1999 between Mr. Wyant and Paper-Pak (the
"Voting Agreement"), Mr. Wyant has agreed to vote the Wyant Shares in favor of
the Paper-Pak Transaction (subject to the fiduciary duties of the Board of
Directors and Mr. Wyant as described in the Voting Agreement). In connection
therewith, Wyant has agreed to indemnify Mr. Wyant against any liability or
obligation arising from such agreement. Mr. Wyant has also indicated his
intention to vote the Wyant Shares in favor of the election of the persons
nominated herein as directors and the appointment of Ernst & Young LLP as
Wyant's independent certified public accountants for the fiscal year ending
December 31, 1999. Accordingly, if Mr. Wyant votes the Wyant Shares in favor of
the approval of the Paper-Pak Transaction as he has agreed to do in the Voting
Agreement, approval of the Paper-Pak Transaction, and if, as he has indicated,
Mr. Wyant votes in favor of the other proposals to be considered at the Annual
Meeting, approval of the other proposals, is assured notwithstanding a negative
vote by shareholders other than Mr. Wyant. A copy of the Voting Agreement is
attached as Annex B to this Proxy Statement and is incorporated by reference
herein. This Proxy Statement describes the material portions of the Voting
Agreement. The description of the Voting Agreement set forth herein is subject
to, and is qualified in its entirety by reference to, the text of the Voting
Agreement.
QUORUM; EFFECT OF ABSTENTIONS AND BROKER NON-VOTES
Pursuant to Wyant's By-laws, the presence, in person or by properly
executed proxy, of the holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Annual Meeting is necessary to constitute a quorum
at the Annual Meeting. Brokers who hold shares in street name for customers will
not have the authority to vote on approval of the Paper-Pak Transaction unless
they receive specific instructions from beneficial owners. Abstentions and
broker non-votes will be included in determining whether a quorum is present.
Abstentions and broker non-votes will have the same effect as a vote against the
Paper-Pak Transaction and will have no effect on determining whether the other
proposals to be considered at the Annual Meeting have been approved.
VOTING AND REVOCATION OF PROXIES
Shareholders of record on the Record Date are entitled to cast their
votes, in person or by properly executed proxy, at the Annual Meeting. A proxy,
in the accompanying form, which is properly executed, duly returned to Wyant and
not revoked, will be voted in accordance with the instructions contained
therein. If no specification is indicated on the proxy, the shares of Common
Stock represented thereby will be voted FOR (1) the approval of the Paper-Pak
Transaction, (2) the election of the persons nominated herein as directors, (3)
the ratification of Ernst & Young LLP as Wyant's independent certified public
accountants for the fiscal year ending December 31, 1999 and (4) the approval of
such other business as properly may come before the Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before the proxy is voted by (1) filing with the
Corporate Secretary of Wyant, at or before the Annual Meeting, a written notice
of revocation bearing a date later than the proxy, (2) duly executing a
subsequent proxy relating to the same shares and delivering it to the Corporate
Secretary of Wyant at
2
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or before the Annual Meeting or (3) attending the Annual Meeting and voting in
person (although attendance at the Annual Meeting will not in and of itself
constitute a revocation of a proxy).
The Board of Directors is not aware of any business to be acted upon at
the Annual Meeting other than as described in this Proxy Statement. If, however,
other matters are properly brought before the Annual Meeting, or any
adjournments thereof, the persons appointed as proxies or their substitutes will
have the discretion to vote or act thereon according to their best judgment and
applicable law unless the proxy indicates otherwise.
DISSENTERS' RIGHTS
Under Sections 623 and 910 of the NYBCL, and assuming that the Paper-Pak
Transaction is consummated, any shareholder who objects to the Paper-Pak
Transaction has the right to receive the "fair value" of such shareholder's
shares by filing with Wyant a written objection to the Paper-Pak Transaction
before the vote of shareholders approving the Paper-Pak Transaction is taken and
by otherwise complying with the provisions of Sections 623 and 910 of the NYBCL,
including not voting such shareholder's shares in favor of the Paper-Pak
Transaction. Under the NYBCL, neither voting against, nor failure to vote in
favor of, the proposal to approve the Paper-Pak Transaction will constitute the
written objection required to be filed by a shareholder. Failure to vote against
the proposal to approve the Paper-Pak Transaction, however, will not constitute
a waiver of rights under Sections 623 and 910 of the NYBCL provided that a
written objection has been properly filed with Wyant. Mr. Wyant, who has the
power to vote approximately 55% of the outstanding shares of Common Stock, has
agreed in the Voting Agreement to vote the Wyant Shares in favor of the approval
of the Paper-Pak Transaction and, therefore, he will be precluded from
perfecting dissenters' rights. See "The Paper-Pak Transaction -- Rights of
Dissenting Shareholders" and the copy of the text of Section 623 of the NYBCL
attached to this Proxy Statement as Annex C.
PROXY SOLICITATION
The costs of soliciting proxies in the accompanying form will be paid by
Wyant. Costs of solicitation include preparation, printing and mailing of the
Notice of Annual Meeting and form of proxy, this Proxy Statement and the Annual
Report. In addition to solicitation by mail, proxies also will be solicited by
the executive officers and regular employees of Wyant, without additional
compensation, personally, by telephone or by telecopy. Arrangements will be made
with brokerage firms and other custodians, nominees and fiduciaries for proxy
materials to be sent to their principals, and Wyant will reimburse such persons
for their reasonable expenses in so doing.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
(1) THE PAPER-PAK TRANSACTION, INCLUDING THE ASSET PURCHASE AGREEMENT, (2) THE
ELECTION OF THE PERSONS NOMINATED HEREIN AS DIRECTORS AND (3) ERNST & YOUNG LLP
AS WYANT'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1999.
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SUMMARY OF PROXY STATEMENT
The following is a summary of certain information contained in this Proxy
Statement. This summary is not intended to be a complete discussion of all of
the matters contained in this Proxy Statement and is qualified in its entirety
by reference to the more detailed information contained elsewhere in this Proxy
Statement, including the Annexes hereto, and the documents referred to herein.
Shareholders are urged to read this Proxy Statement, the Annexes and such other
documents in their entirety before making a decision to vote on the proposals to
be considered at the Annual Meeting. Capitalized terms that are used but not
defined in this Proxy Statement are defined in the Asset Purchase Agreement
unless the context indicates otherwise.
THE ANNUAL MEETING
Time, Date and Place of the Annual Meeting
The Annual Meeting of Wyant will he held on Tuesday, June 22, 1999, at
10:00 a.m. local time at the Newark Airport Marriott Hotel, Newark, New Jersey
07114.
Purpose of the Annual Meeting
At the Annual Meeting, shareholders of Wyant will be asked to consider
and vote upon
(1) the Paper-Pak Transaction,
(2) the election of seven directors to serve one-year terms on the
Board of Directors,
(3) the ratification of the appointment of Ernst & Young LLP as
Wyant's independent certified public accountants for the fiscal year
ending December 31, 1999 and
(4) any other business as properly may come before the Annual Meeting
or any adjournments thereof.
Record Date; Shares Entitled to Vote; Vote Required; Dissenters' Rights
The record date for shareholders of Wyant entitled to notice of, and to
vote at, the Annual Meeting is the close of business on May 7, 1999. As of such
date, there were approximately 700 holders of record and there were 2,273,817
shares of Common Stock issued and outstanding. Each holder of Common Stock is
entitled to one vote per share upon all matters to be acted upon at the Annual
Meeting.
Assuming a quorum is present at the Annual Meeting,
(1) the affirmative vote by the holders of a majority of all
outstanding shares of Common Stock entitled to vote at the Annual
Meeting will be required to approve the Paper-Pak Transaction
pursuant to the Certificate of Incorporation and Section 909 of the
NYBCL,
(2) the affirmative vote by the holders of a plurality of the shares
of Common Stock entitled to vote at the Annual Meeting cast, in
person or by properly executed proxy, will be required to act on the
election of directors and
(3) the affirmative vote by the holders of a majority of the shares
of Common Stock entitled to vote at the Annual Meeting cast, in
person or by properly executed proxy, will be required to ratify the
appointment of Ernst & Young LLP as Wyant's independent certified
public accountants for the fiscal year ending December 31, 1999.
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<PAGE> 9
Mr. Wyant has the power to vote approximately 55% of the outstanding
shares of Common Stock. Pursuant to the Voting Agreement, Mr. Wyant has agreed
to vote the Wyant Shares in favor of the Paper-Pak Transaction (subject to the
fiduciary duties of the Board of Directors and Mr. Wyant as described in the
Voting Agreement). In connection therewith, Wyant has agreed to indemnify Mr.
Wyant against any liability or obligation arising from such agreement. Mr. Wyant
has also indicated his intention to vote the Wyant Shares in favor of the
election of the persons nominated herein as directors and the appointment of
Ernst & Young LLP as Wyant's independent certified public accountants for the
fiscal year ending December 31, 1999. Accordingly, if Mr. Wyant votes the Wyant
Shares in favor of the approval of the Paper-Pak Transaction as he has agreed to
do in the Voting Agreement, approval of the Paper-Pak Transaction, and if, as he
has indicated, Mr. Wyant votes in favor of the other proposals to be considered
at the Annual Meeting, approval of the other proposals, is assured
notwithstanding a negative vote by shareholders other than Mr. Wyant.
Assuming that the Paper-Pak Transaction is consummated, shareholders who
do not vote in favor of the Paper-Pak Transaction may exercise dissenters'
rights by following the procedures set forth in Section 623 of the NYBCL, a copy
of which is attached as Annex C to this Proxy Statement.
See "Introduction," "The Paper-Pak Transaction -- Other Agreements with
Paper-Pak -- Voting Agreement" and " -- Rights of Dissenting Shareholders."
THE PAPER-PAK TRANSACTION
Parties to the Paper-Pak Transaction
Wyant, incorporated in New York in 1971, has conducted its operations
through three distinct business segments:
(1) the health care business, which includes the manufacturing and
distribution of adult incontinent products in the United States,
primarily through its Health Care Division (the "Division"),
(2) the janitorial and sanitation business, which includes the
manufacturing and distribution of sanitation products and systems in
Canada, primarily through its Wood Wyant Inc. subsidiary ("Wood
Wyant"), and
(3) the wiping products business, which includes the manufacturing
and distribution of disposable wipers and sanitary paper products
and systems in the United States, primarily through its IFC
Disposables, Inc. subsidiary ("IFC Disposables").
Subject to shareholder approval and the satisfaction or waiver of certain
other conditions set forth in the Asset Purchase Agreement, including the
ability of Paper-Pak to obtain financing on reasonably satisfactory terms to it,
Wyant has agreed to sell its health care business and substantially all of the
assets relating to such business to Paper-Pak pursuant to the Asset Purchase
Agreement. Currently, Wyant operates six manufacturing facilities (including a
sanitary paper products converting plant, two chemical manufacturing plants, two
operations producing disposable underpads and adult briefs for use in the health
care industry and one converting operation manufacturing disposable wiping
products). If the Paper-Pak Transaction is consummated, the two operations
producing disposable underpads and adult briefs for use in the health care
industry will be sold. At such time, Wyant will employ approximately 500 people.
The principal executive offices of Wyant are located at 100 Readington Road,
Somerville, New Jersey 08876 and its telephone number is (908) 707-1800. See
"Wyant Corporation" and "Documents Incorporated by Reference" for more
information concerning Wyant.
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<PAGE> 10
Founded in 1960 as an industrial tissue packager, Paper-Pak supplies the
health care and food packaging industries with hygienic absorbents composed of
tissue, film, and non-woven materials. Paper-Pak maintains two manufacturing
facilities in La Verne, California and Washington, Georgia and employs
approximately 400 people. The principal executive offices of Paper-Pak are
located at 1941 White Avenue, La Verne, California 91750 and its telephone
number is (909) 392-1700.
General
Pursuant to the Asset Purchase Agreement, Wyant has agreed to sell to
Paper-Pak the Division and substantially all of the Division's operating assets
(subject to certain exclusions), and Paper-Pak has agreed to assume
substantially all of the Division's liabilities (approximately $6.3 million as
of December 31, 1998), other than, among other things set forth under "The
Paper-Pak Transaction -- The Asset Purchase Agreement -- General", certain
environmental liabilities and the Hourly Plan Withdrawal Liability (as defined
in the Asset Purchase Agreement), for $11,912,000 plus or minus the amount by
which the Adjusted Net Assets relating to the Division differ from $11,116,000
as of the consummation of the Paper-Pak Transaction and the other transactions
contemplated by the Asset Purchase Agreement (the "Closing"). The financial
performance (earnings and cash flow) of the Division between December 31, 1998
(the reference point for the $11,116,000 adjusted net assets figure) and the
Closing will determine whether the final purchase price is adjusted upward or
downward. For example, if the Division generates earnings during this time
period, the net assets of the Division will increase and result in an upward
adjustment of the purchase price. The opposite will be true if the Division
generates a loss during this time period. If the Closing would have occurred on
March 31, 1999, Wyant estimates that the final purchase price would have been
approximately $12.1 million (or would have resulted in an upward adjustment of
$178,000).
Wyant estimates that the net purchase price that will be delivered at the
Closing after payment of expenses and liabilities required to be paid by Wyant
in connection with the Paper-Pak Transaction, including the repayment of Wyant's
domestic credit facility (approximately $4.2 million as of December 31,1998) and
the discharge of the Hourly Plan Withdrawal Liability, will be approximately $4
million, $550,000 of which initially will be escrowed in order to provide
Paper-Pak with a source for obtaining any excess payment of the purchase price
and with security for certain of Wyant's indemnification obligations under the
Asset Purchase Agreement. See "The Paper-Pak Transaction -- The Asset Purchase
Agreement."
Recommendation of the Board of Directors
The Board of Directors has determined that the Paper-Pak Transaction is
in the best interests of Wyant and Wyant's shareholders and is fair to Wyant's
shareholders, has approved the Paper-Pak Transaction and recommends that Wyant's
shareholders vote in favor of the Paper-Pak Transaction. The determination made
by the Board of Directors was based upon its evaluation of a number of factors,
including the analysis and preliminary view of the investment banking firm of
Houlihan, Lokey, Howard & Zukin Financial Advisors, Inc. ("Houlihan Lokey")
presented to the Board of Directors that the Paper-Pak Transaction is fair to
Wyant, from a financial point of view, which view was subsequently confirmed in
its fairness opinion to the Board of Directors. A copy of the fairness opinion
dated March 16, 1999 is included as Annex D hereto and should be read carefully
by Wyant shareholders in its entirety with respect to the assumptions made,
other matters considered and the limitations of the review undertaken in
arriving at such opinion. See "The Paper-Pak Transaction -- Background of the
Paper-Pak Transaction," "-- Reasons for the Paper-Pak Transaction" and "--
Opinion of Houlihan Lokey."
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<PAGE> 11
Conditions to the Paper-Pak Transaction
The obligations of Wyant and Paper-Pak to consummate the Paper-Pak
Transaction are subject to the satisfaction of certain conditions set forth in
the Asset Purchase Agreement. Conditions which, as of the date of this Proxy
Statement, have not yet been satisfied include approval of the Paper-Pak
Transaction by the Wyant shareholders and receipt by Paper-Pak of financing to
consummate the Paper-Pak Transaction on terms reasonably satisfactory to
Paper-Pak. Consummation of the Paper-Pak Transaction will occur within five
business days after all conditions are either satisfied or waived (the "Closing
Date"). If consummation of the Paper-Pak Transaction has not occurred by
September 30, 1999, either Wyant or Paper-Pak may elect to terminate the
transaction. See "The Paper-Pak Transaction -- The Asset Purchase Agreement --
Conditions," "-- Closing Date," "-- Termination" and "-- Certain Regulatory
Matters."
Reasons for the Paper-Pak Transaction
In reaching its decision to approve the Paper-Pak Transaction, the Board
of Directors considered a number of material factors, including the financial
terms of the Paper-Pak Transaction, the other terms of the Asset Purchase
Agreement, management's strategic review of the Wyant business, the business
risks associated with the disposition of a significant business and Houlihan
Lokey's fairness opinion. For a further description of the material factors
considered by the Board of Directors and the reasons for its approval of the
Paper-Pak Transaction, see "The Paper-Pak Transaction -- Reasons for the
Paper-Pak Transaction."
Income Tax Consequences of the Paper-Pak Transaction
For U.S. federal and state income tax purposes, Wyant will recognize a
net taxable gain on the Paper-Pak Transaction. Without taking into account any
other item of gain, loss, income, deduction or credit of Wyant for the taxable
year of the Paper-Pak Transaction (other than net operating loss carryforwards
and certain transaction-related expenses), Wyant's combined U.S. federal and
state income tax liability on the Paper-Pak Transaction would be approximately
$1,560,000.
In general, Wyant shareholders that do not exercise appraisal rights will
have no income tax consequences as a result of the Paper-Pak Transaction.
Shareholders who exercise appraisal rights should consult their own tax advisors
concerning the tax consequences to them, in light of their particular
situations, of the Paper-Pak Transaction, including any state, local or foreign
tax consequences. See "The Paper-Pak Transaction -- Income Tax Consequences."
Application of Sale Proceeds; Operations after the Paper-Pak Transaction
Upon consummation of the Paper-Pak Transaction, Wyant will cease
operating its health care business. Wyant is in the process of evaluating
possible alternative uses of the balance of the net cash proceeds from the
Paper-Pak Transaction, including the acquisition of assets or businesses in
North America that are consistent with Wyant's overall strategy of growing as a
North American janitorial and sanitation products manufacturer and distributor.
Pending the application of such proceeds, Wyant intends to use such proceeds to
repay certain short-term debt of its subsidiaries. See "The Paper-Pak
Transaction -- Application of Sale Proceeds; Operations after the Paper-Pak
Transaction."
7
<PAGE> 12
Rights of Dissenting Shareholders
Assuming that the Paper-Pak Transaction is consummated, shareholders that
do not vote in favor of the Paper-Pak Transaction may exercise dissenters'
rights by following the procedures set forth in Section 623 of the NYBCL. See
"The Paper-Pak Transaction -- Rights of Dissenting Shareholders."
Market Prices of the Common Stock
The Common Stock is traded on The Nasdaq SmallCap Market under the symbol
"WYNT." On February 23, 1999, the last trading date prior to the public
announcement of the proposed Paper-Pak Transaction, the bid and asked prices of
the Common Stock, as reported on the Nasdaq National Market System, were $3.25
and $4.125, respectively. On May 17, 1999, the bid and asked prices of the
Common Stock, as reported on The Nasdaq SmallCap Market, were $2.50 and $2.75,
respectively. Shareholders are urged to obtain current market quotations for the
Common Stock prior to making any decision with respect to the Paper-Pak
Transaction.
The listing of the Common Stock was transferred to The Nasdaq SmallCap
Market from the Nasdaq National Market System, effective with the open of
business on April 5, 1999. Wyant has been informed by the Nasdaq Stock Market
that it currently satisfies the continued listing requirements of The Nasdaq
SmallCap Market. The continued listing of the Common Stock on The Nasdaq
SmallCap Market is subject to customary administrative requirements of the
Nasdaq Stock Market relating to the listing. See "Certain Information with
Respect to the Common Stock."
ELECTION OF DIRECTORS
The shareholders of Wyant, at the Annual Meeting, will be asked to elect
seven directors to serve on the Board of Directors until the next Annual
Meeting. The seven current directors of Wyant have all been re-nominated for
election at the Annual Meeting. See "Election of Directors."
APPOINTMENT OF INDEPENDENT AUDITORS
The shareholders of Wyant, at the Annual Meeting, will be asked to ratify
the re-appointment of Ernst & Young LLP as Wyant's independent certified public
accountants for the fiscal year ending December 31, 1999. See "Appointment of
Independent Auditors."
8
<PAGE> 13
WYANT CORPORATION
Wyant, incorporated in New York in 1971, has conducted its operations
through three distinct business segments:
(1) the health care business, which includes the manufacturing and
distribution of adult incontinent products in the United States,
primarily through the Division,
(2) the janitorial and sanitation business, which includes the
manufacturing and distribution of sanitation products and systems in
Canada, primarily through Wood Wyant, and
(3) the wiping products business, which includes the manufacturing
and distribution of disposable wipers and sanitary paper products
and systems in the United States, primarily through IFC Disposables.
Subject to shareholder approval and the satisfaction or waiver of certain
other conditions set forth in the Asset Purchase Agreement, including the
ability of Paper-Pak to obtain financing on reasonably satisfactory terms to it,
Wyant has agreed to sell the health care business and substantially all of the
assets relating to such business to Paper-Pak pursuant to the Asset Purchase
Agreement.
Please read Wyant's Annual Report on Form 10-K/A (Amendment No. 2) for
the year ended December 31, 1998 attached to this Proxy Statement as Annex E,
including the 1998 audited consolidated financial statements of Wyant contained
therein (and the accompanying notes), for more information with respect to the
business and operations of Wyant. Such financial statements, as well as the
related Management's Discussion and Analysis of Financial Condition and Results
of Operations contained therein, reflect the consummation of the Paper-Pak
Transaction by showing the health care business as "discontinued operations" for
income statement purposes and as "net assets held for divestiture" for balance
sheet purposes and otherwise discussing the likely effect of the Paper-Pak
Transaction on the financial condition and results of operations of Wyant.
Currently, Wyant operates six manufacturing facilities (including a
sanitary paper products converting plant, two chemical manufacturing plants, two
operations producing disposable underpads and adult briefs for use in the health
care industry and one converting operation manufacturing disposable wiping
products). If the Paper-Pak Transaction is consummated, the two operations
producing disposable underpads and adult briefs for use in the health care
industry will be sold. At such time, Wyant will employ approximately 500 people.
The principal executive offices of Wyant are located at 100 Readington Road,
Somerville, New Jersey 08876 and its telephone number is (908) 707-1800. See
"Documents Incorporated by Reference" for more information concerning Wyant.
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<PAGE> 14
THE PAPER-PAK TRANSACTION
(ITEM 1 ON THE PROXY CARD)
GENERAL
Pursuant to the terms of the Asset Purchase Agreement, Wyant will sell to
Paper-Pak the Division and substantially all of the Division's operating assets,
including all real and personal property located in New Jersey and California,
and Paper-Pak will assume substantially all of the Division's liabilities
(approximately $6.3 million as of December 31, 1998), other than the excluded
liabilities set forth under "-- The Asset Purchase Agreement -- General,"
including the Hourly Plan Withdrawal Liability (as defined in the Asset Purchase
Agreement) and certain environmental liabilities related to Wyant's former
facilities located at 5 and 6 Easy Street, Bridgewater, New Jersey (the "Former
Bridgewater Facility") (see "Business -- Environmental" in Wyant's Annual Report
on Form 10-K/A (Amendment No. 2) for the year ended December 31, 1998 attached
hereto as Annex E), for a purchase price of $11,912,000 plus or minus the amount
by which the Adjusted Net Assets relating to the Division differs from
$11,116,000 as of the Closing. The financial performance (earnings and cash
flow) of the Division between December 31, 1998 (the reference point for the
$11,116,000 adjusted net assets figure) and the Closing will determine whether
the final purchase price is adjusted upward or downward. For example, if the
Division generates earnings during this time period, the net assets of the
Division will increase and result in an upward adjustment of the purchase price.
The opposite will be true if the Division generates a loss during this time
period. If the Closing would have occurred on March 31, 1999, Wyant estimates
that the final purchase price would have been approximately $12.1 million (or
would have resulted in an upward adjustment of $178,000). The information
contained in this Proxy Statement with respect to the Paper-Pak Transaction is
qualified in its entirety by reference to the complete text of the Asset
Purchase Agreement, a copy of which is attached to this Proxy Statement as Annex
A and is incorporated herein by reference.
BACKGROUND OF THE PAPER-PAK TRANSACTION
On March 18, 1997, Wyant completed a restructuring that included the
acquisition of the business and all operating assets of G.H. Wood + Wyant Inc.
(essentially, the janitorial and sanitation business currently conducted through
Wood Wyant). In the first quarter of 1997, the Division reported a net loss of
$529,000 that contributed to Wyant's consolidated net loss for the quarter of
$176,000. As a result, Wyant took steps to stabilize the Division's business by,
among other things, reducing overhead costs and replacing senior management. As
a result of these efforts, by the third quarter of 1997, the Division reported
net earnings of $33,000.
While attempting to improve the results of the Division, during the
second and third quarters of 1997, Wyant's management received several
unsolicited expressions of interest to purchase the Division, including one from
Paper-Pak. On August 27, 1997, Wyant entered into a confidentiality agreement
with Paper-Pak and, in October 1997, representatives of Wyant met with
representatives of Paper-Pak for the first time to discuss the possibility of a
sale of the Division to Paper-Pak. As a result of these discussions, on November
12, 1997, Wyant received an offer from Paper-Pak to purchase the Division that
was taken under consideration by Wyant management and the Board of Directors.
While this offer was being evaluated by Wyant, between December 1997 and January
1998, representatives of Wyant and Paper-Pak attempted to negotiate an
exclusivity arrangement, but never reached agreement as to its terms. In January
1998, after considering the offer from Paper-Pak with respect to the Division
and discussing it with the Board of Directors, negotiations with Paper-Pak
ceased so as to provide Wyant's management with additional time to assess
Wyant's strategic direction.
10
<PAGE> 15
As a result of internal consideration as well as feedback from Wyant
shareholders with respect to Wyant's business and prospects, Wyant began
formulating a plan to sharpen its strategy in a way that would result in Wyant
becoming solely a North American janitorial and sanitation business.
Specifically, this strategy would focus on its current Canadian janitorial and
sanitation business and domestic wiping products business and would allow for
the pursuit of acquisition opportunities both in Canada and the United States in
these areas. The first step in implementing this strategy was the completion of
several acquisitions by the end of the second quarter of 1998 through Wood Wyant
of distributors of sanitation products in Canada.
In the third quarter of 1998, Wyant again received several unsolicited
expressions of interest to purchase the Division. As a result of such
solicitations, Wyant began to reconsider the sale of the Division, determining
that the sale of the health care business on acceptable terms would be an
effective second step in Wyant's strategy to position itself for growth as a
North American janitorial and sanitation business. Accordingly, in August 1998,
the Board of Directors authorized Wyant's management to send information
packages to prospective purchasers, including Paper-Pak, seeking offers for the
Division. Wyant's management evaluated the offers received and determined that
an offer received from Paper-Pak was the most favorable. On October 1, 1998, the
Board of Directors authorized Wyant's management to pursue negotiations with
Paper-Pak.
Representatives of Wyant met with representatives of Paper-Pak on October
26, 1998 to formally discuss the sale of the Division to Paper-Pak. Subsequent
to this meeting, Wyant and Paper-Pak entered into an exclusivity arrangement and
in November 1998 Paper-Pak began to conduct its due diligence investigation of
the Division.
On several occasions between November 11, 1998 and February 19, 1999,
Paper-Pak, through its counsel, distributed drafts of the Asset Purchase
Agreement to Wyant and its counsel, and Wyant, through its counsel, prepared and
sent to Paper-Pak and its counsel either a set of comments on the respective
drafts or a revised draft of the Asset Purchase Agreement. On December 3, 1998,
representatives of Wyant and its counsel met with representatives of Paper-Pak,
its counsel and its financial advisor to negotiate the Asset Purchase Agreement.
At this meeting, the principal issues discussed related to the issues listed
below as well as the determination of responsibility for the Hourly Plan
Withdrawal Liability relating to Wyant's Hourly Plan that possibly would be
created as a result of a sale of the Division (for a description of the
components of the Hourly Plan Withdrawal Liability, please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Significant Factors and Known Trends With Regard to Discontinued Operations --
Pension Plan" in Wyant's Annual Report on Form 10-K/A (Amendment No. 2) for the
year ended December 31, 1998 attached to this Proxy Statement as Annex E). This
meeting was adjourned when Paper-Pak and Wyant determined they each needed to
evaluate additional information regarding this withdrawal liability. On December
17, 1998, the Board of Directors was updated by management on the status of the
negotiations with Paper-Pak, including with respect to this withdrawal
liability, and reconfirmed its authorization to pursue a transaction with
Paper-Pak. On December 19, 1998, a telephone conference call was held between
representatives of Wyant and representatives of Paper-Pak to further discuss
issues related to this withdrawal liability. Paper-Pak informed Wyant that it
did not want to assume this liability in connection with its purchase of the
Division because it had no interest in becoming a party to an underfunded plan.
Accordingly, Paper-Pak, in the context of the negotiations relating to this
issue, requested that Wyant retain this withdrawal liability after the sale of
the Division. Wyant agreed to consider retaining this withdrawal liability after
the sale of the Division if the parties could agree on Wyant receiving
reasonable value from Paper-Pak in return for such retention. On January 7,
1999, within this context, representatives of Wyant and its counsel met with
11
<PAGE> 16
representatives of Paper-Pak and its counsel again to negotiate responsibility
for this withdrawal liability.
Following several telephone conferences during January 1999, on February
3, 1999, Wyant received a revised offer from Paper-Pak that satisfactorily
addressed the potential withdrawal liability relating to the Hourly Plan and the
parties reached agreement on the financial terms of the sale of the Division to
Paper-Pak. On February 8-9, 1999, representatives of Wyant and its counsel met
with representatives of Paper-Pak, its counsel and its financial advisor to
complete the negotiations of the Asset Purchase Agreement and the related
definitive documentation for the Paper-Pak Transaction. On February 17, 1999,
representatives of Wyant and its counsel met with representatives of Paper-Pak,
its counsel and its financial advisor to review the status of Paper-Pak's
financing plans.
The principal issues raised in the various drafts of the Asset Purchase
Agreement and at meetings between representatives of Wyant and Paper-Pak and
their respective counsel related to:
(1) the representations and warranties pertaining to the Division,
(2) the limits of indemnification by Wyant for any breaches of
representations and warranties,
(3) the covenants of Wyant to conduct the business of the Division in
a certain manner between the signing of the Asset Purchase Agreement
and the Closing,
(4) the ability of Paper-Pak to terminate the Asset Purchase
Agreement and not consummate the Paper-Pak Transaction if it is
unable to obtain financing to pay the purchase price,
(5) responsibility for payment of expenses if the Asset Purchase
Agreement is terminated, and
(6) which liabilities of the Division would be assumed by Paper-Pak
(including certain environmental liabilities pertaining to the
Former Bridgewater Facility and the Hourly Plan Withdrawal Liability
discussed above).
Many of the issues related to representations and warranties and
indemnification were of the kind typically arising in acquisition transactions,
such as the scope and duration of the indemnity provisions, the amount of any
"deductible" (i.e. the amount of any losses from breaches of representations to
be absorbed by the purchaser before it is entitled to make claims under the
indemnity), and the amount of the maximum liability of the seller for any of the
purchaser's losses from breaches of representations.
On February 23, 1999, Wyant's counsel presented to the Board of Directors
a summary of the principal terms and conditions of the Paper-Pak Transaction and
answered questions posed by various members of the Board of Directors. At this
meeting, Houlihan Lokey presented its analysis and preliminary view to the Board
of Directors as hereinafter described that as of such date and based on the
matters described therein, the Paper-Pak Transaction is fair to Wyant from a
financial point of view, which view was subsequently confirmed in writing. After
discussion, including a review of Paper-Pak's financing plans, the Board of
Directors approved the Paper-Pak Transaction and later that day Wyant and
Paper-Pak executed definitive documents with respect to the sale of the
Division.
12
<PAGE> 17
REASONS FOR THE PAPER-PAK TRANSACTION
The Board of Directors has determined that the Paper-Pak Transaction is
in the best interest of Wyant and Wyant's shareholders and is fair to Wyant's
shareholders. In the course of reaching its decision to approve the Paper-Pak
Transaction, the Board of Directors, consulting with its legal counsel, as well
as Wyant's management, considered the following principal factors which were
material to the Board of Directors' decision:
(1) Completion of Wyant's strategic review of its business during
1998 to improve growth and increase shareholder value. The major
conclusion of this review was that Wyant was operating in three
uncomplementary industry sectors. After evaluating each segment,
management found that while the industry dynamics and market
position and prospects of its Wood Wyant and IFC Disposables
subsidiaries were critical to the future results of Wyant, the
Division was experiencing static sales of its branded products and
had a need for additional investment that Wyant, in its current
financial position, could not provide. The Board of Directors, in
this context, also considered the increase in income from operations
in 1998 against cumulative losses of approximately $2 million
incurred in 1996 and 1997. In addition, as a part of this review,
management considered several significant matters relating to the
business of the Division and the likely effect on the consolidated
results of operations of Wyant if the Division was not sold. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Significant Factors and Known Trends With
Regard to Discontinued Operations" in Wyant's Annual Report on Form
10-K/A (Amendment No. 2) for the year ended December 31, 1998
attached to this Proxy Statement as Annex E. The Board of Directors
viewed the results of this strategic review as a positive factor in
arriving at its conclusion with respect to the Paper-Pak
Transaction.
(2) The increasing lack of compatibility between the health care
business and Wyant's other two business segments. Management of
Wyant found that the health care business is relatively mature and
is part of an industry that has already experienced significant
consolidation. Accordingly, the health care business would require
significant additional capital investment to experience future
growth. Management concluded that it would be unable to provide the
necessary capital investment to the health care business for it to
be successful and, at the same time, provide the necessary resources
and financial support to Wyant's other two business segments, which
are viewed by management as having better long-term prospects. The
Board of Directors viewed this increasing lack of compatibility as a
positive factor in arriving at its conclusion with respect to the
Paper-Pak Transaction.
(3) The opportunity to reduce Wyant's debt while, at the same time,
achieving significant value for the assets relating to the health
care business. Pursuant to the terms of the Asset Purchase
Agreement, Paper-Pak will be assuming substantially all of the
operating liabilities relating to the health care business
(approximately $6.3 million as of December 31, 1998). In addition,
Wyant will be using a portion of the cash proceeds to repay its
domestic credit facility. The Board of Directors viewed this
opportunity to reduce Wyant's debt as a positive factor in arriving
at its conclusion with respect to the Paper-Pak Transaction.
(4) The business risks associated with the disposition of a
significant business segment such as the health care business. As a
result of the Paper-Pak Transaction, Wyant's results of operations
will be significantly dependent on, and materially affected by, the
results of
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<PAGE> 18
operations of the remaining two business segments of Wyant (that is,
the janitorial and sanitation business and the wiping products
business). Additionally, the North American sanitation industry is
very competitive and currently experiencing a period of
consolidation. Although Wyant's strategy includes being proactive in
this consolidation process, the Board of Directors, in evaluating
the Paper-Pak Transaction, considered the risk of Wyant being unable
to successfully operate its two remaining businesses in this
environment. In this context, the Board of Directors also evaluated
Wyant's retention of certain environmental liabilities related to
the Former Bridgewater Facility (see "Business -- Environmental" in
Wyant's Annual Report on Form 10-K/A (Amendment No. 2) for the year
ended December 31, 1998 attached to this Proxy Statement as Annex
E). The Board of Directors viewed these risks and retained
liabilities to be negative factors, but acceptable risks in light of
the anticipated benefits of the Paper-Pak Transaction, Wyant's roots
in the janitorial and sanitation business dating back to 1922 and
management's assessment and strategic review of Wyant's business
discussed in (1) above.
(5) The terms of the Asset Purchase Agreement, including the
consideration to be received by Wyant, the exclusion of certain
environmental liabilities related to the Former Bridgewater
Facility, the exclusion of the Hourly Plan Withdrawal Liability
(which will be funded by a portion of the Purchase Price), the
exclusion of the indebtedness outstanding under Wyant's domestic
credit facility (which will be funded by a portion of the Purchase
Price), the financing condition of Paper-Pak and the indemnification
provisions (including the scope and duration of such provisions, the
amount of the "deductible" ($185,000) and the $2 million limit on
indemnification claims). Although, as with any agreement such as the
Asset Purchase Agreement, the Board of Directors viewed individual
provisions of the Asset Purchase Agreement as being favorable or
unfavorable depending on the particular provisions, on balance, the
Board of Directors viewed the terms of the Asset Purchase Agreement
as a positive factor in arriving at its conclusion with respect to
the Paper-Pak Transaction. In particular, although the Board of
Directors viewed the financing condition of Paper-Pak contained in
the Asset Purchase Agreement, on its own, to be a negative factor,
the Board of Directors concluded that Paper-Pak would likely be able
to complete the Paper-Pak Transaction on a timely basis.
(6) The fairness opinion of Houlihan Lokey. The Board of Directors
viewed the fairness opinion of Houlihan Lokey as a positive factor
in arriving at its conclusion with respect to the Paper-Pak
Transaction. See "-- Opinion of Houlihan Lokey."
The foregoing discussion of the information and factors considered and
given weight by the Board of Directors is not intended to be exhaustive but is
believed to include the material factors considered by the Board of Directors.
Furthermore, in making the determination to approve the Paper-Pak Transaction
and the determination of the fairness of the Paper-Pak Transaction, in view of
the wide variety of factors considered in connection with their evaluation of
the Paper-Pak Transaction, the Board of Directors did not find it practical to,
and did not quantify or otherwise attempt to, assign any relative or specific
weights to the foregoing factors and the individual directors may have given
differing weights to different factors. After an evaluation of the foregoing
factors on balance, as well as the projected out-of-pocket costs which would be
incurred by Wyant in the event that the Paper-Pak Transaction failed to be
consummated, and after reviewing the provisions of the Asset Purchase Agreement
and the related agreements which had been negotiated with Paper-Pak, the Board
of Directors concluded that Wyant had negotiated favorable terms with Paper-Pak,
which it believed were
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<PAGE> 19
the best possible for the purchase of the health care business, and that the
terms of the Paper-Pak Transaction are fair to, and in the best interests of,
Wyant and its shareholders and approved the Paper-Pak Transaction.
OPINION OF HOULIHAN LOKEY
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The
following is a brief summary and general description of the valuation
methodologies utilized by Houlihan Lokey. The summary includes all of the
material information relating to the fairness opinion. Houlihan Lokey believes,
and so advised the Board of Directors, that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors considered
by it, without considering all factors and analyses, could create an incomplete
view of the process underlying its analyses and opinions.
Wyant retained Houlihan Lokey to render an opinion as to the fairness,
from a financial point of view, of the Paper-Pak Transaction to Wyant. At the
February 23, 1999 meeting of the Board of Directors, Houlihan Lokey presented
its analysis and preliminary view as hereinafter described and on March 16, 1999
delivered its written opinion that as of such date and based on the matters
described therein, the Paper-Pak Transaction is fair to Wyant from a financial
point of view.
THE COMPLETE TEXT OF HOULIHAN LOKEY'S OPINION IS ATTACHED HERETO AS ANNEX
D. THE SUMMARY OF THE OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH OPINION. WYANT SHAREHOLDERS ARE URGED TO READ SUCH OPINION
CAREFULLY IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, THE
FACTORS CONSIDERED AND THE ASSUMPTIONS MADE BY HOULIHAN LOKEY.
Houlihan Lokey's opinion to the Board of Directors addresses only the
fairness from a financial point of view of the Paper-Pak Transaction, and does
not constitute a recommendation to the shareholders as to how such shareholder
should vote at the Annual Meeting. Houlihan Lokey's opinion does not address
Wyant's underlying business decision to effect the Paper-Pak Transaction.
Houlihan Lokey has not been requested to, and did not, solicit third party
indications of interest in acquiring all or part of the Division. Furthermore,
at the request of the Board of Directors, Houlihan Lokey did not (1) participate
in the negotiations with regard to the Paper-Pak Transaction nor (2) advise the
Board of Directors with respect to alternatives to the Paper-Pak Transaction.
Houlihan Lokey relied upon and assumed, without independent verification,
that the financial forecasts and projections provided to them, and as adjusted
based on their discussions with Wyant management, were reasonably prepared and
reflected the best currently available estimates of the future financial results
and condition of the Division, and that there had been no material change in the
assets, financial condition, business or prospects of the Division since the
date of the most recent financial statements made available to them.
Houlihan Lokey did not independently verify the accuracy and completeness
of the information supplied to them with respect to the Division and do not
assume any responsibility with respect to such information. Houlihan Lokey has
not made any independent appraisal of any of the properties or assets of the
Division. Houlihan Lokey's opinion was necessarily based on business, economic,
market and other conditions as they existed and could be evaluated by them at
the date of their opinion.
In connection with the preparation of its opinion, Houlihan Lokey made
such reviews, analyses and inquiries as they deemed necessary and appropriate
under the circumstances. Among other things, Houlihan Lokey:
(1) reviewed Wyant's audited financial statements for the three
fiscal years ended December 31, 1997, and unaudited financial
statements for the three quarters ended
15
<PAGE> 20
September 30, 1998, which Wyant's management had identified as being
the most current financial statements available at the time Houlihan
Lokey's opinion was being prepared,
(2) reviewed internally-prepared, unaudited financial statements for
the Division for the three fiscal years ended December 31, 1998,
which Wyant's management had identified as being the most current
internal financial statements available at the time Houlihan Lokey's
opinion was being prepared,
(3) reviewed the Asset Purchase Agreement, draft dated February 12,
1999, which was substantially in final form,
(4) reviewed Paper-Pak's "Acquisition of Wyant Healthcare and Tissue,
Status Update," dated February 17, 1999,
(5) reviewed "Wyant Corporation -- Project Sun, Report to the Board
of Directors," dated October 1, 1998,
(6) met with certain members of the senior management of Wyant and
the Division to discuss the operations, financial condition, future
prospects and projected operations and performance of the Division,
(7) reviewed forecasts and projections prepared by Wyant's
management, with respect to the Division for the fiscal year ending
December 31, 1999,
(8) reviewed the historical market prices and trading volume for
Wyant's publicly traded securities,
(9) reviewed certain other publicly available financial data for
certain companies that Houlihan Lokey deemed comparable to the
Division, and publicly available prices paid in other transactions
that Houlihan Lokey considered similar to the Paper-Pak Transaction,
and
(10) conducted such other studies, analyses and inquiries as Houlihan
Lokey deemed appropriate.
In assessing the financial fairness of the Paper-Pak Transaction to
Wyant, Houlihan Lokey:
(1) independently valued the Division using widely accepted valuation
methodologies,
(2) analyzed the reasonableness of the consideration being offered in
the Paper-Pak Transaction, and
(3) reviewed the valuation implications to Wyant shareholders of
various alternatives to the Paper-Pak Transaction.
Valuation of the Division
Houlihan Lokey completed an independent valuation of the Division using
the market multiple and comparable transaction approaches.
Market Multiple Approach. The first approach, the market multiple
approach, involved the multiplication of revenue and cash flow measures by
appropriate risk-adjusted multiples. Multiples were determined through an
analysis of certain publicly traded companies, selected on the basis of
operational and economic similarity with the principal business operations of
the Division. Revenue and cash flow multiples were calculated for the
comparative companies based upon daily trading
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<PAGE> 21
prices. A comparative risk analysis between the Division and these public
companies formed the basis for the selection of appropriate risk adjusted
multiples for the Division. The risk analysis incorporated both quantitative and
qualitative risk factors, which relate to, among other things, the nature of the
industry in which the Division and the other comparative companies were engaged.
For purposes of this analysis, Houlihan Lokey selected six publicly
traded, domestic companies involved in manufacturing various health care
products. These companies were Alba-Waldensian, Inc., Graham-Field Health
Products, Inc., Maxxim Medical, Inc., Medical Action Industries Inc., Polymer
Group, Inc. and Span-America Medical Systems, Inc.
Houlihan Lokey reviewed trailing fiscal year end and latest twelve month
multiples of revenues, earnings before interest, taxes, depreciation and
amortization ("EBITDA") and earnings before interest and taxes ("EBIT"), and
projected EBITDA and EBIT for the next fiscal year for the comparable companies.
The multiples for the comparable companies are summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
REVENUE EBITDA EBIT
-----------------------------------------------------------------------------------------------------------------
LTM FYE NFY LTM FYE NFY LTM FYE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High 2.13 1.53 6.9 7.8 13.9 10.5 12.4 19.4
----------------------------------------------------------------------------------------------------------------
Low 0.33 0.35 6.6 4.1 3.5 9.1 6.4 5.2
----------------------------------------------------------------------------------------------------------------
Mean 0.94 0.78 6.7 6.5 8.8 9.8 9.5 11.0
----------------------------------------------------------------------------------------------------------------
Median 0.82 0.65 6.7 6.9 8.0 9.8 9.7 9.7
----------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
FYE = fiscal year end
LTM = latest twelve months
NFY = next fiscal year
Comparable Transaction Approach. The second approach, the comparable
transaction approach, also involved multiples of revenue and cash flow.
Multiples analyzed in this approach involved controlling interest transactions
for companies with operations similar in some manner to the Division's
operations. For purposes of this analysis Houlihan Lokey analyzed 14 completed
transactions between January 1997 and January 1999.
Houlihan Lokey informed the Board of Directors that based on these two
approaches, Houlihan Lokey concluded that the value of the Division on a total
invested capital basis is reasonably stated in the range of $13 million to $15
million.
Fairness Analysis
To determine the fairness of the Paper-Pak Transaction to Wyant from a
financial point of view, Houlihan Lokey compared the value of the consideration
to be received for the Division to the estimated value of the Division.
Houlihan Lokey valued the cash to be paid at the Closing and the assumed
indebtedness at face value. The Escrow Amount ($550,000) was discounted to
reflect the time value of money by utilizing a discount rate of 15%. This
discount rate was selected by Houlihan Lokey based upon an analysis of the
weighted average cost of capital for the companies used in the market multiple
approach. Houlihan Lokey concluded that the value of the consideration to be
received by Wyant on a present value basis was $15.5 million, which Houlihan
Lokey noted was greater than the concluded value of the Division of between $13
and $15 million.
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<PAGE> 22
Assessment of Wyant's Strategic Alternatives to the Paper-Pak
Transaction
In evaluating the fairness of the Paper-Pak Transaction, from a financial
point of view, Houlihan Lokey considered the expected value to Wyant of
completing the Paper-Pak Transaction and certain alternatives to the Paper-Pak
Transaction. With regard to each alternative Houlihan Lokey's analysis
qualitatively considered the valuation implications to Wyant, the probability of
successfully completing the alternative and the cost and time to implement the
alternative.
For purposes of this analysis Houlihan Lokey considered the following
strategic alternatives: (1) status quo; (2) sale to a strategic buyer; (3) sale
to a financial buyer; and (4) liquidation of the Division. The assessment of
strategic alternatives included a qualitative assessment of the valuation impact
of the Paper-Pak Transaction relative to the alternatives considered by Houlihan
Lokey. The analysis did not quantify the valuation impact because, in the
opinion of Houlihan Lokey, it was not feasible to so quantify such impact due to
the significant number of non-quantifiable variables. Furthermore, Houlihan
Lokey noted that the inability to quantify the valuation impact did not affect
its ability to reach the conclusion that the Paper-Pak Transaction is fair from
a financial point of view. In conclusion, Houlihan Lokey noted that of the
strategic alternatives considered, the Paper-Pak Transaction appears to provide
the greatest value to Wyant.
Houlihan Lokey
Houlihan Lokey is a nationally recognized investment banking firm with
special expertise in, among other things, valuing businesses and securities and
rendering fairness opinions. Houlihan Lokey is continually engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, private placements of debt and equity,
corporate reorganizations, employee stock ownership plans, corporate and other
purposes. Wyant selected Houlihan Lokey because of its experience and expertise
in performing valuation and fairness analyses and because of its knowledge of
Wyant's business that dates back to 1996. Houlihan Lokey does not beneficially
own nor has it ever beneficially owned any interest in Wyant.
Pursuant to an agreement dated February 25, 1999 between Houlihan Lokey
and Wyant, Houlihan Lokey was retained by Wyant to analyze the fairness of the
Paper-Pak Transaction to Wyant from a financial point of view. Wyant has agreed
to pay Houlihan Lokey a fee of $75,000 plus its reasonable out-of-pocket
expenses incurred in connection with the rendering of the fairness opinion
described above. Wyant has further agreed to indemnify Houlihan Lokey against
certain liabilities and expenses in connection with the rendering of its
services.
THE ASSET PURCHASE AGREEMENT
General
Pursuant to the terms of the Asset Purchase Agreement, Wyant will sell to
Paper-Pak the Division and substantially all of its operating assets other than
the following:
(1) cash, including cash on deposit with Banks;
(2) amounts receivable from Wood Wyant and IFC Disposables;
(3) deferred financing charges for Congress Financial Corporation
("CFC") credit facilities;
(4) all pre-paid property and casualty insurance;
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(5) any amounts received from the fire insurance claim for a
September 1998 fire in the Bridgetex section of the 100 Readington
Road facilities;
(6) all pre-paid and other income tax balances; and
(7) all investments made by Wyant in Wood Wyant and IFC Disposables.
Paper-Pak also will assume substantially all of the liabilities of the
Division other than the following:
(1) any liabilities or obligations for income or excise Taxes arising
out of the Division Business for periods on or prior to the Closing
Date;
(2) any liabilities or obligations to any Affiliate of Wyant;
(3) any liability relating to the claim of groundwater or other
environmental contamination at the Former Bridgewater Facility;
(4) any liability relating to certain litigation and/or claims of
officers and directors;
(5) any liability related to a patent infringement claim surrounding
certain airlaid manufacturing equipment prior to the Closing Date;
(6) all of Wyant's overdraft fees and expenses assessed by any bank
or lending institution, whether arising before, on or after the
Closing Date;
(7) all of Wyant's Accrued Expenses arising from any matters
concerning Wyant's corporate allocated expenses;
(8) all payments, liabilities and accrued interest and fees arising
from Wyant's indebtedness to Congress Financial Corporation;
(9) all liabilities or obligations arising from any existing or
contingent standby letter of credit, including the standby letters
of credit issued by CFC to the New Jersey Economic Development
Authority, the New Jersey Department of Environmental Protection
(the "NJDEP") and the Brownsville Industrial Development Board on
behalf of Wyant;
(10) all liabilities and obligations for Remediation Expenses to the
extent that any such liabilities or obligations are not satisfied
prior to the Closing;
(11) any liability or obligation arising out of or relating to the
Hourly Plan, including, without limitation, any Hourly Plan
Withdrawal Liability; and
(12) all payments, liabilities or other obligations arising from, or in
connection with, any agreement or arrangement made between Wyant and
Robert E. Briggs, the President of the Division, whether arising
before, on or after the Closing Date.
Purchased Assets; Assumed Liabilities
Pursuant to the terms of the Asset Purchase Agreement, Wyant will sell to
Paper-Pak substantially all of the Division's assets (excluding the assets set
forth above under "-- General"), including but not limited to all of the
Division's property and assets located in New Jersey and California and any and
all other tangible property used primarily in the Division Business which are
not located in New Jersey or California, all of the Division Contracts that were
in existence on the date of the Asset Purchase Agreement or entered into in the
Ordinary Course on or prior to the Closing Date, all Intellectual Property
Rights that relate primarily to the Division Business including any goodwill
associated therewith, all receivables relating primarily to the Division
Business, all prepaid expenses of Wyant relating primarily to the Division
Assets, all rights solely related to the Division Business under policies of
insurance (including those rights that relate to the Division Business under
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insurance policies that relate to the Division and Wyant), all goodwill
associated with the Division Business, all choses in action related solely to
the Division and all other assets located on the Division Balance Sheet
(excluding assets collected and inventory sold in the Ordinary Course). In
addition, Paper-Pak will assume substantially all of the liabilities of the
Division (excluding the liabilities set forth above under "-- General").
Purchase Price
On the Closing Date, Paper-Pak will pay to Wyant an amount (the "Purchase
Price") equal to $11,912,000 plus or minus the amount by which the Adjusted Net
Assets relating to the Division differ from $11,116,000 as of the Closing.
At least three days prior to the Closing Date, Wyant will provide
Paper-Pak with an Estimated Purchase Price, which sets forth each component of
the Division's Total Division Assets and Total Division Liabilities based on the
most recent month-end balance sheet for the Division that has been prepared in
accordance with generally accepted accounting principles. On the Closing Date,
Paper-Pak shall pay to Wyant the amount by which the Estimated Purchase Price
exceeds $550,000 (the "Escrow Amount") and will deliver the Escrow Amount to the
Escrow Agent pursuant to the terms of the Escrow Agreement. Within sixty days
after the Closing Date, Wyant shall deliver to Paper-Pak a Post-Closing Purchase
Price Estimate based upon a balance sheet of the Division as of the Closing
Date. Assuming that Paper-Pak does not object, this estimate will become binding
on the parties as the final determination of the Purchase Price. As soon as
practicable after the final determination of the Purchase Price, if the
Estimated Purchase Price exceeds the final determination of the Purchase Price,
such excess shall be returned to Paper-Pak from the Escrow Account. If this
excess is greater than the Escrow Amount, then Wyant shall pay this difference
to Paper-Pak. If the final determination of the Purchase Price exceeds the
Estimated Purchase Price, such excess shall be paid to Wyant from Paper-Pak. The
Escrow Amount may be used only (1) for any Purchase Price adjustments in favor
of Paper-Pak and (2) as security for certain indemnification claims by Paper-Pak
under the Asset Purchase Agreement.
For a further discussion of Wyant's estimate of the Purchase Price, see
"-- Application of Sale Proceeds; Operations after the Paper-Pak Transaction."
Conditions
Paper-Pak's obligations to consummate the Paper-Pak Transaction are
subject to, among others, the following conditions being satisfied on the
Closing Date:
(1) no injunction or restraining order of any Governmental Entity
existing against Paper-Pak, Wyant, the Division or any of the
principals, directors or officers of any of them, that materially
changes the transactions contemplated by the Asset Purchase
Agreement;
(2) the Paper-Pak Transaction being duly approved by the Wyant
shareholders;
(3) the representations and warranties made by Wyant contained in the
Asset Purchase Agreement being true and correct as if made on the
Closing Date;
(4) Paper-Pak receiving adequate financing in an amount equal to the
Purchase Price on terms reasonably satisfactory to Paper-Pak;
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(5) the receipt of an extended coverage owner's policy of title
insurance for the Division Owned Real Property in the amount of
$4,000,000, showing title to all such property vested in Paper-Pak,
subject only to various permitted title matters;
(6) all consents, waivers, authorizations and approvals from third
parties being obtained;
(7) satisfactory resolution of certain regulatory matters with the
United States Department of Justice and the NJDEP (see "-- Certain
Regulatory Matters");
(8) no adverse change having occurred in the business of Wyant since
the date of the Asset Purchase Agreement which may have a material
adverse effect on the value of the Division Assets;
(9) Paper-Pak receiving a covenant not to compete from Wyant (see "--
Other Agreements with Paper-Pak");
(10) Paper-Pak, IFC Disposables and Wyant entering into Purchase and
Supply Agreements (see "-- Other Agreements with Paper-Pak"); and
(11) the release by CFC of its lien on the Division Assets so that
Paper-Pak's lender may be substituted in connection with Paper-Pak's
assumption of Wyant's indebtedness to the New Jersey Economic
Development Authority.
Wyant's obligations to consummate the Paper-Pak Transaction are subject
to, among others, the following conditions being satisfied on the Closing Date:
(1) the representations and warranties of Paper-Pak contained in the
Asset Purchase Agreement being true and correct as if made on the
Closing Date;
(2) the Paper-Pak Transaction being duly approved by the Wyant
shareholders;
(3) no injunction or restraining order of any Governmental Entity
existing against Paper-Pak, Wyant, the Division or any of the
principals, directors or officers of any of them, that materially
changes the transactions contemplated by the Asset Purchase
Agreement;
(4) Paper-Pak, IFC Disposables and Wyant entering into Purchase and
Supply Agreements (see "-- Other Agreements with Paper-Pak"); and
(5) satisfactory resolution of certain regulatory matters with the
United States Department of Justice (see "-- Certain Regulatory
Matters").
Covenants
Wyant has agreed, among other things, that from the date of the Asset
Purchase Agreement through the Closing Date (except with respect to clause (3)
below, through six years after the Closing Date), except with Paper-Pak's
consent, it will:
(1) not solicit, initiate or encourage inquiries or proposals
concerning any merger, consolidation, business combination, sale of
all or substantially all of its assets, sale of shares of capital
stock or similar transactions involving Wyant, except that Wyant may
furnish information to, and enter into, negotiations with, any
person who makes an unsolicited bona-fide inquiry or proposal, if
the Board of Directors believes in good faith, after consultation
with its legal advisors, that it is under a fiduciary obligation to
cooperate with such person;
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(2) take all reasonable actions necessary to comply with all legal
requirements necessary to consummate the Paper-Pak Transaction, and
will reasonably cooperate with and furnish information to Paper-Pak
to permit Paper-Pak to comply with all such legal requirements;
(3) provide Paper-Pak with all reasonable information concerning its
business which is deemed necessary in connection with the
preparation or examination of Tax returns, Excluded Liabilities and
financial reporting purposes;
(4) use its reasonable commercial efforts to maintain its business
organization and its relationship with its employees, suppliers and
customers;
(5) outside of the Ordinary Course not encumber any of the Division
Assets;
(6) not dispose of any of the Division Assets except in the Ordinary
Course;
(7) operate its business in compliance with all Legal Requirements;
(8) maintain the Division Assets in good working condition subject to
ordinary wear and tear;
(9) not amend or terminate any material contract or enter into any
contract other than in the Ordinary Course;
(10) not incur any indebtedness which Paper-Pak would be required to
assume under the terms of the Asset Purchase Agreement, except in
the Ordinary Course;
(11) not make any change in accounting principles or methods that would
affect the books of account or financial statements of the Division;
(12) not amend or adopt any labor or employment agreement or increase
any compensation or bonus plan outside of the Ordinary Course;
(13) not purchase or enter into a contract to purchase any capital
asset for use in the conduct of the Division Business, except for
capital expenditures or commitments necessary to maintain the
Division Assets in good condition and repair as well as purchases of
capital assets used primarily in the Division Business not exceeding
$75,000 in the aggregate;
(14) use commercially reasonable efforts to obtain any consent or
waiver by any Person required to be obtained in connection with the
transactions contemplated by the Asset Purchase Agreement;
(15) not cancel, release or discharge any claim of Wyant's that
pertains to the Division Business other than in the Ordinary Course;
(16) at its own expense, make the repairs and purchases necessary to
repair the fire damage at the Bridgetex section of the 100
Readington Road facilities; and
(17) not take any other action or fail to take any action that would
not be in the Ordinary Course.
Representations and Warranties
Wyant has made certain customary representations and warranties in the
Asset Purchase Agreement as to the authorization, validity and enforceability of
the Asset Purchase Agreement and similar corporate matters. Wyant also has made
certain representations and warranties relating to, among other things:
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(1) the absence of conflicts with other contracts and agreements;
(2) certain financial statements;
(3) title to Real Property and personal property associated with the
Division;
(4) accounts receivable and inventories;
(5) the ownership of or right to use certain Intellectual Property;
(6) insurance;
(7) indebtedness;
(8) judgments and litigation;
(9) income and other Taxes;
(10) questionable payments;
(11) certain employee benefit and labor matters;
(12) the absence of any undisclosed material adverse change;
(13) existence of all required permits and licenses;
(14) no violation of any regulatory filing requirement or agreement
with a third party;
(15) absence of certain changes;
(16) Affiliate interests in the Division Business;
(17) no violation of applicable law;
(18) claims regarding products manufactured by the Division;
(19) availability of books and records;
(20) compliance with applicable environmental laws;
(21) brokers fees;
(22) significant customers and vendors; and
(23) Year 2000 compliance.
Wyant's representations and warranties contained in the Asset Purchase
Agreement will survive for a period of two years following the Closing Date
(other than those relating to (1) income and other Taxes and employee benefit
matters which shall survive until the expiration of the applicable statutes of
limitations, (2) title to property and environmental laws which shall terminate
three years following the Closing Date and (3) the validity of the Asset
Purchase Agreement which shall continue forever).
Paper-Pak has made certain customary representations and warranties in
the Asset Purchase Agreement and other documents as to, among others, the
authorization, validity and enforceability of the Asset Purchase Agreement and
similar corporate matters. In addition, in order to consummate the acquisition
of the Division and the other transactions contemplated by the Asset Purchase
Agreement, Paper-Pak has represented to Wyant that it will use commercially
reasonable efforts to seek the Required Financing. Subject to changes in
financial and credit markets after the date of the Asset Purchase Agreement over
which Paper-Pak has no control, Paper-Pak has represented to Wyant that it will
be able to obtain the Required Financing at or prior to the Closing.
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Closing Date
Consummation of the Paper-Pak Transaction will occur within five business
days after all the conditions set forth in the Asset Purchase Agreement have
been fulfilled.
Termination
The Asset Purchase Agreement may be terminated at any time prior to the
Closing Date, whether before or after approval by the Wyant shareholders,
(1) by mutual consent of Wyant and Paper-Pak,
(2) by Wyant or Paper-Pak if (a) the Paper-Pak Transaction is not
consummated by September 30, 1999 (or such later date as Wyant and
Paper-Pak may agree in writing), provided that neither party may
terminate under this clause if its actions or lack thereof are the
cause of the delay, (b) upon a vote at the Meeting, the Stockholder
Approval shall not be obtained, (c) the Meeting shall not have been
held by September 15, 1999, (d) the Paper-Pak Transaction is
prohibited by a final nonappealable order, decree or ruling of a
court of competent jurisdiction or other Governmental Entity or (e)
there has been a material breach by the other party of any
representation, warranty, covenant or agreement, which breach cannot
be cured within twenty days of notice thereof,
(3) by Paper-Pak, if (a) the Board of Directors withdraws or modifies
its recommendation to the Wyant shareholders to approve the
Paper-Pak Transaction, (b) the Board of Directors recommends to the
Wyant shareholders an Alternative Proposal, (c) Wyant solicits or
initiates an Alternative Proposal, or
(4) by Wyant, if the Board of Directors, based upon the written
advice of counsel, determines that to continue to support the
Paper-Pak Transaction and the sale of the Division Assets would be a
breach of their fiduciary duty under New York law.
In the event that the Asset Purchase Agreement is terminated pursuant to
its terms, or the Closing does not occur for any reason, then the maximum
liability of each of Wyant and Paper-Pak for one or more breaches of the Asset
Purchase Agreement prior to such termination shall in no event exceed $350,000.
Indemnification
Wyant and Paper-Pak are each obligated to indemnify the other for, among
other things, breach of their respective representations, warranties, covenants
and agreements made under the Asset Purchase Agreement. Paper-Pak also is
obligated to indemnify Wyant for its failure to discharge the Assumed
Liabilities and Wyant is obligated to indemnify Paper-Pak for its failure to
discharge the Retained Seller Liabilities. To the extent that any of the Escrow
Amount remains undisbursed, any payment of a claim against Wyant for
indemnification by Paper-Pak will first be made from the Escrow Account. The
Escrow Agreement will expire two years after the Closing Date, assuming that
there are no pending claims at that time. An indemnified party shall have no
right to indemnification under the Asset Purchase Agreement unless the aggregate
of all such indemnified party's losses exceed $185,000 and then the indemnifying
party shall be liable for all such indemnified party's losses in excess of such
initial $185,000. An indemnified party shall have no right to indemnification
under the Asset Purchase Agreement after all indemnified parties in the
aggregate have received payment of Damages of $2,000,000 in the aggregate.
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Expenses
The Asset Purchase Agreement provides that if the Paper-Pak Transaction
is consummated, each party will pay its own expenses incurred in connection
therewith. If the Asset Purchase Agreement is terminated by Paper-Pak as a
result of its failure to obtain the Required Financing and Wyant is not then in
material default of any material obligations, Paper-Pak shall pay to Wyant a fee
equal to $350,000. If the Asset Purchase Agreement is terminated by Paper-Pak as
a result of:
(1) the withdrawal of the approval of the Board of Directors of the
Paper-Pak Transaction or the approval by the Board of Directors of
an Alternative Proposal;
(2) the decision by the Board of Directors that to continue to
approve the Paper-Pak Transaction would be a violation of their
fiduciary duty under New York law;
(3) the failure to obtain the Stockholder Approval or to hold the
Stockholder Meeting by September 15, 1999; or
(4) the Board of Directors soliciting or initiating an Alternative
Proposal,
then Wyant is required to pay to Paper-Pak a fee of $350,000.
OTHER AGREEMENTS WITH PAPER-PAK
Escrow Agreement
Pursuant to the Asset Purchase Agreement, at Closing both parties and an
Escrow Agent will enter into an Escrow Agreement in the form contemplated by the
Asset Purchase Agreement. The Escrow Agreement will provide the procedures for
payment of any Purchase Price adjustment and any indemnification claims of
Paper-Pak. Paper-Pak has agreed to pay $550,000 of the Purchase Price to an
Escrow Account on the Closing Date. All claims by Paper-Pak will first be
satisfied from this Escrow Account. The Escrow Agreement will expire two years
after the Closing Date, assuming that there are no pending claims at that time.
At the end of this term, when there are no longer any pending claims or claims
that have been decided but yet to be paid, the Escrow Agent will pay the
remaining sum in the Escrow Account, if any, to Wyant.
Covenant Not to Compete Agreement
Pursuant to the Asset Purchase Agreement, at Closing Wyant and Paper-Pak
will enter into a Covenant Not to Compete Agreement (the "Covenant Agreement")
in the form contemplated by the Asset Purchase Agreement. The Covenant Agreement
will limit Wyant's ability to do the following for five years following the
Closing Date:
(1) engage in any business that, among other things, manufactures or
distributes, adult incontinence products, other than the manufacture
by IFC Disposables of airlaid non-woven washcloths (the "Restricted
Business");
(2) request or induce any customer or vendor of Paper-Pak to limit or
cancel its business with Paper-Pak, as such business relates to the
Restricted Business; and
(3) request or induce any current or future officer, director,
employee or representative of Paper-Pak to terminate his or her
relationship with Paper-Pak or to commit any act that would
constitute a breach of any provision of the Covenant Agreement.
The Covenant Agreement will not restrict Wyant's ability to engage in the
Restricted Business, as described above, with its Affiliates pursuant to the
Purchase and Supply Agreements described below.
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Moreover, Wyant may be a passive owner (less than 5% of the outstanding stock)
of any Person that engages in the Restricted Business, so long as Wyant has no
active participation in the business of such Person. Finally, Wyant will be
permitted to acquire substantially all of a business that engages in the
Restricted Business, provided that the revenues and assets associated with such
business constitute less than 10% of such Person's aggregate revenues and assets
for such fiscal year.
Purchase and Supply Agreements
Pursuant to the Asset Purchase Agreement, Wyant and Paper-Pak will enter
into Purchase and Supply Agreements at Closing. Pursuant to these Purchase and
Supply Agreements which will expire on June 1, 2002:
(1) Paper-Pak will supply and IFC Disposables will purchase an
agreed-upon volume of airlaid products. IFC Disposables will pay the
currently applicable prices for such products and the price term
will be renegotiated once every year;
(2) Paper-Pak will supply IFC Disposables with all of its
requirements for incontinence products. The pricing for such
products will be at agreed-upon prices and there is no
pre-determined volume requirement; and
(3) IFC Disposables will supply Paper-Pak with Quickables(TM)
absorbent washcloths at an agreed upon price, which will be
renegotiated every twelve months. The volume purchased by Paper-Pak
will be predetermined, subject to minimal variation each month.
Wyant will act as a guarantor of all of IFC Disposables's obligations to
Paper-Pak pursuant to these Purchase and Supply Agreements.
Voting Agreement
Pursuant to the Asset Purchase Agreement, Mr. Wyant entered into the
Voting Agreement with Paper-Pak pursuant to which Mr. Wyant agreed to vote the
Wyant Shares in favor of the Asset Purchase Agreement and the Paper-Pak
Transaction. However, Mr. Wyant shall have no obligation to vote in such a
manner if (1) the Board of Directors, in the good faith exercise of its business
judgment, upon written advice from its legal counsel, determines that continuing
to recommend the Paper-Pak Transaction to the shareholders and the approval of
the Paper-Pak Transaction would be a breach of its fiduciary duty under New York
law or (2) in the good faith exercise of his business judgement, based upon
written advice from counsel, he determines that to vote the Wyant shares in such
a manner would be a breach of his fiduciary duty as the majority shareholder of
Wyant under New York law. In connection therewith, Wyant has agreed to indemnify
Mr. Wyant against any liability or obligation arising from such agreement.
APPLICATION OF SALE PROCEEDS; OPERATIONS AFTER THE PAPER-PAK TRANSACTION
Upon consummation of the Paper-Pak Transaction, Wyant will cease
operating its health care business. After payment of its expenses and
liabilities associated with the Paper-Pak Transaction, including the repayment
of Wyant's domestic credit facility (approximately $4.2 million as of December
31, 1998) and the discharge of the Hourly Plan Withdrawal Liability, Wyant
estimates that it will have available cash resources from the Paper-Pak
Transaction of approximately $4 million, $550,000 of which initially will be
escrowed in order to provide Paper-Pak with a source for obtaining any excess
payment of the purchase price and with security for certain of Wyant's
indemnification
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obligations under the Asset Purchase Agreement. See "-- The Asset Purchase
Agreement -- Purchase Price."
Wyant is in the process of evaluating possible alternative uses of the
balance of the net cash proceeds from the Paper-Pak Transaction, including the
acquisition of assets or businesses in North America that are consistent with
Wyant's overall strategy of growing as a North American janitorial and
sanitation products manufacturer and distributor. Although Wyant is evaluating
several opportunities, currently, there are no significant acquisitions of
assets or businesses that would be considered probable. To the extent that Wyant
acquires any such assets or businesses, whether related to its overall strategy
or otherwise, there can be no assurance that such acquisitions will be
successfully integrated with Wyant's operations or that such acquisitions will
ultimately be profitable for Wyant. Pending the application of such proceeds,
Wyant intends to use such proceeds to repay certain short-term debt of its
subsidiaries.
CERTAIN REGULATORY MATTERS
The Paper-Pak Transaction is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR-Act"), and the rules and regulations thereunder, which provide that certain
transactions may not be consummated until required information and materials are
furnished to the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") and the Federal Trade Commission (the "FTC") and the
requisite waiting period expires or terminates. Wyant and Paper-Pak will shortly
make all filings required by the Antitrust Division and the FTC, commencing a
thirty-day waiting period. The FTC may grant early termination of this statutory
waiting period.
Shortly, Wyant will make certain filings with the NJDEP under the New
Jersey Industrial Site Recovery Act ("ISRA") with a view towards obtaining
letters of nonapplicability from the NJDEP with respect to its New Jersey
facility.
INCOME TAX CONSEQUENCES
Income Tax Consequences to Wyant of the Paper-Pak Transaction
For U.S. federal and state income tax purposes, Wyant will recognize a
net taxable gain on the Paper-Pak Transaction. Without taking into account any
other item of gain, loss, income, deduction or credit of Wyant for the taxable
year of the Paper-Pak Transaction (other than net operating loss carryforwards
and certain transaction-related expenses), Wyant's combined U.S. federal and
state income tax liability on the Paper-Pak Transaction would be approximately
$1,560,000.
Income Tax Consequences to Wyant Shareholders of the Paper-Pak
Transaction
Wyant shareholders that do not exercise appraisal rights will have no
income tax consequences as a result of the Paper-Pak Transaction. Wyant
shareholders who duly exercise appraisal rights generally will recognize capital
gain or loss for U.S. federal income tax purposes in an amount equal to the
difference between the cash they receive as a result of appraisal proceedings
and their aggregate tax basis in their shares of Common Stock. Such capital gain
or loss will be long-term capital gain or loss if the shares have been held for
more than one year. Long-term capital gains of individual shareholders generally
will be subject to reduced rates of U.S. federal income taxation. Deduction of
capital losses for U.S. federal income tax purposes is subject to limitations.
Notwithstanding the foregoing, shareholders that are considered under certain
constructive ownership rules to own shares of Common Stock actually owned by
other persons may, under certain circumstances, recognize dividend income,
taxable as ordinary income, equal to the full amount they receive. See "Rights
of Dissenting
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Shareholders." Shareholders should consult their own tax advisors concerning the
tax consequences to them, in light of their particular situations, of the
Paper-Pak Transaction, including any state, local or foreign tax consequences.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of Common Stock who dissent from the proposal to approve the
Paper-Pak Transaction may be entitled to exercise appraisal rights. The rights
of holders of Common Stock who dissent from the proposal to approve the
Paper-Pak Transaction and who seek appraisal rights are governed by Sections
910(a)(1)(B) and 623 of the NYBCL. The applicable provision of Section 910 of
the NYBCL provides that a holder of Common Stock, subject to and by complying
with Section 623 of the NYBCL, shall have the right to receive payment of the
fair value of such holder's shares of Common Stock, and the other rights and
benefits provided by Section 623 of the NYBCL, if the shareholder does not vote
to approve the Paper-Pak Transaction. Mr. Wyant, in his capacity as a Wyant
shareholder, has agreed to vote his shares pursuant to the Voting Agreement in
favor of the Paper-Pak Transaction and, therefore, he will be precluded from
perfecting dissenters' rights. The following discussion of the applicable
provisions of Section 623 of the NYBCL is not intended to be a complete
statement of such provisions and is qualified in its entirety by reference to
the full text of Section 623 of the NYBCL that is set forth in Annex C attached
to this Proxy Statement.
The following is a summary of the procedural steps that must be taken by
a Wyant shareholder if the right of appraisal afforded by Section 623 of the
NYBCL is to be validly exercised.
Any shareholder who elects to exercise such shareholder's dissenter's
rights with respect to the Paper-Pak Transaction (a "Dissenting Shareholder")
must file with Wyant, before the Annual Meeting, or at such Annual Meeting but
before the vote is taken, a written objection to the Paper-Pak Transaction,
which includes (1) a notice of such shareholder's election to dissent, (2) such
shareholder's name and residence address, (3) the number of shares of Common
Stock which such shareholder holds, and (4) a demand for payment of the fair
value of such shareholder's shares of Common Stock if the Paper-Pak Transaction
is consummated. Such objection is not required from any shareholder to which
Wyant does not give notice of the Annual Meeting. This written objection to the
Paper-Pak Transaction must be in addition to, and separate from, any proxy or
vote against the proposal to approve the Paper-Pak Transaction. All notices of
election to dissent should be addressed to Wyant at 100 Readington Road,
Somerville, New Jersey 08876. Attention: Corporate Secretary.
Under the NYBCL, neither voting against, nor failure to vote in favor of,
the proposal to approve the Paper-Pak Transaction will constitute the written
objection required to be filed by a Dissenting Shareholder. Failure to vote
against the proposal to approve the Paper-Pak Transaction, however, will not
constitute a waiver of rights under Sections 623 and 910 of the NYBCL provided
that a written objection has been properly filed with Wyant. A shareholder
voting to approve the Paper-Pak Transaction will be deemed to have waived such
shareholder's appraisal rights under Section 623 of the NYBCL. A shareholder who
inadvertently has voted by proxy to approve the Paper-Pak Transaction may revoke
the proxy before it is voted by (i) filing with the Corporate Secretary of
Wyant, at or before the Annual Meeting, a written notice of revocation bearing a
date later than the proxy, (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Corporate Secretary of Wyant at or
before the Annual Meeting or (iii) attending the Annual Meeting and voting in
person (although attendance at the Annual Meeting will not in and of itself
constitute a revocation of a proxy).
A shareholder may not dissent as to less than all of such shareholder's
shares of Common Stock as to which such shareholder has a right of dissent. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all shares of Common Stock held on behalf of such owner, as to
28
<PAGE> 33
which such nominee or fiduciary has a right to dissent. Furthermore, if the
shares of Common Stock are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, the demand should be made in that capacity, and
if the shares of Common Stock are owned of record by more than one person, as in
a joint tenancy or tenancy in common, the demand should be made by or for all
owners of record. An authorized agent, including one of two or more joint
owners, may execute the demand for appraisal for a holder of record; such agent,
however, must identify the record owner or owners and expressly state in such
demand that the agent is acting as agent for the record owner or owners of such
shares. All notices of election to dissent should be addressed to Wyant at 100
Readington Road, Somerville, New Jersey 08876, Attention: Corporate Secretary.
If the Paper-Pak Transaction is authorized at the Annual Meeting by a
vote of the shareholders, Wyant must, within ten days after such authorization,
give written notice of such authorization, by registered mail, to each
Dissenting Shareholder who timely filed a written objection to the Paper-Pak
Transaction, or from whom written notice of objection was not required because
such shareholder did not receive prior notice of the Annual Meeting, unless such
shareholder voted to approve the Paper-Pak Transaction. Shareholders from whom
written notice of objection was not required and who elect to dissent must file
a written notice of such election within twenty days after notice of approval of
the Paper-Pak Transaction. Such notice must state the shareholder's name and
residence address, the number and class of shares as to which such shareholder
dissents and a demand for payment of the fair value of such shares.
At the time of filing a notice of election to dissent, or within one
month thereafter, a Dissenting Shareholder must submit the Certificates
representing such shareholder's shares of Common Stock to Wyant's transfer
agent; the transfer agent, in turn, then shall note conspicuously thereon that a
notice of election to dissent has been filed and shall return such certificate
to the Dissenting Shareholder. Failure to timely submit such certificate will
result in the loss of such Dissenting Shareholder's appraisal rights unless
otherwise directed by a court after a showing to the court of good cause.
Within fifteen days after the expiration of the period within which
Dissenting Shareholders are required to file their notices of election to
dissent, or within fifteen days after the date of consummation of the Paper-Pak
Transaction, whichever is later (but no later than ninety days from the date of
the Annual Meeting at which the shareholders' vote to authorize the Paper-Pak
Transaction is taken), Wyant shall make a written offer by registered mail
(which, if the Paper-Pak Transaction has not been consummated within ninety days
after the date of such Annual Meeting, may be conditioned upon such
consummation), to each Dissenting Shareholder who has filed a notice of election
to dissent, to pay for such shareholder's shares of Common Stock at a specified
price which Wyant considers to be the "fair value" thereof. Such offer shall be
made at the same price per share to all Dissenting Shareholders. If within
thirty days after the making of such offer, Wyant and any Dissenting Shareholder
agree upon the price to be paid for such shareholder' shares, payment therefor
shall be made within sixty days after the making of such offer or the date of
consummation of the Paper-Pak Transaction, whichever is later, upon the
surrender of the certificates representing such shareholder's shares of Common
Stock.
If Wyant fails to make such an offer within such period of fifteen days,
or if it makes such an offer and any Dissenting Shareholder fails to agree with
Wyant within the period of thirty days thereafter as to the price to be paid for
such shareholder's shares of Common Stock, Wyant must, within twenty days after
the expiration of such fifteen or thirty day period, as the case may be,
institute a special proceeding in the appropriate New York State court to
determine the rights of the Dissenting Shareholders and to fix the "fair value"
of their shares of Common Stock. If Wyant does not institute such a proceeding
within such period of twenty days, any Dissenting Shareholder may institute such
proceeding for the same purpose not later than thirty days after the expiration
of such twenty day
29
<PAGE> 34
period. If such proceeding is not instituted within such thirty day period, all
dissenters' rights will be lost unless the court otherwise directs.
All Dissenting Shareholders, other than those who agreed with Wyant as to
the price to be paid for their shares of Common Stock, will be made parties to
such appraisal proceeding. The court shall fix the value of the shares of Common
Stock which shall be the "fair value" as of the close of business on the day
prior to the date of the Annual Meeting. Within sixty days after the final
determination of such court proceeding, Wyant will be required to pay to each
Dissenting Shareholder the amount found to be due to such shareholder, with
interest thereon from the date of the Annual Meeting at which the Paper-Pak
Transaction was approved by the Wyant shareholders to the date of payment, at
such rate as the court finds to be equitable, upon surrender of the certificates
representing such shareholder's shares of Common Stock. If the court finds that
the refusal of any Dissenting Shareholder to accept an offer of payment by Wyant
was arbitrary, vexatious or otherwise not in good faith, no interest will be
allowed such shareholder.
Any Dissenting Shareholder who has filed a notice of election to dissent
will not, after the date of consummation of the Paper-Pak Transaction, have any
of the rights of a shareholder with respect to such shareholder's shares of
Common Stock, other than the right to be paid the "fair value" for such shares
under the NYBCL. Any notice of election to dissent may be withdrawn by a
Dissenting Shareholder at any time prior to such shareholder's acceptance in
writing of any offer of payment by Wyant, but no withdrawal may be made later
than sixty days after the date of consummation of the Paper-Pak Transaction (or,
if Wyant fails to make a timely offer to pay such shareholder the "fair value"
of such shareholder's shares of Common Stock, at any time within sixty days
after any date on which such an offer is made), or thereafter without the
written consent of Wyant.
The foregoing does not purport to be a complete statement of the
provisions of Section 623 of the NYBCL and is qualified in its entirety by
reference to such section, which is reproduced in its entirety in Annex C
attached to this Proxy Statement. Any Wyant shareholder contemplating the
exercise of appraisal rights is urged to review carefully the provisions of
Section 623 of the NYBCL. Failure of any shareholder to follow precisely and
timely all of the steps required by Section 623 of the NYBCL for perfecting
appraisal rights will result in the loss of such rights by such shareholder.
VOTE REQUIRED
Pursuant to the Certificate of Incorporation and Section 909 of the
NYBCL, the affirmative vote of a majority of all outstanding shares of Common
Stock entitled to vote at the Annual Meeting will be sufficient to approve the
Paper-Pak Transaction. Mr. Wyant has the power to vote approximately 55% of the
outstanding shares of Common Stock. Pursuant to the Voting Agreement, Mr. Wyant
has agreed to vote the Wyant Shares in favor of the Paper-Pak Transaction. If
Mr. Wyant votes the Wyant Shares in favor of the approval of the Paper-Pak
Transaction as he has agreed to do in the Voting Agreement, then a sufficient
number of shares will have been cast in favor of the Paper-Pak Transaction. See
"-- Other Agreements with Paper-Pak -- Voting Agreement."
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE PAPER-PAK TRANSACTION
(ITEM 1 ON THE PROXY CARD) IS IN THE BEST INTEREST OF WYANT AND WYANT'S
SHAREHOLDERS AND IS FAIR TO WYANT'S SHAREHOLDERS, AND RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE PAPER-PAK TRANSACTION. UNLESS OTHERWISE
INSTRUCTED, THE PROXY HOLDERS WILL VOTE THE PROXIES THEY RECEIVE IN FAVOR OF
ITEM 1. SEE "THE PAPER-PAK TRANSACTION -- REASONS FOR THE PAPER-PAK TRANSACTION"
AND "-- OPINION OF HOULIHAN LOKEY."
30
<PAGE> 35
CERTAIN PROJECTIONS OF FUTURE OPERATING RESULTS
Wyant does not as a matter of course make public forecasts as to its
future financial performance and condition. However, in connection with its
discussions with Paper-Pak, Wyant furnished Paper-Pak with certain data relating
to 1999 year-end projected operating results of the Division. The projections
set forth below were included in the data provided by Wyant to Paper-Pak. These
projections were not prepared in compliance with the published guidelines of the
American Institute of Certified Public Accountants or the Commission regarding
projections or financial forecasts and are included herein only because such
information was provided to Paper-Pak. These projections constitute
forward-looking statements and were based upon numerous assumptions, including
pricing of and demand for Wyant's products, freight rates, interest rates,
pricing and availability of raw materials and cost and availability of labor.
Although Wyant believes that such assumptions are reasonable, such assumptions
are inherently subject to significant uncertainties and contingencies that are
difficult or impossible to predict and are beyond Wyant's control. Accordingly,
there can be no assurance, and no representation or warranty is made, that the
actual results of operations and financial position achieved by the Division
will not vary materially from the results of operations and financial condition
set forth in these projections. For a list of important factors that, in the
view of Wyant, could cause actual results to differ materially from those set
forth in these projections, see "Forward-Looking Statements."
<TABLE>
<CAPTION>
1999 YEAR-END PROJECTIONS
-------------------------
(IN THOUSANDS)
<S> <C>
Net Sales....................................... $33,683
Income from Operations before Income Tax........ $ 1,532
</TABLE>
The projections set forth above were finalized by Wyant in December 1998
in connection with Wyant's preparation of its annual operating budget. Forecasts
of future financial performance and condition could differ materially from the
data set forth above if management were to prepare projections based upon
circumstances existing as of the date of this Proxy Statement. None of Wyant or
Paper-Pak intend or have any duty or obligation to publicly disclose updates or
revisions to any of the projections set forth above which are made after the
date hereof to reflect circumstances existing or developments occurring after
the preparation of such projections or to reflect the occurrence of
unanticipated events. Notwithstanding the foregoing, Wyant will continue to have
an obligation to disclose material events affecting it and its results of
operations under the federal securities laws. Wyant's independent auditors have
not examined or compiled the foregoing forward-looking statements or applied any
procedures with respect to such statements. Accordingly, such auditors have not
expressed any opinion or other form of assurance with respect to such statements
and assume no responsibility for them.
31
<PAGE> 36
CERTAIN INFORMATION WITH RESPECT TO THE COMMON STOCK
The Common Stock is traded on The Nasdaq SmallCap Market under the symbol
"WYNT." On May 21, 1998, Wyant effected a four-for-three stock split of the
Common Stock (the "Stock Split") in the form of a stock dividend to holders of
record on April 28, 1998. The following table sets forth the quarterly high and
low prices per share for the Common Stock for the periods indicated, as reported
by the Nasdaq National Market System through April 2, 1999, and as reported by
The Nasdaq SmallCap Market on and after April 5, 1999. The prices for the
periods prior to May 21, 1998 have been retroactively adjusted to reflect the
Stock Split. These prices represent prices by dealers, do not include retail
markups, markdowns or commissions and do not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1(st) Quarter 1997.................................. $4.312 $3.375
2(nd) Quarter 1997.................................. 3.937 3.187
3(rd) Quarter 1997.................................. 4.875 2.625
4(th) Quarter 1997.................................. 5.250 4.125
1(st) Quarter 1998.................................. $7.406 $4.594
2(nd) Quarter 1998.................................. 6.750 5.188
3(rd) Quarter 1998.................................. 5.750 3.250
4(th) Quarter 1998.................................. 4.500 3.250
1(st) Quarter 1999.................................. $4.312 $2.250
2(nd) Quarter 1999 (through May 17)................. 3.250 2.375
</TABLE>
On February 23, 1999, the last trading date prior to the public
announcement of the Paper-Pak Transaction, the bid and asked prices of the
Common Stock, as reported on the Nasdaq National Market System, were $3.25 and
$4.125, respectively. On May 17, 1999, the bid and asked prices of the Common
Stock, as reported on The Nasdaq SmallCap Market, were $2.50 and $2.75,
respectively.
The listing of the Common Stock was transferred to The Nasdaq SmallCap
Market from the Nasdaq National Market System, effective with the open of
business on April 5, 1999. Wyant has been informed by the Nasdaq Stock Market
that it currently satisfies the continued listing requirements of The Nasdaq
SmallCap Market. The continued listing of the Common Stock on The Nasdaq
SmallCap Market is subject to customary administrative requirements of the
Nasdaq Stock Market relating to the listing.
Shareholders are urged to obtain current market quotations for the Common
Stock prior to making any decision with respect to the Paper-Pak Transaction.
As of the Record Date, there were 2,273,817 shares of Common Stock
outstanding and approximately 700 record holders of Common Stock.
Wyant has never paid a cash dividend on the Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. Wyant's ability
to pay dividends is subject to Wyant's income, receipt of cash flow from
subsidiaries in the form of dividends or similar distributions, financial
condition, capital needs and restrictions contained in various credit
agreements.
32
<PAGE> 37
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND WYANT MANAGEMENT
The following table sets forth certain information regarding the
ownership of Common Stock as of the Record Date by (1) all of those known by
Wyant to be beneficial owners of more than five percent (5%) of the outstanding
shares of Common Stock; (2) each director of Wyant, (3) each of the executive
officers named in Table I -- 1998 Summary Compensation Table under "Election of
Directors -- Executive Compensation -- Summary Compensation Tables;" and (4) all
executive officers and directors of Wyant as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (1)(2) PERCENT OF CLASS
- ------------------------------------ ------------------------- ----------------
<S> <C> <C>
The Wyant Voting Trusts.......................... 1,250,252(3) 55.0%
c/o Wyant & Company Inc.
1475, 32nd Avenue
Lachine, Quebec
Wyant & Company Inc.............................. 1,333,333(4) 37.0%
1475, 32nd Avenue
Lachine, Quebec
First Wilshire Securities Management, Inc........ 194,841 8.6%
600 South Lake Street
Pasadena, California
Wilen Management Company, Inc.................... 214,149 9.4%
2360 West Joppa Road
Lutherville, Maryland
Donald C. MacMartin.............................. 178,001(5) 7.4%
(Chairman of the Board, President & Chief
Executive Officer)
James A. Wyant................................... 0(3)(4) 0.0%
(Vice Chairman of the Board & Corporate
Secretary)
Marc A. D'Amour.................................. 45,335(6) 2.0%
(Vice-President, Chief Financial Officer &
Treasurer)
Robert E. Briggs................................. 44,001(7) 1.9%
(A Director)
Richard J. Charles............................... 14,668(8) 0.6%
(A Director)
Thomas R.M. Davis................................ 17,002(9) 0.7%
(A Director)
Nicholas A. Gallopo.............................. 16,002(10) 0.7%
(A Director)
John B. Wight.................................... 32,001(11) 1.4%
(A Director)
All Directors and Officers as a Group............ 2,708,373(12) 73.5%
(8 Persons)
</TABLE>
- ---------------
33
<PAGE> 38
1. In accordance with Rule 13d-3 under the Securities Exchange Act of 1934
(the "Exchange Act"), a person is deemed to be the beneficial owner, for
the purposes of this table, of any shares of Wyant if he or she has or
shares voting or investment power with respect to such security or has the
right to acquire beneficial ownership of any shares of Wyant within 60 days
of the Record Date. For purposes of calculating the percentage of
outstanding shares held by each person included in the table above, any
shares which such person has the right to acquire within 60 days of the
Record Date are deemed to be outstanding, but not for the purpose of
calculating the percentage ownership of any other person. Unless otherwise
noted, the persons as to whom the information is provided have sole voting
and investment power over the shares of Wyant shown as beneficially owned.
2. These shares of Common Stock include fractional shares issued pursuant to
the Stock Split, rounded to the nearest whole number.
3. These shares of Common Stock are held pursuant to certain trust agreements
for the benefit of certain Canadian corporations owned by members of the
Wyant family as follows: (i) 420,920 shares held for the benefit of Wyant &
Company Inc., a Canadian corporation owned by members of the Wyant family
("Wyant & Company"); (ii) 317,333 shares held for the benefit of 3287858
Canada Inc., a Canadian corporation wholly owned by Lynne Emond
("Lynneco"); (iii) 317,333 shares held for the benefit of Derek Wyant
Holdings Inc., a Canadian corporation wholly owned by John Derek Wyant,
M.D. ("Derekco"); and (iv) 194,666 shares held for the benefit of 3323986
Canada Inc., a Canadian corporation wholly owned by the Estate of the late
Gerald W. Wyant ("Geraldco"). The shares held for the benefit of Wyant &
Company, Lynneco and Derekco are subject to a voting trust (the "First
Voting Trust"), under which James A. Wyant has sole and absolute discretion
to vote and dispose of such shares. After March 18, 2003, Wyant & Company,
Lynneco and Derekco shall each have the right to have up to ten percent of
their respective shares released from the First Voting Trust each year. The
First Voting Trust will terminate as of March 18, 2012, unless terminated
earlier pursuant to its terms. The shares held for the benefit of Geraldco
are subject to the terms of a separate voting trust (the "Second Voting
Trust"), under which James A. Wyant has sole and absolute discretion to
vote such shares. The terms of the Second Voting Trust limit the power of
James A. Wyant and Geraldco to dispose of the shares directly or
indirectly, but provide James A. Wyant with an option to purchase the
shares pursuant to terms established thereunder. The Second Voting Trust
will terminate as of March 31, 2007, unless terminated earlier pursuant to
its terms. James A. Wyant, in his capacity as voting trustee, may be deemed
to be the beneficial owner of all the shares held in the First and Second
Voting Trusts but he disclaims beneficial ownership of such shares, other
than the shares held in the First Voting Trust for the benefit of Wyant &
Company.
4. These shares of Common Stock represent record ownership by Wyant & Company
of 1,333,333 shares of Class E Exchangeable Preferred Stock of Wood Wyant
(the "Class E Preferred Stock"), which are exchangeable, on demand and
without additional consideration, for shares of Common Stock of Wyant on a
one-for-one basis. Although Wyant & Company is the record owner of the
Class E Preferred Stock, under the terms of a written agreement among Wyant
& Company and certain of its shareholders, and by virtue of Lynneco's and
Derekco's respective interests in Wyant & Company, each of Lynneco and
Derekco is entitled to cause Wyant & Company to (i) exchange up to 111,111
shares of the Class E Preferred Stock for an equal number of shares of
Common Stock and (ii) immediately thereafter, sell such shares of Common
Stock and deliver to Derekco and Lynneco the net after-tax proceeds
resulting from such sale. Accordingly, Wyant & Company disclaims beneficial
ownership of the Class E Preferred Stock with respect to which Lynneco and
Derekco retain investment control.
5. Includes 73,334 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 66,667 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
6. Includes 13,334 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 30,001 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
7. Includes 13,334 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 26,667 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
34
<PAGE> 39
8. Includes 14,668 shares subject to the Non-Employee Director Options granted
to Mr. Charles under Wyant's 1997 Stock Incentive Plan.
9. Includes 16,002 shares subject to the Non-Employee Director Options granted
to Mr. Davis under Wyant's 1997 Stock Incentive Plan.
10. Includes 16,002 shares subject to the Non-Employee Director Options granted
to Mr. Gallopo under Wyant's 1997 Stock Incentive Plan.
11. Includes 10,667 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 17,334 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
12. Includes 1,250,252 shares beneficially owned by the Wyant Voting Trusts,
1,111,111 shares of the Class E Preferred Stock beneficially owned by Wyant
& Company and 298,010 shares subject to options held by the directors and
executive officers of Wyant.
ELECTION OF DIRECTORS
(ITEM 2 ON THE PROXY CARD)
NOMINEES
Seven directors are to be elected by the shareholders at the Annual
Meeting, each for a one-year term. Wyant's directors hold office until the next
Annual Meeting of Shareholders and until successors are elected and have been
qualified or until death, resignation or removal.
Set forth below is information as of the Record Date regarding the
nominees of the Board of Directors for election, each of whom has agreed to
serve if elected. All of the nominees are currently directors of Wyant and were
elected at Wyant's last annual meeting of shareholders.
ROBERT E. BRIGGS, AGE 54, a director since 1997 and candidate for
director, has been President of the Division since May 1997. He joined Wyant as
Vice President of Operations in August 1996. Prior to that, Mr. Briggs was the
Director of Operations for American White Cross from 1993 to 1996. He started
his career with Johnson & Johnson, spending 26 years in increasingly important
roles and held a number of positions including Director of Operations for the
Johnson & Johnson Film and Finishing Operations.
RICHARD J. CHARLES, AGE 68, a director since 1997 and candidate for
director, was a director of Wyant & Company, an affiliate of Wyant, from 1995 to
March 1997. He has been Vice President -- Customer Service and Subsidiaries of
the Paper Converting Machine Company of Green Bay, Wisconsin for 17 years.
THOMAS R.M. DAVIS, AGE 51, a director since 1996 and candidate for
director, was counsel to Wyant & Company from 1987 to March 1997 and to Wood
Wyant, Wyant's wholly owned Canadian subsidiary, since March 1997 and has been a
partner in the Canadian law firm of McCarthy Tetrault since 1980.
NICHOLAS A. GALLOPO, AGE 66, a director since 1996 and candidate for
director, is a consultant and Certified Public Accountant. He retired as a
partner of Arthur Andersen LLP in 1995 after 31 years with the firm. He also
served as a director of Neuman Drug Company in 1995 and 1996.
DONALD C. MACMARTIN, AGE 56, a director since 1995 and candidate for
director, was President of Wyant & Company from 1994 until March 1997 and became
Chairman, President and Chief Executive Officer of Wood Wyant in March 1997.
Prior to that, he was President of Canstar Sports Inc. of Montreal, Quebec from
1992 to 1994 and President of Corby Distilleries Ltd. of Montreal, Quebec
35
<PAGE> 40
from 1989 to 1992. Since 1996, Mr. MacMartin has served as Wyant's Chief
Executive Officer and the Chairman of the Board of Directors and, in addition
since 1997, as its President.
JOHN B. WIGHT, AGE 73, a director since 1995 and candidate for director,
is a Canadian Chartered Accountant. He was a director of Wyant & Company from
1988 until March 1997.
JAMES A. WYANT, AGE 46, a director since 1990 and candidate for director,
has served as Vice Chairman of the Board of Directors since 1995 and was
appointed Corporate Secretary of Wyant in March 1997. He was President and a
director of Wyant & Company from 1986 until 1994, subsequently served as Vice
Chairman of the Board of Directors until March 1997 and became President and
Secretary of Wyant & Company in March 1997. Mr. Wyant has also been a director
and Vice Chairman of the Board of Directors of Wood Wyant since March 1997.
The affirmative vote by the holders of a plurality of the shares of
Common Stock entitled to vote at the Annual Meeting cast, in person or by
properly executed proxy, will be required to act on the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF
THE NOMINEES (ITEM 2 ON THE PROXY CARD). UNLESS OTHERWISE INSTRUCTED, THE PROXY
HOLDERS WILL VOTE THE PROXIES THEY RECEIVE FOR THOSE NOMINEES.
EXECUTIVE OFFICERS
MARC A. D'AMOUR, AGE 41, was Vice President, Finance and Chief Financial
Officer of Wyant & Company from 1994 until March 1997 and became Vice President,
Finance and Chief Financial Officer of Wood Wyant in March 1997. Mr. D'Amour has
served as Vice President, Chief Financial Officer and Treasurer of Wyant since
March 1997. Prior to joining Wyant & Company, Mr. D'Amour held senior financial
positions with Domtar Inc. after an eleven-year career with Price Waterhouse.
The business experience, current position and related disclosure with
respect to Wyant's other executive officers, each of whom is also a director of
Wyant, is set forth above under "-- Nominees."
36
<PAGE> 41
EXECUTIVE COMPENSATION
Summary Compensation Tables
The following table summarizes compensation earned in 1998, 1997 and 1996
by the Chief Executive Officer and the only other executive officers of Wyant
whose 1998 salary and bonus exceeded $100,000 (the "named officers").
TABLE I
1998 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND COVERED BY STOCK
PRINCIPAL POSITIONS YEAR SALARY BONUS OPTIONS(1)
- ------------------- ---- -------- ------- ----------------
<S> <C> <C> <C> <C>
Donald C. MacMartin (2)............... 1998 $269,633 -0- -0-
Chairman, President and Chief......... 1997 245,582 $56,484 73,334
Executive Officer..................... 1996 -0- -0- 62,667
James A. Wyant (2).................... 1998 147,219 -0- -0-
Vice-Chairman and..................... 1997 155,295 19,024 -0-
Corporate Secretary................... 1996 -0- -0- -0-
Robert E. Briggs...................... 1998 190,000 45,600 -0-
President, Wyant...................... 1997 158,461 25,000 33,335
Health Care Division.................. 1996 47,767 12,500 13,334
Marc A. D'Amour (2)................... 1998 124,705 -0- -0-
Vice-President, Chief................. 1997 122,791 22,265 33,335
Financial Officer and Treasurer....... 1996 -0- -0- 13,334
</TABLE>
- ------------------
(1) The number of shares referred to in the table reflect the Stock Split.
(2) Compensation payments to Messrs. Donald C. MacMartin, James A. Wyant and
Marc A. D'Amour were made in Canadian dollars and, accordingly, such
payments have been converted to United States dollars using an average of
the exchange rates in effect during 1998 and 1997 of U.S. $1.00 = Cdn.
$1.4835 and U.S. $1.00 = Cdn. $1.3844, respectively.
On September 23, 1997, the Board of Directors, acting on the
recommendation of a Special Subcommittee of the Compensation Committee of the
Board of Directors, unanimously approved a Cdn. $300,000 loan from Wood Wyant to
Donald C. MacMartin, the Corporation's Chairman, President and Chief Executive
Officer. Mr. MacMartin absented himself from the meeting. Interest is payable
annually based on Wood Wyant's cost of funds, which is at prevailing commercial
market rates (at December 31, 1998, such rate was 6.75%); principal is payable
at the rate of $15,000 annually, over a ten year period, with the balance
payable at the end of such 10 year period. As of the Record Date, there is Cdn.
$285,000 outstanding with respect to the loan.
37
<PAGE> 42
TABLE 2
1998 STOCK OPTIONS TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES
COVERED BY VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1998 (1) AT DECEMBER 31, 1998 (2)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
$ $
<S> <C> <C> <C> <C>
Donald C. MacMartin................. 140,001 6,667 -0- -0-
Robert E. Briggs.................... 40,001 6,668 2,500 834
Marc A. D'Amour..................... 41,668 5,001 -0- -0-
</TABLE>
- ---------------
(1) The number of shares referred to in this table reflect the Stock Split.
(2) Based on the price of $3.25 per share, the closing price of the shares on
the Nasdaq National Market System on December 31, 1998.
Report of the Compensation Committee
Wyant's executive compensation program is based upon creating shareholder
value. All executive activities including Wyant strategic planning, management
initiatives and overall financial performance are focused on increasing
shareholder value. The Compensation Committee of the Board of Directors has
established a program to:
(1) Reward executives for long-term strategic management and the
enhancement of shareholder value.
(2) Integrate compensation programs with Wyant's annual and long-term
strategic planning.
(3) Support a performance-oriented environment that rewards
performance not only with respect to Wyant goals but also Wyant
performance as compared to industry performance levels.
The total compensation program consists of both cash and equity-based
compensation. The Compensation Committee determines the level of salary and
bonuses, if any, for key executive officers based upon competitive norms. Actual
salary changes are based upon performance.
Long-term incentives are provided through the issuance of stock options,
pursuant to Wyant's 1991 Stock Option Plan and 1997 Stock Incentive Plan. The
1997 Stock Incentive Plan also permits the granting of other types of
stock-based awards. The Board of Directors has the power, subject to the
provisions of these plans, and utilizing recommendations received from the Stock
Option Committee, to determine the persons to whom and the dates on which awards
will be granted, the number of shares subject to each award and the term and
other conditions applicable to each award.
COMPENSATION COMMITTEE
James A. Wyant (Chair)
Richard J. Charles
Thomas R.M. Davis
Donald C. MacMartin
John B. Wight
38
<PAGE> 43
Employment and Related Agreements with Named Executive Officers
Pursuant to an employment agreement with Wood Wyant, James A. Wyant
serves as Vice-Chairman of Wood Wyant and receives a base salary (Cdn. $218,400
in 1998 (US $147,219)), subject to annual increases based on the increase, if
any, in the Consumer Price Index of Canada, bonus compensation based upon a
specified formula and certain other benefits. Unless it is terminated earlier
pursuant to its terms, such employment agreement will expire on December 31,
2001, subject to extension on a year-to-year basis thereafter. Mr. Wyant also
serves as Vice-Chairman and Corporate Secretary of Wyant.
Effective January 1, 1999, Donald C. MacMartin and Marc D'Amour entered
into employment agreements with Wood Wyant and will receive a base salary of
Cdn. $410,000 and Cdn. $195,000, respectively. The agreements also provide for
bonus compensation at the discretion of the Board of Directors of Wood Wyant and
for certain other benefits. Mr. MacMartin serves as Chairman, President and
Chief Executive Officer of Wood Wyant and Mr. D'Amour as Vice-President, Finance
and Chief Financial Officer. Unless terminated earlier pursuant to their terms,
the employment agreements will expire on December 31, 2001, subject to extension
on a year-to-year basis thereafter. Mr. MacMartin also serves as Chairman,
President and Chief Executive Officer of Wyant and Mr. D'Amour serves as Wyant's
Vice-President, Chief Financial Officer and Treasurer.
Pursuant to a retirement arrangement agreement dated June 27, 1994, as
amended, between Mr. MacMartin and Wood Wyant, Wood Wyant agreed to provide Mr.
MacMartin, on retirement or death, with supplementary retirement benefits to the
extent that the benefits provided under such retirement arrangement exceed the
benefits provided pursuant to Wood Wyant's defined benefit final average pension
plan.
Pursuant to a severance agreement dated August 14, 1997 between Wyant and
Robert E. Briggs, Mr. Briggs will receive one year's salary from Wyant if either
(1) within three months after the sale of all or substantially all of the assets
of the Division, Mr. Briggs is terminated without cause by the buyer thereof or
(2) at the time of such sale, Mr. Briggs declines any offer of employment made
by the buyer of the Division. In either situation, the payment to Mr. Briggs of
one year's salary will be made on the final date of employment with the buyer or
the Division, as the case may be, based on his salary then in effect.
Notwithstanding this agreement, no payment will be made to Mr. Briggs should he
resign following his acceptance of any such offer of employment from the buyer
of the Division. This severance agreement would be applicable to Mr. Briggs if
the Paper-Pak Transaction is consummated. Mr. Briggs currently intends to serve
his one-year term on the Board of Directors whether or not he accepts any offer
of employment from Paper-Pak in connection with the Paper-Pak Transaction. Mr.
Briggs serves as President of the Division.
39
<PAGE> 44
Performance Graph
Set forth below is a line graph comparing cumulative total shareholder
return, over five years, upon an investment in the Common Stock with
(artificially aggregated) an equivalent investment in (a) Nasdaq Stock Market
companies (U.S.), and (b) those in the Paper and Allied Products index of the
Nasdaq Stock Market:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
WYANT CORPORATION
Prepared by the Center for Research in Security Prices
Produced on 03/11/1999 including data to 12/31/1998
LOGO
LEGEND
<TABLE>
<CAPTION>
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 12/1993 12/1994 12/1995 12/1996 12/1997 12/1998
- ------ ----------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------ M Wyant Corporation 100.0 116.0 110.0 74.0 104.0 69.3
... -- .. * Nasdaq Stock Market (US Companies) 100.0 97.8 138.3 170.0 208.3 293.5
- - - - - - O NASDAQ Stocks (SIC 2600-2699 US 100.0 107.7 117.5 151.9 202.8 164.9
Companies)
Paper and allied products
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to 100.0 on 12/31/1993.
40
<PAGE> 45
Standing Committees of the Board of Directors, Compensation Committee
Interlocks and Insider Participation
The Board of Directors has no Nominating Committee, but the Board of
Directors as a whole nominates director candidates.
The Board of Directors met twelve times in 1998 to review financial
information, corporate business strategies and general matters in respect of
Wyant's business.
The Executive Committee, comprised of Donald C. MacMartin, Thomas R.M.
Davis, Nicholas A. Gallopo and James A. Wyant, met once in 1998 to review a
strategic business issue.
The Audit Committee, comprised of Richard J. Charles, Nicholas A.
Gallopo, John B. Wight and James A. Wyant, met three times during 1998 to review
financial reporting matters and to discuss audit, internal control, information
technology and other matters.
The Compensation Committee, comprised of Richard J. Charles, Thomas R.M.
Davis, Donald C. MacMartin, John B. Wight and James A. Wyant, met seven times
during 1998 to consider compensation principles and practices and the amounts to
be paid to officers and senior employees.
The Stock Option Committee, comprised of Richard J. Charles, Thomas R.M.
Davis and Nicholas A. Gallopo, met once during 1998 to consider the grants of
options to employees of Wyant and its subsidiaries.
Donald C. MacMartin and James A. Wyant serve on the Compensation
Committee and are also executive officers of Wyant. John B. Wight also serves on
the Compensation Committee and is an employee of Wood Wyant. Mr. MacMartin does
not participate in any decisions of the Compensation Committee concerning his
own compensation. The Compensation Committee does not consider the compensation
of Mr. Wyant or Mr. Wight.
During 1998 all directors of Wyant attended 75% or more of the meetings
of the Board of Directors and the committees on which they served.
Compensation of Directors
During 1998, each director of Wyant who was not an employee of the
Company received an annual director's fee of $8,000 paid in equal quarterly
installments. In addition, under Wyant's 1997 Stock Incentive Plan, options to
purchase Common Stock at $5.8125 per share were awarded during 1998 to the
following directors: Richard J. Charles (1,334 shares), Thomas R.M. Davis (1,334
shares) and Nicholas A. Gallopo (1,334 shares). Under this plan, each new
non-employee director of Wyant receives an option to purchase 13,334 shares of
Common Stock upon joining the Board of Directors and each continuing
non-employee director receives an option to purchase 1,334 shares of Common
Stock for each year of service on the Board of Directors. The exercise price of
each such option is equal to the fair market value of the covered shares at the
time the option is granted. Lastly, effective May 28, 1998, Mr. Davis and Mr.
Gallopo each received a special fee of $1,000 payable in quarterly installments
in respect of their services as chairmen of the Stock Option Committee and the
Audit Committee, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, the law firm of McCarthy Tetrault provided legal services to
Wyant and Wood Wyant. Thomas R.M. Davis, a director of Wyant, is a member of the
law firm of McCarthy Tetrault. In 1998, the fees paid by Wyant and Wood Wyant to
McCarthy Tetrault were approximately Cdn. $263,000 (US $177,000). These fees are
comparable to the fees that Wyant and Wood Wyant would have paid to an
unaffiliated law firm based on the legal services that were provided.
41
<PAGE> 46
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires executive officers, directors
and persons who beneficially own more than 10% of the Common Stock to file
within prescribed periods initial statements of beneficial ownership and
statements of changes in beneficial ownership of their shares of Common Stock
with the Securities and Exchange Commission (the "Commission") and the Nasdaq
Stock Market. Such persons are also required to furnish Wyant with copies of all
such statements that they file. Based on its review of the copies of such
statements received by it, except as described in the next paragraph, Wyant
believes that, during 1998, all such filing requirements applicable to such
persons were duly complied with.
Thomas R.M. Davis and Nicholas A. Gallopo each failed to report his
initial statement of beneficial ownership and the subsequent acquisition of
options to purchase 16,002 shares of Common Stock that were issued to each of
them pursuant to the 1997 Stock Incentive Plan on three separate dates between
1996 and 1998. This failure to report was corrected by each of Mr. Davis and Mr.
Gallopo by the filing of Forms 3 and 4 with the Commission in March 1999.
APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 3 ON THE PROXY CARD)
The Board of Directors of Wyant has appointed the firm of Ernst & Young
LLP, independent certified public accountants (the "Auditors"), to audit the
accounts and certify the financial statements of Wyant for the fiscal year
ending December 31, 1999. The appointment shall continue at the pleasure of the
Board of Directors subject to approval by the shareholders of Wyant.
On April 21, 1997, the firm of Arthur Andersen LLP (the "Former
Auditors") was notified that it was being dismissed as Wyant's independent
certified public accountants as of such date and that the Auditors had been
engaged as of such date as Wyant's independent certified public accountants. The
decision to dismiss the Former Auditors and to engage the Auditors was approved
by the Board of Directors at the time.
The Former Auditors served as independent certified public accountants
for Wyant since 1990. The Report of Independent Public Accountants of the Former
Auditors on the consolidated financial statements of Wyant and subsidiaries as
of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996 expressed an unqualified opinion. There were no
reportable events (as defined in Commission Regulation S-K, Item 304(a)(1)(v))
or disagreements with the Former Auditors on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
that were not resolved to the satisfaction of the Former Auditors during the
1995 and 1996 fiscal years and through April 21, 1997.
The Board of Directors expects that one or more representatives of the
Auditors will be present at the Annual Meeting. The Auditors will then be given
the opportunity to make a statement and will be available to respond to
appropriate questions.
The affirmative vote by the holders of a majority of the shares of Common
Stock entitled to vote at the Annual Meeting cast, in person or by properly
executed proxy, will be sufficient for the ratification of the appointment of
the Auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL
OF ITEM 3 ON THE PROXY CARD. UNLESS OTHERWISE INSTRUCTED, THE PROXY HOLDERS WILL
VOTE THE PROXIES THEY RECEIVE IN FAVOR OF ITEM 3.
42
<PAGE> 47
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any shareholder who desires to present a proposal to the shareholders at
the 2000 Annual Meeting must submit such proposal to Wyant (to the attention of
the Corporate Secretary) no later than January 20, 2000 for such proposal to be
considered for inclusion in the proxy statement for such Annual Meeting. Such
proposal must also meet the other requirements of the Commission relating to
shareholder proposals required to be included in such proxy statement.
Shareholders who intend to present a proposal at the 2000 Annual Meeting
without inclusion of such proposal in Wyant's proxy statement relating to such
Annual Meeting are required to provide notice to Wyant of such proposal sixty
days prior to the date of such Annual Meeting (Wyant's 2000 Annual Meeting is
currently scheduled to take place on or about May 25, 2000). Wyant reserves the
right to reject, rule out of order or take other appropriate action with respect
to any proposal that does not comply with these or other applicable
requirements.
FORWARD-LOOKING STATEMENTS
Certain information contained or incorporated by reference in this Proxy
Statement, including the information set forth under "Certain Projections of
Future Operating Results" and other statements as to the future financial or
operating performance of Wyant, may constitute "forward-looking statements." The
Private Securities Litigation Reform Act of 1995 provides certain "safe harbor"
protections for forward-looking statements in order to encourage companies to
provide prospective information about their businesses. Forward-looking
statements include statements concerning plans, objectives, goals, strategies,
future events or performance, and underlying assumptions and other statements
that are not statements of historical facts. Forward-looking statements
contained or incorporated by reference in this Proxy Statement were not prepared
in compliance with the published guidelines of the American Institute of
Certified Public Accountants or the Commission regarding projections or
financial forecasts.
The forward-looking statements set forth or incorporated by reference in
this Proxy Statement are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including without limitation,
management's examination of historical operating trends, data contained in
Wyant's records and other data available from third parties. Although Wyant
believes that such assumptions are reasonable, because such assumptions are
inherently subject to significant uncertainties and contingencies that are
difficult or impossible to predict and are beyond Wyant's control, there can be
no assurance, and no representation or warranty is made, that management's
expectations, beliefs or projections will result or be achieved or accomplished.
Among the factors that could cause actual results to differ materially are the
following: the ability of Wyant to successfully integrate the business and
personnel of various acquired businesses into its operations, the ability of
Wyant to implement its business strategy assuming consummation of the Paper-Pak
Transaction, the ability to maintain existing customer relationships and to
secure new customers on satisfactory terms, whether by contract or otherwise,
unforeseen price pressure on the Company's products or significant cost
increases that cannot be recovered through price increases or productivity
improvements, the ability of the Company to adequately address Year 2000 related
issues, the ability to obtain any necessary financing on reasonably satisfactory
terms, the effect of exchange rate fluctuations and the effect of competitive,
capital market and general economic conditions.
None of Wyant, Paper-Pak or any of their respective agents, employees or
advisors intend or have any duty or obligation to supplement, amend, update or
revise any of the forward-looking statements contained or incorporated by
reference in this Proxy Statement. Neither Wyant's nor Paper-Pak's independent
auditors have examined or compiled such statements or applied any procedures
with respect to such statements. Accordingly, such auditors have not expressed
any opinion or other form of assurance with respect to such statements and
assume no responsibility for them.
43
<PAGE> 48
DOCUMENTS INCORPORATED BY REFERENCE
Wyant is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission. The following periodic reports filed by Wyant
with the Commission pursuant to the Exchange Act are incorporated by reference
into this Proxy Statement:
(1) Wyant's Annual Report on Form 10-K, as amended by Wyant's Annual
Report on Form 10-K/A (Amendment No. 2), for the fiscal year ended
December 31, 1998.
(2) Wyant's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1999.
(3) Wyant's Current Reports on Form 8-K dated February 23, 1999 and
April 1, 1999.
A copy of the foregoing Annual Report on Form 10-K/A (Amendment No. 2)
and Quarterly Report on Form 10-Q are attached to this Proxy Statement as
Annexes E and F, respectively. Wyant will provide to each person being solicited
by this Proxy Statement, upon the written or oral request of any such person, by
first class mail or other equally prompt means within one business day of
receipt of such request, an additional copy of the foregoing documents (without
charge) and a copy of the exhibits to such Annual Report on Form 10-K/A
(Amendment No. 2) or such Quarterly Report on Form 10-Q if request therefor is
made to James A. Wyant, Corporate Secretary, Wyant Corporation, 100 Readington
Road, Somerville, New Jersey 08876, telephone number (908) 707-1800.
Any statements contained in a document incorporated by reference herein
or contained in this Proxy Statement shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
(or in any other subsequently filed document which also is incorporated by
reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except as
so modified or superseded.
Wyant files annual, quarterly and current reports, proxy statements and
other information with the Commission. You may read and copy any reports,
statements or other information Wyant files at the Commission's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the Commission at 1-800-SEC-0330 for further information on the public reference
rooms. The Commission filings of Wyant are also available to the public from
commercial document retrieval services and on the Internet through the website
maintained by the Commission at "http://www.sec.gov." The Common Stock is traded
on The Nasdaq SmallCap Market and reports and other information concerning Wyant
can also be inspected at the offices of the Nasdaq Stock Market, 1735 K Street,
N.W., Washington, D.C. 20546.
By Order of the Board of Directors,
LOGO
James A. Wyant
Corporate Secretary
Dated: May 19, 1999
Somerville, New Jersey
44
<PAGE> 49
ANNEX A
<PAGE> 50
________________________
________________________
ASSET PURCHASE AGREEMENT
between
PAPER-PAK PRODUCTS, INC.
a Delaware corporation
and
WYANT CORPORATION
a New York corporation
February 23, 1999
________________________
________________________
<PAGE> 51
TABLE OF CONTENT
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
DEFINITIONS AND SCHEDULES................................................... 1
1.1 Definitions.......................................................... 1
ARTICLE 2
PURCHASE AND SALE OF DIVISION ASSETS........................................ 8
2.1 Sale and Delivery.................................................... 8
2.2 Assumption of Liabilities............................................ 10
2.3 Purchase Price....................................................... 11
2.4 Allocation of Purchase Price......................................... 12
2.5 Proration of Expenses................................................ 13
2.6 Transferee Liability and Pre-Payment Expenses........................ 13
ARTICLE 3
CLOSING..................................................................... 13
3.1 Closing.............................................................. 13
3.2 Deliveries by Seller................................................. 14
3.3 Deliveries of Purchaser.............................................. 14
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
CONCERNING SELLER AND THE DIVISION.......................................... 15
4.1 Organization and Good Standing....................................... 15
4.2 Due Execution and Delivery and Binding Agreement..................... 15
4.3 No Conflicts......................................................... 15
4.4 Financial Statements................................................. 16
4.5 Title to Property; Encumbrances...................................... 16
4.6 Accounts Receivable.................................................. 18
4.7 Inventories.......................................................... 18
4.8 Trademarks, Patents, Etc............................................. 18
4.9 Insurance............................................................ 19
4.10 Indebtedness......................................................... 19
4.11 Judgments; Litigation................................................ 19
4.12 Income and Other Taxes............................................... 20
4.13 Questionable Payments................................................ 20
4.14 Employee Benefit Matters............................................. 20
4.15 No Undisclosed Liabilities........................................... 22
4.16 Permits, Licenses, Etc............................................... 22
4.17 Regulatory Filings................................................... 22
</TABLE>
-i-
<PAGE> 52
<TABLE>
<CAPTION>
Page
<S> <C>
4.18 Consents............................................................. 22
4.19 Material Contracts; No Defaults...................................... 23
4.20 Absence of Certain Changes........................................... 24
4.21 Employees and Labor Matters.......................................... 25
4.22 Affiliations......................................................... 26
4.23 Compliance with Law.................................................. 26
4.24 Product Liability and Product Warranty............................... 26
4.25 Books and Records.................................................... 27
4.26 Hazardous Materials.................................................. 27
4.27 Brokers' Fees........................................................ 28
4.28 Customers and Vendors................................................ 28
4.29 Year 2000 Compliance................................................. 28
4.30 Disclosure........................................................... 29
4.31 Disclaimer........................................................... 29
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER................................. 29
5.1 Organization and Good Standing....................................... 29
5.2 Execution and Delivery............................................... 29
5.3 No Conflicts......................................................... 30
5.4 Financing............................................................ 30
5.5 Disclaimer........................................................... 30
ARTICLE 6
CONDUCT OF BUSINESS PENDING CLOSING......................................... 32
6.1 Ordinary Course...................................................... 32
6.2 Indebtedness or Liens on Division Assets............................. 32
6.3 Accounting........................................................... 32
6.4 Compliance with Legal Requirements................................... 32
6.5 Disposition of Assets................................................ 32
6.6 Compensation......................................................... 32
6.7 Modification or Breach of Agreements; New Agreements................. 33
6.8 Capital Expenditures................................................. 33
6.9 Consents............................................................. 33
6.10 Discharge............................................................ 34
ARTICLE 7
ADDITIONAL COVENANTS........................................................ 34
7.1 Covenants of Seller.................................................. 34
</TABLE>
-ii-
<PAGE> 53
<TABLE>
<CAPTION>
Page
<S> <C>
7.2 Covenants of Purchaser................................................. 35
7.3 Access and Information................................................. 36
7.4 Expenses............................................................... 37
7.5 Publicity; Employee Communications..................................... 37
7.6 Further Assurances..................................................... 37
7.7 Competing Offers; Merger or Liquidation................................ 37
7.8 Post-Termination Employment............................................ 38
7.9 HSR Filing............................................................. 39
7.10 Meeting; Approval of Seller's Stockholders............................. 39
7.11 Seller Retained Liabilities; Collection of Receivables................. 40
7.12 Audited Financial Statements........................................... 40
7.13 Promotional Materials and Customer Information; Use of Name............ 40
7.14 Vacation............................................................... 41
7.15 Delivery of Certain Division Assets.................................... 41
7.16 No Third Party Beneficiaries........................................... 41
7.17 ISRA Compliance........................................................ 41
7.18 Voting Agreement....................................................... 42
7.19 Fire Damage Remediation................................................ 42
ARTICLE 8
CONDITIONS PRECEDENT TO CLOSING............................................... 42
8.1 Conditions of Purchaser................................................ 42
8.2 Conditions of Seller................................................... 44
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER............................................. 45
9.1 Termination............................................................ 45
9.2 Effect of Termination.................................................. 46
9.3 Breakup Fee............................................................ 47
9.4 Amendment.............................................................. 47
9.5 Waiver................................................................. 48
ARTICLE 10
INDEMNIFICATION............................................................... 48
10.1 Survival of Representations and Warranties............................. 48
10.2 Indemnification........................................................ 48
10.3 Third Party Claims..................................................... 49
10.4 Limitations on Indemnification......................................... 50
10.5 Deed Indemnification by Purchaser...................................... 51
</TABLE>
-iii-
<PAGE> 54
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 11
GENERAL PROVISIONS.......................................................... 52
11.1 Notices.............................................................. 52
11.2 Severability......................................................... 53
11.3 Entire Agreement..................................................... 53
11.4 Successors and Assigns............................................... 53
11.5 Counterparts......................................................... 53
11.6 Recitals, Schedules and Annexes...................................... 53
11.7 Construction and Miscellaneous....................................... 53
11.8 Governing Law........................................................ 54
11.9 Submission to Jurisdiction........................................... 54
11.10 Disclosure Schedules................................................. 55
</TABLE>
LIST OF ANNEXES
LIST OF SCHEDULES
-iv-
<PAGE> 55
LIST OF ANNEXES
<TABLE>
<CAPTION>
<S> <C>
Annex No. Description
2.3(g) Escrow Agreement
7.18 Voting Agreement
8.1(d) Winthrop, Stimson, Putnam & Roberts Legal Opinion
8.1(m) Covenant Not to Compete
8.2(c) Paul, Hastings, Janofsky & Walker LLP Legal Opinion
8.2(h) Term Sheet for Purchase and Supply Agreement
</TABLE>
-v-
<PAGE> 56
LIST OF SCHEDULES
<TABLE>
<CAPTION>
Schedule No. Description
<S> <C>
1.1(a) Excluded Assets
1.1(b) Exceptions to Definition of GAAP
2.2(g) Additional Excluded Liabilities
2.4 Purchase Price Allocation
4.3 Conflicts; Consents
4.4 Financial Statements
4.5(a)(i) Division Owned Real Property
4.5(a)(ii)(B) Matters Affecting Real Property
4.5(b) Matters Affecting Personal Property
4.5(c) Real Property Leases and Licenses; Personal Property Leases
4.5(d) Condition of Personal Property
4.5(e) Condition of Real Property and Improvements Thereon
4.6 Accounts Receivable
4.7 Inventories
4.8(a) Trademarks; Patents
4.8(b) Restricted Rights to Material Intellectual Property
4.8(c) Licenses to Proprietary Information
4.9 Insurance
4.10(a) Indebtedness
4.10(b) Guaranties
4.11 Judgments; Litigation
4.12 Income and Other Taxes
4.14 Employee Benefit Plans
</TABLE>
-vi-
<PAGE> 57
<TABLE>
<CAPTION>
Schedule No. Description
<S> <C>
4.16 Permits
4.18 Consents
4.19(a) Material Contracts
4.19(b) Enforceability of Contracts
4.20 Absence of Certain Changes
4.21(a) Division Employees
4.21(b) Employment Contracts
4.21(c) Labor Agreements
4.21(e) Labor Disputes
4.22 Affiliations
4.24 Product Liability and Product Warranty Experience
4.26 Hazardous Materials
4.27 Brokers Fees
4.28 Customers and Vendors
4.29 Year 2000 Compliant Matters
5.3 Conflicts of Purchaser
7.19 Fire Damage Remediation
8.1(j) Consents
</TABLE>
-vii-
<PAGE> 58
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
February 23, 1999 between PAPER-PAK PRODUCTS, INC., a Delaware corporation
("Purchaser"), and WYANT CORPORATION, a New York corporation ("Seller").
R E C I T A L S
A. Seller, through its Wyant Health Care Division (the "Division"), owns
and conducts a health care products business which manufactures, develops,
designs, distributes and sells adult incontinence and related products,
including disposable underpads and adult briefs, and airlaid products used for
industrial purposes (collectively, the "Division Business").
B. Seller wishes to sell, and Purchaser wishes to purchase, the Division
Business and all of the Division Assets (as defined herein), subject to the
assumption by Purchaser of the Assumed Division Liabilities (as defined
herein), upon the terms and subject to the conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
ARTICLE 1
DEFINITIONS AND SCHEDULES
1.1 Definitions. Unless otherwise defined herein or the context otherwise
requires, the terms defined in this Article 1 shall have the meanings herein
specified for all purposes of this Agreement, applicable to both the singular
and plural forms of any of the terms herein defined. Unless otherwise
indicated, any reference herein to a "Section," "Article," "Annex" or
"Schedule" shall mean the applicable section, article, annex or schedule of or
to this Agreement. All accounting terms used in this Agreement not defined in
this Article 1 shall, except as otherwise provided for herein, be construed in
accordance with GAAP, consistently applied.
"Action" shall mean any actual claim, suit, arbitration, hearing or
proceeding by or before any Governmental Entity or arbitrator and any appeal
from any of the foregoing.
"Adjusted Net Assets" means, as of the Closing Date, the amount by which
the Total Division Assets exceeds the Total Division Liabilities, in each case
as of the Closing Date, determined in accordance with GAAP on a basis
consistent with that reflected in the Division Balance Sheet.
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"Affiliate" of a Person shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with, the indicated
Person.
"Agreement" shall mean this Asset Purchase Agreement.
"Alternative Proposal" shall have the meaning assigned to it in
Section 7.7(a).
"Assumed Division Liabilities" shall have the meaning assigned to it in
Section 2.2.
"Bridgewater Facility" shall mean the land and improvements thereon
located at 5 and 6 Easy Street, Central Jersey Industrial Park, Bridgewater,
New Jersey.
"Board" shall have the meaning assigned to it in Section 4.2.
"Claim Notice" shall have the meaning assigned to such term in
Section 10.3(a).
"Closing" and "Closing Date" shall have the respective meanings assigned
to such terms in Section 3.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Congress Financial Agreement" shall mean the Loan and Security Agreement
dated November 18, 1997 between Seller and certain of its Subsidiaries, on the
one hand, and Congress Financial Corporation, on the other hand, as amended and
presently in effect.
"CPSC" shall have the meaning assigned to such term in Section 4.24.
"DOL" shall mean the United States Department of Labor.
"Damages" shall mean any and all losses, liabilities, obligations, costs,
expenses, damages or judgments of any kind or nature whatsoever (including
reasonable attorneys', accountants' and experts' fees, disbursements of
counsel, and other costs and expenses incurred pursuing indemnification claims
under Article 10 hereof).
"Division" shall have the meaning assigned to it in Recital A above. All
references herein to the Division prior to March 18, 1997 are references to
Hosposable Products, Inc., a New York corporation, excluding all interest in
IFC.
"Division Assets" shall have the meaning assigned to it in Section 2.1.
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"Division Contracts" shall have the meaning assigned to it in Section
2.1(c).
"Division Balance Sheet" and "Division Balance Sheet Date" shall have the
respective meanings assigned to them in Section 4.4(a).
"Division Business" shall have the meaning assigned to it in Recital A
above. All references herein to the Division Business prior to March 18, 1997
are references to the business of Hosposable Products, Inc., a New York
corporation, excluding all interest in IFC.
"Division Employees" shall have the meaning assigned to it in Section
4.21.
"Division Owned Real Property" shall have the meaning assigned to it in
Section 4.5(a).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any Person which is (or at any relevant time
was) a member of a controlled group of corporations within the meaning of Code
Section 414(b), all trades or businesses under common control within the
meaning of Code Section 414(c), and all affiliated service groups within the
meaning of Code Section 414(m), of which Seller is (or at any relevant time
was) a member.
"Environmental Laws" shall mean all applicable Legal Requirements
pertaining to the protection of the environment, the treatment, emission and
discharge of gaseous, particulate and effluent pollutants and the use,
handling, storage, treatment, removal, transport, transloading, cleanup,
decontamination, discharge and disposal of Hazardous. Materials in effect as
of the date hereof.
"Escrow Account" shall mean the escrow account established under the
Escrow Agreement.
"Escrow Agent" shall mean Bank of America or a financial institution
mutually agreeable to each party.
"Escrow Agreement" shall have the meaning assigned to it in Section
2.3(g).
"Escrow Amount" shall mean the sum of $550,000.
"Estimate Notice" shall have the meaning assigned to it in Section 2.3(b).
"Estimated Purchase Price" shall have the meaning assigned to such term in
Section 2.3(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission adopted thereunder.
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"Excluded Assets" shall mean those assets of Seller described on Schedule
1.1(a) attached hereto.
"Excluded Liabilities" shall have the meaning assigned to such term in
Section 2.2.
"Financial Statements" shall have the meaning assigned to such term in
Section 4.4(a).
"GAAP" shall mean, except as set forth in Schedule 1.1(b) attached hereto,
United States generally accepted accounting principles.
"Governmental Entity" shall mean any local, state, federal or foreign (i)
court, (ii) government or (iii) governmental department, commission,
instrumentality, board, bureau, agency or authority having jurisdiction over
the Seller or the Division Business, including the IRS and other taxing
authorities.
"Guaranties" shall have the meaning assigned to such term in Section
4.10(b).
"HSR Act" shall have the meaning assigned to such term in Section 7.9.
"Hazardous Material" shall mean any flammable, ignitable, corrosive,
reactive, infectious radioactive or explosive substance or material, hazardous
waste, toxic substance or related material and any other pollutant or substance
or material defined or designated as a hazardous or toxic substance, material
or waste by any Environmental Law.
"Holders" shall have the meaning assigned to it in Section 4.2(b).
"Holder Shares" shall have the meaning assigned to it in Section 4.2(b).
"Hourly Plan" shall mean the Production Service and Sales District Council
Pension Fund (as amended and restated effective January 1, 1996), as amended
thereafter and presently in effect.
"Hourly Plan Withdrawal Liability" means any and all amounts required to
be paid by Seller as a result of Seller's withdrawal from the Hourly Plan.
"IFC" shall mean IFC Disposables, Inc., a Tennessee corporation.
"Indenture" shall mean that certain Indenture of Trust dated December 1,
1993, between New Jersey Economic Development Authority and the Bank of New
York NA, as trustee.
"IRB Indebtedness" shall mean Indebtedness of Seller to the New Jersey
Economic Development Authority (the "Authority") pursuant to a Loan Agreement
with the Authority dated as of December 1, 1993, as amended to date.
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"IRB Indebtedness Liens" shall mean the Liens on certain Division Assets
that secure payment of the Seller's obligations to Congress Financial
Corporation under the Congress Financial Agreement.
"IRS" shall mean the United States Internal Revenue Service.
"ISRA" shall have the meaning assigned in Section 8.1(p) hereof.
"ISRA Approval" shall have the meaning assigned in Section 8.1(p) hereof.
"Indebtedness" shall mean, when used with reference to any Person, without
duplication, (i) any liability of such Person created or assumed by such
Person, or any Subsidiary thereof, (A) for borrowed money, (B) evidenced by a
bond, note, debenture or similar instrument (including a purchase money
obligation, deed of trust or mortgage) given in connection with the acquisition
of, or exchange for, any property or assets (other than inventory or similar
property acquired and consumed in the Ordinary Course), including securities
and other Indebtedness (other than trade letters of credit), (C) in respect of
standby letters of credit issued for such Person's account to which such Person
is a party or (D) for the payment of money as lessee under leases that should
be, in accordance with GAAP, recorded as capital leases for financial reporting
purposes; (ii) any liability of others described in the preceding clause (i)
guaranteed as to payment of principal or interest by such Person or in effect
guaranteed by such Person through an agreement, contingent or otherwise, to
purchase, repurchase or pay the related Indebtedness or to acquire the security
therefor; (iii) all liabilities or obligations secured by a Lien upon property
owned by such Person and upon which liabilities or obligations such Person
customarily pays interest or principal, whether or not such Person has not
assumed or become liable for the payment of such liabilities or obligations;
and (iv) any amendment, renewal, extension, revision or refunding of any such
liability or obligation.
"Indemnified Party", "Indemnifying Party" and "Indemnifiable Claim" shall
have the respective meanings assigned to such terms in Section 10.3(a).
"Intellectual Property Rights" shall have the meaning assigned to such
term in Section 2.1(d).
"Knowledge" of Seller shall mean, and shall be limited to, the actual
knowledge of one or more of the following individuals: Donald C. MacMartin,
Marc A. D'Amour, Robert E. Briggs and Martin C. Ostrow [, and with respect to
the matters set forth in Section 4.26, the actual knowledge of William J.
Rivero].
"Legal Requirement" shall mean any statute, law, ordinance, rule,
regulation, permit, order, writ, judgment, injunction, decree or award issued,
enacted or promulgated by any Governmental Entity or any arbitrator.
"Lien" shall mean all liens (including judgment and mechanics' liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements,
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claims, pledges, trusts (constructive or other), deeds of trust, options or
other charges, encumbrances or restrictions.
"Material Adverse Effect" shall mean a material adverse change in the
financial condition, results of operations, properties, assets, liabilities,
operations or business of the Division, taken as a whole; provided, however,
that the loss of those Division customers previously agreed to in writing by
Purchaser and Seller, and any related effect thereof on the financial condition
or results of operations of the Division, shall not be deemed to have resulted
in, and shall otherwise be excluded from any determination of, a Material
Adverse Effect.
"Material Intellectual Property Rights" shall have the meaning assigned to
such term in Section 4.8(a).
"Meeting" shall have the meaning assigned to such term in Section
7.10(a)(i).
"NJDEP" shall mean the New Jersey Department of Environmental Protection
or its successor.
"Objection Notice" shall have the meaning assigned to it in Section
2.3(d).
"Ordinary Course" shall mean ordinary course of the Division's Business,
consistent with past practices.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permits" shall have the meaning assigned to such term in Section 4.16.
"Permitted Liens" shall mean (a) Liens created in the Ordinary Course
subsequent to the date of the Division Balance Sheet and which are not
material, (b) Liens of record or otherwise that do not and will not materially
interfere with the value of, or present use by, the Division Business of the
property subject thereto or affected thereby, (c) Liens for taxes, assessments
or governmental charges, or landlord's, mechanics', workmen's, materialmen's or
similar liens, in each case that are not delinquent or which are being
contested in good faith and for which appropriate reserves have been recorded
on the books and records of the Division in accordance with GAAP, (d) Permitted
Title Matters and (e) IRB Indebtedness Liens.
"Permitted Title Matters" shall have the meaning assigned to it in Section
4.5(a)(ii)(B).
"Person" shall mean all natural persons, corporations, business trusts,
associations, companies, partnerships, limited liability companies, joint
ventures, Governmental Entities and any other entities.
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"Plan" shall mean any "employee benefit plan" within the meaning of Section
3(3) of ERISA and any other written or oral employee benefit plan, arrangement,
practice, contract, policy, or program (other than arrangements merely involving
the payment of wages) which are or at any time have been established,
maintained, or contributed to by the Company, any Shareholder, or any ERISA
Affiliate for the benefit of current or former Division Employees, with respect
to which the Company, any Shareholder or an ERISA Affiliate has or may in the
future have any liability or obligation to contribute or make payments of any
kind. Notwithstanding the foregoing, the term "Plan" shall not include the
Hourly Plan.
"Policies" shall have the meaning assigned to such term in Section 4.9.
"Post-Closing Purchase Price Estimate" shall have the meaning assigned to
such term in Section 2.3(c).
"Proprietary Information" shall have the meaning assigned to such term in
Section 2.1(d).
"Purchase Price" shall have the meaning assigned to such term in Section
2.3(a).
"Purchaser" shall have the meaning assigned to such term in the Preamble.
"Real Property" shall mean all real property and improvements thereon and
all leasehold interests in real property listed on Schedule 4.5(a)(i) and
4.5(c).
"Remediation Expenses" shall have the meaning assigned to such term in
Section 7.19.
"Required Financing" shall have the meaning assigned to such term in
Section 8.1(g).
"Revolving Credit Facility" shall mean the Indebtedness of Seller to
Congress Financial Corporation pursuant to the Congress Financial Agreement, and
any refinancings thereof and substitutions therefor.
"Seller" shall have the meaning assigned to such term in the Preamble.
"Statement" shall mean the notice of meeting, proxy statement and form of
proxy, or the information statement (including without limitation any proxy or
information statement containing information required by Regulation 14A under
the Exchange Act), as the case may be, including any schedules required to be
filed with the Commission in connection therewith, to be distributed to the
stockholders of Seller in connection with the transactions contemplated by this
Agreement.
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"Subsidiary" of a Person shall mean any corporation, partnership, limited
liability company, association or other business entity at least 50% of the
outstanding voting power of which is at the time owned or controlled directly
or indirectly by such Person or by one or more of such subsidiary entities, or
both.
"Tax" shall mean any Federal, state, local or foreign income, gross
receipts, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, without limitation, taxes
under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), employment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated tax or other tax, assessment or charge
of any kind whatsoever, including, without limitation, any interest, fine
penalty or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for refund
or information, or statement relating to Taxes, and any exhibit, schedule,
attachment or amendment thereto.
"Total Division Assets" means all Division Assets, calculated in
accordance with GAAP on a basis consistent with that reflected in the Division
Balance Sheet, as reflected on the books of accounts for the Division as of the
Closing Date; provided, however, that the Division's airlay manufacturing
equipment shall be treated in the manner provided in Section 2.3(b) hereof.
"Total Division Liabilities" means all Assumed Division Liabilities,
calculated in accordance with GAAP on a basis consistent with that reflected in
the Division Balance Sheet, as reflected on the books of account for the
Division as of the Closing Date.
"Voting Agreement" shall have the meaning assigned to it in
Section 4.2(b).
"Year 2000 Compliant" shall have the meaning assigned to it in
Section 4.29.
ARTICLE 2
PURCHASE AND SALE OF DIVISION ASSETS
2.1 Sale and Delivery. Upon the terms and subject to the conditions
appearing herein, Seller agrees to sell and deliver to Purchaser, and Purchaser
agrees to purchase and accept from Seller, at the Closing on the Closing Date,
free and clear of all Liens of any kind or nature whatsoever (other than
Permitted Liens), good and marketable title to the following property and
assets relating to the Division (collectively, hereinafter referred to as the
"Division Assets"):
(a) All property and assets located in the States of New
Jersey or California;
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(b) All other tangible property used primarily in the Division Business
which are not located in the States of New Jersey or California;
(c) All contracts, agreements, licenses, leases (for both real and
personal property), indentures and other legally binding arrangements, whether
oral or written that relate primarily to the Division business and (i) are in
existence on the date hereof or (ii) are entered into in the Ordinary Course on
or prior to the Closing Date and all commitments and orders for the purchase
and sale of goods and equipment (including inventory and supplies) and services
(including advertising, maintenance and other incidental services) to the
extent relating primarily to the Division Business (collectively, the "Division
Contracts");
(d) All patents, copyrights, trademarks, trade names and service marks,
and any applications and registrations therefor, that relate primarily to the
Division Business (collectively, the "Intellectual Property Rights"), whether
registered or not, and any goodwill associated therewith, and all existing
trade secrets, know-how, product formulations, processing procedures and
finished product specifications that relate primarily to the Division Business
(collectively, "Proprietary Information");
(e) All accounts receivable, notes receivable and loans receivable,
relating primarily to the Division Business, together with all agreements,
collateral, guarantees, security interests and other Liens and all rights of,
or amounts owing to, Seller thereunder or in connection therewith;
(f) All prepaid expenses of Seller relating primarily to the Division
Assets;
(g) All rights of Seller under or pursuant to all warranties,
representations and guarantees made by suppliers in connection with products or
services furnished to Seller primarily in connection with the operation of the
Division Business or affecting the Real Property, machinery or equipment used
in connection with the Division Assets or the operation of the Division
Business;
(h) All rights solely related to the Division Business under policies of
insurance (including those rights related to the Division Business under
policies of insurance covering both the Division Business and other operations
of Seller), bonds, letters of credit or other similar items, or any cash
surrender value or other similar items, in each case of any type or nature
whatsoever;
(i) All books, records, files and papers relating primarily to the
Division Business, including, without limitation, all computer programs (in
both object and source code form), manuals and data, catalogues, quotations,
sales and advertising materials, trade association memberships, research and
development records, lists of current and former customers and suppliers,
customer credit information, business plans, books of account and personnel,
employment and other records relating to the Division Assets;
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(j) All of the goodwill associated with the Division Business;
(k) To the extent transferable, all Permits;
(l) All choses in action solely related to the Division Business; and
(m) All other assets reflected on the Division Balance Sheet (exclusive of
inventory sold, accounts receivable collected and supplies consumed in the
Ordinary Course);
provided, however, that Division Assets shall not include Excluded Assets.
2.2 Assumption of Liabilities. As partial consideration for its purchase
of the Division Assets, on the terms and subject to the conditions set forth in
this Agreement, at the Closing on the Closing Date, Purchaser shall assume and
agree to pay, perform, defend and discharge in due course all liabilities,
obligations and contracts of Seller of whatever kind and nature, primary or
secondary, direct or indirect, absolute or contingent, known or unknown,
whether or not accrued and whether arising before, on or after the Closing Date
to the extent they relate to the Division Business (collectively, the "Assumed
Division Liabilities"); provided, however, that Assumed Division Liabilities do
not include and Purchaser shall not assume or otherwise be liable for any of
the following (collectively, "Excluded Liabilities"):
(a) Any liabilities or obligations for income or excise Taxes arising out
of or relating to the Division Business or Division Assets for periods ending
on or prior to the Closing Date or the sale of Division Assets to Purchaser;
(b) Any liabilities or obligations to any Affiliate of Seller, including
without limitation any liabilities related to products sold by the Division to
any Affiliate of Seller prior to the Closing Date;
(c) Any liability or obligation arising out of or relating to claimed
groundwater or other environmental contamination that occurred at or affects
the Bridgewater Facility;
(d) Any liability or obligation arising out or relating to (i) the
litigation matter captioned Jesse M. Flores v. Hosposable Products, Inc./Wyant
Corporation and (ii) claims by any officer or director of Seller with respect
to the Division;
(e) Any liability or obligation arising out of or relating to the Hourly
Plan, including, without limitation, any Hourly Plan Withdrawal Liability;
(f) Any liability or obligation arising out of or related to any asserted
or threatened claim for patent infringement relating to ownership or operation
of the
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airlay manufacturing equipment referred to as "Airlay Line Number Two" prior to
the Closing Date; and
(g) Those liabilities and obligations described on Schedule 2.2(g)
attached hereto.
2.3 Purchase Price.
(a) As additional consideration for the purchase of all of the Division
Assets, Purchaser shall pay a purchase price (the "Purchase Price") equal to
(i) $11,912,000, and (ii) either, as applicable, (A) plus the amount, if any,
by which the Adjusted Net Assets as of the Closing Date are greater than
$11,116,000, or (B) minus the amount, if any, by which $11,116,000 exceeds the
Adjusted Net Assets as of the Closing Date.
(b) At least three (3) days prior to the Closing Date, Seller, in
consultation with Purchaser, shall provide to Purchaser a written notice (the
"Estimate Notice") setting forth Seller's good faith estimate of the Purchase
Price (the "Estimated Purchase Price"), which Estimate Notice shall
specifically set forth each component of the Total Division Assets and the
Total Division Liabilities based on the most recent month-end balance sheet for
the Division that has been prepared in accordance with GAAP on a basis
consistent with that reflected in the Division Balance Sheet. The parties agree
that the net book value for the Division's airlay manufacturing equipment to be
used in computing the Purchase Price shall not exceed $3,200,000 and, to the
extent that the actual net book value of such airlay equipment exceeds
$3,200,000, then, for the purposes of calculating the Purchase Price, the net
book value of such airlay equipment shall be $3,200,000; provided, however,
that if Seller makes any capital expenditures in connection with the airlay
manufacturing equipment referred to as "Airlay Line Number One" in excess of
$50,000 in the aggregate between the date hereof and the closing date, then the
net book value of such equipment will be increased by an amount equal to fifty
percent (50%) of the amount of such capital expenditures in excess of $50,000.
(c) As soon as reasonably practicable after the Closing Date, Seller shall
take a physical inventory (which may be observed by Purchaser) of the
inventories included in the Division Assets as of the Closing Date. Within
sixty (60) days after the Closing Date, Seller shall deliver to Purchaser (i) a
balance sheet of the Division as of the Closing Date, that has been prepared in
good faith in accordance with GAAP on a basis consistent with that reflected
in the Division Balance Sheet, (ii) Seller's calculation of the Purchase Price
(the "Post-Closing Purchase Price Estimate"), together with a statement, in
reasonable detail, of the manner by which such calculation was determined
(including, without limitation, Seller's determination of each component of the
Total Division Assets and the Total Division Liabilities) and (iii) such other
documentation as Seller possesses that supports such determination. Seller
shall make available to Purchaser any of its work papers, financial data and
other information used in calculating the Post-Closing Purchase Price Estimate.
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(d) Within thirty (30) days after receipt of the Post-Closing Purchase
Price Estimate, Purchaser shall notify Seller in writing (an "Objection
Notice") of any objection to the Post-Closing Purchase Price Estimate. If no
Objection Notice is given within such thirty-day period, then (i) the
Post-Closing Purchase Price Estimate shall be final and binding on all parties
and shall be deemed for all purposes to be the Purchase Price and (ii) any
amounts payable to Purchaser or Seller as a result of such final determination
of the Purchase Price shall be paid as provided in Section 2.3(h). If an
Objection Notice is delivered, Seller shall be permitted to take positions
which are different from positions taken in the Post-Closing Purchase Price
Estimate as submitted to Purchaser and Purchaser agrees that Seller shall not
be prejudiced by reason of such differences.
(e) In the event Purchaser provides a timely Objection Notice, Purchaser
and Seller shall, for a period of five (5) days, use their best efforts to
resolve any differences between the parties as to the determination of the
Purchase Price. In the event Seller and Purchaser are not, within the periods
described above, able to resolve such differences, the determination of the
Purchase Price shall be referred for final resolution to Pricewaterhouse
Coopers LLP. Pricewaterhouse Coopers LLP shall as promptly as practicable, but
in no event later than ninety (90) days after receipt by Seller of the
Objection Notice, make a determination of the Purchase Price. Such
determination shall be final and binding on Purchaser and Seller.
(f) On the Closing Date, Purchaser shall pay, by wire transfer in
immediately available funds to an account specified by Seller, the amount by
which the Estimated Purchase Price exceeds the Escrow Amount.
(g) On the Closing Date, Purchaser, Seller and the Escrow Agent shall
execute and deliver an Escrow Agreement substantially in the form of Annex
2.3(g) attached hereto (the "Escrow Agreement") in order to provide Purchaser
with (i) a source for obtaining payment of the excess, if any, of the Estimated
Purchase Price over the Purchase Price as provided in Section 2.3(h) and (ii)
security for indemnifiable claims hereunder. On the Closing Date, Purchaser
shall deliver to the Escrow Agent the Escrow Amount for deposit into the Escrow
Account. The Escrow Amount shall be payable to Purchaser and/or Seller, as
applicable, in accordance with the terms set forth in the Escrow Agreement.
(h) As soon as practicable, but not more than three (3) business days
after final determination of the Purchase Price as set forth above, the
following payments shall be made:
(i) if the Estimated Purchase Price exceeds the Purchase Price, such
excess shall be returned to Purchaser from the Escrow Account pursuant to the
terms of the Escrow Agreement, and, to the extent any such excess is greater
than the Escrow Amount is, shall be payable by Seller to Purchaser by wire
transfer in immediately available funds to an account specified by Purchaser;
and
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(ii) if the Purchase Price exceeds the Estimated Purchase Price, such
excess shall be payable by Purchaser to Seller by wire transfer in immediately
available funds to an account specified by Seller.
2.4 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Division Assets being sold and purchased hereunder as set forth in
the "Purchase Price Allocation," to be agreed upon by the parties and attached
hereto as Schedule 2.4 on the Closing Date. Seller and Purchaser also agree
that none of the parties hereto shall take a reporting position for tax
purposes inconsistent with the allocations set forth in the Purchase Price
Allocation.
2.5 Proration of Expenses. In computing the Purchase Price, the parties
will prorate as of the Closing Date the premiums including any retrospective
adjustment under assigned insurance policies, water and other utility charges,
fuels, prepaid service contracts which are assigned, general real estate taxes
with respect to the Real Property, and any other items as to which a payment
made before the Closing Date relates to any period after the Closing Date or a
payment made after the Closing Date relates to any period before the Closing
Date ; provided, however, that no pro-ration shall be required to the extent
that the items and amounts to be pro-rated are properly taken into account in
determining the Estimated Purchase Price, as adjusted pursuant to Section 2.3.
2.6 Transferee Liability and Pre-Payment Expenses.
(a) All sales Tax and assignment or transfer fees and Taxes (exclusive of
federal or state Taxes on or measured by income) payable in connection with the
Sale of the Division Assets to Purchaser and the transactions contemplated
hereby shall be paid by Purchaser. In the event that Seller pays any of such
sales Tax or assignment or transfer fees and Taxes, Purchaser agrees to
reimburse Seller immediately in the amount of such sales Tax and assignment or
transfer fees and Taxes paid by Seller.
(b) At or prior to the Closing, Seller shall pay in full all pre-payment
fees, charges and expenses payable to any lender to or holder of Indebtedness
of Seller or any Affiliate, or any other amount required to be paid to such
lender or holder, in connection with the satisfaction of any Indebtedness of
Seller or any of its Affiliates that Seller must satisfy in order to consummate
the sale of the Division Assets and the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, Seller shall
arrange for the prepayment of all Indebtedness to Congress Financial
Corporation and the release of all Liens securing such Indebtedness so that
Purchaser's lender is able to substitute itself for Seller's lender in
connection with Purchaser's assumption of the IRB Indebtedness, including,
without limitation, the issuance by Purchaser's lender of an Alternate Letter
of Credit (as defined in the Indenture), in accordance with Section 404(d) of
the Indenture.
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ARTICLE 3
CLOSING
3.1 Closing. The purchase and sale of the Division Assets, the
assumption of the Assumed Division Liabilities and the consummation of the
other transactions contemplated by this Agreement (the "Closing") shall occur
at the offices of Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, 31st
Floor, New York, New York 10022, at 10:00 a.m., New York time, within five
business days after the fulfillment of the last of all conditions precedent to
the Closing set forth in Article 8, or at such other time or on such other date
as shall be agreed upon by Seller and Purchaser, such hour and date being
herein generally referred to as the "Closing Date."
3.2 Deliveries by Seller. At the Closing, Seller shall cause to be
delivered to Purchaser, in form reasonably satisfactory to counsel for Seller
and Purchaser, the following:
(a) A bill of sale for those Division Assets that will not be transferred
pursuant to specific documents described elsewhere in this Section 3.2;
(b) A bargain and sale deed to the Division Owned Real Property (the
"Deed");
(c) An assignment agreement dealing with the assignment by Seller of its
rights under the Division Contracts and similar contractual rights;
(d) Assignment agreements dealing with the assignment by Seller of its
rights in the Intellectual Property Rights;
(e) Such other documents as are, in the reasonable opinion of Purchaser
and Seller, necessary or desirable to transfer the Division Assets to
Purchaser; and
(f) All of the documents, certificates, agreements, instruments, releases
and opinions required to be delivered under Section 8.1.
3.3 Deliveries of Purchaser. At the Closing, Purchaser shall cause to be
delivered to or for the benefit of Seller, in form reasonably satisfactory to
counsel for Seller and Purchaser, the following:
(a) The Estimated Purchase Price less the Escrow Amount (as required by
Section 2.3(f));
(b) The Escrow Amount to the Escrow Agent (as required by Section 2.3(g)),
which amount shall, subject to the terms of the Escrow Agreement, be released
on the second anniversary of the Closing Date;
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(c) An instrument of Purchaser under which Purchaser agrees to pay, perform
and discharge the Assumed Division Liabilities; and
(d) All documents, certificates, instruments, agreements and opinions
required to be delivered under Section 8.2.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
CONCERNING SELLER AND THE DIVISION
Seller hereby represents and warrants to Purchaser as follows:
4.1 Organization and Good Standing. Seller is validly existing as a
corporation in good standing under the laws of the State of New York with full
power and authority (corporate and other) to own and lease its properties, to
conduct its business (including the Division Business) as currently conducted
and to enter into and carry out its obligations under this Agreement.
4.2 Due Execution and Delivery and Binding Agreement. Seller has full
corporate power and authority to enter into this Agreement and the other
agreements contemplated hereby to which it is or will be a party at Closing and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Seller of the agreements contemplated hereby to
which is a party or will be a party at Closing have been duly authorized by all
requisite corporate action (subject to the requisite approval of the
stockholders of Seller). This Agreement has been, and each of the other
agreements contemplated hereby to which it is a party will be as of the Closing
Date, duly executed and delivered by Seller (subject to the requisite approval
of the stockholders of Seller), and (assuming due execution and delivery by
Purchaser) this Agreement constitutes, and each of the other agreements
contemplated hereby to which it is a party when executed and delivered will
constitute, a valid and binding obligation of Seller, (subject to the requisite
approval of the stockholders of Seller), enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally or by
general equitable principles.
4.3 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby (a) have
been duly and validly approved by all action of the Board and, subject to the
approval of Seller's stockholders contemplated by Section 7.10(a), Seller's
stockholders, and no other action of its Board or its stockholders or other
corporate action is required under Seller's Articles of Incorporation or Bylaws
or under any applicable law to enable Seller to carry out its obligations under
this Agreement, (b) except as set forth on Schedule 4.3, will not (i) conflict
with or result in a breach or violation of any term or provision of, or
constitute a default under (with or without notice or passage of time, or both),
or otherwise give any Person a basis for accelerated or increased rights or
termination or nonperformance under, any material indenture, mortgage, deed of
trust, loan or credit agreement, note agreement, lease,
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license or other agreement or instrument to which Seller is a party or by which
Seller is bound or affected or to which any of the property or assets of Seller
is bound or affected including, without limitation, all agreements and
arrangements referred to in Schedule 4.19(a), (ii) result in the violation of
the provisions of the Articles of Incorporation or Bylaws of Seller or any
Legal Requirement applicable to or binding upon it or any Division Asset, (iii)
result in the creation or imposition of any Lien upon any Division Asset, (iv)
require any material authorization, consent, approval, license, exemption of or
filing or registration with any court or Governmental Entity, except such as
shall have been lawfully and validly obtained prior to the Closing, or (v)
otherwise adversely affect any material contractual or other legal rights or
privileges of Seller. Schedule 4.3 attached hereto sets forth a list of all
material agreements requiring the consent, waiver, authorization or approval of
any Person to any of the transactions contemplated hereby.
4.4 Financial Statements.
(a) Schedule 4.4 hereto contains true and complete copies of (i) the
unaudited balance sheet (the "Division Balance Sheet") of the Division at
December 31, 1998 (the "Division Balance Sheet Date"), and the related
unaudited statements of income and cash flows for the twelve months then ended,
and (ii) the balance sheet of the Division at December 31, 1997 and the
related statements of income and cash flows for the fiscal year then ended (the
financial statements described in clause (i) and (ii) above are collectively
referred to as the "Financial Statements"). The Financial Statements of the
Division for the periods ended on the Division Balance Sheet Date and December
31, 1997 reflect all inter-company transactions between the Division, on the
one hand, and Seller and all Subsidiaries of Seller, on the other hand.
(b) The Financial Statements (i) present fairly in all material respects
the financial condition of the Division as of the dates indicated therein and
the results of operations and cash flows of the Division for the periods
specified therein, (ii) have been prepared in conformity with GAAP applied on a
consistent basis during the periods covered thereby and prior periods, except
for the absence of footnotes, and (iii) have been derived from the accounting
records of Seller and represent only actual, bona fide transactions.
4.5 Title to Property; Encumbrances.
(a) (i) Schedule 4.5(a)(i) contains a true and complete legal description
of all real property owned in fee by Seller that is necessary to the Division
Business as currently conducted (the "Division Owned Real Property") together
with a description of all buildings and improvements thereon (the "Division
Improvements").
(ii) (A) Seller has, and immediately prior to the Closing Seller will
have, good and marketable fee title to the Division Owned Real Property free
and clear of all Liens (other than Permitted Liens and Permitted Title
Matters).
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(B) At the Closing, Seller will transfer and deliver to Purchaser
good and marketable fee title to the Division Owned Real Property, free and
clear of all Liens and matters affecting title other than (1) those matters
affecting title set forth on Schedule 4.5(a)(ii)(B) attached hereto, (2)
Permitted Liens (the title matters referred to in clauses (1) and (2) being
collectively referred to as "Permitted Title Matters") and (3) Liens created by
Purchaser.
(iii) True and complete copies of all environmental reports and audits
in the possession of Seller, dated after December 31, 1993, with respect to the
Division Owned Real Property have been delivered to Purchaser.
(b) Seller has, and immediately prior to the Closing will have, good and
marketable fee title to all personal property reflected on the Division Balance
Sheet as owned by Seller and all personal property acquired by Seller since the
Division Balance Sheet Date, in each case free and clear of all Liens except
(i) as set forth on Schedule 4.5(b), (ii) for sales and other dispositions of
inventory and equipment in the Ordinary Course since the Division Balance Sheet
Date which, in the aggregate, have not been materially different from prior
periods, and (iii) Permitted Liens.
(c) Schedule 4.5(c) contains a list of all real property leases, licenses
and personal property leases under which Seller is the lessee or licensee and
that relate to real or personal property used primarily in the conduct of the
Division Business, in each case which has a future liability in excess of
$25,000 per annum. True and complete copies of all real property leases,
licenses and personal property leases listed on Schedule 4.5(c) have been
delivered to Purchaser heretofore, as well as copies of any title reports and
surveys in the possession of Seller, dated after December 31, 1993, relating to
any real property held under lease by Seller and used primarily in the Division
Business. For the purposes of this Section 4.5(c), a "lease" shall include a
sublease. Seller has, and immediately prior to the Closing will have, (i) good
and valid leasehold interests in and title to the leased Division Assets (other
than leased Real Property), and (ii) peaceful and undisturbed possession in the
leased Real Property, in each case free and clear of all Liens other than
Permitted Liens.
(d) To the knowledge of Seller, except as listed on Schedule 4.5(d), all
items of personal property owned by Seller and material to the conduct of the
Division Business, and all personal property held by Seller pursuant to
personal property leases and material to the conduct of the Division Business,
are in good operating condition and repair, subject to ordinary wear and tear.
The Division Owned Real Property, the real property leased by Seller and used
primarily in the conduct of the Division Business, the personal property
described in Section 4.5(b) (together with all owned tangible personal property
having a cost or fair market value less than $10,000) and the Real Property and
personal property held by Seller pursuant to the leases and licenses described
in Schedule 4.5(c) comprise all of the real property and personal property used
primarily in the conduct of the Division Business, except for such leases or
licenses which in each case has a future liability not in excess of $25,000 per
annum.
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(e) Except as set forth in Schedule 4.5(e):
(1) All of the facilities, buildings, plants, structures and
improvements (including the Division Improvements) used primarily in the conduct
of the Division Business (A) to the knowledge of Seller are in good operating
condition and repair, and (B) have adequate access to ingress and egress for the
conduct of the Division Business; and
(2) There are no (i) leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any other Person the right to acquire,
use or occupy any portion of, any Real Property, (ii) outstanding options or
rights of first refusal to purchase all or any portion of Real Property or
interest therein, and (iii) Persons (other than Seller) in possession of any
Real Property.
4.6 Accounts Receivable. All accounts receivable of Seller reflected on
the Division Balance Sheet and all accounts receivable that have arisen in the
conduct of the Division Business since the Division Balance Sheet Date (except
such accounts receivable as have been collected since such dates) arose out of
bona fide transactions. Schedule 4.6 contains a true and complete aging, in
all material respects, of Seller's accounts receivable as of January 31, 1999.
4.7 Inventories. Except as described in Schedule 4.7, all inventories of
raw materials, work-in-process and finished goods set forth or reflected in the
Division Balance Sheet have been so reflected in accordance with GAAP. The
value at which inventories are carried on the Division Balance Sheet reflect
the normal inventory valuation policy of Seller, in accordance with GAAP and on
a basis consistent with that of preceding periods, of stating inventory at the
lower of cost or market value and with cost being determined on a first-in,
first-out basis.
4.8 Trademarks, Patents, Etc.
(a) Schedule 4.8(a) contains a true and complete list of all material
patents, patent applications, trade names, trademarks, service marks, trademark
and service mark registrations and applications, copyrights, copyright
registrations and applications, grants of a license or right to Seller with
respect to the foregoing, both domestic and foreign, claimed by Seller or used
or proposed to be used by Seller primarily in the conduct of the Division
Business, whether registered or not (collectively herein, "Material
Intellectual Property Rights").
(b) Except as described in Schedule 4.8(b), Seller owns and has the
unrestricted right to use the Material Intellectual Property Rights free and
clear of any right, equity or claim of others, subject to any claim of
infringement by any third party and any rights of licensors or licensees.
Seller has taken reasonable security measures to protect the secrecy,
confidentiality and value of the Material Intellectual Property Rights.
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(c) Schedule 4.8(c) contains a true and complete list and description of
all licenses of or rights to Proprietary Information granted to Seller by
others or to others by Seller, in each case in connection with the Division
Business. Except as described in Schedule 4.8(c), (i) Seller has not sold,
transferred, assigned, licensed or subjected to any Lien (other than Permitted
Liens), any Proprietary Information or any interest therein, and (ii) Seller is
not under any written obligation whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other claimant to,
any Proprietary Information.
(d) To the knowledge of Seller, there is no claim or demand of any Person
received by Seller pertaining to, or any Action that is pending or threatened,
which challenges or questions the rights of Seller in respect of any
Proprietary Information.
4.9 Insurance. Schedule 4.9 contains a true and complete list of all
insurance policies and bonds and self insurance arrangements (i) currently in
force that cover or purport to cover risks or losses to or associated only with
the Division Business, Division operations, Division premises, Division Assets,
and Division Employees, and (ii) that were in force for the past three (3)
years covering or purporting to cover claims for personal injury, product
liability, product defect or any other similar event (the "Policies") relating
only to the Division Business. True and complete copies of all such Policies
have been delivered to Purchaser heretofore.
4.10 Indebtedness.
(a) Seller has no liability or obligation for Indebtedness other than as
set forth on Schedule 4.10(a), and true and complete copies of all instruments
and documents evidencing, creating, securing or otherwise relating to such
Indebtedness have been delivered to Purchaser heretofore.
(b) Schedule 4.10(b) contains a list of all agreements or instruments
pursuant to which any of Seller's directors, employees or stockholders have
guaranteed any Indebtedness of Seller (the "Guaranties"). True and complete
copies of all Guaranties have been delivered to Purchaser.
4.11 Judgments; Litigation. Except as set forth on Schedule 4.11:
(a) There is no (i) outstanding judgment, order, decree, award,
stipulation or injunction of any Governmental Entity or arbitrator against
Seller that directly relates to the Division or the Division Assets or the
Division Business or (ii) Action pending against Seller that directly relates
to the Division or the Division Assets or the Division Business. None of the
items listed on Schedule 4.11, if decided adversely against Seller, the
Division, the Division Assets or the Division Business is reasonably expected
to have a Material Adverse Effect.
(b) To Seller's knowledge, there is no (A) outstanding judgment, order,
decree, award, stipulation, injunction of any Governmental Entity or arbitrator
against
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or affecting any officer, director, employee or agent of Seller relating to or
affecting the Division or the Division Business, (B) Action threatened against
Seller that directly relates to the Division, the Division Assets or Division
Business, (C) Action pending or threatened against Seller's officers, directors,
employees or agents that directly relates to the Division or the Division
Business or (D) basis for the institution of any Action against Seller or any of
its officers, directors, employees, properties or assets which, if decided
adversely, is reasonably expected to have a Material Adverse Effect.
4.12 Income and Other Taxes. Except as set forth on Schedule 4.12:
(a) All Taxes required to be paid or withheld and deposited through and
including the date hereof in connection with the operations of the Division have
been duly and timely paid or deposited by Seller, in each case to the extent due
and payable. Seller has properly withheld or collected all amounts required by
law for income Taxes and employment Taxes relating to its employees, creditors,
independent contractors and other third parties, and for Taxes on sales, and, to
the extent due and payable, has properly and timely remitted such withheld or
collected amounts to the appropriate Governmental Entity.
(b) No Tax Return of Seller that includes information about Division Assets
or the Division Business has been audited or been the subject of other Action by
any Governmental Entity. Seller has not received any notice from any
Governmental Entity of any pending examination or any proposed deficiency,
addition, assessment, demand for payment or adjustment relating to or affecting
Seller or its assets or properties, and Seller has no reason to believe that any
Governmental Entity may assess (or threaten to assess) any Taxes for any periods
ending on or prior to the Closing Date.
4.13 Questionable Payments. Neither Seller nor any of its directors,
officers, agents, employees or other Person associated with or acting on behalf
of Seller has, in connection with the Division Business, (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any direct or indirect
unlawful payments to government officials or employees, or foreign government
officials or employees, from corporate funds, (c) established or maintained any
unlawful or unrecorded fund of corporate monies or other assets, (d) made any
false or fictitious entries on the books of account of Seller or any of its
Subsidiaries, or (e) made or received any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
4.14 Employee Benefit Matters.
(a) Schedule 4.14 contains a complete list of all Plans. True and complete
copies of each of the following documents (and any amendments thereto), where
applicable, have been delivered previously to Purchaser: (i) the Plan
documents; (ii) a written description of any Plan which is not in writing; (iii)
if the Plan is funded through a trust or any third-party funding vehicle, the
trust or other funding agreement; (iv) the Plan's most recent financial
statements; (v) the two most recent annual reports (including all schedules and
attachments thereto) required by ERISA; (vi) the most recent actuarial report
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and valuation; (vii) the most recent determination letter received from the IRS
with respect to each Plan that is intended to be qualified under Code Section
401 or to be recognized as tax-exempt under Code Section 501(c); (viii) the
most recent summary plan description and each summary of material modifications
required by ERISA; (ix) any agreement providing for the provision of
administrative or investment management services with respect to the Plan; and
(x) all documents and correspondence received from or provided to the DOL, IRS,
and PBGC during the past two years.
(b) Each Plan and related trust, annuity, or other funding agreement
complies and has been maintained in compliance with all applicable Legal
Requirements. No non-exempt prohibited transaction (as defined in Code Section
4975 and ERISA Sections 406 and 408) has occurred with respect to a Plan and no
"fiduciary" of a Plan (as defined in ERISA Section 3(21)) has committed any
breach of duty which could subject Seller , any ERISA Affiliate, or any
director, officer, or employee thereof to liability under Title I of ERISA or
to tax under Code Section 4975. All material obligations required to be
performed by Seller and any other Person under the terms of each Plan and
applicable Legal Requirements have been performed.
(c) With respect to each Plan, all required reports and descriptions,
including, without limitation, annual reports (Form 5500), summary annual
reports, and summary plan descriptions, have been filed and distributed timely.
With respect to each Plan which is a welfare plan (as defined in ERISA Section
3(1)), the requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
Section 4980B have been satisfied in all material respects.
(d) With respect to each Plan, all contributions, premiums, and other
payments, including, without limitation, employer contributions and employee
salary reduction contributions, have been paid when due or accrued in
accordance with the past custom and practice of Seller and any ERISA Affiliate.
No Plan that is subject to Part 3 of Subtitle B of Title I of ERISA or to Code
Section 412 has incurred any accumulated funding deficiency, whether or not
waived, and no other actual or contingent liability for any other expenses or
obligations of any Plan exists.
(e) Neither Seller nor any ERISA Affiliate maintains or has maintained any
time, or contributes to or has contributed to or is or was required to
contribute to, any (i) Plan subject to Title IV of ERISA, including, without
limitation, any multi-employer plan (as defined in ERISA Section 3(37)), within
the past five years, or (ii) funded or unfunded medical, health, accident, or
life insurance plan or arrangement for current or future retirees or terminated
employees or their spouses or dependents (except to the extent required by Code
Section 4980B).
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a
termination of employment or other event entitling any Person to any additional
or other benefits, or that would otherwise modify benefits or the vesting of
benefits, provided under any Plan.
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(g) No event has occurred which could subject Seller or any ERISA
Affiliate to any material liability (i) under any Legal Requirement relating to
any Plan, or (ii) resulting from any obligation of Seller or an ERISA Affiliate
to indemnify any Person against liability incurred with respect to or in
connection with any Plan.
(h) Each Plan which is intended to be qualified under Code Section 401 has
received, within the last five years, a favorable determination letter from the
IRS. No event has occurred and no facts or circumstances exist which may cause
or result in the loss or revocation of such determination.
(i) With respect to the Hourly Plan, true and complete copies of each of
the following have been previously delivered to Purchaser: (i) the plan
document; (ii) the trust document; (iii) the most recent financial statements;
(iv) the two most recent annual reports (including all schedules and
attachments thereto) required by ERISA; and (v) the most recent estimate of
withdrawal liability that would be incurred by Seller and its Affiliates if
they were to completely withdraw from the Hourly Plan in 1998. All material
obligations required to be performed by Seller and its Affiliates under the
terms of the Hourly Plan and applicable Legal Requirements have been performed.
Seller and its Affiliates have made all contributions to the Hourly Plan when
due.
4.15 No Undisclosed Liabilities. To Seller's knowledge, except for
liabilities or obligations reflected or reserved against in the Division
Balance Sheet or the notes thereto or reflected in the Schedules hereto, the
Division Business has no material liabilities, whether absolute, accrued,
contingent or otherwise, that would be required by GAAP to be reflected on a
balance sheet of the Division, except for (i) liabilities or obligations
incurred in the Ordinary Course consistent with past practice since the
Division Balance Sheet Date and (ii) liabilities or obligations which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
4.16 Permits, Licenses, Etc. Seller possesses, and is operating in
compliance with, all material franchises, licenses, permits, certificates,
authorizations, rights and other approvals of Governmental Entities necessary
to be obtained by it to (i) occupy, maintain, operate and use the Real Property
as it is currently used, (ii) conduct the Division Business as currently
conducted, and (iii) maintain and operate its Plans (collectively, the
"Permits"). Schedule 4.16 contains a true and complete list of all Permits.
Each Permit has been lawfully and validly issued, and no proceeding is pending
or, to Seller's knowledge, threatened looking toward the revocation, suspension
or limitation of any Permit. Except as set forth in Schedule 4.16, all Permits
may be transferred or assigned by Seller to Purchaser without notice to or
approval from any Governmental Entity, and the consummation of the transactions
contemplated by this Agreement will not result in the revocation, suspension or
limitation of any Permit.
4.17 Regulatory Filings. Seller has made all material required
registrations and filings with and submissions to all applicable Governmental
Entities relating to the operations of the Division as currently conducted.
All such material registrations, filings and submissions were in compliance
with all Legal Requirements when filed, no material
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deficiencies have been asserted by any such applicable Governmental Entities
with respect to such material registrations, filings or submissions, and, to
Seller's knowledge, no facts or circumstances exist which would indicate that a
material deficiency may be asserted by any such authority with respect to any
such material registration, filing or submission.
4.18 Consents. Except as set forth on Schedule 4.18, all consents,
waivers, authorizations and approvals of any Person, or as a result of the
consummation of the transactions contemplated hereby, that are necessary for
the operations and business of the Division as currently conducted, or for
which the failure to obtain the same is reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect, have been or prior
to the Closing Date will be lawfully and validly obtained by Seller.
4.19 Material Contracts; No Defaults.
(a) Schedule 4.19(a) contains a true and complete list of all written
material contracts, agreements, understandings, arrangements and commitments of
Seller that directly relate to the Division Assets or the Division Business or
by which the Division or the properties, rights or assets are bound ("Material
Contracts"). True and complete copies of such written Material Contracts have
been delivered to Purchaser heretofore. For the purposes of subsections (a)
and (b) of this Section 4.19, "material" means:
(i) (A) any agreement with any labor union, (B) any agreement for the
purchase of fixed assets or for the purchase of materials, supplies or equipment
in excess of $25,000, (C) any agreement for the employment of any officer,
individual employee or other Person on a full time basis or any agreement with
any Person for consulting services, (D) any bonus, pension, profit sharing,
retirement, deferred compensation, medical, hospitalization or life insurance
(other than group medical, hospitalization or insurance plans applicable to all
employees of the Division in which benefit levels are not related to
compensation) or similar plan, contract or understanding with respect to any or
all of the employees of the Division, (E) any indenture, loan or credit
agreement, note agreement, deed of trust, mortgage, security agreement,
guaranty, promissory note or other agreement or instrument relating to or
evidencing Indebtedness or subjecting any Division Asset or property to any Lien
or evidencing any Indebtedness, (F) any lease or agreement under which Seller is
lessee of or holds or operates any real property or material personal property,
owned by any other Person under which payments to such Person exceed $25,000 per
annum, (G) any lease or agreement under which Seller is lessor or permits any
Person to hold or operate any property included in the Division Assets, real,
personal or mixed, owned or controlled by Seller, (H) any agreement or
arrangement of Seller with regard to the Division and any Affiliate or any
"associate" (as this term is defined in the Exchange Act) of Seller or any
officer, director or shareholder of Seller, (I) any agreement obligating Seller
or any of its Affiliates to pay any royalty or similar charge for the use or
exploitation of any tangible or intangible property, and (J) any covenant not
to compete or other agreement or restriction on its ability to conduct a
business or engage in any other activity, and
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(ii) any contract, agreement, understanding, arrangement or commitment
that (A) involves payments or receipts by Seller in excess of $25,000, (B)
involves capital expenditures in excess of $25,000 or (C) otherwise materially
affects the Division.
(b) Except as described in Schedule 4.19 (b):
(i) each Material Contract is (x) with respect to Seller, legal,
valid, binding, enforceable and in full force and effect (assuming that each
such Material Contract is legal, valid, binding, enforceable and in full force
and effect as to each party thereto other than Seller) and (y) with respect to
any other Person, to the knowledge of Seller, legal, valid, binding, enforceable
and in full force and effect;
(ii) no event or condition has occurred that constitutes or, with
notice or the passage of time, or both, would constitute a default or a basis of
force majeure or other claim of excusable delay, termination, nonperformance or
accelerated or increased rights by Seller or, to Seller's knowledge, any other
Person under any Material Contract; and
(iii) to Seller's knowledge, no party to a Material Contract is in
default thereunder or has failed to perform fully thereunder by reason of force
majeure or other claim of excusable delay, termination or nonperformance
thereunder, the delay, termination or nonperformance of which, or a default
under which, has had or is reasonably expected to have a Material Adverse
Effect.
4.20 Absence of Certain Changes. Since December 31, 1998, except as
disclosed in Schedule 4.20, Seller has not: (i) with respect to the Division,
incurred any debts, obligations or liabilities (absolute, accrued, contingent or
otherwise), other than current liabilities incurred in the Ordinary Course
which, individually or in the aggregate, are not material; (ii) subjected to or
permitted a Lien (other than a Permitted Lien and IRB Indebtedness Liens) upon
or otherwise encumbered any of the Division Assets, tangible or intangible;
(iii) with respect to the Division, sold, transferred, licensed or leased any of
its assets or properties except in the Ordinary Course; (iv) with respect to the
Division, except to the extent required to be set forth in the Division's
financial statements, canceled or compromised any debt owed to or by or claim of
or against it, or waived or released any right, of material value other than in
the Ordinary Course; (v) with respect to the Division, suffered any material
physical damage, destruction or loss (whether or not covered by insurance); (vi)
made or suffered any change in, or condition affecting, its condition (financial
or otherwise), properties, profitability or operations other than changes,
events or conditions in the Ordinary Course, none of which (individually or in
the aggregate) has had or may have a Material Adverse Effect; (vii) with respect
to the Division, made any change in the accounting principles, methods, records
or practices followed by it or depreciation or amortization policies or rates
theretofore adopted (other than those changes required by Seller's independent
auditors in connection with the audit of the Division for the fiscal year ended
December 31, 1998); (viii) with respect to the Division, paid, or made any
accrual or arrangement for payment of, any severance or termination pay to, or
entered into any
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employment or loan or loan guarantee agreement with, any current or former
officer, director or employee or consultant; (ix) with respect to the Division,
paid, or made any accrual or arrangement for payment of, any increase in
compensation, bonuses or special compensation of any kind to any employee other
than in the Ordinary Course; or (x) entered into any agreement or otherwise
obligated itself to do any of the foregoing.
4.21 Employees and Labor Matters.
(a) Schedule 4.21(a) contains a list of (1) all full and part-time
employees of Seller (the "Division Employees") who, as of a date on or about
the date of this Agreement, are engaged in the conduct of the Division Business
and (2) all consultants to Seller who have been advising Seller in connection
with, the conduct of the Division Business. Schedule 4.21(a) sets forth for
each Division Employee the following information as of the date hereof: (i)
base or hourly compensation, (ii) accrued and unused vacation and sick pay, and
(iii) bonuses paid or accrued with respect to the current year.
(b) Schedule 4.21(b) contains a true and complete list of all written
contracts, agreements, plans, arrangements, commitments and understandings
(formal and informal) pertaining to terms of employment, compensation, bonuses,
profit sharing, commissions, incentives, loans or loan guarantees, severance
pay or benefits, use of Seller's property and related matters of Seller with
any Division Employee or any former employee of or consultant to the Division,
other than Plans disclosed on Schedule 4.14. True and complete copies of all
such contracts, agreements, plans, arrangements and understandings have been
delivered to Purchaser heretofore.
(c) Schedule 4.21(c) contains a true and complete list of all labor,
collective bargaining, union and similar agreements that affect the Division
and under or by which Seller or any Affiliate of Seller is obligated, and true
and complete copies of all such agreements have been delivered to Purchaser
heretofore. Except as set forth in Schedule 4.21(c), the employees of Seller
who are engaged in the Division Business are not subject to any collective
bargaining agreement, memorandum of understanding or other written document
binding on Seller respecting terms and conditions of employment with respect to
an identified group of employees. As to the collective bargaining agreements
disclosed on Schedule 4.21(c), Seller is not in material default thereunder.
(d) During the past four (4) years, Seller has not experienced any work
stoppage, slow-down, picket, strike, lock-out or other material labor
disturbance that affected the Division Business or the premises or products of
the Division, nor is any such work stoppage, slow-down, picket, strike,
lock-out or other labor disturbance presently occurring or, to the knowledge of
Seller, threatened. To Seller's knowledge, (i) there are no organizational
efforts presently being made or threatened by or on behalf of any labor union
with respect to the employees of Seller who are engaged in the conduct of the
Division Business, and (ii) except for the union representation reflected in
the collective bargaining agreements disclosed on Schedule 4.21(c), during the
last four (4) years, no union or other labor organization has attempted to
organize any current or former employees of the Division Business.
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(e) Except as disclosed on Schedule 4.21(e), there are no claims,
controversies, labor disturbances, investigations, proceedings or complaints
pending or, to Seller's knowledge, threatened, by any Governmental Entity or
any of the employees of Seller who are engaged in the conduct of the Division
Business or any party or parties representing any of such employees against
Seller before any court, arbitrator or other tribunal. There are no unfair
labor practice charges, charges of discrimination, or other similar complaints
pending against Seller involving employees now or previously employed by Seller
who are or were engaged in the conduct of the Division Business.
(f) No member of the Division's existing or prior work force has been
subjected to any occupational health or safety hazard as a result of its
service to the Division that has had or is reasonably expected to have a
Material Adverse Effect.
4.22 Affiliations. Except as disclosed on Schedule 4.22, no Affiliate of
Seller has, directly or indirectly, (i) an interest in any Person that (A)
furnishes or sells, or proposes to furnish or sell, services or products that
are furnished or sold by the Division or (B) purchases from or sells or
furnishes to, or proposes to purchase from or sell or furnish to, the Division
any goods or services or (ii) a beneficial interest in any contract or
agreement to which the Division is a party or by which the Division or any of
the Division Assets are affected.
4.23 Compliance with Law. Seller (i) is not in violation of or
conducting, and to Seller's knowledge, has not violated or conducted during the
last three (3) years, the Division Business or Division operations in violation
of, and has not used or occupied Division properties or assets in violation of,
any Legal Requirement, (ii) to its knowledge, has not been alleged by any
Governmental Entity to be in violation of any Legal Requirement with respect to
the Division, and (iii) has not received any notice of any alleged violation
of, or any citation for noncompliance with, any Legal Requirement with respect
to the Division, except where such violations, individually or in the
aggregate, are not reasonably expected to have a Material Adverse Effect.
4.24 Product Liability and Product Warranty. Schedule 4.24 hereto
contains a true and complete description of the Division's product liability
and product warranty experience for the last five (5) years, including without
limitation, any product recall or retrieval or similar event, whether or not
such recall or event was voluntary, was done in cooperation with the Consumer
Products Safety Commission ("CPSC") or was publicly announced, any product
seizure by any Governmental Entity with respect to the Division, any claim
brought or any enforcement or other regulatory action by the CPSC or any other
Governmental Entity, any correspondence with any Governmental Entity related to
any product sold by the Division at any time during the last five (5) years,
and any product in connection with which Seller received safety or
quality-related complaints from consumers who, in the aggregate, purchased 5%
or more of the total number of units of such product sold by the Division. To
its knowledge, except to the extent disclosed on Schedule 4.15 or Schedule
4.24, Seller has no financial liability or other legal responsibility whether
or not fault-based, in respect of the advertising or sale of any product, any
product or service warranty offered by the Division, or any claimed or actual
product flaw, hazard or defect,
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including, but not limited to, any claimed or actual design defect or warning
defect, and the amount reserved in respect of all of the foregoing on the
Division Balance Sheet is in all respects sufficient under GAAP.
4.25 Books and Records. Seller has made available for inspection by
Purchaser all the books of account relating to the Division Business. Such
books of account are true, correct and complete and reflect all the
transactions and other matters required to be set forth under GAAP.
4.26 Hazardous Materials. Except as set forth on Schedule 4.26, to the
knowledge of Seller, and except where any inaccuracy in or breach of the
following representations and warranties, individually or in the aggregate,
would not have a material adverse effect on the financial condition or results
of operations of the Division:
(a) No Hazardous Material (i) has been released, placed, stored,
generated, used, manufactured, treated, deposited, spilled, discharged,
released or disposed of on or under any real property currently or previously
owned or leased by Seller in connection with the Division Business or is
presently located on or under any Real Property (or any property adjoining any
Real Property) except for inventories of Hazardous Materials to be used in, or
generated in the course of, the Ordinary Course of the Division, (ii) is
presently maintained, used, generated, or permitted to remain in place in
respect of any Real Property by Seller in violation of any Environmental Law,
(iii) is required by any Environmental Law to be eliminated, removed, treated
or mitigated by Seller with respect to the Division or any of the Division
Assets, given the nature of its present condition, location, nature, material
or maintenance, or (iv) is of a type, location, material, nature or condition
with respect to the Division which requires special notification to third
parties by Seller under Environmental Law or common law.
(b) No written notice, citation, summons or order has been received by,
and no notice has been given by, Seller and no complaint has been filed, no
penalty has been assessed and no claim, investigation or review is pending or
threatened by any Governmental Entity, with respect to (i) any alleged
violation by Seller of any Environmental Law with respect to the Division
Business or any Division Asset or (ii) any alleged failure by Seller to have
any environmental permit, certificate, license, approval, registration or
authorization required in connection with the Division Business or Division
Assets, or (iii) any use, possession, generation, treatment, storage,
recycling, transportation, release or disposal by or on behalf of Seller with
respect to the Division of any Hazardous Material. Seller has at all times
maintained the Division Assets (including the Real Property and all real
property previously owned or leased by Seller for use in the conduct of the
Division Business) and conducted the Division Business in accordance with all
Environmental Laws in all material respects.
(c) Seller has not received and is not aware of any request for
information, notice of claim, demand or notification that it is or that
indicates that it may be a "potentially responsible party" or may otherwise be
liable with respect to any investigation
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or remediation of any threatened or actual release of any Hazardous Material
with respect to the Division Business or any Division Asset.
(d) No above-ground or underground storage tanks, whether or not in use,
are or have ever been located at any property currently owned or leased by
Seller and used in connection with the Division Business.
(e) No written notice has been received by Seller with respect to the
listing or proposed listing of any property currently or previously owned,
operated or leased by Seller with regard to the Division on the National
Priorities List promulgated pursuant to CERCLA, CERCLIS or any similar state
list of sites requiring investigation or cleanup.
(f) During the last five (5) years, there have been no environmental
inspections, investigations, studies, tests, reviews or other analyses
conducted by Seller in relation to any Real Property.
(g) Seller has not released, transported, or arranged for the
transportation of any Hazardous Material from any property currently or
previously owned, operated or leased by Seller that is or was used in
connection with the Division Business.
4.27 Brokers' Fees. Except as provided in Schedule 4.27 attached hereto,
no investment banker, broker, finder or similar agent has been employed by or
on behalf of Seller in connection with this Agreement or the transactions
contemplated hereby, and Seller has not entered into any agreement or
understanding of any kind with any Person for the payment of any brokerage
commission, finder's fee or any similar compensation in connection with this
Agreement or the transactions contemplated hereby.
4.28 Customers and Vendors. Schedule 4.28 is a correct and complete list
of the ten (10) largest customers and the ten (10) largest vendors of the
Division, in each case by dollar volume, during the fiscal year ended December
31, 1998. Except as set forth on Schedule 4.28, Seller has no written
information indicating from any such customer or vendor that any of such
customers or vendors of the Division intends to cease doing business with the
Division or materially alter the volume, pricing or terms of business that it
is presently conducting with the Division.
4.29 Year 2000 Compliance. Schedule 4.29 summarizes all efforts taken by
Seller to ensure that the software and systems used by the Division Business
are Year 2000 Compliant. Seller does not represent or warrant to Purchaser
that the software and systems used by the Division Business are in any respects
Year 2000 Compliant. For purposes of this Agreement, the term "Year 2000
Compliant" means that the software and systems of the Division Business are
able to (i) effectively process date information before, during and after
January 1, 2000; (ii) function accurately and without interruption before,
during and after January 1, 2000, without any change in operation associated
with the advent of the year 2000, the new century or the leap year in 2000,
(iii) respond to two-digit year input in a way that resolves the ambiguity as
to the century in a disclosed, defined and
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predetermined manner; (iv) process two-digit year information in ways that are
similarly unambiguous as to century; and (v) store and provide output of date
information in ways that are similarly unambiguous as to century. Seller has
previously delivered to Purchaser copies of all written communication provided
to Seller from the Division's vendors with respect to Year 2000 Compliance.
4.30 Disclosure. No representation or warranty of Seller in this
Agreement and no information contained in any Schedule or other writing
delivered by or on behalf of Seller pursuant to this Agreement or at the
Closing contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated or to make
the statements herein or therein not misleading.
4.31 Disclaimer. Except, in each case, as expressly set forth in this
Agreement or in any document or instrument delivered in connection with the
consummation of the transactions contemplated hereby, (i) SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES (WHETHER EXPRESS OR IMPLIED) OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR USE OR OTHERWISE IN REGARD TO THE ACQUIRED
ASSETS; AND (ii) SELLER UNDERTAKES NO LIABILITY FOR ANY DAMAGE, LOSS, EXPENSE
OR CLAIM OR ANY OTHER MATTER RELATING TO ANY CAUSE WHATSOEVER ARISING UNDER OR
PURSUANT TO THIS AGREEMENT, OR ANY DOCUMENT OR INSTRUMENT DELIVERED IN
CONNECTION WITH THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER SUCH CAUSE BE BASED IN CONTRACT, NEGLIGENCE, STRICT LIABILITY, OTHER
TORT OR OTHERWISE).
4.32 Disclosure in Schedules. Any disclosure contained in any Schedule to
this Agreement shall, should the disclosure be relevant to any other Schedule
to this Agreement, be deemed to be disclosed with respect to that other
Schedule to the Agreement where such disclosure and its significance would be
reasonably understood by the party to whom the disclosure is made.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 Organization and Good Standing. Purchaser is validly existing as a
corporation in good standing under the laws of the State of Delaware with full
power and authority (corporate and other) to enter into this Agreement and to
consummate the transactions contemplated hereby.
5.2 Execution and Delivery. Purchaser has full corporate power and
authority to enter into this Agreement and the other agreements contemplated
hereby to which it is or will be a party at Closing and to consummate the
transactions contemplated
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hereby and thereby. The execution, delivery and performance by Purchaser of the
agreements contemplated hereby to which it is a party or will be a party at
Closing have been duly authorized by all requisite corporate action. This
Agreement has been, and each of the other agreements contemplated hereby to
which it is a party will be as of the Closing Date, duly executed and delivered
by Purchaser, and (assuming due execution and delivery by Seller) this Agreement
constitutes, and each of the other agreements contemplated hereby to which it is
a party when executed and delivered will constitute, a valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by general equitable
principles.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby (a) have
been duly and validly approved by all action of the Board and, and no other
corporate action is required under Purchaser's Certificate of Incorporation or
Bylaws or under any applicable law to enable Purchaser to carry out its
obligations under this Agreement, (b) except as set forth on Schedule 5.3, will
not (i) conflict with or result in a breach or violation of any term or
provision of, or constitute a default under (with or without notice or passage
of time, or both), or otherwise give any Person a basis for accelerated or
increased rights or termination or nonperformance under, any material indenture,
mortgage, deed of trust, loan or credit agreement, note agreement, lease,
license or other agreement or instrument to which Purchaser is a party or by
which Purchaser is bound or affected or to which any of the property or assets
of Purchaser is bound or affected, (ii) result in the violation of the
provisions of the Certificate of Incorporation or Bylaws of Purchaser or any
Legal Requirement applicable to or binding upon it or any Division Asset, (iii)
result in the creation or imposition of any Lien upon any Division Asset, (iv)
require any authorization, consent, approval, license, exemption of or filing
or registration with any court or Governmental Entity, except such as shall have
been lawfully and validly obtained prior to the Closing, or (v) otherwise
adversely affect any material contractual or other legal rights or privileges of
Purchaser. Schedule 5.3 attached hereto sets forth a list of all material
agreements requiring the consent, waiver, authorization or approval of any
Person to any of the transactions contemplated hereby.
5.4 Financing. To consummate the acquisition of the Division Business and
the other transactions contemplated by this Agreement, Purchaser has advised
Seller that it will use commercially reasonable efforts to seek the Required
Financing. Subject to changes in financial and credit markets after the date
hereof over which Purchaser has no control, Purchaser in good faith believes
that it will be able to obtain the Required Financing at or prior to the
Closing.
5.5 Disclaimer. Except as expressly set forth in this Agreement or in any
document or instrument delivered in connection with the consummation of the
transactions contemplated hereby, PURCHASER UNDERTAKES NO LIABILITY FOR ANY
DAMAGE, LOSS, EXPENSE OR CLAIM OR ANY OTHER MATTER RELATING TO ANY CAUSE
WHATSOEVER ARISING UNDER OR PURSUANT TO THIS AGREEMENT, OR ANY DOCUMENT OR
INSTRUMENT DELIVERED IN
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CONNECTION WITH THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER SUCH CAUSE BE BASED IN CONTRACT, NEGLIGENCE, STRICT LIABILITY, OTHER
TORT OR OTHERWISE).
ARTICLE 6
CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through the
Closing Date, Seller covenants and agrees (except as expressly contemplated by
this Agreement or to the extent that Purchaser shall otherwise expressly
consent in writing) that:
6.1 Ordinary Course. Except as permitted by this Agreement, Seller shall
conduct the Division Business in, and only in, the Ordinary Course and, to the
extent consistent with such business, shall use commercially reasonable efforts
to preserve intact its current business organization, keep available the
services of its current managers and employees and preserve its relationships
with customers, suppliers and others having business dealings with it to the
end that its goodwill and going business value shall be unimpaired at the
Closing Date. Seller shall maintain the Division Assets in good condition and
repair, subject to ordinary wear and tear.
6.2 Indebtedness or Liens on Division Assets. Outside of the Ordinary
Course, Seller shall not incur any Indebtedness (other than the Revolving
Credit Facility) secured by Division Assets, in whole or in part, or otherwise
subject the Division Assets to any Lien (other than Permitted Liens).
6.3 Accounting. Seller shall not make any change in the accounting
principles, methods, records or practices followed by it or depreciation or
amortization policies or rates heretofore adopted by it, to the extent that any
such change would affect the books of account or financial statements of the
Division (other than those changes required by Seller's independent auditors in
connection with the audit of the Division for the fiscal year ended December
31, 1998). Seller shall maintain the Division books, records and accounts in
accordance with GAAP applied on a basis consistent with that of prior periods.
6.4 Compliance with Legal Requirements. Seller shall comply promptly with
all material Legal Requirements that applicable law may impose upon it with
respect to the Division or the operations of the Division and with respect to
the transactions contemplated by this Agreement, and shall cooperate promptly
with, and furnish information to, Purchaser in connection with any such
requirements imposed upon Purchaser, or upon any of its Affiliates, in
connection therewith or herewith.
6.5 Disposition of Assets. Seller shall not sell, transfer, license,
lease or otherwise dispose of any of the Division Assets, tangible or
intangible, or any interest therein, except for sales of inventory and other
assets in the Ordinary Course.
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6.6 Compensation. Other than in the Ordinary Course, Seller shall not
(a) with respect to the Division, adopt or amend in any material respect any
collective bargaining, bonus, profit-sharing, compensation, pension,
retirement, deferred compensation, employment or other plan, agreement, trust,
fund or arrangement for the benefit of employees (whether or not legally
binding) other than to comply with any Legal Requirement or (b) pay, or make
any accrual or arrangement for payment of, any increase in compensation,
bonuses or special compensation of any kind, or any severance or termination
pay to, or enter into any employment or loan or loan guarantee agreement with,
any current or former officer, director, employee or consultant of the Division
Business, except where such action is taken solely in connection with the
duties of such officer, director, employee or consultant which are wholly
unrelated to the conduct of the Division Business.
6.7 Modification or Breach of Agreements; New Agreements. Seller shall
not terminate or modify, or commit or cause or suffer to be committed any act
that will result in a breach or violation by Seller of any term of or (with or
without notice or passage of time, or both) constitute a default by Seller
under, or otherwise give any Person (other than Seller) a basis for
nonperformance under, any indenture, mortgage, deed of trust, loan or credit
agreement, lease, license or other agreement, instrument, arrangement or
understanding, written, disclosed in this Agreement or any of the Schedules
hereto. Seller shall refrain from becoming a party to any contract or
commitment applicable to the Division other than in the Ordinary Course.
Seller shall meet all of its material contractual obligations in connection
with the Division Business in accordance with their respective terms.
6.8 Capital Expenditures. Except for capital expenditures or commitments
necessary to maintain the Division Assets in good condition and repair and
purchases of capital assets for use primarily in the conduct of the Division
Business not exceeding $75,000 in the aggregate, Seller shall not purchase or
enter into any contract to purchase any capital assets for use in the conduct
of the Division Business; provided, however, that Seller shall consult with
Purchaser, and give due consideration to Purchaser's plans for the Division
Business, prior to making any such capital expenditures which exceed $75,000 in
the aggregate.
6.9 Consents. Seller shall use commercially reasonable efforts to obtain
any consent, waiver, authorization or approval of, or exemption by, any Person
required to be obtained or made by any party hereto in connection with the
transactions contemplated hereby or the taking of any action in connection with
the consummation thereof. Notwithstanding Section 2.1, neither this Agreement
nor any other agreement or instrument executed and delivered by Seller
hereunder shall constitute a sale or assignment of any Division Asset for which
the required consent, waiver, authorization or approval has not been obtained
if an attempted sale or assignment without such consent, waiver, authorization
or approval would constitute a breach of any agreement or obligation of Seller,
unless Purchaser shall have executed and delivered to Seller an indemnification
agreement, in form and substance reasonably satisfactory to Seller, with
respect to liabilities incurred by Seller arising out of or based upon Seller
having breached any contract, license or lease by or as a result of the sale or
assignment of a Division Asset to Purchaser without having obtained any
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requisite consent, waiver, authorization or approval. If any such consent,
waiver, authorization or approval cannot be obtained prior to the Closing Date
and Purchaser does not agree so to indemnify Seller, Seller shall cooperate
with Purchaser, at Seller 's expense, in any reasonable arrangement to provide
to Purchaser the benefits of the Division Asset in respect of which the
requisite consent, waiver, authorization or approval has not been obtained.
Nothing in this Section 6.9 shall be construed as a waiver of any of the
conditions set forth in Section 8.1(j).
6.10 Discharge. Outside of the Ordinary Course, Seller shall not cancel,
compromise, release or discharge any claim of Seller that pertains to the
Division Business upon or against any Person or waive any right of Seller that
pertains to the Division Business and is of material value, and, except as
expressly contemplated by this Agreement, not discharge or compromise any
material debt or other material obligation of the Division to any person other
than Liens, debts or obligations with respect to current liabilities of the
Division.
ARTICLE 7
ADDITIONAL COVENANTS
7.1 Covenants of Seller. During the period from the date hereof through
the Closing Date, Seller agrees to:
(a) comply promptly with all Legal Requirements that applicable law may
impose upon it with respect to the Division or the operations of the Division
and with respect to the transactions contemplated by this Agreement, and shall
cooperate promptly with, and furnish information to, Purchaser in connection
with any such requirements imposed upon Purchaser or upon any of its Affiliates
in connection therewith or herewith;
(b) use commercially reasonable efforts to obtain any consent, waiver,
authorization or approval of, or exemption by, any Person required to be
obtained or made by any party hereto in connection with the transactions
contemplated hereby or the taking of any action in connection with the
consummation thereof. Notwithstanding Section 2.1, neither this Agreement nor
any other agreement or instrument executed and delivered by Seller hereunder
shall constitute a sale or assignment of any Division Asset for which the
required consent, waiver, authorization or approval has not been obtained if an
attempted sale or assignment without such consent, waiver, authorization or
approval would constitute a breach of any agreement or obligation of Seller,
unless Purchaser shall have executed and delivered to Seller an indemnification
agreement, in form and substance reasonably satisfactory to Seller, with
respect to liabilities incurred by Seller arising out of or based upon Seller
having breached any contract, license or lease by or as a result of the sale or
assignment of a Division Asset to Purchaser without having obtained any
requisite consent, waiver, authorization or approval. If any such consent,
waiver, authorization or approval cannot be obtained prior to the Closing Date
and Purchaser does not agree so to indemnify
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Seller, Seller shall cooperate with Purchaser, at Seller's expense, in any
reasonable arrangement to provided to Purchaser the benefits of the Division
Asset in respect of which the requisite consent, waiver, authorization or
approval has not been obtained. Nothing in this Section 7.1(b) shall be
construed as a waiver of any of the conditions set forth in Section 8.1(j).
(c) use commercially reasonable efforts to bring about the satisfaction of
the conditions precedent to Closing set forth in Section 8.1;
(d) promptly advise Purchaser orally and, within three (3) business days
thereafter, in writing of any change in the Division Business or condition that
has had or is reasonably expected to have a Material Adverse Effect; and
(e) from time to time prior to the Closing promptly deliver to Purchaser
information concerning events subsequent to the date of this Agreement to and
including the Closing Date to supplement or amend the Schedules hereto, as
called for by the representations and warranties set forth in Article 4, in
order to keep such information therein timely, complete and accurate and any
representation or warranty of the Seller, or covenant of Seller contained in
Section 6.4 hereof (but only to the extent that any breach of such covenant is
not willful or material), affected thereby shall be deemed to have been amended
accordingly for purposes of Article 10; provided, however, that the delivery of
such information shall not prevent Purchaser from terminating this Agreement
pursuant to Section 9.1(d) at any time at or prior to the Closing.
7.2 Covenants of Purchaser. During the period from the date hereof to the
Closing Date, Purchaser shall:
(a) comply promptly with all requirements that applicable Legal
Requirements may impose upon it with respect to the transactions contemplated by
this Agreement, and shall cooperate promptly with, and furnish information to,
Seller in connection with any such requirements imposed upon Seller or upon any
of Seller's Affiliates in connection therewith or herewith;
(b) use commercially reasonable efforts to obtain (and to cooperate with
Seller in obtaining) any consent, authorization or approval of, or exemption by,
any Person required to be obtained or made by Purchaser in connection with the
transactions contemplated by this Agreement;
(c) use commercially reasonable efforts to bring about the satisfaction of
the conditions precedent to Closing set forth in Section 8.2;
(d) provide Seller with such information about Purchaser as may be required
under the Exchange Act for inclusion in the Statement;
(e) promptly following the Closing, Purchaser shall notify all customers
and suppliers of the Division Business in writing of the consummation of the
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transactions contemplated hereby and request that all such customers and
suppliers change their respective billing and invoicing codes as appropriate to
reflect the change in ownership of the Division Business;
(f) Purchaser shall use commercially reasonable efforts to obtain the
Required Financing; and
(g) Purchaser shall release the directors and officers of Seller from any
claim Purchaser may have with respect to any matter related to the Division
Business. Such release shall be in form and substance reasonably satisfactory
to counsel for the Seller and the Purchaser.
7.3 Access and Information.
(a) During the period commencing on the date hereof and continuing through
the Closing Date and, provided that the Closing occurs, for a period of at
least six (6) years after the Closing Date with respect to books and records
reasonably deemed necessary in connection with (i) the preparation or
examination of Tax returns, (ii) Excluded Liabilities, and (iii) financial
reporting purposes, each party shall afford to the other party and to such
other party's accountants, counsel and other representatives, reasonable access
to all of the Division Assets, books, contracts, commitments, records,
facilities, technical information, personnel and, during such period, furnish
promptly to such other party all documents and information concerning the
Division Business, Division Assets and Division Employees as such other party
may reasonably request, including, without limitation for the purpose of
conducting employment, consultant and "Phase One" environmental audits;
provided that such access does not unreasonably interfere with the normal
operations of the Division Business.
(b) Purchaser acknowledges that all information provided to any of it and
its representatives, affiliates and agents by Seller and its representatives,
affiliates and agents is subject to the terms of two letter agreements between
Seller and Purchaser (one bearing a first page date of August 19, 1997 and the
other bearing a first page date of August 27, 1997), the terms of which are
hereby incorporated by reference. Effective upon, and only upon, the Closing,
the Confidentiality Agreements shall terminate. Purchaser and Seller hereby
agree that, after the Closing Date, all information received by each party and
its affiliates, agents and representatives from the other party and its agents,
affiliates and representatives (except, with respect to Purchaser, information
that relates primarily to the Division, the Division Assets or the Division
Business), shall, for a period of two (2) years following the disclosure of
such confidential information, be kept confidential and shall not, without the
prior written consent of the party providing such information, be disclosed to
any third party. Purchaser and Seller further agree that each party shall use
reasonable efforts to cause its directors, officers, employees, advisers and
affiliates to comply with the confidentiality obligations set forth in this
Section 7.3(b). For purposes of the second sentence of this Section 7.3(b),
the term "information" shall not include information which (i) is or becomes
generally available to the public other than as a result of a breach of this
Section 7.3(b), (ii) is obtained from third parties, provided that disclosure
by such third party
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was not a violation of an obligation of secrecy, (iii) was in a party's
possession on a non-confidential basis prior to its disclosure, (iv) is
independently acquired or developed by a party without violating any of such
party's confidentiality obligations and (v) has been made available on an
unrestricted basis by the disclosing party or its advisors.
(c) With respect to all litigation matters relating to the Division
Business, Purchaser and Seller will cooperate with each other in their
respective efforts to conduct or resolve such litigation, including by making
available to such other party, subject to reimbursement by such other party of
the reasonable out-of-pocket expenses of the cooperating party, such documents
and witnesses as may be deemed necessary or useful therefor in such other
party's sole but reasonable discretion.
7.4 Expenses. All costs and expenses (including, without limitation, all
accounting and legal fees and expenses and fees and expenses of any brokers,
finders or similar agents) incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring the same.
Without limiting the generality of the immediately preceding sentence, (i)
Seller shall pay and be liable for any fees, compensation or expenses for or
liabilities to counsel, accountants, investment bankers, brokers, finders or
agents for Seller with respect to the purchase or sale of the Division Assets
or the transactions contemplated by this Agreement, and shall indemnify and
hold Purchaser free and harmless in respect thereof, and (ii) Purchaser shall
pay and be liable for any fees, compensation or expenses for or liabilities to
counsel, accountants, investment bankers, brokers, finders or agents for
Purchaser with respect to the purchase or sale of the Division Assets or the
transactions contemplated by this Agreement, and shall indemnify and hold
Seller free and harmless in respect thereof.
7.5 Publicity: Employee Communications. At all times prior to the Closing
Date, each party shall obtain the consent of the other party hereto prior to
issuing any press release or other information to the press, employees of
Seller with respect to this Agreement or the transactions contemplated hereby,
which consent shall not be unreasonably withheld or delayed; provided, however,
that no party shall be prohibited from furnishing any required information to
any Governmental Entity or authority pursuant to a Legal Requirement or from
making any other disclosure in accordance with any other Legal Requirement.
7.6 Further Assurances. If at any time after the Closing Date, either
party shall consider or be advised that any deeds, bills of sale, assignments
or assurances or any other actions or instruments are necessary, to consummate
the transactions provided for by this Agreement, or otherwise to carry out the
purposes of this Agreement, such other party shall cause its proper officers to
execute and deliver, in the name and on behalf of such other party, all such
deeds, bills of sale, assignments, and other instruments and do, in the name
and on behalf of such other party, all such other necessary actions.
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7.7 Competing Offers; Merger or Liquidation.
(a) Seller agrees that it will not, directly or indirectly, through any
officer, director, employee, accountant, attorney, agent or otherwise, take any
action to
(1) solicit, initiate or encourage
(i) discussions or negotiations with any person or entity, or
(ii) the submission of bids, offers or proposals by, any person or
entity, or
(2) commence, continue or participate in discussions or negotiations with,
or provide any information to, any person or entity,
with respect to the acquisition in any manner of all or any part of the
Division Assets or a joint venture or similar transaction involving all or any
part of the Division Business (an "Alternative Proposal"). Subject to Section
7.7(b), Seller will not engage any investment banker, broker, financial advisor
or other consultant on a basis which could reasonably be expected to provide
such investment banker, broker, financial advisor or consultant with an
incentive to initiate or encourage an Alternative Proposal from any person or
entity.
(b) If and so long as Seller has complied in all material respects with
its obligations under Section 7.7(a), if it receives an unsolicited
Alternative Proposal then (1) Seller may discuss such Alternative Proposal with
the party presenting such Alternative Proposal, participate in negotiations
with respect to such Alternative Proposal with the party making such proposal
and its representatives and provide information with respect to the Division to
such party and its representatives, if and to the extent, but only to the
extent, that the members of the Board reasonably believe, based upon the
written advice of Winthrop, Stimson, Putnam & Roberts, Seller's counsel, that
the directors of Seller are under a fiduciary obligation to so cooperate with
such party, (2) Seller shall promptly notify Purchaser orally and in writing of
the receipt of any such Alternative Proposal and such discussions, negotiations
and provision of information, and (3) Seller may engage an investment banking
firm or other financial advisor to assist it in connection with such
Alternative Proposal discussions and negotiations.
7.8 Post-Termination Employment.
(a) Purchaser agrees that it will offer employment to each of the Division
employees who is employed by Seller immediately prior to the Closing Date.
(b) Notwithstanding anything in this Agreement to the contrary, Seller and
Purchaser expressly acknowledge and agree that Purchaser is not adopting the
collective bargaining agreement presently existing between Seller and the
Division's existing bargaining unit. Purchaser will meet with the collective
bargaining representative to negotiate a new collective bargaining agreement
containing terms and conditions not less
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favorable than those contained in the collective bargaining agreement presently
existing between Seller and the Division's existing bargaining unit, except
that Purchaser will substitute a different retirement plan in place of the
pension plan presently offered by Seller and/or required by the existing
collective bargaining agreement.
(c) If Purchaser terminates the employment of any Division Employee prior
to the first anniversary of the Closing Date, Purchaser shall provide severance
benefits no less favorable than the severance benefits currently granted to
employees of Purchaser in accordance with Purchaser's internal policies (giving
credit to any such terminated Division Employee for his or her time of service
with Seller).
7.9 HSR Filing. To the extent any Person is required in connection with
the transactions contemplated hereby to file a notification and report form in
compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or the rules and regulations promulgated thereunder (collectively, the
"HSR Act"), the parties shall agree to fully cooperate with such Person to
enable such person to promptly make such filing and to respond to any requests
for additional information in connection therewith. The filing fee required by
the HSR Act shall be borne by Purchaser.
7.10 Meeting; Approval of Seller's Stockholders.
(a) Seller shall, in accordance with its charter documents:
(i) If required by New York law, duly call, give notice of, convene
and hold an annual or special meeting (the "Meeting") of its stockholders as
soon as practicable for the purpose of considering and taking action upon this
Agreement;
(ii) Subject to its fiduciary duties under applicable law as advised
in writing by Seller's counsel in this transaction, include in the Statement the
recommendation of its Board that stockholders of Seller vote in favor of the
approval and adoption of this Agreement and the transactions contemplated
hereby; and
(iii) Use commercially reasonable efforts (x)(1) to obtain and furnish
the information required to be included by it in the Statement, (2) to file the
Statement with the Commission, (3) to respond promptly to any comments made by
the Commission with respect to the Statement and any preliminary version thereof
(a "Preliminary Statement") and (4) to cause the final Statement (the
"Definitive Statement") to be mailed to its stockholders at the earliest
practicable time and (y) subject to its fiduciary duties under applicable law as
advised in writing by counsel, to obtain the approval and adoption of this
Agreement and the transaction contemplated hereby by its stockholders to the
extent required by applicable law in order to consummate the transactions
contemplated hereby (the "Stockholder Approval").
(b) Prior to Seller filing any Preliminary Statement with the Commission
it shall consult with Purchaser with respect to such filing and afford
Purchaser reasonable opportunity to comment thereon. Purchaser shall provide
Seller with any
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information for inclusion in the Preliminary Statement and the Definitive
Statement which may be required under applicable law and which is reasonably
requested by Seller. Seller shall promptly notify Purchaser of the receipt of
comments from the Commission and of any request from the Commission for
amendments or supplements to the Preliminary Statement or the Definitive
Statement or for additional information, and will promptly supply Purchaser
with copies of all correspondence between Seller or its representatives on the
one hand, and the Commission or members of its staff, on the other hand, with
respect to the Preliminary Statement, the Definitive Statement or the
transactions contemplated hereby. If at any time prior to the Meeting any
event should occur which is required by applicable law to be set forth in an
amendment of, or a supplement to, the Definitive Statement, Seller will
promptly inform Purchaser. In such case, Seller, with the cooperation of
Purchaser, will, upon learning of such event, promptly prepare and mail such
amendment or supplement; provided, that prior to such mailing, Seller shall
consult with Purchaser with respect to such amendment or supplement and shall
afford Purchaser reasonable opportunity to comment thereon. Seller will notify
Purchaser at least twenty-four hours prior to mailing the Definitive Statement,
or any amendment or supplement thereto, to the stockholders of Seller.
(c) Seller shall use commercially reasonable efforts to hold the Meeting
no later than June 1, 1999.
7.11 Seller Retained Liabilities; Collection of Receivables. From and
after the Closing Date, Seller shall punctually pay, perform and discharge the
Excluded Liabilities. From and after the Closing Date, Seller shall remit to
Purchaser on a weekly basis, all amounts representing collections of accounts
receivable of the Division Business collected by Seller during the prior week.
7.12 Audited Financial Statements. Seller shall afford Purchaser and its
auditors, Ernst & Young LLP, complete access to the Division's books of account
and other records (including the work papers of Seller's accounting firm) with
respect thereto and access to Seller's officers and employees and provide
Purchaser and its accounting firm all assistance and cooperation reasonably
necessary to enable Purchaser to obtain audited financial statements of the
Division, reported on by Ernst & Young LLP (or Arthur Andersen LLP in the case
of 1996), for each of the three fiscal years ended December 31, 1996, 1997 and
1998. Purchaser shall bear the fees and expenses of Ernst & Young LLP and
Arthur Andersen LLP in the performance of such audit, and shall reimburse
Seller for any out-of-pocket expenses incurred by Seller in providing such
access, assistance and cooperation.
7.13 Promotional Materials and Customer Information; Use of Name.
(a) On or as soon as reasonably practicable following the Closing Date,
Seller shall use commercially reasonable efforts to deliver or cause to be
delivered to Purchaser all existing print materials, promotional materials,
point of sales materials and advertising copy used by Seller primarily in
connection with the Division Business (collectively, the "Promotional
Materials"), and all existing customer and vendor lists and price lists to the
extent relating primarily to the Division Business (collectively, the "Customer
Information"), in each case to the extent that such Promotional Materials and
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Customer Information are in the possession of the Seller and not then in the
possession of the Purchaser; provided, however, that any failure of Seller to
deliver or cause to be delivered any of the foregoing shall not constitute a
breach of any provision of this Agreement, except to the extent that such
failure shall be knowing and willful.
(b) As soon as reasonably practicable following the Closing Date but not
later than one year following the Closing Date, Purchaser shall discontinue its
use of the names "Wyant Heath Care", "Wyant" and any derivation thereof.
7.14 Vacation. Purchaser agrees to assume the obligation of Seller and
its Affiliates to provide paid vacation time to those Division Employees whom
Buyer hires to the extent such vacation time has been earned (and has not been
used) by such employees as of the Closing Date.
7.15 Delivery of Certain Division Assets. Within a reasonable time (but
not more than forty-five (45) days) after the Closing Date, Seller shall
provide Buyer all records, files and papers relating primarily to the Division
Assets, including, without limitation, those records, files and papers referred
to in Section 2.1(i), which are not located in California or New Jersey.
7.16 No Third Party Beneficiaries. No provision of this Article 7 shall
create any third-party beneficiary rights in any person or organization,
including without limitation any employees or former employees (including any
beneficiary or dependent thereof) of Seller, Purchaser or any their respective
Affiliates, any unions or other representatives of such employees or former
employees, or any trustees, administrators, participants or beneficiaries of
any employee benefit plan. No provision of this Article 7 shall create such
third-party beneficiary rights in any such person or organization in respect of
any benefits that may be provided, directly or indirectly, under any employee
benefit plan or arrangement, including the currently existing plans of
Purchaser and Seller and the Hourly Plan.
7.17 ISRA Compliance. Seller shall, at Seller's own expense, use
commercially reasonable efforts to complete and obtain ISRA Approval with
respect to the Division Owned Real Property in the State of New Jersey,
including all required cleanups and post-cleanup sampling required by the
NJDEP, on or before the closing date. In no event shall Seller's ISRA Approval
involve any engineering or institutional controls, including without limitation
capping, a deed notice or restriction, or other use restriction on the Division
Owned Real Property in the State of New Jersey. Seller shall notify Purchaser
in advance of all meetings scheduled between Seller or Seller's representatives
and NJDEP, and
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Purchaser and Purchaser's representatives shall have the right, without the
obligation, to attend and participate in all such meetings.
7.18 Voting Agreement. Seller shall promptly request in writing to James
A. Wyant ("Holder") that Holder enter into and deliver to Purchaser an
agreement with Purchaser on or before March 13, 1999, substantially in the form
of Annex 7.18 (the "Voting Agreement") under which Holder shall, as provided
therein, vote not less than a majority of the outstanding voting stock of
Seller, in favor of this Agreement, the sale of the Division Assets to
Purchaser and the consummation of the other transactions contemplated by this
Agreement (subject to Holder's fiduciary duties as described in more detail in
the Voting Agreement).
7.19 Fire Damage Remediation. Seller shall, at Seller's own expense, make
those repairs and purchases set forth on Schedule 7.19 hereto ("Remediation
Expenses"), which Remediation Expenses are related to damage caused by a fire
in September 1998 at the Division's manufacturing facility located at 100
Readington Road, Somerville, New Jersey. If the Remediation Expenses have not
been satisfied by the Closing Date, any remaining liability or obligation for
Remediation Expenses shall be an Excluded Liability as provided in Section
2.2(g) hereof.
ARTICLE 8
CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions of Purchaser. Notwithstanding any other provision of this
Agreement, the obligations of Purchaser to purchase and pay for the Division
Assets and assume the Assumed Division Liabilities and to consummate the other
transactions contemplated hereby shall be subject to the satisfaction, at or
prior to the Closing Date, of each of the following conditions:
(a) No injunction, restraining order or decree of any Governmental Entity
shall exist against Purchaser, Seller, the Division or any of the principals,
officers or directors of any of them, that restrains, prevents or materially
changes the transactions contemplated hereby;
(b) The Stockholder Approval shall have been obtained;
(c) The representations and warranties of Seller in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with
the same effect as if made on the Closing Date (other than representations and
warranties qualified as to materiality, which shall be true and correct in all
respects) and Seller shall have complied with all covenants and agreements and
satisfied all conditions on Seller's part to be performed or satisfied on or
prior to the Closing Date; provided, that the failure of a representation and
warranty to be true or correct or the non-compliance of a covenant or agreement
shall not constitute a failure of the condition contained in this Section
8.1(c) if such failure or non-compliance is not a material breach of such
representation and warranty
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or covenant or agreement, and if such failure or non-compliance, both alone and
in conjunction with all other such failures and non-compliances, has not had a
Material Adverse Effect;
(d) Purchaser shall have received from Winthrop, Stimson, Putnam & Roberts,
counsel for Seller, a favorable written opinion dated the Closing Date and
addressed to Purchaser in substantially the form attached as Annex 8.1(d)
hereto;
(e) Purchaser shall have received from the Chief Executive Officer or Chief
Financial Officer of Seller a certificate dated the Closing Date stating that
the requirements of subsections (b), (c) and (l) of this Section 8.1 have been
satisfied;
(f) Purchaser shall have received a certificate of the Secretary of Seller
as to certain proceedings of the Board and stockholders of Seller;
(g) Purchaser shall have received aggregate cash proceeds in an amount
equal to the Purchase Price from the issuance and sale by Purchaser of its
equity or debt securities and/or from borrowings under senior secured or
revolving credit facilities, in each case on terms reasonably satisfactory to
Purchaser (the "Required Financing");
(h) All corporate and other proceedings and actions taken in connection
with the transactions contemplated hereby and all certificates, opinions,
agreements, instruments, releases and documents referenced herein or incident to
the transactions contemplated hereby shall be in form and substance reasonably
satisfactory to Purchaser and its counsel;
(i) Purchaser shall have received an ALTA extended coverage Owner's policy
of title insurance for the Division Owned Real Property with aggregate liability
in the amount of $4.0 million, showing title to the Division Owned Real Property
including the Division Improvements vested in Purchaser, together with any
endorsements as Purchaser may reasonably request, and subject only to the
Permitted Title Matters;
(j) All consents, waivers, authorizations and approvals from third parties,
including from any Governmental Entity, landlord or other Person, set forth on
Schedule 8.1(j) shall have been obtained;
(k) Seller or any Affiliate of Seller required in connection with the
transactions contemplated hereby to file a notification and report form in
compliance with the HSR Act shall have filed such form and the applicable
waiting period with respect to each such form (including any extension by reason
of a request for additional information) shall have expired or terminated;
(l) No act, event or condition shall have occurred after the date hereof,
whether in the Ordinary Course, as a result of changes in general economic
conditions or otherwise, which has had or could reasonably be expected to have a
Material Adverse Effect;
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(m) Purchaser shall have received a duly executed Covenant Not to Compete
of Seller substantially in the form of Annex 8.1(m);
(n) Purchaser, IFC and Seller, shall have entered into a purchase and
supply agreement substantially in accordance with the terms set forth in the
term sheet attached hereto as Annex 8.1(n); and
(o) Seller shall have arranged to have Congress Financial Corporation
release its Lien on Division Assets so as to enable Purchaser's lender to
substitute itself for Seller's lender in connection with the Purchaser's
assumption of the IRB Indebtedness.
(p) Seller shall have received from NJDEP (i) a No Further Action letter
with Covenant not to Sue; (ii) a de minimus quantity exemption; or (iii)
unconditional approval of Seller's negative declaration (collectively, "ISRA
Approval") or (iv) approval of Seller's remediation agreement or remedial
action work plan. Seller shall promptly apply for one of the above, as
appropriate, pursuant to the Industrial Sites Recovery Act, N.J.S.A. 13:1K-6 et
seq., the regulations promulgated thereunder and any amending or successor
legislation and regulations ("ISRA").
8.2 Conditions of Seller. Notwithstanding any other provision of this
Agreement, and except as set forth below, the obligations of Seller to
consummate the transactions contemplated hereby shall be subject to the
satisfaction, at or prior to the Closing, of the following conditions:
(a) The conditions set forth in subsections (a), (b), (h) (but as to
Seller and its counsel) and (n) of Section 8.1 shall have been satisfied;
(b) The representations and warranties of Purchaser in this Agreement shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as if made on the Closing Date (other than representations and
warranties qualified as to materiality, which shall be true and correct in all
respects) and Purchaser shall have complied with all covenants and agreements
and satisfied all conditions on its part to be performed or satisfied on or
prior to the Closing Date, except for breaches that would not have a material
adverse effect on Purchaser's ability to consummate the transactions
contemplated hereby;
(c) Seller shall have received from Paul, Hastings, Janofsky & Walker LLP,
counsel for Purchaser, a favorable written opinion dated the Closing Date and
addressed to Seller in substantially the form attached as Annex 8.2(c) hereto;
(d) Seller shall have received from the Chief Executive Officer or Chief
Financial Officer of Purchaser a certificate dated the Closing Date stating
that the requirements of Section 8.2(b) have been satisfied;
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(e) Seller shall have received a certificate of the Secretary of Purchaser
as to certain proceedings of the board of directors of Purchaser; and
(f) All corporate and other proceedings and actions taken in connection
with the transactions contemplated hereby and all certificates, opinions,
agreements, instruments, releases and documents referenced herein or incident
to the transactions contemplated hereby shall be in form and substance
reasonably satisfactory to Seller and its counsel;
(g) Purchaser or any Affiliate of Purchaser required in connection with
the transactions contemplated hereby to file a notification and report form in
compliance with the HSR Act shall have filed such form and the applicable
waiting period with respect to each such form (including any extension by
reason of a request for additional information) shall have expired or
terminated; and
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual consent of Purchaser and Seller;
(b) by Seller or by Purchaser, by written notice to the other, if the sale
of Division Assets to Purchaser shall not have been consummated on or before
September 30, 1999 (or such later date as Purchaser and Seller may agree in
writing); provided, that the right to terminate this Agreement under this
clause (b) shall not be available to any party whose failure to fulfill any
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Closing Date to occur on or before this date; provided further,
that the passage of such period shall be tolled (and the date for such
consummation shall be correspondingly extended) for any part thereof (but not
exceeding 60 days in the aggregate) during which any party shall be subject to
a nonfinal order, decree, ruling or action restraining, enjoining or otherwise
prohibiting consummation of the sale of the Division Assets and the other
transactions contemplated by this Agreement or the calling or holding of the
Meeting;
(c) by Purchaser, by written notice to Seller, if prior to the Meeting or
the vote of stockholders at the Meeting, the Board (i) shall withdraw or modify
in any manner adverse to Purchaser its approval or recommendation of this
Agreement, the sale of the Division Assets to Purchaser or the other
transactions contemplated by this Agreement, (ii) shall approve any Alternative
Proposal, or (iii) shall resolve to take any of the actions specified in
sub-clause (i) or (ii) of this clause (c);
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(d) by Purchaser by written notice to Seller if (i) there has been a
material (A) misrepresentation, (B) breach of warranty or (C) breach of
covenant by Seller under this Agreement and such breach (to the extent that
there shall not be continuing a material breach) shall not have been cured
within twenty (20) business days after written notice thereof has been received
by Seller or (ii) any of the conditions precedent to Closing set forth in
Section 8.1 has not been met on the Closing Date, and, in each case, Purchaser
is not then in material default of its material obligations hereunder;
(e) by Seller by written notice to Purchaser if (i) there has been a
material (A) misrepresentation, (B) breach of warranty or (C) breach of
covenant by Purchaser under this Agreement and such breach (to the extent that
there shall not be continuing a material breach) shall not have been cured
within twenty (20) business days after written notice thereof has been received
by Purchaser or (ii) any of the conditions precedent to Closing set forth in
Section 8.2 have not been met on the Closing Date, and Seller is not then in
material default of its material obligations hereunder;
(f) by Seller, by written notice to Purchaser, if the Board, in the good
faith exercise of its business judgment (based upon the written advice of
Seller's counsel (referred to in Section 11.1)) has determined that the Board
continuing to recommend to the stockholders of Seller the approval of this
Agreement and the sale of the Division Assets to Purchaser would be a breach of
the fiduciary duty of the Board of Seller under New York law;
(g) by Seller or Purchaser, by written notice to the other, if (i) upon a
vote at the Meeting, the Stockholder Approval shall not have been obtained or
(ii) the Meeting shall not have been held by September 15, 1999;
(h) by either party, by written notice to the other, if any court of
competent jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the sale of the Division Assets to Purchaser or the
consummation of the other material transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have become final and
non-appealable;
(i) by Purchaser if there shall have been a material breach of
Section 7.7(a); or
(j) by Purchaser if the Voting Agreement shall not have been executed and
delivered to Purchaser by Holder on or prior to March 13, 1999.
9.2 Effect of Termination.
(a) In the case of any termination of this Agreement, the applicable
provisions of Sections 1.1, 7.3, 7.4, 7.7, 9.2 and 9.3 and Article 11 shall
remain in full force and effect.
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(b) Upon termination of this Agreement as provided in Section 9.1, except
as stated in subsection (a) above, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of any party hereto
or their respective stockholders, directors, officers, employees, agents or
other representatives.
(c) Upon termination of this Agreement, all confidential information
received by Purchaser from or on behalf of Seller shall be treated in
accordance with the Confidentiality Agreements, which shall remain in full
force and effect in accordance with their terms notwithstanding the termination
of this Agreement.
(d) Nothing contained in this Section 9.2 shall release Seller or
Purchaser from liability for any breach of this Agreement prior to its
termination; provided, however, that in the event this Agreement is terminated
pursuant to its terms, or the Closing does not occur for any reason, then the
maximum liability of each of Buyer and Seller for one or more breaches of this
Agreement prior to such termination shall in no event exceed $350,000.
9.3 Breakup Fee.
(a) In the event this Agreement is terminated by Purchaser or Seller, as
applicable, pursuant to Sections 9.1(c), (f), (g) or (i) hereof, and Purchaser
is not then in material default of its material obligations hereunder, then
Seller shall promptly pay to Purchaser in immediately available funds a breakup
fee equal to $350,000. The parties acknowledge that the breakup fee payable
pursuant to this Section 9.3(a) in the event of a termination solely pursuant
to Sections 9.1(c), (g) or (i) hereof constitutes the sole and exclusive remedy
of Purchaser for such termination, and, as such, represents Purchaser's
liquidated damages as compensation for such termination of this Agreement.
(b) In the event this Agreement is terminated by Seller pursuant to
Section 9.1(b) hereof as a result of Purchaser's failure to obtain the Required
Financing, and Seller is not then in material default of its material
obligations hereunder, then Purchaser shall promptly pay to Seller in
immediately available funds a breakup fee equal to $350,000. The parties
acknowledge that the breakup fee payable pursuant to this Section 9.3(b) in the
event of a termination solely pursuant to Section 9.1(b) as a result of
Purchaser's failure to obtain the Required Financing constitutes the sole and
exclusive remedy of Seller for such termination, and, as such, represents
Seller's liquidated damages as compensation for such termination of this
Agreement.
9.4 Amendment. This Agreement may not be amended other than by a written
instrument executed by Purchaser and Seller and authorized by their respective
boards of directors; provided, that after the Stockholder Approval has been
obtained, no amendment may be made that would materially reduce the amount of
the Purchase Price or materially and adversely to Seller change the form of
payment of the Purchase Price; provided, however, that Seller's officers acting
in good faith shall have complete discretion in negotiating the resolution of
any dispute over the calculation of the Estimated Purchase Price or the
Purchase Price or any Indemnifiable Claim.
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9.5 Waiver. Any term or provision of this Agreement may be waived only in
writing by the party entitled to the benefits thereof, by action approved by
the board of directors of the waiving party. Any waiver by any party may be
given at any time before or after the Stockholder Approval and (i) may extend
the time for the performance of any of the obligations or acts of the other
party, or (ii) subject to the proviso appearing in Section 9.4, waive
compliance with any of the agreements by the other party or with any conditions
(other than the condition appearing in Section 8.1(b) or 8.2(a)(but only to the
extent that it applies to Section 8.1(b)) to its own obligations. No failure
to exercise and no delay in exercising any right, power or privilege shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege preclude the exercise of any other right, power or
privilege. No waiver of any breach of any covenant or agreement hereunder
shall be deemed a waiver of any preceding or subsequent breach of the same or
any other covenant or agreement. The rights and remedies of each party under
this Agreement are in addition to all other rights and remedies, at law or in
equity, that such party may have against the other parties.
ARTICLE 10
INDEMNIFICATION
10.1 Survival of Representations and Warranties. The representations and
warranties of the parties hereto contained in this Agreement or in any writing
delivered pursuant hereto or at the Closing shall survive the Closing and the
consummation of the transactions contemplated hereby (and any examination or
investigation by or on behalf of any party hereto) until the second anniversary
of the Closing Date (the "Survival Period"); provided, that the representations
and warranties contained in Sections 4.12(a) and 4.14 shall not terminate until
the expiration of any applicable statute of limitations; provided, further,
that representations and warranties contained in Sections 4.5 and 4.26 shall
not terminate until the third anniversary of the Closing Date; provided,
further, that representations and warranties contained in Section 4.2(a) shall
not terminate but shall continue indefinitely.
10.2 Indemnification.
(a) Seller covenants and agrees to defend, indemnify and hold harmless
Purchaser, each officer, director, employee, agent and representative of
Purchaser and each Person who controls Purchaser within the meaning of the
Securities Act from and against any Damages arising out of or resulting from:
(i) any inaccuracy in or breach of any representation or warranty made by
Seller in this Agreement or in any writing delivered pursuant to this Agreement
or at the Closing; (ii) the failure of Seller to perform or observe fully any
covenant or agreement to be performed or observed by Seller pursuant to this
Agreement; or (iii) the failure of Seller to pay, perform and discharge, as and
when the same become due, any and all of the Retained Seller Liabilities;
(b) Purchaser covenants and agrees to defend, indemnify and hold harmless
Seller, each officer, director, employee, agent and representative of Seller
and each
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Person who controls Seller within the meaning of the Securities Act from and
against any Damages arising out of or resulting from: (i) any inaccuracy in or
breach of any representation or warranty made by Purchaser in this Agreement or
in any writing delivered pursuant to this Agreement or at the Closing; (ii) the
failure of Purchaser to perform or observe fully any covenant or agreement to
be performed or observed by Purchaser pursuant to this Agreement; or (iii) the
failure of Purchaser to pay, perform and discharge, as and when the same become
due, any and all of the Assumed Division Liabilities.
10.3 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to Section 10.2 (an
"Indemnified Party") receives notice of the assertion by any third party of any
claim or of the commencement by any such third person of any Action (any such
claim or Action being referred to herein as an "Indemnifiable Claim") with
respect to which another party hereto (an "Indemnifying Party") is or may be
obligated to provide indemnification, the Indemnified Party shall promptly
notify the Indemnifying Party in writing (the "Claim Notice") of the
Indemnifiable Claim; provided, that the failure to provide such notice shall
not relieve or otherwise affect the obligation of the Indemnifying Party to
provide indemnification hereunder, except to the extent that any Damages
directly resulted or were caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days after receipt of
the Claim Notice to undertake, conduct and control, through counsel reasonably
acceptable to the Indemnified Party, and at Indemnifying Party's expense, the
settlement or defense thereof, and the Indemnified Party shall cooperate with
the Indemnifying Party in connection therewith; provided, that (i) the
Indemnifying Party shall permit the Indemnified Party to participate in such
settlement or defense through counsel chosen by the Indemnified Party, provided
that the fees and expenses of such counsel shall not be borne by the
Indemnifying Party unless the Indemnified Party shall have reasonably concluded
that there are defenses or counter or cross claims available to it that may not
be available to the Indemnifying Party, in which event the Indemnifying Party
shall bear the reasonable fees and expenses (and shall pay the same on a
current basis as incurred) of counsel and experts selected by the Indemnified
Party, in the pursuit of such defenses or claims, and (ii) the Indemnifying
Party shall not settle any Indemnifiable Claim as to which the Indemnified
Party has a continuing liability without the Indemnified Party's consent, which
consent shall not be unreasonably withheld or delayed. So long as the
Indemnifying Party is vigorously contesting any such Indemnifiable Claim in
good faith, the Indemnified Party shall not pay or settle such claim without
the Indemnifying Party's consent, which consent shall not be unreasonably
withheld or delayed.
(c) If the Indemnifying Party does not notify the Indemnified Party within
thirty (30) days after receipt of the Claim Notice that it elects to undertake
the defense of the Indemnifiable Claim described therein, the Indemnified Party
shall have the right to contest, settle or compromise the Indemnifiable Claim
in the exercise of its reasonable discretion; provided, that the Indemnified
Party shall obtain the written consent of the
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Indemnifying Party to any compromise or settlement of any such Indemnifiable
Claim (which consent may not be unreasonably withheld).
(d) Anything contained in this Section 10.3 to the contrary
notwithstanding, Seller shall not be entitled to assume the defense for any
Indemnifiable Claim (and shall be liable for (and shall pay the same on a
current basis as incurred) the reasonable fees and expenses incurred by the
Indemnified Party in defending such claim) if the Indemnifiable Claim seeks an
order, injunction or other equitable relief or relief for other than money
damages against Purchaser which Purchaser determines, after conferring with its
counsel, cannot be separated from any related claim for money damages and
which, if successful, could adversely affect the business, properties or
prospects of Purchaser. So long as the Seller is contesting any such
Indemnifiable Claim in good faith, the Indemnified Party shall not pay or
settle such claim without the Seller's consent, which consent shall not be
unreasonably withheld or delayed.
10.4 Limitations on Indemnification. Notwithstanding any other provision
of this Agreement, the liability of the Indemnifying Party for claims under
this Agreement shall be limited by the following:
(a) An Indemnified Party shall have no right to indemnification under this
Article 10 unless the aggregate of all such Indemnified Party's losses exceed
$185,000 and then the Indemnifying Party shall be liable for all such
Indemnified Party's losses in excess of such initial $185,000.
(b) An Indemnified Party shall have no right to indemnification under this
Article 10 after all Indemnified Parties in the aggregate have received payment
of Damages of $2,000,000 in the aggregate.
(c) The limitation set forth in subsections (a) and (b) of this Section
10.4 shall not apply to (i) Damages resulting from conduct constituting fraud,
by any party hereto in connection with the transactions contemplated hereby,
(ii) Seller's failure to indemnify and hold Purchaser free and harmless in
respect of Damages resulting from Seller's failure to pay, perform and to
discharge, as and when they become due, any or all Seller Retained Liabilities
or (iii) Purchaser's failure to indemnify and hold Seller free and harmless in
respect of Damages resulting from Purchaser's failure to perform and to
discharge, when they become due, any or all Assumed Division Liabilities.
(d) An Indemnified Party shall have no right to indemnification under this
Article 10 for a claim based upon an inaccuracy or breach of a representation
or warranty unless that claim is asserted by the Indemnified Party to whom such
representation or warranty was made during the period during which such
representation or warranty survives under Section 10.1. A claim shall be
deemed to have been asserted for purposes of this clause (d) only if the
asserting party provides written notice to the Indemnifying Party within the
prescribed period setting forth in reasonable detail (to the extent of its
information) the basis of its claim and the amount of the indemnity sought (to
the extent then determinable).
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(e) The amount of Damages otherwise recoverable under this Article 10
shall be reduced to the extent to which any Federal, state, local or foreign
tax liabilities of the Indemnified Party, or any of its respective Affiliates
(including in the case of the Purchaser, the Division once the Closing has
occurred) is decreased by reason of any Damage in respect of which such
Indemnified Party shall be entitled to indemnity under this Agreement, in any
event after taking into account any taxes imposed on the receipt of such
payment of Damages to the Indemnified Party. Notwithstanding the foregoing,
Seller and Purchaser agree that, to the extent permitted by applicable law, any
indemnity payments under this Article 10 shall be treated as an adjustment to
the Purchase Price.
(f) No Damages shall be recoverable by an Indemnified Party with respect
to any matter which is covered by insurance, to the extent proceeds of such
insurance or other third party indemnitor are paid net of any costs incurred in
connection with the collection thereof (including, but not limited to present,
retrospective, or future premiums, self-insured retention amounts, deductibles,
legal and administrative costs and costs of investigations). Each Indemnified
Party hereby agrees to file claims with and pursue recovery from all applicable
insurers or indemnitors. To the extent such remedies are not exhausted, the
Indemnifying Party shall be subrogated to the rights of the Indemnified Party
against such insurers and third parties.
(g) Each party hereto acknowledges and agrees that the sole and exclusive
remedy with respect to any and all claims arising out of or relating to this
Agreement or the transactions contemplated hereby other than with respect to
the Voting Agreement, the Covenant Not to Compete of Seller contemplated by
Section 8.1(m), the Escrow Agreement, and Section 2.3 hereof, shall be pursuant
to the indemnification provisions contained in this Article 10.
(h) An Indemnified Party shall have no right to indemnification under this
Article 10 for a claim based upon an inaccuracy or breach of a representation
or warranty if such representation or warranty is supplemented or updated
between the date hereof and the Closing Date pursuant to Section 7.1(e);
provided, that such representation or warranty (i) was true and correct in all
material respects as of the date hereof and (ii) after giving effect to such
supplement or update, is true and correct in all material respects as of the
Closing Date.
10.5 Deed Indemnification by Purchaser. To the extent that Purchaser
asserts any claim or cause of action against Seller under the Deed which
results in the Purchaser being entitled to collect from Seller an amount
greater than such amount that Purchaser would be entitled to collect pursuant
to this Agreement (the "Deed Excess"), Purchaser covenants and agrees to pay
such Deed Excess to Seller at the time such Deed Excess is due from Seller,
which amount shall be paid by Purchaser by Seller setting off against its
obligations under the Deed, Purchaser's obligations hereunder.
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ARTICLE 11
GENERAL PROVISIONS
11.1 Notices. All notices and other communications under or in connection
with this Agreement shall be in writing and shall be deemed given (a) if
delivered personally (including by overnight express or messenger), upon
delivery, (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three days after being
mailed, or (c) if given by facsimile, upon receipt by facsimile, in each case
to the parties at the following addresses or to such other address or facsimile
number as shall be specified in writing by the intended recipient of such
notice:
(a) If to the Purchaser, addressed to:
Paper-Pak Products, Inc.
1941 White Avenue
La Verne, California 91750
Attention: William G. Hopkins,
President and Chief Executive Officer
Facsimile: (909) 392-1726
With a copy to:
Paul, Hastings, Janofsky & Walker LLP
Twenty-Third Floor
555 South Flower Street
Los Angeles, California 90071
Attention: Alan J. Barton, Esq.
Facsimile: (213) 627-0705
(b) If to Seller:
Wyant Corporation
1475 32e Avenue
Lachine (Quebec) H8T 3J1
Attention: Donald C. MacMartin,
Chairman, President and Chief Executive Officer
Facsimile: (514) 636-8317
With a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
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New York, New York 10004-1490
Attention: Kenneth E. Adelsberg, Esq.
Facsimile: (212) 858-1500
11.2 Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable such term or
provision in any other jurisdiction, the remaining terms and provisions of this
Agreement or the application of such terms and provisions to circumstances
other than those as to which it is held invalid or enforceable.
11.3 Entire Agreement. This Agreement, including the annexes and schedules
attached hereto and other documents referred to herein, contains the entire
understanding of the parties hereto in respect of its subject matter and
supersedes all prior and contemporaneous agreements and understandings, oral and
written, between the parties with respect to such subject matter. Without
limiting the generality of the preceding sentence, the parties agree that this
Agreement supersedes and terminates the letter agreement dated as of October 21,
1998 between Purchaser and Seller.
11.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Purchaser and Seller and their respective successors and
assigns; provided, however, that neither party shall directly or indirectly
transfer or assign any of it rights hereunder in whole or in part without the
prior written consent of the other party, and any such transfer or assignment
without said consent shall be void, ab initio. Subject to the immediately
preceding sentence, and except as set forth in Article 10, this Agreement is not
intended to benefit, and shall not run to the benefit of or be enforceable by,
any other person or entity other than the parties hereto and their permitted
successors and assigns; provided, that in any event Purchaser may assign its
rights hereunder to any lender or other provider of financing; provided,
further, that Purchaser may assign or transfer its rights hereunder to a
successor corporation in the event of merger, consolidation, or transfer or sale
of all or substantially all of the assets of Purchaser.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
11.6 Recitals, Schedules and Annexes. The recitals, schedules and annexes
to this Agreement are incorporated herein and, by this reference, made a part
hereof as if fully set forth at length herein.
11.7 Construction and Miscellaneous.
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(a) The article, section and subsection headings used herein are inserted
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) As used in this Agreement, the masculine, feminine or neuter gender,
and the singular or plural, shall be deemed to include the others whenever and
wherever the context so requires.
(c) For the purposes of this Agreement, unless the context clearly
requires, "or" is not exclusive.
(d) This Agreement shall not be construed for or against any party by
reason of the authorship or alleged authorship of any provisions hereof.
(e) For purposes of this Agreement, "including" shall mean "including
without limitation."
(f) References to "$" or "dollars" shall mean lawful currency of the United
States.
(g) References to "Federal" or "federal" shall be to the laws, agencies or
other attributes of the United States (and not to any State or locality
thereof).
(h) References to "days" shall mean calendar days; references to "business
days" shall mean all days other than Saturday, Sunday and days that are legal
holidays in the State of New York.
11.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
New York.
11.9 Submission to Jurisdiction. Seller and Purchaser hereby irrevocably
submit to the jurisdiction of any New York State court sitting in the Borough of
Manhattan, The City of New York, for any action or proceeding arising out of
this Agreement or any Annex or Schedule hereto or any document or instrument
delivered at the Closing. Seller and Purchaser each hereby waives, to the
fullest extent permitted by law, any claim that any action or proceeding brought
in any such court was brought in an inconvenient forum. Seller hereby
irrevocably appoints CT Corporation System in The City of New York as its agent
to receive, on behalf of Seller, service of copies of the summons and complaint
and any other process that may be served in any such action or proceeding.
Purchaser hereby irrevocably appoints CT Corporation System in The City of New
York as its agent to receive, on behalf of Seller, service of copies of the
summons and complaint and any other process that may be served in any such
action or proceeding. Seller and Purchaser each hereby agrees that any final
judgment of the aforesaid Federal court shall be final, binding and conclusive
upon it and may be enforced against it (including by levy of a Lien against any
of its assets and foreclosure of such Lien) in any other court having
jurisdiction over it or its property without any inquiry as to the merits of the
claims or facts that have been so adjudicated and hereby
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waives and agrees not to assert, to the maximum extent permitted by law, any
right or claim to challenge such judgment or to question its validity.
11.10 Disclosure Schedules. Notwithstanding anything in this Agreement to
the contrary, in lieu of schedules being attached to this Agreement, Seller
shall deliver to Purchaser on the date hereof a disclosure letter (with
schedules attached thereto) relating to the appropriate sections of this
Agreement.
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[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the parties hereto has executed this Asset
Purchase Agreement, or has caused this Asset Purchase Agreement to be executed
on its behalf by a representative duly authorized, all as of the date first
above set forth.
PURCHASER:
PAPER-PAK PRODUCTS, INC.
By:________________________
Title:
Name:
SELLER:
WYANT CORPORATION
By:_______________________
Name:
Title:
55
<PAGE> 113
ANNEX B
<PAGE> 114
EXECUTION COPY
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made and entered into as of the
eleventh day of March, 1999 by and between PAPER-PAK PRODUCTS, INC., a Delaware
corporation ("Purchaser"), and JAMES A. WYANT (the "Holder"). For purposes of
this Agreement, all capitalized terms shall have the meaning ascribed to such
terms in the Purchase Agreement (as defined below) unless otherwise defined
herein or the context otherwise requires.
WITNESSETH
WHEREAS, Purchaser and Wyant Corporation, a New York corporation ("Wyant"),
have entered into that certain Asset Purchase Agreement dated February 23, 1999
(the "Purchase Agreement"), pursuant to which Purchaser will purchase (the "Sale
Transaction") from Wyant the Division Business and all of the Division Assets,
subject to the assumption by Purchaser of the Assumed Division Liabilities;
WHEREAS, Holder serves as voting trustee pursuant to that certain Voting
Trust Agreement dated March 14, 1997 (the "First Voting Trust") by and among
Holder, 3323986 Canada, Inc. and McCarthy Tetrault;
WHEREAS, Holder serves as voting trustee pursuant to that certain Voting
Trust Agreement dated March 18, 1997 (the "Second Voting Trust") by and among
Holder, Wyant + Company Inc., 3287858 Canada, Inc., Derek Wyant Holdings, Inc.
and McCarthy Tetrault;
WHEREAS, in order to prevent Purchaser from terminating the Purchase
Agreement pursuant to Section 9.1(j) thereof, Holder desires to enter into an
agreement with respect the voting of the shares of Common Stock, $.01 par value
per share (and as the same may be reclassified, split-up or otherwise modified,
including any voting securities for which the same is exchanged, "Common
Stock"), of Wyant ("Trust Shares") subject to, or which hereafter become subject
to, the First Voting Trust or the Second Voting Trust.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
1. Voting. Commencing on the date hereof and during the term of this
Agreement, Holder agrees to vote, or cause to be voted, as applicable, the Trust
Shares (a) to approve and adopt the Purchase Agreement and the transactions
contemplated thereby, and (b) to approve and authorize the Sale Transaction;
provided, however, that Holder shall have no obligation to vote the Trust Shares
in such manner if (A) the Board of Directors of Wyant, in the good faith
exercise of its business judgment (based upon the written advice of Winthrop,
Stimson, Putnam & Roberts, Wyant's counsel), has determined that continuing to
recommend to the stockholders of Wyant (i) the approval and adoption of the
Purchase Agreement and the transactions contemplated
<PAGE> 115
thereby, and (ii) the approval of the Sale Transaction would be a breach of the
fiduciary duty of the Board of Directors of Wyant under New York law, or (B) if
Holder in the good faith exercise of his business judgment (based upon the
written advice of Holder's counsel to Holder, which shall be a U.S.
nationally-recognized law firm) determines that voting the Trust Shares in such
a manner would be a breach of Holder's fiduciary obligations as a majority
shareholder under New York law.
2. Termination. This Agreement shall continue in full force and effect
from the date hereof through the earliest to occur of (a) the date as of which
the parties hereto terminate this Agreement in writing, (b) the Closing Date or
(c) the terminating of the Purchase Agreement in accordance with its terms.
3. Representations and Warranties. Holder hereby represents and warrants
to Purchaser as follows:
(a) Majority Shares. The Shares represent greater than 50% of the
outstanding shares of Common Stock of Wyant.
(b) Trusts. To the knowledge of Holder, each of the First Voting
Trust and the Second Voting Trust remains in full force and effect.
(c) Voting Trustee. Holder possesses and is entitled to exercise in
his sole and absolute discretion all rights to vote and to take part in or
consent to any corporate or stockholders' action in respect of and as holder of
the Trust Shares.
(d) Authority. Holder has full power and authority to execute and
deliver this Agreement and to perform his obligations hereunder, and this
Agreement has been duly executed and delivered by Holder.
(e) Binding Obligations. This Agreement constitutes the legal, valid
and binding obligation of Holder, enforceable against Holder in accordance with
its terms, except as such enforcement is limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles.
(f) No Conflicts. The execution, delivery and performance of this
Agreement by Holder does not and will not conflict with, or result in the breach
by Holder or violation by Holder of, any agreement or obligation to which Holder
is a party or by which Holder is bound.
4. Covenants. During the term of this Agreement, Holder agrees:
(a) not to resign, or take any action which could reasonably be
expected to result in his removal, as voting trustee under either the First
Voting Trust or the Second Voting Trust;
(b) not to terminate, or take or omit to take any action which could
reasonably be expected to result in the termination of, either the First Voting
Trust or the Second Voting Trust; and
<PAGE> 116
(c) not to directly or indirectly sell, transfer, assign or dispose
of, or take any action which could reasonably be expected to result in the sale,
transfer, assignment or disposition of, any of the Trust Shares.
5. Miscellaneous.
(a) The parties hereto agree that Purchaser would suffer irreparable
harm from a breach by Holder of any of the covenants or agreements contained
herein. The parties hereto hereby declare that it is impossible to measure in
money the damages which will accrue to Purchaser by reason of a failure by
Holder to perform any of the obligations under this Agreement and agree that in
the event of the actual or threatened breach by Holder of any of the provisions
of this Agreement, Purchaser may, in addition and supplementary to other rights
and remedies existing in their favor, apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
equitable relief in order to enforce or prevent any violation of the provisions
hereof. If Purchaser institutes any action or proceeding to specifically enforce
the provisions hereof, Holder hereby waives the claim or defense therein that
Purchaser has an adequate remedy at law, and Holder shall not offer in any such
action or proceeding the claim or defense that such remedy at law exists.
(b) Notwithstanding anything in this Agreement to the contrary, the
maximum liability of Holder to Purchaser for one or more breaches of this
Agreement shall be $350,000, less any amounts actually paid by Seller to
Purchaser pursuant to Section 9.3(a) of the Purchase Agreement.
(c) This Agreement, and the rights of the parties hereto, shall be
governed by and construed and enforced in accordance with the internal laws (and
not the law of conflicts) of the State of New York.
(d) This Agreement may be amended and any term hereof may be waived
only by an instrument in writing signed by Purchaser and Holder.
(e) If any provision of this Agreement is held to be invalid or
unenforceable, the validity and enforceability of the remaining provisions of
this Agreement shall not be affected thereby.
(f) This Agreement may be executed in one or more counterparts, each
of which will be deemed an original but all of which together shall constitute
one and the same agreement.
(g) No waivers of any breach of this Agreement extended by any party
hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
(h) Holder shall not have any right to assign its voting power under
this Agreement.
(i) Each party hereto irrevocably submits to the jurisdiction of the
courts of the State of New York and the United States District Court for the
Southern District of New York for the purpose of any suit, action, proceeding or
judgment relating
<PAGE> 117
to or arising out of this Agreement and the transactions contemplated hereby and
to the laying of venue in any such court. Each party hereto irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
(j) All notices and other communications under or in connection with
this Agreement shall be in writing and shall be deemed given (i) if delivered
personally (including by overnight express or messenger), upon delivery, (ii) if
delivered by registered or certified mail (return receipt requested), upon the
earlier of actual delivery or three days after being mailed, or (iii) if given
by facsimile, upon receipt by facsimile, in each case to the parties at the
following addresses or to such other address or facsimile number as shall be
specified in writing by the intended recipient of such notice:
(A) If to the Purchaser, addressed to:
Paper-Pak Products, Inc.
1941 White Avenue
La Verne, California 91750
Attention: William G. Hopkins,
President and Chief Executive Officer
Facsimile: (909)392-1726
With a copy to:
Paul, Hastings, Janofsky & Walker LLP
Twenty-Third Floor
555 South Flower Street
Los Angeles, California 90071
Attention: Alan J. Barton, Esq.
Facsimile: (213)627-0705
(B) If to Holder:
James A. Wyant
c/o Wyant Corporation
1475 32e Avenue
Lachine (Quebec) H8T 3J1
Facsimile: (514)636-8317
With a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Attention: Kenneth E. Adelsberg, Esq.
Facsimile: (212)858-1500
<PAGE> 118
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PAPER-PAK PRODUCTS INC.
By: _______________________________
An Authorized Officer
JAMES A. WYANT
<PAGE> 119
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PAPER-PAK PRODUCTS INC.
By: _______________________________
An Authorized Officer
JAMES A. WYANT
<PAGE> 120
ANNEX C
<PAGE> 121
BUSINESS CORPORATION LAW
ARTICLE 6. SHAREHOLDERS
NY CLS Bus Corp (Section mark) 623 (1998)
(Section mark) 623. Procedure to enforce shareholder's right to receive payment
for shares
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenters' rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening
<PAGE> 122
preemptive rights and the right to payment of any intervening dividend or other
distribution or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim.
(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1) advance payment to
each such shareholder who has submitted the certificates representing his shares
to the corporation, as provided in paragraph (f), of an amount equal to eighty
percent of the amount of such offer, or (2) as to each shareholder who has not
yet submitted his certificates a statement that advance payment to him of an
amount equal to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholder's authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates [fig 1] for any such
shares represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(l) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a special
proceeding in the supreme court in the judicial district in which the office of
the corporation is located to determine the rights of dissenting shareholders
and to fix the fair value of their shares. If, in the case of merger or
consolidation, the surviving or new corporation is a foreign corporation without
an office in this state,
<PAGE> 123
such proceeding shall be brought in the county where the office of the domestic
corporation, whose shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such proceeding
for the same purpose not later than thirty days after the expiration of such
twenty day period. If such proceeding is not instituted within such thirty day
period, all dissenter's rights shall be lost unless the supreme court, for good
cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid for
their shares, shall be made parties to such proceeding, which shall have the
effect of an action quasi in rem against their shares. The corporation shall
serve a copy of the petition in such proceeding upon each dissenting shareholder
who is a resident of this state in the manner provided by law for the service of
a summons, and upon each nonresident dissenting shareholder either by registered
mail and publication, or in such other manner as is permitted by law. The
jurisdiction of the court shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, is entitled
to receive payment for his shares. If the corporation does not request any such
determination or if the court finds that any dissenting shareholder is so
entitled, it shall proceed to fix the value of the shares, which, for the
purposes of this section, shall be the fair value as of the close of business on
the day prior to the shareholders' authorization date. In fixing the fair value
of the shares, the court shall consider the nature of the transaction giving
rise to the shareholder's right to receive payment for shares and its effects on
the corporation and its shareholders, the concepts and methods then customary in
the relevant securities and financial markets for determining fair value of
shares of a corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall determine the fair
value of the shares without a jury and without referral to an appraiser or
referee. Upon application by the corporation or by any shareholder who is a
party to the proceeding, the court may, in its discretion, permit pretrial
disclosure, including, but not limited to, disclosure of any expert's reports
relating to the fair value of the shares whether or not intended for use at the
trial in the proceeding and notwithstanding subdivision (d) of section 3101 of
the civil practice law and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so determined.
(6) The final order shall include an allowance for interest at such rate as
the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest, the
court shall consider all relevant factors, including the rate of interest which
the corporation would have had to pay to borrow money during the pendency of the
proceeding. If the court finds that the refusal of any shareholder to accept the
corporate offer of payment for his shares was arbitrary, vexatious or otherwise
not in good faith, no interest shall be allowed to him.
(7) Each party to such proceeding shall bear its own costs and expenses,
including the fees and expenses of its counsel and of any experts employed by
it. Notwithstanding the foregoing, the court may, in its discretion, apportion
and assess all or any part of the costs, expenses and fees incurred by the
corporation against any or all of the dissenting shareholders who are parties to
the proceeding, including any who have withdrawn their notices of election as
provided in paragraph (e), if the court finds that their refusal to accept the
corporate offer was arbitrary, vexatious or otherwise not in good faith. The
court may, in its discretion, apportion and assess all or any part of the costs,
expenses and fees incurred by any or all of the dissenting shareholders who are
parties to the proceeding against the corporation if the court finds any of the
following: (A) that the fair value of the shares as determined materially
exceeds the amount which the corporation offered to pay; (B) that no offer or
required advance payment was made by the corporation; (C) that the corporation
failed to institute the special proceeding within the period specified therefor;
or (D) that the action of the corporation in complying with its obligations as
provided in this section was arbitrary, vexatious or otherwise not in good
faith. In making any determination as provided in clause (A), the court may
consider the dollar amount or the percentage, or both, by which the fair value
of the shares as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be due
him, upon surrender of the certificates [fig 1] for any such shares represented
by certificates.
<PAGE> 124
(i) Shares acquired by the corporation upon the payment of the agreed
value therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.
(j) No payment shall be made to a dissenting shareholder under this
section at a time when the corporation is insolvent or when such payment would
make it insolvent. In such event, the dissenting shareholder shall, at his
option:
(1) Withdraw his notice of election, which shall in such event be
deemed withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if
it is liquidated, be subordinated to the rights of creditors of the
corporation, but have rights superior to the non-dissenting shareholders,
and if it is not liquidated, retain his right to be paid for his shares,
which right the corporation shall be obliged to satisfy when the
restrictions of this paragraph do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment
for his shares cannot be made because of the restrictions of this
paragraph. If the dissenting shareholder fails to exercise such option as
provided, the corporation shall exercise the option by written notice given
to him within twenty days after the expiration of such period of thirty
days.
(k) The enforcement by a shareholder of his right to receive payment for
his shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to
be given by a corporation to a shareholder under this section shall be given in
the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as
provided in subparagraph (e)(2) of section 907 (Merger or consolidation of
domestic and foreign corporations).
<PAGE> 125
ANNEX D
<PAGE> 126
[LOGO]
HOULIHAN LOKEY HOWARD & ZUKIN
FINANCIAL ADVISORS
March 16, 1999
To The Board of Directors
Wyant Corporation
Dear Members of the Board:
We understand that Wyant Corporation (the "Company") has entered into an
agreement pursuant to which the Company sold its Wyant Health Care Division
("Wyant Health Care") to Paper-Pak Products, Inc. (the "Buyer") for an aggregate
consideration (the "Consideration") of approximately $15,600,000. We further
understand that the Consideration will consist of: (i) $11,500,000 to be paid at
closing; (ii) $550,000 to be maintained in an escrow account for 24 months;
(iii) the assumption of approximately $3,550,000 of indebtedness and (iv) the
assumption of certain other liabilities of Wyant Health Care. We also understand
that certain liabilities of Wyant Health Care are being retained by the Company.
Such transaction and all related transactions are referred to collectively
herein as the "Transaction."
You have requested our opinion (the "Opinion") as to the fairness of the
Consideration, from a financial point of view, to the Company. The Opinion does
not address the Company's underlying business decision to effect the
Transaction. We have not been requested to, and did not, solicit third party
indications of interest in acquiring all or any part of Wyant Health Care.
Furthermore, at your request, we have not participated in negotiations with
regard to the Transaction or advised you with respect to alternatives to it. We
understand that the terms and conditions of the Transaction have not been
finalized. Our opinion is necessarily based on the latest available information
as of the date of this Opinion.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed Wyant Corporation's audited financial statements on Form 10-K
for the three fiscal years ended December 31, 1997, and unaudited
financial statements on Form 10-Q for the three quarters ended
September 30, 1998, which the Company's management has identified as
being the most current financial statements available;
2. reviewed internally-prepared, unaudited financial statements for Wyant
Health Care for the three fiscal years ended December 31, 1998, which
the Company's management has identified as being the most current
financial statements available;
[LETTERHEAD]
<PAGE> 127
To the Board of Directors
Wyant Corporation
March 16, 1999 Page 2
3. reviewed copies of the following documents and agreements:
(i) Asset Purchase Agreement between Paper-Pak Products, Inc. and
Wyant Corporation, dated February 23, 1999;
(ii) Paper-Pak's Acquisition of Wyant Healthcare and Tissue, Status
Update, dated February 17, 1999; and
(iii) Wyant Corporation -- Project Sun, Report to the Board of
Directors, dated October 1, 1998;
4. met with certain members of the senior management of the Company and
Wyant Health Care to discuss the operations, financial condition,
future prospects and projected operations and performance of Wyant
Health Care;
5. reviewed forecasts and projections prepared by the Company's
management, with respect to Wyant Health Care for the fiscal year
ending December 31, 1999;
6. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
7. reviewed certain other publicly available financial data for certain
companies that we deem comparable to Wyant Health Care, and publicly
available prices paid in other transactions that we considered similar
to the Transaction; and
8. conducted such other studies, analyses and inquiries as we have deemed
appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of Wyant Health Care, and that there has been no material
change in the assets, financial condition, business or prospects of Wyant Health
Care since the date of the most recent financial statements made available
to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to Wyant Health Care and do not assume
any responsibility with respect to it. We have not made any physical inspection
or independent appraisal of any of the properties or assets of Wyant Health
Care. Our opinion is necessarily based on business, economic, market and other
conditions as they exist and can be evaluated by us at the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion that the
Consideration to be received by the Company in connection with the Transaction
is fair to the Company from a financial point of view.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
<PAGE> 128
ANNEX E
<PAGE> 129
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
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 number: 0-8410
WYANT CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
New York 11-2236837
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
100 Readington Road, Somerville, New Jersey 08876
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 908-707-1800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Title of Each Class
- ---------------------------------------
Common Stock, par value $.01 per share
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
================================================================================
<PAGE> 130
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K/A or any amendment to
this Form 10-K/A. ( )
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of May 12, 1999, was $2,436,413.
As of May 12, 1999, there were 2,273,817 shares of common stock of the
registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. The Exhibits identified in Item 14 (a) 3.
ii
<PAGE> 131
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
<S> <C> <C>
PART I.
1. Business.................................................................. 1
2. Properties................................................................ 8
3. Legal Proceedings......................................................... 9
4. Submission of Matters to a Vote of Security Holders....................... 9
PART II.
5. Market for Registrant's Common Equity and Related Stockholder Matters..... 9
6. Selected Financial Data................................................... 11
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 12
7A. Quantitative and Qualitative Disclosures about Market Risk................ 21
8. Financial Statements and Supplementary Data............................... 22
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................... 22
PART III.
10. Directors and Executive Officers of the Registrant....................... 22
11. Executive Compensation................................................... 24
12. Security Ownership of Certain Beneficial Owners and Wyant Management..... 29
13. Certain Relationships and Related Transactions........................... 31
PART IV.
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......... 32
</TABLE>
iii
<PAGE> 132
PART 1
ITEM 1. BUSINESS
A. GENERAL
Wyant Corporation (formerly Hosposable Products, Inc.), a New York
corporation incorporated in 1971 (hereinafter "Wyant"), has three wholly-owned
subsidiaries, Bridgewater Manufacturing Corp., a New Jersey corporation
("Bridgewater"), IFC Disposables, Inc., a Tennessee corporation ("IFC") and Wood
Wyant Inc. (formerly 3290441 Canada Inc.), a Canadian corporation ("Wood
Wyant"). Through its Wyant Health Care Division (the "Division" or "Wyant
Health Care Division"), it manufactures and distributes adult incontinent
products, including disposable underpads and adult briefs. IFC manufactures and
distributes disposable wipers and sanitary paper products and systems. Wyant
Health Care and IFC products are sold primarily in domestic markets. Wood Wyant
manufactures and distributes sanitation products and systems to commercial and
institutional markets in Canada. (The "Company" is used herein to make general
references, without distinction among Wyant, Wyant Health Care Division,
Bridgewater, IFC and Wood Wyant).
WYANT HEALTH CARE DIVISION
The majority of the sales of the Wyant Health Care Division's branded
products are to distributors for eventual use by hospitals, nursing homes and
other health care institutions, and to government agencies. Disposable
underpads and adult briefs are the Division's principal products. Their end-use
is for protection against incontinence. A portion of the Division's revenue is
derived through the sale of finished products as private label brands for major
customers. The Division's airlaid fabrics (AirlayTM) are used as
components of wiping products manufactured by IFC, and also are sold in roll
good form to converters and manufacturers who produce a wide range of health
care, consumer and industrial products.
In late 1996 the Division purchased a high speed adult brief converting
line. Both branded and private label adult briefs were introduced in 1997 to
further expand the Division's line of incontinent care products in this growth
market.
The Division's products are manufactured on a number of continuous
production lines that automatically assemble the various layers of product
materials, bond them with various fixative means, cut the materials to specific
lengths and fold, count, stack and bag/box the completed products. During 1998,
the Division produced the vast majority of its products with its own equipment,
at leased facilities in Fresno, California and at its principal manufacturing
facility in Branchburg, New Jersey purchased by Wyant in December 1993. The
Division's products are sold by a direct sales organization supported by a
customer service department located at the Branchburg facility.
SALE OF WYANT HEALTH CARE DIVISION
On February 23, 1999, Wyant's Board of Directors, pursuant to an Asset
Purchase Agreement (the "Asset Purchase Agreement") dated as of such date,
approved the sale of its Wyant Health Care Division to Paper-Pak Products, Inc.
("PaperPak") of LaVerne, California, for total consideration of approximately
$15,500,000 including the assumption of certain debt of $3,500,000. The
transaction is subject to PaperPak's completion of financing, customary
regulatory approvals and the approval of Wyant shareholders and is expected to
close during the second quarter of 1999.
As stated above, the operations of the Division comprise the company-owned
facility in Branchburg, New Jersey and the leased facility in Fresno, California
and incorporate the adult incontinent products manufacturing activities
undertaken directly by Wyant and Bridgewater. All assets related to these
operations (including equipment) will be sold to Paper-Pak subject to the terms
of the Asset Purchase Agreement. The lease covering the Fresno, California
facility will be assigned to Paper-Pak.
1
<PAGE> 133
Following completion of the sale, the Company will cease the manufacture of
adult incontinent products and the sale of the Division is not expected to
materially affect the operations of the Company's other operating units as each
is autonomous and separately managed. The Company will be precluded from
re-entering the adult incontinent products business for a period of five years
following the sale.
The Division supplies airlaid non-woven fabric and incontinent products to
IFC which will be subject to a three-year supply agreement upon completion of
the sale. IFC will supply PaperPak with QuickableTM absorbent washcloths at an
agreed upon price, which will be renegotiated every twelve months, and at a
volume which will be predetermined.
In reaching its decision to sell the Division , the Board of Directors
considered the following principal factors:
1. Strategic review of business
During 1998, the Company completed a strategic review of its business. The
major conclusion of this review was that the Company was operating in three
uncomplementary industry sectors. After evaluating each segment,
management found that the industry dynamics and market position and
prospects of Wood Wyant and IFC were critical to the future results of
Wyant, and that the Division's branded product sales had fallen in recent
years. The Board of Directors, in this context, also considered the
increase in income from operations in 1998 against cumulative operating
losses of approximately $2,000,000 in 1997 and 1996.
2. Significant capital investment could not be provided.
The industry in which the Division operates has already experienced
significant consolidation. Accordingly, the Division would require
significant additional capital investment to experience future growth.
Management concluded that the Company would not be able to provide the
necessary capital to the Division for it to be successful.
3. Debt reduction
The sale of the Division will provide the opportunity to reduce the
Company's debt while, at the same time, achieving significant value for the
business and assets related to the Division.
4. Future uncertainties related to the Division
The Division faces several significant uncertainties in the near term that
could have a material affect on the Company if the Division is not sold.
(See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Significant factors and known trends with regard to
Discontinued Operations").
5. Business risks associated with disposition of the Division
As a result of the sale of the Division, the Company's results of
operations will be significantly dependent on, and materially affected by,
the results of operations of its two remaining business segments. The
Board of Directors viewed these as acceptable risks in light of the
anticipated benefits of the sale of the Division, the Company's roots in
the janitorial and sanitation business dating back to 1922 and management's
strategic review and assessment of the Company's business segments.
6. Fairness opinion
The Board of Directors retained the services of outside financial advisors
to assist in evaluating the financial elements of the sale of the Division.
On March 16, 1999, these advisors provided the Board of Directors with the
opinion that the transaction was fair from a financial point of view.
2
<PAGE> 134
WOOD WYANT
Wood Wyant is a manufacturer and national distributor, in Canada, of a
broad range of industrial and institutional sanitation products, including paper
hand towels, bathroom tissue, related sanitary paper products, janitorial
chemicals, waste receptacles and cleaning equipment and systems. Wood Wyant is
one of two national distributors of a full line of sanitary paper products,
janitorial chemicals and equipment, and sanitation supplies to institutional
markets in Canada and is the only distributor focused solely on janitorial and
sanitation supply products. Wood Wyant, headquartered in Montreal, employs
approximately 440 people and operates a paper converting plant and two chemical
manufacturing facilities in Ontario and British Columbia. Wood Wyant services
some 20,000 customers through a direct sales organization supported by customer
service centers located across Canada.
Wood Wyant's manufacturing operations include the conversion of base paper
and the manufacture of janitorial chemicals. Base paper is converted into paper
hand towels and bathroom tissue at a plant owned by Wood Wyant in Pickering,
Ontario. Specialized machinery in this plant cuts, folds or winds the paper into
finished products that are packaged and placed in shipping containers.
Wood Wyant develops and manufactures janitorial chemicals from raw
materials produced by major base chemical suppliers. The chemicals are blended
in large tanks and packed into shipping containers for sale by Wood Wyant's
distribution network.
Wood Wyant's distribution operations are conducted primarily from leased
facilities throughout Canada, thereby providing flexibility in meeting market
requirements and eliminating the need to make capital expenditures for real
estate.
In 1998, the Company, through Wood Wyant, acquired several businesses
engaged in the distribution of sanitation products and manufacture of janitorial
chemicals. On April 30, 1998, Wood Wyant acquired all of the issued and
outstanding shares of H.A. Perigord Company Limited, a distributor of sanitation
products. On June 26, 1998, Wood Wyant acquired all of the issued and
outstanding shares of Professional Sanitation Products Ltd., a distributor of
sanitation products. The total consideration for these acquisitions amounted to
$3,070,806, which was comprised of cash of $2,107,645 and 146,666 Class F
Preferred shares of Wood Wyant.
On June 30, 1998, Wood Wyant acquired all of the issued and outstanding
shares of four related businesses based in British Columbia for $2,644,228,
comprised of cash of $1,760,696 and 136,445 Class F Preferred shares of Wood
Wyant. The companies acquired are Midway Supply Ltd., Purnel Distributors Ltd.
and Midway Purnel Sanitary Supply Ltd., all of which are distributors of
sanitation products, and Fraser Valley Industrial Chemicals Inc., a manufacturer
of janitorial chemicals. For further information with respect to these
acquisitions, please see Note 3 to the Company's consolidated financial
statements.
IFC
IFC's operations are conducted at a newly established location in
Brownsville, Tennessee. IFC's manufacturing operations include the conversion of
various materials into wiping products. Specialized machinery cuts, folds or
winds various materials into finished products which are packaged and placed
into shipping containers. IFC's products are sold to some 683 distributors and
brokers located in 44 states by a direct sales organization and independent
brokers supported by customer service located at the Brownsville facility.
B. INDUSTRY SEGMENTS
The Company operates in three industry segments, including the health care
products segment. The assets, revenues and income before taxes of the two
continuing segments are shown in the "Notes to Consolidated Financial
Statements" (Part IV, Item 14).
3
<PAGE> 135
C. SUPPLY OF RAW MATERIALS
The Company purchases raw materials necessary for the manufacture of its
products from several unaffiliated suppliers. These raw materials are readily
available from numerous sources. The Company is not dependent upon any one major
source of supply, and is not limited by any supply contracts.
As of January 1, 1999, the Company signed a five-year supply agreement to
purchase a minimum of 16,200 short tons of paper towelling and tissue annually
at market prices. This supplier provides 100% of the Company's requirements for
these products.
D. MARKETING AND SALES
WOOD WYANT
Wood Wyant's products are sold by a field sales organization of
approximately 110. Sales (other than inter-company transactions with IFC) are
made primarily to end users, with a minor percentage made to distributors.
STRATEGY AND MARKETING
Wood Wyant's marketing strategy was established in the fall of 1994
following an extensive study of its sales organization by Wood Wyant and Tandem
Consulting Group, Canada's leading sales and marketing consulting group. This
study, which was undertaken over a period of several months, led to the
corporate strategy of building a business with superior return based upon a
consultative approach of developing comprehensive cost effective solutions to
customers' sanitation needs. In pursuing this strategy, Wood Wyant's primary
focus was on washroom and floor care programs within the health care, education,
industrial and office channels of distribution. This strategy has required
increased investment in sales training activities to increase product knowledge
and improve sales and account management capabilities. In addition, a broad
cross-section of managers participated under the direction of a task force in
the development of a strategic sales plan designed to ensure growth consistent
with Wood Wyant's objective.
Wood Wyant's direction in marketing calls for profitable growth based upon
a consultative selling approach where skilled and highly trained account
managers provide customers with cost effective solutions to sanitation problems.
Wood Wyant's marketing activities are consolidated in Montreal and have been
strengthened by the appointment of a Director of Marketing reporting to the Vice
President, Sales and Marketing and by the appointment of Product Line Managers
responsible for the planning and profitability of Wood Wyant's product lines.
The marketing group of Wood Wyant is responsible for the strategic direction and
growth and development of Wyant's various product lines.
SERVICE AND LOGISTICS
Wood Wyant operates fourteen full service customer service centers located
strategically across Canada in Dartmouth (Halifax), Lachine (Montreal), Hull
(Ottawa), Pickering (Toronto), Sudbury, Sault Ste-Marie, Thunder Bay, Winnipeg,
Edmonton, Castlegar, Kelowna and Vancouver (3). Responsibility for logistics is
centralized to provide greater control over essential operations of the business
in the areas of forecasting, production planning, inventory control and
management and purchasing. Service level standards are established and
performance is monitored on a continuous basis. Wood Wyant maintains a policy of
next day delivery of all core stocking products from its major service centers.
Such deliveries are made via courier companies, transportation companies, local
cartage or company - operated vehicles in selected locations. As a result of
these service levels and short lead times for replenishment, there are no
material backlogs.
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<PAGE> 136
Wood Wyant's principal customer channels are in the health care and
education (including schools, universities and colleges) segments, but also
include industrial entities and distributors. Most of its customers are located
in Canada, with customers in the United States accounting for less than 8% of
sales, including sales to IFC. Wood Wyant has no single customer that accounts
for more than 1% of sales, except for IFC, which accounts for 6.5% of sales.
WYANT HEALTH CARE DIVISION
The Division's products are sold by 13 salaried sales and marketing
personnel and by several independent sales organizations that work on a
commission basis.
Most of the Division's sales (other than inter-company transactions with
IFC) are made to distributors that, in turn, sell the Company's products to
institutional users such as hospitals and nursing homes, and to industrial
users. Other sales are made to private labellers that sell to retail
individual/chain stores. The retail chains usually sell the products under
private label.
The following table shows, for the years indicated, percentage information
in respect of the Division's net sales.
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Major Distributors................... 10.5 12.4 11.1
Other Distributors................... 34.7 19.9 21.0
Government Agencies.................. 1.0 1.1 0.8
Private Label........................ 18.4 28.9 28.7
Converters (airlaid/nonwoven fabrics) 7.0 * 5.2 * 7.7 *
Industrial Wiping Products (IFC)..... 28.4 32.5 30.7
</TABLE>
[FN]
* Does not include inter-company sales of $2,474,815, $2,498,939 and
$1,542,772, in 1998, 1997 and 1996, respectively, to IFC.
</FN>
At December 31, 1998 the Division had a backlog of firm orders of
approximately $2,120,000, compared to $1,460,000 at December 31, 1997. These
firm orders will be filled during the first quarter of 1999.
IFC
IFC's products are sold by 8 salaried sales personnel and by several
independent sales organizations that are paid on a commission basis.
IFC sales are comprised of wiping products (60%) and sanitary paper
products (40%). All wiper products sold by IFC are manufactured in its
Brownsville, Tennessee facility. All of IFC's sanitary paper products and
systems are supplied by Wood Wyant with IFC acting as Wood Wyant's master
distributor in the continental United States market.
IFC's sales are made primarily to distributors that resell IFC's products
to institutional users such as manufacturers, utilities, nursing homes and
restaurants.
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<PAGE> 137
E. COMPETITION
WOOD WYANT
Wood Wyant competes in the sanitary paper and janitorial product markets
across Canada. The Canadian market for sanitary paper and sanitation products
is fragmented and is served by over 200 distribution companies that compete
directly with Wood Wyant on a regional basis and that tend to be small to medium
sized. Only two companies compete on a national basis, with Wood Wyant being
the only national full line distributor focused solely on the institutional
sanitation market. Recently, the North American sanitation distribution
industry has been experiencing a period of consolidation. Wood Wyant
participated in this consolidation process through the acquisition of four
distributors in Canada during the second quarter of 1998. Wood Wyant will
continue to seek out acquisition opportunities which meet its investment
criteria.
Wood Wyant's distribution capabilities are enhanced by its vertical
integration as a converter of paper products and a manufacturer of a complete
line of sanitation chemicals. Wood Wyant's size also permits it to take full
advantage of the benefits of bulk pricing and volume discounts offered by its
suppliers. However, Wood Wyant's ability to compete successfully is dependent
upon its ability to make timely delivery of quality products at competitive
prices. With respect to sanitary paper products, Wood Wyant is not fully
integrated and competes with fully integrated sanitary paper producers that have
substantial financial resources and significant market share relative to Wood
Wyant; therefore, Wood Wyant's results of operations could be adversely affected
if such fully integrated producers attempt to significantly increase market
share.
WYANT HEALTH CARE DIVISION
The industry in which the Division competes is highly competitive. Among
the competitors are such firms as Kendall, PaperPak (the proposed buyer of the
Division) and others with substantially greater resources than the Company's,
as well as many firms comparable to the Division in size and the primary
businesses of which are directly competitive. Although the Division is a
leading manufacturer of underpads, it is not a significant factor in the overall
adult incontinent market.
The Division's ability to compete successfully is dependent upon its
ability to make timely deliveries of value added products of a quality similar
to or higher than that of its competitors and at competitive prices.
IFC
IFC competes with major paper mills and smaller converters of towel,
tissue and disposable wiping products. The major mill category of competition
includes such companies as Kimberly Clark, Fort James and Wisconsin Tissue.
The smaller converters are multiple in number and are more regional in their
market approach.
In order to compete successfully, IFC must supply its customers with
quality products at competitive prices. Customer service and sales support
programs are necessary to insure that IFC is regarded as a valuable partner by
its customers.
6
<PAGE> 138
F. EMPLOYEES/UNION CONTRACTS
WOOD WYANT
Wood Wyant currently has approximately 440 employees, including
approximately 320 salaried employees and 120 hourly employees. Wood Wyant's
hourly workers are covered under four separate collective bargaining agreements,
the largest of which covers 80 workers at Wood Wyant's Pickering plant and
expires on October 25, 1999. Wood Wyant has never had a work stoppage in its
history, nor has it had any other material labor problems.
WYANT HEALTH CARE DIVISION
The Division has 187 employees, of whom 145 are employed in New Jersey,
and 42 are employed in Fresno, California.
The Division is party to collective bargaining agreements with the
International Production Service & Sales Employees Union that serves its New
Jersey factory-labor employees. The agreements expire in 2001. The Division
considers its relations with its employees to be satisfactory, and no labor
disputes are anticipated, nor have any affected operations negatively to date.
IFC
IFC employs 62 personnel at its facility in Brownsville, Tennessee.
Employees are not unionized.
G. PATENTS AND TRADEMARKS
The Company is the owner of 36 patents and 167 trademarks.
Of the patents, 35 apply to the Sanitation Products segment and relate to
dispensers used with the Company's paper and chemicals products. The remaining
patent is for "Tuckables(R)" underpads manufactured by the Health Care Products
segment. The Company is not able to assess any economic advantage particularly
attributable to any of the above patents.
The trademarks relate primarily to the Sanitation Products segment (134
trademarks), with 19 applicable to the Health Care Products segment and 14 to
the Wiping Products segment. These trademarks are used to protect the
identification of individual products, but the Company is unable to assess any
economic advantage particularly attributable to any of them. Moreover, there is
no assurance that trademark rights are enforceable as a mere consequence of
trademark registration.
H. ENVIRONMENTAL
The Company has been participating with the New Jersey Department of
Environmental Protection ("DEP") in the investigation and potential clean-up of
the Company's former site of operation located at 5 and 6 Easy Street,
Bridgewater, New Jersey. As a tenant, the Company is potentially responsible to
the DEP for environmental contamination based solely upon it having been a
tenant at the site where there is contamination. Similarly, the Company is
potentially jointly and severally liable with the landlord for both the
investigation and clean-up costs. To date, the investigation has established
that, in addition to on-site contamination, some of the contamination on the
site is or has come from off site. The Company disputes it caused any such
contamination and maintains that on-site contamination was a result of prior
tenants' acts.
Nevertheless, the Company has fully cooperated with the DEP and has
presently been directed by the DEP to delineate the ground water contaminant
plume, which may result in establishing that the contamination is a regional
problem rather than one specific to the former site that the Company leased.
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<PAGE> 139
The Company has entered into a flat fee contract with its environmental
consultants for $11,750 for the delineation investigation. Upon determination
of the contaminant plume, the Company will petition the DEP for a classification
exception area where the remedial action will be natural attenuation.
After the investigation is completed, the DEP could require clean-up or
remediation of the contamination on site, the cost of which could potentially be
in the range of $100,000 to $150,000. However, present technology is such that
no remedial action plan could bring the site in conformity with the present DEP
regulations, regardless of the funds spent.
The Company is unaware of any other environmental or similar matters that
would have a material effect on the capital expenditures, earnings or
competitive position of the Company.
Item 2. PROPERTIES
WOOD WYANT
Wood Wyant's manufacturing operations include the conversion of base paper
and the manufacturing of janitorial chemicals. Base paper is converted into
paper hand towels and bathroom tissue at a plant owned by Wood Wyant in
Pickering (Toronto), Ontario. Specialized machinery in this plant cuts, folds
or winds the paper into finished products that are packaged and placed in
shipping containers. The Pickering plant occupies approximately 149,500 square
feet. For the year ended December 31, 1998, production at Pickering totalled
approximately 1,808,000 cases, which represents approximately 66% of capacity.
Wood Wyant develops and blends janitorial chemicals from raw materials
produced by major base chemical suppliers. The chemicals are blended in large
tanks and packed into shipping containers for sale by the Wood Wyant
distribution network. Wood Wyant operates two chemical plants which are located
in rented facilities in Scarborough (Toronto), Ontario and Abbotsford
(Vancouver), British Columbia. For the year ended December 31, 1998, total
production at these plants reached approximately 2,857,000 liters (49% of
capacity).
Wood Wyant's distribution operations are conducted through leased
facilities throughout Canada, thereby providing flexibility in meeting market
requirements and eliminating the need to make capital expenditures for real
estate. The location of the leased facilities, including square footage and
lease expiration dates, are as follows:
<TABLE>
<CAPTION>
AREA IN YEAR OF
SQUARE FEET EXPIRATION
----------- ----------
<S> <C> <C>
Manufacturing
Pickering (Toronto), Ontario (1)...... 78,200 --
Scarborough (Toronto), Ontario........ 22,700 2001
Abbotsford, B.C....................... 4,500 month to month
Distribution
Dartmouth (Halifax), Nova Scotia...... 12,100 2003
Lachine (Montreal), Quebec............ 91,700 2004
Hull (Ottawa), Quebec (2)............. 7,800 month to month
Pickering (Toronto), Ontario (1)...... 71,300 --
Sudbury, Ontario...................... 12,000 2003
Sault Ste-Marie, Ontario.............. 8,100 2003
Thunder Bay, Ontario.................. 4,200 2003
Winnipeg, Manitoba.................... 12,000 2001
Edmonton, Alberta..................... 14,000 2000
Burnaby (Vancouver), B.C.............. 10,400 2000
Coquitlam (Vancouver), B.C............ 25,000 2000
Vancouver, B.C........................ 8,000 2000
</TABLE>
(1) Wood Wyant owns this 149,500 sq. ft. facility.
(2) A new lease for a term of 5 years is currently being finalized.
8
<PAGE> 140
WYANT HEALTH CARE DIVISION
Since May 31, 1994 the Division has conducted all New Jersey operations at
its Branchburg, New Jersey location. This facility accommodates manufacturing
operations, warehousing and administrative activities in a 111,640 square foot
building. This facility will be sold to PaperPak pursuant to the Asset Purchase
Agreement if the transaction is consummated.
The Division leases approximately 80,000 square feet, used for
manufacturing and warehousing, in a building at 95 Santa Fe Avenue, Fresno,
California, from Len-Sid Realty Co. Leonard Schramm, a former President of the
Company is a partner in Len-Sid Realty Co. The terms of the lease agreement,
including $110,116 as annual rent, are comparable to terms that might be
obtainable from an unaffiliated lessor of like property in the immediate
vicinity of the Fresno warehouse. The lease term is for six months, but
terminable on 90 days' notice (essentially, because the landowner, The Atchison,
Topeka and Santa Fe Railroad, has the right to terminate Len-Sid Realty Co.'s
"possession" on 90 days' notice). This lease will be assigned to PaperPak upon
completion of the sale of the Division. See "Business - General - Sale of Wyant
Health Care Division."
IFC
During November 1997, IFC relocated its manufacturing operations from
leased premises in Jackson, Tennessee to a leased facility in Brownsville,
Tennessee. The lease for this 100,000 square foot facility will expire on
December 31, 2004. IFC has the option to extend the term by three years to
December 31, 2007.
Item 3. LEGAL PROCEEDINGS
From time to time, the Company may be a party to legal proceedings
incidental to its business. At present, there are no legal proceedings that are
material to the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No event that would be described in response to this item has occurred.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is traded on The Nasdaq SmallCap Market under the symbol
"WYNT". The listing of the Common Stock was transferred to The Nasdaq SmallCap
Market from the Nasdaq National Market System, effective with the open of
business on April 5, 1999. Wyant has been informed by the Nasdaq Stock Market
that it currently satisfies the continued listing requirements of The Nasdaq
SmallCap Market. The continued listing of the Common Stock on The Nasdaq
SmallCap Market is subject to customary administrative requirements of the
Nasdaq Stock Market relating to the listing.
On May 21, 1998, the Company effected a four-for-three stock split of the
Common Stock (the "Stock Split") in the form of a stock dividend to holders of
record on April 28, 1998. The following table sets forth the quarterly high and
low prices per share for the Common Stock for the periods indicated, as reported
by the Nasdaq National Market System. The prices for the period prior to May 21,
1998 have been retroactively adjusted to reflect the Stock Split. These prices
represent prices by dealers, do not include retail markups, markdowns or
commissions and do not necessarily represent actual transactions.
9
<PAGE> 141
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1997
1st Quarter 4.312 3.375
2nd Quarter 3.937 3.187
3rd Quarter 4.875 2.625
4th Quarter 5.250 4.125
1998
1st Quarter 7.406 4.594
2nd Quarter 6.750 5.188
3rd Quarter 5.750 3.250
4th Quarter 4.500 3.250
</TABLE>
As of May 12, 1999, there were 2,273,817 shares of Common Stock
outstanding and approximately 700 record holders of Common Stock.
Wyant has never paid a cash dividend on the Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. Wyant's ability
to pay dividends is subject to Wyant's income, receipt of cash flow from
subsidiaries in the form of dividends or similar distributions, financial
condition, capital needs and restrictions contained in various credit
agreements.
10
<PAGE> 142
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Unaudited
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales..................................... $ 67,124 $ 63,560 $ 62,591 $ 60,539 $ 59,456
Cost of sales............................. 43,218 39,691 38,152 37,035 38,167
--------- --------- --------- --------- ---------
Gross profit.............................. 23,906 23,869 24,439 23,504 21,289
Selling, general and administration
expenses................................ 21,358 21,125 21,325 20,814 22,125
Amortization.............................. 508 429 505 584 653
Non-recurring items....................... -- -- 550 1,808 61
Interest expense.......................... 1,158 745 511 742 724
Other income (expense).................... (244) (230) (185) 191 265
--------- --------- --------- --------- ---------
22,780 22,069 22,706 24,139 23,828
Income (loss) from continuing
operations before income taxes
and extraordinary gain.................. 1,126 1,800 1,733 (635) (2,539)
Income tax expense (benefit).............. 572 801 796 (460) (625)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before extraordinary gain............... 554 999 937 (175) (1,914)
Income (loss) from discontinued
operations, net of income taxes......... 1,021 (581) (793) 269 1,210
--------- --------- --------- --------- ---------
Income (loss) before extraordinary gain... 1,575 418 144 94 (704)
Extraordinary gain, net of income taxes... -- 92 -- -- --
--------- --------- --------- --------- ---------
Net income (loss)......................... 1,575 510 144 94 (704)
Dividends and accretion of mandatorily
redeemable preferred shares............. 360 191 -- -- --
--------- --------- --------- --------- ---------
Net income (loss) attributable to
common shares........................... $ 1,215 $ 319 $ 144 $ 94 $ (704)
========= ========= ========= ========= =========
Per common share
Basic
Income (loss) from continuing operations
before extraordinary gain............. $ 0.06 $ 0.22 $ 0.26 $ (0.05) $ (0.53)
Discontinued operations................. $ 0.28 $ (0.16) $ (0.22) $ 0.08 $ 0.33
Net income (loss)....................... $ 0.34 $ 0.09 $ 0.04 $ 0.03 $ (0.20)
Diluted
Income (loss) from continuing operations
before extraordinary gain............. $ 0.06 $ 0.22 $ 0.26 $ (0.05) $ (0.53)
Discontinued operations................. $ 0.27 $ (0.16) $ (0.22) $ 0.08 $ 0.33
Net income (loss)....................... $ 0.33 $ 0.09 $ 0.04 $ 0.03 $ (0.20)
Weighted average number of common
shares outstanding...................... 3,606,247 3,597,125 3,589,884 3,589,884 3,589,124
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Unaudited Unaudited
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital of continuing operations.. $ 1,822 $ 82 $ 3,217 $ 8,410 $ 6,783
Total assets.............................. 42,540 37,156 37,593 38,441 39,586
Long-term obligations (excluding
current maturities)..................... 3,888 1,998 6,259 5,945 7,718
Redeemable preferred shares............... 5,990 4,930 2,268 2,268 2,268
Cash Dividends declared per common share.. -- -- -- -- --
</TABLE>
NOTE: Data for the years 1994 to 1997 inclusive have been restated to reflect
the discontinued operations presentation and the stock split which
occurred in 1998.
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<PAGE> 143
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's consolidated
financial statements and accompanying notes. (See Item 14). As discussed under
"Business - General - Sale of Wyant Health Care Division", pursuant to the Asset
Purchase Agreement, Wyant has agreed to sell the Division and substantially all
of its operating assets to PaperPak. Accordingly, such consolidated financial
statements, as well as the discussion below and analysis of financial condition
and operations, reflect the consummation of this transaction by showing the
health care business as "discontinued operations" for income statement purposes
and as "assets held for divestiture" for balance sheet purposes.
The following information and the information included under "Business"
includes forward-looking statements (within the meaning of Section 21E of the
Securities Exchange Act of 1934) that involve a number of risks and
uncertainties that may influence the financial performance and earnings of the
Company, and may cause actual results to differ materially from those in the
forward-looking statements, including, but not limited to, factors such as the
ability of the Company to successfully integrate the business and personnel of
various acquired businesses into its operations, the ability to implement its
business strategy assuming consummation of the PaperPak transaction, the ability
to adequately address Year 2000-related issues, the ability to maintain existing
customer relationships and to secure new customers on satisfactory terms,
whether by contract or otherwise, unforeseen price pressure on the Company's
products or significant cost increases that cannot be recovered through price
increases or productivity improvements, the ability to obtain any necessary
financing on reasonably satisfactory terms, the effect of exchange rate
fluctuations and the effect of competitive, capital market and general economic
conditions. Such forward-looking statements, which reflect the Company's current
views with respect to certain future events and financial performance, should be
considered in light of such factors.
RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED
DECEMBER 31, 1997
SALES: Sales of continuing operations for the year ended December 31, 1998
increased by $3,564,434 or 5.6% to $67,124,137 from the total of $63,559,703 in
the year ended December 31, 1997, after eliminating inter-segment sales of
$4,083,590 in 1998 and of $4,074,080 in 1997.
Sales of the sanitation products segment were $54,490,900 in 1998, up by
$1,956,172 or 3.7% over the 1997 sales of $52,534,728. This increase resulted
from additional sales from the businesses acquired in the second quarter of
1998, which more than offset a reduction in selling prices of paper products and
the adverse effect of a weaker Canadian dollar translation rate.
Sales of the wiping products segment increased by $1,617,772 or 10.7% to
$16,716,827 in 1998, from $15,099,055 in 1997. The increase resulted primarily
from higher sales of paper products and systems.
COST OF SALES AND GROSS PROFIT: Gross profit of the sanitation products
segment for 1998 was $21,041,150 or 38.6% of sales, compared with $21,169,065 or
40.3% of sales in 1997. The lower margin primarily reflected the continuing
competitive pricing environment for paper products, together with slightly
reduced margins for chemicals and sanitation products.
Gross profit of the wiping products segment in 1998 amounted to $2,864,521
or 17.1% of sales, compared with $2,699,437 or 17.9% of sales in 1997. The
reduced margin resulted from increased sales of paper products, which generate
relatively lower margins than most of the segment's other product lines.
12
<PAGE> 144
SELLING EXPENSES: Selling expenses for 1998 amounted to $12,658,838, an
increase of $727,358 or 6.1% over the 1997 level of $11,931,480. Expenses of the
sanitation products segment in 1998 at $10,438,946 were $573,953 or 5.8% higher
than the 1997 amount of $9,864,993. The increase resulted primarily from the
added expenses of the acquired businesses, which more than offset the favorable
impact of the weaker Canadian dollar translation rate. In the wiping products
segment, selling expenses in 1998 were $2,219,892, an increase of $153,405 or
7.4% over the 1997 total of $2,066,487, due principally to higher outward
freight costs resulting from the higher level of sales ($119,934).
GENERAL AND ADMINISTRATION EXPENSES: General and administration expenses
for 1998 were $8,699,535, a reduction of $494,408 or 5.4% compared with the 1997
expenses of $9,193,943. Expenses of the sanitation products segment for 1998
were $7,811,599, compared with $8,288,049 in 1997. The decrease of $476,450 or
5.7% from 1997 resulted from savings derived primarily from lower staffing
levels and the consolidation of warehousing activities at a Company-owned
facility which, together with the favorable impact of the weaker Canadian dollar
translation rate, more than offset the expenses added from the businesses
acquired during the second quarter of 1998 and the special charge of $464,286
incurred in the third quarter of the year for the rationalization of Wood
Wyant's operations following the acquisition of those businesses.
Expenses of the wiping products segment for 1998 were $572,936, an increase
of $114,542 or 25.0% over the 1997 level of $458,394. This resulted primarily
from a $50,000 increase to the allowance for doubtful accounts which was
required due to slower collection of accounts receivable, together with higher
staffing costs. Corporate charges in 1998 were $315,000, a decrease of $132,500
compared with the total of $447,500 in 1997, which included $206,500 of
professional fees associated with the purchase of the Canadian sanitation
products business in March 1997.
AMORTIZATION: Amortization amounted to $507,540 in 1998, an increase of
$78,729 over the 1997 level of $428,811, due to the additional amortization from
the acquired businesses and from the goodwill resulting from their purchase.
INTEREST EXPENSE: Interest expense amounted to $1,158,249 in 1998, an
increase of $413,160 over the 1997 expense of $745,089. The increase resulted
from higher borrowing costs in the United States ($290,450), together with an
increase in Canada of $122,710 which resulted from the financing of the
businesses acquired during 1998. Interest expense in the United States for 1998
includes approximately $632,000 of interest on the loan from Congress Financial
Corporation. This loan will be repaid from the proceeds from the sale of the
discontinued health care operations and consequently the interest expense will
be reduced accordingly from the time of the transaction.
OTHER INCOME: Other income amounted to $244,067 in 1998, up from $230,790
in 1997.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EXTRAORDINARY
GAIN: Income from continuing operations before income taxes and extraordinary
gain amounted to $1,125,576 in 1998, a reduction of $674,393 from the 1997 level
of $1,799,969. The sanitation products and wiping products segments decreased by
$414,468 and $149,059 respectively, while corporate expenses were $110,866
higher in 1998. The results for 1998 include the special charge of $464,286
incurred in the third quarter for the rationalization of Wood Wyant's operations
following the acquisitions in the second quarter of the year.
INCOME TAXES: Income tax expense at $572,000 was $228,597 lower in 1998
than the expense of $800,597 in 1997, reflecting the reduced level of pre-tax
income in 1998.
13
<PAGE> 145
DISCONTINUED OPERATIONS: The discontinued health care operations generated
after-tax income from operations of $1,021,602 or $0.28 per common share in
1998, compared with an after-tax loss of $580,874 or ($0.16) per common share in
1997. The improvement in 1998 was primarily a result of a 16.4% increase in
sales, due to the higher sales of Symphony(R) and private label adult
incontinent briefs, which were introduced during the first half of 1997 and of
higher margins, at 20% of sales compared with 16% of sales in 1997, due to
manufacturing efficiencies and increased sales activity. In addition, general
and administration expenses were lower than in 1997, when a non-recurring charge
of $427,000 for severance costs and professional fees was incurred.
EXTRAORDINARY GAIN: An extraordinary gain of $91,958 or $0.03 per common
share, net of tax of $47,372, was realized in 1997 on the refinancing of certain
term debt.
NET INCOME: Net income for 1998 amounted to $1,575,178, an improvement of
$1,064,722 over the 1997 income of $510,456. After deducting dividends and
accretion relating to the mandatorily redeemable preferred shares, the earnings
amounted to $0.34 per common share in 1998, compared with $0.09 per common
share in 1997.
RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1996
SALES: Sales of continuing operations for the year ended December 31,
1997 increased by $968,996 or 1.55% to $63,559,703 from the level of
$62,590,707 in the year 1996, after eliminating inter-segment sales, which
increased to $4,074,080 in 1997 from $2,299,634 in 1996.
Sales of the sanitation products segment were $52,534,728 in 1997, down by
$351,618 or 0.7% from the 1996 sales of $52,886,346. This reduction resulted
from the negative impact of a weaker Canadian dollar translation rate and lower
selling prices for paper products, partially offset by higher sales volume of
paper products and increased sales of sanitation products and equipment.
Sales of the wiping products segment increased by $3,095,060 or 25.8% to
$15,099,055 in 1997, from $12,003,995 in 1996. This improvement was the result
of significantly higher sales of paper products and systems.
COST OF SALES AND GROSS PROFIT: The sanitation products segment realized
gross profit of $21,169,065 or 40.3% of sales in 1997, compared with
$21,991,889 or 41.6% of sales in 1996. The margin reduction was primarily
caused by the competitive pricing environment for paper products in 1997.
Gross profit of the wiping products segment was $2,699,437 or 17.9% of
sales in 1997. In 1996 gross profit amounted to $2,447,344 or 20.4% of sales.
The lower margin was the result of the significant increase in sales of paper
products, which generate lower margins than the segment's other product lines.
SELLING EXPENSES: Selling expenses for 1997 totalled $11,931,480, a
reduction of $84,284 from the 1996 level of $12,015,764. Expenses of the
sanitation products segment for 1997 at $9,864,993 were $468,691 lower than the
1996 amount of $10,333,684. The reduction was due primarily to lower staffing
levels in 1997 and the favorable impact of the weaker Canadian dollar
translation rate, together with lower marketing and promotion expenses than in
1996, when a new product catalogue was produced. In the wiping products
segment, 1997 expenses were $2,066,487, an increase of $384,407 or 22.9% over
the 1996 expenses of $1,682,080. This increase resulted primarily from higher
outward freight costs associated with the increased sales activity ($180,660)
and related selling expense increases.
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GENERAL AND ADMINISTRATION EXPENSES: General and administration expenses
for 1997 at $9,193,943 were $114,895 lower than the 1996 total of $9,308,838.
In the sanitation products segment, expenses declined by $463,916 in 1997 to
$8,288,049, compared with $8,751,965 in 1996 The reduction resulted primarily
from lower staffing levels in 1997 and the favorable impact of the weaker
Canadian dollar translation rate During 1997, the Company transferred its
Ontario Distribution Center from a leased facility in Scarborough, Ontario to
the company-owned facility at Pickering, Ontario The Company provided
approximately $238,000 at December 31, 1997 for future costs related to the
sublease of the Scarborough facility In the wiping products segment, 1997
expenses amounted to $458,394, an increase of $33,521 over the 1996 expenses of
$424,873, due primarily to higher staffing costs Corporate charges were
$447,500 in 1997, compared with $132,000 in 1996 The increase of $315,500 was
primarily a result of professional fees of $206,500 related to the Wood Wyant
acquisition in March 1997, together with increased insurance costs.
AMORTIZATION: Amortization amounted to $428,811 in 1997, a reduction of
$76,534 from the 1996 level due to the relatively low level of capital spending
in 1997.
NON-RECURRING ITEMS: A charge of $549,805 was recorded in 1996 for
expenses incurred in relation to the Wood Wyant acquisition.
INTEREST EXPENSE: Interest expense totalled $745,089 for 1997, an
increase of $233,836 over the 1996 expense of $511,253, as the additional
interest costs related to the debt used to finance the Wood Wyant acquisition
more than offset the favorable impact of lower interest rates in 1997.
OTHER INCOME: Other income for 1997 of $230,790 was $46,154 higher than
in 1996 The increase resulted from foreign exchange gains in Canada.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOMES TAXES AND EXTRAORDINARY
GAIN: Income from continuing operations before tax and extraordinary gain
totalled $1,799,969 in 1997, an improvement of $67,105 over the 1996 amount of
$1,732,864 The sanitation products segment improved by $326,224, while the
wiping products segment declined by $171,424 Corporate expenses increased by
$86,695 in 1997.
INCOME TAXES: Income tax expense increased by $4,604 in 1997 to $800,597,
reflecting primarily the higher pre-tax income in 1997.
DISCONTINUED OPERATIONS: The discontinued health care operations incurred
an after-tax loss from operations of $580,874 or $(0.16) per common share in
1997, compared with an after-tax loss of $792,481 or $(0.22) per common share
in 1996 The reduction in after-tax loss resulted from higher margins in 1997
due to cost reductions and improved operating efficiencies, together with
general and administration expenses which were lower in 1997 as a result of
cost reduction programs, despite the inclusion of a non-recurring charge of
$427,000 in 1997 for severance costs and professional fees.
EXTRAORDINARY GAIN: An extraordinary gain of $91,958 or $0.03 per common
share, net of tax of $47,372, was realized in 1997 on the refinancing of
certain term debt.
NET INCOME: Net income for 1997 amounted to $510,456, an improvement of
$366,066 over the 1996 income of $144,390 After deducting dividends and
accretion relating to the mandatorily redeemable preferred shares, the earnings
amounted to $0.09 per common share in 1997, compared with $0.04 per common
share in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and capital resources of the Company's United States operations
(IFC Disposables) and Canadian operations (Wood Wyant) are discussed
separately, as each is self-financing and has separate banking facilities.
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CANADIAN OPERATIONS
Cash utilized during 1998 amounted to $941,045. Cash generated from
operations, net of a working capital increase of $167,032, amounted to
$1,912,769. The higher working capital resulted primarily from decreases in
accounts payable ($428,079) and income taxes payable ($595,130) which, together
with an increase in prepaid expenses ($176,753), more than offset a reduction
in accounts receivable of $1,098,925. The lower receivables resulted from the
return to more normal levels following a postal strike in Canada in late -
1997, together with the impact of a weaker Canadian dollar translation rate.
The reduction in payables was primarily due to the weaker Canadian dollar
translation rate. The decrease in income taxes payable resulted from the
payment of 1997 income tax liabilities and a higher level of instalment
payments in 1998. Capital expenditures amounted to $679,331 in 1998.
Repayments of long-term debt during the year totalled $1,001,944, while an
amount of $197,671 was borrowed from an existing facility to finance certain of
the capital expenditures. In addition, $550,122 of outstanding Class A
Preferred shares were redeemed in January 1998 and dividends of $190,955 have
been paid on the Class A and Class B Preferred shares.
During the second quarter of 1998, Wood Wyant acquired four businesses for
total consideration of $5,715,034. These acquisitions were financed by term
bank loans, under which an amount of $3,525,440 was drawn down, and by the
issue of 283,111 Class F Preferred shares of Wood Wyant with a fair value of
$1,861,876.
The Class F Preferred shares of Wood Wyant were issued to the former
owners of the businesses acquired during the second quarter of 1998. The
significant conditions of the Class F Preferred shares of Wood Wyant are:
Prior to July 1, 2000 and subject to the priorities of the other classes
of preferred stock of Wood Wyant Inc., the shares:
1. are exchangeable for Wyant Corporation common stock on a share for
share basis and are entitled to dividends equivalent on a per share
basis, to any dividends paid on Wyant Corporation common stock; and
2. have a liquidation preference per share of one share of Wyant
Corporation common stock.
Holders of the shares have an option, which may be exercised between
July 1, 2000 and July 31, 2000, to cause Wood Wyant Inc. to redeem the shares in
five equal annual instalments at a price of Cdn $11.250028 ($7.3371) per share
plus any accrued and unpaid dividends. If the redemption option is exercised,
dividends of 3.5% per annum will be payable commencing July 1, 2000.
On June 25, 1998 the Company increased its secured revolving line of
credit from Cdn. $6,000,000 to Cdn. $7,500,000 ($4,891,411) and on March 10,
1999 increased it by an additional Cdn. $2,000,000 to Cdn. $9,500,000
($6,195,787). These increases were required to assist in refinancing the
operating cash requirements of the newly-acquired companies and to meet
increased working capital requirements. At December 31, 1998, approximately
$1,190,000 was available under the Cdn. $7,500,000 facility. In addition,
approximately $721,000 was available to finance future capital expenditures
under a revolving credit facility of $1,956,564 (Cdn. $3,000,000).
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All borrowings of the Canadian Operations are with the Bank of Nova
Scotia. Long-term debt outstanding at December 31, 1998 amounted to
$4,948,925, including $1,061,332 due within one year. All of the loans were at
the commercial prime rate in Canada (6.75% at December 31, 1998) plus 0.75%.
The secured revolving line of credit bears interest at the prime rate in
Canada. Under the terms of the loan agreements, covenants exist which require
Wood Wyant to meet certain ratios relating to debt to tangible net worth,
current assets to current liabilities and cash flow to debt service, as well as
maintaining a minimum level of tangible net worth. Also, borrowings under the
revolving credit facility must not exceed a given proportion of accounts
receivable. The Company was in compliance with all of the covenants at
December 31, 1998.
The Company has no commitments for material capital expenditures and has
no plans for major capital expenditures for existing businesses during the next
five years. Payments on long-term debt obligations existing at December 31,
1998 average less than $1,000,000 over the next five years with a maximum of
$1,496,000 in 2000. Amounts required to redeem Class A and Class B Preferred
shares approximate $550,000 per annum during that period, while redemption of
the Class F Preferred shares in the event that the option to redeem is
exercised by the holders of those shares would require an additional annual
amount of approximately $425,000 for five years commencing in 2000.
Management believes that operating cash flows from the continuing
businesses and amounts available under existing credit facilities will be
sufficient to meet ongoing operating cash requirements and amounts required for
capital asset additions, as well as meet the cash requirements for debt and
Preferred shares redemptions discussed above.
U.S. OPERATIONS
Cash of $2,524,213 was utilized by continuing operations in the United
States during 1998. Working capital increased $344,847, primarily due to
higher inventories ($509,741) and lower payables ($234,987), partially offset
by an increase of $347,435 in income taxes payable. The higher inventory
levels were at IFC and resulted primarily from a build-up of inventories to
counter temporary raw material supply shortages. Capital expenditures of
continuing operations in 1998 amounted to $174,361. A total of $1,642,028 of
the committed revolving credit facility with Congress Financial Corporation was
repaid during 1998.
Borrowings of the U.S. Operations consist of a committed revolving credit
facility of $13,000,000 with Congress Financial Corporation which bears
interest at commercial prime rate plus 1% (prime at December 31, 1998 was
7.75%). Unused availability was approximately $2,841,000 at December 31, 1998.
Maximum borrowing under the facility is determined by certain advance formulas
applicable to the level of accounts receivable and inventories and the value of
property, plant and equipment, net of guarantees.
Management believes that future operating cash flows and the unused
balance available under the existing credit facility will be sufficient to
enable the Company to meet its ongoing operating cash requirements and to
finance capital asset additions until the sale of the Wyant Health Care
Division and to meet its ongoing cash requirements if the sale of the Wyant
Health Care Division is not consummated. Thereafter, following the repayment of
the balance outstanding under the secured line of credit with Congress
Financial Corporation, management believes that future operating cash flows
and excess cash on hand will be sufficient to meet operating cash requirements
and to finance capital asset additions.
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DISCONTINUED OPERATIONS
On February 23, 1999, the Board of Directors approved the sale of the
Company's Wyant Health Care Division, subject to completion of buyer financing,
customary regulatory approvals and the approval of the Company's shareholders,
for cash on closing of $11,500,000 and $550,000 which will be held in escrow for
twenty-four months. These cash proceeds are subject to adjustment on closing,
which is expected to occur in the second quarter of 1999. Results of operations
between the measurement date of December 17, 1998 and the closing date are
expected to contribute positively to the Company's overall results.
Cash received on closing will be utilized to pay off the balance under the
secured line of credit with Congress Financial Corporation ($4,238,720 as at
December 31, 1998), and to pay the withdrawal liability and income taxes
generated by the transaction. The Company is in the process of evaluating
possible alternative uses of the balance of the net cash proceeds from the sale,
including the acquisition of assets or businesses in North America that are
consistent with its overall strategy of growing as a North American janitorial
and sanitation products manufacturer and distributor. Although the Company is
evaluating several opportunities, currently, there are no significant
acquisitions of assets or businesses that would be considered probable. To the
extent that it acquires any such assets or businesses, whether related to its
overall strategy or otherwise, there can be no assurance that such acquisitions
will be successfully integrated with its operations or that such acquisitions
will ultimately be profitable for the Company. Pending the application of such
proceeds, the Company intends to use such proceeds to repay certain short-term
debt of its subsidiaries.
Following completion of the sale, the Company will cease the manufacture of
adult incontinent products and the sale of the Division is not expected to
materially affect the operations of the Company's other operating units as each
is autonomous and separately managed. The Company will be precluded from
re-entering the adult incontinent products business for a period of five years
following the sale.
The Division supplies airlaid non-woven fabric and incontinent products to
IFC which will be subject to a three-year supply agreement upon completion of
the sale. IFC will supply PaperPak with Quickable(TM) absorbent washcloths at an
agreed upon price, which will be renegotiated every twelve months, and at a
volume which will be predetermined.
For more information with respect to the sale of the Division, including
the principal factors considered by the Board of Directors in approving the
sale, see "Business - General - Sale of the Wyant Health Care Division."
SIGNIFICANT FACTORS AND KNOWN TRENDS WITH REGARD TO DISCONTINUED OPERATIONS
PENSION PLAN
Certain employees of the Wyant Health Care Division are members of a
multi-employer defined benefit Pension Plan (the "Plan" or "Pension Plan"). The
Company was informed by the Pension Plan administrators that the Plan had failed
to meet minimum legal funding requirements and that the Company's pro-rata share
of the minimum funding deficiency was $370,000. The Plan has applied to the IRS
for a waiver from the minimum funding requirements and awaits a response. If the
waiver is obtained, the employers contributing to the Plan would be required to
fund and charge to earnings the funding deficiency, and corresponding interest
charges, over a 15 year period. If the waiver is not obtained, an excise tax may
be imposed on the Plan and such excise tax could be as much as 100% of the
funding deficiency.
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The sale of the Wyant Health Care Division will trigger a withdrawal
liability as PaperPak, the acquirer of the Division, will not assume the
Company's obligation under the Plan. This withdrawal liability will be funded
through the proceeds from the sale of the Division. In addition to the
withdrawal liability, the Plan may also seek to collect the Division's pro-rata
share of the funding deficiency discussed above. After taking into account these
Pension Plan liabilities, the Company estimates that it will realize a gain on
the sale of the Division.
AIRLAY II MACHINE
In 1992, the Division purchased a machine ("Airlay II") for the production
of airlaid products. During 1993, the machine was redesigned for commercial use.
Although Airlay II was installed in the Branchburg, New Jersey manufacturing
facility in the fourth quarter of 1994, only a small quantity of commercially
acceptable product has been manufactured to date. During the second quarter of
1998, a complete engineering evaluation of the machine was performed.
The Division implemented the majority of the recommended changes included
in the engineering evaluation. In December 1998 the Division developed a
business plan that included, as an objective, full commercial operation of
Airlay II by the end of 1999.
Airlay II is part of the assets of the Division that Wyant has agreed to
sell to PaperPak. As of December 31, 1998 the net book value of Airlay II was
approximately $2.2 million. In the event that the sale of the Division is not
consummated, there can be no assurance that Airlay II will achieve full
commercial operation or produce saleable product for the Division. Accordingly,
failure to achieve full commercial operation in the near future could result in
a significant write-down of the Company's investment in Airlay II, which
write-down would have a material adverse effect on the results of operations of
the Company.
ENVIRONMENTAL
The Company has been participating with the New Jersey Department of
Environmental Protection ("DEP") in the investigation and potential clean-up of
the Company's former site of operation located at 5 and 6 Easy Street,
Bridgewater, New Jersey. As a tenant, the Company is potentially responsible to
the DEP for environmental contamination based solely upon it having been a
tenant at the site where there is contamination. Similarly, the Company is
potentially jointly and severally liable with the landlord for both the
investigation and clean-up costs. To date, the investigation has established
that, in addition to on-site contamination, some of the contamination on the
site is or has come from off site. The Company disputes it caused any such
contamination and maintains that on-site contamination was a result of prior
tenants' acts.
Nevertheless, the Company has fully cooperated with the DEP and has
presently been directed by the DEP to delineate the ground water contaminant
plume, which may result in establishing that the contamination is a regional
problem rather than one specific to the former site that the Company leased. The
Company has entered into a flat fee contract with its environmental consultants
for $11,750 for the delineation investigation. Upon determination of the
contaminant plume, the Company will petition the DEP for a classification
exception area where the remedial action will be natural attenuation.
After the investigation is completed, the DEP could require clean-up or
remediation of the contamination on site, the cost of which could potentially be
in the range of $100,000 to $150,000. However, present technology is such that
no remedial action plan could bring the site in conformity with the present DEP
regulations, regardless of the funds spent.
The Company is unaware of any other environmental or similar matters that
would have a material effect on the capital expenditures, earnings or
competitive position of the Company.
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BACKLOG, IMPACT OF INFLATION, SEASONALITY
The Company attempts to maintain sufficient inventory levels for all
products to allow shipment against most orders for wiping products within a one
week period and next day for core stocking items of the Company's sanitation
products. To some extent, however, certain components must be inventoried
further in advance of actual orders to ensure availability. For the most part,
purchases are based upon quarterly requirements as projected after calculating
sales indications from the sales and marketing departments.
The Company's products are not subject to significant seasonal influences.
Because its products are sold primarily to distributors throughout the
United States and to distributors and end-users in Canada, the Company is
affected by general economic conditions. Accordingly, any adverse change in the
economic climate may have an adverse impact on the Company's sales and financial
condition.
YEAR 2000
The Year 2000 problem arises because many computer systems and software
products currently in use are coded to accept only two digit entries in the date
code field. Four digit entries will be required to identify 21st century dates.
Consequently, the use of software and computer systems that are not Year 2000
compliant could result in the disruption of operations. As a result, many
companies' computer systems and software may need to be upgraded or replaced to
conform with Year 2000 requirements.
In order to properly address the Year 2000 Issue, the Company has appointed
the Vice President, Information Technology of Wood Wyant as Year 2000 Project
Director to direct a project team which will coordinate the implementation of a
Year 2000 Plan by identifying Year 2000 issues and coordinating solutions. The
project team is currently being assembled. Its role will be to conduct Year 2000
readiness assessment audits at all of the Company's facilities, encompassing all
equipment and processes deemed important to the facility's operation.
Wood Wyant has installed new applications software for which it has
obtained written confirmation from the vendor that it is Year 2000 compliant.
This software has become operational in the first quarter of 1999. The software
currently in use at IFC is not Year 2000 compliant and will be replaced by
hardware and applications software which will be Year 2000 compliant by
mid-1999. As an additional precaution, the technical infrastructure of all the
Company's businesses will be audited and tested to ensure Year 2000 compliance
under normal business conditions.
The total cost of purchasing and installing the new Wood Wyant software is
estimated to be $1,957,000 (Cdn. $3,000,000), and is being financed through
lease facilities established with the Bank of Nova Scotia. The cost to replace
computer hardware and applications software at IFC has not yet been determined
but is not expected to be material.
The Company is also preparing to issue Year 2000 compliance letters
requesting confirmation of suppliers' readiness and follow-up discussions will
take place for all business-critical suppliers. Major customers will also be
contacted to confirm their Year 2000 readiness.
To date, the Company has not incurred significant incremental costs in
order to comply with Year 2000 requirements and does not believe it will incur
significant incremental costs in the foreseeable future. However, there can be
no assurance that Year 2000 errors or defects will not be discovered in the
Company's software systems and, if errors or defects are discovered, there is no
assurance that this would not result in a material financial risk to the
Company.
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In addition, the Company purchases goods and services from third party
vendors that may not be Year 2000 compliant. While the Company intends to obtain
confirmation of vendors' state of readiness during the second quarter of 1999,
their failure to operate properly with regard to Year 2000 requirements could
require the Company to incur material expenses to rectify the impact on the
Company of such failure. However, all of the Company's raw materials are widely
available and the Company is not dependent on any one supplier or group of
suppliers.
The Company does not know the state of preparedness for Year 2000 issues of
all of its customers. However, no single customer exceeds 2% of consolidated
sales and therefore the risk the Company faces is broad based if many customers
are unable to use information systems necessary to place orders for Company
products.
The Company's Year 2000 Issue involves significant risks. There can be no
assurance that the Company will succeed in implementing its Year 2000 Plan. The
following describes the Company's most reasonably likely worst-case scenario,
given current uncertainties.
If the Company's replaced internal information technology systems fail the
Company will experience significant difficulties in supplying customers and such
a failure could hamper the Company's ability to manage the orderly replenishment
of inventories.
If the Company's vendors or suppliers of its required power,
telecommunications, transportation and financial services, fail to provide the
Company with products and services, it will be unable to provide services to its
customers.
If any of these uncertainties were to occur, the Company's business,
financial condition and results of operations would be adversely affected. The
Company is unable to assess the likelihood of such events occurring or the
extent of the effect on the Company.
Although the Company has not yet developed a comprehensive contingency plan
to address situations that may result if the Company or any of the third parties
upon which the Company is dependent is unable to achieve Year 2000 readiness,
the Company's Year 2000 compliance program is ongoing and its ultimate scope, as
well as the consideration of contingency plans, will continue to be evaluated as
new information becomes available.
The Company plans to achieve Year 2000 compliance by mid-1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk principally in two areas, interest
rate risk and foreign currency exchange rate risk.
INTEREST RATE RISK
The Company's lines of credit and long-term debt are all at rates of
interest which fluctuate with changes to bank prime rates in either the United
States or Canada. Consequently, increases in interest rates could have an
adverse effect on the Company's future results.
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FOREIGN CURRENCY EXCHANGE RATE RISK
The Company's results of operations are significantly dependent on, and
materially affected by, the results of operations of Wood Wyant and the
attendant business risks that are associated with the operation of Wood Wyant as
a going concern. These material risks include the following:
- A significant portion of the Company's earnings, on a consolidated
basis, will come from Wood Wyant, a Canadian corporation. As a
result, the Company's results of operations and earnings may be
adversely affected by the fluctuation in the currency exchange rate
between US and Canadian dollars.
- Since Wood Wyant conducts its business using Canadian dollars as its
operational currency, to the extent the Canadian dollar strengthens
against the US dollar, United States competitors in the institutional
sanitation business may become more active in the Canadian market. As
a result, the Company's results of operations and earnings may be
adversely affected in light of potential greater competition in times
of a stronger Canadian dollar.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On April 21, 1997, the firm of Arthur Andersen LLP (the "Former Auditors")
was notified that it was being dismissed as Wyant's independent certified public
accountants as of such date and that the firm of Ernst & Young LLP (the
"Auditors") had been engaged as of such date as Wyant's independent certified
public accountants. The decision to dismiss the Former Auditors and to engage
the Auditors was approved by the Board of Directors at the time.
The Former Auditors served as independent certified public accountants for
Wyant since 1990. The Report of Independent Public Accountants of the Former
Auditors on the consolidated financial statements of Wyant and subsidiaries as
of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996 expressed an unqualified opinion. There were no
reportable events (as defined in Commission Regulation S-K, Item 304(a)(1)(v))
or disagreements with the Former Auditors on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
that were not resolved to the satisfaction of the Former Auditors during the
1995 and 1996 fiscal years and through April 21, 1997.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
ROBERT E. BRIGGS, AGE 54, a director since 1997, has been President of the
Division since May 1997. He joined Wyant as Vice President of Operations in
August 1996. Prior to that, Mr. Briggs was the Director of Operations for
American White Cross from 1993 to 1996. He started his career with Johnson &
Johnson, spending 26 years in increasingly important roles and held a number of
positions including Director of Operations for the Johnson & Johnson Film and
Finishing Operations.
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RICHARD J. CHARLES, AGE 68, a director since 1997, was a director of Wyant
& Company, an affiliate of Wyant, from 1995 to March 1997. He has been Vice
President - Customer Service and Subsidiaries of the Paper Converting Machine
Company of Green Bay, Wisconsin for 17 years.
THOMAS R.M. DAVIS, AGE 51, a director since 1996, was counsel to Wyant &
Company from 1987 to March 1997 and to Wood Wyant, Wyant's wholly owned Canadian
subsidiary, since March 1997 and has been a partner in the Canadian law firm of
McCarthy T#trault since 1980.
NICHOLAS A. GALLOPO, AGE 66, a director since 1996, is a consultant and
Certified Public Accountant. He retired as a partner of Arthur Andersen LLP in
1995 after 31 years with the firm. He also served as a director of Neuman Drug
Company in 1995 and 1996.
DONALD C. MACMARTIN, AGE 56, a director since 1995, was President of Wyant
& Company from 1994 until March 1997 and became Chairman, President and Chief
Executive Officer of Wood Wyant in March 1997. Prior to that, he was President
of Canstar Sports Inc. of Montreal, Quebec from 1992 to 1994 and President of
Corby Distilleries Ltd. of Montreal, Quebec from 1989 to 1992. Since 1996, Mr.
MacMartin has served as Wyant's Chief Executive Officer and the Chairman of the
Board of Directors and, in addition since 1997, as its President.
JOHN B. WIGHT, AGE 73, a director since 1995, is a Canadian Chartered
Accountant. He was a director of Wyant & Company from 1988 until March 1997.
JAMES A. WYANT, AGE 46, a director since 1990, has served as Vice Chairman
of the Board of Directors since 1995 and was appointed Corporate Secretary of
Wyant in March 1997. He was President and a director of Wyant & Company from
1986 until 1994, subsequently served as Vice Chairman of the Board of Directors
until March 1997 and became President and Secretary of Wyant & Company in March
1997. Mr. Wyant has also been a director and Vice Chairman of the Board of
Directors of Wood Wyant since March 1997.
Each director of the Company is elected yearly to serve by the shareholders
of the Company at its annual meeting.
EXECUTIVE OFFICERS
MARC A. D'AMOUR, AGE 41, was Vice President, Finance and Chief Financial
Officer of Wyant & Company from 1994 until March 1997 and became Vice President,
Finance and Chief Financial Officer of Wood Wyant in March 1997. Mr. D'Amour has
served as Vice President, Chief Financial Officer and Treasurer of Wyant since
March 1997. Prior to joining Wyant & Company, Mr. D'Amour held senior financial
positions with Domtar Inc. after an eleven-year career with Price Waterhouse.
The business experience, current position and related disclosure with
respect to Wyant's other executive officers, each of whom is also a director of
Wyant, is set forth above under "--Directors."
COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires executive officers, directors and persons who beneficially own more
than 10% of the Common Stock to file within prescribed periods initial
statements of beneficial ownership and statements of changes in beneficial
ownership of their shares of Common Stock with the Securities and Exchange
Commission (the "Commission") and the Nasdaq Stock Market. Such persons are also
required to furnish Wyant with copies of all such statements that they file.
Based on its review of the copies of such statements received by it, except as
described in the next paragraph, Wyant believes that, during 1998, all such
filing requirements applicable to such persons were duly complied with.
23
<PAGE> 155
Thomas R.M. Davis and Nicholas A. Gallopo each failed to report his initial
statement of beneficial ownership and the subsequent acquisition of options to
purchase 16,002 shares of Common Stock that were issued to each of them pursuant
to the 1997 Stock Incentive Plan on three separate dates between 1996 and 1998.
This failure to report was corrected by each of Mr. Davis and Mr. Gallopo by the
filing of a Form 3 and 4 with the Commission in March 1999.
Item 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLES
The following table summarizes compensation earned in 1998, 1997 and 1996
by the Chief Executive Officer and the only other executive officers whose 1998
salary and bonus exceeded $100,000 (the "named officers").
TABLE I
1998 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Number
of Shares
Covered
Name and by Stock
Principal Positions Year Salary Bonus Options (1)
- ------------------- ---- ------ ----- -----------
<S> <C> <C> <C> <C>
Donald C. MacMartin (2)
Chairman, President 1998 $269,633 -0- -0-
and Chief Executive 1997 245,582 $56,484 73,334
Officer 1996 -0- -0- 62,667
James A. Wyant (2) 1998 147,219 -0- -0-
Vice-Chairman and 1997 155,295 19,024 -0-
Corporate Secretary 1996 -0- -0- -0-
Robert E. Briggs 1998 190,000 45,600 -0-
President, Wyant 1997 158,461 25,000 33,335
Health Care Division 1996 47,767 12,500 13,334
Marc A. D'Amour (2) 1998 124,705 -0- -0-
Vice-President, Chief 1997 122,791 22,265 33,335
Financial Officer and 1996 -0- -0- 13,334
Treasurer
</TABLE>
(1) The number of shares referred to in Table I reflect the Stock Split.
(2) Compensation payments to Messrs. Donald C. MacMartin, James A. Wyant and
Marc A. D'Amour were made in Canadian dollars and, accordingly, such
payments have been converted to United States dollars using an average of
the exchange rates in effect during 1998 and 1997 of U.S. $1.00 = Cdn.
$1.4835 and U.S. $1.00 = Cdn. $1.3844, respectively.
24
<PAGE> 156
On September 23, 1997, the Board of Directors, acting on the recommendation
of a Special Subcommittee of the Compensation Committee of the Board of
Directors, unanimously approved a Cdn. $300,000 loan from Wood Wyant to
Donald C. MacMartin, the Corporation's Chairman, President and Chief
Executive Officer. Mr. MacMartin absented himself from the meeting.
Interest is payable annually based on Wood Wyant's cost of funds, which is
at prevailing commercial market rates (at December 31, 1998, such rate was
6.75%); principal is payable at the rate of $15,000 annually, over a ten
year period, with the balance payable at the end of such 10 year period.
As of April 22, 1999, there is Cdn. $285,000 outstanding with respect to
the loan.
TABLE 2
1998 STOCK OPTIONS TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES COVERED BY VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
NAME DECEMBER 31, 1998 (1) AT DECEMBER 31, 1998 (2)
- ------------------ -------------------------------- --------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
$ $
<S> <C> <C> <C> <C>
Donald C. MacMartin 140,001 6,667 -0- -0-
Robert E. Briggs 40,001 6,668 2,500 834
Marc A. D'Amour 41,668 5,001 -0- -0-
</TABLE>
____________
(1) The number of shares referred to in Table 2 reflect the Stock Split.
(2) Based on the price of $3.25 per share, the closing price of the shares
on the Nasdaq National Market System on December 31, 1998.
REPORT OF THE COMPENSATION COMMITTEE
Wyant's executive compensation program is based upon creating shareholder
value. All executive activities including Wyant strategic planning, management
initiatives and overall financial performance are focused on increasing
shareholder value. The Compensation Committee of the Board of Directors has
established a program to:
(1) Reward executives for long-term strategic management and the
enhancement of shareholder value.
(2) Integrate compensation programs with Wyant's annual and long-term
strategic planning.
(3) Support a performance-oriented environment that rewards performance
not only with respect to Wyant goals but also Wyant performance as
compared to industry performance levels.
25
<PAGE> 157
The total compensation program consists of both cash and equity-based
compensation. The Compensation Committee determines the level of salary and
bonuses, if any, for key executive officers based upon competitive norms.
Actual salary changes are based upon performance.
Long-term incentives are provided through the issuance of stock options,
pursuant to Wyant's 1991 Stock Option Plan and 1997 Stock Incentive Plan. The
1997 Stock Incentive Plan also permits the granting of other types of
stock-based awards. The Board of Directors has the power, subject to the
provisions of these plans, and utilizing recommendations received from the
Stock Option Committee, to determine the persons to whom and the dates on which
awards will be granted, the number of shares subject to each award and the term
and other conditions applicable to each award.
Compensation Committee
James A. Wyant (Chair)
Richard J. Charles
Thomas R.M. Davis
Donald C. MacMartin
John B. Wight
EMPLOYMENT AND RELATED AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Pursuant to an employment agreement with Wood Wyant, James A. Wyant serves
as Vice-Chairman of Wood Wyant and receives a base salary (Cdn. $218,400 in
1998 [U.S. $147,219]), subject to annual increases based on the increase, if
any, in the Consumer Price Index of Canada, bonus compensation based upon a
specified formula and certain other benefits. Unless it is terminated earlier
pursuant to its terms, such employment agreement will expire on December 31,
2001, subject to extension on a year-to-year basis thereafter. Mr. Wyant also
serves as Vice-Chairman and Corporate Secretary of Wyant.
Effective January 1, 1999, Donald C. MacMartin and Marc D'Amour entered
into employment agreements with Wood Wyant and will receive a base salary of
Cdn. $410,000 and Cdn. $195,000, respectively. The agreements also provide for
bonus compensation at the discretion of the Board of Directors of Wood Wyant
and for certain other benefits. Mr. MacMartin serves as Chairman, President and
Chief Executive Officer of Wood Wyant and Mr. D'Amour as Vice-President,
Finance and Chief Financial Officer. Unless terminated earlier pursuant to
their terms, the employment agreements will expire on December 31, 2001,
subject to extension on a year-to-year basis thereafter. Mr. MacMartin also
serves as Chairman, President and Chief Executive Officer of Wyant and Mr.
D'Amour serves as Wyant's Vice-President, Chief Financial Officer and
Treasurer.
Pursuant to a retirement arrangement agreement dated June 27, 1994, as
amended, between Mr. MacMartin and Wood Wyant, Wood Wyant agreed to provide Mr.
MacMartin, on retirement or death, with supplementary retirement benefits to
the extent that the benefits provided under such retirement arrangement exceed
the benefits provided pursuant to Wood Wyant's defined benefit final average
pension plan.
Pursuant to a severance agreement dated August 14, 1997 between Wyant and
Robert E. Briggs, Mr. Briggs will receive one year's salary from Wyant if
either (1) within three months after the sale of all or substantially all of
the assets of the Division, Mr. Briggs is terminated without cause by the
buyer thereof or (2) at the time of such sale, Mr. Briggs declines any offer of
employment made by the buyer of the Division. In either situation, the payment
to Mr. Briggs of one year's salary will be made on the final date of employment
with the buyer or the Division, as the case may be, based on his salary then in
effect. Notwithstanding this agreement, no payment will be made to Mr. Briggs
should he resign following his acceptance of any such offer of employment from
the buyer of the Division. This severance agreement would be applicable to Mr.
Briggs if the Paper-Pak Transaction is consummated. Mr. Briggs serves as
President of the Division.
26
<PAGE> 158
PERFORMANCE GRAPH
Set forth below is a line graph comparing cumulative total shareholder
return, over five years, upon an investment in the Common Stock with
(artificially aggregated) an equivalent investment in (a) Nasdaq Stock Market
companies (U.S.), and (b) those in the Paper and Allied Products index of the
Nasdaq Stock Market:
GRAPH
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
WYANT CORPORATION
Prepared by the Center for Research in Security Prices
Produced on 03/11/99 including data to 12/31/1998
LOGO
LEGEND
<TABLE>
<CAPTION>
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 12/1993 12/1994 12/1995 12/1996 12/1997 12/1998
- ------ ----------------------------- ------- ------- -------- ------- ------- -------
<C> <S> <C> <C> <C> <C> <C> <C>
Wyant Corporation 100.0 116.0 110.0 74.0 104.0 69.3
Nasdaq Stock Market (US Companies) 100.0 97.8 138.3 170.0 208.3 293.5
NASDAQ Stocks (SIC 2600-2699 US Companies)
Paper and allied products 100.0 107.7 117.5 151.9 202.8 164.9
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to 100.0 on 12/31/93.
27
<PAGE> 159
STANDING COMMITTEES OF THE BOARD OF DIRECTORS, COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has no Nominating Committee, but the Board of
Directors as a whole nominates director candidates.
The Board of Directors met twelve times in 1998 to review financial
information, corporate business strategies and general matters in respect of
Wyant's business.
The Executive Committee, comprised of Donald C. MacMartin, Thomas R.M.
Davis, Nicholas A. Gallopo and James A. Wyant, met once in 1998 to review a
strategic business issue.
The Audit Committee, comprised of Richard J. Charles, Nicholas A. Gallopo,
John B. Wight and James A. Wyant, met three times during 1998 to review
financial reporting matters and to discuss audit, internal control, information
technology and other matters.
The Compensation Committee, comprised of Richard J. Charles, Thomas R.M.
Davis, Donald C. MacMartin, John B. Wight and James A. Wyant, met seven times
during 1998 to consider compensation principles and practices and the amounts to
be paid to officers and senior employees.
The Stock Option Committee, comprised of Richard J. Charles, Thomas R.M.
Davis and Nicholas A. Gallopo, met once during 1998 to consider the grants of
options to employees of Wyant and its subsidiaries.
Donald C. MacMartin and James A. Wyant serve on the Compensation Committee
and are also executive officers of Wyant. John B. Wight also serves on the
Compensation Committee and is an employee of Wood Wyant. Mr. MacMartin does not
participate in any decisions of the Compensation Committee concerning his own
compensation. The Compensation Committee does not consider the compensation of
Mr. Wyant or Mr. Wight.
During 1998 all directors of Wyant attended 75% or more of the meetings of
the Board of Directors and the committees on which they served.
COMPENSATION OF DIRECTORS
During 1998, each director of Wyant who was not an employee of the Company
received an annual director's fee of $8,000 paid in equal quarterly
installments. In addition, under Wyant's 1997 Stock Incentive Plan, options to
purchase Common Stock at $5.8125 per share were awarded during 1998 to the
following directors: Richard J. Charles (1,334 shares), Thomas R.M. Davis (1,334
shares) and Nicholas A. Gallopo (1,334 shares). Under this plan, each new
non-employee director of Wyant receives an option to purchase 13,334 shares of
Common Stock upon joining Wyant's Board of Directors and each continuing
non-employee director receives an option to purchase 1,334 shares of Common
Stock for each year of service on the Board of Directors. The exercise price of
each such option is equal to the fair market value of the covered shares at the
time the option is granted. Lastly, effective May 28, 1998, Mr. Davis and Mr.
Gallopo each received a special fee of $1,000 payable in quarterly installments
in respect of their services as chairmen of the Stock Option Committee and the
Audit Committee, respectively.
28
<PAGE> 160
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND WYANT MANAGEMENT
The following table sets forth certain information regarding the ownership
of Common Stock as of April 22, 1999 by (1) all of those known by Wyant to be
beneficial owners of more than five percent (5%) of the outstanding shares of
Common Stock; (2) each director of Wyant, (3) each of the executive officers
named in Table I - 1998 Summary Compensation Table under "Executive
Compensation # Summary Compensation Tables;" and (4) all executive officers and
directors of Wyant as a group.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED (1)(2) OF CLASS
- ------------------- ------------ --------
<S> <C> <C>
The Wyant Voting Trusts 1,250,252 (3) 55.0%
c/o Wyant & Company Inc.
1475, 32nd Avenue
Lachine, Quebec
Wyant & Company Inc. 1,333,333 (4) 37.0%
1475, 32nd Avenue
Lachine, Quebec
First Wilshire Securities Management, Inc. 194,841 8.6%
600 South Lake Street
Pasadena, California
Wilen Management Company, Inc. 214,149 9.4%
2360 West Joppa Road
Lutherville, Maryland
Donald C. MacMartin
(Chairman of the Board, President & Chief 178,001 (5) 7.4%
Executive Officer)
James A. Wyant 0 (3)(4) 0.0%
(Vice Chairman of the Board &
Corporate Secretary)
Marc A. D'Amour 45,335 (6) 2.0%
(Vice-President, Chief Financial Officer &
Treasurer)
Robert E. Briggs 44,001 (7) 1.9%
(A Director)
Richard J. Charles 14,668 (8) 0.6%
(A Director)
Thomas R.M. Davis 17,002 (9) 0.7%
(A Director)
Nicholas A. Gallopo 16,002 (10) 0.7%
(A Director)
John B. Wight 32,001 (11) 1.4%
(A Director)
All Directors and Officers as a Group 2,708,373 (12) 73.5%
(8 Persons)
</TABLE>
29
<PAGE> 161
1. In accordance with Rule 13d-3 under the Securities Exchange Act of 1934
(the "Exchange Act"), a person is deemed to be the beneficial owner, for
the purposes of this table, of any shares of Wyant if he or she has or
shares voting or investment power with respect to such security or has the
right to acquire beneficial ownership of any shares of Wyant within 60 days
of the Record Date. For purposes of calculating the percentage of
outstanding shares held by each person included in the table above, any
shares which such person has the right to acquire within 60 days of the
Record Date are deemed to be outstanding, but not for the purpose of
calculating the percentage ownership of any other person. Unless otherwise
noted, the persons as to whom the information is provided have sole voting
and investment power over the shares of Wyant shown as beneficially owned.
2. These shares of Common Stock include fractional shares issued pursuant to
the Stock Split, rounded to the nearest whole number.
3. These shares of Common Stock are held pursuant to certain trust agreements
for the benefit of certain Canadian corporations owned by members of the
Wyant family as follows: (i) 420,920 shares held for the benefit of Wyant
& Company Inc., a Canadian corporation owned by members of the Wyant family
("Wyant & Company"); (ii) 317,333 shares held for the benefit of 3287858
Canada Inc., a Canadian corporation wholly owned by Lynne Emond
("Lynneco"); (iii) 317,333 shares held for the benefit of Derek Wyant
Holdings Inc., a Canadian corporation wholly owned by John Derek Wyant,
M.D. ("Derekco"); and (iv) 194,666 shares held for the benefit of 3323986
Canada Inc., a Canadian corporation wholly owned by the Estate of the late
Gerald W. Wyant ("Geraldco"). The shares held for the benefit of Wyant &
Company, Lynneco and Derekco are subject to a voting trust (the "First
Voting Trust"), under which James A. Wyant has sole and absolute discretion
to vote and dispose of such shares. After March 18, 2003, Wyant & Company,
Lynneco and Derekco shall each have the right to have up to ten percent of
their respective shares released from the First Voting Trust each year. The
First Voting Trust will terminate as of March 18, 2012, unless terminated
earlier pursuant to its terms. The shares held for the benefit of Geraldco
are subject to the terms of a separate voting trust (the "Second Voting
Trust"), under which James A. Wyant has sole and absolute discretion to
vote such shares. The terms of the Second Voting Trust limit the power of
James A. Wyant and Geraldco to dispose of the shares directly or
indirectly, but provide James A. Wyant with an option to purchase the
shares pursuant to terms established thereunder. The Second Voting Trust
will terminate as of March 31, 2007, unless terminated earlier pursuant to
its terms. James A. Wyant, in his capacity as voting trustee, may be deemed
to be the beneficial owner of all the shares held in the First and Second
Voting Trusts but he disclaims beneficial ownership of such shares, other
than the shares held in the First Voting Trust for the benefit of Wyant &
Company.
4. These shares of Common Stock represent record ownership by Wyant & Company
of 1,333,333 shares of Class E Exchangeable Preferred Stock of Wood Wyant
Inc. ("Wood Wyant"), a wholly owned Canadian subsidiary of Wyant (the
"Class E Preferred Stock"), which are exchangeable, on demand and without
additional consideration, for shares of Common Stock of Wyant on a
one-for-one basis. Although Wyant & Company is the record owner of the
Class E Preferred Stock, under the terms of a written agreement among
Wyant & Company and certain of its shareholders, and by virtue of
Lynneco's and Derekco's respective interests in Wyant & Company, each of
Lynneco and Derekco is entitled to cause Wyant & Company to (i) exchange
up to 111,111 shares of the Class E Preferred Stock for an equal number of
shares of Common Stock and (ii) immediately thereafter, sell such shares
of Common Stock and deliver to Derekco and Lynneco the net after-tax
proceeds resulting from such sale. Accordingly, Wyant & Company disclaims
beneficial ownership of the Class E Preferred Stock with respect to which
Lynneco and Derekco retain investment control.
5. Includes 73,334 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 66,667 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
6. Includes 13,334 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 30,001 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
30
<PAGE> 162
7. Includes 13,334 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 26,667 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
8. Includes 14,668 shares subject to the Non-Employee Director Options granted
to Mr. Charles under Wyant's 1997 Stock Incentive Plan.
9. Includes 16,002 shares subject to the Non-Employee Director Options granted
to Mr. Davis under Wyant's 1997 Stock Incentive Plan.
10. Includes 16,002 shares subject to the Non-Employee Director Options granted
to Mr. Gallopo under Wyant's 1997 Stock Incentive Plan.
11. Includes 10,667 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 17,334 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
12. Includes 1,250,252 shares beneficially owned by the Wyant Voting Trusts,
1,111,111 shares of the Class E Preferred Stock beneficially owned by Wyant
& Company and 298,010 shares subject to options held by the directors and
executive officers of Wyant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, the law firm of McCarthy Tetrault provided legal services to
Wyant and Wood Wyant. Thomas R.M. Davis, a director of Wyant, is a member of
the law firm of McCarthy Tetrault. In 1998, the fees paid by Wyant and Wood
Wyant to McCarthy Tetrault were approximately Cdn. $263,000 (US $177,000). These
fees are comparable to the fees that Wyant and Wood Wyant would have paid to an
unaffiliated law firm based on the legal services that were provided.
31
<PAGE> 163
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. The following Financial Statements are included in Item 8.
<TABLE>
<S> <C>
Reports of Independent Auditors F-1
Consolidated Balance Sheet as at December 31, 1998
and 1997 F-3
Consolidated Statement of Operations for the years
ended December 31, 1998, 1997 and 1996 F-4
Consolidated Statement of Stockholders' Equity for
the years ended December 31,1998, 1997 and 1996 F-5
Consolidated Statement of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial Statements F-9
</TABLE>
2. Financial Statement Schedules.
Schedule II - Valuation and Qualifying Accounts. F-32
All other schedules are omitted because they are not applicable or not
required, or the applicable information is shown in the Consolidated
Financial Statements or in notes thereto.
3. Exhibits
The following exhibits have been previously filed or incorporated by
reference as indicated. Exhibit numbers refer to Item 601 of
Regulation S-K.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
2.1 Asset Purchase Agreement dated as of February 23, 1999 between
Wyant Corporation and Paper-Pak Products, Inc. (incorporated by
reference from the Company's Current Report on Form 8-K dated
February 23, 1999).
3.1 Certificate of Incorporation and Amendments thereof (with the
exception of Exhibits 3.2 and 3.3 below) and By-Laws are
incorporated by reference. They were filed as exhibits with the
Company's February 2, 1984 and January 7, 1987 Registration
Statements and the Registrant's Proxy Statement filed May 30,
1990.
3.2 Certificate of Amendment of the Certificate of Incorporation
dated March 18, 1997 (incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December
31, 1996).
3.3 Certificate of Amendment of the Certificate of Incorporation
dated June 3, 1998 (incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998).
32
<PAGE> 164
EXHIBIT NO. DESCRIPTION OF EXHIBIT
9.1 Voting Trust Agreement dated March 14, 1997 among McCarthy
Tetrault, as depository, James A. Wyant, as voting trustee, and
3323986 Canada Inc. (incorporated by reference to Exhibit D of
Amendment No. 13 to Schedule 13D filed March 18, 1997).
9.2 Voting Trust Agreement dated March 18, 1997 among Wyant & Company
Inc., McCarthy Tetrault, as depository, James A. Wyant, as voting
trustee, 3287858 Canada Inc., and Derek Wyant Holdings Inc.
(f/k/a 1186020 Ontario Limited) (incorporated by reference to
Exhibit C of Amendment No. 12 to Schedule 13D dated December 3,
1996 and filed on December 13, 1996).
10.1 The 1991 Stock Option Plan filed with the Company's 1994 Proxy
Statement is incorporated by reference thereto.
10.2 The 1997 Stock Incentive Plan filed with the Company's Form S-8
on March 19, 1997 is incorporated by reference thereto.
10.3 Loan and Security Agreement between Congress Financial
Corporation and Wyant Corporation, IFC Disposables, Inc. and
Bridgewater Manufacturing Corp. dated November 18, 1997
(incorporated by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997).
10.4 Credit facilities agreement between the Bank of Nova Scotia and
Wood Wyant Inc. dated June 22, 1998, together with amendments
thereto dated February 19, 1999 and March 10, 1999 (previously
filed).
10.5 Employment Agreement dated November 11, 1996 between James A.
Wyant and Wood Wyant Inc. (successor to G.H. Wood + Wyant Inc.),
as amended (incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1997).
10.6 Addendum dated March 10, 1998 to the Employment Agreement dated
November 11, 1996, as amended, between James A. Wyant and Wood
Wyant Inc. (previously filed).
10.7 Retirement Arrangement Agreement dated June 27, 1994 between Wood
Wyant Inc. (successor to G.H. Wood + Wyant Inc.) and Donald C.
MacMartin (incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1997).
10.8 Employment Agreement dated January 1, 1999 between Donald C.
MacMartin and Wood Wyant Inc. (previously filed).
10.9 Employment Agreement dated January 1, 1999 between Marc D'Amour
and Wood Wyant Inc. (previously filed).
10.10 Letter of Agreement dated August 14, 1997 between Wyant
Corporation and Robert E. Briggs (previously filed).
10.11 Indemnification Agreement dated March 11, 1999 between Wyant
Corporation and James A. Wyant (previously filed).
16.1 Letters from Arthur Andersen LLP regarding change of certifying
independent accountants (incorporated by reference from the
Company's Current Report on Form 8-K dated April 21, 1997).
33
<PAGE> 165
EXHIBIT NO. DESCRIPTION OF EXHIBIT
21.1 Subsidiaries (previously filed).
(b) Reports on Form 8-K
No current reports on Form 8-K have been filed during the quarter ended
December 31, 1998.
Shareholders may obtain a copy of any exhibit not filed herewith by writing
to Wyant Corporation, P.O. Box 8609, Somerville, New Jersey 08876.
34
<PAGE> 166
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WYANT CORPORATION
<TABLE>
<S> <C>
By: /s/M.A. D'Amour
--------------------------
M.A. D'Amour
Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date: May 13, 1999
</TABLE>
35
<PAGE> 167
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Wyant Corporation [formerly Hosposable Products, Inc.]
We have audited the accompanying consolidated balance sheet of Wyant
Corporation [formerly Hosposable Products, Inc.] as at December 31, 1998 and
1997, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the two years then ended. Our audit also included the
financial statement schedule listed in the Index at 14(a). These financial
statements and the schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
an audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinions.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Wyant
Corporation at December 31, 1998 and 1997, and the consolidated results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We previously audited and reported on the consolidated balance sheet and
related consolidated statements of income, stockholders' equity and cash flows
of The Canadian Operations of G.H. Wood + Wyant Inc. and Subsidiaries for the
year ended December 31, 1996, prior to their restatement for the 1997
transaction more fully described in Note 3. The contribution of G.H. Wood +
Wyant Inc. and Subsidiaries to total assets, revenues and expenses represented
46.9%, 68.8% and 57.1% of the respective restated totals for 1996. Financial
statements of the other pooled company included in the 1996 restated
consolidated statements were audited and reported on separately by other
auditors. We also have audited, as to combination only, the accompanying
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended December 31, 1996, after restatement for the 1997 pooling of
interests; in our opinion, such consolidated financial statements have been
properly combined on the basis described in Note 3 to the consolidated financial
statements.
Montreal, Canada,
February 16, 1999, except for Note 2
which is as at February 23, 1999. Ernst & Young LLP
F-1
<PAGE> 168
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Hosposable Products, Inc.
We have audited the accompanying consolidated balance sheets of Hosposable
Products, Inc. (a New York corporation) and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of operations, changes in
stockholders equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hosposable Products, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
New York, New York Arthur Andersen LLP
February 11, 1997 (except with respect
to matters discussed in Note 13 as to
which the date is March 18, 1997)
F-2
<PAGE> 169
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As at December 31
------------------------
1998 1997
$ $
---------- ---------
[Restated]
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 59,985 156,131
Receivables [note 4] 10,215,812 9,298,779
Inventories [note 5] 8,576,960 6,161,254
Net assets held for divestiture [note 2] 9,203,356 9,981,183
Other 1,393,270 1,683,097
---------- ----------
TOTAL CURRENT ASSETS 29,449,383 27,280,444
---------- ---------
Property, plant and equipment, net of accumulated depreciation and
amortization of $11,474,155 [1997- $10,651,878] [notes 6 & 8 8,593,460 8,798,204
Other assets [note 7] 4,496,821 1,077,229
---------- ----------
TOTAL ASSETS 42,539,664 37,155,877
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving line of credit [note 8] 4,092,128 2,204,719
Committed revolving credit facility [note 8] 4,238,720 5,880,748
Accounts payable 4,856,657 4,951,071
Accrued expenses 3,228,412 1,988,842
Income taxes payable 433,288 1,252,988
Current portion of long-term debt [note 8] 1,061,332 389,035
Current portion of preferred stock of subsidiary [note 3] 513,204 550,084
---------- ----------
TOTAL CURRENT LIABILITIES 18,423,741 17,217,487
---------- ----------
Long-term debt, excluding current portion [note 8] 3,887,593 1,998,152
Preferred stock of subsidiary [note 3] 5,477,072 4,379,527
Deferred income taxes [note 9] 2,076,416 1,780,726
Commitments [note 14]
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share, authorized 6,000,000
shares; issued and issuable 3,607,150 {3,604,817 in 1997} 27,053 27,037
Additional paid-in capital 6,821,825 6,806,867
Retained earnings 6,326,679 5,112,006
Cumulative translation adjustment (500,715) (165,925)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 12,674,842 11,779,985
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 42,539,664 37,155,877
========== ==========
</TABLE>
See accompanying notes
F-3
<PAGE> 170
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
$ $ $
[Restated] [Restated]
<S> <C> <C> <C>
NET SALES 67,124,137 63,559,703 62,590,707
COST OF SALES 43,218,466 39,691,201 38,151,474
---------- ---------- ----------
GROSS PROFIT 23,905,671 23,868,502 24,439,233
---------- ---------- ----------
EXPENSES
Selling 12,658,838 11,931,480 12,015,764
General and administration 8,699,535 9,193,943 9,308,838
Amortization 507,540 428,811 505,345
Non-recurring items [note 11] -- -- 549,805
Interest expense 1,158,249 745,089 511,253
Other income [note 12] (244,067) (230,790) (184,636)
---------- ---------- ----------
22,780,095 22,068,533 22,706,369
---------- ---------- ----------
Income from continuing operations before income
taxes and extraordinary gain 1,125,576 1,799,969 1,732,864
Income tax expense [note 9] 572,000 800,597 795,993
---------- ---------- ----------
Income from continuing operations before
extraordinary gain 553,576 999,372 936,871
Discontinued operations [note 2] --
Income (loss) from operations (net of income taxes
(recoveries) of $545,000, ($289,610) and ($448,358),
respectively) 1,021,602 (580,874) (792,481)
---------- ---------- ----------
Income before extraordinary gain 1,575,178 418,498 144,390
Extraordinary gain, net of income taxes [note 13] -- 91,958 --
---------- ---------- ----------
NET INCOME 1,575,178 510,456 144,390
Dividends and accretion of mandatorily
redeemable preferred stock 360,505 191,746 --
---------- ---------- ----------
NET INCOME ATTRIBUTABLE TO COMMON SHARES 1,214,673 318,710 144,390
========== ========== ==========
Per common share [note 15]
BASIC
Income from continuing operations before
extraordinary gain 0.06 0.22 0.26
Discontinued operations 0.28 (0.16) (0.22)
Extraordinary gain -- 0.03 --
Net income 0.34 0.09 0.04
DILUTED
Income from continuing operations before
extraordinary gain 0.06 0.22 0.26
Discontinued operations 0.27 (0.16) (0.22)
Extraordinary gain -- 0.03 --
Net income 0.33 0.09 0.04
</TABLE>
See accompanying notes
F-4
<PAGE> 171
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------
1998 1997 1996
$ $ $
---------- ---------- -----------
[Restated] [Restated]
<S> <C> <C> <C>
COMMON STOCK AT PAR VALUE
Balance at beginning of year 27,037 27,037 27,037
Stock issued for options exercised 16 -- --
---------- ---------- -----------
BALANCE AT END OF YEAR 27,053 27,037 27,037
---------- ---------- -----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year 6,806,867 6,789,397 6,789,397
Stock issued for options exercised 14,958 -- --
Gain on sale of treasury stock -- 17,470 --
---------- ---------- ----------
BALANCE AT END OF YEAR 6,821,825 6,806,867 6,789,397
---------- ---------- ----------
RETAINED EARNINGS
Balance at beginning of year 5,112,006 4,999,823 5,390,064
Net income 1,575,178 510,456 144,390
Dividends declared by subsidiary (190,955) (125,746) --
Accretion on preferred shares of subsidiary (169,550) (66,000) --
Distribution to minority shareholders -- (206,527) (534,631)
---------- ---------- ----------
BALANCE AT END OF YEAR 6,326,679 5,112,006 4,999,823
---------- ---------- ----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of year (165,925) 26,955 72,146
Foreign currency translation adjustments (334,790) (192,880) (45,191)
---------- ---------- ----------
BALANCE AT END OF YEAR (500,715) (165,925) 26,955
---------- ---------- ----------
TREASURY STOCK
Balance at beginning of year -- (31,530) (31,530)
Treasury stock sold, at cost -- 31,530 --
---------- ---------- ----------
BALANCE AT END OF YEAR -- -- (31,530)
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 12,674,842 11,779,985 11,811,682
========== ========== ==========
COMPREHENSIVE INCOME
Net income 1,575,178 510,456 144,390
Other - foreign currency translation adjustments (334,790) (192,880) (45,191)
---------- ---------- ----------
COMPREHENSIVE INCOME FOR YEAR 1,240,388 317,576 99,199
---------- ---------- ----------
</TABLE>
F-5
<PAGE> 172
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY [CONT'D]
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------------------
1998 1997 1996
$ $ $
--------- --------- ---------
[Restated] [Restated]
<S> <C> <C> <C>
COMMON SHARES
Number issued at beginning of year 2,271,484 2,271,484 2,271,484
Shares issued for options exercised 2,333 -- --
NUMBER ISSUED AT END OF YEAR 2,273,817 2,271,484 2,271,484
--------- --------- ---------
TREASURY STOCK
Held at beginning of year -- (14,933) (14,933)
Sold during the year -- 14,933 --
--------- --------- --------
HELD AT END OF YEAR -- -- (14,933)
--------- --------- --------
COMMON SHARES ISSUED AND OUTSTANDING 2,273,817 2,271,484 2,256,551
COMMON SHARES ISSUABLE UPON CONVERSION OF
EXCHANGEABLE SHARES [NOTE 3] 1,333,333 1,333,333 1,333,333
--------- --------- ---------
COMMON SHARES ISSUED, ISSUABLE AND OUTSTANDING 3,607,150 3,604,817 3,589,884
========= ========= =========
</TABLE>
See accompanying notes
F-6
<PAGE> 173
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------------
1998 1997 1996
$ $ $
----------- ----------- -----------
[Restated] [Restated]
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations 553,576 1,091,330 936,871
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 1,137,698 990,013 1,060,687
Loss (gain) on sale of fixed assets 11,792 (28,470) (122,810)
Deferred income tax expense (benefit) 72,000 (25,823) 814,027
Deferred pension costs (107,014) (92,177) (13,200)
Increase in deferred charges (49,480) (320,234) --
Decrease (increase) in working capital (511,879) 752,956 (73,888)
Decrease in other liabilities -- -- (100,000)
Cash provided by (used for) discontinued
operations 2,727,120 (1,994,643) (57,400)
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,833,813 372,952 2,444,287
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of businesses, net of cash
acquired [note 3] (3,853,158) -- --
Capital expenditures (853,692) (1,313,246) (970,985)
Cash proceeds from sale of fixed assets 15,850 35,628 236,188
Sale of marketable securities -- 446,812 1,488,783
Purchase of marketable securities -- -- (573,362)
Decrease in other assets 83,278 -- --
Cash used for discontinued operations (234,590) (564,933) (2,969,853)
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (4,842,312) (1,395,739) (2,789,229)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in committed revolving
credit facility (1,642,028) 5,880,748 --
Repayment of long-term debt (1,001,944) (7,820,959) (2,066,431)
Increase in long-term debt 3,723,111 5,122,507 2,233,353
Distribution to minority shareholders -- (206,527) (534,631)
Issue of common shares 14,974 -- --
Redemption of preferred shares (550,122) -- --
Sale of treasury stock -- 49,000 --
Dividends paid by subsidiary (190,955) (125,746) --
Increase (decrease) in bank indebtedness 1,376,683 911,368 (481,598)
Distribution to G.H. Wood + Wyant Inc.
shareholders [note 3] -- (3,667,033) --
Cash used for discontinued operations (500,101) (349,428) (98,327)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,229,618 (206,070) (947,634)
---------- ---------- ----------
Effect of exchange rate changes on cash (317,265) (185,637) (56,268)
---------- ---------- ----------
Net decrease in cash and cash equivalents (96,146) (1,414,494) (1,348,844)
Cash and cash equivalents, beginning of year 156,131 1,570,625 2,919,469
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR 59,985 156,131 1,570,625
========== ========== ==========
</TABLE>
F-7
<PAGE> 174
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF CASH FLOWS [CONT'D]
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------
1998 1997 1996
$ $ $
--------- --------- ---------
[Restated] [Restated]
<S> <C> <C> <C>
DECREASE (INCREASE) IN WORKING CAPITAL
Decrease in accounts receivable 976,667 338,451 376,263
Decrease (increase) in inventories (575,736) 852,005 732,898
Decrease (increase) in other current assets 593,683 29,537 (139,879)
Decrease in accounts payable and accrued liabilities (663,066) (1,439,298) (1,323,897)
Increase (decrease) in income taxes payable (843,427) 972,261 280,727
--------- ---------- ----------
(511,879) 752,956 (73,888)
========= ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (received) during the year for
Interest 1,002,946 530,153 495,767
Income taxes 1,061,716 (216,376) (300,690)
---------- ---------- ----------
</TABLE>
See accompanying notes
F-8
<PAGE> 175
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Wyant Corporation [formerly Hosposable Products, Inc.], a New York
corporation incorporated in 1971 [the "Corporation"], operates the
following wholly owned subsidiaries: IFC Disposables, Inc., a Tennessee
corporation ["IFC"] and Wood Wyant Inc., a Canadian corporation ["Wood
Wyant]. IFC manufactures and distributes disposable wipers and sanitary
paper products and systems which are sold primarily in domestic markets.
Wood Wyant manufactures and distributes sanitation products and systems to
commercial and institutional markets in Canada.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Corporation and its wholly owned subsidiaries, IFC and Wood Wyant
[collectively, the "Company"]. All significant intercompany balances and
transactions have been eliminated in consolidation.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
UTILIZATION OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
EARNINGS PER SHARE
Basic earnings per share are calculated using the weighted average number
of shares outstanding during the period. Contingently issuable shares are
considered outstanding common shares and included in the calculation of
basic earnings per share only when there is no circumstance under which
these shares would not be issued.
Diluted earnings per share are calculated taking into consideration the
effect of the potential exercise of stock options and of the exchangeable
Class F preferred shares.
F-9
<PAGE> 176
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D]
INVENTORIES
Inventories are stated at the lower of cost and net realizable value. Cost
is determined on a first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation and
amortization of property, plant and equipment in the Wiping Products
segment is provided utilizing the straight-line method over the estimated
useful lives of the respective assets ranging from 5 to 30 years; in the
Sanitation Products segment, the declining balance method is used, with
rates ranging from 5% to 20% per year. Leasehold improvements are amortized
on a straight-line basis over the term of the related leases or the
estimated useful life, whichever is shorter. Patents and trademarks are
amortized on a straight-line basis over periods from 5 to 17 years.
GOODWILL
Goodwill is amortized on a straight-line basis over periods not exceeding
40 years. The Company periodically reviews goodwill for possible
impairment, which would be recognized if a permanent decline in value has
occurred.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards ["SFAS"] No.123, "Accounting
for Stock-Based Compensation," encourages, but does not require companies
to record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to continue to account for stock-based
compensation awards to employees and directors using the intrinsic value
method prescribed in Accounting Principles Board Opinion ["APB"] No.25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for stock options awarded to employees and
directors is measured as the excess, if any, of the quoted market price of
the Corporation's stock at the date of grant over the amount an employee or
director must pay to acquire the stock.
As required, the Company has adopted SFAS No.123 to account for stock-based
compensation awards to outside consultants and affiliates. Accordingly,
compensation costs for stock option awards to outside consultants and
affiliates are measured at the date of grant based on the fair value of the
award using the Black-Scholes option pricing model.
F-10
<PAGE> 177
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D]
INCOME TAXES
The Company files a consolidated federal income tax return for its United
States companies. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the year in
which those temporary differences are expected to be recovered or settled.
Deferred income taxes result primarily from differences between financial
and tax reporting of depreciation.
FOREIGN CURRENCY TRANSLATION
The Corporation translates the accounts of its foreign subsidiary, Wood
Wyant, such that the assets and liabilities of the subsidiary are
translated into U.S. dollars at rates of exchange prevailing at the
year-end. Exchange gains and losses arising from these translations are
deferred and included as a separate component of stockholders' equity on
the consolidated balance sheet ["Cumulative Translation Adjustment"].
Revenue and expense items are translated at average rates of exchange
prevailing during the year.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires all
derivatives to be recorded on the balance sheet at fair value and provides
a comprehensive and consistent standard for the recognition and measurement
of derivatives and hedging activities. The Company is studying the
application of this new standard but has not yet determined its impact. As
required, the Company will adopt this statement upon its applicable
effective date in fiscal 2000.
2. DISCONTINUED OPERATIONS
On December 17, 1998, the Board of Directors authorized management to
pursue the sale of the Company's Wyant Health Care Division ("Division").
On February 23, 1999 the Board approved the sale of the Division, subject
to completion of buyer financing, customary regulatory approvals and the
approval of the Company's shareholders. Consequently, the results of the
Division have been reported in these financial statements as discontinued
operations.
F-11
<PAGE> 178
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
2. DISCONTINUED OPERATIONS [CONT'D]
The Company will receive cash of $11,500,000 on closing and $550,000 will
be held in escrow for twenty four months, subject to adjustment on closing.
The operating results of the Division are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
---------- ---------- ---------
<S> <C> <C> <C>
Net sales 36,462,815 31,324,702 31,829,712
Income (loss) before income taxes 1,566,602 (870,484) (1,240,839)
---------- ---------- ----------
</TABLE>
The net assets of the Division are as follows:
<TABLE>
<CAPTION>
1998 1997
$ $
---------- ----------
<S> <C> <C>
Current assets 5,785,245 6,146,234
Property, plant and equipment 9,787,618 10,520,611
Other assets 215,928 332,913
Current liabilities (3,428,034) (3,468,706)
Long-term liabilities (3,157,401) (3,549,869)
---------- ----------
Net assets of discontinued operations 9,203,356 9,981,183
========== ==========
</TABLE>
The Company expects the sale of the Division to close in the second quarter
of 1999. At the date of disposal, the Company expects to record a small
gain. Included in the Company's estimated gain are the estimated costs to
satisfy the Division's obligation with respect to a defined benefit
multi-employer pension plan which covers certain of the Division's
employees.
3. ACQUISITIONS
[a] On April 30, 1998, the Company, through its wholly-owned Canadian
subsidiary, Wood Wyant Inc., acquired all of the issued and outstanding
shares of H.A. Perigord Company Limited, a distributor of sanitation
products. On June 26, 1998, Wood Wyant Inc. acquired all of the issued and
outstanding shares of Professional Sanitation Products Ltd., a distributor
of sanitation products. The total consideration for these acquisitions
amounted to $3,070,806, which was comprised of cash of $2,107,645 and
146,666 Class F Preferred shares of Wood Wyant Inc.
F-12
<PAGE> 179
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
3. ACQUISITIONS [CONT'D]
On June 30, 1998, Wood Wyant acquired all of the issued and outstanding
shares of four related businesses based in British Columbia for $2,644,228,
comprised of cash of $1,760,696 and 136,445 Class F Preferred shares of
Wood Wyant Inc. The companies acquired are Midway Supply Ltd., Purnel
Distributors Ltd. and Midway Purnel Sanitary Supply Ltd., all of which are
distributors of sanitation products, and Fraser Valley Industrial Chemicals
Inc., a manufacturer of janitorial chemicals.
The significant conditions of the Class F Preferred shares of Wood Wyant
Inc. are:
Prior to July 1, 2000 and subject to the priorities of the other classes of
preferred stock of Wood Wyant Inc., the shares:
1) are exchangeable for Wyant Corporation common stock on a share for
share basis and are entitled to dividends equivalent on a per share
basis, to any dividends paid on Wyant Corporation common stock; and
2) have a liquidation preference per share of one share of Wyant
Corporation common stock.
Holders of the shares have an option, which may be exercised between July
1, 2000 and July 31, 2000, to cause Wood Wyant Inc. to redeem the shares in
five equal annual instalments at a price of Cdn $11.250028 ($7.3371) per
share plus any accrued and unpaid dividends. If the redemption option is
exercised, dividends of 3.5% per annum will be payable commencing July 1,
2000.
Each of the above acquisitions has been accounted for under the purchase
method and the results of operations accordingly are included in the
consolidated statement of operations from the respective dates of
acquisition. The purchase prices have been allocated to assets acquired and
liabilities assumed based on fair market value at the dates of
acquisitions, as follows:
<TABLE>
<S> <C>
Working capital, other than cash $1,618,307
Property, plant and equipment 386,518
Other assets 60,975
Goodwill 3,831,153
Long-term liabilities (177,491)
Deferred income taxes (4,428)
</TABLE>
The excess of purchase price over the fair values of the net assets
acquired was $3,831,153 and has been recorded as goodwill, which is being
amortized on a straight-line basis over 40 years.
F-13
<PAGE> 180
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
3. ACQUISITIONS [CONT'D]
The following unaudited pro forma information gives effect to the
transactions as if they had occurred at January 1, 1998. This pro forma
information does not necessarily reflect the results of operations that
would have been achieved if the acquisitions had been consummated as of
that time.
<TABLE>
<CAPTION>
1998
$
----------
<S> <C>
Net sales 73,391,486
Income from continuing operations 529,740
Net income 1,551,342
Per common share
Income from continuing operations 0.03
Net income 0.31
</TABLE>
[b] On March 18, 1997 the Corporation, through a wholly owned subsidiary,
Wood Wyant Inc., purchased the Canadian operations of G.H. Wood + Wyant
Inc. for [i] cash consideration of Cdn $5,000,000 [US$3,667,033], [ii] a
promissory note ["the Note"] in the amount of Cdn $4,068,951 [US
$2,961,606] having a fair value of US $2,798,794, [iii] 3,800,000 shares of
Class B Preferred Stock of Wood Wyant Inc. having a liquidation preference
of Cdn $3,800,000 [US $2,765,849] and a fair value of US $2,267,900, and
[iv] 1,333,333 shares of Class E Preferred Stock of Wood Wyant Inc. having
a liquidation preference per share of one share of Wyant Corporation Common
Stock. The fair value of Class E Preferred shares at March 18, 1997 was US
$5,000,000. These Class E Preferred shares are recorded at par value of
$10,000 in Wyant Corporation Common Stock and $4,990,000 in additional
paid-in capital. Each Class E Preferred share is exchangeable by the holder
at any time for one share of Wyant Corporation Common Stock. Other than
having a liquidation preference to obtain payment of any accrued but
unpaid dividends in cash, the liquidation preference of each Class E
Preferred share is equal to that of a share of Wyant Corporation
Common Stock.
The transaction represents a combination of entities under common control
and has been accounted for in a manner similar to a pooling of interests.
Accordingly, the comparative figures in these financial statements have
been restated to retroactively reflect the financial information of the
combined entities. The excess of the fair value of the consideration paid
of US $13,733,727 over the book value of the net assets acquired of US
$8,638,875 [Cdn $11,868,951] is considered a deemed dividend for accounting
purposes, which reduces the additional paid-in capital by US $5,094,852.
The Note, which yielded interest at 6% per annum, was exchanged on August
29, 1997 for shares of Class A Preferred Stock of Wood Wyant Inc. on the
basis of one share for each Cdn $1.00 of unpaid principal amount of the
Note.
F-14
<PAGE> 181
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
3. ACQUISITIONS [CONT'D]
The Class A and B Preferred shares entitle holders to fixed cumulative
preferential dividends at the rate of 4% and 3.999999%, respectively, of
their redemption price of $1.00 Cdn per share and are mandatorily
redeemable in ten consecutive annual tranches, each equal to 10% of their
combined redemption value, commencing on January 3, 1998. No Class B
Preferred shares shall be redeemed until all Class A Preferred shares have
been redeemed. The Class E Preferred shares entitle holders to receive
dividends on a pro-rata basis equivalent to dividends declared to the
Corporation's common stockholders.
Included in the consolidated statement of operations for the three years
ended December 31, 1998 are the following results of the previously
separate companies for periods prior to the transaction date.
<TABLE>
<CAPTION>
CANADIAN
OPERATIONS OF
G.H. WOOD + HOSPOSABLE
WYANT INC. PRODUCTS, INC. CONSOLIDATED
$ $ $
---------- ----------- -----------
<S> <C> <C> <C>
UNAUDITED
1997
Revenue from external customers 12,287,019 9,842,579 22,129,598
Inter Company revenues 726,293 116,675 842,968
Net income (loss) 474,869 (651,354) (176,485)
---------- ----------- -----------
UNAUDITED
1996
Revenue from external customers 50,835,445 42,009,735 92,845,180
Inter Company revenues 2,050,901 283,898 2,334,799
Net income (loss) 1,199,580 (1,055,190) 144,390
---------- ----------- -----------
</TABLE>
4. RECEIVABLES
<TABLE>
<CAPTION>
1998 1997
$ $
----------- -----------
<S> <C> <C>
Trade 9,882,672 8,838,881
Less allowance for doubtful accounts 405,424 323,759
----------- -----------
9,477,248 8,515,122
Other 738,564 783,657
----------- -----------
10,215,812 9,298,779
=========== ===========
</TABLE>
F-15
<PAGE> 182
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
5. INVENTORIES
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
Raw materials 2,065,073 1,716,534
Finished goods 6,511,887 4,444,720
--------- ---------
8,576,960 6,161,254
========= =========
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consisted of the following:
<TABLE>
<CAPTION>
ACCUMULATED
DEPRECIATION NET BOOK
COST AND AMORTIZATION VALUE
$ $ $
---------- ----------------- ----------
<S> <C> <C> <C>
1998
Land 584,410 -- 584,410
Buildings and improvements 3,232,031 1,248,044 1,983,987
Machinery and equipment 9,522,060 5,421,294 4,100,766
Computer equipment 1,901,811 1,651,201 250,610
Furniture, fixtures and equipment 2,896,169 2,323,532 572,637
Leasehold improvements 876,931 493,494 383,437
Patents and trademarks 1,054,203 336,590 717,613
---------- ---------- ---------
20,067,615 11,474,155 8,593,460
========== ========== =========
1997
Land 626,408 -- 626,408
Buildings and improvements 3,358,486 1,231,300 2,127,186
Machinery and equipment 9,654,271 5,392,597 4,261,674
Computer equipment 1,567,487 1,385,706 181,781
Furniture, fixtures and equipment 2,301,585 1,960,191 341,394
Leasehold improvements 871,973 387,910 484,063
Patents and trademarks 1,069,872 294,174 775,698
---------- ---------- ---------
19,450,082 10,651,878 8,798,204
========== ========== =========
</TABLE>
Depreciation and amortization expense amounted to $851,873, $785,093 and
$942,688 in 1998, 1997 and 1996, respectively.
F-16
<PAGE> 183
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
7. OTHER ASSETS
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
Goodwill, at cost 4,481,761 916,925
Accumulated amortization 785,168 654,946
--------- ---------
Net book value 3,696,593 261,979
Deferred pension costs 551,882 484,586
Deferred financing charges 248,346 330,664
--------- ---------
4,496,821 1,077,229
========= =========
</TABLE>
Amortization expense amounted to $179,978, $135,351 and $137,416 in 1998,
1997 and 1996, respectively.
8. LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
WOOD WYANT INC.
Term loan repayable in monthly instalments of
Cdn $20,476 plus interest at the prime rate in Canada
plus 0.75% [prime at December 31, 1998 - 6.75%]
maturing October 1, 2001. Principal amount
Cdn $1,692,856 [December 31, 1997 - Cdn. $1,938,571] 1,104,060 1,355,170
Revolving credit facility - Cdn. $1,401,125
[December 31, 1997 - Cdn $1,476,300] 913,797 1,032,017
Term loan repayable in monthly instalments of
Cdn $35,000 plus interest at the prime rate in Canada
plus 0.75%, maturing April 30, 2003 [principal
amount Cdn. $1,820,000] 1,186,982 --
Term loan repayable in monthly instalments of
Cdn $49,523 plus interest at the prime rate in
Canada plus 0.75%, maturing June 30, 2003
[principal amount Cdn $2,674,207] 1,744,086 --
--------- ---------
4,948,925 2,387,187
Current port 1,061,332 389,035
--------- ---------
3,887,593 1,998,152
========= =========
</TABLE>
F-17
<PAGE> 184
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
8. LONG-TERM DEBT [CONT'D]
The exchange rate used at December 31, 1998 to translate the long-term debt
denominated in Canadian dollars was Cdn $1.5333 = US $1.00 [December 31,
1997 - Cdn $1.4305 = US $1.00].
Principal payments of long-term debt over the next five years are as
follows:
<TABLE>
<CAPTION>
$
---------
<S> <C>
1999 1,061,332
2000 1,495,965
2001 1,445,056
2002 661,499
2003 285,073
---------
</TABLE>
In September 1997, Wood Wyant obtained a collateralized revolving credit
facility in the amount of Cdn $3,000,000 with the Bank of Nova Scotia which
expires on September 30, 2000 and bears interest at prime plus 0.75%. This
facility was utilized on September 30, 1997 to repay two existing term
loans totalling Cdn $1,554,000 and in March 1998 to finance equipment
purchases of Cdn $282,749. These amounts are being repaid by monthly
instalments of Cdn $30,612. The balance is available to finance future
equipment purchases. Maximum availability under the facility reduces
monthly by Cdn $50,000. Unused availability at December 31, 1998 was
Cdn $848,876.
LINES OF CREDIT
On November 18, 1997, the Corporation obtained a committed revolving credit
facility with Congress Financial Corporation ["Congress"] in the amount of
$13,000,000 which expires on November 18, 2000 and bears interest at prime
plus 1% [prime rate at December 31, 1998 - 7.75%].
The maximum amount that the Corporation may borrow at any time is
determined by the sum of:
i. Amounts based on advance formulas applicable to the book value of
accounts receivable and inventories of the Corporation and IFC
["Tranche A"]
and
ii. Advance formulas applicable to the November 1997 appraised values of
property, plant and equipment to a maximum of $5,500,000 less the
amounts required to guarantee amounts outstanding under New Jersey
Economic Development Authority bonds ($3,560,000 at December 31,
1998), which are included under "Net Assets Held for Divestiture'
["Tranche B"].
Maximum availability under Tranche B reduces monthly by $76,388.
F-18
<PAGE> 185
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
8. LONG-TERM DEBT [CONT'D]
The facility is collateralized by substantially all of the assets of the
Corporation and IFC, tangible and intangible, except for the Corporation's
investment in the shares of Wood Wyant. Unused availability at December
31, 1998 was approximately $2,841,000. Amounts outstanding under the line
of credit are classified as a current liability due to the inclusion in the
loan agreement of a subjective acceleration clause and a lock box
arrangement. The agreement also contains a minimum adjusted net worth
requirement.
Wood Wyant has available a collateralized revolving line of credit in
Canada in the amount of Cdn $7,500,000 with the Bank of Nova Scotia which
is subject to periodic review and which bears interest at the prime rate
[6.75% at December 31, 1998]. This line of credit and the term loans of
Wood Wyant are collateralized by a general assignment of book debts of Wood
Wyant, a pledge of inventory under Section 427 of the Bank Act, a hypothec
in the amount of Cdn $30,000,000 on all movable property and a general
security agreement.
9. INCOME TAXES
Details of the income tax provision are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
$ $ $
<S> <C> <C> <C>
CURRENT
Federal (324,132) (210,559) (179,144)
State 46,132 10,291 3,929
Foreign 778,000 945,482 223,673
------- ------- -------
500,000 745,214 48,458
======= ======= =======
DEFERRED
Federal (45,000) (26,413) 110,775
State -- -- (95,098)
Foreign 117,000 81,796 731,858
------- ------- -------
72,000 55,383 747,535
------- ------- -------
INCOME TAX PROVISION 572,000 800,597 795,993
======= ======= =======
</TABLE>
F-19
<PAGE> 186
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
9. INCOME TAXES [CONT'D]
The reported income tax provision differs from the amount computed by
applying the Federal tax rate to income before income taxes. The reasons
for this difference and the related tax effects are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
------- ------- -------
<S> <C> <C> <C>
Expected Federal tax rate 34.0% 34.0% 34.0%
Expected tax provision 382,696 611,990 589,174
State income tax 46,132 18,219 3,996
Foreign tax rate differences 146,403 66,408 84,464
Non-deductible expenses 65,000 25,377 46,110
Other (68,231) 78,603 72,249
-------- ------- -------
REPORTED INCOME TAX PROVISION 572,000 800,597 795,993
======== ======= =======
</TABLE>
Deferred income taxes result principally from temporary differences in the
recognition of certain revenue and expense items for financial and tax
reporting purposes. Significant components of the Company's deferred tax
assets and liabilities as at December 31, 1998 and December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
Deferred tax assets
Reserves and allowances 272,760 236,000
Goodwill 151,784 137,474
Other 177,839 151,821
--------- ---------
TOTAL DEFERRED TAX ASSETS 602,383 525,295
Deferred tax liabilities
Book and tax differences on property,
plant and equipment 1,855,109 1,572,601
Pension 221,307 194,689
Other -- 13,436
--------- ---------
TOTAL DEFERRED TAX LIABILITIES 2,076,416 1,780,726
--------- ---------
NET DEFERRED INCOME TAX LIABILITY 1,474,033 1,255,431
========= =========
</TABLE>
Income before taxes attributable to all foreign operations was $2,066,867,
$2,481,335 and $2,155,111 in each of fiscal 1998, 1997 and 1996,
respectively.
F-20
<PAGE> 187
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
10. STOCK-BASED COMPENSATION PLANS
The Corporation has two stock option plans, the 1997 Stock Incentive Plan
[the "1997 Plan"] and the 1991 Stock Option Plan [the "1991 Plan"]. The
Company accounts for options granted to employees and directors under these
plans using APB No.25, under which no compensation cost has been recognized
for stock options granted. Had compensation cost for these stock options
been determined consistent with SFAS No.123, the Company's pro forma
earnings per share would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
---------- --------- ---------
<S> <C> <C> <C>
Net income (loss) available to common stockholders
As reported 1,214,673 318,710 144,390
Pro forma 745,270 (248,852) (273,691)
Earnings (loss) per share
Basic
As reported 0.34 0.09 0.04
Pro forma 0.21 (0.07) (0.08)
Diluted
As reported 0.33 0.09 0.04
Pro forma 0.21 (0.07) (0.08)
---------- --------- ---------
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. Additional awards in future years are
anticipated.
During 1997 and 1991, the stockholders of the Company approved the adoption
of the 1997 Plan and the 1991 Plan, respectively. Each plan authorizes the
granting of stock options [either non-qualified stock options or incentive
stock options], the exercise of which would allow up to an aggregate of
400,000 shares of the Company's common stock under the 1997 Plan and
333,333 shares under the 1991 Plan, to be acquired by the holders of the
stock options. The 1997 Plan also permits the granting of other types of
stock-based awards.
Under the 1997 and 1991 Plans, non-qualified stock options have been
granted to directors, employees and consultants for terms of up to ten
years at exercise prices of not less than 100% of the fair market value of
the shares at the date of grant, exercisable in whole or in part at stated
times from the date of grant to up to two years thereafter. At December 31,
1998, options to purchase 319,351 shares and 165,340 shares of common stock
were exercisable with respect to the 1997 Plan and the 1991 Plan,
respectively. Option activity during 1998, 1997 and 1996 is summarized as
follows:
F-21
<PAGE> 188
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
10. STOCK-BASED COMPENSATION PLANS [CONT'D]
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
$
<S> <C> <C>
------- --------
1998
OUTSTANDING, BEGINNING OF YEAR 592,048 4.53
Granted 25,335 5.29
Exercised (2,333) 4.19
Expired (33,334) 4.50
Canceled / surrendered (44,340) 4.79
------- ----
OUTSTANDING, END OF YEAR 537,376 4.55
------- ----
EXERCISABLE, END OF YEAR 484,691 4.57
======= ====
Weighted average fair value of options granted 2.34
1997
OUTSTANDING, BEGINNING OF YEAR 332,048 5.41
Granted 416,000 4.01
Canceled / surrendered (156,000) 5.00
------- ----
OUTSTANDING, END OF YEAR 592,048 4.53
------- ----
EXERCISABLE, END OF YEAR 342,667 4.66
======= ====
Weighted average fair value of options granted 1.69
1996
OUTSTANDING, BEGINNING OF YEAR 141,381 5.28
Granted 250,667 5.59
Expired (21,333) 4.33
Canceled / surrendered (38,667) 5.44
------- ----
OUTSTANDING, END OF YEAR 332,048 5.41
------- ----
EXERCISABLE, END OF YEAR 216,000 5.32
======= ====
Weighted average fair value of options granted 2.51
</TABLE>
F-22
<PAGE> 189
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
10. STOCK-BASED COMPENSATION PLANS [CONT'D]
The fair value of options at date of grant was estimated using the
Black-Scholes pricing model with the following weighted average
assumptions.
<TABLE>
<CAPTION>
1998 1997
% %
----- -----
<S> <C> <C>
Expected life [years] 5.00 5.00
Risk-free interest rates 5.15 6.22
Volatility 41.20 37.60
Dividend yield 0.00 0.00
</TABLE>
The following table summarizes information with respect to stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------------- -------------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE EXERCISABLE
RANGE AT REMAINING WEIGHTED AT WEIGHTED
OF EXERCISE DECEMBER 31, CONTRACTUAL AVERAGE DECEMBER 31, AVERAGE
PRICES 1998 LIFE EXERCISE PRICE 1998 EXERCISE PRICE
----------- ----------- ------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$3.00 - $4.50 346,701 8.32 years $4.01 304,683 $3.99
$4.51 - $5.81 190,675 7.12 years $5.52 180,008 $5.54
------------- --------- ------------ ----------- --------- ----------
</TABLE>
All comparative data have been restated to reflect the four-for-three stock
split effected in the form of a stock dividend, which was announced on
March 27, 1998 and paid on May 21, 1998.
11. NON-RECURRING ITEMS
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
------ ------ -------
<S> <C> <C> <C>
Acquisition costs -- -- 549,805
------ ------- -------
-- -- 549,805
====== ======= =======
</TABLE>
ACQUISITION COSTS
During 1996, the Company incurred $549,805 for professional services in
connection with the acquisition described in note 3.
F-23
<PAGE> 190
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
12. OTHER INCOME
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
------- ------- -------
<S> <C> <C> <C>
Interest income 2,492 7,323 11,553
Gain on disposal of assets -- 28,470 122,810
Cash discounts and other 241,575 194,997 50,273
------- ------- -------
244,067 230,790 184,636
======= ======= =======
</TABLE>
13. EXTRAORDINARY GAIN
In 1997, the Company realized a net gain of $139,330 [$91,958 net of income
tax] as a result of the refinancing of certain term debt.
14. COMMITMENTS
The Company occupies manufacturing, warehousing and office facilities under
operating leases which expire at various dates to December 31, 2004.
Future minimum rental commitments relating to continuing operations are as
follows:
<TABLE>
<CAPTION>
$
---------
<S> <C>
1999 1,137,841
2000 1,007,522
2001 696,673
2002 599,775
2003 542,239
Thereafter 209,523
---------
</TABLE>
Aggregate rental expense of continuing operations amounted to $1,078,283
[net of sublease income of $177,821] $1,480,409 [net of sublease income of
$124,893] and $1,242,186 [net of sublease income of $140,000 and $100,000
previously provided for [note 11]] for the years ended December 31, 1998,
1997 and 1996, respectively.
As of January 1, 1999, the Company signed a five-year supply agreement to
purchase a minimum of 16,200 short tons of paper towelling and tissue
annually at market prices. This supplier provides 100% of the Company's
requirements for these products.
F-24
<PAGE> 191
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
14. COMMITMENTS [CONT'D]
In September 1997, the Company entered into a lease agreement for a maximum
amount of Cdn $2,000,000 for computer equipment. The equipment leases
under this agreement will be for a maximum term of five years and will be
based on either a floating rate of bank prime plus 0.75%, or a fixed rate
of the leasing company's base rate at the commencement date of each lease
plus 1.75%. As at December 31, 1998, an amount of Cdn $1,716,732 had been
committed under this agreement.
A financial institution has registered a second-ranking lien in the amount
of $650,000 on the Company's book debts as collateral for letters of
guarantee that it may issue from time to time in favour of customers to
guarantee the Company's performance under certain contracts. As at
December 31, 1998 there were no letters of guarantee outstanding.
15. EARNINGS PER SHARE
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
--------- --------- -------
<S> <C> <C> <C>
Numerator
Income from continuing operations before
extraordinary gain 553,576 999,372 936,871
Preferred stock dividends and accretion 360,505 191,746 --
--------- --------- -------
Numerator for basic earnings per share --
income from continuing operations available to
common stockholders before extraordinary gain 193,071 807,626 936,871
Accretion on convertible preferred shares 61,542 -- --
--------- -------- --------
Numerator for diluted earnings per share --
income from continuing operations
available to common stockholders before
extraordinary gain 254,613 807,626 936,871
--------- --------- --------
Denominator
Denominator for basic earnings per share --
Weighted-average shares issued, issuable and
outstanding 3,606,247 3,597,125 3,589,884
Effect of dilutive securities
Convertible preferred shares 165,147 -- --
Stock options 62,867 6,668 4,080
--------- --------- --------
Denominator for diluted earnings per share --
adjusted weighted-average shares 3,834,261 3,603,793 3,593,964
========= ========= =========
Basic earnings per share from continuing operations
before extraordinary gain 0.06 0.22 0.26
========= ========= =========
Diluted earnings per share from continuing operations
before extraordinary gain 0.06(1) 0.22 0.26
========= ========= =========
</TABLE>
F-25
<PAGE> 192
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
15. EARNINGS PER SHARE [CONT'D]
(1) For purposes of calculating diluted earnings per share from continuing
operations before extraordinary gain for 1998, the effect of the
convertible preferred shares has not been considered, as its effect is
anti-dilutive.
Options to purchase 209,000 shares of common stock at exercise prices
ranging from $5.06 to $5.81 per share were outstanding during 1998 but were
not included in the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price of the
common stock and, therefore, the effect would be anti-dilutive.
The number of shares and earnings per share for 1997 and 1996 have been
restated to reflect a four-for-three stock split effected in the form of a
stock dividend, which was announced on March 27, 1998 and paid on May 21,
1998.
16. PENSION PLANS
The Company maintains a defined benefit final average pension plan which
covers certain of its Canadian employees. The periodic cost of pension
benefits is determined using the projected benefit method prorated on
service. The pension plan is administered by a major Canadian financial
institution. At December 31, 1998, the Company had made or accrued for all
required contributions.
Net periodic pension expense (income) in 1998, 1997 and 1996 included the
following components:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
--------- --------- ---------
<S> <C> <C> <C>
Current service cost 170,745 161,731 182,605
Interest cost on projected benefit obligations 270,711 272,176 274,861
Expected return on plan assets (457,566) (442,936) (409,358)
Net amortization and deferral (87,024) (84,875) (61,308)
--------- --------- ---------
Net periodic pension expense (income) (103,134) (93,904) (13,200)
========= ========= =========
The assumptions used in the Company's plan at December 31, 1998, 1997 and 1996 are as follows:
1998 1997 1996
% % %
--------- --------- ---------
Weighted average discount rate 7.5 7.5 7.5
Expected long-term rate of return on assets 7.5 7.5 7.5
========= ========= =========
</TABLE>
F-26
<PAGE> 193
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
16. PENSION PLANS [CONT'D]
The changes to the projected benefit obligation and the amount of pension
assets were as follows:
<TABLE>
<CAPTION>
1998 1997
$ $
---------- ---------
<S> <C> <C>
BENEFIT OBLIGATION
Balance at January 1 3,649,283 3,532,540
Current service cost 262,959 262,135
Interest cost 270,711 272,176
Benefit payments (345,062) (260,835)
Foreign currency exchange rate component (250,791) (156,733)
---------- ----------
BALANCE AT DECEMBER 31 3,587,100 3,649,283
========== ==========
PENSION PLAN ASSETS
Balance at January 1 6,417,616 6,088,428
Contributions 92,214 100,405
Return on pension plan assets 525,177 764,013
Benefit payments (345,062) (260,835)
Foreign currency exchange rate component (439,113) (274,395)
---------- ----------
BALANCE AT DECEMBER 31 6,250,832 6,417,616
========== ==========
</TABLE>
The following table sets forth the funded status of the Company's defined
benefit plan at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
$ $
---------- ----------
<S> <C> <C>
Actuarial present value of
Vested benefit obligation 2,626,296 2,648,165
Non-vested benefit obligation -- --
---------- ----------
Accumulated benefit obligation 2,626,296 2,648,165
Additional benefits based on
salary projection 960,804 1,001,118
---------- ----------
Projected benefit obligation 3,587,100 3,649,283
Plan assets at fair market value
[primarily listed stocks and bonds] 6,250,832 6,417,616
---------- ----------
Plan assets in excess of projected
benefit obligation 2,663,732 2,768,333
Unrecognized net asset at transition (39,457) (46,976)
Unrecognized net gain (2,431,814) (2,647,746)
Unrecognized prior service cost 359,421 410,975
---------- ----------
PENSION ASSET INCLUDED IN THE CONSOLIDATED
BALANCE SHEET 551,882 484,586
========== ==========
</TABLE>
F-27
<PAGE> 194
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
16. PENSION PLANS [CONT'D]
The Company has a pension plan under Section 401(k) of the INTERNAL REVENUE
CODE for certain of its US employees. Under the terms of the 401(k) plan,
the Company makes a matching contribution of up to 6% of each eligible
employee's earned wages, to a maximum of $1,000 per employee per year.
Under this plan employees may also contribute up to 15% of their earned
wages. The Company makes monthly contributions to the plan whereby $18,998
was paid in 1998, $25,139 in 1997 and $21,968 in 1996.
The Company has a non-contributory defined contribution pension plan for
certain of its Canadian employees. Under the terms of the plan, the Company
contributed 3% of each eligible employee's earned wages. The Company made
monthly contributions to the plan whereby $15,061 was paid in 1997 and
$62,527 was paid in 1996. In March 1997 the Company ceased to contribute to
this plan and instead contributed the 3% of each eligible employee's earned
wages to a group retirement savings plan. The monthly contributions made to
this plan in 1998 amounted to $66,851 [1997 - $54,993].
17. FINANCIAL INSTRUMENTS
OFF-BALANCE-SHEET RISK
The Company's policy with respect to foreign currency exposure is to manage
its financial exposure to certain foreign exchange fluctuations with the
objective of neutralizing some of the impact of foreign currency exchange
movements. To achieve this objective, the Company enters into foreign
exchange forward contracts to hedge certain non-local-currency payables.
The Company enters into foreign exchange forward contracts with a major
Canadian chartered bank, and therefore does not anticipate non-performance
by its counterparty. The amount of the exposure on account of any
non-performance is restricted to the unrealized gains in such contracts. As
at December 31, 1998, the Company had no significant foreign exchange
forward contracts outstanding.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For certain of the Company's financial instruments, including cash and cash
equivalents, short-term investments, accounts receivable, accounts payable
and other accrued charges, the carrying amounts approximate the fair value
due to their short maturities. The carrying value of long-term debt and
preferred stock approximates the fair value.
F-28
<PAGE> 195
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS
The Company's reportable segments are strategic business units that offer
different products. They are managed separately because each business
requires different technology and marketing services and has a different
customer base.
The Company conducts business in two operating segments: Sanitation
Products and Wiping Products. The Sanitation Products segment manufactures
and distributes sanitary paper products, cleaning and maintenance
chemicals, sanitation products, electro-mechanical and maintenance systems.
The Wiping Products segment manufactures and distributes disposable wiping
products and sanitary paper products and systems.
The Company evaluates performance based on profit or loss from operations
before income taxes not including non-recurring gains and losses.
The Company accounts for intersegment sales and transfers as if the sales
or transfers were to third parties, that is, at current market prices.
<TABLE>
<CAPTION>
SANITATION WIPING
PRODUCTS PRODUCTS CORPORATE TOTAL
SEGMENT INFORMATION $ $ $ $
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1998
Revenues from external customers 50,787,121 16,337,016 67,124,137
Intersegment revenues 3,703,779 379,811 4,083,590
Interest revenue 2,343 149 2,492
Interest expense 478,799 47,084 632,366 1,158,249
Depreciation and amortization of
property, plant and equipment and
goodwill 833,287 196,984 1,030,271
Segment income (loss) before taxes 2,066,867 6,075 (947,366) 1,125,576
Segment assets [1] 28,239,472 6,948,348 1,906,218 33,336,308
Expenditures for segment property,
plant and equipment and goodwill 4,510,484 127,361 4,637,845
---------- ---------- --------- ----------
</TABLE>
F-29
<PAGE> 196
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS [CONT'D]
<TABLE>
<CAPTION>
SANITATION WIPING
PRODUCTS PRODUCTS CORPORATE TOTAL
SEGMENT INFORMATION $ $ $ $
------------------- ---------- -------- --------- -----
<S> <C> <C> <C> <C>
1997
Revenues from external customers 48,847,534 14,712,169 63,559,703
Intersegment revenues 3,687,194 386,886 4,074,080
Interest revenue -- 7,323 7,323
Interest expense 356,089 -- 389,000 745,089
Depreciation and amortization of
property, plant and equipment and
goodwill 748,985 190,876 939,861
Segment income (loss) before taxes 2,481,335 155,134 (836,500) 1,799,969
Segment assets [1] 21,884,327 6,289,975 2,009,049 27,174,694
Expenditures for segment
property, plant and equipment and
goodwill 991,126 273,834 1,264,960
---------- ---------- --------- ----------
1996
Revenues from external customers 50,835,445 11,755,262 62,590,707
Intersegment revenues 2,050,901 248,733 2,299,634
Interest revenue -- 11,553 11,553
Interest expense 444,253 -- 67,000 511,253
Depreciation and amortization of
property, plant and equipment and
goodwill 856,990 180,863 1,037,853
Segment income (loss) before taxes 2,155,111 326,558 (748,805) 1,732,864
Expenditures for segment
property, plant and equipment and
goodwill 894,743 40,251 934,994
---------- ---------- --------- ----------
</TABLE>
F-30
<PAGE> 197
Wyant Corporation
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS [CONT'D]
<TABLE>
<CAPTION>
PROPERTY, PLANT
AND EQUIPMENT
GEOGRAPHIC INFORMATION REVENUES[2] AND GOODWILL
$ % $
------------------------- ---------------- ------------
<S> <C> <C>
1998
United States 16,397,707 24.4 1,017,172
Canada 50,092,840 74.6 11,272,881
Other foreign countries 633,590 1.0 --
---------- ----- ----------
67,124,137 100.0 12,290,053
========== ===== ==========
1997
United States 14,598,461 23.0 1,039,795
Canada 48,521,689 76.3 8,020,388
Other foreign countries 439,553 0.7 --
---------- ----- ----------
63,559,703 100.0 9,060,183
========== ===== ==========
1996
United States 11,878,609 19.0 956,837
Canada 50,615,592 80.9 8,146,876
Other foreign countries 96,506 0.1 --
---------- ----- ----------
62,590,707 100.0 9,103,713
========== ===== ==========
</TABLE>
Notes
[1] Inter segment eliminations at December 31 were $3,757,730 and
$3,008,657 in 1998 and 1997 respectively.
[2] Revenues are attributed to countries based on location of customers.
F-31
<PAGE> 198
WYANT CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND COMPANIES AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS (1) ACQUIRED OF YEAR
----------- ---------- ---------- -------------- --------- -------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR
DOUBTFUL ACCOUNTS:
Year ended December 31 -
1998 $323,759 $119,788 $ 64,335 $26,212 $405,424
1997 $325,276 $116,923 $118,440 -- $323,759
1996 $594,489 $(66,826) $202,387 -- $325,276
</TABLE>
________________________________________________________________
(1) Represents amounts written off, net of recoveries
F-32
<PAGE> 199
ANNEX F
<PAGE> 200
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 31, 1999
-------------------------------------------------
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 number 0-8410
-------------------------------------------------
WYANT CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 11-2236837
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Readington Road Somerville, New Jersey 08876
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code 908-707-1800
NONE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
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 requirement for the past 90 days.
Yes X No
---------- ---------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the latest practicable date.
Class Outstanding at May 12, 1999
- ---------------------------------------------------------------------------
Common stock, $.01 par value 2,273,817
1
<PAGE> 201
WYANT CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The attached unaudited consolidated financial statements of Wyant Corporation
and Subsidiaries reflect all adjustments which are, in the opinion of
management, necessary to present a fair statement of the operating results for
the interim periods.
<TABLE>
<S> <C>
Consolidated balance sheet 3
Consolidated statement of operations 4
Consolidated statement of cash flows 5
Consolidated statement of stockholders' equity 6
Notes to consolidated financial statements 7-11
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
2
<PAGE> 202
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WYANT CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ -- $ 59,985
Accounts receivable 11,791,279 10,215,812
Inventories (note 3) 8,519,215 8,576,960
Net assets held for divestiture (note 2) 9,462,241 9,203,356
Other 740,347 1,393,270
----------- -----------
TOTAL CURRENT ASSETS 30,513,082 29,449,383
Property, plant and equipment, net of
accumulated amortization of $11,888,229
(December 31, 1998 - $11,474,155) 10,320,143 8,593,460
Other assets 4,511,653 4,496,821
----------- -----------
TOTAL ASSETS $45,344,878 $42,539,664
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Revolving line of credit $ 6,261,270 $ 4,092,128
Committed revolving credit facility 3,789,294 4,238,720
Accounts payable 5,780,282 4,856,657
Accrued expenses 1,856,266 3,228,412
Income taxes payable 710,663 433,288
Current portion of long-term debt (note 4) 1,416,621 1,061,332
Current portion of preferred stock of subsidiary 524,003 513,204
---------- -----------
TOTAL CURRENT LIABILITIES 20,338,399 18,423,741
Long-term debt (notes 4 & 6) 5,002,560 3,887,593
Preferred stock of subsidiary (note 6) 5,121,513 5,477,072
Deferred income taxes 1,705,931 2,076,416
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share 27,053 27,053
Additional paid-in capital 6,821,825 6,821,825
Retained earnings 6,721,249 6,326,679
Cumulative translation adjustment (393,652) (500,715)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 13,176,475 12,674,842
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $45,344,878 $42,539,664
=========== ===========
</TABLE>
See accompanying notes
3
<PAGE> 203
WYANT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---- ----
[Restated]
<S> <C> <C>
Net sales $18,525,359 $15,550,112
Cost of sales 12,245,520 10,166,464
----------- -----------
Gross profit 6,279,839 5,383,648
Expenses
Selling 3,589,520 3,006,940
General and administration 2,186,133 1,837,128
Amortization 143,910 91,043
Interest expense 309,885 248,614
Other income (123,440) (79,595)
----------- -----------
6,106,008 5,104,130
----------- -----------
Income from continuing operations
before income taxes 173,831 279,518
Income tax expense
Current 69,700 95,600
Deferred 21,300 124,600
----------- -----------
91,000 124,600
----------- -----------
Income from continuing operations 82,831 154,918
Discontinued operations, net of income taxes
of $212,300 (1998 - $194,400) (note 2) 406,700 355,056
----------- -----------
Net income 489,531 509,974
Dividends and accretion of mandatorily
redeemable preferred stock 94,961 75,446
----------- -----------
Net income attributable to common shares $ 394,570 $ 434,528
=========== ===========
Per common share (note 5)
BASIC
Income from continuing operations $ -- $ 0.02
Discontinued operations 0.11 0.10
Net income 0.11 0.12
DILUTED
Income from continuing operations -- 0.02
Discontinued operations 0.10 0.10
Net income 0.10 0.12
</TABLE>
See accompanying notes
4
<PAGE> 204
WYANT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 and 1998
(UNAUDITED)
<TABLE>
1999 1998
---- ----
[Restated]
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations $ 82,831 $ 154,918
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 305,168 243,034
Gain on sale of fixed assets (287) --
Deferred income tax expense 12,360 29,000
Deferred pension costs (8,748) (30,216)
Changes in non-cash working capital balances
Accounts receivable (1,575,467) 319,815
Inventories 57,745 307,898
Other current assets 250,793 (63,272)
Accounts payable (448,521) (240,191)
Income taxes payable 276,122 (300,701)
Cash provided by discontinued operations 166,659 29,569
----------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (881,345) 449,854
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,777,705) (200,805)
Cash proceeds from sale of fixed assets 9,135 --
Decrease in other assets -- 24,691
Cash used for discontinued operations (18,844) (16,449)
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (1,787,414) (192,563)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in committed revolving
credit facility (449,426) 221,043
Repayment of long-term debt (296,766) (363,129)
Increase in long-term debt 1,654,205 460,241
Redemption of preferred shares (513,204) (550,122)
Dividends paid by subsidiary (41,654) (49,511)
Increase (decrease) in bank indebtedness 2,169,142 (231,549)
Cash provided by discontinued operations -- 80,101
----------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,522,297 (432,926)
Effect of exchange rate changes on cash 86,477 19,504
----------- ---------
Net decrease in cash and cash equivalents (59,985) (156,131)
Cash and cash equivalents, beginning of period 59,985 156,131
----------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ -- $ --
=========== =========
</TABLE>
See accompanying notes
5
<PAGE> 205
WYANT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1999 and 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
COMMON STOCK AT PAR VALUE $ 27,053 $ 27,037
----------- -----------
ADDITIONAL PAID-IN CAPITAL 6,821,825 6,806,867
----------- -----------
RETAINED EARNINGS
Balance at beginning of period 6,326,679 5,112,006
Net income 489,531 509,974
Dividends declared (41,654) (49,511)
Accretion on preferred shares
of subsidiary (53,307) (25,935)
----------- -----------
BALANCE AT END OF PERIOD 6,721,249 5,546,534
----------- -----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of period (500,715) (165,925)
Foreign currency translation adjustments 107,063 23,824
----------- -----------
BALANCE AT END OF PERIOD (393,652) (142,101)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY $13,176,475 $12,238,337
=========== ===========
COMPREHENSIVE INCOME
Net income $ 489,531 $ 509,974
Other - Foreign currency translation
adjustments 107,063 23,824
----------- -----------
Comprehensive income for period $ 596,594 $ 533,798
=========== ===========
NUMBER OF COMMON SHARES ISSUED
AND OUTSTANDING 2,273,817 2,271,484
COMMON SHARES ISSUABLE UPON CONVERSION
OF EXCHANGEABLE SHARES 1,333,333 1,333,333
----------- -----------
NUMBER OF COMMON SHARES ISSUED, ISSUABLE
AND OUTSTANDING 3,607,150 3,604,817
=========== ===========
</TABLE>
See accompanying notes
6
<PAGE> 206
WYANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as at March 31, 1999 and for the three months
ended March 31, 1999 and 1998 are unaudited)
1. GENERAL
The accompanying unaudited consolidated financial statements include the
accounts of Wyant Corporation and its wholly-owned subsidiaries, IFC
Disposables, Inc. and Wood Wyant Inc. They have been prepared in accordance
with accounting principles generally accepted in the United States for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, the accompanying consolidated financial statements contain all
adjustments, consisting only of normal recurring accruals considered
necessary to present fairly the financial position as of March 31, 1999,
the results of operations, cash flows and changes in stockholders' equity
for the three months ended March 31, 1999 and 1998. For further
information, refer to the financial statements and notes thereto included
in the Company's annual report for the year ended December 31, 1998.
2. DISCONTINUED OPERATIONS
On December 17, 1998, the Board of Directors authorized management to
pursue the sale of the Company's Wyant Health Care Division ("Division").
On February 23, 1999 the Board approved the sale of the Division to
Paper-Pak Products, Inc. ("PaperPak"), subject to completion of buyer
financing, customary regulatory approvals and the approval of the Company's
shareholders. Consequently, the results of the Division have been reported
in these financial statements as discontinued operations.
The Company will receive cash of $11,500,000 on closing and $550,000 will
be held in escrow for twenty four months, subject to adjustment on closing.
The operating results of the Division are as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1999 1998
----- -----
<S> <C> <C>
Net sales $10,286,439 $9,787,184
Income before income taxes 619,000 549,456
</TABLE>
The Company expects the sale of the Division to close in the second quarter
of 1999. At the date of disposal, the Company expects to record a small
gain. Included in the Company's estimated gain are the estimated costs to
satisfy the Division's obligation with respect to a defined benefit
multi-employer pension plan which covers certain of the Division's
employees.
7
<PAGE> 207
3. INVENTORIES
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------ -----
<S> <C> <C>
Raw materials $2,321,787 $2,065,073
Finished goods 6,197,428 6,511,887
---------- ----------
$8,519,215 $8,576,960
========== ==========
</TABLE>
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Wood Wyant Inc.
Term loan repayable in monthly installments
of Cdn. $20,476 plus interest at prime plus
3/4% (prime at March 31, 1999 - 6.75%),
maturing October 1, 2001. Principal amount
Cdn. $1,631,428 (December 31, 1998 - Cdn.
$1,692,856) 1,086,387 1,104,060
Term loan repayable in monthly installments
of Cdn. $35,000 plus interest at prime plus
3/4%, maturing April 30, 2003. Principal
amount Cdn. $1,715,000 (December 31, 1998 -
Cdn. $1,820,000) 1,142,039 1,186,982
Term loan repayable in monthly installments
of Cdn. $49,523 plus interest
at prime plus 3/4%, maturing June 30, 2003.
Principal amount Cdn.$2,525,638 (December 31,
1998 - Cdn. $2,674,207) 1,681,853 1,744,086
Term loan repayable in monthly installments
of Cdn. $41,667 plus interest at prime plus
3/4%, maturing March 15, 2004.
Principal amount Cdn.$2,458,333 1,637,033 --
Revolving credit facility (Cdn. $1,309,286 -
December 31, 1998 - Cdn.$1,401,125) 871,869 913,797
--------- ---------
6,419,181 4,948,925
Current portion 1,416,621 1,061,332
---------- ----------
$5,002,560 $3,887,593
========== ==========
</TABLE>
8
<PAGE> 208
5. EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------
1999 1998
---- ----
<S> <C> <C>
Numerator
Income from continuing operations before
extraordinary gain $ 82,831 $ 154,918
Preferred stock dividends and accretion 94,661 75,446
-------- ---------
Numerator for basic earnings per share -
income (loss) from continuing operations available
to common stockholders (12,130) 79,472
Accretion on convertible preferred shares 28,307 --
--------- ----------
Numerator for diluted earnings per share -
income from continuing operations available
to common stockholders $ 16,177 $ 79,472
========= ==========
Denominator
Denominator for basic earnings per share -
weighted-average shares issued, issuable and
outstanding 3,607,150 3,604,817
Effect of dilutive securities
Convertible securities 283,111 --
Stock options 540 96,062
---------- ----------
Denominator for diluted earnings per share -
adjusted weighted-average shares 3,890,801 3,700,879
========== ==========
Basic earnings per share from continuing operations $ -- $ 0.02
Diluted earnings per share from continuing operations $ -- $ 0.02
</TABLE>
6. PURCHASE OF BUSINESSES
During the second quarter of 1998, the Company, through its
wholly-owned subsidiary, Wood Wyant Inc. acquired 100% of
the outstanding shares of the following companies:
<TABLE>
<S> <C>
April 30, 1998 H.A. Perigord Company Limited
June 26, 1998 Professional Sanitation Products Ltd.
June 30, 1998 Midway Supply Ltd.
Purnel Distributors Ltd.
Midway Purnel Sanitary Supply Ltd.
Fraser Valley Industrial Chemicals Inc.
</TABLE>
9
<PAGE> 209
6. PURCHASE OF BUSINESSES (Cont'd)
Fraser Valley Industrial Chemicals Inc. is a manufacturer of sanitary
chemical products. All of the other acquired companies are distributors of
sanitation products. The acquisitions have been accounted for under the
purchase method. Financial results of the companies are included in the
Company's consolidated statement of operations from the respective dates of
acquisition.
The cost of purchase of the above companies totalled $5,715,895, including
expenses related to the transactions but excluding cash acquired. This was
financed by the issue of 283,111 Class F Preferred shares of Wood Wyant
Inc., with a fair value of $1,861,876 at the respective transaction dates,
with the balance paid in cash. The cash portion was financed by term bank
loans, from which $3,525,440 had been drawn at March 31, 1999. The Class F
Preferred shares are exchangeable at any time for common shares of Wyant
Corporation on a one-for-one basis, and in addition holders have a one-time
option in July 2000 to retract all of the Class F shares at Cdn. $11.250028
per share, payable in five equal annual instalments commencing August 3,
2000, with dividends at 3.5% per annum payable monthly from July 1, 2000 if
the option is exercised.
The pro-forma unaudited results of operations for the three months ended
March 31, 1998, assuming consummation of the transactions as of January 1,
1998, are as follows:
<TABLE>
<CAPTION>
Three months ended March 31, 1998
---------------------------------
<S> <C>
Net sales $18,999,971
Income from continuing operations 171,750
Net income 526,806
Per common share
Income from continuing operations 0.02
Net income 0.12
</TABLE>
7. SEGMENT INFORMATION FROM CONTINUING OPERATIONS
Three months ended March 31
---------------------------
<TABLE>
<CAPTION>
Sanitation Wiping
Products Products Corporate Total
---------- -------- --------- -----
<S> <C> <C> <C> <C>
1999
----
Revenues from external customers $14,406,362 $4,118,997 $18,525,359
Intersegment revenues 813,455 85,138 898,593
Segment income (loss) before taxes 335,309 23,020 (184,498) 173,831
Segment assets 29,979,995 5,324,738 577,904 35,882,637
1998
----
Revenues from external customers $11,500,782 $4,049,330 $15,550,112
Intersegment revenues 832,171 88,763 920,934
Segment income (loss) before taxes 465,529 83,989 (270,000) 279,518
</TABLE>
10
<PAGE> 210
8. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with the
presentation in the current period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the accompanying
unaudited financial statements and the notes thereto included in Item I of this
quarterly report, and the financial statements and the notes thereto and
management's discussion and analysis of financial condition and results of
operations contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998. As indicated in Note 2 to the consolidated financial
statements, the Company has agreed to sell its Wyant Health Care Division and
substantially all of its operating assets. Accordingly, such consolidated
financial statements, as well as the discussion below, reflect the consummation
of this transaction by showing the health care business as "discontinued
operations" for income statement purposes and as "net assets held for
divestiture" for balance sheet purposes.
The following information includes forward-looking statements (within the
meaning of Section 21E of the Securities Exchange Act of 1934) that involve a
number of risks and uncertainties that may influence the financial performance
and earnings of the Company, and may cause actual results to differ materially
from those in the forward-looking statements, including, but not limited to,
factors such as the ability of the Company to successfully integrate the
business and personnel of various acquired businesses into its operations, the
ability to implement its business strategy assuming consummation of the PaperPak
transaction, the ability to adequately address Year 2000-related issues, the
ability to maintain existing customer relationships and to secure new customers
on satisfactory terms, whether by contract or otherwise, unforeseen price
pressure on the Company's products or significant cost increases that cannot be
recovered through price increases or productivity improvements, the ability to
obtain any necessary financing on reasonably satisfactory terms, the effect of
exchange rate fluctuations and the effect of competitive, capital market and
general economic conditions. Such forward-looking statements, which reflect the
Company's current views with respect to certain future events and financial
performance, should be considered in light of such factors.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THE THREE MONTHS ENDED
MARCH 31, 1998
SALES
- -----
Sales of continuing operations for the three months ended March 31, 1999
increased by $2,975,247 or 19.1% to $18,525,359 from the total of $15,550,112
in the first quarter of 1998, after eliminating inter-segment sales of $898,593
in the current quarter and $920,934 in the same quarter last year. Sales of
the sanitation products segment were $15,219,817 in the current quarter,
compared with $12,332,953 in the first quarter of 1998, an increase of
$2,886,864 or 23.4%. The increase resulted primarily from the sales of the
businesses acquired in the second quarter of 1998 and higher direct sales of
paper products from the Company's paper converting operation, which more than
offset the negative impact of a weaker Canadian dollar translation rate. Sales
of the wiping products segment at $4,204,135 were $66,042 or 1.6% higher than
in the first quarter of 1998, primarily due to increased sales of wipers.
COST OF SALES AND GROSS PROFIT
- ------------------------------
Gross profit of the sanitation products segment declined to 36.4% of sales from
37.9% of sales in the first quarter of 1998, reflecting primarily lower selling
prices for paper products. Gross profit of the wiping products segment
improved to 17.7% of sales from 17.3% in the corresponding period last year,
primarily due to improved margins on sales of paper products.
11
<PAGE> 211
SELLING EXPENSES
- ----------------
Selling expenses for the first quarter of 1999 amounted to $3,589,520, an
increase of $582,580 or 19.4% over the same period last year. In the
sanitation products segment, selling expenses at $3,207,020 were $708,324
higher than in the first quarter of 1998, an increase of 28.3%. The increase
resulted from the added expenses of the acquired businesses and additional
costs of approximately $116,000 incurred as a result of challenges associated
with the implementation of new information systems during the first quarter of
1999, which more than offset the favorable impact of the weaker Canadian dollar
translation rate. In the wiping products segment, selling expenses increased
by $54,256 or 10.7% to $562,500, reflecting primarily higher outward freight
and staffing costs.
GENERAL AND ADMINISTRATION EXPENSES
- -----------------------------------
General and administration expenses increased by $349,005 or 19.0% to
$2,186,133 in the current quarter. Expenses of the sanitation products segment
at $1,985,478 were $358,250 or 22.0% higher than in the first quarter of 1998,
as the added expenses of the businesses acquired in the second quarter of 1998
and costs resulting from the new information systems implementation more than
offset the favorable impact of the weaker Canadian dollar translation rate.
General and administration expenses of the wiping products segment were
$131,409 in the current quarter, an increase of $19,999 or 18.0% over the same
quarter last year due primarily to higher staffing costs. Corporate charges in
the current quarter at $69,246 were $29,754 lower than in the prior year due
primarily to lower professional fees.
AMORTIZATION
- ------------
Amortization amounted to $143,910 in the first quarter of 1999, an increase of
$52,867 over the corresponding quarter last year. The increase reflected the
additional amortization from the businesses acquired in mid-1998 and from the
goodwill resulting from their purchase.
INTEREST EXPENSE
- ----------------
Interest expense increased by $61,271 to $309,885 in the current quarter. The
increase resulted from higher borrowing costs in Canada ($99,258) incurred
primarily to finance the 1998 acquisitions of businesses, partially offset by a
reduction of $37,987 in interest cost in the United States on the loan from
Congress Financial Corporation. This loan will be repaid from the proceeds of
the sale of the Wyant Health Care Division.
OTHER INCOME
- ------------
Other income increased to $123,440 from $79,595 in the first quarter of 1998.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
- -----------------------------------------------------
Income from continuing operations before income taxes amounted to $173,831 for
the first quarter of 1999, a reduction of $105,687 from the level of $279,518
in the same quarter last year. The sanitation products and wiping products
segments decreased by $130,220 and $60,969 respectively, while corporate
expenses were $85,502 lower than in the first quarter of 1998.
INCOME TAXES
- ------------
Income tax expense at $91,000 was $33,600 lower than in the first quarter of
1998, reflecting the lower level of pre-tax income in the current quarter.
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<PAGE> 212
DISCONTINUED OPERATIONS
- -----------------------
The discontinued health care operations generated after-tax income from
operations of $406,700 or $0.11 per common share, compared with $355,056 or
$0.10 per common share in the first quarter of 1998. The improvement in 1999
results compared with the first quarter of 1998 was due to a 5.1% increase in
sales revenue, primarily from higher sales of airlaid products and branded adult
incontinent products, partially offset by lower sales of private label products,
together with higher margins, at 21% of sales compared with 20% of sales in the
first quarter last year. These were partially offset by an increase of $203,424
or 15.5% in operating expenses, which included $87,936 of higher outward freight
costs to support the increased sales and $54,296 from increased marketing
expenses.
NET INCOME
- ----------
Net income for the first quarter of 1999 amounted to $489,531, or $0.11 per
common share after deducting dividends and accretion relating to the mandatorily
redeemable preferred shares, compared with net income of $509,974 or $0.12 per
common share in the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Liquidity and capital resources of the Company's Canadian operations (Wood
Wyant) and United States operations (IFC Disposables) are discussed separately,
as each is self-financing and has separate banking facilities.
CANADIAN OPERATIONS
- -------------------
Cash utilized during the first quarter of 1999 amounted to $1,741,170. Operating
activities utilized $1,145,214 due to an increase in working capital of
$1,565,233, primarily due to higher receivables ($1,485,474) and lower payables
($578,780), partially offset by lower prepaid expenses ($247,558) and
inventories ($139,313) and higher income taxes payable ($112,150). The increased
receivables resulted from a higher level of sales in March 1999, together with
poorer collection performance in the first quarter of 1999, due in part to
problems associated with the start-up of new applications software in February
1999. The lower level of payables reflected primarily a new contract for paper
purchases which provides less favorable payment terms. Capital expenditures
amounted to $1,758,308 in the current quarter, comprising for the most part
expenditures for the new applications software and related hardware. The Company
originally had intended to lease this equipment and had entered into a lease
agreement in September 1997 for this purpose. However, a decision was made in
the first quarter of 1999 to cancel the lease agreement and instead to finance
the purchase by a five-year term bank loan of Cdn. $2,500,000 ($1,664,780).
Repayments of long-term debt during the quarter amounted to $296,766. In
addition, $513,204 of outstanding Class A Preferred shares were redeemed in
January 1999 and dividends of $41,654 were paid in the quarter on the Class A
and Class B Preferred shares.
On March 10, 1999 the Company increased its secured revolving line of credit
from Cdn. $7,500,000 to Cdn. $9,500,000 ($6,326,164) to meet increased working
capital requirements. At March 31, 1999, approximately $1,025,000 was available
under this facility. In addition, approximately $697,000 was available to
finance future capital expenditures under a revolving credit facility of
$1,997,736 (Cdn. $3,000,000).
All borrowings of the Canadian Operations are with the Bank of Nova Scotia.
Long-term debt outstanding at March 31, 1999 amounted to $6,419,181 including
$1,416,621 due within one year. All of the loans were at the commercial prime
rate in Canada (6.75% at March 31, 1999) plus 0.75%. The secured revolving line
of credit bears interest at the prime rate in Canada. Under the terms of the
loan agreements, covenants exist which require Wood Wyant to meet certain ratios
relating to debt to tangible net worth, current assets to current liabilities
and cash flow to debt service, as well as maintaining a minimum level of
tangible net worth. Also, borrowings under the revolving credit facility must
not exceed a given proportion of accounts receivable. The Company was in
compliance with all of the covenants at March 31, 1999.
The Company has no commitments for material capital expenditures and has no
plans for major capital expenditures for existing businesses during the next
five years. Payments on long-term debt obligations existing at March 31, 1999
average less than $1,000,000 over the next five years with a maximum of
$1,496,000 in 2000.
13
<PAGE> 213
CANADIAN OPERATIONS (Cont'd)
- ----------------------------
Amounts required to redeem Class A and Class B Preferred shares approximate
$550,000 per annum during that period, while redemption of the Class F
Preferred shares in the event that the option to redeem is exercised by the
holders of those shares would require an additional annual amount of
approximately $425,000 for five years commencing in 2000.
Management believes that future operating cash flows and the unused balance
available under existing credit facilities will be sufficient to meet its
ongoing operating cash requirements, to repay the term debt and redeem the
Preferred shares as they become due and to meet cash requirements for capital
asset additions.
U.S. OPERATIONS
- ---------------
Cash of $635,772 was utilized by continuing operations in the United States
during the first quarter of 1999. Working capital decreased by $125,905, as
increases in payables ($130,259) and income taxes payable ($163,978) were only
partially offset by higher receivables ($89,993) and inventories ($81,568).
Capital expenditures in the quarter amounted to $19,397. A total of $449,426
of the committed revolving credit facility with Congress Financial Corporation
was repaid during the quarter.
Borrowings of the U.S. Operations consist of a committed revolving credit
facility of $13,000,000 with Congress Financial Corporation which bears
interest at commercial prime rate plus 1% (prime at March 31, 1999 was 7.75%).
Unused availability was approximately $3,773,000 at March 31, 1999. Maximum
borrowing under the facility is determined by certain advance formulas
applicable to the level of accounts receivable and inventories and the value of
property, plant and equipment, net of guarantees.
Management believes that future operating cash flows and the unused balance
available under the existing credit facility will be sufficient to enable the
Company to meet its ongoing operating cash requirements and to finance capital
asset additions until the sale of the Wyant Health Care Division and to meet
its ongoing cash requirements if the sale of the Wyant Health Care Division is
not consummated. Thereafter, following the repayment of the balance
outstanding under the secured line of credit with Congress Financial
Corporation, management believes that future operating cash flows and excess
cash on hand will be sufficient to meet operating cash requirements and to
finance capital asset additions.
DISCONTINUED OPERATIONS
- -----------------------
On February 23, 1999, the Board of Directors approved the sale of the Company's
Wyant Health Care Division, subject to completion of buyer financing, customary
regulatory approvals and the approval of the Company's shareholders, for cash
on closing of $11,500,000 and $550,000 which will be held in escrow for
twenty-four months. These cash proceeds are subject to adjustment on closing,
which is expected to occur in the second quarter of 1999. Results of
operations between the measurement date of December 17, 1998 and the closing
date are expected to contribute positively to the Company's overall results.
Cash received on closing will be utilized to pay off the balance under the
secured line of credit with Congress Financial Corporation ($3,789,294 as at
March 31, 1999), and to pay the withdrawal liability and income taxes generated
by the transaction. The Company is in the process of evaluating possible
alternative uses of the balance of the net cash proceeds from the sale,
including the acquisition of assets or businesses in North America that are
consistent with its overall strategy of growing as a North American janitorial
and sanitation products manufacturer and distributor. Although the Company is
evaluating several opportunities, currently, there are no significant
acquisitions of assets or businesses that would be considered probable. To the
extent that it acquires any such assets or businesses, whether related to its
overall strategy or otherwise, there can be no assurance that such acquisitions
will be successfully integrated with its operations or that such acquisitions
will ultimately be profitable for the Company. Pending the application of such
proceeds, the Company intends to use such proceeds to repay certain short-term
debt of its subsidiaries.
14
<PAGE> 214
DISCONTINUED OPERATIONS (Cont'd)
- --------------------------------
Following completion of the sale, the Company will cease the manufacture of
adult incontinent products and the sale of the Division is not expected to
materially affect the operations of the Company's other operating units as each
is autonomous and separately managed. The Company will be precluded from
re-entering the adult incontinent products business for a period of five years
following the sale.
The Division supplies airlaid non-woven fabric and incontinent products to IFC
which will be subject to a three-year supply agreement upon completion of the
sale. IFC will supply PaperPak with Quickable(TM) absorbent washcloths at an
agreed upon price, which will be renegotiated every twelve months, and at
a volume which will be predetermined.
SIGNIFICANT FACTORS AND KNOWN TRENDS WITH REGARD TO DISCONTINUED OPERATIONS
PENSION PLAN
- ------------
Certain employees of the Wyant Health Care Division are members of a
multi-employer defined benefit Pension Plan (the "Plan" or "Pension Plan"). The
Company was informed by the Pension Plan administrators that the Plan had failed
to meet minimum legal funding requirements and that the Company's pro-rata share
of the minimum funding deficiency was $370,000. The Plan has applied to the IRS
for a waiver from the minimum funding requirements and awaits a response. If
the waiver is obtained, the employers contributing to the Plan would be required
to fund and charge to earnings the funding deficiency, and corresponding
interest charges, over a 15 year period. If the waiver is not obtained, an
excise tax may be imposed on the Plan and such excise tax could be as much as
100% of the funding deficiency.
The sale of the Wyant Health Care Division will trigger a withdrawal liability
as PaperPak, the acquirer of the Division, will not assume the Company's
obligation under the Plan. This withdrawal liability will be funded through the
proceeds from the sale of the Division. In addition to the withdrawal
liability, the Plan may also seek to collect the Division's pro-rata share of
the funding deficiency discussed above. After taking into account these Pension
Plan liabilities, the Company estimates that it will realize a gain on the sale
of the Division.
AIRLAY II MACHINE
- -----------------
In 1992, the Division purchased a machine ("Airlay II") for the production of
airlaid products. During 1993, the machine was redesigned for commercial use.
Although Airlay II was installed in the Branchburg, New Jersey manufacturing
facility in the fourth quarter of 1994, only a small quantity of commercially
acceptable product has been manufactured to date. During the second quarter of
1998, a complete engineering evaluation of the machine was performed.
The Division implemented the majority of the recommended changes included in the
engineering evaluation. In December 1998 the Division developed a business plan
that included, as an objective, full commercial operation of Airlay II by the
end of 1999.
Airlay II is part of the assets of the Division that Wyant has agreed to sell to
PaperPak. As of March 31, 1999 the net book value of Airlay II was
approximately $2.2 million. In the event that the sale of the Division is not
consummated, there can be no assurance that Airlay II will achieve full
commercial operation or produce saleable product for the Division. Accordingly,
failure to achieve full commercial operation in the near future could result in
a significant write-down of the Company's investment in Airlay II, which
write-down would have a material adverse effect on the results of operations of
the Company.
15
<PAGE> 215
ENVIRONMENTAL
- -------------
The Company has been participating with the New Jersey Department of
Environmental Protection ("DEP") in the investigation and potential clean-up of
the Company's former site of operation located at 5 and 6 Easy Street,
Bridgewater, New Jersey. As a tenant, the Company is potentially responsible to
the DEP for environmental contamination based solely upon it having been a
tenant at the site where there is contamination. Similarly, the Company is
potentially jointly and severally liable with the landlord for both the
investigation and clean-up costs. To date, the investigation has established
that, in addition to on-site contamination, some of the contamination on the
site is or has come from off site. The Company disputes it caused any such
contamination and maintains that on-site contamination was a result of prior
tenants' acts.
Nevertheless, the Company has fully cooperated with the DEP and has presently
been directed by the DEP to delineate the ground water contaminant plume, which
may result in establishing that the contamination is a regional problem rather
than one specific to the former site that the Company leased. The Company has
entered into a flat fee contract with its environmental consultants for $11,750
for the delineation investigation. Upon determination of the contaminant plume,
the Company will petition the DEP for a classification exception area where the
remedial action will be natural attenuation.
After the investigation is completed, the DEP could require clean-up or
remediation of the contamination on site, the cost of which could potentially be
in the range of $100,000 to $150,000. However, present technology is such that
no remedial action plan could bring the site in conformity with the present DEP
regulations, regardless of the funds spent.
The Company is unaware of any other environmental or similar matters that would
have a material effect on the capital expenditures, earnings or competitive
position of the Company.
BACKLOG, IMPACT OF INFLATION, SEASONALITY
- -----------------------------------------
The Company attempts to maintain sufficient inventory levels for all products to
allow shipment against most orders for wiping products within a one week period
and next day for core stocking items of the Company's sanitation products. To
some extent, however, certain components must be inventoried further in advance
of actual orders to ensure availability. For the most part, purchases are based
upon quarterly requirements as projected after calculating sales indications
from the sales and marketing departments.
The Company's products are not subject to significant seasonal influences.
Because its products are sold primarily to distributors throughout the United
States and to distributors and end-users in Canada, the Company is affected by
general economic conditions. Accordingly, any adverse change in the economic
climate may have an adverse impact on the Company's sales and financial
condition.
YEAR 2000
- ---------
The Year 2000 problem arises because many computer systems and software products
currently in use are coded to accept only two digit entries in the date code
field. Four digit entries will be required to identify 21st century dates.
Consequently, the use of software and computer systems that are not Year 2000
compliant could result in the disruption of operations. As a result, many
companies' computer systems and software may need to be upgraded or replaced to
conform with Year 2000 requirements.
In order to properly address the Year 2000 Issue, the Company has appointed the
Vice President, Information Technology of Wood Wyant as Year 2000 Project
Director to direct a project team which will coordinate the implementation of a
Year 2000 Plan by identifying Year 2000 issues and coordinating solutions. The
project team is currently being assembled. Its role will be to conduct Year
2000 readiness assessment audits at all of the Company's facilities,
encompassing all equipment and processes deemed important to the facility's
operation.
16
<PAGE> 216
YEAR 2000 (Cont'd)
- ------------------
Wood Wyant has installed new applications software for which it has obtained
written confirmation from the vendor that it is Year 2000 compliant. This
software has become operational in the first quarter of 1999. The software
currently in use at IFC is not Year 2000 compliant and will be replaced by
hardware and applications software which will be Year 2000 compliant by
mid-1999. As an additional precaution, the technical infrastructure of all the
Company's businesses will be audited and tested to ensure Year 2000 compliance
under normal business conditions.
The total cost of purchasing and installing the new Wood Wyant software is
estimated to be $1,998,000 (Cdn. $3,000,000), and is being financed through a
five-year term loan with the Bank of Nova Scotia. The cost to replace computer
hardware and applications software at IFC has not yet been determined but is not
expected to be material.
The Company is also preparing to issue Year 2000 compliance letters requesting
confirmation of suppliers' readiness and follow-up discussions will take place
for all business-critical suppliers. Major customers will also be contacted to
confirm their Year 2000 readiness.
To date, the Company has not incurred significant incremental costs in order to
comply with Year 2000 requirements and does not believe it will incur
significant incremental costs in the foreseeable future. However, there can be
no assurance that Year 2000 errors or defects will not be discovered in the
Company's software systems and, if errors or defects are discovered, there is no
assurance that this would not result in a material financial risk to the
Company.
In addition, the Company purchases goods and services from third party vendors
that may not be Year 2000 compliant. While the Company intends to obtain
confirmation of vendors' state of readiness during the second quarter of 1999,
their failure to operate properly with regard to Year 2000 requirements could
require the Company to incur material expenses to rectify the impact on the
Company of such failure. However, all of the Company's raw materials are widely
available and the Company is not dependent on any one supplier or group of
suppliers.
The Company does not know the state of preparedness for Year 2000 issues of all
of its customers. However, no single customer exceeds 2% of consolidated sales
and therefore the risk the Company faces is broad based if many customers are
unable to use information systems necessary to place orders for Company
products.
The Company's Year 2000 Issue involves significant risks. There can be no
assurance that the Company will succeed in implementing its Year 2000 Plan. The
following describes the Company's most reasonably likely worst-case scenario,
given current uncertainties.
If the Company's replaced internal information technology systems fail the
Company will experience significant difficulties in supplying customers and such
a failure could hamper the Company's ability to manage the orderly replenishment
of inventories.
If the Company's vendors or suppliers of its required power, telecommunications,
transportation and financial services, fail to provide the Company with products
and services, it will be unable to provide services to its customers.
If any of these uncertainties were to occur, the Company's business, financial
condition and results of operations would be adversely affected. The Company is
unable to assess the likelihood of such events occurring or the extent of the
effect on the Company.
Although the Company has not yet developed a comprehensive contingency plan to
address situations that may result if the Company or any of the third parties
upon which the Company is dependent is unable to achieve Year 2000 readiness,
the Company's Year 2000 compliance program is ongoing and its ultimate scope, as
well as the consideration of contingency plans, will continue to be evaluated as
new information becomes available.
The Company plans to achieve Year 2000 compliance by mid-1999.
17
<PAGE> 217
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEMS 2, 3, 4 & 5
Not applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Not applicable
b) Reports on Form 8-K
A current report on Form 8-K, dated February 23, 1999, was filed on
March 11, 1999, reporting information under Item 5, Other Events and
Item 7, Financial Statements and Exhibits.
18
<PAGE> 218
WYANT CORPORATION
SIGNATURES
Pursuant to the requirement 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.
Wyant Corporation
(Registrant)
<TABLE>
<S> <C> <C>
Date: May 12, 1999 SIGNATURE: /s/ Marc D'Amour
--------------------------- -------------------------
Marc D'Amour
Vice President,
Chief Financial Officer
and Treasurer
(For the registrant and as
Principal Financial Officer)
</TABLE>
19
<PAGE> 219
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON JUNE 22, 1999
The undersigned, revoking all prior proxies, hereby appoints
James A. Wyant and John B. Wight, or each or either of them with
full power of substitution, as proxy or proxies of the
undersigned, to vote all shares of common stock of WYANT
CORPORATION that the undersigned would be entitled to vote if
present at the Annual Meeting of Shareholders of WYANT CORPORATION
to be held on June 22, 1999, at 10:00 A.M. local time, at the
Newark Airport Marriott Hotel, Newark, New Jersey 07114 or any
adjournments or postponements thereof, including, without limiting
such general authorization, the following proposals described in
the accompanying Proxy Statement:
1. Approval of the Asset Purchase Agreement, dated as of February
23, 1999 between Wyant Corporation and Paper-Pak Products, Inc.
and the other transactions contemplated thereby.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Election of Directors. Nominees: Robert E. Briggs, Richard J.
Charles, Thomas R. M. Davis, Nicholas A. Gallopo, Donald C.
MacMartin, John B. Wight, James A. Wyant.
[ ] FOR [ ] WITHHELD
[ ] For, except vote withheld from the following
nominee(s):
--------------------------
--------------------------
3. Approval of appointment of Ernst & Young LLP as independent
certified public accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Any other business as may properly come before the Annual
Meeting or any adjournment thereof.
[X] Please mark your vote as in this example.
(Continued and to be signed on reverse side).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] I plan to attend the Annual Meeting on June 22, 1999.
Abstentions will be counted for purposes of determining whether a
quorum is present. With respect to the vote represented in
Proposal 1 above, abstentions will have the same effect as a vote
against the matter. With respect to the votes represented in
Proposals 2 and 3 above, votes withheld or abstentions will have
no effect on determining whether these Proposals have been
approved. This proxy is being solicited by the management of Wyant
Corporation and will be voted as specified. If not otherwise
specified, this proxy will be voted for the approval of each
Proposal.
Dated: , 1999
-----------------------------
Signature of Shareholder(s)
-----------------------------
Signature of Shareholder(s)
This proxy should be dated,
signed by the shareholder(s)
and returned promptly in the
enclosed envelope. Persons
signing in a fiduciary
capacity should so indicate.
- --------------------------------------------------------------------------------
