SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
AMCOL INTERNATIONAL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share
(2) Aggregate number of securities to which transactions applies:
______________ (as of April ___, 2000)
<PAGE>
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Value of
Transaction: $656.5 million, consisting of (i) $628 million, less the
amount of any outstanding intercompany indebtedness of the SAP
Business as of the closing, subject to certain additional adjustments,
as the purchase price under an Asset and Stock Purchase Agreement
dated November 22, 1999, and (ii) $28.5 million, as consideration for
entering into an Acrylic Acid Supply Agreement.
(4) Proposed maximum aggregate value of transaction:
$656.5 million (See line 3 above)
(5) Total fee paid:
$131,300
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
AMCOL INTERNATIONAL CORPORATION
One North Arlington
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On May __, 2000
To Our Shareholders:
The special meeting of shareholders of AMCOL International Corporation, or
AMCOL, will take place on __________, May __, 2000, at 10:00 a.m., Chicago time,
at _______________, for the following purposes:
1. To consider and vote upon a proposal to approve the sale of our
superabsorbent polymers business, or SAP business, to BASF
Aktiengesellschaft, or BASF, pursuant to the terms of an Asset and
Stock Purchase Agreement dated November 22, 1999. The purchase
agreement provides for the sale of the following to BASF:
- all of the shares of capital stock of AMCOL's indirect
subsidiaries Chemdal Corporation and Chemdal Asia Ltd.; and
- all other assets of AMCOL and its subsidiaries related
primarily to the SAP business.
A copy of the purchase agreement is attached as Annex A to the
accompanying proxy statement.
2. To consider and vote upon a proposal to approve amendments to
AMCOL's 1993 Stock Plan and 1998 Long-Term Incentive Plan.
3. To transact any other business which properly comes before the
special meeting.
Only shareholders of record of AMCOL's common stock as of the close of
business on April ___, 2000 will be entitled to notice of and to vote at the
special meeting and at any adjournments of the special meeting.
AMCOL's Board of Directors has unanimously approved the purchase agreement
and the sale transaction, and believes that the purchase agreement and the sale
transaction are fair to, and in
<PAGE>
the best interests of, AMCOL and its shareholders. The Board of Directors
recommends that you vote "FOR" approval of the sale transaction and the plan
amendments.
Whether or not you plan to attend the special meeting, please complete,
sign, date and mail the proxy card in the enclosed self-addressed, postage-paid
envelope, or vote by telephone in accordance with the instructions provided.
Please do not submit a proxy card if you have voted by telephone. If you attend
the special meeting, you may revoke your proxy and, if you wish, vote your
shares in person. Thank you for your interest and cooperation.
By Order of the Board of Directors,
Clarence O. Redman
Secretary
Arlington Heights, Illinois
April __, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION................................................................8
SUMMARY.....................................................................10
FORWARD LOOKING STATEMENTS / RISK FACTORS...................................16
Narrowed Focus of Business.........................................16
Significant Increase In Shares Subject To Outstanding Options......16
Use of Proceeds....................................................17
Competition........................................................17
Reliance on Metalcasting and Construction Industries...............17
Contingent Liabilities.............................................18
Regulatory and Legal Matters.......................................18
Risks of International Operations..................................18
Stock Price........................................................19
SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA.19
THE COMPANY.................................................................22
THE SPECIAL MEETING.........................................................22
General............................................................22
Record Date........................................................22
Purpose of the Special Meeting; Recommendation of the Board of
Directors..........................................................22
Proxies; Vote Required.............................................23
Proxy Solicitation and Expenses....................................23
PROPOSAL 1: THE SALE TRANSACTION...........................................24
General............................................................24
The SAP Business...................................................24
Background of the Sale Transaction.................................25
Opinion of Schroders...............................................31
Recommendation of the Board........................................36
Reasons for the Sale Transaction...................................36
Use of Proceeds....................................................38
Accounting Treatment...............................................39
Certain Federal Income Tax Consequences............................39
Interests of Certain Persons.......................................41
No Appraisal Rights................................................42
<PAGE>
THE PURCHASE AGREEMENT......................................................42
Purchased Shares and Assets........................................42
Assumed Liabilities................................................43
Purchase Price.....................................................44
The Closing........................................................44
Representations and Warranties.....................................44
Conduct of Business................................................45
No Solicitation....................................................46
Non-Competition....................................................47
Employee Matters...................................................48
Tax Matters........................................................49
Closing Conditions.................................................49
Survival of Representations and Warranties; Indemnification........50
Termination........................................................52
Expenses 53
Ancillary Agreements...............................................53
MARKET PRICE DATA; DIVIDENDS................................................54
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIESUNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION.......................................................55
UNAUDITED FINANCIAL STATEMENTS OF THE SAP BUSINESS..........................62
PROPOSAL 2: THE PLAN AMENDMENTS............................................67
General............................................................67
The 1993 Plan and the 1998 Plan....................................68
The Plan Amendments................................................72
Board Recommendation...............................................73
SECURITY OWNERSHIP..........................................................74
Security Ownership of Five Percent Beneficial Owners...............74
Security Ownership of Directors and Executive Officers.............75
NAMED OFFICERS' COMPENSATION................................................77
Summary Compensation Table.........................................77
Option Grants in Last Fiscal Year..................................78
Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values......................................................................78
Pension Plans......................................................79
Change In Control Arrangements.....................................80
Director Compensation..............................................81
Compensation Committee Report on Executive Compensation............81
Compensation Committee Philosophy..................................82
Components of Compensation.........................................82
<PAGE>
Base Pay 83
Annual Incentives..................................................83
Long-Term Incentives...............................................83
Stock Performance Graph............................................84
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....................................85
SHAREHOLDER PROPOSALS.......................................................85
OTHER MATTERS...............................................................85
ADDITIONAL INFORMATION......................................................86
ANNEXES:
A Asset and Stock Purchase Agreement
B Opinion of Schroders
<PAGE>
AMCOL INTERNATIONAL CORPORATION
One North Arlington
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
To Be Held On May __, 2000
INTRODUCTION
We are furnishing this proxy statement to you in connection with the
solicitation of proxies by the Board of Directors of AMCOL International
Corporation, or AMCOL, for use at our special meeting of shareholders to be held
on _________, May ___, 2000, at 10:00 a.m., Chicago time, at _______________,
and at any adjournment of the special meeting. This proxy statement and the
accompanying proxy card are first being mailed or delivered to AMCOL
shareholders on or about April __, 2000.
At the special meeting, you will be asked to consider and vote upon the
following matters:
1. A proposal to approve the sale of our superabsorbent polymers
business,or SAP business, to BASF Aktiengesellschaft, or BASF,
pursuant to the terms of an Asset and Stock Purchase Agreement
dated November 22,1999. The purchase agreement provides for the sale
of the following to BASF:
- all of the shares of capital stock of AMCOL's
indirect subsidiaries Chemdal Corporation and
Chemdal Asia Ltd.; and
- all other assets of AMCOL and its subsidiaries
related primarily to the SAP business.
A copy of the purchase agreement is attached as Annex A to this proxy
statement.
2. A proposal to approve amendments to AMCOL's 1993 Stock Plan
and 1998 Long-Term Incentive Plan.
3. Any other business which properly comes before the special meeting.
AMCOL's Board of Directors has unanimously approved the purchase agreement
and the sale transaction, and believes that the purchase agreement and the sale
transaction are fair to, and in
<PAGE>
the best interests of, AMCOL and its shareholders. The Board of Directors
recommends that you vote"FOR" approval of the sale transaction and the plan
amendments.
In connection with the sale transaction, AMCOL currently intends to adopt a
plan of partial liquidation pursuant to which AMCOL will distribute pro rata to
its shareholders a significant portion of the net proceeds from the sale
transaction. AMCOL currently expects to distribute between $14.00 and $14.50 per
share. AMCOL currently expects to make this distribution in the second quarter
of 2000. We cannot assure you that any plan of partial liquidation will be
adopted or that any distribution will be made. The Board of Directors will
consider the facts and circumstances existing after completion of the sale
transaction to determine whether a distribution in partial liquidation is in the
best interests of AMCOL's shareholders at that time and the timing and amount of
any such distribution. Any plan of partial liquidation must be approved by the
Board, but does not require the approval of AMCOL's shareholders. You are not
being asked to vote on or approve any plan of partial liquidation.
Whether or not you plan to attend the special meeting, please complete,
sign, date and mail the proxy card in the enclosed self-addressed, postage-paid
envelope, or vote by telephone in accordance with the instructions provided.
Please do not submit a proxy card if you have voted by telephone. If you attend
the special meeting, you may revoke your proxy and, if you wish, vote your
shares in person.
The date of this proxy statement is April ___, 2000.
<PAGE>
SUMMARY
This summary highlights information contained in other places in this proxy
statement. You should read the entire proxy statement carefully, including the
"Risk Factors" section and the annexes to this proxy statement.
THE SPECIAL MEETING
Time, Date and Place: The special meeting will be held on ___________,
May ___, 2000, at 10:00 a.m., Chicago
time, at _______________.
Record Date: Shareholders of record of AMCOL's common stock as of
the close of business on April ___, 2000 will be entitled
to vote at the special meeting.
Purpose: 1. To approve the sale of the SAP business to
BASF pursuant to the terms of the purchase agreement. The
purchase agreement provides for the sale of the following to
BASF:
- all of the shares of capital stock of AMCOL's indirect
subsidiaries Chemdal Corporation and Chemdal Asia Ltd.;
and
- all other assets of AMCOL and its subsidiaries related
primarily to the SAP business.
A copy of the purchase agreement is attached as Annex A to
this proxy statement.
2. To approve amendments to AMCOL's 1993 Stock Plan and 1998
Long-Term Incentive Plan.
3. To transact such any other business which properly comes
before the special meeting.
Board Recommendations:
AMCOL's Board of Directors has unanimously approved the
purchase agreement and the sale transaction, and believes
that the purchase agreement and the sale transaction are
fair to, and in the best interests of, AMCOL and its
shareholders. The Board of Directors recommends that you
vote "FOR" approval of the sale transaction and the plan
amendments.
<PAGE>
Required Vote:
The sale transaction must be approved by the holders of a
majority of the outstanding shares of AMCOL's common stock.
The plan amendments must be approved by the holders of a
majority of the shares of AMCOL's common stock represented
at the special meeting.
PROPOSAL 1: THE SALE TRANSACTION
The Sale Transaction:
Under the purchase agreement, AMCOL or its subsidiaries will
transfer to BASF or its subsidiaries the following:
- all of the outstanding shares of the capital stock of
AMCOL's indirect subsidiaries Chemdal Corporation and
Chemdal Asia Ltd.; and
- all other assets of AMCOL and its subsidiaries related
primarily to the SAP business.
The Purchase Price:
Subject to post-closing adjustments, the total amount BASF
will pay AMCOL for the SAP business is $656.5 million, less
any outstanding intercompany indebtedness of the SAP
business as of the closing. The purchase price consists of:
- subject to post-closing adjustments, $628 million, less
any outstanding intercompany indebtedness of the SAP
business as of the closing, as the purchase price under
the purchase agreement; and
- $28.5 million, as consideration for entering into an
Acrylic Acid Supply Agreement.
See "The Purchase Agreement - Purchase Price."
Opinion of Schroders:
Schroder & Co. Inc., our financial advisor in connection
with the sale transaction, delivered a written opinion to
AMCOL's Board of Directors that, as of the date of the
opinion, the cash consideration to be paid to AMCOL by BASF
for the SAP business was fair to AMCOL from a financial
point of view. A copy of Schroders' opinion, which sets
forth the assumptions made, the matters considered and the
scope of its review, is attached as Annex B hereto. See
"Proposal 1: The Sale Transaction - Opinion of Schroders."
Reasons for the Sale Transaction
In reaching its decision to recommend and approve the
purchase agreement, our Board of Directors considered, among
other things, the financial performance and future
<PAGE>
prospects of the SAP business, current economic and market
conditions in the superabsorbent polymers industry, and the
price and other terms of the sale transaction. For a more
detailed review of the reasons for the sale transaction, see
"Proposal 1: The Sale Transaction - Reasons for the Sale
Transaction."
Use of Proceeds:
We expect to receive approximately $656.5 million in gross
proceeds from the sale transaction. See "The Purchase
Agreement - Purchase Price." From these gross proceeds,
AMCOL intends to repay indebtedness of the SAP business
(totaling approximately $44.3 million as of December 31,
1999) and will pay various transaction related costs,
including estimated legal, accounting and advisory fees of
$7.5 million, estimated employee bonuses of $3.6 million,
estimated filing, printing and other costs of $1.3 million,
estimated penalties for the prepayment of debt of $1.3
million, and estimated corporate income taxes of $208.4
million.
In connection with the sale transaction, the Board of
Directors currently intends to adopt a plan of partial
liquidation pursuant to which we will distribute pro rata to
our shareholders a significant portion of the net proceeds
from the sale transaction after paying the expenses
described above. AMCOL currently expects to distribute
between $14.00 and $14.50 per share in the second quarter of
2000. We cannot assure you that any plan of partial
liquidation will be adopted or that any distribution will be
made. The Board of Directors will consider the facts and
circumstances existing after completion of the sale
transaction to determine whether a distribution in partial
liquidation is in the best interests of AMCOL's shareholders
at that time and the timing and amount of any such
distribution. Any plan of partial liquidation must be
approved by the Board, but will not require the approval of
AMCOL's shareholders. You are not being asked to vote on or
approve any plan of partial liquidation. See "Risk Factors -
Use of Proceeds" and "Proposal 1: The Sale Transaction - Use
of Proceeds."
Certain Federal Income
Tax Consequences:
AMCOL will recognize a gain on the sale of the SAP business
in the sale transaction, but no gain will be recognized by
you in the sale transaction.
<PAGE>
Any distribution to you in connection with the sale
transaction will be treated as a partial liquidation of
AMCOL for federal income tax purposes. A distribution in
partial liquidation made to non-corporate shareholders will
be treated as an exchange of a portion of the shareholder's
common stock for the cash distributed rather than a
dividend. The distribution will be a dividend in the hands
of corporate shareholders to the extent of current and
accumulated earnings and profits of AMCOL. The amount of any
dividend not subject to federal income tax due to the
corporate dividends received deduction will reduce a
corporate shareholder's basis in its AMCOL common stock.
For a more detailed discussion of the federal income tax
consequences of the sale transaction and the distribution to
AMCOL's shareholders, see "Proposal 1: The Sale Transaction
- Certain Federal Income Tax Consequences." All descriptions
of federal income tax consequences in this proxy statement
are general and do not address all of the tax consequences
of the proposed distribution that may be relevant to
particular shareholders. Each shareholder is urged to obtain
advice from his or her own tax advisor regarding the tax
consequences of the proposed distribution to them.
No Appraisal Rights:
Under Delaware law, you are not entitled to appraisal rights
as a result of the sale transaction.
THE PURCHASE AGREEMENT
The Closing:
The closing of the sale transaction will take place on the
tenth business day following the date on which all of the
conditions to each party's obligations under the purchase
agreement have been satisfied or waived, or on another date
as the parties may mutually agree. It is currently
anticipated that the closing will occur in the second
quarter of 2000.
Closing Conditions:
The closing is conditioned upon approval of the sale
transaction by AMCOL's shareholders and is also subject to
the satisfaction of other conditions, including United
States antitrust regulatory review, and the absence of any
material adverse change in the SAP business. See "The
Purchase Agreement - Closing Conditions."
<PAGE>
Termination:
The purchase agreement may be terminated in some
circumstances, including:
- the breach of any representation, warranty, covenant or
agreement on the part of AMCOL or BASF which prevents
closing conditions to the purchase agreement from being
satisfied;
- a vote by AMCOL's shareholders against approval of the
purchase agreement;
- the issuance of an order by a governmental authority
restraining or enjoining the purchase agreement; or
- the failure to complete the transaction by May 31,
2000.
See "The Purchase Agreement - Termination."
Expenses:
The purchase agreement requires AMCOL to pay BASF a
termination fee of $20 million plus expenses if the purchase
agreement is terminated under certain circumstances. See
"The Purchase Agreement - Expenses."
PROPOSAL 2: THE PLAN AMENDMENTS
General:
The purchase agreement requires AMCOL to cause each unvested
stock option to purchase shares of AMCOL common stock held
by employees of the SAP business to become fully vested and
exercisable on or before the closing of the sale
transaction. However, AMCOL is unable to accelerate the
vesting of the options granted to employees who reside in
the United Kingdom which were issued under a scheme approved
by United Kingdom Inland Revenue because the necessary
approvals were not received from United Kingdom Inland
Revenue. Pursuant to the purchase agreement, AMCOL will
either replace the options held by these employees in the
United Kingdom or pay a special cash bonus to these
employees. AMCOL intends to vest the options held by all
other employees.
Your Board of Directors has decided to vest these options
prior to the closing in order to provide these employees
with the opportunity to exercise their options and sell the
underlying shares of AMCOL common stock prior to the closing
and the termination of their employment with AMCOL. The
vesting of these options will be contingent
<PAGE>
upon the receipt of shareholder approval of the purchase
agreement but will not be contingent upon closing the sale
transaction or the termination of the employment with AMCOL
of the employees of the SAP business.
The Plan Amendments:
In order to accelerate the vesting of these options, the
Board of Directors has adopted, subject to shareholder
approval, amendments to AMCOL's 1993 Stock Plan and AMCOL's
1998 Long-Term Incentive Plan which:
- provide for the acceleration of vesting of all options
held by employees who will become employees of BASF
except for nonvested options held by employees whose
options were issued under a scheme approved by United
Kingdom Inland Revenue; and
- eliminate the $100,000 cap on the aggregate fair market
value of an employee's incentive stock options, or
ISOs, which become exercisable in any calendar year
pursuant to the 1998 Plan.
The acceleration of vesting will become effective
immediately upon receipt of shareholder approval of the plan
amendments at the special meeting.
<PAGE>
FORWARD LOOKING STATEMENTS / RISK FACTORS
Some of the statements made in this proxy statement and the documents
incorporated by reference in this proxy statement that are not historical fact
are forward-looking statements made in reliance upon the safe harbor contained
in Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements include statements relating to AMCOL or its
operations that are preceded by terms such as "expects," "believes,"
"anticipates," "intends" and similar expressions, and statements relating to
anticipated growth, levels of capital expenditures, future dividends, expansion
into global markets and the development of new products. These forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties. Our actual results, performance or achievements could differ
materially from the results, performance or achievements expressed in, or
implied by, these forward-looking statements as a result of various factors,
including without limitation, the following:
Narrowed Focus of Business
After the sale of the SAP business, AMCOL will be substantially smaller.
AMCOL will focus on its minerals and environmental businesses while continuing
to operate its transportation business. The minerals business mines, processes
and distributes clays and similar products. The environmental business processes
and distributes clays and similar products for use in a variety of industrial
and commercial applications. AMCOL's transportation business provides long-haul
trucking and freight brokerage services for AMCOL's plants and for certain
customers. The following table sets forth historical financial information for
these remaining businesses and for the SAP business for the years ended December
31, 1998 and 1999.
<TABLE>
<CAPTION>
(In millions)
Net Sales Gross Profit Operating Profit (Loss)
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Remaining Businesses $299.1 $300.4 $68.9 $64.7 $(8.5) $8.9
SAP Business $252.9 $221.1 $68.9 $46.5 $51.9 $33.3
</TABLE>
The operating loss of the remaining businesses in 1999 reflects a one-time
charge taken in the fourth quarter totaling $14.6 million.
Significant Increase In Shares Subject To Outstanding Options
If the Board of Directors approves the proposed distribution in partial
liquidation, the Compensation Committee will be required pursuant to the
Internal Revenue Code, or Code, to adjust the number of shares subject to
incentive stock options outstanding under AMCOL's 1983 Incentive Stock Option
Plan, 1993 Stock Plan and 1998 Long-Term Incentive Plan, and their exercise
price. These adjustments are intended to preserve the ratio of the exercise
price of the option to the fair market value of AMCOL's common stock. In
accordance with the requirements
<PAGE>
of the Code, the number of shares subject to incentive stock options would be
increased to the product of (A) the ratio of the pre-distribution price of AMCOL
common stock to the post-distribution price of AMCOL common stock, and (B) the
number of shares subject to incentive stock options, rounded down to the next
whole number. The exercise price would be reduced to the product of (A) the
ratio of the post-distribution price of AMCOL common stock to the
pre-distribution price of AMCOL common stock, and (B) the original option price,
rounded down to the next whole cent. The Compensation Committee intends to make
similar adjustments to non-qualified stock options outstanding under those plans
or under AMCOL's 1987 Non-Qualified Stock Option Plan. As an example, if the
pre-distribution price of AMCOL common stock were $____ per share and the
post-distribution price of AMCOL common stock were $____ per share and there
were ______ stock options outstanding on the distribution date, then the number
of options outstanding would be increased to the product of ________ and
_________, or ________ shares. If the exercise price were $___, the exercise
price would be reduced to the product of ___ and ___, or $___. Once these
adjustments are made, the shares subject to outstanding options will constitute
a significant portion of AMCOL's outstanding shares of common stock. Assuming
the stock prices set forth above immediately after the distribution and the
required adjustment, shares subject to outstanding options would constitute
_____________ out of ___________ outstanding shares of AMCOL common stock, or
__%.
Use of Proceeds
AMCOL expects to receive approximately $656.5 million in gross proceeds
from the sale transaction. From these gross proceeds, AMCOL intends to repay
certain indebtedness of the SAP business and pay various transaction related
costs. In connection with the sale transaction, the Board of Directors currently
intends to adopt a plan of partial liquidation pursuant to which AMCOL will
distribute pro rata to its shareholders a significant portion of the net
proceeds from the sale transaction after paying the expenses described above.
AMCOL currently expects to distribute between $14.00 and $14.50 per share in the
second quarter of 2000. We cannot assure you that any plan of partial
liquidation will be adopted or that any distribution will be made. The Board of
Directors will consider the facts and circumstances existing after completion of
the sale transaction to determine whether a distribution in partial liquidation
is in the best interest of AMCOL's shareholders at that time and the timing and
amount of any such distribution. Any plan of partial liquidation must be
approved by the Board, but does not require the approval of AMCOL's
shareholders. You are not being asked to vote on or approve any plan of partial
liquidation. See "Proposal 1: The Sale Transaction - Use of Proceeds."
Competition
The minerals market is very competitive. We believe competition is
essentially a matter of product quality, price, delivery, service and technical
support. Several of our competitors in the United States market are larger and
have substantially greater financial resources. If we fail to compete
successfully based on these or other factors, we may lose customers or fail to
recruit new customers and our business and future financial results could be
materially and adversely affected.
<PAGE>
Reliance on Metalcasting and Construction Industries
Approximately 48% of our minerals segment's sales and 31% of our
environmental business' sales in 1999 were to the metalcasting and construction
markets, respectively. The metalcasting and construction markets depend heavily
upon the strength of the domestic and international economies. If these
economies weaken, demand for products from our minerals business by the
metalcasting market and from our environmental business for the construction
markets may decline and our business or future financial results could be
materially and adversely affected.
Contingent Liabilities
Under the purchase agreement, AMCOL has agreed to indemnify BASF for the
breach of its representations and warranties contained in the purchase agreement
and other matters. See "The Purchase Agreement - Survival of Representations and
Warranties; Indemnification." If the proceeds of the sale transaction are
distributed to AMCOL's shareholders, AMCOL would be required to fund the payment
of any indemnification claims by BASF under the purchase agreement or otherwise
out of its then existing working capital and cash flows from its continuing
businesses. For example, an indemnification claim by BASF might result if
representations by AMCOL about the SAP business made in the purchase agreement
are later proved to be materially incorrect. Significant indemnification claims
by BASF could materially and adversely affect AMCOL's financial condition and
profitability.
Regulatory and Legal Matters
Our operations are subject to various federal, state, local and foreign
laws and regulations relating to the environment and to health and safety
matters. Substantial penalties may be imposed if we violate these laws and
regulations. If these laws or regulations are changed or interpreted differently
in the future, it may become difficult or expensive for us to comply. In
addition, investigations or evaluations of our products by government agencies
may require us to adopt additional safety measures or precautions. If our costs
to comply with such laws and regulations in the future materially increase, our
business and future financial results could be materially and adversely
affected. AMCOL may be subject to adverse litigation results, as well as, future
changes in laws and regulations which may negatively impact its operations and
profits.
Risks of International Operations
After the sale transaction, we expect our business outside of the United
States to represent approximately 26% of our consolidated sales. Our
international operations will be subject to various risks, including the
following:
- currency exchange or price control laws;
- currency translation adjustments;
- political and economic instability;
- unexpected changes in regulatory requirements;
<PAGE>
- tariffs and other trade barriers;
- longer accounts receivable collection cycles; and
- potentially adverse tax consequences.
The events listed above could result in sudden, and potentially prolonged,
changes in demand for AMCOL's products. Also, we may have difficulty enforcing
agreements and collecting accounts receivable through a foreign country's legal
system. At December 31, 1999, approximately 47% of our gross accounts receivable
from our continuing businesses were due from customers outside of the United
States and Canada. Stock Price
In connection with the sale transaction, AMCOL currently intends to adopt a
plan of partial liquidation pursuant to which AMCOL will distribute pro rata to
its shareholders a significant portion of the net proceeds from the sale
transaction. See "Proposal 1: The Sale Transaction - Use of Proceeds." After the
record date of any distribution, the market price of AMCOL's common stock will
significantly decrease to reflect the payment of this distribution to AMCOL's
shareholders.
The stock market has been extremely volatile in recent years. These broad
market fluctuations may adversely affect the market price of our common stock.
In addition, factors such as the following may have a significant effect on the
market price of our common stock:
- fluctuations in our financial results;
- our introduction of new services or products;
- announcements of acquisitions, strategic alliances or
joint ventures by us, our customers or our competitors;
- changes in analysts' recommendations regarding our common
stock; and
- general economic conditions.
There can be no assurance as to the price our common stock will trade at
after the sale of the SAP business and the record date for any distribution to
AMCOL's shareholders in connection with the sale transaction.
SELECTED CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL AND OPERATING DATA
The following tables set forth the selected financial data as of and for
the twelve months ended December 31, 1995, 1996, 1997, 1998 and 1999. The
financial data in the "Historical" table insofar as it relates to the years
ended December 31, 1995, 1996, 1997, 1998 and 1999 has been derived from AMCOL's
audited consolidated financial statements, which are incorporated by reference
in this Proxy Statement. The financial data in the "Pro Forma" table gives
effect to the consummation of the sale transaction and the proposed use of
proceeds as consummated: on December 31, 1995, 1996, 1997, 1998 and 1999, in the
case of the respective Pro Forma Balance Sheet financial data; and on January 1,
the first day of AMCOL's fiscal year, in the case of the Pro Forma Statement of
Operations Data for the fiscal years ended December 31, 1995, 1996, 1997,
<PAGE>
1998 and 1999, and are derived from AMCOL's Unaudited Pro Forma Consolidated
Financial Information and notes thereto included elsewhere in this Proxy
Statement.
The selected consolidated pro forma financial and operating data is
presented for illustrative purposes only and does not necessarily reflect what
our financial position and results of operation would have been if the sale
transaction and the proposed use of proceeds had been consummated on the above
referenced dates, and may not be indicative of our future performance.
The selected consolidated historical and pro forma financial and operating
data is qualified in its entirety by, and should be read in conjunction with,
AMCOL's audited consolidated financial statements and the notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations which are incorporated by reference to this Proxy Statement and
AMCOL's Unaudited Pro Forma Consolidated Financial Information and notes thereto
which are included elsewhere in this Proxy Statement.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS DATA - HISTORICAL
(In thousands, except ratios and share and per share amounts)
Year Ended December 31,
PER SHARE 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity (1) $6.94 $6.44 $6.18 $5.87 $5.42
Basic earnings (2) 0.83 0.79 0.74 0.53 0.62
Diluted earnings (3) 0.82 0.78 0.72 0.52 0.60
Dividends 0.27 0.23 0.21 0.19 0.17
Shares outstanding (3) 27,199,263 28,385,860 29,125,168 29,294,489 29,519,220
INCOME DATA
Sales $552,052 $521,530 $477,060 $405,347 $347,688
Gross profit 137,796 111,171 100,741 84,311 76,562
Operating profit 43,433 42,220 41,469 32,337 32,397
Net income 22,234 22,085 21,044 15,225 17,771
BALANCE SHEET DATA
Current assets $164,770 $164,076 $150,270 $147,773 $126,337
Net property, plant and equipment 172,408 171,478 175,324 180,876 175,211
Total assets 349,007 357,864 351,009 350,708 322,366
Current liabilities 59,715 74,083 67,241 51,870 35,882
Long-term debt 93,914 96,268 94,425 118,855 117,016
Stockholders' equity 186,440 172,914 175,943 167,404 155,494
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS DATA - PRO FORMA
(In thousands, except ratios and share and per share amounts)
Year Ended December 31,
PER SHARE 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity (1) $4.12 $4.63 $4.82 $4.70 $4.59
Basic earnings (2) (loss) (0.23) 0.19 0.28 0.24 0.31
Diluted earnings (3) (loss) (0.23) 0.18 0.28 0.24 0.30
Dividends 0.27 0.23 0.21 0.19 0.17
Shares outstanding (3) 27,199,263 28,385,860 29,125,168 29,294,489 29,519,220
INCOME DATA
Sales $299,144 $300,437 $281,116 $251,481 $226,926
Gross profit 68,894 64,713 59,780 53,893 50,724
Operating profit (loss) (7,160) 8,969 12,606 12,710 15,495
Net income (loss) (6,161) 5,187 8,228 6,982 8,999
BALANCE SHEET DATA
Current assets $99,888 $111,524 $99,603 $95,626 $85,062
Net property, plant and equipment 89,260 92,063 90,885 85,324 90,101
Total assets 200,977 225,887 215,902 202,303 195,974
Current liabilities 34,980 55,082 51,392 36,213 26,634
Long-term debt 49,625 37,274 16,927 21,407 25,199
Stockholders' equity 110,536 124,460 137,119 133,797 131,619
<FN>
(1) Based on the number of common shares outstanding at the end of the period.
(2) Based on the weighted average common shares outstanding for the period.
(3) Based on the weighted average common shares outstanding, including common stock equivalents, for the period.
</FN>
</TABLE>
<PAGE>
THE COMPANY
AMCOL International Corporation, or AMCOL, was originally incorporated in
South Dakota in 1924 as the Bentonite Mining & Manufacturing Company. Its name
was changed to American Colloid Company in 1927, and in 1959, it was
reincorporated in Delaware. In 1995, its name was changed to AMCOL International
Corporation.
AMCOL currently operates three major businesses: absorbent polymers,
minerals and environmental. We also operate a transportation business. The
absorbent polymers business produces and distributes superabsorbent polymers
primarily for use in consumer markets. The minerals business mines, processes
and distributes clays and products with similar applications to various
industrial and consumer markets. The environmental business processes and
distributes clays and products with similar applications for use in commercial
construction, landfill liners and in a variety of other industrial and
commercial applications. The transportation business includes a long-haul
trucking business and a freight brokerage business, which provide services to
both AMCOL's plants and outside customers.
We have entered into an agreement to sell our absorbent polymers business.
See "Proposal 1: The Sale Transaction."
THE SPECIAL MEETING
General
We are furnishing this proxy statement to you in connection with the
solicitation of proxies by the Board of Directors of AMCOL for use at the
special meeting to be held on __________, May ___, 2000, at 10:00 a.m., Chicago
time, at _______________ and at any adjournment of the special meeting.
Record Date
The Board of Directors has fixed the close of business on April ___, 2000
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the special meeting or any adjournment. Accordingly, only
holders of record of AMCOL's common stock at the close of business on the record
date will be entitled to vote at the special meeting, either by proxy, telephone
or in person. As of the record date, there were __________ shares of AMCOL's
common stock issued and outstanding. Each share of AMCOL's common stock entitles
the holder to one vote.
Purpose of the Special Meeting; Recommendation of the Board of Directors
At the special meeting, AMCOL's shareholders will be asked to consider and
vote upon the following matters:
- a proposal to approve the sale by AMCOL of the SAP business to
BASF;
<PAGE>
- a proposal to approve certain amendments to AMCOL's 1993 Stock
Plan and 1998 Long-Term Incentive Plan; and
- any other business which properly comes before the special
meeting.
AMCOL's Board of Directors has unanimously approved the purchase agreement
and the sale transaction, and believes that the purchase agreement and the sale
transaction are fair to, and in the best interests of, AMCOL and its
shareholders. The Board of Directors recommends that you vote "FOR" approval of
the sale transaction and the plan amendments.
Proxies; Vote Required
Under Delaware law, the plan amendments must be approved by the holders of
a majority of the shares of AMCOL's common stock represented at the special
meeting. The affirmative vote of the holders of a majority of the outstanding
shares of AMCOL's common stock are required to approve the sale transaction.
All properly executed proxies received by AMCOL prior to the special
meeting and not revoked will be voted in accordance with the instructions marked
on those proxies. Unless contrary instructions are marked, proxies will be voted
"FOR" the sale transaction and the plan amendments. The Board of Directors knows
of no other business which will be presented for consideration at the special
meeting. If any other matter is properly presented, it is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment. Any shareholder may revoke his or her proxy at any time prior to the
exercise of the proxy by doing any of the following:
- giving written notice to the Secretary of AMCOL at One North
Arlington, 1500 West Shure Drive, Suite 500, Arlington Heights,
Illinois 60004-7803;
- submitting a duly executed proxy bearing a later date;
- voting by telephone on a later date; or
- attending the special meeting and voting in person.
Attendance at the special meeting will not, in itself, constitute
revocation of a proxy.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of AMCOL's common stock is necessary to constitute a quorum
at the special meeting. In deciding all questions, a holder of AMCOL's common
stock is entitled to one vote, in person or by proxy, for each share held in
such holders' name on the record date. Abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business but are not counted for purposes of determining whether
a proposal has been approved. Thus, abstentions and broker non-votes will have
the same effect as a vote against the plan amendments.
Proxy Solicitation and Expenses
The accompanying proxy is being solicited on behalf of the Board of
Directors of AMCOL. All expenses of this solicitation, including the cost of
preparing and mailing this proxy statement,
<PAGE>
will be paid by AMCOL. Solicitation of holders of AMCOL's common stock by mail,
telephone, facsimile or by personal solicitation may be done by directors,
officers and regular employees of AMCOL, for which they will receive no
additional compensation. Brokerage houses and other nominees, fiduciaries and
custodians nominally holding shares of AMCOL's common stock as of the record
date will be requested to forward proxy soliciting material to the beneficial
owners of such shares, and will be reimbursed by AMCOL for their reasonable
out-of-pocket expenses.
PROPOSAL 1: THE SALE TRANSACTION
General
Under the purchase agreement, AMCOL will transfer to BASF the following:
- all of the outstanding shares of the capital stock of AMCOL's
indirect subsidiaries Chemdal Corporation, or Chemdal US, and
Chemdal Asia Ltd., or Chemdal Asia; and
- all other assets of AMCOL and its subsidiaries related primarily
to the SAP business.
Subject to certain post-closing adjustments, the total consideration to be
paid to AMCOL by BASF for the SAP business is $656.5 million, less any
outstanding intercompany indebtedness of the SAP business as of the closing. The
purchase price consists of, subject to certain post-closing adjustments, $628
million, less any outstanding intercompany indebtedness of the SAP business as
of the closing, as the purchase price under the purchase agreement, and $28.5
million, as consideration for entering into an Acrylic Acid Supply Agreement.
See "The Purchase Agreement - Purchase Price."
The sale transaction does not include the sale of AMCOL's Poly-Pore
business which includes the business of researching, manufacturing and selling
of microporous oil and/or water absorbent polymers capable of entrapping solids
and liquids. The Poly-Pore business was accounted for as part of the SAP
business.
The SAP Business
Substantially all of the SAP business is conducted through Chemdal US,
Chemdal Limited, and Chemdal Asia and includes manufacturing operations in the
United States, the United Kingdom and Thailand. Generally, the SAP business
produces superabsorbent polymers for use in disposable baby diapers, adult
incontinence and feminine hygiene products, and other absorbent personal care
items. The following table sets forth historical financial information for
AMCOL's remaining businesses and for the SAP business for the years ended
December 31, 1998 and 1999. See "Unaudited Financial Statements of the SAP
Business."
<PAGE>
<TABLE>
<CAPTION>
(In millions)
Net Sales Gross Profit Operating Profit (Loss)
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
SAP Business $252.9 $221.1 $68.9 $46.5 $51.9 $33.3
</TABLE>
The following tables set forth the percentage of total assets of AMCOL
attributable to the SAP business and the remaining businesses as of December 31
of each of the last three calendar years, and the percentage contributions to
net sales of AMCOL attributable to the SAP business and the remaining businesses
for each of the last three calendar years.
<TABLE>
<CAPTION>
Percentage of Total Assets as of
12/31/1999 12/31/1998 12/31/1997
<S> <C> <C> <C>
SAP Business 42.4% 36.9% 38.5%
Remaining Businesses 57.6% 63.1% 61.5%
100.% 100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Percentage of Net Sales for the Year Ended
12/31/1999 12/31/1998 12/31/1997
<S> <C> <C> <C>
SAP Business 45.8% 42.4% 41.1%
Remaining Businesses 54.2% 57.6% 58.9%
100.0% 100.0% 100.0%
</TABLE>
Background of the Sale Transaction
We continually review our strategic focus in order to identify strategies
to enhance shareholder value. In reviewing our possible strategic alternatives,
we consider the changing competitive environment in the industries in which our
absorbent polymers, minerals and environmental businesses operate and the
financial performance, business operations, capital requirements and future
prospects of these businesses.
On April 1, 1999, Lawrence Washow, the President and Chief Operating
Officer of AMCOL, received an unsolicited inquiry from a representative of BASF
requesting a meeting with AMCOL relating to the SAP business.
In early April of 1999, an executive of Company A contacted Gary L.
Castagna, a Vice President of AMCOL and the President of Chemdal International
Corporation, to determine whether AMCOL was interested in pursuing a joint
venture combining Company A's superabsorbent polymer business with the SAP
business.
On April 15, 1999, Mr. Castagna and Mr. Washow met with an executive of
Company A to discuss a possible joint venture involving each party's
superabsorbent polymers business.
<PAGE>
On April 19, 1999, John Hughes, the Chairman and Chief Executive Officer of
AMCOL, Mr. Washow, and Mr. Castagna met with Dr. Joseph Kohnle, President of the
Dispersions Group of BASF, and Cenan Ozmeral, Group Vice President of BASF
Corporation, at AMCOL's offices in Arlington Heights, Illinois. At this meeting,
BASF indicated to AMCOL that it was interested in acquiring the SAP business and
the parties held preliminary discussions regarding the possible sale of the SAP
business to BASF.
On April 28, 1999, AMCOL held a meeting of its Board of Directors. At this
meeting Mr. Hughes, Mr. Washow and Paul G. Shelton, a Senior Vice President and
the Chief Financial Officer of AMCOL, briefed the Board of Directors on
strategic alternatives for the SAP business, including the recent discussions
with BASF. After discussion, the Board of Directors instructed management to
continue discussions with BASF regarding a possible sale of the SAP business. On
the same date, Mr. Hughes sent a letter to Dr. Kohnle of BASF indicating AMCOL's
proposed valuation of the SAP business.
On May 6, 1999, Mr. Hughes and Mr. Washow met Dr. Kohnle, Dr. Harald
Schultheiss, Director, Dispersions of BASF and other BASF representatives, in
Frankfurt, Germany, to discuss the possible sale of the SAP business to BASF.
Discussions focused on the historical performance of the SAP business,
comparable acquisitions in the specialty chemical business and methods of
valuing the SAP business.
On May 11, 1999, AMCOL held its annual meeting of the Board of Directors.
At the meeting, AMCOL's management updated the Board of Directors as to the
status of discussions with BASF and the contact by Company A regarding a
possible joint venture.
On May 14, 1999, Mr. Hughes, Mr. Washow and Mr. Castagna met with an
executive of Company A to continue discussions regarding a possible joint
venture involving each party's superabsorbent polymers business. During these
discussions, AMCOL indicated to Company A that it would also consider selling
the SAP business and suggested that Company A consider making an offer. Company
A indicated that it was more interested in forming a joint venture, but agreed
to review a possible acquisition of the SAP business.
On May 17, 1999, AMCOL and BASF executed Secrecy Agreements obligating the
parties to maintain the confidentiality of shared confidential information. On
the same date, Mr. Castagna and Mr. Shelton met with Dr. Schultheiss and other
BASF representatives in Frankfurt, Germany. At these meetings, the parties
discussed BASF's initial valuation for the SAP business. The parties also
reviewed strategies for structuring the transaction, business synergies,
potential for new technologies, and possible risks associated with the proposed
transaction.
On May 20, 1999, Mr. Hughes and Mr. Washow met with Dr. Kohnle, Dr.
Schultheiss, and other BASF representatives in Frankfurt, Germany, to further
discuss the valuation of the SAP business.
<PAGE>
On May 28, 1999, Company A informed AMCOL that it would not make an offer
to acquire the SAP business at that time, but reiterated its willingness to
discuss the formation of a joint venture consisting of the SAP business and
Company A's superabsorbent polymer business. However, the proposed joint venture
would not provide for the supply of acrylic acid.
On June 22, 1999, Mr. Hughes and Mr. Washow met with Dr. Kohnle and other
BASF representatives in Frankfurt, Germany. At this meeting, the parties
discussed various structures for BASF's proposed acquisition of the SAP
business, including the sale of the stock and assets of certain AMCOL
subsidiaries and a structure in which AMCOL would spin-off all of its businesses
other than the SAP business immediately prior to the acquisition of AMCOL (then
consisting of the SAP business) by BASF through a merger of AMCOL and a BASF
subsidiary. The spin-off/merger structure was favored by AMCOL over the sale of
the stock and assets of the subsidiaries since the spin-off/merger structure
provided the most tax efficient structure for AMCOL and its shareholders.
On June 28, 1999, Mr. Hughes, Mr. Washow and Mr. Castagna met with two
executives from Company A in Chicago, Illinois to further discuss the possible
formation of a joint venture. The parties also discussed preliminary valuations
of the SAP business.
On June 30, 1999, Mr. Shelton and Dr. Schultheiss of BASF discussed by
telephone various issues regarding the possible
acquisition of the SAP business by BASF.
On July 7, 1999, AMCOL and Company A executed a confidentiality agreement.
On the same date, AMCOL provided Company A with a copy of the business plan for
the SAP business.
On July 22, 1999, Mr. Shelton and Dr. Schultheiss of BASF participated in a
conference call with their respective legal and accounting advisors to discuss
alternative structures for the sale of the SAP business to BASF. The parties
discussed the federal income tax consequences of the proposed transaction to
AMCOL and its shareholders.
On July 26, 1999, AMCOL engaged Schroder & Co. Inc. to act as its exclusive
financial advisor in connection with a possible sale of the SAP business. After
its engagement, Schroders contacted four other likely potential buyers to
determine their level of interest in acquiring the SAP business. As a result of
these contacts, Schroders received an indication of interest from Company B
regarding a possible transaction.
On July 27 and 28, 1999, Mr. Shelton and AMCOL's legal counsel met with Dr.
Schultheiss, Dr. Wolf-Dieter Starp, Director of Subsidiary Financing and
Acquisitions of BASF, Dr. Jorg Buchmuller, director of BASF, Mr. Ozmeral, and
other BASF representatives in the New York office of BASF's legal counsel. The
parties discussed terms for a possible transaction, including price and
structure. BASF also requested that the directors and certain of their
affiliates agree to vote their shares of AMCOL common stock in favor of the
proposed transaction.
On July 29, 1999, Mr. Hughes and Dr. Kohnle of BASF discussed the proposed
transaction in a telephone call. Later that day, Mr. Hughes sent a follow-up
letter to Dr. Kohnle indicating that AMCOL would not consider an offer of less
than $540 million, excluding working capital, for the SAP business, using a
spin-off/merger structure.
<PAGE>
On August 4, 1999, Mr. Hughes, Mr. Washow, Mr. Shelton and Mr. Castagna,
AMCOL's legal counsel and Schroders met with Dr. Kohnle, Dr. Schultheiss and
other BASF representatives at Schroders' offices in London, England. At this
meeting, the parties discussed a purchase price of approximately $555.5 million,
including working capital, for the SAP business, using a spin-off/merger
structure.
On August 9, 1999, Mr. Hughes met with representatives from Company A to
determine Company A's interest in pursuing a transaction and whether further
discussions were warranted. During this meeting, the parties also discussed
preliminary valuations for the SAP business. On August __, 1999, AMCOL
terminated discussions with Company A because Company A's preliminary indication
of the valuation of the SAP business was insufficient, and Company A was not
willing to discuss any increase in value.
On August 10, 1999, AMCOL held a meeting of its Board of Directors. At the
meeting, AMCOL's management advised the Board of Directors as to the status of
discussions with BASF and Company A. The Board discussed and considered its
fiduciary duties in connection with a possible sale of the SAP business. The
Board of Directors discussed current conditions in the superabsorbent polymer
industry and AMCOL's strategic alternatives. The Board of Directors approved the
retention of Schroders as AMCOL's financial advisor in connection with the sale
of the SAP business.
On September 1 and 2, 1999, Mr. Shelton, Mr. Castagna, and Mark Anderson,
the Vice President of Corporate Development of AMCOL and the Vice President of
Absorbent Technologies for Chemdal US, met with Dr. Schultheiss, Dr. Buchmuller,
Mr. Ozmeral and other BASF representatives in Chicago, Illinois. At these
meetings, BASF informed AMCOL that the proposed structure of the transaction as
a spin-off/merger was unacceptable to BASF and proposed to restructure the
transaction such that BASF would acquire the SAP business by purchasing the
assets and stock of certain of AMCOL's subsidiaries. BASF also indicated that it
would be willing to increase the purchase price for the SAP business to take
into account the greater tax benefits of the proposed structure to BASF.
On September 6, 1999, Mr. Hughes spoke by telephone with Dr. Kohnle
regarding BASF's proposed change in the transaction structure. On the same date,
Mr. Hughes sent a letter to BASF requesting additional information regarding
BASF's proposed transaction structure and advising BASF that AMCOL would need
time to review its new proposal.
On September 8, 1999, Dr. Kohnle provided a revised term sheet setting
forth its proposed terms for the purchase of the SAP business. In the term
sheet, BASF indicated that it would raise its offer for the SAP business to $650
million, using an asset/stock purchase structure. The term sheet included
information regarding the acquisition structure, the scope of the due diligence
review and the treatment of employees of the SAP business.
<PAGE>
On September 14, 1999, Mr. Hughes and Dr. Kohnle discussed by telephone the
tax impact of BASF's proposed change in the transaction structure and various
other matters. Mr. Hughes and Dr. Kohnle discussed the fact that the asset/stock
purchase structure was more tax efficient for BASF and less tax efficient for
AMCOL and its shareholders. Dr. Kohnle and Mr. Hughes discussed an adjustment to
the purchase price based on using an asset/stock purchase structure instead of
the spin-off/merger structure. On September 16, 1999, Dr. Kohnle sent a letter
to Mr. Hughes informing AMCOL that BASF was raising its offer to acquire the SAP
business to $660 million, using an asset/stock purchase structure.
On September 22, 1999, Mr. Hughes, Mr. Washow and Schroders met with
representatives of Company B. During the meeting, Company B expressed an
interest in acquiring the SAP business, although a specific purchase price was
not discussed.
On October 1, 1999, Mr. Hughes and Mr. Shelton met Dr. Kohnle, Dr.
Schultheiss and other BASF representatives in Frankfurt, Germany to negotiate
various terms of the proposed transaction.
On October 5 and 6, 1999, Mr. Shelton, AMCOL's legal counsel and Schroders
met with Dr. Schultheiss and other BASF representatives in New York to negotiate
the terms of an acquisition agreement and discuss various other aspects of the
proposed transaction, including lock-ups and break-up fees.
On October 6, 1999, Mr. Shelton and AMCOL's legal counsel met with
representatives of Company C to discuss whether a sale of the SAP business to
Company C using a spin-off/merger structure could be arranged to take advantage
of certain tax benefits available to Company C.
On October 8, 1999, Company B orally advised Schroders of its preliminary
indication of value for the SAP business. This indication of value was lower
than the price offered by BASF.
On October 8, 1999, AMCOL held a meeting of its Board of Directors. At this
meeting, Mr. Hughes advised the Board that Company B had withdrawn their
consideration of an acquisition of the SAP business. Company B indicated that
its interest in purchasing the SAP business at that time was not high because of
other pending transactions. AMCOL's management also reported to the Board of
Directors on the status of its discussions with BASF regarding the sale of the
SAP business.
On October 14, 1999, AMCOL held a meeting of its Board of Directors. At the
meeting, AMCOL's management advised the Board of Directors on the status of
discussions with BASF and the preliminary discussions with Company C regarding a
possible transaction. Schroders also gave a presentation to the Board of
Directors in which it described the current structure of the proposed
transaction, and reviewed its analysis of the value of the SAP business. After
Schroders' presentation, the Board of Directors discussed the various terms of
the proposed transaction with BASF.
<PAGE>
On October 14, 1999, Mr. Hughes, Mr. Shelton and Schroders met with
representatives of Company C in Chicago, Illinois, to further discuss the
possibility of selling the SAP business to Company C using a spin-off/merger
structure.
On October 15, 1999, Mr. Hughes met with Dr. Kohnle and other BASF
representatives in London, England and advised him of AMCOL's preliminary
discussions with Company C regarding a possible sale of the SAP business to
Company C using a spin-off/merger structure and the possible resale of the SAP
business by Company C to BASF.
On October 20, 1999, AMCOL received a preliminary indication of interest
from Company C to acquire the SAP business using a spin-off/merger structure for
a purchase price of $614 million. The indication of interest was subject to
Company C obtaining financing, satisfactory due diligence, minimum valuations
for the net assets to be acquired, and obtaining applicable regulatory
approvals.
On October 20, 1999, Mr. Shelton, AMCOL's legal counsel and Schroders met
with Dr. Schultheiss and other BASF representatives in New York to further
negotiate the terms of an acquisition agreement and discuss various other
aspects of the proposed transaction.
On October 28, 1999, Dr. Kohnle informed Mr. Hughes by telephone that the
BASF Supervisory Board approved the decision of BASF to make an offer of $660
million for the SAP business.
On November 2 and 3, 1999, Mr. Hughes, Mr. Shelton, AMCOL's legal counsel
and Schroders met with Dr. Kohnle and other BASF representatives in New York to
discuss the terms of the proposed transaction.
On November 4, 1999, AMCOL held a meeting of its Board of Directors. At the
meeting, the Board discussed the terms of the proposed sale of the SAP business
to BASF. The Board also reviewed the status of the discussions with Company C.
After discussion, the Board instructed management to terminate further
discussions with Company C based on the Board's concerns relating to potential
adverse tax consequences of the proposed transaction, timing issues and concerns
over Company C's ability to finance and close the proposed transaction.
On November 8, 1999, Mr. Hughes received a call from Dr. Kohnle requesting
a meeting in New York on the next day to discuss the transaction. Later that
day, AMCOL's Board of Directors met to review and discuss the proposed sale of
the SAP business to BASF. At the meeting, Mr. Hughes reported BASF's request for
a meeting the next day in New York. Schroders then reviewed its efforts to
identify other potential buyers of the SAP business and delivered a presentation
to the Board and its opinion that the consideration to be received by AMCOL
pursuant to the purchase agreement is fair, from a financial point of view, to
AMCOL. AMCOL's legal counsel gave a presentation to the Board on the terms of
the purchase agreement and related documents. The Board discussed the terms of
the proposed sale of the SAP business to BASF and asked questions of Schroders
and AMCOL's legal counsel. Following this discussion, the Board determined that
the purchase agreement and the sale transaction are fair to, and in the best
interests of, AMCOL and its shareholders, approved the purchase agreement and
the sale transaction, and recommended approval of the purchase agreement by
AMCOL's shareholders.
<PAGE>
On November 9, 1999, Mr. Hughes, Mr. Washow, Mr. Shelton, AMCOL's legal
counsel and Schroders met with Dr. Kohnle, Dr. Schultheiss, Dr. Jorg Buchmuller,
and other BASF executives in New York. The purpose of the meeting was to discuss
an adjustment to the proposed purchase price for the SAP business based on
BASF's further analysis of future obligations of the SAP business under certain
acrylic acid supply contracts. On the next day, Mr. Hughes and Dr. Kohnle spoke
by telephone and agreed to a $3.5 million downward adjustment in the purchase
price for the SAP business.
On November 22, 1999, AMCOL held a meeting of its Board of Directors. At
this meeting, AMCOL's legal counsel reported to the Board of Directors that the
agreement with BASF for the sale of the SAP business had been finalized and
advised the Board of the changes in the terms of the proposed sale of the SAP
business, including a $3.5 million downward adjustment to the purchase price.
Schroders then reported to the Board that it had reviewed the purchase price
adjustment and reaffirmed its previous opinion regarding the fairness of the
transaction and delivered its written opinion that the consideration to be
received by AMCOL pursuant to the purchase agreement is fair, from a financial
point of view, to AMCOL. After discussion, the Board affirmed its approval of
the purchase agreement.
On November 22, 1999, AMCOL and BASF executed the purchase agreement. The
transaction was publicly announced prior to the opening of the New York Stock
Exchange on November 23, 1999.
Opinion of Schroders
On November 22, 1999, Schroders rendered its opinion to AMCOL's Board of
Directors that, as of the date of such opinion, the cash consideration to be
paid to AMCOL by BASF for the SAP business was fair to AMCOL from a financial
point of view.
A copy of the Schroders opinion, which sets forth the assumptions made,
matters considered and limitations on the scope of review undertaken by
Schroders, is attached as Annex B to this proxy statement. The Schroders opinion
is directed only to the fairness, from a financial point of view, of the cash
consideration to be paid to AMCOL by BASF for the SAP business. The Schroders
opinion was provided at the request and for the information of AMCOL's Board of
Directors in evaluating the consideration to be paid to AMCOL and does not
constitute a recommendation to any shareholder to vote in favor of the
transactions contemplated by the purchase agreement. AMCOL's shareholders should
read the Schroders opinion carefully and in its entirety for information with
respect to the procedures followed, assumptions made, matters considered and
limitations on the review undertaken by Schroders in rendering the Schroders
opinion. Schroders has consented to the references to Schroders and the
Schroders opinion in this proxy statement, and to the attachment of the
Schroders opinion to this proxy statement as an appendix.
<PAGE>
In arriving at the Schroders opinion, Schroders:
- reviewed certain publicly available business and financial
information relating to the SAP business;
- reviewed certain unaudited historical financial and operating
information provided by AMCOL relating to the SAP business;
- reviewed certain other information, including financial and
operating forecasts of the SAP business, provided by AMCOL;
- held discussions with senior management and AMCOL representatives
regarding the business, operations and prospects of the SAP
business;
- reviewed a draft of the purchase agreement dated November 19,
1999;
- performed various financial analyses, as Schroders deemed
appropriate, using generally accepted analytical methodologies,
including:
(a) the application to the financial results of the
SAP business of the public trading multiples of companies which
Schroders deemed comparable;
(b) the application to the financial
results of the SAP business of the multiples reflected in recent
acquisition transactions which Schroders deemed comparable;
(c) a discounted cash flow analysis of the SAP business'
financial forecasts; and
(d) a leveraged buyout analysis of the SAP business'
financial forecasts;
- considered the results of solicitations of interest from third
parties regarding potential business combinations involving the
SAP business; and
- performed such other analyses, studies, inquiries and
investigations as Schroders deemed appropriate.
In its review and analysis and in formulating the Schroders opinion,
Schroders:
- assumed and relied upon the accuracy and completeness of all
information supplied or otherwise made available to it by AMCOL
or obtained by Schroders from other sources, and upon AMCOL's
assurance that it was not aware of any information or facts that
would make the information provided to Schroders incomplete or
misleading;
- did not attempt to independently verify any of such information;
- did not undertake an independent appraisal of the assets or
liabilities (contingent or otherwise) of AMCOL, nor was Schroders
furnished with any such appraisals;
- with respect to the projected financial information referred to
above, was advised by AMCOL, and Schroders assumed, without
independent investigation, that they were reasonably prepared and
reflected the best estimates and judgments of the expected future
financial performance of the SAP business; and
- expressed no opinion with respect to such projected financial
statements.
The Schroders opinion was necessarily based upon financial, economic,
market and other conditions as they existed and could be evaluated by Schroders
on the date thereof. Schroders disclaimed any undertaking or obligation to
advise any person of any change in any fact or matter affecting the Schroders
opinion which may come or be brought to its attention after that date of the
Schroders opinion unless specifically requested by AMCOL to do so.
<PAGE>
The Schroders opinion does not constitute a recommendation as to any action
AMCOL's Board of Directors or any shareholder of AMCOL should take in connection
with the purchase agreement or any aspect thereof or alternatives thereto.
In rendering the Schroders opinion, Schroders was not engaged as an agent
or fiduciary of AMCOL's shareholders or of any other third party. The Schroders
opinion related solely to the fairness, from a financial point of view, of
consideration to be paid to AMCOL in the transaction. Schroders expressed no
opinion therein as to the structure, terms or effects of any other aspect of the
transactions contemplated by, or provisions of, the purchase agreement or any of
the agreements or instruments delivered pursuant thereto.
The following is a summary of the material financial analyses performed by
Schroders in arriving at the Schroders opinion and was provided by Schroders for
inclusion herein.
Selected Comparable Speciality Chemicals and Materials Companies Analysis.
Schroders compared selected historical and projected financial and operating
data of the SAP business to the corresponding data of a group of publicly traded
companies that Schroders deemed to be reasonably comparable to the SAP business.
In determining the appropriate comparable companies, Schroders considered a
variety of factors, including market capitalization, business focus and
end-markets, revenues, EBITDA and EBIT. These companies, or the Comparable
Companies, included AEP Industries; Applied Extrusion Technologies; BASF AG;
Cabot Corp.; Calgon Carbon Corp.; Polymer Group Inc.; and Tredegar Industries.
Schroders calculated multiples of enterprise value, which is defined in the
Schroders opinion as market value of equity plus total debt less cash and cash
equivalents, to latest twelve months, or LTM, earnings before interest, taxes,
depreciation, amortization, or EBITDA, 1999 estimated EBITDA and 2000 estimated
EBITDA. Schroders also calculated multiples of enterprise value to LTM earnings
before interest and taxes, or EBIT, 1999 estimated EBIT and 2000 estimated EBIT.
For each of these multiples, Schroders determined a selected multiple range
based on the mean, adjusted mean and range of values. The results of this
analysis are set forth in the tables below:
<TABLE>
<CAPTION>
Multiple to
LTM EBITDA 1999E EBITDA 2000E EBITDA
<S> <C> <C> <C>
Mean 7.4x 6.8x 6.1x
Mean excluding high/low 7.6x 6.8x 6.2x
Selected multiple range 6.5x - 8.5x 6.0x - 8.0x 5.0x - 7.0x
</TABLE>
<TABLE>
<CAPTION>
Multiple to
LTM EBIT 1999E EBIT 2000E EBIT
<S> <C> <C> <C>
Mean 12.5x 10.8x 9.4x
Mean excluding high/low 11.3x 10.6x 9.3x
Selected multiple range 10.5x - 12.5x 9.5x - 11.5x 8.0x - 10.0x
</TABLE>
<PAGE>
As the above ranges represent trading multiples for publicly traded
companies, Schroders then applied control premiums of 30%, 35% and 40% to the
selected multiple ranges to determine the implied private market valuation for
the SAP business. This range of control premiums was based on a review of
premiums paid in recent public merger and acquisition transactions. The
following table sets forth the implied enterprise value ranges for the SAP
business based upon the foregoing analysis:
<TABLE>
<CAPTION>
(% millions) Implied Valuation Based on
30% Control Premium 35% Control Premium 40% Control Premium
<S> <C> <C> <C> <C> <C> <C>
Selected Enterprise Value Range $550 - $700 $570 - $725 $590 - $750
</TABLE>
Comparable Transactions Analysis. Schroders considered the terms, to the
extent publicly available, of selected transactions reasonably comparable to the
sale transaction, or the comparable transactions, and sought to compare the
consideration to be paid to AMCOL with the consideration involved in such
transactions. Schroders selected the comparable transactions based on a variety
of factors, including the date, size, profitability, range of product offerings
and types of end-use markets of the target companies. The comparable
transactions and their pertinent dates were as follows:
- The acquisition by Rhodia SA of Albright & Wilson plc (completed
July 1999).
- The acquisition by Suez Lyonnaise des Eaux of Imetal SA's Calgon
Water Treatment (completed June 1999).
- The acquisition by Eastman Chemical Company of Lawter
International, Inc. (completed June 1999).
- The Tredegar Industries' acquisition of Exxon Chemical Company's
Films Business (completed May 1999).
- Laporte plc's acquisition of Inspec Group plc (completed
September 1998)
- BBA Group plc's acquisition of International Paper Co.'s Veratec
Nonwovens Business (completed in August 1998).
- Huntsman Packaging Corporation's acquisition of Blessings
Corporation (completed in May 1998).
- B.F. Goodrich Company's acquisition of Freedom Chemical Company
(completed in March 1998).
- Polymer Group's acquisition of Dominion Textile Inc.'s Nonwovens
Business (completed in February 1998).
- Elementis plc's acquisition of Rheox Inc. from NL Industries
Inc.(completed in January 1998).
- Sentrachem Ltd.'s acquisition of Hampshire Chemical Co.
(completed in September 1995) .
- Witco Corporation's acquisition
of OSi Specialties Inc. (completed in October 1995).
<PAGE>
Schroders calculated the multiple of enterprise value, which in this case
is defined in the Schroders opinion as the purchase price of equity plus debt
assumed less cash, to the target company's EBITDA for the twelve months
preceding the transaction. The mean enterprise value to LTM EBITDA multiple for
the comparable transactions was 9.7x. The consideration to be paid by BASF for
the SAP business implies transaction multiples of 10.6x LTM EBITDA and 9.9x 1999
estimated EBITDA. Schroders determined a selected multiple range of 9.0x to 11.0
x based upon the mean multiple and the range of multiples of the comparable
transactions. The following table sets forth the implied enterprise value ranges
for the SAP business based upon the foregoing analysis:
<TABLE>
<CAPTION>
Multiple Range for Comparable Implied Enterprise Value
Transactions ($ millions)
<S> <C> <C> <C> <C>
LTM EBITDA 9.0x - 11.0x $555.3 - $678.7
1999E EBITDA 9.0x - 11.0x $595.8 - $728.2
</TABLE>
Discounted Cash Flow Analysis. Schroders performed discounted cash flow
analyses of the projected free cash flows of the SAP business. Free cash flows
are defined as after-tax operating profit, plus depreciation and amortization,
less capital expenditures and changes in working capital. The discounted cash
flow analyses of the SAP business were determined by adding the present value of
the projected free cash flows of the SAP business, and the present value of the
estimated terminal value of the SAP business.
Schroders performed discounted cash flow analysis of the SAP business based
on projections provided by AMCOL's management, including sensitivity cases in
which adjustments were made to the financial forecast and terminal value
calculation as follows:
<TABLE>
<CAPTION>
Projections Terminal Value / Discount Period
<S> <C>
Management projections as provided Free cash flows were calculated using the SAP business
projections from 2000 to 2008. The terminal value of the SAP
business was determined by applying exit multiples ranging
from 6.0x to 8.0x to average EBITDA from 2004 through 2008
Alternative projections which incorporated a 10% Free cash flows were calculated using the SAP business
reduction in variable margin, or a 7.5% increase projections from 2000 to 2005. The terminal value of the SAP
in acrylic acid pricing, the key raw material for business was determined by applying exit multiples ranging
the SAP business from 6.0x to 8.0x to 2005 EBITDA
</TABLE>
Estimated cash flows and terminal values were discounted at rates ranging
from 9.0% to 11.0%. These discount rates were based on the weighted average cost
of capital for AMCOL and the comparable companies. Based on such terminal value
multiples and discount rates, the implied
<PAGE>
enterprise values for the SAP business are presented below:
<TABLE>
<CAPTION>
Implied Enterprise Value Range
Description ($ millions)
<S> <C> <C> <C>
Management case projections through 2008 $534.6 - $728.5
Alternative case projections through 2008 $418.7 - $578.0
Management case projections through 2005 $502.3 - $677.8
Alternative case projections through 2005 $391.1 - $534.6
</TABLE>
Leveraged Buyout Analysis. Schroders performed a leveraged buyout analysis
on the SAP business to determine what a potential financial investor could
afford to pay for the SAP business. This analysis was based on assumed interest
rates of 8.75% for bank debt, 12.0% for senior subordinated debt and current
minimum acceptable debt coverage ratios. This analysis also assumed that a
financial investor would require a minimum internal rate of return, or IRR, of
20% to 25% over the term of its investment. Based upon these assumptions,
Schroders determined that a financial investor would be able to pay up to $483
million (assuming a 25% IRR) and $513 million (assuming a 20% IRR) for the SAP
business.
The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant quantitative and
qualitative methods of financial analysis and the application of those methods
to the particular circumstances and, therefore, is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, Schroders
considered the results of all its analyses as a whole and did not attribute any
particular weight to any analysis or factor considered by it. Subject to the
matters set forth in the Schroders opinion, the judgments made by Schroders as
to its analyses and the factors considered by it caused Schroders to be of the
opinion, as of the date of the Schroders opinion, that the consideration to be
paid by BASF was fair, from a financial point of view, to AMCOL. Schroders'
analyses must be considered as a whole and considering any portion of such
analyses and of the factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the process underlying
the Schroders opinion.
Any estimates contained in Schroders' analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those contained in such analyses.
Estimated values do not purport to be appraisals or to reflect the prices at
which businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty.
Schroders is an internationally recognized investment banking firm with
experience in the valuation of businesses and their securities in connection
with mergers; acquisitions; sales and distributions of listed and unlisted
securities; private placements; and valuations for corporate and other purposes.
<PAGE>
The extensive experience of Schroders' chemical investment banking group in
providing corporate finance and advisory services to companies in the chemical
industry was a significant factor in AMCOL's decision to select Schroders to be
its financial advisor for the transaction.
Schroders, in the past, has performed financial advisory services for
AMCOL. Schroders may provide investment banking or financial advisory services
for AMCOL in the future.
Pursuant to a letter agreement dated July 26, 1999, AMCOL has paid to
Schroders a $150,000 retainer fee, and a fee of $850,000 for the Schroders
opinion furnished to AMCOL and has agreed to pay, contingent upon consummation
of the transaction, a cash success fee equal to 0.5% of the aggregate
consideration to be received by AMCOL in the transaction. The retainer fee and
the fairness opinion fee will be credited against this success fee. In addition,
AMCOL has agreed to indemnify Schroders against certain expenses and liabilities
in connection with its engagement. The fairness opinion fee was not conditioned
upon the conclusion reached by Schroders as to the fairness of the
consideration, nor upon the ultimate consummation of the transaction.
Recommendation of the Board
AMCOL's Board of Directors has unanimously approved the purchase agreement
and the sale transaction, and believes that the purchase agreement and the sale
transaction are fair to, and in the best interests of, AMCOL and its
shareholders. The Board of Directors recommends that you vote "FOR" the approval
of the sale transaction.
Reasons for the Sale Transaction
In reaching its decision to recommend and approve the purchase agreement,
AMCOL's Board of Directors consulted with its advisors and considered a number
of factors, including the following:
- Information regarding the financial performance, business operations,
capital requirements and future prospects of the SAP business. The
Board reviewed the likelihood of realizing a long-term value equal to
or greater than the value offered by BASF if the SAP business was not
sold. The Board determined that the ability to obtain such value would
depend on numerous factors, many of which were speculative or
uncertain. These factors included the investment of significant
amounts of capital and the continued availability of acrylic acid at
reasonable prices. In light of these uncertainties, the Board
determined that the interests of AMCOL's shareholders were better
served by the sale of the SAP business to BASF . - The terms of the
purchase agreement, including the price, the proposed structure of the
sale transaction and BASF's financial strength and the fact that
financing is not a condition to the sale transaction.
- The process engaged by AMCOL's management and Schroders which included
discussions with potential acquirors of the SAP business, and the view
of AMCOL's Board of Directors, based in part on Schroders'
presentation, that it was unlikely a superior offer for the SAP
business would arise and be consummated.
<PAGE>
- Schroders' presentation and written opinion that, as of the date of
the opinion and based upon and subject to certain matters stated
therein, the cash consideration to be received by AMCOL pursuant to
the sale transaction is fair to AMCOL from a financial point of view.
The full text of Schroders' opinion is attached hereto as Annex B.
Shareholders are urged to read the opinion in its entirety.
- Current industry, economic and market conditions in the superabsorbent
polymers industry, including (a) the fact that AMCOL is one of several
superabsorbent polymers producers which does not also produce acrylic
acid, the primary raw material used in the production of
superabsorbent polymers, (b) the increasing vertical integration of
the superabsorbent polymers industry as competing manufacturers of
superabsorbent polymers have become suppliers of acrylic acid, and (c)
the decrease in available sources of acrylic acid which are not
competitors of the SAP business.
- AMCOL management's belief that, although acrylic acid production
presently exceeds demand, the SAP business may become increasingly
dependent upon its competitors for supplies of acrylic acid and that
in periods of low supply, such dependence may have a significant
negative impact on the profitability of the SAP business. Any decrease
in the profitability of the SAP business may decrease the value a
potential purchaser would assign to the SAP business.
- AMCOL's review of alternatives to a sale of the SAP business,
including (a) acquiring an acrylic acid supplier, (b) developing the
internal capacity to produce acrylic acid, or (c) entering into a
strategic relationship with an acrylic acid supplier, and the costs
and capital expenditures associated with each alternative. The Board
determined that significant capital expenditures would be required to
acquire an acrylic acid supplier or develop the capacity to produce
acrylic acid. In addition, the Board concluded that AMCOL did not
currently possess the technology or resources necessary to produce
acrylic acid.
- AMCOL's ability to adopt a plan of partial liquidation and to
distribute a substantial portion of the net proceeds from the sale
transaction to AMCOL's shareholders.
- That the purchase agreement permits AMCOL to furnish nonpublic
information to, and to participate in negotiations with, any third
party that has submitted an unsolicited acquisition proposal, if the
Board determines in good faith that such acquisition proposal is, or
may reasonably be expected to lead, to a superior proposal, and the
purchase agreement permits AMCOL's Board of Directors to change its
recommendation with respect to the sale transaction and to terminate
the purchase agreement in certain circumstances in the exercise of its
fiduciary duties.
- The absence of any lock-up arrangements requiring any shareholders of
AMCOL to vote in favor of the sale transaction.
- The termination provisions of the purchase agreement, which under
certain circumstances could obligate AMCOL to pay a termination fee of
$20 million to BASF and to reimburse BASF for its actual expenses
incurred in connection with the transaction, up to $3 million, and the
Board's belief that such fees and expense reimbursement provisions
would not deter a higher offer for the SAP business.
<PAGE>
The Board also considered the following facts, risks and uncertainties
associated with the sale transaction:
- The asset/stock purchase structure of the sale transaction is not as
tax efficient to AMCOL as the spin-off/merger structure. AMCOL will
recognize gain on the sale of the SAP business and the AMCOL
shareholders will recognize a gain or loss on any distribution by
AMCOL of the proceeds from the sale transaction. The Board recognized
that BASF was not willing to agree to the spin-off/merger structure
and increased the purchase price to mitigate the adverse tax
consequences of the asset/stock purchase structure.
- Under the purchase agreement, AMCOL has agreed to indemnify BASF for
the breach of its representations and warranties contained in the
purchase agreement and other matters. If the proceeds of the sale
transaction are distributed to AMCOL's shareholders, AMCOL would be
required to fund the payment of any indemnification claims by BASF
under the purchase agreement or otherwise out of its then existing
working capital and cash flows from its continuing businesses.
The foregoing addresses the material information and factors considered by
AMCOL's Board of Directors in its consideration of the sale transaction. In view
of the variety of factors and the amount of information considered, AMCOL's
Board of Directors did not find it practicable to provide specific assessments
of, quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. The determination to recommend that
AMCOL's shareholders approve the purchase agreement was made after consideration
of all of the factors taken as a whole. In addition, individual members of the
Board may have given different weights to different factors.
Use of Proceeds
AMCOL expects to receive approximately $656.5 million in gross proceeds
from the sale transaction. See "The Purchase Agreement - Purchase Price." From
these gross proceeds, AMCOL intends to repay certain indebtedness of the SAP
business (totaling approximately $44.3 million as of December 31, 1999) and will
pay various transaction related costs, including estimated legal, accounting and
advisory fees of $7.5 million, estimated employee bonuses of $3.6 million,
estimated filing, printing and other costs of $1.3 million, estimated penalties
for the prepayment of debt of $1.3 million, and estimated corporate income taxes
of $208.4 million.
In connection with the sale transaction, AMCOL currently intends to adopt a
plan of partial liquidation pursuant to which AMCOL will distribute pro rata to
its shareholders a significant portion of the net proceeds from the sale
transaction after payment of the expenses described above. We cannot assure you
that any plan of partial liquidation will be adopted or that any distribution
will be made. The Board of Directors will consider the facts and circumstances
existing after the completion of the sale transaction to determine whether a
distribution in partial liquidation is in the best interests of AMCOL's
shareholders at that time and the timing and amount of any such distribution.
Any plan of partial liquidation must be approved by the Board, but does not
require the approval of AMCOL's shareholders. Shareholders are not being asked
to vote on or approve any plan of partial liquidation.
<PAGE>
AMCOL currently expects to distribute between $14.00 and $14.50 per share.
See "Selected Consolidated Historical and Pro Forma Financial Data." This amount
is based upon the selected consolidated pro forma financial data, the expected
gross proceeds of the sale transaction, and estimated transaction related costs.
The actual amount of any distribution is expected to be determined after the
closing of the sale transaction. Accordingly, shareholders are advised that the
actual amount of any distribution to shareholders may be substantially different
from the amount indicated above.
If the sale transaction is consummated, AMCOL's shareholders will retain
their equity interest in AMCOL. The sale transaction will not result in any
changes in the rights of AMCOL's shareholders.
Accounting Treatment
Upon consummation of the sale transaction, the entities comprising the SAP
business will be treated as a discontinued operation of AMCOL. All prior periods
will be reclassified to show the operations of the entities comprising the SAP
business separately from the continuing operations of AMCOL. The gain on the
sale transaction will be calculated as the excess of the consideration received
by AMCOL plus liabilities assumed by BASF over the net book value of the assets
sold, net of transaction costs and applicable income taxes. The gain will be
recorded as a separate component of discontinued operations in AMCOL's
consolidated financial statements.
Certain Federal Income Tax Consequences
The following summary describes material United States federal income tax
consequences to AMCOL and its shareholders from the sale transaction and the
proposed distribution to AMCOL's shareholders, which would result if the plan of
partial liquidation were adopted. It is based upon the Code, Treasury
Regulations promulgated and proposed thereunder, administrative pronouncements
and judicial decisions, all of which are subject to change (either prospectively
or retroactively), which changes could materially affect the tax consequences
described herein.
No rulings have been or will be requested from the Internal Revenue
Service, or the IRS, as to the matters discussed herein and, as to some such
matters, such a ruling might not be obtainable even if requested. Accordingly,
no assurance can be given that the IRS will not challenge the federal income tax
treatment of certain matters discussed herein, which challenge, if any, might be
upheld by the courts.
<PAGE>
This summary is necessarily general in nature, and does not address all of
the tax consequences that may be relevant to particular shareholders in light of
the personal circumstances, or to certain types of shareholders (such as certain
financial institutions, dealers in securities or commodities, insurance
companies, tax-exempt organizations, or persons who hold shares as a position in
a straddle). In particular, the discussion applies only to a shareholder who is
a United States resident for federal income tax purposes. This summary further
assumes that all shares of stock are held as "capital assets," and thus may not
be applicable as to shares acquired as compensation (including shares acquired
upon the exercise of options). This summary also does not address the state,
local or foreign tax consequences to a shareholder of the proposed transaction.
Accordingly, each shareholder is urged to consult with and to obtain the
advice of his or her own tax advisor as to the tax consequences of the proposed
transaction as to such shareholder.
Sale Transaction. AMCOL will recognize gain on the sale of the SAP business
in the sale transaction, but no gain will be recognized by AMCOL's shareholders
on the sale transaction. AMCOL and BASF will make a joint election under Code
Section 338(h)(10). Under this election, AMCOL will be deemed to have sold all
of the assets of the SAP business (rather than the shares of Chemdal US) to BASF
for the purchase price. AMCOL's gain or loss will be determined based upon the
amount of the sales price allocated to each asset and AMCOL's or its
subsidiary's tax basis for each asset. The sale transaction may also result in
foreign, state or local income, franchise or sales and use tax liabilities in
some or all of the foreign countries, states or local tax jurisdictions in which
AMCOL or a subsidiary files returns.
Shareholder Distribution. The proposed distribution by AMCOL of proceeds
from the sale transaction will be treated by AMCOL as a distribution in partial
liquidation of AMCOL under Code Section 302(b)(4). No shares will be exchanged
in the distribution, although non-corporate shareholders will be deemed to have
transferred a portion of their common stock to AMCOL in exchange for the amount
received in the distribution. For federal income tax purposes, a non-corporate
shareholder will recognize gain or loss on such redemption equal to the
difference between the amount of cash received, and such shareholder's tax basis
in the common stock considered to be redeemed. The number of shares considered
to be redeemed shall be determined by multiplying the number of shares held by
such non-corporate shareholder by the fraction that the total amount distributed
bears to the total value of the common shares immediately prior to the
distribution. Any gain or loss would be considered long term capital gain or
loss if the stock deemed to have been exchanged has been held for more than one
year and short-term gain or loss if the stock was owned for less than one year.
If the redemption does not qualify as one which is made in partial
liquidation of AMCOL, then the entire amount of the cash received by a
non-corporate shareholder will be treated as a dividend in the year of the
redemption to the extent that AMCOL has current or accumulated earnings and
profits. Such dividend will be includable in the shareholder's gross income as
ordinary income. If the amount of the distribution exceeds AMCOL's current and
accumulated earnings and profits, such excess will first be treated as a
non-taxable return of capital to the shareholder to the extent of the
non-corporate shareholder's basis in AMCOL shares, with any balance being
treated as capital gain from the sale or exchange of such shares.
<PAGE>
Because "partial liquidation" treatment under Code Section 302(b)(4) only
obtains with respect to non-corporate shareholders, the deemed exchange
treatment described above will not apply to corporate shareholders. A domestic
corporate shareholder will be treated as having received a dividend to the
extent of the current and accumulated earnings and profits of AMCOL. However, to
the extent the distribution received by the corporate shareholder is treated as
a dividend, such dividend income will then generally be in part offset by the
corporate shareholder by a dividends-received deduction; subject, however, among
other limitations, to its having satisfied the minimum holding period
requirements, and possible reduction in the amount of such dividend-received
deduction in and to the extent that the common stock owned by it is considered
to be "debt financed."
In addition, and irrespective of a corporate shareholder's holding period
for its common stock, a dividend received in partial liquidation of AMCOL will
be characterized as an "extraordinary dividend" under Code Section 1059, with
the result that the portion of such dividend which qualifies for the
dividend-received deduction will reduce the corporate shareholder's tax basis in
its common stock (but not below zero). If the non-taxed portion of the dividend
exceeds the corporate shareholder's tax basis in the common stock, such excess
will be recognized as gain from the sale or exchange of the common stock in the
year the extraordinary dividend is received. If the amount of the distribution
exceeds AMCOL's current and accumulated earnings and profits, such excess will
first be treated as a non-taxable return of capital to the shareholder to the
extent of the shareholder's basis in AMCOL shares, with any balance being
treated as capital gain from the sale or exchange of such shares.
Interests of Certain Persons
The Compensation Committee of the Board of Directors has granted bonuses to
certain of AMCOL's employees in recognition of their contribution to the
development and success of the SAP business. The grant of these bonuses creates
a different and additional interest in the sale transaction for these employees
that could influence their support of the sale transaction. As a result of these
bonuses, these employees could be more likely to support the sale transaction
than if they were not granted the bonuses. The directors or executive officers
of AMCOL listed below were granted bonuses in the following amounts: John
Hughes, Chairman, Chief Executive Officer and Director, $_________; Lawrence E.
Washow, President, Chief Operating Officer and Director, $_________; Paul G.
Shelton, Senior Vice-President, Chief Financial Officer and Director,
$_________; and Gary L. Castagna, Vice President of AMCOL and President of
Chemdal International Corporation, $_________. In addition, seven key employees
of the SAP business were granted bonuses in the aggregate amount of $__________.
In order to be eligible to receive these bonuses, the relevant employees may not
terminate their employment with AMCOL prior to closing of the sale transaction.
In addition, these bonuses are contingent upon the closing of the sale
transaction.
<PAGE>
In addition to approving the sale transaction, AMCOL's shareholders are
being asked to adopt amendments to AMCOL's 1993 Stock Plan and AMCOL's 1998
Long-Term Incentive Plan which provide for the acceleration of vesting of all
options held by employees who will become employees of BASF. If these amendments
are approved, as of April __, 2000, options to purchase___________ shares of
AMCOL's common stock held by Gary Castagna will become immediately vested. The
exercise prices of the relevant options held by Mr. Castagna range from
$__________ to $__________. Based on the closing sale price of AMCOL's common
stock on April __, 2000, as reported by the New York Stock Exchange, the
aggregate value of the benefit to be received by Mr. Castagna upon the
acceleration of the relevant options is $___________. The vesting of these
options is contingent upon the receipt of shareholder approval of the purchase
agreement, but is not contingent upon closing the sale transaction or the
termination of Mr. Castagna's employment with AMCOL. See "Approval of Amendments
to AMCOL's 1993 Stock Plan and 1998 Long-Term Incentive Plan - General."
If the Board of Directors approves the proposed distribution in partial
liquidation, the Compensation Committee will be required pursuant to the Code to
adjust the number of shares subject to incentive stock options outstanding under
AMCOL's 1983 Incentive Stock Option Plan, 1993 Stock Plan and 1998 Long-Term
Incentive Plan, and their exercise price. These adjustments are intended to
preserve the ratio of the exercise price of the option to the fair market value
of AMCOL's common stock. In accordance with the requirements of the Code, the
number of shares subject to incentive stock options would be increased to the
product of (A) the ratio of the pre-distribution price of AMCOL common stock to
the post-distribution price of AMCOL common stock, and (B) the number of shares
subject to incentive stock options, rounded down to the next whole number. The
exercise price would be reduced to the product of (A) the ratio of the
post-distribution price of AMCOL common stock to the pre-distribution price of
AMCOL common stock, and (B) the original option price, rounded down to the next
whole cent. The Compensation Committee intends to make similar adjustments to
non-qualified stock options outstanding under those plans or under AMCOL's 1987
Non-Qualified Stock Option Plan. As an example, if the pre-distribution price of
AMCOL common stock were $_________ per share and the post-distribution price of
AMCOL common stock were $_________ per share and there were ___________ stock
options outstanding on the distribution date, then the number of options
outstanding would be increased to the product of _____________ and
______________, or _____________ shares. If the exercise price were $________,
the exercise price would be reduced to the product of ________ and ________, or
$________. Once these adjustments are made, the shares subject to outstanding
options will constitute a significant portion of AMCOL's outstanding shares of
common stock. Assuming the stock prices set forth above immediately after the
distribution and the required adjustment, shares subject to outstanding options
would constitute _____________ out of ___________ outstanding shares of AMCOL
common stock, or _____%.
No Appraisal Rights
Under Delaware law, AMCOL's shareholders are not entitled to appraisal
rights with respect to the proposed sale of the SAP business or any transaction
contemplated by the purchase agreement.
<PAGE>
THE PURCHASE AGREEMENT
The following discussion of the material terms and conditions of the
purchase agreement is qualified in its entirety by reference to the provisions
of the purchase agreement, which is attached to this proxy statement as Annex A
and incorporated herein by reference.
Purchased Shares and Assets
Under the terms of the purchase agreement, AMCOL and its subsidiaries, or
the sellers, will sell to BASF or one or more of its affiliates all of the
issued and outstanding capital stock of Chemdal US and Chemdal Asia, or the
shares, and, except for some excluded assets, all assets of the sellers which
are primarily related to the SAP business, or the SAP assets. The SAP assets
include the following:
- owned real property;
- furniture, fixtures, equipment and other tangible personal
property;
- inventories;
- receivables;
- books and records;
- intellectual property and other intangible personal property;
- customer lists and sales-related materials;
- contracts, licenses, leases, sales and purchase orders and
other similar commitments; and
- all permits and licenses.
Specifically excluded from the SAP assets are the following:
- all cash and cash equivalents;
- except as otherwise provided in the purchase agreement, all
assets and properties not primarily related to or used
in the conduct of the SAP business (including the assets used
primarily in the Poly-Pore business);
- the name "AMCOL" and all related trademarks, logos, and domain
names;
- all intellectual property rights which do not primarily relate
to the SAP business;
- certain tax refunds and credits for periods prior to the
closing; and
- rebates and refunds due to AMCOL and the other sellers
pursuant to some supply agreements.
Assumed Liabilities
BASF or one of its affiliates will assume all debts, obligations,
contracts, commitments, agreements and liabilities of the sellers primarily
related to the conduct of the SAP business. The sellers will retain
responsibility for the payment of any debts, obligations, contracts,
commitments, agreements or liabilities of the sellers not primarily related to
the conduct of the SAP business, including the following:
<PAGE>
- taxes relating to periods prior to the closing;
- liabilities relating to assets excluded from the SAP assets;
- liabilities arising from the employment or termination of any
employees prior to the closing;
- any indebtedness for borrowed money other than any assumed
intercompany indebtedness;
- liabilities relating to the conduct of the SAP business
prior to the closing to the extent the existence of such
liability constitutes a breach by the sellers of any of
their representations and warranties under the purchase
agreement;
- any liabilities relating to the conduct of the businesses
conducted by AMCOL or its subsidiaries other than the SAP
business occurring or existing before or after the closing;
and
- subject to certain exceptions, any losses or liabilities
pursuant to any environmental law arising from or related
to any action, event, circumstance or condition related to
the SAP business and occurring or existing on or before
the closing.
Purchase Price
The purchase price for the shares and the SAP assets is $628 million in
cash, less the amount of any outstanding intercompany indebtedness of the SAP
business as of the closing, subject to certain additional adjustments as
described below. In addition, BASF will pay $28.5 million to Chemdal Limited as
consideration for entering into the Acrylic Acid Supply Agreement described
below.
The purchase price is subject to adjustment based on the aggregate amount
of the working capital of the SAP business as of the closing, consisting of the
amount of the accrued current trade accounts receivables (net of allowances),
Chemdal Asia value added tax receivables and inventories, less accounts payable
and accrued current liabilities of the SAP business. Within thirty business days
following the closing, AMCOL is required to deliver to BASF a statement of
working capital of the SAP business as of the closing. If the statement of
working capital is acceptable to BASF, the amount of the purchase price will be
adjusted by the amount of the difference between the amount of working capital
of the SAP business as of the closing and $34,175,000, and a cash payment in the
amount of such difference will be made by AMCOL or BASF, as the case may be, to
the other party within ten business days following the final determination of
the statement of working capital. If BASF objects to the statement of working
capital, the parties will attempt to resolve the dispute in good faith and if
they are unable to resolve the dispute, the matter will be submitted to an
independent accounting firm for binding resolution.
The Closing
Subject to the terms of the purchase agreement, the closing of the sale
transaction will take place on the tenth business day following the date on
which all of the conditions to each party's obligations under the purchase
agreement have been satisfied or waived, or on such other date as the parties
may mutually agree, or the closing date. It is currently anticipated that the
closing will occur in the second quarter of 2000.
<PAGE>
Representations and Warranties
The purchase agreement contains various representations and warranties of
AMCOL and the other sellers regarding the SAP business, including
representations and warranties regarding the following:
- the organization, authority and qualification of the sellers,
Chemdal US and Chemdal Asia;
- capitalization and ownership of Chemdal US and Chemdal Asia;
- no conflicts;
- consents and approvals;
- accuracy of financial statements;
- absence of undisclosed liabilities;
- receivables and inventories;
- the absence of certain changes, events and conditions;
- material litigation;
- compliance with laws;
- environmental matters;
- material contracts;
- intellectual property;
- real property and tangible personal property;
- employee benefit matters;
- labor matters and key employees;
- taxes; and
- insurance.
The purchase agreement also contains representations and warranties of
BASF, including representations and warranties as to the organization and
authority of BASF; no conflicts; consents and approvals; material litigation;
and financial statements.
For a description of the survivability of the representations and
warranties and related indemnification, see "Survival of Representations and
Warranties; Indemnification."
Conduct of Business
During the period from the date of the purchase agreement to the closing
date, AMCOL will, and will cause Chemdal US, Chemdal Asia and the other sellers
to, conduct its business in the ordinary course and consistent with past
practice, including to
- continue its advertising and promotional activities, and pricing and
purchasing policies, in accordance with past practice;
<PAGE>
- not intentionally shorten or lengthen the customary payment cycles for
any of its payables or receivables;
- use all reasonable efforts consistent with past practice to (A)
preserve intact its business organizations and the business
organization of the SAP business, (B) keep available to BASF the
services of the employees of the SAP business, (C) continue in force
without material modification all existing insurance policies, and (D)
preserve the current relationships with its customers and suppliers;
- exercise, subject to BASF's approval, any renewal rights under leases;
and
- not engage in any practice, take any action, fail to take any action
or enter into any transaction which could cause any representation or
warranty of the sellers in the purchase agreement to be untrue or
result in a breach of any covenant made by the sellers in the purchase
agreement.
AMCOL also agreed that, prior to closing, neither Chemdal US, Chemdal Asia
nor the sellers with respect to the SAP business will
- incur any indebtedness;
- redeem any of its capital stock or declare, make or pay any dividends
or distributions (whether in cash, securities or other property) to
the holders of capital stock of Chemdal US or Chemdal Asia;
- make any material changes in the customary methods of operations of
Chemdal US, Chemdal Asia or the sellers;
- merge with, enter into a consolidation with or acquire an interest in
any person or acquire a substantial portion of the assets or business
of any person or any division or line of business thereof, or
otherwise acquire any material assets other than in the ordinary
course of business consistent with past practice;
- except as directly related to the construction of the Chemdal Asia
facility in Thailand, issue any sales orders or otherwise agree to
make any purchases involving exchanges in value in excess of $500,000
individually;
- sell, transfer, lease, sublease, license or otherwise dispose of any
properties or assets, real, personal or mixed (including, without
limitation, leasehold interests and intangible assets), other than in
the ordinary course of business consistent with past practice;
- grant any increase, or announce any increase, in the wages, salaries,
compensation, bonuses, incentives, pension or other benefits payable
by Chemdal US, Chemdal Asia or any seller to any of the employees of
the SAP business or establish or increase or promise to increase any
benefits under any employee benefit plan, in either case except as
required by law, or any collective bargaining agreement, or involving
ordinary increases consistent with the past practices, or a
contractual obligation existing on the date of the purchase agreement;
or
- agree to employ any new hire on terms that would pay any such person
an annual base salary in excess of $50,000 or annual aggregate
compensation in excess of $75,000.
<PAGE>
No Solicitation
AMCOL has agreed that between the date of the purchase agreement and the
earlier of the closing or the termination of the purchase agreement, none of
AMCOL, Chemdal US, Chemdal Asia, the other sellers, nor any of their affiliates,
officers, directors, representatives or agents will solicit, initiate, consider,
encourage or accept any acquisition proposals from any person, or except as
required by the fiduciary duties of AMCOL's Board of Directors, participate in
any discussions, conversations, negotiations or other communications regarding,
or furnish to any other person any information with respect to, or otherwise
cooperate in any way, assist or participate in, or facilitate or encourage any
effort or attempt by any other person to seek or to consummate an acquisition
proposal. Notwithstanding the above, prior to the consummation of the purchase
agreement, AMCOL's Board of Directors is permitted to furnish information to, or
enter into discussions or negotiations with, any person that after the date of
the purchase agreement makes an unsolicited acquisition proposal, if, and only
to the extent that, (A) AMCOL's Board of Directors determines in good faith,
after consultation with and based upon the advice of counsel and a financial
advisor of a nationally recognized reputation, that such acquisition proposal
is, or may reasonably be expected to lead to, a superior proposal, (B) AMCOL
provides written notice to BASF that it is furnishing information to, or
entering into discussions or negotiations with, such person, indicating in
reasonable detail the terms and conditions of such acquisition proposal, offer,
inquiry or other contact, and (C) information to be furnished has been
previously delivered to BASF, or to comply with Rule 14e-2 under the Securities
Exchange Act of 1934, as amended, with regard to an acquisition proposal.
AMCOL has agreed to notify BASF promptly if any such acquisition proposal
or offer, or any inquiry or other contact with any person with respect to an
acquisition proposal is made. AMCOL agrees not to, and to cause Chemdal US,
Chemdal Asia and each other seller not to, without BASF's prior written consent,
release any person from, or waive any provision of, any confidentiality or
standstill agreement, except in the event AMCOL's Board of Directors determines
in good faith, after consultation with and based upon the advice of counsel and
a financial advisor of a nationally recognized reputation, that such release or
waiver is reasonably expected to lead to a superior proposal. AMCOL has also
terminated all existing discussions, conversations, negotiations and other
communications with any persons conducted before the date of the purchase
agreement with respect to any acquisition proposal.
An acquisition proposal means any proposal or offer relating to the
following:
- any acquisition or purchase of all or any portion of the capital stock
of Chemdal US, Chemdal Asia or any other seller or all or a
substantial portion of the assets of Chemdal US, Chemdal Asia, any
other seller or the SAP business;
- any business combination with Chemdal US, Chemdal Asia or any other
seller;
- any other extraordinary business transaction involving or otherwise
relating to Chemdal US, Chemdal Asia, any other
seller or the SAP business; or
- any acquisition or purchase of, or tender offer or exchange offer for,
more than 20% of the equity securities of AMCOL, or any merger,
consolidation or business combination with AMCOL, or other
extraordinary business transaction involving or otherwise relating to
AMCOL that would result in any other person owning in excess of 20% of
the outstanding equity securities of AMCOL.
<PAGE>
A superior proposal means any acquisition proposal on terms which AMCOL's
Board of Directors determines, in its good faith judgment (after having received
the advice of a financial adviser of nationally recognized reputation), to be
more favorable to AMCOL and its shareholders than the sale transaction and for
which financing, to the extent required, is then committed or, in the good faith
judgment of AMCOL's Board of Directors, based upon the written advice of its
financial adviser, is reasonably capable of being obtained by the third party
bidder.
Non-Competition
For a period of three years after the closing in the European Community and
a period of ten years after the closing in every other location or, in each
case, for such shorter period as may be required by applicable law, AMCOL and
its affiliates will not engage, directly or indirectly, in any business anywhere
in the world that researches, develops, manufactures, markets, distributes,
sells, produces or supplies products or services of the kind researched,
developed, manufactured, marketed, distributed, sold, produced or supplied by
the SAP business, Chemdal US or Chemdal Asia, in each case, for traditional SAP
market segments as of the closing date, or without BASF's prior written consent,
own, directly or indirectly, an interest in, manage, operate, join, control,
lend money or render financial or other assistance to or participate in or be
connected with, as an officer, employee, partner, stockholder, consultant or
otherwise, any person that competes with Chemdal US, Chemdal Asia or the SAP
business in researching, developing, manufacturing, marketing, distributing,
selling, producing or supplying products or services of the kind researched,
developed, manufactured, marketed, distributed, sold, produced or supplied by
Chemdal US, Chemdal Asia or the SAP business for traditional SAP market segments
as of the closing.
For a period of three years after the closing in the European Community and
a period of ten years after the closing in every other location or, in each
case, for such shorter period as may be required by applicable law, AMCOL
further agreed to not, and not permit any of its affiliates to, in any way,
directly or indirectly for the purpose of conducting or engaging in any business
that researches, develops, manufactures, markets, distributes, sells, produces
or supplies products or services of the kind researched, developed,
manufactured, marketed, distributed, sold, produced or supplied by the SAP
business, Chemdal US or Chemdal Asia, in each case, for traditional SAP market
segments as of the closing, call upon, solicit, advise or otherwise do, or
attempt to do, business in the traditional SAP market segments with any customer
of the SAP business with whom the SAP business had any dealings in the
traditional SAP market segments during the period of time in which the SAP
business, Chemdal US, and Chemdal Asia was owned by AMCOL, or take away or
interfere or attempt to interfere with any custom, trade, business or patronage
of the SAP business in the traditional SAP market segments.
<PAGE>
Traditional SAP market segments mean disposable hygienics (such as diapers,
adult incontinence products, and feminine care products), cable wraps, fire
retardants, freezer packs and food packaging liquid absorption.
For a period of one year after the closing, neither AMCOL nor any of its
affiliates will solicit the employment of, attempt to employ, or employ any
employee of the SAP business hired or retained by BASF and not subsequently
terminated. For a period of one year after the closing, neither BASF nor any of
its affiliates will solicit the employment of, attempt to employ, or employ any
employee of AMCOL or its affiliates which has not been terminated. The foregoing
restrictions on hiring will not apply to general solicitations to the public or
general advertising.
<PAGE>
Employee Matters
AMCOL has agreed to indemnify and hold harmless BASF against any severance
claim and against any loss, damage, liability or expense incurred in connection
with any claim for severance benefits brought by any employees or former
employees of AMCOL, Chemdal US, Chemdal Asia or the other sellers, except as
provided below. BASF will be responsible for any severance obligations incurred
pursuant to any severance plan, program arrangement or agreement of Chemdal US,
Chemdal Asia or any other seller with respect to the termination of a
transferred employee or a U.K. designated employee on or after the closing.
For a period of one year after the closing date, BASF has agreed to provide
the transferred employees who are employed by Chemdal US within the United
States, or the US transferred employees, with a level of employee benefit plans
and arrangements substantially comparable to the employee benefits provided to
similarly situated employees of BASF. For certain specified purposes, the US
transferred employees will be credited for service prior to the closing with
Chemdal US or the sellers to the extent that such service was recognized under a
comparable employee benefit plan, program or arrangement under which such
applicable US transferred employee was participating in immediately prior to the
closing. As of the closing date, each US transferred employee and their eligible
dependents who are participating in the sellers' welfare benefit plans shall
become entitled to participate in the welfare benefit plans sponsored by BASF or
its affiliates at the closing date. Additional agreements have also been made by
AMCOL and BASF regarding employee benefits to be provided to U.K. designated
employees and Thai transferred employees.
The purchase agreement requires AMCOL to cause each unvested stock option
to purchase shares of AMCOL's common stock held by transferred employees and
U.K. designated employees to become fully vested and exercisable on or before
the closing. For this reason, AMCOL's shareholders are being asked to approve
amendments to AMCOL's 1993 Stock Plan and 1998 Long-Term Incentive Plan to
provide for the acceleration of vesting of stock options held by employees of
the SAP business. See "Proposal 2: The Plan Amendments." AMCOL is unable to
accelerate the vesting of the options granted to the U.K. designated employees
which were issued under a scheme approved by United Kingdom Inland Revenue
because the necessary approvals were not received from United Kingdom Inland
Revenue. Pursuant to the purchase agreement, AMCOL may either replace the
options held by these U.K. designated employees or pay a special cash bonus to
these employees in an amount equal to the product of the number of shares of
AMCOL's common stock subject to an unvested stock option and the excess, if any,
of the closing price on the New York Stock Exchange of AMCOL's common stock on
the last trading day immediately prior to the closing over the exercise price
per share of AMCOL's common stock subject to such unvested stock option.
Tax Matters
AMCOL agreed to indemnify on an after-tax basis and hold harmless BASF,
each of its subsidiaries, Chemdal US and Chemdal Asia against the following
taxes and related expenses:
<PAGE>
- taxes imposed on Chemdal US, Chemdal Asia or attributable to the
SAP assets or the SAP business with respect to taxable periods
ending on or before the closing date;
- with respect to taxable periods beginning before the closing date
and ending after the closing date, taxes imposed on Chemdal US,
Chemdal Asia or attributable to the SAP assets or the SAP
business which are allocable to the portion of such period ending
on the closing date;
- taxes imposed on any of the sellers, any of their subsidiaries or
any member of any affiliated group with which Chemdal US or
Chemdal Asia files or has filed a tax return on a consolidated,
unitary or combined basis for a taxable period (or portion of a
taxable period) ending on or before the closing date;
- taxes imposed on BASF, any of its subsidiaries, Chemdal US or
Chemdal Asia as a result of any breach of warranty or
misrepresentation by AMCOL regarding taxes; and
- taxes resulting from any 338(h)(10) election by the parties.
AMCOL agreed to join BASF in making an election under Section 338(h)(10) of
the Code with respect to the sale of Chemdal US to BASF.
Closing Conditions
Conditions to AMCOL's Obligations. AMCOL's obligations to consummate the
sale transaction are subject to the satisfaction of some conditions, including
the following:
- the representations and warranties of BASF being true and correct in
all material respects as of the closing date, as if those
representations and warranties were made at and as of such date,
subject to certain qualifications specified in the purchase agreement;
- BASF having complied in all material respects with all agreements and
covenants required by the purchase agreement to be complied with by it
on or before the closing date;
- the expiration or termination of any waiting period under the HSR Act;
- the purchase agreement having been approved by the affirmative vote of
AMCOL's shareholders; and
- BASF having executed and delivered to AMCOL the Acrylic Acid Supply
Agreement, the SAP subleases and certain other ancillary agreements.
Conditions to BASF's Obligations. BASF's obligations to consummate the sale
transaction are subject to the satisfaction of some conditions, including the
following:
- the representations and warranties of the sellers being true and
correct in all material respects as of the closing date, as if those
representations and warranties where made at and as of such date,
subject to certain qualifications specified in the purchase agreement;
<PAGE>
- the sellers having complied in all material respects with all
agreements and covenants required by the purchase agreement to be
complied with by it on or before the closing date;
- the expiration or termination of any waiting period under the HSR Act;
- the purchase agreement shall have been approved by the affirmative
vote of AMCOL's shareholders;
- no events having occurred, which, individually or in the aggregate,
have, or are reasonably likely to have, a material adverse effect;
- AMCOL or one of its affiliates having executed and delivered to BASF
the Acrylic Acid Supply Agreement, the SAP subleases and certain other
ancillary agreements; and
- the facility being constructed by AMCOL and its affiliates in Thailand
being mechanically complete in accordance with certain specifications
described in the purchase agreement.
Survival of Representations and Warranties; Indemnification
All representations and warranties of the parties contained in the purchase
agreement will survive the closing for a period of fifteen months following the
closing date, except that the representations and warranties made by AMCOL
relating to employee benefits taxes, employment taxes and other applicable taxes
shall survive until the 120th day after the expiration of the applicable
statutes of limitations, and the representations and warranties made by AMCOL
relating to environmental matters shall survive for a period of four years
following the closing date.
AMCOL will indemnify BASF, its affiliates and their successors and assigns,
and the officers, directors, employees and
agents of such parties for losses arising out of or resulting from:
- the breach of any representation or warranty made by the sellers in
the purchase agreement (without giving effect to any qualifications or
limitations as to materiality except for representations and
warranties relating to material contracts);
- the breach of any covenant or agreement by the sellers contained in
the purchase agreement;
- the excluded liabilities;
- all liabilities arising from or relating to the any businesses
conducted by AMCOL and its subsidiaries other than the SAP business;
- any liabilities suffered by BASF, Chemdal US, Chemdal Asia or the SAP
business related to the operation of Chemdal US, Chemdal Asia or the
SAP business prior to the closing to the extent that such liability
constitutes a breach by the sellers of their representations and
warranties in the purchase agreement;
- the assets excluded pursuant to the purchase agreement;
- subject to certain exceptions, any losses or liabilities pursuant to
any environmental law arising from or related to any action, event,
circumstance or condition related to the SAP business and occurring or
existing on or before the closing date;
<PAGE>
- the transfer or termination of any employees of Chemdal Limited prior
to or in connection with the closing or the breach by the sellers of
certain U.K. employment laws or employment contracts prior to the
closing;
- subject to certain qualifications, claims of patent infringement with
respect to certain patents; and
- expenditures or amounts payable in connection with construction of the
Thai facility.
BASF will indemnify AMCOL, its affiliates and their successors and assigns,
and the officers, directors, employees and agents of such parties for losses
arising out of or resulting from:
- the breach of any representation or warranty made by BASF in the
purchase agreement;
- the breach of any covenant or agreement by BASF contained in the
purchase agreement;
- any assumed liabilities;
- any third party claims arising primarily out of, or relating primarily
to, the conduct of the SAP business before or after the closing,
except to the extent that AMCOL is obligated to indemnify BASF with
respect to such claim or as otherwise contemplated in the purchase
agreement;
- any claims arising out of the employment or discharge of any
transferred employee at any time on or after the closing; or
- claims made by any U.K. designated employees against the sellers in
connection with the transfer of their employment pursuant to U.K.
regulations or from the termination of any U.K. designated employees
after the closing.
BASF will not be required to indemnify AMCOL for any such losses to
the extent AMCOL receives insurance proceeds under its applicable insurance
policies to cover such loss.
Each party will not be liable for any indemnification claim relating to a
breach of its representations and warranties and certain other specified matters
unless the amount of a loss resulting from such claim (or aggregated claims
arising out of the same event) exceeds $150,000 and the aggregate amount of all
losses incurred by the party seeking indemnification exceeds $5 million, after
which the indemnifying party will only be liable for those losses in excess of
$5 million. Each party's aggregate liability for indemnification claims relating
to a breach of its representations and warranties and certain other specified
matters is also limited to the amount of the purchase price.
Termination
The purchase agreement may be terminated (subject to a termination fee
under certain circumstances as described below) at any time prior to the closing
as follows:
(a) By BASF if before closing an event or condition occurs that has
resulted in or that is reasonably likely to result in a material
adverse effect to the SAP business or AMCOL, Chemdal US, Chemdal Asia
or any other seller makes a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against AMCOL,
Chemdal US or any seller seeking to adjudicate any of them a bankrupt
or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its
debts under any law relating to bankruptcy, insolvency or
reorganization, and such proceeding is not dismissed within ninety
days; or
<PAGE>
(b) By BASF, upon a breach of any representation, warranty, covenant or
agreement on the part of the sellers set forth in the purchase
agreement, or if any representation or warranty of the sellers has
become untrue, in either case, such that BASF's closing conditions
relating to AMCOL's representations and warranties and covenants would
not be satisfied; provided that if such a breach is curable by the
sellers through the exercise of their reasonable efforts and for so
long as the sellers continue to exercise such reasonable efforts, BASF
may not terminate the purchase agreement under this provision; or
(c) By AMCOL upon a breach of any representation, warranty, covenant or
agreement on the part of BASF set forth in the purchase agreement, or
if any representation or warranty of BASF has become untrue, in either
case, such that AMCOL's closing conditions relating to BASF's
representations and warranties and covenants would not be satisfied;
provided that if such breach is curable by BASF through the exercise
of its reasonable efforts and for so long as BASF continues to
exercise such reasonable efforts, AMCOL may not terminate the purchase
agreement under this provision; or
(d) By either AMCOL or BASF if the closing shall not have occurred by May
31, 2000; or
(e) By BASF or AMCOL if AMCOL's shareholders vote against approval of the
purchase agreement; or
(f) By either BASF or AMCOL in the event that any governmental authority
has issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the purchase agreement and such order, decree, ruling
or other action has become final and nonappealable; or
(g) By AMCOL in order to enter into a definitive agreement with respect to
a superior proposal; provided, however, that AMCOL must provide BASF
with written notice of such superior proposal, including a reasonable
description of the material terms thereof, and AMCOL will not take any
action in respect of such superior proposal, including terminating the
purchase agreement or entering into an agreement relating to the
superior proposal, for a period of five business days following
receipt of such notice by BASF and until such time as AMCOL's Board of
Directors has considered any response to such notice provided by BASF
to AMCOL during such five business day period; provided that such
termination will not be effective until AMCOL pays the fee (as defined
below) to BASF; or
<PAGE>
(h) By the mutual written consent of AMCOL and BASF.
In the event of the termination of the purchase agreement as provided
above, there will be no liability on the part of either party, except for
provisions in the purchase agreement regarding confidential information and fees
and expenses and that nothing in the purchase agreement will relieve either
party from liability for any breach of the purchase agreement.
Expenses
In the event that (1) the purchase agreement is terminated because AMCOL's
shareholders vote against approval and adoption of the purchase agreement and at
or prior to the time of such vote an acquisition proposal has been made public
and AMCOL enters into an agreement with respect to an acquisition proposal, or
an acquisition proposal is consummated, in each case within twelve months after
such termination of this agreement; (2) the purchase agreement is terminated by
AMCOL in order to enter into a definitive agreement with respect to a superior
proposal; or (3) the purchase agreement is terminated for any reason, other than
items (a), (c), (f) or (h) described under "Termination" above, and AMCOL enters
into an agreement with respect to a superior proposal, or a superior proposal is
consummated, in each case within twelve months after such termination of the
purchase agreement; then AMCOL will be required to pay BASF a fee of $20
million, or the fee, plus all of BASF's out of pocket expenses up to $3 million,
or expenses. If the fee and expenses become payable pursuant to item (1) or (3)
above, AMCOL is required to pay such amounts no later than one business day
after consummation of the acquisition proposal or the superior proposal, as the
case may be, and if the fee and expenses become payable pursuant to item (2)
above, AMCOL is required to pay such amounts prior to termination of the
purchase agreement.
Ancillary Agreements
Acrylic Acid Supply Agreement. Immediately prior to the closing of the sale
transaction, Chemdal Limited and a BASF subsidiary will enter into a supply
agreement pursuant to which the BASF subsidiary will supply acrylic acid to
Chemdal Limited for a period of ten years. Upon the signing of such agreement,
the BASF subsidiary will pay a non-refundable signing premium of $28.5 million
to Chemdal Limited as consideration for entering into the supply agreement.
Immediately following the closing of the sale transaction, the supply agreement
will be assigned by Chemdal Limited to one of BASF's designated affiliates which
will assume Chemdal Limited's obligations under the supply agreement, and
Chemdal Limited will be released from any further liability under the supply
agreement.
SAP Subleases. At the closing, AMCOL and BASF will enter into subleases for
a portion of two facilities currently leased by AMCOL in Arlington Heights,
Illinois. The first sublease is for approximately 7,453 square feet currently
being used as Chemdal's corporate headquarters. The second sublease is for
approximately 14,610 square feet currently being used as a research laboratory.
The initial annual base rent under these subleases will be approximately $99,800
and $136,000, respectively, subject to annual escalations. This rent will cover
AMCOL's costs for the space being subleased. BASF will also be required to pay
its proportionate share of operating expenses, real estate taxes and certain
other expenses. The term of each sublease will expire on July 31, 2008.
<PAGE>
One of AMCOL's subsidiaries and an affiliate of BASF will also enter into a
lease agreement for a portion of certain properties owned by such AMCOL
subsidiary in Birkenhead, Merseyside, U.K. The annual rent under the lease will
be determined by the parties after the closing of the sale transaction, but will
be between 70,000 and 100,000 Pounds. The term of the lease will be for seven
years.
MARKET PRICE DATA; DIVIDENDS
AMCOL's common stock trades on the New York Stock Exchange under the symbol
ACO. Prior to September 22, 1998, AMCOL's common stock traded on the Nasdaq
National Market tier of The Nasdaq Stock Market under the symbol ACOL. The table
below sets forth, for the calendar periods indicated, the high and low intra-day
sales price per share of AMCOL's common stock as reported by the relevant
organizations, and cash dividends declared per share.
<TABLE>
<CAPTION>
Cash
Dividends
Declared
Stock Price Per Share
High Low
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 2000: 1st Quarter.............. $ $ $
2nd Quarter (through
April , 2000).........
Fiscal Year Ended December 31, 1999: 1st Quarter.............. $11.375 $8.250 $.0600
2nd Quarter.............. 14.750 8.875 .0700
3rd Quarter.............. 15.125 13.250 .0700
4th Quarter.............. 17.750 12.000 .0700
Fiscal Year Ended December 31, 1998: 1st Quarter.............. $16.375 $12.125 $.0550
2nd Quarter.............. 16.375 11.500 .0550
3rd Quarter.............. 14.250 9.375 .0600
4th Quarter.............. 11.375 8.000 .0600
</TABLE>
On November 22, 1999, the last full trading day before the public
announcement of the sale transaction, the high and low sales price per share of
AMCOL's common stock, as quoted on the NYSE Composite Tape, were $13.75 and
$13.4375, respectively.
The closing sales price for the shares of AMCOL's common stock as reported
on the NYSE Composite Tape on April __, 2000 (the latest practicable date prior
to mailing this proxy statement) was $________. As of the close of business on
the record date, there were __________ holders of record of AMCOL's common
stock, excluding shares held in street name.
<PAGE>
In connection with the sale transaction, the Board of Directors currently
intends to adopt a plan of partial liquidation pursuant to which AMCOL will
distribute pro rata to its shareholders a significant portion of the net
proceeds from the sale transaction. AMCOL currently expects to distribute
between $14.00 and $14.50 per share in the second quarter of 2000. We cannot
assure you that any plan of partial liquidation will be adopted or that any
distribution will be made. The Board of Directors will consider the facts and
circumstances existing after completion of the sale transaction to determine
whether a distribution in partial liquidation is in the best interests of
AMCOL's shareholders at that time and the timing and amount of any such
distribution. Any plan of partial liquidation must be approved by the Board, but
does not require the approval of AMCOL's shareholders. You are not being asked
to vote on or approve any plan of partial liquidation. See "Proposal 1: The Sale
Transaction - Use of Proceeds."
After the closing of the sale transaction, the payment of dividends and the
amount and timing of such dividends will depend on AMCOL's earnings, capital
requirements, financial condition and other factors deemed relevant by AMCOL's
Board of Directors.
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Financial Information gives
effect to the consummation of the sale transaction and the proposed use of
proceeds as if consummated: on December 31, 1999, in the case of the Unaudited
Pro Forma Balance Sheet; and on January 1, 1997, the first day of AMCOL's fiscal
year, in the case of the Unaudited Pro Forma Statements of Operations for the
fiscal years ended December 31, 1997, 1998 and 1999.
The Unaudited Pro Forma Consolidated Financial Information is presented for
illustrative purposes only and does not necessarily reflect what our financial
position and results of operation would have been if the sale transaction and
the proposed use of proceeds had been consummated on the above referenced dates,
and may not be indicative of our future performance, nor does it give effect to
any transactions other than the sale transaction and the proposed use of
proceeds as described in the Notes to the Unaudited Pro Forma Consolidated
Financial Information or AMCOL's results of operations since December 31, 1999.
The Unaudited Pro Forma Balance Sheet at December 31, 1999 is based upon
AMCOL's financial position at December 31, 1999. The Unaudited Pro Forma
Statements of Operations for the fiscal years ended December 31, 1997, 1998 and
1999 are based upon AMCOL's results of operations for those years.
The Unaudited Pro Forma Consolidated Financial Information is qualified in
its entirety by, and should be read in conjunction with, AMCOL's audited
consolidated financial statements and the notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations which
are incorporated by reference to this Proxy Statement.
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
BALANCE SHEET
December 31, 1999
(in thousands)
Reclassify SAP
Historical Discontinued Adjustment Pro Forma
Operations (E)
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 3,815 $ 139 $ - $ 3,954
Accounts receivable:
Trade, net 98,943 (50,013) - 48,930
Other 7,873 (4,747) - 3,126
Inventories 40,680 (9,715) - 30,965
Prepaid expenses 6,571 (5) - 6,566
Current deferred tax asset 6,888 (541) - 6,347
Net current assets of discontinued operations - 40,147 (40,147) (H) -
Total current assets 164,770 (24,735) (40,147) 99,888
Investment in and advances to joint ventures 9,111 - - 9,111
Property, plant, equipment and mineral rights and
reserves:
Land and mineral rights and reserves 12,369 (2,401) 9,968
Depreciable assets 339,006 (153,652) - 185,354
351,375 (156,053) - 195,322
Less accumulated depreciation 178,967 (72,905) - 106,062
172,408 (83,148) - 89,260
Other assets:
Goodwill and other intangible assets, net 452 - - 452
Long-term prepayments and other assets 1,534 - - 1,534
Deferred tax asset 732 - - 732
2,718 - - 2,718
Net non-current assets of discontinued operations - 81,531 (81,531) (H) -
Total assets $ 349,007 $ (26,352) $ (121,678) $ 200,977
Current liabilities:
Current maturities of long-term obligations $ 509 $ - $ - $ 509
Accounts payable 20,656 (9,880) - 10,776
Accrued income taxes 7,564 (5,263) - 2,301
Accrued liabilities 30,986 (9,592) - 21,394
Total current liabilities 59,715 (24,735) - 34,980
Long-term debt 93,914 - (44,289) (C) 49,625
Deferred income tax liabilities - (2,781) - (2,781)
Other liabilities 8,938 (321) - 8,617
8,938 (3,102) - 5,836
Stockholders' equity:
Common stock 320 - - 320
Additional paid-in-capital 76,440 - - 76,440
Foreign currency translation adjustment (2,607) 1,485 - (1,122)
Retained earnings 142,270 - 312,673 (B) 454,943
Distribution to stockholders - - (390,062) (A) (390,062)
Treasury stock (29,983) - - (29,983)
Total stockholders' equity 186,440 1,485 (77,389) 110,536
Total liabilities and stockholders' equity $ 349,007 $ (26,352) $ (121,678) $ 200,977
=============== ================ =============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
(in thousands)
Reclassify SAP
Business to Pro Forma
Historical Discontinued Adjustment Pro Forma
Operations
<S> <C> <C> <C> <C>
Net sales $ 552,052 $ (252,908) (E) $ - $ 299,144
Cost of sales 414,256 (184,006) (E) - 230,250
Gross profit 137,796 (68,902) - 68,894
General, selling and administrative expenses 79,834 (17,052) (E) (1,257) (M) 61,525
Write down of impaired assets 14,529 - - 14,529
Operating profit 43,433 (51,850) 1,257 (7,160)
Other income (expense):
Interest expense, net (6,396) 111 (E) 3,687 (F) (2,598)
Other, net (1,338) 269 (E) - (1,069)
Total other income (expense) (7,734) 380 3,687 (3,667)
Income before income taxes and joint ventures 35,699 (51,470) 4,944 (10,827)
Income taxes 13,913 (20,058) (N) 1,927 (G) (4,218)
Income before joint ventures 21,786 (31,412) 3,017 (6,609)
Equity interests in income of joint ventures 448 - - 448
Income from continuing operations $ 22,234 $ (31,412) $ 3,017 $ (6,161)
Weighted average common shares 26,772,569 26,772,569
Weighted average common and common equivalent shares 27,199,263 27,199,263
Earnings per share:
Basic $ 0.83 $ (0.23)
Diluted $ 0.82 $ (0.23)
=============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
Year ended December 31, 1998
(in thousands)
Reclassify SAP
Business to Pro Forma
Historical Discontinued Adjustment Pro Forma
Operations
<S> <C> <C> <C> <C>
Net sales $ 521,530 $ (221,093) (E) $ - $ 300,437
Cost of sales 410,359 (174,635) - 235,724
(E)
Gross profit 111,171 (46,458) - 64,713
General, selling and administrative expenses 68,951 (13,207) - 55,744
(E)
Operating profit 42,220 (33,251) - 8,969
Other income (expense):
Interest expense, net (7,933) 1,345 5,541 (I) (1,047)
(E)
Other, net 140 16 - 156
(E)
(7,793) 1,361 5,541 (891)
Income before income taxes and minority interest 34,427 (31,890) 5,541 8,078
Income taxes 12,350 (11,439) (N) 1,988 (J) 2,899
Income before minority interest 22,077 (20,451) 3,554 5,179
Minority interest 8 - - 8
Income from continuing operations $ 22,085 $ (20,451) $ 3,554 $ 5,187
Weighted average common shares 27,918,391 27,918,391
Weighted average common and common equivalent shares 28,385,860 28,385,860
Earnings per share:
Basic $ 0.79 $ 0.19
Diluted $ 0.78 $ 0.18
=============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
Year ended December 31, 1997
(in thousands)
Reclassify SAP
Business to Pro Forma
Historical Discontinued Adjustment Pro Forma
Operations
<S> <C> <C> <C> <C>
Net sales $ 477,060 $ (195,944) $ - $ 281,116
(E)
Cost of sales 376,319 (154,983) - 221,336
(E)
Gross profit 100,741 (40,961) - 59,780
General, selling and administrative expenses 59,272 (12,098) - 47,174
(E)
Operating profit 41,469 (28,863) - 12,606
Other income (expense):
Interest expense, net (8,628) 1,531 7,114 (K) 17
(E)
Other, net (398) 459 - 61
(E)
(9,026) 1,990 7,114 78
Income before income taxes and minority interest 32,443 (26,873) 7,114 12,684
Income taxes 11,399 (9,443) (N) 2,500 (L) 4,456
Income before minority interest 21,044 (17,430) 4,614 8,228
Minority interest - - - -
Income from continuing operations $ 21,044 $ (17,430) $ 4,614 $ 8,228
Weighted average common shares 28,488,527 28,488,527
Weighted average common and common equivalent shares 29,125,168 29,125,168
Earnings per share:
Basic $ 0.74 $ 0.29
Diluted $ 0.72 $ 0.28
=============== =============
<PAGE>
<FN>
Notes to Unaudited Pro Forma Consolidated Financial Information
(A) For pro forma purposes at December 31, 1999, the total distribution to stockholders is calculated below. The sales price
is net of estimated transaction costs of $13,700,000.
-----------------------------------------------------------------
Sales price, net of estimated transaction costs $ 642,800
-----------------------------------------------------------------
-----------------------------------------------------------------
Less intercompany indebtedness 44,289 (C)
-----------------------------------------------------------------
-----------------------------------------------------------------
Net cash proceeds 598,511
-----------------------------------------------------------------
-----------------------------------------------------------------
Income taxes 208,449
-----------------------------------------------------------------
-----------------------------------------------------------------
Distribution to stockholders 390,062
------------------------------------------------=============----
-----------------------------------------------------------------
Common stock outstanding 26,852,081
-----------------------------------------------------------------
-----------------------------------------------------------------
Distribution per share $ 14.53
------------------------------------------------=============----
The distribution per share was calculated based on common stock and
intercompany indebtedness outstanding at December 31,1999. The actual
amount of any distribution will be determined after the closing of the
sale transaction and will be based on the amount of indebtedness of
the SAP business to be repaid and the number of shares of common stock
outstanding at such time. The number of shares of common stock
outstanding will increase in the event an AMCOL director or employees
exercise vested outstanding options prior to the record date of the
distribution. The actual amount of any distribution will likely be
different from the amount indicated above.
(B) For pro forma purposes at December 31, 1999, gain on sale of SAP
business and resulting effect on equity is calculated below.
-----------------------------------------------------------------
Sales price, net of estimated transaction costs $ 642,800
-----------------------------------------------------------------
-----------------------------------------------------------------
Net investment in SAP business 121,678
-----------------------------------------------------------------
-----------------------------------------------------------------
Gain before income taxes 521,122
-----------------------------------------------------------------
-----------------------------------------------------------------
Income taxes 208,449 (D)
-----------------------------------------------------------------
-----------------------------------------------------------------
Net gain on sale 312,673
-----------------------------------------------------------------
-----------------------------------------------------------------
Distribution to stockholders 390,062
-----------------------------------------------------------------
-----------------------------------------------------------------
Net decrease in equity $ (77,389)
------------------------------------------------=============----
(C) The intercompany indebtedness as of the date of closing will reduce the cash received on the date of sale but will be
paid by BASF the day following the closing date. This amount will be used to repay a portion of AMCOL's long-term debt
and could vary based on the indebtedness level at the date of closing. As of December 31, 1999 the intercompany
indebtedness was $44,289,000. Increases or decreases in this amount from the pro-forma amount to the actual amount
will proportionately effect interest expense in future periods, as this amount will directly reduce long-term debt.
For every $1,000,000 of additional debt as of the date of closing annual interest expense in future periods will decrease
by $62,500.
(D) Tax expense for federal and state purposes is calculated at the effective statutory rate at December 31, 1999 of 40%.
(E) To reclassify the SAP business as a discontinued operation as a result of the proposed sale of the business.
(F) To record reduction in interest expense arising from the repayment of indebtedness using the funds received from
BASF to settle the intercompany liability, as discussed in Note C. The indebtedness repaid had an average interest
rate of 6.25% for the year ended December 31, 1999.
(G) To record income tax benefit attributable to adjustment (F) at the 1999 effective rate of 38.97%.
(H) To remove the net assets of the SAP business.
(I) To record reduction in interest expense arising from the repayment of indebtedness using the funds received from BASF
to settle the intercompany liability, as discussed in Note C. The indebtedness repaid had an average interest rate of
7.15% for the year ended December 31, 1998.
(J) To record income tax benefit attributable to adjustment (I) at the 1998 effective rate of 35.87%.
<PAGE>
(K) To record reduction in interest expense arising from the repayment of indebtedness using the funds received from
BASF to settle the intercompany liability, as discussed in Note C. The indebtedness repaid had an average interest
rate of 7.30% for the year ended December 31, 1997.
(L) To record income tax benefit attributable to adjustment (K) at the 1997 effective rate of 35.14%.
(M) To reclassify acquisition costs expensed up through the third quarter to discontinued operations as a result of the
proposed sale of the SAP business.
(N) To reclassify the SAP business as a discontinued operation as a result of the proposed sale of the SAP business.
The difference in the income taxes of the SAP business in the unaudited statements of operations is due to the
additional expenses related to intercompany royalties, intercompany interest, corporate allocations and the use of a
different tax rate. The tax rate used in the pro-forma financial statements is a consolidated effective tax rate
whereas the tax rate used in the unaudited financial statements of the SAP business is the effective tax rate for the SAP
business.
</FN>
</TABLE>
<PAGE>
UNAUDITED FINANCIAL STATEMENTS OF THE SAP BUSINESS
The following are the unaudited comparative financial statements of the SAP
business. The unaudited financial statements have been derived from historical
financial data of AMCOL and include balance sheets of the SAP business as of
December 31, 1999 and 1998, and the related statements of operations and cash
flows for each of the years in the three year period ending December 31, 1999.
This financial information does not necessarily reflect what the financial
position and results of operation of the SAP business would have been if such
business were operated as a separate, stand-alone entity for the periods
presented, and may not be indicative of the future performance of the SAP
business.
The unaudited financial statements of the SAP business are qualified in its
entirety by, and should be read in conjunction with, AMCOL's audited
consolidated financial statements and the notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations which
are incorporated by reference to this Proxy Statement.
<PAGE>
<TABLE>
<CAPTION>
SAP BUSINESS
BALANCE SHEETS
(Unaudited)
(in thousands)
ASSETS December 31
1999 1998
Current assets:
<S> <C> <C>
Cash and cash equivalents $ (139) $ (3,448)
Accounts receivable:
Trade, less allowance for doubtful accounts of $1,876 and $1,393 50,013 41,155
Other 4,747 2,354
Inventories 9,715 11,479
Prepaid expenses 5 491
Current deferred tax asset 541 521
Total current assets 64,882 52,552
Investment in and advances to joint ventures - 10
Property, plant, equipment and mineral rights and reserves:
Land and mineral rights and reserves 2,401 2,461
Depreciable assets 153,652 134,104
156,053 136,565
Less accumulated depreciation 72,905 57,150
83,148 79,415
Total assets $ 148,030 $ 131,977
--------------------
LIABILITIES AND STOCKHOLDERS' EQUITY December 31
1999 1998
Current liabilities:
Notes payable and current maturities of long-term obligations $ - $ 1,577
Accounts payable 9,880 8,023
Accrued income taxes 5,263 -
Accrued liabilities 9,592 9,401
Due to AMCOL 44,289 58,994
Total current liabilities 69,024 77,995
Deferred income tax liabilities 2,781 5,213
Other liabilities 321 315
3,102 5,528
Stockholders' equity:
Common stock 13,135 13,135
Additional paid-in-capital 2,235 2,235
Retained earnings 62,019 33,507
Cumulative translation adjustment (1,485) (423)
75,904 48,454
Total liabilities and stockholders' equity $ 148,030 $ 131,977
- - ---------------------------------------------------------------------------------===============----================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SAP BUSINESS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
Years Ended December 31,
-------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
Net sales $ 252,908 $ 221,093 $ 195,944
Cost of sales 184,006 174,635 154,983
Gross profit 68,902 46,458 40,961
General, selling and administrative expenses 17,052 13,207 12,098
Write down of intangible and long-term assets - - -
Operating profit 51,850 33,251 28,863
Other income (expense):
Intercompany interest expense (2,845) (3,591) (5,756)
Other interest expense (111) (1,345) (1,531)
Intercompany royalties (2,053) (1,844) (4,679)
Other, net (269) (16) (459)
(5,278) (6,796) (12,425)
Income before allocations 46,572 26,455 16,438
Corporate allocations (2,489) (1,778) (1,585)
Income before income taxes and minority interest 44,083 24,677 14,853
Income taxes 15,571 8,838 5,340
Net income $ 28,512 $ 15,839 $ 9,513
Retained earnings at the beginning of the year 33,507 23,668 14,155
Dividends paid - (6,000) -
Retained earnings at the end of the year $ 62,019 $ 33,507 $ 23,668
- - -------------------------------------------------------------===============-----===============----================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SAP BUSINESS
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Years Ended December 31,
-------------------------------------------------------
1999 1998 1997
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 28,512 $ 15,839 $ 9,513
Adjustment to reconcile net income to net cash
provided by
operating activities:
Depreciation and amortization 17,356 14,840 14,362
Loss on sale or transfer of depreciable assets 49 13 --
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (11,251) (5,708) (3,233)
Inventories 1,764 408 4,732
Prepaid expenses 486 583 (819)
Deferred income taxes (2,452) 2,741 1,336
Accounts payable 1,857 2,103 (5,273)
Accrued income taxes 5,263 -- --
Accrued liabilities 191 1,039 5,525
Other liabilities 6 (95) (119)
Net cash used in operating activities 41,781 31,763 26,024
Cash flows from investing activities:
Acquisition of depreciable assets (22,639) (9,614) (4,842)
Investment in/advance to subsidiary 10 (10) --
Foreign currency 439 (423) (2,700)
Net cash used in investing activities (22,190) (10,047) (7,542)
Cash flows from financing activities:
Payment of cash dividends -- (6,000) --
Issuance of notes payable -- 10 --
Payment of notes payable (1,577) -- (60)
Net payments to AMCOL (14,705) (18,504) (19,950)
Net cash provided by financing activities (16,282) (24,494) (20,010)
Net increase in cash and cash equivalents 3,309 (2,778) (1,528)
Cash and cash equivalents at the (3,448) (670) 858
beginning of year
Cash and cash equivalents at the end of $ (139) $ (3,448) $ (670)
year
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAP BUSINESS
NOTES TO FINANCIAL STATEMENTS
(in thousands)
Note 1: BASIS OF PRESENTATION
The financial information included herein has been prepared by management
without audit. The information furnished herein includes all adjustments which
are, in the opinion of management, necessary for a fair statement of the
financial position and operating results and all such adjustments are of a
normal recurring nature.
Note 2: INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
by the first-in, first-out method. The composition of inventories at December
31, 1999 and December 31, 1998, was as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Finished Product Inventory $ 5,899 $ 8,468
Stores Inventory 3,816 3,011
$ 9,715 $ 11,479
</TABLE>
PROPOSAL 2: THE PLAN AMENDMENTS
General
The Board of Directors has adopted, subject to shareholder approval,
amendments to AMCOL's 1993 Stock Plan, or the 1993 plan, and AMCOL's 1998
Long-Term Incentive Plan, or the 1998 plan, which provide for the acceleration
of vesting of all options held by employees who will become employees of BASF
except for nonvested options held by employees whose options were issued under a
scheme approved by United Kingdom Inland Revenue. This acceleration of vesting
will become effective immediately upon receipt of shareholder approval of the
vesting amendments at the special meeting. In addition, the Board of Directors
has adopted, subject to shareholder approval, an amendment to the 1998 plan
which deletes the $100,000 cap on the aggregate fair market value of an
employee's incentive stock options, or ISOs, which become exercisable in any
calendar year.
The 1993 plan and the 1998 plan were approved by AMCOL's shareholders at
AMCOL's annual meeting of shareholders held in 1993 and 1998, respectively. As
of April __, 2000, options to purchase ___________ shares of AMCOL's common
stock held by _______ employees will become immediately vested upon the approval
of the plan amendments by AMCOL's shareholders. This includes options to
purchase ___ shares of AMCOL's common stock held as of April __, 2000 by Gary
Castagna, an executive officer of AMCOL. The exercise prices of the options held
by the Chemdal employees range from $_______ to $________. The exercise prices
of the options held by Mr. Castagna range from $___ to $_____. Based on the
closing sale price of AMCOL's common stock on April __, 2000 as reported by the
New York Stock Exchange, the aggregate value of the benefit to be received by
Mr. Castagna upon the acceleration of the options held by him is $___________.
<PAGE>
The purchase agreement requires AMCOL to cause each unvested stock option
to purchase shares of AMCOL's common stock held by employees who are to become
employees of BASF to become fully vested and exercisable on or before the
closing. However, AMCOL is unable to accelerate the vesting of the options
granted to employees who reside in the United Kingdom which were issued under a
scheme approved by United Kingdom Inland Revenue because the necessary approvals
were not received from United Kingdom Inland Revenue. Pursuant to the purchase
agreement, AMCOL may either replace the options held by these employees in the
United Kingdom or pay a special cash bonus to these employees in an amount equal
to the product of the number of shares of AMCOL's common stock subject to an
unvested stock option and the excess, if any, of the closing price on the New
York Stock Exchange of AMCOL's common stock on the last trading day immediately
prior to the closing over the exercise price per share of AMCOL's common stock
subject to such unvested stock option.
The 1998 Plan contains a provision which prohibits the aggregate fair
market value of an employee's ISOs which become exercisable in any calendar year
to exceed $100,000. Due to the acceleration of vesting of the options held by
these employees, the aggregate fair market value of certain employees' ISOs
which will become exercisable will exceed $100,000. Therefore, the Board of
Directors has decided to delete this restriction from the 1998 plan.
<PAGE>
The 1993 Plan and the 1998 Plan
Purpose. The purpose of the 1993 plan and 1998 plan is to provide officers,
directors and employees who have substantial responsibility for the direction
and management of AMCOL with an additional incentive to promote the success of
AMCOL's business, to encourage such persons to remain in the service of AMCOL
and to enable them to acquire proprietary interests in AMCOL. The following is a
summary of the 1993 plan and the 1998 plan. You are encouraged to read the 1993
plan and the 1998 plan in their entirety. These documents have been filed with
the SEC and are publicly available. See "Additional Information."
Awards. Both the 1993 plan and the 1998 plan provide for the granting of
awards of restricted stock, ISOs within the meaning of Section 422 of the Code,
nonqualified stock options, or NSOs, and stock appreciation rights, or SARs. In
addition, the 1993 plan provides for the granting of awards of phantom stock.
The 1993 plan and the 1998 plan permit a total of 1,260,000 and 1,900,000 shares
of AMCOL's common stock to be awarded to participants, respectively. However, as
of March 1, 1998, no further awards may be made pursuant to the 1993 plan. As of
April __, 2000 the closing sale price of AMCOL's common stock was $______ per
share as reported by the New York Stock Exchange.
The Committee. Both the 1993 plan and the 1998 plan are administered by a
committee composed of two or more individuals elected by the Board of Directors
from time to time. The committee administering the 1998 plan must be composed of
directors. Currently, both the 1993 plan and the 1998 plan are administered by
the Compensation Committee of the Board of Directors. The Compensation Committee
from time to time grants awards under the 1998 plan to selected eligible
directors and employees, without payment by the participant. As set forth above,
awards are no longer made pursuant to the 1993 plan.
Restricted Stock Awards. The 1993 plan and the 1998 plan permit the
granting of awards of restricted stock to any participant. Awards of restricted
stock may be issued to participants without payment. Upon completion of a
vesting period and the fulfillment of any required conditions, restrictions upon
the restricted stock expire and new certificates representing unrestricted
shares of common stock are issued to the participant. Generally, the participant
will have all of the rights of a shareholder of AMCOL with respect to his shares
of restricted stock including, but not limited to, the right to vote such shares
and the right to receive dividends payable with respect to the shares of
restricted stock.
Incentive Stock Options. Both the 1993 plan and the 1998 plan provide for
the granting of ISOs to any employee of AMCOL. The committee has the authority
to determine the terms and conditions of each ISO grant, including without
limitation, the number of shares subject to each ISO and the option period. The
ISO exercise price is also determined by the committee and may not be less than
the fair market value of AMCOL's common stock on the date of grant. The exercise
price may not be less than 110% of such fair market value if the participant was
the holder of more than 10% of AMCOL's outstanding voting securities. Unless the
committee otherwise determines, the option period for ISOs granted under the
1993 plan expire upon the earliest of:
<PAGE>
- ten years after the date of grant (five years in the case of a
holder of more than 10% of AMCOL's outstanding voting
securities);
- three months after termination of employment for any reason other
than death;
- twelve months after death; or
- such other date or event as specified by the committee.
Unless the committee otherwise determines, the option period for ISOs
granted under the 1998 plan will expire upon the earliest of:
- ten years after the date of grant (five years in the case of a
holder of more than 10% of AMCOL's outstanding voting
securities);
- three months after termination of employment for any reason other
than cause, death or total and permanent disability;
- immediately upon termination of employment for cause;
- twelve months after death or termination of employment on account
of total and permanent disability; or
- such other date or event as specified by the committee.
Nonqualified Stock Options. The 1993 plan and the 1998 plan provide for the
granting of NSOs to any participant. The committee has the authority to
determine the terms and conditions of each grant including the number of shares
subject to each NSO, the option period and the option exercise price. The NSO
exercise price may not be less than 85% of the fair market value of the common
stock on the date of grant. Unless the committee otherwise determines, the
option period for NSOs granted pursuant to the 1993 plan will expire upon the
earliest of:
- three months after termination of employment for any reason other
than death;
- twelve months after death; or
- such other date or event as specified by the committee.
Unless the committee otherwise determines, the option period for NSOs
granted pursuant to the 1998 plan will expire upon the
earliest of:
- ten years after the date of grant;
- three months after termination of employment for any reason other
than cause, death, total and permanent disability or retirement
after age 65 (nonemployee directors will be treated as being
terminated when they cease to serve on the Board);
- immediately upon termination of employment for cause;
- sixty months after termination of employment on account of
retirement after age 65;
- twelve months after death or termination of employment on account
of total and permanent disability; or
- such other date or event as specified by the committee.
<PAGE>
Stock Appreciation Rights. Both the 1993 plan and the 1998 plan provide for
the granting of SARs to any participant. SARs granted by the committee pursuant
to the 1993 plan or the 1998 plan may relate to and be associated with all or
any part of a specific ISO or NSO. An SAR shall entitle the participant to
surrender any then exercisable portion of the SAR and, if applicable, the
related ISO or NSO. In exchange, the participant would receive from AMCOL an
amount equal to the product of the excess of the fair market value of a share of
common stock on the date of surrender over the fair market value of the common
stock on the date the SARs were issued, or, if the SARs are related to an ISO or
an NSO, the per share exercise price under such option and the number of shares
of common stock subject to such SAR, and, if applicable, the related option
which is surrendered. SARs may be exercisable during a period established by the
committee and, if related to an ISO or NSO, shall terminate on the same date as
the related option. Upon exercise, participants may be paid in shares of common
stock or cash, as determined by the committee.
Phantom Stock. The 1993 plan provided for awards of phantom stock to a
participant. Subject to any limitations imposed by the committee, an award of
phantom stock entitles the participant to surrender any vested portion of the
phantom stock in exchange for the fair market value of the common stock to which
the surrendered phantom stock relates. No awards of phantom stock were made
pursuant to the 1993 plan.
The Manner of Exercise. The committee may permit the exercise price for
options granted under the 1993 plan or the 1998 plan to be paid in cash or
shares of common stock, including shares of common stock which the participant
received upon the exercise of one or more options. The committee may also permit
the option exercise price to be paid by the participant's delivery of an
election directing AMCOL to withhold shares of common stock from the common
stock otherwise due upon exercise of the option or any method permitted by law.
Vesting. Unless the committee establishes a different vesting schedule at
the time of grant, awards generally vest 40% after two years, 60% after three
years, 80% after four years and 100% after five years. A participant may not
exercise an option or SAR or transfer shares of restricted stock until the award
has vested.
Under the 1993 plan, if a participant's employment with AMCOL is terminated
due to retirement on or after the age of 65 (or 55 with AMCOL's consent),
retirement at any age on account of disability, or death, all Awards become
fully vested. If a participant's employment with or service to AMCOL is
terminated for any other reason, any Awards that are not yet vested are
forfeited.
Under the 1998 plan, generally, if a participant's employment with AMCOL or
service on the Board is terminated due to retirement, death, disability or a
change in control of AMCOL (as determined by the committee), the committee may,
in its discretion, accelerate vesting. If a participant's employment with or
service to AMCOL is terminated for any other reason, any awards that are not yet
vested are forfeited.
<PAGE>
Nontransferability. Awards are not transferable other than by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code; provided, however, that under the 1998 plan NSOs,
SARs and restricted stock are transferable in the committee's discretion after
vesting. During a participant's lifetime, his ISOs and any NSOs granted under
the 1993 plan may be exercised only by him.
Withholding Tax. AMCOL shall have the right to withhold in cash or shares
of common stock with respect to any payments made to participants, any taxes
required by law to be withheld because of such payments.
Amendment; Termination. The Board of Directors may amend the 1993 plan and
the 1998 plan at any time, but may not impair the rights of participants with
respect to any outstanding awards without the consent of participants, and
provided further that the Board of Directors may not amend the 1993 plan so as
to extend the period in which a participant may exercise an ISO and may not, in
the absence of shareholder approval, change the aggregate number of shares that
may be issued pursuant to the options granted, change the class of eligible
employees, adopt any amendment affecting the exercise price, or materially
increase benefits accruing to the participants.
The 1998 plan will terminate ten years after its adoption by the Board of
Directors; provided, however, that the Board of Directors may terminate the 1998
plan at any time. The 1993 plan was terminated effective March 1, 1998.
Termination of the 1993 plan and the 1998 plan will not affect the rights of
participants with respect to any awards granted before the termination date.
Federal Tax Consequences-Incentive Stock Options. Provided a participant is
an employee of AMCOL during the period beginning on the date of grant of the ISO
and ending on the day three months before the date of exercise, neither the
grant nor the exercise of an ISO has an immediate tax consequence to the
participant or AMCOL. If subsequent to the exercise of an ISO the participant
does not dispose of the acquired common stock within two years after the date of
the grant of the ISO, or within one year after the date of the transfer of the
common stock to the participant, or the holding period, AMCOL is not entitled to
a tax deduction, the participant realizes no ordinary income, and any gain or
loss that is realized on the subsequent sale or taxable exchange of the common
stock is treated as a long-term capital gain or loss. Some tax deductions and
exclusions, known as "tax preference items," give rise to an "alternative
minimum tax" enacted to recapture some of the tax savings provided by such tax
preference items. The tax benefits associated with an ISO are tax preference
items that may affect the alternative minimum tax that must be paid by certain
high income individuals.
If a participant exercises an ISO and disposes of the acquired common stock
before the end of the holding period, the participant realizes ordinary income
in an amount equal to the lesser of the fair market value of the common stock on
the date of exercise over the option price of the common stock, or the amount
realized on disposition over the adjusted basis of the common stock. Any
remaining gain will be considered capital gain to the participant. AMCOL will be
entitled to a corresponding tax deduction in the same amount and at the same
time, subject to the limitations imposed by Code Section 162(m).
<PAGE>
Code Section 162(m) denies a deduction to any publicly held corporation for
compensation paid to certain "covered employees" in a taxable year to the extent
that such compensation exceeds $1,000,000. "Covered employees" are a
corporation's chief executive officer on the last day of the taxable year and
any other individuals whose compensation is required to be reported to
shareholders under the Exchange Act by reason of being among the four most
highly compensated officers (other than the chief executive officer) for the
taxable year and who are employed on the last day of the taxable year.
Compensation paid under some qualified performance-based compensation
arrangements, which (among other things) provide for compensation based on
pre-established performance goals established by a compensation committee that
is composed solely of two or more "outside directors," is not considered in
determining whether a "covered employee's" compensation exceeds $1,000,000.
Federal Tax Consequences-Non-Qualified Stock Options. Generally, the
recipient of an NSO realizes no taxable income at the time of grant. Similarly,
AMCOL is not entitled to a deduction with respect to the grant of an NSO.
Upon the exercise of an NSO, a participant realizes income at ordinary
income tax rates. The amount included in income is the excess of the fair market
value of the common stock acquired (as of the date of exercise) over the
exercise price. AMCOL will generally be entitled to a corresponding deduction
equal to this amount for AMCOL's taxable year that ends with or includes the end
of the participant's taxable year of income inclusion, subject to the
limitations imposed by Code Section 162(m).
A participant's basis in the common stock acquired upon the exercise of an
NSO will be the exercise price, plus any amount includable in the participant's
gross income upon the exercise of the NSO. The gain or loss realized by the
participant upon a subsequent sale or exchange of the shares will be a capital
gain or loss.
Federal Tax Consequences-Restricted Stock. Generally, because of the risk
of forfeiture prior to vesting (and certain other restrictions that may be
imposed by the committee), no taxable income will be recognized by the
participant upon an award of restricted stock. Absent an election under Section
83(b) of the Code, the participant is deemed to receive ordinary income at the
time the restrictions on the restricted stock lapse. The amount of the
participant's taxable income is equal to the fair market value of the restricted
stock, less any amount paid by the participant for the restricted stock.
However, a participant may make an election under Section 83(b) of the Code,
within thirty days of the date of issuance of the restricted stock, to be taxed
at the time of issuance. Any participant who makes such an election recognizes
ordinary income on the date of issuance of the restricted stock equal to its
fair market value at that time, less any amount paid by the participant for the
restricted stock. The participant's basis in this stock will be increased by the
amount includable in his or her gross income under Code Section 83.
AMCOL is entitled to a deduction equal to the amount includable in the
participant's gross income for AMCOL's tax year in which or with which ends the
participant's taxable year in which
<PAGE>
the amount is included in the participant's gross income. AMCOL's deduction is
also subject to the limitations imposed by Code Section 162(m) mentioned above.
If the participant subsequently disposes of the restricted stock after it
becomes substantially vested, the participant will recognize capital gain or
loss equal to the difference between the amount realized and the participant's
basis in the restricted stock, assuming the restricted stock is held as a
capital asset.
Unless an election under Code Section 83(b) is made, dividends paid to a
participant while the restricted stock remains subject to restrictions are
treated as compensation for federal income tax purposes. Any dividends paid on
the restricted stock subsequent to a Code Section 83(b) election are treated as
dividend income, rather than compensation, for federal income tax purposes.
The Plan Amendments
In order to implement the plan amendments, the 1993 plan and the 1998 plan
are proposed to be amended as set forth below. The plan amendments are
contingent upon the receipt of shareholder approval of the purchase agreement.
1993 Plan. The following shall be added to the end of Section 12 of the
1993 plan:
"Notwithstanding anything herein to the contrary, all nonvested options
held by employees who are to become employees of BASF (the "Chemdal
Employees"), pursuant to the Asset and Stock Purchase Agreement dated
November 22, 1999, between AMCOL International Corporation, a Delaware
corporation, and BASF Aktiengesellschaft, a corporation organized under the
laws of Germany, shall be immediately fully vested and exercisable, except
that any nonvested options held by any Chemdal employees whose options were
issued under a scheme approved by United Kingdom Inland Revenue will not be
vested."
1998 Plan. The following shall be added to the end of Section 11 of the
1998 plan:
"Notwithstanding anything herein to the contrary, all nonvested options
held by employees who are to become employees of BASF (the "Chemdal
Employees"), pursuant to the Asset and Stock Purchase Agreement dated
November 22, 1999, between AMCOL International Corporation, a Delaware
corporation, and BASF Aktiengesellschaft, a corporation organized under the
laws of Germany, shall be immediately fully vested and exercisable, except
that any nonvested options held by any Chemdal employees whose options were
issued under a scheme approved by United Kingdom Inland Revenue will not be
vested.
The following sentences shall be removed in their entirety from Section 7
of the 1998 plan:
"The aggregate fair market value of the common stock covered by ISOs
granted under the Plan or any other stock option plan of AMCOL or any
subsidiary or parent of AMCOL that become exercisable for the first time by
any employee in any calendar year shall not exceed $100,000. The aggregate
fair market value will be determined at the Award Date."
<PAGE>
Board Recommendation
Proxies will be voted for or against approval of the plan amendments to the
1993 plan and the 1998 plan in accordance with the specifications marked
thereon, and will be voted in favor of approval if no specification is made.
Assuming a quorum is present, the affirmative vote of a majority of the shares
of common stock represented in person or by proxy at the special meeting and
entitled to vote thereon is required to adopt the plan amendments.
The Board of Directors recommends that you vote "FOR" adoption of the plan
amendments.
SECURITY OWNERSHIP
Security Ownership of Five Percent Beneficial Owners
The following table sets forth all persons known to be the beneficial owner
of more than 5% of AMCOL's common stock as of December 31, 1999.
<TABLE>
<CAPTION>
Number of Shares and
Name and Address of Beneficial Owner Nature of Beneficial Percent
Ownership (1) of Class
<S> <C> <C> <C>
Bank of Montreal 3,101,751 (2) 11.52%
Paul Bechtner Trust
111 West Monroe Street
Chicago, Illinois 60690
Everett P. Weaver 3,116,751 (3)(4) 11.58%
c/o AMCOL International Corporation
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
William D. Weaver 4,155,059 (3)(5) 15.43%
c/o AMCOL International Corporation
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
<FN>
(1) Nature of beneficial ownership is direct unless otherwise indicated by footnote. Beneficial ownership as shown in the
table arises from sole voting and investment power unless otherwise indicated by footnote.
(2) Voting and investment power are shared by the trustees of this trust. See note (3) below.
(3) Includes 3,101,751 shares held in the Paul Bechtner Trust as to which Messrs. Everett P. Weaver, William D. Weaver and the
Bank of Montreal are co-trustees and share voting and investment power.
(4) Includes 15,000 shares in a trust as to which voting and investment power are shared with Mr. Weaver's wife.
(5) Includes 615,570 shares held in a living trust and 56,800 shares in a charitable remainder unit trust as to which Mr.
Weaver exercises sole voting and investment power. Also includes 1,600 shares held by his wife, 223,400 shares held in
his wife's living trust, 45,000 shares held by his wife as trustee for the benefit of her brother, and 63,560 shares held
by his wife for the benefit of their grandchildren as to which Mr. Weaver may be deemed to share voting and investment power.
</FN>
</TABLE>
<PAGE>
Security Ownership of Directors and Executive Officers
The following table sets forth, as of February 21, 2000, shares
beneficially owned by: each director and nominee; the Chief Executive Officer;
the four other most highly compensated executive officers; and as a group, such
persons and other executive officers.
<TABLE>
<CAPTION>
Number of Shares and Nature
Beneficial Owner of Beneficial Ownership (1) Percent of Class
<S> <C>
Arthur Brown 28,146 *
Robert E. Driscoll, III 380,895 1.38%
John Hughes 800,709 2.90%
James A. McClung 4,600 *
Jay D. Proops 42,700 *
C. Eugene Ray 106,146 *
Clarence O. Redman 63,708 *
Paul G. Shelton 416,962 1.51%
Dale E. Stahl 28,200 *
Lawrence E. Washow 433,325 1.57%
Audrey L. Weaver 651,796 2.36%
Paul C. Weaver 383,920 1.39%
Gary L. Castagna 62,825 *
Frank B. Wright, Jr. 35,251 *
All of the above and other executive officers as a group (20
persons) 3,220,884 11.66%
<FN>
* Percentage represents less than 1% of the total shares of common stock outstanding as of February 21, 2000.
(1) Nature of beneficial ownership is set forth on Page _____.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nature of Beneficial Ownership
(Shares Held) as of February 21, 2000
Directly In the In Limited As As By As Trustee Subject
Beneficial Owner or as Company's Partnership Trustee Custodian Family of the to Options
Joint Savings or Members Company's Exercisable
Tenants Plan Co-Trustee Pension in 60 Days
(1) (2) Plan (4)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arthur Brown 23,400 --- --- --- --- --- --- 4,746
Robert E. Driscoll, III 5,000 --- 371,295 (3) 4,000 --- --- --- 600
John Hughes 249,530 103,443 --- --- --- 41,328 217,500 188,908
James A. McClung 1,000 --- --- --- --- --- --- 3,600
Jay D. Proops 24,000 --- 10,000 --- --- --- --- 8,700
C. Eugene Ray 81,150 --- --- --- --- 20,250 --- 4,746
Clarence O. Redman 25,374 14,934 --- --- --- --- --- 23,400
Paul G. Shelton 70,085 22,068 --- --- 14,492 935 217,500 91,882
Dale E. Stahl 19,500 --- --- --- --- --- --- 8,700
Lawrence E. Washow 79,643 13,448 --- --- 7,500 --- 217,500 115,234
Audrey L. Weaver 646,070 --- --- --- --- 5,126 --- 600
Paul C. Weaver 318,876 --- --- 30,638 --- 31,706 --- 2,700
Gary L. Castagna 2,733 4,357 --- --- --- --- --- 55,735
Frank B. Wright, Jr. 1,350 18,284 --- --- --- --- --- 15,617
All Directors and Executive 1,568,524 242,595 381,295 34,638 21,992 99,345 217,500 692,177
Officers
<FN>
(1) Includes shares held in joint tenancy with spouses for which voting rights may be shared.
(2) With the exception of Mr. Redman's shares, which are held in the Clarence O. Redman PC Savings Plan, the shares are held
in AMCOL's Savings Plan.
(3) Mr. Driscoll is a general partner.
(4) Messrs. Hughes, Shelton and Washow share voting rights.
</FN>
</TABLE>
<PAGE>
NAMED OFFICERS' COMPENSATION
Summary Compensation Table
The Summary Compensation Table below includes, for each of the fiscal years
ended December 31, 1999, 1998 and 1997, individual compensation for services to
AMCOL and its subsidiaries of those persons who were at December 31, 1999: the
Chief Executive Officer; and the four other most highly compensated executive
officers of AMCOL, or collectively, the named officers.
<TABLE>
<CAPTION>
Long-Term All Other
Compen-sation Compen-sation
Name and Principal Position Annual Compensation (1)(2) Awards ($)(4)
Securities
Bonus Underlying
Year Salary ($) ($)(3) Options (#)
<S> <C> <C> <C> <C> <C>
John Hughes 1999 475,000 712,500 25,000 41,146
Chairman and Chief Executive Officer 1998 450,000 257,792 25,000 19,386
1997 400,000 244,650 25,500 24,400
Lawrence E. Washow 1999 350,000 437,500 21,250 31,280
President and Chief Operating 1998 316,667 137,600 18,750 16,578
Officer 1997 229,256 114,449 12,750 8,740
Paul G. Shelton 1999 275,000 258,090 17,000 21,656
Senior Vice President and Chief 1998 240,000 92,800 12,500 13,694
Financial Officer of AMCOL and 1997 215,000 102,354 12,750 8,600
President of Ameri-Co Carriers, Inc.
and Nationwide Freight Service, Inc.
Frank B. Wright, Jr. 1999 215,000 112,698 11,250 15,840
Vice President of AMCOL and 1998 195,000 101,010 10,750 10,600
President of Volclay International 1997 175,000 70,000 9,563 3,500
Corporation
Gary L. Castagna 1999 200,000 200,000 11,250 18,571
Vice President of AMCOL and 1998 160,000 109,874 10,750 8,599
President of Chemdal International 1997 142,645 54,976 6,375 5,706
Corporation
<FN>
(1) Includes deferred compensation under AMCOL's Savings Plan and AMCOL's Deferred Compensation Plan.
(2) The incremental cost of non-cash compensation and other personal benefits during any year presented did not exceed the lesser
of $50,000 or 10% of the total of annual salary and bonus reported for any individual named above.
(3) The figures in this column reflect bonuses from the Executive Incentive Compensation Plan and the Bonus Plan as described in
the Board Compensation Committee Report on Executive Compensation.
<PAGE>
(4) The figures in this column include Company matching contributions under AMCOL's Savings Plan. During 1997, AMCOL
approved a 401(k) restoration plan whereby the matching contributions for salary deferrals in excess of ERISA limits to
AMCOL's Savings Plan were credited to AMCOL's Deferred Compensation Plan.
</FN>
</TABLE>
Option Grants in Last Fiscal Year
Shown below is information on grants of incentive stock options during the
fiscal year ended December 31, 1999 to the named officers, which are reflected
in the Summary Compensation Table on Page ___.
<TABLE>
<CAPTION>
Date
Name Individual Grants in 1999 Value
Number of
Securities % of Total Grant
Underlying Options Date
Options Granted to Exercise Expiration Present
Granted (1) Employees (2) Price (3) Date Value (4)
<S> <C> <C> <C> <C> <C> <C>
John Hughes 25,000 8.68% $9.00 02/03/09 $87,494
Lawrence E. Washow 21,250 7.38 9.00 02/03/09 74,370
Paul G. Shelton 17,000 5.90 9.00 02/03/09 59,496
Frank B. Wright, Jr. 11,250 3.91 9.00 02/03/09 39,372
Gary L. Castagna 11,250 3.91 9.00 02/03/09 39,372
<FN>
(1) These incentive stock options, or ISOs, were issued pursuant to the 1998
plan and may not be exercised until they vest. These ISOs vest 40% after
two years, 60% after three years, 80% after four years and 100% after five
years, provided that on death or retirement under specified conditions,
these ISOs become fully vested. The exercise price may not be less than the
fair market value of the shares subject to the option on the date of grant.
The exercise price may not be less than 110% of such fair market value if
the purchaser is a holder of more than 10% of AMCOL's outstanding voting
securities.
(2) Based on 288,000 options granted to all employees.
(3) Fair market value on the date of grant.
(4) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options reflected in the above table include the following: an
exercise price on the option of $9.00, equal to the fair market value of
the underlying stock on the date of grant; an option term of 6 years;
interest rate of 4.87% representing the interest rates on U.S. Treasury
securities on the date of grant with maturity dates corresponding to the
vesting of the options; volatility of 44.90% and dividends at the rate of
$0.24 per share representing the annualized dividends paid with respect to
a share of common stock at the date of grant. There have been no reductions
to reflect the probability of forfeiture due to termination prior to
vesting, or to reflect the probability of a shortened option term due to
termination of employment prior to the option expiration date. The ultimate
values of the options will depend on the future market price of AMCOL's
stock, which cannot be forecast with reasonable accuracy. The actual value,
if any, an optionee will realize upon exercise of an option will depend on
the excess of the market value of AMCOL's common stock over the exercise
price on the date the option is exercised.
</FN>
</TABLE>
<PAGE>
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Shown below is information with respect to options exercised by the named
officers pursuant to AMCOL'S option plans during fiscal 1999 and unexercised
options granted in fiscal 1999 and prior years under AMCOL's option plans to the
named officers and held by them at December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Name Acquired Value Options at 12/31/99 12/31/99
on Realized Exercisable/ Exercisable/
Exercise Unexercisable Unexercisable (1)
<S> <C> <C> <C> <C> <C> <C>
John Hughes 33,750 $179,759 164,463 / 78,425 $1,305,643 / $407,027
Lawrence E. Washow 20,000 182,333 105,003 / 53,469 785,263 / 281,791
Paul G. Shelton 17,300 134,489 84,606 / 43,318 766,669 / 232,464
Frank B. Wright, Jr. -- -- 9,135 / 31,278 53,237 / 161,580
Gary L. Castagna -- -- 50,040 / 29,186 259,340 / 152,664
<FN>
(1) Based on the closing sale price as quoted on The New York Stock Exchange on that date.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Pension Plans
Remuneration Estimated Annual Retirement Benefits Based on Years of Service
15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
<S> <C> <C> <C> <C> <C> <C> <C>
$150,000 $33,750 $45,000 $56,250 $67,500 $78,750 $84,375
200,000 45,000 60,000 75,000 90,000 105,000 112,500
250,000 56,250 75,000 93,750 112,500 131,250 140,625
300,000 67,500 90,000 112,500 135,000 157,500 168,750
350,000 78,750 105,000 131,250 157,500 183,750 196,875
400,000 90,000 120,000 150,000 180,000 210,000 225,000
450,000 101,250 135,000 168,750 202,500 236,250 253,125
500,000 112,500 150,000 187,500 225,000 262,500 281,250
550,000 123,750 165,000 206,250 247,500 288,750 309,375
</TABLE>
The above table shows the estimated annual retirement benefits payable on a
straight life annuity basis to participating employees, including officers, in
the earnings and years of service classifications indicated under AMCOL's
retirement plans, which cover substantially all of its domestic employees on a
non-contributory basis. The estimated benefits as disclosed below assume that
the plans will be continued and that the employee will elect to receive his
pension at normal retirement age. The table above and the estimates below do not
reflect the reduction in an individual's final monthly compensation due to the
social security monthly covered compensation. This reduction is based upon the
retirement year for a particular individual.
<PAGE>
<TABLE>
<CAPTION>
Years of Average Pension
Name Service Compensation Benefit
<S> <C> <C> <C>
John Hughes 35 $604,658 $296,330
Lawrence E. Washow 21 375,426 112,142
Paul G. Shelton 18 303,929 85,007
Frank B. Wright, Jr. 4 200,324 --
Gary L. Castagna 10 233,207 30,044
</TABLE>
The above table indicates the average earnings for the highest five
consecutive calendar years and the number of years of credited service under the
pension plans as of December 31, 1999, for each of the named officers. Covered
compensation includes a participant's base salary, commissions, bonuses and
salary reductions under AMCOL's Savings Plan and Deferred Compensation Plan. Mr.
Wright has only been employed by AMCOL for four years, and does not have a
vested pension benefit. The average compensation for Mr. Wright represents the
average paid during his employment with AMCOL.
Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as
amended, limit the annual benefits that may be paid from a tax-qualified
retirement plan. As permitted by the Employee Retirement Income Security Act of
1974, AMCOL has a supplemental plan that authorizes the payment out of general
funds of AMCOL any benefits calculated under provisions of AMCOL's pension plan
that may be above the limits under these sections. The accrued, unfunded
liability of the supplemental plan at December 31, 1999, was $__________.
Change In Control Arrangements
Each of the named officers has an agreement with AMCOL which provides that,
upon a change in control of AMCOL, each of them is to be employed by AMCOL for a
period of time after the change in control (three years in the case of Messrs.
Hughes, Washow and Shelton and two years for Messrs. Wright and Castagna),
unless there is just cause for his termination. A change in control is defined
as a change in legal or beneficial ownership of 51% of AMCOL's common stock
within a six-month period, or the sale of 90% or more of AMCOL's assets. The
sale transaction does not constitute a change of control under these agreements.
If termination occurs within the specified period for other than just
cause, through either actual termination or constructive termination, the named
officer will receive compensation equal to his current annual salary plus an
average of his incentive bonus payments for prior periods, less any compensation
received from the date of the change in control. These payments may not exceed
an amount equal to two times, in the case of Messrs. Wright and Castagna, and
three times, in the case of Messrs. Hughes, Washow and Shelton, the respective
named officer's average annual compensation during the prior five calendar
years. Each named officer will also receive continued medical, health and
disability benefits for one year after termination.
<PAGE>
The table below indicates the maximum amount that would have been paid had
a change of control occurred and the named executives were terminated without
cause prior to December 31, 1999.
<TABLE>
<CAPTION>
Name Date of Agreement Payment
<S> <C> <C>
John Hughes April 1, 1997 $1,813,974
Lawrence E. Washow February 16, 1998 1,126,278
Paul G. Shelton April 1, 1997 911,772
Frank B. Wright, Jr. December 1, 1999 400,648
Gary L. Castagna February 17, 1998 466,414
</TABLE>
The agreements do not require the named officers to seek other employment,
but any payments or benefits will be reduced by up to 50% by any compensation
earned from other employment. For a period of years (three years in the case of
Messrs. Hughes, Washow and Shelton and two years in the case of Messrs. Wright
and Castagna) from the date of termination of employment with or without cause,
before or after a change in control, each of the named officers is prohibited
from engaging in any business that competes with AMCOL and from soliciting any
employee of AMCOL.
<TABLE>
<CAPTION>
Director Compensation
Type of Compensation Cash Stock Options
<S> <C> <C>
Annual Retainer $14,700 2,000 shares
Board Meeting Attendance Fee $1,470
Annual Retainer for Committee Chairman $1,969
Committee Meeting Attendance Fee $525
</TABLE>
Directors who are also full-time employees of AMCOL are not paid for their
services as directors or for attendance at meetings.
Pursuant to the 1998 plan, each of the non-employee directors was granted
2,000 options at $13.00 per share in 1999.
Compensation Committee Report on Executive Compensation
AMCOL's mission is to supply high-quality performance products and
innovative technologies for absorbent polymers, minerals and environmental
markets worldwide. To accomplish this objective, AMCOL has developed
comprehensive compensation strategies that emphasize maximizing shareholder
value and growth in sales and earnings. The compensation program has been
designed to reinforce and support AMCOL's business goals and to help the
organization both attract and retain high quality executive talent.
<PAGE>
The Compensation Committee of the Board of Directors is comprised of seven
non-employee directors whose objectives are to approve the design, assess the
effectiveness of and administer compensation programs in support of the
compensation policies. The Compensation Committee also evaluates executive
performance and reviews and approves all salary arrangements and other
remuneration for the officer group.
Compensation Committee Philosophy
The Compensation Committee is committed to implementing and administering a
compensation program that supports and underscores AMCOL's mission and values.
The policies underlying the Compensation Committee's compensation decisions are
enumerated more fully below:
Compensation opportunities should strengthen AMCOL's ability to attract,
retain, and encourage the growth and development of the highest caliber
executive talent upon whose efforts the success of AMCOL largely depends.
A substantial portion of pay for senior executives should be comprised of
at-risk, variable compensation whose payout is dependent on the achievement
of specific corporate and individual performance objectives. In addition,
the at-risk components of pay will have a significant equity-based element
to ensure appropriate linkage between executive behavior and shareholder
interests.
The committee considers stock ownership by management to be an important
means of linking management's interests with those of shareholders.
Effective February 1999, AMCOL adopted stock ownership guidelines for its
corporate and subsidiary officers. The amount of stock required to be owned
increases with the level of responsibility of each executive, with the
Chief Executive Officer expected to own stock with a value of at least
equal to four times base salary. Shares that the executives have the right
to acquire through the exercise of stock options are not included in the
calculation of stock ownership for purposes of these guidelines. Executives
are expected to reach their respective stock ownership goals over a
three-year period.
Each compensation component targets pay opportunities at the median of
compensation paid to executives included in AMCOL's comparative
compensation peer group. AMCOL's comparative compensation group is not the
same as the companies that make up the peer group in the stock price
performance graph included in this proxy statement. In order to provide an
appropriate basis for compensation analysis, a group larger than the stock
price graph's peer group was used; note, however, that a significant number
of the peer group companies are included in the comparative compensation
group.
Components of Compensation
<PAGE>
AMCOL's total compensation program consists of several components, each of
which plays a role in supporting overall business goals and pay philosophy. In
assessing the competitiveness of AMCOL's senior executive compensation programs,
available salary data consisting of general manufacturing companies is used for
comparison purposes. Pay decisions are based upon pay data for comparable
positions. The total compensation program consists of base salary, annual
incentives and long-term incentives.
Base Pay
Base salaries are set at median levels (50th percentile) relative to
competitive market levels for comparable positions based upon available survey
data from general manufacturing and durable and nondurable goods manufacturing
industries. The Compensation Committee annually reviews each executive's base
salary and makes adjustments based upon levels of responsibility, breadth of
knowledge, internal equity issues, as well as market pay practices. Salary
adjustments are based primarily upon individual performance, which is evaluated
based on individual contributions to AMCOL.
As reflected in the Summary Compensation Table on Page ___, the Chief
Executive Officer's base salary was increased in 1999 by $25,000 (5.6%). In
arriving at Mr. Hughes' base salary, the Compensation Committee considered his
individual performance and his long-term contributions to the financial success
of AMCOL. The Committee also compared Mr. Hughes' base salary with the base
salaries of chief executive officers from appropriate salary surveys.
Annual Incentives
The Executive Incentive Compensation Plan, or the incentive plan,
underscores AMCOL's pay-for-performance philosophy by rewarding executives for
meaningful contributions toward predetermined financial performance goals. The
annual incentive opportunity for the Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer is based upon performance of AMCOL, as a
whole, compared to targets for return on capital and earnings per share. These
executives do not receive bonuses until AMCOL achieves a designated level of
return on capital and earnings per share. In the case of the other executives,
their bonus is determined pursuant to formulas tailored for each business
segment with an emphasis on the return on capital and earnings of the particular
business segment to which the executive devotes the majority of his time. The
Chief Executive Officer was paid a bonus of $712,500 for the 1999 financial
performance of AMCOL.
In connection with the proposed sale of AMCOL's SAP business, the
Compensation Committee has granted bonuses to certain of AMCOL's employees in
recognition of their contribution to the development and success of the SAP
business. These bonuses are contingent upon the closing of the sale of the SAP
business. John Hughes, our Chief Executive Officer was granted a bonus of
$_________. In addition, the following executive officers were also granted a
bonus in connection with the proposed sale of the SAP business: Lawrence E.
Washow, President and Chief Operating Officer, Paul G. Shelton, Senior
Vice-President and Chief Financial Officer,
<PAGE>
and Gary L. Castagna, Vice President of AMCOL and President of Chemdal
International Corporation. In addition, seven key employees of the SAP business
were granted bonuses. In order to be eligible to receive these bonuses, the
relevant employees may not terminate their employment with AMCOL prior to the
closing of the sale of the SAP business.
<PAGE>
Long-Term Incentives
Long-term incentives are provided annually in the form of incentive stock
options, or ISOs. Options under AMCOL's 1998 Long-Term Incentive Plan are
granted by the Compensation Committee. ISOs are granted at a price not less than
the fair market value of the common stock on the date of grant. Hence, the
options will only have value when and if the stock price appreciates above the
grant date price. ISOs are the only long-term incentive compensation vehicle
currently used by AMCOL.
The option program serves to focus executives on long-term shareholder
value creation and to foster an ownership mentality among the executive
management team. In keeping with AMCOL's commitment to provide a total
compensation package that focuses on at-risk pay components, long-term
incentives will continue to comprise a large portion of the value of an
executive's total compensation package. Currently, approximately 15% to 20% of
the value of total compensation is comprised of equity incentives.
When determining award sizes, the Compensation Committee considers the
executive's responsibility level, prior experience, historical award data and
ability to positively impact long-term shareholder value. The Compensation
Committee also strives to deliver market competitive long-term incentive award
opportunities to executives based on the dollar value of the award delivered.
In 1999, the Chief Executive Officer received options to purchase 25,000
shares with an exercise price of $9.00, as provided in the Option Grant Table on
Page __. The Compensation Committee believes the equity incentive program
provides a strong link between management behavior and shareholder interests.
Compensation Committee
Jay D. Proops, Chairman
Arthur Brown
Robert E. Driscoll, III
C. Eugene Ray
Clarence O. Redman
Dale E. Stahl
Audrey L. Weaver
Stock Performance Graph
The following graph sets forth a five-year comparison of cumulative total
returns for: AMCOL (which trades on The New York Stock Exchange); S&P SmallCap
600 Index; and a custom peer group of publicly traded companies, or the peer
group.
Using the assistance of consultants, AMCOL selected the peer group which
consists of companies whose businesses, sales sizes, market capitalization and
stock trading volumes were similar to that of AMCOL.
<PAGE>
All returns were calculated assuming dividend reinvestment on a quarterly
basis. The returns of each company in the peer group have been weighted
according to market capitalization.
The peer group consists of the following companies: Calgon Carbon
Corporation, ChemFirst, Inc., Lilly Industries Inc., McWhorter Technologies,
Inc., Mississippi Chemical Corporation, Oil-Dri Corporation of America and Zemex
Corporation.
Comparison of Five-Year Cumulative Total Return*
AMCOL, S&P SmallCap 600 and Self-Determined Peer Group
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
12/95 12/96 12/97 12/98 12/99
<S> <C> <C> <C> <C> <C>
AMCOL International 102.6 115.7 177.7 112.7 187.76
S&P SmallCap 129.9 157.6 197.8 195.2 219.16
Self-Determined Peer Group 116.1 133.5 135.2 109.6 86.1
</TABLE>
* Assumes $100 invested on December 31, 1994, in AMCOL International
Corporation CommonStock, S&P SmallCap 600 and Self-Determined Peer Group.
* Total return assumes reinvestment of dividends on a quarterly basis.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
A representative of KPMG LLP, AMCOL's independent certified public
accountants, will be present at the special meeting, will be afforded the
opportunity to make a statement, and will be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be included in AMCOL's proxy statement
and form of proxy relating to, and to be presented at, the annual meeting of
shareholders of AMCOL to be held in 2001, must be received by AMCOL on or before
December __, 2000.
If a shareholder intends to present a proposal at the 2001 annual meeting
of shareholders but does not seek inclusion of that proposal in AMCOL's proxy
statement for that meeting, such shareholder must deliver written notice of the
proposal to AMCOL in accordance with the requirements of AMCOL's By-Laws.
Generally, such proposals must be delivered to AMCOL between ___________, 2001
and ________, 2001. All proposals or notices should be directed to
<PAGE>
the Secretary of AMCOL at One North Arlington, 1500 West Shure Drive, Suite 500,
Arlington Heights, Illinois 60004-7803.
OTHER MATTERS
In addition to the business described above, there will be remarks by the
Chairman and Chief Executive Officer and a general discussion period during
which shareholders will have an opportunity to ask questions about AMCOL.
As of the date of this proxy statement, AMCOL's management knows of no
matter not specifically referred to above as to which any action is expected to
be taken at the special meeting. It is intended, however, that the persons named
as proxies will vote the proxies, insofar as they are not otherwise instructed,
regarding such other matters and the transaction of such other business as may
be properly brought before the meeting, as seems to them to be in the best
interest of AMCOL and its shareholders.
ADDITIONAL INFORMATION
AMCOL files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information that AMCOL files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information about the public reference rooms. Our
filings are also available from commercial document retrieval services and at
the Internet web site maintained by the SEC at http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this proxy
statement, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this proxy statement, except
for any information superseded by information contained directly in this proxy
statement. This proxy statement incorporates by reference AMCOL's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999, which contains
important information about us and our financial condition.
We are also incorporating by reference additional documents that we may
file with the SEC between the date of this proxy statement and the date of the
special meeting. These include periodic reports, such as Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
If you are a shareholder, you may have previously received some of the
documents incorporated by reference. You may still obtain copies of any of these
documents from AMCOL or the SEC or the SEC's Internet web site described above.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this proxy statement, by requesting them in writing or by telephone
from AMCOL at AMCOL International Corporation, One North Arlington, 1500 West
Shure Drive, Suite
<PAGE>
500, Arlington Heights, Illinois 60004-7803, Telephone: (847) 394-8730,
Attention: Investor Relations. Please request documents by April __, 2000 to
ensure receipt before the special meeting.
<PAGE>
By Order of the Board of Directors,
Clarence O. Redman
Secretary
Arlington Heights, Illinois
April __, 2000
AMCOL INTERNATIONAL CORPORATION
Special Meeting of Shareholders to be held on May ___, 2000
As a shareholder of AMCOL International Corporation (the "Company"), I
acknowledge receipt of Notice of Special Meeting and accompanying Proxy
Statement and appoint John Hughes, Lawrence E. Washow and Paul C. Weaver, or any
one of them, to vote all shares of stock of AMCOL International Corporation that
I am entitled to vote, at the special meeting of shareholders to be held on
___________, May ___, 2000, at 10:00 a.m., Chicago time, at _______________, and
any adjournment thereof.
1. To consider and vote upon a proposal to approve the sale by AMCOL of its
superabsorbent polymers business, or the SAP business, to BASF
Aktiengesellschaft, or BASF, pursuant to the terms of an Asset and Stock
Purchase Agreement dated November 22, 1999. The purchase agreement provides
for the transfer to BASF of the following:
- all of the shares of capital stock of AMCOL's indirect subsidiaries
Chemdal Corporation and Chemdal Asia Ltd.; and
- all other assets of AMCOL and its designated subsidiaries related
primarily to the SAP business.
FOR AGAINST ABSTAIN 2. To consider and vote upon a proposal to approve certain
amendments to AMCOL's 1993 Stock Plan and 1998 Long-Term Incentive Plan, or the
plan amendments. FOR AGAINST ABSTAIN THIS PROXY SHALL BE VOTED IN ACCORDANCE
WITH THE INSTRUCTIONS GIVEN, AND IN THE ABSENCE OF SUCH INSTRUCTIONS, SHALL BE
VOTED FOR EACH OF THE PROPOSALS. IF OTHER BUSINESS IS PRESENTED AT THE MEETING,
THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXIES ON
THOSE MATTERS.
This Proxy Is Solicited on Behalf of the Board of Directors
<PAGE>
You are urged to mark, sign and return your proxy promptly in the enclosed
self-addressed, postage-paid (if mailed in the United States) envelope.
Dated ________________, 2000
_________________________________________
SIGNATURE OF SHAREHOLDER
_________________________________________
SIGNATURE OF SHAREHOLDER
When signing the proxy, please date it and take care to have the
signature agree to the shareholder's name as it appears on this
side of the proxy. If shares are registered in the names of two
or more persons, each person should sign. Executors,
administrators, trustees and guardians should so indicate when
signing.
<PAGE>
CONTROL NUMBER VOTE BY TELEPHONE Call Toll Free On a Touch Tone
Telephone 1-888-___-____ There is NO CHARGE to you for this call.
The Board of Directors encourages you to use this inexpensive,
time saving method to vote.
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
You will be asked to enter a Control Number, which is located in the box on the
left side of this form.
Proposal 1: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1-
THANK YOU FOR VOTING.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1-
THANK YOU FOR VOTING.
If you vote by telephone, DO NOT mail back your proxy.
EXHIBIT 10.17
ASSET AND STOCK PURCHASE AGREEMENT
Between
AMCOL INTERNATIONAL CORPORATION
and
BASF AKTIENGESELLSCHAFT
Dated November 22, 1999
* An asterisk represents certain material which has been omitted pursuant to a
request for confidential treatment filed with the Securities and Exchange
Commission. Such omitted material has been filed separately with the SEC.
<PAGE>
TABLE OF CONTENTS
Section
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.01. Certain Defined Terms...............................................................................2
ARTICLE II
PURCHASE AND SALE
2.01. Purchase and Sale of the Shares....................................................................13
2.02. Assets to be Sold..................................................................................13
2.03. Assumption and Exclusion of Liabilities............................................................15
2.04. Purchase Price; Allocation of Purchase Price.......................................................17
2.05. Closing............................................................................................18
2.06. Closing Deliveries by Parent.......................................................................18
2.07. Closing Deliveries by the Purchaser................................................................18
2.08. Statement of Working Capital.......................................................................19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
3.01. Organization, Authority and Qualification of the Sellers...........................................21
3.02. Organization, Authority and Qualification of the Company and SAP Thai..............................21
3.03. Capital Stock of the Company and SAP Thai; Ownership of the Shares.................................22
3.04. Corporate Books and Records........................................................................23
3.05. No Conflict........................................................................................23
3.06. Governmental Consents and Approvals................................................................23
3.07. Financial Statements...............................................................................23
3.08. No Undisclosed Liabilities.........................................................................24
3.09. Receivables........................................................................................24
3.10. Inventories........................................................................................25
3.11. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions..........................................................................25
3.12. Litigation.........................................................................................27
3.13. Compliance with Laws...............................................................................28
3.14. Environmental Matters..............................................................................28
3.15. Material Contracts.................................................................................30
3.16. Intellectual Property..............................................................................31
3.17. Real Property......................................................................................34
3.18. Tangible Personal Property.........................................................................36
3.19. Assets.............................................................................................37
3.20. Employee Benefit Matters...........................................................................37
3.21. Labor Matters......................................................................................42
<PAGE>
Section Page
3.22. Key Employees......................................................................................43
3.23. Taxes..............................................................................................43
3.24. Insurance..........................................................................................45
3.25. Brokers............................................................................................47
3.26. Disclaimer.........................................................................................47
3.27. Disclosure Schedule................................................................................47
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01. Organization and Authority of the Purchaser........................................................47
4.02. No Conflict........................................................................................48
4.03. Governmental Consents and Approvals................................................................48
4.04. Investment Purpose.................................................................................48
4.05. Litigation.........................................................................................48
4.06. Purchaser Financial Statements.....................................................................49
4.07. Brokers............................................................................................49
4.08. Disclaimer.........................................................................................49
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business Prior to the Closing...........................................................49
5.02. Access to Information..............................................................................50
5.03. Confidentiality....................................................................................51
5.04. Stockholders' Meeting..............................................................................51
5.05. Proxy Statement....................................................................................52
5.06. Regulatory and Other Authorizations; Notices and Consents..........................................52
5.07. Notice of Developments.............................................................................54
5.08. No Solicitation or Negotiation.....................................................................54
5.09. Use of Intellectual Property.......................................................................55
5.10. Non-Competition....................................................................................56
5.11. Release of Indemnity Obligations...................................................................57
5.12. Termination of Intercompany Agreements.............................................................57
5.13. Transition Services Agreement......................................................................57
5.14. CETCO Supply Agreement.............................................................................58
5.15. Acrylic Acid Supply Agreement......................................................................58
5.16. License Agreement..................................................................................58
5.17. SAP Subleases......................................................................................58
5.18. Product/Material Rebates...........................................................................58
5.19. ION Exchange License Agreement.....................................................................58
5.20. Mixed-Use Assets...................................................................................58
5.21. Termination of SAP Indebtedness....................................................................59
<PAGE>
Section Page
5.22. Termination of the Celanese Supply Agreement.......................................................59
5.23. Uncashed Cheques...................................................................................59
5.24. Access to Insurance................................................................................59
5.25. Patent Opinions....................................................................................60
5.26. Thai Facility......................................................................................60
5.27. * Obligations......................................................................................60
5.28. * Regional Assistance Grants.......................................................................60
5.29. Thai Facility Construction Contracts...............................................................61
5.30. Further Action.....................................................................................61
ARTICLE VI
EMPLOYEE MATTERS
6.01. Transferred Employees..............................................................................61
6.02. Severance Obligations..............................................................................61
6.03. Employee Benefit Plans.............................................................................62
6.04. Pension Plans......................................................................................63
6.05. U.S. Employee Information..........................................................................64
6.06. Workers' Compensation Obligation for U.S. Transferred Employees....................................64
6.07. Provisions Relating to U.K. Employees..............................................................64
6.08. Provisions Relating to Thai Employees..............................................................65
6.09. Retained Obligations of Parent.....................................................................65
6.10. Employee Stock Options.............................................................................66
ARTICLE VII
TAX MATTERS
7.01. Indemnity..........................................................................................67
7.02. Returns and Payments...............................................................................68
7.03. Contests...........................................................................................69
7.04. Time of Payment....................................................................................70
7.05. Cooperation and Exchange of Information............................................................70
7.06. Conveyance Taxes...................................................................................71
7.07. Section 338 Election...............................................................................71
7.08. Miscellaneous......................................................................................72
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions to Obligations of Parent................................................................73
8.02. Conditions to Obligations of the Purchaser.........................................................74
<PAGE>
Section Page
ARTICLE IX
INDEMNIFICATION
9.01. Survival of Representations and Warranties.........................................................77
9.02. Indemnification by Parent..........................................................................77
9.03. Indemnification by the Purchaser...................................................................80
9.04. Indemnification Procedures.........................................................................81
9.05. Limits on Indemnification..........................................................................82
9.06. Waiver of Other Remedies...........................................................................83
ARTICLE X
TERMINATION AND WAIVER
10.01. Termination........................................................................................83
10.02. Effect of Termination..............................................................................85
10.03. Fees and Expenses..................................................................................85
ARTICLE XI
GENERAL PROVISIONS
11.01. Expenses...........................................................................................86
11.02. Notices............................................................................................86
11.03. Public Announcements...............................................................................87
11.04. Headings...........................................................................................88
11.05. Severability.......................................................................................88
11.06. Entire Agreement...................................................................................88
11.07. Assignment.........................................................................................88
11.08. Third Party Beneficiaries..........................................................................88
11.09. Amendment..........................................................................................88
11.10. Waiver.............................................................................................88
11.11. Governing Law......................................................................................89
11.12. Counterparts.......................................................................................89
11.13. Specific Performance...............................................................................89
</TABLE>
<PAGE>
EXHIBITS
Exhibit 1.01 - Other Sellers
Exhibit 1.01(a) - SAP Thai Shareholders
Exhibit 1.01(b) - Executive Officers of the Other Sellers
Exhibit 1.01(c) - Managers/Persons with Knowledge
Exhibit 1.01(d) - SAP Real Property
Exhibit 1.01(e) - Thai Recordings
Exhibit 2.04(b) - Purchase Price Allocation
Exhibit 2.08 - Working Capital
Exhibit 5.02 - Access to Information
Exhibit 5.10(c) - Certain Employees
Exhibit 5.11 - Release of Indemnity Obligations
Exhibit 5.12 - Continuing Intercompany Agreements
Exhibit 5.13 - Transition Services Agreement
Exhibit 5.14 - CETCO Supply Agreement
Exhibit 5.15 - Acrylic Acid Supply Agreement
Exhibit 5.16 - License Agreement
Exhibit 5.17 - SAP Subleases
Exhibit 5.19 - ION Exchange License Agreement
Exhibit 5.26 - Definition of Mechanically Complete
Exhibit 5.27 - * Obligations
<PAGE>
ASSET AND STOCK PURCHASE AGREEMENT dated November 22, 1999 between AMCOL
International Corporation, a Delaware corporation ("Parent"), and BASF
Aktiengesellschaft, a corporation organized under the laws of Germany (the
"Purchaser").
W I T N E S S E T H:
WHEREAS, Parent and its Subsidiaries (as defined herein) have been and are
engaged in various businesses, including, without limitation, the business of
researching, developing, manufacturing, marketing, distributing, supplying and
selling Superabsorbent Polymers (as defined herein) and other products
comprising Superabsorbent Polymers (such business being, the "SAP Business") (it
being understood and agreed that the SAP Business does not include the Poly-Pore
Business (as defined herein));
WHEREAS, the Purchaser wishes to acquire the SAP Business conducted by
Parent, its subsidiaries, Chemdal Corporation, a Delaware corporation (the
"Company"), and Chemdal Asia Ltd. (Thailand), a Thai corporation ("SAP Thai"),
and the other sellers listed on Exhibit 1.01 hereto (such other sellers listed
on Exhibit 1.01 being, the "Other Sellers"; and the Other Sellers together with
Parent being, the "Sellers"; any of the Sellers individually being, a "Seller");
WHEREAS, Chemdal International Corporation, a Delaware corporation and
wholly owned subsidiary of Parent ("Chemdal International Sub"), owns all of the
issued and outstanding shares (the "Company Shares") of common stock, $0.01 par
value per share (the "Company Common Stock"), of the Company;
WHEREAS, Chemdal Holdings B.V., a Netherlands corporation and wholly owned
subsidiary of Parent ("Chemdal Netherlands Sub"), and the Persons listed on
Exhibit 1.01(a) hereto own all of the issued and outstanding ordinary shares of
SAP Thai (the "Thai Shares"; and the Thai Shares together with the Company
Shares being, the "Shares");
WHEREAS, Parent wishes to sell, and to cause the Other Sellers to sell, to
the Purchaser, and the Purchaser wishes to purchase from Parent and the Other
Sellers, the SAP Business and the Shares, as applicable, upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Purchaser and Parent hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms (a) As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration or proceeding by or
before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"After-Tax Basis" means, with respect to any payment to be received or
accrued by any Person, the amount of such payment supplemented by a further
payment or payments (which will be payable simultaneously with the initial
payment or, in the event that Taxes resulting from the receipt or accrual of
such initial payment are not payable for the year of receipt or accrual, at the
time or times that such Taxes become payable) so that the sum of all such
initial and supplemental payments, after deduction of all Taxes imposed by any
taxing authority in respect of or
<PAGE>
attributable to the receipt or accrual of such initial and supplemental payments
(whether or not such Taxes are payable for the year of receipt or accrual), and
after taking into account the net present value of any Tax benefit realized by
such Person with respect to the loss or other amount that gave rise to such
initial payment (using a discount rate of 10%), will be equal to the amount of
the initial payment to be so received or accrued.
"Agreement" or "this Agreement" means this Asset and Stock Purchase
Agreement dated November 22, 1999 between Parent and the Purchaser (including
the Exhibits hereto and the Disclosure Schedule) and all amendments hereto made
in accordance with the provisions of Section 11.09.
"Assumption Agreements" means the Assumption Agreements to be executed by
the Purchaser or certain of its designated Affiliates on the Closing Date.
"Bills of Sale" means the Bill of Sale to be executed by Parent, the Bill
of Sale to be executed by Chemdal Limited (U.K.), a United Kingdom corporation
and a wholly owned Subsidiary of Parent ("Chemdal U.K."), and the Bills of Sale
to be executed by any other Persons selling assets to the Purchaser or its
designated Affiliates hereunder, in each case, on the Closing Date; which Bills
of Sale shall be consistent in all respects with, and will not impose any
liabilities or obligations other than those imposed by, this Agreement or any
applicable Law.
"Board" means the board of directors of Parent or the executive board of
directors of the Purchaser, as applicable.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by Law to be closed in The City of New
York.
"Business Intellectual Property" means all Intellectual Property in and to
which any Seller holds, or has a right to hold, any right, title or interest,
and all Intellectual Property licensed or sublicensed to a Seller from a third
party, in each case, used primarily in, developed primarily for, or relating
primarily to, the SAP Business, including the ION Exchange Intellectual
Property.
"Code" means the Internal Revenue Code of 1986, as amended through the date
hereof.
"Company Intellectual Property" means all Intellectual Property in and to
which the Company holds, or has a right to hold, any right, title or interest,
and all Intellectual Property licensed or sublicensed to the Company from a
third party, in each case, used primarily in, developed primarily for, or
relating primarily to, the SAP Business, including the ION Exchange Intellectual
Property.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Disclosure Schedule" means the Disclosure Schedule attached hereto, dated
as of the date hereof, and forming a part of this Agreement.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and Tax liens), charge,
encumbrance, written adverse claim, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership,
except for any Encumbrance arising from the transactions contemplated by this
Agreement or any action by the Purchaser.
"Environment" means surface waters, groundwater, surface water sediment,
soil, subsurface strata, ambient air and any other environmental medium.
<PAGE>
"Environmental Claims" means any and all Actions, suits, demands, demand
letters, claims, liens, notices of non-compliance or violation, notices of
liability or potential liability, investigations, proceedings, consent orders or
consent agreements relating in any way to any Environmental Law, any
Environmental Permit or any Hazardous Material or arising as a result of the
presence of gases occurring naturally, geologically or otherwise.
"Environmental Law" means any applicable Law, rule or regulation, in each
case in effect and as amended as of the Closing, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
Environment, health, safety or natural resources or to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials; provided, however, that the term Environmental Law shall also include
the U.K. Environment Act of 1995, as amended.
"Environmental Permit" means any permit (or permit application pursuant to
which comparable operations may be conducted in compliance with Environmental
Law), approval, identification number, license or other written authorization
required to operate the SAP Business or the SAP Real Property under any
applicable Environmental Law.
"Governmental Authority" means any United States federal, state or local or
any non-U.S. government, governmental, regulatory or administrative authority,
state enterprise, agency or commission or any court, tribunal, or judicial or
arbitral body.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" means (a) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls, and (b) any other chemicals, materials
or substances regulated as toxic or hazardous or as a pollutant, contaminant or
solid waste, in each case, as regulated under any applicable Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, (a) all indebtedness of
such Person, whether or not contingent, for borrowed money, (b) all obligations
of such Person for the deferred purchase price of property or services, (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of Parent or lender
under such agreement in the event of default are limited to repossession or sale
of such property), (e) all obligations of such Person as lessee under leases
that have been or should be, in accordance with U.S. GAAP, recorded as capital
leases, (f) all obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities, (g) all Indebtedness of
others referred to in clauses (a) through (f) above guaranteed directly or
indirectly in any manner by such Person, and (h) all Indebtedness referred to in
clauses (a) through (f) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Encumbrance on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness.
"Indemnified Products" means any Superabsorbent Polymer (i) manufactured
prior to the Closing Date by the Sellers, SAP Thai or the Company, and/or (ii)
manufactured subsequent to the Closing Date by the Purchaser in the same manner
as manufactured by the Sellers, SAP Thai or the Company prior to the Closing
Date; provided, however, that (A) Indemnified Products shall also include any
Superabsorbent Polymers that are not manufactured in the same manner as
manufactured by the Sellers, SAP Thai or the Company prior to the Closing Date
to the extent any difference between the method of manufacture (including
processes and ingredients) employed by a Purchaser Indemnified Party after the
Closing Date and the method of manufacture used by the Sellers, SAP Thai or the
Company prior to the Closing Date is not the cause of infringement, and (B)
Indemnified Products shall not include any Superabsorbent Polymers (whether or
not evaluated by Parent and/or one of the Sellers) (x) manufactured by the
Purchaser prior to the Closing Date, or (y) manufactured by the Purchaser after
the Closing Date to the extent
<PAGE>
that such products and processes are not directly related to the SAP Business
acquired by the Purchaser and its designated Affiliates pursuant to this
Agreement.
"Intellectual Property" means United States, international, and non-U.S.
(i) patents and patent applications, (ii) registered and unregistered trademarks
and service marks, including, without limitation, the goodwill associated
therewith, (iii) registered and unregistered copyrights, and (iv) confidential
and proprietary information, including, without limitation, trade secrets and
know-how.
"Inventories" means all inventory, merchandise, finished goods,
work-in-progress, raw materials, repair parts and supplies maintained, held or
stored for use in the SAP Business by or on behalf of the Company, SAP Thai or
the Sellers and any prepaid deposits for any of the same.
"ION Exchange Intellectual Property" means the following patent
applications, together with any patents issuing therefrom, including all
divisionals, continuations, continuations-in-part, reissues, reexaminations, and
global counterparts thereto, together with the proprietary information,
know-how, trade secrets, data, processes and formulae relating to the claimed
subject matter described therein, existing as of the Closing Date: *
"IRS" means the Internal Revenue Service of the United States.
"Law" means any federal, state, local or non-U.S. statute, law, ordinance,
regulation, rule, code, order, other requirement or rule of law.
"Liabilities" means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined or
determinable, including, without limitation, those arising under any Law
(including, without limitation, any Environmental Law), Action, investigation or
Governmental Order and those arising under any contract, agreement, commitment
or undertaking.
"Licensed Intellectual Property" means all Seller Intellectual Property
licensed to the Purchaser or one or more of its designated Affiliates pursuant
to Section 5.16 of this Agreement.
"Material Adverse Effect" means any change or effect that (i) is reasonably
likely to be materially adverse to the business, financial condition or results
of operations of the SAP Business, taken as a whole, or (ii) when taken together
with all other adverse changes, effects or exceptions that are within the scope
of the representations and warranties made by the Sellers in this Agreement and
which are not individually deemed to have a Material Adverse Effect, is
reasonably likely to be materially adverse to the business, financial condition
or results of operations of the SAP Business, taken as a whole, other than any
change, effect, event or occurrence to the extent arising from or relating to
(x) actions taken pursuant to the obligations of the parties expressly set forth
in this Agreement, or (y) the United States, the global economy or the
securities market in general, or the Superabsorbent Polymer industry in general;
provided, however, that the SAP Business, taken as a whole, is not materially
disproportionately affected, as compared to other Persons engaged in such
industry, by such change, effect, event or occurrence.
"* Patents" means any patent claiming priority from *, together with all
worldwide counterparts thereto, including continuations, continuations-in-part,
divisionals, reissues and reexaminations thereof, issued either (i) as of the
Closing Date or (ii) after the Closing Date, provided that the claim of any
patent that issued after the Closing Date which forms the basis of any
infringement claim or assertion of infringement against a Purchaser Indemnified
Party is not broader in scope (in respect of a material claim limitation) than
any claim of any patent claiming priority from the * issued as of the Closing
Date.
"Offsite Environmental Liabilities" means any Liabilities pursuant to
Environmental Law that arise from the transportation, or arrangement thereof, on
or before the Closing Date, of any Hazardous Material generated at SAP Real
Property to a site not at any time owned or operated by the Company, SAP Thai,
the Sellers (with respect to the SAP Business) or the SAP Business for the
purpose of disposal of such Hazardous Material at such site; provided, however,
that such term shall not mean the Release of any Hazardous Material from the SAP
Real Property
<PAGE>
or any other property at any time owned or operated by the Company, SAP Thai,
the Sellers (with respect to the SAP Business) or the SAP Business to any area
surrounding or in the vicinity of such property.
"Parent's Accountants" means KPMG LLP, the independent accountants of
Parent.
"Parent's Knowledge" means the actual knowledge of (i) any of the executive
officers of Parent who will not become employees of Purchaser or its Affiliates
following the Closing pursuant to this Agreement, and (ii) any of the executive
officers of the Other Sellers listed on Exhibit 1.01(b) attached hereto who will
not become employees of Purchaser or its Affiliates following the Closing
pursuant to this Agreement, in each case, after making due inquiry of the
Persons listed on Exhibit 1.01(c) attached hereto.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for Taxes, assessments and governmental charges or
levies not yet due and payable (i) which are not in excess of $50,000 in the
aggregate or (ii) which are disclosed in the Agreement, disclosed or reflected
on the Financial Statements (as defined below) or included in the Disclosure
Schedule; (b) Encumbrances imposed by Law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens and other similar liens arising in
the ordinary course of business securing obligations that (x) are not overdue
for a period of more than 30 days and (y) are not in excess of $25,000 in the
case of a single property or $150,000 in the aggregate at any time or are
disclosed in the Agreement, disclosed or reflected on the Financial Statements
(as defined below) or included in the Disclosure Schedule; (c) pledges or
deposits to secure obligations under workers' compensation Laws or similar
legislation or to secure public or statutory obligations; and (d) minor survey
exceptions, reciprocal easement agreements and other customary encumbrances on
title to real property that (i) were not incurred in connection with any
Indebtedness, (ii) do not render title to the property encumbered thereby
unmarketable and (iii) do not, individually or in the aggregate, materially
adversely affect the use of such property in the manner being currently utilized
by Parent.
"Person" means any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity, as well as any syndicate or
group that would be deemed to be a person under Section 13(d)(3) of the Exchange
Act.
"Poly-Pore Business" means the business of researching, developing,
manufacturing, marketing, distributing, supplying and selling of microporus, oil
and/or water sorbent polymers capable of entrapping solids and liquids, wherein
such polymers, their method of manufacture or use meet all of the limitations of
one or more claims of U.S. Patent Nos. 5,677,407; 5,830,967; 5,837,790;
5,608,005; 5,777,054; 5,712,358; 5,834,577; 5,830,960; 5,955,552; and
divisionals, continuations, continuations-in-part, reissues, and global
counterparts thereto (collectively being, the "Poly-Pore Patents"), including
the Poly-Pore Patents and the proprietary information, know-how, trade secrets,
data, processes, and formulae relating to the claimed subject matter described
in the Poly-Pore Patents.
"Purchase Price Bank Account" means a bank account in the United States to
be designated by Parent in a written notice to the Purchaser at least five
Business Days before the Closing.
"Purchaser's Accountants" means Deloitte & Touche LLP, the independent
accountants of the Purchaser.
"Receivables" means any and all accounts receivable, notes and other
amounts receivable from third parties, including, without limitation, customers,
arising from the conduct of the SAP Business before the Closing Date, whether or
not in the ordinary course, together with all unpaid financing charges accrued
thereon; provided, however, that the term shall not include any rights to
refunds for Taxes for any period, or any portion of any period, ending on or
prior to the Closing Date.
"Regulations" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
any Hazardous Materials into or upon any land or water or air or otherwise into
the Environment in a manner subject to regulation under the Environmental Laws.
<PAGE>
"Remco Businesses" means any of the businesses conducted by Parent and its
Subsidiaries, other than the SAP Business.
"Remedial Action" means any investigation, assessment, monitoring,
treatment, excavation, removal, remediation or cleanup of Hazardous Materials in
the Environment.
"SAP Opinion" means any patent opinion prepared by counsel to Parent or its
Affiliates prior to Closing which relates to the Business Intellectual Property,
the Company Intellectual Property or the SAP Thai Intellectual Property.
"SAP Real Property" means the real property used in the SAP Business and
described in Exhibit 1.01(d) attached hereto.
"SAP Thai Intellectual Property" means all Intellectual Property in and to
which SAP Thai holds, or has a right to hold, any right, title or interest, and
all Intellectual Property licensed or sublicensed to SAP Thai from a third
party, in each case, used primarily in, developed primarily for, or relating
primarily to, the SAP Business, including the ION Exchange Intellectual
Property.
"Seller Intellectual Property" means all Intellectual Property in and to
which any Seller holds, or has a right to hold, any right, title and interest,
and all Intellectual Property licensed or sublicensed to a Seller, in each case,
other than the Business Intellectual Property.
"Sellers' Accountants" means KPMG LLP, the independent accountants of
Parent.
"Stock Option Plans" means, collectively, Parent's 1983 Incentive Stock
Option Plan, 1987 Non-Qualified Stock Option Plan (as amended and restated
effective as of January 1, 1993), 1993 Stock Option Plan and 1998 Long-Term
Incentive Stock Option Plan, and the Chemdal U.K. 1995 Share Option Scheme.
"Subsidiaries" means, with respect to any Person, any and all corporations,
partnerships, joint ventures, associations and other entities a majority of
whose outstanding voting interests or other equity securities are owned by such
Person, directly or indirectly through one or more Subsidiaries.
"Superabsorbent Polymers" means, lightly cross linked, organic, polymeric
materials capable of absorbing more than ten (10) times their own weight of a
standard sodium chloride solution under conditions which are specified in
Standard 440.199 of the European Disposable and Nonwovens Association which have
been evaluated by Parent and/or the Sellers for potential use in any Traditional
SAP Market Segments.
"Superior Proposal" means any Acquisition Proposal on terms which Parent's
Board determines, in its good faith judgment (after having received the advice
of a financial adviser of nationally recognized reputation), to be more
favorable to Parent and its stockholders than the transaction contemplated by
this Agreement and for which financing, to the extent required, is then
committed or, in the good faith judgment of Parent's Board, based upon the
written advice of its financial adviser, is reasonably capable of being obtained
by the third party bidder.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any government or taxing authority or arising under any tax law or
tax indemnity or tax sharing agreement, including, without limitation: taxes or
other charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges.
"Thai Facility Construction Contracts" means the various construction
contracts listed on Section 3.15 of the Disclosure Schedule entered into prior
to the Closing between SAP Thai or its Affiliates, on the one hand, and certain
third parties, on the other hand, which relate to the construction of the Thai
Facility.
<PAGE>
"Thai Recordings" means the recordings set forth on Exhibit 1.01(e).
"Traditional SAP Market Segments" means disposable hygienics (such as
diapers, adult incontinence products, and feminine care products), cable wraps,
fire retardants, freezer packs and food packaging liquid absorption.
"Transaction Agreements" means the Bills of Sale, the Assumption
Agreements, the Transition Services Agreement, the License Agreement, the Ion
Exchange License Agreement, the CETCO Supply Agreement, the Acrylic Acid Supply
Agreement and the SAP Subleases.
"Transaction Intellectual Property" means the Business Intellectual
Property, the Company Intellectual Property, the SAP Thai Intellectual Property
and the Licensed Intellectual Property.
"* Assistance Grants" means (i) the regional financial assistance grant in
the amount of * evidenced by a letter dated * from the * and (ii) the regional
financial assistance grant in the amount of * evidenced * from the *.
"U.S. GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently throughout
the periods involved.
b) The following terms have the meaning set forth in the
Sections set forth below:
Defined Term Location of Definition
Acquisition Proposal 5.08
Acrylic Acid Supply Agreement 5.15
Adjusted Statement of Working Capital 2.08(b)(ii)
Allocation 7.07(b)
Assumed Liabilities 2.03(a)
Celanese Agreement 5.22
CETCO Supply Agreement 5.14
Chemdal International Sub Recitals
Chemdal Names 5.09(a)
Chemdal Netherlands Sub Recitals
Chemdal U.K. 1.01
Closing 2.05
Closing Date 2.05
COBRA Benefits 6.03(c)
Company Recitals
Company Common Stock Recitals
Company Shares Recitals
Confidentiality Agreement 5.03
Continuing Intercompany Indebtedness 2.04(c)
ERISA 3.20(a)
Exchange Act 5.05(a)
Excluded Assets 2.02(b)
Excluded Liabilities 2.03(b)
Expenses 10.03(b)
FAS No. 87 3.20(i)
Fee 10.03(a)
Financial Statements 3.07
Foreign Benefit Plan 3.20(i)
<PAGE>
Indemnified Party 9.04
Indemnifying Party 9.04
Independent Accounting Firm 2.08(b)(ii)
ION Exchange License Agreement 5.19
License Agreement 5.16
Licensed Transaction Intellectual Property 3.16(a)
Loss 9.02
Loss Event 5.24
Material Contracts 3.15(a)
Multiemployer Plan 3.20(b)
Multiple Employer Plan 3.20(b)
* Application 1.01
Other Sellers Recitals
Owned Transaction Intellectual Property 3.16(b)
Parent Preamble
Plans 3.20(a)
Poly-Pore Patents 1.01(a)
Proxy Statement 5.05(a)
Purchase Price 2.04(a)
Purchaser Preamble
Purchaser Defined Contribution Plan 6.04
Purchaser Indemnified Party 9.02
Purchaser Objection 2.08(b)(ii)
Purchaser's Scheme 6.07(e)
Rebates 5.18
Restricted Period 5.10(a)
Returns 7.02(a)
SAP Assets 2.02(a)
SAP Business Recitals
SAP Subleases 5.17
SAP Thai Recitals
SEC 5.05(a)
Seller Recitals
Seller Defined Benefit Plan 6.04
Seller Defined Contribution Plan 6.04
Seller Indemnified Party 9.03(a)
Seller Pension Plans 6.04
Sellers Recitals
Shares Recitals
Signing Premium 2.04(a)
Statement of Working Capital 2.08(a)
Stock Option 6.10(a)
Stockholders' Meeting 5.04
Substituted Stock Option 6.10(b)(i)
Tangible Personal Property 3.18(a)
Terminating Purchaser Breach 10.01(c)
Terminating Sellers' Breach 10.01(b)
Thai Facility 8.02(r)
Thai Shares Recitals
Thai Transferred Employee 6.08(a)
Third Party Claims 9.04
Transfer Laws 6.07(b)
Transferred Assets 3.19(a)
<PAGE>
Transferred Employee 6.01
Transition Services Agreement 5.13
U.K. Designated Employee 6.07(a)
U.K. Regulations 6.07(d)
Unpaid SAP Cheques 5.23
Unvested Stock Option 6.10(b)(i)
U.S. Transferred Employees 6.03(a)
WARN 3.20(h)
Working Capital 2.08(a)
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and subject
to the conditions of this Agreement, at the Closing, Parent shall cause the sale
of the Shares to the Purchaser or one or more of its designated Affiliates, and
the Purchaser or one or more of such designated Affiliates shall purchase the
Shares.
SECTION 2.02. Assets to be Sold. (a) On the terms and subject to the
conditions of this Agreement, Parent shall, and shall cause the Other Sellers
to, on the Closing Date, sell, assign, transfer, convey and deliver to the
Purchaser or one or more of the Purchaser's designated Affiliates, and the
Purchaser or one or more of such designated Affiliates shall purchase from the
Sellers, on the Closing Date, all the assets, properties, goodwill and business
of every kind and description and wherever located, whether tangible or
intangible, real, personal or mixed, directly or indirectly owned by the Sellers
or to which they are directly or indirectly entitled and, in any case, belonging
to or used or intended to be used primarily in the SAP Business or primarily
related to the SAP Business, other than the Excluded Assets (the assets to be
purchased by the Purchaser and its designated Affiliates being referred to as
the "SAP Assets"), including, without limitation, the following:
(i) the SAP Business as a going concern;
(ii) all the SAP Real Property;
(iii) all furniture, fixtures, equipment, machinery and
other tangible personal property used or held for use by
the Sellers at the locations at which the SAP Business is
conducted, or otherwise owned or held by a Seller at the
Closing Date for use in the conduct of the SAP Business and
not otherwise included in clause (ii) above;
(iv) all Inventories;
(v) all Receivables;
(vi) all books of account, general, financial, tax and
personnel records, invoices, shipping records, supplier
lists, correspondence and other documents, records and files
and all computer software and programs and any rights thereto
owned by, primarily associated with, primarily used in, or
primarily relating to, the SAP Business at the Closing Date,
other than organization documents, minute and stock record
books and the corporate seal of each of the Sellers;
(vii) all the Sellers' right, title and interest in, to and
under the Business Intellectual Property;
(viii) all claims, causes of action, choses in action,
rights of recovery and rights of set-off of any kind
(including rights to insurance proceeds and rights under and
pursuant to all warranties, representations and guarantees
made by suppliers of products, materials or equipment, or
components thereof) primarily relating to the SAP Business;
(ix) all sales and promotional literature, customer lists
and other sales-related materials owned by or primarily used,
associated with or employed by the Sellers in the SAP Business
at the Closing Date;
<PAGE>
(x) all rights of the Sellers under all contracts,
licenses, sublicenses, agreements, leases, commitments, and
sales and purchase orders, and under all commitments, bids and
offers (to the extent such offers are transferable) primarily
relating to the SAP Business;
(xi) all municipal, state and federal franchises, permits,
licenses, agreements, waivers and authorizations primarily
held or used by the Sellers in connection with, or required
for, the SAP Business, to the extent transferable;
(xii) all refunds of any Taxes relating to any period, or
any portion of any period, ending on or prior to the Closing
Date to the extent any such refunds are reflected on the
Statement of Working Capital; and
(xiii) all the Sellers' right, title and interest on the
Closing Date in, to and under all other assets, rights and
claims of every kind and nature primarily used or intended to
be primarily used in the operation of the SAP Business or
located on the SAP Real Property.
(b) The SAP Assets shall exclude the following assets
owned by the Sellers (the "Excluded Assets"):
(i) all cash, cash equivalents and bank accounts owned by
the Sellers at the Closing Date;
(ii) all rights of the Sellers under this Agreement;
(iii) except as otherwise provided in this Agreement, all
assets and properties of every kind and description and
wherever located, directly or indirectly, owned or held for
use by the Sellers and not primarily related to, or primarily
used in the conduct of, the SAP Business including, without
limitation, all of the assets and business of Parent and its
Subsidiaries used or intended to be used primarily in the
Poly-Pore Business;
(iv) the name "AMCOL" and all related trademarks, logos,
tradenames, telephone numbers and internet domain names;
(v) all of the Sellers' right, title and interest to an
under the Seller Intellectual Property;
(vi) the right of the Seller to receive refunds of any
Taxes relating to any period, or any portion of any period,
ending on or prior to the Closing Date, except to the extent
any such refunds are reflected on the Statement of Working
Capital; and
(vii) the right to receive any rebates and other refunds
arising in connection with amounts paid by Parent and its
Affiliates to the Purchaser and its Affiliates prior to the
Closing pursuant to any materials supply agreements between
the parties or their Affiliates.
SECTION 2.03. Assumption and Exclusion of Liabilities. (a) On the terms and
subject to the conditions of this Agreement, the Purchaser or one of its
designated Affiliates shall, on the Closing Date, assume and shall pay, perform
and discharge when due all debts, obligations, contracts, commitments,
agreements and liabilities of the Sellers, of every kind and description
primarily related to the conduct of the SAP Business and arising by reason of
actions or events occurring on or before the Closing Date, whether or not
existing on the Closing Date, and whether absolute or contingent, matured or
unmatured, or known or unknown, except for the Excluded Liabilities (as defined
below) (the "Assumed Liabilities").
(b) The Purchaser and its designated Affiliates, as applicable, shall not
assume or have any responsibility for any debts, obligations, contracts,
commitments, agreements or liabilities of the Sellers of any kind or description
not primarily related to the conduct of the SAP Business (the "Excluded
Liabilities"). The Sellers shall
<PAGE>
retain, and shall be responsible for paying, performing and discharging when due
(provided that nothing herein shall preclude Parent from contesting or disputing
any such Excluded Liabilities) all of the Excluded Liabilities, including,
without limitation:
(i) all Taxes now or hereafter owed by the Sellers, or attributable to
the SAP Assets or the SAP Business, to the extent relating to any period,
or any portion of any period, ending on or prior to the Closing Date
(excluding, for purposes of clarification, any conveyance Taxes subject to
Section 7.06 hereof, which shall be shared by the parties in the manner set
forth therein);
(ii) all Liabilities (including Taxes) relating to or arising out of
the Excluded Assets or the Remco Businesses;
(iii) all Liabilities arising from or relating to the employment or
termination of employment of any Transferred Employee or U.K. Designated
Employee prior to the Closing Date (including, without limitation, any
Liabilities arising under any Plan or other compensation program,
arrangement or agreement of the Sellers, the Company or SAP Thai except to
the extent otherwise provided in this Agreement);
(iv) any Indebtedness for borrowed money other than the Continuing
Intercompany Indebtedness;
(v) all debts, Liabilities and obligations of the Sellers related to,
or arising out of, the conduct of the SAP Business prior to the Closing
Date to the extent that the existence of such Liability or obligation
constitutes a breach by the Sellers of any of their representations and
warranties in this Agreement;
(vi) any Liabilities of, or retained by, the Sellers under this
Agreement;
(vii) any and all Liabilities or Losses suffered or incurred by the
Sellers or the SAP Business, including by reason of or in connection with
any claim or cause of action of any third party, to the extent arising out
of any action, inaction, event, condition, liability or obligation of the
Remco Businesses occurring or existing before or after the Closing Date;
(viii) except for Offsite Environmental Liabilities, and the
obligations of the Purchaser as described in Exhibit 5.27 attached hereto
with respect to the specific condition described therein, any and all
Losses or Liabilities pursuant to any Environmental Law, or related to
gases occurring naturally, geologically or otherwise, in each case, arising
from or related to any action, event, circumstance or condition related to
the SAP Business and occurring or existing on or before the Closing Date,
including, without limitation, (A) any Release of Hazardous Materials into
the Environment at, to or from the SAP Real Property or any property
formerly owned or operated in connection with the SAP Business, in each
case on or prior to the Closing (and any additional migration of such
Release after the Closing Date) to the extent such Release is in violation
of any Environmental Law or is in a quantity, concentration or any other
form that is reportable or requires investigation, remediation or other
action pursuant to Environmental Law; (B) any and all Environmental Claims
arising at any time that relate to the SAP Business or the SAP Real
Property on or prior to the Closing; and (C) any and all non-compliances
with or violations of any applicable Environmental Law or Environmental
Permit relating to the Sellers, the SAP Real Property or the SAP Business
on or prior to the Closing (and any continuance of such non-compliance or
violation after the Closing Date, except, with respect to this Section
2.03(viii)(C), to the extent (i) the Purchaser was or should have been
aware of such non-compliance or violation on or before the Closing Date, or
(ii) the condition constituting such non-compliance or violation is altered
or changed by the Purchaser and its Affiliates after the Closing Date); and
(ix) any and all costs and expenses (including attorneys' fees)
incurred by the Sellers in preparing and negotiating this Agreement or the
transactions contemplated hereby, and any Liabilities with respect to
Actions relating to, resulting from, or arising out of, this Agreement or
the transactions contemplated hereby.
<PAGE>
SECTION 2.04. Purchase Price; Allocation of Purchase Price. (a) Subject to
the adjustments set forth in Section 2.08, the purchase price for the Shares and
the SAP Assets shall be U.S.$628,000,000, less the Continuing Intercompany
Indebtedness (as defined in Section 2.04(c) below) (the "Purchase Price"). In
addition, the Purchaser will cause the payment to Chemdal U.K. of an amount
equal to U.S.$28,500,000 (the "Signing Premium") as consideration for entering
into the Acrylic Acid Supply Agreement set forth in Section 5.15 of this
Agreement (it being understood that the Signing Premium shall be non-refundable
for any reason, including, without limitation, on account of an early
termination of the Acrylic Acid Supply Agreement for any reason, including,
without limitation, for any actual or alleged breach or nonperformance
thereunder by Chemdal U.K.).
(b) The sum of the Purchase Price and the Assumed Liabilities shall be
allocated among the Shares and the SAP Assets as of the Closing Date in
accordance with Exhibit 2.04(b) attached hereto. Any subsequent adjustments to
the sum of the Purchase Price and Assumed Liabilities shall be reflected in the
allocation hereunder in a manner consistent with Treasury Regulation
1.1060-1T(f). For all Tax purposes, each of the Purchaser, Parent and the Other
Sellers agrees to report the transactions contemplated in this Agreement in a
manner consistent with the terms of this Agreement, including the allocation
under Exhibit 2.04(b), and to refrain from taking any position inconsistent
therewith in any Tax return, in any refund claim, in any litigation, or
otherwise.
(c) No less than 10 days prior to the Closing Date, Parent shall deliver to
the Purchaser a certificate signed by the chief financial officer of Parent
indicating the amount of any outstanding intercompany Indebtedness (the
"Continuing Intercompany Indebtedness") of the SAP Business that will exist as
of the Closing Date (it being understood that there will be no Continuing
Intercompany Indebtedness existing as of the Closing Date that by its terms
cannot be prepaid in full or in part at any time without penalty).
SECTION 2.05. Closing. Upon the terms and subject to the conditions of this
Agreement, the sale and purchase of the Shares and the SAP Assets contemplated
by this Agreement shall take place at a closing (the "Closing") to be held at
the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York, at
10:00 A.M. New York time, on the tenth Business Day following the satisfaction
or waiver of all other conditions to the obligations of the parties set forth in
Article VIII, or at such other place or at such other time or on such other date
as Parent and the Purchaser may mutually agree upon in writing (the day on which
the Closing takes place being the "Closing Date").
SECTION 2.06. Closing Deliveries by Parent. At the Closing, Parent shall
deliver or cause to be delivered to the Purchaser:
(i) stock certificates evidencing the Shares duly endorsed in blank,
or accompanied by stock powers duly executed in blank, in form reasonably
satisfactory to the Purchaser and with all required stock transfer tax
stamps affixed;
(ii) the Bills of Sale (or any such other documents as may be
reasonably requested by the Purchaser to transfer the SAP Assets to the
Purchaser or one or more of its designated Affiliates or to evidence such
transfer on the public records), customary instruments of transfer for the
SAP Real Property, and customary instruments of transfer for the Business
Intellectual Property, the Company Intellectual Property and the Thai
Intellectual Property, all such documents to be in form and substance
reasonably satisfactory to the parties;
(iii) a receipt for the Purchase Price and the Signing Premium; and
(iv) the certificates and other documents required to be delivered
pursuant to Section 8.02.
SECTION 2.07. Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to Parent:
(i) the Purchase Price by wire transfer in immediately available funds
to the Purchase Price Bank Account;
<PAGE>
(ii) the Signing Premium by wire transfer in immediately available
funds to the Purchase Price Bank Account;
(iii) the Assumption Agreements and such other documents as may be
reasonably requested by Parent to effect the assumption by the Purchaser or
one or more of its designated Affiliates of the Assumed Liabilities and to
evidence such assumption on the public records, all such documents to be in
form and substance reasonably satisfactory to the parties; and
(iv) the certificates and other documents required to be delivered
pursuant to Section 8.01.
SECTION 2.08. Statement of Working Capital. (a) As promptly as practicable,
but in any event within 30 Business Days following the Closing Date, Parent
shall deliver to the Purchaser (i) a statement (the "Statement of Working
Capital") indicating the amount of current trade accounts receivable, net of
allowance for doubtful accounts, SAP Thai Value Added Tax (VAT) receivables, if
any, and Inventories, less accounts payable and accrued current liabilities (it
being understood that (i) only those accrued current liabilities actually being
transferred to the Purchaser pursuant to this Agreement shall be included in
this statement and that this statement shall exclude any Receivables or rebates
due to the SAP Business from the Purchaser and its Affiliates pursuant to any
materials supply agreements, and (ii) to the extent there are any other current
Receivables existing as of the Closing Date that were not included in the June
30, 1999 statement of working capital (attached hereto as Exhibit 2.08), the
Purchaser shall promptly advise Parent whether it wishes to acquire any of such
current Receivables, and should the Purchaser decide to acquire any of such
current Receivables, then any of such current Receivables actually acquired by
the Purchaser will be included in the Statement of Working Capital) (the
"Working Capital") of the SAP Business as of the Closing Date, which Statement
of Working Capital shall be prepared substantially in the same manner as the
June 30, 1999 statement of working capital attached hereto as Exhibit 2.08 and
(ii) an unqualified report thereon of Parent's Accountants stating that the
Statement of Working Capital fairly presents in all material respects the
Working Capital of the SAP Business at the Closing Date.
(b) (i) Subject to clause (ii) of this Section 2.08, the Statement of
Working Capital delivered by Parent to the Purchaser shall be deemed to be and
shall be final, binding and conclusive on the parties hereto.
(ii) The Purchaser may dispute any amounts reflected on the Statement of
Working Capital; provided, however, that the Purchaser shall have notified
Parent and the Sellers' Accountants in writing of each disputed item, specifying
the estimated amount thereof in dispute and setting forth, in reasonable detail,
the basis for such dispute (the "Purchaser Objection") within 30 Business Days
of receipt of the Statement of Working Capital from Parent. Parent shall then
have 30 Business Days from the receipt of the Purchaser Objection to review and
respond to the Purchaser Objection. If the Purchaser and Parent are unable to
resolve all of their disagreements with respect to the Statement of Working
Capital within 10 Business Days following Parent's review of the Purchaser
Objection, they shall submit the items remaining in dispute for resolution to an
independent accounting firm of international reputation mutually acceptable to
the Purchaser and Parent (such accounting firm being referred to herein as the
"Independent Accounting Firm"), which shall, within 30 Business Days after such
submission, determine and report to the Purchaser and Parent upon such dispute,
and such written report shall be final, binding and conclusive on the Purchaser
and Parent. The fees and disbursements of the Independent Accounting Firm shall
be paid by the Purchaser and Parent in inverse proportion to those matters
submitted to the Independent Accounting Firm which are resolved in favor of the
Purchaser and Parent, as the case may be, as so allocated between the Purchaser
and Parent by the Independent Accounting Firm in accordance with this Section
2.08 at the time of the Independent Accounting Firm's determination. The
"Adjusted Statement of Working Capital" shall be (i) the Statement of Working
Capital in the event that (x) no Purchaser Objection is delivered to Parent
during the 30 Business Day period specified above or (y) the Purchaser and
Parent so agree during such 30 Business Day period; (ii) the Statement of
Working Capital as adjusted in accordance with the Purchaser Objection, in the
event that the Purchaser Objection is timely delivered to Parent and (x) Parent
does not respond to the Purchaser Objection within the 30 Business Day period
following receipt by Parent of the Purchaser Objection or (y) the Purchaser and
Parent so agree during such 30 Business Day period; or (iii) the Statement of
Working Capital as adjusted by either (x) the agreement of the Purchaser and
Parent or (y) the Independent Accounting Firm.
<PAGE>
(c) (i) Within 10 Business Days following the determination of the Adjusted
Statement of Working Capital pursuant to this Section 2.08, the adjustment
payments, if any, payable pursuant to this Section 2.08 shall be paid by wire
transfer of immediately available funds to a bank account designated by the
Purchaser or Parent, as the case may be, at least five Business Days prior to
the expiration of such 10 Business Day period. For the purposes of determining
which of the Purchaser's designated Affiliates will make or receive any required
adjustment payments hereunder, the amount of U.S.$34,175,000 referred to in (ii)
and (iii) below is assumed attributed as follows: U.S.$ * to the Company, U.S.$
* to SAP U.K. and U.S.$ * to SAP Thai.
(ii) Parent shall make an adjustment payment to the Purchaser or one of its
designated Affiliates in respect of Working Capital in an amount equal to the
amount, if any, by which the (x) Adjusted Statement of Working Capital is less
than (y) U.S.$34,175,000.
(iii) The Purchaser shall make, or cause to be made, an adjustment payment
to Parent in respect of Working Capital in an amount equal to the amount, if
any, by which the (x) Adjusted Statement of Working Capital is greater than (y)
U.S.$34,175,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
As an inducement to the Purchaser to enter into this Agreement, each of the
Sellers hereby represents and warrants to the Purchaser as follows (except as
set forth in the Disclosure Schedule):
SECTION 3.01. Organization, Authority and Qualification of the Sellers.
Each of the Sellers is a corporation duly organized, validly existing and in
good standing under the Laws of its jurisdiction of incorporation and, in the
case of Parent, has all necessary power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. Each of the Sellers is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary, except to the extent that the failure to
be so licensed or qualified (i) would not materially adversely affect the
ability of such Seller to carry out its obligations under, and to consummate the
transactions contemplated by, this Agreement, or (ii) have a Material Adverse
Effect. Except for obtaining the necessary approval of stockholders, the
execution and delivery of this Agreement by Parent, the performance by Parent of
its obligations hereunder and the consummation by Parent of the transactions
contemplated hereby have been duly authorized by all requisite action on the
part of Parent. This Agreement has been duly executed and delivered by Parent,
and (assuming due authorization, execution and delivery by the Purchaser) this
Agreement constitutes a legal, valid and binding obligation of Parent
enforceable against Parent in accordance with its terms, subject to bankruptcy,
insolvency, moratorium, reorganization or similar Laws affecting the rights of
creditors generally and the availability of equitable remedies.
SECTION 3.02. Organization, Authority and Qualification of the Company and
SAP Thai. Each of the Company and SAP Thai is a corporation duly organized,
validly existing and in good standing under the Laws of its jurisdiction of
incorporation and has all necessary power and authority to own, operate or lease
the properties and assets now owned, operated or leased by it and to carry on
the SAP Business as it has been and is currently conducted, except for the
failure to be so organized, existing or in good standing or to have such power
or authority as would not have a Material Adverse Effect. Each of the Company
and SAP Thai is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business makes such licensing or qualification necessary or
desirable, except for failures to be so qualified or in good standing which
would not, in the aggregate, have a Material Adverse Effect. All corporate
actions taken by the Company during the past five years and by SAP Thai since
the date of its incorporation have been duly authorized, and neither the Company
nor SAP Thai has taken any action that in any respect conflicts with,
constitutes a default under or results in a violation of any provision of its
Certificate of Incorporation or By-laws (or similar organizational documents),
except to the extent that the absence of such authority or the existence of such
conflict or default would not have a Material Adverse Effect. True and correct
copies of the Certificate of Incorporation and By-laws (or similar
organizational documents) of the Company and SAP Thai, each as in effect on the
date hereof, have been delivered by Parent to the Purchaser. As of the Closing
Date, neither the Company nor SAP Thai will have any Subsidiaries.
<PAGE>
SECTION 3.03. Capital Stock of the Company and SAP Thai; Ownership of the
Shares. (a) The authorized capital stock of the Company consists of 150,000
shares of Company Common Stock and the authorized capital stock of SAP Thai
consists of 2,000,000 ordinary shares. As of the date hereof, 2,000 shares of
Company Common Stock and 2,000,000 ordinary shares of SAP Thai are issued and
outstanding, all of which are validly issued, fully paid and nonassessable. None
of the issued and outstanding Shares were issued in violation of any preemptive
rights. There are no options, warrants, convertible securities or other rights,
agreements, arrangements or commitments of any character relating to the capital
stock of the Company or SAP Thai or obligating Parent, Chemdal International
Sub, Chemdal Netherlands Sub, the Company or SAP Thai to issue or sell any
shares of capital stock of, or any other interest in, the Company or SAP Thai.
There are no outstanding contractual obligations of the Company or SAP Thai to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
shares of SAP Thai or to provide funds to, or make any investment (in the form
of a loan, capital contribution or otherwise) in, any other Person. The Company
Shares constitute all the issued and outstanding capital stock of the Company
and are owned of record and beneficially solely by Chemdal International Sub
free and clear of all Encumbrances, and the Thai Shares constitute all the
issued and outstanding capital stock of SAP Thai and are owned of record and
beneficially solely by the Persons set forth on Exhibit 1.01(a) attached hereto
free and clear of all Encumbrances. Upon consummation of the transactions
contemplated by this Agreement and registration of the Shares in the name of the
Purchaser in the stock records of the Company and SAP Thai, as applicable, the
Purchaser, assuming it shall have purchased the Shares for value in good faith
and without notice of any adverse claim, will own all the issued and outstanding
capital stock of the Company and SAP Thai free and clear of all Encumbrances.
Upon consummation of the transactions contemplated by this Agreement, the Shares
will be fully paid and nonassessable. There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any of the Shares.
(b) The stock register of each of the Company and SAP Thai accurately
records: (i) the name and address of each Person owning shares of capital stock
of the Company and SAP Thai, as applicable and (ii) the certificate number of
each certificate evidencing shares of capital stock issued by the Company and
SAP Thai, as applicable, the number of shares evidenced by each such
certificate, the date of issuance thereof and, in the case of cancellation, the
date of cancellation.
SECTION 3.04. Corporate Books and Records. Except as would not have a
Material Adverse Effect, the minute books of the Company and SAP Thai contain
accurate records of all meetings and accurately reflect all other actions taken
by the stockholders, the board of directors and all committees of the board of
directors of the Company and SAP Thai, as applicable. Complete and accurate
copies of all such minute books and of the stock register of the Company and SAP
Thai have been provided by Parent to the Purchaser.
SECTION 3.05. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.06 have been obtained
and all filings and notifications listed in Section 3.06 of the Disclosure
Schedule have been made, except for any facts or circumstances relating solely
to the Purchaser, the execution, delivery and performance of this Agreement by
Parent do not and will not (a) violate, conflict with or result in the breach of
any provision of the charter or by-laws (or similar organizational documents) of
Parent, the Company, SAP Thai or any Other Seller, (b) cause an event which
could reasonably be expected to have a Material Adverse Effect as a result of
any conflict with or violation of any Law or Governmental Order applicable to
Parent, the Company, SAP Thai or any Other Seller or any of their respective
assets, properties or businesses, including, without limitation, the SAP
Business, or (c) except as set forth in Section 3.05(c) of the Disclosure
Schedule or as would not have a Material Adverse Effect, conflict with, result
in any breach of, constitute a default (or event which with the giving of notice
or lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the Company Shares or the Thai Shares or on any of the
assets or properties of the Company, SAP Thai or of the Sellers pursuant to, any
note, bond, mortgage or indenture, contract, agreement, lease, sublease,
license, permit, franchise or other instrument or arrangement to which prior to
the Closing the Company, SAP Thai or the Sellers is a party or by which any of
the Shares or any of such assets or properties is bound or affected.
SECTION 3.06. Governmental Consents and Approvals. The execution, delivery
and performance of this Agreement by Parent do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority, except (a) as described in Section
3.06 of the Disclosure
<PAGE>
Schedule and (b) the notification requirements of the HSR Act and applicable
filings under non-U.S. merger control and competition Laws; or (c) where the
failure to obtain such consent, authorization or to make such filing would not
have a Material Adverse Effect.
SECTION 3.07. Financial Statements. True and complete copies of (i) the
unaudited balance sheets of the Company, Chemdal International Sub, Chemdal
Netherlands Sub, Chemdal U.K. and SAP Thai for the nine-month period ending
September 30, 1999 and the related statements of income, and, with respect to
the Company, the related statement of operations, (ii) the unaudited balance
sheets of the Company, Chemdal International Sub, Chemdal Netherlands Sub and
Chemdal U.K. for the fiscal year ended as of December 31, 1998 and the related
statements of income, and, with respect to the Company and Chemdal International
Sub, the related statements of cash flows, and (iii) the unaudited balance sheet
of the Company, Chemdal International Sub and Chemdal U.K. for the fiscal years
ended as of December 31, 1997 and December 31, 1996 and the related statements
of income, and, with respect to the Company and Chemdal International Sub, the
related statements of cash flows ((i), (ii) and (iii) above being collectively
referred to herein as the "Financial Statements") have been delivered by Parent
to the Purchaser and are set forth herein at Section 3.07 of the Disclosure
Schedule. The Financial Statements (i) were prepared in accordance with the
books of account and other financial records of the Company, SAP Thai, Chemdal
International Sub, Chemdal Netherlands Sub and Chemdal U.K., and in all material
respects and except as otherwise indicated therein or described in Section 3.07
of the Disclosure Schedule, present fairly the financial condition and results
of operations of such entities as of the dates thereof or for the periods
covered thereby, (ii) have been prepared on a basis consistent with the past
practices of the Company, SAP Thai, Chemdal International Sub, Chemdal
Netherlands Sub and Chemdal U.K. and (iii) include all adjustments (consisting
only of normal recurring accruals) that are necessary for a fair presentation of
the financial condition of the Company, SAP Thai, Chemdal International Sub,
Chemdal Netherlands Sub and Chemdal U.K. and the results of the operations of
such entities as of the dates thereof or for the periods covered thereby
(subject to, for the purposes only of the financial statements for the period
ending September 30, 1999, any normal year-end adjustments which were not and
are not expected, individually or in the aggregate, to have a Material Adverse
Effect). If adjusted to account for the disclosures described in Paragraph 1 of
Section 3.07 of the Disclosure Schedule, the results of the operations of the
SAP Business for the periods covered by the Financial Statements shall be no
worse than the results of the operations reflected on the Financial Statements
for such periods.
SECTION 3.08. No Undisclosed Liabilities. Except as disclosed elsewhere in
the Disclosure Schedule, and except where the existence of such Liability would
not have a Material Adverse Effect, there are no Liabilities of the Company, SAP
Thai or the Sellers relating to the SAP Business, other than Liabilities
reflected on the Financial Statements or incurred since September 30, 1999 in
the ordinary course of the SAP Business consistent with the past practice of
Parent, the Company, SAP Thai and the Other Sellers.
SECTION 3.09. Receivables. To Parent's Knowledge, all Receivables existing
on the Closing Date will have arisen from the sale of Inventory or services to
Persons not affiliated with Parent, the Company, SAP Thai or the Other Sellers
and in the ordinary course of the business consistent with past practice and, to
Parent's Knowledge, in all material respects constitute or will constitute, as
the case may be, only valid, undisputed claims of the SAP Business not subject
to valid claims of set-off or other defenses or counterclaims other than normal
cash discounts and rebates accrued in the ordinary course of the SAP Business
consistent with past practice. Notwithstanding the foregoing, nothing in this
Agreement shall constitute a guaranty or warranty by Parent or its Affiliates
that such Receivables will ultimately be collected.
SECTION 3.10. Inventories. The Company, SAP Thai or the Sellers, as the
case may be, have good and marketable title to the Inventories free and clear of
all Encumbrances. To Parent's Knowledge, the Inventories do not consist of, in
any material amount, items that are obsolete or damaged. Except as described in
Section 3.10 of the Disclosure Schedule, the Inventories do not consist of any
items held on consignment. Neither the Company, SAP Thai nor any Seller is under
any obligation or liability with respect to accepting returns of items of
Inventory or merchandise in the possession of their customers other than in the
ordinary course of business consistent with past practice. To Parent's
Knowledge, neither the Company, SAP Thai nor any Seller has acquired or
committed to acquire or manufacture Inventory for sale which is not of a quality
and quantity usable in the ordinary course of the SAP Business within a
reasonable period of time and consistent with past practice, nor has the
Company, SAP Thai or a Seller changed the price of any Inventory except for (i)
price reductions to reflect any reduction in the cost thereof to
<PAGE>
the Company, SAP Thai or such Seller, (ii) reductions and increases responsive
to normal competitive conditions and consistent with past sales practices, (iii)
increases to reflect any increase in the cost thereof to the Company, SAP Thai
or such Seller and (iv) increases and reductions made with the written consent
of the Purchaser.
SECTION 3.11. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions. Since September 30, 1999, except as disclosed in Section
3.11 of the Disclosure Schedule or as would not have a Material Adverse Effect,
the SAP Business has been conducted in the ordinary course and consistent with
past practice. As amplification and not limitation of the foregoing, except as
disclosed in Section 3.11 of the Disclosure Schedule and except as relates to
the business and assets of the Sellers other than the SAP Business and the SAP
Assets, since September 30, 1999, the Company, SAP Thai and the Sellers have
not:
(i) made any loan to, guaranteed any Indebtedness of or otherwise incurred
any Indebtedness on behalf of any Person;
(ii) redeemed any of the capital stock or declared, made or paid any
dividends or distributions (whether in cash, securities or other property) to
the holders of capital stock of the Company or shares of SAP Thai;
(iii) to Parent's Knowledge, made any material changes in the customary
methods of operations of the Company, SAP Thai or the Sellers, including,
without limitation, practices and policies relating to manufacturing,
purchasing, Inventories, marketing, selling and pricing;
(iv) merged with, entered into a consolidation with or acquired an interest
in any Person or acquired a substantial portion of the assets or business of any
Person or any division or line of business thereof, or otherwise acquired any
material assets other than in the ordinary course of business consistent with
past practice;
(v) except as directly related to the construction of the SAP Thai facility
in Thailand, issued any sales orders or otherwise agreed to make any purchases
involving exchanges in value in excess of $500,000 individually;
(vi) sold, transferred, leased, subleased, licensed or otherwise disposed
of any properties or assets, real, personal or mixed (including, without
limitation, leasehold interests and intangible assets), other than in the
ordinary course of business consistent with past practice;
(vii) issued or sold any capital stock, notes, bonds or other securities,
or any option, warrant or other right to acquire the same, of, or any other
interest in, the Company, Chemdal U.K. or SAP Thai;
(viii) entered into any agreement, arrangement or transaction with any of
the directors, officers, employees or shareholders (or with any relative,
beneficiary, spouse or Affiliate thereof) of the SAP Business;
(ix) (A) granted any increase, or announced any increase, in the wages,
salaries, compensation, bonuses, incentives, pension or other benefits payable
by the Company, SAP Thai or a Seller to any of the SAP Employees, including,
without limitation, any increase or change pursuant to any Plan or (B)
established or increased or promised to increase any benefits under any Plan, in
either case except as required by Law, or any collective bargaining agreement,
or involving ordinary increases consistent with the past practices of the
Company, SAP Thai or a Seller, or a contractual obligation existing on the date
hereof;
(x) written down or written up (or failed to write down or write up in
accordance with U.S. GAAP consistent with past practice) the value of any
Inventories or Receivables or revalued any assets of the Company, SAP Thai or
any of the SAP Assets, other than in the ordinary course of business consistent
with past practice and in accordance with U.S. GAAP;
(xi) amended, terminated, canceled or compromised any material claims of
the Company, SAP Thai or the Sellers or waived any other rights of substantial
value to the SAP Business;
<PAGE>
(xii) made any change in any method of accounting or accounting practice or
policy used by the Company, SAP Thai or the Sellers relating to the SAP
Business, other than such changes as are required by U.S. GAAP (or other
applicable non-U.S. accounting principals or practices);
(xiii) made or revoked any material Tax election, or any change in any
method of Tax accounting;
(xiv) compromised or settled any material Tax Liability;
(xv) failed in any material respect to maintain the SAP Assets in
accordance with good business practice and in good operating condition and
repair;
(xvi) incurred any Indebtedness;
(xvii) amended, modified or consented to the termination of any Material
Contract or the Company's, SAP Thai's or a Sellers' rights thereunder;
(xviii) amended or restated the Certificate of Incorporation or the By-laws
(or similar organizational documents) of the Company, SAP Thai or the Sellers;
(xix) suffered any Material Adverse Effect; or
(xx) agreed, whether in writing or otherwise, to take any of the actions
specified in this Section 3.11 or granted any options to purchase, rights of
first refusal, rights of first offer or any other similar rights or commitments
with respect to any of the actions specified in this Section 3.11, except as
expressly contemplated by this Agreement.
SECTION 3.12. Litigation. Except as set forth in Section 3.12 of the
Disclosure Schedule (which, with respect to each Action and investigation
disclosed therein, sets forth: the parties, nature of the proceeding, date
commenced, relief sought and, if applicable, paid or granted), there are no
Actions or, to Parent's Knowledge, investigations by or against the Company, SAP
Thai or an Other Seller (or by or against Parent or any Affiliate thereof and
relating to the SAP Business, the Company, SAP Thai or an Other Seller), or
affecting the SAP Business or any of the SAP Assets, pending (or, to Parent's
Knowledge, threatened to be brought) that has or has had a Material Adverse
Effect or could affect the legality, validity or enforceability of this
Agreement or the consummation of the transactions contemplated hereby. Except as
set forth in Section 3.12 of the Disclosure Schedule, none of the Company, SAP
Thai the Other Sellers nor any of the SAP Assets nor Parent is subject to any
Governmental Order (nor, to Parent's Knowledge, are there any such Governmental
Orders threatened to be imposed by any Governmental Authority) which has, has
had or is reasonably likely to have, a Material Adverse Effect.
SECTION 3.13. Compliance with Laws. Except as set forth in Section 3.13 of the
Disclosure Schedule, the SAP Business has been and continues to be conducted in
accordance with all Laws and Governmental Orders applicable to the SAP Business,
and neither the Company, SAP Thai nor the Sellers are in violation of any such
Law or Governmental Order, except where the failure to be in compliance with
such Laws and orders would not have a Material Adverse Effect.
SECTION 3.14. Environmental Matters. (a) Except as disclosed in Section
3.14(a) of the Disclosure Schedule or as would not have, or as would not
reasonably be expected to have, a Material Adverse Effect:
(i) The SAP Business is in compliance with, and has been in compliance
with, all applicable Environmental Laws and all Environmental Permits. All
past non-compliance with Environmental Laws or Environmental Permits has
been resolved without any pending, on-going or future obligation, cost or
liability, and there is no requirement proposed for adoption or
implementation under any Environmental Law or Environmental Permit.
<PAGE>
(ii) There are no underground or aboveground storage tanks or any
surface impoundments, septic tanks, pits, sumps or lagoons in which
Hazardous Materials are being or have been treated, stored or disposed on
any of the SAP Real Property or, to Parent's Knowledge, on any property
formerly owned, leased or occupied by, or on behalf of, the Company, SAP
Thai, the Sellers or the SAP Business.
(iii) Hazardous Materials have not been Released on any of the SAP
Real Property or, during their period of ownership, lease or occupancy, on
any property formerly owned, leased or occupied by, or on behalf of, the
Company, SAP Thai, the Sellers or the SAP Business.
(iv) Except as contemplated in Exhibit 5.27 attached hereto, neither
the Company, SAP Thai nor the Sellers are conducting, and none of them have
undertaken or completed, any Remedial Action relating to any Release or
threatened Release of Hazardous Materials at the SAP Real Property or, on
behalf of the SAP Business, at any other site, location or operation,
either voluntarily or pursuant to the order of any Governmental Authority
or the requirements of any Environmental Law or Environmental Permit.
(v) There is no asbestos or asbestos-containing material on any of the
SAP Real Property, the existence of which is a violation of any
Environmental Law.
(vi) There are no Environmental Claims pending or threatened against
the Company, SAP Thai, the Sellers (with respect to the SAP Business), the
SAP Business or the SAP Real Property, and, to Parent's Knowledge, there
are no circumstances that are reasonably expected to form the basis of any
such Environmental Claim, including, without limitation, with respect to
any off-site disposal location currently or formerly used by, or on behalf
of, the Company, SAP Thai, a Seller or the SAP Business or any of their
predecessors or with respect to any previously owned or operated
facilities.
(vii) The Company, SAP Thai and the Sellers do not require any new or
additional Environmental Permits and are not required to modify any
existing Environmental Permits and will not require any increase in capital
expenditures, in order to produce at present production levels with respect
to the SAP Business in compliance with applicable Environmental Laws.
(viii) None of the SAP Real Property or, to Parent's Knowledge, any
property formerly owned, leased or occupied by or on behalf of the Sellers,
the Company, SAP Thai or the SAP Business is listed or proposed for
listing, or adjoins any other property that is listed or proposed for
listing, on the National Priorities List or the Comprehensive Environmental
Response, Compensation and Liability Information System under the federal
Comprehensive Environmental Response, Compensation, and Liability Act or
any analogous federal, state or local list.
(b) The Company, SAP Thai and the Sellers have provided the Purchaser with
copies or summaries of (i) all written environmental assessment or audit reports
and other similar studies or analyses relating to the SAP Business or the SAP
Real Property or the operations of the Company, SAP Thai or the Sellers, as
applicable, and (ii) to Parent's Knowledge, all insurance policies issued since
December 31, 1995 that may provide coverage for the SAP Business related to
environmental matters, provided that no representations or warranties are made
by Parent that such policies or the rights and benefits thereunder are
transferable to the Purchaser.
(c) Except as disclosed in Section 3.14(c) of the Disclosure Schedule,
neither the execution of this Agreement nor the consummation of the transactions
contemplated in this Agreement will require any Remedial Action or notice to or
consent of Governmental Authorities or any third party pursuant to any
applicable Environmental Law or Environmental Permit.
(d) The Purchaser acknowledges that (i) the representations and warranties
contained in this Section 3.14 are the only representations and warranties being
made with respect to compliance with or liability under Environmental Laws
related to this Agreement or its subject matter, and (ii) no other
representation contained in this Agreement shall apply to any such matters and
no other representation or warranty, express or implied, is being made with
respect thereto.
<PAGE>
SECTION 3.15. Material Contracts. (a) Section 3.15(a) of the Disclosure
Schedule lists each of the following contracts and agreements (including,
without limitation, oral agreements) of the Company, SAP Thai and the Sellers
relating to the SAP Business (such contracts and agreements, together with all
contracts, agreements, leases and subleases concerning the management or
operation of any SAP Real Property to which the Company, SAP Thai or any of the
Sellers is a party and all agreements relating to Intellectual Property being,
the "Material Contracts"):
(i) each contract and agreement for the purchase of Inventory, spare
parts, other materials or personal property with any supplier or for the
furnishing of services to the Company, SAP Thai or the Sellers or otherwise
related to the SAP Business under the terms of which the Company, SAP Thai
or any of the Sellers: (A) is likely to pay or otherwise give consideration
of more than $500,000 in the aggregate during the calendar year ended
December 31, 1999, or (B) cannot be canceled by the Company, SAP Thai or a
Seller without penalty or further payment and without more than 30 days'
notice;
(ii) each contract and agreement for the sale of Inventory or other
personal property or for the furnishing of services by the Company, SAP
Thai or the SAP Business which: (A) is likely to involve consideration of
more than $2,500,000 in the aggregate during the calendar year ended
December 31, 1999, or (B) cannot be canceled by the Company, SAP Thai or a
Seller without penalty or further payment and without more than 30 days'
notice;
(iii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which the
Company, SAP Thai or any of the Sellers is a party;
(iv) all employment contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the Company,
SAP Thai or any of the Sellers is a party and which are not cancellable
without penalty or further payment and without more than 30 days' notice;
(v) all contracts and agreements of the Company and SAP Thai relating
to Indebtedness;
(vi) all material contracts and agreements with any Governmental
Authority to which the Company, SAP Thai or any of the Sellers is a party;
(vii) all contracts and agreements that limit or purport to limit the
ability of the Company, SAP Thai or the Sellers (as it affects the SAP
Business) to compete in any line of business or with any Person or in any
geographic area or during any period of time;
(viii) all contracts and agreements between or among the Company, SAP
Thai or a Seller (as it affects the SAP Business), on the one hand, and
Parent or any Affiliate of Parent (other than the Company, SAP Thai and the
Other Sellers) on the other hand, other than tax sharing and other
intercompany agreements entered into in the ordinary course of business;
(ix) all contracts and agreements providing for benefits under any
Plan or any policy, including applicable Chemdal U.K. and SAP Thai employee
life insurance contracts and other similar documents; and
(x) all other contracts and agreements, whether or not made in the
ordinary course of business, the absence of which would be expected to have
a Material Adverse Effect.
(b) Except as disclosed in Section 3.15(b) of the Disclosure Schedule, or
as would not have a Material Adverse Effect, each Material Contract: (i) is
valid and binding on the respective parties thereto and is in full force and
effect and (ii) solely by reason of the consummation of the transactions
contemplated by this Agreement, except to the extent that any consents set forth
in Section 3.06 of the Disclosure Schedule are not obtained, shall not terminate
or impose a penalty or other material adverse consequence on the SAP Business.
To Parent's Knowledge, neither the Company, SAP Thai nor any of the Sellers is
in breach of, or default under, any Material Contract.
(c) Except as disclosed in Section 3.15(c) of the Disclosure Schedule, to
Parent's Knowledge, no other party to any Material Contract is in material
breach thereof or material default thereunder.
<PAGE>
(d) Except as disclosed in Section 3.15(d) of the Disclosure Schedule,
there is no contract, agreement or other arrangement granting any Person any
preferential right to purchase, other than in the ordinary course of business
consistent with past practice, any of the properties or assets of the Company,
SAP Thai or the Sellers relating to the SAP Business.
SECTION 3.16. Intellectual Property. (a) Section 3.16(a)(i) of the
Disclosure Schedule sets forth a true and complete list and a brief description
of each patent and patent application, and each registration or application for
registration, of Business Intellectual Property, Company Intellectual Property,
and SAP Thai Intellectual Property and Section 3.16(a)(ii) of the Disclosure
Schedule sets forth a true and complete list and a brief description of all
Transaction Intellectual Property that is licensed by the Company, SAP Thai or a
Seller (the "Licensed Transaction Intellectual Property"). Except as otherwise
described in Section 3.16(a)(i) of the Disclosure Schedule, in each case where a
registration or patent or application for registration or patent listed in
Section 3.16(a)(i) of the Disclosure Schedule is held by assignment, the
assignment has been duly recorded with each Governmental Authority from which
the original registration issued or before which the application for
registration is pending. Except as disclosed in Section 3.16(a)(ii) of the
Disclosure Schedule, to Parent's Knowledge, the operation of the SAP Business
and the rights of the Company, SAP Thai or a Seller, as the case may be, in or
to the Transaction Intellectual Property do not conflict with or infringe the
rights of any other Person, and none of Parent, the Company, SAP Thai nor an
Other Seller has received any written claim or written notice from any Person to
such effect. Except as disclosed in Section 3.16(a)(iii) of the Disclosure
Schedule, to Parent's Knowledge, the conduct of the SAP Business does not
conflict with or infringe on the rights of any other Person, and none of Parent,
the Company, SAP Thai nor an Other Seller has received any written claim or
written notice from any Person to such effect. Notwithstanding the foregoing,
Parent makes no representation or warranties as to the adequacy of Parent's
programs to monitor, use and protect patents, trademarks, trade secrets and
know-how.
(b) Except as disclosed in Section 3.16(b) of the Disclosure Schedule and
except as would not have a Material Adverse Effect: (i) all the Transaction
Intellectual Property that is owned by the Company, SAP Thai or a Seller (the
"Owned Transaction Intellectual Property") is owned free and clear of any
Encumbrance and (ii) to Parent's Knowledge, no Actions have been made or
asserted or are pending (nor, to Parent's Knowledge, (x) has there been any
written notification sufficient to result in reasonable apprehension that any
such action might ensue, nor (y) has any such Action been threatened) against
the Company, SAP Thai or a Seller either (A) based upon or challenging or
seeking to deny or restrict the use by the Company, SAP Thai or a Seller of any
of the Transaction Intellectual Property or (B) alleging that the use of the
Transaction Intellectual Property in connection with the SAP Business, or that
any services provided, or products manufactured or sold by the Company, SAP Thai
or a Seller (with respect to the conduct of the SAP Business infringes any
rights of any Person). Except as disclosed in Section 3.16(b) of the Disclosure
Schedule, to Parent's Knowledge, no Person is engaging in any activity or is
using any Intellectual Property that in any manner infringes upon the Owned
Transaction Intellectual Property or Licensed Transaction Intellectual Property
or upon the rights of the Company, SAP Thai or a Seller therein. Except as
disclosed in Section 3.16(b) of the Disclosure Schedule, none of Parent, the
Company, SAP Thai nor an Other Seller has granted any license or other right to
any other Person with respect to the Transaction Intellectual Property. The
consummation of the transactions contemplated by this Agreement will not result
in the termination or impairment of any of the Transaction Intellectual
Property.
(c) With respect to all Licensed Transaction Intellectual Property and
Owned Transaction Intellectual Property, except as would not have a Material
Adverse Effect, the registered user provisions (required due to the manner in
which the Transaction Intellectual Property is currently being used) of all
nations requiring such registrations have been complied with.
(d) Parent has, or has caused to be, delivered to the Purchaser correct and
complete copies of all the licenses and sublicenses for the Licensed Transaction
Intellectual Property and any and all ancillary documents modifying or
qualifying or otherwise material thereto (including, without limitation, all
amendments, consents and evidence of commencement dates and expiration dates).
With respect to each of such licenses and sublicenses:
<PAGE>
(i) such license or sublicense, together with all ancillary documents
delivered pursuant to the first sentence of this Section 3.16(d), is valid
and binding and in full force and effect and represents the entire
agreement between the respective licensor and licensee with respect to the
subject matter of such license or sublicense;
(ii) except as otherwise set forth in Section 3.16(d)(ii) of the
Disclosure Schedule, such license or sublicense will not cease to be valid
and binding and in full force and effect on terms identical to those
currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or default
under such license or sublicense or otherwise give the licensor or
sublicensor a right to terminate such license or sublicense;
(iii) except as otherwise disclosed in Section 3.16(d)(iii) of the
Disclosure Schedule, with respect to each such license or sublicense: (A)
none of Parent, the Company, SAP Thai nor an Other Seller has received any
written notice of termination or cancellation under such license or
sublicense and no licensor or sublicensor has any right of termination or
cancellation under such license or sublicense except in connection with the
default of the Company, SAP Thai or an Other Seller thereunder, (B) none of
Parent, the Company, SAP Thai nor an Other Seller has received any notice
of a breach or default under such license or sublicense, which breach or
default has not been cured, and (C) none of Parent, SAP Thai, the Company
nor an Other Seller has granted to any other Person any rights, adverse or
otherwise, under such license or sublicense;
(iv) none of the Company, SAP Thai, a Seller, nor (to Parent's
Knowledge) any other party to such license or sublicense is in breach or
default in any material respect, and, to Parent's Knowledge, no event has
occurred that, with notice or lapse of time would constitute such a breach
or default or permit termination, modification or acceleration under such
license or sublicense;
(v) to Parent's Knowledge, no Actions have been made or asserted or
are pending (nor, to Parent's Knowledge, has any such Action been
threatened, nor has there been any notification sufficient to result in
reasonable apprehension that any such Action might ensue) against the
Company, SAP Thai or a Seller either (A) based upon or challenging or
seeking to deny or restrict the use by the Company, SAP Thai or a Seller of
any of the Licensed Transaction Intellectual Property or (B) alleging that
any Licensed Transaction Intellectual Property is being licensed,
sublicensed or used in violation of any Intellectual Property rights of any
Person, or (C) alleging that any services provided or products manufactured
or sold by the Company, SAP Thai or a Seller using any Licensed Transaction
Intellectual Property (with respect to the conduct of the SAP Business) are
being provided, manufactured or sold in violation of any patents or
trademarks or other rights of any Person; and
(vi) to Parent's Knowledge, no Person is using any Intellectual
Property that in any manner infringes upon the Licensed Transaction
Intellectual Property or upon the rights of the Company, SAP Thai or a
Seller therein.
(e) Except as set forth in Section 3.16(e) of the Disclosure Schedule, with
respect to Transaction Intellectual Property, Parent has not received written
notification that any pending applications to register trademarks, service marks
or copyrights or any pending patent applications will not be granted or, if
granted, will not be valid and enforceable; provided, however, that rejections
to requested patents are customarily received from the U.S. Patent and Trademark
Office in connection with filed patent applications. The patents and trademarks
included in the Transaction Intellectual Property have not been adjudged invalid
or unenforceable in whole or part, and to Parent's Knowledge, are valid and
enforceable. Parent makes no representation or warranty that any pending patent
applications relating to Transaction Intellectual Property will be granted.
(f) The Transaction Intellectual Property constitutes all the Intellectual
Property used or held or intended to be used by the Company, SAP Thai or a
Seller or forming a part of, used, held or intended to be used in the SAP
Business and there are no other items of Intellectual Property owned or licensed
by Parent that are material to the Company, SAP Thai or the SAP Business.
<PAGE>
SECTION 3.17. Real Property. (a) Section 3.17(a) of the Disclosure Schedule
lists: (i) the street address of each parcel of SAP Real Property, (ii) the date
on which each parcel of SAP Real Property was acquired or leased, (iii) the
current owner of each such parcel of SAP Real Property, (iv) information
relating to the recordation of any deed pursuant to which each such parcel of
SAP Real Property was acquired and (v) the current use of each such parcel of
SAP Real Property.
(b) The Sellers will make available to the Purchaser true and complete
copies of each deed for each parcel of SAP Real Property and all the title
insurance policies, title reports, licensed surveys, certificates of occupancy,
environmental reports and audits, appraisals, Permits, other material title
documents for the SAP Real Property which are in their possession or control.
Except as described in Section 3.17(b) of the Disclosure Schedule, or as would
not have a Material Adverse Effect, (i) there is no violation of any Law
(including, without limitation, any building, planning or zoning Law) relating
to any of the SAP Real Property, (ii) either the Company, SAP Thai or the
Sellers, as the case may be, is in peaceful and undisturbed possession of each
parcel of SAP Real Property and there are no contractual or legal restrictions
that preclude or restrict the ability to use the premises for the purposes for
which they are currently being used, and (iii) to Parent's Knowledge, all
existing water, sewer, steam, gas, electricity, telephone and other utilities
required for the construction, use, occupancy, operation and maintenance of the
SAP Real Property are adequate for the conduct of the business of the Company,
SAP Thai and the Sellers as it has been and currently is conducted and there are
no material latent defects or adverse physical conditions affecting the SAP Real
Property or any of the facilities, buildings, structures, erections,
improvements, fixtures, fixed assets and personalty of a permanent nature
annexed, affixed or attached to, located on or forming part of the SAP Real
Property that would have a Material Adverse Effect. Except as set forth in
Section 3.17(b) of the Disclosure Schedule, neither the Company, SAP Thai nor
any of the Sellers has leased or subleased any parcel or any portion of any
parcel of SAP Real Property to any other Person.
(c) There are no condemnation proceedings or eminent domain proceedings of
any kind of which Parent has received written notice nor, to Parent's Knowledge,
are there any such proceedings threatened against the SAP Real Property.
(d) Except as set forth in Section 3.17 of the Disclosure Schedule, all the
SAP Real Property is occupied under a valid and current certificate of occupancy
or similar permit and, to Parent's Knowledge, the transactions contemplated by
this Agreement will not require the issuance of any new or amended certificate
of occupancy and, to Parent's Knowledge, there are no facts that would prevent
the SAP Real Property from being occupied by the Company, SAP Thai or the
Purchaser, as the case may be, after the Closing in substantially the same
manner as occupied by the Company, SAP Thai or the Sellers immediately prior to
the Closing.
(e) Except as set forth in Section 3.17 of the Disclosure Schedule, all
improvements on the SAP Real Property constructed by or on behalf of the
Company, SAP Thai or the Sellers or, to Parent's Knowledge, constructed by or on
behalf of any other Person were constructed in compliance with all applicable
Laws (including, without limitation, any building, planning or zoning Laws)
affecting such SAP Real Property, except, in each case, as would not have a
Material Adverse Effect.
(f) No improvements on the SAP Real Property and none of the current uses
and conditions thereof violate any applicable deed restrictions or other
applicable covenants, restrictions, agreements, existing site plan approvals,
zoning or subdivision regulations or urban redevelopment plans as modified by
any duly issued variances, and no permits, licenses or certificates pertaining
to the ownership or operation of all improvements on the SAP Real Property,
other than those required to be assigned to Purchaser pursuant to this
Agreement, are required by any Governmental Authority having jurisdiction over
the SAP Real Property, except, in each case, as would not have a Material
Adverse Effect.
(g) Except for fences, curbs, gutters, sidewalks and light fixtures or
signs, all improvements on any SAP Real Property are wholly within the lot
limits of such SAP Real Property and do not encroach on any adjoining premises,
and there are no encroachments on any SAP Real Property by any improvements
located on any adjoining premises, except, in each case, as would not have a
Material Adverse Effect.
<PAGE>
SECTION 3.18. Tangible Personal Property. (a) Section 3.18(a) of the
Disclosure Schedule lists, as of the date thereof, each material item or
distinct group of machinery, equipment, tools, supplies, furniture, fixtures,
personalty, vehicles, rolling stock and other tangible personal property other
than Inventories (the "Tangible Personal Property") used primarily in the SAP
Business or owned or leased by the Company, SAP Thai or a Seller, other than
certain Excluded Assets described therein.
(b) Parent has, or has caused to be, delivered to the Purchaser true and
complete copies of all material leases and subleases for Tangible Personal
Property and any and all material ancillary documents modifying or qualifying or
otherwise material thereto (including, without limitation, all amendments,
consents and evidence of commencement dates and expiration dates). With respect
to each of such material leases and subleases:
(i) such lease or sublease, together with all ancillary documents
delivered pursuant to the first sentence of this Section 3.18(b), is legal,
valid, binding, enforceable and in full force and effect and represents the
entire agreement between the respective lessor and lessee with respect to
such property;
(ii) except as set forth in Section 3.18(b) of the Disclosure
Schedule, such lease or sublease will not cease to be legal, valid,
binding, enforceable and in full force and effect on terms identical to
those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation of
the transactions contemplated by this Agreement constitute a breach or
default under such lease or sublease or otherwise give the lessor a right
to terminate such lease or sublease;
(iii) except as otherwise disclosed in Section 3.18(b) of the
Disclosure Schedule, with respect to each such lease or sublease: (A) none
of Parent, the Company, SAP Thai nor an Other Seller has received any
written notice of cancellation or termination under such lease or sublease
and no lessor has any right of termination or cancellation under such lease
or sublease except as may be provided therein, (B) none of Parent, the
Company, SAP Thai nor an Other Seller has received any written notice of a
breach or default under such lease or sublease, which breach or default
has, to Parent's Knowledge, not been cured, and (C) none of Parent, the
Company, SAP Thai nor an Other Seller has granted to any other Person any
material rights, adverse or otherwise, under such lease or sublease; and
(iv) none of the Company, SAP Thai, the Sellers nor (to Parent's
Knowledge) any other party to such lease or sublease, is in breach or
default in any material respect and, to Parent's Knowledge, no event has
occurred that, with notice or lapse of time, would constitute such a breach
or default or permit termination, modification or acceleration under such
lease or sublease.
(c) Either the Company, SAP Thai or the Sellers, as the case may be, has
the full right to exercise any renewal options contained in the leases and
subleases pertaining to the Tangible Personal Property on the terms and
conditions contained therein and upon due exercise would be entitled to enjoy
the use of each item of leased Tangible Personal Property for the full term of
such renewal options.
SECTION 3.19. Assets. (a) Except as disclosed in the Disclosure Schedule,
either the Company, SAP Thai or a Seller, as the case may be, owns, leases or
has the legal right to use all the properties and assets used or intended to be
used in the conduct of the SAP Business and, with respect to contract rights, is
a party to and enjoys the right to the benefits of all contracts, agreements and
other arrangements used or intended to be used by the Company, SAP Thai or a
Seller in the conduct of the SAP Business (all such assets, properties and
contract rights being, the "Transferred Assets"); provided, however, that to the
extent that portions of the representations in Sections 3.16(a),
3.16(d)(iv)through(vi) and 3.16(e) are made to Parent's Knowledge, then this
sentence shall be similarly qualified as respects such portions of Sections
3.16(a), 3.16(d)(iv)through(vi) and 3.16(e). Either the Company, SAP Thai or a
Seller, as the case may be, has good and marketable title to, or, in the case of
leased or subleased assets, valid and subsisting leasehold interests in, all
such assets, free and clear of all Encumbrances, except (i) as disclosed in
Sections 3.15, 3.16, 3.17, 3.18 or 3.19(a) of the Disclosure Schedule or the
Agreement, and (ii) Permitted Encumbrances.
(b) The Transferred Assets constitute all the properties, assets and rights
used, held or intended to be used in, and all such properties, assets and rights
as are primarily related to, or necessary in the conduct of, the SAP Business as
currently conducted by the Company, SAP Thai or the Sellers, except as described
in Section 3.19(b) of the Disclosure Schedule.
<PAGE>
SECTION 3.20. Employee Benefit Matters. (a) Plans and Material Documents.
Section 3.20(a) of the Disclosure Schedule lists (i) each employee benefit plan
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), and each other bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other material benefit plans,
programs, policies or arrangements, and all employment, termination, severance
or other contracts or agreements (whether or not in writing), to which the
Company, SAP Thai, or a Seller (with respect to the SAP Business) is a party,
with respect to which the Company, SAP Thai, or a Seller (with respect to the
SAP Business) has any obligations or which are maintained, contributed to or
sponsored by the Company, SAP Thai, or a Seller for the benefit of any current
or former independent contractor of the Company, SAP Thai, or a Seller (with
respect to the SAP Business) or any current or former employee, officer or
director of the Company, SAP Thai, or a Seller (with respect to the SAP
Business), (ii) each employee benefit plan for which the Company, SAP Thai, or a
Seller (with respect to the SAP Business) could incur liability under Section
4069 of ERISA in the event such plan has been or were to be terminated, (iii)
any plan in respect of which the Company, SAP Thai, or a Seller (with respect to
the SAP Business) could incur liability under Section 4212(c) of ERISA and (iv)
any contracts, arrangements or understandings between Parent or any of its
Affiliates and any employee of the Company, SAP Thai, or a Seller (with respect
to the SAP Business), including, without limitation, any contracts, arrangements
or understandings relating to the sale of the Company ((i), (ii), (iii) and (iv)
collectively, the "Plans"). Except as described in Section 3.20 of the
Disclosure Schedule, each Plan is in writing and Parent has furnished the
Purchaser with a complete and accurate copy of each Plan and a complete and
accurate copy of each material document prepared in connection with each such
Plan including, without limitation, (i) a copy of each trust or other funding
arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the IRS Form 5500 filed with respect to the most recent
plan year, (iv) the most recently received IRS determination letter for each
such Plan, and (v) the most recently prepared actuarial report and financial
statement in connection with each such Plan. Except as disclosed in Section
3.20(a) of the Disclosure Schedule, there are no other employee benefit plans,
programs, arrangements or agreements, whether formal or informal, whether in
writing or not, to which the Company, SAP Thai, or a Seller (with respect to the
SAP Business) is a party, with respect to which the Company, SAP Thai, or a
Seller (with respect to the SAP Business) has any obligation or which are
maintained, contributed to or sponsored by the Company, SAP Thai, or a Seller
for the benefit of any current or former independent contractor of the Company,
SAP Thai, or a Seller (with respect to the SAP Business) or any current or
former employee, officer or director of the Company, SAP Thai, or a Seller (with
respect to the SAP Business). Neither the Company, SAP Thai nor any Seller (with
respect to the SAP Business) has any express or implied commitment (i) to
create, incur liability with respect to or cause to exist any other employee
benefit plan, program or arrangement, (ii) to enter into any contract or
agreement to provide compensation or benefits to any individual or (iii) to
modify, change or terminate any Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
(b) Absence of Certain Types of Plans. None of the Plans is a multiemployer
plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a
"Multiemployer Plan") or a single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) for which the Company, SAP Thai, or a Seller (with
respect to the SAP Business) could incur liability under Section 4063 or 4064 of
ERISA (a "Multiple Employer Plan"). Except as described in Section 3.20 of the
Disclosure Schedule, none of the Plans provides for the payment of separation,
severance, termination or similar-type benefits to any Person or obligates, the
Company, SAP Thai, or a Seller (as it relates to the SAP Business) to pay
separation, severance, termination bonus, retirement, enhanced benefits nor any
acceleration, vesting, distribution or increase in benefits or obligations or
similar-type benefits solely as a result of any transaction contemplated by this
Agreement or as a result of a "change in control", within the meaning of such
term under Section 280G of the Code. None of the Plans provides for or promise
retiree medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company, SAP Thai, or a Seller (with
respect to the SAP Business), except to the extent required by Part 6 of Title I
of ERISA.
(c) Compliance with Applicable Law. Except as would not result in a
Material Adverse Effect, (i) each Plan is operated in all respects in accordance
with the requirements of all applicable Law, including, without limitation,
ERISA and the Code and, to Parent's Knowledge, all Persons who participate in
the operation of such Plans and all Plan "fiduciaries" (within the meaning of
Section 3(21) of ERISA) are acting in all respects in accordance with the
provisions of applicable Law, including, without limitation, ERISA and the Code;
(ii) the Company, SAP Thai and each Seller (with respect to the SAP Business)
have performed all obligations required to be performed by them under, are not
in any respect in default under or in violation of, and have no knowledge of any
default or violation by
<PAGE>
any party to, any Plan; and (iii) no legal action, suit or claim is pending or
threatened with respect to any Plan (other than claims for benefits in the
ordinary course) and no fact or event exists that could give rise to any such
action, suit or claim.
(d) Qualification of Certain Plans. Each Plan which is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and each trust established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt and, to
Parent's Knowledge, no fact or event has occurred since the date of such
determination letter from the IRS to adversely affect the qualified status of
any such Plan or the exempt status of any such trust. Each trust maintained or
contributed to by, the Company, SAP Thai or a Seller for the benefit of any
current or former independent contractor of the Company, SAP Thai or a Seller
(with respect to the SAP Business) or any current or former employee, officer or
director of the Company, SAP Thai or a Seller (with respect to the SAP Business)
which is intended to be qualified as a voluntary employees' beneficiary
association and which is intended to be exempt from federal income taxation
under Section 501(c)(9) of the Code has received a favorable determination
letter from the IRS that it is so qualified and so exempt and, to Parent's
Knowledge, no fact or event has occurred since the date of such determination by
the IRS to adversely affect such qualified or exempt status.
(e) Absence of Certain Liabilities and Events. With respect to the Plans,
no event has occurred and, to Parent's Knowledge, there exists no condition or
set of circumstances in connection with which the Company, SAP Thai, or a Seller
(with respect to the SAP Business) could reasonably be expected to be subject to
any liability under the terms of such Plans, ERISA, the Code or any other
applicable Law, which in any such case would have a Material Adverse Effect.
(f) Plan Contributions and Funding. All contributions, premiums or payments
required to be made with respect to any Plan are fully deductible for income tax
purposes. Parent has not received notice that any such deduction previously
claimed has been challenged by any government entity.
(g) Laws Relating to Disability. Except as set forth in Section 3.20(g) of
the Disclosure Schedule, the Company, SAP Thai and each Seller (with respect to
the SAP Business) are in compliance with the requirements of the Americans With
Disabilities Act, the U.K. Disability Discrimination Act 1995, and any
applicable Thai Law including, without limitation, the Cripples Capability
Reformation Act, B.E. 2534 (1991), except to the extent that failure to comply
with such legislation would not have a Material Adverse Effect.
(h) WARN Act. The Company, SAP Thai and each Seller have not incurred any
liability under, and have complied in all respects with, the Worker Adjustment
Retraining Notification Act and the regulations promulgated thereunder and all
similar state and local "plant-closing" Laws ("WARN"), and do not reasonably
expect to incur any such liability as a result of actions taken or not taken
prior to the Closing Date, except to the extent that such liability may be
incurred as a result of the transaction contemplated by this Agreement. Section
3.20(h) of the Disclosure Schedule lists (i) all the employees terminated or
laid off by the Company during the 90 days prior to the date hereof and (ii) all
the employees of the Company who have experienced a reduction in hours of work
of more than 50% during any month during the 90 days prior to the date hereof
and describes all notices given by the Company in connection with WARN. Parent
will, by written notice to the Purchaser, update Section 3.20(h) of the
Disclosure Schedule at Closing to include any such terminations, layoffs and
reductions in hours from the date hereof through the Closing Date and will
furnish the Purchaser with any related information which they may reasonably
request. Parent will indemnify and hold harmless the Purchaser with respect to
any liability under WARN to the extent arising from the actions or action, of
the Company, SAP Thai or each Seller on or prior to the Closing Date except to
the extent relating to the transactions contemplated by this Agreement.
(i) Foreign Benefit Plans. In addition to the foregoing, with respect to
each Plan that is subject to or governed by the Law of any jurisdiction other
than the United States or any State or Commonwealth of the United States (each a
"Foreign Benefit Plan"), and except for matters that would not have a Material
Adverse Effect:
<PAGE>
(A) all employer and employee contributions to each Foreign Benefit Plan
required by Law or by the terms of such Foreign Benefit Plan have been made, or,
if applicable, accrued in accordance with normal accounting practices, and a pro
rata contribution for the period prior to and including the Closing Date has
been made or accrued;
(B) the fair market value of the assets of each funded Foreign Benefit
Plan, the liability of each insurer for any Foreign Benefit Plan funded through
insurance or the book reserve established for any Foreign Benefit Plan, together
with any accrued contributions, is sufficient to procure or provide for the
benefits determined on an ongoing basis (actual or contingent) calculated to the
Closing Date using a methodology consistent with Financial Accounting Standards
Board Statement No. 87 ("FAS No. 87") calculating the projected benefit
obligations, applying the projected unit credit method, with respect to all
current participants under such Foreign Benefit Plan according to the actuarial
assumptions and valuations most recently used to determine employer
contributions to such Foreign Benefit Plan, and the transactions contemplated by
this Agreement shall not cause such assets or insurance obligations to be less
than such benefit obligations;
(C) each Foreign Benefit Plan required to be registered has been registered
and has been maintained in good standing with applicable regulatory authorities
and each Foreign Benefit Plan is now and always has been operated in compliance
with all applicable non-U.S. Laws;
(D) the Company, the Sellers and SAP Thai have provided the Purchaser with
true and complete copies of all Foreign Benefit Plans (and in the case where
such Foreign Benefit Plans are not in writing, a written description of each
such Foreign Benefit Plan) including all information relating to all benefits
payable or prospectively payable under each Foreign Benefit Plan (including
supplemental benefits). Except as set forth in Section 3.20(i) of the Disclosure
Schedule, there are no Foreign Benefit Plans, programs, schemes or arrangements
to pay any pension or make any other payment after retirement, death or
otherwise with respect to any employee or former employee of the SAP Business
and each Seller, SAP Thai and the Company do not sponsor, contribute or maintain
any scheme, plan, program or arrangement having as its purpose or one of its
purposes the making of such payments or the provision or such benefits;
(E) the Company, the Sellers and SAP Thai have provided the Purchaser with
a complete and accurate copy of all the documentation (including, without
limitation, the trust deeds, rules, announcements and booklets) governing each
Foreign Benefit Plan;
(F) neither the Company, SAP Thai nor any Seller are engaged in any
litigation, arbitration or mediation proceedings with respect to any Foreign
Benefit Plan, and there exists no condition or set of circumstances in
connection with which the Company, SAP Thai or a Seller (with respect to the SAP
Business) could reasonably be expected to be subject to any litigation,
arbitration or mediation proceeding with respect to any Foreign Benefit Plan;
(G) neither the Company, SAP Thai nor any Seller (with respect to the SAP
Business) are in violation of any non-U.S. Laws, including, without limitation,
the U.K. Financial Services Act; and
(H) with respect to any part-time employees employed by Chemdal U.K. at any
time within the preceding 12-month period, to Parent's Knowledge, there have
been no terminations of such part-time employees which could result in any
Liability under Article 119 of the Treaty of Rome or Section 62 of the Pensions
Act, 1995.
SECTION 3.21. Labor Matters. With respect to the SAP Business and the
Persons employed in connection with the SAP Business, and except as set forth in
Section 3.21 of the Disclosure Schedule or as would not have a Material Adverse
Effect, (a) neither the Company, SAP Thai, or a Seller is a party to any
collective bargaining agreement or other labor union contract applicable to
Persons employed by the Company, SAP Thai or a Seller and currently there are no
organizational campaigns, petitions or other unionization activities seeking
recognition of a collective bargaining unit which could reasonably affect the
SAP Business, (b) there are no controversies, strikes, slowdowns or work
stoppages pending or, to Parent's Knowledge, threatened between the Company, SAP
Thai or a Seller and any of their respective employees, and neither the Company,
SAP Thai nor a Seller has experienced any
<PAGE>
such controversy, strike, slowdown or work stoppage within the past three years,
(c) neither the Company, SAP Thai nor any Seller has breached or otherwise
failed to comply with the provisions of any applicable collective bargaining or
union contract and there are no written grievances outstanding against the
Company, SAP Thai or a Seller under any such agreement or contract, (d) neither
the Company, SAP Thai nor a Seller has committed unfair labor practices nor has
there been any unfair labor practice complaints pending against the Company, SAP
Thai or a Seller before the National Labor Relations Board or any other
Governmental Authority involving union representation or employees of the
Company, SAP Thai or the Sellers, (e) the Company, SAP Thai and the Sellers are
currently in compliance with all applicable Laws relating to the employment of
labor, including those related to wages, hours, collective bargaining and the
payment and withholding of Taxes and other sums as required by the appropriate
Governmental Authority and have withheld and paid to the appropriate
Governmental Authority or are holding for payment not yet due to such
Governmental Authority all amounts required to be withheld from employees of the
Company, SAP Thai and each Seller and are not liable for any arrears of wages,
Taxes, penalties or other sums for failure to comply with any of the foregoing,
(f) the Company, SAP Thai and the Sellers have paid in full to all their
respective employees or adequately accrued for in accordance with U.S. GAAP all
wages, salaries, commissions, bonuses, benefits and other compensation due to or
on behalf of such employees, (g) there is no written claim with respect to
payment of wages, salary or overtime pay that has been asserted or is now
pending or, to Parent's Knowledge, threatened before any Governmental Authority
with respect to any Persons currently or formerly employed by the Company, SAP
Thai or a Seller, (h) neither the Company, SAP Thai nor a Seller is a party to,
or otherwise bound by, any consent decree with, or citation by, any Governmental
Authority relating to employees or employment practices, (i) there is no written
charge or proceeding with respect to a violation of any occupational safety or
health standards that has been asserted or is now pending or, to Parent's
Knowledge, threatened with respect to the Company, SAP Thai or any Seller, and
(j) there is no written charge of discrimination in employment or employment
practices, as respects any legally protected category, for any reason,
including, without limitation, age, gender, race or religion, which has been
asserted or is now pending or, to Parent's Knowledge, threatened before the
United States Equal Employment Opportunity Commission, or any other Governmental
Authority in any jurisdiction in which the Company, SAP Thai or any Sellers have
employed or currently employ any Person.
SECTION 3.22. Key Employees. All directors, officers, management employees,
and technical and professional employees of the Company, SAP Thai and each
Seller employed in the SAP Business are under an obligation to the Company, SAP
Thai or a Seller to maintain in confidence all confidential or proprietary
information acquired by them in the course of their employment and to assign to
the Company, SAP Thai or a Seller all inventions made by them within the scope
of their employment during such employment and for a reasonable period
thereafter. The Company, SAP Thai and the Sellers shall use all reasonable
efforts to assign such arrangements to the Purchaser as of the Closing Date.
SECTION 3.23. Taxes. (a) Except as set forth in Section 3.23 of the
Disclosure Schedule, (i) all returns and reports in respect of Taxes required to
be filed by or with respect to the Company, SAP Thai or the Sellers (including
the consolidated federal income Tax return of Parent and any state, local or
foreign Tax return or report that includes the Company, SAP Thai or any Other
Seller on a consolidated or combined basis) have been timely filed, (ii) all
Taxes required to be shown on such returns and reports or otherwise due have
been timely paid, (iii) all such returns and reports (insofar as they relate to
the activities or income of the Company, SAP Thai, the SAP Assets or the SAP
Business) are true, correct and complete in all material respects, (iv) no
adjustment relating to such returns or reports has been proposed formally or
informally by any Tax authority (insofar as either relates to the activities or
income of the Company, SAP Thai, the SAP Assets or the SAP Business or could
result in Liability of the Company or SAP Thai on the basis of joint and/or
several liability) and, to Parent's Knowledge, no basis exists for any such
adjustment, (v) there are no pending or, to Parent's Knowledge, threatened
actions or proceedings for the assessment or collection of Taxes against the
Company, SAP Thai, the SAP Assets or the SAP Business or (insofar as either
relates to the activities or income of the Company, SAP Thai, the SAP Assets or
the SAP Business or could result in Liability of the Company or SAP Thai on the
basis of joint and/or several liability) any corporation that was included in
the filing of a return with Parent, the Company, SAP Thai or the Other Sellers
on a consolidated or combined basis, (vi) no consent under Section 341(f) of the
Code has been filed with respect to the Company or SAP Thai, (vii) there are no
Tax liens on any assets of the Company, SAP Thai or any of the SAP Assets,
(viii) neither Parent nor any Subsidiary or Affiliate of Parent or any Other
Seller is a party to any agreement or arrangement that would result, separately
or in the aggregate, in the payment of any "excess parachute payments", within
the meaning of Section 280G of the Code (insofar as relates to the Company, SAP
Thai or the SAP Business), (ix) no acceleration of the vesting schedule for any
property that is substantially unvested within the meaning of the Regulations
under Section
<PAGE>
83 of the Code will occur in connection with the transactions contemplated by
this Agreement (insofar as relates to the Company, SAP Thai or the SAP
Business), except for the accelerated vesting of stock options and other
benefits pursuant to Article VI hereof; (x) from and after January 1, 1990, the
Company has been and continues to be a member of the affiliated group (within
the meaning of Section 1504(a)(1) of the Code) for which Parent files a
consolidated return as the common parent, and has not been includible in any
other consolidated return for any taxable period for which the statute of
limitations has not expired, (xi) neither the Company nor SAP Thai has been at
any time a member of any partnership or joint venture or the holder of a
beneficial interest in any trust for any period for which the statute of
limitations for any Tax has not expired, (xii) the Company has not been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code, (xiii) none of the SAP Assets held by SAP Thai or the Other Sellers
constitute U.S. real property interests within the meaning of Section 897(c)(i)
of the Code, (xiv) neither the Company, nor SAP Thai is subject to any
accumulated earnings Tax penalty or personal holding company Tax, and (xv) SAP
Thai has never been included in the filing of a Tax return or report on a
consolidated, combined or unitary basis.
(b) Except as disclosed in Section 3.23 of the Disclosure Schedule: (i)
there are no outstanding waivers or agreements extending the statute of
limitations for any period with respect to any Tax to which the Company or SAP
Thai may be subject; (ii) the Company (A) has not and is not projected to have
an amount includible in its income for the current taxable year under Section
951 of the Code, (B) does not have an unrecaptured overall foreign loss within
the meaning of Section 904(f) of the Code and (C) has not participated in or
cooperated with an international boycott within the meaning of Section 999 of
the Code; (iii) neither the Company nor SAP Thai has any (A) income reportable
for a period ending after the Closing Date but attributable to a transaction
(e.g., an installment sale) occurring in or a change in accounting method made
for a period ending on or prior to the Closing Date which resulted in a deferred
reporting of income from such transaction or from such change in accounting
method (other than a deferred intercompany transaction), or (B) deferred gain or
loss arising out of any deferred intercompany transaction (insofar as either
could result in material Taxes to the Company or SAP Thai for any taxable
period, or portion of any taxable period, ending after the Closing Date); (iv)
there are no requests from any governmental or taxing authority for information
currently outstanding that could affect the Taxes of the Company or SAP Thai;
(v) there are no proposed reassessments of any property owned by the Company,
SAP Thai or of any of the SAP Assets and there are no other proposals from any
governmental or taxing authority that could increase the amount of any Tax to
which the Purchaser (in respect of the SAP Business), the Company or SAP Thai
would be subject, or which would be imposed, in respect of real property of the
Company, SAP Thai or the SAP Business; (vi) the Company is not obligated under
any agreement with respect to industrial development bonds or similar
obligations, with respect to which the excludibility from gross income of the
holder for federal income Tax purposes could be affected by the transactions
contemplated hereunder; and (vii) no power of attorney that is currently in
force has been granted with respect to any request for a ruling or similar
matter relating to Taxes that could affect the Company, SAP Thai, the SAP Assets
or the SAP Business.
(c) (i) Section 3.23(c) of the Disclosure Schedule lists all income,
franchise and similar Tax returns and reports (federal, state, local and
foreign) filed with respect to the Company and SAP Thai for taxable periods
ended on or after December 31, 1997, indicates for which jurisdictions Tax
returns and reports have been filed on the basis of a unitary group, indicates
the most recent income, franchise or similar Tax return or report for each
relevant jurisdiction for which an audit has been completed or the statute of
limitations has lapsed and indicates all Tax returns and reports that currently
are the subject of audit, (ii) Parent has delivered to the Purchaser correct and
complete copies of all federal, state and foreign income, franchise and similar
Tax returns and reports, examination reports, and statements of deficiencies
assessed against or agreed to by the Company and SAP Thai since January 1, 1996,
(iii) Parent has delivered to the Purchaser a true and complete copy of any
Tax-sharing or allocation agreement or arrangement involving the Company or SAP
Thai and a true and complete description of any such unwritten or informal
agreement or arrangement, and (iv) Parent has delivered to the Purchaser
complete and correct copies of all pro forma federal income Tax returns of the
Company prepared in connection with the Parent's or any other consolidated
federal income Tax return, accompanied by a schedule reconciling the items in
the pro forma Tax return to the items as included in the consolidated Tax return
for all taxable years ending on or after December 31, 1997.
<PAGE>
SECTION 3.24. Insurance. (a) Section 3.24(a) of the Disclosure Schedule
sets forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, including
directors' and officers' liability, workers' compensation, and bond and surety
arrangements) under which the Company, SAP Thai, an Other Seller or the SAP
Business has been an insured, a named insured or otherwise the principal
beneficiary of coverage at any time within the past three years:
(i) the name, address and telephone number of the agent or broker;
(ii) the name of the insurer and the names of the principal insured
and each named insured;
(iii) the policy number and the period of coverage;
(iv) the type, scope (including an indication of whether the coverage
was on a claims made, occurrence or other basis) and amount (including
deductibles) of coverage; and
(v) the premium charged for the policy, including, without limitation,
a description of any retroactive premium adjustments or other loss-sharing
arrangements.
(b) With respect to each such insurance policy: (i) the policy is legal,
valid, binding and enforceable in accordance with its terms, subject to
bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the
rights of creditors generally and the availability of equitable remedies and,
except for policies that have expired under their terms in the ordinary course,
is in full force and effect; (ii) neither Parent, the Company, SAP Thai, an
Other Seller nor the SAP Business is in breach or default (including any breach
or default with respect to the payment of premiums or the giving of notice) and,
to Parent's Knowledge, no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default or permit termination or
modification under the policy; and (iii) no party to the policy has repudiated
in writing, or given written notice of an intent to repudiate, any provision
thereof.
(c) Section 3.24(c) of the Disclosure Schedule sets forth all material
risks against which the Company, SAP Thai, an Other Seller or the SAP Business
is self-insured or which are covered under any risk retention program in which
the Company, SAP Thai or an Other Seller participates, together with information
for the last three years of the Company's, SAP Thai's, the Other Sellers' or the
SAP Business' loss experience with respect to such risks.
(d) To Parent's Knowledge, all material assets, properties and risks of the
Company, SAP Thai, each Other Seller and the SAP Business are covered by valid
and currently effective insurance policies or binders of insurance (including,
without limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company, SAP Thai, the Sellers,
or the SAP Business, as the case may be, in each case, in such types and amounts
and covering such risks as are specified in Section 3.24 of the Disclosure
Schedule or as otherwise are consistent with customary practices and standards
of companies engaged in businesses and operations similar to those of the
Company, SAP Thai, the Sellers, or the SAP Business, as the case may be.
(e) To Parent's Knowledge, at no time subsequent to June 30, 1999 has the
Company, SAP Thai, any of the Sellers or the SAP Business (i) been denied any
material insurance or indemnity bond coverage which it has requested, (ii) made
any material reduction in the scope or amount of its insurance coverage, or,
except as set forth in Section 3.24(e) of the Disclosure Schedule, received
written notice from any of its insurance carriers that any insurance premiums
will be subject to increase in an amount materially disproportionate to the
amount of the increases with respect thereto (or with respect to similar
insurance) in prior years or that any insurance coverage listed in Section
3.24(a) of the Disclosure Schedule will not be available in the future
substantially on the same terms as are now in effect or (iii) suffered any
extraordinary increase in premium for renewed coverage. Since June 30, 1999, no
insurance carrier has canceled, failed to renew or materially reduced any
insurance coverage for the Company, SAP Thai, the Sellers or the SAP Business or
given any notice or other indication of its intention to cancel, not renew or
reduce any such coverage.
<PAGE>
(f) No insurance policy listed in Section 3.24(a) of the Disclosure
Schedule will cease to be legal, valid, binding, enforceable in accordance with
its terms and in full force and effect as respects matters arising out of events
occurring prior to the Closing Date on terms identical to those in effect as of
the date hereof as a result of the consummation of the transactions contemplated
by this Agreement.
SECTION 3.25. Brokers. Except for Schroder & Co. Inc., no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent. Parent is solely
responsible for the fees and expenses of Schroder & Co. Inc.
SECTION 3.26. Disclaimer. Except for the representations and warranties
specifically set forth in this Article III, none of the Sellers, the Company,
SAP Thai nor their Affiliates makes any (or shall in any manner whatsoever be
deemed or be construed as having made any) representation or warranty to the
Purchaser or any other Person hereunder or otherwise, express or implied.
SECTION 3.27. Disclosure Schedule. The Parties hereto acknowledge that the
mere inclusion of an item in the Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by the Sellers that
such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to Parent to enter into this Agreement, the Purchaser, on
behalf of itself and any designated Affiliate that will purchase any of the SAP
Assets or the SAP Business pursuant to this Agreement, hereby represents and
warrants to Parent as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The Purchaser is
a corporation duly organized, validly existing and in good standing under the
Laws of its jurisdiction of incorporation and has all necessary corporate power
and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The Purchaser
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary, except to the
extent that the failure to be so licensed or qualified would not materially
adversely affect the ability of the Purchaser to carry out its obligations
under, and to consummate the transactions contemplated by, this Agreement. The
execution and delivery of this Agreement by the Purchaser, the performance by
the Purchaser of its obligations hereunder and the consummation by the Purchaser
of the transactions contemplated hereby have been duly authorized by all
requisite action on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser, and (assuming due authorization,
execution and delivery by Parent) this Agreement constitutes a legal, valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, moratorium,
reorganization or similar Laws affecting the rights of creditors generally and
the availability of equitable remedies.
SECTION 4.02. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and other actions referred to
in Section 4.03, except as may result from any facts or circumstances relating
solely to Parent, the execution, delivery and performance of this Agreement by
the Purchaser do not and will not (a) violate, conflict with or result in the
breach of any provision of the Certificate of Incorporation or By-laws (or
similar organizational documents) of the Purchaser, (b) conflict with or violate
any Law or Governmental Order applicable to the Purchaser or (c) conflict with,
or result in any breach of, constitute a default (or event which with the giving
of notice or lapse or time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation, or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Purchaser
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to which
the Purchaser is a party or by which any of such assets or properties are bound
or affected which would have a materially adverse effect on the ability of the
Purchaser to consummate the transactions contemplated by this Agreement.
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SECTION 4.03. Governmental Consents and Approvals. The execution, delivery
and performance of this Agreement by the Purchaser do not and will not require
any consent, approval, authorization or other order of, action by, filing with,
or notification to, any Governmental Authority, except (a) as described in a
writing given to Parent by the Purchaser on the date of this Agreement and (b)
the notification requirements of the HSR Act and certain applicable filings
under non-U.S. merger control and competition Laws.
SECTION 4.04. Investment Purpose. The Purchaser is acquiring the Shares
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
SECTION 4.05. Litigation. Except as disclosed in a writing given to Parent
by the Purchaser on the date of this Agreement, no claim, action, proceeding or
investigation is pending or, to the knowledge of the Purchaser, threatened,
which seeks to delay or prevent the consummation of, or which would be
reasonably likely to materially adversely affect the Purchaser's ability to
consummate, the transactions contemplated by this Agreement. The Purchaser is
not subject to any continuing order of, consent decree, settlement agreement or
similar written agreement with, or, to the knowledge of Purchaser, continuing
investigation by, any Governmental Authority, or any order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority or
arbitrator that would prevent the Purchaser from performing its material
obligations under this Agreement or prevent or materially delay the consummation
of any of the transactions contemplated hereby.
SECTION 4.06. Purchaser Financial Statements. True and complete copies of
the Purchaser's audited balance sheet for the fiscal year ended as of December
31, 1998, and the related audited statements of income, together with all
related notes and schedules thereto, have been delivered by the Purchaser to
Parent and are set forth herein at Section 4.06 of the Disclosure Schedule.
SECTION 4.07. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser.
SECTION 4.08. Disclaimer. Except for the representations and warranties
specifically set forth in this Article IV, neither the Purchaser nor its
Affiliates makes any (or shall in any manner whatsoever be deemed or be
construed as having made any) representation or warranty to Parent or to any
other Person hereunder or otherwise, express or implied.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) Parent
covenants and agrees that, with respect to the SAP Business and the SAP Assets
and except as described in Section 5.01(a) of the Disclosure Schedule or as
contemplated by this Agreement, between the date hereof and the time of the
Closing, Parent will, and will cause the Company, SAP Thai and each of the Other
Sellers to, conduct its business in the ordinary course and consistent with past
practice. Without limiting the generality of the foregoing, except as described
in Section 5.01(a) of the Disclosure Schedule, Parent will, with respect to the
SAP Business, and will cause each of the Company, SAP Thai and each of the Other
Sellers to, (i) continue its advertising and promotional activities, and pricing
and purchasing policies, in accordance with past practice, (ii) not
intentionally shorten or lengthen the customary payment cycles for any of its
payables or receivables, (iii) use all reasonable efforts consistent with past
practices to (A) preserve intact its business organizations and the business
organization of the SAP Business, (B) keep available to the Purchaser the
services of the employees of the Company, SAP Thai and the SAP Business, (C)
continue in full force and effect without material modification all existing
policies or binders of insurance currently maintained in respect of the Company,
SAP Thai, the Other Sellers and the SAP Business and (D) preserve the current
relationships with its customers, suppliers and other Persons with which it has
significant business relationships, (iv) exercise, but only after notice to the
Purchaser and receipt of the Purchaser's prior written approval, any rights of
renewal pursuant to the
<PAGE>
terms of any of the leases or subleases relating to the SAP Business which by
their terms would otherwise expire, and (v) not engage in any practice, take any
action, fail to take any action or enter into any transaction which could cause
any representation or warranty of the Sellers to be untrue or result in a breach
of any covenant made by the Sellers in this Agreement.
(b) Except as described in Section 5.01(b) of the Disclosure Schedule,
Parent covenants and agrees that, prior to the Closing, without the prior
written consent of the Purchaser, neither the Company, SAP Thai nor the Sellers
(with respect to the SAP Business) will: (i) do any of the things enumerated in
the second sentence of Section 3.11 (including, without limitation, clauses (i)
through (xx) thereof, except for those actions specifically contemplated by
Section 6.10 hereof); or (ii) agree to employ any new hire on terms that would
pay any such Person an annual base salary in excess of U.S.$50,000 or annual
aggregate compensation in excess of U.S.$75,000. Notwithstanding anything to the
contrary contained in this Section 5.01(b), prior to the Closing, Parent may
cause the Company and/or SAP Thai to convey to Parent or one of its Affiliates
(i) any cash or cash equivalents owned by the Company or SAP Thai; (ii) any
Intellectual Property (including Intellectual Property used in the Poly-Pore
Business) owned by or licensed to the Company or SAP Thai that is not used
primarily in, developed primarily for, or related primarily to, the SAP Business
(it being understood that Parent may not cause the Company and/or SAP Thai to
convey to Parent or one of its Affiliates any Company Intellectual Property or
SAP Thai Intellectual Property); and (iii) all rights to the name "AMCOL" and
all related trademarks, logos, tradenames, telephone numbers and internet domain
names.
SECTION 5.02. Access to Information. (a) From the date hereof until the
Closing, upon reasonable notice, Parent will, and will cause the Company, SAP
Thai and the Other Sellers and each of its and the Company's, SAP Thai's and the
Other Sellers' officers, directors, employees, agents, representatives,
accountants and counsel to: (i) afford the officers, employees and authorized
agents, accountants, counsel, financing sources and representatives of the
Purchaser reasonable access, during normal business hours, to the offices,
properties, plants, other facilities, books and records of Parent (to the extent
such offices, plants, facilities, books and records relate to the SAP Business),
the Company, SAP Thai, the Other Sellers and to those officers, directors,
employees, agents, accountants and counsel of Parent, the Company, SAP Thai and
of each of the Other Sellers who have any knowledge relating to the Company, SAP
Thai, the Other Sellers or the SAP Business and (ii) furnish to the officers,
employees and authorized agents, accountants, counsel, financing sources and
representatives of the Purchaser such additional financial and operating data
and other information regarding the assets, properties and goodwill of the
Company, SAP Thai, the Other Sellers and the SAP Business (or legible copies
thereof) as the Purchaser may from time to time reasonably request; provided,
however, that the Company shall not be required by this provision to waive or
impair its right to assert any attorney-client privilege that may exist as
respects any Actions or other matters; provided, further, however, that none of
the Purchaser or its representatives shall contact or have any communication
with any employees of Parent or any of its Subsidiaries without the prior
written approval of Parent, except for those employees of Parent and its
Subsidiaries listed on Exhibit 5.02 attached hereto.
(b) In order to facilitate the resolution of any claims made against or
incurred by Parent prior to the Closing, or for any other reasonable purpose,
for a period of seven years after the Closing, the Purchaser shall (i) retain
the books and records of the Company, SAP Thai and the SAP Business relating to
periods prior to the Closing in a manner reasonably consistent with the prior
practice of the Company, SAP Thai and the Sellers (with respect to the SAP
Business) and (ii) upon reasonable notice, afford the officers, employees and
authorized agents and representatives of Parent reasonable access (including the
right to make, at Parent's expense, photocopies), during normal business hours,
to such books and records.
(c) In order to facilitate the resolution of any claims made by or against
or incurred by the Purchaser, the Company, SAP Thai or the SAP Business after
the Closing or for any other reasonable purpose, for a period of seven years
following the Closing, Parent shall (i) retain the books and records of Parent
which relate to the Company, SAP Thai and the SAP Business for periods prior to
the Closing and which shall not otherwise have been delivered to the Purchaser,
the Company or SAP Thai and (ii) upon reasonable notice, afford the officers,
employees and authorized agents and representatives of the Purchaser, the
Company or SAP Thai reasonable access (including the right to make photocopies,
at the expense of the Purchaser or the Company), during normal business hours,
to such books and records.
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SECTION 5.03. Confidentiality. All information obtained by the Purchaser
pursuant to Section 5.02 shall be kept confidential in accordance with the
confidentiality agreement (the "Confidentiality Agreement") between the
Purchaser and Parent, dated May 17, 1999.
SECTION 5.04. Stockholders' Meeting. Parent, acting through the Board,
shall, in accordance with applicable Law and Parent's Restated Certificate of
Incorporation and By-laws, (i) duly call, give notice of, convene and hold a
meeting of its stockholders as soon as practicable following the date hereof for
the purpose of considering and taking action on this Agreement and the
transactions contemplated hereby (the "Stockholders' Meeting") and (ii) except
as the Board determines is required by its fiduciary duties under applicable Law
after having received advice from outside legal counsel (A) include in the Proxy
Statement (as defined herein) the recommendation of the Board that the
stockholders of Parent approve and adopt this Agreement and the transactions
contemplated hereby, (B) not subsequently withdraw, modify or change in any
manner adverse to the Purchaser such recommendation, and (C) use its reasonable
efforts to obtain such approval and adoption.
SECTION 5.05. Proxy Statement. (a) As promptly as practicable after the
execution of this Agreement, Parent (i) will prepare and file with the
Securities and Exchange Commission (the "SEC") the Proxy Statement (as defined
below) relating to the Stockholders' Meeting to be held to consider approval of
this Agreement and the transactions contemplated hereby and (ii) mail the Proxy
Statement to its stockholders. The Proxy Statement to be sent to the
stockholders of Parent in connection with the Stockholders' Meeting (such proxy
statement or information statement, as amended or supplemented, being referred
to herein as the "Proxy Statement") shall not, at the date the Proxy Statement
(or any amendment or supplement thereto) is first mailed to stockholders of
Parent, and at the time of the Stockholder's Meeting, contain any statement
which, at the time and in light of the circumstances under which it was made, is
false or misleading with respect to any material fact, or which omits to state
any material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders' Meeting which
shall have become false or misleading. Any information provided by the Purchaser
to Parent which is included in the Proxy Statement shall not, on the date
provided to Parent, contain any statement which, at the time and in light of the
circumstances under which it was made, is false or misleading with respect to
any material fact, or which omits to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which shall have become false or
misleading. The Proxy Statement shall comply in all material respects as to form
with the requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder.
(b) The Proxy Statement shall include the recommendation of Parent's Board
to the stockholders of the Company in favor of approval of this Agreement and
the transactions contemplated hereby; provided, however, that the Board may,
prior to the Stockholders' Meeting, withdraw, modify or change any such
recommendation only as it may determine is required by its fiduciary duties
under applicable Law after having received advice from outside legal counsel;
provided, further, that, notwithstanding anything to the contrary contained in
this Agreement, such a withdrawal, modification or change in such recommendation
shall not relieve Parent in any way whatsoever of its other obligations under
Section 5.04 or 5.05(a) of this Agreement.
(c) Parent shall advise the Purchaser of any request by the SEC for
amendment of the Proxy Statement or comments thereon and responses thereto or
requests by the SEC for additional information.
SECTION 5.06. Regulatory and Other Authorizations; Notices and Consents.
(a) Parent shall use all reasonable efforts to obtain (or cause the Company, SAP
Thai and the Other Sellers to obtain) all authorizations, consents, orders and
approvals of all Governmental Authorities and officials that may be or become
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and will cooperate fully with the
Purchaser in promptly seeking to obtain all such authorizations, consents,
orders and approvals. Each party hereto agrees to make an appropriate filing, if
necessary, pursuant to the HSR Act with respect to the transactions contemplated
by this Agreement within five Business Days of the date hereof and to supply as
promptly as practicable to the appropriate Governmental Authorities any
additional information and documentary material that may be requested pursuant
to the HSR Act. In addition, each Party agrees to make, or cause to be made,
promptly any filing that the Purchaser identifies to Parent as being required
under any other non-United States antitrust, merger control or competition Law
or by any other antitrust, merger control or competition authority. The
Purchaser will be responsible
<PAGE>
for paying the normal filing fees incurred by the Purchaser and Parent in
connection with the HSR Act filings and the similar merger control or
competition Law filings being made by the parties in the United Kingdom and
Germany; provided, however, that the Purchaser shall not be responsible for
paying any other fees or expenses incurred by Parent (including, without
limitation, counsel fees) in connection with the preparation of such filings.
(b) Parent shall, or shall cause the Company, SAP Thai and the Other
Sellers to, give promptly such notices to third parties and use its or their
reasonable efforts to obtain such third party consents as the Purchaser may
reasonably deem necessary or desirable in connection with the transactions
contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all reasonable efforts to assist
Parent in giving such notices and obtaining such consents.
(d) In connection with any consent that may be requested by Parent or
Purchaser, neither party to this Agreement shall have any obligation to give any
guarantee or other financial or similar consideration of any nature in
connection with any notice or consent or to consent to any change in the terms
of any agreement or arrangement which either party in its sole and absolute
discretion may deem adverse to the interests of such party, the Company, SAP
Thai or the SAP Business.
(e) Parent and the Purchaser agree that, in the event any consent, approval
or authorization necessary or desirable to preserve for the SAP Business, the
Company or SAP Thai or any right or benefit under any lease, license, contract,
commitment or other agreement or arrangement to which Parent, the Company, SAP
Thai or an Other Seller is a party is not obtained prior to the Closing (and the
parties acknowledge and agree that, except as set forth herein, no such consent,
approval or authorization shall be a condition to the Purchaser's obligation to
close), Parent will, subsequent to the Closing, cooperate with the Purchaser,
the Company and SAP Thai in attempting to obtain such consent, approval or
authorization as promptly thereafter as practicable. If such consent, approval
or authorization cannot be obtained, except with respect to customer contracts,
Parent shall use its reasonable efforts to provide the Purchaser, the Company,
SAP Thai or the SAP Business, as the case may be, with the rights and benefits
of the affected lease, license, contract, commitment or other agreement or
arrangement for the term of such lease, license, contract or other agreement or
arrangement, and, if Parent provides any such rights and benefits, the
Purchaser, the Company or SAP Thai, as the case may be, shall assume the
obligations and burdens thereunder.
SECTION 5.07. Notice of Developments. Prior to the Closing, Parent shall
promptly notify the Purchaser in writing of (i) all events, circumstances, facts
and occurrences arising subsequent to the date of this Agreement of which Parent
becomes aware and which could result in any material breach of a representation
or warranty or covenant of the Sellers in this Agreement or which could have the
effect of making any representation or warranty of the Sellers in this Agreement
untrue or incorrect in any material respect and (ii) all other developments of
which Parent becomes aware and affecting the Liabilities, business, financial
condition or prospects of the Company, SAP Thai or the SAP Business, other than
changes affecting the economy or the SAP industry generally, which developments
could have a Material Adverse Effect.
SECTION 5.08. No Solicitation or Negotiation. Parent agrees that between
the date of this Agreement and the earlier of (i) the Closing and (ii) the
termination of this Agreement, none of Parent, the Company, SAP Thai, the Other
Sellers nor any of their respective Affiliates, officers, directors,
representatives or agents will (a) solicit, initiate, consider, encourage or
accept (except to the extent permitted below) any other proposals or offers from
any Person (i) relating to any acquisition or purchase of all or any portion of
the capital stock of the Company, SAP Thai or an Other Seller or all or a
substantial portion of the assets of the Company, SAP Thai, an Other Seller or
the SAP Business (other than Inventory to be sold in the ordinary course of
business consistent with past practice), or (ii) relating to any business
combination with the Company, SAP Thai or any Other Seller, or (iii) relating to
any other extraordinary business transaction involving or otherwise relating to
the Company, SAP Thai, any Other Seller or the SAP Business, or (iv) relating to
(x) any acquisition or purchase of, or tender offer or exchange offer for, more
than 20% of the equity securities of Parent, or (y) any merger, consolidation or
business combination with Parent, or other extraordinary business transaction
involving or otherwise relating to Parent that would result in any other Person
owning in excess of 20% of the outstanding equity securities of Parent (any of
the events described in (i), (ii), (iii) and (iv) being an ("Acquisition
Proposal")) (it being understood that any transaction, the sole purpose of which
is to spin-off the SAP Business to the shareholders of Parent on a pro rata
basis, shall not constitute an Acquisition Proposal for purposes of this
Agreement provided that such spin-off is not part of a transaction, or series of
transactions, the
<PAGE>
intended result of which is that a controlling interest in the shares or the
assets of the SAP Business will be transferred to a non-affiliated third party
(other than such shareholders of Parent)) or (b) except as required by the
fiduciary duties of the Board of Directors of Parent as such duties would exist
in the absence of any limitations in this Agreement, participate in any
discussions, conversations, negotiations and other communications regarding, or
furnish to any other Person any information with respect to, or otherwise
cooperate in any way, assist or participate in, facilitate or encourage any
effort or attempt by any other Person to seek or to consummate an Acquisition
Proposal; provided, however, that prior to the consummation of the transaction
contemplated hereby, nothing contained in Section 5.08 shall prohibit the Board
from (i) furnishing information to, or entering into discussions or negotiations
with, any Person that after the date hereof makes an unsolicited Acquisition
Proposal, if, and only to the extent that, (A) prior to furnishing such
information to, or entering into discussions or negotiations with such Person or
agreeing to or endorsing any Acquisition Proposal, the Board determines in good
faith, after consultation with and based upon the advice of counsel and a
financial advisor of a nationally recognized reputation, that such Acquisition
Proposal is, or may reasonably be expected to lead to, a Superior Proposal, (B)
prior to furnishing such information to, or entering into discussions or
negotiations with, such Person, Parent provides written notice to the Purchaser
to the effect that it is furnishing information to, or entering into discussions
or negotiations with, such Person and, in any such notice to the Purchaser,
indicating in reasonable detail the terms and conditions of such Acquisition
Proposal, offer, inquiry or other contact, and (C) such information to be so
furnished has been previously delivered to the Purchaser or (ii) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal. Parent shall notify the Purchaser promptly if any such Acquisition
Proposal or offer, or any inquiry or other contact with any Person with respect
thereto is made. Parent agrees not to, and to cause the Company, SAP Thai and
each Other Seller not to, without the prior written consent of the Purchaser,
release any Person from, or waive any provision of, any confidentiality or
standstill agreement to which Parent, the Company, SAP Thai or an Other Seller
is a party, except in the event the Parent Board determines in good faith, after
consultation with and based upon the advice of counsel and a financial advisor
of a nationally recognized reputation, that such release or waiver is reasonably
expected to lead to a Superior Proposal. Except as required by the fiduciary
duties of the Board of Directors of Parent, Parent immediately shall cease and
cause to be terminated all existing discussions, conversations, negotiations and
other communications with any Persons conducted heretofore with respect to any
of the foregoing.
SECTION 5.09. Use of Intellectual Property. (a) Parent acknowledges that
from and after the Closing, the name "Chemdal" and all similar names, marks and
logos (all of such names, marks and logos being the "Chemdal Names") shall be
owned by the Purchaser, one of its designated Affiliates, the Company or SAP
Thai and that neither Parent nor any of its Affiliates shall have any rights in
the Chemdal Names, and that neither Parent nor any of its Affiliates will
contest the ownership or validity of any rights of the Purchaser, its designated
Affiliates, SAP Thai or the Company in or to the Chemdal Names.
(b) Except as otherwise provided in the ION Exchange License Agreement (as
defined in Section 5.19 of the Agreement), from and after the Closing, neither
the Sellers nor any of their Affiliates shall use or disclose any of the
Business Intellectual Property or the Company Intellectual Property or the SAP
Thai Intellectual Property.
SECTION 5.10. Non-Competition. (a) For a period of three (3) years after
the Closing in the European Community and for a period of ten (10) years after
the Closing in every other location or, in each case, for such shorter period as
may be required by applicable Law (in each case, the "Restricted Period"),
Parent and its Affiliates shall not engage, directly or indirectly, in any
business anywhere in the world that researches, develops, manufactures, markets,
distributes, sells, produces or supplies products or services of the kind
researched, developed, manufactured, marketed, distributed, sold, produced or
supplied by the SAP Business, the Company or SAP Thai, in each case, for the
Traditional SAP Market Segments as of the Closing Date or, without the prior
written consent of the Purchaser, directly or indirectly, own an interest in,
manage, operate, join, control, lend money or render financial or other
assistance to or participate in or be connected with, as an officer, employee,
partner, stockholder, consultant or otherwise, any Person that competes with the
Company, SAP Thai or the SAP Business in researching, developing, manufacturing,
marketing, distributing, selling, producing or supplying products or services of
the kind researched, developed, manufactured, marketed, distributed, sold,
produced or supplied by the Company, SAP Thai or the SAP Business for the
Traditional SAP Market Segments as of the Closing; provided, however, that, for
the purposes of this
<PAGE>
Section 5.10, ownership of securities having no more than three percent of the
outstanding voting power of any competitor which are listed on any national
securities exchange or traded actively in the national over-the-counter market
shall not be deemed to be in violation of this Section 5.10 so long as the
Person owning such securities has no other connection or relationship with such
competitor.
(b) As a separate and independent covenant, Parent agrees with the
Purchaser that, for a period of three (3) years after the Closing in the
European Community and for a period of ten (10) years after the Closing in every
other location or, in each case, for such shorter period as may be required by
applicable Law, Parent will not, and will not permit its Affiliates to, in any
way, directly or indirectly, for the purpose of conducting or engaging in any
business that researches, develops, manufactures, markets, distributes, sells,
produces or supplies products or services of the kind researched, developed,
manufactured, marketed, distributed, sold, produced or supplied by the SAP
Business, the Company or SAP Thai, in each case, for the Traditional SAP Market
Segments as of the Closing, call upon, solicit, advise or otherwise do, or
attempt to do, business in the Traditional SAP Market Segments with any
customers of the SAP Business with whom the SAP Business had any dealings in the
Traditional SAP Market Segments during the period of time in which the SAP
Business, the Company and SAP Thai was owned by Parent, or take away or
interfere or attempt to interfere with any custom, trade, business or patronage
of the SAP Business in the Traditional SAP Market Segments.
(c) Parent will not, and will not permit any of its Affiliates to, directly
or indirectly, solicit the employment of, attempt to employ, or employ any
Transferred Employee or U.K. Designated Employee during the period commencing on
the Closing Date and ending twelve months thereafter, and the Purchaser will not
and will not permit any of its Affiliates to, directly or indirectly, solicit
the employment of, attempt to employ, or employ any employees of Parent or any
of is Affiliates during the period commencing on the Closing Date and ending
twelve months thereafter; provided, however, that the forgoing will not prohibit
a general solicitation to the public or general advertising; provided, further,
that the foregoing will also not prohibit (i) Parent or one of its Affiliates
from employing any Transferred Employee or U.K. Designated Employee that is
terminated by the Purchaser or one of its Affiliates without cause following the
Closing Date or (ii) the Purchaser or one of its Affiliates from employing any
employee of Parent or any of its Affiliates that is terminated by Parent or one
of its Affiliates without cause following the Closing Date or (iii) Parent or
one of its Affiliates from employing any Person listed on Exhibit 5.10(c) so
long as such employee accepts employment with Parent or one of its Affiliates on
or prior to the Closing Date.
(d) The Restricted Period shall be extended by the length of any period
during which Parent or any of its Affiliates is in breach of the terms of this
Section 5.10.
(e) Parent acknowledges that the covenants of Parent set forth in this
Section 5.10 are an essential element of this Agreement and that, but for the
agreement of Parent to comply with these covenants, the Purchaser would not have
entered into this Agreement. Parent acknowledges that this Section 5.10
constitutes an independent covenant and shall not be affected by performance or
nonperformance of any other provision of this Agreement by the Purchaser. Parent
has independently consulted with its counsel and after such consultation agrees
that the covenants set forth in this Section 5.10 are reasonable and proper.
SECTION 5.11. Release of Indemnity Obligations. Parent covenants and
agrees, on or prior to the Closing, to execute and deliver to the Purchaser, for
the benefit of the Purchaser, a general release and discharge, in the form
attached as Exhibit 5.11 hereto, releasing and discharging the Company, SAP Thai
and the SAP Business from any and all obligations to indemnify Parent or any of
its Affiliates or otherwise defend it or them or hold it or them harmless
pursuant to any agreement or other arrangement (other than this Agreement and
the agreements contemplated hereby) entered into prior to the Closing.
SECTION 5.12. Termination of Intercompany Agreements. Except for the
contracts or arrangements set forth on Exhibit 5.12 attached hereto, and except
for the Continuing Intercompany Indebtedness, prior to the Closing Date, Parent
shall cause the termination of any contracts, arrangements or agreements between
or among the Company, SAP Thai or a Seller (as it affects the SAP Business), on
the one hand, and Parent or any Affiliate of Parent (other than the Company or
SAP Thai) on the other hand, including any intercompany agreements entered into
in the ordinary course of business.
<PAGE>
SECTION 5.13. Transition Services Agreement. At the Closing, Parent and the
Purchaser shall enter into a transition services agreement (the "Transition
Services Agreement"), substantially in the form attached hereto as Exhibit 5.13.
SECTION 5.14. CETCO Supply Agreement. At the Closing, Parent and the
Purchaser or one of its designated Affiliates shall enter into the CETCO supply
agreement (the "CETCO Supply Agreement"), substantially on the terms set forth
on Exhibit 5.14 attached hereto.
SECTION 5.15. Acrylic Acid Supply Agreement. Immediately prior to Closing,
Parent will cause Chemdal U.K. to enter into an acrylic acid supply agreement
(the "Acrylic Acid Supply Agreement") with BASF (Antwerp), a Belgian corporation
and a wholly owned Subsidiary of the Purchaser, substantially on the terms set
forth on Exhibit 5.15 attached hereto. On the Closing Date, but immediately
following the Closing, the Acrylic Acid Supply Agreement will be assigned by
Chemdal U.K. to one of the Purchaser's designated Affiliates, and such
designated Affiliate will assume all of Chemdal U.K.'s obligations under the
Acrylic Acid Supply Agreement at such time; provided, however, that the
designated Affiliate shall not be entitled to and shall not receive any portion
of the Signing Premium and, simultaneously with such assignment, such designated
Affiliate shall deliver a release and novation to Parent releasing Parent,
Sellers and their Affiliates (including Chemdal U.K.) from any further Liability
or obligation under the Acrylic Acid Supply Agreement.
SECTION 5.16. License Agreement. At the Closing, Parent and the Purchaser
shall enter into a license agreement (the "License Agreement"), substantially in
the form attached hereto as Exhibit 5.16.
SECTION 5.17. SAP Subleases. At the Closing, Purchaser will execute and
deliver to Parent subleases (the "SAP Subleases") of certain properties utilized
by the Company and the Sellers in the SAP Business, substantially on the terms
set forth on Exhibit 5.17 attached hereto.
SECTION 5.18. Product/Material Rebates. Prior to December 31, 1999, the
Purchaser shall have paid Parent in full for all amounts due to Parent from the
Purchaser and its Affiliates on account of all rebates (the "Rebates") resulting
from the purchase of products and materials by Parent and its Affiliates from
the Purchaser and such Affiliates during calendar year 1999 and, prior to
Closing, the Purchaser shall have paid Parent in full for all Rebates resulting
from the purchase of products and materials by Parent and its Affiliates from
the Purchaser and such Affiliates from December 31, 1999 to the date of Closing.
SECTION 5.19. ION Exchange License Agreement. At the Closing, Parent and
the Purchaser shall enter into a license agreement (the "ION Exchange License
Agreement"), substantially in the form attached hereto as Exhibit 5.19.
SECTION 5.20. Mixed-Use Assets. Except as may be provided for in the
Transition Services Agreement and the License Agreement, to the extent that,
following the Closing, the Sellers have retained any assets that were used, but
not primarily used, in the operation of the SAP Business prior to the Closing,
Parent will, and will cause its Subsidiaries to, permit the Purchaser, its
designated Affiliates, the Company and SAP Thai to use such assets in the
operation of the SAP Business following the Closing, on substantially the same
terms as such assets were used in the conduct of the SAP Business prior to the
Closing and as may be reasonably requested by the Purchaser, such designated
Affiliates, the Company and SAP Thai.
SECTION 5.21. Termination of SAP Indebtedness. Prior to the Closing, Parent
shall, and shall cause its Subsidiaries to, take all necessary action,
including, without limitation, the repayment of any outstanding third-party
Indebtedness relating to the Company, SAP Thai or the SAP Business, so that, at
the Closing Date, there is no outstanding Indebtedness relating to the Company,
SAP Thai or the SAP Business, other than the Continuing Intercompany
Indebtedness.
SECTION 5.22. Termination of the Celanese Supply Agreement. Upon receipt of
written instructions from the Purchaser or one of its Affiliates, Parent will
promptly (but in no event later than seven Business Days following receipt of
such instructions) cause the termination, effective December 31, 2001, of the
Supply Agreement (96-SMS-08) dated April 8, 1997, as amended, between Celanese
Ltd. and the Company (the "Celanese Agreement"), such termination to be effected
in accordance with the terms of the Celanese Agreement; provided,
<PAGE>
however, that should the Closing not occur for any reason whatsoever, and should
Celanese be unwilling to enter into a new supply contract with Parent or the
Company on substantially similar terms to those contained in the Celanese
Agreement, then the Purchaser will supply Parent with glacial acrylic acid from
December 31, 2001 until December 31, 2003 on terms and conditions substantially
similar to those contained in the Celanese Agreement.
SECTION 5.23. Uncashed Cheques. Parent understands and agrees that to the
extent any cheques (the "Unpaid SAP Cheques") are drawn prior to the Closing on
the account of the Company, SAP Thai or otherwise relating to the SAP Business
and such cheques are presented for payment following the Closing (i) none of the
Purchaser, its Affiliates, the Company, SAP Thai or the SAP Business shall have
any obligation, responsibility or liability for any such Unpaid SAP Cheques,
except to the extent that (i) Parent and its Affiliates have delivered any cash
to the Purchaser at Closing or (ii) Parent has permitted the Company or SAP Thai
to retain any cash at Closing, in each case, for the purpose of satisfying such
unpaid SAP Cheques and (ii) Parent and its Affiliates shall be responsible for
all such Unpaid SAP Cheques and shall indemnify the Purchaser, the Company, SAP
Thai or any of their Affiliates for any Losses or Liabilities incurred by them
as a result of the Unpaid SAP Cheques, except to the extent that (i) Parent and
its Affiliates have delivered any cash to the Purchaser at Closing or (ii)
Parent has permitted the Company or SAP Thai to retain any cash at Closing, in
each case, for the purpose of satisfying such unpaid SAP Cheques.
SECTION 5.24. Access to Insurance. Notwithstanding anything to the contrary
contained in this Agreement, to the extent that the Purchaser, the Company, SAP
Thai or the SAP Business suffer or incur any Losses or Liabilities (a "Loss
Event") by reason of, or arising out of, any action, inaction, event, condition,
liability or obligation of the Company, SAP Thai, the Sellers or the SAP
Business which occurred or existed prior to the Closing, or by reason of or in
connection with any claim or cause of action of any third party relating to the
conduct of the SAP Business prior to Closing, then upon receipt of notice from
the Purchaser or one of its Affiliates of such Loss Event, Parent shall, and
shall cause its Affiliates to, promptly (i) use all reasonable efforts to access
any of its (or any of its Affiliates) applicable insurance policies on behalf of
the Purchaser, the Company, SAP Thai or the SAP Business, as applicable, in
connection with such Loss Event in a manner that is consistent with the terms of
such policies, all such reasonable efforts to include, without limitation,
Parent (or any of its Affiliates) using all reasonable efforts to pursue any
claims denied under such applicable insurance policies and (ii) indemnify the
Purchaser, the Company, SAP Thai or the SAP Business, as applicable, for any
such Loss Event up to an amount which is equal to the aggregate amount of any
proceeds actually received by Parent (or any of its Affiliates) under any and
all of its applicable insurance policies in connection with such Loss Event;
provided that under no circumstances whatsoever shall Parent or its Affiliates
have any obligation to indemnify the Purchaser or its Affiliates pursuant to
this provision of the Agreement by reason of any denial under the policies of
all or any portion of the claim or claims submitted under the policies by Parent
or their Affiliates. Any reasonable out-of-pocket expenses incurred by Parent in
pursuing any claims denied under the applicable policies shall promptly be
reimbursed by the Purchaser.
SECTION 5.25. Patent Opinions. Following the Closing, the Purchaser shall
permit Parent and its Affiliates to rely on the SAP Opinions as reasonably
necessary for the purpose of defending any claims of patent infringement, and
the Purchaser shall provide the Patent Opinions to Parent and its Affiliates as
reasonably requested by Parent for such purpose.
SECTION 5.26. Thai Facility. At the Closing, Parent shall cause the
delivery of the Thai Facility to the Purchaser, which Thai Facility shall be
"Mechanically Complete" as defined in Exhibit 5.26 attached hereto.
SECTION 5.27. * Obligations. Promptly following the date hereof, Parent and
the Purchaser will undertake to satisfy their respective * obligations as
specifically described in, and in the manner contemplated by, Exhibit 5.27
attached hereto.
SECTION 5.28. * Assistance Grants. Parent understands and agrees that (i)
as a result of the execution of this Agreement and the transactions contemplated
hereby, all or a portion of the financial assistance granted by certain
Governmental Authorities to the SAP Business pursuant to the * Assistance Grants
may become immediately due and payable to such Governmental Authorities and (ii)
in the event any such amounts become due and payable to such Governmental
Authorities pursuant to the * Assistance Grants solely as a result of the
entering
<PAGE>
into of this Agreement or the consummation of the transactions contemplated
hereby, (x) Parent will be responsible for promptly paying such amounts to the
applicable Governmental Authority or (y) Parent will indemnify the Purchaser and
its Affiliates from any Losses or Liabilities incurred as a result of the
failure of Parent to pay such amounts that become due and payable as described
in clause (ii) above.
SECTION 5.29. Thai Facility Construction Contracts. Following the Closing,
the Purchaser shall permit Parent and its Affiliates to rely on the Thai
Facility Construction Contracts as reasonably necessary for the purpose of
pursuing any rights and remedies thereunder against the counter-parties thereto,
to the extent the pursuit of such rights and remedies is necessary to satisfy
any obligations and Liabilities of Parent and its Affiliates to the Purchaser
and its Affiliates under this Agreement or the transactions contemplated hereby
including, without limitation, pursuant to Section 5.26 hereof (it being
understood that Parent and its Affiliates shall transfer to Purchaser and its
Affiliates any recoveries and awards resulting from the pursuit of such rights
and remedies to the extent that such recoveries and awards exceed (i) the
aggregate amounts actually paid by Parent and its Affiliates to Purchaser and
its Affiliates to satisfy the obligations and Liabilities described above, and
(ii) any out-of-pocket costs and amounts incurred by Parent and its Affiliates
in pursuing such rights and remedies, including, without limitation, legal fees
and other costs of the suit; provided that Parent and its Affiliates shall not
be entitled to any such costs and amounts to the extent Parent has not
previously paid to Purchaser and its Affiliates all amounts owing to satisfy the
obligations described above).
SECTION 5.30. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable Law,
and execute and deliver such documents and other papers, as may be necessary to
carry out the provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Transferred Employees. Each hourly and salaried employee of
the Company and SAP Thai (a list of which employees is attached hereto at
Section 6.01 of the Disclosure Schedule) who is employed with the Purchaser or
its Affiliates immediately following the Closing shall hereinafter be referred
to as a "Transferred Employee".
SECTION 6.02. Severance Obligations. The Sellers and the Purchaser agree
that the transactions contemplated by this Agreement shall not constitute a
severance of employment of any Transferred Employees or U.K. Designated
Employees (as defined below) under any severance plan, program or arrangement of
any Seller, SAP Thai or the Company and that such employees shall be deemed to
have continuous and uninterrupted employment before and immediately after the
Closing. If any Transferred Employee or U.K. Designated Employee incurs or is
deemed pursuant to Law or any severance plan, program or arrangement to have
incurred a severance of employment before the Closing, then Parent shall be
responsible for all severance obligations with respect to each Transferred
Employee and U.K. Designated Employee. The Purchaser shall be responsible for
any severance obligations incurred pursuant to any severance plan, program,
arrangement or agreement of the Company, SAP Thai or any Other Seller with
respect to the termination of a Transferred Employee or a U.K. Designated
Employee on or after the Closing. Except as provided in this Section 6.02,
Parent agrees, pursuant to Section 9.02, to indemnify and hold harmless the
Purchaser against any severance claim and against any loss, damage, liability or
expense, including attorney fees, incurred in connection with any claim for
severance benefits brought by any employees or former employees of Parent, the
Company, SAP Thai or the Other Sellers.
SECTION 6.03. (a) Employee Benefit Plans. For a period of one year after
the Closing Date, the Purchaser shall provide the Transferred Employees who are
employed by the Company within the United States (the "U.S. Transferred
Employees") with a level of employee benefit plans and arrangements
substantially comparable in the aggregate to the level of employee benefits
provided to similar situated employees of the Purchaser.
<PAGE>
To the extent that service is relevant for purposes of eligibility,
participation, vesting or benefit accrual under any employee benefit plan,
program or arrangement established, maintained or contributed to by the
Purchaser or any of its Affiliates (excluding benefit accrual under the
Purchaser Defined Benefit Plan), U.S. Transferred Employees shall be credited
for service prior to the Closing with the Sellers or the Company to the extent
that such service was recognized under a comparable employee benefit plan,
program or arrangement under which such applicable U.S. Transferred Employee was
participating immediately prior to the Closing; provided, however, that such
crediting of service does not result in the duplication of benefits or an
unintended windfall with respect to the accrual of benefits.
(b) Medical, Dental and Life Insurance Plans. Effective as of the Closing
Date, each U.S. Transferred Employee and their eligible dependents who are
participating in the Sellers' welfare benefit plans shall become entitled to
participate in the medical, dental, life insurance and other welfare benefit
plans sponsored by the Purchaser or its Affiliates on the Closing Date. To the
extent that any welfare benefit plan in which any U.S. Transferred Employee
participates after the Closing Date (i) imposes any pre-existing condition
limitation, such condition shall be waived or (ii) has a deductible or requires
a co-payment by the U.S. Transferred Employee that is subject to maximum
out-of-pocket limitation, each U.S. Transferred Employee will receive credit for
any co-payments and deductibles for any costs paid during the portion of the
relevant plan year or other period preceding the Closing in which the Closing
Date occurs which have been submitted to the plan administrator of the
Purchaser's welfare benefit plans as of the 90th day following the Closing Date.
The Purchaser shall provide notification to all U.S. Transferred Employees if
any co-payments or deductibles for any period preceding the Closing must be
submitted to the plan administrator of the Purchaser's welfare benefit plans as
of the 90th day following the Closing Date. The Purchaser shall not be
responsible for medical, dental and other welfare benefit claims incurred, but
not paid, in the ordinary course on or prior to the Closing Date with respect to
U.S. Transferred Employees, which shall remain the responsibility of the
Sellers.
(c) COBRA. The Purchaser shall assume all responsibility for providing
benefits required under Part 6 of Title I of ERISA ("COBRA Benefits") in respect
of qualifying events occurring after the Closing for U.S. Transferred Employees
and their qualified beneficiaries.
(d) Vacation. The Purchaser shall provide, without duplication of benefits,
all Transferred Employees and U.K. Designated Employees who were employees of
the Sellers, the Company or SAP Thai immediately prior to the Closing Date with
paid vacation time rather than cash in lieu of vacation time for all vacation
earned and unpaid through the Closing Date.
(e) Miscellaneous. No employee or any other Person (except the parties to
this Agreement) shall be entitled to assert any claim against the Purchaser, the
Company, SAP Thai or any of the Sellers relating to the employment,
compensation, employee benefits or benefit plans or programs based on or arising
from any provisions of this Agreement.
SECTION 6.04. Pension Plans. Effective as of the Closing Date, the U.S.
Transferred Employees shall be considered terminated participants in accordance
with the terms of the Parent Savings Plan (the "Seller Defined Contribution
Plan") and the Parent Pension Plan (the "Seller Defined Benefit Plan"; and
together with the Seller Defined Contribution Plan, the "Seller Pension Plans")
and as soon as administratively practical following the Closing Date, Parent
shall take all such action as may be required to achieve this result, including,
without limitation, advising participants in the Seller Pension Plans who are
U.S. Transferred Employees of their right to elect to receive a rollover
distribution of their individual nonforfeitable account balances and
nonforfeitable accrued benefits, respectively, in accordance with the terms of
the Seller Pension Plans by reason of the transactions contemplated by this
Agreement, which distribution or distributions may to the extent permitted by
Law be transferred by the participant to the Purchaser Salaried Employees'
Savings Plan (the "Purchaser Defined Contribution Plan") in a directed rollover;
provided, however, that the Seller Pension Plans shall not be required to permit
distributions or transfers by U.S. Transferred Employees to the extent that such
distributions or transfers would adversely affect the qualified status of the
Seller Pension Plans. Parent and the Purchaser may agree to allow participants
to elect direct rollover distributions from the Seller Pension Plans to the
Purchaser Defined Contribution Plan. U.S. Transferred Employees who are
participants in the Seller Pension Plans shall be 100% vested in their accrued
benefits and individual account balances under the Seller Pension Plans as of
the Closing Date. Effective as of the Closing Date, the Purchaser shall amend
the Purchaser Defined Contribution Plan to the extent necessary to enable U.S.
Transferred
<PAGE>
Employees who were participants in the Seller Pension Plans to elect
rollover distributions, which in the discretion of the plan administrator for
the Purchaser Defined Contribution Plan, may include any outstanding loan notes
from the Seller Defined Contribution Plan in accordance with Section 402 of the
Code. In order to rollover an outstanding loan note, U.S. Transferred Employees
shall be required to execute (i) an acknowledgment that the Purchaser Defined
Contribution Plan will be substituted for the Seller Defined Contribution Plan
as the obligee of the loan note, (ii) a payroll authorization form and (iii) any
other forms deemed necessary by the plan administrator for the Purchaser Defined
Contribution Plan. No other assets shall be transferred from the Seller Pension
Plans to the Purchaser Defined Contribution Plan other than as specified herein.
All directed rollovers between the Seller Pension Plans and the Purchaser
Defined Contribution Plan will be in the form of cash. Service of the U.S.
Transferred Employees prior to the Closing Date which was recognized under the
Seller Pension Plans shall be credited to the U.S. Transferred Employees for
purposes of eligibility and vesting under the Purchaser Defined Contribution
Plan.
SECTION 6.05. U.S. Employee Information. No later than ten (10) calendar
days after the Closing Date, Parent shall furnish to the Purchaser the following
information with respect to each U.S. Transferred Employee, as applicable:
(a) social security number;
(b) years and months of service as of the Closing Date; and
(c) base salary and bonus for the three calendar years
immediately preceding the Closing Date and current base salary.
SECTION 6.06. Workers' Compensation Obligation for U.S. Transferred
Employees. With respect to U.S. Transferred Employees, the Sellers shall retain
and shall assume and be responsible for any and all workers' compensation
benefits in connection with claims which are incurred on or before the Closing
Date, and the Purchaser shall assume, bear and discharge all liabilities for
workers' compensation benefits in connection with claims incurred after the
Closing Date.
SECTION 6.07. Provisions Relating to U.K. Employees. (a) Each employee of
the Company and the Sellers with respect to the SAP Business whose normal place
of work is the United Kingdom who is listed on Section 6.07 of the Disclosure
Schedule shall hereinafter be referred to as a "U.K. Designated Employee".
(b) The Purchaser acknowledges that the Acquired Rights Directive (77/187
EEC) as enacted in the Member States of the European Union and similar Laws in
other jurisdictions which safeguard the rights of employees in transfers of
undertakings, businesses or parts of businesses (collectively, the "Transfer
Laws") may operate to automatically transfer all or some of the U.K. Designated
Employees to the Purchaser. If any contract of employment of a Person who is not
a U.K. Designated Employee of the Purchaser has effect as if originally made
between the Sellers and such Person as a result of the application of the
Transfer Laws: (i) then such Seller may, within thirty (30) days of becoming
aware of the application of the Transfer Laws to such contract, give notice to
such Person to terminate such contract and (ii) any losses arising out of or in
connection with such contract to the date of such termination shall be assumed
or retained by the Sellers and shall be Excluded Liabilities.
(c) The Sellers and the Purchaser shall comply with their respective
obligations under the Transfer Laws, including, without limitation, the
provision of information to and/or consultation with representatives of the U.K.
Designated Employees in relation to the transactions contemplated under this
Agreement whether pursuant to the Transfer Laws or any other legal requirement
as enacted in the Member States of the European Union and similar Laws in other
jurisdictions or any collective agreement or otherwise.
(d) The employment of each U.K. Designated Employee shall, at the Closing
Date, be transferred to the Purchaser in accordance with the Transfer of
Undertakings (Protection of Employment) Regulations 1981 (as amended) (the "U.K.
Regulations"), which are in force in the United Kingdom to implement the
Acquired Rights Directive in the United Kingdom.
<PAGE>
(e) Effective as of the Closing Date, the U.K. Designated Employees shall:
(i) be offered membership in a retirement benefits scheme nominated by the
Purchaser (the "Purchaser's Scheme") subject to satisfying its eligibility
provisions and (ii) be permitted to transfer the value of their past service
pension rights secured under the pension arrangements operated by the Sellers to
the Purchaser's Scheme, provided that the exempt approved status of the
Purchaser's Scheme under the Income and Corporation Taxes Act 1988 is not
adversely affected by such transfer.
SECTION 6.08. Provisions Relating to Thai Employees. (a) Each Transferred
Employee who is employed by SAP Thai within Thailand (and who is listed on
Section 6.01 of the Disclosure Schedule) shall hereinafter be referred to as
a"Thai Transferred Employee".
(b) The Sellers and the Purchaser shall comply with their respective
obligations under any Laws relating to the transfer of employment of the Thai
Transferred Employees.
(c) The employment of each Thai Transferred Employee shall, at the Closing
Date, be transferred to the Purchaser in accordance with any regulations
regarding such transfer which are in force in Thailand.
SECTION 6.09. Retained Obligations of Parent. Parent expressly agrees to
retain (i) all obligations or Liabilities with respect to the employees who are
not Transferred Employees or U.K. Designated Employees and (ii) any obligations
or Liabilities of Parent or any of its Affiliates with respect to any former
employee of the SAP Business or as a result of actions taken by, or omissions
of, Parent or any of its Affiliates prior to the Closing Date with respect to
any Transferred Employee or U.K. Designated Employee.
SECTION 6.10 Employee Stock Options. (a) Effective on or prior to the
Closing Date, Parent shall cause each vested and unvested stock option to
purchase shares of Parent common stock (each a "Stock Option") that was granted
to Transferred Employees and U.K. Designated Employees pursuant to the Stock
Option Plans (other than unvested stock options granted pursuant to the Chemdal
U.K. 1995 Share Option Scheme) or otherwise that remains outstanding on the
Closing Date to become fully vested and exercisable and to remain exercisable
for a period of at least 90 days following the Closing Date; provided, however,
that such 90 day period shall not extend beyond the term of the Stock Option as
set forth in the relevant Stock Option Plan or stock option agreement.
(b) To the extent any required U.K. Inland Revenue approvals can reasonably
be obtained prior to the Closing Date that will permit any and all amendments to
the Chemdal U.K. 1995 Share Option Scheme necessary to provide for the full
vesting and immediate exercise of all outstanding Stock Options granted
thereunder, then, effective on or prior to the Closing Date, Parent shall cause
each outstanding Stock Option that was granted to Transferred Employees and U.K.
Designated Employees pursuant to the Chemdal U.K. 1995 Share Option Scheme to
become fully vested and immediately exercisable and to remain exercisable for a
period of at least 90 days following the Closing Date; provided, however, that
such 90 day period shall not extend beyond the term of the Stock Option as set
forth in the Chemdal U.K. 1995 Share Option Scheme or the related stock option
agreement. In the event that such U.K. Inland Revenue approvals cannot be
obtained at least 3 Business Days prior to the Closing Date, Parent may, in its
discretion:
(i) take such action as may be necessary to cause each Stock Option
granted pursuant to the Chemdal U.K. 1995 Share Option Scheme that is held
by a Transferred Employee or U.K. Designated Employee and that remains
outstanding on the Closing Date (an "Unvested Stock Option") to be
automatically replaced effective as of the Closing Date with a stock option
granted pursuant to another Stock Option Plan or any successor plan (a
"Substituted Stock Option"). Such Substituted Stock Option shall be subject
to the same terms and conditions as the replaced Stock Option granted
pursuant to the Chemdal U.K. 1995 Share Option Scheme (including, without
limitation, the exercise price of such Stock Option); provided, however,
that such Substituted Stock Option shall be fully vested and immediately
exercisable as of the Closing Date and shall remain exercisable for a
period of at least 90 days following the Closing Date. As promptly as
practicable after the Closing Date, Parent shall issue to each holder of a
Substituted Stock Option a document evidencing such Substituted Stock
Option; or
<PAGE>
(ii) within 3 Business Days following the Closing Date, pay a special
cash bonus to each Transferred Employee or U.K. Designated Employee who
holds an Unvested Stock Option in an amount equal to the product of (y) the
number of shares of Parent common stock subject to such Unvested Stock
Option and (z) the excess, if any, of the closing price on the New York
Stock Exchange of Parent common stock on the last trading day immediately
prior to the Closing Date over the exercise price per share of Parent
common stock subject to such Unvested Stock Option.
(c) Parent shall use all reasonable efforts to cause each holder of an
Unvested Stock Option to consent to the cancellation of such Unvested Stock
Option in consideration of the payment or the Substituted Stock Option, as
applicable, and as provided for in subparagraph (b)(i) and (ii) above and
Parent may require such consent as a condition to such payment or
Substituted Stock Option. The Company, SAP Thai, the Sellers and the
Purchaser shall cooperate to take all such action as may be necessary to
carry out the terms of Section 6.10.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Indemnity. (a) Parent agrees to indemnify on an After-Tax
Basis and hold harmless the Purchaser, each of its Subsidiaries, the Company and
SAP Thai against the following Taxes and against any loss, damage, liability or
expense, including reasonable costs for in-house or outside attorneys,
accountants and other consultants, incurred in contesting or otherwise in
connection with any such Taxes: (i) Taxes imposed on the Company, SAP Thai or
attributable to the SAP Assets or the SAP Business with respect to taxable
periods ending on or before the Closing Date; (ii) with respect to taxable
periods beginning before the Closing Date and ending after the Closing Date,
Taxes imposed on the Company, SAP Thai or attributable to the SAP Assets or the
SAP Business which are allocable, pursuant to Section 7.01(b), to the portion of
such period ending on the Closing Date; (iii) Taxes imposed on the Seller, the
Other Sellers, any of their Subsidiaries or any member of any affiliated group
with which the Company or SAP Thai files or has filed a Tax return on a
consolidated, unitary or combined basis for a taxable period (or portion of a
taxable period) ending on or before the Closing Date; (iv) Taxes imposed on the
Purchaser, any of its Subsidiaries, the Company or SAP Thai as a result of any
breach of warranty or misrepresentation under Section 3.23; and (v) Taxes
resulting from any election described in Section 7.07 of this Agreement.
(b) In the case of Taxes that are payable with respect to a taxable period
that begins before the Closing Date and ends after the Closing Date, the portion
of any such Tax that is allocable to the portion of the period ending on the
Closing Date shall be:
(i) in the case of Taxes that are either (x) based upon or related to
income or receipts or (y) imposed in connection with any sale or other
transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, as provided
under Section 7.06), deemed equal to the amount which would be payable if
the taxable year ended with the Closing Date; and
(ii) in the case of Taxes imposed on a periodic basis with respect to
the assets of the Company, SAP Thai or the SAP Assets or that are otherwise
measured by the level of any item, deemed to be the amount of such Taxes
for the entire period, multiplied by a fraction the numerator of which is
the number of calendar days in the period ending on the Closing Date and
the denominator of which is the number of calendar days in the entire
period.
(c) Refunds of any Taxes paid by Parent or its Affiliates by or on behalf
of the Company or SAP Thai relating to any taxable period, or any portion of any
taxable period, ending on or prior to the Closing Date, shall be for the account
of Parent and its Affiliates (and will promptly be paid by Purchaser and its
Affiliates, if received by them, to Parent), except to the extent that such
refunds were reflected in the Statement of Working Capital.
SECTION 7.02. Returns and Payments. (a) From the date of this Agreement
through and after the Closing Date, Parent shall prepare and file or otherwise
furnish in proper form to the appropriate governmental or taxing authority (or
cause to be prepared and filed or so furnished) in a timely manner all Tax
returns, reports and forms ("Returns") relating to the Company, SAP Thai, the
SAP Assets or the SAP Business that are due on or before
<PAGE>
or relate to any taxable period ending on or before the Closing Date (and the
Purchaser shall do the same for any Returns for which it or the Company or SAP
Thai are responsible for any taxable period that ends after the Closing Date).
Returns of the Company or SAP Thai not yet filed for any taxable period that
begins before the Closing Date shall be prepared in a manner consistent with
past practices employed with respect to the Company or SAP Thai (except to the
extent counsel for Parent or the Purchaser renders a legal opinion that there is
no reasonable basis in Law therefor or determines that a Return cannot be so
prepared and filed without being subject to penalties). With respect to any
Return required to be filed by the Purchaser or Parent with respect to the
Company or SAP Thai or attributable to the SAP Assets or the SAP Business, and
as to which an amount of Tax is allocable to the other party under Section
7.01(b), the filing party shall provide the other party and its authorized
representatives with a copy of such completed Return and a statement certifying
the amount of Tax shown on such Return that is allocable to such other party
pursuant to Section 7.01(b), together with appropriate supporting information
and schedules, at least 20 Business Days prior to the due date (including any
extension thereof) for the filing of such Return. Such other party and its
authorized representatives shall have the right to review and comment on such
Return and statement prior to the filing of such Return, and the reasonable
comments of such other party and its authorized representatives shall be
considered by the filing party in good faith.
(b) Parent shall pay or cause to be paid when due and payable all Taxes
with respect to the Company or SAP Thai or attributable to the SAP Assets or the
SAP Business for any taxable period ending on or before the Closing Date, and
the Purchaser shall so pay or cause to be paid Taxes with respect to the Company
or SAP Thai, or for which the Purchaser is responsible in respect of the SAP
Business or the SAP Assets, for any taxable period ending after the Closing Date
(subject to the Purchaser's right of indemnification from Parent by the date set
forth in Section 7.04 for Taxes attributable to the portion of any Tax period
that includes the Closing Date pursuant to Sections 7.01(a) and 7.01(b)).
SECTION 7.03. Contests. (a) After the Closing, the Purchaser shall promptly
notify Parent in writing of any notice received by the Purchaser or any of its
Subsidiaries of a proposed assessment or claim in an audit or administrative or
judicial proceeding of the Purchaser or any of its Subsidiaries, or of the
Company or SAP Thai, which, if determined adversely to the taxpayer, would be
grounds for indemnification under this Article VII. If, following the receipt by
the Purchaser or any of its Subsidiaries of notice of such a proposed assessment
or claim, the Purchaser fails to give Parent the prompt notice required by the
preceding sentence of this Section 7.03, then (i) if Parent is precluded by such
failure from contesting the asserted Tax liability in question, Parent shall not
have any obligation to indemnify the Purchaser under this Article VII for any
loss or damage arising out of such asserted Tax liability, and (ii) if Parent is
not precluded from contesting the asserted Tax liability in question, but such
failure results in a monetary detriment to Parent, any amount which Parent
otherwise would be required to pay the Purchaser pursuant to this Article VII
with respect to such liability shall be reduced by the amount of such detriment.
(b) In the case of an audit or administrative or judicial proceeding that
relates to periods ending on or before the Closing Date, provided that Parent
acknowledges in writing its liability under this Agreement to hold the Purchaser
and its Subsidiaries and the Company and SAP Thai harmless against the full
amount of any adjustment which may be made as a result of such audit or
proceeding that relates to periods ending on or before the Closing Date (or, in
the case of any taxable year that includes the Closing Date, against an
adjustment allocable under Section 7.01(b) to the portion of such year ending on
or before the Closing Date), Parent shall have the right at its expense to
participate in and control the conduct of such audit or proceeding but only to
the extent that such audit or proceeding relates solely to a potential
adjustment for which Parent has acknowledged its liability; the Purchaser also
may participate in any such audit or proceeding and, if Parent does not assume
the defense of any such audit or proceeding, the Purchaser may defend the same
in such manner as it may deem appropriate, including, without limitation,
settling such audit or proceeding after giving five days' prior written notice
to Parent setting forth the terms and conditions of settlement. In the event
that issues relating to a potential adjustment for which Parent has acknowledged
its liability are required to be dealt with in the same proceeding as separate
issues relating to a potential adjustment for which the Purchaser would be
liable, the Purchaser shall have the right, at its expense, to control the audit
or proceeding with respect to the latter issues.
(c) With respect to issues relating to a potential adjustment for which
both Parent (as evidenced by its acknowledgment under this Section 7.03) and any
of the Purchaser, one of its Subsidiaries or the Company or SAP Thai could be
liable, (i) each party may participate in the audit or proceeding and (ii) the
audit or proceeding shall be controlled by that party which would bear the
burden of the greater portion of the sum of the
<PAGE>
adjustment and any corresponding adjustments that may reasonably be anticipated
for future Tax periods. The principle set forth in the immediately preceding
sentence shall govern also for purposes of deciding any issue that must be
decided jointly (including, without limitation, choice of judicial forum) in
situations in which separate issues are otherwise controlled under this Article
VII by the Purchaser and Parent.
(d) Neither the Purchaser nor Parent shall enter into any compromise or
agree to settle any claim pursuant to any Tax audit or proceeding which would
adversely affect the other party for such year or a subsequent year without the
written consent of the other party, which consent may not be unreasonably
withheld. The Purchaser and Parent agree to cooperate in the defense against or
compromise of any claim in any audit or proceeding.
SECTION 7.04. Time of Payment. Payment by Parent of any amounts due under
this Article VII in respect of Taxes shall be made (i) at least three Business
Days before the due date of the applicable estimated or final Return required to
be filed by the Purchaser on which is required to be reported income for a
period ending after the Closing Date for which Parent is responsible under
Sections 7.01(a) and 7.01(b) without regard to whether the Return shows overall
net income or loss for such period and (ii) within three Business Days following
an agreement between Parent and the Purchaser that an indemnity amount is
payable, an assessment of a Tax by a taxing authority, or a "determination" as
defined in Section 1313(a) of the Code. If liability under this Article VII is
in respect of costs or expenses other than Taxes, payment by Parent of any
amounts due under this Article VII shall be made within five Business Days after
the date when Parent has been notified by the Purchaser that Parent has a
liability for a determinable amount under this Article VII and is provided with
calculations or other materials supporting such liability.
SECTION 7.05. Cooperation and Exchange of Information. Parent and the
Purchaser will provide each other with such cooperation and information as
either of them reasonably may request of the other in filing any Return, amended
Return or claim for refund, determining a liability for Taxes or a right to a
refund of Taxes, participating in or conducting any audit or other proceeding in
respect of Taxes or making representations to or furnishing information to
parties subsequently desiring to purchase the Company or SAP Thai or any part of
the SAP Business from the Purchaser. Such cooperation and information shall
include providing copies of relevant Returns or portions thereof, together with
accompanying schedules, related work papers and documents relating to rulings or
other determinations by Tax authorities. Parent and the Purchaser shall each
make its employees available on a basis mutually convenient to both parties to
provide explanations of any documents or information provided hereunder. Each of
Parent and the Purchaser shall retain all Returns, schedules and work papers,
records and other documents in its possession relating to Tax matters of the
Company or SAP Thai or of the SAP Assets or SAP Business, for each taxable
period first ending after the Closing Date and for all prior taxable periods
until the later of (i) the expiration of the statute of limitations of the
taxable periods to which such Returns and other documents relate, without regard
to extensions except to the extent notified by the other party in writing of
such extensions for the respective Tax periods or (ii) six years following the
due date (without extension) for such Returns. Any information obtained under
this Section 7.05 shall be kept confidential except as may be otherwise
necessary in connection with the filing of Returns or claims for refund or in
conducting an audit or other proceeding.
SECTION 7.06. Conveyance Taxes. The Purchaser and Parent agree to share
equally any sales, use, transfer, value added, stamp, stock transfer, real
property transfer or gains and any similar Taxes, and any recording,
registration and other fees, incurred as a result of the transactions
contemplated hereby.
SECTION 7.07. Section 338 Election. (a) Parent agrees to join the Purchaser
in making an election under Section 338(g) and 338(h)(10) of the Code, and under
any comparable provisions of state, local or non-U.S. Tax Law, with respect to
the sale of the Company to the Purchaser. On or prior to the Closing Date,
Parent shall duly execute (or cause to be duly executed by the appropriate
Subsidiary or Affiliate), and shall deliver to the Purchaser, IRS Form 8023 (or
successor form), and any comparable forms that are required by applicable state,
local or non-U.S. Tax Laws, for purposes of making the elections contemplated by
this Section 7.07. Parent shall provide the Purchasers with reasonable
cooperation in the preparation and filing of any and all such elections (and in
taking all steps necessary to effectuate the same). In accordance with Section
7.01 hereof, Parent agrees to indemnify the Purchaser, its Subsidiaries, the
Company or SAP Thai against all Taxes relating to such elections.
<PAGE>
(b) For purposes of making the elections required by paragraph (a) of this
Section 7.07, the Purchaser shall determine the value of the tangible and
intangible assets of the Company and shall provide Parent with a proposed
allocation of the Purchaser's "adjusted grossed-up basis" in the Company Shares
(within the meaning of the Treasury Regulations under Section 338 of the Code)
to such assets within 15 days of the due date for the filing of the election
under Section 338(g) and Section 338(h)(10) of the Code with respect to the sale
of the Company Shares to the Purchaser (the "Allocation"). For purposes of
allocating the "deemed selling price" (within the meaning of the Treasury
Regulations under Section 338 of the Code) among the assets of the Company, (i)
if all disputes regarding the proposed Allocation are resolved by the parties on
or prior to the due date for the filing of the election under Section 338(g) and
Section 338(h)(10) of the Code with respect to the sale of the Company Shares to
the Purchaser, then the agreed-to Allocation shall be binding upon the Purchaser
and Parent, and (ii) if the parties are unable to resolve all disputes regarding
the proposed Allocation, then the Allocation shall be considered binding upon
the Purchaser and Parent with respect to any items which are not in dispute, and
each of Purchaser and Parent shall be responsible for determining its treatment
of any disputed items. In any case, appropriate adjustments shall be made to the
Allocation to reflect any Purchase Price adjustments pursuant to this Agreement
or adjustments required by Law.
SECTION 7.08. Miscellaneous. (a) Parent and the Purchaser agree to treat
all payments made by either of them to or for the benefit of the other
(including any payments to the Company or SAP Thai) under this Article VII,
under other indemnity provisions of this Agreement and for any
misrepresentations or breaches of warranties or covenants as adjustments to the
Purchase Price or as capital contributions for Tax purposes, and further agree
that such treatment shall govern for purposes hereof except to the extent that
the Laws of a particular jurisdiction provide otherwise, in which case such
payments shall be made in an amount sufficient to indemnify the relevant party
on an After-Tax Basis.
(b) Any Tax sharing agreement or arrangement between Parent and any of its
Subsidiaries, on the one hand, and the Company or SAP Thai, on the other hand,
shall be terminated immediately prior to the Closing.
(c) Notwithstanding any provision in this Agreement to the contrary, the
obligations of Parent to indemnify and hold harmless the Purchaser, its
Subsidiaries, the Company and SAP Thai pursuant to this Article VII, and the
representations and warranties contained in Section 3.23, shall terminate at the
close of business on the 120th day following the expiration of the applicable
statute of limitations with respect to the Tax liabilities in question (giving
effect to any waiver, mitigation or extension thereof).
(d) From and after the date of this Agreement, Parent shall not without the
prior written consent of the Purchaser (which may, in its sole and absolute
discretion, withhold such consent) change, make or revoke, or cause or permit to
be changed, made or revoked, any Tax election, adopt or change, or cause to
permit to be adopted or changed, any method of Tax accounting, or settle or
compromise, or cause or permit to be settled or compromised, any Tax liability
that would materially affect the Company, SAP Thai, the SAP Assets or the SAP
Business.
(e) Each of Parent and the Purchaser shall be entitled to recover
professional fees and related costs that it may reasonably incur to enforce the
provisions of this Article VII.
(f) Parent shall cause the Company to deliver to the Purchaser at the
Closing a statement pursuant to Regulation Section 1.897-2(h), in form and
substance satisfactory to the Purchaser, duly executed and acknowledged,
certifying that the Company Shares are not a U.S. real property interest within
the meaning of Section 897(c)(i) of the Code, and Parent or the Other Sellers
shall provide the Purchaser with statements, duly executed and acknowledged,
certifying as to the facts that exempt the sale of SAP Thai and the SAP Assets
from withholding in accordance with Section 1445 of the Code.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of Parent. The obligations of
Parent to consummate the transactions contemplated by this Agreement shall be
subject to the fulfilment, at or prior to the Closing, of each of the following
conditions:
<PAGE>
(a) Representations and Warranties. Each of the representations and
warranties of the Purchaser contained in this Agreement shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects as of the Closing Date, with the same force and effect as if
made as of the Closing Date (other than such representations and warranties as
are made as of another date, which shall be true and correct in all material
respects as of such date), except where the failure to be so true and correct
would not materially and adversely effect the consummation of the Closing, or
otherwise prevent the Purchaser from performing its material obligations under
this Agreement, and Parent shall have received a certificate from the Purchaser
to such effect signed by a duly authorized officer thereof;
(b) Covenants. Each of the covenants and agreements contained in this
Agreement to be complied with by the Purchaser on or before the Closing shall
have been complied with in all material respects, and Parent shall have received
a certificate from the Purchaser to such effect signed by a duly authorized
officer thereof;
(c) HSR Act. Any waiting period (and any extension thereof) under the HSR
Act or under the applicable merger control or competition Laws of Germany and
the United Kingdom applicable to the purchase of the Shares and the SAP Assets
contemplated hereby shall have expired or shall have been terminated;
(d) No Proceeding or Litigation. No Action shall have been commenced by or
before any Governmental Authority against either the Sellers or the Purchaser,
seeking to restrain or materially and adversely alter the transactions
contemplated by this Agreement which, in the reasonable, good faith
determination of Parent, is likely to render it impossible or unlawful to
consummate such transactions; provided, however, that the provisions of this
Section 8.01(d) shall not apply if Parent has directly or indirectly solicited
or encouraged any such Action;
(e) Resolutions. Parent shall have received a true and complete copy,
certified by the General Counsel of the Purchaser, of the written approval of
the Board of Directors of the Purchaser evidencing its authorization of the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(f) Incumbency Certificate. Parent shall have received a certificate,
signed by the General Counsel of the Purchaser, certifying the names and
signatures of the employees of the Purchaser authorized to sign this Agreement
and the other documents to be delivered hereunder and to bind the Purchaser
hereby;
(g) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of the stockholders of Parent in accordance with
applicable Law and Parent's Restated Certificate of Incorporation and By-Laws;
(h) Transition Services Agreement. The Purchaser shall have executed and
delivered to Parent the Transition Services Agreement;
(i) SAP Subleases. The Purchaser or one of its designated Affiliates shall
have executed and delivered to Parent the SAP Subleases;
(j) CETCO Supply Agreement. The Purchaser shall have executed and delivered
to Parent the CETCO Supply Agreement;
(k) ION Exchange License Agreement. The Purchaser shall have executed and
delivered to Parent the ION Exchange License Agreement;
(l) Certain Rebates. The Purchaser shall have paid Parent in full for the
Rebates;
<PAGE>
(m) Acrylic Acid Supply Agreement. The Purchaser shall have executed and
delivered to Chemdal U.K. the Acrylic Acid Supply Agreement, together with the
related release and novation described in Section 5.15 hereof; and
(n) License Agreement. The Purchaser shall have executed and delivered to
Parent the License Agreement.
SECTION 8.02. Conditions to Obligations of the Purchaser. The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfilment, at or prior to the Closing, of each of the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Sellers contained in this Agreement shall have been true
and correct in all respects when made and shall be true and correct in all
respects as of the Closing Date, with the same force and effect as if made
as of the Closing Date (other than such representations and warranties as
are made as of another date, which shall be true and correct in all
respects as of such date), except where the failure to be so true and
correct would not have a Material Adverse Effect, and the Purchaser shall
have received a certificate from each of the Sellers to such effect signed
by a duly authorized officer thereof;
(b) Covenants. Each of the covenants and agreements contained in this
Agreement to be complied with by the Sellers on or before the Closing shall
have been complied with in all material respects, and the Purchaser shall
have received a certificate from each of the Sellers to such effect signed
by a duly authorized officer thereof;
(c) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act or under the applicable merger control or competition Laws of
Germany and the United Kingdom applicable to the purchase of the Shares and
the SAP Assets contemplated hereby shall have expired or shall have been
terminated;
(d) No Proceeding or Litigation. No Action shall have been commenced
or threatened by or before any Governmental Authority against the Sellers
or the Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated hereby which, in the reasonable, good faith
determination of the Purchaser, is likely to render it impossible or
unlawful to consummate the transactions contemplated by this Agreement or
which could have a Material Adverse Effect; provided, however, that the
provisions of this Section 8.02(d) shall not apply if the Purchaser has
solicited or encouraged any such Action;
(e) Resolutions of the Sellers. The Purchaser shall have received a
true and complete copy, certified by the Secretary or an Assistant
Secretary of each of the Sellers, of the resolutions duly and validly
adopted by the board of directors of each of the Sellers evidencing its
authorization of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, as applicable;
(f) Incumbency Certificate of the Sellers. The Purchaser shall have
received a certificate of the Secretary or an Assistant Secretary of each
of the Sellers certifying the names and signatures of the officers of such
Sellers authorized to sign this Agreement and the other documents to be
delivered hereunder, as applicable;
(g) Resignations of the Directors of the Company and SAP Thai. The
Purchaser shall have received the resignations, effective as of the
Closing, of all the directors and officers of the Company and SAP Thai,
except for such Persons, if any, as shall have been designated in writing
prior to the Closing by the Purchaser to Parent;
(h) Release of Indemnity Obligations. The Purchaser shall have
received the general release and discharge from Parent described in Section
5.11 of this Agreement;
(i) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of the stockholders of Parent in accordance
with applicable Law and Parent's Restated Certificate of Incorporation and
By-Laws;
<PAGE>
(j) No Material Adverse Effect. No event or events shall have
occurred, or be reasonably likely to occur, which, individually or in the
aggregate, have, or is reasonably likely to have, a Material Adverse
Effect, it being understood and agreed that the termination of customer
contracts shall not be considered a Material Adverse Effect for purposes of
this paragraph;
(k) Transition Services Agreement. Parent shall have executed and
delivered to the Purchaser the Transition Services Agreement;
(l) SAP Subleases. Parent or one of its designated Affiliates shall
have executed and delivered to the Purchaser the SAP Subleases;
(m) CETCO Supply Agreement. Parent shall have executed and delivered
to the Purchaser the CETCO Supply Agreement;
(n) ION Exchange License Agreement. Parent shall have executed and
delivered to the Purchaser the ION Exchange License Agreement;
(o) License Agreement. Parent shall have executed and delivered to the
Purchaser the License Agreement;
(p) Acrylic Acid Supply Agreement. Chemdal U.K. shall have executed
and delivered to the Purchaser the Acrylic Acid Supply Agreement;
(q) Tax Forms and Certificates. The Purchaser shall have received the
Tax forms and certifications required to be delivered by Parent and the
Other Sellers pursuant to Sections 7.07(a) and 7.08(f) of this Agreement;
(r) Thai Plant Facility. The manufacturing facility being constructed
by Parent and its Affiliates in Rayong, Thailand (the "Thai Facility")
shall be delivered to the Purchaser and shall be Mechanically Complete as
defined in Exhibit 5.26 attached hereto; and
(s) Thai Recordings. Parent shall have delivered, or shall have caused
to be delivered, to the Purchaser, certificates from a duly authorized
officer of Parent as shall reasonably be required for the Purchaser to make
the Thai Recordings, each in form and substance satisfactory to the
Purchaser acting reasonably.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties. The
representations and warranties contained in this Agreement and the obligations
of the parties pursuant to Sections 9.02(i), 9.02(v), 9.02(viii), 9.02(ix) and
9.03(a)(i) hereof shall survive the Closing and remain in full force and effect
for a period of 15 months following the Closing Date (it being understood that,
subject to Sections 9.01(a), 9.01(b) and 9.01(c) hereof, and subject to the
effect of any applicable statute of limitations, the obligations of the parties
pursuant to the remaining provisions of Sections 9.02 and 9.03 hereof shall
survive Closing indefinitely); provided, however, that (a) the representations
and warranties contained in Sections 3.20, 3.21 and 3.23 shall survive for the
period provided in Section 7.08(c) (it being understood that the representations
and warranties contained in Sections 3.20 and 3.21 shall survive for the period
provided in Section 7.08(c) only to the extent of resulting Tax liabilities and
otherwise shall remain in full force and effect for a period of 15 months
following the Closing Date); (b) the representations and warranties contained in
Section 3.14 and the obligations of the parties pursuant to Section 9.02(vii)
hereof shall survive the Closing and remain in full force and effect until the
fourth anniversary of the Closing Date; and (c) the obligations of the parties
pursuant to Section 9.02(x) shall survive the Closing and remain in full force
and effect until the 120th day following
<PAGE>
the expiration of the applicable statute of limitations with respect to the Loss
or Liabilities in question (giving effect to any waiver, mitigation or extension
thereof). If written notice of a claim has been given prior to the expiration of
the applicable representations and warranties by the Purchaser to Parent, or by
Parent to the Purchaser, then the relevant representations and warranties shall
survive as to such claim, until such claim has been finally resolved.
SECTION 9.02. Indemnification by Parent. The Purchaser, its Affiliates and
their successors and assigns, and the officers, directors, employees and agents
of the Purchaser, its Affiliates and their successors and assigns (each, a
"Purchaser Indemnified Party") shall be indemnified and held harmless by Parent
for any and all Liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including, without limitation,
attorneys' and consultants' fees and expenses) actually suffered or incurred by
them (including, without limitation, any Action or investigation brought or
otherwise initiated by any of them) (hereinafter, a "Loss"), arising out of or
resulting from:
(i) the breach of any representation or warranty made by the Sellers
contained in this Agreement (it being understood that for purposes of this
Article IX, and except for the representations and warranties contained at
Section 3.15 of the Agreement, such representations and warranties will be
interpreted without giving effect to any qualifications or limitations as
to "materiality" or "Material Adverse Effect"); or
(ii) the breach of any covenant or agreement by the Sellers contained
in this Agreement; or
(iii) the Excluded Liabilities; or
(iv) all Liabilities, whether arising before or after the Closing
Date, arising from or relating to the Remco Businesses; or
(v) any and all Liabilities or Losses suffered or incurred by the
Purchaser or the Company or SAP Thai or the SAP Business, including by
reason of or in connection with any claim or cause of action of any third
party, to the extent arising out of any action, inaction, event, condition,
liability or obligation of the Company, SAP Thai, the Sellers or the SAP
Business occurring or existing prior to the Closing, but only to the extent
that the existence of such Liability or Loss constitutes a breach by the
Sellers of their representations and warranties in this Agreement; or
(vi) the Excluded Assets; or
(vii) except for any Offsite Environmental Liabilities, and except for
the matter specifically described in Exhibit 5.27 attached hereto which
shall be resolved in the manner contemplated therein, any and all Losses or
Liabilities pursuant to any Environmental Law, or related to gases
occurring naturally, geologically or otherwise, in each case, arising from
or related to any action, event, circumstance or condition related to the
SAP Business and occurring or existing on or before the Closing Date,
including, without limitation, (A) any Release of Hazardous Materials into
the Environment at, to or from the SAP Real Property or any property
formerly owned or operated in connection with the SAP Business, in each
case on or prior to the Closing (and any additional migration of such
Release after the Closing Date) to the extent such Release is in violation
of any Environmental Law or is in a quantity, concentration or any other
form that is reportable or requires investigation, remediation or other
action pursuant to any Environmental Law, (B) any and all Environmental
Claims arising at any time that relate to the SAP Business or the SAP Real
Property on or prior to the Closing and (C) any and all non-compliances
with or violations of any applicable Environmental Law or Environmental
Permit relating to the Company, SAP Thai, the Sellers, the SAP Real
Property or the SAP Business on or prior to the Closing (and any
continuance of such non-compliance or violation after the Closing Date,
except, with respect to this Section 9.02(vii)(C), to the extent (i) the
Purchaser was or should have been aware of such noncompliance or violation
on or before the Closing Date, or (ii) the condition constituting such
noncompliance or violation is altered or changed by Purchaser and its
Affiliates after the Closing Date); or
<PAGE>
(viii) any Losses arising from claims made by any Person in connection
with the transfer of the employment of the U.K. Designated Employees, or as
a result of the subsequent expiry of notice given to them by the Sellers,
or arising from any earlier termination of any Person's employment (whether
such claim shall be for wrongful or unfair dismissal, statutory gross
redundancy payments, contractual or other redundancy payment, compensation
for failure to consult, pay in lieu of notice, dismissal at common law or
otherwise) and from and against all actions, losses, costs, claims,
proceedings, demands, judgments, liabilities and expenses incurred or
suffered by the Purchaser in connection with or as a result of any
liability or obligation to any U.K. Designated Employee in relation to the
foregoing (it being understood that Parent shall have no obligation to
indemnify a Purchaser Indemnified Party for any Losses specifically arising
out of, or specifically attributed to, the Purchaser satisfying its
obligations under Article VI hereof); or
(ix) any Losses arising out of any breach prior to the Closing Date by
the Sellers of the U.K. Regulations or of any obligation in connection with
or under any contract of employment of any U.K. Designated Employee to the
extent that the event giving rise to the cause of action in respect of any
such claim arose prior to the Closing Date; or
(x) any claim that the manufacture, use, importation, offering for
sale or sale of Indemnified Products infringes the * Patents,
notwithstanding the inclusion of such matters on the Disclosure Schedule,
but only to the extent of the Losses arising from the aggregate volumes of
Indemnified Products that the manufacturing facilities included in the SAP
Businesses were capable of manufacturing as of the Closing Date (including,
for this purpose, the anticipated production capacity of 20,000 metric tons
annually in the Thai Facility); provided, however, that the Purchaser
agrees to reasonably cooperate with Parent, at Parent's cost, in responding
to and defending any such assertion of infringement or infringement claims;
and provided, further, however, that the Purchaser acts in a commercially
reasonable manner (which shall not require the Purchaser to impair or
jeopardize the SAP Business) to mitigate the Losses that result from or
potentially could result from such infringement or alleged infringement; or
(xi) any Loss or Liability arising out of any expenditures or amounts
payable in connection with construction of the Thai Facility in accordance
with the Thai Facility Construction Contracts.
SECTION 9.03. Indemnification by the Purchaser. (a) Subject to the
provisions of Section 9.03(b), Parent, its Affiliates and their successors and
assigns, and the officers, directors, employees and agents of Parent, its
Affiliates and their successors and assigns (each, a "Seller Indemnified Party")
shall be indemnified and held harmless by the Purchaser for any and all Losses
arising out of or resulting from:
(i) the breach of any representation or warranty made by the Purchaser
contained in this Agreement; or
(ii) the breach of any covenant or agreement by the Purchaser
contained in this Agreement; or
(iii) any Assumed Liabilities; or
(iv) any third party claims to the extent arising primarily out of, or
relating primarily to, the conduct of the SAP Business before or after the
Closing, except (i) to the extent that Parent is obligated to indemnify the
Purchaser with respect to such Losses pursuant to Sections 9.02 and 7.01
hereof, or (ii) as otherwise contemplated by this Agreement (it being
understood that the Purchaser shall have no obligation to indemnify a
Seller Indemnified Party hereunder for any Losses to the extent actually
paid, satisfied or resolved prior to the date hereof ); or
(v) any claim arising out of the employment or discharge at any time
on or after the Closing Date by the Purchaser, the Company or SAP Thai of
any employee listed on Section 6.01 of the Disclosure Schedule and Section
6.08 of the Disclosure Schedule attached hereto or otherwise, including,
without limitation, any failure by the Purchaser to satisfy its obligations
under Article 6 hereof, and any severance amounts payable to such employees
arising as a result of his or her discharge or termination of employment by
the Purchaser, the Company or SAP Thai following the Closing Date; or
<PAGE>
(vi) subject to the terms of Section 9.02(viii), any Losses arising
from claims made by any U.K. Designated Employees against the Sellers in
connection with the transfer of their employment pursuant to the U.K.
Regulations or as a result of any termination of their employment by the
Purchaser (whether such claim shall be for wrongful or unfair dismissal,
redundancy payment or dismissal at common law or otherwise) where such
termination takes place after the Closing Date.
(b) Notwithstanding anything to the contrary contained in Section
9.03(a) herein, in the event the Purchaser is required to indemnify a
Seller Indemnified Party for any Loss pursuant to this Article IX, the
Purchaser shall not have any obligation or otherwise be required to pay any
amount to such Seller Indemnified Party on account of such Loss unless and
until the Seller Indemnified Party has used its reasonable efforts to
access any of its (or any of its Affiliate's) applicable insurance policies
in a manner that is consistent with the terms of such policies, such
reasonable efforts to include, without limitation, the Seller Indemnified
Party using reasonable efforts to pursue any claims denied under such
applicable insurance policies; provided, however, that, subject to the
provisions of Section 9.05(b), the Purchaser shall then only be obligated
to pay the Seller Indemnified Party (i) the amount, if any, equal to the
difference between the amount the Purchaser would otherwise have been
required to pay to such Seller Indemnified Party hereunder and the
aggregate amount of any insurance proceeds actually paid to the Seller
Indemnified Party on account of the Loss giving rise to the Purchaser's
obligation to reimburse the Seller Indemnified Party, and (ii) the
aggregate amount of any deductible payments actually paid by the Seller
Indemnified Party to an insurance carrier in connection with accessing any
applicable insurance policies.
SECTION 9.04. Indemnification Procedures. A Purchaser Indemnified Party or
a Seller Indemnified Party, as the case may be (for purposes of this Article IX,
an "Indemnified Party"), shall give the indemnifying party under Section 9.02 or
9.03, as applicable (for purposes of this Section 9.04, an "Indemnifying
Party"), prompt written notice of any matter which an Indemnified Party has
determined has given or could give rise to a right of indemnification under this
Agreement, and in any case within 60 days of such determination, stating the
amount of the claim, if known, and method of computation thereof, and containing
a reference to the provisions of this Agreement in respect of which such right
of indemnification is claimed or arises. The obligations and Liabilities of the
Indemnifying Party under this Article IX with respect to Losses arising from
claims of any third party which are subject to the indemnification provided for
in this Article IX ("Third Party Claims") shall be governed by and contingent
upon the following additional terms and conditions: if an Indemnified Party
shall receive notice of any Third Party Claim, the Indemnified Party shall give
the Indemnifying Party written notice of such Third Party Claim within 30 days
of the receipt by the Indemnified Party of such written notice; provided,
however, that if such notice of a Third Party Claim is in the form of a
Complaint (or other similar legal document commencing litigation), the
Indemnified Party shall give the Indemnifying Party written notice of such Third
Party Claim within 15 days of the receipt by the Indemnified Party of such
Complaint (or other similar document); provided, further, however, that the
failure to provide such written notice shall not release the Indemnifying Party
from any of its obligations under this Article IX except to the extent the
Indemnifying Party is materially prejudiced by such failure and shall not
relieve the Indemnifying Party from any other obligation or Liability that it
may have to any Indemnified Party otherwise than under this Article IX. If the
Indemnifying Party acknowledges in writing its obligation to indemnify the
Indemnified Party hereunder against any Losses that may result from such Third
Party Claim, then the Indemnifying Party shall be entitled to assume and control
the defense of such Third Party Claim at its expense and through counsel of its
choice if it gives written notice of its intention to do so to the Indemnified
Party within 90 days of the receipt of such written notice from the Indemnified
Party (it being understood that, during such 90 day period, the Indemnifying
Party may assume and control the defense of such Third Party Claim at its own
expense and through counsel of its choice, and, regardless of whether the
Indemnifying Party has assumed control of the defense during the 90 day period,
the Indemnified Party may not settle such Third Party Claim during such 90 day
period without the prior written consent of the Indemnifying Party, such consent
not to be unreasonably withheld, unless the Indemnifying Party is given a full
and complete release of any and all liability by all relevant parties relating
thereto); provided, however, that if there exists or is reasonably likely to
exist a conflict of interest that would make it inappropriate in the judgment of
the Indemnified Party, in its reasonable discretion, for the same counsel to
represent both the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of the Indemnifying Party. If, prior to the expiration of such 90
day period, the Indemnifying Party does not acknowledge in writing its
obligation to indemnify the Indemnified Party for any Losses which may result
from the Third Party Claim, the Indemnified Party (i) may elect to assume and
control the defense of such Third Party Claim at the Indemnifying Party's
expense; and (ii) the Indemnified Party shall have the right to settle such
Third Party Claim without the consent of the Indemnifying Party
<PAGE>
after reasonable prior written notice to the Indemnifying Party of the material
terms of such proposed settlement. In the event the Indemnified Party is,
directly or indirectly, conducting the defense against any such Third Party
Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at the Indemnified Party's
expense, all such witnesses, records, materials and information in the
Indemnifying Party's possession or under the Indemnifying Party's control
relating thereto as is reasonably required by the Indemnified Party. In the
event the Indemnifying Party elects to control the defense of any Third Party
Claim by notifying the Indemnified Party of such decision within the 90 day
period provided above, then (x) the Indemnified Party shall cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying Party,
at the Indemnifying Party's expense, all witnesses, pertinent records, materials
and information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indemnifying
Party and (y) the Indemnifying Party may not settle such Third Party Claim
without the prior consent of the Indemnified Party, such consent not to be
unreasonably withheld, unless the Indemnified Party is given a full and complete
release of any and all liability by all relevant parties relating thereto. If
the Indemnifying Party shall elect to assume the defense of a Third Party Claim
by notifying the Indemnified Party of its obligation to indemnify such party
during the 90 day period as provided above, then it shall do so at its own
expense; provided, however, that all other matters described above as being at
the expense of the Indemnifying Party shall only become payable by the
Indemnifying Party if, when and to the extent that the Indemnifying Party is
ultimately determined to be obligated to indemnify the Indemnified Party
pursuant to this Article IX.
SECTION 9.05. Limits on Indemnification. (a) Any indemnity payment required
to be made under this Agreement shall include any amount necessary to hold the
Indemnified Party harmless on an After-Tax Basis.
(b) Notwithstanding anything to the contrary contained in this Agreement,
(i) an Indemnifying Party shall not be liable for any claim for indemnification
pursuant to Section 9.02(i), 9.02(v), 9.02(vii) or 9.03(a)(i) hereof, as
applicable, unless and until the aggregate amount of Losses incurred by an
Indemnified Party or group of Indemnified Parties pursuant to all claims made
pursuant to all such Sections in the aggregate equals or exceeds $5,000,000,
after which the Indemnifying Party shall be liable only for those Losses in
excess of $5,000,000, (ii) no Losses shall be claimed under Sections 9.02(i),
9.02(v), 9.02(vii) or 9.03(a)(i) by an Indemnified Party or group of Indemnified
Parties or shall be reimbursable by an Indemnifying Party pursuant to this
Article IX, or shall be included in calculating the aggregate Losses in clause
(i) of this paragraph, other than Losses in excess of $150,000 resulting from
any single or aggregated claims arising out of the same facts, event or
circumstances and (iii) in no event shall the Indemnifying Party be liable for
aggregate Losses arising under Section 9.02(i), 9.02(v), 9.02(vii), 9.02(x),
9.02(xi) or 9.03(a)(i), as applicable, in excess of the Purchase Price.
SECTION 9.06. Waiver of Other Remedies. The rights and remedies provided in
this Agreement are cumulative, but absent fraud, shall be the exclusive remedies
of the parties hereto with respect to claims for monetary damages related to the
matters addressed herein and with respect to the transactions contemplated
hereby, and the parties shall have no other liability for monetary damages to
each other under any statutory or common law right; provided, however, that
nothing herein shall be construed as limiting the right of a party hereto to
equitable relief, other than monetary damages, for a breach of this Agreement.
Any election of one available remedy by a party hereto shall not constitute a
waiver of any other available remedy. An Indemnified Party may claim
indemnification hereunder for consequential damages; provided, however, that an
Indemnified Party shall not claim indemnification for lost profits.
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the Purchaser if, between the date hereof and the time scheduled for
the Closing: (i) an event or condition occurs that has resulted in or that is
reasonably likely to result in a Material Adverse Effect or (ii) Parent, the
Company, SAP Thai or an Other Seller makes a general assignment for the benefit
of
<PAGE>
creditors, or any proceeding shall be instituted by or against Parent, the
Company, SAP Thai or an Other Seller seeking to adjudicate any of them a
bankrupt or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its debts under
any Law relating to bankruptcy, insolvency or reorganization, and such
proceeding is not dismissed within 90 days; or
(b) by the Purchaser, upon a breach of any representation, warranty,
covenant or agreement on the part of the Sellers set forth in this Agreement, or
if any representation or warranty of the Sellers shall have become untrue, in
either case, such that the conditions set forth in Section 8.02(a) or Section
8.02(b) would not be satisfied ("Terminating Sellers' Breach"); provided,
however, that, if such Terminating Sellers' Breach is curable by the Sellers
through the exercise of their reasonable efforts and for so long as the Sellers
continue to exercise such reasonable efforts, the Purchaser may not terminate
this Agreement under this Section 10.01(b); or
(c) by Parent upon a breach of any representation, warranty, covenant or
agreement on the part of the Purchaser set forth in this Agreement, or if any
representation or warranty of the Purchaser shall have become untrue, in either
case such that the conditions set forth in Section 8.01(a) or Section 8.01(b)
would not be satisfied ("Terminating Purchaser Breach"); provided, however,
that, if such Terminating Purchaser Breach is curable by the Purchaser through
the exercise of its reasonable efforts and for so long as the Purchaser
continues to exercise such reasonable efforts, Parent may not terminate this
Agreement under this Section 10.01(c); or
(d) by either Parent or the Purchaser if the Closing shall not have
occurred by May 31, 2000; provided, however, that the right to terminate this
Agreement under this Section 10.01(d) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Closing to occur on or prior
to such date; or
(e) by the Purchaser or Parent if, at such time as this Agreement is
submitted for approval to a vote of the stockholders of Parent, Parent's
stockholders vote against approval and adoption of this Agreement; or
(f) by either the Purchaser or Parent in the event that any Governmental
Authority shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable; or
(g) by Parent in order to enter into a definitive agreement with respect to
a Superior Proposal; provided, however, that (x) Parent must provide the
Purchaser with written notice of such Superior Proposal, including a reasonable
description of the material terms thereof, and (y) Parent shall not take any
action in respect of such Superior Proposal, including terminating this
Agreement or entering into an agreement relating to the Superior Proposal, for a
period of five Business Days following receipt of such notice by the Purchaser
and until such time as Parent's Board of Directors has considered any response
to such notice provided by the Purchaser to Parent during such five Business Day
period; provided, further, however, that no such termination by Parent pursuant
to this Section 10.01(g) shall be effective until after Parent has paid the
Purchaser the Fee (as defined herein) set forth in Section 10.03 of this
Agreement; or
(h) by the mutual written consent of Parent and the Purchaser.
SECTION 10.02. Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.01, this Agreement shall forthwith become
void and there shall be no liability on the part of either party hereto except
(a) as set forth in Sections 5.03 and 10.03 and (b) that nothing herein shall
relieve either party from liability for any breach of this Agreement.
<PAGE>
SECTION 10.03. Fees and Expenses. (a) In the event that:
(i) (x) this Agreement is terminated pursuant to Section 10.01(e) and at or
prior to the time of the vote of Parent's stockholders with respect to the
Agreement, an Acquisition Proposal shall have been made public and (y) Parent
enters into an agreement with respect to an Acquisition Proposal, or an
Acquisition Proposal is consummated, in each case within 12 months after such
termination of this Agreement; or
(ii) this Agreement is terminated pursuant to Section 10.01(g); or
(iii) (x) this Agreement is terminated for any reason, other than pursuant
to Section 10.01(a)(i), Section 10.01(a)(ii), Section 10.01(c), Section 10.01(f)
or Section 10.01(h), and (y) Parent enters into an agreement with respect to a
Superior Proposal, or a Superior Proposal is consummated, in each case within 12
months after such termination of this Agreement; then, in any such event, Parent
shall pay the Purchaser a fee of U.S.$20,000,000 (the "Fee"), which amount shall
be payable in immediately available funds, plus all Expenses (as hereinafter
defined). Should the Fee and Expenses become payable to the Purchaser pursuant
to (x) Section 10.03(a)(i), then Parent shall pay such Fee and Expenses to the
Purchaser promptly (but in no event later than one Business Day after
consummation of the Acquisition Proposal), or (y) Section 10.03(a)(iii), then
Parent shall pay such Fee and Expenses to the Purchaser promptly (but in no
event later than one Business Day after consummation of the Superior Proposal)
or (z) Section 10.03(a)(ii), then Parent shall pay such Fee and Expenses to the
Purchaser prior to termination of the Agreement pursuant to Section 10.01(g).
For the purposes of this Section 10.03(a), "Expenses" shall mean all
out-of-pocket expenses and fees up to U.S.$3,000,000, in the aggregate
(including, without limitation, fees and expenses payable to all banks and
investment banking firms and all fees of counsel, accountants, experts and
consultants to the Purchaser) actually incurred or accrued by, or on behalf of,
the Purchaser in connection with this Agreement and the transactions
contemplated hereby.
(b) In the event that Parent shall fail to pay the Fee and any Expenses
when due, the term "Expenses" shall be deemed to include the costs and expenses
actually incurred or accrued (including, without limitation, fees and expenses
of counsel) by the Purchaser in connection with the collection under and
enforcement of this Section 10.03, together with interest on such unpaid
Expenses and Fee, commencing on the date that the Expenses and such Fee, as
applicable, became due, at a rate equal to the rate of interest publicly
announced by Citibank, N.A., from time to time, in the City of New York, as such
bank's Base Rate plus 2%.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses. Except as otherwise provided in Sections 5.06(a),
7.06, and 10.03, and as otherwise may be contemplated by this Agreement, all
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred.
SECTION 11.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in Person, by telecopy,
cable, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 11.02):
<PAGE>
if to the Purchaser:
BASF Aktiengesellschaft
Carl-Bosch-Strasse 38
67056 Ludwigshafen
Germany
Telecopier No.: 011-49-621-609-2502
Attention: Mr. Harald Schultheiss
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No: (212) 848-7179
Attention: Peter D. Lyons, Esq.
with a copy to:
BASF Corporation
3000 Continental Drive North
Mount Olive, NJ 07828-1234
Telecopier No.: (973) 426-3052
Attention: Mr. Cenan Ozmeral
if to Parent:
AMCOL International Corporation
One North Arlington
1500 West Shure Drive
Arlington Heights, IL 60004
Telecopier No.: (847) 394-8730
Attention: Mr. Paul Shelton
with a copy to:
Lord, Bissell & Brook
115 South La Salle Street
Chicago, Illinois 60603
Telecopier No: (312) 443-0336
Attention: Clarence O. Redman, Esq.
SECTION 11.03. Public Announcements. The Purchaser and Parent shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement and the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation and agreement on such press release, except
as may be required by Law or any listing agreement with a national securities
exchange to which the Purchaser or Parent is a party.
SECTION 11.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 11.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith
<PAGE>
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to the greatest
extent possible.
SECTION 11.06. Entire Agreement. This Agreement and the Transaction
Agreements constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof and, except for the Confidentiality
Agreement, supersede all prior agreements and undertakings, both written and
oral, between Parent and the Purchaser with respect to the subject matter hereof
and thereof.
SECTION 11.07. Assignment. This Agreement shall not be assigned by
operation of Law or otherwise, except that the Purchaser may assign all or any
of its rights and obligations hereunder to any Affiliate of the Purchaser,
provided, however, that no such assignment shall relieve the Purchaser of its
obligations hereunder if such assignee does not perform such obligations.
SECTION 11.08. Third Party Beneficiaries. Except for the provisions of
Article IX and Article VII relating to Indemnified Parties, (a) the provisions
of this Agreement are solely for the benefit of the parties and are not intended
to confer upon any Person except the parties any rights or remedies hereunder
and (b) there are no third party beneficiaries of this Agreement and this
Agreement shall not provide any third Person with any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 11.09. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, Parent and
the Purchaser or (b) by a waiver in accordance with Section 11.10.
SECTION 11.10. Waiver. Either party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of the other party contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby, and shall thereafter, except as otherwise specified in such writing,
operate as a waiver (or satisfaction) of such condition for all purposes of this
Agreement. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any of such rights.
SECTION 11.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any Delaware state or federal court sitting in Wilmington. The
parties hereto hereby (i) submit to the exclusive jurisdiction of any Delaware
state or federal court sitting in Wilmington for the purpose of any Action
arising out of or relating to this Agreement brought by any party hereto and
(ii) waive, and agree not to assert by way of motion, defense, or otherwise, in
any such Action, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution, that the Action is brought in an inconvenient forum, that the
venue of the Action is improper, or that this Agreement or the transactions
contemplated hereby may not be enforced in or by any of the above-named courts.
SECTION 11.12. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
<PAGE>
IN WITNESS WHEREOF, Parent and the Purchaser have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
AMCOL INTERNATIONAL CORPORATION
By: /s/ John Hughes
Name: John Hughes
Title: Chairman & CEO
BASF AKTIENGESELLSCHAFT
By: /s/ Jorg Buchmuller
Name: Jorg Buchmuller
Title: Director, Legal
BASF AKTIENGESELLSCHAFT
By: /s/ Harald Schultheiss
Name: Harald Schultheiss
Title: Director
<PAGE>
[Schroder & Co. Inc. Letterhead]
November 22, 1999
The Board of Directors
AMCOL International Corporation
1500 West Shore Drive
Suite 500
Arlington Heights, IL 60004
Members of the Board of Directors:
We understand that AMCOL International Corporation ("AMCOL" or the "Company") is
entering into a transaction (the "Transaction") pursuant to which the Company
would sell substantially all of the assets and certain liabilities (as described
in the Agreement (as defined below)) associated with the Superabsorbent Polymers
Business (the "SAP Business") to BASF AG ("BASF") for cash consideration of
$656.5 million, subject to adjustment as provided in the Agreement (the
"Transaction Consideration"). The Agreement provides for an adjustment of the
Transaction Consideration to the extent that the actual net working capital of
the SAP Business is greater or less than the targeted working capital amount as
indicated by management of approximately $34,175,000.
You have requested that Schroder & Co. Inc. ("Schroders") render an opinion (the
"Opinion"), as investment bankers, as to the fairness to AMCOL, from a financial
point of view, of the Transaction Consideration being paid to AMCOL.
Schroders, as part of its investment banking business, is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. Schroders has acted as financial advisor to AMCOL with respect
to the Transaction for which we will receive a fee for our services, a
significant portion of which is contingent upon consummation of the Transaction.
In connection with the Opinion set forth herein, we have, among other things:
1. Reviewed certain publicly available business and financial information
relating to AMCOL and the SAP Business that we deemed relevant;
2. Reviewed certain unaudited historical financial and operating
information relating to the SAP Business provided to us by AMCOL;
<PAGE>
3. Reviewed certain other information, including financial and operating
forecasts of the SAP Business, provided to us by AMCOL;
4. Held discussions with senior management and representatives of AMCOL
regarding the business, operations and prospects of the SAP Business
and its products;
5. Reviewed a draft Asset Purchase Agreement dated November 19, 1999,
between AMCOL and BASF relating to the Transaction (the "Agreement");
6. Performed various valuation analyses, as we deemed appropriate, of the
SAP Business using generally accepted analytical methodologies,
including (i) the application to the financial results of the SAP
Business of the public trading multiples of companies which we deemed
comparable; (ii) the application to the financial results of the SAP
Business of the multiples reflected in recent mergers and acquisitions
for businesses which we deemed comparable; (iii) discounted cash flow
analyses of the SAP Business' operations and (iv) leveraged buyout
analysis of the SAP Business' operations;
7. Considered the results of solicitations of interest from third parties
regarding potential business combinations involving the SAP Business;
and
8. Performed such other financial studies, analyses, inquiries and
investigations, as we deemed appropriate including an assessment of
the current economic and market conditions.
In rendering the Opinion, we have assumed and relied upon the accuracy and
completeness of all information (including the assumptions and bases used in
connection with preparation of forecasts and projections) supplied or otherwise
made available to us by the Company and the SAP Business or obtained by us from
publicly available sources, and upon the assurance of the Company's management
that they are not aware of any information or facts that would make the
information provided to us incomplete or misleading. We have also assumed that
there will be no decrease in the Transaction Consideration as a result of the
working capital adjustment provided for in the Agreement. We have not
independently verified such information, undertaken an independent appraisal of
the assets or liabilities (contingent or otherwise) of the SAP Business, or been
furnished with any such appraisals. With respect to financial forecasts for the
SAP Business, we have been advised by the Company, and we have assumed, without
independent investigation, that they have been reasonably prepared and reflect
the best currently available estimates and judgment as to the expected future
financial performance of the SAP Business.
You have advised us that the Company does not disclose internal forecasts or
projections of the type provided to Schroders and therefore such forecasts and
projections were not prepared with expectation of public disclosure. You have
advised us that such forecasts and projections were based upon numerous
variables and assumptions that are inherently uncertain, including, without
limitation, factors related to general economic and competitive conditions.
Accordingly, actual results could vary significantly from those set forth in
such projections.
<PAGE>
The Opinion is necessarily based upon financial, economic, market and other
conditions as they exist, and the information made available to us, as of the
date hereof. We disclaim any undertakings or obligations to advise any person of
any change in any fact or matter affecting the Opinion which may come or be
brought to our attention after the date of the Opinion.
In the ordinary course of our business, we may hold and actively trade debt or
equity securities of AMCOL for our own account or for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
The Opinion does not constitute a recommendation as to any action the Board of
Directors of the Company or any stockholder of the Company should take in
connection with the Transaction or any aspect thereof. The Opinion relates
solely to the fairness from a financial point of view of the Transaction
Consideration being paid to AMCOL. We have not taken into account nor are we
opining on any tax liabilities related to or resulting from the Transaction
which the Company may incur. We express no opinion herein as to the structure,
terms or effect of any other aspect of the Transaction or as to the merits of
the underlying decision of the Company to enter into the Transaction.
This letter is for the information of the Board of Directors of AMCOL solely for
its use in evaluating the fairness from a financial point of view of the
Transaction Consideration being paid to AMCOL. It may not be used for any other
purpose or referred to without our prior written consent.
Based upon and subject to all of the foregoing, we are of the opinion, as
investment bankers, that as of the date hereof, the Transaction Consideration
being paid is fair, from a financial point of view, to AMCOL.
Very truly yours,
/s/SCHRODER & CO. INC.
