SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 7, 1996
SPARTECH CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-5911 43-0761773
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
7733 Forsyth Blvd., Suite 1450, Clayton, Missouri 63105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 721-4242
1<PAGE>
SPARTECH CORPORATION
FORM 8-K
Item 5. Other Events
On June 10, 1996, Spartech Corporation ("the Company") announced that
it signed an Asset Purchase and Sale Agreement to purchase the net assets of
the extrusion, color and molding divisions of Hamelin Group Inc. (Hamelin).
Hamelin is a leading manufacturer of extruded plastic sheet, color
concentrate and molded food packaging, industrial & housewares products and
is based in Montreal, Canada. It has two extruded sheet plants, one color
concentrate facility and three molding operations located in Canada and a
molding operation located in the United States.
The acquisition will be financed through a combination of additional
borrowings and a common stock equity offering of the Company. It is expected
that the Company's debt to equity ratio will continue to be approximately
one-to-one after the transaction is completed.
Item 7. Financial Statements and Exhibits
Exhibits
2 Asset Purchase and Sale Agreement between Spartech Corporation,
Hamelin Group Inc., Hamelin Industries Inc., Robert Hamelin and
Hamro Group, Inc. dated June 7, 1996.
99 Spartech press release dated June 10, 1996.
2 <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPARTECH CORPORATION
Date June 19, 1996 By /S/ Randy C. Martin
Randy C. Martin
Vice President-Finance and
Chief Financial Officer
3
ASSET PURCHASE AND
SALE AGREEMENT
among
Spartech Corporation
as Buyer,
Hamelin Group Inc.,
and
Hamelin Industries Inc.
as Seller,
and
Robert Hamelin
and
Hamro Group Inc.,
June 7, 1996
<PAGE>
TABLE OF CONTENTS
Page
1. Purchase and Sale of Assets. . . . . . . . . . . 1
1.1 Purchased Assets.. . . . . . . . . . . . . . 1
(a) Cash.. . . . . . . . . . . . . . . . . . 1
(b) Accounts Receivable. . . . . . . . . . . 2
(c) Notes Receivable.. . . . . . . . . . . . 2
(d) Employee Receivables.. . . . . . . . . . 2
(e) Inventory. . . . . . . . . . . . . . . . 2
(f) Property, Plant and Equipment. . . . . . 2
(g) Intangible Assets. . . . . . . . . . . . 2
1.2 Excluded Assets. . . . . . . . . . . . . . . 3
1.3 Assumed Liabilities. . . . . . . . . . . . . 3
(a) Accounts Payable and Accrued Expenses. . 3
(b) Customer-Owned Inventory.. . . . . . . . 3
(c) Employee-Related Liabilities.. . . . . . 3
(d) Assumed Contracts. . . . . . . . . . . . 4
(e) Other Assumed Liabilities. . . . . . . . 4
1.4 Transfer of the Purchased Assets.. . . . . . 4
1.5 The Closing. . . . . . . . . . . . . . . . . 4
1.6 Prorations.. . . . . . . . . . . . . . . . . 4
2. Purchase Price . . . . . . . . . . . . . . . . . 4
2.1 Total Consideration. . . . . . . . . . . . . 4
2.2 Allocation of Consideration. . . . . . . . . 5
2.3 Adjustments to Base Purchase Price.. . . . . 5
(a) Basis for Adjustment.. . . . . . . . . . 5
(b) Adjustments to Inventories.. . . . . . . 6
(c) Estimated Purchase Price.. . . . . . . . 6
(d) Closing Report.. . . . . . . . . . . . . 6
2.4 Payment of Purchase Price. . . . . . . . . . 7
(a) Payment to Seller at Closing.. . . . . . 7
(b) Payment of Hold-Back.. . . . . . . . . . 7
(c) Retention of Funds by Seller.. . . . . . 7
3. Representations and Warranties of Seller and the
Shareholders . . . . . . . . . . . . . . . . . . 8
3.1 Organization, Standing and Qualification.. . 8
3.2 Power; Authorization.. . . . . . . . . . . . 8
3.3 Authority. . . . . . . . . . . . . . . . . . 8
3.4 Ownership of Outstanding Capital Stock; Subsidiaries.
8
3.5 Execution, Delivery and Performance of Agreements. 8
3.6 Title to and Sufficiency of Purchased Assets. 9
3.7 No Third Party Options.. . . . . . . . . . . 9
3.8 Receivables. . . . . . . . . . . . . . . . . 9
3.9 Inventory. . . . . . . . . . . . . . . . . . 9
3.10 Property, Plant and Equipment. . . . . . 9
3.11 Intellectual Property Matters. . . . . . 10
3.12 Financial Statements.. . . . . . . . . . 10
(a) 1995 and 1994 Audited Financial Statements. 10
(b) 1996 Audited Financial Statements. . . . 10
(c) Unaudited Interim Financial Statements.. 10
3.13 Books of Account.. . . . . . . . . . . . 11
3.14 Taxes and Tax Returns and Reports. . . . 11
3.15 Absence of Certain Changes or Events.. . 11
3.16 Compliance with Law; Authorizations. . . 12
3.17 Transactions with Certain Related Parties. 13
3.18 Litigation.. . . . . . . . . . . . . . . 13
3.19 Insurance. . . . . . . . . . . . . . . . 13
3.20 Contracts. . . . . . . . . . . . . . . . 13
3.21 Brokers, Finders, etc. . . . . . . . . . 14
3.22 Employees. . . . . . . . . . . . . . . . 14
3.23 Employee Benefit Plans and Arrangements. 16
(a) Plans Covering United States Employees.. 16
(b) Plans Covering Canadian Employees. . . . 19
3.24 Environmental Matters. . . . . . . . . . 21
3.25 Business Names and Locations.. . . . . . 22
3.26 United States Sales. . . . . . . . . . . 22
3.27 Canadian v. United States GAAP.. . . . . 22
3.28 Management Fee.. . . . . . . . . . . . . 22
3.29 Copies of Documents. . . . . . . . . . . 22
3.30 Completeness of Disclosure.. . . . . . . 22
3.31 Seller's Tax Residence.. . . . . . . . . 22
3.32 Business Locations.. . . . . . . . . . . 23
4. Representations and Warranties by Purchaser. . . 23
4.1 Organization and Standing. . . . . . . . . . 23
4.2 Power; Authorization.. . . . . . . . . . . . 23
4.3 Execution, Delivery and Performance of Agreements. 23
4.4 Brokers, Finders, etc. . . . . . . . . . . . 23
5. Conduct of Business Prior to Closing . . . . . . 23
5.1 Access to Information. . . . . . . . . . . . 23
5.2 Interim Operations of Seller.. . . . . . . . 24
5.3 Additions to Schedules; Changes; Corrections. 25
5.4 Cooperation in Transaction.. . . . . . . . . 25
5.5 Exclusive Dealings.. . . . . . . . . . . . . 26
5.6 Public Announcements.. . . . . . . . . . . . 26
5.7 Hiring of Employees. . . . . . . . . . . . . 26
5.8 Maintenance of Insurance.. . . . . . . . . . 26
6. Conditions Precedent to Closing. . . . . . . . . 26
6.1 Conditions to Purchaser's Obligations. . . . 26
6.2 Conditions to Seller's Obligations.. . . . . 28
7. Indemnification. . . . . . . . . . . . . . . . . 28
7.1 Indemnification by Seller and the Shareholders. 28
7.2 Indemnification by Purchaser.. . . . . . . . 29
7.3 Indemnification Procedures.. . . . . . . . . 29
8. Taxes. . . . . . . . . . . . . . . . . . . . . . 30
8.1 Income Tax Elections.. . . . . . . . . . . . 30
8.2 Sales Taxes. . . . . . . . . . . . . . . . . 30
9. Other Matters. . . . . . . . . . . . . . . . . . 31
9.1 Survival of Representations and Warranties.. 31
9.2 Payments Received. . . . . . . . . . . . . . 31
9.3 Covenant Not to Compete. . . . . . . . . . . 31
9.4 Accounts Receivable. . . . . . . . . . . . . 32
9.5 Name Change. . . . . . . . . . . . . . . . . 32
10. Miscellaneous . . . . . . . . . . . . . . . . . 32
10.1 Termination. . . . . . . . . . . . . . . 32
10.2 Expenses.. . . . . . . . . . . . . . . . 33
10.3 Contents of Agreement, Parties in Interest, etc. 33
10.4 Assignment and Binding Effect. . . . . . 33
10.5 Waiver.. . . . . . . . . . . . . . . . . 33
10.6 Notices. . . . . . . . . . . . . . . . . 33
10.7 Governing Law. . . . . . . . . . . . . . 34
10.8 No Benefit to Others.. . . . . . . . . . 34
10.9 Headings; Terminology. . . . . . . . . . 34
10.10 Schedules and Exhibits.. . . . . . . . . 34
10.11 Severability.. . . . . . . . . . . . . . 34
10.12 Counterparts.. . . . . . . . . . . . . . 34
10.13 Canadian Dollars.. . . . . . . . . . . . 35
10.14 Language.. . . . . . . . . . . . . . . . 35
LIST OF EXHIBITS AND SCHEDULES
Exhibit A- April 30 Working Capital
Exhibit B- Capital Expenditures
Exhibit C- Opinion of Gross, Pinsky
Exhibit D- Opinion of Stikeman, Elliott
Schedule 1.1(f)(i) Real Property
Schedule 1.1(g)(i) Intellectual Property
Schedule 1.1(g)(ii) Permits
Schedule 1.1(g)(iv)-A Open Customer Purchase Orders
Schedule 1.1(g)(iv)-B Open Supplier Purchase Orders
Schedule 1.1(g)(iv)-C Other Contracts, Leases, etc.
Schedule 1.1(g)(iv)-D Employment and/or Non-disclosure
Agreements
Schedule 1.2 Excluded Assets
Schedule 1.3 Assumed Liabilities
Schedule 1.3(a) Accounts Payable and Accrued Expenses
Schedule 1.3(b) Customer-Owned Inventory
Schedule 1.3(c) Employee-Related Liabilities
Schedule 2.2 Allocation of Consideration
Schedule 3.5 Required Consents and Approvals Seller and
Shareholders
Schedule 3.6 Liens to be Released
Schedule 3.7 No Third Party Options
Schedule 3.8 Other Receivables
Schedule 3.11 Intellectual Property Violations or
Infringement
Schedule 3.15 Absence of Certain Changes or Events
Schedule 3.16 Compliance with Law; Authorizations
Schedule 3.17 Transactions with Certain Related Parties
Schedule 3.18 Litigation
Schedule 3.19 Seller's Insurance Policies
Schedule 3.22(a) Employees
Schedule 3.22(b) Employment Matters
Schedule 3.23(a) United States Plans
Schedule 3.23(b) Canadian Plans
Schedule 3.24 Business Names and Locations
Schedule 4.3 Required Consents and Approvals Purchaser
Schedule 6.1 Curable Representations and Warranties
<PAGE>
DEFINED TERMS
Defined Term Cross Reference
Page
Accounts Receivable 1.1(b) 2
Agreement Preamble 1
Applicable Employee Benefit Laws 3.23(b)(ii) 19
Assumed Contracts 1.1(g)(iv) 3
Assumed Liabilities 1.3 3
Authorizations 3.16 13
Base Purchase Price 2.1 5
Canadian Plans 3.23(b)(i) 19
Capex Historical Average 2.3(a) 5
Capitalized Leases 1.1 1
Closing 1.5 4
Closing Date 1.5 4
Closing Report 2.3(d) 6
Code 3.23(a)(ii) 17
Cost 2.3(b) 5
Contracts 3.20 13
Customer-Owned Inventory 1.3(b) 3
Deposits 1.1(g)(iv) 3
EBITDA 2.1 5
Employee Receivables 1.1(d) 2
United States Plan 3.23(a)(ix) 19
Employee-Related Liabilities 1.3(c) 3
Employees 3.22(a) 14
Environmental Regulations 3.24(a) 21
Equipment 1.1(f)(ii) 2
ERISA Affiliate 3.23(a)(ix) 19
Estimated Purchase Price 2.3(c) 6
Everly Note Receivable 3.8 10
Excluded Assets 1.2 3
Final Purchase Price 2.4(b) 7
GAAP 2.1 5
Hamro Preamble 1
Hamelin Preamble 1
Hamelin Industries Preamble 1
Hazardous Substances 3.24(a) 21
Hired Employees 5.7 26
Indemnitee 7.3(a) 29
Indemnitor 7.3(a) 29
Inspections 6.1(k) 27
Intangible Assets 1.1(g) 2
Intellectual Property 1.1(g)(i) 2
Interim Balance Sheet Date 3.12(c) 11
Inventory 1.1(e) 2
Loss 7.3(a) 29
Market 2.3(b) 6
Multiemployer Plan 3.23(a)(iii) 17
Multiple Employer Welfare Plan 3.23(a)(v) 17
Notes Receivable 1.1(c) 2
Notice of Claim 7.3(b) 29
Pension Plan 3.23(a)(ii) 17
Permits 1.1(g)(ii) 2
Permitted Securities 2.4(c) 7
Physical Inventory 2.3(b) 6
Plan 3.23(a)(ix) 18
Pre-Closing Period 2.3(a) 5
Prepaid Expenses 1.1(g)(iv) 3
Property, Plant and Equipment 1.1(f) 2
Purchased Assets 1.1 1
Purchaser Preamble 1
Purchaser Loss 7.1 29
Real Property 1.1(f)(i) 2
Regulations 3.16 12
Related Agreements 3.2 8
Seller Preamble 1
Seller Loss 7.2 29
Shareholder Preamble 1
Shareholders Preamble 1
Tax Returns 3.14 11
Taxes 3.14 11
Third Party Claim 7.3(c) 29
Title Commitments 6.1(l) 28
Trade Names 1.1(g)(i) 2
United States Plan 3.23(a)(ix) 19
Working Capital 2.3(a) 5
<PAGE>
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement ("Agreement") is
entered into as of
the 7th day of June, 1996 among Spartech Corporation, a
Delaware corporation
having its principal office at 7733 Forsyth, Suite 1450,
Clayton, Missouri 63105
("Purchaser"), Hamro Group Inc., a corporation incorporated
under the laws of
the Province of Quebec having its principal place of business
at 150 Industrial
Boulevard, Boucherville, Quebec J4B 2X3 ("Hamro"), Hamelin
Group Inc., a
corporation incorporated under the laws of the Province of
Quebec having its
principal place of business at 150 Industrial Boulevard,
Boucherville, Quebec
J4B 2X3 ("Hamelin") and Hamelin Industries Inc., an Indiana
corporation
having its principal place of business in Warsaw, Indiana
("Hamelin Industries")
(Hamelin and Hamelin Industries are hereinafter referred to
collectively as
"Seller"), and Robert Hamelin.
Whereas, Seller is engaged in the business of formulation,
manufacture,
marketing and sale of extruded plastic sheet, other plastic
products and color
compounds, concentrates and additives used in the manufacture
of plastic products;
and
Whereas, 9010-4738 Quebec, Inc. and Capital d'Amerique CDPQ
Inc. own
100% of the outstanding capital stock of Hamro, Hamro owns 100%
of the capital
stock of Hamelin, and Hamelin owns not less than 91% (on a
fully diluted basis)
of the capital stock of Hamelin Industries; and
Whereas, Robert Hamelin and Fiducie Hamelin own 100% of the
capital
stock of 9010-4738 Quebec, Inc.; and
Whereas, Seller desires to sell, transfer and assign to
Purchaser, and
Purchaser desires to purchase and acquire from Seller, all of
Seller's assets,
properties and rights upon the terms and subject to the
conditions hereinafter set
forth;
Now, Therefore, in consideration of the mutual covenants
and agreements
hereinafter set forth, and intending to be legally bound
hereby, the parties hereby
agree as follows:
1. Purchase and Sale of Assets
1.1 Purchased Assets. Upon the terms and subject to the
conditions set
forth in this Agreement, Seller will sell, transfer and assign
to Purchaser, and
Purchaser will purchase and acquire from Seller, at the Closing
(which term, as
well as other capitalized terms used herein, are defined in the
Sections of this
Agreement referenced in the table of Defined Terms), all
tangible property, plant,
equipment (including equipment covered by "Capitalized Leases",
defined as a
lease with respect to which Seller is required concurrently to
recognize the
acquisition of an asset and the incurrence of a liability in
accordance with GAAP),
vehicles and other assets used in connection with the
manufacture or sale of Seller's
products, and all cash, accounts receivable, inventories,
operating leases,
distribution rights, patents, copyrights, trade secrets,
tradenames, trademarks,
customer lists, intangible assets, prepaid contracts, office
supplies, and books and
records, which are owned by Seller or used in connection with
its business (the
"Purchased Assets"), including, without limitation, the
following Purchased Assets
(as described in more detail, including in each case whether
the Purchased Asset
is owned by Hamelin or Hamelin Industries, as indicated in the
Purchased Asset
Schedules referenced in this Section 1.1:
(a) Cash. All cash and cash equivalents;
(b) Accounts Receivable. All customer accounts
receivable entered
into in the ordinary course of business in accordance with
past practice (the
"Accounts Receivable");
(c) Notes Receivable. All notes receivable reflected
on Seller's
April 27, 1996 balance sheet (the "Notes Receivable");
(d) Employee Receivables. All advances to and
receivables from
Hired Employees made in the ordinary course of business in
accordance with
past practice (the "Employee Receivables");
(e) Inventory. All inventories (the "Inventory"),
including raw
materials, work in process and finished goods, spare parts,
replacement parts
and maintenance supplies, wherever located, goods
previously purchased for
the account of Seller and in transit to Seller on the
Closing Date, and
excluding any and all right, title and interest of Seller
in and to the
Customer-Owned Inventory;
(f) Property, Plant and Equipment. The following
tangible assets
(the "Property, Plant and Equipment"):
(i) Real Property. All real or immovable property
owned by
Seller, the legal descriptions of which are set forth
on Schedule
1.1(f)(i), including all land, buildings, fixtures and
other
improvements thereon and all rights appurtenant thereto
(the "Real
Property");
(ii) Equipment, etc. The machinery, equipment,
furniture and
furnishings of Seller, wherever located (the
"Equipment"), including
both the machinery, equipment, vehicles, furniture and
furnishings
reflected on the books of Seller on the Closing Date,
each item of
which valued in excess of C$1,000 is listed and
described on
Schedule 1.1(f)(ii); and the machinery, equipment,
furniture and
furnishings which are either fully depreciated or are
otherwise not
reflected on the books of Seller on the Closing Date,
each item of
which valued in excess of C$1,000 is listed and
described on Sched-
ule 1.1(f)(ii); and equipment, computers, office and
maintenance
supplies and other similar items owned by Seller, each
item of which
valued in excess of C$1,000 is listed and described on
Schedule 1.1(f)(ii);
(g) Intangible Assets. The following intangible assets
of Seller (the
"Intangible Assets"):
(i) Intellectual Property. To the extent their
transfer is
permitted by law or not otherwise prohibited, all
patents, patent
applications, trademarks, service marks, and trade or
product names
used by Seller, including without limitation, all
rights to use the
Hamelin name (the "Trade Names"), copyrights, including
registrations and applications for registration
thereof, if any, patent,
software and technology licenses of Seller, all of
which are listed and
described on Schedule 1.1(g)(i), and all related common
law rights,
manufacturing formulations, processes and recipes,
software, know-how and trade secrets
of Seller (the "Intellectual Property");
(ii) Permits. To the extent their transfer is
permitted by law,
all of Seller's governmental licenses, permits, code
and other
approvals (including both UL and U.S. military
approvals and
comparable Canadian government and military approvals),
license
applications, license amendment applications, and
product
registrations (the "Permits"), all of which will be
listed and described
on Schedule 1.1(g)(ii) to be provided within 30 days
from the date
hereof;
(iii) Lists, Books and Records. All of Seller's
customer lists,
including terms of sale and related records, books,
manuals,
documentation and other materials relating to the
business of Seller or
the Purchased Assets, excluding Seller's general
ledger. Purchaser
undertakes to retain all such lists, books and records
for a period of
not less than seven (7) years from the Closing Date and
Purchaser
agrees to grant Seller and/or its designated
representatives access
thereto during normal business hours subject to prior
reasonable
notice and to permit Seller to make copies.
(iv) Contract Rights. All rights of Seller
relating to the
Purchased Assets including rights with respect to
prepaid expenses
(the "Prepaid Expenses"), deposits (the "Deposits") and
other
advances, at the Closing Date pursuant to the following
contracts (the
"Assumed Contracts"): (A) all open purchase orders of
Seller's
customers entered into in the ordinary course of
Seller's business in
accordance with past practice, all of which are listed
on Schedule
1.1(g)(iv)-A, which shall be updated as of the Closing;
(B) all open
supplier purchase orders issued by Seller to its
vendors, suppliers and
providers relating to the purchase of raw materials and
supplies by
Seller for its business entered into in the ordinary
course of Seller's
business in accordance with past practice, all of which
are listed on
Schedule 1.1(g)(iv)-B, which shall be updated as of the
Closing Date;
(C) such leases of real or immoveable property entered
into in the
ordinary course of Seller's business in accordance with
past practice
and listed and described on Schedule 1.1(g)(iv)-C; (D)
such other
agreements with any customer, supplier, distributor,
licensor, licensee
or purchaser (other than as described on Schedule
1.1(g)(iv)-B) as are
listed and described on Schedule 1.1(g)(iv)-D entered
into in the
ordinary course of Seller's business in accordance with
past practice,
which shall be updated as of the Closing Date; and (E)
the non-disclosure agreements
with certain employees of Seller and the
employment agreement with Bruce Harrison, copies of
which are
included in Schedule 1.1(g)(iv)-E, which shall be
updated as of the
Closing Date.
(v) Goodwill. All goodwill of Seller.
1.2 Excluded Assets. Notwithstanding anything contained in
Section 1.1
hereof, Purchaser shall not purchase, and Seller shall not sell
to Purchaser, any
assets of Seller specifically listed in Schedule 1.2 (the
"Excluded Assets").
Schedule 1.2 will include Seller's interest in any refunds for
any payments made
with respect to goods and services tax or Quebec Sales Tax.
1.3 Assumed Liabilities. Effective as of the Closing Date,
Purchaser
shall assume and hereby agrees to pay or otherwise discharge
only the following
liabilities of Seller, which liabilities will be set forth on
Schedule 1.3 hereto,
including in each case the name of Seller entity to which the
liability is attributable
(the "Assumed Liabilities").
(a) Accounts Payable and Accrued Expenses. Accounts
payable and
accrued expenses at the Closing Date incurred by Seller in
the ordinary
course of business, all of which will be listed by payee
and associated dollar
amount on Schedule 1.3(a). On the date hereof, Schedule
1.3(a) provides
as at April 27, 1996 a summary of such payables and
expenses of each
business unit;
(b) Customer-Owned Inventory. All liabilities of
Seller at the
Closing Date with respect to customer-owned inventory
received on
consignment on Seller's books (the "Customer-Owned
Inventory"), all of
which Customer-Owned Inventory will be listed by customer,
including the
quantity and associated dollar amount on Schedule 1.3(b).
On the date
hereof, Schedule 1.3(b) provides as at April 27, 1996 a
summary of such
Customer-Owned Inventory;
(c) Employee-Related Liabilities. All obligations and
liabilities of
Seller at the Closing Date to Hired Employees for accrued
salaries and wages
and related payroll and withholding taxes (both employer
and employee
portions), accrued vacation for non-salaried employees and
accrued liabilities
for employer contributions under Seller's pension plans
listed on Schedule
3.23(a) and (b) (the "Employee-Related Liabilities"), all
of which will be
listed by employee, including the quantity and associated
dollar amount as
of the Closing Date on Schedule 1.3(c). Schedule 1.3(c)
shall be provided
to Purchaser within sufficient time to permit Purchaser to
meet all applicable
payroll, payroll tax and pension payment schedules. On the
date hereof,
Schedule 1.3(c) provides a summary of all such obligations.
Purchaser
acknowledges that vacation expense for salaried employees
is not accrued by
Seller on its books, and agrees to assume the same and that
Purchaser's
assumption of such amounts will not be considered to be an
assumed liability
for the purpose of adjusting the Base Purchase Price
pursuant to Section 2.3
hereof;
(d) Assumed Contracts. All obligations of Seller
arising after
Closing Date under the Assumed Contracts, including all
Capitalized Leases
(to the extent included in the calculation of working
capital in accordance
with Section 2.3 hereof) and all operating leases governing
all Equipment,
entered into in the ordinary course of Seller's business in
accordance with
past practice, whether or not listed on Schedule
1.1(g)(iv); and
(e) Other Assumed Liabilities. Any liability for
property taxes,
utilities and similar items with respect to the Real
Property for periods after
the Closing Date, prorated in accordance with local
practice.
Notwithstanding anything in this Section 1.3 to the contrary,
Purchaser shall not
assume (i) any liabilities of Seller which have arisen from
Seller's defaults under
leases, contracts or other obligations; (ii) any tax
liabilities of Seller, including any
liability for goods and services tax or provincial sales tax
(other than for property
taxes described in clause (e) above); or (iii) any obligations
or liabilities of Seller
other than the Assumed Liabilities expressly set forth in this
Section 1.3 or
specifically listed on Schedule 1.3.
1.4 Transfer of the Purchased Assets. Subject to the terms
and
conditions hereof, on the Closing Date the Purchased Assets
shall be transferred
or otherwise conveyed to Purchaser by bills of sale,
assignments, deeds or other
appropriate instruments of conveyance or assignment, free and
clear of all
mortgages, hypothecs, liens, pledges, security interests,
charges, claims, liabilities,
restrictions and encumbrances whatsoever, other than the
Assumed Liabilities, and
other than title defects or irregularities which are of a minor
nature and in the
aggregate do not materially impair the value of any immoveable
or which do not
impair real property or the use of such immoveable or real
property for the
purposes for which it is held.
1.5 The Closing. The purchase and sale of assets herein
described shall
take place at a closing (the "Closing") which shall be held at
the offices of Seller's
counsel, Gross, Pinsky, Two Alexis Nihon Plaza, Suite 1000,
Montreal, Quebec
H3Z 3C1 at 9:00 a.m. on August 30, 1996, or at the option of
either Seller or
Purchaser, a date not later than September 30, 1996 (the
"Closing Date"). Unless
otherwise expressly provided in this Agreement, all balance
sheet and other
financial calculations herein shall be made as of the close of
business on the
business day immediately preceding the Closing Date. At the
Closing, Seller shall
deliver to Purchaser such documents as Purchaser may reasonably
request to
evidence compliance with Section 1.4, and shall take such other
steps as may be
required to put Purchaser in actual possession and operating
control of the
Purchased Assets, as described in Article 6.
1.6 Prorations. All real estate taxes, utilities and
similar items with
respect to the Real Property for periods after the Closing Date
shall be prorated in
accordance with local practice, with Purchaser responsible for
such items
applicable to all periods after the Closing Date.
2. Purchase Price
2.1 Total Consideration. In addition to the assumption of
liabilities
described in Section 1.3 hereof (estimated to be C$12,227,200
at April 27, 1996),
Purchaser will pay an aggregate cash purchase price equal to
seven times Seller's
average annual earnings before interest, taxes, depreciation
and amortization
("EBITDA") for the three year period ending April 27, 1996 (the
"Base Purchase
Price") for all of the Purchased Assets and for the covenants
not to compete
described in Section 9.3 hereof. Seller's 1996 EBITDA shall be
calculated and
agreed upon by Purchaser and Seller in accordance with Seller's
1996 year-end
audited financial statements, which shall be prepared in
accordance with Canadian
generally accepted accounting principles ("GAAP"), applied on a
basis consistent
with prior periods and will not contain any change from prior
periods in the
valuation method for inventory. Seller has advised Purchaser
that 1996 EBITDA
will be adversely affected by a C$254,176 charge relating to
the termination of,
and severance amounts paid or payable to, certain former
employees of Seller's
Korlin Concentrates facility in Stratford, Ontario. Purchaser
and Seller agree that
the Base Purchase Price shall not be adversely affected by this
charge, and
accordingly agree to add the amount of the charge back into
1996 EBITDA for the
purpose of calculating the Base Purchase Price. Based on
Seller's actual 1994 and
1995 EBITDA of C$9,393,000 and C$12,646,000, respectively, and
Seller's
estimated 1996 EBITDA of C$11,587,000, the parties currently
project a Base
Purchase Price of approximately C$78.46 million. The Base
Purchase Price shall
be subject to adjustment as provided in Section 2.3 below.
2.2 Allocation of Consideration. Purchaser and Seller
agree and
acknowledge that the purchase price for the Purchased Assets
has been allocated
in accordance with Schedule 2.2. Schedule 2.2 shall be updated
at Closing in a
manner consistent with the allocation method used therein.
Purchaser and Seller
agree to make all appropriate tax filings on a basis consistent
with the agreed
allocation, to provide a draft of any required information
return to the other party,
if requested, at least ten days prior to filing any such
return, and not to take a
position on any return or in any proceeding before any court or
governmental
agency that is inconsistent with the terms of any agreed
allocation.
2.3 Adjustments to Base Purchase Price.
(a) Basis for Adjustment. Seller has represented that,
at Closing,
Seller will have at least C$15.37 million of Working
Capital. For the
purpose of this Agreement, "Working Capital" means cash and
cash
equivalents, plus Accounts Receivable (net of doubtful
accounts), plus Notes
Receivable, plus Employee Receivables, plus Prepaid
Expenses (less any
prorations made pursuant to Section 1.6), plus Deposits,
plus Inventory
(including spare and replacement parts and maintenance
supplies) (valued at
the lower of FIFO Cost or Market as defined in subsection
(b) below and net
of obsolescence reserve), minus the dollar amount of
assumed Accounts
Payable, Accrued Expenses, liabilities for Capitalized
Lease obligations,
Customer-Owned Inventory and Employee-Related liabilities.
Doubtful
accounts shall be determined in good faith by Seller and
Purchaser as of the
Closing Date based upon actual information available at
Closing and not
based upon an arbitrary formula without reference to
specific accounts of
Seller or without reference to Seller's historical
experience with its
customers.
Seller has also represented that during the period
commencing on
April 27, 1996, and ending on the Closing Date (the
"Pre-Closing Period"),
Seller has made and will make "Net Capital Expenditures"
(defined as
additions to fixed assets and Capitalized Leases, less
proceeds from
disposals) relating to its business in amounts equal (on a
prorated basis) to
its historical average over the past three fiscal years
(i.e., C$5.026 million
annually) (the "Capex Historical Average").
Accordingly, the Base Purchase Price shall be adjusted
by calculating
the following:
(i) the Base Purchase Price; minus
(ii) the amount, if any, by which the Working
Capital at
Closing is less than C$15.37 million, or plus
(iii) the amount, if any, by which the Working
Capital at
Closing is more than C$15.37 million; minus
(iv) the amount, if any, by which Capital
Expenditures made
during the Pre-Closing Period is less than the Capex
Historical
Average, prorated for the number of days in the period;
plus
(v) the amount, if any, by which Capital
Expenditures made
during the Pre-Closing Period is more than the Capex
Historical
Average, prorated for the number of days in the period;
In calculating all adjustments to the Base Purchase
Price, the parties
shall negotiate in good faith to determine all amounts and
shall use Seller's
historical accounting practices consistently applied as
determined by and with
reference to Exhibit A as at April 27, 1996 and to be
updated at Closing.
Inventory shall be valued at the lower of FIFO Cost or
Market. Any
disputes with respect to the Base Purchase Price shall be
resolved by an
accounting firm (selected in the manner provided in Section
2.3(d) below)
as arbitrator, and the good faith decision of such firm
shall be binding on all
parties and non-appealable.
(b) Adjustments to Inventories. During the two days
immediately
after the Closing Date, representatives of Seller and
representatives of
Purchaser shall jointly perform a physical inventory count
and valuation of
each item of Seller's useable raw material and saleable
finished goods
inventory, replacement parts and maintenance supplies (the
"Physical
Inventory"), for the purpose of establishing the valuation
of inventory to be
used in calculating Working Capital. For purposes of
calculating Working
Capital all inventory shall be valued at the lower of FIFO
Cost or Market,
which Seller represents to be consistent with Seller's
historical accounting
practices consistently applied. "Market" is defined as net
realizable value for
finished goods, and as replacement cost for raw materials,
replacement parts
and maintenance supplies "Cost" of inventories is
determined as follows:
(i) raw materials using the first-in, first-out
method;
(ii) replacement parts and maintenance supplies
using the
specific identification method; and
(iii) finished goods using the accumulation of
actual cost of raw
materials and labour, plus a percentage of overhead in
accordance
with GAAP.
Each party shall bear its own expenses incurred in connection
with the Physical
Inventory.
(c) Estimated Purchase Price. As of a date selected by
Seller which
is not earlier than fifteen (15) days prior to the Closing
Date, Seller shall
prepare its best estimate of the amount which would be
equal to Seller's
Working Capital and Pre-Closing Period Net Capital
Expenditures if the
Closing had occurred on such selected date, based on the
information
reasonably available to Seller at the time of such
estimated calculation, and
shall provide Purchaser not less than seven (7) days prior
to the Closing Date
with a written report reflecting such estimated
calculation, together with
supporting documentation, and the resulting estimated
purchase price (the
"Estimated Purchase Price"). Any disputes with respect to
the Estimated
Purchase Price shall be resolved by an accounting firm
(selected in the
manner provided in Section 2.3(d) below) as arbitrator, and
the good faith
decision of such firm shall be binding on all parties and
non-appealable.
(d) Closing Report. As promptly as practicable
following the
completion of the Physical Inventory and not more than
thirty (30) days
following the Closing Date, Seller shall provide Purchaser
with a written
report reflecting the final calculation of Working Capital,
Pre-Closing Period
Net Capital Expenditures and the resulting final purchase
price, including all
prorations (the "Closing Report"), together with supporting
documentation,
determined in accordance with Seller's historical practices
consistent with the
methods used in determining Exhibit A (with inventory
valued according to
paragraphs 2.3(a) and 2.3(b)), and Seller shall promptly
provide Purchaser
with such additional supporting information as Purchaser
may from time to
time thereafter request. Within ten (10) days after
Seller's delivery of the
Closing Report to Purchaser, Purchaser shall notify Seller
of any dispute as
to the information contained in the Closing Report. The
notice shall specify
any objections Purchaser may have, and Purchaser and Seller
shall then
endeavor in good faith to resolve any discrepancies between
the Closing
Report and the matters specified in the notice delivered by
Purchaser. In the
event that there are items in dispute between Purchaser and
Seller so that the
parties cannot agree as to the Closing Report within sixty
(60) days after
Closing, the disputed matters shall be submitted to a
partner of a mutually
agreeable Montreal or Toronto based big six accounting firm
(excluding
Seller's accountants, Coopers & Lybrand and Purchaser's
accountants,
Arthur Andersen) as arbitrator, and the good faith decision
of such firm,
which shall be made within 90 days after the Closing Date,
shall be final and
binding on all parties and non-appealable. Each party
shall bear its own
expenses incurred in connection with preparation and
examination of the
Closing Report. The cost of the engagement of such
accounting firm shall
be borne equally by the parties.
2.4 Payment of Purchase Price.
(a) Payment to Seller at Closing. At the Closing,
Purchaser shall
pay to Hamelin, by wire transfer to an account designated
by Hamelin at
least twenty-four (24) hours before the Closing Date, an
amount equal to
90% of the Estimated Purchase Price. Hamelin will divide
the same among
each Seller entity in the manner in which such entities
have agreed.
(b) Payment of Hold-Back. Upon the later to occur of
60 days after
the Closing Date or three business days following the date
the Closing Report
becomes final pursuant to paragraph 2.3(d) above resulting
in the calculation
of the final purchase price (the "Final Purchase Price"),
Purchaser shall pay
to Hamelin, by wire transfer to an account designated by
Hamro at least
twenty-four (24) hours previously, the remaining balance of
the Final
Purchase Price, after applicable adjustments. Hamelin will
divide the same
among each Seller entity in the manner in which such
entities have agreed.
In the event that the Final Purchase Price calculation
results in a credit due
to Purchaser, Seller shall repay such excess to Purchaser
within the same
time period.
(c) Retention of Funds by Escrow Agent
At Closing, and in accordance with an escrow agreement that
will be
executed by the Seller and Purchaser not later than June
12, 1996, Seller
shall deliver to a mutually agreeable escrow agent ("Escrow
Agent") an
irrevocable Letter of Credit issued by a Schedule I bank
chartered under the
Bank Act of Canada in a form consistent with the Letter of
Credit to be
provided by the Purchaser pursuant to Section 6.4 under the
terms of which
the issuing bank will undertake to pay Escrow Agent:
(i) at any time during the twelve (12) month period
commencing on the Closing Date an amount equal to the
sum of
FIVE MILLION CANADIAN DOLLARS ($5,000,000.00) to
satisfy,
or on account of, Seller's indemnification obligations
provided for in
Article 7; and
(ii) at any time during the twelve (12) month
period
commencing on the first anniversary following Closing
Date and
ending on the second anniversary thereof an amount
equal to the
greater of TWO MILLION FIVE HUNDRED THOUSAND
DOLLARS ($2,500,000.00), or the dollar amount of any
unpaid
Purchaser Claims for indemnification made in good faith
prior to the
first anniversary of the Closing Date (the amount of
the Letter of
Credit not to exceed in any event more than
C$5,000,000), to satisfy,
or on account of, Seller's indemnification obligations
provided for in
Article 7; provided further that the Letter of Credit
shall not expire
until the date of final resolutions of any claims for
indemnification
made in good faith by Purchaser during said two year
period.
3. Representations and Warranties of Seller, Hamro and Robert
Hamelin
Seller, Hamro and Robert Hamelin, solidarily represent and
warrant to
Purchaser as of the date hereof and as of the Closing Date as
follows:
3.1 Organization, Standing and Qualification. Hamro is a
corporation
duly incorporated, organized, validly existing and in good
standing under the laws
of Quebec. Hamelin is a corporation duly incorporated,
organized, validly existing
and in good standing under the laws of Quebec and is duly
qualified and in good
standing in all jurisdictions in which the nature of its
business or assets would
require it to be so qualified, except where the failure to be
so qualified would not
have a material adverse effect on Seller. Hamelin Industries
is a corporation duly
incorporated organized, validly existing and in good standing
under the laws of
Indiana and is duly qualified and in good standing in all
jurisdictions in which the
nature of its business or assets would require it to be so
qualified, except where the
failure to be so qualified would not have a material adverse
effect on Seller.
3.2 Power; Authorization. Seller has full corporate power
and authority
to enter into this Agreement and the other agreements
contemplated hereby (the
"Related Agreements"), to carry out the transactions
contemplated by this
Agreement and the Related Agreements, to carry on its business
as now being
conducted, and to own, lease and operate its properties. The
execution, delivery
and performance of this Agreement and the Related Agreements by
Seller have
been authorized by all necessary corporate and shareholder
action.
3.3 Authority. Robert Hamelin has the full right, power
and authority
to enter into this Agreement.
3.4 Ownership of Outstanding Capital Stock; Subsidiaries.
9010-4738
Quebec, Inc. and Capital d'Amerique CDPQ Inc. collectively own,
beneficially
and of record, all of the issued and outstanding capital stock
of Hamro as follows:
70% by 9010-4738 Quebec Inc. and 30% by Capital d'Amerique CDPQ
Inc.
Hamro owns, beneficially and of record, all of the issued and
outstanding capital
stock of Hamelin, and Hamelin owns, beneficially and of record,
not less than 91%
(on a fully diluted basis) of the issued and outstanding
capital stock of Hamelin
Industries. The remaining interest is owned by Bruce Harrison.
Except for the
above-described ownership interests, none of the Seller
entities own beneficially
or of record, either directly or indirectly, any interest or
investment (whether debt
or equity) in any corporation, partnership, joint venture,
business, trust or other
entity.
3.5 Execution, Delivery and Performance of Agreements.
This
Agreement has been duly executed and delivered by Seller and
Robert Hamelin and
constitutes a legal, valid and binding obligation, enforceable
against each of them
in accordance with its terms. The execution, delivery and
performance of this
Agreement and the Related Agreements by Seller and Robert
Hamelin will not,
with or without the giving of notice or the passage of time, or
both, violate,
conflict with or result in a breach of any term, condition or
provision of, or require
the consent of any other person under, (i) the Articles of
Incorporation or By-Laws
of Seller, (ii) any license, law, rule, regulation, order,
judgment or decree
applicable to Seller or Robert Hamelin, or (iii) any mortgage,
hypothec, indenture,
deed of trust, security agreement, lease or other contract by
which Seller or Robert
Hamelin or any of the Purchased Assets may be bound or
affected, or give any
person with rights thereunder the right to terminate, modify,
accelerate or
otherwise change the existing rights or obligations of Seller
thereunder. No
consent, approval, order or authorization of, notice to, or
registration, declaration
or filing with, any governmental authority or entity, domestic
or foreign, is or has
been or will be required on the part of Seller in connection
with the execution and
delivery of this Agreement and the Related Agreements, or will
be required in
connection with the consummation of the transactions
contemplated hereby and
thereby, except as set forth on Schedule 3.5.
3.6 Title to and Sufficiency of Purchased Assets. Seller
has good, valid
and marketable title to all of the Purchased Assets, which
constitute all of the assets
and interests in assets that are necessary or used in the
business of Seller. All
Purchased Assets are free and clear of all mortgages,
hypothecs, liens, pledges,
security interests, charges, claims, restrictions and other
encumbrances and defects
of title of any nature whatsoever, except those relating to the
Capitalized Lease
obligations assumed and disclosed on Schedule 1.3(d) and those
to be released
prior to or simultaneous with Closing or disclosed on Schedule
3.6 and those title
defects or irregularities which are of a minor nature and in
the aggregate do not
materially impair the value of any immoveable or real property
or the use of such
immoveable or real property for the purposes for which it is
held. No person other
than Seller owns any equipment or other tangible assets or
properties situated on
Seller's premises or necessary to the operation of Seller's
business, except for
leased items disclosed on Schedule 1.1(f)(ii) hereto.
3.7 No Third Party Options. Except as set forth on
Schedule 3.7 hereto,
there are no agreements, options, commitments or rights with,
of or to any person
to acquire any of the Purchased Assets or any interest therein
or any part of
Seller's business, except for rights of customers to
Customer-Owned Inventory and
the rights of customers under contracts entered into in the
normal course of
business consistent with past practice for the sale of finished
goods inventory of
Seller.
3.8 Receivables. Seller's Accounts Receivable are valid
and genuine;
have arisen solely out of bona fide sales and deliveries of
goods or other business
transactions in the ordinary course of Seller's business
consistent with Seller's past
practice. The amounts of Accounts Receivable and the
approximately $375,000
note receivable owed by Woody Everly ("Everly Note Receivable"
set forth on
Exhibit A are not (or as revised pursuant to Section 2.3 will
not be) overstated.
The Allowance for Doubtful Accounts set forth on Exhibit A is
(and as revised
pursuant to Section 2.3 will be) adequate to cover any portion
of the Accounts
Receivable which are not collected in the ordinary course
within 90 days after the
Closing, save and except for Other Receivables as described on
Schedule 3.8,
which will not exceed C$343,575 on the Closing Date. The
principal and accrued
interest on the Notes Receivable are collectible in their full
amounts in accordance
with the terms of the governing instrument.
3.9 Inventory. All Inventory was acquired and has been
maintained in
the ordinary course of the business of Seller, and is not
adulterated, misbranded,
mispackaged or mislabelled within the meaning of, or in
violation of, any
applicable Canadian or United States local, state, provincial
or Federal laws or
regulations. All amounts of Inventory reflected on Exhibit A
are (and as revised
pursuant to Section 2.3 will) represent bona fide inventories
of Seller on hand, and
are (or as revised pursuant to Section 2.3 will be) valued at
the lower of FIFO Cost
or Market, which is consistent with Seller's past practices as
historically applied.
The Obsolescence Reserve shown on Exhibit A is (or as revised
pursuant to Section
2.3 will be) adequate. The amount of Customer-Owned Inventory
set forth on
Schedule 1.3(b) and Exhibit A is not (and as revised pursuant
to Section 2.3 will
not be) understated.
3.10 Property, Plant and Equipment. Schedules 1.1(f)
and 1.1(g)(iv)-C
and D hereto sets forth (i) the description and the location of
each item of Property
owned by Seller or in the possession of Seller and (ii) an
identification of each
lease of Property under which Seller is either a lessee or
lessor, copies of which
have been made available to Purchaser. With respect to the
foregoing:
(a) Each of the described leases is in full force and
effect and is a
valid and binding obligation of Seller and each of the
parties thereto;
(b) Seller is not, and Seller is not aware that any
other party is, in
default with respect to any material term or condition of
any lease and no
event has occurred which through the passage of time or the
giving of notice,
or both, would constitute a default thereunder or would
cause the
acceleration of any obligation of any party thereto or the
creation of a lien
or encumbrance upon any asset of Seller;
(c) The Property, Plant and Equipment that is used in
the current
conduct of Seller's business is in all material respects in
good and operating
and useable condition and repair and is in all material
respects fit for the
respective intended purpose. The Seller has advised the
Purchaser that the
Company maintains a preventative maintenance program, the
costs of which
have been historically provided for and suitably budgeted.
Items of
Property, Plant and Equipment that are not in good
condition have either
been included in the repair and maintenance budget or are
scheduled to be
replaced in a capital budget within the next two fiscal
years of the Company.
(d) The Real Property is not located within an
agricultural zone.
3.11 Intellectual Property Matters. Seller in the
conduct of its business
does not utilize or otherwise have any material rights in any
patent (including
patent applications), copyright, software, trade secret or
know-how except for the
Intellectual Property, and to Seller's best knowledge and
belief Seller does not
infringe upon or unlawfully or wrongfully use any patent,
trademark, tradename,
service mark, copyright or trade secret owned or claimed by
another. Seller is not
in default under any agreement related to Intellectual
Property, and has not
received any written notice of any claim of infringement or any
other claim or
proceeding relating to any Intellectual Property. Schedule
1.1(g)(iv)-E lists all
confidentiality or non-disclosure agreements to which Seller is
a party, except for
those agreements which by their terms prohibit Seller from
disclosing the existence
of the agreement to third parties or are not otherwise
transferable by their terms
without consent. Seller has not granted any licenses or other
rights to any of the
Intellectual Property. Except as set forth on Schedule 3.11,
Seller is not aware of
any violation or infringement by others of its rights to the
Intellectual Property and
is not aware of any basis for the making of any such claim.
3.12 Financial Statements.
(a) 1995 and 1994 Audited Financial Statements. Seller
has
delivered to Purchaser true and complete copies of the
consolidated balance
sheets of Hamro at April 30, 1994 and April 29, 1995 and
the related
consolidated statements of income, retained earnings and
cash flows for the
fiscal years then ended, certified by Seller's auditors,
all of which have been
prepared in accordance with GAAP consistently applied
throughout the
periods involved. Such balance sheets, including the
related notes, fairly
present in all material respects the financial position,
assets and liabilities
(whether accrued, absolute, contingent or otherwise) of
Seller at the dates
indicated, and such statements of income, retained earnings
and cash flows
fairly present in all material respects the results of
operations, changes in
retained earnings and cash flows of Seller for the periods
indicated.
(b) 1996 Audited Financial Statements. Seller shall
deliver to
Purchaser on or before June 30, 1996 a true and complete
copy of Hamro's
consolidated balance sheet at April 27, 1996 and the
related consolidated
statements of income, retained earnings and cash flow for
the fiscal year then
ended, certified by Seller's auditors, all of which will be
prepared in
accordance with GAAP consistently applied throughout the
periods involved.
Such balance sheet, including the related notes, will
fairly present in all
material respects the financial position, assets and
liabilities (whether
accrued, absolute, contingent or otherwise) of Seller at
the dates indicated,
and such statement of income, retained earnings and cash
flows will fairly
present in all material respects the results of operations,
changes in retained
earnings and cash flows of Seller for the period indicated.
(c) Unaudited 1996 Financial Statements. Except for
research and
development tax credits received and/or assessed against
research and
development expenses, Seller has delivered to Purchaser a
true and correct
internally generated unaudited consolidated balance sheet
and income
statement of Hamro on a consolidated basis for the year
ended April 27,
1996 (the "1996 Year End Balance Sheet Date"). The
unaudited financial
statements as of and for the period ending on the 1996 Year
End Balance
Sheet Date were prepared in accordance with GAAP, subject
to normal year-end audit
adjustments. Such balance sheet fairly presents in all
material
respects the financial position, assets and liabilities
(whether accrued,
absolute, contingent or otherwise) of Seller at the date
indicated, in such
statement of income, retained earnings and cash flows
fairly presents in all
material respects the results of operations, changes in
retained earnings in
cash flows of Seller for the period indicated.
3.13 Books of Account. The books, records and accounts
of Seller and
Hamro accurately and fairly reflect, consistent with Seller's
historical practice
consistently applied, all transactions and assets and
liabilities of Seller. Seller has
not engaged in any transaction or used any of the funds of
Seller in the conduct of
its business except for transactions and funds which have been
and are reflected in
the normally maintained books and records of Seller.
3.14 Taxes and Tax Returns and Reports. All returns,
reports,
statements and other similar filings required to be filed by
Hamro or Seller ("Tax
Returns") with respect to any material Canadian and United
States Federal, state,
provincial, local or foreign taxes, assessments, interest,
penalties, deficiencies, fees
and other governmental charges or impositions (including
without limitation all
income, unemployment compensation, social security, payroll,
sales and use,
goods and services, excise, privilege, property, ad valorem,
franchise, license,
school and any other tax or similar governmental charge or
imposition under laws
of Canada and the United States or any provincial, state or
municipal or political
subdivision thereof or any foreign country or political
subdivision thereof)
("Taxes") have been filed with the appropriate governmental
agencies in all
jurisdictions in which such Tax Returns are required to be
filed, and all such Tax
Returns properly reflect the liabilities of Seller for Taxes
for the periods, property
or events covered thereby. All Taxes, including without
limitation those which are
called for by the Tax Returns or heretofore claimed to be due
by any taxing
authority from Seller, have been properly accrued or paid.
Hamro or Seller has
duly collected and remitted all sales or commodity tax in
accordance with
applicable legislation. Hamro or Seller has not received any
notice of assessment
or proposed assessment in connection with any Tax Returns and
there are no
pending Tax examinations of or Tax claims asserted against
Hamro or Seller or any
of its assets or properties. Hamro or Seller has not extended,
or waived the
application of, any statute of limitations of any jurisdiction
regarding the
assessment or collection of any Taxes in respect of any periods
prior to the date of
this Agreement. There are no Tax liens (other than any lien
for current Taxes not
yet due and payable) on any of the assets or properties of
Hamro or Seller. Neither
Hamro nor Seller has knowledge of any basis for any additional
assessment of
Taxes. Hamro and Seller has made all deductions, withholdings
and deposits
required by law to be made with respect to employees'
withholding and other
employment taxes, including without limitation the portion of
such deposits relating
to Taxes imposed upon Seller, and has paid all amounts when
due. None of the
Seller entities nor Hamro has been a member of an Affiliated
Group (as defined in
Section 1504(a) of the Code), filing a consolidated income tax
return (other than
a group the common parent of which is Hamro). Hamro and Seller
are
"Registrants" within the meaning of Part IX of the Excise Tax
Act (Canada) and
Chapter VIII of an Act Respecting the Quebec Sales Tax and its
registration
numbers will be provided to Purchaser within 30 days after the
date of this
Agreement.
3.15 Absence of Certain Changes or Events. Since the
1996 Year End
Balance Sheet Date, except as disclosed on Schedule 3.15,
Seller has not:
(a) Sold, encumbered, assigned or transferred any
assets or
properties which would have been included in the Purchased
Assets if the
Closing had been held on the 1996 Year End Balance Sheet
Date or on any
date since then, except for the sale of inventory in the
ordinary course of
business consistent with past practice, or sales of
equipment in the ordinary
course of business consistent with past practices not to
exceed C$100,000 in
the aggregate;
(b) Made or suffered any amendment or termination of
any
agreement, contract, license, commitment, lease or plan to
which it is a party
or by which it is bound, other than customer or supply
orders entered into
in the ordinary course of business in accordance with past
practice;
(c) Suffered any damage, destruction or loss, whether
or not covered
by insurance, with regard to any item or items carried on
its books of
account individually or in the aggregate at more than
C$100,000; or suffered
any shortage, cessation or interruption of material
supplies or utilities or
other material services required to conduct its business
and operations;
(d) Received notice or had knowledge of any actual or
threatened
labor trouble, strike or other occurrence, event or
condition of any similar
character which has had or might have an adverse effect on
its business,
operations, assets, properties or prospects of Seller;
(e) Made any change in its customary operating methods
(including
its purchasing, marketing, selling and pricing practices
and policies);
(f) Made commitments or agreements for capital
expenditures or
capital additions not listed on Exhibit B except such as
may be involved in
ordinary repair, maintenance or replacement of its assets
not to exceed
C$25,000 individually or C$250,000 in the aggregate;
(g) Increased the salaries or other compensation of, or
made any
advance (excluding advances for ordinary and necessary
business expenses)
or loan to, any of its employees, officers or directors or
made any increase
in, or any addition to, other benefits to which any of its
employees, officers
or directors may be entitled, except for increases required
by Seller's existing
collective bargaining agreements, and except for increases
to salaried
employees effective May 1, 1996, of less than 4% in the
aggregate;
(h) Adopted or amended any employee benefit plan in any
material
respect;
(i) Changed any of the accounting principles followed
by it or the
methods of applying such principles, or revalued any of its
assets;
(j) Entered into any transaction other than in the
ordinary course of
business consistent with past practice;
(k) Mortgaged, hypothecated, pledged or encumbered any
asset of
Seller;
(l) Made any loan to any person or entity;
(m) Waived or released any right or claim of Seller of
a material
nature; or
(n) Agreed, whether in writing or otherwise, to take
any of the
actions described in this Section 3.15.
3.16 Compliance with Law; Authorizations. Seller has
complied in all
material respects with each and is not in violation in any
respect of any, law,
ordinance, or governmental or regulatory rule or regulation,
whether Federal,
state, provincial, local or foreign, to which its business,
operations, assets or
properties is subject ("Regulations"). Seller owns, holds,
possesses or lawfully uses
in the operation of its business, all material franchises,
licenses, permits,
easements, rights, applications, filings, registrations and
other authorizations
("Authorizations") which are in any manner necessary for it to
conduct its business
as now or previously conducted or for the ownership and use of
the assets owned
or used by Seller in the conduct of its business, and at the
Closing will be in
compliance with all Regulations. All such Authorizations are
listed and described
on Schedule 3.16 hereto. Seller is not in default, nor has it
received any notice of
any claim of default, with respect to any such Authorization or
under any
Regulation.
3.17 Transactions with Certain Related Parties. Except
as set forth on
Schedule 3.17, no director or executive officer of Seller, no
employee of Seller
with current annual compensation in excess of C$50,000, and no
member of the
immediate family of any such director, executive officer or
employee, has a
controlling interest (direct or indirect) in any corporation or
other entity that is or
was during the last three years a party to, or in any property
which is or was
during the last three years the subject of, any material
contract, agreement or
understanding, business arrangement or relationship with
Seller.
3.18 Litigation. Except as set forth on Schedule 3.18,
no litigation,
including any arbitration, investigation or other proceeding of
or before any court,
arbitrator or governmental or regulatory official, body or
authority is pending or,
to the best knowledge of Seller, threatened either against
Seller or the Purchased
Assets or the transactions contemplated by this Agreement, nor
does Seller know
of any reasonably likely basis for any such litigation,
arbitration, investigation or
proceeding, the result of which could materially adversely
affect the business of
Seller or the Purchased Assets or the transactions contemplated
hereby. Seller is
not a party to or subject to the provisions of any judgment,
order, writ, injunction,
decree or award of any court, arbitrator or governmental or
regulatory official,
body or authority which may materially adversely affect Seller,
the Purchased
Assets or the transactions contemplated hereby.
3.19 Insurance. Seller carries insurance with respect
to its business and
the Purchased Assets. Such policies are in full force and
effect on the date hereof,
and Seller has not received notice of cancellation with respect
to any such policy.
All of the properties and assets of Seller are covered by
effective insurance
in amounts at least equal to their fair market value and such
insurance provides
protection against losses and risks as are generally insured
against by comparable
businesses. There are no outstanding requirements or
recommendations by any
insurance company that issued any such policy, or by any Board
of Fire
Underwriters or other similar body exercising similar functions
or by any
governmental authority exercising similar functions which
requires or recommends
any changes in the conduct of Seller's business, or any repairs
or other work to be
done on or with respect to any of the properties or assets of
Seller. Seller has not
received any notice or other communication from any insurance
company within
the three (3) years preceding the date hereof cancelling or
materially amending any
insurance policies, and to the best knowledge of Seller, no
such cancellation,
amendment or increase of premiums is threatened with respect to
the policies
currently in effect. Schedule 3.19 contains a complete and
correct list of Seller's
insurance policies as in effect on the date of this Agreement.
Loss experience for
the three (3) year period preceding the date hereof will be
provided within 30 days
from the date hereof.
3.20 Contracts. Schedule 1.1(g)(iv)-D contains a
complete and correct list
of all written agreements, contracts and commitments
(collectively, the
"Contracts") of the following types to which any of the
Purchased Assets are
subject, or to which Seller is a party or is bound or which
relate to its business or
to the Purchased Assets:
(a) Sales agency, manufacturer's representative,
distributorship or
marketing agreements, which may not be cancelled by
Purchase without
penalty upon the giving of not more than one year's written
notice;
(b) Licenses to others of any Intellectual Property,
Trade Names or
Licenses;
(c) Contracts or commitments to sell, lease or
otherwise dispose of
any of the Purchased Assets other than at market rates or
other than in the
ordinary course of business;
(d) Contracts or commitments limiting the freedom of
Seller to
compete in any line of business or in any geographic area
or with any
person;
(e) Contracts or commitments with Seller's customers or
suppliers
which may not be cancelled by Seller without penalty upon
the giving of not
more than 90 days notice).
With respect to each such contract and the Assumed
Contracts:
(i) Each item is in full force and effect;
(ii) There is no default or event that with
notice or lapse of
time, or both, would constitute a default by any party
to any of these
agreements; and
(iii) Seller has not received written notice that
any party to any
of these contracts intends to cancel or terminate any
of these contacts
or to exercise, or not exercise, any options under any
of these
contracts.
Seller will provide access to Purchaser all written Contracts.
3.21 Brokers, Finders, etc. All negotiations relating
to this Agreement
and the transactions contemplated hereby have been carried on
without the
intervention of any person acting on behalf of Seller in such
manner as to give rise
to any claim against Purchaser for any brokerage or finders'
commission, fee or
similar compensation.
3.22 Employees.
(a) To the extent that Seller is permitted to do so
under existing
legislation, Schedule 3.22(a) will be updated at Closing so
as to set forth a
true and complete list of the name, title, job description,
length of service,
current location and base salary or hourly rate of every
employee of Seller,
including employees on personal, military, family,
educational or medical
leave, each employee receiving sickness disability benefits
or occupational,
illness and injury benefits and each employee on long-term
disability (the
"Employees"), as of the date of this Agreement, together
with a statement of
the basis, amount and nature of any other remuneration,
whether in cash or
kind, paid to each such Employee during the current fiscal
year or accrued
for or payable to each such Employee in the future, and the
basis for accrual
and amount of all vacation and to which each such
non-salaried Employee
was entitled as of the 1996 Year End Balance Sheet Date.
(b) Except as set forth on Schedule 1.1(g)(iv)-E, 3.18
or 3.22(b):
(i) Seller is not a party to or bound by any
employment
agreement or any collective bargaining agreement with
respect to any
of the Employees;
(ii) There is not pending, or to the best
knowledge of Seller
threatened any strike, walkout or other work stoppage
or any union
organizing effort relating to Seller or the Employees;
(iii) With respect to the Hired Employees, Seller
is in
compliance with all Canadian and United States,
Federal, state and
provincial laws in all material respects with respect
to employment
and employment practices, terms and conditions of
employment, and
wages and hours, and is not engaged in any unfair labor
practice,
employment discrimination or unjust enrichment, and
there is no
unfair labor practice complaint, employment
discrimination or unjust
enrichment against Seller or any Hired Employees
pending before the
United States National Labor Relations Board or any
comparable
Canadian federal or provincial review board;
(iv) No organized labor representation question
exists
respecting the employees of the Seller, no grievance or
any arbitration
proceeding is pending and no claim therefor exists;
(v) Seller has not experienced any labor stoppage,
concerted
labor activity, or other material labor difficulty
during the last three
years;
(vi) No labor organization has been certified or
is currently
negotiating as a bargaining representative of an
employee;
(vii) No collective bargaining is currently being
negotiated with
respect to an Employee except as disclosed to Purchaser
with respect
to the union in Granby;
(viii) No current or former Employee has a claim
against Seller
on account or for:
a. overtime pay, other than overtime pay for
the current
payroll period;
b. wages or salary for any period other than
the current
payroll period;
c. with respect to non-salaried employees,
vacation,
time off or pay in lieu of vacation or time off, or
other than that
earned with respect to the current fiscal year; or
d. any violation of any law relating to
minimum wages
or maximum hours of work; and
(c) Except as required under Seller's existing
collective bargaining
agreements, and except for increases to salaried employees
effective May 1,
1996, of less than 4% in the aggregate, Seller has no
outstanding
commitment or agreement to effect any general wage or
salary increase for
any of the Hired Employees and has not increased the salary
or wages of any
Hired Employees since the 1996 Year End Balance Sheet Date.
(d) Except for persons hired on a short-term, temporary
basis, none
of the persons employed in Seller's business is provided to
the Seller under
contract with a third party.
(e) Seller is not in violation in any material respect
of the Americans
with Disabilities Act of 1990 or any Canadian federal or
provincial law or
United States law, regulation or order relating to
employment discrimination
or occupational safety, nor has Seller received any
unresolved complaint
from any Federal, state or provincial agency or regulatory
body alleging
violations of any such laws or regulations, nor is Seller
implementing any
orders or consent decrees remedying any such prior
violation.
(f) Seller has not entered into any written contract
with any Hired
Employees or made any written representation, direct or
implied, which
would require Purchaser to provide post-retirement medical
benefits or post-retirement life
insurance benefits.
(g) The amounts of Employee-Related Liabilities
reflected on
Schedule 1.3(c) as of the Closing and Exhibit A (or as
revised pursuant to
Section 2.3) are not and will not be understated.
3.23 Employee Benefit Plans and Arrangements.
(a) Plans Covering United States Employees.
(i) Schedule 3.23(a) to this Arrangement sets forth
a list of
each of the United States Plans (as defined in
subsection (iv) below.
Seller has complied with and performed in all material
respects all
contractual obligations and all obligations under
applicable federal,
state and local laws, rules and regulations required to
be performed
by it under or with respect to any of the United States
Plans or any
related trust agreement or insurance contract. All
contributions and
other payments required to be made by Seller to any
United States
Plan prior to the date hereof have been made, all
accruals required to
be made under any United States Plan have been made,
and there are
no unfunded benefit obligations with respect to any
United States Plan
which have not been made, and there are no unfunded
benefit
obligations with respect to any United States Plan
which have not
been accounted for by reserves or otherwise properly
footnoted in
accordance with GAAP in Seller's financial statements
for the year
ended April 27, 1996 or reflected on Schedule 1.3(c).
There is no
claim, dispute, grievance, charge, complaint,
restraining or injunctive
order, litigation or proceeding pending, or to the best
knowledge of
Seller threatened or anticipated (other than routine
claims for benefits)
against or relating to any United States Plan or
against the assets of
any United States Plan.
(ii) Seller has not incurred, nor has any event
occurred which
has imposed or is reasonably likely to impose upon
Seller any
withdrawal liability (complete or partial within the
meanings of
Sections 4203 or 4205 of Title TV of ERISA,
respectively) in respect
of any multiemployer plan (within the meaning of
Sections 3(37) or
4001(a)(3) of Title IV of ERISA) (a "Multiemployer
Plan"), which
withdrawal liability has not been satisfied or
discharged in full. Seller
has not received notice to the effect that any
Multiemployer Plan has
any unfunded vested benefits within the meaning of
Section 4213(c)
of Title IV of ERISA, nor has Seller been notified of
any
reorganization or insolvency under and within the
meaning of
Sections 4241 or 4245 of Title IV of ERISA. There are
no
Multiemployer Plans to which Seller has ever had an
obligation to
contribute;
(iii) The execution, delivery and performance of
this Agreement
and consummation of the transactions contemplated
hereby will not
result in the imposition of any federal excise tax
under Section 4975
of the Code with respect to the Hamelin Industries,
Inc. 401(k) Profit
Sharing Plan and Trust ("Hamelin 401(k) Plan");
(iv) With respect to all United States Benefit
Plans, no benefits
will be accelerated, vested, increased or paid as a
result of the
transactions contemplated by this Agreement except to
the extent
required to consummate the plan merger described in
Section 9.7(a)
of this Agreement.
(v) United States Plans which are Plans described
in Section
3(2) of Title I of ERISA and which are qualified under
Section 401(a)
of the Code comply in all material respects with the
applicable
requirements of ERISA, meet the requirements of
"qualified plans"
under Section 401(a) of the Code and each such Plan has
received a
favourable determination letter from the Internal
Revenue Service to
this effect. No act or omission has occurred that
would cause the loss
of qualified status under or omission has occurred that
would cause
the loss of qualified status under Section 401(a) of
the Code for any
Plan intended to be qualified. Such Plans have been
timely amended
and filed with the Internal Revenue Service with
respect to changes
required by the Tax Reform Act of 1986, as amended.
All required
reports and descriptions (including Form 5500 Annual
Reports,
summary annual reports and summary plan descriptions)
have been
appropriately and timely filed and distributed with
respect to the
United States Plans; there have been no prohibited
transactions as
defined in 406 of Title I of ERISA or Section 4975 of
the Code with
respect to the United States Plans; no litigation
concerning any United
States Plan is pending or, to Seller's knowledge,
threatened, nor, to
the knowledge of Seller is there outstanding any
complaint to the
Department of Labour concerning any such United States
Plan;
neither Seller nor any other "fiduciary", as such term
is defined in
Section 3(21) of ERISA, has any liability for failure
to comply with
ERISA, the Code or any other law for any action or
failure to act in
connection with the administration or investment of any
United States
Plan; any contribution made or accrued with respect to
the Hamelin
401(k) Plan is fully deductible for Federal income tax
purposes; no
employees of Seller will be entitled to any
retirement,severance or
similar benefit or enhanced benefit solely as a result
of the transaction
contemplated herein.
(vi) With respect to the all United States
Benefit Plans Seller
has furnished to Purchaser true and complete copies of
(a) the Plan
document, (b) the most recent determination letter
received from the
Internal Revenue Service, (c) Form 5500 Annual Reports
(including
all schedules) for the three most recent plan years,
(d) the actuarial
and audited financial reports for the three most recent
plan years, if
any, (e) all related trust agreements, insurance
contracts or other
funding agreements, (f) a copy of each and any general
explanation
or communication which was required or otherwise
provided to
participants in such Plan which describes all or any
relevant aspect of
the Plan, including any summary plan description,
summary annual
report and/or summary of material modifications, and
(g) a copy of
any and all rulings or notices, other than Internal
Revenue Service
determination letter, issued by any government agency
with respect
to such Plan.
(vii) Seller does not maintain or contribute to
(or has maintained
or contributed to) any United States Plan which
provides, or has a
liability to provide, life insurance, medical,
severance, or other
employee welfare benefit to any employee upon his
retirement or
termination of employment, except as may be required by
Section
4980(b) of the Code. No United States Plan is or has
been a
"Multiple Employer Welfare Plan" as defined in Section
3(40)(A) of
Title I of ERISA.
(viii) All United States Plans listed on Schedule
3.23(a) which
are not employee pension benefit plans are fully funded
through
insurance, except as follows:
A) The first $25,000 of claims in the aggregate
made each
year by all participants collectively pursuant
to the health
coverage provided under the cafeteria (Code
section 125)
plan listed on Schedule 3.23(a) ("U.S.
Cafeteria Plan") is
paid by Seller as a "deductible" under the
Seller's group
health insurance policy; and
B) Pursuant to the medical expense reimbursement
arrangement maintained by Seller under the U.S.
Cafeteria
Plan, the medical expenses of a participant for
which
health coverage is not provided may be
reimbursed to the
participant out of the participant's
contributions.
No event has occurred with respect to a United
States Plan which
will cause a retroactive increase in the premium
relating to such
United States Plans assumed pursuant to Section 9.7(b).
No Hamelin
Industries employees are currently receiving long-term
disability pay
nor does Seller have knowledge of any employee who has
incurred
any injury which could result in the filing of a
long-term disability
claim. No United States Plan provides for short-term
disability
benefits in excess of a period of ninety (90) days.
(ix) "Plan" means any bonus, incentive
compensation,
deferred compensation, pension, profit sharing,
retirement, stock
purchase, stock option, stock ownership, stock
appreciation rights,
phantom stock, leave of absence, layoff, vacation, day
or dependent
care, legal services, cafeteria, life, health,
accident, disability,
workers' compensation, scholarship, company car, sick
pay, tuition
reimbursement, relocation, fringe benefit or other
insurance,
severance, separation or other employee benefit plan,
practice, policy
or arrangement of any kind, including, but not limited
to, any
"employee benefit plan" within the meaning of Section
3(3) of Title
I of ERISA which relates to the Employees or former
employees of
Seller in the United States and (b) "United States
Plan" means any
employee pension benefit plan and any Plan, other than
a
Multiemployer Plan, established by Seller or to which
Seller
contributes or has contributed or has or may have
liability and which
relates to the Employees or former employees of Seller
in the United
States (including any such Plans not now maintained by
Seller or to
which Seller does not now contribute, but with respect
to which Seller
has or may have any liability).
(b) Plans Covering Canadian Employees.
(i) Schedule 3.23(b) to this Agreement sets forth a
list of each
of the employee benefit, health, welfare, supplemental
unemployment
benefit, bonus, severance, pension, profit sharing,
deferred
compensation, stock, stock appreciation, retirement,
hospitalization
insurance, medical, dental, legal, disability and
similar plans or
arrangements or practices relating to the Employees or
former
employees of Seller in Canada (the "Canadian Plans").
(ii) All of the Canadian Plans are and have been
established,
registered, qualified, invested and administered, in
all respects, in
accordance with all laws and regulations applicable to
the Canadian
Plans ("Applicable Employee Benefit Laws"). No fact or
circumstance
exists that could adversely affect the tax-exempt
status of any
Canadian Plan that is tax-exempt.
(iii) All obligations regarding the Canadian
Plans have been
satisfied, there are no outstanding defaults or
violations by any party
to any Canadian Plan and no taxes, penalties or fees
are owing or
exigible under any of the Canadian Plans.
(iv) No Canadian Plan, nor any related trust or
other funding
medium thereunder, is subject to any pending
proceeding, action or
claim initiated by any governmental agency or
instrumentality, or by
any other party (other than routine claims for
benefits), and to the
best of Seller's knowledge, there exists no state of
facts which after
notice or lapse of time or both could reasonably be
expected to give
rise to any such proceeding, action or claim or to
affect the
registration of any Canadian Plan required to be
registered.
(v) All contributions or premiums required to be
made by
Seller under the terms of each Canadian Plan or by
Applicable
Employee Benefit Laws have been made in a timely
fashion in
accordance with Applicable Employee Benefit Laws and
the terms of
the Canadian Plans, and Seller does not have, and as of
the Closing
Date will not have, any liability with respect to any
of the Canadian
Plans which have not been accounted for by reserves or
otherwise
properly footnoted in accordance with GAAP in Seller's
financial
statements for the nine months ended January 31, 1996
or reflected
on Schedule 1.3(c).
(vi) No improvements to any Canadian Plan have
been
promised and except as required to comply with
Applicable Employee
Benefit Laws, no amendments or improvements to any
Canadian Plan
will be made or promised prior to the Closing Date.
(vii) There have been no improper withdrawals,
applications or
transfers of assets from any Canadian Plan or the
trusts or other
funding media relating thereto.
(viii) Seller has furnished to Purchaser true,
correct and complete
copies of the current versions of all the Canadian
Plans as amended
as of the date hereof together with all related
documentation
including, without limitation, funding agreements,
actuarial reports,
funding and financial information returns and
statements, with respect
to each Canadian Plan and plan summaries, booklets and
personnel
manuals. No material changes have occurred to the
Canadian Plans
or are expected to occur which would affect the
actuarial reports or
financial statements required to be provided to the
Purchaser pursuant
to this provision.
(ix) Each Canadian Plan which is a registered
pension plan is
fully registered pension as of the Closing Date on both
a going
concern and a solvency basis pursuant to the actuarial
assumptions
and methodology utilized in the most recent actuarial
valuation
therefor.
(x) All employee data necessary to administer each
Canadian
Plan have been provided by Seller to Purchaser and are
true and
correct as of the date of this Agreement, and Seller
will notify the
Purchaser of any changes thereto.
(xi) No insurance policy or any other contract
or agreement
affecting any Canadian Plan requires or permits a
retroactive increase
in contributions, premiums or payments due thereunder.
(xii) Except as disclosed in Schedule 3.23(b) of
this Agreement,
none of the Canadian Plans which is not a pension or
retirement plan
provides benefits to retired employees or to the
beneficiaries or
dependents of retired employees.
3.24 Business Names and Locations. Schedule 3.24 sets
forth a list of all
corporate, business, trade, assumed or other names under which,
and all street and
post office addresses at which, Seller has conducted any
business or at which any
Purchased Assets have been located since January 1, 1991.
3.25 United States Sales. Sales by Seller in or into
the United States
during its fiscal year ended April 27, 1996 did not in the
aggregate exceed
US$25,000,000.
3.26 Canadian v. United States GAAP. The amount of the
Base
Purchase Price, Estimated Purchase Price and Final Purchase
Price would not be
affected by the application of United States GAAP (as opposed
to Canadian GAAP)
to the calculation of such amounts.
3.27 Management Fee. Seller has advised Purchaser that
it pays a
management fee to 121768 Canada Inc., and that 121768 Canada
Inc. pays the
salary and other compensation owing to certain of Seller's
employees ("Certain
Empoyees"). For each year in the three year period ending
April 27, 1996, the
amount of such fees has exceeded (and during the period
commencing on the date
hereof and ending on the Closing Date, the amount of such fees
will exceed) the
aggregate amount paid or owing to the Certain Employees.
3.28 Copies of Documents. Save and except for
agreements which are not
assignable by law or by their terms, Seller will provide access
to copies of all
documents listed on any Schedule hereto or referred to herein
or therein. Such
copies are true and complete and include all amendments,
supplements and
modifications thereto or waivers currently in effect
thereunder.
3.29 Completeness of Disclosure. No representation or
warranty by
Seller, Hamro or Robert Hamelin, in this Agreement nor any
schedule, certificate,
document or instrument furnished or to be furnished to
Purchaser pursuant hereto
or in connection with the negotiation, execution or performance
of this Agreement,
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 herein or
therein or necessary to
make any statement herein or therein not misleading. There is
no fact that
materially and adversely affects the business, prospects,
conditions, affairs or
operations of Seller or any of its properties or assets which
has not been fully
described in this Agreement or the exhibits or schedules
hereto.
3.30 Seller's Tax Residence. Hamro and Hamelin are not
non residents
of Canada within the meaning of the Income Tax Act (Canada).
4. Representations and Warranties by Purchaser
Purchaser represents and warrants to Seller as of the date
hereof and as of the
Closing Date as follows:
4.1 Organization and Standing. Purchaser is a corporation
duly
organized, validly existing and in good standing under the laws
of Delaware.
4.2 Power; Authorization. Purchaser has full corporate
power and
authority to enter into this Agreement and the Related
Agreements and to carry out
the transactions contemplated by this Agreement and the Related
Agreements. The
execution, delivery and performance of this Agreement and the
Related
Agreements by Purchaser has been authorized by all necessary
corporate action on
the part of Purchaser.
4.3 Execution, Delivery and Performance of Agreements.
This
Agreement has been duly executed and delivered by Purchaser and
constitutes its
legal, valid and binding obligation, enforceable against
Purchaser in accordance
with its terms. The execution, delivery and performance of
this Agreement and the
Related Agreements by Purchaser will not, with or without the
giving of notice or
the passage of time, or both, violate, conflict with or result
in a breach of any
term, condition or provision of, or require the consent of any
other person under,
(i) the Certificate of Incorporation or By-Laws of Purchaser,
(ii) any license, law,
rule, regulation, order, judgment or decree applicable to
Purchaser, or (iii) any
mortgage, hypothec, indenture, deed of trust, security
agreement, lease or other
contract by which Purchaser may be bound or affected, or give
any person with
rights thereunder the right to terminate, modify, accelerate or
otherwise change the
existing rights or obligations of Purchaser thereunder. No
consent, approval, order
or authorization of, notice to, or registration, declaration or
filing with, any
governmental authority or entity, domestic or foreign, is or
has been or will be
required on the part of Seller in connection with the execution
and delivery of this
Agreement and the Related Agreements, or will be required in
connection with the
consummation of the transactions contemplated hereby and
thereby except as set
forth on Schedule 4.3.
4.4 Brokers, Finders, etc. All negotiations relating to
this Agreement
and the transactions contemplated hereby have been carried on
without the
intervention of any person acting on behalf of Purchaser in
such manner as to give
rise to any valid claim against Seller for any brokerage or
finder's commission, fee
or similar compensation.
5. Conduct of Business Prior to Closing
5.1 Access to Information. From the date hereof and until
the Closing,
Seller will afford to Purchaser and Purchaser's attorneys,
accountants and other
designated representatives reasonable opportunities to inspect
the Purchased Assets
and full access to Seller's personnel and all properties,
documents, contracts, books
and records of Seller relating to its business, the Purchased
Assets or the Assumed
Contracts, and will furnish Purchaser with copies of such
documents and such
additional information pertaining to the Purchased Assets and
Assumed Liabilities
and its business as Purchaser may reasonably request. With
respect to the Real
Property, Seller shall deliver to Purchaser:
(a) within ten (10) days of the date of this Agreement,
any certificate
of location, survey plans, title opinions and title deeds
in respect of the Real
Property which it may have in its possession; and
(b) within thirty (30) days of the date of this
Agreement, an updated
certificate of location or title commitment and survey plan
in respect of the
Real Property prepared by a certified land survey or title
insurance company
acceptable to Purchaser, at Seller's expense, showing both
the land and
building(s) thereon, showing that there is no encroachment
or illegal views
on the property, and stating that the property is in
compliance with all
municipal and zoning by-laws, except for such title defects
or irregularities
which are of a minor nature and in the aggregate do not
materially impair the
value of any immoveable or real property or which do not
impair the use of
such immoveable or real property for the purposes for which
it is held.
5.2 Interim Operations of Seller. From and after the date
of this
Agreement until the Closing Date, unless the Purchaser has
consented in writing
thereto, the Seller:
(a) Shall conduct its operations according to its
usual, regular and
ordinary course in substantially the same manner as
heretofore conducted;
(b) Shall preserve intact its respective business
organizations and
goodwill, keep available the services of their respective
officers and
employees and maintain satisfactory relationships with
those persons having
business relationships with it;
(c) Shall not amend its Articles of Incorporation or
Bylaws or
comparable governing instruments;
(d) Shall promptly notify the Purchaser of any breach
of any
representation or warranty contained herein;
(e) (A) Shall not issue any shares of its capital
stock, or otherwise
change its capitalization as it existed on the date hereof
(except that Hamelin
Industries may issue shares of its Common Stock in
accordance with the
terms of the outstanding stock option described in Section
3.4 hereof) and
(B) shall not (x) grant, confer or award any option,
warrant, conversion right
or other right to acquire any shares of its capital stock,
(y) increase any
compensation with any present or future officers, directors
or key
employees, grant any severance or termination pay to, or
enter into any
employment or severance agreement with any officer,
director or key
employee or amend any such existing agreement in any
material respect, or
(z) adopt any new employee benefit plan or amend any
existing employee
benefit plan in any material respect;
(f) Shall not sell, lease, abandon or otherwise dispose
of any of its
assets or acquire by merging or consolidating with, or by
purchasing a
substantial portion of the assets of or equity in, or by
any other manner, any
business or any corporation, partnership, association or
other business
organization or division thereof or otherwise acquire any
assets, except for
purchases and sales of inventory in the ordinary course of
business consistent
with past practice or sales of equipment in the ordinary
course of business
consistent with past practices not to exceed C$100,000 in
the aggregate;
(g) Shall not mortgage, hypothecate or otherwise
encumber or
subject to any lien any of its properties or assets;
(h) Shall not make any change to its accounting
(including tax
accounting) methods, principles or practices;
(i) Shall not make, amend or terminate any commitment
or enter
into, amend or terminate any contract or agreement or make
any capital
expenditure except for (x) customer purchase orders and
purchases of raw
materials used in the business of Seller agreed to or made
in the ordinary
course of business consistent with past practice, (y) any
other commitment,
contract and agreement entered into in the ordinary course
of business
involving aggregate payments to or by Seller not in excess
of C$100,000,
providing for termination without notice by Seller on 90 or
fewer days'
notice, and made by Seller in the ordinary course of
business consistent with
past practice or (z) capital expenditures listed on Exhibit
B or made in the
ordinary course of business that individually do not exceed
C$25,000 or in
the aggregate do not exceed C$250,000;
(j) Shall not alter through merger, liquidation,
reorganization,
restructuring or in any other fashion the corporate
structure or ownership of
Seller;
(k) Shall not revalue any of its assets, including,
without limitation,
writing down the value of its Inventory or writing off
notes or Accounts
Receivable;
(l) Shall not make any tax election or settle or
compromise any
material income tax liability;
(m) Shall not settle or compromise any pending or
threatened suit,
action or claim relating to the transactions contemplated
hereby and shall not
waive or release any right or claim of Seller;
(n) Shall not pay, discharge or satisfy any claims,
liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or
otherwise), other than the payment, discharge or
satisfaction in the ordinary
course of business of liabilities reflected or reserved
against in, or
contemplated by, the April 27, 1996 financial statements of
Seller or
incurred in the ordinary course of business consistent with
past practice; and
(o) Shall not agree or otherwise commit to take any of
the foregoing
actions.
5.3 Additions to Schedules; Changes; Corrections. Seller
shall
promptly give Purchaser prompt written notice of any material
change in its
business or the Purchased Assets which occurs prior to the
Closing. At least five
(5) days before the Closing, Seller will supplement or amend
the Schedules to this
Agreement in order to disclose any material matter hereafter
arising which, if
existing or occurring at or prior to the date of this
Agreement, would have been
required to be set forth or described in the Schedules, or
which is necessary to
correct any error in the Schedules or in any representation and
warranty of Seller.
Unless approved by Purchaser in writing, no such supplement or
amendment shall
limit or affect the representations of Seller or the
Shareholders set forth herein in
respect of the Schedules attached hereto at the date of this
Agreement.
5.4 Cooperation in Transaction. The parties, as promptly
as practicable
after the date hereof, shall cooperate with each other to (i)
make all such filings
and submissions required under applicable laws, rules and
regulations in order to
consummate the transfer of the Purchased Assets and the other
transactions
contemplated hereby in accordance with the terms of this
Agreement, (ii) obtain
all necessary Authorizations required in order for the parties
to consummate such
transfer and transactions, and (iii) cause the transfer,
renewal or issuance to
Purchaser of any of Seller's permits, licenses, approvals or
other authorizations.
In addition, Seller shall use its reasonable, good faith
efforts to cause such key
employees as Purchaser shall designate to enter into employment
contracts and/or
non-compete agreements in form satisfactory to Purchaser.
5.5 Exclusive Dealings. During the term of this Agreement,
Seller and
the Shareholders will not, directly or indirectly, through any
officer, director,
shareholder, agent or otherwise (i) solicit or initiate,
directly or indirectly, or
encourage submission of inquiries, proposals or offers from any
potential buyer
(other than Purchaser) relating to the disposition of the
assets or securities of
Seller, or any part thereof (other than sales of inventory in
the ordinary course) or
(ii) participate in any discussions or negotiations regarding,
or furnish any person
with information with respect to, the disposition of the assets
or any securities of
Seller or any part thereof.
5.6 Public Announcements. Purchaser and Seller shall make
no public
statements or releases relating to the transactions,
contemplated by this Agreement,
except those that may be required by law in the judgment of
counsel, without the
advance approval of the other party as to substance and timing.
Purchaser and
Seller will cooperate with each other to coordinate all such
public statements and
releases.
5.7 Hiring of Employees. Save and except for Mr. Robert
Hamelin who
shall not be offered employment by Purchaser, Purchaser shall
offer to continue
the employment of all of the employees of Seller upon the same
terms, conditions
and compensation as those which each of the employees enjoy on
the Closing Date
and shall in addition recognize and assume the seniority rights
of those employees
who accept the Purchaser's offer of employment. The employees
who accept
employment pursuant to this Section 5.7 are referred to
hereinafter as the "Hired
Employees". Seller and Robert Hamelin will not offer
employment to any
employee of Seller for one year after the Closing Date. Hired
Employees who are
disabled on the Closing Date shall continue to receive
disability benefits from
Seller or pursuant to a Seller disability plan until such
employee recovers from
disability.
5.8 Maintenance of Insurance. Seller will continue to
carry its existing
insurance.
6. Conditions Precedent to Closing
6.1 Conditions to Purchaser's Obligations. The obligation
of Purchaser
to complete the Closing is subject, at the option of Purchaser,
to the fulfilment of
each of the following conditions at or prior to the Closing,
and Seller shall exert
good faith reasonable commercial efforts to cause each such
condition to be so
fulfilled:
(a) All representations and warranties of Seller, Hamro
and Robert
Hamelin contained herein shall be true and correct in all
material respects
when made and at the Closing as though made as of the time
of Closing;
provided, however, that Seller shall have a ten business
day period following
the scheduled Closing Date in which to cure any breach or
inaccuracy of the
representations and warranties contained on Schedule 6.1,
the cure of which
must be reasonably satisfactory to Purchaser.
(b) There shall not exist or occur any event, contract,
commitment
or agreement, including without limitation any breach or
inaccuracy of the
representations and warranties contained herein, which
matters individually
or in the aggregate would reasonably be expected to
diminish the ability of
the business comprising the Purchased Assets to maintain an
EBITDA of at
least C$10 Million; the parties agree that any cure of any
breach or
inaccuracy of the representations or warranties contained
in Sections 3.15,
3.18, 3.20 or 3.29 will not be considered for the purpose
of determining
compliance with the foregoing EBITDA test.
(c) All covenants, agreements and obligations required
by the terms
of this Agreement to be performed by Seller at or before
the Closing shall
have been duly and properly performed in all material
respects.
(d) Purchaser shall have received a certificate
executed by the
President of Hamelin, dated as of the Closing Date,
certifying that the
conditions set forth in clauses (a), (b) and (c) of this
Section 6.1 have been
fulfilled, together with such certificates of the Secretary
of Seller, certified
copies of notices of meetings and resolutions approving the
transactions
contemplated by this Agreement, constating documents,
By-Laws and
incumbency certificates as Purchaser shall reasonably
require.
(e) Purchaser shall be satisfied, in its sole
discretion, with the results
of any supplements or amendments provided by Seller after
execution of this
Agreement to Schedules 1.1 (f)(i), 1.1(g)(iv)-C, 2.2, 3.5,
3.6, 3.7, 3.11,
3.15, 3.17, 3.18, 3.20, 3.22(b), 3.23(a) and 3.23(b).
Schedules 1.1(f)(ii),
1.1(g)(i), 1.1(g)(ii), 3.16, 3.19, 3.22(a) and 3.24 shall
be revised only to the
extent necessary to accurately reflect information acquired
by Seller after the
execution of this Agreement, the parties agreeing that such
schedules are
illustrative only in that Section 1.1 provides that
Purchaser is purchasing all
of the assets owned or used by Seller in the business (and
not just those listed
on the schedules), and that while Seller agrees to use its
best efforts to cause
such schedules to be accurate, any good faith inaccuracies
will not constitute
a breach of a condition to Purchaser's obligation to close;
any and all
additions to Schedule 1.1(g)(iv) will consist exclusively
of contracts or
agreements entered into in good faith in the ordinary
course of Seller's
business in accordance with past practice which either (i)
may be cancelled
by Purchaser without penalty upon the giving of not more
than 30 days
notice or which do not call for annual consideration of
more than C$500,000
individually or more than C$ 1,000,000 in the aggregate;
all changes to
Schedule 1.3 shall reflect only the liabilities incurred in
the ordinary course
of Seller's business and such liabilities will be fully
reflected in the
adjustment to the purchase price in accordance with Section
2.3 hereof; all
changes to Schedule 1.2 will relate only to items which
Seller does not own
on the date hereof and which in the aggregate are not of a
value exceeding
C$100,000.
(f) Purchaser shall have received an opinion of Gross,
Pinsky,
counsel to Seller, dated the Closing Date, substantially in
accordance with
Exhibit C, and covering such other matters as may be
requested by Purchaser
or its counsel.
(g) All governmental approvals and any other approvals
and consents
required to be obtained by Seller in order to consummate
the transactions
contemplated hereby (including consents with respect to the
Assumed
Contracts) shall have been duly obtained.
(h) Except for liens tied to Capitalized Lease
obligations, all
mortgages, deeds of trust and other security interests in
the Purchased Assets
shall have been released, and duly executed deeds of
release, terminations of
any financing statements, and other necessary documents
shall have been
delivered to Purchaser for filing.
(i) No action or proceeding at law or in equity (other
than by
Purchaser) shall be pending (A) which seeks to enjoin the
transactions herein
contemplated, or (B) interferes with the right of Purchaser
to conduct its
operations using the Purchased Assets subsequent to the
Closing.
(j) Seller shall have delivered to Purchaser at the
Closing all bills of
sale, deeds, documents, certificates and agreements
necessary, in the opinion
of Purchaser or its counsel, to transfer to Purchaser good
and marketable title
to the Purchased Assets, free and clear of any and all
liens thereon (other
than the Assumed Liabilities and title defects or
irregularities which are of
a minor nature and in the aggregate do not materially
impair the value of any
immoveable or real property or which do not impair the use
of such
immoveable or real property for the purposes for which it
is held) and to
assign to Purchaser the Assumed Contracts and shall have
taken such other
steps as may be required, in the opinion of Purchaser or
its counsel, to put
Purchaser in actual possession and operating control of the
Purchased Assets.
(k) The Real Property shall, prior to Closing, have
passed
environmental and structural inspections (the
"Inspections") to Purchaser's
satisfaction, such inspections to be at Purchaser's cost,
and all governmental
files and correspondence with governmental entities with
respect to the Real
Property in the possession of Seller shall have been made
available to
Purchaser. In the event any of the written reports of the
Inspections or the
governmental files contain any findings which are
unacceptable to Purchaser.
Purchaser shall notify Seller of the same. Seller shall
then have a period of
sixty (60) days from the date of Purchaser's notification
to cure such matters.
If Seller has not cured such matters to Purchaser's
satisfaction within sixty
(60) days of Purchaser's notice regarding the same,
Purchaser shall have the
right: (A) to terminate this Agreement and declare it
void; or (B) to waive
its objections.
(l) Seller shall have furnished to Purchaser, at
Purchaser's cost, at
least ten (10) days prior to Closing, commitments from a
title insurance
company reasonably acceptable to Purchaser, to insure title
to the Real
Property located in the United States in such amount as
Purchaser reasonably
determines insuring fee simple title to such Real Property
and the improve-
ments thereon, subject only to such exceptions as are
reasonably acceptable
to Purchaser (the "Title Commitments"). With respect to
the Canadian Real
Property, Purchaser shall have received an opinion of a law
or notarial firm
acceptable to Purchaser, and Purchaser shall be reasonably
satisfied with the
condition of and title to such Real Property. In the event
such commitment
or opinion contains any exceptions which are reasonably
unacceptable to
Purchaser, Purchaser shall have the right: (A) to
terminate this Agreement
and declare it void; (B) to waive its objections or (C) to
request that Seller
take reasonable efforts to cure such objections. Seller
has advised Purchaser
that a railroad company owns a parcel of immovable property
which
encroaches on a small pond owned by Seller and which is
located on the
perimeter of Seller's Cookshire property. Seller
represents that such
encroachment does not interfere with the operations
conducted at such plant.
If the encroachment is as represented above, Purchaser
agrees not to object
to such encroachment or to assert it as a reason not to
close the transactions
contemplated hereby.
(m) Purchaser and Seller shall have agreed on the
amount of the
Estimated Purchase Price.
(n) Seller shall have delivered to Purchaser a sworn
statement dated
the Closing Date containing the names and addresses of all
of the creditors
of Seller (other than those creditors the liabilities to
which are being assumed
by Purchaser pursuant to this Agreement) , indicating the
amount and nature
of each of their claims, specifying the amounts remaining
to become due and
indicating the security attached to each claim. The amount
of liabilities set
forth in the sworn statement which are not Assumed
Liabilities, shall not be
greater than C$1,000,000.
(o) Seller shall have delivered or cause to be
delivered to Purchaser
a certificate of payment issued by the Minister of Revenue
of Ontario under
Section Six of the Retail Sales Tax Act (Ontario) or
similar legislation in
other relevant provinces (if applicable) to the effect that
all requisite taxes
under such Act and similar legislation relating to the
Purchased Assets (other
than relating to the conveyance or transfer of the
Purchased Assets to
Purchaser hereunder) have been paid by Seller.
(p) The escrow agreement referenced in Section 2.4(c)
shall have
been executed and delivered by Seller and the Escrow Agent,
and the letter
of credit in the form and amount specified in Section
2.4(c) shall have been
delivered to the Escrow Agent.
6.2 Conditions to Seller's Obligations. The obligations of
Seller to
complete the Closing are subject, at the option of Seller, to
the fulfilment of each
of the following conditions at or prior to the Closing, and
Purchaser shall exert its
good faith reasonable commercial efforts to cause each such
condition to be so
fulfilled:
(a) All representations and warranties of Purchaser
contained herein
shall be true and correct in all material respects when
made and at the
Closing as though made as of the time of Closing.
(b) All covenants, agreements and obligations required
by the terms
of this Agreement to be performed by Purchaser at or before
the Closing
shall have been duly and properly performed in all material
respects.
(c) Purchaser shall have delivered to Seller a
certificate executed by
the President of Purchaser, dated as of the Closing Date,
certifying that the
conditions set forth in clauses (a) and (b) of this Section
6.2 have been
fulfilled.
(d) All governmental approvals and any other required
approvals and
consents required to be obtained by Purchaser in order to
consummate the
transactions contemplated hereby shall have been duly
obtained.
(e) No action or proceeding at law or in equity (other
than by Seller)
shall be pending which seeks to enjoin the transactions
herein contemplated.
(f) Purchaser shall have delivered to Seller at the
Closing an
assumption agreement containing customary terms and
conditions in form
reasonably satisfactory to Seller providing for Purchaser
to assume the
Assumed Liabilities. Purchaser agrees to provide a form of
assumption
agreement to Seller within 30 days hereof.
(g) Purchaser shall have received an opinion of
Stikeman, Elliot,
counsel to Purchaser, dated the Closing Date, substantially
in accordance
with Exhibit D, and covering such other matters as may be
requested by
Seller or its counsel.
6.3 Liquidated Damages. Subject to the satisfaction of
Purchaser's
conditions to Closing set forth in Section 6.1 hereof,
Purchaser shall deliver to
Seller the Purchase Price in the manner provided by Article 2
hereof against the
sale, transfer and assignment by Seller to Purchaser of the
Purchased Assets.
Subject to the satisfaction of Seller's conditions to Closing
set forth in Section 6.2
hereof, Seller shall sell, transfer and assign to Purchaser the
Purchased Assets
against delivery of the Purchase Price in the manner provided
by Article 2 hereof.
If either party shall breach this Section 6.3, the breaching
party shall pay to the
non-breaching party liquidated damages in the manner provided
in Section 6.4
below.
6.4 Escrow. In order that the non-breaching party receive
the appropriate
amount of liquidated damages, the parties agree that:
(a) they will on or before June 12, 1996 sign and
execute an escrow
agreement with a mutually agreeable escrow agent ("Escrow
Agent")
whereby the Escrow Agent will be instructed by the parties
to deal in and
with the letters of credit provided for in Sections 6.4 (b)
and 6.4 (c) so as
provide the non-breaching party with the amount of
liquidated damages to
which it may be entitled;
(b) Purchaser will deliver to Escrow Agent within
seventy-two (72)
hours of the execution of the Escrow Agreement referred in
Clause 6.4 (a)
an irrevocable letter of credit issued by a Bank of America
or a Canadian
Chartered Schedule I Bank in form and content satisfactory
to Seller whereby
the issuing bank will agree to pay to Escrow Agent for
delivery to Seller an
amount of FIVE MILLION CANADIAN DOLLARS (C$5,000,000.00) as
liquidated damages should Purchaser not comply with the
conditions to close
set forth in Section 6.3 hereof; and
(c) Seller will deliver to Escrow Agent within
seventy-two (72)
hours of the execution of the Escrow Agreement referred to
in Clause 6.4 (a)
an irrevocable letter of credit issued by a Canadian
Chartered Schedule I
Bank in form and content satisfactory to the Purchaser
whereby the issuing
bank will agree to pay to Escrow Agent for delivery to
Purchaser an amount
of ONE MILLION CANADIAN DOLLARS (C$1,000,000.00) as
liquidated
damages should the Seller not comply with the conditions to
close set forth
in Section 6.3 hereof.
Recovery of such liquidated damages by the non-breaching
party shall be
deemed to be such party's sole and exclusive remedy for the
breaching party's
failure to close the transactions contemplated hereby.
On Closing the Letters of Credit shall be returned to the
Purchaser and Seller
by the Escrow Agent.
7. Indemnification
7.1 Indemnification by Seller, Hamro and Robert Hamelin.
Except
as otherwise limited by this Article 7, Purchaser and its
officers, directors,
employees, agents, successors and assigns shall be solidarily
indemnified and held
harmless by Seller, Hamro and Robert Hamelin from any and all
liabilities, losses,
damages, claims, costs and expenses, interest, awards,
judgments and penalties
(including, without limitation, reasonable legal fees and
expenses) suffered or
incurred by any of them (a "Purchaser Loss"), arising out of or
resulting from:
(a) The breach or inaccuracy of any representation or
warranty of
Seller contained herein or in any Related Agreement or in
any Exhibit,
Schedule or certificate delivered under this Agreement;
(b) The breach of any covenant or agreement by Seller
contained
herein or in any Related Agreement or other document
delivered at the
Closing;
(c) any liability resulting from the failure to comply
with applicable
bulk sales laws; or
(d) Any other liabilities of Seller not expressly
assumed by Purchaser
herein.
7.2 Indemnification by Purchaser. Except as otherwise
limited by this
Article 7, the Shareholders, Seller and its officers,
directors, employees, agents,
successors and assigns shall be indemnified and held harmless
by Purchaser from
any and all liabilities, losses, damages, claims, costs and
expenses, interest,
awards, judgments and penalties (including, without limitation,
legal fees and
expenses) suffered or incurred by any of them (a "Seller Loss")
arising out of or
resulting from:
(a) The breach or inaccuracy of any representation or
warranty of
Purchaser contained herein or in any Related Agreement or
in any Exhibit,
Schedule or certificate delivered under this Agreement;
(b) The breach of any covenant or agreement by
Purchaser contained
herein or in any Related Agreement or other document
delivered at the
Closing; or
(c) The failure of Purchaser to pay or otherwise
discharge the
Assumed Liabilities.
7.3 Indemnification Procedures.
(a) For the purposes of this Section 7.3, "Indemnitee"
shall mean the
person indemnified, or entitled, or claiming to be
entitled, to be indemnified,
pursuant to the provisions of Section 7.1 or 7.2, as the
case may be;
"Indemnitor" shall mean the person having the obligation to
indemnify
pursuant to such provisions; and "Loss" shall mean a Seller
Loss or a
Purchaser Loss, as the case may be.
(b) An Indemnitee shall give written notice (a "Notice
of Claim") to
the Indemnitor within thirty (30) days after the Indemnitee
has knowledge of
any claim (including a Third Party Claim) which an
Indemnitee has
determined has given or could give rise to a right of
indemnification under
this Agreement. No failure to give such Notice of Claim
shall affect the
indemnification obligations of the Indemnitor hereunder,
except to the extent
the Indemnitor can demonstrate such failure materially
prejudiced such
Indemnitor's ability to successfully defend the matter
giving rise to the
claim. The Notice of Claim shall state the nature of the
claim and the amount
of the Loss, if known, and the Indemnitor shall have a
period of 30 days to
reply to such Notice of Claim.
(c) The obligations and liabilities of an Indemnitor
under this Section
7.3 with respect to a Loss arising from a claim of any
third party that is
subject to the indemnification provisions provided for in
this Article 7 (a
"Third Party Claim") shall be governed by the following
additional terms and
conditions: the Indemnitee at the time it gives a Notice
of Claim to the
Indemnitor of the Third Party Claim shall advise the
Indemnitor that the
Indemnitor shall be permitted, at the Indemnitor's option,
to assume and
control the defense of such Third Party Claim at the
Indemnitor's expense
and through counsel of the Indemnitor's choice if the
Indemnitor gives notice
within the 30-day period specified above of the
Indemnitor's intention to do
so to the Indemnitee and confirms that the Third Party
Claim is one with
respect to which the Indemnitor is obligated to indemnify.
In the event the
Indemnitor exercises the Indemnitor's right to undertake
the defense against
any such Third Party Claim as provided above, the
Indemnitee shall
cooperate with the Indemnitor in such defense and to the
extent reasonably
possible make good faith diligent efforts to make available
to the Indemnitor
all witnesses, pertinent records, materials and information
in the
Indemnitee's possession or under the Indemnitee's control
relating thereto as
is reasonably required by the Indemnitor and the Indemnitee
may participate
by the Indemnitee's own counsel and at the Indemnitee's own
expense in
defense of such Third Party Claim; provided, however, that
the Indemnitor
shall thereafter consult with the Indemnitee upon the
Indemnitee's reasonable
request for such consultation from time to time with
respect to such Third
Party Claim. Except for the settlement of a Third Party
Claim which
involves the payment of money damages solely by the party
agreeing to such
settlement, no Third Party Claim for which the Indemnitor
has elected to
defend may be settled by the Indemnitor without the written
consent of the
Indemnitee, which consent may be reasonably withheld by
such party in
consideration of its individual interests. If the
Indemnitee does not receive
written notice within said period that the Indemnitor has
elected to assume
the defense of such Third Party Claim, the Indemnitee may
elect to assume
such defense, assisted by counsel of the Indemnitee's own
choosing.
Whether or not the Indemnitee elects to assume the defense
of such Third
Party Claim, the Indemnitor shall not be relieved of the
Indemnitor's
obligations hereunder.
(d) Any claim by an Indemnitee with respect to Losses
which do not
result from a Third Party Claim will be asserted in the
same manner as
specified in paragraph 7.3(b) above. If the Indemnitor
does not respond to
such claim within the 30-day period specified in paragraph
7.3(b), the
Indemnitor will be deemed to have rejected such claim, in
which event the
Indemnitee will be free to pursue such remedies as may be
available to the
Indemnitee under this Agreement and applicable law.
(e) Notwithstanding any other provision of this
Agreement, Seller
shall not be liable to Purchaser for any Purchaser Loss
unless and until the
aggregate amount of Purchaser Losses exceeds C$500,000
("Loss
Threshold"); provided, however, that when the aggregate
amount of all
Purchaser Losses reaches the Loss Threshold, Seller shall
thereafter be liable
for the full amount of all Purchaser Losses, (and not just
the amount in
excess of the Loss Threshold).
(f) Robert Hamelin and Hamro bind and oblige themselves
solidarily
with Seller for the payment of the Purchaser's Losses to
the extent
contemplated by the foregoing paragraph. However, the
liability of Robert
Hamelin and Hamro shall be limited to an amount not
exceeding seventy
percent (70%) of such Purchaser's Losses.
8. Taxes
8.1 Income Tax Elections. Purchaser and Seller shall file
an election
under Section 22 of the Income Tax Act (Canada), Section 184 of
the Taxation Act
(Quebec) and the corresponding sections of any other applicable
provincial statute
and any regulations under such statutes within the prescribed
delays, and in the
prescribed election forms and any other documents required to
give effect to the
foregoing and shall also prepare and file all of the respective
tax returns in a
manner consistent with the aforesaid elections.
8.2 Sales Taxes. Purchaser and Seller each agree to
deliver to the other
party (or to such governmental or taxing authority as the other
party reasonable
directs) any form of document that may be required or
reasonably requested in
order to obtain an exemption with respect to any national,
provincial, municipal
or other, sales, use or other transfer taxes that may otherwise
be required to be
paid on the transfer of the Purchased Assets or that may
otherwise be due with
respect to such transfer, promptly upon the earlier of (i)
reasonable demand by the
other party or (ii) learning that such form or document is
required. Purchaser and
Seller further agree that Purchaser shall be responsible for
the cost of any sales tax
and transfer duties, if any, properly payable upon and in
connection with the sale,
assignment and transfer of the Purchased Assets from Seller to
Purchaser hereunder
and levied upon Purchaser.
Purchaser and Seller hereby agree to make the joint
election provided for in
Subsection 167(1) of the Excise Tax Act in the prescribed form
and containing the
prescribed information and Seller hereby undertakes to file
said election with the
Minister of Revenue within the prescribed time period in order
that no goods and
services tax will be payable with respect to the Purchased
Assets and Purchaser
shall be deemed, for the purposes of Part IX of the Excise Tax
Act, to have
acquired the Purchased Assets for use exclusively in
Purchaser's commercial
activities. Moreover, Purchaser and Seller hereby agree to
make the joint election
provided for in Section 75 of the Quebec Sales Tax Act in the
prescribed form and
containing the prescribed information, and Seller hereby
undertakes to file said
election in a timely manner and within the prescribed time
period in order that no
Quebec sales tax be payable with respect to the sale of the
Purchased Assets.
9. Other Matters
9.1 Survival of Representations and Warranties. All
representations
and warranties made by the parties in this Agreement or in any
Related Agreement,
certificate, Schedule, statement, document or instrument
furnished hereunder or in
connection with negotiation, execution and performance of this
Agreement shall
survive for a period of two (2) years after the Closing Date.
Notwithstanding any
investigation or audit conducted before or after the Closing
Date or the decision of
any party to complete the Closing, each party shall be entitled
to rely upon the
representations and warranties set forth herein and therein.
9.2 Payments Received. Seller and Purchaser each agree
that after the
Closing they will hold and will promptly, but in any event
within 10 days, transfer
and deliver to the other, from time to time as and when
received by them, any
cash, checks with appropriate endorsements (using their best
efforts not to convert
such checks into cash), or other property that they may receive
on or after the
Closing which properly belongs to the other party, including
without limitation any
account payments and insurance proceeds, and will account to
the other for all such
receipts.
9.3 Covenant Not to Compete.
(a) Seller and Robert Hamelin each agree that for a
period of five (5)
years after the Closing Date, they will not, directly or
indirectly, as a
partner, joint venturer, employer, employee, consultant,
shareholder,
principal, agent or otherwise, own, manage, operate, join,
control or
participate in the ownership, management, operation or
control of any
business, whether in corporate, proprietorship or
partnership form or
otherwise, which in any way competes with the business of
Seller as carried
on at the time of this Agreement in any geographic area in
which Seller
currently or within the past year has sold its products.
The parties hereto
specifically acknowledge and agree that the remedy at law
for any breach of
the foregoing will be inadequate and that Purchaser, in
addition to any other
relief available to it, shall be entitled to temporary and
permanent injunctive
relief without the necessity of proving actual damage.
(b) From and after the Closing Date, Seller and Robert
Hamelin shall
not, directly or indirectly, disclose or use for its own
benefit, or for the
benefit of any other person, any information relating to
the business of Seller
or the Purchased Assets, except to the extent such
disclosure may be required
by law.
(c) Seller and Robert Hamelin acknowledge that in view
of the
nature of the business of Seller and the Purchased Assets
and the business
objectives of Purchaser in acquiring them, and the
consideration paid to
Seller therefor, the territorial and time limitations
contained in paragraph
9.3(a) are reasonable and properly required for the
adequate protection of
Purchaser, and that in the event that any such territorial
or time limitation is
deemed to be unreasonable and is then reduced by a court of
competent
jurisdiction, then, as reduced, the territorial and/or time
limitation shall be
enforced. Paragraphs 9.3(a) and 9.3(b) constitute
independent and severable
covenants and if any or all of the provisions of either
thereof are held to be
unenforceable for any reason whatsoever, it will not in any
way invalidate
or affect the remainder of this Agreement, which will
remain in full force
and effect. The parties intend for the covenants of
paragraphs 9.3(a) and
9.3(b) to be enforceable to the maximum extent permitted by
law, and if any
reviewing court deems any of such covenants to be
unenforceable or invalid,
Purchaser, Seller and Robert Hamelin authorize such court
to reform (i) the
unenforceable or invalid provisions and to impose such
restrictions as
reformed and (ii) the remaining provisions as it deems
reasonable.
(d) Nothing contained in this Section 9.3 shall apply
in any respect
to Caisse de Depot et de Placement du Quebec, Capital
d'Amerique CDPQ
Inc., or their respective affiliates or subsidiary
companies.
9.4 Collection of Receivables. Seller has represented to
Purchaser that
the Allowance for Doubtful Accounts set forth on Exhibit A (as
revised pursuant
to Section 2.3 hereof) is and will be adequate to cover any
portion of the Accounts
Receivable (other than the Other Receivables reflected on
Schedule 3.8) which are
not collected in the ordinary course within 90 days after the
Closing, and that the
Everly Note Receivable is collectible in its full amount.
During said ninety day
period, payments received by Purchaser with respect to customer
accounts shall be
credited first against the applicable customer's oldest
invoice(s), unless payment
is accompanied by direction to apply the payment against a
specific invoice. In the
event the amount of Accounts Receivable remaining unpaid at the
end of said 90
day period exceeds the Allowance for Doubtful Accounts agreed
to by Purchaser
and Seller pursuant to Section 2.3 hereof, Seller shall be
liable to Purchaser for the
amount of said excess. Seller shall also be liable for the
amount of Other
Receivables reflected on Schedule 3.8 which are not collected
within 18 months
following the Closing. In addition, Seller shall be liable to
Purchaser for the full
amount of all past due interest and principal under the Everly
Note Receivable.
Purchaser will promptly notify Seller of any Seller liability
with respect to the
foregoing receivables, and upon payment by Seller to Purchaser
of the amount of
said liability, Purchaser will assign to Seller the uncollected
receivable and any
supporting documents.
9.5 Name Change. Seller shall take all necessary corporate
action to
change its corporate name following the Closing to a name which
will not include
any reference to the name Hamelin, and will deliver to
Purchaser for filing with
the appropriate governmental entity a duly executed amendment
to its Articles of
Incorporation, in form and substance satisfactory to Purchaser,
effectuating such
change.
9.6 Assumption of Canadian Pension Plans
(a) As of the Closing Date, Purchaser shall become the
sponsor and
employer of the Korlin Concentrates Defined Benefit Pension
Plan and of the
Genpak Toronto Defined Benefit Pension Plan (collectively
the "Canadian
Pension Plans") and shall assume responsibility for the
Canadian Pension
Plans from and after the Closing Date;
(b) Prior to Closing, but with effect as of the Closing
Date, Seller
will amend the Canadian Pension Plans in order to implement
the change of
sponsorship and will deliver to the Purchaser, at Closing,
all documents
relative to such change of sponsorship, including the
appropriate resolution
of the Board of Directors of Seller;
(c) No later than sixty (60) days following the Closing
Date, Seller
shall file with the relevant regulatory authorities all
documents relative to the
change of sponsorship of the Canadian Pension Plans.
Seller and Purchaser
shall cooperate in making such filings, in making the
appropriate
arrangements with the trustees or other funding agents of
the Canadian
Pension Plans and in performing any other action that has
to be performed
in order to implement the change of sponsorship in a timely
fashion;
(d) Should Purchaser be required by any government
authority or
any court or arbitration decision at any time to make any
contributions to
either Canadian Pension Plan or otherwise to compensate
participants in the
Canadian Pension Plans as a result of a contribution
holiday taken by Seller
at any time prior to the Closing Date, Seller shall
reimburse Purchaser for
the amounts of such required contributions or other
compensation.
9.7 Continuation of Plans Covering United States Employees
(a) Qualified Retirement Plan. Purchaser shall take
any such
actions as may be necessary to enroll all Hamelin
Industries Hired
Employees as of the Closing date (the "Hamelin Employees")
in the Spartech
Corporation 401(k) Savings and Investment Plan (the
"Purchaser DC Plan").
Prior periods of employment with Seller and any affiliate
of Seller including,
without limitation, Hamelin Industries, and prior periods
of plan service with
Seller and any affiliate of Seller including, without
limitation, Hamelin
Industries, shall be considered as periods of employment
and plan service
with the sponsor or "employer" designated as such in the
Purchaser DC Plan
for all purposes of the Purchaser DC Plan including,
without limitation,
determining eligibility to participate, eligibility for
death, disability, early
retirement, and normal retirement benefits, benefit
accrual, and non-forfeitability (vesting) of
accrued benefits. Any current and former Hamelin
Industries Employees who, as of the Closing Date, are
participants in the
Hamelin Industries, Inc. 401(k) Profit Sharing Plan and
Trust (the "Hamelin
401(k) Plan") shall become participants in the Purchaser DC
Plan pursuant
to a merger of the Hamelin 401(k) Plan into the Purchaser
DC Plan pursuant
to an instrument of merger, which shall be prepared by the
parties and
executed by the sponsor, plan administrator, and trustees
of each such plan,
and which shall contain any such terms and conditions as
may be necessary
to effectuate the merger including, without limitation, the
following
provisions;
(i) All assets and liabilities of the Hamelin
401(k) Plan shall
become assets and liabilities of the Purchaser DC Plan,
and all
elections, waivers, consents, designation, directions,
qualified
domestic relations orders and other exercises of rights
and privileges
under the Hamelin 401(k) Plan shall be deemed effective
and
applicable with respect to the Purchaser DC Plan as of
the effective
date of the plan merger;
(ii) Prior periods of employment and plan
service shall be
credited the Hamelin Industries Employees as provided
in the second
sentence of this Section 9.7(a);
(iii) All accrued benefits and account balances
under the
Hamelin 401(k) Plan shall become accrued benefits and
account
balances under the Purchaser DC Plan, and all benefits
in "pay status"
under the Hamelin 401(k) Plan as of the date of the
plan merger shall
become benefits in "pay status" under the Purchaser DC
Plan.
(iv) The trustees of the Hamelin 401(k) Plan
shall deliver to the
trustees of the Purchaser DC Plan all of the books,
record, and assets
of or pertaining to the Hamelin 401(k) Plan and the
trust established
thereunder, along with all such documentation, fully
executed, as may
be required to permit the transfer of title,
registration, or other indicia
of ownership of the assets of the Hamelin 401(k) Plan
Trust to the
trustees of the Purchaser DC Plan Trust;
(v) The plan administrator of the Hamelin 401(k)
Plan shall
deliver to the plan administrator of the Purchaser DC
Plan all of the
books, records, and documents of or pertaining to the
Hamelin 401(k)
Plan.
(vi) The merger shall comply in all respects
with applicable law
including, without limitation, section 208 (29 United
States Code
1058) of the Employee Retirement Income Security Act of
1974, as
amended ("ERISA"), and section 414(l)(26) U.S.C.
414(l)) of the
United States Internal Revenue Code ("Code"); and
(vii) Purchaser and Seller and the sponsor (if
not Purchaser),
plan administrator, and trustees of each such plan
shall cooperate as
may be reasonably requested in order to comply with the
requirements
of ERISA and the Code with respect to: (A) the plan
merger
contemplated herein; (B) any governmental approvals
required to
effectuate the transactions contemplated by this
section 9.7(a); and
(C) all reporting and disclosure requirements imposed
by applicable
law (including, without limitation, ERISA and the Code)
with respect
to the plan years of each plan that include the Closing
Date and the
effective date of the transactions contemplated in this
Section 9.7(a),
and the plan years of each plan that immediately
precede and follow
such plan year.
(b) Other Employee Benefit Plans. Purchaser shall
assume and
adopt the other United States Plans set forth on Schedule
3.23(a) (the "Other
Assumed US Plans"). Without limiting the generality of the
immediately
preceding sentence;
(i) Purchaser and Seller shall cooperate to comply
with any
applicable law with respect to the anticipated effect
of the transaction
contemplated by this Agreement on the Hamelin 401(k)
Plan and the
Other Assumed US Plans of Seller referred to below;
(ii) After the Closing Purchaser shall adopt
and/or assume
sponsorship of the cafeteria (Code Section 125) plan
sponsored by
Seller for the Hamelin Industries Employees (the
"Hamelin Cafeteria
Plan") and shall continue to offer such coverage and
benefits to the
Hamelin Industries Hired Employees as were offered
under the
Hamelin Cafeteria Plan except to the extent that such
plan provides
any benefit which extends past the termination of
employment.
Purchaser may, at its election, comply with this
Section 9.7(b)(ii) by
providing to the Hamelin Employees, at Purchaser's sole
cost and
expense, coverage under Purchaser's medical and dental
arrangements
on substantially the same terms and with substantially
the same
benefits as were available to Hamelin Employees prior
to the Closing
Date. Purchaser and Seller shall cooperate to the
extent necessary to
comply with any applicable provisions of Title I, Part
6 of ERISA and
section 4980B of the Code and any other applicable law
pertaining to
the continuation of health/medical/dental coverage of
Hamelin
Industries Employees not employed by Purchaser or its
affiliates; and
(iii) After the Closing, Purchaser shall, to the
extent assumable,
assume Seller's group term life insurance arrangement
with respect to
the Hamelin Employees, except to the extent that such
plan provides
any benefit which extends past the termination of
employment. To
the extent not assumable, Purchaser shall provide to
the Hamelin
Industries Employees group term life insurance on terms
substantially
similar to coverage provided under the Seller's group
term life
insurance arrangement. Purchaser shall cooperate with
Seller and any
insurance carriers in providing notice or other
applicable information
to, and obtaining information from, Hamelin Employees
with respect
to any right to convert insurance coverage in Seller's
group term life
insurance arrangements to individual policies for any
Hamelin
Employees not employed by Purchaser.
(c) WARN Liability. Seller and Purchaser shall
cooperate in all
respects to effectuate compliance with the Worker
Adjustment and Retraining
Notification Act (29 U.S.C. 2101 et. seq.) ("WARN") if,
in the opinion
of counsel to Seller or Purchaser following disclosure of
all relevant facts,
such compliance is required. Purchaser shall defend,
indemnify, and hold
harmless Seller from and against any liability for
violations of WARN arising
from any failure of Purchaser to either: (A) comply with
WARN; or (B)
provide Seller with information such that Seller may, if
required, comply
with WARN.
10. Miscellaneous
10.1 Termination. This Agreement and the transactions
contemplated
herein may be terminated and abandoned at any time by mutual
consent of the
Seller and Purchaser, or by either Seller or Purchaser by
notice to the other if the
Closing shall not have taken place on or prior to September 30,
1996 (or such later
date as may hereafter be agreed upon by the parties). If the
Agreement is
terminated under this Section 10.1, the parties shall have no
further liability to each
other by reason of such termination (other than pursuant to the
Confidentiality
Agreement described in Section 10.3 below); provided, however,
that nothing
herein is intended to affect the operation of the liquidated
damage provision
resulting from a breach of Section 6.3 which occurs on or
before September 30,
1996.
10.2 Expenses. Except as otherwise provided in this
Agreement, each
party hereto shall pay its own expenses incidental to the
preparation of this
Agreement, the carrying out of the provisions of this Agreement
and the
consummation of the transactions contemplated hereby.
10.3 Contents of Agreement, Parties in Interest, etc.
This Agreement
sets forth the entire understanding of the parties hereto with
respect to the
transactions contemplated hereby. It shall not be amended or
modified except by
written instrument duly executed by each of the parties hereto.
Any and all
previous agreements and understandings between or among the
parties regarding
the subject matter hereof, whether written or oral, are
superseded by this
Agreement, except that the Confidentiality Agreement between
the parties dated
March 14, 1996 shall remain in effect according to its terms.
10.4 Assignment and Binding Effect. This Agreement may
not be
assigned prior to the Closing by any party without the prior
written consent of the
other parties, provided that Purchaser may assign this
Agreement to a subsidiary
or affiliate if such assignment does not relieve Purchaser of
its obligations
hereunder. Subject to the foregoing, all of the terms and
provisions of this
Agreement shall be binding upon and inure to the benefit of and
be enforceable by
the successors and assigns of Seller, Purchaser and the
Shareholder.
10.5 Waiver. Any term or provision of this Agreement
may be waived at
any time by the party entitled to the benefit thereof by a
written instrument duly
executed by such party.
10.6 Notices. All notices required to be given under
the terms of this
Agreement or which any of the parties desires to give hereunder
shall be in writing
and delivered personally or sent by registered or certified
mail, postage prepaid,
return receipt requested or sent by facsimile (and confirmed by
registered or
certified mail), each addressed as follows:
If to Seller:<PAGE>
Hamelin Group Inc.
150 Industrial Boulevard
Boucherville, Quebec J4B 2X3
Attn: Robert Hamelin, President
Fax: 514-641-4523<PAGE>
with a copy to:<PAGE>
Gross, Pinsky
Two Alexis Nihon Plaza
Suite 1000
Montreal, Quebec H3Z 3C1
Attn: Martin Gross, Esq.
Fax: 514-933-0810<PAGE>
If to Purchaser:<PAGE>
Spartech Corporation
7733 Forsyth, Suite 1450
Clayton, Missouri 63105
Attn: David B. Mueller
Fax: (314) 721-1447
<PAGE>
with a copy to: Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square, Suite 2600
St. Louis, Missouri 63102
Attn: Albert F. Bender, III, Esq.
Fax: (314) 621-5065<PAGE>
or to such other address and to the attention of such other
person as the party to
whom such notice is to be given may have theretofore designated
in a notice to the
other party hereto. Any notice given in accordance with the
foregoing shall be
deemed to have been given when delivered.
10.7 Governing Law. This Agreement shall be governed by
and
interpreted and enforced in accordance with the internal laws
of the Province of
Quebec.
10.8 No Benefit to Others. The representations,
warranties, covenants
and agreements contained in this Agreement are for the sole
benefit of the parties
hereto and in the case of indemnification pursuant to Article
7, the other
Indemnitees, and their heirs, executors, administrators, legal
representatives,
successors and assigns, and they shall not be construed as
conferring any rights on
any other persons.
10.9 Headings; Terminology. All headings contained in
this Agreement
are for convenience of reference only, do not form a part of
this Agreement and
shall not affect in any way the meaning or interpretation of
this Agreement. Words
used herein, regardless of the number and gender specifically
used, shall be
deemed and construed to include any other number, singular or
plural, and any
other gender, masculine, feminine or neuter, as the context
requires. Any
reference to a "person" herein shall include an individual,
firm, corporation,
partnership, trust, governmental authority or body,
association, unincorporated
organization or any other entity.
10.10 Schedules and Exhibits. All Schedules and Exhibits
referred to
herein are intended to be and hereby are specifically made a
part of this
Agreement.
10.11 Severability. Any provision of this Agreement
which is invalid or
unenforceable in any jurisdiction shall be ineffective to the
extent of such invalidity
or unenforceability without invalidating or rendering
unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability
in any jurisdiction
shall not invalidate or render unenforceable such provision in
any other jurisdiction
as long as the remaining provisions are sufficient to carry out
the overall intentions
of the parties as evidenced hereby.
10.12 Counterparts. This Agreement may be executed in
any number of
counterparts and any party hereto may execute any such
counterpart, each of which
when executed and delivered shall be deemed to be an original
and all of which
counterparts taken together shall constitute but one and the
same instrument. This
Agreement shall become binding when one or more counterparts
taken together
shall have been executed and delivered by the parties.
10.13 Canadian Dollars. Except as provided in Section
3.26, all references
in this Agreement to "dollars" "C$" or "$" shall refer to
Canadian dollars.
10.14 Language. The parties have required that this
Agreement and all
contracts, documents or notices relating thereto be in the
English language. Les
parties ont exige que cette convention et tout contrat,
document ou avis afferent
soit en langue anglaise.
10.15 Exchange Rate. For the purposes of this Agreement,
the parties
agree that the Canadian \ United States exchange rate shall be
equal to the Closing
exchange rate published by the Bank of Canada on the day
immediately preceding
the Closing Date.
In Witness Whereof, the parties have duly executed this
Agreement as of
the day and year first above written.
PURCHASER:
Spartech Corporation
By: /s/Bradley B. Buechler
Bradley Buechler
President and Chief Executive Officer<PAGE>
SELLER:
Hamro Group Inc.
By: /s/Robert Hamelin
Robert Hamelin
President
Hamelin Group Inc.
By: /s/Robert Hamelin
Robert Hamelin
President
Hamelin Industries Inc.
By: /s/Robert Hamelin
Robert Hamelin
President
ROBERT HAMELIN,
INDIVIDUALLY
/s/Robert Hamelin
Robert Hamelin
<PAGE>
EXHIBIT A
Working Capital as of April 27, 1996
Assets
Cash and Cash Equivalents
C$ 344,529
Accounts Receivable
16,833,855
Less: Allowance for Doubtful Accounts
(
400,873 )
Notes Receivable
542,591
Employee and Other Receivable
314,077
Prepaid Expenses
251,155
Deposits
--
Inventory (at lower of FIFO cost or Market:)
Raw Materials 4,482,869
Replacement Parts & Maintenance Supplies
605,644
Supplies 331,434
Finished Goods (Net of Obsolescence)
4,661,332
Total Inventory
10,081,279
Total Current Assets
C$ 27,966,613
Assumed Liabilities
Accounts Payable
5,919,511
Accrued Expenses
4,457,041
Customer-Owned Inventory
Employee Related Liabilities
Payroll Taxes Withheld
Payroll Tax Accrual
Accrued Vacations
Wages Payable
Total Employee Related Liabilities
C$
1,800,051
Total Current Liabilities
C$ 12,176,603
Capitalized Lease Obligations
2,221,855
Working Capital
C$ 13,568,155
Company Contacts:
Bradley B. Buechler, President
and Chief Executive Officer
David B. Mueller, Executive V.P.
and Chief Operating Officer
For Immediate Release
Monday, June 10, 1996
SPARTECH CORPORATION ANNOUNCES AGREEMENT TO PURCHASE
THE NET ASSETS OF HAMELIN GROUP INC.
ST. LOUIS, MISSOURI, June 10, 1996 -- Spartech Corporation
(NYSE-SEH) announced today that it has entered into an agreement to
acquire the net assets of Hamelin Group Inc.'s Extrusion, Color and
Molding Divisions -- long established manufacturers of extruded plastic
sheet, color concentrates and molded food packaging, industrial &
housewares products -- based in Montreal, Canada.
Spartech's President and Chief Executive Officer, Bradley B.
Buechler, stated, "We are enthusiastic about the prospect of adding
Hamelin's extrusion, color and molding divisions to the Spartech family
of companies. The addition of Hamelin will be of strategic importance
in further strengthening our current eleven plant extruded sheet &
rollstock segment -- Spartech Plastics -- while also enhancing the
capabilities within our Spartech Compounding group. Hamelin's two
extruded sheet plants, located in Cornwall, Ontario and Granby, Quebec,
plus their color concentrate house, situated in Stratford, Ontario,
will give us the additional capacity we were looking for when we
recently announced our intent to open a new Northeastern U.S. or
Canadian Spartech Plastics facility by early 1997. In addition,
Hamelin's molding group, with one U.S. and three Canadian facilities,
will complement well our recent acquisition of Portage Industries and
its significant volume in the growing plastics packaging industry."
-more-
Mr. Buechler further stated, "When completed, the combination of
Spartech Corporation's current annual sales volume of just over $400
million and Hamelin's recent running rate of $80-$85 million will
increase our annual production capacity and total Company sales to more
than 550 million pounds and $475 million, respectively. Terms of the
acquisition, which has an approximate $55-$60 million cash purchase
price, will be disclosed when the transaction is completed."
Spartech's Executive Vice President and Chief Operating Officer,
David B. Mueller, stated, "Current plans call for the transaction to
close, subject to necessary consents and approvals, on or before August
31, 1996. The acquisition will be financed through a combination of
$30 million in new borrowings and an approximate equal amount of a
common stock equity offering. We expect our debt-to-equity ratio to be
approximately one-to-one after the transaction and currently anticipate
the acquisition to be accretive to our earnings per share immediately."
Finally, Mr. Buechler added, "Spartech plans on putting additional
manufacturing equipment and capital into Hamelin's facilities during
the next 12-18 months. We also anticipate retaining all Hamelin
personnel following completion of the transaction."
Spartech is a leading manufacturer of engineered thermoplastic
materials and polymeric compounds which today annually produces more
than 400 million pounds of extruded sheet & rollstock and specialty
plastic alloys, compounds & color concentrates.
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