<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 3, 1995
---------------
Sun Distributors L. P.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9375 23-2439550
- - --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
organization) Number)
2600 One Logan Square
Philadelphia, Pennsylvania 19103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 665-3650
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Page 1 of 11
Exhibit Index on page 11
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On January 3, 1995, the Registrant completed the sale of certain
assets of its Dorman Products division to R&B, Inc. for a cash consideration of
$37,786,000 (subject to certain post-closing adjustments) and the assumption
of certain liabilities. The amount of the consideration was determined by
arms-length negotiations between the parties. The asset purchase agreement, as
amended, is attached as an exhibit to this report.
Item 7. Financial Statements and Exhibits.
<TABLE>
<CAPTION>
(b) Pro forma financial information.
Page
----
<S> <C>
Introduction 3
Pro Forma Consolidated Balance Sheet,
September 30, 1994 (Unaudited) 4
Pro Forma Consolidated Statement of Income
for the Nine Months ended September 30,
1994 (Unaudited) 5
Pro Forma Consolidated Statement of Income
for the Year ended December 31, 1993
(Unaudited) 6
Notes to Pro Forma Financial Information
(Unaudited) 7-9
</TABLE>
(c) Exhibits.
The following exhibit is filed as part of this Report:
2.1 Asset Purchase Agreement for the Acquisition of the Assets of the
Dorman Products Division of SDI Operating Partners, L.P. by R&B, Inc.,
dated as of October 5, 1994, as amended.
Page 2 of 11
<PAGE>
SUN DISTRIBUTORS L.P. AND SUBSIDIARY
PRO FORMA FINANCIAL INFORMATION
INTRODUCTION
On January 3, 1995, SDI Operating Partners, L.P., a subsidiary limited
partnership of Sun Distributors L.P. ("the Company") sold certain assets of its
Dorman Products Division for an aggregate consideration of approximately $37.8
million (subject to certain post-closing adjustments) and the assumption of
certain liabilities. Also, the Company's report on Form 8-K dated December 5,
1994, disclosed the sale of certain assets of its three Electrical Group
Divisions and the assumption of certain liabilities. The accompanying pro forma
consolidated balance sheet and pro forma consolidated statements of income give
effect to both of these divestitures.
The pro forma financial information is unaudited and assumes that the
transactions for which pro forma effects are shown occurred as of September 30,
1994 for the pro forma consolidated balance sheet and as of January 1, 1993 for
the pro forma consolidated statements of income (the "pro forma financial
information").
The pro forma financial information presented herein is not necessarily
indicative of what the financial position or results of operations would have
been had the transactions occurred on those dates, nor are they necessarily
indicative of the future results of operations of the company. Management
believes the pro forma adjustments reflected in the accompanying consolidated
balance sheet and consolidated statements of income give effect to all material
changes arising from the divestment of the Dorman Products Division and the
three Electrical Group Divisions ("the divested divisions"). The pro forma
financial information should be read in conjunction with the historical
consolidated financial information and related notes included in the Company's
report on Form 10-K for the year ended December 31, 1993, report on Form 10-Q
for the quarter ended September 30, 1994, and report on Form 8-K dated
December 5, 1994.
Page 3 of 11
<PAGE>
SUN DISTRIBUTORS L.P. AND SUBSIDIARY
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1994
(UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
Divested
Divisions Pro Forma
ASSETS Historical (a) Adjustments Pro Forma
------------------ ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $2,645 ( $166) $35,636 (b) $38,115
Accounts and notes receivable, net 95,089 ( 19,363) 247 (c) 75,973
Inventories 103,839 ( 25,209) 514 (d) 79,144
Other current assets 4,346 ( 1,239) 2,500 (e) 5,607
------------- ------------ ----------- ------------
Total current assets 205,919 ( 45,977) 38,897 198,839
Property, plant and equipment, net 28,664 ( 8,039) 224 (f) 20,849
Goodwill 54,320 ( 9,044) 45,276
Other intangibles 2,959 ( 556) 2,403
Deferred income taxes 1,889 1,889
Other assets 2,704 ( 3,203) 264 (g) ( 235)
------------- ------------ ----------- ------------
Total assets $296,455 ( $66,819) $39,385 $269,021
============= ============ =========== ============
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
-----------------------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable, trade $61,907 ( $15,376) 46,531
Current portion of senior notes 5,700 5,700
Notes payable 2,308 2,308
Current portion of capitalized lease obligations 498 ( 403) 95
Distributions payable to partners 1,625 7,978 (h) 9,603
Accrued expenses:
Salaries and wages 6,322 ( 1,002) 5,320
Interest on senior notes 2,811 2,811
Management fee due the general partner 2,491 2,491
Income and other taxes 3,795 ( 691) 3,104
Other accrued expenses 14,080 ( 2,028) 3,038 (i) 15,090
------------- ------------ ----------- ------------
Total current liabilities 101,537 ( 19,500) 11,016 93,053
Senior notes 89,300 ( 14,250) (j) 75,050
Bank revolving credit 13,000 ( 13,000) (k)
Capitalized lease obligations 4,535 ( 4,521) 14
Deferred compensation 6,962 6,962
Other liabilities 1,116 ( 1) 1,115
Commitments and contingencies
Partners' capital:
General partner 800 800
Limited partners:
Class A interests 67,642 67,642
Class B interests 13,077 ( 42,797) 55,619 (1) 25,899
Class B interests held in treasury ( 1,514) ( 1,514)
------------- ------------ ----------- ------------
Total liabilities and partners' capital $296,455 ( $66,819) $39,385 $269,021
============= ============ =========== ============
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL INFORMATION
Page 4 of 11
<PAGE>
SUN DISTRIBUTORS L.P. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
(dollars in thousands except for partnership interest amounts)
<TABLE>
<CAPTION>
Divested
Divisions Pro Forma
Historical (m) Adjustments Pro Forma
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $557,016 ($111,671) $445,345
Cost of sales 344,054 (76,885) 267,169
---------- ---------- ---------- ----------
Gross profit 212,962 (34,786) 178,176
---------- ---------- ---------- ----------
Operating expenses:
Selling, general and administrative expenses 176,694 (29,082) 147,612
Management fee to general partner 2,491 2,491
Depreciation 3,491 (729) 2,762
Amortization 2,010 (364) 1,646
---------- ---------- ---------- ----------
Total operating expenses 184,686 (30,175) 154,511
---------- ---------- ---------- ----------
Income from operations 28,276 (4,611) 23,665
Interest income 51 (3) (n) 48
Interest expense 7,702 (179) (1,865)(o) 5,658
Other income (expense), net (640) (180) (820)
---------- ---------- ---------- ----------
Income before provision for income taxes 19,985 (4,615) 1,865 17,235
Provision for income taxes 138 138
---------- ---------- ---------- ----------
Net income $19,847 ($4,615) $1,865 $17,097
========== ========== ========== ==========
Net income allocated to partners:
General partner $198 ($46) $19 $171
---------- ---------- ---------- ----------
Class A limited partners $9,157 $9,157
---------- ---------- ---------- ----------
Class B limited partners $10,492 ($4,569) $1,846 $7,770
---------- ---------- ---------- ----------
Weighted average number of outstanding
limited partnership interests:
- Class A interests 11,099,573 11,099,573 11,099,573 11,099,573
- Class B interests 21,675,746 21,675,746 21,675,746 21,675,746
Earnings per limited partnership interest:
- Class A interest $.82 $.82
- Class B interest $.48 ($.21) $.09 $.36
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL INFORMATION
Page 5 of 11
<PAGE>
SUN DISTRIBUTORS L.P. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
(dollars in thousands except for partnership interest amounts)
<TABLE>
<CAPTION>
Divested
Divisions Pro Forma
Historical (p) Adjustments Pro Forma
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $655,707 ($137,107) $518,600
Cost of sales 402,441 (92,984) 309,457
---------- ---------- ---------- ----------
Gross profit 253,266 (44,123) 209,143
---------- ---------- ---------- ----------
Operating expenses:
Selling, general and administrative expenses 213,101 (36,173) 176,928
Management fee to general partner 3,330 3,330
Depreciation 5,106 (1,024) 4,082
Amortization 2,848 (344) 2,504
---------- ---------- ---------- ----------
Total operating expenses 224,385 (37,541) 186,844
---------- ---------- ---------- ----------
Income from operations 28,881 (6,582) 22,299
Interest income 92 (7) (q) 85
Interest expense 10,096 (219) (2,226)(r) 7,651
Other income (expense), net 498 (222) 276
---------- ---------- ---------- ----------
Income before provision for income taxes 19,375 (6,592) 2,226 15,009
Provision for income taxes 869 869
---------- ---------- ---------- ----------
Net income $18,506 ($6,592) 2,226 $14,140
========== ========== ========== ==========
Net income allocated to partners:
General partner $185 ($66) $22 $141
---------- ---------- ---------- ----------
Class A limited partners $12,210 $12,210
---------- ---------- ---------- ----------
Class B limited partners $6,111 ($6,526) $2,204 $1,789
---------- ---------- ---------- ----------
Weighted average number of outstanding
limited partnership interests:
- Class A interests 11,099,573 11,099,573 11,099,573 11,099,573
- Class B interests 21,675,746 21,675,746 21,675,746 21,675,746
Earnings per limited partnership interest:
- Class A interest $1.10 $1.10
- Class B interest $.28 ($.30) $.10 $.08
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL INFORMATION
Page 6 of 11
<PAGE>
SUN DISTRIBUTORS L.P. AND SUBSIDIARY
NOTES TO PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
(dollars in thousands)
1. Basis of Presentation
The pro forma financial information is unaudited and assumes that the
transactions for which the pro forma effects are shown occurred as of
September 30, 1994, for the pro forma consolidated balance sheet and as of
January 1, 1993, for the pro forma consolidated statements of income.
The gain on the sale of the divested divisions of approximately $20,800 and
other non-recurring items related to the sale have been excluded from the
accompanying pro forma consolidated statements of income as such amounts do
not represent on-going income or costs of operations.
2. Pro forma adjustments to consolidated balance sheet:
(a) Adjustment to reflect the elimination of historical assets and
liabilities as of September 30, 1994 of the divested divisions.
(b) Adjustment to reflect remaining cash proceeds from the sale of the
divested divisions after application of cash reflected in pro forma
adjustments (e), (g), (j), (k) and (l) listed below.
(c) Adjustment to reflect the estimated Electrical Group Divisions'
accounts receivable balances not sold on December 5, 1994.
(d) Adjustment to reflect estimated Dorman Products inventory not sold on
January 3, 1995.
(e) Adjustment to reflect the portion of aggregate consideration held in
escrow as of December 5, 1994, related to the sale of the Electrical
Group.
(f) Adjustment to reflect Electrical Group Divisions' properties not sold
on December 5, 1994.
Page 7 of 11
<PAGE>
SUN DISTRIBUTORS L.P. AND SUBSIDIARY, Continued
NOTES TO PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
(dollars in thousands)
2. Pro forma adjustments to consolidated balance sheet (continued):
(g) Adjustment to reflect the Electrical Group prepaid pension asset not
sold on December 5, 1994.
(h) Adjustment to reflect estimated tax distribution required to be paid
to Class B interest holders as a result of the capital gain recognized
from the sale transactions.
(i) Adjustment to reflect accrued expenses related to sale of the divested
divisions, such as investment banking fees, legal, severance and other
divestiture costs.
(j) Adjustment to reflect mandatory repayment of senior notes in
accordance with Note Purchase Agreement dated December 15, 1992.
(k) Adjustment to reflect repayment of outstanding bank revolving credit
borrowings.
(l) Adjustment to reflect net assets sold based on September 30, 1994 book
values plus estimated gain recognized from the sale transactions less
required tax distribution (reference Note 1 and pro forma adjustments
(a) and (h)).
3. Pro forma adjustments to consolidated statement of income
for the nine months ended September 30, 1994:
(m) Adjustment to reflect elimination of the results of operations for the
divested divisions for the nine months ended September 30, 1994.
(n) Interest income that would have been earned from excess cash balances
approximates $648 for the nine months ended September 30, 1994 based
on an assumed short-term investment rate of 3.5%. This amount is not
reflected in the accompanying pro forma consolidated statement of
income.
Page 8 of 11
<PAGE>
SUN DISTRIBUTORS L.P. AND SUBSIDIARY, Continued
NOTES TO PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
(dollars in thousands)
3. Pro forma adjustments to consolidated statement of income for the nine
months ended September 30, 1994 (continued):
(o) Adjustment to reflect reduced interest expense resulting from the
repayment of the outstanding bank revolving credit borrowings and
senior notes (reference pro forma adjustments (j) and (k)).
4. Pro forma adjustments to consolidated statement of income for the year
ended December 31, 1993:
(p) Adjustments to reflect elimination of the results of operations for
the divested divisions for the year ended December 31, 1993.
(q) Interest income that would have been earned from excess cash balances
approximates $1,218 for the year ended December 31, 1993 based on an
assumed short-term investment rate of 3.7%. This amount is not
reflected in the accompanying pro forma consolidated statement of
income.
(r) Adjustment to reflect reduced interest expense resulting from the
repayment of the outstanding bank revolving credit borrowings and
senior notes (reference pro forma adjustments (j) and (k)).
Page 9 of 11
<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.
SUN DISTRIBUTORS L.P.
By /s/ Louis J. Cissone
-----------------------
Louis J. Cissone
Senior Vice President and
Chief Financial Officer
DATE: January 18, 1995
Page 10 of 11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Page
- - ------ ----
<S> <C>
2.1 Asset Purchase Agreement for the Acquisition
of the Assets of the Dorman Products Division
of SDI Operating Partners, L.P. by R&B, Inc.,
dated as of October 5, 1994, as amended.
</TABLE>
Page 11 of 11
<PAGE>
FINAL
ASSET PURCHASE AGREEMENT
FOR THE
ACQUISITION OF THE ASSETS
OF
THE DORMAN PRODUCTS DIVISION
OF
SDI OPERATING PARTNERS, L.P.
BY
R&B, INC.
Dated as of October 5, 1994
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT dated as of October 5, 1994 between SDI OPERATING PARTNERS, L.P.
a Delaware limited partnership (the "Seller") and R&B, Inc., a Pennsylvania
corporation (the "Buyer").
The Dorman Products Division of the Seller (the "Division") is engaged
principally in the business of distribution of small parts and fasteners to the
automotive aftermarket throughout the United States. The Seller desires to sell
all of the assets and properties of the Division to the Buyer, and the Buyer
desires to acquire the same from the Seller, upon and subject to the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Sale and Purchase of Assets.
---------------------------
1.1 Assets to be Purchased. At the Closing (as hereinafter defined)
----------------------
hereunder, the Seller will sell to the Buyer, and the Buyer will purchase from
the Seller, (a) all of Seller's right, title and interest in and to all of the
assets of the Division wherever situated, including, but not limited, to (i)
real estate; leaseholds; notes, accounts and drafts receivable; supplies on
hand and in transit, inventories of finished goods, raw materials and
work-in-process; goodwill, franchises and all its right,
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<PAGE>
title and interest in and to the use of the name Dorman Products, or any
similar name; United States and foreign trademarks and trademark registrations
and trademark applications, trade names, copyrights, United States and foreign
patents and patent applications, including all international priority rights
associated therewith, patent and other licenses, processes, formulae, trade
secrets, inventions and royalties, including all rights to sue for past
infringement; tangible and intangible personal property of all kinds; and books
of account, files, papers and records relating to the aforesaid business and
assets if any there be; and (ii) those assets reflected in the Division's June
30 Balance Sheet (as hereinafter defined), with only such changes therein as
shall have occurred between June 30, 1994 and the Closing Date in the ordinary
course of business or as are permitted or contemplated by this Agreement, (b)
all rights of Seller with respect to the business of the Division under any and
all agreements, contracts, commitments, leases, plans, bids, quotations,
proposals, licenses, permits, authorizations, instruments and other documents to
which it is a party or by which it has rights, including but not limited to
fidelity and contract bonds; causes of action, judgments, claims and demands of
whatsoever nature; membership, agencies and permits; contracts for the purchase
of raw materials and supplies and for the sale of goods, employment contracts,
restrictive covenants and
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<PAGE>
obligations of present and former officers and employees and of individuals and
corporations, and all other contracts, and (c) the business and operations of
the Division as a going concern; provided, however, that the assets to be sold
-------- -------
shall not include (i) cash and cash items other than petty cash and bonds or
deposits with suppliers or customers, and (ii) tax refunds ("Excluded Assets").
All of the assets and business to be sold by the Seller are hereinafter
referred to collectively as the "Purchased Assets".
1.2 Purchase Price. The aggregate purchase price to be paid for the
--------------
Purchased Assets (the "Purchase Price") shall be:
(a) Cash payable to the Seller at the Closing in the amount of
$38,300,000;
(b) the assumption of the Assumed Liabilities as set forth in
Section 1.3; and
(c) the cash portion of the Purchase Price will be adjusted,
dollar for dollar, as follows:
(i) If the June Book Value of Seller, which is set forth
in Exhibit 1.2(c) attached hereto, exceeds the Closing Book Value of
Seller, as defined in and determined in accordance with Exhibit 1.2(c)
attached hereto, the amount determined in accordance with the applicable
provisions of Exhibit 1.2(c) (which shall be referred to hereinafter as the
"Adjustment
-3-
<PAGE>
Payment") shall be paid to Buyer by Seller, by wire transfer of funds or
bank cashiers check, on the fifth (5th) business day following the
determination of the Closing Book Value of Seller; or
(ii) If the Closing Book Value of Seller exceeds the June
Book Value of Seller, then an Adjustment Payment (as an additional part of
the Purchase Price) shall be paid to Seller by Buyer, by wire transfer of
funds or bank cashiers check, on the fifth (5th) business day following
such determination of the Closing Book Value of Seller; and
(iii) Any amount due pursuant to this Section 1.2(c) by one
party to the other shall bear interest at a rate of eight percent (8%) per
annum from the Closing Date until such amount is paid.
1.3 Assumption of Liabilities and Obligations.
-----------------------------------------
(a) Except as otherwise provided in paragraph (b) of this
Section 1.3 at and effective as of the Closing, the Buyer shall assume and agree
to pay, discharge or perform, as appropriate, the following liabilities and
obligations of the Seller relating to the Division:
(i) all liabilities and obligations of the Seller relating
to the Division as of June 30, 1994 reflected or reserved against in the
June 30 Balance Sheet and not paid or discharged prior to the closing;
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<PAGE>
(ii) liabilities and obligations of the Seller relating to
the Division's creditors arising in the ordinary course of the Division's
business and consistent with the Division's past practice between June 30,
1994 and the close of business on the last business day preceding the day
of the Closing;
(iii) all liabilities and obligations of the Seller relating
to the Contracts that are specifically identified as being assumed by the
Buyer hereunder in the Schedule (as hereinafter defined) or are less than
$1,000; and
(iv) all other liabilities and obligations listed in the
Schedule as being assumed by the Buyer.
All of the liabilities and obligations assumed by the Buyer pursuant
to this Section 1.3 are hereinafter referred to collectively as the "Assumed
Liabilities".
(b) Notwithstanding paragraph (a) of this Section 1.3 and any
other provisions of this Agreement, Buyer shall not purchase the Purchased
Assets subject to, and Buyer shall not in any manner and in no event assume,
agree to pay, discharge or perform, incur or be liable or responsible for, as
the case may be, any liability or obligation of Seller or the Division other
than the Assumed Liabilities, including, but not limited to, any liability or
obligation in respect of any Taxes (as defined in Section 3.4A hereof) incident
to or
-5-
<PAGE>
arising as a consequence of the negotiation or consummation of this Agreement
and the transactions contemplated hereby or any accrued wages, vacation pay,
miscellaneous employee benefit expense, or relating to any 'employee benefit
plan' (as that term is defined in Section 3(3) of ERISA), or any other plan,
trust agreement or arrangement providing deferred compensation, retirement or
welfare benefits, sponsored or maintained by the Seller with respect to the
Division prior to, on, or subsequent to, the Closing Date.
1.4 Allocation of Purchase Price. The Purchase Price shall be
----------------------------
allocated among the Purchased Assets as the parties shall mutually agree. The
parties agree that neither of them will take any position for income tax
purposes which is inconsistent with the allocation the parties shall mutually
agree on.
2. Closing.
-------
2.1 Time and Place of Closing. The closing (the "Closing") of the
-------------------------
sale and purchase of the Purchased Assets shall take place at 10:00 A.M. on
January 3, 1995, effective January 1, 1995 (the "Closing Date") at the offices
of Morgan, Lewis & Bockius, 2000 one Logan Square, Philadelphia, Pennsylvania,
or at such other time and place as the parties shall mutually agree in writing;
provided, however, Buyer may extend the Closing and the Closing Date for 30 days
if the financing commitment described in Section 4.4 is not
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<PAGE>
provided. Notwithstanding the foregoing, the calculation pursuant to Section
1.2(c) shall be as of December 31, 1994.
2.2 Items to be Delivered at Closing.
--------------------------------
(a) At the Closing, the Seller will deliver to the Buyer a bill
of sale for the Purchased Assets, deeds for the Real Property disclosed in the
Schedule pursuant to Section 3.7(c) and such other assignments, endorsements and
other good and sufficient instruments and documents of conveyance and transfer,
in form satisfactory to the Buyer and its counsel, as shall be necessary and
effective to convey, transfer and assign to, and vest in, the Buyer all of the
Seller's right, title and interest in and to the Purchased Assets, including
without limitation, (i) good, valid and marketable title in and to all of the
Purchased Assets, (ii) good and valid leasehold interests in and to all of the
Purchased Assets leased by the Seller and (iii) all of the Seller's rights under
all agreements, contracts, commitments, leases, plans, bids, quotations,
proposals, licenses, permits, authorizations, instruments and other documents
comprising the Purchased Assets to which the Seller is a party or by which it
has rights on the Closing Date.
(b) At the Closing, the Buyer will deliver to the Seller a
payment by wire transfer to an account designated by the Seller as provided in
Section 1.2(a), and an Assumption Agreement whereby the Buyer will assume and
-7-
<PAGE>
agree to pay, discharge or perform, as appropriate, the Assumed Liabilities as
provided in Section 1.3.
2.3 Further Assurances. Following the Closing, at the request of the
------------------
Buyer, the Seller will execute, acknowledge and deliver to the Buyer such other
instruments of conveyance and transfer and will take such other actions and
execute and deliver such other documents, certifications and further assurances
as the Buyer may reasonably require in order to vest more effectively in the
Buyer, or to put the Buyer more fully in possession of, any of the Purchased
Assets, or to better enable the Buyer to complete, perform or discharge any of
the Assumed Liabilities.
3. Representations and Warranties of the Seller. The Seller represents
--------------------------------------------
and warrants to the Buyer on the date hereof and on and as of the Closing Date
as follows:
3.1 Organization and Powers. The Seller is a limited partnership duly
-----------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease and operate
its properties and assets and carry on its business as and where such business
is now conducted.
3.2 Power and Authorization. The Seller has full authority to execute
-----------------------
and deliver this Agreement and to carry out the transactions contemplated
hereby. The execution, delivery and performance of this Agreement (and all other
documents and instruments required to effect the transactions
-8-
<PAGE>
contemplated hereunder) by the Seller and the consummation of the transactions
contemplated herein have been duly authorized by all necessary partnership
action. This Agreement constitutes the legally valid and binding obligation of
Seller and is enforceable upon the Seller in accordance with its terms. The
Seller is qualified and registered to do business in each of the jurisdictions
listed on the Schedule. There is no other jurisdiction in which the nature of
the Division's business or location of its assets or properties requires such
qualification or registration, the failure of which to qualify would have a
material adverse effect on the Purchased Assets, Assumed Liabilities, financial
condition, results of operations, business or business prospects of the
Division.
3.3 Conflict with Other Agreements, Approvals. With respect to the
-----------------------------------------
following:
(a) the Certificate of Limited Partnership (and any and all
amendments thereto) and Agreement of Limited Partnership (and any and all
amendments thereto) of the Seller,
(b) any law, statute, ordinance, charter, rule or regulation,
enacted, approved or adopted by any governmental, administrative or regulatory
authority,
(c) any material agreement, instrument or permit to which the
Seller or the Division is a party or may be bound (including, but not limited
to, the Contracts), or
-9-
<PAGE>
(d) any judgment, order, writ, injunction, citation, decree or
ruling of any court, governmental, administrative or regulatory authority or
arbitration tribunal to which the Seller or the Division is a party or subject,
except as disclosed in the schedule to be delivered by the Seller to the Buyer
as soon as practicable after the date hereof (the "Schedule"), the execution and
delivery by the Seller of this Agreement (and the documents required to effect
the transactions contemplated hereunder) and the consummation of the
transactions contemplated hereby, do not and will not, (i) constitute or result
in any violation, conflict or default (either immediately or upon notice, lapse
of time or both), give to others any interest or rights, including rights of
termination, cancellation or acceleration, or create or impose an encumbrance on
any of the Purchased Assets or (ii) require any authorization, consent,
approval, exemption or other action by any court, administrative, regulatory or
governmental body which has not been obtained, or any notice to or filing with
any court, administrative, regulatory or governmental body which has not been
given or done except for filings pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules and regulations thereunder (the "H-S-R
Act").
3.4 Compliance with Law. Except as disclosed in the Schedule, to the
-------------------
knowledge of the Seller, the Division's business and the Seller's conduct of
the business of the
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<PAGE>
Division is and has been in compliance with all applicable federal, state, local
or other governmental, administrative and regulatory laws or ordinances, foreign
or domestic, and any order, rule or regulation of any state, local or other
governmental, administrative or regulatory agency or body, foreign or domestic
(including, without limitation, all environmental, energy, safety, health,
zoning, anti-discrimination, antitrust, labor, wage and hour and price and wage
control laws, ordinances, orders, rules or regulations to the extent any or all
of the foregoing are applicable), and there is no basis for a violation thereof
which may occur in the future, the non-compliance with which, or the violation
of which would (individually or in the aggregate) have a material adverse effect
on the Purchased Assets, Assumed Liabilities, financial condition, results of
operations, business or business prospects of the Division, and the Seller has
received no claim or notice of violation with respect thereto, and there is no
investigation pending or threatened.
3.4A Taxes. (a) The Seller or an affiliate of the Seller on its
-----
behalf has (i) duly filed with the appropriate federal, state, local and foreign
taxing authorities all Tax Returns (as hereinafter defined) required to be filed
by or with respect to the Seller other than those Tax Returns the failure of
which to file would not have a material adverse effect on the business,
operations or
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<PAGE>
financial condition of the Seller and the Division taken as a whole, and such
Tax Returns are true, correct and complete in all material respects, and (ii)
paid in full or have made adequate provision for on its balance sheet (in
accordance with generally accepted accounting principles) all material Taxes (as
hereinafter defined) shown to be due on such Tax Returns. There are no material
liens for Taxes upon the assets of the Seller except for statutory liens for
current taxes not yet due. Except as set forth in the Schedule, neither the
Seller nor any affiliate of the Seller, has received any notice of deficiency or
assessment from any federal, state, local or foreign taxing authority with
respect to liabilities for Taxes with respect to the operations of the Division
which has not been fully paid or finally settled, and any such deficiency or
assessment shown on such Schedule is being contested in good faith through
appropriate proceedings.
(ii) For the purposes of this Agreement, "Taxes" shall mean
all taxes, charges, fees, levies, penalties or other assessment imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest, penalties
or additions attributable thereto.
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<PAGE>
(iii) For purposes of this Agreement, "Tax Return" shall
mean any return, report, information return or other document (including any
related or supporting information) with respect to Taxes.
3.5 Financial Statements.
--------------------
(a) The Seller will deliver to the Buyer with the Schedule true
and complete copies of the following "Financial Statements" (including the notes
thereto) of the Division: (i) Unaudited Balance Sheets for the years ended
December 31, 1991, 1992 and 1993 and for the six months ended June 30, 1994,
(ii) Unaudited Statements of Income for the years ending December 31, 1991, 1992
and 1993 and for the six months ending June 30, 1994, and (iii) Unaudited
Statements of Cash Flows for the years ended December 31, 1991, 1992 and 1993,
and the six months ended June 30, 1994.
(b) Except as disclosed in the Schedule, such Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods indicated and the
Financial Statements are true and correct in all material respects, and fairly
present the financial position, results of operations and cash flows of the
Division at the dates indicated. The balance sheet as of June 30, 1994 is
referred to herein as the "June 30 Balance Sheet", and fairly presents those
assets and liabilities necessary and sufficient to operate the business
consistent with past practices.
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<PAGE>
(c) Appropriate records exist, and testing procedures have been
or can be performed, to allow the Division's Financial Statements, including
financial statements for the current fiscal year, to be audited in accordance
with generally accepted accounting principles.
(d) All inventory consists of a quality and quantity usable or
salable in the ordinary course of the business of Seller, except for items of
obsolete materials and materials below standard quality, all of which: (i) have
been written down to realizable market value; or (ii) adequately reserved for.
(e) The purpose of this Section 3.5(e) is to provide the
mechanics whereby the Buyer will be paid for (i) the amount of accounts
receivable on the Closing Date Balance Sheet which are not collected within the
time periods set forth below less (ii) (x) the amount of the bad debt reserve on
----
the Closing Date Balance Sheet and (y) any payments received by the Buyer with
respect to accounts receivable which had been written off by the Seller prior to
the Closing Date ("written off accounts"). The Buyer shall use its best efforts
and due diligence to collect all accounts receivable shown on the Closing Date
Balance Sheet. All payments received after the Closing Date from a customer of
the Seller shall, unless application to a specified invoice or account is
otherwise directed by the customer, be applied first to the oldest account owing
by such customer as of the Closing
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<PAGE>
Date. Customer debits shall be allocated depending on whether the underlying
basis for the debit arose before or after the Closing Date. The Buyer shall
provide the Seller with monthly reports with respect to the collection of the
accounts receivable.
Within 30 days after 60 days after the Closing Date, the Buyer may notify
the Seller of any uncollected accounts which were included on the Closing Date
Balance Sheet and were past due on the Closing Date, and the Seller shall
thereupon pay to the Buyer the amount of such accounts less any bad debt reserve
allocated to them and any amounts received by the Buyer since the Closing Date
with respect to written off accounts. Within 30 days after 150 days after the
Closing Date, the Buyer may notify the Seller of any remaining uncollected
accounts, and the Seller shall thereupon pay to the Buyer the amount of such
accounts less the balance of the bad debt reserve and any amounts received by
the Buyer since the first notification with respect to written off accounts or
accounts included in the first notification. Upon such payment, the Buyer shall
transfer and assign to the Seller, without recourse, all accounts receivable
which are uncollected.
(f) The description of the Division's customer credits and
allowances set forth in the Schedule is true and correct.
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<PAGE>
3.6 Absence of Adverse Changes or Events. Except as otherwise
------------------------------------
reflected in the Schedule, since June 30, 1994 there has been no change in the
Purchased Assets, Assumed Liabilities, financial condition, results of
operations, business or business prospects of the Division which has materially
adversely affected or, in the judgement of the Seller might materially adversely
affect, the Purchased Assets, Assumed Liabilities, financial condition, results
of operations, business or business prospects of the Division.
3.7 Assets.
------
(a) Except as disclosed in the Schedule, the Seller is the owner
of and has good, valid and marketable title to all of the Purchased Assets, free
and clear of all mortgages, liens, pledges, charges or encumbrances or other
third party interests of any kind or nature whatsoever.
(b) The Purchased Assets are in good operating condition in all
material respects and are usable in the ordinary course of business, subject to
ordinary wear and tear.
(c) The Schedule sets forth all real estate utilized by the
Division included in the Purchased Assets (the "Real Property") and the location
of the Real Property. The Seller will deliver to the Buyer (i) a copy of each
deed by which the Seller acquired title to or interest in the Real Property,
(ii) a copy of title abstracts and title insurance policies for the Real
Property, (iii) a copy of the most
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<PAGE>
recent survey or surveys for the Real Property, (iv) a copy of certificates of
occupancy (or, if a copy is not readily obtainable, confirmation that a
certificate was in the past issued) for the improvements on the Real Property
and any notices of violation with respect to the Real Property, including
without limitation, notices relating to environmental laws, (v) a copy of any
variance granted with respect to any of the Real Property pursuant to applicable
zoning laws or ordinances, all of which documents are true and complete copies
thereof as in effect on the date hereof and (vi) any and all other documents and
instruments relating to the Real Property utilized by the Division. The Real
Property is zoned as set forth in the Schedule, and the conduct of the business
of the Seller which is currently conducted on the Real Property does not violate
such zoning classification. There are no public improvements, condominium or
association assessments against the Real Property. Except as set forth in the
Schedule, to the knowledge of the Seller, there is no easement, covenant, right-
of-way, agreement, license, lease, sublease, occupancy agreement or restriction
with respect to the Real Property. The Seller has received no notices, oral or
written, and has no reason to believe, that any government body having
jurisdiction over the Real Property intends to exercise the power of eminent
domain or similar power with respect to all or any part of the Real Property.
The Division's Real
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<PAGE>
Property and facilities are adequate for the operation of the Division's
business
(d) (i) The Real Property is currently operated in accordance
with applicable law and no notice has been given to the Seller by any person or
governmental authority claiming any violation of any federal, state, or local
statute, ordinance, regulation, standard, administrative order or court order or
decree or private agreement (hereinafter collectively called "Environmental
Requirements") or demanding payment or contribution for any environmental
contamination of or from the Real Property or any damages attributable thereto;
(ii) No administrative order, consent order, lien, superlien or agreement,
litigation or settlement with respect to any Hazardous Substance located on,
about or under all or any portion of the Real Property, is pending, or to the
knowledge of the Seller, proposed, threatened or anticipated; (iii) Except as
set forth in the Schedule, no Hazardous Substance as that term is defined
herein, has been used, generated, treated, stored, discharged, disposed of,
deposited or otherwise released in or on the Real Property; (iv) Except as set
forth in the Schedule, no Hazardous Substance is currently stored, used or
otherwise present on the Real Property except for any concentrations or
quantities that occur naturally on the Real Property. To the knowledge of the
Seller no asbestos or PCBs are present on the Real Property; (v) To the
knowledge of the
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<PAGE>
Seller, there is no actual or threatened release of any Hazardous Substance and
there is no other environmental condition (such as a wetland, sinkhole, coastal
zone, floodplain or other environmentally sensitive area), in or on the Real
Property that may: (a) restrict any development or use of the Real Property; (b)
increase the cost of developing, operating or maintaining the Real Property; (c)
present any risk to any persons or things on or off of the Real Property; or (d)
diminish or impair the value or marketability of the Real Property; (vii) As
used herein, the term Hazardous Substance shall mean and include: (a) any
"Hazardous Substance", "Pollutant" or "Contaminant" (as defined in Section
101(14) and (33) of the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), 42 U.S.C. 9601 (14) and (33)) or 40 C.F.R. Part 302; (b)
any hazardous substance or any hazardous waste or solid waste, as those terms
are defined in applicable state or local law; (c) any substance containing
petroleum, as that term is defined in Section 9001(8) of the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6991(8) or 40 C.F.R. 280.1;
or (d) any other substance for which any governmental entity requires special
handling in its collection, storage, treatment or disposal.
3.8 Contracts. All written or oral contracts, agreements, leases,
---------
subleases, options, instruments, mortgages, commitments or binding arrangements,
express or
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<PAGE>
implied, of any nature whatsoever ("Contracts"), to which, with respect to the
Division, the Seller or the Division is a party or may be bound or subject, are
listed in the Schedule, except Contracts relating to purchase or sales orders in
the ordinary course of business or involving a payment of less than $50,000. All
Contracts are valid and in full force and effect. The Seller is not in default
under any of the Contracts nor, to the knowledge of the Seller, is any other
party to any such Contract in default thereunder, and the Seller has not
violated any provision of, or committed or failed to perform any act, which with
notice, lapse of time or both would constitute a default under the provisions of
any Contract, nor, to the knowledge of the Seller, is there any condition or
basis for any claim of a default by any party thereof. Copies of all Contracts
will be attached to the Schedule. Except as disclosed in the Schedule, all
rights of Seller under the Contracts are assignable to Buyer on and after the
Closing Date without the consent of any person or entity or the payment of any
penalty, the incurrence of any additional obligation or the change of any
material term.
3.9 Litigation. Except as disclosed in the Schedule, (a) no claim,
----------
action, suit, arbitration, investigation or other proceeding is pending or, to
the knowledge of the Seller, threatened or known to be contemplated, against the
Seller or the Division with respect
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<PAGE>
to the Division or any of the Division's assets (including, but not limited to,
the Purchased Assets), properties, operations, business or business prospects
before any court, governmental or regulatory agency, authority or commission,
arbitrator or "impartial mediator", (b) there are no judgments, consents,
decrees, injunctions, or any other judicial, administrative or regulatory
mandates outstanding against the Seller or the Division with respect to the
Division or any of the Division's assets (including, but not limited to,
Purchased Assets), properties, operations, business or business prospects and
(c) no litigation or claims have been brought or threatened, or are known to be
contemplated, respecting the transactions contemplated by this Agreement.
3.10 Employee Benefit Plans and Arrangements. The Schedule contains a
---------------------------------------
complete list of all employee benefit plans sponsored or maintained by the
Seller with the Division. For the purposes hereof, the term "employee benefit
plan" includes all employee welfare benefit plans within the meaning of section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all employee pension benefit plans within the meaning of section
3(2) of ERISA. Buyer shall assume no obligations or liabilities relating to any
'employee benefit plan' (as that term is defined in Section 3(3) of ERISA), or
any other plan, trust agreement or arrangement providing deferred compensation,
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<PAGE>
retirement or welfare benefits, sponsored or maintained by the Seller with
respect to the Division prior to, on, or subsequent to the Closing Date. Seller
shall be solely responsible with respect to any such plan for all obligations
under Section 4980B of the Code and Sections 601 through 608 of ERISA and for
any other obligations, liabilities or claims asserted in relation to any such
plan pursuant to ERISA, the Code or any other applicable law (whether federal,
state, or local) or by any governmental agency (including, but not limited to,
the Internal Revenue Service, the U.S. Department of Labor and the Pension
Benefit Guaranty Corporation).
3.11 Patents and Trademarks. The Seller owns all foreign and United
----------------------
States patents, trademarks, service marks, trade names, copyrights and
applications with respect thereto, or has entered into a subsisting license
agreement with respect thereto, which are necessary for the conduct of the
business of the Division as now conducted and as heretofore conducted, with no
known conflict with, or infringement of, any patent, trademark, service mark,
tradename or copyright owned by any person. The Schedule contains a complete and
correct listing of all such patents, trademarks, service marks, trade names,
copyrights and applications with respect thereto and license agreements.
3.12 Franchises, Licenses, Permits, etc. To the knowledge of the
----------------------------------
Seller, the Seller owns or possesses in the operation of the business of the
Division all franchises,
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<PAGE>
permits, consents, approvals, waivers and other authorizations, governmental or
otherwise, which are necessary for it to conduct the business of the Division as
now or heretofore conducted ("Authorizations"), all of which are listed in the
Schedule, and all of which are in full force and effect. The Seller is not in
default to the knowledge of the Seller, and has not received any notice of any
violation or claim of default, with respect to any such Authorization, or any
notice of any other violation, claim or proceeding or threatened proceeding
relating to any such Authorization or claimed lack of any necessary
Authorization. Neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby will have any materially
adverse effect upon any such Authorization except as disclosed in the Schedule.
Except as set forth on the Schedule, all of the Authorizations are assignable
and transferable by Seller to Buyer without the consent of any person or entity.
3.13 Full Disclosure. The information furnished by or on behalf of
---------------
Seller to Buyer in connection with this Agreement (and any documents and
instruments related thereto) and the transactions contemplated hereby do not
contain any untrue statement of material fact and do not fail to state any
material fact necessary to make the statements made, in the context in which
they are made, not false or misleading.
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<PAGE>
3.14 Employment Relations.
--------------------
(a) The Schedule contains a complete list of all of the
Division's employees, and sets forth each employee's annual compensation,
position with the Division and years of employment with the Division and Seller.
(b) All accrued wages, vacation pay, and miscellaneous employee
benefit expenses owed to any of Seller's employees shall be paid in full to the
Buyer as of the Closing Date and there shall be no continuing or future
liabilities with respect to any wages, compensation, benefits or other
employment related liabilities to any employees, including, but not limited to,
any salespersons or administrative employees as of and after the Closing Date.
(c) As of the Closing Date, Seller shall have no liability, with
respect to employees of the Division, whether contingent, liquidated or
unliquidated, to any pension or other benefit plan, including, but not limited
to any bonus, deferred compensation, pension, profit sharing, retirement, stock
option, group insurance, health benefit, welfare, or other fringe benefit plan,
including, but not limited to, plans defined in Section 3(3) of the Employment
Retirement Income Security Act of 1974 ("ERISA").
(d) Seller shall completely satisfy any and all obligations
regarding its employees imposed under the Kentucky Unemployment Compensation
Act, the Kentucky Workers Compensation Act, and under any other statute or
regulation
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<PAGE>
of either the Commonwealth of Kentucky, the State of California, or any of their
political subdivisions.
(e) Seller acknowledges that Buyer will not assume any
liability, nor will be liable for any debt, liability, or obligation of Seller,
whether contingent, actual, liquidated or unliquidated, that might have arisen
or may in the future arise, as a result of Seller's status as an employer,
termination of any individual employment contract, termination of any labor
agreement or termination of any pension or benefit plan.
(f) To the knowledge of the Seller, Seller is in complete
compliance with all federal, state, and local laws and regulations respecting
employment, including employment practices, the terms and conditions of
employment, the payment of wages, plant closings and the governance of pension
and employee welfare benefit plans, including, but not limited to, the Worker
Adjustment and Retraining Notification Act, the Consolidated Omnibus Budget
Reconciliation Act, ERISA, the Multi-employer Pension Plan Amendments Act, and
any other laws referred to above.
3.15 Knowledge. For purposes of this Section 3, "knowledge" means the
---------
actual knowledge of the Seller and the following executive officers of the
Division (which includes all of the Division's executive officers): Robert
Bryant, Charles Burke, Jack Cameron, August Knickelbein, Jeffrey Moore and
Richart Shutt.
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<PAGE>
3A. Right to Rescind. The Buyer shall have the right to rescind this
----------------
Agreement within 15 days after the delivery of the Schedule if in the good
faith judgment of the Buyer the Schedule is not reasonably satisfactory to the
Buyer.
4. Representations and Warranties of the Buyer. The Buyer represents and
-------------------------------------------
warrants to the Seller on the date hereof and on and as of the Closing Date as
follows:
4.1 Organization and Powers. The Buyer is a corporation duly
-----------------------
organized and validly subsisting under the laws of the Commonwealth of
Pennsylvania and has all requisite power and authority to own, lease and operate
its properties and assets and carry on its business as and where such business
is now conducted.
4.2 Power and Authorization. The Buyer has full authority to execute
-----------------------
and deliver this Agreement and carry out the transactions contemplated hereby.
The execution, delivery and performance of this Agreement (and all other
documents and instruments required to effect the transaction contemplated) by
the Buyer and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate action. This Agreement constitutes
the legally valid and binding obligation of Buyer and is enforceable upon the
Buyer in accordance with its terms.
4.3 Conflict with Other Agreements, Approvals. With respect to the
-----------------------------------------
following:
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<PAGE>
(a) the Articles of Incorporation or Bylaws of the Buyer,
(b) any applicable law, statute, rule or regulation,
(c) any material agreement or instrument to which the Buyer is a
party or may be bound, or
(d) any judgment, order, injunction, decree or ruling of any
court or governmental authority to which the Buyer is a party or subject, the
execution and delivery by the Buyer of this Agreement and the consummation of
the transactions contemplated hereby will not (i) result in any violation,
conflict or default, or give to others any interest or rights, including rights
of termination, cancellation or acceleration, or (ii) require any authorization,
consent, approval, exemption or other action by any court or administrative or
governmental body which has not been obtained, or any notice to or filing with
any court or administrative or governmental body which has not been obtained or
any notice to or filing with any court or administrative or governmental body
which has not been given or done except for filings pursuant to the H-S-R Act.
4.4 Financing. Buyer has received a commitment letter from
---------
CoreStates Bank N.A. providing for financing sufficient to effect the
transaction (the "Financing"), a true and correct copy of which is attached
hereto as Exhibit 4.4, and which has previously been provided to the Seller.
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<PAGE>
The Buyer has not received any oral or written indication that CoreStates Bank
N.A. does not intend to furnish the Financing, and to the Buyer's knowledge
CoreStates Bank N.A. is taking all actions necessary in a reasonable and
diligent manner to enable it to meet the scheduled Closing Date.
5. Conduct of Business of the Division Prior to Closing. The Seller
----------------------------------------------------
covenants to the Buyer that, except as may be approved in writing by the Buyer,
from and after the date hereof to the Closing Date:
5.1 Business. The Seller will conduct and operate the business of the
--------
Division only in the ordinary course consistent with past practice so as to
protect such business and to maintain the good will it now enjoys and, to the
extent consistent with such operations, use all reasonable efforts to preserve
intact the present business organization, keep available the services of its
present officers and employees, and preserve its relationships with suppliers,
jobbers, distributors, customers and others having business dealings with it.
The Seller will pay all of the Division's liabilities and obligations as and
when due in the ordinary course of business consistent with the Division's past
practice.
5.2 Adverse Changes. The Seller will not take or omit to take any
---------------
action which action or omission would in its reasonable judgment cause any
material adverse change to occur in the Purchased Assets, Assumed Liabilities,
financial
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<PAGE>
condition, results of operations, business or business prospects of
the Division.
5.3 Maintenance of Properties, Permits, Franchises, Licenses, etc.
--------------------------------------------------------------
The Seller will, at its own expense, maintain all of the properties used or
useful in the business of the Division in customary repair, order and condition,
and maintain in full force and effect all Authorizations currently in effect.
5.4 Encumbrances. Except as set forth on the Schedule, the Seller
------------
will not mortgage, pledge or otherwise subject to any lien, security interest,
encumbrance or charge of any nature, any of the Purchased Assets or become
committed to do so, or permit or suffer any of the Purchased Assets to become
subject to any mortgage, pledge, lien, security interest, encumbrance or charge
of any nature, or become committed so to do.
6. H-S-R Act. As promptly as practicable after the execution of this
---------
Agreement, the Seller and the Buyer shall each make appropriate filings with the
Federal Trade Commission and the Department of Justice pursuant to the H-S-R Act
and shall comply with any and all reasonable requests for additional information
as soon as possible after receipt of such requests.
7. Consents. The Seller and the Buyer shall each use their best efforts
--------
to obtain all consents or authorizations of third parties which may be necessary
or reasonably
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<PAGE>
required in order to effect the transactions contemplated by this Agreement.
8. Access to Business and Records.
------------------------------
(a) Between the date hereof and the Closing Date and in the absence of
any breach of this Agreement by Buyer, the Seller grants to the Buyer and its
officers, employees, attorneys, accountants and agents, the right, during normal
business hours, to inspect and copy the books, records, properties and inventory
of the Seller with respect to the Division and to consult with officers,
employees, attorneys and agents of the Seller for the purpose of investigating
the business of the Division and determining the accuracy of the representations
and warranties made herein: provided that no inspection of records shall be made
pursuant to and for the purposes of this Section 8 unless the Buyer shall first
inform a Group Vice President of the Seller of the proposed time and place of
the proposed visit and the general purposes thereof and coordinate with him the
arrangements therefor. Buyer's investigation shall not affect, limit, eliminate
or modify the warranties, representations and covenants of Seller hereunder and
Buyer may continue to rely thereon notwithstanding such investigation. Seller
shall promptly, by appropriate notice, keep Buyer fully informed of all material
events and occurrences relevant to the Division, its business, business
prospects, operations and the Purchased Assets. Seller shall promptly provide
Buyer, between the
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<PAGE>
date hereof and the Closing Date, updating information, including but not
limited to, balance sheets, income statements, and statements of cash flows.
(b) For a period of five years after the Closing, the Buyer shall
preserve all files and records that relate to the Division and that were in
existence on the Closing Date and shall allow representatives of the Seller
access to such files and records and the right to make copies and extracts
therefrom during normal business hours, provided that (i) neither Seller nor its
representatives shall have access to the Division's files and records that were
not in existence on the Closing Date and (ii) commencing three years after the
Closing the Buyer may give the Seller written notice of its intention to dispose
of any specified part of such files and records (that were in existence on the
Closing Date), in which case the Seller may notify the Buyer within 60 days of
receipt of the notice of the Seller's desire to retain one or more of the items
to be disposed of and the Buyer shall thereupon deliver such items to the Seller
or agree to continue to retain such items.
9. Confidential Information. If Closing does not take place hereunder,
------------------------
each of the parties hereto shall keep confidential, and shall cause any of its
representatives to keep confidential, any information (unless ascertainable from
public or published information or trade sources) obtained
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<PAGE>
from the other party concerning the operations and business of the other
party.
10. Employees. Effective as of the Closing, the Buyer shall make its best
---------
efforts to offer employment (on an at-will basis and with the right to
terminate at any time) to substantially all active employees of the Division
with compensation and benefit plans and programs consistent with compensation
and plans offered to Buyer's employees. The Buyer agrees that, except for
Charles Burke, August Knickelbein and Jeffrey Moore, with respect to any
employee of the Division not employed by the Buyer after the Closing Date or
discharged without cause (as defined) by the Buyer prior to June 30, 1995, it
will pay each such employee the amount of his or her compensation through June
30, 1995.
For purposes of this Section 10, "cause" means (i) any misconduct
(acts or omissions) injurious to the business of the Buyer, (ii)
insubordination, or (iii) any other acts or omissions not in the best interest
of the business of the Buyer.
11. Conditions to Obligation of the Buyer to Consummate Acquisition. The
---------------------------------------------------------------
obligation of the Buyer to consummate the asset purchase provided for in this
Agreement shall be subject to the following conditions:
11.1 Representations, Warranties and Covenants of the Seller. The
-------------------------------------------------------
representations and warranties of the Seller herein contained and the
information contained in the
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<PAGE>
Schedule and any closing and other documents delivered by the Seller in
connection with this Agreement shall be true and correct in all material
respects on the date hereof and on the Closing Date with the same effect as
though made at such time and there shall have been no material adverse change in
the Purchased Assets, properties, business or business prospects of the Division
from the date of the June 30 Balance Sheet; the Seller shall have performed all
obligations and complied with all agreements, undertakings, covenants and
conditions required by this Agreement (and any and all documents and instruments
related thereto) to be performed or complied with by it at or prior to the
Closing Date; and the Seller shall have delivered to the Buyer a certificate in
form and substance reasonably satisfactory to the Buyer dated the Closing Date
and signed by a Vice President of the Seller to all such effects.
11.2 Pending Litigation. No statute, rule, regulation or order of any
------------------
court or agency shall be in effect and there shall not be any litigation or
proceeding pending or threatened which is designed to restrain, invalidate or
prohibit any of the transactions contemplated by this Agreement, the defense of
which would, in the judgment of the Buyer, made in good faith, involve expense,
lapse of time or which otherwise would be materially adverse to the interests of
the Buyer.
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<PAGE>
11.3 H-S-R Act Compliance. All applicable waiting periods under the
--------------------
H-S-R Act shall have expired or early termination thereof shall have been
granted.
11.4 Third Party Consents. The written consent to or written approval
--------------------
of the transactions contemplated by this Agreement from each person whose
consent or approval is required in the reasonable opinion of the Buyer shall
have been obtained, all in the form and substance satisfactory to Buyer ("Third
Party Consents").
11.5 Title Insurance. The Buyer shall have received policies of title
---------------
insurance at regular rates as to each parcel of the Real Property from a
reputable title insurance company licensed to do business in the State in which
such Real Property is located, free of all exceptions, liens and encumbrances
except those disclosed in the Schedule pursuant to Section 3.7(c).
11.6 Opinion of Counsel for the Seller. The Buyer shall have received
---------------------------------
an opinion dated the Closing Date of Morgan, Lewis & Bockius, counsel for the
Seller, satisfactory to the Buyer and its counsel, to the effect that:
(a) The Seller is a limited partnership organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to own, lease and operate its properties and
assets and to carry on its business as and where such business is now being
conducted.
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<PAGE>
(b) All action required to have been taken by the Seller to
authorize and effect the execution and delivery of this Agreement (and all other
documents and instruments required to effect the transactions contemplated
hereunder) by the Seller and the consummation of the transactions contemplated
hereby has been taken; this Agreement constitutes the legally valid and binding
obligation of the Seller and is enforceable against it in accordance with its
terms subject to any bankruptcy, insolvency, moratorium or other laws affecting
the enforcement of creditors' rights.
(c) With respect to the following:
(i) the Certificate of Limited Partnership (and any and
all amendments thereto) and Agreement of Limited Partnership (and any and
all amendments thereto) of the Seller,
(ii) any applicable law, statute, rule or regulation,
(iii) any material agreement or instrument with respect to
the Division to which the Seller is a party or may be bound of which such
counsel has knowledge, or
(iv) any judgment, order, injunction, ruling of any court
or governmental authority to which the Seller is a party or subject of
which such counsel has knowledge,
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<PAGE>
except as disclosed in the Schedule, the execution and delivery by the Seller of
this Agreement and the consummation of the transactions contemplated hereby will
not (A) result in any violation, conflict or default, or give to others any
interest or rights, including rights of termination, cancellation or
acceleration, or (B) require any authorization, consent, approval, exemption or
other action by any court or administrative or governmental body which has not
been obtained, or any notice to or filing with any court or administrative or
governmental body which has not been given or done.
11.7 Approval of Counsel. All steps to be taken and all papers and
-------------------
documents to be executed and delivered, and all other legal matters in
connection with the transactions contemplated by this Agreement shall be
subject to the reasonable approval of the Buyer and its counsel.
11.8 Closing Documents. Seller shall have delivered to Buyer, on or
-----------------
before the Closing Date, the following documents, instruments, certificates and
items, which shall be in form and substance acceptable to Buyer and Buyer's
counsel, Blank, Rome, Comisky & McCauley, including, but not limited to:
(a) A Certificate of Seller's Group Vice President or other
authorized officer stating that the (i) representations and warranties of Seller
contained in this Agreement are true and correct on and as of the Closing Date
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with the same force and effect as though made on and as of the Closing Date,
(ii) the Schedules to this Agreement are complete, accurate and current on and
as of the Closing Date; and (iii) Seller has performed and complied with all
covenants and agreements required by this Agreement to be performed or complied
with by it on or prior to the Closing Date.
(b) The items set forth in Section 2.2 of this Agreement.
(c) Third Party Consents.
(d) All files, papers, and books and records relating to the
Division.
(e) The keys, codes and the like to all of the Division's
property and equipment used in, or relating to, the Division's business.
(f) The legal opinion of Seller's counsel as set forth in
Section 11.6 of this Agreement.
(g) Copies of the minutes of the meetings of the Seller's Board
authorizing the execution, delivery and performance of this Agreement and all
related agreements, instruments and certificates of Seller, and copies of the
Seller's Certificate of Limited Partnership (and any and all amendments thereto)
and Agreement of Limited Partnership (and any and all amendments thereto), all
certified by an authorized officer of the Seller.
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(h) All such further documents, instruments and agreements which
may be requested by Buyer or its counsel to carry out and effectuate any
provisions of this Agreement and the transactions provided herein.
11.9 Financing. The Buyer shall have successfully completed the
---------
funding of the purchase price necessary to close the transaction on terms and
conditions satisfactory to the Buyer. In the event Buyer invokes this condition,
Buyer shall pay to the Seller $1,000,000 within 15 days after the date of such
invocation.
12. Conditions to Obligation of the Seller to Consummate the Acquisition.
--------------------------------------------------------------------
The obligation of the Seller to consummate the asset purchase provided for in
this Agreement shall be subject to the following conditions:
12.1 Representations, Warranties and Covenants of the Buyer. The
------------------------------------------------------
representations and warranties of the Buyer contained herein and the
information contained in the closing and other documents delivered by the Buyer
in connection with this Agreement shall be true and correct in all material
respects at the Closing Date with the same effect as though made at such time;
the Buyer shall have performed all obligations and complied with all
agreements, undertakings, covenants and conditions required performed or
complied with by it at or prior to the Closing Date; and the Buyer shall have
delivered to the Seller a certificate of the Buyer in form and substance
satisfactory to the Seller dated this
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<PAGE>
Closing Date and signed by a Vice President of the Buyer to all such effects.
12.2 Pending Litigation. There shall not be any litigation or
------------------
proceeding pending or threatened to restrain or invalidate the transactions
contemplated by this Agreement, the defense of which would in the judgment of
the Seller made in good faith, involve expense or lapse of time that would be
materially adverse to the interests of the Seller.
12.3 H-S-R Act Compliance. All applicable waiting periods under the
--------------------
H-S-R Act shall have expired or early termination thereof shall have been
granted.
12.4 Release from Liabilities. Seller shall be released from all
------------------------
liabilities with respect to the lease and letter of credit with respect to the
Warsaw, Kentucky facility and the bonds related thereto.
12.5 Opinion of Counsel for the Buyer. The Seller shall have received
--------------------------------
an opinion dated the Closing Date of Barry D. Myers, counsel for the Buyer,
satisfactory to the Seller and its counsel, to the effect that:
(a) The Buyer is a corporation organized and validly subsisting
under the laws of the Commonwealth of Pennsylvania and has all requisite power
and authority to own, lease and operate its properties and assets and carry on
its business as and where such business is now conducted.
(b) All action required to have been taken by or on behalf of
the Buyer authorize and effect the
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<PAGE>
execution and delivery of this Agreement (and all other documents and
instruments required to effect the transactions contemplated hereunder) by the
Buyer and the consummation of the transactions contemplated hereby has been
taken; this Agreement constitutes the legally valid and binding obligation of
the Buyer and is enforceable against it in accordance with its terms, subject to
any bankruptcy, insolvency, moratorium or other laws affecting the enforcement
of creditors' rights.
(c) With respect to the following:
(i) the Articles of Incorporation or Bylaws of the Buyer,
(ii) any applicable law, statute, rule or regulation,
(iii) any material agreement or instrument to which the
Buyer is a party or may be bound of which such counsel has knowledge, or
(iv) any judgment, order, injunction, decree or ruling of
any court or governmental authority to which the Buyer is a party or
subject of which such counsel has knowledge,
the execution and delivery by the Buyer of this Agreement and the consummation
of the transactions contemplated hereby will not (A) result in any violation,
conflict or default, or give to others any interest or rights, including rights
of termination, cancellation or acceleration, or (B) require any
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<PAGE>
authorization, consent, approval, exemption, or other action by any court or
administrative or governmental body which has not been obtained, or any notice
to or filing with any court or administrative or governmental body which has not
been given or done.
12.6 Approval of Counsel. All steps to be taken and all papers and
-------------------
documents to be executed, and all other legal matters in connection with the
transactions contemplated by this Agreement shall be subject to the reasonable
approval of Morgan, Lewis & Bockius, counsel for the Seller.
12.7 Closing Documents. The Seller shall have received such
-----------------
certificates and other closing documentation as Morgan, Lewis & Bockius, counsel
for the Seller, may reasonably request, including but not limited to:
(a) A Certificate of Buyer's President or other authorized
officer stating that the (i) representations and warranties of Buyer contained
in this Agreement are true and correct on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date; and (ii)
Buyer has performed and complied with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
(b) The items set forth in Section 2.2 of this Agreement.
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<PAGE>
(c) The legal opinion of Buyer's counsel as set forth in Section
12.5 of this Agreement.
(d) Copies of the minutes of the meetings of Buyer's Board of
Directors authorizing the execution, delivery and performance of this Agreement
and all related agreements, instruments and certificates of Buyer, and copies of
the Buyer's Articles of Incorporation (and any and all amendments thereto) and
Bylaws (and any and all amendments thereto), all certified by an authorized
officer of the Buyer.
(e) All such further documents, instruments and agreements which
may be requested by Seller or its counsel to carry out and effectuate any
provision of this Agreement and the transactions provided herein.
13. Survival of Representations and Warranties. The representations and
------------------------------------------
warranties given by the Seller or the Buyer under this Agreement shall survive
the Closing for a period ending February 28, 1996, except Taxes (as defined in
Section 3.4A) and Environmental Requirements (as defined in Section 3.7(d))
which shall survive Closing for a period of three (3) years. The
representations and warranties shall survive the Closing as aforesaid
regardless of any investigation or inspection at any time made by or on behalf
of the Buyer. No information furnished by the Seller pursuant hereto will
operate as a waiver of any of Buyer's rights for any misrepresentation or
breach of any
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<PAGE>
representation or warranty which is disclosed by such information. Each
representation and warranty contained herein is independent of all other
representations and warranties contained herein and must be independently and
separately complied with and satisfied.
The Seller shall not have any liability to the Buyer for any
indemnification claims which arise from a breach of any covenant, representation
or warranty contained in this Agreement if the Buyer had actual knowledge at the
time of Closing that such covenant had been breached or that such representation
or warranty was not true, correct and complete. For purposes of this paragraph,
"actual knowledge" means the conscious awareness by any of the Buyer's executive
officers of facts or other information relating to the foregoing.
13A. Indemnification.
---------------
13A.1 Seller Indemnification Provisions. Seller shall indemnify,
---------------------------------
defend and hold harmless Buyer and its shareholders, directors, officers,
affiliates, successors and assigns (collectively, the "Buyer Group"), upon
demand, from and against any and all claims, demands, losses, costs, damages,
suits, judgments, penalties, expenses and liabilities of any kind, or nature,
known or unknown, foreseen or unforeseen, contingent or otherwise, including
reasonable attorney's fees, incurred by any of them arising out of or in
connection with:
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(a) All claims attributable to the conduct of Seller of its
business prior to the Closing or events or conditions with respect to or
affecting the Seller occurring or existing prior to the Closing, including but
not limited to, all claims of Sellers' creditors or any person making a claim on
the account of the ownership or operation of any of the Purchased Assets or the
operation of the business by Seller prior to the Closing, other than the Assumed
Liabilities as set forth in the Assumption Agreement;
(b) All debts, liabilities and obligations (including those for
Taxes as defined in Section 3.4A, and penalties with respect thereto) of Seller
at any time asserted against Buyer, other than the Assumed Liabilities; and
(c) Any breach of any representation, warranty, covenant or
agreement made by Seller to Buyer pursuant to the terms of this Agreement or any
other agreement, document or instrument executed and delivered in connection
with the transactions contemplated hereby (collectively, all of the foregoing in
Sections 13A.1 (a), (b), and (c) shall be referred to as "Claims").
13A.2 Buyer Indemnification Provisions. Buyer shall indemnify, defend
--------------------------------
and hold harmless Seller and its partners, directors, officers, affiliates,
successors and assigns (collectively, the "Seller Group") upon demand, from and
against any and all claims, demands, losses, costs,
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<PAGE>
damages, suits, judgments, penalties, expenses and liabilities of any kind,
or nature, known or unknown, foreseen or unforeseen, contingent or otherwise,
including reasonable attorney's fees, incurred by any of them arising out of or
in connection with:
(a) Any claim arising out of the Assumed Liabilities; and
(b) Any breach of any representation, warranty, covenant, or
agreement made by Buyer to Seller pursuant to the terms of this Agreement or any
other agreement, document or instrument executed and delivered in connection
with the transactions contemplated hereby (collectively, all of the foregoing in
Sections 13A.2 (a) and (b) shall be referred to as "Claims").
13A.3 Indemnification Procedures. The obligations and liabilities of
--------------------------
the indemnifying party under Section 13A hereof with respect to Claims by third
parties will be subject to the following terms and conditions:
(a) The indemnified party will give the indemnifying party
notice of any Claim asserted against, resulting to, imposed upon or incurred by
any member of the indemnified party Group, directly or indirectly, and the
indemnifying party (at its cost) will undertake the defense thereof by legal
counsel of its own choosing which is reasonably satisfactory to the indemnified
party.
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<PAGE>
(b) If within fifteen days after notice of any Claim, the
indemnifying party fails to defend against such Claim, the indemnified party or
any member of the indemnified party Group against whom such Claim has been
asserted will have the right to undertake the defense, compromise or settlement
of such Claims on behalf of and for the account and at the risk and expense of
the indemnifying party subject to the right of the indemnifying party to assume
the defense of such Claim at any time prior to settlement, compromise or final
determination thereof.
(c) Anything in Section 13A to the contrary notwithstanding, (a)
if there is a reasonable probability that (1) a Claim may materially and
adversely affect the indemnified party or any member of the indemnified party
Group against whom a Claim is asserted other than as a result of money damages
or other money payments or (2) the indemnifying party cannot provide the
indemnified party with adequate assurance that they are capable of fulfilling
their indemnification obligations under Section 13A.1 or 13A.2 (including, but
not limited to, obligations relating to money damages or other money payments),
the indemnified party or any member of the indemnified party Group against whom
a Claim is asserted will have the right to defend, co-defend, reasonably
compromise or settle such Claim without the indemnifying party's approval but
after giving the indemnifying party three days prior notice of such compromise
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<PAGE>
or settlement and (b) the indemnifying party will not, without the prior
written consent of the indemnified party or any member of the indemnified party
Group against whom a Claim is asserted, settle or compromise any claim or
consent to entry of any judgment relating to any such Claim, which settlement,
compromise or judgment does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the indemnified party or any member
of the indemnified party Group against whom a Claim is asserted, a release from
all liabilities and obligations in respect of such Claim. The indemnified party
will have the right to participate in any defense of a Claim and the
indemnifying party will cooperate and cause the indemnifying party's counsel to
fully and promptly cooperate with the indemnified party and the indemnified
party's counsel with respect to its participation in the defense of the Claim.
(d) The indemnifying party will provide the indemnified party or
any member of the indemnified party Group against whom a Claim is asserted, and
their representatives, access to all records and documents of the indemnifying
party relating to any claim.
13A.4 Certain Limitation on Indemnification Remedies.
----------------------------------------------
(a) Minimum. The Seller shall not be liable to make any payments
-------
pursuant to Section 13A.1 until the liability of the Seller pursuant to Section
13A.1 exceeds in
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<PAGE>
the aggregate $200,000 and there shall be no liability with respect to the first
$200,000 of claims hereunder; provided, however, that the foregoing limitation
shall not apply to any claim for indemnification arising out of or in any manner
incident, relating or attributable to (i) a knowing breach of any covenant by
the Seller, (ii) a breach of or an inaccurate or incorrect representation or
warranty, which, when made by the Seller, was known by the Seller to have been a
breach and/or inaccurate or incorrect or (iii) a breach of any of the
representations and warranties set forth in Sections 3.1, 3.2 and 3.7(a).
(b) Cap. Notwithstanding anything to the contrary set forth in
---
this Agreement, Seller shall not be liable for any Claims in excess of
$10,000,000 in the aggregate, other than Claims pursuant to Sections 3.4A and
3.7(d), and the Buyer shall not be liable for any Claims in excess of
$10,000,000 in the aggregate, other than Claims arising out of the Assumed
Liabilities.
(c) Time Limitation. Notwithstanding anything to the contrary
---------------
set forth in this Agreement, any Claim pursuant to Section 13A.1 or 13A.2(b)
shall be made no later than February 28, 1996 except for claims with respect to
Sections 3.4A and 3.7(d), which may be made at any time within three years of
the Closing Date.
13A.4 Additional Indemnification Provisions.
-------------------------------------
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<PAGE>
(a) The remedies provided herein will be cumulative and will not
preclude assertion by Buyer or any member of the Buyer Group of any other rights
or the seeking of any other remedies against the Seller.
(b) Buyer shall have the right to set-off against all amounts
(if any) it owes the Seller pursuant to this Agreement any amounts for which it
has an indemnification claim hereunder.
14. Bulk Sales Laws. The parties hereby waive compliance with the bulk
---------------
sales law and any other similar laws in any applicable jurisdiction in respect
of the transactions contemplated by this Agreement.
15. Termination of Agreement.
------------------------
(a) Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
(i) by mutual consent of the Buyer and the Seller;
(ii) by the Buyer (A) if it determines through its due
diligence or otherwise at any time that the representations and warranties
of the Seller contained in Section 3 hereof were materially incorrect when
made, become materially incorrect between the date hereof and the Closing
Date, or are materially incorrect on the Closing Date or (B) upon written
notice to the
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<PAGE>
Seller given at any time after January 31, 1995 (or such later date as
shall have been specified in a writing authorized on behalf of the Buyer
and the Seller) if all of the conditions precedent set forth in Section 11
hereof have not been met; or
(iii) by the Seller (A) at any time if the representations
and warranties of the Buyer contained in Section 4 hereof were materially
incorrect when made or are materially incorrect on the Closing Date or (B)
upon written notice to the Buyer by the Seller given at any time after
January 31, 1995 (or such later date as shall have been specified in a
writing authorized on behalf of the Buyer and the Seller) if all of the
conditions precedent set forth in Section 12 hereof have not been met.
(b) In the event of the termination and abandonment hereof
pursuant to the provisions of this Section 15, this Agreement shall become void
and have no effect, without any liability on the part of any of the parties or
their partners, affiliates, directors, officers or shareholders in respect of
this Agreement except that the Buyer's obligations under Section 9 hereof shall
survive such termination.
16. Waiver of Terms. Any of the terms or conditions of this Agreement may
---------------
be waived at any time by the party which is entitled to the benefit thereof but
only by a written
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<PAGE>
notice signed by an authorized officer of the Seller or the Buyer.
17. Amendment of Agreement. This Agreement may be amended, supplemented or
----------------------
interpreted at any time only by written instrument duly executed by the Buyer
and the Seller.
18. Payment of Expenses. The Buyer and the Seller shall each pay their own
-------------------
expenses, including, without limitation, the expenses of their own counsel and
accountants and any broker's, finder's or similar agent's fee, and any fees and
expenses related to the H-S-R Act incurred in connection with this Agreement
and the transactions contemplated hereby. The Buyer shall pay any sales or
other transfer taxes that may be due in connection with the sale of the
Purchased Assets to the Buyer. The Seller shall pay the costs and expenses
incident to the assumption of the Seller's liabilities by Buyer relating to the
Real Property located in Warsaw, Kentucky, including, but not limited to, the
costs and expenses relating to legal opinions and other documentation, except
for any costs or expenses related to financing arrangements on behalf of the
Buyer.
19. Cooperation. Subject to the terms and conditions herein provided, each
-----------
of the parties hereto shall use its or their best efforts to take, or cause to
be taken, such action, to execute and deliver, or cause to be executed and
delivered, such governmental notifications and additional documents and
instruments and to do, or cause to be done, all
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<PAGE>
things necessary, proper or advisable under the provisions of this Agreement and
under applicable law to consummate and make effective the transactions
contemplated by this Agreement.
20. Counterparts. This Agreement may be executed in two counterparts, each
------------
of which shall be deemed an original, but both of such counterparts together
shall be deemed to be one and the same instrument. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to produce or account
for the other counterpart.
21. Contents of Agreement, Parties in Interest, Assignment, etc. This
-----------------------------------------------------------
Agreement sets forth the entire understanding of the parties with respect to
the subject matter hereof. Any previous agreements or understandings between
the parties regarding the subject matter hereof are merged into and superseded
by this Agreement. All representations, warranties, covenants, terms and
conditions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto. Nothing herein express or implied is intended or shall be construed to
confer upon or to give any person, other than the Buyer and the Seller and
their respective successors or assigns, any rights or remedies under or by
reason of this Agreement.
22. Section Headings, Gender and "Person". The section headings herein
-------------------------------------
have been inserted for convenience of
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<PAGE>
reference only and shall in no way modify or restrict any of the terms or
provisions hereof. The use of the masculine or any other pronoun herein when
referring to any party has been for convenience only and shall be deemed to
refer to the particular party intended regardless of the actual gender of such
party or whether such party is a corporate or other entity. Any reference to a
"person" herein shall include an individual, firm, corporation, partnership,
trust, government or political subdivision or agency or instrumentality
thereof, association, unincorporated organization or any other entity.
23. Notices. All notices, consents, waivers or other communications which
-------
are required or permitted hereunder shall be sufficient if given in writing and
delivered personally, by Federal Express or similar overnight delivery, by
telecopy or facsimile transmission, or by registered or certified mail, return
receipt requested, postage prepaid, as follows (or to such other addressee or
address as shall be set forth in a notice given in the same manner):
If to the Seller:
SDI Operating Partners, L.P.
2600 One Logan Square
Philadelphia, PA 19103
Attention: Norman V. Edmonson,
Group Vice President
With a required copy to:
Morgan, Lewis & Bockius
2000 One Logan Square
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<PAGE>
Philadelphia, PA 19103
Attention: Donald A. Scott, Esquire
If to the Buyer:
R&B, Inc.
3400 E. Walnut Street
Colmar, PA 18915
Attention: Richard N. Berman,
President
With a required copy to:
R&B, Inc.
3400 E. Walnut Street
Colmar, PA 18915
Attention: Barry D. Myers, Esquire,
Vice President, General Counsel
With a required copy to:
Blank, Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attention: Fred Blume, Esquire
All such notices shall be deemed to have been given on the date delivered,
telecopied or mailed in the manner provided above.
24. Governing Law. This Agreement shall be construed and interpreted in
-------------
accordance with the laws of the Commonwealth of Pennsylvania. The parties
hereto consent to the exclusive jurisdiction of the Court of Common Pleas of
Montgomery County, Pennsylvania, and the Federal District Court for the Eastern
District of Pennsylvania with respect to all claims, disputes, controversies,
differences or misunderstandings between or among the parties hereto with
respect to the subject matter hereof and waive the right to
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<PAGE>
request a jury trial in any action or proceeding pursuant hereto and agree
to service of process by certified mail, return receipt requested, postage
prepaid to the addresses set forth in Section 23, or to such other addresses as
the respective party may properly designate in writing received by the other
party.
25. Publicity. Unless otherwise required by law, no publicity release or
---------
announcement concerning this Agreement or the transactions contemplated hereby
shall be issued without advance approval of the form and substance thereof by
Buyer and Seller.
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<PAGE>
IN WITNESS WHEREOF, this Asset Purchase Agreement has been executed as of
the day and year first above written.
SELLER:
SDI OPERATING PARTNERS, L.P.
By: SDI Partners I, L.P.,
Its General Partner
By: Lehman/SDI, Inc.,
Its General Partner
By: /s/ Norman V. Edmonson
-------------------------
Norman V. Edmonson
Group Vice President
BUYER:
R&B, INC.
By: /s/ Richard N. Berman
-------------------------
Richard N. Berman
President
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<PAGE>
EXHIBIT 1.2(c)
--------------
DETERMINATION OF ADDITIONAL PAYMENT
-----------------------------------
(a) June 30 Balance Sheet. The Seller prepared the unaudited June 30
Balance Sheet (as defined in Section 3.5(b) of the Agreement), attached hereto
as Appendix 1, as well as the other financial documents making up the Financial
Statements (as defined in Section 35(a) of the Agreement). The Financial
Statements were prepared on an accrual basis and in accordance with generally
accepted accounting principles ("GAAP"), except as set forth in the Schedule.
(b) Excluded Assets and Credits. The Excluded Assets (as defined in
Section 1.1 of the Agreement) and unamortized customer credits shall be
eliminated from the June 30 Balance Sheet and the Closing Date Balance Sheet.
(c) Closing Book Value. Promptly after the Closing, the Buyer shall
engage Arthur Andersen & Co. ("AA") to assist the Buyer in preparing, on an
accrual basis and in accordance with GAAP, an unaudited balance sheet of the
Seller as of 11:59 P.M. (eastern time) on the day immediately prior to the
Closing Date (the "Pre-Closing Date") (the "Closing Date Balance Sheet"), in
order to determine, and to issue to the parties, as soon as practicable after
the Closing Date, a special closing report ("Closing Report") setting forth AA's
determination of the book value of the Seller as of the Pre-Closing Date (the
"Closing Book Value"). In preparing the Closing Report, AA shall use generally
accepted accounting principles that are consistent with the principles used for
the June 30 Balance Sheet. The Seller shall make available its applicable books
and records. For purposes hereof, the Closing Book Value shall mean the amount
by which (i) the aggregate dollar amount of the historical book value of the
assets of the Seller as of the Pre-Closing Date, net of depreciation, reserves
(such as, without limitation, bad debt reserves and reserves for obsolescence
and slow-moving inventory in accordance with Seller's Policy No. 21 attached
hereto as Appendix 2, except that the required allowance of excess inventory
over 36 months but less than 60 months supply on hand shall be 90% of the excess
in this layer; provided, however, that the allowance requirements shall be
provided for by December 31, 1994), and any "write-ups" that occurred on or
prior to the Pre-Closing Date in the historical cost of any assets as a result
of the application of purchase accounting principles, exceeds (ii) the sum of
-------
the liabilities of the Seller outstanding as of the Closing Date and assumed by
Buyer, all as determined on an accrual basis in accordance with GAAP. The
Seller's accountants shall have access to the AA work papers.
(d) Review of Closing Book Value Determination. Unless the Seller, on
the one hand, or the Buyer, on the other hand, notify the other in writing that
such party disagrees with AA's determination as to the Seller's Closing Book
Value within 30 business days after receipt of Buyer's Closing Report, then,
such determination shall be
<PAGE>
conclusive and binding upon the parties hereto for purposes of determining
the amount of the Adjustment Payment, if any, pursuant to Section 1.2(c) of the
Agreement. If, on the other hand, Seller disagrees with such determination, and
within the aforementioned 30 business day period has notified the Buyer in
writing thereof, specifying in detail the basis of such disagreement, then
Seller, on the one hand, and Buyer, on the other, shall attempt to resolve
their differences by agreement between them with respect thereto within ten
(10) business days after receipt of written notice of such disagreement. Any
such dispute that is not resolved by agreement between them within such ten
(10) business day period shall be submitted to binding resolution by either (i)
an independent accounting firm selected within five (5) business days
thereafter by agreement of Seller and Buyer or (ii) in the event Seller and
Buyer have been unable to select a firm by agreement within the prescribed time
period, a "Big Six" accounting firm selected by lot, after eliminating Coopers
& Lybrand ("C&L"), AA and any other "Big Six" accounting firm that has, in the
prior three years, been engaged to provide accounting, tax advisory or
consulting services to any of the parties hereto or any subsidiaries or
affiliates of any of the foregoing. The determination of any accounting firm so
selected (the "Review Accountants") with respect to the matters in dispute
relating to Seller's Closing Book Value shall be conclusive and binding upon
the parties. Buyer and Seller shall each pay one-half of the fees and expenses
of any Review Accountants selected to resolve any dispute between the parties
regarding such determination.
(e) Determination of Adjustment Payment. Upon final determination of
Seller's Closing Book Value, the Adjustment Payment that shall be due by Seller
to Buyer or by Buyer to Seller, pursuant to Section 1.2(c) of the Agreement
shall be determined, as follows: If the June Book Value exceeds the Closing
Book Value the excess shall constitute the Adjustment Payment due by Seller to
Buyer pursuant to Section 1.2(c)(i) of the Agreement. If, on the other hand,
Seller's Closing Book Value exceeds the June Book Value then the excess shall
constitute the payment due by the Buyer to Seller pursuant to Section
1.2(c)(ii) of the Agreement.
<PAGE>
Appendix 1
Dorman Products
Balance Sheet
JUNE, 1994
($ M)
ASSETS
<TABLE>
<CAPTION>
Current Assets:
<S> <C>
Cash ($457)
Certificate of Deposit 0
Short-Term Investments 0
Accounts Receivable 6,882
Intercompany Receivable (Payable) 0
Notes Receivable 0
Less: Reserve for Bad Debts (184)
Inventories:
Material and Supplies 9,783
Less: Inventory Reserves (460)
Other Current Assets 1,152
------------
TOTAL CURRENT ASSETS 16,716
Long-Term Accounts and Notes Receivable:
Accounts Receivable 0
Notes Receivable 0
Investment in Affiliated Companies 0
Other Investments 0
Property, Plant and Equipment 10,668
Less: Accumulated Depreciation (4,459)
------------
Property, Plant and Equipment, Net 6,209
Deferred Charges and Other Assets:
Prepaid Pension 0
Goodwill 3,737
* Intangible Assets 338
** Other Assets 2,042
------------
TOTAL ASSETS $29,042
============
</TABLE>
* - Contains bonds issuance cost of $226M.
** - Unamortized 1993 Credits.
S-A
<PAGE>
Dorman Products
Balance Sheet
JUNE, 1994
($ M)
LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
Current Liabilities:
<S> <C>
Accounts Payable 3,774
Notes Payable (Note A) 0
Current Portion of Long Term Debt 342
Current Portion of Capitalized Lease Obligations 0
Taxes, Other than Income Taxes Payable 148
Income Taxes 0
Accrued Salaries, Wages and Bonuses 164
Other Accrued Liabilities 1,146
-------------
TOTAL CURRENT LIABILITIES 5,574
Long Term Debt 4,608
Long Term Capitalized Lease Obligations 0
Deferred Credits 0
-------------
TOTAL LIABILITIES 10,182
Capital:
Beginning of Year - Capital Investment 17,103
Distributions (Dividends) 198
Net Income (Loss) 1,559
End of Period - Capital Investment 18,860
Capital Investment of Division 18,860
-------------
TOTAL LIABILITIES AND CAPITAL $29,042
=============
</TABLE>
NOTE (A): Includes $0 of trade Notes Payable
S-A
<PAGE>
Appendix 2
SUN DISTRIBUTORS
POLICY BOOK
================================================================================
SUBJECT:
- - --------
INVENTORY CONTROL AND VALUATION
================================================================================
POLICY NO. DATE PAGE REPLACES DATED
---------- ---- ---- -------- -----
21 4/30/92 1 OF 5 1 OF 1 10/31/90
================================================================================
OBJECTIVE
---------
To provide assurance that the level of control over, and accountability for,
the investment in inventory is adequate. Also, to ensure that interim inventory
valuation and gross profit reporting are as accurate as possible.
POLICY SUMMARY
--------------
There are three sections to this policy, covering the following subjects:
1. Physical counts of inventory which are required to confirm perpetual
records and the inventory balance reported on the financial statements.
Procedures should be formalized no later than 1/1/93.
2. Inventory Allowances (Reserves) required to recognize a loss in value of
inventory, usually because it is slow-moving or obsolete. Procedures should
be formalized for inclusion in 1993 plan year.
3. Required maintenance of adequate yet cost-effective controls over the
management information system to ensure interim gross profit reporting is as
accurate as possible. Effective immediately.
SECTION ONE: PHYSICAL COUNTS OF INVENTORY
-----------------------------------------
All divisions of Sun Distributors will eventually be required to develop and
implement a procedure for periodic cycle-counting of inventory throughout the
year. The President of each division, after assessing current capability to
implement cycle counting, should inform the Group Vice President and the V.P. -
Finance for Sun Distributors of the date he expects to have adequate inventory
controls and procedures in place to begin a cycle count program. This
assessment must be completed no later than December 31, 1992.
Annual physical counts will be required until cycle count procedures and
results, on a stand-alone basis, are deemed acceptable for confirming perpetual
records and the general ledger inventory balance. The operating committee of
the division, in conjunction with Sun Distributor's V.P. - Finance, must
provide written authorization stating that the cycle count program may replace
the annual physical inventory count.
The following general guidelines should be followed in the development of
the division's specific procedures for annual "wall-to-wall" and cycle count
physical inventories:
Required Basic Conditions
- - -------------------------
1. Adequate perpetual records are maintained on an up-to-date basis.
2. Adequate controls over physical movement of goods and cutoff of
transactions.
3. Processing of paperwork related to inventory transactions and posting to the
perpetual records is completed promptly and accurately each day in the normal
course of business. This applies both to shipments to customers and to
inter-branch transfers.
<PAGE>
================================================================================
SUN DISTRIBUTORS - POLICY BOOK
- - --------------------------------------------------------------------------------
POLICY NO. 21 - INVENTORY CONTROL AND VALUATION
================================================================================
4. General conditions favorable to good count procedures must exist. These would
include, a well-organized layout of the warehouse with established inventory
locations which are well labeled and easily identified; employees familiar
with the inventory and the flow-of-goods throughout the warehouse;
branch/warehouse managers who clearly understand the importance of physical
custody controls over the company's investment in inventory.
Control Concerns
- - ----------------
1. Instructions and procedures for the counts should be written, specific, and
easily understood. A formal schedule of counts and specific assignments
(covering both personnel to perform the counts and supervisory
responsibility) should be established. Overall responsibility for the
development and execution of the program should rest with a member of the
senior management of the division.
2. The written procedures and schedules should be discussed thoroughly with
those performing and supervising the counts to obtain their input and ensure
the counts are performed effectively and efficiently.
3. A good cutoff must be obtained by promptly and accurately posting inventory
records prior to counting. Otherwise, the counts result in apparent
differences that are actually delays in recording of transactions.
4. Employees making the physical counts should not know the on-hand balance in
the perpetual record just prior to the count so that objectivity in the
counts can be maintained.
5. Procedures for the valuation of inventory items after the counting is
complete should be developed. These should include instructions for the
investigation of material differences with reports to management of the
results of the investigation and proper recording on the books in accordance
with the requirements outlined in this policy.
6. Adequate segregation of duties must be maintained between personnel
performing initial counts, those valuing and extending the inventory, those
investigating differences and reporting to management, and those recording
adjusting entries (as necessary) on the books.
Recording Adjustments on the Books
- - ----------------------------------
1. Inventory write-downs as a result of interim physical inventory counts should
be recognized in the operating company's financial statements immediately
after the results of the physical inventory have been identified, analyzed
and approved by the chief financial officer of the division.
2. Inventory write-ups as a result of interim physical inventory counts should
not be recognized in the operating company's financial statements, but the
---
results must still be identified, analyzed and approved by the chief
financial officer of the division. Recognition of interim inventory write-ups
should be deferred until confirmed by the operating company's annual physical
inventory. Only after the division has received written authorization from
the operating committee to forego an annual physical inventory, may interim
write-ups be recorded on the books in the same manner as write-downs.
Annual Operating Plans
- - ----------------------
Division management should not incorporate interim inventory write-ups in
---
company operating plans. Annual inventory write-ups may be included in operating
plans while annual physical counts are still required. Planned interim
adjustments to cost-of-goods sold which are intended to cover inventory
write-downs at physical
2
<PAGE>
================================================================================
SUN DISTRIBUTORS - POLICY BOOK
- - --------------------------------------------------------------------------------
POLICY NO. 21 - INVENTORY CONTROL AND VALUATION
================================================================================
Inventory time should be recorded separately as an allowance in the general
ledger regardless of the methodology used to calculate the amount. These
----------------------------------------------------------
adjustments should not be changed from the planned amounts without the prior
written approval of SDI's V.P. - Finance.
Disclosure
- - ----------
Division management is required to disclose the results and the accounting
recognition of all unplanned inventory adjustments (including charges against
---
an allowance (reserve) account). Such disclosures should be included in the
"Results As to Plan Summary - B. Balance Sheet and Asset Management" section of
the monthly reporting package.
Frequency of Cycle Counts
- - -------------------------
Cycle counts should cover all inventory items at least once during the year,
but more active or valuable items should be counted more frequently.
Cycle Count Teams
- - -----------------
Consideration should be given to the development of small cycle count "teams"
within the division who become proficient with the proper procedures, thereby
making the exercise more efficient and productive.
SECTION TWO: INVENTORY ALLOWANCES
---------------------------------
Inventory allowances (reserves) recorded on the books of the operating
divisions of Sun Distributors must be based on reliable information and
documented formulas which are consistently applied. Procedures should be
formalized in time to be incorporated in the 1993 operating plan, therefore no
later than 9/1/92.
Definitions and Allowance Requirements for Slow-Moving and Obsolete Inventory:
- - -----------------------------------------------------------------------------
The policy establishes three layers of slow-moving inventory with an allowance
requirement for excess inventory in each layer, along with a separate definition
and requirement for obsolete inventory, as follows:
<TABLE>
<CAPTION>
================================================================================
Required
Category Fluid Power Group All Other Operating Groups Allowance
================================================================================
<S> <C> <C> <C>
Slow-Moving Excess only: over 36 Excess only: over 24 months One-Third of
Layer # 1 months but less than but less than 36 months Excess in
48 months supply on supply on hand. this Layer.
hand.
- - --------------------------------------------------------------------------------
Slow-Moving Excess only: over 48 Excess only: over 36 months Two-Thirds
Layer # 2 months but less than but less than 60 months of Excess in
60 months supply on supply on hand. this Layer.
hand.
- - --------------------------------------------------------------------------------
Slow-Moving Excess only: over Excess only: over 60 months 90% of
Layer # 3 60 months supply on supply on hand. Excess in
hand. this Layer.
- - --------------------------------------------------------------------------------
Obsolete Inventory items with Inventory items with no 90% of Total
no movement in the movement in the last 24 Obsolete.
last 24 months. months.
================================================================================
</TABLE>
3
<PAGE>
================================================================================
SUN DISTRIBUTORS - POLICY BOOK
- - --------------------------------------------------------------------------------
POLICY NO. 21 - INVENTORY CONTROL AND VALUATION
================================================================================
Any stock-keeping unit (SKU) with a total extended value less than $100.00
should be excluded from the calculations made under this policy. Each inventory
item should be viewed on a consolidated basis for all branches. Interbranch
transfers must be excluded from "usage" for this purpose. New products should be
excluded from the calculations made under this policy for the first 12 months
after being added to inventory. Each division's computer system must be able to
separately identify and total inventory items in each of the above categories
in order to make the calculations required under this policy. Your internal
procedures should also ensure that inventory items identified as slow-moving
and obsolete are excluded from normal purchasing routines.
Allowance Requirements:
- - -----------------------
The required allowances for excess slow-moving and obsolete inventory as
defined above must be recorded in full by 12/31/95. If your current monthly
accrual is insufficient to achieve the required allowance by 12/31/95, it must
be increased to the necessary level. If your current monthly accrual is greater
than what is necessary to achieve the required allowance by 12/31/95, you
---
should retain your current accrual amount so that you can achieve your required
- - -------------------------------------------------------------------------------
allowance target prior to 12/31/95. At the time of the annual plan review, the
- - ----------------------------------
monthly accrual to the allowance account for the new plan year should be
adjusted so that the monthly accrual equals the amortization of the required
portion of the excess slow-moving and obsolete inventory over the remaining
months until 12/31/95. For years after 1995, the annual accrual should be
sufficient to maintain the excess slow-moving and obsolete inventory allowances
required by the definitions above.
Frequency of Review
- - -------------------
The allowance and accrual requirements will normally be evaluated on an
annual basis as part of the planning process. However, the status of
slow-moving and obsolete inventory should be reviewed by the chief financial
officer of the operating division on a quarterly basis and the totals reported
on the appropriate form in the quarterly financial reporting package. If there
is a significant change in the amount of excess slow-moving and/or obsolete
Inventory between quarters, a change in the planned accrual should be discussed
with your Sun Distributors' group vice president and vice president of Finance
at the earliest possible date.
Inventory usage and other information required to properly age the perpetual
inventory records should be continually updated as part of an effective
inventory control and management system. If a division's computer system is
currently not capable of providing the information necessary to comply with the
requirements of this policy, a practical schedule for implementing the required
changes should be developed in conjunction with your Sun Distributor's group
vice president and vice president of Finance.
Exceptions
- - ----------
Any exceptions to the methodology described above must be documented, and
written authorization for another methodology must be obtained from the
operating committee of the division, and the CFO of Sun Distributors.
SECTION THREE: INVENTORY VALUATION AND INTERIM GROSS-PROFIT REPORTING
---------------------------------------------------------------------
The purpose of the following procedures is to ensure that inventory is
properly valued, that gross profit calculations for interim reporting purposes
are consistently calculated on all sales, and to prohibit adjustments to cost
of goods sold which artificially affect gross profit. The following general
guidelines, from which your specific policies should be developed, are
therefore effective immediately:
4
<PAGE>
================================================================================
SUN DISTRIBUTORS - POLICY BOOK
- - --------------------------------------------------------------------------------
POLICY NO. 21 - INVENTORY CONTROL AND VALUATION
================================================================================
1. Inventory is valued by Sun Distributors according to the FIFO (First-In,
First-Out) method. Any alternative method must be applied consistently and
must result in an inventory valuation which is "fairly stated" on a FIFO
basis, subject to approval by the SDI VP-Finance.
2. Stock Items are to be costed out on sales invoices at the value designated by
division management based on actual purchase history.
3. Non-Stock and/or Direct (Drop) Shipped Items are to be costed at the specific
cost contained on the corresponding purchase invoice for the item(s). A clear
audit trail connecting the properly executed purchase order with the sales
order must be documented.
4. Costs related to specific sales invoices which differ from that mentioned in
item 1 or 2 above must be approved in advance by the Chief Financial Officer
of the Division. Such approval should be documented on the sales invoice.
5. Updates or adjustments to price/cost master files must be restricted to those
headquarters personnel of the division who are specifically authorized by
divisional management to make such changes.
6. Work-sheets should be prepared monthly which show the detailed calculation of
gross profit reported to Sun Distributors. The work-sheets should include a
reconciliation of gross profit recorded in the general ledger with gross
profit reported on system-generated profitability reports, and if different,
gross profit used to calculate sales commissions.
Documentation
- - -------------
Without exception, work-sheets and other supporting documentation related to
topics covered by this policy should be retained for review by internal and/or
external auditors according to the document retention policy of the division.
5
<PAGE>
DORMAN PRODUCTS - 2 ST QUARTERLY - 1994
<TABLE>
<CAPTION>
-------------------------------------------------
YEAR ENDED YEAR ENDED 1st QTR 2st QTR
1992 1993 1994 1994
-------------------------------------------------
<S> <C> <C> <C> <C>
INVENTORY
INVENTORY, NET PLAN 6,153 7,271 9,494 9,017
-------------------------------------------------
INVENTORY, ACTUAL GROSS 6,974 8,824 10,103 9,783
INVENTORY, RESERVE-ACTUAL (339) (371) (407) (460)
-------------------------------------------------
INVENTORY, NET-ACTUAL 6,635 8,453 9,696 9,323
-------------------------------------------------
VARIANCE (482) (1,182) (202) (306)
VARIANCE AS % OF PLAN 7.8% 16.3% 2.1% 3.4%
-------------------------------------------------
INVENTORY TURNOVER
------------------
PLAN 2.21 2.46 1.64 1.96
ACTUAL 2.21 1.68 1.59 1.82
-------------------------------------------------
VARIANCE -0.58 -0.05 -0.14
VARIANCE AS % OF PLAN -23.6% -3.0% -7.1%
INVENTORY RESERVE-ACTUAL
------------------------
BEGINNING BALANCE-JAN 1 (252) (339) (371) (371)
PROVISION CHARGED TO INCOME-YTD (209) (215) (36) (72)
WRITE-OFFS CHARGED TO RESERVE-YTD 122 183 49 79
-------------------------------------------------
ENDING BALANCE (339) (371) (358) (364)
-------------------------------------------------
INVENTORY-EXCESS & OBSOLETE
---------------------------
SLOW MOVING 24-36 MONTHS EXCESS SUPPLY 32 75 64 70
SLOW MOVING 36-60 MONTHS EXCESS SUPPLY 84 71 78 81
SLOW MOVING OVER 60 MONTHS EXCESS SUPPLY 262 251 239 245
OBSOLETE NO SALES IN 24 MONTHS-SCRAP-100% 77 47 30 22
-------------------------------------------------
455 444 411 418
-------------------------------------------------
REQUIRED RESERVE @ 33.3%, 67%, & 90%, 100% 379 345 319 320
RESERVE AT PERIOD END-ACTUAL (339) (371) (358) (364)
-------------------------------------------------
RESERVE EXCESS (SHORTFALL) (40) 26 39 44
-------------------------------------------------
*EXCLUDES ITEMS LESS THAN $100 AND ALL DISPLAY ITEMS 16 22 13 12
-- -- -- --
</TABLE>
<PAGE>
Philadelphia National Bank
Suite 300
2240 Butler Pike
Plymouth Meeting PA 19462-1302
215 834 2013
Fax 215 834 2069
Richard O Collins
Vice President
[LOGO OF CORESTATES APPEARS HERE]
October 5, 1994
Mr. Richard Berman
President
R & B, Inc.
3400 Walnut Street
Colmar, PA 18915
Dear Richard:
CoreStates Bank, N.A. ("CoreStates") is pleased to advise you, R & B, Inc. and
its subsidiary RBVEST, Inc., (the "Borrowers") of its commitment to underwrite
the entire amount of the Facility as described in the Term Sheet attached here
to as Annex I and will reserve the right to syndicate the Facility. All
capitalized terms used and not otherwise defined herein shall have the meanings
set forth in the Term Sheet. This Commitment Letter and Term Sheet replace the
August 19, 1994 Commitment Letter and Term Sheet that was accepted by the
Borrowers on that date.
The commitment of CoreStates is subject, however, to each of the following terms
and conditions being satisfied in a manner acceptable to CoreStates in its sole
discretion:
(a) satisfaction of each of the terms and conditions set forth
herein and in the Term Sheet; and
(b) The negotiation, execution and delivery of definitive
documentation with respect to the Facility consistent with the
Term Sheet and otherwise satisfactory to CoreStates.
The commitment of CoreStates hereunder is based upon the financial and other
information regarding the Borrowers provided to CoreStates by the Borrowers. The
commitment hereunder is subject to the condition, among others, that there shall
not have occurred after the date of such financial information any material
adverse change in the business, assets, liabilities (actual or contingent),
operations, condition (financial or otherwise) or prospects of the Borrowers and
its subsidiaries taken as a whole and CoreStates continuing satisfaction, upon
completion of due diligence, with the condition, assets, properties, business,
operations and prospects of the Borrowers. If CoreStates' continuing review of
the Borrowers discloses information relating to conditions or events not
previously disclosed to CoreStates or relating to new information or
<PAGE>
Mr. Richard Berman
Page 2
August 19, 1994
additional developments concerning conditions or events previously disclosed to
CoreStates which in its sole discretion believes may have a material adverse
effect on the condition (financial or otherwise), assets, properties, business,
operations or prospects of the Borrowers may, in their sole discretion, suggest
alternative financing amounts or structures that ensure adequate protection for
the Lenders or decline to participate in the proposed funding. You agree to
actively assist CoreStates in achieving a syndication of the Facilities that is
satisfactory to CoreStates and you.
You hereby represent and covenant that (i) all information, other than
projections (as defined below), which has been or is hereafter made available to
CoreStates by you or any of your representatives in connection with the
transactions contemplated hereby ("Information") is and will be complete and
correct in all material respects and does not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained therein not materially misleading and (ii) all
financial projections concerning the Borrowers that have been or are hereafter
made available to CoreStates (the "Projections") have been or will be prepared
in good faith based upon reasonable assumptions. You agree to supplement the
Information and the Projections from time to time until the closing date so that
the representation and warranty in the preceding sentence is correct on the
closing date. You further agree (i) to supply to CoreStates any information
requested by us that was obtained by the Borrowers after the date hereof. In
arranging and syndicating the Facilities, CoreStates will be using and relying
on the Information and the Projections without independent verification thereof.
By executing this letter agreement, you agree to reimburse CoreStates from time
to time on demand for all reasonable out-of-pocket fees and expenses (including,
but not limited to, the reasonable fees, disbursements and other charges of
counsel to CoreStates and the other Lenders) incurred in connection with the
Facilities and the other transactions contemplated hereby.
The Borrowers agree to indemnify and hold harmless, each other Lender and each
director, officer, employee, attorney and affiliate of CoreStates and each other
Lender, and each director, officer, employee or attorney of such affiliate of
CoreStates and each other Lender (each such person or entity referred to
hereafter in this paragraph as an "Indemnified Person") from any losses, claims,
costs, damages, expenses or liabilities (or actions, suits or proceedings,
including any inquiry or investigation, with respect thereto) to which any
Indemnified Person may become subject, insofar as such losses, claims, costs,
damages, expenses or liabilities (or actions, suits, or proceedings, including
any inquiry or investigation, with respect thereto) arise out of, in any way
relate to, or result from, this letter, the Facilities, or the other
transactions contemplated hereby and thereby and to reimburse upon demand each
Indemnified Person for any and all legal and other expenses incurred in
connection with investigating, preparing to defend or defending any such loss,
claim, cost, damage, expense or liability (or actions, suits or proceedings,
including any inquiry or investigation, with respect thereto); provided that the
Borrowers shall
<PAGE>
Mr. Richard Berman
Page 3
October 5, 1994
not have any obligation under this indemnity provision for liabilities from
gross negligence or willful misconduct of any Indemnified Person. The foregoing
provisions of this paragraph shall be in addition to any right that an
Indemnified Person shall have at common law or otherwise. No Indemnified Person
shall be responsible or liable for consequential damages which may be alleged
as a result of this letter.
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect regardless of whether definitive financing documentation shall
be executed and delivered and notwithstanding the termination of this letter
agreement or the commitments of CoreStates hereunder.
As described herein and in the Term Sheet, CoreStates Investment Banking, a
division of CoreStates will act as Syndication Agent for the Facilities.
CoreStates reserves the right to allocate, in whole or in part, to CoreStates
Investment Banking, certain fees payable to CoreStates in such manner as
CoreStates and CoreStates Investment Banking agree in their sole discretion. You
acknowledge and agree that CoreStates may share with any of its affiliates
(including specifically CoreStates Investment Banking) any information relating
to the Facilities or the Borrowers and their subsidiaries and affiliates.
If you are in agreement with the foregoing, please execute and return the
enclosed copy of this Commitment Letter no later than the close of business on
October 7, 1994. This letter will become effective upon your delivery to us of
executed counterparts of this letter on or before commitment acceptance. This
commitment shall terminate if not so accepted by you prior to that time.
Except as required by applicable law, this letter and the contents thereof shall
not be disclosed by you to any third party without the prior consent of
CoreStates, other than to your attorneys, financial advisors, accountants, and
SDI Operating Partners, LP or its agents, in each case to the extent necessary
in your reasonable judgment. Without limiting the foregoing, in the event that
you disclose the contents of this letter in contravention of the preceding
sentence, you shall be deemed to have accepted the terms of this letter and Fee
letter.
This letter may be executed in counterparts which, taken together, shall
constitute an original. This letter, together with the Term Sheet, embodies the
entire agreement and understanding between CoreStates and the Borrowers with
respect to the specific matters set forth herein and supersedes all prior
agreements and understanding relating to the subject matter hereof. No
<PAGE>
Mr. Richard Berman
Page 4
October 5, 1994
party has been authorized by CoreStates to make any oral or written statements
inconsistent with this letter. THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW.
Very truly yours,
CORESTATES BANK, N.A.
/s/Richard C. Collins
By: Richard C. Collins
Title: Vice President
ACCEPTED AND AGREED TO:
R & B, INC.
By:
---------------------
Title:
------------------
Date:
-------------------
<PAGE>
October 5, 1994
R & B, INC.
SUMMARY TERMS AND CONDITIONS
----------------------------
CONFIDENTIAL
Not to be disclosed to parties other than the Borrower
BORROWERS: R&B, Inc. and its subsidiaries ("Borrowers")
AGENT: CoreStates Bank, N.A. ("Agent" or "Issuing
Bank").
CORESTATES' PROPOSED Up to $50,000,000. Subject to the terms and
COMMITMENT: conditions hereof and the attached proposal
letter, CoreStates will underwrite the
Facility provided for herein and syndicate the
Facility to banks acceptable to it.
LENDERS: CoreStates and a syndicate of banks acceptable
to the Borrowers and Agent ("Lenders").
FACILITIES STRUCTURE:
Revolving Credit: $20,000,000 Revolving Credit, which shall
terminate three years from Closing. (Revolving
Credit Termination Date). The Revolving Credit
Termination Date may be extended at the
Borrowers' request up to two times for
additional one year periods. Such requests
must be made not more than 90 days and not
less than 60 days prior to the first
anniversary and second anniversary
respectively of the Closing. Such extension
requests must be agreed to by all of the
Lenders within 30 days of the request to be
effective. Within the Revolving Credit, there
shall be a sublimit of up to $5,000,000 or
some lesser or greater amount to be negotiated
for Documentary Letters of Credit ("L/C's")
and Standby Letters of Credit ("Standbys")
with tenors not greater than two years, which
shall be extended by Issuing Bank.
<PAGE>
The Issuing Bank will issue letters of credit
pursuant to the terms and conditions of its
standard letter of credit agreement, each
letter of credit issued and outstanding will
reduce availability under the Revolving
Credit.
Term Loan: $25,000,000 seven year Secured Term Loan
subject to quarterly principal reductions
commencing the first calendar quarter end
after Closing as follows:
Year 1 $ 500,000/quarter
2 $ 625,000/quarter
3 $ 750,000/quarter
4 $ 875,000/quarter
5 $1,000,000/quarter
6 $1,125,000/quarter
7 $1,375,000/quarter
Standby Letter In addition to the sublimit for Standby
of Credit: Letters of Credit provided for above,
CoreStates will review the letter of credit
issued on August 4, 1988 by The Fifth Third
Bank in the original stated amount of
$6,500,000 with a view to issuing its letter
of credit to secure the obligation of SDI
Operating Partners, L.P. to the City of
Warsaw, Kentucky.
Collateral: The Facilities will be secured by a first
perfected priority security interest in all
tangible and intangible assets (including
without limitation inventory, accounts
receivable, contracts, equipment, fixtures,
trademarks and real property) now existing or
hereinafter acquired by the Borrowers and any
entity acquired by any of the Borrowers.
USE OF PROCEEDS:
Revolving Credit: To partially finance the acquisition of Dorman
Products ("Dorman") which will become a
subsidiary of R&B, Inc. and a Borrower
hereunder immediately upon such acquisition,
capital expenditures, working capital and
general corporate purposes.
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Term Loan: To finance the acquisition of the assets of
Dorman.
Standby Letter Credit enhancement for Industrial Revenue
of Credit: Bonds.
INTEREST RATES:
Revolving Credit: 1) Base Rate, (defined as the higher of
Agent's Prime Rate as announced publicly
from time to time changing when, and if,
such rate changes or Fed Funds plus 1/2%
p.a.)
2) Adjusted LIBOR plus .85% p.a.
Term Loan: 1) Base Rate plus 1/4% p.a.
2) Adjusted LIBOR plus 1.10% p.a.
Standby Letter 1) To be discussed upon review of the
of Credit: existing letter of credit issued by The
Fifth Third Bank.
INTEREST PERIODS: Interest periods for LIBOR loans shall be
1,2,3, or 6 months.
INTEREST PAYMENTS: Interest shall be payable on the last day of
each interest period for LIBOR Loans. If the
interest period is 6 months for LIBOR Loans,
interest shall be payable on the 90th day and
on the last day of the interest period.
Interest on Base Rate Loans shall be payable
monthly.
FEES:
Commitment Letter Fee: The Borrowers paid the Agent $25,000 for
deliverance of the August 19, 1994 Commitment
Letter and Term Sheet, which was a previous
version of this Commitment Letter and Term
Sheet. If the Borrowers' bid for Dorman is
accepted, this fee will be applied to the
Closing Fee. This fee will be refunded by
Agent only in the event Borrowers' bid for
Dorman is not accepted by October 30, 1994.
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Closing Fee: 3/8 of 1% of CoreStates' Proposed Commitment,
$75,000 of which had been paid as of September
15, 1994, and the balance payable upon Closing
to the Lenders. This fee will be refunded by
Agent only in the event Borrowers' bid for
Dorman is not accepted by October 30, 1994.
Unused Commitment Fee: 3/8 of 1% per annum of the unused portion for
the period commencing upon acceptance of this
commitment. The Unused Commitment Fee shall be
non-refundable and will be payable quarterly
in arrears, calculated on the basis of actual
number of days elapsed in a year of 360 days.
Standby Letter of ___% p.a. plus issuance charges.
Credit Fee:
Legal Fees: For the account of the Borrowers.
MINIMUM DRAWDOWN: Drawdowns under Revolving Credit shall be in
minimum amounts of $100,000 for Base Rate
loans and $1,000,000 for LIBOR loans.
OPTIONAL PREPAYMENT: Base Rate and LIBOR loans may be prepaid at
any time upon one business days notice to the
Agent. If any LIBOR loans are due or paid for
any reason (mandatory prepayment,
acceleration, or otherwise) prior to the end
of such interest period, the Lenders shall be
compensated for any loss or expense, including
loss of margin, incurred as a result of such
payment.
REDUCTION OF COMMITMENTS: Commitments on Revolving Credit may be reduced
at Borrowers' option in increments of at least
$2,000,000 at any time on five (5) business
days notice.
MANDATORY PREPAYMENTS: In addition to the scheduled installments due
on the Term Loan, 100% of the proceeds
received from the activities listed below
shall be applied to prepay the Term Loan in
inverse order of maturity as and when such
proceeds are received.
a. The sale of material assets;
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b. Issuance of other debt;
c. 50% of Excess Cash Flow (to be defined)
calculated annually based on audited year
end financial statements; remitted within
10 days of receipt of such statements.
REPRESENTATIONS Customary for transactions of this type,
AND WARRANTIES: including but not limited to:
a. Corporate Existence and Authority;
b. Binding Effect;
c. Financial Information;
d. No Material Adverse Change;
e. Compliance with laws and regulations,
including environmental and ERISA.
f. Payment of Taxes;
g. Absence of Litigation;
h. Absence of Default.
CONDITIONS PRECEDENT: Customary for credit facilities of this
nature, including but not limited to:
First Advance: a. Absence of Default;
b. Accuracy of Representations and
Warranties;
c. Negotiation and execution of documentation
satisfactory to the Agent and Lenders;
d. Satisfactory completion of Lender's due
diligence; including collateral audit, a
satisfactory review by the Agent of Arthur
Andersen's due diligence (the scope of
which shall be reviewed with the Agent
prior to the commencement of the due
diligence) and receipt of updated
financial projections;
e. No material adverse change in the
financial condition, assets, nature of the
assets, operations or prospects of the
Borrowers or Dorman;
f. A signed definitive agreement for the
purchase of Dorman with the purchase price
of Dorman not to exceed total
consideration agreed to between Agent and
Borrower as described in Exhibit A
attached hereto.
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Subsequent Advances: a. Absence of Default;
b. No Material Adverse Change;
c. Notice of Borrowing.
COVENANTS: This proposal is subject to negotiation of
covenants satisfactory to the Agent and
Lenders. These shall be customary for
facilities of this type, including but not
limited to:
Affirmative Covenants: a. Financial Reporting;
b. Payment of Taxes;
c. Corporate Existence;
d. Maintenance of Properties;
e. Compliance with laws, including
environmental, ERISA and CERCLA;
f. Maintenance of ownership;
g. Compliance Certificates;
h. SEC Reports and Filings;
i. Accounts Receivable Agings (upon request);
j. Maintenance of Insurance.
Financial Covenants: a. Minimum Quick Ratio
b. Minimum Cash Flow Coverage Ratio
c. Maximum Total Liabilities to Tangible Net
Worth
d. Minimum Tangible Net Worth, increasing by
50% of cumulative net income after tax
without any reduction for losses.
NOTE: Financial covenants will be set based
upon Closing balance sheet and other financial
statement revisions.
Negative Covenants: a. Restriction on Additional Indebtedness;
Guaranties;
b. Restricted Payments;
c. Change of control (the Berman's and their
immediate family must maintain control of
at least 40% of R&B);
d. Limitation on Investments;
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c. Limitation on Mergers, Acquisitions,
Divestitures.
EVENTS OF DEFAULT: Customary for these types of facilities,
including but not limited to:
a. Failure to pay principal, interest, or
fees when due;
b. Noncompliance with covenants;
c. Any representation or warranty shall prove
to be incorrect, false or misleading in a
material respect when made;
d. Insolvency; Bankruptcy;
e. Cross default to other indebtedness.
INDEMNIFICATIONS: The Borrowers will indemnify the Agent and all
Lenders against all losses, liabilities,
claims, damages, or expense relative to their
loans, the Borrowers use of loan proceeds, or
the commitments, including but not limited to
legal fees and settlement costs whether or not
the transaction contemplated hereby is
consummated.
TRANSFERS: The Agent may sell assignments in its
Commitments and Loans in a minimum amount of
$5,000,000. Participations may be granted in
any amount with voting rights limited to
changes in interest rate, maturity of the
Loans, release of collateral and amount of
Commitments.
EXPENSES: The Borrowers will pay all legal and other
reasonable out-of-pocket expenses of the Agent
related to this transaction and any subsequent
waivers or amendments.
WAIVER OF JURY TRIAL: Borrower and Lenders agree to waive trial by
jury.
GOVERNING LAW: Commonwealth of Pennsylvania
LATEST PERMITTED
CLOSING DATE: February 28, 1995
COMMITMENT LETTER
TERMINATION DATE: October 7, 1994
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AMENDMENT TO ASSET PURCHASE AGREEMENT
DATED AS OF OCTOBER 5, 1994
BETWEEN
SDI OPERATING PARTNERS, L.P. ("SELLER")
AND
R&B, INC. ("BUYER")
(THE "AGREEMENT")
A. Certain inventory of Seller (the "Brooks inventory") is held on
consignment by Brooks Enterprises of Brevard, Inc. pursuant to an agreement
dated May 29, 1987 as amended (the "Brooks Agreement"). Seller estimates that
the Brooks inventory included in the June 30 Balance Sheet was valued at
$514,000. The parties agree that (1) the Brooks inventory shall be included
within the definition of Excluded Assets in the Agreement; (2) the amount
payable at Closing pursuant to Section 1.2(a) shall be reduced by $514,000 and
such amount payable shall be $37,786,000; and (3) the Brooks Agreement shall
not be an Assumed Liability under Section 1.3. During the preparation of the
Closing Date Balance Sheet the exact amount of the value of the Brooks
inventory on the June 30 Balance Sheet shall be determined and any difference
from $514,000 will be paid by Buyer to Seller or Seller to Buyer in the same
manner as the adjustment provided in Section 1.2(c).
B. Amounts payable to Buyer by Seller under Section 3.14(b) shall be
estimated to the extent necessary and shall be adjusted when the exact amounts
are determined.
C. It is noted with respect to Section 3.14(c) that Seller will suspend
but not terminate the Dorman pension plan after the Closing.
WITNESS the due execution hereof as of the 1st day of January, 1995.
SDI OPERATING PARTNERS, L.P.
By SDI Partners I, L.P.,
Its General Partner
By Lehman/SDI, Inc.,
Its General Partner
By /s/ Norman V. Edmonson
---------------------------------
Norman V. Edmonson
Executive Vice President
<PAGE>
DORMAN PRODUCTS OF AMERICA, LTD.
By RB Management, Inc.
Its General Partner
By /s/ Richard N. Berman
---------------------------------
Richard N. Berman
President
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