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 August 22, 1997
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: (314) 721-4242
1
SPARTECH CORPORATION
FORM 8-K
Item 2. Acquisition or Disposition of Assets
On August 22, 1997, Spartech Corporation ("the Company") completed the
acquisition of the net assets of the Preferred Plastic Sheet Division of
Echlin Inc. ("Preferred"). The purchase included four rigid plastic sheet
& rollstock manufacturing plants located in Greensboro, Georgia; McPherson,
Kansas; Greenville, Ohio; and Taylorville, Illinois, along with profile
production capabilities located in McPherson, Kansas.
The acquired assets were used by Preferred in the business of
manufacturing and selling extruded rigid plastic sheet & rollstock produced
from various resins, including polyethylenes, high impact polystyrenes,
crystal polystyrenes, acrylonitrile-butadiene-styrenes, and other related
specialty alloys blends. Preferred's rigid plastic sheet & rollstock was
sold to a large group of manufacturers, who thermoformed, cut and trimmed
the plastic sheet & rollstock into end products such as shower surrounds,
agricultural products, dunnage and pallets, and truck bed liners. The
Company intends to use the acquired assets in the same manner as Preferred.
The purchase price for Preferred's net assets, was approximately $65
million. The purchase price was determined by arms' length negotiations
between the parties. The acquisition was primarily funded by a $60 million
private placement of debt with a fixed interest rate of 7.0%.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
At present, it is impractical for the Company to provide required
financial statements for the acquired business, but such financial
statements will be filed by an amendment to this report within 60 days
after the time for filing this report.
(b) Pro forma financial information.
At present, it is impractical for the company to provide required
pro forma financial information relative to the acquired business, but such
financial information will be filed by an amendment to this report within
60 days after the time for filing this report.
2
Item 7. Financial Statements and Exhibits (continued)
(c) Exhibits
2 Asset Purchase Agreement dated August 22, 1997(Exclusive
of exhibits and schedules referred to in said agreements, except
for exhibits A, C, and D).
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 September 2, 1997 By /S/ Randy C. Martin
Randy C. Martin
Vice President-Finance and
Chief Financial Officer
4
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 September 2, 1997 __________________________
Randy C. Martin
Vice President-Finance and Chief Financial Officer
Chief Financial Officer
ASSET PURCHASE
AND SALE AGREEMENT
BETWEEN
SPARTECH CORPORATION,
as Purchaser,
PREFERRED TECHNICAL GROUP, INC.,
as Seller
AND
ECHLIN INC.
for Seller's
PREFERRED PLASTIC SHEET
DIVISION
July 28, 1997
Table of Contents
Page
I. SALE AND PURCHASE OF ASSETS . . . . . . . . . . . . . . . . .1
1.1 Purchased Assets . . . . . . . . . . . . . . . . . . . .1
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . .2
1.3 Liabilities . . . . . . . . . . . . . . . . . . . . . .3
1.4 Transfer of the Purchased Assets . . . . . . . . . . . .4
1.5 The Closing . . . . . . . . . . . . . . . . . . . . . .4
1.6 Prorations . . . . . . . . . . . . . . . . . . . . . . .5
1.7 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . .5
II. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . .5
2.1 Total Consideration . . . . . . . . . . . . . . . . . .5
2.2 Allocation of Consideration . . . . . . . . . . . . . .5
2.3 Adjustments to Cash Purchase Price . . . . . . . . . . .5
2.4 Payment of Cash Purchase Price . . . . . . . . . . . . .7
III. REPRESENTATIONS AND WARRANTIES BY SELLER AND ECHLIN . . . . .7
3.1 Organization, Standing and Qualification . . . . . . . .7
3.2 Power, Authorization . . . . . . . . . . . . . . . . . .7
3.3 Execution, Delivery and Performance Agreements . . . . .7
3.4 Title to and Sufficiency of Purchased Assets . . . . . .8
3.5 No Third Party Options . . . . . . . . . . . . . . . . .8
3.6 Assets and Liabilities, Generally . . . . . . . . . . .8
3.7 Receivables and Payables . . . . . . . . . . . . . . . .8
3.8 Inventory . . . . . . . . . . . . . . . . . . . . . . .9
3.9 Property, Plant and Equipment . . . . . . . . . . . . .9
3.10 Intellectual Property Matters . . . . . . . . . . . . .9
3.11 Financial Statements . . . . . . . . . . . . . . . . . 10
3.12 Books of Account . . . . . . . . . . . . . . . . . . . 10
3.13 Taxes and Tax Returns and Reports . . . . . . . . . . 10
3.14 Absence of Certain Changes or Events . . . . . . . . . 11
3.15 Compliance with Law; Authorizations . . . . . . . . . 12
3.16 Transactions with Certain Related Parties . . . . . . 12
3.17 Litigation . . . . . . . . . . . . . . . . . . . . . . 12
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . 12
3.19 Leases . . . . . . . . . . . . . . . . . . . . . . . . 12
3.20 Contracts . . . . . . . . . . . . . . . . . . . . . . 13
3.21 Brokers, Finders, Etc. . . . . . . . . . . . . . . . . 13
3.22 Employees . . . . . . . . . . . . . . . . . . . . . . 13
3.23 Employee Benefit Plans and Arrangements . . . . . . . 15
3.24 Environmental Matters . . . . . . . . . . . . . . . . 17
3.25 Business Names and Locations . . . . . . . . . . . . . 18
3.26 Copies of Documents . . . . . . . . . . . . . . . . . 18
3.27 Completeness of Disclosure . . . . . . . . . . . . . . 18
IV. REPRESENTATIONS AND WARRANTIES BY PURCHASER . . . . . . . . 18
4.1 Organization and Standing . . . . . . . . . . . . . . 18
4.2 Power; Authorization . . . . . . . . . . . . . . . . . 18
4.3 Execution, Delivery and Performance of Agreements . . 18
4.4 Brokers, Finders, Etc. . . . . . . . . . . . . . . . . 19
4.5 Employee Benefit Plans and Arrangements . . . . . . . 19
V. CONDUCT OF BUSINESS PRIOR TO CLOSING . . . . . . . . . . . 19
5.1 Access to Information . . . . . . . . . . . . . . . . 19
5.2 Interim Operations of the Division . . . . . . . . . . 19
5.3 Schedules; Changes; Corrections . . . . . . . . . . . 20
5.4 Cooperation in Transaction . . . . . . . . . . . . . . 20
5.5 Exclusive Dealings . . . . . . . . . . . . . . . . . 21
5.6 Hiring of Employees . . . . . . . . . . . . . . . . . 21
5.7 Collective Bargaining Agreements . . . . . . . . . . . 23
5.8 Audited Financial Statements . . . . . . . . . . . . . 23
VI. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . 23
6.1 Conditions to Purchaser's Obligations . . . . . . . . 23
6.2 Conditions to Seller's Obligations . . . . . . . . . . 25
VII. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 26
7.1 Indemnification by Seller and Echlin . . . . . . . . . 26
7.2 Indemnification by Purchaser . . . . . . . . . . . . . 26
7.3 Indemnification Procedures . . . . . . . . . . . . . . 26
7.4 Limits of Indemnification . . . . . . . . . . . . . . 27
VIII. OTHER MATTERS . . . . . . . . . . . . . . . . . . . . 28
8.1 Transfer Taxes . . . . . . . . . . . . . . . . . . . . 28
8.2 Survival of Representations and Warranties . . . . . . 28
8.3 Maintenance of Books and Records . . . . . . . . . . . 28
8.4 Payments Received . . . . . . . . . . . . . . . . . . 29
8.5 Covenant Not to Compete . . . . . . . . . . . . . . . 29
8.6 Confidentiality; Public Announcements . . . . . . . . 30
8.7 Product Liability Insurance . . . . . . . . . . . . . 30
8.8 Notice to Creditors and Customers . . . . . . . . . . 30
8.9 Covenant of Performance . . . . . . . . . . . . . . . 30
IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 30
9.1 Termination . . . . . . . . . . . . . . . . . . . . . 30
9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Contents of Agreement, Parties in Interest, Etc. . . . 30
9.4 Assignment and Binding Effect . . . . . . . . . . . . 31
9.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . 31
9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . 31
9.7 Governing Law . . . . . . . . . . . . . . . . . . . . 32
9.8 No Benefit to Others . . . . . . . . . . . . . . . . . 32
9.9 Headings; Terminology . . . . . . . . . . . . . . . . 32
9.10 Schedules and Exhibits . . . . . . . . . . . . . . . . 32
9.11 Severability . . . . . . . . . . . . . . . . . . . . . 32
9.12 Counterparts . . . . . . . . . . . . . . . . . . . . . 32
Table of Defined Terms
Defined Term Cross Reference Page
Accounts Receivable 1.1(a) 1
Agreement Preamble 1
Assumed Contracts 1.1(f)(iv) 2
Assumed Liabilities 1.3(a) 3
Authorizations 3.15 12
Bargaining Employees 5.6(a) 21
Bargaining Hired Employees 5.6(a) 21
Best Knowledge of Seller 3.6 8
Cash Purchase Price 2.1 5
Closing 1.5 4
Closing Date 1.5 4
Closing Report 2.3(c) 5
Code 2.2 5
Collective Bargaining Agreements 5.7 23
Contracts 3.20 13
Covenant Not to Compete 2.1 5
Customer-Owned Inventory 1.3(a)(ii) 3
Deposits 1.1(f)(iv) 2
Division Preamble 1
Echlin Preamble 1
Employee Benefit Plan 3.23(a) 15
Employee Receivables 1.1(c) 1
Employee-Related Liabilities 1.3(a)(iii) 3
Employees 3.22 13
Environmental Regulations 3.24(a) 17
Equipment 1.1(e)(ii) 2
ERISA 3.23(a) 15
ERISA Affiliate 3.23(a) 15
Estimated Cash Purchase Price 2.4(a) 7
Excluded Assets 1.2 2
GAAP 2.3(c) 5
Hart-Scott-Rodino Act 3.3 8
Hazardous Substances 3.24(a) 17
Hired Employees 5.6(a) 21
Indemnitee 7.3(a) 26
Indemnitor 7.3(a) 26
Intangible Assets 1.1(f) 2
Intellectual Property 1.1(f)(i) 2
Interim Balance Sheet Date 3.11(b) 10
Inventory 1.1(d) 1
Loss 7.3(a) 26
Multiemployer Plan 3.23(g) 16
Net Assets 2.3(a) 5
Non-Bargaining Employees 5.6(a) 21
Non-Bargaining Hired Employees 5.6(a) 21
Notes Receivable 1.1(b) 1
Notice of Claim 7.3(b) 26
Permits 1.1(f)(ii) 2
Permitted Encumbrances 1.4 4
Physical Inventory 2.3(b) 5
Plains Plastics Savings Plan 3.23(b) 15
Prepaid Expenses 1.1(f)(iv) 2
Property, Plant and Equipment 1.1(e) 1
PTG Pension Plan 5.7 15,23
PTG Savings Plan 3.23(b) 15,23
Purchased Assets 1.1 1
Purchaser Preamble 1
Purchaser Loss 7.1 26
Purchaser Plan 4.5 19
Real Property 1.1(e)(i) 2
Regulations 3.15 12
Seller Preamble 1
Seller Loss 7.2 26
Seller Plans 3.23(b) 15
Tax Returns 3.13 10
Taxes 3.13 10
Third Party Claim 7.3(c) 26
Threshold 7.4 27
Title Commitments 6.1(m) 25
Trade Accounts Payable 1.3(a)(i) 3
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement ("Agreement") is entered
into as of the 28th day of July, 1997 between SPARTECH CORPORATION,
a Delaware corporation having its principal office at 7733 Forsyth,
Suite 1450, Clayton, Missouri 63105 ("Purchaser"), PREFERRED
TECHNICAL GROUP, INC., a Delaware corporation having its principal
place of business at 2044 Austin Drive, Rochester Hills, Michigan
48309 ("Seller"), and ECHLIN INC., a Connecticut corporation having
its principal place of business at 100 Double Beach Road, Branford,
Connecticut 06405 ("Echlin").
WHEREAS, Seller is engaged, among other enterprises, in the
business of the formulation, manufacture, marketing and sale of
extruded plastic sheet and profile extruded products, which business
is known as Seller's Preferred Plastic Sheet Division (the
"Division"); and
WHEREAS, Seller desires to sell, transfer and assign to
Purchaser, and Purchaser desires to purchase and acquire from Seller,
substantially all of the assets and business of the Division, upon
the terms and subject to the conditions hereinafter set forth; and
WHEREAS, Echlin is the indirect corporate parent and 100%
beneficial owner of Seller, and Purchaser's willingness to enter into
this Agreement is conditioned upon Echlin's willingness to become
liable for certain obligations of Seller and make certain other
covenants with Purchaser as 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:
I. SALE AND PURCHASE OF ASSETS.
1.1 Purchased Assets. Upon the terms and subject to the
conditions set forth in this Agreement, Seller will sell, transfer,
convey and assign to Purchaser, and Purchaser will purchase and
acquire, at the Closing (which term and the other capitalized terms
used herein are defined in the respective Sections of this Agreement
referenced in the Table of Defined Terms), substantially all of the
assets used in the ordinary course of business of the Division as of
the Closing Date (the "Purchased Assets"), including without
limitation the following specifically described Purchased Assets:
(a) Accounts Receivable. All customer accounts receivable
(the "Accounts Receivable");
(b) Notes Receivable. All notes receivable (the "Notes
Receivable");
(c) Employee Receivables. All advances to and receivables
from Hired Employees (the "Employee Receivables");
(d) Inventory. All inventories (the "Inventory"),
including raw materials, work in progress, supplies (including
office supplies), and finished goods, wherever located, goods
previously purchased for the account of the Division and in
transit to Seller on the Closing Date, and any and all rights,
title and interest of Seller in and with respect to Customer-Owned
Inventory;
(e) Property, Plant and Equipment. The following tangible
assets (the "Property, Plant and Equipment"):
(i) Real Property. All real property owned by Seller
and used in the ordinary course of business of the
Division, including all land, buildings, fixtures and other
improvements thereon located in Greensboro, Georgia,
McPherson, Kansas, Greenville, Ohio and Taylorville,
Illinois, the legal descriptions of which are set forth on
Schedule 1.1(e)(i), and all rights appurtenant thereto (the
"Real Property");
(ii) Equipment, etc. The machinery, equipment,
vehicles, furniture and furnishings of the Division,
wherever located (the "Equipment"), including both the
machinery, equipment, vehicles, furniture and furnishings
used in the ordinary course of business of the Division
reflected on the books of Seller at the Closing Date, each
item of which is listed and described on
Schedule 1.1(e)(ii); the machinery, equipment, vehicles,
furniture and furnishings of the Division which are either
fully depreciated or are otherwise not reflected on the
books of Seller at the Closing Date; and
(f) Intangible Assets. The following intangible assets of
the Division (the "Intangible Assets"):
(i) Intellectual Property. All patents, patent
applications, trademarks, service marks, trade or product
names, copyrights, including registrations and applications
for registration thereof, if any, patent, software and
technology licenses, each item of which is listed and
described on Schedule 1.1(f)(i); and all related common law
rights, manufacturing formulations, processes and recipes,
software, know-how and trade secrets of the business of the
Division or associated with the Purchased Assets (the
"Intellectual Property");
(ii) Permits. To the extent their transfer is
permitted by law, all governmental licenses, permits, code
and other approvals (including both UL and U.S. military
approvals), license applications, license amendment
applications, and product registrations used or utilized by
or in the business of the Division (the "Permits"), all of
which are listed and described on Schedule 1.1(f)(ii);
(iii) Lists, Books and Records. All customer
lists, including terms of sale and related records, books,
records, manuals, documentation and other materials
relating to the business of the Division or the Purchased
Assets;
(iv) Contract Rights. All rights of Seller relating
to the Division and 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 relating to the purchase of products of
the Division; (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
the business of the Division; (C) other contracts, leases
of personal or real property and other agreements with any
customer, supplier, distributor, licensor, licensee, union,
purchaser or provider; and (D) any non-disclosure
agreements with Employees; and
(v) Goodwill. All goodwill of the Division.
1.2 Excluded Assets. Notwithstanding anything contained in
Section 1.1, Purchaser shall not purchase, and Seller shall not sell
to Purchaser the following described assets and any other assets
specifically listed and described in Schedule 1.2 (the "Excluded
Assets"):
(i) any cash, cash equivalents, funds on deposit or
marketable securities;
(ii) any intercompany receivables or any other receivables
other than Accounts Receivable, Notes Receivable and Employee
Receivables;
(iii) any records having to do with the corporate
organization of Seller;
(iv) any insurance and/or workers' compensation premium
refunds and proceeds from claims arising out of occurrences
prior to Closing;
(v) any pension or other funded employee benefit plan
assets except as provided in Section 5.6, or any amounts owed to
Seller by, or claims by Seller against, third parties with
respect to Excluded Assets or with respect to liabilities other
than Assumed Liabilities (including any right or claim to refund
of any deposits, prepayments, taxes or tax abatements for which
Seller may have a claim);
(vi) all Seller's rights to the name "Preferred Technical
Group, Inc." or "Echlin Inc." (and any similar names other than
the name "Preferred Plastic") and any related marks;
(vii) all Seller's licenses or other rights in all
computer software, software programs or other similar rights
used in the collection or reporting of financial information;
and
(viii) all of Seller's other assets, properties and
rights not primarily used in and not otherwise material to the
conduct of the business of the Division as a going concern.
1.3 Liabilities.
(a) 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 as they exist on
the Closing Date (the "Assumed Liabilities"):
(i) Trade Accounts Payable; Other Current and Accrued
Liabilities. Trade accounts payable and any other current and
accrued liabilities incurred by Seller in the business of the
Division ("Trade Accounts Payable"), if and only to the extent
reflected on the Closing Report;
(ii) Liabilities Related to Customer-Owned Inventory. All
liabilities of Seller at the Closing Date with respect to
customer-owned inventory in or formerly in the Division's plants
and arising out of the business of the Division (the "Customer-Owned
Inventory");
(iii) Employee-Related Liabilities. All obligations
and liabilities of Seller at the Closing Date to Non-Bargaining
Hired Employees for accrued salaries, wages and vacation (the
"Employee-Related Liabilities"), and all obligations and
liabilities of Seller, to the extent provided in Section 5.7, at
the Closing Date to Bargaining Hired Employees under the
Collective Bargaining Agreements, listed by employee and amount
on Schedule 3.22(a) (as updated to the Closing Date);
(iv) Assumed Contracts. All obligations of Seller arising
after Closing under the Assumed Contracts;
(v) Real Estate Liabilities. Any prorated liability for
property taxes, utilities and similar items with respect to the
Real Property as provided in Section 1.6;
(vi) Normal Warranty Obligations. Normal warranty
obligations (i.e. to repair, replace or refund) arising prior to
Closing in the ordinary course of the conduct of the business of
the Division;
(vii) Certain Other Liabilities to Hired Employees.
Liabilities expressly assumed by Purchaser under Section 5.6 or
Section 5.7; and
(viii) Other Specified Liabilities. Such other
liabilities, if any, as Purchaser may hereafter expressly agree
in writing to assume.
(b) No Other Debts, Obligations or Liabilities Assumed. Except
as expressly set forth in paragraph 1.3(a) above, Purchaser does not
assume and shall not be liable for any of the debts, obligations or
liabilities of Seller whatsoever, including, without limitation: (i)
any liabilities of Seller which have arisen from Seller's defaults
under leases, contracts or other obligations; (ii) any liability for
warranty claims with respect to products sold before the Closing in
excess of normal warranty obligations (i.e. to repair, replace or
refund) arising prior to Closing in the ordinary course of the
conduct of the business of the Division; (iii) any income tax, sales
tax or other tax liabilities of Seller (other than for property taxes
described in clause 1.3(a)(v) above); (iv) any intercompany or
interdivisional indebtedness or any indebtedness of Seller to third
parties; (v) any unemployment, payroll or withholding tax payable
with respect to Division employees for any period through the Closing
Date; (vi) any liability for contributions or otherwise pursuant to
any Employee Benefit Plan; or (vii) any liability (including
multiemployer withdrawal liability under Title IV of ERISA) accrued
as of the Closing Date for contributions or otherwise to an Employee
Benefit Plan pursuant to the Collective Bargaining Agreements.
1.4 Transfer of the Purchased Assets. Subject to the terms and
conditions hereof, at the Closing 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, liens, pledges, security
interests, charges, claims, liabilities, restrictions and
encumbrances whatsoever, other than (i) the Assumed Liabilities, (ii)
statutory liens for current real or personal property taxes not yet
due and payable, (iii) statutory worker's, carrier's and
materialman's liens that are immaterial in character, amount, and
extent, and which do not detract from the value or interfere with the
present or proposed use of the properties they affect, and (iv) in
the case of the Real Property, the exceptions shown on "Schedule B"
to the Title Commitments (hereafter defined) (the "Permitted
Encumbrances").
1.5 The Closing. The sale and purchase of assets herein
described shall take place at a closing (the "Closing") which shall
be held at the offices of Purchaser's counsel, Armstrong, Teasdale,
Schlafly & Davis, One Metropolitan Square, Suite 2600, St. Louis,
Missouri 63102 at 9:00 a.m. on such date as may be agreed upon by
Seller and Purchaser by which all conditions to the Closing shall
have been satisfied or waived (the "Closing Date"). The parties
shall use their respective best efforts to complete the Closing on or
before August 31, 1997. 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 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 and the Customer-Owned Inventory.
1.6. Prorations. All real estate taxes, utilities and similar
items with respect to the Real Property customarily prorated in sales
of real property shall be prorated to the Closing Date with Purchaser
responsible for such items applicable to all periods after the
Closing Date.
1.7. Sales Taxes. The party upon which the law imposes the
obligation shall pay directly, or reimburse the other party promptly
upon demand and delivery of proof of payment, all sums required to be
paid to any state or local taxing jurisdictin as sales tax on account
of the consummation of the transactions contemplated hereby.
II. PURCHASE PRICE.
2.1 Total Consideration. The total consideration for the
Purchased Assets and for the covenant not to compete set forth in
Section 8.5 (the "Covenant Not to Compete") shall be Sixty-Five
Million Dollars ($65,000,000) (the "Cash Purchase Price") plus the
amount of the Assumed Liabilities. The Cash Purchase Price shall be
subject to adjustment as provided in Section 2.3.
2.2 Allocation of Consideration. The Cash Purchase Price shall
be allocated among the Purchased Assets and to the Covenant Not to
Compete as set forth in Schedule 2.2, and otherwise in accordance
with the applicable sections of the Internal Revenue Code of 1986, as
amended (the "Code"). Seller and Purchaser 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 the agreed allocation.
2.3 Adjustments to Cash Purchase Price.
(a) Basis for Adjustment. The Cash Purchase Price shall be
increased by the amount, if any, by which the Purchased Assets, as
shown on the Closing Report, less the Assumed Liabilities, as shown
on the Closing Report, (such difference being the "Net Assets") is
greater than $47,389,141 and decreased by the amount, if any, by
which Net Assets is less than $47,389,141.
(b) Physical Inventory. During the two days immediately after
the Closing Date, representatives of Purchaser shall perform an
actual physical inventory count and valuation of each item of
Inventory (the "Physical Inventory"), for the purpose of establishing
the valuation of Inventory to be used in the calculation of Net
Assets. Representatives of Seller shall be allowed to attend the
Physical Inventory and participate in verifying and reviewing the
count and valuation of all items. Each party shall bear its own
expenses incurred in connection with the Physical Inventory.
(c) Closing Report. As promptly as practicable following the
completion of the Physical Inventory and not more than 30 days
following the Closing Date, Purchaser shall provide Seller with a
written report (the "Closing Report") reflecting the final list and
valuation of Purchased Assets and the final list of Assumed
Liabilities, including all prorations, and the resulting calculation
of Net Assets, together with supporting detail and other
documentation including details of receivables and payables; and
Purchaser shall promptly provide Seller with such additional
supporting information available to Purchaser as Seller may from time
to time thereafter request. Net Assets shall be calculated in the
same manner as the calculation reflected in Exhibit A, but using
appropriate line items and valuations determined pursuant to Article
I and this Section 2.3. To the extent not expressly provided for in
this Agreement, the composition of the line items, and all amounts,
on the Closing Report shall be determined in accordance with
generally accepted accounting principles consistently applied over
all relevant periods ("GAAP"), subject to the following specific
instructions:
(i) The Allowance for Bad Debts shall not be less than a
number which bears the same proportion to Accounts Receivable as
the Allowance for Bad Debts set forth on Exhibit A bears to the
Accounts Receivable set forth on Exhibit A, unless otherwise
specifically consented to by Purchaser, which consent shall not
be unreasonably withheld, based upon actual information
available at Closing;
(ii) Inventory shall be valued at the lower of FIFO cost or
market value, which Seller represents to be consistent with
Seller's historical accounting practices historically applied;
(iii) The Obsolescence Reserve shall be equal to the
value of Inventory which is not then usable or salable in the
ordinary course of business, as determined on the basis of the
Physical Inventory;
(iv) Other Current Assets shall not include any deferred
taxes or any book v. tax adjustments;
(v) Property, Plant & Equipment shall be valued in
accordance with generally accepted accounting principles,
without allowance for accumulated depreciation; and no
adjustment shall be made to Property, Plant and Equipment for
any capital expenditures not listed in Exhibit B or for ordinary
repair, maintenance or replacement not exceeding $25,000 in the
aggregate, unless specifically approved by Purchaser prior to
such expenditures;
(vi) The gross amounts of Deferred Charges and Intangibles
shall not exceed the value shown on Exhibit A, and shall be
reduced by incremental amortization between May 31, 1997 and the
month-end prior to the Closing Date;
(vii) A reserve for assumed warranty obligations shall
be included in the Closing Report, based on actual experience
and information available at the time of preparation of the
Closing Report;
(vii) No liabilities shall be reflected other than
Assumed Liabilities; and
(viii) The Physical Inventory shall include Customer-Owned
Inventory, which shall be reflected on a schedule to the
Closing Report; and the Closing Report shall reflect a liability
in an amount equal to the excess (if any) of (A) the amount of
Customer-Owned Inventory which should be in Seller's possession
at the Closing Date, based on all available information, over
(B) the Customer-Owned Inventory on hand at the Closing Date as
shown on such schedule.
(d) Objections to Closing Report. Purchaser and Seller shall
each review the Closing Report, and shall cooperate with each other
in endeavoring to respond to any questions and resolve any disputes
about the contents and accuracy of the Closing Report. 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 90 days
after the Closing Date, the disputed matters shall be submitted to
the independent public accounting firm of Deloitte & Touche LLP as
experts in accounting, and the good faith decision of such firm,
which shall be made within 120 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
Deloitte & Touche LLP under this paragraph shall be borne equally by
the parties.
2.4 Payment of Cash Purchase Price.
(a) Estimated Cash Purchase Price. As of a date selected by
Seller which is not earlier than 15 days prior to the Closing Date,
Seller shall prepare its best estimate of the amount which would be
the Net Assets 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 Cash Purchase Price (the
"Estimated Cash Purchase Price").
(b) Payment to Seller at Closing. At the Closing, Purchaser
shall pay to Seller, by wire transfer to an account designated by
Seller at least twenty-four (24) hours before the Closing Date, an
amount equal to 95% of the Estimated Cash Purchase Price.
(c) Payment of Hold-Back. Upon the later to occur of 90 days
after the Closing Date or three business days following the date the
Closing Report becomes final pursuant to paragraph 2.3(d) resulting
in the final calculation of any adjustments to the Cash Purchase
Price, Purchaser shall pay to Seller, by wire transfer to an account
designated by Seller at least twenty-four (24) hours previously, the
remaining balance of the final, adjusted Cash Purchase Price. In the
event that the calculation of the final, adjusted Cash Purchase Price
results in a credit due to Purchaser, Seller shall repay such excess
to Purchaser within the same time period. Any payment made pursuant
to this paragraph 2.4(c) shall be accompanied by interest from the
Closing Date until the date of payment at a rate per annum equal to
the lower of (i) the rate publicly announced by The First National
Bank of Chicago as its "reference" or "base" rate of interest as in
effect on the Closing Date or, if higher, the last business day
preceding the payment date, or (ii) the maximum rate of interest
allowable under applicable law.
III. REPRESENTATIONS AND WARRANTIES BY SELLER AND ECHLIN.
Each of Seller and Echlin represents and warrants to Purchaser
as follows:
3.1 Organization, Standing and Qualification. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of Delaware and is duly qualified and in good standing
under the laws of Georgia, Illinois, Kansas, Ohio and every other
jurisdiction in which qualification is required, except where failure
to be so qualified would not have a material adverse effect on the
business, assets or financial condition of the Division. Echlin is
a corporation duly organized, validly existing and in good standing
under the laws of Connecticut.
3.2 Power; Authorization. Seller has full corporate power and
authority to enter into this Agreement, to carry out the transactions
contemplated by this Agreement, to carry on the business of the
Division as now being conducted, and to own, lease or operate its
properties. The execution, delivery and performance of this
Agreement by Seller has been authorized by all necessary corporate
action on the part of Seller, including the consent or approval by
Seller's shareholder to this Agreement and the transactions
contemplated hereby. Echlin has full corporate power and authority
to enter into this Agreement. The execution, delivery and
performance of this Agreement by Echlin has been authorized by all
necessary corporate action on the part of Echlin, and no consent or
approval by Echlin's shareholders is required for this Agreement or
the transactions contemplated hereby.
3.3 Execution, Delivery and Performance of Agreements. This
Agreement has been duly executed and delivered by Seller and Echlin
and constitutes the legal, valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms.
The execution, delivery and performance of this Agreement by Seller
and Echlin 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
bylaws of Seller or the articles [certificate] of incorporation or
bylaws of Echlin, (ii) any license, law, rule, regulation, order,
judgment or decree applicable to Seller or Echlin, or (iii) any
mortgage, indenture, deed of trust, security agreement, lease or
other contract by which Seller or Echlin 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 or Echlin
thereunder. Except for required filings under the Hart-Scott-Rodino
Antitrust Improvements Act, 15 U.S.C. 18a, as amended (the "Hart-Scott-Rodino
Act") and except for those authorizations, consents,
orders, permits, approvals, notices, filings, registrations or
qualifications which if not made or obtained would not have a
material adverse effect on the business, assets or financial
condition of the Division, no authorization, consent, order, permit,
approval, notice, filing, registration or qualification to, from or
with any governmental authority or entity, domestic or foreign, is or
has been or will be required on the part of Seller or Echlin in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
3.4 Title to and Sufficiency of Purchased Assets. Seller has
good title to all of the Purchased Assets, which constitute all of
the assets and interests in assets that are necessary to the business
of the Division. All Purchased Assets are free and clear of all
mortgages, liens, pledges, security interests, charges, claims,
restrictions and other encumbrances and defects of title of any
nature whatsoever, except for the Permitted Encumbrances and those to
be released prior to Closing and disclosed on Schedule 3.4. No
person other than Seller owns any equipment or other tangible assets
or properties situated on the Division's premises or necessary to the
business of the Division, except for leased items disclosed on
Schedule 3.4 hereto or Customer-Owned Inventory disclosed on Schedule
3.8 hereto.
3.5 No Third Party Options. There are no existing agreements,
options, commitments or rights with, of or to any person to acquire
any of the Purchased Assets or any interest therein or any of the
business of the Division, except for the rights of customers under
contracts entered into in the ordinary course of business consistent
with past practice for the sale of finished goods inventory of
Seller.
3.6 Assets and Liabilities, Generally. Each amount in Exhibit
A has been, and each amount in the Closing Report will be, calculated
according to GAAP, and will be correct in all material respects. To
the Best Knowledge of Seller, the asset values reflected in Exhibit
A are not, and the asset values reflected in the Closing Report will
not be, overstated. To the Best Knowledge of Seller, the liabilities
reflected in Exhibit A are not, and the liabilities reflected in the
Closing Report will not be, understated. Exhibit A does not reflect,
and the Closing Report will not reflect, any transaction or
obligation between the Division and any other division or affiliate
of Seller. As used in this Agreement, the "Best Knowledge of Seller"
means the actual knowledge, after reasonable investigation, of any of
the directors and officers of Seller and any of the employees of the
Division responsible for the type of matter as to which knowledge is
being represented.
3.7 Receivables and Payables. Schedule 3.7 correctly sets
forth all Accounts Receivable, Notes Receivable and Employee
Receivables by debtor, due date or aging, and dollar amount. The
Accounts Receivable, Notes Receivable and Employee Receivables are
valid and genuine; have arisen solely out of bona fide sales and
deliveries of goods, advances or loans, performance of services or
other business transactions in the ordinary course of the business of
the Division consistent with Seller's past practice, and are not
subject to any known defenses, set-offs or counterclaims except as
set forth on Schedule 3.7. To the Best Knowledge of Seller, the
amounts of Accounts Receivable, Notes Receivable and Employee
Receivables set forth on Exhibit A are not overstated. To the Best
Knowledge of Seller, the Allowance for Bad Debts set forth on Exhibit
A is adequate. Seller does not have any knowledge of any facts or
circumstances generally (other than general economic conditions)
which would result in any material increase in the uncollectability
of Accounts Receivable, Notes Receivable or Employee Receivables if
pursued with good faith diligent efforts. To the Best Knowledge of
Seller, the amount of Trade Accounts Payable set forth on Exhibit A
is not understated, and there are no open purchase orders other than
those entered into in the ordinary course of the business of the
Division.
3.8 Inventory. All Inventory was acquired and has been
maintained in the ordinary course of the business of the Division,
and to Seller's best knowledge and belief is not adulterated,
misbranded, mispackaged or mislabeled within the meaning of, or in
violation of, any applicable local, state or Federal laws or
regulations. All amounts of Inventory reflected on Exhibit A
represent bona fide inventories of the Division on hand at May 31,
1997, and are valued thereon at the lower of FIFO cost or market
value, which is consistent with Seller's past practices as
historically applied. All amounts of Inventory reflected on the
Closing Report will represent bona fide inventories of the Division
on hand at the Closing Date and will be valued thereon at the lower
of FIFO cost or market value. To the Best Knowledge of Seller, the
Obsolescence Reserve shown on Exhibit A is adequate to cover obsolete
and unsalable Inventory. All liabilities, if any, with respect to
Customer-Owned Inventory are reflected in Exhibit A. All Customer-Owned
Inventory is listed by customer, including the quantity and
associated dollar amount, on Schedule 3.8.
3.9 Property, Plant and Equipment. Except that the valuation
of Property, Plant and Equipment reflected on Exhibit A does not
reflect an allowance for accumulated depreciation, it is in
accordance with generally accepted accounting principles. Schedule
1.1(e)(i) together with Schedule 1.1(e)(ii) set forth the description
and the location of each item of Property, Plant and Equipment, and
Schedule 3.19 sets forth an identification of each material lease of
Property, Plant and Equipment 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, to
the Best Knowledge of Seller, each of the other parties thereto;
(b) Seller is not, and to the Best Knowledge of Seller, no
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; and
(c) Each item of Property, Plant and Equipment that is
used in the current conduct of the business of the Division is
in normal operating condition and repair and is fit for its
intended purpose, ordinary wear and tear excepted.
Seller has delivered to Purchaser true and complete copies of the
most recent title insurance policies and surveys available to Seller
relating to the Division's real property.
3.10 Intellectual Property Matters. Seller in the conduct of
the business of the Division 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 it
does not infringe upon or unlawfully or wrongfully use any patent,
trademark, trade name, 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 notice of
any claim of infringement or any other claim or proceeding relating
to any Intellectual Property. Schedule 3.10 lists all material
confidentiality or non-disclosure agreements which relate to the
Division. Seller has not granted any licenses or other rights to any
of the Intellectual Property. Except as set forth on Schedule 3.10,
Seller has not made any claim 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.
3.11 Financial Statements.
(a) Year-End Financial Statements. Seller has delivered to
Purchaser true and complete copies of the unaudited balance sheets of
the Division at August 31, 1996 and 1995 and the related unaudited
statements of income, retained earnings and cash flows for the fiscal
years then ended, all of which have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved. Such balance sheets, including the
related notes, if any, fairly present in all material respects the
financial position of the Division 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 the Division for the periods
indicated, in conformity with generally accepted accounting
principles.
(b) Interim Financial Statements. Seller has delivered to
Purchaser a true and complete copy of the unaudited balance sheet of
the Division at May 31, 1997 (the "Interim Balance Sheet Date") and
the unaudited income statement of the Division for the nine months
then ended, which have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved. Such balance sheet, including the related notes,
if any, fairly presents in all material respects the financial
position of the Division at May 31, 1997, and such statement of
income fairly presents in all material respects the results of
operations for the period ended May 31, 1997, in conformity with
generally accepted accounting principles.
(c) Exhibit A. The dollar amounts listed for the particular
line items on Exhibit A hereto are consistent with the dollar amounts
for those line items contained in the interim financial statements
described in paragraph 3.11(b) above.
(d) Notwithstanding the foregoing, the financial statements
referred to in paragraphs 3.11(a) and 3.11(b) do not contain the
footnote disclosures required by generally accepted accounting
principles, and the interim financial statements do not reflect
normal, non-material year-end adjustments. Property, Plant and
Equipment on Exhibit A does not reflect an allowance for
depreciation.
3.12 Books of Account. The books, records and accounts of
Seller maintained with respect to the Division accurately and fairly
reflect, consistent with Seller's historical practice consistently
applied, all transactions and assets and liabilities of the Division.
Seller has not engaged in any transaction with respect to the
business of the Division or used any of the funds of Seller in the
conduct of the business of the Division except for transactions and
funds which have been and are reflected in the normally maintained
books and records of the Division.
3.13 Taxes and Tax Returns and Reports. All returns, reports,
statements and other similar filings required to be filed by Seller
("Tax Returns") with respect to any material Federal, state, 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, withholding, sales and use, excise, privilege, property, ad
valorem, franchise, license, school and any other tax or similar
governmental charge or imposition under laws of the United States or
any state or municipal or political subdivision thereof or any
foreign country or political subdivision thereof) ("Taxes") have been
filed or will be filed, when due, 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 in all
material respects 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 or hereafter claimed to be due by any taxing authority
from Seller, have been properly accrued or paid. 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 Seller or any of its
assets or properties. Seller has not extended, or waived the
application of, any statute of limitations of any jurisdiction
regarding the assessment or collection of any Taxes. 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 Seller. Except for
the possible reassessment of the Real Property, Seller has no
knowledge of any basis for any additional assessment of Taxes.
Seller has made all 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.
3.14 Absence of Certain Changes or Events. Since the Interim
Balance Sheet Date, except as disclosed on Schedule 3.14, Seller has
not, with respect to the Division:
(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 Interim 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;
(b) Made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which
it is a party or by which it is bound;
(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 $25,000; or suffered any repeated, recurring or
prolonged 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 the business, operations, assets,
properties or prospects of the Division;
(e) Made any material 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 or betterments not listed on
Exhibit B except such as may be involved in ordinary repair,
maintenance or replacement of its assets not exceeding $25,000
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 or made any
increase in, or any addition to, other benefits to which any of
its employees may be entitled;
(h) Changed any of the accounting principles followed by
it or the methods of applying such principles, or revalued any
of its assets;
(i) Entered into any transaction relating to the Division
or the Purchased Assets other than in the ordinary course of
business consistent with past practice; or
(j) Agreed, whether in writing or otherwise, to take any
of the actions set forth in this Section 3.14.
3.15 Compliance with Law; Authorizations. Except as set forth
on Schedule 3.15, Seller has complied in all material respects with
each, and is not in violation in any material respect of any, law,
ordinance, or governmental or regulatory rule or regulation, whether
Federal, state, local or foreign, to which the business, operations,
assets or properties of the Division is subject ("Regulations").
Seller owns, holds, possesses or lawfully uses in the operation of
the business of the Division, all material franchises, licenses,
permits, easements, rights, applications, filings, registrations and
other authorizations ("Authorizations") which are in any manner
necessary for it to conduct the business of the Division as now or
previously conducted or necessary for the ownership and use of the
assets owned or used by Seller in the conduct of the business of the
Division, free and clear of all liens, charges, restrictions and
encumbrances and in compliance in all material respects with all
Regulations. All such Authorizations are listed and described on
Schedule 3.15. 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.
3.16 Transactions with Certain Related Parties. Except as set
forth on Schedule 3.16, no director or executive officer of Seller,
no employee of Seller with current annual compensation in excess of
$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, understanding, business arrangement or relationship with
Seller with respect to the business of the Division.
3.17 Litigation. Except as set forth on Schedule 3.17, no
litigation, 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 by or against Seller relating to the Purchased Assets or
the business of the Division 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 the
Division 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 the Division, the Purchased
Assets or the transactions contemplated hereby.
3.18 Insurance. Seller carries insurance with respect to the
business of the Division 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 the Division are covered by effective
insurance in amounts at least equal to their replacement cost 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 for
continuance of insurance mandates 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 3.18 contains a complete and correct list of Seller's
insurance policies applicable to the Division and its assets as in
effect on the date of this Agreement, together with its insurance
loss experience with respect to the Division and its assets for the
three (3) year period preceding the date hereof.
3.19 Leases. Schedule 3.19 contains a complete and correct list
of all material leases and other agreements pursuant to which Seller
leases (or has purchased subject to a conditional sales or title
retention agreement) from others any property used or useful in
connection with the business of the Division, and all material leases
and other agreements pursuant to which Seller leases (or has sold
subject to any conditional sales or other title retention agreement)
to others any property used or useful in connection with the business
of the Division, together with a description of the property to which
each such lease, conditional sales or other title retention agreement
relates.
3.20 Contracts. To the best knowledge of Seller, Schedule 3.20,
together with Schedule 3.10, Schedule 3.19 and Schedule 3.22 contains
a complete and correct list of all material agreements, contracts and
commitments (collectively, the "Contracts") of the following types,
whether written or oral, to which any of the Purchased Assets are
subject, or to which Seller is a party or is bound and which relate
to the business of the Division or to the Purchased Assets:
(a) Mortgages, indentures, deeds of trust, security
agreements and other agreements and instruments relating to the
borrowing of money by, or any extension of credit to, Seller;
(b) Sales agency, manufacturer's representative,
distributorship, employment or marketing agreements;
(c) Licenses to or from others of any Intellectual
Property or Licenses;
(d) 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;
(e) Contracts or commitments limiting the freedom of
Seller to compete in any line of business or in any geographic
area or with any person;
(f) Employment, non-disclosure, confidentiality or
intellectual property ownership or transfer agreements with any
employees of the Division; and
(g) Contracts or commitments with Seller's customers or
suppliers.
For purposes of this Agreement, without excluding other agreements,
contracts and commitments which may be material, any contract which
may be not cancelled by Seller without penalty upon the giving of not
more than 30 days notice is deemed to be material. Seller has
delivered to Purchaser complete and correct copies of all material
written Contracts. Schedule 3.20 sets forth an accurate description
of all material oral Contracts. With respect to each Contract and
the Assumed Contracts, (i) each item is in full force and effect,
(ii) to the Best Knowledge of Seller, 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 such contracts, and (iii) Seller has
not received written notice that any party to any of such contracts
intends to cancel or terminate any of such contracts or to exercise,
or not exercise, any options under any of such 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) Schedule 3.22(a) sets forth a true and complete list of the
name, title, current location and base salary or hourly rate of every
employee of Seller engaged in the business of the Division including
employees on personal, military, family, educational or medical
leave, employees receiving sickness disability benefits or
occupational, illness and injury benefits, and employees on long-term
disability ("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 severance benefits to which each such Employee was
entitled as of the Interim Balance Sheet Date. To the Best Knowledge
of Seller, the value of Employee-Related Liabilities in Schedule 3.22
and Exhibit A is not understated.
(b) Except as set forth on Schedule 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 of Seller's
knowledge, threatened any strike, walkout or other work stoppage
or any union organizing effort relating to the Division or the
Employees;
(iii) With respect to the Employees, Seller is in
compliance with all Federal and state laws 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, and there is no unfair labor practice
complaint against Seller with respect to the Division or any
Employees pending before the National Labor Relations Board;
(iv) No organized labor representation question exists
respecting the Employees, and no grievance or any arbitration
proceeding is pending and no claim therefor exists with respect
to the Employees or the Division;
(v) Seller has not experienced any labor stoppage,
concerted labor activity, or other material labor difficulty
with respect to the Division during the last three years;
(vi) No current or former Employee has a formal or informal
claim against Seller, which is currently pending, on account of
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) 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; or
(E) violation of any federal, state or local
anti-discrimination statute, breach of the terms of
employment or wrongful discharge, whether arising
under any contract or statute, or any tort; and
(vii) As of the Closing Date, all of Seller's
obligations under the Collective Bargaining Agreements will be
current.
(c) Schedule 3.10 includes a true and complete list of all
Employees with current annual compensation in excess of $50,000 who
have signed a non-disclosure agreement with Seller, and copies of all
such non-disclosure agreements have been provided to Purchaser.
(d) Except as set forth on Schedule 3.22(d), Seller has no
outstanding commitment or agreement to effect any general wage or
salary increase for any Employees, has not increased the salary or
wages of any Employees since the Interim Balance Sheet Date, and has
no plan or outstanding commitment to implement or amend any Employee
Benefit Plan.
(e) Except for persons hired on a short-term, temporary basis,
none of the persons employed in the business of the Division is
provided to the Seller under contract with a third party (except
workers made available under contracts disclosed on
Schedule 3.22(e)).
(f) With respect to the Division, except as indicated on
Schedule 3.22(f), Seller is not in violation in any material respect
of the Americans with Disabilities Act of 1990 or any law, regulation
or order relating to employment discrimination or occupational
safety, nor has Seller received any unresolved complaint from any
Federal or state 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.
(g) Seller has not entered into any written contract with any
Hired Employees or made any oral or written representation, direct or
implied, which would require Purchaser to provide post-retirement
medical benefits or post-retirement life insurance benefits.
3.23 Employee Benefit Plans and Arrangements.
(a) "Employee Benefit 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 the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") which relates to the Employees or
former employees of the Division, established by Seller or an ERISA
Affiliate or to which Seller or an ERISA Affiliate contributes or has
contributed or has or may have liability and which relates to the
Employees or former employees of the Division (including any such
Employee Benefit Plan not now maintained by Seller or an ERISA
Affiliate or to which Seller or an ERISA Affiliate does not now
contribute, but with respect to which Seller or ERISA Affiliate has
or may have any liability). "ERISA Affiliate" means any corporation,
entity or individual which has ever been: (i) a member of the same
controlled group (within the meaning of Section 414(b) of the Code or
Section 4001 of Title IV of ERISA) as Seller, (ii) under common
control (within the meaning of Section 414(c) of the Code with
Seller, (iii) a member of an affiliated service group (within the
meaning of Section 414(m) of the Code with Seller, or (iv) required
to be aggregated with Seller pursuant to Section 414(o) of the Code
or regulations promulgated thereunder.
(b) Seller and each ERISA Affiliate 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 the Plains Plastics, Inc. 401(k) Profit Sharing Plan (the "Plains
Plastics Savings Plan") and the Preferred Technical Group, Inc.
401(k) Savings Plan (the "PTG Savings Plan," or together with the
Plains Plastics Savings Plan, the "Seller Plans") and the trust under
the Seller Plans. All contributions and other payments required to
be made by Seller and each ERISA Affiliate to the Seller Plans have
been made, all accruals required to be made under the Seller Plans
have been made, and there are no unfunded benefit obligations with
respect to the Seller Plans which have not been accounted for by
reserves or otherwise properly footnoted in accordance with GAAP in
Seller's financial statements at and for the nine months ended on the
Interim Balance Sheet Date. There is no claim, dispute, grievance,
charge, complaint, restraining or injunctive order, litigation or
proceeding pending, or, to the best knowledge of Seller and each
ERISA Affiliate, threatened or anticipated (other than routine claims
for benefits) against or relating to the Seller Plans or against the
assets of the Seller Plans.
(c) 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 Seller Plans.
(d) Each of the Seller Plans complies in all material respects
with the applicable requirements of ERISA, meets the requirements of
a "qualified plan" under Section 401(a) of the Code, and has received
a favorable 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 Section 401(a) of the Code for the
Seller Plans. The Seller 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 Seller Plans. There
have been no prohibited transactions as defined in Section 406 of
Title I of ERISA or Section 4975 of the Code with respect to the
Seller Plans. No litigation concerning the Seller Plans is pending
or, to Seller's knowledge, threatened, nor, to the knowledge of
Seller is there outstanding any complaint to the Department of Labor
concerning the Seller Plans. Neither Seller nor an ERISA Affiliate
nor any of their officers, employees or 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 the Seller Plans.
(e) With respect to the Seller Plans, Seller has furnished to
Purchaser true and complete copies of (i) the plan documents, (ii)
the most recent determination letters received from the Internal
Revenue Service, (iii) Form 5500 Annual Reports (including all
schedules) for the three most recent plan years, (iv) the audited
financial reports for the three most recent plan years, (v) all
related trust agreements, insurance contracts or other funding
agreements and (vi) a copy of each and any general explanation or
communication which was required or otherwise provided to
participants in the Seller Plans which describes all or any relevant
aspect of such plan, including any summary plan description, summary
annual report and/or summary of material modifications, and (vii) a
copy of any and all rulings or notices, other than Internal Revenue
Service determination letters, issued by any government agency with
respect to the Seller Plans.
(f) To Seller's best knowledge and belief after due inquiry of
its medical insurance carrier, except as disclosed on Schedule
3.23(f), no Employee and no known dependent of any Employee has a
medical condition which would be excluded from coverage as a pre-existing
condition under any of Seller's medical plans if such
Employee were a new hire.
(g) 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 IV 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) which covers or has covered former
or current employees engaged in the business of the Division (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.
(h) Purchaser shall not, by reason of adoption of the
Collective Bargaining Agreements pursuant to Section 5.7, assume, be
responsible for, or have any liability to provide post-retirement
medical or life insurance benefits.
3.24 Environmental Matters.
(a) Except as set forth on Schedule 3.24, Seller has obtained
all material permits, licenses and other authorizations which are
required in connection with the conduct of the business of the
Division under Regulations relating to pollution or protection of the
environment, including Regulations relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes
("Hazardous Substances") into the environment (including without
limitation ambient air, surface water, groundwater, or land), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of Hazardous
Substances ("Environmental Regulations").
(b) Except as set forth on Schedule 3.24, Seller maintains and
is in full compliance in the conduct of the business of the Division
with all material terms and conditions of the material required
permits, licenses and Authorizations, and is also in full compliance
in all material respects with all other material limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables, contained in any Environmental
Regulations or contained in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder.
(c) Except as set forth on Schedule 3.24, Seller is not aware
of, nor has Seller received notice of, any past, present or future
events, conditions, circumstances, activities, practices, incidents,
actions or plans which may interfere with or prevent in any material
respect compliance or continued compliance with any Environmental
Regulations or any regulations, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder, or which may give rise to any material common
law or legal liability, or otherwise form the basis of any material
claim, action, demand, suit, proceeding, hearing, study or
investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened release
into the environment, of any Hazardous Substance.
(d) Except as set forth on Schedule 3.24, there is no civil,
criminal or administrative action, suit, demand, claim, hearing,
notice or demand letter, notice of violation or to Seller's knowledge
any investigation, or proceeding pending or threatened against Seller
in connection with the conduct of the business of the Division
relating in any way to the Environmental Regulations or any
regulation, code, plan, order, decree, judgment, injunction, notice
or demand letter issued, entered, promulgated or approved thereunder.
(e) To the extent Seller is reasonably able to do so, Seller
shall cooperate with Purchaser in connection with Purchaser's
application for the transfer, renewal or issuance of any permits,
licenses, approvals or other authorizations or to satisfy any
regulatory requirements involving the business of the Division.
(f) None of the Purchased Assets are being or have been used
for the generation, use, storage, manufacture, transportation,
treatment or disposal of Hazardous Substances, except as permitted
by, and in compliance with, all applicable Environmental Regulations.
There is not and there has not been any underground storage tank
located on the Real Property or used in connection with the business
of the Division.
(g) Seller has delivered to Purchaser true and complete copies
of the most recent environmental reports (Phase I or otherwise)
relating to the Division's real property.
3.25 Business Names and Locations. Schedule 3.25 sets forth a
list of all corporate, business, trade, assumed or other names, and
all street and post office addresses at which Seller has conducted
any business under the name of the Division or at which any Purchased
Assets have been located in the past five years.
3.26 Copies of Documents. Seller has provided to Purchaser
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.
3.27 Completeness of Disclosure. To the Best Knowledge of
Seller, no representation or warranty by Seller 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.
To the Best Knowledge of Seller, there is no fact that materially and
adversely affects the business, prospects, conditions, affairs or
operations of the Division or any of its properties or assets which
has not been fully described in this Agreement or the exhibits or
schedules hereto exclusive of matters relating to the economy or the
industry generally. Notwithstanding anything to the contrary in the
foregoing, Purchaser shall not be entitled to assert any claim based
on projections or other forward-looking information furnished by or
on behalf of Seller.
IV. REPRESENTATIONS AND WARRANTIES BY PURCHASER
Purchaser represents and warrants to Seller 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 to carry out the
transactions contemplated by this Agreement. The execution, delivery
and performance of this Agreement 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 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 bylaws of Purchaser, (ii) any
license, law, rule, regulation, order, judgment or decree applicable
to Purchaser, or (iii) any mortgage, 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. Except for
required filings under the Hart-Scott-Rodino Act, 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 or the consummation of the transactions contemplated
hereby.
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.
4.5 Employee Benefit Plans and Arrangements. The Spartech
Corporation 401(k) Savings and Investment Plan (the "Purchaser Plan")
complies in all material respects with the applicable requirements of
ERISA, meets the requirements of a "qualified plan" under Section
401(a) of the Code, and has received a favorable 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
Section 401(a) of the Code for the Purchaser Plan. The Purchaser
Plan has 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 Purchaser Plan. 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 Purchaser Plan. No
litigation concerning the Purchaser Plan is pending or, to
Purchaser's knowledge, threatened, nor, to the knowledge of Purchaser
is there outstanding any complaint to the Department of Labor
concerning the Purchaser Plan. Neither Purchaser nor its affiliates
nor any of their officers, employees or 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 the Purchaser Plan.
V. 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 the business of the Division, 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 the
business of the Division as Purchaser may reasonably request.
5.2 Interim Operations of the Division. From and after the
date of this Agreement until the Closing, except to the extent
Purchaser may otherwise consent in writing, Seller:
(a) Shall conduct the business of the Division only according
to its usual, regular and ordinary course in substantially the same
manner as heretofore conducted;
(b) Shall maintain, keep and preserve the Property, Plant and
Equipment in normal operating condition and repair, ordinary wear and
tear excepted, and maintain insurance with respect to the assets and
business of the Division as provided in Section 3.17;
(c) Shall use reasonable efforts to preserve for Purchaser the
goodwill of Seller's suppliers, customers, landlords and others
having business relations with the Division.
(d) Shall promptly notify the Purchaser of any breach of any
representation or warranty contained herein;
(e) Shall not alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of the Division;
(f) Shall not revalue any of the Purchased Assets, settle or
compromise any pending or threatened suit, action or claim relating
to the Division or the transactions contemplated hereby, waive or
release any right or claim of Seller with respect to the Division, or
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 May 31, 1997 financial statements of Seller
or incurred in the ordinary course of business consistent with past
practice;
(g) Shall not sell, encumber, assign or transfer any assets or
properties which would have been included in the Purchased Assets if
the Closing had been held on the Interim Balance Sheet Date or on any
date subsequent thereto, except for the sale of inventory in the
ordinary course of business consistent with past practice;
(h) Shall not amend or terminate any material agreement,
contract, commitment, lease or plan to which it is a party or by
which it is bound;
(i) Shall not make any material change in its customary
operating methods (including its purchasing, marketing, selling and
pricing practices and policies);
(j) Shall not make commitments or agreements for capital
expenditures or capital additions or betterments not listed on
Exhibit B except such as may be involved in ordinary repair,
maintenance or replacement of its assets not exceeding $25,000 in the
aggregate;
(k) Except in the ordinary course of business consistent with
past practice, shall not increase the salaries or other compensation
of, or make any advance (excluding advances for ordinary and
necessary business expenses) or loan to, any of its employees or make
any increase in, or any addition to, other benefits to which any of
its employees may be entitled, and any such increase shall be
discussed with Purchaser in advance;
(l) Shall not change any of the accounting principles followed
by it or the methods of applying such principles, or revalue any of
its assets; and
(m) Shall not agree, whether in writing or otherwise, to take
any of the actions set forth in this Section 5.2.
5.3 Schedules; Changes; Corrections. Seller shall provide to
Purchaser no later than August 8, 1997 all Schedules which are not
attached to this Agreement at its execution. Seller shall give
Purchaser prompt written notice of any material change in the
business of the Division or the Purchased Assets which occurs prior
to the Closing. At least 5 days and not more than 10 days before the
Closing, and again at and as of the latest practicable time prior to
the Closing, Seller will supplement or amend the Schedules to this
Agreement in order to disclose any 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.
5.4 Cooperation in Transaction. The parties shall cooperate in
(i) making all filings and submissions required under the Hart-Scott-Rodino Act
as expeditiously as possible, and in any event not later
than July 31, 1997, (ii) making as promptly as possible any other
filings 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, (iii) obtaining all necessary Authorizations
required in order for the parties to consummate such transfer and
transactions, and (iv) causing the transfer, renewal or issuance to
Purchaser of any of Seller's permits, licenses or approvals used in
the operation of the Division. In addition, Seller shall use its
reasonable, good faith efforts to cause such key employees of the
Division as Purchaser shall designate to enter into employment
contracts and/or non-compete agreements in form satisfactory to
Purchaser.
5.5 Exclusive Dealings. So long as this Agreement remains in
full force and effect, Seller 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 Division 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 Division or any part thereof. If during such period Seller
receives any proposal for any such disposition, Seller shall promptly
notify Purchaser of such proposal and the terms thereof.
5.6 Hiring of Employees.
(a) Purchaser shall offer employment to all Employees currently
and actively employed in the business of the Division, effective as
of the day following the Closing Date and to each other Employee who
is not actively employed in the business of the Division on the
Closing Date provided such return to work is within 12 months after
the Closing Date. Seller shall exercise reasonable efforts to assist
Purchaser in its efforts to secure the employment of Employees. Such
employment offers for Non-Bargaining Employees shall provide for
accrued vacation benefits under Seller's vacation plan as of the
Closing Date, but other employment benefits shall be determined by
Purchaser except as provided in paragraphs 5.6(b) and 5.6(c). For
purposes of this Agreement, "Bargaining Employees" means any
Employees covered under any of the Collective Bargaining Agreements;
"Non-Bargaining Employees" means any Employees who are not Bargaining
Employees; "Bargaining Hired Employees" means Bargaining Employees
who accept employment with Purchaser; "Non-Bargaining Hired
Employees," means Non-Bargaining Employees who accept employment with
Purchaser; and "Hired Employees" means Bargaining Hired Employees and
Non-Bargaining Hired Employees. Hired Employees shall be deemed to
have resigned their employment with Seller as of the Closing Date.
Seller will not offer employment to any Hired Employee for one year
after the Closing Date. The terms of Purchaser's employment of
William Augustine are set forth in a written employment contract
entered into prior to or contemporaneously with this Agreement.
(b) Except as otherwise provided in this paragraph 5.6(b),
Seller shall not be responsible for any welfare benefit claims
incurred after the Closing Date for Hired Employees. Purchaser's
medical plan shall provide, for eligibility purposes, that the
employment of the Hired Employees with Seller shall be treated as
employment with Purchaser. A Non-Bargaining Hired Employee who is on
a leave of absence from Seller on the Closing Date shall not be
eligible to participate in Purchaser's medical plan until such Non-Bargaining
Hired Employee's leave of absence terminates and he or she
commences employment duties for Purchaser; a Non-Bargaining Hired
Employee who is hospitalized or otherwise institutionalized for
medical reasons on the Closing Date shall not be eligible to
participate in Purchaser's medical plan until such Non-Bargaining
Hired Employee is discharged from care and he or she commences
employment duties for Purchaser; and a dependent of a Non-Bargaining
Hired Employee who is hospitalized or otherwise institutionalized for
medical reasons on the Closing Date shall not be eligible to
participate in Purchaser's medical plan until such dependent is
discharged from care. Seller shall be responsible for all welfare
benefits for Bargaining Hired Employees that are incurred prior to
the Closing Date. Purchaser shall provide all welfare benefits
incurred after the Closing Date for all Bargaining Hired Employees
according to the Collective Bargaining Agreements.
(c) The Purchaser Plan shall provide, for eligibility and
vesting purposes, that the employment of the Non-Bargaining Hired
Employees with Seller shall be treated as employment with Purchaser.
(d) With respect to the Hired Employees, Purchaser shall assume
and discharge the Employee-Related Liabilities. Notwithstanding the
preceding sentence, however, if Seller pays severance or termination
payments or payments in lieu of accrued vacation to a Hired Employee,
Purchaser shall not be required to carry over the vacation accrual
for such Hired Employee. 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 or is re-employed by Purchaser.
(e) Except as otherwise provided in this Section 5.6, Purchaser
shall have no liability to employees of Seller or Hired Employees for
events or occurrences which take place or arise prior to Closing or
for:
(i) any obligations and claims under the Seller Plans;
(ii) any failure to withhold or remit Taxes;
(iii) any claims for worker's compensation benefits by
employees or former employees;
(iv) any claims against Seller for discriminatory
employment practices; or
(v) except as provided in paragraph 5.6(h), any
obligations Seller has to its employees or their dependents
under sections 601 through 609 of Title I of ERISA, including
such obligations relating to Hired Employees and their
dependents.
(f) Seller shall, on or before the Closing Date, cause the
accounts under the PTG Savings Plan of the Hired Employees to be
fully vested. As soon as administratively possible, but no later
than December 31, 1997, Seller shall instruct the trustee under the
PTG Savings Plan to cause the transfer of cash, in an amount equal to
the value of accounts under the PTG Savings Plan of the Hired
Employees as of a date chosen by Seller but not more than 10 days
prior to the date of such transfer, from the PTG Savings Plan and
related trust to the Purchaser Plan and related trust; provided,
however, that a participant loan credited to a Hired Employee's
account under the PTG Savings Plan, instead of being transferred to
the Purchaser Plan and related trust in cash, shall be assumed by the
Purchaser Plan and related trust. Upon receipt of assets pursuant to
this paragraph 5.6(f), Purchaser shall cause to be established an
account pursuant to the Purchaser Plan for each Hired Employee in an
amount equal to the value of such Hired Employee's account under the
PTG Savings Plan as of a date which is as close to the date of
transfer as practicable. Seller contributions pursuant to the PTG
Savings Plan which have been accrued as of the Closing Date but have
not been paid as of the time of transfer described in this paragraph
5.6(f) shall be paid by Seller to the trust under the Purchaser Plan
and shall be credited to the accounts of the Hired Employees under
the Purchaser Plan. Seller and Purchaser shall cooperate as may be
reasonably required with respect to each of the filings, calculations
and other actions necessary to effect the transactions contemplated
by this paragraph 5.6(f), including the obtaining of any governmental
approvals required to effect such transfer and amendments of the PTG
Savings Plan and Purchaser Plan, if necessary, to effect this
paragraph 5.6(f).
(g) As soon as administratively possible, but in no event later
than December 31, 1997, the Plains Plastic Savings Plan shall be
merged into the Purchaser Plan in accordance with this paragraph
5.6(g). Seller shall instruct the trustee under the Plains Plastic
Savings Plan to cause the transfer of cash, in an amount equal to the
total value of all assets funding the Plains Plastic Savings Plan as
of a date chosen by Seller but not more than 10 days prior to the
date of such transfer, from the Plains Plastic Savings Plan and
related trust to the Purchaser Plan and related trust; provided,
however, that a participant loan credited to a participant's account
under the Plains Plastic Savings Plan, instead of being transferred
to the Purchaser Plan and related trust in cash, shall be assumed by
the Purchaser Plan and related trust. Upon receipt of assets
pursuant to this paragraph 5.6(g), Purchaser shall cause to be
established an account pursuant to the Purchaser Plan for each Plains
Plastic Savings Plan participant and beneficiary in an amount equal
to the value of such account under the Plains Plastic Savings Plan as
of a date which is as close to the date of transfer as practicable.
Seller contributions pursuant to the Plains Plastic Savings Plan
which have been accrued as of the Closing Date but have not been paid
as of the time of transfer described in this paragraph 5.6(g) shall
be paid by Seller to the trust under the Purchaser Plan and shall be
credited to the accounts of Hired Employees under the Purchaser Plan.
Seller and Purchaser shall cooperate as may be reasonably required
with respect to each of the filings, calculations and other actions
necessary to effect the transactions contemplated by this
paragraph 5.6(g), including the obtaining of any governmental
approvals required to effect such transfer and amendments of the
Plains Plastic Savings Plan and Purchaser Plan, if necessary, to
effect this paragraph 5.6(g).
(h) All benefits to which any Employee or his or her qualifying
beneficiaries may be entitled under Sections 601 through 609 of Title
I of ERISA ("COBRA") for qualifying events occurring prior to the
Closing Date shall be provided for Hired Employees and their
qualifying beneficiaries by Purchaser and for all other Employees and
their qualifying beneficiaries by Seller.
(i) Except as otherwise expressly agreed by Purchaser in
paragraph 1.3(a)(iii), this Section 5.6 or Section 5.7, nothing in
this Agreement shall cause Purchaser to have any liability under or
responsibility for or with respect to any Employee Benefit Plan.
5.7 Collective Bargaining Agreements. Purchaser shall assume
as of the Closing Date all collective bargaining agreements listed in
Schedule 3.22(b) (the "Collective Bargaining Agreements"), except
that Purchaser expressly does not assume any obligations under the
Preferred Technical Group, Inc. Hourly Employees Pension Plan (the
"PTG Pension Plan") provided for in the Collective Bargaining
Agreements, and Seller shall have no ongoing obligations under the
Collective Bargaining Agreements for Bargaining Employees after the
Closing Date except for benefits accrued under the PTG Pension Plan
through the Closing Date.
5.8 Audited Financial Statements. Seller shall cooperate with
Purchaser in preparing within 55 days after the Closing Date a
balance sheet of the Division at August 31, 1996 and the related
statements of income, retained earnings and cash flows for the fiscal
year then ended, all of which shall have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved, and Seller shall use its best
efforts to cause Seller's auditors to issue an unqualified opinion
thereon within such period. Such balance sheets, including the
related notes, shall fairly present in all material respects the
financial position of the Division at the date indicated, and such
statements of income, retained earnings and cash flows shall fairly
present in all material respects the results of operations, changes
in retained earnings and cash flows of the Division for the period
indicated, in conformity with generally accepted accounting
principles. The cost of the engagement of the auditors for such
purpose shall be borne equally by both parties.
VI. 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 fulfillment of each of the following conditions at
or prior to the Closing, and Seller shall exert good faith diligent
reasonable commercial efforts to cause each such condition to be so
fulfilled:
(a) All representations and warranties of Seller and
Echlin 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 Seller or Echlin
at or before the Closing shall have been duly and properly
performed in all material respects.
(c) Since the date of this Agreement, there shall not have
occurred any material adverse change in the condition of the
Purchased Assets or the business, financial condition or results
of operations of the Division.
(d) Purchaser shall have received certificates executed by
the President of Seller and an executive officer of Echlin,
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.
(e) Purchaser shall have received an opinion of counsel to
Seller and Echlin, dated the Closing Date, substantially in
accordance with Exhibit C.
(f) Any Schedules which are not attached to this Agreement
at its execution shall be acceptable to Purchaser; provided that
any such Schedule shall be deemed acceptable to Purchaser unless
Purchaser notifies Seller of its objection within 7 days after
its receipt of such Schedule. Purchaser's due diligence
procedures and any Schedule supplements, amendments or
corrections delivered by Seller or Echlin after execution of
this Agreement shall not disclose any facts or conditions that
individually or collectively are materially at variance with any
one or more of the warranties or representations of Seller set
forth in this Agreement or the information in any earlier
version of a supplemented, amended or corrected Schedule;
provided that any supplement, amendment or correction to a
Schedule which is materially at variance with the prior version
of such Schedule shall be deemed acceptable to Purchaser unless
Purchaser notifies Seller of its objection within 7 days after
its receipt of the supplement, amendment or correction.
(g) All Hart-Scott-Rodino Act and any other necessary
governmental approvals and any other required approvals and
consents required of any person other than Purchaser shall have
been duly obtained, and any waiting periods shall have expired
or been terminated.
(h) 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 filed
or delivered to Purchaser for filing.
(i) No action or proceeding at law or in equity (other
than by Purchaser) shall be pending which (i) seeks to enjoin
the transactions herein contemplated, or (ii) materially
interferes with the right of Purchaser to conduct its operations
and operate the business of the Division 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 to transfer to Purchaser good title to the
Purchased Assets, free and clear of any and all liens thereon
(other than the Assumed Liabilities and the Permitted
Encumbrances), and to assign to Purchaser the Assumed Contracts,
and Seller shall have taken such other steps as may be required
to put Purchaser in actual possession and operating control of
the Purchased Assets.
(k) The Real Property shall, prior to Closing, have passed
environmental inspections which do not disclose facts or
conditions materially at variance with any of the warranties or
representations set forth in Section 3.24 or in the
environmental reports provided to Purchaser pursuant to
paragraph 3.24(g).
(l) The Real Property shall, prior to Closing, have passed
structural inspections which do not disclose facts or conditions
materially at variance with any of the warranties or
representations set forth in paragraph 3.9(c) or any structural
defects or flaws which, if not remedied, are reasonably likely
to result in bodily injury or a material interruption in the
business carried on at such location.
(m) Purchaser shall have received at its own cost at least
10 days prior to Closing, commitments from a title insurance
company acceptable to Purchaser, to insure title to each parcel
of Real Property, such commitments to be for an ALTA Owner's
Policy of Title Insurance in such amount as Purchaser reasonably
determines, insuring fee simple title to such Real Property and
the improvements thereon subject only to the Permitted
Encumbrances and such other exceptions as are acceptable to
Purchaser (the "Title Commitments").
6.2 Conditions to Seller's Obligations. The obligations of
Seller to complete the Closing are subject, at the option of Seller,
to the fulfillment of each of the following conditions at or prior to
the Closing, and Purchaser shall exert good faith diligent 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) Seller shall have received 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) Seller shall have received an opinion of Armstrong,
Teasdale, Schlafly & Davis, counsel to Purchaser, dated as of
the Closing date, substantially in accordance with Exhibit D.
(e) All Hart-Scott-Rodino Act and any other necessary
governmental approvals and any other required approvals and
consents required of any person other than Seller shall have
been duly obtained, and any waiting periods shall have expired
or been terminated.
(f) No action or proceeding at law or in equity (other
than by Seller) shall be pending which seeks to enjoin the
transactions herein contemplated.
(g) Purchaser shall have delivered to Seller at the
Closing all agreements of assumption and other agreements
necessary for Purchaser to assume the Assumed Liabilities.
VII. INDEMNIFICATION
7.1 Indemnification by Seller and Echlin. Except as otherwise
limited by this Article VII, Purchaser and its officers, directors,
employees, agents, successors and assigns shall be indemnified and
held harmless by Seller and Echlin, jointly and severally, 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 of any representation or warranty of Seller
or Echlin contained herein 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 other document delivered at the
Closing; or
(c) Any other liabilities of Seller, or any entity
controlling, controlled by or under common control with Seller,
not expressly assumed by Purchaser herein.
7.2 Indemnification by Purchaser. Except as otherwise limited
by this Article VII, 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 of any representation or warranty of
Purchaser contained herein 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 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" means
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" means the person having the obligation
to indemnify pursuant to such provisions; and "Loss" means 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 30 days after the Indemnitee has
knowledge of any claim (including a Third Party Claim, as hereafter
defined) 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 that 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
Article VII 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 VII (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 only 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; provided however, the Indemnitee shall
thereafter consult with the Indemnitor upon the Indemnitor's
reasonable request for such consultation from time to time with
respect to such Third Party Claim. 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) An Indemnitee shall be entitled to reimbursement for
reasonable expenses, including legal fees and expenses, incurred in
defending against any Third Party Claim, in advance of the final
disposition of the Third Party Claim, upon receipt by the Indemnitor
of a written undertaking to repay such amount if it shall ultimately
be determined that the Indemnitee was not entitled to indemnification
under this Article VII.
(e) 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.
7.4 Limits on Indemnification. No claim may be made against an
Indemnitor under this Article VII for breach of a representation or
warranty contained in this Agreement or in any Exhibit, Schedule or
certificate delivered under this Agreement unless and only to the
extent the aggregate of all the Indemnitee's Losses exceeds $250,000
(the "Threshold"); provided that once the aggregate of all the
Indemnitee's Losses exceeds the Threshold, the Indemnitee may claim,
and the Indemnitor shall be liable for, all of the Indemnitee's
Losses without regard to the Threshold; and provided further that the
Threshold shall not apply to any Loss arising under clauses 7.1(b),
7.1(c), 7.2(b) or 7.2(c).
7.5 Exclusive Remedy. The indemnification provided for in this
Article VII shall be the exclusive right and remedy available to one
party against the other for a Loss, and no claim or cause of action
with respect thereto shall be enforceable unless made in accordance
with the procedures and within the time periods set forth in this
Article VII.
VIII. OTHER MATTERS
8.1 Transfer 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 state, 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.
8.2 Survival of Representations and Warranties. All
representations and warranties made by the parties in this Agreement
or in any certificate, Schedule, statement, document or instrument
furnished hereunder or in connection with negotiation, execution and
performance of this Agreement shall survive the Closing for a period
of two years after the Closing Date, except that Seller's and
Echlin's representations regarding Taxes, Employee Benefit Plans and
environmental matters shall survive for so long as permitted under
applicable statutes of limitations. 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; provided, however, that if at the Closing any
party hereto or its representatives shall have knowledge of the
inaccuracy in a material respect of any representation or warranty by
another party and shall nevertheless proceed to complete the Closing,
the party making such representation or warranty shall have no
liability after the Closing by reason of such inaccuracy to the party
who has, or whose representative has, such knowledge.
8.3 Maintenance of Books and Records.
(a) Following the Closing, Purchaser shall give Seller the
opportunity to remove from the Division all records pertaining solely
to Excluded Assets.
(b) Each of Seller and Purchaser shall preserve until the
seventh anniversary of the Closing Date all records possessed by such
party after the Closing relating to any of the Purchased Assets, or
Assumed Liabilities or business of the Division prior to the Closing.
After the Closing, where there is a legitimate purpose, such party
shall provide the other party with access, upon prior reasonable
written request specifying the need therefor, during regular business
hours, to the officers, employees, books of account and records of
such party, but, in each case, only to the extent relating to the
assets, liabilities or business of the Division prior to the Closing,
and the other party and its representatives shall have the right to
make copies of such books and records; provided, however, that the
foregoing right of access shall not be exercisable in such a manner
as to interfere unreasonably with the normal operations and business
of such party. Such records may nevertheless be destroyed by a party
if such party sends to the other parties written notice of its intent
to destroy records, specifying with particularity the contents of the
records to be destroyed. Such records may then be destroyed after
the 60th day after such notice is given unless the other party
objects to the destruction, in which case the party seeking to
destroy the records shall deliver such records to the objecting
party.
(c) Seller shall provide to Purchaser, without charge, for a
reasonable period of time not to exceed 12 months after the Closing
Date, access to all computer equipment and software used by the
Division which is not included in the Purchased Assets (including the
AS400 system containing Seller's general ledger, accounts payable,
accounts receivable and financial reporting information), to the
extent related to Division accounting and to the extent necessary to
maintain continuity in the collection or reporting of Division
business transaction and financial information during the transition
of the business of the Division to Purchaser's computer systems;
however, Purchaser shall pay or reimburse Seller for the costs of the
telephone line connections between the Division's plants and Seller's
AS400 system. Seller shall provide Purchaser, without charge, copies
of transaction records, vouchers and other data with respect to the
Division not otherwise available to Purchaser (including without
limitation accounts payable information for periods before September,
1996), as reasonably required by Purchaser to resolve customer and
supplier disputes, audits and claims relating to Taxes, and other
similar matters.
8.4 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 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.
8.5 Covenant Not to Compete.
(a) Each of Seller and Echlin hereby agrees that for a period
of five (5) years after the Closing Date, it 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, limited
liability company or partnership form or otherwise, which in any way
competes with the business of the Division as carried on at the time
of this Agreement or at Closing in any geographic area in which the
Division has sold its products within the two years prior to the
Closing Date. The parties hereto specifically acknowledge and agree
that a 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,
provided, however, that nothing herein shall be construed to prevent
Seller from:
(i) the acquisition of any company or business not more
than 10% of whose business consists of activities carried on by
the Division;
(ii) the holding of not more than 5% of the shares in any
company whose shares are quoted on any stock exchange, even
though that company carries on activities carried on by the
Division;
(iii) the continued conduct of any business or holding
of any interest in any business conducted or held by Seller at
the Closing Date (other than the Division); or
(iv) the developing, manufacturing, marketing, selling or
distributing of any other products or services or the carrying
on of any other activities, not carried on by the Division at
the Closing Date.
(b) From and after the Closing Date, Seller 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 the Division or the Purchased Assets, except to the extent such
disclosure may be required by law.
(c) Seller acknowledges and agrees that in view of the nature
of the business of the Division 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 8.5(a) are reasonable and properly
required for the adequate protection of Purchaser. The parties
intend for the covenants of paragraphs 8.5(a) and 8.5(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 and Seller 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.
8.6 Confidentiality; Public Announcements. Purchaser, Seller
and Echlin shall hold in confidence the terms and conditions of this
Agreement and 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. It is agreed, however, that
Purchaser will publicly announce the execution of this Agreement.
This paragraph shall survive any termination of this Agreement
pursuant to Section 9.1, but shall cease to apply to information
which hereafter is publicly disclosed or otherwise becomes publicly
available.
8.7 Product Liability Insurance. Seller will maintain its
product liability insurance in at least the current coverage limits
for at least five years after the Closing Date.
8.8 Notice to Creditors and Customers. Purchaser and Seller
each hereby waive compliance by the other with the provisions of laws
commonly referred to as "bulk sales laws" requiring the furnishing of
notice to creditors of Seller. Seller shall indemnify Purchaser
against, and hold Purchaser harmless from, any and all loss, cost,
damage and expense (including but not limited to reasonable
attorney's fees) which Purchaser may sustain by reason of the failure
by Seller and Purchaser to comply, in connection with the transaction
contemplated by this Agreement, with any applicable bulk sales or
bulk transfer act. Such indemnification shall be without regard to
the Basket but shall otherwise be subject to the procedures set forth
in Article VII.
8.9 Covenant of Performance. Echlin shall cause Seller to
comply with Seller's covenants made in this Agreement.
IX. MISCELLANEOUS
9.1 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, 1997 (or such other date as may
hereafter be agreed upon by the parties). If the Agreement is
terminated under this Section 9.1, the parties shall have no further
liability to each other by reason of such termination, except that if
any party hereto knowingly or wilfully breaches or defaults in any of
its representations, warranties or covenants, the other party
adversely affected may at its option seek and exercise all remedies
permitted by law and seek to recover attorneys' fees and other
expenses related to the exercise of the foregoing remedies.
9.2 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.
9.3 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, including but not limited to
the letter of intent between Purchaser and Seller dated June 27, 1997
are superseded by this Agreement, except that the confidentiality
provisions of the agreements in said letter of intent and in the
letter agreement between the parties dated July 2, 1997 shall remain
in effect according to their terms.
9.4 Assignment and Binding Effect. This Agreement may not be
assigned prior to the Closing by either party without the prior
written consent of the other parties, provided that Purchaser may
assign this Agreement in whole or in part 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 and Purchaser.
9.5 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.
9.6 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, return receipt requested, by overnight
mail or courier service, or by facsimile (and confirmed by registered
or certified mail or overnight mail or courier as aforesaid),
addressed as follows:
If to Seller: Preferred Technical Group, Inc.
2044 Austin Drive
Rochester Hills, Michigan 48309
Attention: President
Facsimile: (810) 853-8232
Telephone: (810) 299-1500
with a copy to: Echlin Inc.
100 Double Beach Road
Branford, Connecticut 06405
Attention: Secretary
Facsimile: (203) 481-6485
Telephone: (203) 481-5751
If to Echlin: Echlin Inc.
[Same address as above]
If to Purchaser: Spartech Corporation
7733 Forsyth, Suite 1450
Clayton, Missouri 63105
Attention: Chief Financial Officer
Facsimile: (314) 721-1447
Telephone: (314) 721-4242
with a copy to: Jeffrey D. Fisher, Esq.
Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square, Suite 2600
St. Louis, Missouri 63102
Facsimile: (314) 621-5065
Telephone: (314) 621-5070
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 to the office of the recipient as aforesaid,
regardless of actual receipt by the individual named.
9.7 Governing Law. This Agreement shall be governed by and
interpreted and enforced in accordance with the internal laws of the
State of Missouri without regard to principles of conflicts of laws.
9.8 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 VII, any 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.
9.9 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 others entity. The
term "affiliate" when used with respect to a person shall mean any
other person directly or indirectly controlled by, under common
control with or in control of such person.
9.10 Schedules and Exhibits. All Schedules and Exhibits
referred to herein are intended to be and hereby are specifically
made a part of this Agreement.
9.11 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.
9.12 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. It shall not
be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
[Signature page follows]
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
Purchaser: SPARTECH CORPORATION
By
Title
Seller: PREFERRED TECHNICAL GROUP, INC.
By
Title
Echlin: ECHLIN INC.
By
Title
List of Exhibits and Schedules
Exhibit A - May 31, 1997 Net Assets
Exhibit B - Allowable Capital Expenditures
Exhibit C - Opinion of Counsel for Seller and Echlin
Exhibit D - Opinion of Armstrong, Teasdale, Schlafly & Davis
Schedule 1.1(e)(i) - Real Property
Schedule 1.1(e)(ii) - Equipment
Schedule 1.1(f)(i) - Intellectual Property
Schedule 1.1(f)(ii) - Permits
Schedule 3.4 - Encumbrances; leased items used by the Division
Schedule 3.7 - Receivables
Schedule 3.8 - Customer-Owned Inventory
Schedule 3.10 - Confidentiality or non-disclosure agreements;
intellectual property claims
Schedule 3.14 - Events since the Interim Balance Sheet Date
Schedule 3.15 - Violations of Regulations; Authorizations
Schedule 3.16 - Related Party Transactions
Schedule 3.17 - Pending or threatened litigation or other
proceedings
Schedule 3.18 - Insurance policies
Schedule 3.19 - Leases
Schedule 3.20 - Contracts not to be assumed; description of oral
Contracts
Schedule 3.22(a) - List and compensation of Employees
Schedule 3.22(b) - Labor matters; non-compliance with labor laws
Schedule 3.22(d) - Compensation increases and commitments
Schedule 3.22(e) - Agreements regarding work by non-employees
Schedule 3.22(f) - Violations of certain employment laws
Schedule 3.23(f) - Certain medical conditions
Schedule 3.24 - Environmental non-compliance
Schedule 3.25 - Business names and locations
EXHIBIT A
Certain Division Assets and Liabilities as of May 31, 1997
Current Assets
Accounts Receivable $ 11,700,931
Less: Allowance for Bad Debts ( 462,006)
Notes Receivable 0
Employee Receivables 0
Inventory:
Raw Materials 3,800,084
Work in Process 0
Finished Goods 660,392
Less: Obsolescence Reserve ( 0)
Less: Reserve for Warranties and Returns ( 0)
Total Inventory 4,460,476
Prepaid Expenses 47,799
Other Current Assets 617,776
Total Current Assets $ 16,364,976
Property, Plant & Equipment
Land & Improvements $ 196,780
Buildings & Improvements 3,478,324
Vehicles, Machinery & Eqipment 13,267,588
Total Property, Plant & Equipment $ 16,942,692
Other Assets
Deferred Charges $ 13,940
Intangibles 20,031,293
Total $ 53,352,901
Current Liabilities
Trade Accounts Payable $ 4,910,011
Accrued Income Taxes 224,282
Employee-Related Liabilities:
Accrued Salaries and Wages 78,075
Accrued Payroll and Other Taxes 212,367
Other Current & Accrued Liabilities (accrued vacation) 539,025
Total $ 5,963,760
Net as of May 31, 1997 $ 47,389,141
EXHIBIT B
List of Permitted Capital Expenditures
[SEE ATTACHED SHEET]
EXHIBIT C
Form of Opinion of Seller's Counsel
______________, 1997
[Spartech Corporation]
7733 Forsyth, Suite 1450
St. Louis, Missouri 63105
Gentlemen:
I have acted as counsel to Preferred Technical Group, Inc., a
Delaware corporation ("Seller"), and Echlin Inc., a Connecticut
corporation ("Echlin") in connection with the Asset Purchase and Sale
Agreement dated as of July __, 1997, between [Spartech Corporation]
("Purchaser"), Seller and Echlin (the "Agreement"), and the
transactions contemplated thereby. This opinion is being delivered
to you pursuant to paragraph 6.1(e) of the Agreement. Capitalized
terms used but not defined herein shall have the meanings ascribed to
them in the Agreement.
In connection with rendering the opinions hereinafter expressed,
I have examined and relied upon such records, documents, instruments,
certificates of public officials and certificates of officers and
employees of Seller and Echlin and their affiliated companies as I
have deemed appropriate. In conducting my examination, I have
assumed the legal capacity of all natural persons, the genuineness of
all signatures, the authenticity of all documents submitted to me as
originals, the conformity to original documents of all documents
submitted to me as certified, photostatic or facsimile copies and the
authenticity of the originals of such copies, the accuracy and
completeness of all records made available to me by Seller and
Echlin, and the accuracy of all statements as to factual matters made
by officers and employees of, and accountants for, Seller and Echlin
and by public officials. In conducting my examination of documents
executed by parties other than Seller and Echlin and their
affiliates, I have assumed, without investigation, that each such
other party had the power and capacity to enter into and perform all
of its obligations under such documents and have also assumed the due
authorization by all requisite action, execution and delivery by such
parties of such documents and the validity and binding effect
thereof.
No opinion is expressed as to any laws other than the laws of
the State of Connecticut, the General Corporation Law of the State of
Delaware, and the Federal laws of the United States.
Based upon the foregoing, and with due regard to such legal
considerations as we deem relevant, I am of the opinion that:
1. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Delaware. Echlin is a corporation duly organized, validly
existing and in good standing under the laws of
Connecticut.
2. Seller has full corporate power and authority to enter into
the Agreement and perform the covenants contemplated
thereby to be performed by it. The execution, delivery and
performance of the Agreement by Seller has been duly
authorized by all necessary corporate action on the part of
Seller, including the consent or approval by Seller's
shareholder to the Agreement and the transactions
contemplated thereby. Echlin has full corporate power and
authority to enter into the Agreement and perform the
covenants contemplated thereby to be performed by it. The
execution, delivery and performance of the Agreement by
Echlin has been authorized by all necessary corporate
action on the part of Echlin, and no consent or approval by
Echlin's shareholders is required for the Agreement or the
transactions contemplated hereby.
3. The Agreement has been duly executed and delivered by
Seller and Echlin and constitutes the legal, valid and
binding obligation of each of them, enforceable against
each of them in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws
limiting the enforcement of creditors' rights generally,
and by general principles of equity and the general
equitable discretion of the court before which any
proceeding in equity may be brought.
4. Except for required filings under the Hart-Scott-Rodino Act
(the filing having been made and the waiting period having
expired or been terminated), to the best of my knowledge,
after reasonable investigation, no consent, approval, order
or authorization of, notice to, or registration,
declaration or filing with, any governmental authority or
entity, which if not made or obtained would have a material
adverse effect on the business, assets or financial
condition of the Division, is or has been or will be
required on the part of Seller in connection with the
execution and delivery of the Agreement or the consummation
of the transactions contemplated thereby.
5. The execution, delivery, and performance of the Agreement
and the transactions contemplated thereby do not and will
not violate the Certificate of Incorporation or Bylaws of
Seller or the Certificate of Incorporation or Bylaws of
Echlin.
Except as set forth below, this opinion is rendered only to you
and is solely for your benefit in connection with the transactions
covered hereby, and may not be relied upon by you for any other
purpose, or furnished to, quoted or relied upon by any other person,
firm or corporation for any purpose, without my prior written
consent.
Very truly yours,
________________________________
EXHIBIT D
Form of Opinion of Purchaser's Counsel
______________, 1997
Echlin Inc.
100 Double Beach Road
Branford, Connecticut 06405
Gentlemen:
We have acted as counsel to [Spartech Corporation], a Delaware
corporation ("Purchaser") in connection with the Asset Purchase and
Sale Agreement dated as of July __, 1997, between Echlin Inc.
("Seller") and Purchaser (the "Agreement"), and the transactions
contemplated thereby. This opinion is being delivered to you
pursuant to paragraph 6.2(d) of the Agreement. Capitalized terms
used but not defined herein shall have the meanings ascribed to them
in the Agreement.
In connection with rendering the opinions hereinafter expressed,
we have examined and relied upon such records, documents,
instruments, certificates of public officials and certificates of
officers and employees of Purchaser and its affiliated companies as
we have deemed appropriate. In conducting our examination, we have
assumed the legal capacity of all natural persons, the genuineness of
all signatures, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents
submitted to us as certified, photostatic or facsimile copies and the
authenticity of the originals of such copies, the accuracy and
completeness of all records made available to us by Purchaser, and
the accuracy of all statements as to factual matters made by officers
and employees of, and accountants for, Purchaser and by public
officials. In conducting our examination of documents executed by
parties other than Purchaser, we have assumed, without investigation,
that each such other party had the power and capacity to enter into
and perform all of its obligations under such documents and have also
assumed the due authorization by all requisite action, execution and
delivery by such parties of such documents and the validity and
binding effect thereof.
We express no opinion as to any matters governed by any laws
other than the laws of the State of Missouri, the General Corporation
Law of the State of Delaware, and the Federal laws of the United
States.
Based upon the foregoing, and with due regard to such legal
considerations as we deem relevant, we are of the opinion that:
1. Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Delaware.
2. Purchaser has full corporate power and authority to enter
into the Agreement and carry out the transactions
contemplated thereby. The execution, delivery and
performance by Purchaser of the Agreement have been duly
authorized and approved by all required corporate actions
on the part of Purchaser.
3. The 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, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer
or other similar laws limiting the enforcement of
creditors' rights generally, and by general principles of
equity and the general equitable discretion of the court
before which any proceeding in equity may be brought.
4. Except for required filings under the Hart-Scott-Rodino Act
(the filing having been made, and the waiting period having
expired or been terminated) to the best of our knowledge,
after reasonable investigation, no consent, approval, order
or authorization of, notice to, or registration,
declaration or filing with, any governmental authority or
entity, which if not made or obtained would have a material
adverse effect on the business, assets or financial
condition of Purchaser, is or has been or will be required
on the part of Purchaser in connection with the execution
and delivery of the Agreement or the consummation of the
transactions contemplated thereby.
5. The execution, delivery, and performance of the Agreement
and the transactions contemplated thereby do not and will
not violate the Certificate of Incorporation or Bylaws of
Purchaser.
Except as set forth below, this opinion is rendered only to you
and is solely for your benefit in connection with the transactions
covered hereby, and may not be relied upon by you for any other
purpose, or furnished to, quoted or relied upon by any other person,
firm or corporation for any purpose, without our prior written
consent.
Very truly yours,
ARMSTRONG, TEASDALE,
SCHLAFLY & DAVIS
