<PAGE>
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-9753
------------------------
GEORGIA GULF CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 58-1563799
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
400 PERIMETER CENTER TERRACE, SUITE 595, ATLANTA, GEORGIA 30346
Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (770) 395-4500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
OUTSTANDING AS OF
CLASS OCTOBER 18, 1999
----- -----------------
<S> <C>
Common Stock, $0.01 par value 30,966,774 shares
</TABLE>
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- --------------------------------------------------------------------------------
<PAGE>
GEORGIA GULF CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBERS
PART I. FINANCIAL INFORMATION --------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998........ 1
Condensed Consolidated Statements of Income for
the Three and Nine Months Ended September 30,
1999 and 1998................................... 2
Condensed Consolidated Statements of Cash Flows
for the Nine Months
Ended September 30, 1999 and 1998............... 3
Notes to Condensed Consolidated Financial
Statements as of
September 30, 1999.............................. 4-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 8-12
Item 3. Quantitative and Qualitative Disclosure About
Market Risk............................................. 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................ 13
Item 6. Exhibits and Reports on Form 8-K................. 13
SIGNATURES.................................................. 14
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 3,213 $ 1,244
Receivables................................................. 63,657 60,964
Insurance receivable........................................ 419 9,030
Inventories................................................. 67,755 69,339
Prepaid expenses............................................ 2,785 2,227
Deferred income taxes....................................... 6,492 6,492
----------- -----------
Total current assets...................................... 144,321 149,296
----------- -----------
Property, plant and equipment, at cost...................... 666,261 656,527
Less accumulated depreciation............................. (300,337) (268,334)
----------- -----------
Property, plant and equipment, net...................... 365,924 388,193
----------- -----------
Goodwill.................................................... 83,295 85,154
----------- -----------
Other assets................................................ 33,133 29,626
----------- -----------
Net assets of discontinued operations....................... 3,532 13,319
----------- -----------
Total assets................................................ $ 630,205 $ 665,588
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 78,963 $ 65,270
Interest payable............................................ 4,316 2,272
Accrued taxes, other than income............................ 8,896 2,355
Accrued compensation........................................ 4,962 6,814
Other accrued liabilities................................... 11,421 10,856
----------- -----------
Total current liabilities................................. 108,558 87,567
----------- -----------
Long-term debt.............................................. 396,525 459,475
----------- -----------
Deferred income taxes....................................... 90,861 89,665
----------- -----------
Stockholders' equity
Common stock--$0.01 par value............................. 309 309
Additional paid-in capital................................ 602 --
Retained earnings......................................... 33,350 28,572
----------- -----------
Total stockholders' equity.............................. 34,261 28,881
----------- -----------
Total liabilities and stockholders' equity.................. $ 630,205 $ 665,588
=========== ===========
Common shares outstanding................................... 30,944,574 30,883,754
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................. $ 213,277 $ 208,517 $ 573,253 $ 638,713
----------- ----------- ----------- -----------
Operating costs and expenses
Cost of sales........................... 175,302 161,883 487,122 503,698
Selling and administrative.............. 9,288 11,964 29,206 33,059
----------- ----------- ----------- -----------
Total operating costs and expenses.... 184,590 173,847 516,328 536,757
----------- ----------- ----------- -----------
Operating income.......................... 28,687 34,670 56,925 101,956
Other expense
Loss on interest rate hedge agreement... -- 9,500 -- 9,500
Interest, net........................... 7,037 8,053 21,719 22,882
----------- ----------- ----------- -----------
Income from continuing operations before
income taxes............................ 21,650 17,117 35,206 69,574
Provision for income taxes................ 7,903 6,278 12,850 25,965
----------- ----------- ----------- -----------
Income from continuing operations......... $ 13,747 $ 10,839 $ 22,356 $ 43,609
----------- ----------- ----------- -----------
Discontinued Operations
(Loss) earnings from discontinued
operations, net of tax................ $ (520) $ (664) $ (2,525) $ 28
Loss on disposal of discontinued
operations, net of tax................ (7,631) -- (7,631) --
----------- ----------- ----------- -----------
Net income................................ $ 5,596 $ 10,175 $ 12,200 $ 43,637
=========== =========== =========== ===========
Earnings (loss) per share:
Basic
Continuing operations................. $ 0.44 $ 0.35 $ 0.72 $ 1.38
Discontinued operations............... (0.26) (0.02) (0.33) --
----------- ----------- ----------- -----------
$ 0.18 $ 0.33 $ 0.39 $ 1.38
=========== =========== =========== ===========
Diluted
Continuing operations................. $ 0.44 $ 0.35 $ 0.72 $ 1.36
Discontinued operations............... (0.26) (0.02) (0.33) --
----------- ----------- ----------- -----------
$ 0.18 $ 0.33 0.39 $ 1.36
=========== =========== =========== ===========
Weighted average common shares
Basic................................... 30,936,764 31,047,468 30,919,368 31,691,501
Diluted................................. 31,068,452 31,287,379 31,004,457 32,044,014
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 12,200 $ 43,637
Adjustments to reconcile net income to net cash provided
by operating activities, net of acquired amounts:
Depreciation and amortization......................... 34,392 32,594
Provision for deferred income taxes................... 1,196 10,916
Loss on disposal of discontinued operations, net...... 7,631 --
Loss (earnings) on discontinued operations, net....... 2,525 (28)
Change in operating assets, liabilities and other..... 24,053 22,756
--------- ---------
Net cash provided by continuing operations.................. 81,997 109,875
Net cash (used in) provided by discontinued operations...... (369) 2,934
--------- ---------
Net cash provided by operating activities................... 81,628 112,809
--------- ---------
Cash flows from financing activities:
Long-term debt proceeds................................... 115,000 180,300
Long-term debt payments................................... (177,950) (110,000)
Proceeds from issuance of common stock.................... 471 1,377
Purchase and retirement of common stock................... -- (55,002)
Dividends paid............................................ (7,422) (7,561)
--------- ---------
Net cash (used in) provided by financing activities......... (69,901) 9,114
--------- ---------
Cash flows from investing activities:
Capital expenditures...................................... (9,758) (20,148)
Acquisition, net of cash acquired......................... -- (99,902)
--------- ---------
Net cash used in investing activities....................... (9,758) (120,050)
--------- ---------
Net change in cash and cash equivalents..................... 1,969 1,873
Cash and cash equivalents at beginning of period............ 1,244 1,621
--------- ---------
Cash and cash equivalents at end of period.................. $ 3,213 $ 3,494
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included in the annual
report for the year ended December 31, 1998 for Georgia Gulf Corporation and its
subsidiaries (the "Company" or "Georgia Gulf").
Operating results for Georgia Gulf for the three- and nine-month periods
ended September 30, 1999, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999.
NOTE 2: NEW ACCOUNTING PRONOUNCEMENT
During June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value and
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows derivative gains and losses to offset related results
on the hedged item in the income statement, and requires that a company must
formally document, designate and assess the effectiveness of transactions that
receive hedge accounting. In June 1999, the FASB issued SFAS No. 137 which
deferred the effective date of SFAS No. 133 for fiscal quarters of all fiscal
years beginning after June 15, 2000, although earlier adoption is permitted.
SFAS No. 133 cannot be applied retroactively. Management has not yet quantified
the impacts of adopting SFAS No. 133 on the Company's financial statements.
NOTE 3: DISCONTINUED OPERATIONS
On September 2, 1999, the Company announced its decision to exit the
methanol business at the end of 1999. In connection with the discontinuance of
the methanol business, Georgia Gulf incurred a one-time charge of $7.6 million
(net of taxes) related to the write-off of the methanol plant assets, net of
expected proceeds, and an accrual for estimated losses during the phase-out
period. Georgia Gulf will fulfill customer contracts with purchased methanol
until December 31, 1999. The methanol plant remains idle and management intends
to dismantle the facility at some time in the future. A number of methanol sales
contracts have been assigned and Georgia Gulf's customer list has been sold. Net
proceeds from the sale of the methanol railcars, customer list and other
discontinued plant assets are estimated at $2.9 million. The disposition of the
methanol operations represents the disposal of a business segment under APB
Opinion No. 30. Accordingly, results of these operations have been classified as
discontinued and prior periods have been restated, including the reallocation of
fixed overhead charges to other business segments. For business segment
reporting purposes, the methanol business results were previously classified as
the segment "Gas Chemicals".
4
<PAGE>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3: DISCONTINUED OPERATIONS (CONTINUED)
Net sales and income from discontinued operations are as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales.............................. $ 9,710 $11,948 $ 26,181 $40,012
======== ======= ======== =======
Pretax (loss) income from discontinued
operations........................... $ (819) $(1,048) $ (3,976) $ 45
Loss on disposal of business segment... (12,017) -- (12,017) --
Income tax benefit (expense)........... 4,685 384 5,837 (17)
-------- ------- -------- -------
Net (loss) income from discontinued
operations........................... $ (8,151) $ (664) $(10,156) $ 28
======== ======= ======== =======
</TABLE>
Net assets of discontinued operations were as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Current assets...................................... $ 9,023 $ 4,536
Property, plant, and equipment, net................. -- 12,956
Current liabilities................................. (2,576) (1,189)
Long term liabilities............................... (2,915) (2,984)
------- -------
Net assets of discontinued operations............... $ 3,532 $13,319
======= =======
</TABLE>
NOTE 4: INVENTORIES
The major classes of inventories were as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Raw materials and supplies.......................... $37,074 $26,462
Finished goods...................................... 30,681 42,877
------- -------
$67,755 $69,339
======= =======
</TABLE>
NOTE 5: DERIVATIVE FINANCIAL INSTRUMENTS
Georgia Gulf has two interest rate swap agreements for a total notional
amount of $100,000,000 maturing in June 2002 to fix the interest rate on a term
loan. Also, the Company has an interest rate swap agreement for a notional
amount of $100,000,000 as a cash flow hedge for a cogeneration facility
operating lease agreement. This interest rate swap agreement will mature
August 2002.
In June 1998, the Company filed a shelf registration with the Securities and
Exchange Commission for the issuance of $200,000,000 of long-term bonds. Shortly
after the filing, the Company entered into an agreement to lock-in interest
rates on a portion of the long-term bonds. During the third quarter, treasury
yields plunged to their lowest levels in thirty years, while at the same time,
investors' preference for treasury bonds and reluctance to buy corporate bonds
limited the Company's ability to
5
<PAGE>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5: DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
issue longer-term bonds. As a result, the Company's plans to issue long-term
bonds were postponed indefinitely and the interest rate lock agreements were
terminated, resulting in a pre-tax loss of $9,500,000 in the third quarter of
1998.
Georgia Gulf does not use derivatives for trading purposes. Interest rate
swap agreements, a form of derivative, are used by the Company to manage
interest costs on certain portions of the Company's long-term debt. These
financial statements do not reflect temporary market gains and losses on
derivative financial instruments. Amounts paid or received on the interest rate
swap agreements are recorded to interest expense as incurred. As of
September 30, 1999, and December 31, 1998, interest rate swap agreements were
the only form of derivative financial instruments outstanding. The fair value
position of these swap agreements as of September 30, 1999 and December 31, 1998
was a receivable of $410,000 and a payable of $6,412,000, respectively.
NOTE 6: EARNINGS PER SHARE
The numerator in basic and diluted earnings per share computations is
reported net income and income from continuing and discontinued operations.
The following table reconciles the denominator for the basic and diluted
earnings per share computations shown on the condensed consolidated statements
of income (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average common shares--basic....... 30,936 31,047 30,919 31,692
Plus incremental shares from assumed
conversions:
Options................................... 99 165 61 242
Employee stock purchase plan rights....... 33 75 24 110
------ ------ ------ ------
Weighted average common shares--diluted..... 31,068 31,287 31,004 32,044
====== ====== ====== ======
</TABLE>
NOTE 7: SEGMENT INFORMATION
SFAS No. 131--"Disclosures about Segments of an Enterprise and Related
Information" became effective for fiscal year 1998 and for all succeeding
interim reporting periods. In accordance with the requirements of SFAS No. 131,
the Company has identified two reportable segments through which it conducts its
operating activities: chlorovinyls and aromatics. These two segments reflect the
organization used by Company management for internal reporting. The chlorovinyls
segment is a highly integrated chain of products which includes chlorine,
caustic soda, vinyl chloride monomer and vinyl resins and compounds. The
aromatics segment is also vertically integrated and includes cumene and the
co-products phenol and acetone. A third product segment, gas chemicals, which
included methanol, was discontinued in the third quarter of 1999.
Earnings of industry segments exclude interest income and expense,
unallocated corporate expenses and general plant services, provision for income
taxes, and income and expense items
6
<PAGE>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7: SEGMENT INFORMATION (CONTINUED)
reflected as "other income (expense)" on the Company's consolidated statements
of income. Intersegment sales and transfers are insignificant.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Segment net sales:
Chlorovinyls...................... $155,121 $130,636 $408,391 $390,936
Aromatics......................... 58,156 77,881 164,862 247,777
-------- -------- -------- --------
Net sales........................... $213,277 $208,517 $573,253 $638,713
======== ======== ======== ========
Segment operating income:
Chlorovinyls...................... $ 28,414 $ 18,832 $ 52,796 $ 54,591
Aromatics......................... 3,682 19,842 12,899 59,278
Corporate and general plant
services........................ (3,409) (4,004) (8,770) (11,913)
-------- -------- -------- --------
Total operating income.............. $ 28,687 $ 34,670 $ 56,925 $101,956
======== ======== ======== ========
</TABLE>
NOTE 8: ACQUISITION OF NORTH AMERICAN PLASTICS, INC.
On May 11, 1998, the Company acquired all the issued and outstanding common
stock (the "Stock") of North American Plastics, Inc. ("North American
Plastics"), a privately-held manufacturer of flexible polyvinyl chloride ("PVC")
compounds with a production capacity of 190,000,000 pounds. North American
Plastics has two manufacturing locations in Mississippi, with revenues for 1997
of approximately $90,000,000. Its PVC compounds are used in wire and cable for
construction, automobiles and appliances, as well as various other consumer and
industrial products.
The Stock was acquired in exchange for net cash consideration of $99,902,000
plus the assumption of $500,000 in debt. The cash portion of the acquisition was
financed with proceeds from the Company's existing revolving credit facility.
The transaction was accounted for as a purchase and the consideration exchanged
exceeded the fair market value of the net tangible assets of North American
Plastics by approximately $86,725,000. This excess was allocated to goodwill and
is being amortized on a straight-line basis over a period of 35 years. The
results of operations of the acquired business have been included in Georgia
Gulf's condensed consolidated financial statements from the date of acquisition.
Pro forma results of operations have not been presented because the effect of
this acquisition was not significant.
NOTE 9: ACQUISITION OF VINYLS BUSINESS OF CONDEA VISTA
On August 30, 1999, the Company announced that it signed a definitive
agreement to acquire the vinyls business of CONDEA Vista Company for
approximately $270 million. The purchase includes substantially all of the
assets and the net working capital of the vinyls business as of the closing
date. The Company will finance the acquisition with a combination of new debt
and a refinancing of certain existing credit facilities and expects to complete
the transaction in the fourth quarter of 1999. The acquisition will be accounted
for by the purchase method of accounting for business combinations as of the
closing date.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Georgia Gulf is a leading manufacturer and marketer of two highly integrated
chemical lines, chlorovinyls and aromatics. The Company's chlorovinyl products
include chlorine, caustic soda, sodium chlorate, vinyl chloride monomer ("VCM"),
and polyvinyl chloride ("PVC") resins and compounds; the Company's primary
aromatic chemical products include cumene, phenol and acetone. On September 2,
1999, Georgia Gulf announced its decision to exit the methanol business at the
end of the year.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1998
NET SALES. Net sales for the quarter ended September 30, 1999 were
$213.2 million, a gain of 2 percent compared to $208.5 million for the same
period in 1998. This gain was due to an increase of the overall average selling
price of 13 percent offset in part by a decline in sales volumes of 10 percent.
Net sales of chlorovinyls for the third quarter of 1999 were
$155.1 million, an increase of 19 percent compared to $130.6 million in the
third quarter of 1998. This increase was the result of a 22 percent increase in
average selling prices, offset in part by a 6 percent decline in sales volumes.
Strong demand for vinyl products, particularly VCM and PVC resins, resulted in
higher average selling prices which were partially offset by a 60 percent
decrease in caustic soda pricing. Contributing to lower sales volumes were
chlorine, caustic soda and PVC resins, offset in part by an increase in PVC
compound sales volumes. Additionally, chlorovinyls segment benefited from
increased electricity sales during certain peak demand periods in the third
quarter of 1999.
Net sales of aromatics for the third quarter of 1999 were $58.2 million, a
decrease of 25 percent compared to $77.9 million for the same period in 1998.
This decrease was the result of a 15 percent decrease in sales volume and a
13 percent decline in prices. Lower cumene sales volumes were partially offset
with an increase in cumene selling prices. Phenol prices decreased 29 percent
from the prior year period, resulting from new capacity additions creating an
oversupply of phenol.
COST OF SALES. Cost of sales for the third quarter of 1999 was
$175.3 million, an increase of 8 percent compared to $161.9 million in 1998.
This increase was due to an increase in prices for all major raw materials. As a
percentage of sales, cost of sales increased to 82.2 percent in the third
quarter of 1999 compared to 77.6 percent in the third quarter of 1998. This
increase in cost of sales as a percentage of net sales was due to higher raw
material costs along with reduced operating rates and the reallocation of
ongoing fixed charges which were previously allocated to the discontinued
methanol business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $9.3 million for the three months ended
September 30, 1999, a decrease of 22 percent from the same period in 1998. This
decrease was attributable to a reduction in employee headcount and lower legal
and environmental expenditures.
OPERATING INCOME. Operating income in the third quarter of 1999 was
$28.7 million, a decrease of 17 percent compared to $34.7 million in the third
quarter of 1998. This decrease was the result of lower operating income in
aromatics offset in part by an increase in operating income for chlorovinyls.
Chlorovinyls operating profit for the third quarter of 1999 was $28.4 million,
an increase of 51 percent compared to $18.8 million for the same period in 1998.
This increase was due to average selling price increases outpacing raw material
price increases and the sale of electricity during peak demand periods, which
resulted in a $4.7 million contribution to operating income. Our aromatics
operating profit for the third quarter of 1999 was $3.7 million, a decrease of
81 percent compared to $19.8 million in 1998. This decrease was due to lower
operating rates, lower cumene sales volume, increased raw material
8
<PAGE>
costs and a decrease in the selling price for phenol. Operating income as a
percentage of net sales declined to 13.5 percent of sales in the third quarter
of 1999 from 16.6 percent for the same period last year. This decrease was the
result of higher raw material costs across all product lines and reduced pricing
in aromatics, which together outpaced average selling price increases in
chlorovinyls resulting in reduced overall margins.
OTHER EXPENSES. During the third quarter of 1998, Georgia Gulf incurred
other expenses of $9.5 million ($6.0 million net of taxes) related to the
termination an interest rate hedge agreement.
NET INTEREST EXPENSE. Interest expense decreased to $7.0 million for the
quarter ended September 30, 1999 compared with $8.1 million for the same period
in 1998. This decrease was attributable to lower average outstanding debt
balances during the third quarter of 1999.
PROVISION FOR INCOME TAXES. Provision for income taxes was $7.9 million for
the third quarter of 1999, an increase of 25 percent compared to $6.3 million in
1998. Our effective tax rate in the third quarter of 1999 was 36.5 percent
compared to 36.7 percent for the same period in 1998.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations for
the third quarter of 1999 was $13.7 million, an increase of 27 percent compared
to $10.8 million for the third quarter of 1998. This increase was a result of
the termination of the interest rate hedge agreement and higher interest expense
in the third quarter of 1998, offset by lower operating income for 1999.
(LOSS) EARNINGS FROM DISCONTINUED OPERATIONS. Discontinued methanol
operations incurred a net loss of $0.5 million for the third quarter of 1999 as
compared to a net loss of $0.7 million for the third quarter of 1998.
Additionally, during the third quarter of 1999, Georgia Gulf recognized a
one-time charge of $7.6 million, net of taxes, in connection with the write-off
of certain methanol assets and estimated future losses on servicing the
remaining methanol contracts through the end of the year.
NET INCOME. Net income in the third quarter of 1999 was $5.6 million, a
decrease of 45 percent compared to $10.2 million in the third quarter of 1998.
This decrease was due to the factors discussed above.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1998
NET SALES. For the nine months ended September 30, 1999, Georgia Gulf
reported net sales of $573.3 million, a decrease of 10 percent compared to
$638.7 million for the same period in 1998. This decrease was primarily
attributable to a decline in sales volumes of 10 percent and lower average
selling prices for most products.
Net sales for chlorovinyls were $408.4 million for the nine months ended
September 30, 1999, an increase of 4 percent from $390.9 million for the same
period of 1998. Sales volumes for PVC compounds, including a full nine months of
sales for North American Plastics acquired in May 1998, were 40 percent higher
in 1999 compared to the same period in 1998. These increased sales volumes,
higher VCM average selling prices and the additional electricity sales were
partially offset by a 44 percent decline in caustic soda average selling prices
and an 18 percent reduction in caustic soda sales volumes.
Net sales for aromatics for the nine months ended September 30, 1999 were
$164.9 million, a decrease of 33 percent from $247.8 million for the same period
last year. This decrease was primarily attributable to a 48 percent decrease in
cumene sales volumes and lower average selling sales prices for all aromatic
products for the nine month comparison. Price declines in aromatics were
attributable to a 34 percent decrease in phenol average selling prices resulting
from market positioning in anticipation of significant capacity expansions and a
26 percent decrease in acetone average selling prices resulting from increased
production attributable to higher phenol demand.
9
<PAGE>
COST OF SALES. Cost of sales for the nine months ended September 30, 1999
was $487.1 million, a decrease of 3 percent compared to $503.7 million in 1998.
This decrease was due to lower production volume partially offset by an increase
in ethylene prices. As a percentage of net sales, cost of sales increased to
85.0 percent for the first nine months of 1999 compared to 78.9 percent for the
first nine months of 1998. This increase in cost of sales as a percentage of net
sales was due to higher ethylene costs and lower average selling prices for most
products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $29.2 million for the nine months ended
September 30, 1999, a decrease of 12 percent from $33.1 million in the same
period of 1998. This decrease was due to lower expenses from profit sharing
plans and decreased legal and environmental expenses.
OPERATING INCOME. Operating income for the nine months ended September 30,
1999 was $56.9 million, a decrease of 44 percent compared to $102.0 million for
the same period last year. This decrease was the result of lower operating
income in both chlorovinyls and aromatics. Chlorovinyls operating income for the
first nine months of 1999 was $52.8 million, a decrease of 3 percent compared to
$54.6 million for the same period in 1998. This decrease was attributable to
overall sales volume decreases, reduced caustic soda average selling prices and
increases in ethylene costs which were partially offset by increased VCM sales
prices, the sale of electricity during peak demand periods and the inclusion of
North American Plastics for the full nine-month period. Aromatics operating
income for the nine months ended September 30, 1999 was $12.9 million, a
decrease of 78 percent compared to $59.3 million for the first nine months of
1998. This decrease in operating income was due to lower prices for phenol and
acetone. As a percentage of net sales, operating income decreased to
9.9 percent of sales in the first nine months of 1999 compared to 16.0 percent
in 1998. This decrease in operating income as a percentage of net sales was
primarily the result of lower average selling prices and increased prices for
ethylene.
OTHER EXPENSES. During the third quarter of 1998, Georgia Gulf incurred
other expenses of $9.5 million, $6.0 million net of taxes, related to the
termination of an interest rate hedge agreement.
NET INTEREST EXPENSE. Interest expense decreased to $21.7 million for the
quarter ended September 30, 1999 compared with $22.9 million for the same period
in 1998. This decrease was attributable to lower average outstanding debt
balances during the first nine months of 1999.
PROVISION FOR INCOME TAXES. Provision for income taxes was $12.9 million
for the nine months ended in 1999, a decrease of 51 percent compared to
$26.0 million for the same period in 1998. This decrease was due to lower
taxable income. Our effective tax rate for the nine months ended in 1999 was
36.5 percent compared to 37.3 percent for the same period in 1998.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations for
nine months ended in 1999 was $22.4 million, a decrease of 48.7 percent compared
to $43.6 million for the same period in 1998. This decrease was due to the
factors discussed above.
(LOSS) EARNINGS FROM DISCONTINUED OPERATIONS. Discontinued methanol
operations incurred a net loss of $2.5 million for the nine months ended
September 30, 1999 as compared to breakeven earnings for the same period in
1998. Additionally, during the third quarter of 1999, Georgia Gulf recognized a
one-time charge of $7.6 million, net of taxes, in connection with the write-off
of certain methanol assets and estimated future losses on the servicing of the
remaining methanol contracts through the end of the year.
NET INCOME. Net income for the nine months ended in 1999 was
$12.2 million, a decrease of 72 percent compared to $43.6 million for the same
period in 1998. This decrease was primarily due to lower income from continuing
operations as discussed above.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1999, Georgia Gulf generated
$81.6 million of cash flow from operating activities as compared with
$112.8 million during the nine months ended September 30, 1998. The "change in
operating assets, liabilities and other" category for the first nine months of
1999 included the net receipt of $8.6 million in litigation expenses which were
reimbursed by Georgia Gulf's insurance carriers in 1999. Other significant
working capital changes included increases in accounts receivable, accounts
payable and accrued liabilities due to the timing of payments. Changes in
working capital during the first nine months of 1998 were primarily attributable
to a decrease in inventories offset in part by lower accounts payable.
Debt decreased by $63.0 million during the nine months ended September 30,
1999, to a level of $396.5 million. Georgia Gulf had approximately
$180.0 million of availability under its $350.0 million revolving credit
facility as of September 30, 1999. The revolving credit facility has a stated
maturity date of March 30, 2000. The Company intends to refinance the revolving
credit facility in conjunction with the acquisition of the vinyls business of
CONDEA Vista and has, accordingly, classified this debt as long-term in the
accompanying condensed consolidated balance sheet as of September 30, 1999.
Capital expenditures for the nine months ended September 30, 1999 were
$9.8 million as compared to $20.1 million for the same 1998 period. Capital
expenditures for 1999 have been and will be directed toward increasing
efficiency of existing operations and certain environmental projects. Georgia
Gulf estimates that total capital expenditures for 1999, excluding the purchase
of the vinyls business of CONDEA Vista, will be less than $15.0 million.
Georgia Gulf declared dividends of $0.24 per share or $7.4 million during
the first nine months of 1999. As of September 30, 1999, Georgia Gulf had
authorization to repurchase up to 5.2 million shares under the current common
stock repurchase program, although no shares have been repurchased in 1999.
Georgia Gulf's management believes that cash flow from operations, along
with the availability under Georgia Gulf's current revolving credit facility,
will be sufficient to fund, for the foreseeable future, working capital,
dividend payments and capital investments of its current operations. Georgia
Gulf has announced its intention to purchase substantially all of the assets of
the vinyls business of CONDEA Vista for $270 million. Georgia Gulf also intends
to exercise its purchase option on the co-generation lease which will result in
additional borrowings of approximately $108.0 million to fund the purchase. The
existing $100 million aggregate principal 7 5/8% senior notes (due 2005) will
remain outstanding. Georgia Gulf plans to finance the acquisition of the vinyls
business of CONDEA Vista and the purchase of the co-generation facility with a
combination of new debt and a refinancing of certain existing credit facilities
during the fourth quarter of 1999.
11
<PAGE>
YEAR 2000 COMPUTER SYSTEMS COMPLIANCE
Systems that do not properly recognize and process date-sensitive
information could generate erroneous data, or even fail, as the Year 2000
approaches. We have acquired or developed all of our financial reporting systems
within the past seven years; installation of these systems is complete and
testing indicates that these systems are Year 2000 compliant. Process control
software, which controls the operation of many of our plants, was updated to
Year 2000 compliant versions during 1998. None of the critical third parties
contacted by Georgia Gulf, both suppliers and customers, indicated anticipating
any difficulties handling Year 2000 issues. Although we acknowledge
unanticipated Year 2000 problems could occur, we believe that all critical
systems will continue to function after 1999 and that any remaining systems that
may not be Year 2000 compliant are low-risk. Accordingly, we have not developed
any contingency plans beyond our normal business interruption plans. As a part
of our efforts to maintain our Year 2000 compliant status, Year 2000 status of
certain suppliers will be updated during the fourth quarter of 1999.
Expenditures related to Year 2000 compliance efforts were not material.
FORWARD-LOOKING STATEMENTS
This form 10-Q and other communications to stockholders, as well as oral
statements made by representatives of Georgia Gulf, may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements relate to, among other things, Georgia Gulf's outlook
for future periods, supply and demand, pricing trends and market forces within
the chemical industry, cost reduction strategies and their results, planned
capital expenditures, long-term objectives of management and other statements of
expectations concerning matters that are not historical facts.
Predictions of future results contain a measure of uncertainty and,
accordingly, actual results could differ materially due to various factors.
Factors that could change forward-looking statements are, among others:
- changes in the general economy;
- changes in demand for Georgia Gulf's products or increases in overall
industry capacity that could affect production volumes and/or pricing;
- changes and/or cyclicality in the industries to which Georgia Gulf's
products are sold;
- availability and pricing of raw materials;
- technological changes affecting production;
- difficulty in plant operations and product transportation;
- governmental and environmental regulations; and
- other unforseen circumstances.
A number of these factors are discussed in this Form 10-Q and in Georgia
Gulf's other periodic filings with the Securities and Exchange Commission,
including Georgia Gulf's annual report on Form 10-K for the year ended
December 31, 1998.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
For a discussion of certain market risks related to Georgia Gulf, see
Part I, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk",
in the Company's Annual Report on Form 10-K for the year ended December 31,
1998. There have been no significant developments with respect to the Company's
exposure to market risk except for the change in the fair value of interest rate
swaps disclosed in note 4 to the financial statements included herein.
12
<PAGE>
PART II. OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
Georgia Gulf is a party to numerous individual and several class-action
lawsuits filed against Georgia Gulf, among other parties, arising out of an
incident that occurred in September 1996 in which workers were exposed to a
chemical substance on Georgia Gulf's premises in Plaquemine, Louisiana. The
substance was later identified to be a form of mustard agent, a chemical which
is not manufactured as part of Georgia Gulf's ordinary operations, but instead
occurred as a result of an unforeseen chemical reaction. Georgia Gulf presently
believes there are approximately 2,000 plaintiffs, of which approximately 650
are workers claiming to have been on-site at the time of the incident. All of
the actions claim one or more forms of compensable damages, including past and
future wages, past and future physical and emotional pain and suffering, and
medical monitoring. The lawsuits were originally filed in Louisiana State Court
in Iberville Parish.
In September 1998, the plaintiffs filed amended petitions that added the
additional allegations that Georgia Gulf had engaged in intentional conduct
against the plaintiffs. These additional allegations raised a coverage issue
under Georgia Gulf's general liability insurance policies. In December 1998, as
required by the terms of the insurance policies, the insurers demanded
arbitration to determine whether coverage is required for the alleged
intentional conduct in addition to the coverage applicable to the other
allegations of the case. The date for the arbitration has not yet been
established.
As a result of the arbitration relating to the insurance issue, as permitted
by federal statute, the insurers removed the cases to United States District
Court in December 1998. By order entered March 2, 1999, the federal court denied
the plaintiff's motion to remand the cases back to state court and retained
federal jurisdiction.
Settlements have been reached with a majority of the original workers,
including those claimants believed to be the most severely injured. The majority
of cases have been dismissed or motions to dismiss are pending before the court.
Additionally, settlements have been reached or are being negotiated with other
parties named as defendants whereby such parties have made, or are being
requested to make, contributions to the recoveries made by the plaintiffs.
Negotiations for the resolution of the remaining claims are continuing.
Georgia Gulf is asserting and pursuing defenses to the claims. Based on the
present status of the proceedings, Georgia Gulf believes the liability
ultimately imposed will not have a material effect on the financial position or
on results of operations of Georgia Gulf.
In addition, Georgia Gulf is subject to other claims and legal actions may
arise in the ordinary course of business. Management believes that the ultimate
liability, if any, with respect to these other claims and legal actions, will
not have a material effect on the financial position or on results of operations
of Georgia Gulf.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A) Exhibits
2(A) Asset Purchase Agreement dated as of August 30, 1999, between CONDEA
Vista Company and Georgia Gulf Corporation.
B) Reports on Form 8-K.
During the quarter ended September 30, 1999, Georgia Gulf filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated August 30, 1999 (date of the
earliest event reported), filed on August 31, 1999, for the purpose of
reporting, under Item 5, Georgia Gulf's agreement to purchase the vinyls
business of CONDEA Vista Corporation.
2. Current Report on Form 8-K dated September 2, 1999 (date of
earliest event reported), filed on September 3, 1999, for the purpose of
reporting, under Item 5, Georgia Gulf's exit from the methanol business.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
GEORGIA GULF CORPORATION
(Registrant)
</TABLE>
<TABLE>
<S> <C> <C>
Date October 27, 1999 /s/ EDWARD A. SCHMITT
-------------------------------------- --------------------------------------------
Edward A. Schmitt
President and Chief Executive Officer
(Principal Executive Officer)
Date October 27, 1999 /s/ RICHARD B. MARCHESE
-------------------------------------- --------------------------------------------
Richard B. Marchese
Vice President Finance, Chief Financial
Officer and Treasurer (Principal Financial
Officer)
</TABLE>
14
<PAGE>
EXHIBIT 2(a)
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of August 30, 1999, between CONDEA
Vista Company, a Delaware corporation ("SELLER"), and Georgia Gulf Corporation,
a Delaware corporation ("PURCHASER").
Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, substantially all of the assets of Seller's vinyls
business comprised of or associated with:
(a) Seller's vinyl chloride monomer ("VCM") and polyvinyl
chloride ("PVC") resins and compound units as currently operated at
(i) Seller's VCM plant in Lake Charles, Louisiana (the "VCM
PLANT");
(ii) Seller's PVC resin plant and PVC compound plant and
plasticizer production in Aberdeen, Mississippi;
(iii) Seller's PVC resin plant in Oklahoma City, Oklahoma;
and
(iv) Seller's compound plants in Jeffersontown, Kentucky
and Mansfield, Massachusetts (collectively, as more particularly
defined hereinbelow, the "BUSINESS PROPERTIES", with the business and
operations conducted at or related to the Business Properties being
referred to herein as the "PURCHASED OPERATING BUSINESS"); and
(b) Seller's joint venture interest in PHH Monomers, L.L.C.
("PHH") (as more particularly defined hereinbelow as the "PURCHASED EQUITY
INTEREST");
upon the terms and subject to the conditions of this Agreement (such business,
constituting the Purchased Operating Business and Purchased Equity Interest
being referred to herein collectively as the "BUSINESS").
Accordingly, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ACQUIRED ASSETS
SECTION 1.01. PURCHASE AND SALE. On the terms and subject to
the conditions of this Agreement, at the Closing (as defined in Section 2.01),
Seller shall sell, assign, transfer, convey and deliver to Purchaser, and
Purchaser shall purchase from Seller, on a going-concern basis, all the right,
title and interest in, to and under the Acquired Assets (as defined in Section
1.02(a)), for (i) an aggregate initial purchase price of two hundred sixty
million dollars ($260,000,000) (the "INITIAL PURCHASE PRICE"), which shall be
payable in cash as set forth in Section 2.02 and subject to adjustment as set
forth in Section 1.05, (ii) the Delayed Purchase Price (as defined in Section
1.06), and (iii) the assumption of the Assumed Liabilities
<PAGE>
2
(as defined in Section 1.03(a)). The purchase and sale of the Acquired Assets
and the assumption of the Assumed Liabilities is referred to in this Agreement
as the "ACQUISITION".
SECTION 1.02. ACQUIRED ASSETS AND EXCLUDED ASSETS.
(a) The term "ACQUIRED ASSETS" means all of the business,
properties, assets, goodwill and rights of whatever kind and nature, real or
personal, tangible or intangible, that are owned, leased, licensed, used,
occupied or held by or for the benefit of Seller and its affiliates in the
operation of the Business, wherever situated, as the same shall exist as of the
Closing Date (as defined in Section 2.01), including the following:
(i) all prepaid expenses, advance payments, deposits,
surety accounts and other similar assets resulting from or relating to
the Purchased Operating Business, including prepaid deposits with
suppliers and utilities (collectively, the "PREPAIDS");
(ii) all inventories of products, work-in-process,
finished goods, raw materials, supplies and parts resulting from or
relating to the Purchased Operating Business (collectively, "INVENTORY"
or "INVENTORIES"), including all Inventories located at the Business
Properties (as defined in Section 1.02(a)(v)) and off-site warehouses
and in transit;
(iii) all accounts receivable (including royalties
receivable) of the Purchased Operating Business, any payments received
with respect thereto after the Closing Date, unpaid interest accrued on
any such accounts receivable and any security or collateral relating
thereto (collectively, "RECEIVABLES");
(iv) all tangible personal property, plant and
equipment owned, used, occupied or held by or for the benefit of the
Purchased Operating Business and all tangible personal property, plant
and equipment located at the Business Properties or held in central
storage for use in the VCM Plant, including buildings, structures,
fixtures, machinery and equipment, dies, jigs, molds, patterns, tools,
tooling, production fixtures, maintenance machinery and equipment,
office furniture and office equipment, other furnishings, trucks,
automobiles and other vehicles and transportation equipment, leasehold
improvements and construction-in-process (collectively, the "FIXED
ASSETS");
(v) all real property rights and interests of any
kind whatsoever owned, leased, used or held by or for the benefit of
the Purchased Operating Business, including the rights and interests
identified on Schedule 3.06 which consist of: (A) the land more
particularly described on such Schedule, which descriptions are
incorporated herein by reference, (B) all buildings, structures, and
leasehold improvements located thereon and all appurtenances relating
thereto, and (C) all fixtures, machinery, apparatus or equipment
affixed to said premises, including all of the electrical, heating,
plumbing, air conditioning, air compression and all other systems
located on said premises, and all other structures, fences and
improvements (collectively, the "BUSINESS PROPERTIES");
(vi) all inventions, discoveries, trademarks,
patents, trade names, copyrights, know-how, intellectual property,
software, shop rights, licenses, developments, research data, designs,
technology, discoveries, trade secrets, test procedures, processes,
research data, formulas and other confidential information,
<PAGE>
3
intellectual and similar intangible property rights, whether or not
patentable (or otherwise subject to legally enforceable restrictions or
protections against unauthorized third-party usage), and any and all
applications for, and extensions, divisions and reissuances of, any of
the foregoing, and rights therein, owned, used or held by or for the
benefit of the Purchased Operating Business or otherwise used in the
conduct of, or which relate to, the Purchased Operating Business,
including (A) the Intellectual Property (as defined in Section 3.05(b))
described in Schedule 3.07, and (B) the production methods, formulas,
know-how and technical expertise relating to the manufacture of the
VCM, PVC and PVC compound products and plasticizers manufactured by the
Purchased Operating Business (the "PRODUCTS");
(vii) all books and records relating to the Business,
including all files, invoices, forms, accounts, correspondence,
production records, technical, accounting, manufacturing and procedural
manuals, customer lists, employment records, studies, reports or
summaries relating to any Environmental Laws (as defined in Section
3.16), and other books and records relating to the operation of any of
the Acquired Assets or other assets or properties associated with the
Business, and any confidential information which has been reduced to
writing or other tangible medium relating to or arising out of the
Business (collectively, the "BUSINESS RECORDS");
(viii) all rights, claims and benefits in, to or
under any (A) (1) employee confidentiality agreements entered into by
Seller and (2) confidentiality or secrecy agreements entered into by
Seller with third parties that relate to the use or disclosure of
information, in each case to the extent concerning or otherwise
relating to the Purchased Operating Business, Products or any of the
Acquired Assets (the "CONFIDENTIALITY AGREEMENT RIGHTS"); and (B)
express or implied warranties from the suppliers of goods or services
relating to the Purchased Operating Business (including any coverage
rights under product liability or other insurance maintained by any of
such suppliers for the benefit of the Seller);
(ix) all promotional and advertising materials
relating to the Purchased Operating Business or to the Products;
(x) all unfilled purchase and sale orders (including
releases of quantities pursuant thereto) relating to the Purchased
Operating Business;
(xi) subject to Section 1.04, all rights, benefits
and interests of Seller and its affiliates in and to all licenses,
leases, contracts, agreements, commitments and undertakings relating to
the Purchased Operating Business;
(xii) all certificates, licenses, permits, approvals,
authorizations, variances, waivers or consents to the extent
transferable, issued by any Governmental Entity (as defined in Section
3.03) and used in or necessary to the operation of the Purchased
Operating Business;
(xiii) all of Seller's joint venture interest in PHH,
and subject to Section 1.04, all rights, benefits and interests of
Seller in and to all contracts, agreements, commitments and
undertakings related to such interest in PHH;
<PAGE>
4
(xiv) those certain assets used in the Business and
located at Seller's Austin, Texas laboratory listed in Schedule
1.02(a)(xiv);
(xv) the goodwill of the Business as a going concern;
and
(xvi) except for the Excluded Assets (as defined in
Section 1.02(b)), all other assets, properties, rights and interests
otherwise employed in or related to the operation of the Purchased
Operating Business, of every kind, nature and description, whether
tangible or intangible, real, personal or mixed, and wherever situated,
including those assets, properties, rights and interests set forth on
the Balance Sheet (as defined in Section 3.04), all of which are to be
sold, transferred, conveyed, assigned and delivered to Purchaser at the
Closing pursuant to this Agreement.
(b) Notwithstanding the foregoing, the Acquired Assets shall
not include any Excluded Assets. The term "EXCLUDED ASSETS" means:
(i) all assets identified in Schedule 1.02(b);
(ii) all cash and cash equivalents of Seller;
(iii) all rights, claims and credits of Seller to the
extent relating to any other Excluded Asset or any Excluded Liability
(as defined in Section 1.03(b)), including any such items arising under
insurance policies and all guarantees, warranties, indemnities and
similar rights in favor of Seller in respect of any other Excluded
Asset or any Excluded Liability;
(iv) all the assets of the Seller Pension Plans (as
defined in Section 3.14(a)) and all the assets of the Seller's Savings
Plan (as defined in Section 5.10(a)) to the extent relating to
employees of Seller that do not become employees of Purchaser
immediately following the Closing Date;
(v) the land and buildings at Seller's compound plant
at Mansfield, Massachusetts, which Excluded Assets are described with
more particularity in the Lease attached hereto as EXHIBIT I;
(vi) all assets used in the provision of central
services to the VCM Plant located outside the Business Properties,
including those services to be provided by Seller pursuant to the
Services and Supply Agreement attached hereto as Exhibit E (the
"SUPPORT ASSETS");
(vii) all rights of Seller under this Agreement and
the other agreements and instruments executed and delivered in
connection with this Agreement and listed on Annex I hereto (the
"ANCILLARY AGREEMENTS");
(viii) all records prepared in connection with the sale
of the Business to Purchaser;
(ix) all financial and tax records relating to the
Business that form part of Seller's general ledger (it being understood
that Seller shall provide copies of such records to Purchaser on or
prior to the Closing Date);
<PAGE>
5
(x) all assets associated with Seller's Austin,
Texas laboratory not listed in Schedule 1.02(a)(xiv); and
(xi) all trade receivables retained by Seller
pursuant to Schedule 1.05(d).
SECTION 1.03. ASSUMPTION OF CERTAIN LIABILITIES.
(a) Upon the terms and subject to the conditions of this
Agreement, Purchaser shall assume, effective as of the Closing, and from and
after the Closing, Purchaser shall pay, perform and discharge when due, all the
following liabilities, obligations and commitments of Seller (the "ASSUMED
LIABILITIES"), other than any Excluded Liabilities:
(i) all liabilities, obligations and commitments of
Seller under the assigned contracts constituting an Acquired Asset (the
"ASSIGNED CONTRACTS") to the extent such liabilities, obligations and
commitments relate to the period after the Closing Date;
(ii) all accounts payable and accruals to the extent
included in Closing Working Capital (as defined in Section 1.05(a));
(iii) any liability, obligation or commitment for
Taxes (as defined in Section 3.12) relating to the operation or
ownership of the Acquired Assets for any Tax period (or portion
thereof) beginning after the Closing Date;
(iv) all liabilities, obligations and commitments of
Seller, relating to or arising out of the operation of the Business or
any Acquired Asset by Purchaser after the Closing;
(v) all liabilities, obligations and commitments of
Seller based upon, arising out of or resulting from any fact,
circumstance, occurrence, condition, act or omission existing or
occurring on or prior to the Closing Date, but only if such
liabilities, obligations and commitments and related expenses (i)
relate to or arise out of the Business or any Acquired Asset in the
ordinary course of business and consistent with the representations,
warranties, covenants, obligations and agreements set forth in this
Agreement and (ii) are of a nature and in an amount generally
consistent with the liabilities, obligations, commitments and expenses
reflected in the Financial Statements referred to in Section 3.04;
(vi) all Expense Items (as defined in the Site
Access, Cooperation and Remedial Control Agreement (the "SARCA"),
attached as Exhibit F hereto) identified as Purchaser's Payment
Obligations pursuant to Section I.F of the SARCA; and
(vii) any liabilities or obligations relating to,
based on or arising out of, any action which could be construed as a
"plant closing" or "mass layoff", as those terms are defined in the
WARN Act, or any "employment loss," as defined in the WARN Act, which
any employee of Seller or any of its affiliates as of the Closing Date
whose principal place of employment is one of the Business Properties
may suffer or may be deemed to suffer as a consequence of the
transactions contemplated hereby.
<PAGE>
6
(b) Notwithstanding Section 1.03(a) or any other provision of
this Agreement or any Ancillary Agreement, Purchaser shall not assume or be
liable or responsible with respect to, and Seller shall retain, pay, perform and
discharge when due, all Excluded Liabilities. To the extent a liability
constitutes both an Assumed Liability as defined in Section 1.03(a) and an
Excluded Liability under Section 1.03(b), it shall be deemed for all purposes to
be an Excluded Liability and not an Assumed Liability except to the extent
included in Closing Working Capital. The term "Excluded Liabilities" means:
(i) any liabilities and obligations of Seller or any
of its affiliates, or their respective directors, officers,
shareholders or agents, for finder's or broker's fees and expenses, and
any and all fees and expenses of any attorneys, accountants or other
professionals retained by or on behalf of Seller or any of its
affiliates, in each case arising out of, or relating to, this Agreement
or the transactions contemplated hereby, whether incurred prior to, at,
or subsequent to the Closing Date;
(ii) any liabilities and obligations relating to
any litigation, action, suit, claim, investigation or proceeding
pending on the Closing Date;
(iii) any liabilities and obligations, known or
unknown, fixed, contingent or otherwise, the existence of which is a
breach of any representation, warranty, covenant, obligation or
agreement of Seller set forth in this Agreement or in any of the other
documents or agreements contemplated hereby;
(iv) any liabilities and obligations incurred by
Seller or its affiliates or their respective directors, officers,
shareholders, agents or employees after the Closing Date;
(v) any liabilities or obligations relating to, based
on or arising out of, any action which could be construed as a "plant
closing" or "mass layoff" as those terms are defined in the WARN Act,
or "employment loss," as defined in the WARN Act, which any employee of
Seller or any of its affiliates as of the Closing Date (A) whose
principal place of employment is not one of the Business Properties may
suffer or may be deemed to suffer as a consequence of the transactions
contemplated hereby or (B) may have suffered or may be deemed to have
suffered as a consequence of any transaction other than those
transactions contemplated hereby;
(vi) any liability, obligation or commitment of
Seller, whether express or implied, liquidated, absolute, accrued,
contingent or otherwise, or known or unknown, arising primarily out of
the operation or conduct by Seller or any of its affiliates of any
business other than the Business;
(vii) any account payable or accrual of Seller to the
extent not included in Closing Working Capital;
(viii) any liability, obligation or commitment of
Seller to the extent it relates to, is based on events or conditions
occurring or existing in connection with, or arises out of, any
Excluded Asset;
<PAGE>
7
(ix) any liability, obligation or commitment for
Taxes, whether or not accrued, assessed or currently due and payable,
relating to the operation or ownership of the Purchased Operating
Business or the Acquired Assets for any Tax period (or portion thereof)
ending on or prior to the Closing Date (for purposes of this clause
(ix), all real property Taxes, personal property Taxes and similar ad
valorem obligations levied with respect to the Acquired Assets for a
Tax period that includes (but does not end on) the Closing Date shall,
to the extent not included in Closing Working Capital, be apportioned
between Seller and Purchaser based upon the number of days of such
period included in the pre- Closing Tax period and the number of days
of such Tax period after the Closing Date (which period shall not
include the Closing Date));
(x) any liability, obligation or commitment of Seller
based upon, arising out of or resulting from any fact, circumstance,
occurrence, condition, act or omission existing or occurring on or
prior to the Closing Date, but only if such liabilities, obligations
and commitments and related expenses either (i) do not relate to or
arise out of the Business or any Acquired Asset in the ordinary course
of business and consistent with the representations, warranties,
covenants, obligations and agreements set forth in this Agreement or
(ii) are not of a nature and in an amount generally consistent with the
liabilities, obligations, commitments and expenses reflected in the
Financial Statements referred to in Section 3.04;
(xi) any liabilities or obligations to any persons at
any time employed by Seller or its affiliates or their respective
predecessors in interest in the Purchased Operating Business or
otherwise, at any time or to any such person's spouses, children,
either dependents or beneficiaries, with respect to incidents, events
or circumstances occurring at any time during the period or periods of
any such persons' employment by Seller or its affiliates or their
respective predecessors in interest, whenever such claims mature or are
asserted, including all liabilities and obligations arising (A) under
any Seller Benefit Plans (as defined in Section 3.14(a)), (B) under any
Applicable Laws or (C) under any collective bargaining laws, agreements
or arrangements, other than in all cases (I) any liability or
obligation for which Purchaser has agreed to indemnify Seller
pursuant to Section 5.09 or 5.10 and (II) any liability or obligation
to the extent taken into account in determining Closing Working
Capital;
(xii) any Environmental Claims, as defined below, to
the extent they arise from the ownership or operation of the Purchased
Operating Business on or prior to the Closing Date. For purposes of
this subsection, "ENVIRONMENTAL CLAIMS" shall mean any and all claims
by any third person (A) seeking to require a Response to the presence,
release or threat of release of any Contaminants of Concern, including
the investigation, remediation, removal, monitoring or any other
activities taken in Response thereto, or any and all claims seeking
recovery of or contribution to the costs of a Response to the presence,
release, or threat of release of any Contaminants of Concern (as
defined in Section 3.16(b)) in any environmental media, including the
soil or groundwater at, on, under or emanating from any Business
Properties (for the purposes of this provision the term Response shall
include, but not be limited to, the definition of Response under
Section 101(25) of CERCLA, 42 U.S.C. Section 9601(25)), (B) natural
resource damages, to the extent arising from the ownership or
operations of any Business Properties, (C) personal injury, death or
medical monitoring, in any case alleged to be caused or required by
reason of the operations of any Business Properties by current or
former employees, contractors or other third persons, (D) property
value
<PAGE>
8
diminution, to the extent allegedly attributable to the operations of
any Business Properties and (E) except as set forth in Schedule
1.03(b)(xii)(E) or otherwise addressed as a Seller Payment Obligation
pursuant to Section I.E. of the SARCA, any failure of Seller to comply
with Environmental Laws in its operation of the Business prior to
Closing, including any matters described in any notice of violation
issued prior to or after Closing, and any fines imposed or corrective
measures required in respect of any such non-compliance; PROVIDED THAT
the activities described in Schedule 1.03(b)(xii)(A) shall give rise
to Environmental Claims only to the extent specified therein, and
PROVIDED FURTHER THAT, if any action taken by Purchaser of the type
described in Schedule 1.03(b)(xii)(A) leads to circumstances in which
a third party indemnitor of Seller identified in Schedule
1.03(b)(xii)(B) (a "Predecessor Indemnitor") refuses indemnity
payment, then Seller, at Purchaser's expense, shall use commercially
reasonable best efforts to secure such indemnity payment to the extent
that there are dispute resolution mechanisms established in the
pertinent agreements with the Predecessor Indemnitor ("COST RECOVERY
ACTION"), and, in so doing, shall consult with Purchaser and keep
Purchaser informed about any such efforts and allow Purchaser to
participate in, but not control, any resulting proceedings; and that,
if in such Cost Recovery Action, it is determined that the Predecessor
Indemnitor's obligation has been wholly or partially extinguished by
virtue of Purchaser's actions, then the Environmental Claim shall not
include that portion of the extinguished obligation.
In the event that any Environmental Claim subject to this
clause (xii) arises from events, states of fact or conditions that may have
existed both on or before and after the Closing Date, the following principles
shall apply for the purposes of this Agreement:
(A) In all cases (except for claims
relating to the Calcasieu Estuary,
including those arising under
CERCLA as defined in Section
3.16(b)(vi) and the Federal Clean
Water Act requiring a response, as
defined under CERCLA, or imposing
natural resource damages as to which
this paragraph (A) has no
application), there shall be an
irrebuttable presumption that any
Contaminants of Concern newly
discovered within ten (10) years
after the Closing Date are
attributable to operations occurring
on or prior to the Closing Date,
unless Seller can demonstrate that
such Contaminants of Concern are
attributable to a major Release (as
defined in Section 3.16(b)) of
Contaminants of Concern that
occurred after the Closing Date and
which has not been remedied by
Purchaser pursuant to applicable
Environmental Law;
(B) if the Environmental Claim is
asserted within five (5) years after
the Closing Date by an employee or
contractor, who was employed or
engaged by the Purchased Operating
Business at any time on or before
the Closing Date, liability will be
solely the responsibility of Seller
unless Seller can demonstrate that
the Environmental Claim arises out
of a new exposure that occurred
after the Closing Date (which
evidence may
<PAGE>
9
include the characterization of the
Environmental Claim as involving
symptoms indicating "acute" as
opposed to "chronic" exposure);
(C) if the Environmental Claim is
asserted by an employee or
contractor five (5) or more years
after the Closing Date, at the
commencement of the defense of the
action liability for the defense,
settlement and litigation of the
Claim will be allocated in
proportion to respective periods of
operation by Seller of the Business
Property or Properties at which the
employee or contractor worked on or
before the Closing Date, on the one
hand, and by Purchaser or its
successors and assigns after the
Closing Date, on the other hand;
PROVIDED THAT, Purchaser and Seller
shall use their commercially
reasonable efforts to pursue a claim
against any predecessors of Seller
and successors of Purchaser in
respect of such predecessors' and
successors' respective allocable
shares of liability based upon years
of operation of the pertinent
Business Property or Properties by
such predecessors or successors, and
Seller shall not be responsible for
such predecessors' allocable share
of liability, nor Purchaser
responsible for such
successors' allocable share of
liability, in the event such
predecessor or successor, as the
case may be, within six (6) months
of any final non-appealable
judgment, binding arbitration
decision or settlement agreement in
respect of such liability satisfies
such allocable share.
(D) In the event that either party
(the "RELEASING PARTY") releases,
assigns, or otherwise abrogates its
indemnification or other rights it
may have, whether under Contract,
Judgment, or Applicable Laws (as
such terms are defined in Section
3.03) against any third parties in
respect of matters that may
constitute Environmental Claims,
then the Releasing Party's
predecessors' or successors' years
of operation, as applicable, shall
be added to the Releasing Party's
years of operation of the Business
Property or Properties for the
purpose of determining its allocable
share of liability under Section
1.03(b)(xii)(C) above.
(xiii) all Expense Items identified as Seller's
Payment Obligations pursuant to Section I.E of the SARCA.
(c) Purchaser shall acquire the Acquired Assets free and clear
of all liabilities, obligations and commitments of Seller, other than the
Assumed Liabilities, and free and clear of all Liens (as defined in Section
3.05(a)), other than Permitted Liens (as defined in
<PAGE>
10
Section 3.05(a)), and with respect to the Business Properties only, the
Permitted Encumbrances (as defined in Section 3.06).
(d) Seller and Purchaser acknowledge that certain expenses of
the Purchased Operating Business are paid on a periodic basis. Accordingly, the
items listed below, to the extent not included in Closing Working Capital, shall
be apportioned between Seller and Purchaser, with Seller being responsible for
all such expenses attributable to periods on and prior to the Closing Date, and
Purchaser being responsible for all expenses attributable to periods after the
Closing Date:
(i) prepaid rent, tenant utility payments and all
other percentage or additional rent, common area maintenance and sundry
charges (including any HVAC charges);
(ii) utility company charges, including electricity,
gas, fuel, water and sewer charges;
(iii) real estate taxes, personal property taxes,
similar ad valorem taxes, general and special assessments and other
public or private charges affecting the Business Properties; and
(iv) other items typically apportioned in sale of
assets transactions of the type contemplated by this Agreement.
(e) Seller and Purchaser acknowledge that certain accounts
payable arising primarily out of the operation or conduct of the Purchased
Operating Business on or prior to the Closing and included in Closing Working
Capital may be paid by Seller after the Closing Date and Purchaser agrees to
reimburse Seller for any such payments within seven business days of payment by
Seller.
(f) Seller and Purchaser acknowledge that payments with
respect to certain accounts receivable of the Purchased Operating Business may
be received by Seller after the Closing Date and Seller agrees to turn over to
Purchaser any such amounts within seven business days of receipt thereof.
SECTION 1.04. CONSENTS OF THIRD PARTIES.
(a) Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign any asset
or any claim or right or any benefit arising under or resulting from such asset
if an attempted assignment thereof, without the consent of a third party, would
constitute a breach or other contravention of the rights of such third party,
would be ineffective with respect to any party to an agreement concerning such
asset, or would in any way adversely affect the rights of Seller or, upon
transfer, Purchaser under such asset (the "NONASSIGNABLE ASSETS"). If any
transfer or assignment by Seller, or any assumption by Purchaser of, any
interest in, or liability, obligation or commitment under, any asset requires
the consent of a third party, then such assignment or assumption shall be made
subject to such consent being obtained. Seller shall use its best efforts and
Purchaser shall cooperate in all reasonable respects with Seller to obtain and
satisfy all consents and to resolve all impracticabilities of sale, conveyance,
assignment, sublease or transfer necessary to convey to Purchaser all
Nonassignable Assets.
<PAGE>
11
(b) If any such consent is not obtained prior to the Closing,
Seller and Purchaser shall cooperate (at their own expense) in any lawful and
reasonable arrangement reasonably proposed by Purchaser under which Purchaser
shall obtain the economic claims, rights and benefits under the Nonassignable
Asset with respect to which the consent has not been obtained in accordance with
this Agreement. Such reasonable arrangement may include (i) the subcontracting,
sublicensing or subleasing to Purchaser of any and all rights of Seller against
the other party to such third-party agreement arising out of a breach or
cancellation thereof by the other party, and (ii) the enforcement by Seller of
such rights. To the extent, and only to the extent, Purchaser is able to receive
the economic claims, rights and benefits under such asset, Purchaser shall be
responsible for the Assumed Liabilities, if any, arising under such asset.
SECTION 1.05. PURCHASE PRICE ADJUSTMENT.
(a) Within 60 days after the Closing Date, Seller shall
prepare and deliver to Purchaser a statement (the "STATEMENT") setting forth
Working Capital (as defined in Section 1.05(d)) as of the close of business on
the Closing Date ("CLOSING WORKING CAPITAL") certified by Seller's independent
auditors without exception or qualification to the effect that the Statement has
been prepared in compliance with the requirements of this Section 1.05.
Purchaser shall assist Seller in the preparation of the Statement and shall
provide Seller and its independent auditors access at all reasonable times to
the personnel, properties, books and records of the Business (to the
extent within the control of Purchaser) for such purpose. Purchaser's
independent auditors may participate in the preparation of the Statement;
PROVIDED, HOWEVER, that Purchaser acknowledges that Seller shall have the
primary responsibility and authority for preparing the Statement and Seller's
independent auditors shall have the primary responsibility and authority for
certifying the Statement.
(b) During the 30 day period following Purchaser's receipt of
the Statement Purchaser and its independent auditors shall be permitted to
review the working papers of Seller's independent auditors relating to the
Statement and be afforded reasonable access during normal business hours to the
books and records of Seller relating to preparation of the Statement. Purchaser
and Seller agree that Seller's independent auditors shall not be liable to
Purchaser or its advisors or Seller or its advisors as a result of granting such
access. The Statement shall become final and binding upon the parties on the
30th day following delivery thereof, unless Purchaser gives written notice of
its disagreement with the Statement (a "NOTICE OF DISAGREEMENT") to Seller prior
to such date. Any Notice of Disagreement shall (i) specify in reasonable detail
the nature of any disagreement so asserted, and (ii) be accompanied by a
certificate of Purchaser's independent auditors in the form of Exhibit A that
they concur with each of the positions taken by Purchaser in the Notice of
Disagreement. If a Notice of Disagreement is received by Seller in a timely
manner, then the Statement (as revised in accordance with this sentence) shall
become final and binding upon Seller and Purchaser on the earlier of (A) the
date Seller and Purchaser resolve in writing any differences they have with
respect to the matters specified in the Notice of Disagreement or (B) the date
any disputed matters are finally resolved in writing by the Accounting Firm (as
defined below). During the 30-day period following the delivery of a Notice of
Disagreement, Seller and Purchaser shall seek in good faith to resolve in
writing any differences that they may have with respect to the matters specified
in the Notice of Disagreement. During such period Seller and its auditors shall
have access to the working papers of Purchaser's auditors prepared in connection
with their certification of the Notice of Disagreement. Purchaser and Seller
agree that Purchaser's
<PAGE>
12
independent auditors shall not be liable to Purchaser or its advisors or Seller
or its advisors as a result of granting such access. At the end of such 30-day
period, Seller and Purchaser shall submit to an independent accounting firm (the
"ACCOUNTING FIRM") for arbitration any and all matters that remain in dispute
and were properly included in the Notice of Disagreement. The Accounting Firm
shall be Deloitte & Touche LLP or, if such firm is unable or unwilling to act,
such other nationally recognized independent public accounting firm as shall be
agreed upon by the parties hereto in writing. Seller and Purchaser shall jointly
request that the Accounting Firm use reasonable efforts to render a decision
resolving the matters submitted within 30 days following such submission.
Judgment may be entered upon the determination of the Accounting Firm in any
court having jurisdiction over the party against which such determination is to
be enforced. The cost of any arbitration (including the fees and expenses of the
Accounting Firm and reasonable attorney fees and expenses of the parties)
pursuant to this Section 1.05 shall be borne by Purchaser and Seller in inverse
proportion as they may prevail on matters resolved by the Accounting Firm, which
proportionate allocations shall also be determined by the Accounting Firm at the
time the determination of the Accounting Firm is rendered on the merits of the
matters submitted. The fees and disbursements of Seller's independent auditors
incurred in connection with their certification of the Statement and review of
any Notice of Disagreement shall be borne by Seller, and the fees and
disbursements of Purchaser's independent auditors incurred in connection with
their review of the Statement and certification of any Notice of Disagreement
shall be borne by Purchaser.
(c) The Initial Purchase Price shall be increased by the
amount by which Closing Working Capital exceeds $65,060,000 (the "WC AMOUNT"),
and the Initial Purchase Price shall be decreased by the amount by which Closing
Working Capital is less than the WC Amount (the Initial Purchase Price as so
increased or decreased shall hereinafter be referred to as the "ADJUSTED
PURCHASE PRICE"). If the Initial Purchase Price is less than the Adjusted
Purchase Price, Purchaser shall, and if the Initial Purchase Price is more than
the Adjusted Purchase Price, Seller shall, within 10 business days after the
Statement becomes final and binding on the parties, make payment by wire
transfer in immediately available funds of the amount of such difference,
together with interest thereon at a rate equal to the rate of interest from time
to time announced publicly by Citibank, N.A., as its prime rate, calculated on
the basis of the actual number of days elapsed divided by 365, from the Closing
Date to the date of payment.
(d) The term "WORKING CAPITAL" means Current Assets minus
Current Liabilities. The terms "CURRENT ASSETS" and "CURRENT LIABILITIES" mean
the current assets and current liabilities, respectively, of the Purchased
Operating Business, calculated in accordance with United States generally
accepted accounting principles ("GAAP"), applied on a basis consistent with the
Balance Sheet (as defined in Section 3.04), except as modified by the principles
set forth in Schedule 1.05(d).
(e) Purchaser shall cooperate in the preparation of the
Statement, including providing customary certifications to Seller's auditors.
During the period of time from and after the Closing Date through the resolution
of any adjustment to the Initial Purchase Price contemplated by this Section
1.05, Purchaser shall afford to Seller and any accountants, counsel or financial
advisers retained by Seller in connection with any adjustment to the Initial
Purchase Price contemplated by this Section 1.05 reasonable access during normal
business hours to all the properties, books, contracts, personnel and records of
the Purchased Operating Business relevant to the adjustment contemplated by this
Section 1.05.
<PAGE>
13
SECTION 1.06. DELAYED PURCHASE PRICE.
(a) On the terms and subject to the conditions of this
Agreement, Purchaser shall pay to Seller as additional consideration for the
Acquired Assets an amount in cash equal to ten million dollars ($10,000,000)
(the "DELAYED PURCHASE PRICE"). The Delayed Purchase Price is due and payable on
March 31, 2002 if the Closing should occur on or prior to December 31, 1999; if
the Closing occurs after such date, then the Delayed Purchase Price is due and
payable on the twenty fifth (25th) day succeeding the last day of the first
calendar quarter to end on a day that succeeds the second (2nd) anniversary of
the Closing Date. The Delayed Purchase Price shall be paid by wire transfer to a
bank account designated in writing to Purchaser by Seller, in immediately
available funds.
(b) Purchaser may setoff against the Delayed Purchase Price
any amounts Purchaser believes in good faith are due from Seller, or any of its
affiliates, to Purchaser, or any of its affiliates, including any amounts due
pursuant to this Agreement, any Ancillary Agreement or any other agreement
between the parties, PROVIDED THAT, within six (6) months of any such setoff,
Purchaser shall either (i) commence a lawsuit or other dispute resolution
proceeding, as applicable, and deposit the amount so set off with the court or a
third party escrow agent, or (ii) pay the amount of such setoff to Seller.
(c) The Delayed Purchase Price shall be subject to the
subordination terms summarized on Schedule 1.06, and Seller agrees to execute
and deliver an agreement providing for such subordination in such form as
reasonably proposed by Purchaser's lenders and reasonably approved by Seller.
ARTICLE II
THE CLOSING
SECTION 2.01. CLOSING DATE. The closing of the Acquisition
(the "CLOSING") shall take place at the offices of Jones, Day, Reavis & Pogue,
3500 SunTrust Plaza, 303 Peachtree Street, Atlanta, Georgia 30308-3242, at 10:00
a.m. on the second business day following the satisfaction (or, to the extent
permitted, the waiver) of the conditions set forth in Section 6.01, or, if on
such day any condition set forth in Section 6.02 or 6.03 has not been satisfied
(or, to the extent permitted, waived by the party entitled to the benefit
thereof), as soon as practicable after all the conditions set forth in Article
VI have been satisfied (or, to the extent permitted, waived by the parties
entitled to the benefits thereof), or at such other place, time and date as
shall be agreed between Seller and Purchaser. The date on which the Closing
occurs is referred to in this Agreement as the "CLOSING DATE". Legal title,
equitable title and risk of loss with respect to the Acquired Assets shall not
pass to Purchaser until the Acquired Assets are transferred at the Closing,
which transfer, once it has occurred, shall be deemed effective for tax,
accounting and other computational purposes as of 11:59 p.m. Eastern Time on the
Closing Date.
SECTION 2.02. TRANSACTIONS TO BE EFFECTED AT THE CLOSING. At
the Closing:
(a) Seller shall deliver to Purchaser (i) appropriately
executed deeds (in recordable form), bills of sale, assignments, stock powers
and other instruments of transfer relating to the Acquired Assets in form and
substance reasonably satisfactory to Purchaser and
<PAGE>
14
its counsel and (ii) such other documents as Purchaser or its counsel may
reasonably request to demonstrate satisfaction of the conditions and compliance
with the covenants set forth in this Agreement;
(b) Seller and Purchaser shall execute the other agreements
and instruments to be executed and delivered in connection with this Agreement,
including the Ancillary Agreements; and
(c) Purchaser shall deliver to Seller (i) payment, by wire
transfer to a bank account designated in writing by Seller (such designation to
be made at least two business days prior to the Closing Date), of immediately
available funds in an amount equal to the Initial Purchase Price, (ii)
appropriately executed assumption agreements and other instruments providing for
the assumption of the Assumed Liabilities in form and substance reasonably
satisfactory to Seller and its counsel and (iii) such other documents as Seller
or its counsel may reasonably request to demonstrate satisfaction of the
conditions and compliance with the covenants set forth in this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
SECTION 3.01. ORGANIZATION, STANDING AND POWER. Seller is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full corporate power and authority
to own, lease or otherwise hold its properties and assets and to conduct the
Purchased Operating Business and its other businesses as presently conducted.
Seller is duly qualified to do business as a foreign corporation in each
jurisdiction where the failure to so qualify has had or would have a material
adverse effect (i) on the business, assets, condition (financial or otherwise),
prospects or results of operations of the Business, or (ii) on the ability of
Seller to consummate the Acquisition and the other transactions contemplated
hereby (a "SELLER MATERIAL ADVERSE EFFECT"). Seller has delivered to Purchaser
true and complete copies of the certificate of incorporation and by-laws of
Seller, in each case as amended through the date of this Agreement.
SECTION 3.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. Seller has full power and authority to execute this Agreement
and the Ancillary Agreements to which it is, or is specified to be, a party and
to consummate the Acquisition and the other transactions contemplated hereby and
thereby. The execution and delivery by Seller of this Agreement and the
Ancillary Agreements to which it is, or is specified to be, a party and the
consummation by Seller of the Acquisition and the other transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action. Seller has duly executed and delivered this Agreement and
prior to the Closing will have duly executed and delivered each Ancillary
Agreement to which it is, or is specified to be, a party. This Agreement
constitutes, and each Ancillary Agreement to which Seller is, or is specified to
be, a party will after the Closing constitute, its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
<PAGE>
15
SECTION 3.03. NO CONFLICTS; CONSENTS. Except as set forth in
Schedule 3.03, the execution and delivery by Seller of this Agreement do not,
the execution and delivery by Seller of each Ancillary Agreement to which it is,
or is specified to be, a party will not, and the consummation of the Acquisition
and the other transactions contemplated hereby and thereby and compliance by
Seller with the terms hereof and thereof will not conflict with, or result in
any violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien in favor of any third party or entity upon any of the properties or
assets of Seller or any of its affiliates under, any provision of (i) the
certificate of incorporation or by-laws of Seller or any of its affiliates, (ii)
any Material Contracts (as defined in Section 3.08) to which Seller or any of
its affiliates is a party or by which any of their respective properties or
assets is bound, or (iii) any judgment, order, decree, award, decision,
stipulation, injunction, settlement, process, ruling, subpoena or verdict
("JUDGMENT") entered by any Governmental Entity (as defined below) or
arbitrator, or (iv) Federal, state, local, municipal, foreign, international,
multinational or other constitution, statute, law, ordinance, rule, regulation,
standard, administrative ruling, order, principle of common law, code or treaty
("APPLICABLE LAW") applicable to Seller or any of its affiliates or their
respective properties or assets. No consent, approval, license, permit, order,
waiver or authorization ("CONSENT") of, or registration, declaration or filing
with, any Federal, state, local or foreign government or any court of competent
jurisdiction, tribunal, administrative agency or municipality or subdivision
thereof, or any department, board, bureau, agency, commission or other
governmental authority, quasi-governmental authority, body or instrumentality,
domestic or foreign (a "GOVERNMENTAL ENTITY"), is required to be obtained or
made by or with respect to Seller or any of its affiliates in connection with
the execution, delivery and performance of this Agreement or any Ancillary
Agreement or the consummation of the Acquisition or the other transactions
contemplated hereby and thereby, other than compliance with and filings under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT").
SECTION 3.04. FINANCIAL STATEMENTS.
(a) Schedule 3.04 sets forth the unaudited consolidated
balance sheet of the Purchased Operating Business as of June 30, 1999, December
31, 1998 and June 30, 1998 (the unaudited consolidated balance sheet as of June
30, 1999, the "BALANCE SHEET"), and the unaudited consolidated statements of
income and cash flows of the Purchased Operating Business for the twelve months
ended June 30, 1999 and the six months ended December 31, 1998 and the twelve
months ended June 30, 1998, together with the notes to such financial statements
(such financial statements, together with the notes to such financial
statements, collectively, the "FINANCIAL STATEMENTS"). Each of the Financial
Statements is true, complete and correct in all material respects, and was
prepared from the books and records kept by Seller for the Purchased Operating
Business. Except as set forth in Schedule 3.04, the Financial Statements fairly
present the financial condition and results of operations and cash flows of the
Purchased Operating Business as of the respective dates thereof and for the
respective periods indicated, in accordance with GAAP consistently applied
(except that such Financial Statements may not include all footnote disclosures
required by GAAP, none of which would include any liabilities material in
amount), and disclose all liabilities of Seller, whether absolute, contingent,
accrued or otherwise, existing as of the dates thereof which are of a nature
required to be reflected in financial statements prepared in accordance with
GAAP.
(b) The Balance Sheet reflects all tangible properties and
assets, real, personal or mixed, which are currently used in connection with the
Purchased Operating
<PAGE>
16
Business, except for (A) inventory purchased or sold consistent with past
practice and in the ordinary and normal course of business since the date of the
Balance Sheet (the "BALANCE SHEET DATE"), (B) other properties and assets (other
than capital assets) not in excess of $1,000,000 (in the aggregate) purchased or
sold since the Balance Sheet Date consistent with past practice and in the
ordinary and normal course of business, (C) capital assets purchased since the
Balance Sheet Date, in an amount not in excess of $1,000,000 (in the aggregate),
(D) purchase commitments, (E) the Excluded Assets and (F) the Support Assets.
SECTION 3.05. ASSETS OTHER THAN REAL PROPERTY INTERESTS.
(a) Seller has good and valid title to all the Acquired
Assets, and enforceable power and unqualified right to use and transfer to
Purchaser, in each case free and clear of all mortgages, liens, security
interests, charges, easements, leases, subleases, covenants, rights of way,
options, conditional sales or other title retention agreements, claims, pledges,
reservations, rights of first refusal, servitudes, restrictions or encumbrances
of any kind (collectively, "LIENS"), except (i) such as are set forth in
Schedule 3.05, (ii) mechanics', carriers', workmen's, repairmen's or other like
Liens arising or incurred in the ordinary course of business, for sums not yet
due and payable or which may hereafter be paid without penalty or which are
being contested in good faith, (iii) Liens for Taxes that are not due and
payable or that may hereafter be paid without penalty, (iv) Liens shown on the
Balance Sheet as securing specified liabilities or obligations and Liens
incurred in connection with the purchase of property and/or assets if such
purchase was effected after the Balance Sheet Date in the ordinary course of
business (in each case with respect to which no default exists), and (v) other
minor imperfections of title or encumbrances, if any, none of which,
individually or in the aggregate, are substantial in amount, materially detract
from the value or materially impair the continued use and operation of the
assets to which they relate in the conduct of the Purchased Operating Business
as presently conducted (the Liens described above in clauses (i) through (v) are
referred to collectively as "PERMITTED LIENS"). Schedule 3.05 is a true, correct
and complete list of the Fixed Assets.
(b) This Section 3.05 does not relate to real property or
interests in real property, such items being the subject of Section 3.06, or to
all trademarks and service marks, whether registered or unregistered, brand
names, certification marks, assumed names, trade names and other indications of
origin, the goodwill associated with the foregoing, all registrations and
applications to register the foregoing including any extension, modification or
renewal of any such registration or application; all inventions, discoveries and
ideas, whether patentable or not; all patents, applications for patents
(including divisions, continuations, continuations in-part and renewal
applications), and any renewal, extensions or reissues thereof; non-public
information, trade secrets and confidential and proprietary information,
technology and know-how and rights to limit the use or disclosure thereof by any
person; all writings and other works, whether copyrightable or not;
registrations or applications for registrations of copyrights; and any renewals
or extensions thereof; designs and design registrations; all computer software
and databases; any similar intellectual property or proprietary rights licensed
to Seller and used in the Purchased Operating Business; and any claims or causes
of action arising out of or related to any infringement or misappropriation of
any of the foregoing ("INTELLECTUAL PROPERTY"), such items being the subject of
Section 3.07.
SECTION 3.06. REAL PROPERTY.
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(a) Schedule 3.06 sets forth a true, correct and complete list
of all real property and interests in favor of Seller in real property owned in
fee by Seller and included as an Acquired Asset (individually, an "OWNED
PROPERTY"), and all real property and interests in favor of Seller in real
property leased by Seller and included as an Acquired Asset (individually, a
"LEASED PROPERTY"). The Owned Property and Leased Property comprise all of the
Business Properties. Schedule 3.06 also sets forth a true, correct and complete
list of all instruments and agreements creating any interest in favor of Seller
in the Owned Property or Leased Property. True, correct and complete copies of
the instruments and agreements identified in Schedule 3.06 have been delivered
to Purchaser. Each such instrument and agreement is in full force and effect and
is a legal, binding and enforceable obligation of Seller and, to the knowledge
of Seller, each of the other parties thereto and no event has occurred which
constitutes, or with the giving of notice or passage of time, or both, would
constitute a default or breach thereunder, except for any such default or breach
that, individually or in the aggregate, is not substantial or would not
materially detract from the value or materially impair the continued use and
operation of the Business Properties to which they relate in the conduct of the
Purchased Operating Business as presently conducted.
(b) Seller has good, marketable and insurable fee title to all
Owned Property and good and valid title to the leasehold estates in all Leased
Property, in each case free and clear of all Liens, except (i) Liens described
in clauses (ii) through (v) of Section 3.05(a), (ii) such Liens as are set forth
in Schedule 3.06, (iii) leases, subleases and similar agreements set forth in
Schedule 3.06, (iv) easements, covenants, rights-of-way and other similar
restrictions of record, and (v) (A) zoning, building and other similar
restrictions and (B) Liens that have been placed by any developer, landlord or
other third party on property over which Seller has easement rights or on any
Leased Property and subordination or similar agreements relating thereto (the
Liens described above in clauses (i) through (v) are referred to collectively as
the "PERMITTED ENCUMBRANCES"). None of the items set forth in clause (v) above,
individually or in the aggregate, is substantial in amount, materially detracts
from the value or materially impairs the continued use and operation of the
Business Properties to which they relate in the conduct of the Purchased
Operating Business as presently conducted.
SECTION 3.07. INTELLECTUAL PROPERTY.
(a) Schedule 3.07 sets forth a true and complete list of all
material Intellectual Property owned, used, filed by, licensed to or held for
use by or for the benefit of the Purchased Operating Business, or otherwise used
in the conduct of, or which relate to, the Purchased Operating Business, other
than Intellectual Property included within the Support Assets and other Excluded
Assets and software generally commercially available and requiring no material
customization (such Intellectual Property being hereinafter referred to as the
"ASSIGNED INTELLECTUAL PROPERTY"). With respect to Assigned Intellectual
Property that is registered or subject to an application for registration,
Schedule 3.07 sets forth a list of all jurisdictions in which such Assigned
Intellectual Property is registered or registrations applied for and all
registration and application numbers. Except as set forth in Schedule 3.07, (i)
to the knowledge of Seller, all the Assigned Intellectual Property has been duly
registered in, filed in or issued by the appropriate Governmental Entity where
such registration, filing or issuance is necessary for the conduct of the
Purchased Operating Business as presently conducted, (ii) Seller is the sole and
exclusive owner of, and Seller has the right to use, execute, reproduce,
display, perform, modify, enhance, distribute, prepare derivative works of and
sublicense, without payment to any other person, all the Assigned Intellectual
Property and the
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18
consummation of the Acquisition and the other transactions contemplated hereby
does not and will not conflict with, alter or impair any such rights.
(b) True, correct and complete copies of the Assigned
Intellectual Property identified in Schedule 3.07 have been delivered to
Purchaser. To the Seller's knowledge, the Assigned Intellectual Property is
valid and enforceable. There is no claim or demand of any third party, or any
Proceedings (as defined in Section 3.10(a)) which are pending or, to the
knowledge of Seller, threatened, which challenge the exclusive rights of Seller
in respect of any Assigned Intellectual Property. No Assigned Intellectual
Property is subject to any outstanding Judgment by or with any Governmental
Entity or any Contract, or undertaking with any third party other than set forth
in Schedule 3.07, or infringes or, to the best of Seller's knowledge, is being
infringed or misappropriated by others or is used by others (whether or not such
use constitutes infringement). To the knowledge of Seller, the Purchased
Operating Business does not involve employment of any person in a manner which
violates any non-competition or non-disclosure agreement which such person
entered into in connection with any former employment. All Assigned Intellectual
Property owned or held, directly or indirectly, by any officer, director,
shareholder, employee or any affiliate of Seller and relating to the Purchased
Operating Business have been, or prior to the Closing Date shall have been, duly
and effectively transferred to Seller. Set forth in Schedule 3.07 is a
description of all Proceedings asserted, brought or threatened against Seller
with respect to the Assigned Intellectual Property within the two (2) years
preceding the date hereof, together with a description of the outcome or present
status thereof.
SECTION 3.08. CONTRACTS.
(a) Except as set forth in Schedule 3.08 and except for
Contracts relating solely to Excluded Assets, Seller is not a party to or bound
by any Contract that is included as an Acquired Asset and that is:
(i) an employment, consulting, management or services
Contract with any officers, employees, agents, consultants or advisors
that has an aggregate future liability in excess of $50,000 and is not
terminable by Seller by notice of not more than 30 days without
liability, penalty or premium;
(ii) a collective bargaining agreement or other
Contract with any labor organization, union or association;
(iii) a covenant not to compete that restricts the
conduct of the Purchased Operating Business anywhere in the world;
(iv) a Contract with (A) any shareholder or affiliate
of Seller or (B) any officer, director or employee of Seller or any of
its affiliates (other than the Contracts described in clause (i)
above);
(v) a lease, sublease or similar Contract with any
person under which Seller is a lessor or sublessor of, or makes
available for use to any person, (A) any Business Properties or (B) any
portion of any premises otherwise occupied by Seller;
(vi) a lease, sublease or similar Contract with any
person under which (A)(I) Seller is lessee of, or holds or uses, any
machinery, equipment, vehicle or other
<PAGE>
19
tangible personal property owned by any person or (II) Seller is a
lessor or sublessor of, or makes available for use by any person, any
tangible personal property owned or leased by Seller, in any such case
having an annual liability or receivable, as the case may be, in
excess of $100,000 or (B) Seller is lessee of, or holds or uses,
railcars owned by any person;
(vii) (A) a continuing Contract for the future
purchase of materials, supplies or equipment (other than purchase
orders for inventory in the ordinary course of business consistent with
past practice), or (B) an advertising agreement or arrangement, in any
such case that has an aggregate future liability to any person in
excess of $250,000 and is not terminable by Seller by notice of not
more than 30 days for a cost of less than $50,000;
(viii) a license, sublicense, option or other
Contract relating in whole or in part to the Assigned Intellectual
Property (including any license or other Contract under which Seller is
licensee or licensor of any Assigned Intellectual Property);
(ix) (A) a Contract under which Seller has borrowed
any money from, or issued any note, bond, debenture or other evidence
of indebtedness to, any person or (B) any other note, bond, debenture
or other evidence of indebtedness issued to any person, in any such
case that, individually, is in excess of $100,000;
(x) a Contract (including any so-called take-or-pay
or keepwell agreement) under which (A) any person has directly or
indirectly guaranteed indebtedness, liabilities or obligations of
Seller or (B) Seller has directly or indirectly guaranteed
indebtedness, liabilities or obligations of any other person (in each
case other than endorsements for the purpose of collection in the
ordinary course of business), in any such case that, individually, is
in excess of $100,000;
(xi) a Contract under which Seller has, directly or
indirectly, made any advance, loan, extension of credit or capital
contribution to, or other investment in, any person (other than Seller
and other than extensions of trade credit in the ordinary course of the
Business), in any such case that, individually, is in excess of
$100,000;
(xii) a Contract granting a Lien (other than Permitted
Liens) upon any Business Properties or any other Acquired Asset;
(xiii) a Contract providing for indemnification of
any person with respect to liabilities relating to any current or
former business of Seller or any predecessor person (other than such
contracts entered into with customers and suppliers in the ordinary
course of business);
(xiv) a power of attorney (other than a power of
attorney given in the ordinary course of the Purchased Operating
Business with respect to routine tax matters);
(xv) a confidentiality agreement made for the benefit
of third parties (other than such agreements entered into with
customers and suppliers in the ordinary course of business);
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20
(xvi) a Contract (including a purchase order),
involving payment by Seller of more than $1,000,000 or extending for a
term more than 180 days from the date of this Agreement (unless
terminable without payment or penalty upon no more than 30 days'
notice), other than purchase orders entered into in the ordinary course
of the business after the date of this Agreement and not in violation
of this Agreement;
(xvii) a Contract (including a sales order) involving
the obligation of Seller to deliver products or services for payment of
more than $1,000,000 or extending for a term more than 180 days from
the date of this Agreement (unless terminable without payment or
penalty upon no more than 30 days' notice), other than sales orders
entered into in the ordinary course of the business after the date of
this Agreement and not in violation of this Agreement;
(xviii) a Contract for the sale of any Acquired Asset
or the grant of any preferential rights to purchase any Acquired Asset
or requiring the consent of any party to the transfer thereof (other
than sales of Products in the ordinary course of business);
(xix) a Contract with or license or Permit by or from
any Governmental Entity, other than any permits required by
Environmental Law which are treated in Section 3.16(b) below;
(xx) a currency exchange, interest rate exchange,
commodity exchange or similar Contract;
(xxi) a Contract for any joint venture, partnership
or similar arrangement involving an investment or commitment by Seller
in excess of $250,000, including any ancillary agreements with any such
entity;
(xxii) a Contract providing for the services of any
dealer, distributor, sales representative, franchisee or similar
representative involving the payment or receipt over the life of such
Contract in excess of $250,000 by Seller; or
(xxiii) any other Contract that has an aggregate
future liability to any person in excess of $500,000 or which extends
for a period of more than one year and is not terminable by Seller by
notice of not more than 30 days for a cost of less than $100,000 (other
than purchase orders and sales orders).
The Contracts required to be listed in Schedule 3.08 and the other Schedules
hereto are hereinafter referred to as the "MATERIAL CONTRACTS".
(b) Except as set forth in Schedule 3.08, all Assigned
Contracts are valid, binding and in full force and effect and are enforceable by
Seller, in accordance with their terms, except for such failures to be valid,
binding, in full force and effect or enforceable that, individually or in the
aggregate, have not had and could not reasonably be expected to have a Seller
Material Adverse Effect. Except as set forth in Schedule 3.08, to the knowledge
of Seller, Seller has performed all material obligations required to be
performed by it to date under the Assigned Contracts, and it is not (with or
without the lapse of time or the giving of notice,
<PAGE>
21
or both) in breach or default in any material respect thereunder and, to the
knowledge of Seller, no other party to any Assigned Contract is (with or without
the lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder. Seller has not, except as disclosed in the
applicable Schedule, received any notice of the intention of any party to
terminate any Material Contract. Seller has made available to Purchaser complete
and correct copies of all Material Contracts, together with all modifications
and amendments thereto.
(c) Schedule 3.08 sets forth each Material Contract with
respect to which the Consent of the other party or parties thereto must be
obtained by virtue of the execution and delivery of this Agreement or the
consummation of the Acquisition to avoid the invalidity of the transfer of such
Contract, the termination thereof, a breach, violation or default thereunder or
any other change or modification to the terms thereof.
(d) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to
Seller under any Material Contract.
SECTION 3.09. RECEIVABLES. All Receivables on the Closing Date
(a) represent actual indebtedness incurred by the applicable account debtors and
(b) have arisen from bona fide transactions in the ordinary course of the
Business. To the knowledge of Seller, all the Receivables are good and will be
collectible at the aggregate recorded amounts thereof, net of any applicable
reserves for doubtful accounts reflected in the calculation of Closing Working
Capital. Since the date of the Balance Sheet, there have not been any write-offs
as uncollectible of any Receivables, except for write-offs in the ordinary
course of business and consistent with past practice. Schedule 3.09 sets forth
an aged listing by customer of the Receivables that are outstanding as of June
30, 1999.
SECTION 3.10. PERMITS. Seller possesses or has applied for all
Permits (as defined below) necessary to own or hold under lease and operate the
Acquired Assets and to conduct the Purchased Operating Business as currently
conducted. There has been no material change in the facts or circumstances
reported or assumed in the application for or granting of such Permits. Seller's
operation of the Purchased Operating Business during the pendency of its
applications, if any, for Permits has not violated in any material respect any
law, regulation or order of any Governmental Entity. Schedule 3.10 sets forth a
true, correct and complete list of all material certificates, licenses, permits,
authorizations, variances, waivers, consents and approvals ("PERMITS") issued or
granted to Seller by Governmental Entities that are required for the conduct of
the Purchased Operating Business other than any Permits required under
Environmental Laws, which are treated in Section 3.16(b) below. Except as set
forth in Schedule 3.10, (i) all such Permits are validly held by Seller, and
Seller has complied in all material respects with all terms and conditions
thereof, (ii) during the past twelve months, Seller has not received notice of
any suits, actions, claims, investigations or proceedings (each, a "PROCEEDING")
relating to the revocation, cancellation, suspension or modification of any such
Permits and no such Proceeding is currently pending or, to Seller's knowledge,
threatened, and (iii) none of such Permits will be subject to suspension,
modification, revocation or nonrenewal as a result of the execution and delivery
of this Agreement or the consummation of the Acquisition.
SECTION 3.11. SUFFICIENCY OF ACQUIRED ASSETS. The Acquired
Assets (together with the Excluded Assets specified in Section 1.02(b)),
comprise all the assets employed primarily in connection with the Purchased
Operating Business. The Acquired Assets (together with the Support Assets)
include all rights, properties and other assets necessary to permit Purchaser to
conduct the Purchased Operating Business immediately
<PAGE>
22
following the Closing in all material respects as currently conducted. Except as
set forth in Schedule 3.11, to the knowledge of Seller, (i) all buildings,
plants, structures, equipment and other assets of the Purchased Operating
Business are in good operating condition and repair, and are adequate for the
uses to which they are being put, and (ii) none of such buildings, plants,
structures or equipment is in need of maintenance or repair except for routine
maintenance and repairs.
SECTION 3.12. TAXES.
(a) For purposes of this Agreement:
"TAX" means (i) any tax, governmental fee or other like
assessment or charge of any kind whatsoever together with any interest, penalty,
addition to tax or additional amount due, imposed by any Governmental Entity
(domestic or foreign) responsible for the imposition of any such tax and (ii)
any liability for the payment of any amount of the type described in clause (i)
above as a result of a party to this Agreement being a member of an affiliated,
consolidated or combined group with any other corporation at any time on or
prior to the Closing Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
(b) Seller has (i) filed or caused to be filed with the
appropriate Governmental Entities all returns, declarations, reports and
information returns or statements relating to Taxes, including any amendments
thereto ("TAX RETURNS"), required to be filed by it on or prior to the Closing
Date (taking into account all extensions of due dates). All such Tax Returns
were correct and complete, and all amounts in respect of Taxes due to or claimed
to be due by any Governmental Entity or other taxing authority or any other
person or entity from Seller (other than amounts being contested in good faith)
have been fully and timely paid. No security interests have been imposed on or
asserted against any of the Acquired Assets as a result of or in connection with
any failure or alleged failure to pay any Tax.
(c) Seller has (i) withheld proper and accurate amounts in
compliance with the tax withholding provisions of all applicable laws from its
employees and former employees for all periods which, as of the date of this
Agreement, remain open under federal, state, municipal, local or other laws for
assessment or collection, (ii) correctly and properly prepared and duly and
timely filed all returns and reports relating to Taxes withheld from its
employees and former employees and to its employer liability for employment
Taxes under federal, state, municipal, local and other laws, and (iii) duly and
timely paid and remitted to the appropriate taxing authorities all amounts
withheld from its employees and former employees and any additional amounts that
represent its employer liability for employment Taxes under applicable law.
(d) Seller is a United States person within the meaning of
Section 7701(a)(9) and (a)(1) of the Code. Seller is not a "United States real
property holding corporation" as defined in Section 897(c)(2) of the Code.
Seller has not entered into any agreement, whether or not written, for the
payment of Tax liabilities or entitlement to refunds and related matters with
any other party.
SECTION 3.13. PROCEEDINGS. Schedule 3.13 sets forth a list as
of the date of this Agreement of each pending Proceeding, arising out of the
conduct of the Purchased
<PAGE>
23
Operating Business or against any Acquired Asset or any employee associated
with the Purchased Operating Business or the Acquired Assets, or which would
affect the transactions contemplated by this Agreement, at law or in equity
or before any Governmental Entity or arbitrator, including claims for product
warranty, product liability, anti-trust, unfair competition, price
discrimination or other liability or obligation relating to products, whether
manufactured or sold by Seller, any of its affiliates or any of their
respective predecessors-in-interest in respect of the Purchased Operating
Business, or which would adversely affect the transactions contemplated by
this Agreement, and, to the knowledge of Seller, no one has grounds to assert
any such Proceeding. Except as set forth in Schedule 3.13, none of the
Proceedings or claims listed in Schedule 3.13 would have, if determined
adversely to Seller, individually or in the aggregate, a Seller Material
Adverse Effect. Except as set forth in Schedule 3.13, Seller is not a party
or subject to or in default under any Judgment applicable to the conduct of
the Purchased Operating Business or any Acquired Asset or Assumed Liability,
and a description of all such Judgments is set forth in Schedule 3.13. Except
as set forth in Schedule 3.13, there is not any Proceeding by Seller pending,
or which Seller intends to initiate, against any other Person arising out of
the conduct of the Business.
SECTION 3.14. BENEFIT PLANS.
(a) Schedule 3.14 contains a list and brief description of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained or
contributed to by Seller for the benefit of any Hired Employee (as defined in
Section 5.09) ("SELLER PENSION PLANS") and all "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA), bonus, stock option, stock purchase,
deferred compensation plans or arrangements and other employee fringe benefit
plans maintained, or contributed to, by Seller or any of its affiliates for the
benefit of any Hired Employee (all the foregoing, including Seller Pension
Plans, being herein called "SELLER BENEFIT PLANS"). Seller has made available to
Purchaser true, complete and correct copies of (i) each Seller Benefit Plan,
(ii) the most recent annual reports on Form 5500 (including all schedules and
attachments thereto) filed with the Internal Revenue Service with respect to
each Seller Benefit Plan (if any such report was required), (iii) the most
recent summary plan description for each Seller Benefit Plan for which such a
summary plan description is required and (iv) each trust agreement, group
annuity contract or other funding and financing arrangement relating to any
Seller Benefit Plan.
(b) Except as set forth in Schedule 3.14, no employee or
former employee of the Purchased Operating Business will become entitled to any
bonus, retirement, severance, job security or similar benefit or any enhanced
benefit solely as a result of the transactions contemplated hereby.
SECTION 3.15. ABSENCE OF CHANGES OR EVENTS. Except as set
forth in Schedule 3.15, since the date of the Balance Sheet, there has been no
Seller Material Adverse Effect, other than any such effect relating to United
States or foreign economies in general or the industries in which the Business
operates and not specifically relating to the Business. Except as set forth in
Schedule 3.15, since the date of the Balance Sheet, Seller has caused the
Purchased Operating Business to be conducted in the ordinary course and in
substantially the same manner as previously conducted. Except as disclosed in
Schedule 3.15, since the date of the Balance Sheet, Seller has not (i) sold,
transferred or otherwise disposed of any properties or assets used in connection
with the Purchased Operating Business (including the Acquired Assets) outside
the ordinary and normal course of business; (ii) mortgaged, pledged or
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24
subjected to any Lien any of the Acquired Assets outside the ordinary
and normal course of business; (iii) acquired any property or assets used in
connection with the Purchased Operating Business (including the Acquired Assets)
outside the ordinary and normal course of business or for more than fair market
value; (iv) sustained any material damage, loss or destruction of or to the
Acquired Assets (whether or not covered by insurance); (v) experienced or
suffered any material delay as compared to past experience in payment of its
liabilities and obligations to its trade creditors (including suppliers) or
trade debt; (vi) in connection with the Purchased Operating Business, granted
any salary increase or bonus or permitted any advance to any officer, director
or employee, instituted or granted any general salary increase to the employees
of Seller or entered into any new, or altered or amended any existing, employee
benefit plan or any employment or consulting agreement other than in the
ordinary and normal course consistent with historical practice; (vii) in
connection with the Purchased Operating Business, other than in the ordinary and
normal course of business, paid any obligation or liability (fixed or
contingent), discharged or satisfied any Lien, or settled any claim, liability
or suit pending or threatened against the Purchased Operating Business or any of
the Acquired Assets; (viii) modified, amended, canceled or terminated any
Contracts or commitments under circumstances which would have a Seller Material
Adverse Effect; (ix) made capital expenditures or commitments not set forth in
the capital expenditure budget provided to Purchaser in excess of an aggregate
of $500,000 for additions to property, plant or equipment for use in connection
with the Purchased Operating Business; (x) written down the value of any
Inventory in any material amount; (xi) canceled any other material debts or
claims or waived any rights of substantial value; or (xii) made any material
change in any method of accounting or accounting practice.
SECTION 3.16. COMPLIANCE WITH APPLICABLE LAWS.
(a) Except as set forth in Schedule 3.16, the Business is, and
at all times during the two-year period preceding the date hereof has been, in
compliance in all material respects with all Applicable Laws. Except as set
forth in Schedule 3.16, Seller has not received any notification during the past
two years from a Governmental Entity that alleges that the Purchased Operating
Business is not in compliance in any material respect with any Applicable Law
that has not been cured, and Seller is not subject to any unpaid fine or
continuing sanction for any such non-compliance. No investigation or review by
any Governmental Entity with respect to the Purchased Operating Business is
pending or, to Seller's knowledge, threatened. Seller has not received any
notification that the current use of the Business Properties violates any local
zoning or similar land use or government regulations in any material respect,
and no such violation exists. This Section 3.16(a) does not relate to matters
with respect to Taxes, which are the subject of Section 3.12, or to
environmental matters, which are the subject of Section 3.16(b).
(b) Schedule 3.16(b) set forth a list of all material
certificates, licenses, permits, authorizations, variances, waivers, consents
and approvals (collectively "Environmental Permits") issued or granted to Seller
and required under Environmental Laws for the conduct of the Purchased Operating
Business. Except as set forth in Schedules 3.16(b)(i)-(vi), as applicable (or
otherwise disclosed in the reports listed in Schedules 3.16(b)(i)-(vi), as
applicable), (i) Seller has not received any notification from a Governmental
Entity that alleges that the Purchased Operating Business is not in compliance
with any Environmental Law (as defined below); (ii) Seller holds, and is in
compliance with, all Environmental Permits, and is in compliance with all
Environmental Laws, including all reporting requirements thereunder, except for
any such failure to hold or any noncompliance that could not reasonably be
expected to lead
<PAGE>
25
to a material liability; (iii) in connection with the conduct of the Purchased
Operating Business, Seller has not been ordered, entered into or agreed to any
court decree or order and is not subject to any Judgment relating to compliance
with any Environmental Law or to investigation or cleanup of Contaminants of
Concern (as defined below) or seeking reimbursement of the costs of response
associated therewith; (iv) Seller has not assumed, whether by contract or
operation of law, any material liabilities arising under any Environmental Laws
in connection with its conduct of the Purchased Operating Business; (v) Seller
has not handled, managed, transported, disposed, treated or stored any
Contaminants of Concern in a manner that would cause the release or potential
release of, and to the knowledge of Seller, there are no Contaminants of Concern
on, at, or under any of the Business Properties or any other real property
previously used in the Purchased Operating Business; and (vi) no off-site
facility to which Contaminants of Concern from the operations of the Purchased
Operating Business have been taken for disposal is currently under any
investigation or remediation pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") or any comparable local or
state Environmental Law and Seller knows of no information or facts which would
cause such off-site facility to be subject to such investigation or remediation.
Except as set forth in Schedules 3.13 and 3.16(b)(i), there are no Proceedings
or investigations related to the presence, release, productions, handling,
discharge, spillage, transportation or disposal of any Contaminant of Concern or
contamination of soil, water or air by any Contaminant of Concern pending or
threatened with respect to the Business Property or otherwise against the Seller
in any court or before any state, federal or other Governmental Entity or
private arbitration tribunal and there is no basis for any such claim, action,
suit, proceeding or investigation. The term "ENVIRONMENTAL LAWS" means any and
all Applicable Laws, Judgments and Permits issued, promulgated or entered into
by or with any Governmental Entity, relating to the environment, preservation or
reclamation of natural resources; to the management, Release or threatened
Release of Contaminants of Concern; or to occupational health and safety. The
term "CONTAMINANTS OF CONCERN" means (1) any and all radioactive materials or
wastes, petroleum (including crude oil or any fraction thereof) or petroleum
distillates, asbestos or asbestos containing materials, urea formaldehyde foam
and (2) any other wastes, materials, chemicals or substances regulated under any
Environmental Law. The term "RELEASE" has the meaning set forth in Section
101(22) of CERCLA. Notwithstanding anything to the contrary in this Agreement,
this Section 3.16(b) contains Seller's only representations and warranties with
respect to matters arising under or relating to Environmental Laws.
SECTION 3.17. EMPLOYEE AND LABOR MATTERS.
(a) Except as set forth in Schedule 3.17: (i) there is not
any, and during the past five years there has not been any, labor strike,
slowdown, picketing, work stoppage or lockout pending, or, to the knowledge of
Seller, threatened, against the Purchased Operating Business; (ii) to the
knowledge of Seller, no union organizational campaign is in progress with
respect to the employees of the Purchased Operating Business and no question
concerning representation of such employees exists, and no application for
certification of a collective bargaining agent is pending or, to Seller's
knowledge, threatened; (iii) Seller is not engaged in any unfair labor practice
in connection with the conduct of the Purchased Operating Business; (iv) there
are not any unfair labor practice charges or complaints against Seller pending,
or, to the knowledge of Seller, threatened, before the National Labor Relations
Board in connection with the conduct of the Purchased Operating Business; (v)
there are not any pending, or, to the knowledge of Seller, threatened, union
grievances against Seller in connection with the conduct of the Purchased
Operating Business as to which there is a reasonable possibility of adverse
determination and that, if so determined, individually or in the aggregate,
could reasonably be
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26
expected to have a Seller Material Adverse Effect; (vi) there are not any
pending, or, to the knowledge of Seller, threatened, charges in connection with
the conduct of the Purchased Operating Business against Seller or any current or
former employee of the Purchased Operating Business before the Equal Employment
Opportunity Commission or any state or local agency responsible for the
prevention of unlawful employment practices; and (vii) Seller has not received
written notice during the past five years of the intent of any Governmental
Entity responsible for the enforcement of labor or employment laws to conduct an
investigation of the Purchased Operating Business and, to the knowledge of
Seller, no such investigation is in progress.
(b) Seller has substantially complied, and the Purchased
Operating Business is operating and has been operated in substantial compliance
with all Applicable Laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including the Immigration
Reform and Control Act, the Civil Rights Act of 1964, the Age Discrimination Act
of 1967, the Americans with Disabilities Act, the WARN Act, and any similar
Applicable Laws relating to the Purchased Operating Business respecting
employment discrimination, equal employment opportunity, affirmative action,
employee privacy, plant closing, wrongful or unlawful termination, workers'
compensation, the payment of social security and similar Taxes, labor management
relations and unemployment insurance, or related matters.
SECTION 3.18. LIABILITIES. Except as set forth in Schedule
3.18, to the knowledge of Seller, Seller has no liabilities or obligations of
any nature whatsoever, whether absolute, accrued, contingent or otherwise,
related to or connected with the Business or the Acquired Assets not set forth
on the Balance Sheet, except for those (i) incurred or accrued in the ordinary
and normal course of the Seller's business, (ii) related to environmental
matters or (iii) which could not reasonably be expected to result in a Seller
Material Adverse Effect.
SECTION 3.19. INSURANCE. Seller maintains insurance policies
that (i) are sufficient for compliance with all requirements of law and of all
Contracts to which the Seller or any affiliate is a party in respect of the
Business and (ii) provide adequate insurance coverage for the assets, operations
and risks of the Purchased Operating Business in accordance with customary
industry practice.
SECTION 3.20. CUSTOMERS AND SUPPLIERS. Seller is not involved
in any material controversy with any of the customers or suppliers to the
Purchased Operating Business. Schedule 3.20 sets forth a true, correct and
complete list of (i) Seller's twenty (20) largest customers in terms of sales
during the twelve-month period ended June 30, 1999 and (ii) Seller's suppliers
which, during the twelve (12) months ended June 30, 1999, individually accounted
for $1,000,000 or more of Seller's orders for the purchase of raw materials,
supplies, equipment or parts. Except as set forth in Schedule 3.20, Seller has
not been advised by any customer or supplier set forth in Schedule 3.20 that
such customer or supplier was or is intending to terminate its relationship with
Seller or would not continue to purchase supplies or services relating to the
Purchased Operating Business for future periods on account of any
dissatisfaction with Seller's performance. All business placed by all employees
of Seller with respect to the Purchased Operating Business has been placed in
the name of Seller, and all fees on such Purchased Operating Business have been
paid to and are the property of Seller.
SECTION 3.21. ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither
Seller, parent of Seller, nor any director, officer or employee thereof has,
directly or indirectly, within
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27
the past five years, given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other person who is or may be in a
position to help or hinder the Business (or assist Seller in connection with any
actual or proposed transaction in respect thereof) which is reasonably likely to
subject the Seller to any damage or penalty in any civil, criminal or
governmental Proceeding.
SECTION 3.22. YEAR 2000 COMPLIANCE. To the knowledge of
Seller, (i) all of the software used in the Purchased Operating Business (the
"SOFTWARE") is designed to be used prior to, during, and after the calendar year
2000 A.D., and the Software will operate during each such time period without
error relating to date data, specifically including any error relating to, or
the product of, date data which represents or references different centuries or
more than one century; (ii) the Software will not abnormally end or provide
invalid or incorrect results as a result of date data, specifically including
date data that represents or references different centuries or more than one
century; (iii) the Software has been designed to ensure year 2000 compatibility,
including date data century recognition, calculations that accommodate same
century and multi- century formulas and date values, and date data interface
values that reflect the century; and (iv) the software includes "year 2000
capabilities," except, in each such case, to the extent it could not reasonably
be expected to have a Seller Material Adverse Effect. For the purposes of this
Agreement, "year 2000 capabilities" means that the Software:
(a) will manage and manipulate data involving dates, including
single century formulas and multi-century formulas, and will not cause an
abnormally ending scenario within the application or generate incorrect values
or invalid results involving such dates;
(b) provides that all date-related user interface
functionalities and data fields include the indication of century or appropriate
windowing code; and
(c) provides that all date-related data interface
functionalities include the indication of century or appropriate windowing code.
SECTION 3.23. EMPLOYMENT CIRCUMSTANCES. Neither Seller nor its
management or other agents has at any time made any representation to the
employees of the Business nor to any bargaining representative of any of said
employees as to the fact, terms or conditions of employment of said persons
subsequent to the Closing (other than any such facts, terms or conditions
expressly set forth in this Agreement).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
SECTION 4.01. ORGANIZATION, STANDING AND POWER. Purchaser is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full corporate power and authority
to enable it to own, lease or otherwise hold its properties and assets and to
carry on its business as presently conducted, other than such franchises,
licenses, permits, authorizations and approvals the lack of which, individually
or in the aggregate, have not had and could not reasonably be expected to have a
material adverse effect on the ability of Purchaser to consummate the
Acquisition and the other transactions
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28
contemplated hereby (a "PURCHASER MATERIAL ADVERSE EFFECT"). Purchaser has
delivered to Seller true and complete copies of the certificate of incorporation
and by-laws of Purchaser, in each case as amended through the date of this
Agreement.
SECTION 4.02. AUTHORITY; EXECUTION AND DELIVERY; AND
ENFORCEABILITY. Purchaser has full power and authority to execute this Agreement
and the Ancillary Agreements to which it is, or is specified to be, a party and
to consummate the Acquisition and the other transactions contemplated hereby and
thereby. The execution and delivery by Purchaser of this Agreement and the
Ancillary Agreements to which it is, or is specified to be, a party and the
consummation by Purchaser of the Acquisition and the other transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action. Purchaser has duly executed and delivered this Agreement and
prior to the Closing will have duly executed and delivered each Ancillary
Agreement to which it is, or is specified to be, a party. This Agreement
constitutes, and each Ancillary Agreement to which it is, or is specified to be,
a party will after the Closing constitute, its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
SECTION 4.03. NO CONFLICTS; CONSENTS. The execution and
delivery by Purchaser of this Agreement do not, the execution and delivery by
Purchaser of each Ancillary Agreement to which it is, or is specified to be, a
party will not, and the consummation of the Acquisition and the other
transactions contemplated hereby and thereby and compliance by Purchaser with
the terms hereof and thereof will not conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of Purchaser or any of its subsidiaries
under, any provision of (i) the certificate of incorporation or by-laws of
Purchaser or any of its subsidiaries, (ii) any Contract to which Purchaser or
any of its subsidiaries is a party or by which any of their respective
properties or assets is bound or (iii) any Judgment or Applicable Law applicable
to Purchaser or any of its subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and (iii) above, any such items
that, individually or in the aggregate, have not had and could not reasonably be
expected to have a Purchaser Material Adverse Effect. No Consent of or
registration, declaration or filing with any Governmental Entity is required to
be obtained or made by or with respect to Purchaser or any of its subsidiaries
in connection with the execution, delivery and performance of this Agreement or
any Ancillary Agreement or the consummation of the Acquisition or the other
transactions contemplated hereby and thereby, other than (A) compliance with and
filings under the HSR Act, (B) compliance with and filings under Section 13(a)
of the Securities and Exchange Act of 1934, as amended, and under the Securities
Act of 1933, as amended, and (C) compliance with and filings and notifications
under applicable environmental laws.
SECTION 4.04. LITIGATION. There are not any (a) outstanding
Judgments against or affecting Purchaser or any of its subsidiaries, (b)
Proceedings pending or, to the knowledge of Purchaser, threatened against or
affecting Purchaser or any of its subsidiaries or (c) investigations by any
Governmental Entity that are, to the knowledge of Purchaser, pending or
threatened against or affecting Purchaser or any of its subsidiaries that, in
any case, individually or in the aggregate, have had or could reasonably be
expected to have a Purchaser Material Adverse Effect.
SECTION 4.05. AVAILABILITY OF FUNDS. True and correct copies
of a commitment letter from The Chase Manhattan Bank related to a senior secured
credit facility
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29
(the "SENIOR COMMITMENT"), and a "highly confident" letter from
Chase Securities Inc. related to a proposed offering of senior subordinated
notes ("NOTES LETTER") which each remain in full force and effect, have been
provided to Seller. The financing required to consummate the Acquisition is
referred to in this Agreement as the "FINANCING." As of the date of this
Agreement, Purchaser does not have any reason to believe that any of the
conditions to the Senior Commitment or Notes Letter will not be satisfied or
that the Financing will not be available to Purchaser on a timely basis to
consummate the Acquisition.
ARTICLE V
COVENANTS
SECTION 5.01. Covenants of Seller Relating to Conduct of
Business.
(a) Except for matters set forth in Schedule 5.01 or otherwise
expressly permitted by the terms of this Agreement, from the date of this
Agreement to the Closing, Seller shall conduct the Business in the usual,
regular and ordinary course in substantially the same manner as previously
conducted and, to the extent consistent therewith, use its best efforts to keep
intact the Purchased Operating Business, keep available the services of the
current employees of the Purchased Operating Business and preserve the
relationships of the Business with customers, suppliers, licensors, licensees,
distributors and others with whom the Purchased Operating Business deals to the
end that the Purchased Operating Business shall be unimpaired at the Closing.
Prior to the Closing, Seller shall not take any action that would, or that could
reasonably be expected to, result in any of the conditions to the purchase and
sale of the Acquired Assets set forth in Article VI not being satisfied. Seller
shall also confer with Purchaser concerning operational matters of a material
nature to the extent permitted by Applicable Laws and shall report periodically
to Purchaser concerning the status of the Business. In addition (and without
limiting the generality of the foregoing), except as set forth in Schedule 5.01
or otherwise expressly permitted or required by the terms of this Agreement,
Seller shall not do any of the following in connection with the Purchased
Operating Business without the prior written consent of Purchaser:
(i) adopt or amend in any material respect any Seller
Benefit Plan (or any plan that would be a Seller Benefit Plan if
adopted) or enter into, adopt, extend (beyond the Closing Date), renew
or amend any collective bargaining agreement or other Contract with any
labor organization, union or association, except in each case as
required by Applicable Law;
(ii) grant to any executive officer or employee any
increase in compensation or benefits, except in the ordinary course of
business and consistent with past practice or as may be required under
existing agreements and except for any increases for which Seller shall
be solely obligated, or select any executive officer or employee for
benefits under the Vista Chemical Company Discretionary Termination
Plan except as may be required under such plan;
(iii) incur or assume any liabilities, obligations or
indebtedness for borrowed money or guarantee any such liabilities,
obligations or indebtedness, other than in the ordinary course of
business and consistent with past practice; PROVIDED,
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HOWEVER, that in no event shall the Business incur or assume any
long-term indebtedness for borrowed money;
(iv) permit, allow or suffer any Acquired Asset to
become subjected to any Lien of any nature whatsoever that would have
been required to be set forth in Schedule 3.05 or 3.06 if existing on
the date of this Agreement;
(v) cancel any material indebtedness (individually or
in the aggregate) or waive any claims or rights of substantial value;
(vi) except for intercompany transactions in the
ordinary course of business, pay, loan or advance any amount to, or
sell, transfer or lease any of its assets to, or enter into any
agreement or arrangement with, Seller or any of its affiliates;
(vii) make any change in any method of accounting or
accounting practice or policy other than those required by
international accounting standards;
(viii) acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire
any assets (other than in the ordinary course of business) that are
material, individually or in the aggregate, to the Purchased Operating
Business;
(ix) make or incur any capital expenditure that,
individually or in the aggregate, exceeds the capital expenditure
budget provided to Purchaser by more than $500,000;
(x) sell, lease, license or otherwise dispose of any
of its assets that are material, individually or in the aggregate, to
the Business, except (A) inventory and obsolete or excess equipment
sold in the ordinary course of business and consistent with past
practice and (B) any Excluded Asset identified in Schedule 1.02(b);
(xi) enter into any lease of real property, except
any renewals of existing leases in the ordinary course of business; or
(xii) authorize any of, or commit or agree to take,
whether in writing or otherwise, to do any of, the foregoing actions.
(b) ADVISE OF CHANGES. Seller shall promptly advise Purchaser
in writing of the occurrence of any matter or event that is material to the
business, working capital or results of operations of the Business.
(c) AFFIRMATIVE COVENANTS. Until the Closing, Seller shall,
and shall cause its affiliates to:
(i) maintain the Acquired Assets in the ordinary
course of business in good operating order and condition, reasonable
wear and tear excepted;
(ii) upon any damage, destruction or loss to any
material Acquired Asset, apply any insurance proceeds received with
respect thereto to the prompt
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31
repair, replacement and restoration thereof to the condition of such
Acquired Asset before such event or, if required, to such other
(better) condition as may be required by Applicable Law; and
(iii) maintain its level and quality of inventory and
supplies, raw materials and spare parts in the ordinary course in a
manner consistent with its historical practices, taking into account
current business circumstances such as customer allocation and industry
demand.
SECTION 5.02. NO SOLICITATION. Seller shall not, nor shall it
authorize or permit any officer, director or employee of or any investment
banker, attorney, accountant or other representative retained by either of them
to, (i) directly or indirectly, solicit, initiate or encourage any "other bid",
(ii) enter into any agreement with respect to any other bid or (iii) participate
in any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any other bid. Seller promptly shall advise Purchaser
orally and in writing of any other bid or any inquiry with respect to or which
could lead to any other bid and the identity of the person making any such other
bid or inquiry. As used in this Section 5.02, "other bid" shall mean any
proposal to acquire in any manner any Acquired Asset or enter into any joint
venture arrangement with respect to any of the Acquired Assets, other than (A)
the transactions contemplated by this Agreement and (B) the acquisition of
inventory in the ordinary course of business.
SECTION 5.03. ACCESS TO INFORMATION. Subject to applicable
legal constraints, Seller shall afford to Purchaser and its accountants, counsel
and other representatives reasonable access, upon reasonable notice during
normal business hours during the period prior to the Closing, to all the
personnel, properties, books, contracts, commitments, Tax returns and records of
the Business, and during such period shall furnish promptly to Purchaser any
information concerning the Business as Purchaser may reasonably request;
PROVIDED, HOWEVER, that such access does not unreasonably disrupt the normal
operations of Seller or the Business and Seller shall not be required to
disclose any competitively sensitive information. Seller shall authorize its
accountants to permit Purchaser and Purchaser's accountants to examine all
accounting records and working papers pertaining to the Financial Statements.
SECTION 5.04. CONFIDENTIALITY. Seller shall keep confidential,
and cause its affiliates and instruct its and their officers, directors,
employees and advisors to keep confidential, all information relating to the
Business or Purchaser, except as required by law or administrative process and
except for information that is available to the public on the Closing Date, or
thereafter becomes available to the public other than as a result of a breach of
this Section 5.04. The covenant set forth in this Section 5.04 shall terminate
three years after the Closing Date.
SECTION 5.05. BEST EFFORTS.
(a) On the terms and subject to the conditions of this
Agreement, each party shall use its best efforts to cause the Closing to occur,
including taking all reasonable actions necessary to comply promptly with all
legal requirements that may be imposed on it or any of its affiliates with
respect to the Closing. Without limiting the foregoing or the provisions
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32
set forth in Section 5.05(b), each party shall use its best efforts to cause the
Closing to occur on or prior to December 31, 1999.
(b) Each of Seller and Purchaser shall as promptly as
practicable, but in no event later than five business days following the
execution and delivery of this Agreement, file with the United States Federal
Trade Commission (the "FTC") and the United States Department of Justice (the
"DOJ") the notification and report form, if any, required for the transactions
contemplated hereby and any supplemental information requested in connection
therewith pursuant to the HSR Act. Any such notification and report form and
supplemental information shall be in substantial compliance with the
requirements of the HSR Act. The HSR Act filing fee shall be paid one-half by
each of the Purchaser and Seller. Each of Purchaser and Seller shall furnish to
the other such necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or submission that is
necessary under the HSR Act. Seller and Purchaser shall keep each other apprised
of the status of any communications with, and any inquiries or requests for
additional information from, the FTC and the DOJ and shall comply promptly with
any such inquiry or request. Each of Seller and Purchaser shall use its best
efforts to obtain any clearance required under the HSR Act for the consummation
of the transactions contemplated by this Agreement.
(c) Each party shall, and shall cause its affiliates to, use
its best efforts (at its own expense) to obtain, and to cooperate in obtaining,
all consents from third parties necessary or appropriate to permit the transfer
of the Acquired Assets to, and the assumption of the Assumed Liabilities by,
Purchaser; PROVIDED, HOWEVER, that the parties shall not be required to pay or
commit to pay any amount to (or incur any obligation in favor of) any person
from whom any such consent may be required (other than nominal filing or
application fees). Purchaser acknowledges that certain consents and waivers with
respect to the transactions contemplated by this Agreement may be required from
parties to the Assigned Contracts and that such consents and waivers have not
been obtained as of the date hereof. Seller shall not have any liability
whatsoever to Purchaser arising out of or relating to the failure to obtain any
such consents or waivers that may be required in connection with the
transactions contemplated by this Agreement or because of the termination of any
Assigned Contract as a result thereof and Purchaser acknowledges that no
representation, warranty or covenant of Seller contained herein shall be
breached or deemed breached, and, subject to satisfaction of Section 6.02(e), no
condition shall be deemed not satisfied, solely as a result of (i) the failure
to obtain any such consent or waiver, (ii) any such termination or (iii) any
lawsuit, action, proceeding or investigation commenced or threatened by or on
behalf of any person arising out of or relating to the failure to obtain any
such consent or any such termination; PROVIDED that Seller has otherwise
complied with and not breached any representation, warranty or covenant herein,
including the first sentence of this clause (c) and Section 3.08 hereof.
SECTION 5.06. EXPENSES; CERTAIN TAX MATTERS.
(a) Whether or not the Closing takes place, and except as set
forth in Sections 5.05(b), 5.12 and 9.03 and Article VIII, all costs and
expenses incurred in connection with this Agreement and the Ancillary Agreements
and the transactions contemplated hereby and thereby shall be paid by the party
incurring such expense, including all costs and expenses incurred pursuant to
Sections 1.04 and 5.05.
(b) Any sales, use, transfer, vehicle transfer, stamp,
conveyance, value added or other similar Taxes that may be imposed by any
Governmental Entity, and all
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33
recording or filing fees, notarial fees and other similar costs of Closing with
respect to the purchase and sale of the Acquired Assets or otherwise on account
of this Agreement or the transactions contemplated hereby, will be borne by
Seller, PROVIDED that Purchaser shall cooperate with Seller to minimize the
amount of any such Taxes due with respect to the sale of the Acquired Assets and
shall indemnify Seller for any additional Taxes due from Seller as a result of
Purchaser's failure to cooperate.
(c) Seller will cause to be included in its income Tax Returns
for all periods or portions thereof ending on or before the Closing Date, all
revenue and expense relating to the operations of the Purchased Operating
Business during such periods or portions thereof. Seller will prepare and timely
file or cause to be prepared and timely filed all such Tax Returns with the
appropriate Governmental Entities. Seller will make all payments of Tax shown to
be due and owing in such Tax Returns.
(d) Seller and Purchaser will (i) each provide the other with
such assistance as may reasonably be requested by any of them in connection with
the preparation of any Tax Return, audit or other examination by any taxing
authority or judicial or administrative proceedings relating to liability for
Taxes, (ii) each retain and provide the other with any records or other
information that may be relevant to such Tax Return, audit or examination,
proceeding or determination, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any Tax Return of the other for any
period. In addition, Seller will retain until the applicable statutes of
limitations (including any extensions) have expired copies of all Tax Returns,
supporting work schedules, and other records or information that may be relevant
to such Tax Returns for all tax periods or portions thereof ending on or before
or which include the Closing Date and will not destroy or otherwise dispose of
any such records without first providing Purchaser with a reasonable opportunity
to review and copy the same.
SECTION 5.07. BROKERS OR FINDERS. Each of Purchaser and Seller
represent, as to itself and its affiliates, that no agent, broker, investment
banker or other firm or person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except, as to Seller and its
affiliates, Deutsche Bank Securities Inc., whose fees and expenses will be paid
by Seller and, as to Purchaser and its affiliates, Chase Securities Inc., whose
fees and expenses will be paid by Purchaser.
SECTION 5.08. COLLECTION OF RECEIVABLES. From and after the
Closing, Purchaser shall have the right and authority to collect for its own
account all Receivables and other related items that are included in the
Acquired Assets and to endorse with the name of Seller, any checks or drafts
received with respect to any Receivables or such other related items. Seller
shall promptly deliver to Purchaser any cash or other property received directly
or indirectly by it with respect to the Receivables and such other related
items, including any amounts payable as interest.
SECTION 5.09. EMPLOYEE MATTERS.
(a) Purchaser will not be required and at its option may
choose to not adopt or assume the Collective Bargaining Agreement in effect at
the Aberdeen, Mississippi plant between Seller and the United Steelworkers of
America, AFL-CIO- CLC and its Local 15198.
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34
(b) Purchaser will establish the initial terms and conditions
of employment for the Purchased Operating Business. The initial terms and
conditions of employment (other than with respect to the employees set forth on
Schedule 5.09(c)) are set forth on Schedule 5.09(b). Purchaser shall indemnify
and hold Seller and its affiliates harmless for all Losses incurred by Seller
relating to the failure of Purchaser to (i) offer employment on the terms set
forth in Schedule 5.09(b) to each employee of Seller as of the Closing Date
whose principal place of employment is one of the Business Properties or (ii)
provide salary compensation to each Hired Employee during the twelve month
period following the Closing Date that is no less favorable than that paid prior
to Closing. Any of Seller's employees actually hired by Purchaser pursuant to
this Section 5.09(b) or Section 5.09(c) are hereinafter referred to as "HIRED
EMPLOYEES".
(c) Purchaser will offer employment on the terms, and to the
employees of Seller whose principal place of employment is not one of the
Business Properties, set forth in Schedule 5.09(c).
(d) Purchaser shall recognize service of Hired Employees with
Seller prior to the Closing Date and, to the extent recognized by Seller for
such purposes, service with Seller's affiliates and predecessors prior to the
Closing Date, for purposes of determining the amount of vacation benefits for
such Hired Employees.
SECTION 5.10. BENEFIT PLANS.
(a) Effective as of the day immediately following the Closing
Date, Purchaser shall have in effect a defined contribution plan that includes a
qualified cash or deferred arrangement within the meaning of Section 401(k) of
the Code ("PURCHASER'S SAVINGS PLAN"). Each Hired Employee who was participating
in the Savings and Investment Plan of Seller ("SELLER'S SAVINGS PLAN") as of the
Closing shall be eligible to become a participant in Purchaser's Saving's Plan
as of the day immediately following the Closing Date. Hired Employees shall
receive credit for all service with Seller prior to Closing and, to the extent
recognized by Seller for such purposes, service with Seller's affiliates and
predecessors prior to Closing, for purposes of eligibility and vesting under
Purchaser's Savings Plan. The Seller's Savings Plan shall retain all assets and
liabilities with respect to the accounts of retirees or other former employees
of the Purchased Operating Business ("FORMER EMPLOYEES") or accounts created
pursuant to qualified domestic relations orders, within the meaning of Section
414(p) of the Code, affecting Seller's Savings Plan. Upon receipt by Purchaser
and Seller of favorable determination letters to the effect that Purchaser's and
Seller's Savings Plans are qualified under Section 401(a) of the Code (or an
opinion of Purchaser's or Seller's counsel, as the case may be, reasonably
satisfactory to Seller or Purchaser, as appropriate, to such effect), Seller
shall vest all accounts in Seller's Savings Plan for the Hired Employees and
shall cause to be transferred from the Seller's Savings Plan to Purchaser's
Savings Plan assets having a fair market value equal to the aggregate value of
the account balances of the Hired Employees in the Seller's Savings Plan as of
the date of transfer (such transfer to consist of notes evidencing loans to
Hired Employees from their account balances and the balance in cash).
(b) (i) Seller shall be responsible in accordance with its
applicable welfare plans in effect prior to the Closing for all medical and
dental claims for expenses incurred on or prior to the Closing Date by Hired
Employees, Former Employees and their dependents. Reimbursement of employees and
their dependents for medical and dental expenses associated
<PAGE>
35
with such claims (including claims submitted on behalf of disabled employees and
their dependents) shall be determined in accordance with the terms of Sellers'
applicable welfare plans. Seller shall terminate coverage of Hired Employees and
their dependents effective for claims for expenses incurred after the Closing
Date. Purchaser shall be responsible for all medical and dental claims, pursuant
to the provisions of plans adopted by Purchaser providing said benefits, for
expenses incurred after the Closing Date (but specifically not including
responsibility for post-retirement medical claims of employees of Seller who
retire or retired prior to Closing) by Hired Employees and their dependents;
PROVIDED HOWEVER, that Purchaser's medical and dental programs shall not contain
a pre-existing condition clause and shall otherwise provide sufficient medical
and dental coverage that Seller and its affiliates and predecessors shall have
no obligation to provide "COBRA" continuation coverage under Section 4980B(f) of
the Code as a consequence solely of the employment by Purchaser of the Hired
Employees. Seller shall remain responsible for "COBRA" continuation coverage for
all other employees or their dependents whose "qualifying events" occurred on
ar prior to the Closing Date;
(ii) Purchaser shall be responsible for all long-term
disability income benefits payable in respect of periods after the
Closing Date for Hired Employees who become disabled after the Closing
Date and for short-term disability benefits payable in respect of
periods after the Closing Date regardless of when the Hired Employee
becomes disabled. Seller shall be responsible for long-term disability
benefits payable in respect of periods on or after the Closing Date for
Hired Employees who become disabled on or prior to the Closing Date;
(iii) Purchaser shall be responsible for all life
insurance claims (including post-retirement life insurance claims) of
Hired Employees and their dependents for losses incurred by such
employees or dependents after the Closing Date under group life, travel
and accident, and accidental death and dismemberment insurance policies
in effect prior to or following the Closing. Seller shall be
responsible solely for claims for such losses incurred on or prior to
the Closing Date; and
(iv) If the Closing occurs on or before December 31,
1999, Purchaser intends to adopt benefit plans which are substantially
similar to those Seller welfare benefit plans which provide medical,
dental, long-term and short-term disability and life, travel accident
and accidental death and dismemberment benefits for the Hired Employees
for a period until and including December 31, 1999, and Seller will
provide (and Purchaser will promptly pay to Seller the reasonable cost
of) any administrative services reasonably necessary for the
administration of said benefits for said period if requested by
Purchaser, and Purchaser will fully indemnify Seller and its affiliates
for all liabilities and obligations arising from such administration;
subsequent to said date, Purchaser will provide such benefits as it
deems appropriate for the Hired Employees who remain actively employed
by Purchaser, PROVIDED that Purchaser shall indemnify and hold Seller
and its affiliates harmless for all Losses incurred by Seller relating
to the failure of Purchaser during the twelve month period following
the Closing Date to offer benefits to Hired Employees that are as
favorable as those provided to similarly situated other employees of
Purchaser.
(c) Purchaser shall provide severance and other separation
benefits to each Hired Employee terminated by Purchaser prior to the first (1st)
anniversary of Closing that are comparable to the severance and other separation
benefits provided by Seller in effect on the
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36
date of the Agreement, and for Hired Employees terminated thereafter Purchaser
shall provide severance and separation benefits in accordance with Purchaser's
policies. Purchaser shall recognize service with Seller prior to Closing, and,
to the extent recognized by Seller for such purposes, service with Seller's
affiliates and predecessors prior to the Closing Date, for purposes of
determining the amount of such severance and other separation benefits.
Purchaser shall indemnify and hold Seller and its affiliates harmless from any
claims made by any Hired Employee for severance or other separation benefits and
from any other claims arising out of or in connection with the employment or the
termination of employment of, any Hired Employee by Purchaser.
(d) The parties agree to furnish each other with such
information concerning employees and employee benefit plans, and to take all
such other action, as is necessary and appropriate to effect the transactions
contemplated by this Agreement.
(e) Seller currently sponsors a program that provides workers
compensation benefits for eligible current and former employees of the Purchased
Operating Business ("SELLER'S WORKERS COMPENSATION PROGRAM"). Seller shall be
responsible for all claims for workers compensation benefits which are incurred
on or prior to the Closing Date by such Purchased Operating Business employees
that are payable under the terms and conditions of Seller's Workers Compensation
Program. Effective as of the Closing Date, Purchaser shall take all necessary
and appropriate action to adopt a workers compensation program providing such
workers compensation benefits as Purchaser determines appropriate and consistent
with applicable law for the Hired Employees covered by such program
("PURCHASER'S WORKERS COMPENSATION PROGRAM"). Purchaser's Workers Compensation
Program shall be responsible for all claims for benefits which are incurred
after the Closing Date by Hired Employees that are payable under the terms and
conditions of Purchaser's Workers Compensation Program. For purposes of this
Section 5.10(e), a claim for workers compensation benefits shall be deemed to be
incurred when the injury or illness which is the cause of the claim occurs.
(f) Seller agrees to provide any required notice under the
Worker Adjustment and Retraining Notification Act, as amended (the "WARN ACT"),
and any similar statute, and otherwise to comply with any such statute with
respect to any "plant closing" or "mass layoff" (as defined in the WARN Act) or
similar event affecting employees of Seller as of the Closing Date whose
principal place of employment is not one of the Business Properties and
occurring immediately before, on or after the Closing as a consequence of the
transactions contemplated hereby.
(g) Purchaser agrees to provide any required notice under the
WARN Act, and any similar statute, and otherwise to comply with any statute with
respect to any "plant closing" or "mass layoff" (as defined in the WARN Act) or
similar event affecting employees of Seller as of the Closing Date whose
principal place of employment is one of the Business Properties and occurring
immediately before, on or after the Closing as a consequence of the transactions
contemplated hereby. Seller agrees to cooperate with respect to the provision of
said notice by Purchaser, including the physical delivery thereof or execution
thereof as the "employer" in the event that Purchaser reasonably concludes that
said notice must be given prior to the Closing.
SECTION 5.11. SUPPLEMENTAL DISCLOSURE. Seller shall have the
continuing obligation until the Closing promptly to supplement or amend the
Schedules with respect to any matter hereafter arising or discovered that, if
existing or known at the date of this Agreement,
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37
would have been required to be set forth or described in the Schedules;
PROVIDED, HOWEVER, that for the purpose of the rights and obligations of the
parties hereunder, no such supplemental or amended Schedule shall be deemed to
cure any breach of any representation or warranty made in this Agreement unless
so agreed in writing by Purchaser.
SECTION 5.12. POST-CLOSING COOPERATION.
(a) Purchaser and Seller shall cooperate with each other, and
shall cause their officers, employees, agents, auditors and representatives to
cooperate with each other, for a period of one year after the Closing to ensure
the orderly transition of the Business from Seller to Purchaser and to minimize
any disruption to the Business and the other respective businesses of Seller and
Purchaser that might result from the transactions contemplated hereby. After the
Closing, upon reasonable written notice, Purchaser and Seller shall furnish or
cause to be furnished to each other and their employees, counsel, auditors and
representatives access, during normal business hours, to such information and
assistance relating to the Business (to the extent within the control of such
party) as is reasonably necessary for financial reporting and accounting
matters.
(b) After the Closing, upon reasonable written notice,
Purchaser and Seller shall furnish or cause to be furnished to each other, as
promptly as practicable, such information and assistance (to the extent within
the control of such party) relating to the Acquired Assets (including, access to
books and records) as is reasonably necessary for the filing of all Tax returns,
and making of any election related to Taxes, the preparation for any audit by
any Taxing Authority, and the prosecution or defense of any claim, suit or
proceeding related to any Tax return. Seller and Purchaser shall cooperate with
each other in the conduct of any audit or other proceeding relating to Taxes
involving the Business. Purchaser shall retain the books and records of Seller
included in the Acquired Assets for a period of seven years after the Closing.
After the end of such seven-year period, before disposing of such books or
records, Purchaser shall give notice to such effect to Seller and to give
Seller, at Seller's cost and expense, an opportunity to remove and retain all or
any part of such books or records as Seller may select.
(c) Each party shall reimburse the other for reasonable
out-of-pocket costs and expenses incurred in assisting the other pursuant to
this Section 5.12. Neither party shall be required by this Section 5.12 to take
any action that would unreasonably interfere with the conduct of its business or
unreasonably disrupt its normal operations (or, in the case of Purchaser, the
Business).
SECTION 5.13. PUBLICITY. No public release or announcement
concerning the transactions contemplated hereby shall be issued by any party
without the prior consent of the other party (which consent shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the rules or regulations of any United States or foreign securities
exchange, in which case the party required to make the release or announcement
shall allow the other party reasonable time to comment on such release or
announcement in advance of such issuance; PROVIDED HOWEVER, that each of Seller
and Purchaser may make internal announcements to their respective employees that
are consistent with the parties' prior public disclosures regarding the
transactions contemplated hereby after reasonable prior notice to and
consultation with the other.
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SECTION 5.14. RECORDS. Purchaser recognizes that certain
Records may contain incidental information relating primarily to subsidiaries or
divisions of Seller other than the Business and that Seller may retain copies of
the relevant portions thereof.
SECTION 5.15. AGREEMENT NOT TO COMPETE.
(a) Seller understands that Purchaser shall be entitled to
protect and preserve the going concern value of the Business to the extent
permitted by law and that Purchaser would not have entered into this Agreement
absent the provisions of this Section 5.15 and, therefore, for a period of three
years from the Closing, Seller shall not, and shall cause each of its
subsidiaries not to, directly or indirectly engage in the following activities
within North America:
(i) (A) selling goods or services of the type sold by
the Business at the time of the Closing (collectively, "RESTRICTED
GOODS AND SERVICES"), or (B) soliciting any customer of the Business at
the Closing Date to purchase any Restricted Goods and Services from
anyone other than Purchaser and its affiliates; and
(ii) soliciting or recruiting any employee of the
Purchased Operating Business offered employment by Purchaser.
(b) Section 5.15(a) shall be deemed not breached as a result
of the ownership by Seller or any of its subsidiaries of: (i) less than an
aggregate of 5% of any class of stock of a person engaged, directly or
indirectly, in activities or businesses within North America that are
substantially in competition with the Business ("COMPETITIVE ACTIVITIES"); (ii)
less than 10% in value of any instrument of indebtedness of a person engaged,
directly or indirectly, in Competitive Activities; or (iii) a person that
engages, directly or indirectly, in Competitive Activities if such Competitive
Activities account for less than 12.5% of such person's consolidated annual
revenues.
SECTION 5.16. BULK TRANSFER LAWS. Purchaser hereby waives
compliance by Seller with the provisions of any so-called "bulk transfer law" of
any jurisdiction in connection with the sale of the Acquired Assets to
Purchaser.
SECTION 5.17. FURTHER ASSURANCES. From time to time, as and
when requested by any party, each party shall execute and deliver, or cause to
be executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions (subject to Section 5.05),
as such other party may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement, including, in the case of Seller,
executing and delivering to Purchaser such assignments, deeds, bills of sale,
consents and other instruments as Purchaser or its counsel may reasonably
request as necessary or desirable for such purpose.
SECTION 5.18. PURCHASE PRICE ALLOCATION. Seller and Purchaser
hereby agree on the allocation of the Purchase Price among the Acquired Assets
set forth in Schedule 5.18 and not to take any position inconsistent with that
allocation.
SECTION 5.19. SUPPLIES. Purchaser shall not use stationery,
purchase order forms or other similar paper goods or supplies (collectively, the
"SUPPLIES"), that state or otherwise indicate thereon that the Purchased
Operating Business is a division or unit of RWE-
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39
DEA AG fur Mineraloel und Chemie ("RWE-DEA") or Seller more than five business
days after the Closing Date (except for box containers which Purchaser may use
for ten business days after the Closing Date) without first crossing out or
marking over such statement or indication or otherwise clearly indicating on
such Supplies that the Purchased Operating Business is no longer a division or
unit of RWE-DEA or Seller, asapplicable. Purchaser shall not reorder any
Supplies which state or otherwise indicate thereon that the Purchased Operating
Business is a division or unit of RWE-DEA or Seller.
SECTION 5.20. NAMES FOLLOWING CLOSING. Immediately following
the Closing, Purchaser shall not use the names CONDEA Vista, CONDEA, Vista,
Vista Chemical, Vista Polymer or any name that, in the reasonable judgment of
Seller, is similar to any such names, and Purchaser shall not thereafter use
those names or names confusingly similar thereto.
SECTION 5.21. REFUNDS. Seller shall be entitled to any refunds
or credits of Taxes for any taxable period (or portion thereof) ending on or
prior to the Closing Date. Purchaser shall be entitled to any refunds or credits
of Taxes for any taxable period (or portion thereof) beginning after the Closing
Date.
SECTION 5.22. AUDITED STATEMENTS. At Purchaser's request,
Seller will cause the financial statements of Seller in respect of the Business,
for the periods requested by Purchaser as required for reporting purposes of
Purchaser pursuant to the rules and regulations of the Securities Exchange
Commission, to be audited by Seller's auditors. Seller shall provide access to
its records and personnel as reasonably required or requested by Purchaser to
effect such audits. All out-of-pocket expenses incurred by Seller (including
fees to Seller's accountants) in connection with the foregoing will be
reimbursed by Purchaser.
SECTION 5.23. ACCESSIBILITY TO RECORDS AND EMPLOYEES. Until
the eleventh anniversary of the Closing Date, Purchaser shall retain such
records and information relating to the Business Properties as might reasonably
be expected to be relevant to a potential Third Party Claim relating to the
Business Properties and shall, and hereby does, grant to Seller and its agents
all reasonable access required by Seller to investigate and respond to any
conditions that could reasonably be expected to give rise to an Environmental
Claim arising from the operation of the Business Properties, PROVIDED that
Purchaser shall be permitted to dispose of any such records and information in
the ordinary course if prior to such disposal (i) Purchaser shall have given not
less than 90 days prior written notice of such intention to Seller and (ii)
Seller shall not have requested that such records and information be transferred
to Seller in lieu of disposal. Such access and cooperation shall include the
retention and (upon Seller's request) the provision to Seller of records and
information that are reasonably relevant to potential Third Party Claims, and
making employees available on a mutually convenient basis to provide additional
information and explanation of any materials provided hereunder. To the extent
such records contain confidential matters involving attorney-client
communication, attorney work product or other privilege recognized by law,
Purchaser and Seller agree that all privileged records shall be maintained in
strict confidence and not disclosed to others. In the event either Purchaser or
Seller is requested or required (by oral questions, interrogatories, requests
for information or documents, subpoena, civil investigative demand or similar
process) to disclose any privileged records subject to its obligation hereunder
of non-disclosure, it shall provide the other party prompt written notice of
such request so that the other party may seek appropriate means of protecting
the confidentiality of such privileged records. Notwithstanding the absence of
such means, and if in the reasonable opinion of counsel, a party is compelled to
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disclose such privileged records or else stand liable for contempt or suffer
other censure or penalty, it may disclose only those privileged records that are
legally required to be disclosed.
SECTION 5.24. ANCILLARY AGREEMENTS. Seller and Purchaser
covenant and agree to execute and deliver at Closing each of the Ancillary
Agreements to which it is a party. Seller further covenants and agrees to
deliver at Closing the Undertaking of RWE-DEA in favor of Purchaser in the form
of EXHIBIT H hereto, executed by RWE- DEA.
SECTION 5.25. POST-CLOSING EMPLOYMENT CIRCUMSTANCES. Neither
Seller nor its management or other agents shall, from the date of this Agreement
through the Closing, make any representation to the employees of the Business
nor to any bargaining representative of any said employees as to the fact, terms
or conditions of employment of said persons subsequent to the Closing (other
than any such facts, terms or conditions expressly set forth in this Agreement).
SECTION 5.26. INTERIM SERVICES AGREEMENT. Seller and Purchaser
covenant and agree to execute and deliver on or prior to Closing an agreement
containing the terms contemplated by Schedule 5.26.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION. The
obligation of Purchaser to purchase and pay for the Acquired Assets and the
obligation of Seller to sell the Acquired Assets to Purchaser is subject to the
satisfaction or waiver on or prior to the Closing of the following conditions:
(a) GOVERNMENTAL APPROVALS. The waiting period under the HSR
Act, if applicable to the consummation of the Acquisition, shall have expired or
been terminated. All other authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity necessary for the consummation of the Acquisition shall have
been obtained or filed or shall have occurred.
(b) NO INJUNCTIONS OR RESTRAINTS. No Applicable Law or
effective injunction, writ, preliminary restraining order or order of any nature
(an "INJUNCTION") enacted, entered, promulgated, enforced or issued by any
Governmental Entity or other legal restraint or prohibition preventing the
consummation of the Acquisition shall be in effect.
(c) ANCILLARY AGREEMENTS. The Ancillary Agreements shall have
been duly executed and delivered by all parties thereto.
SECTION 6.02. CONDITIONS TO OBLIGATION OF PURCHASER. The
obligation of Purchaser to purchase and pay for the Acquired Assets is subject
to the satisfaction (or waiver by Purchaser) on or prior to the Closing Date of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller in this Agreement and the Ancillary Agreements that are
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, as
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41
of the date hereof and as of the Closing Date as though made on the Closing
Date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties qualified
as to materiality shall be true and correct, and those not so qualified shall be
true and correct in all material respects, on and as of such earlier date), and
Purchaser shall have received a certificate signed by an authorized officer of
Seller to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF SELLER. Seller shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Seller
by the time of the Closing, and Purchaser shall have received a certificate
signed by an authorized officer of Seller to such effect.
(c) OPINION OF SELLER'S COUNSEL. Purchaser shall have received
an opinion dated the Closing Date of Cravath, Swaine & Moore, counsel to Seller,
substantially in the form of Exhibit B.
(d) ABSENCE OF PROCEEDINGS. There shall not be pending, or
threatened by any Governmental Entity, any Proceeding against the Purchaser or
any of its subsidiaries (i) challenging or seeking to restrain, prohibit or
materially modify the Acquisition or any other transaction contemplated by this
Agreement or the Ancillary Agreements or seeking to obtain from Purchaser or any
of its subsidiaries in connection with the Acquisition any damages that are
material in relation to the Business taken as a whole, (ii) seeking to prohibit
or limit the ownership or operation by Purchaser or any of its subsidiaries of
any material portion of the business or assets of Purchaser (including the
Business) or any of its subsidiaries, or to compel Purchaser or any of its
subsidiaries to dispose of or hold separate any material portion of the business
or assets of Purchaser (including the Business) or any of its subsidiaries, in
each case as a result of the Acquisition or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose limitations on the
ability of Purchaser to acquire or hold, or exercise full rights of ownership
of, the Acquired Assets or (iv) seeking to prohibit Purchaser or any of its
subsidiaries from effectively controlling in any material respect the Business.
(e) CONSENTS. Purchaser shall have received written consents
from the third parties listed on Schedule 6.02(e) (the "REQUIRED CONSENTS").
(f) OTHER DOCUMENTS. Seller shall have furnished to Purchaser
such other documents relating to Seller's corporate existence and authority,
absence of Liens, and such other matters as Purchaser or its counsel may
reasonably request.
(g) ACCEPTANCE BY PURCHASER'S COUNSEL. The form and substance
of all legal matters contemplated herein and of all documents delivered
hereunder shall be reasonably acceptable to Jones, Day, Reavis & Pogue, counsel
to Purchaser.
(h) FIRPTA AFFIDAVITS. Purchaser shall have received
affidavits pursuant to Section 1445(b)(2) of the Code in substantially the form
of Exhibit J hereto, duly executed by Seller.
(i) FINANCING. Purchaser shall have closed and received
funding in respect of the financings required to consummate the Acquisition
described in the Senior Commitment and the Notes Letter, or such other financing
or financings enabling Purchaser to consummate the Acquisition.
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(j) TRANSFER TAXES. Seller shall have prepared, executed and
filed all returns, questionnaires, applications or other documents regarding any
transfer tax that is required to be filed by Seller prior to Closing.
SECTION 6.03. CONDITIONS TO OBLIGATION OF SELLER. The
obligation of Seller to sell, assign, convey, and deliver the Acquired Assets is
subject to the satisfaction (or waiver by Seller) on or prior to the Closing
Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser made in this Agreement and the Ancillary Agreement
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, as of the date
hereof and as of the Closing Date as though made on the Closing Date, except to
the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, on and as of such earlier date), in each
case except for breaches as to matters that, individually or in the aggregate,
could not reasonably be expected to have a Purchaser Material Adverse Effect.
Seller shall have received a certificate signed by an authorized officer of
Purchaser to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PURCHASER. Purchaser shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by
Purchaser by the time of the Closing, and Seller shall have received a
certificate signed by an authorized officer of Purchaser to such effect.
(c) OPINION OF PURCHASER'S COUNSEL. Seller shall have received
an opinion dated the Closing Date of Jones, Day, Reavis & Pogue, counsel to
Purchaser, substantially in the form of Exhibit C.
(d) ABSENCE OF PROCEEDINGS. There shall not be pending or
threatened by any Governmental Entity any Proceeding against Seller or any of
its subsidiaries challenging or seeking to restrain or prohibit the Acquisition
or any other transaction contemplated by this Agreement or the Ancillary
Agreements or seeking to obtain from Seller or any of its subsidiaries in
connection with the Acquisition any damages that are material in relation to
Seller and its subsidiaries taken as whole.
(e) OTHER DOCUMENTS. Purchaser shall have furnished to Seller
such other documents relating to corporate existence and authority, absence of
Liens, and such other matters as Seller or its counsel may reasonably request.
(f) ACCEPTANCE BY SELLER'S COUNSEL. The form and substance of
all legal matters contemplated herein and of all documents delivered hereunder
shall be reasonably acceptable to Cravath, Swaine & Moore, counsel to Seller.
SECTION 6.04. FRUSTRATION OF CLOSING CONDITIONS. Neither
Purchaser nor Seller may rely on the failure of any condition set forth in this
Article VI to be satisfied if such failure was caused by such party's failure to
act in good faith or to use its best efforts to cause the Closing to occur, as
equired by Section 5.05.
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SECTION 6.05. EFFECT OF CERTAIN WAIVERS OF CLOSING CONDITIONS.
If prior to the Closing any party (the "WAIVING PARTY") receives written notice
from the other party acknowledging that such party has breached any
representation, warranty or covenant contained in this Agreement, any instrument
or certificate furnished hereunder or any Ancillary Agreement, and that the
effect of such breach is a failure of any condition to the waiving party's
obligations set forth in this Article VI, (a) if such breach arose after the
date of this Agreement and the waiving party proceeds with the Closing, the
waiving party shall be deemed to have waived such breach and the waiving party
and its successors, assigns and affiliates shall not be entitled to be
indemnified pursuant to Article VIII, to sue for damages or to assert any other
right or remedy for any losses arising from any matters relating to such
condition or breach, notwithstanding anything to the contrary contained herein
or in any certificate delivered pursuant hereto, and (b) if such breach arose on
or prior to the date of this Agreement, the waiving party may waive the
unsatisfied closing condition for the purposes of consummating the Acquisition
but without prejudice to any other right or remedy which they may have hereunder
for such breach by the other party.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION.
(a) Notwithstanding anything to the contrary in this
Agreement, this Agreement may be terminated and the Acquisition and the other
transactions contemplated by this Agreement abandoned at any time prior to the
Closing:
(i) by mutual written consent of Seller and Purchaser;
(ii) by Seller if any of the conditions set forth in
Sections 6.01 or 6.03 shall have become incapable of fulfillment, and
shall not have been waived by Seller;
(iii) by Purchaser if any of the conditions set forth
in Sections 6.01 or 6.02 shall have become incapable of fulfillment,
and shall not have been waived by Purchaser; or
(iv) by Seller or Purchaser, if the Closing does not
occur on or prior to March 31, 2000;
PROVIDED, HOWEVER, that the party seeking termination pursuant to clause (ii),
(iii) or (iv) is not then in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement.
(b) In the event of termination by Seller or Purchaser
pursuant to this Section 7.01, written notice thereof shall forthwith be given
to the other and the transactions contemplated by this Agreement shall be
terminated, without further action by any party. If the transactions
contemplated by this Agreement are terminated as provided herein, Purchaser
shall return all documents and other material received from Seller relating to
the transactions contemplated hereby, whether so obtained before or after the
execution hereof, to Seller.
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SECTION 7.02. EFFECT OF TERMINATION. If this Agreement is
terminated and the transactions contemplated hereby are abandoned as described
in Section 7.01, this Agreement shall become null and void and of no further
force and effect, except for the provisions of (i) Section 5.04 relating to the
obligation of Seller to keep confidential certain information and data, (ii)
Section 5.06 relating to certain expenses, (iii) Section 5.07 relating to
finder's fees and broker's fees, (iv) Section 7.01 and this Section 7.02 and (v)
Section 5.13 relating to publicity. Nothing in this Section 7.02 shall be deemed
to release any party from any liability for any breach by such party of the
terms and provisions of this Agreement or to impair the right of any party to
compel specific performance by any other party of its obligations under this
Agreement.
SECTION 7.03. AMENDMENTS AND WAIVERS. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto. By an instrument in writing Purchaser, on the one hand, or
Seller, on the other hand, may waive compliance by the other party with any term
or provision of this Agreement that such other party was or is obligated to
comply with or perform.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. INDEMNIFICATION BY SELLER.
(a) From and after the Closing, Seller shall indemnify
Purchaser and its affiliates and each of their respective officers, directors,
employees, stockholders, agents and representatives against, and hold them
harmless from, any Losses (as defined in Section 9.05), as incurred (payable
promptly upon written request), arising from, in connection with or otherwise
with respect to:
(i) any breach of any representation or warranty of
Seller that survives the Closing and is contained in this Agreement, in
any Ancillary Agreement or in any document delivered in connection
herewith (it being agreed and acknowledged by the parties that for
purposes of Purchaser's right to indemnification pursuant to this
Section 8.01 the representations and warranties of Seller shall be
deemed not qualified by any references therein to materiality generally
or to whether or not any breach results or may result in a Seller
Material Adverse Effect);
(ii) any breach of any covenant of Seller contained
in this Agreement or in any Ancillary Agreement;
(iii) any Excluded Liability (including any Excluded
Liability for which Purchaser would otherwise be liable due to its
waiver of compliance with bulk transfer laws); and
(iv) any fees, expenses or other payments incurred or
owed by Seller to any brokers, financial advisors or comparable other
persons retained or employed by it in connection with the transactions
contemplated by this Agreement.
<PAGE>
45
(b) Seller shall not be required to indemnify any person, and
shall not have any liability:
(i) under clause (i) of Section 8.01(a) unless the
aggregate of all Losses for which Seller would, but for this clause
(i), be liable exceeds on a cumulative basis an amount equal to
$2,250,000 (the "THRESHOLD AMOUNT"), and then only to the extent of any
such excess, PROVIDED, that (A) for purposes of this clause (i), Losses
shall not include any amounts paid or payable by Purchaser pursuant to
the SARCA and (B) after the aggregate of all Losses exceeds on a
cumulative basis the Threshold Amount after giving effect to Section
8.01(b)(ii) Purchaser may assert its right to indemnification hereunder
to the full extent of Losses arising from the breach of a particular
representation or warranty (which, for the purposes hereof, shall mean
all breaches of the representations and warranties within a particular
Section in the aggregate) if such Losses exceed $250,000 (in addition
to recovering the aggregate amount of Losses in excess of the Threshold
Amount but in no event in an amount greater than the actual Losses);
and
(ii) under clause (i) of Section 8.01(a) for any
breach of a particular representation or warranty (which, for the
purposes hereof, shall mean all breaches of the representations and
warranties within a particular Section in the aggregate) unless and
until the Losses relating to such particular representation or warranty
exceed $50,000, and only amounts in excess of $50,000 shall be
aggregated for purposes of clause (i) of this Section 8.01(b); and
(iii) under clauses (i) and (ii) of Section 8.01(a)
in excess of the Initial Purchase Price (the "INDEMNIFICATION
MAXIMUM").
The limitations in this clause (b) above shall not apply to the willful
or knowing breach of any representation, warranty or covenant.
(c) Except as otherwise specifically provided in this
Agreement or in any Ancillary Agreement, Purchaser acknowledges that its sole
and exclusive remedy with respect to any and all monetary claims relating to
this Agreement and the Ancillary Agreements, the Acquisition and the other
transactions contemplated hereby and thereby, the Business and its assets and
liabilities shall be pursuant to the indemnification provisions set forth in
this Article VIII. In furtherance of the foregoing, Purchaser hereby waives,
from and after the Closing, to the fullest extent permitted under applicable
law, any and all rights, claims and causes of action (other than claims of, or
causes of action arising from, fraud, intentional or willful misrepresentation
or breach, or seeking equitable relief) it may have against Seller arising under
or based upon this Agreement, any Ancillary Agreement, any document or
certificate delivered in connection herewith, any Applicable Law (including any
relating to environmental matters), common law or otherwise (except pursuant to
the indemnification provisions set forth in this Section 8.01).
SECTION 8.02. INDEMNIFICATION BY PURCHASER.
(a) From and after the Closing, Purchaser shall indemnify
Seller and its affiliates and each of their respective officers, directors,
employees, stockholders, agents and representatives against, and agrees to hold
them harmless from, any Losses, as incurred (payable promptly upon written
request), for or on account of or arising from or in connection
<PAGE>
46
with or otherwise with respect to (i) any breach of any representation or
warranty of Purchaser contained in this Agreement, in any Ancillary Agreement or
in any document delivered in connection herewith, (ii) any breach of any
covenant of Purchaser contained in this Agreement or in any Ancillary Agreement,
(iii) any Assumed Liability or (iv) any fees, expenses or other payments
incurred or owed by Purchaser to any brokers, financial advisors or other
comparable persons retained or employed by it in connection with the
transactions contemplated by this Agreement or by any Ancillary Agreement.
SECTION 8.03. CALCULATION OF LOSSES. The amount of the Losses
arising out of any item included as a liability in calculating Closing Working
Capital shall be calculated net of the amount so included. The amount of the
Losses arising out of any reduction in value of any Current Asset owned at the
Closing shall be calculated as a reduction from the reported value of such
Current Asset used in calculating Closing Working Capital.
SECTION 8.04. TERMINATION OF INDEMNIFICATION. The
obligations to indemnify and hold harmless any party, (i) pursuant to Section
8.01(a)(i) or 8.02(a)(i), shall terminate when the applicable representation or
warranty terminates pursuant to Section 8.06 and (ii) pursuant to the other
clauses of Sections 8.01 and 8.02 shall not terminate; PROVIDED, HOWEVER, that
any obligations to indemnify with respect to Taxes shall terminate upon the
expiration of the relevant statute of limitations; and PROVIDED, FURTHER, that
Seller shall have no obligation to indemnify Purchaser in respect of
Environmental Claims as to which a notice requesting indemnification is made by
Purchaser after the Unknown Claims Bar Date (as defined below) relating to
Contaminants of Concern in any environmental media, including soil or
groundwater, at, on, under or emanating from the Business Properties to the
extent discovered after the Closing Date (exclusive of and not including any
such Contaminants of Concern which were known by Seller prior to the Closing
Date whether or not disclosed to Purchaser or included in the Disclosure
Schedule to this Agreement and except for Environmental Claims relating to
disposal of Contaminants of Concern offsite from the Business Properties, claims
arising under CERCLA or the CWA, requiring a response, as defined under CERCLA,
or imposing natural resource damages relating to the Calcasieu Estuary and
third-party tort claims including death and personal injury claims, all as to
which this proviso has no application); and PROVIDED, FURTHER, that such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice of such claim (stating in reasonable detail the basis of such claim)
pursuant to Section 8.05 to the party to be providing the indemnification. The
"UNKNOWN CLAIMS BAR DATE" means the tenth (10th) anniversary of the Closing Date
unless in respect of any of the Business Properties a "no further action
letter", or the substantial equivalent thereof, is issued by a Governmental
Entity prior to the tenth (10th) anniversary of the Closing Date, in which event
the Unknown Claims Bar Date in respect of the Environmental Claims that are the
subject of such letter shall be the later to occur of the date of issuance of
such letter or the date that is the fifth (5th) anniversary of the Closing Date.
SECTION 8.05. PROCEDURES.
(a) THIRD PARTY CLAIMS. In order for a party (the "INDEMNIFIED
PARTY"), to be entitled to any indemnification provided for under this Agreement
in respect of, arising out of or involving a claim made by any person against
the indemnified party (a "THIRD PARTY CLAIM"), such indemnified party must
notify the indemnifying party in writing of the Third Party Claim within 10
business days after receipt by such indemnified party of written notice of the
Third
<PAGE>
47
Party Claim; PROVIDED HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually and materially prejudiced as a
result of such failure. Thereafter, the indemnified party shall deliver to the
indemnifying party, within ten business days' time after the indemnified party's
receipt thereof, copies of all notices and documents (including court papers)
received by the indemnified party relating to the Third Party Claim.
(b) ASSUMPTION. If a Third Party Claim is made against an
indemnified party and the indemnifying party confirms in writing that it is
obligated to indemnify such indemnified party pursuant to this Article VIII, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party, PROVIDED that such Third Party Claim, together with all
other indemnity claims then pending or theretofore made by the indemnified
party, does not exceed the Indemnification Maximum; and, PROVIDED, FURTHER, that
such counsel is not reasonably objected to by the indemnified party. Any
election to assume the defense by the indemnifying party must be made in writing
within 30 days after notice of claim from the indemnified party or within 30
days after the indemnified party presents a proposed settlement for indemnifying
party's approval as set forth below. Should the indemnifying party so elect to
assume the defense of a Third Party Claim, the indemnifying party shall not be
liable to the indemnified party for any legal expenses subsequently incurred by
the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the indemnified party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense, except to the
extent that separate defenses are available to the indemnified party. The
indemnifying party shall be liable for the fees and expenses of counsel employed
by the indemnified party for any period during which the indemnifying party has
not assumed the defense thereof. If the indemnifying party chooses to defend or
prosecute a Third Party Claim, all the indemnified parties shall cooperate in
the defense or prosecution thereof. If the indemnified party defends or
prosecutes a Third Party Claim, all indemnifying parties shall cooperate in the
defense or prosecution thereof. Such cooperation shall include the retention and
(upon the indemnifying or indemnified party's request) the provision to the
indemnifying or indemnified party of records and information that are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. If the indemnifying party assumes the defense of a
Third Party Claim, the indemnified party shall agree to any settlement,
compromise or discharge of a Third Party Claim that the indemnifying party may
recommend and that by its terms obligates the indemnifying party to pay the full
amount of the liability in connection with such Third Party Claim, which
releases the indemnified party completely in connection with such Third Party
Claim and that would not otherwise adversely affect the indemnified party.
Notwithstanding the foregoing, the indemnifying party shall not be entitled to
assume the defense of any Third Party Claim (and shall be liable for the fees
and expenses of counsel incurred by the indemnified party in defending such
Third Party Claim) if the Third Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against the indemnified
party that the indemnified party reasonably determines, after conferring with
its outside counsel, cannot be separated from any related claim for money
damages. If such equitable relief or other relief portion of the Third Party
Claim can be so separated from that for money damages, the indemnifying party
shall be entitled to assume the defense of the portion relating to money
damages.
<PAGE>
48
In the event the indemnifying party fails to assume the
defense, settlement, or appeal of such Third Party Claim and/or fails to confirm
in writing its obligation to indemnify the indemnified party pursuant to this
Article VIII within 30 days after receipt of notice thereof from the indemnified
party, the indemnified party shall have the right to undertake the defense,
settlement, or appeal of such Third Party Claim.
(c) OTHER CLAIMS. In the event any indemnified party should
have a claim against any indemnifying party under Section 8.01 or 8.02 that does
not involve a Third Party Claim being asserted against or sought to be collected
from such indemnified party, the indemnified party shall deliver notice of such
claim with reasonable promptness to the indemnifying party. Subject to Sections
8.04 and 8.06, the failure by any indemnified party so to notify the
indemnifying party shall not relieve the indemnifying party from any liability
that it may have to such indemnified party under Section 8.01 or 8.02, except to
the extent that the indemnifying party demonstrates that it has been materially
prejudiced by such failure. If the indemnifying party does not notify the
indemnified party within 20 calendar days following its receipt of such notice
that the indemnifying party disputes its liability to the indemnified party
under Section 8.01 or 8.02, such claim specified by the indemnified party in
such notice shall be conclusively deemed a liability of the indemnifying party
under Section 8.01 or 8.02 and the indemnifying party shall pay the amount of
such liability to the indemnified party on demand or, in the case of any notice
in which the amount of the claim (or any portion thereof) is estimated, on such
later date when the amount of such claim (or such portion thereof) becomes
finally determined.
(d) MITIGATION. Purchaser and Seller shall cooperate with each
other with respect to resolving any claim or liability with respect to which one
party is obligated to indemnify the other party hereunder, including by making
commercially reasonably efforts to mitigate or resolve any such claim or
liability; PROVIDED, HOWEVER, that such party shall not be required to make such
efforts if they would be detrimental in any material respect to such party.
SECTION 8.06. SURVIVAL OF REPRESENTATIONS. Except in the event
of fraud or intentional or willful misrepresentation or breach, the
representations and warranties contained in this Agreement and in any document
delivered in connection herewith shall survive the Closing solely for purposes
of Article VIII and shall terminate at the close of business on the second
anniversary of the Closing Date, except for (i) the representations and
warranties in Section 3.16(b) which shall terminate at Closing, and (ii) the
representations and warranties in Section 3.12 which shall survive Closing for
the relevant statute of limitations.
SECTION 8.07. NO ADDITIONAL REPRESENTATIONS. Purchaser
acknowledges that it and its representatives have been permitted full and
complete access to the books and records, facilities, equipment, tax returns,
contracts, insurance policies (or summaries thereof) and other properties and
assets of the Business that it and its representatives have desired or requested
to see or review, and that it and its representatives have had a full
opportunity to meet with the officers and employees of Seller to discuss the
Business. Purchaser acknowledges that neither Seller nor any other person has
made any representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding the Business furnished or made
available to Purchaser and its representatives, except as expressly set forth in
this Agreement, the Ancillary Agreements or the Schedules, and neither Seller
nor any other person shall have or be subject to any liability to Purchaser or
any other person resulting from the distribution to Purchaser, or Purchaser's
use of, any such information, including the Confidential Memorandum prepared by
Deutsche Bank Securities Inc. dated
<PAGE>
49
February 1999 and any information, documents or material made available to
Purchaser in any "data rooms", management presentations or in any other form in
expectation of the transactions contemplated hereby. Purchaser acknowledges
that, should the Closing occur, Purchaser shall acquire the Acquired Assets
without any representation or warranty as to merchantability or fitness for any
particular purpose, in an "as is" condition and on a "where is" basis, except as
otherwise expressly represented or warranted in this Agreement and the Ancillary
Agreements.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. ASSIGNMENT. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by Purchaser or
Seller (including by operation of law in connection with a merger or
consolidation of Purchaser or Seller) without the prior written consent of the
other parties hereto, which consent shall not be unreasonably withheld, PROVIDED
that notwithstanding the foregoing, Purchaser may assign all or any part of its
rights and obligations hereunder to any wholly-owned subsidiary of Purchaser (it
being agreed between the parties that such assignment shall not relieve
Purchaser of any of its obligations hereunder). Any attempted assignment in
violation of this Section 9.01 shall be void.
SECTION 9.02. NO THIRD-PARTY BENEFICIARIES. Except (i) as
provided in Article VIII and (ii) for the agreement of Purchaser in Section 5.04
which is for the benefit of RWE-DEA as well as Seller, this Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any person,
other than the parties hereto and such assigns, any legal or equitable rights
hereunder.
SECTION 9.03. ATTORNEY FEES. A party in breach of this
Agreement shall, on demand, indemnify and hold harmless the other party for and
against all reasonable out-of-pocket expenses, including legal fees, incurred by
such other party by reason of the enforcement and protection of its rights under
this Agreement. The payment of such expenses is in addition to any other relief
to which such other party may be entitled.
SECTION 9.04. NOTICES. All notices or other communications
required or permitted to be given hereunder shall be in writing and shall be
delivered by hand or sent by facsimile or sent, postage prepaid, by registered,
certified or express mail or reputable
<PAGE>
50
overnight courier service and shall be deemed given when so delivered by hand or
facsimile, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service), as follows:
(i) if to Purchaser,
Georgia Gulf Corporation
400 Perimeter Center Terrace
Suite 595
Atlanta, Georgia 30346
Attention: Joel I. Beerman,
Vice President and General Counsel
with a copy to:
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, GA 30308-3242
Attention: John E. Zamer, Esq.; and
(ii) if to Seller,
CONDEA Vista Company
900 Threadneedle
Houston, Texas 77079-2990
Attention: Vice President and General Counsel
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
SECTION 9.05. INTERPRETATION; EXHIBITS AND SCHEDULES; CERTAIN
DEFINITIONS.
(a) The headings contained in this Agreement, in any Exhibit
or Schedule hereto and in the table of contents to this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All Exhibits and Schedules annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning as defined in
this Agreement. When a reference is made in this Agreement to a Section or
Exhibit such reference shall be to a Section of, or an Exhibit to, this
Agreement unless otherwise indicated.
<PAGE>
51
(b) For all purposes hereof:
"AFFILIATE" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person.
"CONTRACT" means any lease, sublease, license, indenture,
agreement, commitment, mortgage, note, deed, instrument or other legally binding
arrangement, whether oral or written, to which a person or any of its affiliates
is a party or by which any of their respective properties or assets is bound.
"INCLUDING" means including, without limitation.
"LOSSES" means any losses, liabilities, judgments,
settlements, assessments, costs and expenses, including court costs and fees and
disbursements of counsel (including those incurred in connection with the
defense or prosecution of an indemnifiable claim, those incurred in connection
with the enforcement of any provision of this Agreement and all other court
costs and fees and disbursements of counsel incurred by an indemnified party in
respect thereof) and damages (including punitive damages) of any kind or nature
whatsoever, whether or not involving a Third Party Claim, provided that Losses
shall only include punitive damages relating to a Third Party Claim.
"PERSON" means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, Governmental Entity or other
entity.
"SCHEDULE" means the particular Section of the Disclosure
Schedule to this Asset Purchase Agreement between CONDEA Vista Company and
Georgia Gulf Corporation of even date herewith, incorporated herein by
reference.
"SUBSIDIARY" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person and/or by one or more subsidiaries of such person.
(c) other terms are defined as follows:
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Accounting Firm"............................................... 1.05(b)
"Acquired Assets" .............................................. 1.02(a)
"Acquisition"................................................... 1.01
"Adjusted Purchase Price"....................................... 1.05(c)
"Ancillary Agreements".......................................... 1.02(b)
"Applicable Law"................................................ 3.03
"Assigned Contracts" ........................................... 1.03(a)
"Assigned Intellectual Property" ............................... 3.07
"Assumed Liabilities" .......................................... 1.03(a)
</TABLE>
<PAGE>
52
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Balance Sheet"................................................. 3.04(b)
"Balance Sheet Date"............................................ 3.04
"Budgeted Income"............................................... 1.06(a)
"Business"...................................................... Page 1
"Business Properties"........................................... 1.02(a)(v)
"Business Records".............................................. 1.02(a)(vii)
"CERCLA"........................................................ 3.16(b)
"Closing"....................................................... 2.01
"Closing Date".................................................. 2.01
"Closing Working Capital"....................................... 1.05(a)
"Code".......................................................... 3.12(a)
"Competitive Activities"........................................ 5.15(b)
"Confidentiality Agreement Rights".............................. 1.02(a)(viii)
"Consent"....................................................... 3.03
"Contaminants of Concern"....................................... 3.16(b)
"Cost Recovery Action".......................................... 1.03(b)(ix)
"CPP Statement"................................................. 1.06(i)
"Current Assets"................................................ 1.05(d)
"Current Liabilities"........................................... 1.05(d)
"Delayed Purchase Price......................................... 1.06
"DOJ"........................................................... 5.05(b)
"Environmental Claims".......................................... 1.03(b)(xiii)
"Environmental Laws"............................................ 3.16(b)
"Environmental Permits"......................................... 3.16(b)
"ERISA"......................................................... 3.14(a)
"Excluded Assets" .............................................. 1.02(b)
"Excluded Liabilities" ......................................... 1.03(b)
"Financial Statements".......................................... 3.04
"Financing"..................................................... 4.05
"Fixed Assets".................................................. 1.02(a)(iv)
"FTC"........................................................... 5.05(d)
"GAAP".......................................................... 1.05(d)
"Governmental Entity"........................................... 3.03
"Hired Employee"................................................ 5.09(b)
"HSR Act"....................................................... 3.03
"Indemnification Maximum"....................................... 8.01(b)(ii)
"Initial Purchase Price"........................................ 1.01
"Injunction".................................................... 6.01(b)
"Intellectual Property"......................................... 3.05(b)
"Inventory"..................................................... 1.02(a)(ii)
"Judgment"...................................................... 3.03
"Leased Property"............................................... 3.06
"Liens" ........................................................ 3.05(a)
"Material Contracts"............................................ 3.08
"Nonassignable Assets".......................................... 1.04
"Notes Letter".................................................. 4.05
"Notice of Disagreement"........................................ 1.05(b)
</TABLE>
<PAGE>
53
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Owned Property"................................................ 3.06
"PBGC".......................................................... 5.10(a)
"Permits"....................................................... 3.10(a)
"Permitted Encumbrances"........................................ 3.06
"Permitted Liens"............................................... 3.05(a)
"Predecessor Indemnitor"........................................ 1.03(b)(xii)
"Premises"...................................................... 1.03(d)
"Prepaids"...................................................... 1.02(a)(i)
"Proceeding".................................................... 3.10(a)
"Products"...................................................... 1.02(a)(vi)
"Purchased Equity Interest"..................................... Page 1
"Purchased Operating Business".................................. Page 1
"Purchaser Material Adverse Effect"............................. 4.01
"Purchaser's Savings Plan"...................................... 5.10(a)
"Purchaser's Workers Compensation Program"...................... 5.10(e)
"PVC"........................................................... Page 1
"Receivables"................................................... 1.02(a)(iii)
"Release"....................................................... 3.16(b)
"Releasing Party"............................................... 3.16
"Required Consents"............................................. 6.02(e)
"Restricted Goods and Services"................................. 5.15(a)
"SARCA"......................................................... 1.03(a)(vi)
"Seller Benefit Plan"........................................... 3.14(a)
"Seller Material Adverse Effect"................................ 3.01
"Seller Pension Plan"........................................... 3.14(a)
"Seller's Savings Plan"......................................... 5.10(a)
"Seller's Workers Compensation Program.......................... 5.10(e)
"Senior Commitment" ............................................ 4.05
"Software"...................................................... 3.22
"Statement"..................................................... 1.05(a)
"Supplies"...................................................... 5.19
"Support Assets"................................................ 1.02(b)(vi)
"Target Income"................................................. 1.06(b)
"Tax Returns"................................................... 3.12(b)
"Tax"........................................................... 3.12(a)
"Third Party Claim"............................................. 8.05
"Threshold Amount".............................................. 8.01(b)(i)
"Transferred Benefits".......................................... 5.10(a)
"Unknown Claims Bar Date"....................................... 8.04
"VCM"........................................................... Page 1
"VCM Plant"..................................................... 1.03(b)
"WARN Act"...................................................... 5.10(f)
"WC Amount"..................................................... 1.05(b)
"Working Capital" .............................................. 1.05(d)
"year 2000 capabilities"........................................ 3.22
</TABLE>
<PAGE>
54
SECTION 9.06. COUNTERPARTS. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement, and shall become effective when one or more such
counterparts have been signed by each of the parties and delivered to the other
party.
SECTION 9.07. ENTIRE AGREEMENT. This Agreement and
the Ancillary Agreements, along with the Schedules and Exhibits thereto, contain
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter. Neither party shall be liable or
bound to any other party in any manner by any representations, warranties or
covenants relating to such subject matter except as specifically set forth
herein or in the Ancillary Agreements.
SECTION 9.08. SEVERABILITY. If any provision of
this Agreement (or any portion thereof) or the application of any such provision
(or any portion thereof) to any person or circumstance shall be held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof (or the remaining portion thereof) or the application of such
provision to any other persons or circumstances.
SECTION 9.09. CONSENT TO JURISDICTION. Each party
irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of
the State of New York, and (b) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement, any Ancillary Agreement or any transaction
contemplated hereby or thereby. Each of Purchaser and Seller further agrees that
service of any process, summons, notice ordocument by U.S. registered mail to
such party's respective address set forth above shall be effective service of
process for any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction in this Section 9.09. Each of
Purchaser and Seller irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement,
any Ancillary Agreement or the transactions contemplated hereby and thereby in
(i) the Supreme Court of the State of New York, or (ii) the United States
District Court for the Southern District of New York, and hereby and thereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
SECTION 9.10. GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York applicable to agreements made and to be performed entirely within such
State, without regard to the conflicts of law principles of such State.
SECTION 9.11. WAIVER OF JURY TRIAL. Each party
hereby waives to the fullest extent permitted by applicable law, any right it
may have to a trial by jury in respect to any litigation directly or indirectly
arising out of, under or in connection with this Agreement, any Ancillary
Agreement or any transaction contemplated hereby or thereby. Each party (a)
certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce that foregoing waiver and (b) acknowledges
that it and the other parties hereto have been induced to enter into this
Agreement and the Ancillary Agreements, as applicable, by, among other things,
the mutual waivers and certifications in this Section 9.11.
<PAGE>
55
IN WITNESS WHEREOF, Seller and Purchaser have duly
executed this Agreement as of the date first written above.
CONDEA VISTA COMPANY,
by /s/ William Knodel
-----------------------------
Name:
Title:
GEORGIA GULF CORPORATION,
by /s/ Edward A. Schmitt
-----------------------------
Name:
Title:
<PAGE>
56
In accordance with Item 601(b)(2), the following schedules, copies of which
will be provided to the Commission on request, have been omitted from this
filing
<TABLE>
<CAPTION>
Schedule Description
- -------- -----------
<S> <C>
1.02(a)(xiv) R&D Inventory
1.02(b) Excluded Assets
1.03(b)(xii) Excluded Environmental Liabilities
1.05(d) Working Capital Principles
1.06 Subordination Terms RE Delayed Purchase Price
3.04 Financial Statements
3.05 Fixed Assets (Other than Real Property Interests or
Intellectual Property)
3.06 Real Property
3.07 Assigned Intellectual Property
3.08(a)(i) Employment Consulting, Management or Service Contracts
3.08(a)(ii) Collective Bargaining Agreements
3.08(a)(iv) Contracts with Shareholders and Affiliates
3.08(a)(vi) Leases or Subleases of Machinery, Equipment or other
Tangible Personal Property
</TABLE>
<PAGE>
57
<TABLE>
<S> <C>
3.08(a)(vii) Continuing Contracts for Future Purchase of Materials,
Supplies or Equipment
3.08(a)(viii) Licenses/Sublicenses Relating to Assigned Intellectual
Property
3.08(a)(x) Take or Pay Agreements
3.08(a)(xi) Seller Investments
3.08(a)(xiii) Indemnification Agreements
3.08(a)(xiv) Powers of Attorney
3.08(a)(xv) Confidentiality Agreements
3.08(a)(xvi) Sales Agreements
3.08(a)(xvii) Rights of First Refusal
3.08(a)(xix) Governmental Contracts, Licenses & Permits Other than
Environmental
3.08(a)(xxi) Joint Ventures, Partnerships
3.08(a)(xxii) Distributor & Sales Agency Agreements
3.08(c) Material Contracts--Consents to Assignment Needed
3.09 Receivables
3.10 Permits Other than Those Required By Environmental Laws
3.11 Major Repairs Needed
3.13 Legal Proceedings
3.14 Seller's Benefit Plans
3.16(b) Environmental Matters
3.18 Liabilities
3.20 Top Customers & Suppliers
5.09(b) Employment Terms
5.18 Purchase Price Adjustment
5.26 Agreement as to Interim Services
6.02(e) Required Consents
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,213
<SECURITIES> 0
<RECEIVABLES> 66,476
<ALLOWANCES> 2,400
<INVENTORY> 67,755
<CURRENT-ASSETS> 144,321
<PP&E> 666,261
<DEPRECIATION> 300,337
<TOTAL-ASSETS> 630,205
<CURRENT-LIABILITIES> 108,558
<BONDS> 396,525
0
0
<COMMON> 309
<OTHER-SE> 33,952
<TOTAL-LIABILITY-AND-EQUITY> 630,205
<SALES> 573,253
<TOTAL-REVENUES> 573,253
<CGS> 487,122
<TOTAL-COSTS> 487,122
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,719
<INCOME-PRETAX> 35,206
<INCOME-TAX> 12,850
<INCOME-CONTINUING> 22,356
<DISCONTINUED> (10,156)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,200
<EPS-BASIC> .39
<EPS-DILUTED> .39
</TABLE>
